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  • The Red Cross has long been recognized as a

  • universal symbol of humanitarian services, and

  • it's an enormous operation. The American

  • Red Cross has about 230 chapters nationwide, with

  • almost 18,000 employees and more than a quarter of

  • a million volunteers responding to more than

  • 60,000 disasters every year.

  • It's really the preeminent organization in the wake

  • of domestic national disasters like floods,

  • hurricanes, wildfires.

  • In 2022, the American Red Cross had net assets of

  • about $2.7 billion and spent just over $3 billion

  • in operating expenses the same year.

  • When you look at charities in the United States, most

  • are quite small.

  • $0 to $5 million is where the vast majority of

  • American nonprofits sit today.

  • So the American Red Cross really is at a different

  • size and percentage than just about everyone else.

  • When the White House starts raising money, when

  • big corporations, the NFL, Hollywood A-listers,

  • when they're raising money in the aftermath of

  • a disaster, it's most likely targeted towards

  • the American Red Cross.

  • But the sheer size of their budget has also

  • raised concerns over the years.

  • There is controversy swirling around one of the

  • biggest charities of all, the Red Cross.

  • There are critics raising questions about

  • transparency and about how the money you give is

  • spent.

  • They're the biggest player, they're receiving

  • the lion's share of the funds. And so of course,

  • the focus is going to be on what they're doing with

  • that money.

  • So how does the American Red Cross make and spend

  • its billions?

  • In 1863, The International Red Cross

  • Movement first began in Geneva, Switzerland, to

  • help protect the sick and wounded during combat.

  • A nurse by the name of Clara Barton later brought

  • the idea to the U.S.

  • in 1881, and established the American Association

  • of the Red Cross.

  • Today, it's one of the few selected

  • congressionally chartered non-profits in America,

  • frequently collaborating with federal institutions

  • like FEMA and the U.S.

  • military.

  • The American Red Cross is a large and established

  • and very well-funded organization, and so it's

  • really able to have its hand in a lot of different

  • programs.

  • Their most well-known efforts are arguably in

  • disaster relief.

  • This can range from responding to small house

  • fires to multi state natural disasters such as

  • hurricanes, floods and wildfires.

  • One of the primary things it does is that it

  • mobilizes volunteers to provide boots on the

  • ground aid in the wake of domestic national

  • disasters, and so it helps to transport and

  • distribute aid to people in emergency situations.

  • And it can often do this before some of the other

  • non-profits can come in and do what they do best,

  • such as medical professionals.

  • But the organization's biggest operation is

  • actually in blood supply.

  • The American Red Cross is essentially responsible

  • for about 40% of the blood supply in the United

  • States. It's central to the supply chain for blood

  • transfusions. So it collects and tests

  • volunteer blood donations. And then it's

  • responsible for distributing these blood

  • donations to about 2,500 facilities and hospitals

  • across the country.

  • The American Red Cross also performs other lesser

  • known services, such as providing training and

  • certification, assistance for military families, and

  • international aid and support.

  • When you've been around for over 100 years, you

  • start growing into the areas that you really can

  • contribute, and the American Red Cross has

  • clearly done that in a very effective way.

  • In 2022, the Red Cross generated over $3.2

  • billion in operating revenue.

  • A third of that, about $1 billion, comes from

  • contributions. These include donations from

  • corporations and individuals, contracts

  • from the federal government, as well as

  • donated materials and services.

  • It's really sort of the charity of choice.

  • When the White House starts raising money, when

  • big corporations, the NFL, Hollywood A-listers,

  • when they're raising money in the aftermath of

  • a disaster, it's most likely targeted towards

  • the American Red Cross. And that puts them in a

  • really unique position as sort of the main recipient

  • of donations in this immediate aftermath.

  • The American Red Cross is quite effective in their

  • fundraising, and we look at the fundraising

  • efficiency and essentially how many cents

  • on the dollar does it cost you to raise a

  • dollar. And in 2022, it costs them 17.8 cents to

  • raise $1.

  • But the majority of their revenue, just over $1.8

  • billion, comes from what their financial statements

  • refer to as biomedical services.

  • Predominantly funded by programs oriented on the

  • sale of biomedical products, which is really

  • their blood business.

  • The American Red Cross essentially collects blood

  • from donors, and then as part of the way it raises

  • revenue to recover costs, it then sells that blood

  • to about 2,500 hospitals and medical facilities

  • across the country.

  • When CNBC inquired about the pricing of these

  • products, the American Red Cross responded that

  • prices for a unit of red blood cells is proprietary

  • information. The pricing is determined by purchase

  • volumes by blood type, service levels, and

  • delivery requirements, as well as other agreed upon

  • terms with a hospital.

  • The more transparent an organization can be, the

  • greater the possibility, I think, for trust to be

  • established between that nonprofit and its donor

  • base. If it appears that you're withholding

  • information or you're being a little bit closed

  • with some of your practices, that can raise

  • concern.

  • The American Red Cross further clarified that it

  • does not charge for the blood itself, but instead

  • is reimbursed by hospitals and transfusion

  • centers for the costs associated with providing

  • blood products.

  • A majority of the American Red Cross is

  • operating expenses, just over $2 million, are also

  • spent on collecting blood. About $139 million

  • more than the revenue they make from biomedical

  • services.

