Red Cross to Overhaul Policy on Donation Appeals

Wed Jun 5, 5:29 PM ET
By Todd Zwillich

WASHINGTON (Reuters Health) - The American Red Cross (news - web sites) announced on Wednesday plans to revamp its fundraising practices in the wake of public outcry over the organization's use of money intended for victims of September 11.

The shift will take the form of new marketing standards governing appeals to the public for contributions. Red Cross officials said they will change the way the group solicits donations for its Disaster Relief Fund by improving disclosure to contributors about how the money may be spent.

The group was rocked by widespread complaints that funds raised in response to the attacks were steered toward disasters not related to the terrorist attacks on the World Trade Center and the Pentagon (news - web sites). Officials said the reforms were an essential part of regaining public trust.

The ensuing controversy helped bring about the ouster of former Red Cross president Dr. Bernadine Healey and led to the appointment of former Senate Majority Leader George Mitchell to independently oversee one of the organization's funds.

"Most of the time, disaster after disaster, we usually get things right," said David McClaughlin, chair of the American Red Cross. "We've made some unintended mistakes" that "have raised some important questions about our fundraising practices," he said.

Iowa Senator Charles Grassley, the senior Republican on the Finance Committee, issued a statement saying he was encouraged by the policy shift. "The more transparency from the Red Cross to potential donors, the better," he said.

The organization's Disaster Relief Fund is a revolving account used to finance relief efforts for the victims of natural disasters throughout the year. For years, the Red Cross has used images of and references to specific disasters in its marketing materials.

Print appeals for donations will now avoid mentioning specific disasters in headlines, though they will still mention them in text lower down, according to the new policy. All printed advertisements will also make it clear to potential donors that money given to the fund may be used in other relief efforts.

Ads will now contain text that reads, "You can help the victims of this disaster and thousands of other disasters across the country each year" by supporting the Disaster Relief Fund. Ads will further explain that the fund is a pool of money available to all disaster victims.

Potential donors will also be required to confirm that they want their contributions to be directed to the Disaster Relief Fund for any or all disasters. Confirmations will take the form of checking a box in the case of direct mail or other printed solicitations and a recited confirmation by an operator in the case of telephone solicitations.

Donors giving over the Internet will be required to click a box confirming their approval, officials said.

Officials stressed that they will still honor donations made explicitly for specific disasters, though they will not encourage the practice.

Appeals will also now inform potential donors when the costs of a particular disaster have been paid.

Donor intent "will be the centerpiece of everything we do," McClauglin told reporters at Red Cross headquarters near the White House in Washington, DC.

Officials also said they will probably avoid setting up separate funds targeted toward victims of specific disasters. A Red Cross account called the Liberty Disaster Relief Fund raised nearly $1 billion for victims of the terrorist attacks in New York, Pennsylvania and the Washington, DC area, but became controversial when donors learned that some money was used in other, non-terrorist-related disasters.

The fund disbursed $567 million as of April 30, 2002 and still holds about $400 million, according a Red Cross financial report written by Sen. Mitchell.

The Better Business Bureau received over 17,000 e-mails per week shortly after September 11 complaining about the Red Cross and other charities, according to H. Art Taylor, president of the bureau's Wise Giving Alliance, a charity watch-dog group.

"You never want to say never," said Harold Decker, interim president and CEO of the Red Cross. "It is unlikely that we would do something like that again."

Taylor said the new solicitation policies are likely to help meet the public's rising expectations about the use of donated money. "It's certainly a step in the right direction," he said.

But Taylor, whose group was consulted about the new policy, cautioned in an interview that Red Cross must continue to sample public expectations about the use of money and change its rules accordingly.

"This can't be seen as a one-shot deal," Taylor said.