Red Cross Revises Its Fund-Raising Policies for Disaster Aid

In a move aimed at quelling concerns about how it raises funds, the American Red Cross last week announced new practices to make itself more accountable to donors. The Red Cross headquarters, in Washington, identified several steps it said would allow the organization to be more responsive to donors’ wishes and to be clearer about how disaster-relief contributions were being spent.

The charity hopes the changes will put an end to criticism that arose about its fund-raising practices after the September 11 terrorist attacks, when some members of Congress, donors, and charity watchdogs charged that the organization’s solicitations were potentially misleading. Many donors said they assumed the charity would put all donations to use helping people affected by the attacks, but the charity initially said it planned to use some of the money to prepare the organization to deal with future disasters. After many complaints, the charity said all of the more than $967-million it raised would go to dealing with the September 11 events.

“One of the lessons from September 11 is that the Red Cross must do a better job of educating donors about how we fund our disaster-relief services, while honoring their intent,” said David T. McLaughlin, chairman of the American Red Cross.

The new fund-raising practices, known as Donor DIRECT (which stands for Donor Intent Recognition, Confirmation, and Trust), make four major changes:

• Future solicitations will emphasize that gifts to the group’s Disaster Relief Fund could be used for operations other than the specific disaster the advertisements may mention.
• Donors who do not choose to earmark their gifts for a specific disaster-relief effort will be asked several times to confirm that they understand how their donations will be spent.
• The Red Cross will set up a toll-free telephone line to give donors the opportunity to contact the group if they have questions about their donations.
• The disaster-aid group will tell the public when it has collected enough resources to cope with an emergency and will recommend that surplus donations be applied to help victims of future disasters.

The policies will take effect June 30 for the national Red Cross and July 31 for local chapters, though national officials said some local groups may not be able to meet the deadline.

The practices were developed after six months of consultations with donors from across the country, officials from local Red Cross chapters, members of Congress, and others, including charity watchdog groups and associations that represent nonprofit organizations.

In general, the changes appear to have assuaged the concerns of critics. “We certainly think it’s a positive step,” said Juanita Scarlett, spokeswoman for the New York attorney general’s office, which had threatened to sue the Red Cross last fall over concerns about the way it handled donations raised for September 11 victims.

But despite the steps the Red Cross has taken, Ms. Scarlett said, New York State Attorney General Eliot L. Spitzer still plans to work with U.S. Sen. Charles E. Grassley, Republican of Iowa, to draft legislation that would impose stricter standards on the Red Cross and other nonprofit groups that are congressionally chartered.

Such legislation, which is expected to be finished this summer, would make sure the organizations meet the wishes of donors, Ms. Scarlett said. Mr. Spitzer has been offering advice on how to draft the measure to Mr. Grassley, who recently sent the Red Cross a letter with a series of questions about its fund-raising practices. The organization has until June 14 to respond to Mr. Grassley’s inquiry (The Chronicle, May 16).

The disaster-aid group’s effort to double-check that donors understand where their money will be going and to offer assistance in clarifying what happens to a contribution could lead other charities to follow the same procedures — and donors to demand that other charities follow suit.

“I would hope that others who are involved in disaster relief or any kind of fund raising would look at the strategies we’ve undertaken to make sure they understand what the donor intent is,” Michael D. Farley, vice president of chapter fund raising for the Red Cross.

Paulette V. Maehara, president of the Association of Fundraising Professionals, in Alexandria, Va., agreed. “This is a good practice for other organizations to follow, no matter what their cause,” she said.

Daniel Borochoff, president of the American Institute of Philanthropy, in Chicago, predicted that the American Red Cross’s new policies and the problems that prompted them would have more impact on donors than on charities. He says he hopes people will pay greater attention to the fine print on solicitations in the future.

Mr. Borochoff and officials from the Association of Fundraising Professionals helped to design the new Red Cross policies.