  • Drawing blood is actually a medical intervention

  • that requires certain levels of certification by

  • the people doing that work. The preservation of

  • that blood, sort of keeping it refrigerated,

  • making sure that it actually stays clean, gets

  • through all these places. All of that costs money.

  • I think one should take comfort in the fact that

  • they're trying to run a sustainable business, so

  • that they can also provide aid and disaster

  • recovery, and then help train us in the different

  • areas of, let's say, CPR and first aid.

  • The American Red Cross revenue has always

  • surpassed its operating expenses every year since

  • 2020. That has allowed the organization to build

  • up its net assets to about $2.7 billion.

  • Nonprofit organizations.

  • They don't have a quote, unquote profit per se.

  • They do have increases and decreases in their net

  • fund balance. And so what that means is that, in

  • some years, an organization might take in

  • more money than it spends, and another year

  • it might spend more than it takes in.

  • They have to have money on hand so that they can act

  • instantly. When a hurricane hits or a fire

  • starts burning somewhere.

  • You can't start looking for money when you need

  • people on the street instantly, and you're

  • sending out ambulances and trucks and whatever it

  • is that needs to happen there.

  • So generally, the American Red Cross is not

  • different than any other working charity.

  • When you have an excess, you put it in reserves.

  • When you need it, you spend it.

  • The Red Cross also claims that it spends an average

  • of $0.90 for every dollar it spends on those who are

  • in need, based on their financial statements for

  • 2022, overhead expenses like fundraising and

  • management accounted for just 9.3% of total

  • expenses.

  • This is a very large organization, and when you

  • look at in a global way, how does it spend?

  • How efficiently does it spend its resources?

  • Overall, it's a highly efficient organization.

  • Nevertheless, the American Red Cross has faced

  • numerous criticisms regarding the utilization

  • of funds and its effectiveness.

  • A 2007 Government Accountability Office

  • report said the Red Cross lacked adequate plans for

  • providing shelter and temporary housing to

  • victims of catastrophic disasters such as

  • Hurricanes Katrina and Rita.

  • After 9/11, government officials criticized the

  • Red Cross for diverting relief funds to its

  • general operating fund.

  • Criticism surrounding the American Red Cross's

  • response to the 2010 Haiti earthquake led

  • Senator Chuck Grassley to release a memo in 2016.

  • His inquiry revealed that a quarter of the raised

  • funds for relief were spent on other expenses.

  • The Red Cross immediately disputed these claims,

  • arguing that 91% of the $490 million collected was

  • invested in programs, while just 9% was spent on

  • overall management, general, and fundraisers.

  • Experts suggest that matters like these are

  • often due to a lack of transparency.

  • You can look at Red Cross annual reports, monthly

  • reports, updates from their different disaster

  • response, and you see these huge numbers.

  • That's great. But what does that actually mean?

  • And it's not in their interest to break that

  • down and explain what that means.

  • So in Haiti, the Red Cross was saying, we

  • provided 130,000 people with new homes.

  • Well, that's not true.

  • The Red Cross built six new homes in Haiti.

  • What that number actually is including are families

  • that got rental subsidies, people who got

  • training in construction techniques right across

  • the board. These things don't necessarily actually

  • put a roof over anybody's head.

  • They're broadly involved with the shelter sector.

  • Senator Grassley eventually introduced the

  • American Red Cross Transparency Act in 2016

  • and 2019, to allow for more government oversight

  • over the organization.

  • Previously, in 2015, Gao published a public study

  • concluding that no regular independent

  • evaluations are conducted of the impact or

  • effectiveness of the Red Cross disaster services.

  • I think not just the Red Cross could benefit from

  • greater government oversight, but NGOs across

  • the board. It's a sort of Wild West out there.

  • These groups bring in hundreds of millions of

  • dollars and are spending it all over the world, and

  • there's very little accountability for what

  • they're spending it on, how they're managing that

  • money. And so I think any step that can lead

  • towards, first off, greater transparency and

  • second off, greater accountability should be

  • welcomed by these organizations.

  • Experts suggest that such a level of scrutiny is

  • inevitable for organizations like the

  • Red Cross.

  • I think the American Red Cross comes under scrutiny

  • much more than other organizations, primarily

  • because they tend to be everywhere there's a

  • problem. They're highly visible.

  • And that visibility, plus their size, plus the fact

  • that we have a dependance on them, we do hold them

  • to a higher standard.

  • But criticisms could help Red Cross to grow even

  • further.

  • It's really important for people to understand we

  • are all stakeholders, either as donors or as

  • taxpayers in the Red Cross, as well as other

  • charities. In terms of, we do need to hold them

  • accountable for operating efficiently and

  • effectively because we're essentially, as taxpayers,

  • subsidizing this and other charities' ability

  • to exist. When it's well placed criticism, that's

  • part of what helps a nonprofit to evaluate how

  • it's operating and to improve and to get better.

  • So, while it does receive some criticism because of

  • the huge volume of work that it does across the

  • country, the best thing it can do is to take that

  • criticism to heart and kind of self-reflect and

  • find ways to improve its transparency, to improve

  • the way it operates, and to mitigate any sort of

  • fraud or mismanagement or theft that does go on

  • during natural disasters.

  • There's all kinds of ways to improve.

The Red Cross has long been recognized as a

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