American Red Cross as a nonprofit organization

¶ … non-for-profit organizations. Specifically it will discuss the American Red Cross and what it is a not-for-profit entity. Nurse Clara Barton founded the American Red Cross in 1881. It has since spread to countries around the globe, and it is often the first relief agency on the scene after natural or man made disasters strike. There are local Red Cross organizations across the country that coordinate their aid with local disaster agencies. For example, it is often the Red Cross that aids victims of house fires in local communities. They find them shelter and offer them food, clothing, and even money to help them get back on their feet. The Red Cross is founded on not-for-profit principles, but they have come under fire for how they handled their donations in the past.

The American Red Cross began as a domestic organization that helped victims of war, and then that spread to disaster relief, as well. Today, they also address other areas of need, including "community services that help the needy; support and comfort for military members and their families; the collection, processing and distribution of lifesaving blood and blood products; educational programs that promote health and safety; and international relief and development programs" (Editors, 2010). All of these programs take massive funds, and the Red Cross raises millions of dollars every year in donations from the public. They have also come under criticism for how they manage their funds, including how they manage large donations during times of intense crisis, such as the aftermath of the 9/11 terrorism attacks or the tsunami in Asia in 2004.

The Red Cross is a not-for-profit institution because they do not make a profit on their donations. They note, "An average of 92 cents of every dollar the Red Cross spends is invested in humanitarian services and programs. The Red Cross is not a government agency; it relies on donations of time, money, and blood to do its work" (Editors, 2010). As a non-profit, the American Red Cross offers tax deduction advantages to its donors, and it enjoys certain tax-related benefits from the IRS. The fact that it is non-profit has not been disputed, but the high salaries paid to employees and managers have been questioned in the past. Because of this, the Red Cross has tried to become more open about its finances, and Red Cross volunteers and staffers have spoken out. One long-term volunteer says, "But in 25 years I have yet to see a public service announcement showing an internal auditor looking at internal controls, a CFO preparing financial statements or an external auditor working with an American Red Cross exec and an audit committee to make operations more efficient" (Forbes, 2005). She goes on to discuss the fiscal controls in place in the Red Cross, and the extra controls that take effect after serious national disasters. She states, "The American Red Cross was one of only two charities that received an A-plus rating from a watchdog organization on its handling of the tsunami disaster donations" (Forbes, 2005). This has helped answer many of the critics of the organization, and indicates how important it is for non-profits to retain the trust of their volunteers and donors.

The Red Cross has become extremely efficient in mobilizing after a disaster and quickly offering aid. They are also well-known and largely respected in their field, so they tend to garner more donations after disasters hit. Another group of writers note that they raised billions of dollars to help aid the victims of hurricane Katrina in 2005. They note, "Overall, the ARC raised over $2 billion and fielded 230,000 volunteers in Katrina-related efforts. Over $11 million was raised in Dallas" (Eckel, Grossman & Milano, 2007). This gives them great responsibility as a non-profit, and has not saved them from scandal.

The American Red Cross came under fire after the Oklahoma City bombings in 1995. Donations poured in, but some families claimed that donations sent directly to them were never received, and that the Red Cross intervened. Initially, the Post Office and the Red Cross collaborated on managing all the mail that came in. "The Postal Service received thousands of cards, letters and gift packages that were addressed, for example, to 'the woman who lost two kids' the 'rescue dogs' or the 'family who lost the little boy' (O'Meara, 2001). The PO agreed that the Red Cross could go through those unidentifiable envelopes, remove any donations, and set up a fund to manage those donations. Many families of victims eventually received mail from the Red Cross that had been opened and donations removed. They eventually took the matter to court, where their claims were denied. One of the families told a reporter, "We even went to local television stations asking them to do a piece on it, but they said it would make us look money-hungry. That wasn't it, of course. We were upset that our mail was being opened" (O'Meara, 2001). The Red Cross denied it had any ulterior motives.