Mar-a-Lago Red Cross Gala Raises Questions

(The gates of luxury: outside of Mar-a-Lago)

Does it matter where you host your charity gala?

The days following Trump’s January 27 executive order were chaos. Customs and Border Protection agents were abruptly tasked with barring Syrian refugees’ entry to the United States indefinitely, blocking all other refugees for 120 days, and preventing the entry of all citizens of seven mostly Muslim countries for 90 days. The plan was ill-defined and generated immense consternation among those enforcing it. It also created tremendous backlash, bringing protesters out to airports in support of refugees and in opposition to the targeting of a single religion, Islam.

A familiar charity – the Red Cross – was at JFK Airport in New York, providing basic provisions to those impacted by the order, just as they have done since 1881 for others dislocated by major events.

According to the American Red Cross’s 2015 990, the group received over $46 million in government grants. Not a significant amount when factoring in annual gross receipts over $3 billion. But is it a conflict of interest to accept funding from a government that creates duress for those the nonprofit is supposed to serve?

Consider this: The American Red Cross recently hosted its annual charity gala at Mar-a-Lago, a Trump property, which has become known as the Winter White House. The Trumps attended the gala and offered praise to the organization.

Optics matter. Nonprofits should be mindful of the potential repercussions of their actions. Fixing with one hand what the other breaks isn’t going to make any real progress.

Red Cross Gives Money Directly to Canadian Wildfire Evacuees

Much of central Canada is still ablaze. According to reports, wildfires just spread to the Saskatchewan province having torn through Fort McMurray over the past two weeks, scorching well over 100,000 hectares of land and displacing more than 80,000 people. The number of individual fires numbers at least 49, and more than 16,000 structures have been completely destroyed.

This is a harrowing disaster for those directly impacted. Their homes and belongings destroyed, they face an uncertain future and a steep hill to climb before regaining normalcy in their lives.

The Red Cross – in conjunction with Canada’s federal government – is trying fresh approach to disaster relief that places financial resources directly in the hands of those impacted by the wildfires. Debit cards have been distributed to people fleeing the destruction, with each adult receiving $1,250 with an additional $500 for each child. As of this week, the total funds distributed amounted to $65 million disbursed to more than 63,000 evacuees.

According to Canadian Red Cross CEO Conrad Sauve, the organization’s move is a milestone in disaster relief strategy, calling it “the most important cash transfer we have done in our history.” The ongoing disaster – set to break records for the costliest in Canadian history – certainly warrants bold efforts.

Directly distributing funds to disaster victims, however, is historically controversial, considered by some in the humanitarian sector to lack the oversight and transparency of top-down organizational spending through which aid groups provide services for the dispossessed rather than providing them financial resources directly.

This conventional wisdom was shaken following the Haiti earthquake in 2010, for which the Red Cross raised half a billion dollars from an energized international public struck by the tragic scenes splayed on television sets across the world. Much of the money vanished, without tangible infrastructure or humanitarian improvements in the poor Caribbean nation. A joint report from NPR and ProPublica found a number of dismaying statistics; for example, the Red Cross initially announced that it provided homes for 130,000 people, whereas reporters were only able to uncover six permanent homes.

The Red Cross is also known for its decision to use funds donated in the wake of 9/11 for general operating costs, infuriating the public and ultimately bringing down the organization’s chief officer.

As the Canadian wildfires represent one of the highest profile disasters in the Western hemisphere of the last decade, perhaps the decision to provide funds directly to victims is – in part – an attempt to pursue the organization’s mission without the liability of generating another front-page snafu tarnishing the humanitarian group’s image.

How the evacuees fair in the short- and long-term will indicate whether such a strategy is worth emulating for future disasters.

Red Cross Under Scrutiny

The Red Cross is drawing some bad press following a joint report by ProPublica and NPR concerning the organization’s accounting. An oft-cited statistic – peddled by Red Cross CEO Gail McGovern, among other executives – that the group uses 91 cents of each dollar it raises to provide humanitarian services is false. In 2013, overhead costs comprised 17.5 percent of contributed dollars, or nearly twice as much implied by the claim.

Senator Charles Grassley has called for the Red Cross to “elaborate on how it calculates the facts and figures given to the donating public.” Following the report, the Red Cross altered it’s language to state that 91 cents of each dollar it spends goes into humanitarian services – a statement that ProPublica also labels “misleading.”

The Red Cross is a unique entity. While technically an independent nonprofit organization, the group operates formally as a “federal instrumentality,” which requires the Red Cross to follow congressional mandates for humanitarian assistance. While the organization is not a federal agency, it nonetheless occasionally receives government funding when publicly-raised money is insufficient for particular humanitarian services.


Another idiosyncratic side to the Red Cross is its business structure. The group’s well-known blood drives actually provide it with a salable product from which it profits immensely. The Red Cross sells donated blood to medical providers, often at a lower price than private competitors (as evidenced this year when the Indiana Blood Center lost one-third of its revenue as clients flocked to the Red Cross’ cheaper blood supply).

As pointed out by ProPublica, the Red Cross conflates its blood business with disaster relief. If the two services are separated, actual operating costs show that the organization spends two-thirds of its budget on its blood services. For this reason, the altered claim that 91 cents on the dollar go to humanitarian services is rather spacious. Notwithstanding the value of cheap and abundant blood supplies, its difficult to equate disaster relief with profitable blood drives.

McGovern’s less-than-truthful claim does not match up to the standards of transparency and forthrightness that nonprofit institutions should hold themselves to. Nonetheless, there is nothing remarkably off about the group’s services-to-overhead ratio. Indeed, the Better Business Bureau Wise Giving Alliance states that nonprofit overhead costs should not exceed 35 percent of budget, a ceiling that the Red Cross does not even approach.

Furthermore, the business practices of the Red Cross should not obfuscate the organization’s financial needs. While selling blood is no doubt a profitable enterprise, the organization cannot afford to appear completely self-sufficient. If donors perceive a nonprofit to have a diverse revenue stream that adequately provides the funding necessary for operations, essential fundraising efforts can consequently have worse returns. This threatens the organization with budget shortfalls, as well as a tarnished image for its efficacy and social impact.

The Red Cross should rectify its false statements. But instead of entrenching the value of a humanitarian organization exclusively in dollars and cents, the public should consider the greater impact resultant from the organization’s efforts as the chief inducement for philanthropic giving.

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