Red Cross Fends Off Fundraising Criticism

The American Red Cross, under increasing criticism for its handling of half a billion dollars in Sept. 11 donations, said on Tuesday that it had spent nearly a third of the money on direct disaster relief and offered new details on how it plans to spend another third.

And the plans go far beyond victims and rescue workers. The agency says it will spend tens of millions of dollars in the coming years on freezing its blood supplies, on programs to promote “humanitarian principles such as neutrality and unity and encouraging tolerance” and on administration efforts.

Hours before being called to testify before a hostile House subcommittee on the subject, the Red Cross said it has already spent or committed $154 million of the so-called Liberty Fund to victims of the terror attacks and those involved in the relief efforts.

The Liberty Fund is an independent account created after Sept. 11. which stopped accepting donations two weeks ago when the total take had reached $564 million.

The plan announced Tuesday offers a blueprint for how the agency plans to spend another $166 million of the remaining $320 million.

The organization says it will spend the money on general disaster relief and preparation for future bio-terrorist attacks on the United States, including $50 million to cover the cost of collecting, freezing and transporting blood donations for future use.

It also will set aside $29 million to install phones, data bases, audit services and communications centers to help distribute the money, and another $16 million to expand local chapter services to include "promoting humanitarian principles such as neutrality and unity and encouraging tolerance," as well as grief counseling, outreach services and "humanitarian law efforts."

The remaining $71 million will be used for the Red Cross armed services program and long-term goals.

"We exercise judgment and some may not agree. But I believe (the funds) will continue to be used wisely," said Dr. Bernadine Healy, American Red Cross president and executive director.

Healy abruptly resigned last month over her differences with the organization’s board about how to spend money in the Liberty Fund. She is due to leave her post at the end of the year.

Healy testified Tuesday before the House Energy and Commerce Oversight Subcommittee shortly after two women whose husbands perished in the World Trade Center attacks. The pair complained that they were having trouble getting relief from the Red Cross, which promised $129 million for the families of victims.

Another witness, New York Attorney General Elliot Spitzer, told the panel that he thought the Liberty Fund money was being "sequestered."

"It is an anathema of what the American public expects," he told lawmakers.

Subcommittee members pummeled Healy with accusations that the Red Cross had not clearly conveyed to contributors that their money may not go to people affected by the attacks or to rescue workers at the attack sites.

"Questions have been raised... how can they be sure the money they sent out of the generosity of their hearts is going where it is intended?" asked Rep. Billy Tauzin, R-Louisiana.

Healy said the Red Cross was doing all it could to contact families, but could not explain the delay in services. "There is no excuse for that," she said.

Part of the problem, however, may be bureaucratic delays as well as the need for proper assessment of and contact with victims in need, said Stacy Palmer, editor at the Chronicle of Philanthropy.

Palmer's organization has found that most of the $1.2 billion raised by charities has not been spent yet. She said the Red Cross was clear from the start that "some of the money would pay for administration, some for freezing blood, and some for getting prepared for bio-terrorism."

Palmer said that the Red Cross publicly posted its plans on the Red Cross Web site in recent weeks, but that word did not reach the bulk of donors.

"They (donors) are definitely angry and concerned. They thought the money was going to go to the victims and go to them fast," said Palmer, who added that the bad perception was already hurting other charities.

Other groups besides the Red Cross raised considerable sums following the attacks. The September 11th Fund, created by the New York Community Trust and the United Way of New York City, brought in $186 million as of Oct. 23. The Salvation Army collected $50 million as of that date; the Families of Freedom Scholarship Fund, an education fund for children of victims, raised $10 million; and Catholic Charities collected $8 million.