American Red Cross' Bank Account Runs Dry

American Red Cross is pleading with donors to keep giving despite weak economy.

June 18, 2008 — -- The organization best known for helping people cope with the aftermath of tragedy – the American Red Cross – is in dire need of assistance itself as it pleads with Americans to make donations to its depleted relief fund.

"Right now the balance in our disaster relief fund is sitting close to zero," Laura Howe, a spokesperson for the American Red Cross, told "We anticipate that the series of tornadoes and floods that we've had since the beginning of April is going to cost our organization about $15 million."

For the first time since Hurricane Katrina, in 2005, the Red Cross may have no choice but to take out loans to cover the cost of relief efforts, Howe said, blaming the shortfall on an atypically high number of disasters across the U.S. this year.

"What's been difficult since [Katrina] is the large number of medium-sized disasters we've had in the last couple of years that have really chipped away at the disaster fund," said Howe. "It's important for people to know that the fund is where we draw from to pay for all of our disaster relief efforts, ranging from an apartment fire in Massachusetts to hurricanes."

While local Red Cross chapters have their own money, if tragedy strikes and the community is unable to meet the need, funds are taken from the national disaster relief fund.

The $15 million the Red Cross hopes to raise will cover the approximately 30 disasters that have occurred in the past two months, said Howe, but will mainly go to funding the relief effort for those affected by the floods in the Midwest.

The floods have claimed more than 20 lives and caused the evacuation of about 40,000 people along the swollen Iowa and Mississippi Rivers.

Howe is concerned that with the approach of the hurricane season, the Red Cross will have no money to draw on.

"We're heading into hurricane season already strapped with the cost of very large relief organizations for tornadoes and flooding," said Howe.

The reasons why Americans are not in the giving mood lately depend on whom you ask. The Red Cross believes it's because smaller-scale disasters don't garner nearly as much attention as larger ones like Hurricane Katrina. Others suggest that a weak economy and the organization's tarnished reputation has put a damper on donations.

"With bills and gas and food prices going up, people are not making charity as much of a priority as they ought to," said Daniel Borochoff, president of the Chicago-based American Institute of Philanthropy. "If people aren't optimistic [about the economy] or think gas prices will continue to escalate, then they're less confident to give."

Borochoff added that public opinion of the Red Cross may also be a factor.

"People who follow the Red Cross have concerns about its revolving door – there have been seven CEOs in seven years," said Borochoff. "Those who have memories of what happened after 9/11 and Hurricane Katrina and think their money wasn't handled as best as it could have been have concerns."

Will Cash-Strapped Americans Pony Up?

"The American Red Cross and its continued leadership issues and fundraising issues is having an effect on the public's confidence and willingness to give," Bob Ottenhoff, the CEO of Guidestar, which provides information on U.S. nonprofit groups, told

"There was some grumbling after Katrina about whether they'd done an effective job," said Ottenhoff, "and I think there is still some public concern about that."

Even so, these disaster relief experts say that giving with some doubts is far better than not giving at all because the Red Cross is still the leading organization when disaster strikes.

"The nonprofit volunteer sector is the key resource for providing national disaster relief, so we're very vulnerable as a society if these organizations do not have the resources to provide the emergency care we've come to expect," said Ottenhoff.

"But Americans do respond to crisis," he added. "We've seen that time and time again after 9/11 and the tsunami and Katrina and even with the earthquake in China."

"I would never underestimate the generosity of the American public," he said.