Red Cross Faces Sharp Criticism Over Spending and Management

As the American Red Cross continues its public appeals for money and blood donations to help victims of the September 11 terrorist attacks, some people inside and outside the charity are expressing concerns about the humanitarian organization's plans for spending the $452-million that have already flooded into the charity, as well as all future donations. New questions are also being raised about whether the Red Cross's president, Bernadine P. Healy, is doing a good job.

While no one affiliated with the organization doubts the intense dedication -- and high quality -- of services provided by the legion of Red Cross employees and volunteers throughout the country, some worry that Dr. Healy and her top aides are making mistakes that could make it more difficult for the charity's national and local offices to raise money to help with future disasters, especially those unrelated to terrorist attacks.

In fact, critics of Dr. Healy worry that the public does not understand that most donations will not ultimately go directly to victims and their families or to rescue workers. Instead, huge sums will go to help the charity improve its own operations and "expand into new programs of aid never before required," according to the Red Cross, including plans to handle terrorist attacks involving weapons of mass destruction and a new way to make blood supplies last longer. Said one former employee: "Dr. Healy's attitude seems to be, 'If the money is there, we'll find a program to spend it on.'"

Some members of the charity's Board of Governors are worried about Dr. Healy's leadership abilities, sources said, and about the turnover among key staff members since Dr. Healy arrived at the charity in September 1999. Sparking concern: the charity's sudden firing last month of two well-regarded top officials (with combined experience of more than 60 years) who ran the Red Cross's Disaster Operations Center -- the nerve center of the charity's relief services. The firings came just days after the September 11 attacks. They followedthe departure of several senior Red Cross officials during Dr. Healy's tenure, including a top aide to Dr. Healy and several senior fund-raising staff members.

Turmoil and confusion exist within the organization, some observers say, in part because of what they describe as Dr. Healy's imperious management style.

Dr. Healy did not respond to a request for comment, but Red Cross officials said that the criticisms of the charity and Dr. Healy are groundless and unfair.

David T. McLaughlin, chairman of the charity's Board of Governors, said recently that the board had "total" confidence in Dr. Healy.

"Her management style and that of her predecessor, Elizabeth Dole, are very different," said Mr. McLaughlin, which he said was understandable and fine. "There have been a lot of changes in the management structure, but they were things that were felt to be needed to strengthen the operations, particularly in the biomedical services side. Dr. Healy managed that and managed it brilliantly."

The Red Cross is handling the outpouring of donations wisely and explaining its plans for the money clearly to the public, said Bill Blaul, the charity's senior vice president of communication and marketing.

Moreover, said Mr. Blaul, morale at the charity is high, the result of Dr. Healy's management style that matches a clear vision with close consultations with coworkers. "She acts professionally and with speed," he said. "That's what she's brought back to the Red Cross. A lot of passion, yes. And toughness and dedication to the mission."

He added: "The American Red Cross is thinking and acting way outside the box that we had defined for ourselves for the past 10 or 15 years and the changes are making a very positive difference in the organization. Certainly there may be some that are hesitant to accept change, to even discuss or consider change."

Said Chris Thomas, a spokesman for Dr. Healy: "She is a visionary leader and a change agent who really has turned this organization around. She has made it relevant in America again and made our services relevant to the public."

Last week, Terry J. Sicilia, chief executive officer of the Mile High Chapter of the Red Cross in Denver, described his concerns, shared by many others, about the national leadership and its continuing efforts to raise money from donors who, he worried, may become tapped out. "Do you really feel the need to raise more money and blood?" Mr. Sicilia of Denver asked in a letter obtained by The Chronicle to a top Red Cross official. (Mr. Sicilia made clear he was speaking only for himself.))

The Denver leader said that he was worried about the national organization's becoming its own "worst enemy" by hurting local chapters that seek to raise money for their own needs. "At minimum, our chapters' biggest competitor for charitable dollars is our national organization -- how much money can we 'take' before the well dries up?" he asked.

"Let's remember that over the coming years, these donors will be among the heart and soul of local United Way employee campaigns and our own monthly fund-raising efforts," Mr. Sicilia said. "How we treat their gifts of time, money, and blood now will directly impact their support of chapters down the road."

