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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Red Cross relief fund tapped out

Jacqueline L. Salmon and Elizabeth Williamson Washington Post

WASHINGTON – The American Red Cross said Thursday 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,” said spokeswoman Carrie Martin. “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, said 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 size of the storm. “It’s just staggering when you have an area affected that is the size of Great Britain,” said chief executive Marsha Evans.

Critics said that is precisely the point. “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.

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.”

Chartered by Congress in 1905, the Red Cross today is designated by the federal government as the nation’s front-line responder in national emergencies in providing “mass care” – shelter, food and first aid for disaster victims. It also functions as a support agency to the government in providing blood, first aid and counseling services.

Those services are not affected by the current shortfall in the disaster fund. The Red Cross has taken out a $1 billion line of credit from seven banks and continues to raise money from the public.