“The American Red Cross regularly touts how responsible it is with donors’ money. ‘We’re very proud of the fact that 91 cents of every dollar that’s donated goes to our services,’ Red Cross CEO Gail McGovern said in a speech in Baltimore last year. ‘That’s world class, obviously.’
“McGovern has often repeated that figure, which has also appeared on the charity’s website.
“The problem with that number: It isn’t true.”
That stunning revelation was made in a recently released investigative report by ProPublica and NPR.
American Red Cross National Headquarters
The Red Cross is a great organization. My wife and I have been donors. I even did a blog post highlighting the effective stewardship practices at the Red Cross and encouraging readers to support the organization. The American Red Cross does not have to “serially mislead” the public.
Yet, that’s exactly what it has been doing according to the reporters. While the organization has told the public that 91 cents of every donated dollar goes to services, its fundraising cost to raise a dollar has been 17 cents on average. And that does not include organization overhead expenses. Clearly, the Red Cross has not been as efficient as its leader has claimed.
When reporters contacted Red Cross officials for more information, those officials were uncooperative. However, the organization did change the claim on its “website to another formulation it frequently uses: that 91 cents of every dollar the charity ‘spends’ goes to humanitarian services. But that too is misleading to donors,” states the investigative report.
Sadly, this is not the first time that the Red Cross has been accused by the media of misleading the public.
As a Red Cross supporter and a fundraising professional, I’m alarmed and disappointed by the behavior of the Red Cross. Misleading the public, either through lies or the clever manipulation of language, is unnecessary, unethical, and unacceptable.
Such inappropriate behavior erodes public trust, which makes fundraising more difficult. Perhaps this is one reason that the Red Cross has had trouble consistently raising more money. In 2009-10, the Red Cross raised $1.1 billion. In 2012-13, the Red Cross again raised $1.1 billion.
In a study that examined the relationship between trust and philanthropy, researchers Adrian Sargeant and Stephen Lee found, “there would appear to be a relationship between trust and a propensity to donate.” In addition, “there is some indication here that a relationship does exist between trust and amount donated, comparatively little increases in the former having a marked impact on the latter.”
In other words, public trust level affects both propensity for giving and the amount given.
If an organization desires to raise more money, it should strive to be completely honest and thoroughly transparent.
By its own behavior, the Red Cross is hurting itself. That’s certainly bad enough. Unfortunately, the Red Cross is likely making it more difficult for all charities to raise money. As its behavior erodes trust in the Red Cross, it might also erode public confidence in the entire nonprofit sector. In addition, by setting a false standard for cost per dollar raised, the Red Cross is potentially making life more difficult for organizations that honestly report their numbers.
Think I’m overstating the danger? Consider what happened in Scotland a number of years ago. The Sunday Mail newspaper published a report highly critical of the professional fundraising company Solutions RMC and its work for a breast cancer research charity. The controversy had an impact throughout the charity sector in Scotland, even affecting charities that never worked with Solutions RMC. Some cancer charities saw a downturn in contributions as high as 30 percent in the months following the controversy, according to Andrew Watt, now President and CEO of the Association of Fundraising Professionals.
Nonprofit professionals that erode the public trust not only harm their own organizations, they potentially harm the entire charity sector.
Everyone who works within the nonprofit sector has an obligation to themselves, their organizations, and the entire sector to behave in accordance with the highest ethical standards. Maintaining the public’s trust is not always a simple matter. However, it’s far easier to maintain trust than regain it once it’s lost.
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That’s what Michael Rosen says… What do you say?
UPDATE (Jan. 13, 2015): Sen. Charles Grassley (R-IA) has asked the American Red Cross to explain how it calculates figures showing how much of a donated dollar goes to services. He told The Chronicle of Philanthropy, “The public’s expectation for an important, well-known organization like the Red Cross is complete, accurate fundraising and spending information. In reaction to the news reports on this topic, I’m asking the Red Cross to elaborate on how it calculates the facts and figures given to the donating public.” You can read more by clicking here.
UPDATE (Feb. 23, 2015): The American Red Cross has demanded that ProPublica and NPR make a series of corrections in their report about the disaster-relief agency’s activities. ProPublica and NPR have both declined citing the accuracy of their reporting and the opportunities they previously gave the Red Cross to respond to allegations. You can read more by clicking here.