Mr. Blaul of the national headquarters said that the Red Cross has handled its fund-raising efforts with great care and that donors will not tire of providing help in future emergencies.

"The American public regards September 11 as an exceptional, unique occasion in which we all give a little more, do a little more, reach a little deeper," he said. "Will people simply stop giving because they feel they have already provided some financial assistance for that disaster? No, and I don't think there's any evidence or data to support that."

But also reflecting the concerns of others with ties to the Red Cross, Mr. Sicilia of the Denver chapter wrote that he was "disappointed in President Healy's leadership" since the September 11 attacks, that he felt that communications from the national headquarters to local chapters were confusing, and that the firing of the Disaster Operations Center workers "without apparent good cause during the emergency phase" of relief work was "imprudent and demoralizing." Mr. Sicilia could not be reached to elaborate upon his letter.

Mr. Blaul said that the national Red Cross's plans and activities have been straightforward and communicated clearly to chapters. Mr. McLaughlin said that the firing of the disaster operations officials stemmed from "operational difficulties" and "problems responding to the Pentagon disaster" in the days after the terrorist attacks on September 11, although he said that the charity was still able to provide undiminished services to the public.

Mr. Blaul said that the firings occurred because "there was a clear need for improvement in some of our disaster services. Dr. Healy has been personally involved in insuring that that improvement is implemented with professionalism, with clarity, and with speed." He added: "The feeling that those two particular individuals' leaving was morale-busting is not universally felt. There are many people who simply don't share that opinion in the organization."

Some people associated with the charity, who include former and current employees who asked not to be named, maintain that the Red Cross erred by creating a special "Liberty Fund" last month separate and distinct from its domestic Disaster Relief Fund, which traditionally is used to help victims of disasters such as hurricanes and floods. According to the Red Cross Web site, the Liberty Fund "will support the immediate and emerging efforts of the American Red Cross to alleviate human suffering brought on by the attacks of September 11. All donations received since September 11, 2001, will be placed in this disaster relief fund."

The policy of the Red Cross Board of Governors is for the organization to keep about $50-million on hand in its regular Disaster Relief Fund, because dealing with a major natural calamity can cost that much within a couple of weeks. One Red Cross official told The Chronicle last month that the fund contained about $50-million before September 11; another charity source said that the fund's balance had recently dropped to about $30-million, low enough to alarm many charity workers.

Mr. Blaul acknowledged that "it is a concern that the national Disaster Relief Fund is below what we believe to be an optimal level." But, he said, "the American Red Cross has such a strong combination of public awareness, of brand identity, and community presence that with an appropriate amount of effort we can fund raise the cost of every and any disaster-relief job that we would encounter in the future," which he said the charity did to cope with weather-related disasters in recent years.

Immediately following the terrorist attacks on September 11, the Red Cross told the public that money raised by the charity would be spent to respond to the attacks and for future disaster-relief efforts, reflecting the charity's official policy to make sure that funds are be used in a flexible way.

The Red Cross soon created the Liberty Fund, but has given differing descriptions of how the money raised will be spent.

In videotaped appeals that have appeared widely on television, Dr. Healy describes what the Red Cross is doing to help people affected by the terrorist attacks and makes a general plea for donations of blood and money without specifying their use. "Together we can save a life," she says.

Earlier this month, Dr. Healy, in a radio interview, provided a broader description. "Recognizing the scope, the intensity, and the fact that virtually every one of our lines of work is going to be involved," she said, "we immediately created what we call our Liberty Disaster Fund, which is specific to this particular disaster and its aftermath. And all of the funds go in there and are related to our priority activities."

Critics say that the Red Cross should be more specific in its advertisements and public statements about how it will spend the money.

Mr. Blaul said that "there is no confusion whatsoever" in the way the Red Cross depicts its plans. The charity did not deceive the public as it developed the Liberty Fund and how it would work, he said. "Yes, of course, the Liberty Fund is different," he said. "It's different because what happened on September 11 is exceptionally different than a hurricane or a tornado or an earthquake or a flood. The organization had to look in the mirror and say, 'Are we ready for other weapons of mass destruction events or terrorists attacks?' and then act."

