Money comes between charities, terror victims: Red Cross another black eye.

At Ground Zero in lower Manhattan, the remnants of the World Trade Center are now known as "the pile." While emotions have run high there, leading to physical confrontations between firefighters and police over access to the site, they are also reaching fever pitch over the pile of money raised to help victims of the September 11 terrorist attacks.

At the same time, thousands of pints of blood donated for potential victims will go to waste because the American Red Cross (ARC) could not manage the unprecedented surplus.

And, in a stunning reversal, the ARC announced that 100 percent of the $543 million in the controversial liberty Fund would go to the needs of September 11 terror victims and surviving families.

In confrontations that challenge the credibility of the nation's most reputable charities, the do-gooders are on the defensive, fending off allegations of self-interest and organizational ineptitude in the face of catastrophic trauma.

Among the highest profile casualties in the charity maelstrom is Dr. Bernadine Healy, forced out as ARC president and grilled intensively in a congressional hearing designed to weed out "fraud, waste and abuse" in the unprecedented relief effort. Healy's departure came suddenly, amid efforts to galvanize the nation around a central rallying point.

Within days after Healy's emotional announcement, Interim Chief Executive Harold Decker announced a major shake-up in the ARC ranks to improve communication. Gone were Kate Berry, chief of staff and executive vice president for external affairs, along with Ruth Sorrells, deputy secretary. Decker also eliminated the Board of Governors' Office, transferring those duties Andrea Morisi, interim corporate secretary in the Office of the General Counsel.

In the communications and marketing offices, Decker brought in Frank Donaghue, chief executive of the Southeastern Pennsylvania Chapter, to work with Senior Vice President Bill Blaul as a troubleshooter. Blaul, meanwhile took on new authority; supervising Chris Thomas, director of domestic and international communication and policy and Policy Analyst Laura Cavender. Blaul has since resigned.

Red Cross officials attributed the shakeup to a change in administrations rather than deeper problems in the organization. "We have a new chief executive officer and that's Harold Decker," said Michael Farley, vice president for chapter fundraising. "And he, like any senior leader, would want to organize their staff in a way they think works best for them."

While Decker managed another crisis -- the right of Israel's Magen David Adom organization to be a full member of the Red Cross and Red Crescent Societies -- the public relations blowup over the Liberty Fund remained clearly front and center as Congressional committees investigated allocation of donations.

"My highest priority is to ensure that the Liberty funds are disbursed quickly, efficiently and appropriately to meet the needs of victims and our nation, while retaining the trust and confidence of all those who have contributed so generously," Decker said.

To date, the ARC had spent $137 million from the Liberty Fund and project that $275 million will be spent by year's end. Expenses for the program will be paid from interest accrued on the fund. Decker said it would take several years for all of the money to be disbursed.

In addition to the money management issue, ARC had to deal with another public relations crisis, admitting that hundreds of thousands of blood donations -- an estimated one in five, according to some estimates -- would be destroyed due to lack of capacity for frozen reserves. While Healy told Congress that the surplus blood would be given to the military, military officials expressed surprise because the armed services already maintain their own reserves.

In many ways, the blood represented more of an outpouring of support than the money, with even Palestinian leader Yassir Arafat roiling up his sleeve.

"It's inexcusable," Arthur Caplan, former chairman of the federal Advisory Committee on Blood Safety and Availability, told The Washington Post. "It could be very damaging and cost them an enormous amount of good will."

Rep. Billy Tauzin (R-La.), chairman of the House Committee on Energy and Commerce investigating complaints about management of the record $1.2 billion collected by relief agencies, acknowledged the logistics nightmare. There were the estimated 5,000 deaths in the World Trade Center, the bureaucratic hassles of federal, state and city criminal investigations and the overlap of various charitable and governmental relief efforts.

"This is more than 25 times what was generously provided the victims following Oklahoma City, more than 10 times what was donated in the wake of Hurricane Andrew," Tauzin pointed out.

But that did not spare Healy from the brunt of allegations that the American Red Cross sought to bolster its financial health at the cost of victims' families. "I see the Red Cross, which has raised hundreds of millions of dollars that was intended by the donating public to be used for the victims of September 11 -- I see those funds being sequestered into long-term plans for an organization," New York Attorney General Eliot Spitzer told Tauzin's committee.

Within the American Red Cross, the debate concerning how to use the Liberty Fund has prompted rancorous debate, with Healy advocating for a long-term view, including potential demands arising from future acts of terrorism and military combat.

"The Liberty Fund is a war fund. It has evolved into a war fund," Healy said. "We must have blood readiness. We must have the ability to help our troops if we go into a ground war. We must have the ability to help the victims of tomorrow."

Although Healy has been making the rounds of television news programs, she has declined repeated requests from nonprofit sector publications for comments and clarifications.

While the ARC appeared to distance itself from Healy, Farley sought to clarify the purpose of the Liberty Fund to members of Congress. "We established the Liberty Disaster Relief Fund, a separate, segregated account that was created to hold and disburse funds related to the September 11 attacks, its aftermath and other terrorist events," Farley told Tauzin's committee. "This fund is structured to ensure that every dollar raised will go to help people who are and will be affected by acts of terrorism as well as to ensure the Red Cross will help people whenever and wherever terrorism strikes."

