Charities Wary on Use of Katrina Donations
Friday, September 23, 2005
Much of the $1.1 billion donated to charities to help the victims of Hurricane Katrina may be unavailable to assist those affected by Hurricane Rita because of legal limits on how the organizations can use the money.
Rita is widely expected to cause significant damage along the Gulf Coast when it slams into the Texas shoreline late today or early tomorrow. But laws in most states requiring charities to honor donors' intentions will hamper the charities' ability to use money raised for Katrina victims to aid survivors of Rita, relief organizations and legal experts said yesterday.
The situation has sent charities scrambling to reword fundraising appeals -- or launch new ones -- in order to free cash for what could be another catastrophe.
"It's a nightmare," said Maj. George Hood, a spokesman for the Salvation Army, which has raised $156 million to help the victims of Hurricane Katrina. Now, Hood said, the group will probably have to start a separate fund for Hurricane Rita donors.
The Red Cross, which has raised $827 million for Katrina relief, said yesterday that it also expects shortly to set up a system to allow donors to designate contributions to Hurricane Rita relief.
Although there will be overlap because the storms are affecting some of the same areas and the same people, the money raised so far by the Red Cross "came in specifically for Katrina, and that is what it will be used for," said spokeswoman Devorah Goldburg. "There is no wavering."
Legal experts said charities are restricted by state laws that generally limit the use of charitable funds to their designated purpose.
"You cannot accept it for one purpose and use it for another," said Eugene Tempel, executive director of the Center on Philanthropy at Indiana University.
Diverting funds to a different cause -- even one as similar as another hurricane -- could open charities up to prosecution by state attorneys general, said Jill Manny, executive director of the National Center for Philanthropy and the Law at New York University.
Many charities are also mindful of the controversy that ensnared the American Red Cross over its Liberty Disaster Fund, created after the Sept. 11, 2001, attacks.
The organization came in for a wave of criticism when it decided to reserve some of the money for causes other than helping Sept. 11 victims and their families. In the end, the Red Cross apologized and pledged to use the money, ultimately totaling $1 billion, solely for those affected by the terrorist attacks.
Charities are determined not to make the same mistake.