On Monday, for the first time, the Red Cross on its Web site offered a partial detailed explanation of how it intends to spend a large chunk of the money that goes into the Liberty Fund for "near-term response costs."

The charity said that it would devote $300-million to $320-million "to provide ongoing disaster relief" following the terrorist attacks, including one project the charity had previously described: $100-million for a "family gift program." The program is designed to help families that have lost a breadwinner as a result of the terrorist attacks, and to cover their near-term financial needs such as food, clothing, utilities, transportation, mortgage or rent, tuition, funeral, and related expenses "and other time-sensitive expenses."

As of last week, the charity had spent only $27-million on the program, and in recent days the Red Cross ran advertisements in newspapers encouraging qualified people to call a special charity phone number to request assistance. Dr. Healy has said that she thinks many people who qualify for the money have not understood that the help was available and that she expects many more requests to roll in.

In its Web site notice, the Red Cross offered new details about the expenditures of the remaining $300-million:

$90-million to $100-million for disaster-relief efforts in New York City, at the Pentagon, in Pennsylvania, and at other sites affected by the terrorist actions. The Red Cross said that money would cover such costs as food, shelter, mental health, and spiritual counseling, and help for Red Cross disaster-relief efforts.

$50-million to cover the cost of a surge of blood donations made in the aftermath of the disaster and to help accelerate the creation of a "strategic blood reserve" that will allow the Red Cross to freeze blood and "increase the inventory of blood from the historic two-three days to more than 10 days."

$29-million to cover indirect costs incurred to support relief efforts, such as " toll-free nationwide hotlines, information systems, database management, contribution processing, public information and communication, expanded audit services, accounting services, and around-the-clock activation" of the Red Cross's Disaster Operations Center.

The balance, $30-million to $40-million, would go to help Red Cross chapters do such things as provide "grieving" programs and encourage "tolerance"; support people serving in the military; and assist families of foreign nationals who perished in the terrorist attacks.

In its Web site notice, the Red Cross says that it has the responsibility "to invest additional resources in preparedness and mitigation for present and future terrorist threats in the aftermath of what took place on September 11. Those longer-term efforts are underway as a phase II effort under the American Red Cross Liberty Fund."

While the Red Cross offers no further public explanation, a memo obtained by The Chronicle that Dr. Healy wrote to chapters and volunteers last week says that the Red Cross will need "several hundred million additional dollars" over the next 18 to 24 months "to prepare for future terrorist attacks." the additional money would be used to "invest in our chapters" to do such work as developing "preparedness standards" that would include "training and development in responding to weapons of mass destruction."

Another program would focus on "assuring blood readiness" through the strategic reserve, while others would focus on creating "a whole new level of volunteer recruitment, screening, training, and development, continued engagement, retention, cultivation, re-training, and deployment," and on being prepared as an organization to respond to "future terrorist attacks and catastrophic events which may be multifaceted and which may occur concurrently in multiple cities and regions."

The Red Cross has not made public an instruction from the charity's chief financial officer to local chapters last month that the chapters would be allowed to "retain a flat 10 percent of all contributions that are received on behalf of national headquarters" for their own programs following the September 11 attacks.

Some observers worried that Dr. Healy's overall plans are too ambitious and way beyond what many donors are prepared to endorse -- or even understand, based on the Red Cross's descriptions of the plans.

"I question if they will support capital purchases for a blood-training program and/or our staff expansions for a war that is likely not to be, as we would normally label, a 'war,'" said Mr. Sicilia from the Denver chapter official in his letter, which he wrote just before the national headquarters sent chapters its breakdown of how it plans to spend funds in coming months.

Mr. Sicilia suggested that the national headquarters now "share with the field some plans or thoughts on how chapters could recover" as traditional sources of chapter revenue have been hurt by fund-raising efforts surrounding the September 11 attacks. He added that "a recovery plan may be needed -- for both chapters and the national sector."

