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Red Cross CEO Misstates How Donor Dollars Are Spent

“On average, 91 cents of every dollar that’s donated to the Red Cross goes directly to the services that we provide.”

Gail McGovern, the American Red Cross’s CEO, spelled out this promise to donors in front of a City Club audience on June 20, 2014:

Recently, this statistic has come under scrutiny from NPR and ProPublica, two organizations that have been critical in their examination of the Red Cross’s disaster relief efforts in response to the last major U.S. hurricanes. An inspection conducted of charity’s tax records suggests that 91 percent is simply too high. Recent fundraising expenses for the Red Cross have been as high as 26 percent, with the average falling at roughly 17 cents per donated dollar in the last five years. This number, however, still understates the total percentage because it neglects to account for additional management and overhead expenses. In reality, this means that the percentage of donor money being translated directly into services likely a much more modest 60 or 70 percent.

Unfortunately, there is not way to know precisely because the Red Cross has declined to report a new number or provide a new breakdown of their expenses. After these inquiries from NPR and ProPublica, the charity has also removed the 91 percent figure from its website

This is concerning because it not only misleads donors on how their money is being spent, but fails to take into account another important aspect of the Red Cross's charitable work: blood donations. The numbers reported by the charity conflate diaster relief and blood donation, painting a confusing operational picture for donors.

According to ProPublica's analysis, the Red Cross spent $2.2 billion on its blood business, while only spending about $467 million on the domestic disaster relief programs McGovern touted in her address to the City Club. Why the organization fails to distinguish between these two equally important roles is puzzling.

While we should be grateful to have charitable organizations of the size and scope of the Red Cross, greater transparency would be a welcome addition to its mission of service and compassionate care.

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