Magazine article Insight on the News

Red Cross Feathers Its Own Nest First: After Receiving $546 Million to Aid Victims of the Sept. 11 Attacks, the Red Cross Admits Giving Only the Equivalent of Two Weeks' Financial Assistance to Families. (Nation: Victim Assistance)

Magazine article Insight on the News

Red Cross Feathers Its Own Nest First: After Receiving $546 Million to Aid Victims of the Sept. 11 Attacks, the Red Cross Admits Giving Only the Equivalent of Two Weeks' Financial Assistance to Families. (Nation: Victim Assistance)

Article excerpt

Bernadine Healy, the departing American Red Cross (ARC) president and chief executive officer (CEO), testified before Congress the second week in November concerning the stunning decision by the nation's most-recognizable charity to hold back nearly one-half of the $546 million it has received to aid the victims of the Sept. 11 attacks on the World Trade Center and the Pentagon. Healy explained to lawmakers that an estimated $300 million would be required for the "immediate needs" of the victims, but that the remaining $246 million would be put to such unrelated uses as "investments in volunteer mobilization, chapter development for response to weapons of mass destruction, expanded blood security and continuity of operations efforts."

This meant that hundreds of millions of dollars given for victims through the ARC would not go to them but instead be tucked away for other ARC projects and infrastructure. Given the trickle of distribution to date, Healy's testimony caused an immediate stir. For example, critics noted, the ARC announced that $153.8 million of the $546 million donated had been "committed or spent" on relief efforts. The following figures were said by the ARC to account for how that money has been spent:

* Immediate disaster relief: $72.4 million;

* Family Gift Program: $47.9 million;

* International family assistance: $0.6 million;

* Immediate blood readiness and strategic blood reserve: $12 million;

* Armed forces services: $0.4 million;

* Community outreach: $14.7 million; and

* Direct support costs: $5.8 million.

Only two of those categories represent direct family assistance: the Family Gift Program and International Family Assistance, totaling $48.5 million, not $153.8 million. Indeed, while the ARC reports that 25,000 families have received assistance, this $48.5 million breaks down into $1,940 for each of the 25,000 families.

A combative Healy testified that the money wasn't raised to "give $200,000 to every family," something all $546 million collected by the ARC Liberty Fund would not come close to doing. According to an ARC official, "Dr. Healy's reference to the $200,000 per family was based on dividing all of the money collected by each of the charitable organizations, totaling $1.3 billion, among the 25,000 families, not just the amount collected by the American Red Cross."

If the ARC had taken its donations of $546 million and divided it in cash among 25,000 families, which it did not do, each would have received $21,840. However, with the ARC board's decision to hold back nearly one-half of the money, $19,900 was being withheld from each of the families of the victims of the Sept. 11 attacks and pocketed by the ARC, according to Healy, for "threats we are facing" in the future.

According to a financial analyst who spoke to INSIGHT on the condition of anonymity, "What this means to the donors is that the American people sent enough money for each of these families to live for approximately six months and the ARC decided to distribute just two weeks of financial assistance and keep the rest of the money for whatever. The question to be asked is whether this was the intent of the donors" It was not.

While no one found anything dubious about a charitable organization wanting to set aside a nest egg to deal with future catastrophic events, the ARC did not lay all its financial cards on the table. But two congressional hearings failed to address the organization's claimed need for reserves even though it already has more than $1 billion in reserve, including its Endowment Fund.

According to the 1999-2000 financial statement of the ARC, the tax-exempt charitable organization has maintained a national Endowment Fund since 1905. By a 1910 Act of Congress the fund is under the control of a separate board of trustees, which is responsible for overseeing and investing these monies. …

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