Correction to This Article
An Oct. 28 article incorrectly said that the American Red Cross received a $70 million appropriation from Congress last year to make up for a budget shortfall after four hurricanes hit Florida. The appropriation was for as much as $70 million, and of that, the Red Cross said it has received $27 million.

Red Cross Borrowing Funds for Storm Aid

University of Maryland student-athletes collect donations for the American Red Cross's Hurricane Katrina fund at a football game in College Park last month. The nonprofit predicts a disaster relief shortfall of about $400 million.
University of Maryland student-athletes collect donations for the American Red Cross's Hurricane Katrina fund at a football game in College Park last month. The nonprofit predicts a disaster relief shortfall of about $400 million. (By Doug Pensinger -- Getty Images)
By Jacqueline L. Salmon and Elizabeth Williamson
Washington Post Staff Writers
Friday, October 28, 2005

The American Red Cross said yesterday that its response to hurricanes Katrina and Rita has depleted its Disaster Relief Fund, forcing it to borrow $340 million to cover costs -- the first time in its 124-year history that the charity has sought a loan for disaster relief.

Of the $2 billion in donations the organization said it needs to handle relief efforts from the Gulf Coast hurricanes, it has received $1.3 billion and spent all of it. "Our best projections indicate we're going to have a shortfall of about $400 million," spokeswoman Carrie Martin said. "We're still determining how much Wilma will cost."

The financial problems come as some members of Congress and other relief agencies have begun to question the Red Cross's Katrina response, its largest ever. Many of the difficulties the charity has encountered this year mirror problems that surfaced in past catastrophes, records and interviews show.

The Red Cross holds near-mythic status as the premier U.S. disaster relief agency, a role reinforced by the federal government, which has incorporated the organization as a key part of its disaster response.

But the $3 billion charity spends two-thirds of its resources on blood collection, not disaster relief. And 90 percent of its disasters are small fires and local mishaps. During larger events -- such as violent storms, wildfires and the Sept. 11, 2001, terrorist attacks -- the Red Cross has stumbled repeatedly, misleading donors on how contributions are used and underserving victims, particularly in rural minority communities, according to other relief groups and experts on nonprofit agencies.

Although they acknowledged some missteps, Red Cross officials said the charity is more than capable. The problems and the current financial shortfall, they added, were due to the massive scale of the storm. "It's just staggering when you have an area affected that is the size of Great Britain," said chief executive Marsha J. Evans.

Critics said that is precisely the point: Similar problems have cropped up in at least a half-dozen other large disasters in the past 16 years, from the Loma Prieta earthquake in San Francisco and Hurricane Hugo in South Carolina in 1989 to the Sept. 11 terrorist attacks.

"The question is not whether we need something like the Red Cross, but whether its capacity is scalable to true catastrophes and multiple disaster events," said Kathleen Tierney, director of the Natural Hazards Center at the University of Colorado. "Now we're talking about a pandemic. Where would the Red Cross be?"

The Senate Finance Committee, which has oversight of nonprofit agencies, has said it is "monitoring" the group's performance.

"The Red Cross in its disaster response was more than a charity. It was also a federal contractor," said Sen. Charles E. Grassley (R-Iowa), chairman of the committee. "It's appropriate for Congress to verify whether taxpayers got their money's worth."

On the House side, Rep. Bennie Thompson (D-Miss.) has sent the organization a letter asking about delays in helping Katrina victims; procedures for providing aid and training volunteers; and steps the charity has taken to "reach out to religious organizations, especially African-American religious entities."

Evans responded with a seven-page letter laying blame for delays on the Federal Emergency Management Agency, and she assured the committee that "the American Red Cross seeks to develop long-term cooperative relationships with community and faith-based organizations."


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