Mr. Blaul said that Mr. Sicilia raised good questions but that the national office has the right answers that it will continue to communicate to all chapters as it listens to what the local offices say. Said Mr. Blaul: "There is tremendous opportunity for input across the country every step of the way."

My husband came home this evening with an interesting story about the Red Cross. A contractor who does work with his company had spent time in NYC at Ground Zero - to dismantle The Bank of New York buildings - evidently it needed to come down. He got to meet Mayor Guiliani, whom he said was very nice. The WHOLE time he was there (Sept. 13th till just recently) the Salvation Army was there, giving massages (YES), handing out sandwiches, and catering to their every need. He said Ground Zero was unbelievable and had trouble fighting back tears just talking about this. (The guy is around 70+ years old.)

Bottom Line: The Red Cross FINALLY showed up in their trucks about two weeks after they had been working. He said, when he dies, all his money is going to the Salvation Army!

The RED CROSS has been a DOUBLE CROSS for years. The lack of accountability of a lot of "Charities" need to be investigated. Especially, the 501 (3) (c)'s. Many of these "Feel Good" organizations are just ment to make someone a nice salary while appearing benevolent. Others, like, HCI, are downright evil.

You got that right...Many years ago I lived across the street from a volunteer with the Red Cross. They furnished a car and paid all expenses for her to go to and from work among other perks.

The Red Cross has not received a penny from me since then.

We don't understand??? EXCUSE ME you buttheads .. YOU DON't understand .. that money is to go to the PEOPLE not you and your programs ..

Here is a little hint to the Red Cross .. there is a reason why I stopped donating to the United Way .. does this mean I should put the Red Cross on my BOYCOTT list .. I and a lot of other people can do that in a heart beat ...

Yes yes yes..... the RC is not honest in their accounting - they claim to have a very low percentage of money that goes to administration -but in actuality a high percentage of their actual funds goes to "training" of volunteers AND they "reward" the volunteers with lavish banquets and trips to those dinners..... Their "volunteers" make careers of volunteering.....

I have never trusted the Red Cross. When my father was in the Navy during WW2, his ship was sank by the enemy. After floating in the ocean for hours before being rescued, many of his buddies dead, he was taken to a Red Cross tent to recuperate. Cold, wet, and shaken by his experience he wanted a cup of coffee. The Red Cross charged him and his fellow Sailors who survived for a cup of coffee! For the rest of his life, and now mine, he would never give any money to them, and neither will I!
The very idea that this supposed humanitarian org. is sponsored by donations and tax money and then charges our military at war for a cup of coffee after they have been nearly killed disgusts me.

Kinda like "Public Enemy Radio" (NPR)? A jobs program for Muffy and Biff and other swells? Enough has already been said about this organization by WWII vets - but, when powerful people use their contacts and clout...At least we can hope something will result in change for the better.

I encourage everyone to donate to the Salvation Army rather than the Red Cross. They've done at least as much to help actual victims, and since they don't have a huge beuracracy to advertize for donations, they really do depend on people taking the initiative to donate.

When my father was in the Navy during WW2, his ship was sank by the enemy. After floating in the ocean for hours before being rescued, many of his buddies dead, he was taken to a Red Cross tent to recuperate. Cold, wet, and shaken by his experience he wanted a cup of coffee. The Red Cross charged him and his fellow Sailors who survived for a cup of coffee!

Words escape me. How utterly sad!

Meet my other big brother...Red

My uncle had said that when he was in the Navy '56-60, my grandfather had become very ill. The RC notified him and made arrangements for him to come home. After he returned to his base, he found out that he had to reimburse the RC. He paid monthly, and kept receipts. He got called to Captains Mast, because the RC sent a letter to his X-O. He provided the X-O with the documentation, and it was cleared up. Never gave to the RC again.

Noted here...the prospect of access to big money will turn adults to chlld like behavior. Reminds me of my daughter scooping up armfuls of Halloween candy, chanting "mine, all mine".

My whole family has always made Salvation Army preferred charity due to story from father about how during WWII the Salvation Army gave away coffee and donuts while the Red Cross charged 10 cents. They must have caught him when he didn't have a dime in his pocket because he has carried a grudge all these years.

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