Red Cross Misstates How Donors' Dollars Are Spent
The American Red Cross's CEO, Gail McGovern, has spelled out the organization's promise to donors repeatedly in recent years.
"Ninety-one cents of every dollar that's donated goes to our services," McGovern said in a speech at Johns Hopkins University last year. "That's world class obviously."
She said the same thing to the City Club of Cleveland in April. And the Economic Club of Indiana in June. The statement was also displayed prominently on the Red Cross's website.
Laura Howe, Red Cross's vice president for public affairs, told a radio show in January it was one of the highest averages of any humanitarian charity.
"When you do give during the holiday season I think it's important that people know that and they can feel good about knowing that such a large portion of their dollar supports services," Howe said.
The problem is it's not true.
After questions from NPR and ProPublica, the Red Cross removed the figure from its website and said in a statement: "The language used has not been as clear as it could have been, and we are clarifying the language."
NPR and ProPublica have been examining the organization's flawed efforts to provide disaster services in two of the last major hurricanes to hit the United States. The charity's own documents suggest it put the appearance of serving victims ahead of actually helping them.
In this case, the problem with the number stems from its own tax documents. In recent years, fundraising expenses have been as high as 26 percent compared with what people donated. That doesn't even include management and overhead. Instead of 91 percent of people's money going to services, the real number could be in the 70s, or lower.
There's no way to know precisely because the Red Cross officials would not say what the new number is and would not provide a breakdown of the charity's expenses.
"They're not going to look as good if they do," says Daniel Borochoff, president of Charity Watch, "so they don't have that much incentive to do it."
"I think the Red Cross's numbers are really reasonable so I don't know why they need to exaggerate," he said. "They're the most important disaster relief responder and they control half our blood supply so it's vital they be as truthful as possible so we can support the work they do."
In place of 91 cents of every dollar donated, the Red Cross offered a different statistic. Officials say that an average of 91 cents of every dollar they spend goes to disaster services, and that's what they meant to say all along.
Multiple charity experts like Rob Reich, a professor at Stanford University, told NPR that's a very different number — and a confusing one for donors to parse.
"If they're not spending it, what are they doing with it?" he asks, offering one example of the questions it could raise. "There are a bunch of possibilities, but it would be nice to see an accounting statement that broke that material out."
While the Red Cross is known for disaster services, its main business is actually collecting and selling blood. Last year, the charity took in $2 billion from the blood operation.
That's one reason it's hard to know just where donations go. In financial statements, expenses are lumped together and officials say they can't — or won't — separate the blood business expenses from the disaster services.
In their statement, Red Cross officials said they keep their administrative and fundraising costs low and they are proud of their work and their financial transparency. They say while they are correcting some of their statements, they have never attempted to mislead the public.
Reich said that even if the numbers as the Red Cross presents them support the alternative statistic that 91 cents of every dollar spent supports its services — and has all along — it's still troubling.
"It seems like a very strange thing that the number has remained constant for nearly 20 years when different amounts of money are raised in different years," Reich said. "Different disasters happen in different years — which means there should be peaks and valleys in disaster relief spending."
This story was reported in partnership between NPR News Investigations and ProPublica. To read more on this story from ProPublica, go here. Can you help? Email NPR correspondent Laura Sullivan or share a tip here.
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Transcript
MELISSA BLOCK, HOST:
We've been examining the American Red Cross in recent months and the organization's flawed efforts to provide disaster services in two of the last major hurricanes to hit the U.S. The charity's own documents suggest it put the appearance of serving victims ahead of actually helping them.
AUDIE CORNISH, HOST:
Today, we're turning our attention to the charity's money - the millions of dollars people donate to the Red Cross every year. Red Cross officials have repeatedly said 91 cents of every dollar given to the organization goes to humanitarian services.
BLOCK: An investigation by NPR and ProPublica found that's just not true. NPR's Laura Sullivan reports.
LAURA SULLIVAN, BYLINE: American Red Cross CEO Gail McGovern has spelled out the Red Cross's promise to donors repeatedly in recent years.
(SOUNDBITE OF SPEECH)
GAIL MCGOVERN: Ninety cents of every dollar that's donated goes to our services. That's world-class, obviously.
SULLIVAN: That's McGovern giving a speech at Johns Hopkins University last year. Here she is at the City Club of Cleveland in April.
(SOUNDBITE OF SPEECH)
MCGOVERN: Ninety-one cents of every dollar that's donated goes directly to the services that we provide.
SULLIVAN: The Economic Club of Indiana in June.
(SOUNDBITE OF SPEECH)
MCGOVERN: Ninety-one cents on average of every dollar that is donated to the American Red Cross goes to our services.
SULLIVAN: Top Red Cross officials said the same thing in an interview recently with NPR and ProPublica. It was displayed prominently on their website. Their vice president of public affairs, Laura Howe, told a radio show in January it was one of the highest averages of any humanitarian charity.
(SOUNDBITE OF ARCHIVED RECORDING)
LAURA HOWE: When you do give during the holiday season, I think it's important that people know that and they can feel good about knowing that such a large portion of their dollar supports services.
SULLIVAN: Except the number's wrong. After questions from NPR and ProPublica, the Red Cross removed the figure from its website and said in a statement, quote, "the language used has not been as clear as it could have been and we are clarifying the language."
They declined to be interviewed on tape. The problem with the numbers stems from their own tax documents. In recent years their fundraising expenses have been as high as 26 percent, compared to what people donated. That doesn't even include management and overhead. So instead of 91 percent of people's money going to services, the real number could be in the 70s or lower. But there's no way to know precisely because Red Cross officials would not say what the new number is and would not provide a breakdown of the charity's expenses.
DANIEL BOROCHOFF: They're not going to look as good if they do, so they don't have that much incentive to do it.
SULLIVAN: Daniel Borochoff is president of Charity Watch and reviewed the Red Cross's tax documents.
BOROCHOFF: I think the Red Cross's numbers are very reasonable so I don't know why they need to exaggerate. They're the most important disaster relief responder and they control half our blood supply, so it's vital that they be as truthful as possible so we can continue to be able to support the work that they do.
SULLIVAN: In place of 91 cents of every dollar donated, the Red Cross offered a different statistic. Officials say that an average of 91 cents of every dollar they spend goes to humanitarian services, and that's what they meant to say all along.
Multiple charity experts like Professor Rob Reich at Stanford University told NPR that's a very different number, and a confusing one.
ROB REICH: If they're not spending it, what are they doing with it? There are a bunch of possibilities, but it'd be nice to see an accounting statement that broke that material out.
SULLIVAN: While the Red Cross is known for disaster services, their main business is actually collecting and selling blood, $2 billion worth last year. And that's one reason it's hard to know just where donations go. In financial statements, expenses are lumped together and officials say they won't or can't separate them out. Reich says even if the combined numbers support the alternative statistic of 91 cents of every dollar spent, it's still troubling.
REICH: It seems like a very strange thing that the number has remained constant for nearly 20 years when different amounts of money are raised in different years, different disasters happen in different years, which means there should be peaks and valleys in terms of disaster relief spending.
SULLIVAN: By email, Red Cross officials said they keep their administrative and fundraising costs low, and they are proud of their work and their financial transparency. They say while they are correcting some of their statements, they have never attempted to mislead the public. Laura Sullivan, NPR News.
BLOCK: Laura reported that story with ProPublica's Jesse Eisinger and Justin Elliott. You can read more on our website, npr.org and at propublica.org. Transcript provided by NPR, Copyright NPR.
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