American Red Cross borrows $400m for disaster relief.

Washington -- For the first time in its history, the American Red Cross had to borrow $340m for its Disaster Relief Fund, depleted by its responses to hurricanes Katrina and Rita.

The ARC needs $2 billion in donations to support the relief efforts in the Gulf Coast areas affected by hurricanes. Approximately $1.3 billion was donated and spent in these areas. The organization has not completed a tally of the costs associated with hurricane Wilma.

The ARC raised $3 billion for charity and spends two-thirds of its resources on blood collection, not disaster relief. The agency has been subject to considerable criticism for its handling of large scale disasters in the U.S. in recent years. It has been accused of misleading donors on how contributions are used and giving less than adequate aid to victims, particularly in rural minority communities. Critics are questioning whether the ARC can deal with large scale disasters.

The ARC responds to these assertions by pointing out that the number and scale of the disasters is much greater than it has ever experienced. It also joined the many critics of the Federal Emergency Organization, for failing to provide resources and guidance.

By Act of Congress in 1905, the Red Cross is designated by the federal government as the front-line responder in national emergencies in providing "mass care"--shelter, food and first aid for disaster victims. It also functions as a support agency to the government in providing blood, first aid and counseling services.

The Senate Finance Committee, which has oversight of nonprofit agencies, is monitoring the group's performance.