Humanitarian and International Development NGOs

The American Red Cross announced recently that their disaster relief fund was depleted, meaning the organization will have to borrow significant sums to fund relief operations for the Midwest floods.  This is not a good situation, especially with hurricane season about to arrive.

Peter Dobkin Hall, a Hauser Center principal who has done exceptional work on the arcane, baffling, and often ineffective arrangements that constitute Red Cross governance, attributes the situation to a decline in Red Cross credibility.

I’m not so sure.  Despite high-profile snafus and a revolving door at the CEO level, the general public still rates the American Red Cross as one of the most trusted and well-known national nonprofit brands.  I think this is more a function of a broken business model for disaster fundraising.

The masterful fundraising machine at the Red Cross knows well what all relief organizations understand - the most profitable time to raise funds for relief occurs in the immediate aftermath of a disaster.  In the past, it was Red Cross practice to put contributions received during one disaster into a general fund that could also be used in future emergencies.

The problem: donors were responding to the crisis at hand, and many weren’t happy when they learned that some of the money was being put aside for another “rainy” day.  Not to mention that affected communities did not take kindly to learning that they might not benefit from all the money raised during their time of need.

Both had a point.  Under pressure, the Red Cross adopted a policy of double-checking with donors who did not earmark their donations, so donors understood their contributions were going to a general fund rather than a specific crisis.  This type of transparency should be (and always should have been) the norm in the sector.

What the Red Cross hasn’t done, however, is adapt.  It’s absolutely necessary to have a robust reserve fund, in order to attend to myriad crises that may occur during a given period.  This is especially true as the response by donors to different disasters becomes increasingly uneven (without clear reasons, no matter how much we talk about “donor fatigue” or man-made vs. natural emergencies or the varying levels of media coverage), and mid-level emergencies promise to occur more often (as climate change becomes more pronounced).   It’s not easy to raise money for such a fund just on its merits.  Educating the public about the true nature of disaster response will help, but I don’t think will ever suffice.

To be fair, this is not an easy problem.   Instinctively, I don’t think the Red Cross will be able to solve it on its own. It will become increasingly untenable to rely upon timely and disaster-specific donations to provide relief.  (I also think it will be increasingly untenable for the Red Cross to be the primary provider of services in all cases - Katrina highlighted that a decentralized, local response is most effective in a large-scale catastrophe.)

It may take a collective partnership - similar to the joint appeal concept I outlined in an earlier post, but perhaps on a permanent basis - to build and develop a fund that collects money in an insurance capacity. The fund would not be Red-Cross specific, but would provide support to any organization (even local) that responds responsibly.  The fund might also become the primary contribution vehicle for the general public during a disaster. For such a fund to be successful, however, the Red Cross would have to be willing to play a lead development role, and in true partnership.   One thing is clear: as the donating public views disasters and relief operations as less than exceptional events, we’ll need to change our fundraising approach to reflect this.