While the ARC is working hard to defend and explain its actions, Farley acknowledged the organization is also assessing its own missteps. "I think we certainly have a challenge here of clarity and intent," he told The NonProfit Times. "I think we need to be always clear and mindful of the donor intent and that what is given in good faith is used to maintain the trust of the donor."

But Farley said the ARC has also absorbed some unfair blows, such as an erroneous report in several newspapers and a wire service that the organization spent $100 million on telecommunications equipment. The confusion apparently arose over the ARC's creation of a 1-800 call-in line for families seeking information about potential victims. "The rest is just an urban myth," he said.

While no one can predict what future horrors the Al Qaeda terror network has in store for the United States, the victims of the September 11 attacks are reeling from the realities of daily life after losing family members.

Russa Steiner, of New Hope, Pa., wife of WiUiam R. Steiner -- presumed killed in his Marsh, Inc. office on the 97th floor of the North Tower of the World Trade Center -- told Tauzin's committee she has received only $1,244.57 from the Red Cross. To qualify for that amount, she had to submit bills for everything from trash pickup to weekly grocery bills. Meanwhile, an obscure Taiwan Buddhist charity called the Tzu Chi Foundation cut her a check for $1,000 as soon as she identified herself as a victim of the September 11 attacks. At the same time, she has received $1,500 from the United Way's September 11 Fund and other offers of help for her three college-student children, including a pledge of a future meal from Salvation Army.

Those outlays might look fairly responsive when compared to some of the other funds. Through the first week in November, for example, the New York Fallen Firefighters fund had not disbursed a single penny of the $6.5 million collected.

Elizabeth McLaughlin of Peiham, N.Y., widowed in the World Trade Center attack, said she had to build an 18-page spreadsheet to keep track of the qualifications the various relief efforts demanded. "Why then haven't these charities been able to get together and agree on one uniform application?" McLaughlin asked. "Why haven't they been able to get together and develop a quicker way for families to receive these funds?"

While the New York attorney general took steps to ease the impasse between relief efforts, Healy and the ARC initially balked at a potential threat to clients' privacy But she was forced by the board to reverse the Red Cross position. That meant the relief organizations could share a database that they, themselves would manage. Spitzer said the database would be modeled on one created in the wake of the Oklahoma City bombing designed to reduce fraud and duplication of services.

As pan of the reversal of course, ARC will provide the names of the 25,000 families it has helped to the database shared among relief agencies. However, affected individuals will be given an opportunity to opt out of the program without jeopardizing help from the ARC.

To restore confidence in its ability to manage a flood of donations, the American Red Cross pointed out that disbursing $137 million to 25,000 families and individuals in only seven weeks is no small task.

The organization has also provided more than 10 million meals and snacks (more than 10,000 per day) to families, police officers, firefighters, recovery personnel, rescue workers and investigators. Red Cross mental health workers have aided more than 144,000 people affected by the terrorist attacks.

To prevent further confusion concerning how donations will be handled, interim CEO Decker announced at the end of October that the Red Cross would stop soliciting contributions to the liberty Fund, a move that stirred further controversy. "We have enough to cover the anticipated needs," Decker said.

"Any contributions after Oct. 31 will be placed in the Disaster Relief Fund unless the donor specifies another purpose," he said. The Disaster Relief Fund is used to cover the expenses of domestic disasters, regardless of their source.

The rush to find a funnel for the funds pouring into charitable coffers after the September 11 attacks was reflected in an internal memo at a California Red Cross chapter acquired by The NonProfit Times. "Please note language that says funds go directly to 'victims' or to families of victims' can be misleading," the memo advised. "Once again, the funds go to the National Disaster Relief Fund to help provide support for this and other national disasters."

Sept. 11 Donations And Amounts Disbursed

Organization                Raised         Collected      Disbursed

Red Cross                   $564 million   --             $154 million
Sept. 11 Fund as of 10/26   $337 million   $248 million   $34 million
Salvation Army              $62.4 million  $62.4 million  $8.5 million
New York Times 9/11         $44 million    $44 million    $9.5 million
Family Freedom Scholarship  $30 million    --             $12.7 million
NY City Firefighters 9/11   $62 million    $62 million    $7 million
NY Fallen Firefighters      $6.5 million   $6.5 million   $0

SOURCE: CNN
How Red Cross Has Used $153.8 Million So Far


Immediate disaster relief  $72.4 million
Family gift program        $47.9 million
Int'l family assistance     $0.6 million
Blood readiness & reserve    $12 million
Armed forces services       $0.4 million
Community outreach         $14.7 million
Direct support costs        $5.8 million

SOURCE: American Red Cross
Charitable Response To One Victim's Family

Aid to Russa Steiner, wife of William R. Steiner, killed in WTC

Source                                 Amount

United Way                             $1,500
Red Cross                              $1,244
Tzu Chi Foundation                     $1,000
Salvation Army                         Holiday meal voucher
N.J. Relators Housing Relief Fund      Request pending
Families of Freedom Scholarship Found  Apps. pending
Twin Tower Fund                        Pending
Sylvan Learning                        Referral
Count Your Business                    Semester tuition
 Tuition Fund

Source: testimony Nov.6, 2001 before House Subcommittee on Oversight and
Investigations by Robert O. Baldi, attorney for Russa Steiner.