Grassley, Critics Eye Red Cross’s Disaster Relief

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

WASHINGTON – As Hurricane Wilma batters South Florida and the American Red Cross prepares another disaster relief effort, the charity is coming under scrutiny from the Senate Finance Committee.


A spokeswoman for the Finance Committee chairman, Senator Grassley, a Republican of Iowa, told The New York Sun that the senator is keeping an eye on “how the Red Cross is functioning as a government contractor” and “whether the taxpayers are getting their money’s worth … and whether the Red Cross is spending donations appropriately.”


While the senator is not alleging mismanagement on the charity’s part, the spokeswoman, Jill Gerber, said, “Media reports are raising areas of concern.”


In the days and weeks after Hurricane Katrina, President Bush repeatedly urged Americans to send their donations to the Red Cross, singling it out for cash contributions in his major national address on Katrina. Directing Americans to the organization’s Web site, the president said: “The Red Cross needs our help. I urge our fellow citizens to contribute.”


The organization projects that it will spend $2 billion on Katrina relief, deriving the estimate from the costs of previous disasters. It says it has already spent $1.7 billion on the disaster and raised $1.2 billion, including a total of $89.9 million from individuals, corporations, and foundations in the state of New York.


Breaking down the $2 billion estimate on its Web site, the Red Cross says it expects to spend $1.56 billion on “emergency financial assistance,” $513 million on “food and shelter,” $121 million on “additional Red Cross support,” and $11 million on “physical and mental health services.” An additional $54 million will go toward the Red Cross’s fund-raising operation, and $36 million will be spent on “management and general expenses,” such as “public information outreach.” The $513 million spent on “food and shelter” does not include the cost of the Red Cross’s program to house Katrina victims in hotels, which it expects to cost several million dollars, to be reimbursed by the Federal Emergency Management Agency.


No itemized accounting of spending or further breakdowns within these categories will be available until six months after the disaster, said a Red Cross spokeswoman, Sarah Marchetti.


Some of the financial information that is available apparently includes discrepancies. According to figures compiled by the Red Cross, the charity has served, as of late last week, 24.8 million meals and 21.9 million snacks to victims of Hurricane Katrina.


Ms. Marchetti told the Sun that the estimated cost of each meal was $5, yielding a total meal cost of $124 million. That cost for meals – not including the 21.9 million snacks the Red Cross claims to have served – exceeds the latest amount posted on the Red Cross’s Web site for the total expenditure so far for food and shelter for Hurricanes Katrina and Rita, listed as $110 million.


When asked by the Sun why the total amount spent by the Red Cross on meals alone exceeded by $14 million the amount the charity said it had spent on all food and shelter combined, Ms. Marchetti responded: “These numbers are completely unaudited. These are not numbers for you to do math on; these aren’t anything official.


“We’ll come out with stuff like that later,” Ms. Marchetti continued. “We don’t have time to sit around calculating costs right now. We’re out providing relief for people.”


The Red Cross’s program for housing victims in hotels, too, is attracting attention. According to a report in the New York Times, the Red Cross stated that 600,000 people were being sheltered in hotels. The cost of the program, officials had said, was around $11 million a day. On October 18, the Red Cross corrected the figure, saying 200,000 people remained in hotels at a cost of $4 million a day. On October 17, Ms. Marchetti had told the Sun in an email that 341,000 people remained in hotels, at a cost of “several million” dollars a day.


Some critics have also suggested that the Red Cross may be overstating the total number of people it has served in connection with Hurricane Katrina. According to Ms. Marchetti, the number of people served stands at around 4 million. Richard Walden, a critic of the Red Cross and the director of Operation USA, a Los Angeles based charity, put the number of refugees served by the Red Cross at closer to 300,000.


The Red Cross Web site says it has provided 4 million people with direct financial assistance for Hurricanes Katrina and Rita, in the form of debit cards, vouchers, checks, and cash – stating, “the number continues to climb higher than first estimated.”


That number is more than eight times the entire population of the city of New Orleans, which, before Hurricane Katrina, was around 484,000, according to the 2000 census. It is roughly equal to the population of the entire greater New Orleans area – around 1.3 million – plus the entire state of Mississippi, around 2.8 million.


Alleged misuse and lax oversight of the direct financial assistance provided by the Red Cross and FEMA have drawn extensive criticism from the public and from elected officials, most recently in Massachusetts. There, according to a Boston Herald report last week, Katrina evacuees on Cape Cod were found spending their relief cash on alcohol, strip shows, and lap dances.


Another Red Cross spokeswoman, Renita Hosler, responded to the abuse by saying the Red Cross has “done everything we’re supposed to do” to ensure that the financial assistance is well spent. “We’re absolutely accountable and good stewards of the donor dollar,” Ms. Hosler told the Sun.


In a Los Angeles Times op-ed last month, Mr. Walden said the Red Cross uses large disasters as a “media blitz” to drum up more money for smaller, less visible crises. Mr. Walden said he had been contacted by Congressional staffers considering a probe of the Red Cross.


After the attacks of September 11, 2001, when the Red Cross was found funneling money donated to victims of the attacks to other parts of the organization’s operations, the Red Cross implemented measures to strictly honor donor intent, charity spokeswomen said.


Mr. Walden, however, said in a phone interview with the Sun that this results in money sitting around in the designated funds, and that the organization has to find ways to spend it.


One example, Mr. Walden told the Sun, was the Red Cross’s tsunami fund. According to the Red Cross, the organization had raised $556 million for the South Asian tsunami as of June. Only $110.3 million, however, had been spent since December on emergency relief for the catastrophe.


Of the remaining $446 million, the Red Cross reports that $232 million – more than double the amount of the entire emergency relief effort – has been budgeted for “community health and disease control.” An additional $77 million is earmarked for “remaining funds to be budgeted as needs arise.”


Representatives of the Red Cross said the organization scrupulously honors donor intent. All donations earmarked for hurricane relief are being directed to the Katrina fund, they said, and all donations without any fund specified are also funneled to Katrina relief.


The New York Sun

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