Only 6% spent of $115 million in donations while "people are on their knees".
On January 22, Australian Red Cross gave an update on its plans to spend the $115 million in donations received. While the Daily Mail’s headline of 10% budgeted for administrative costs drew knee-jerk reactions, criticisms about delays in distributing aid are valid. In disaster response, speed matters.
Australian Red Cross response has been painfully slow. It began raising donations in July 2019 and only 6% has been paid out.1 It is baffling why Australian Red Cross has not executed direct cash transfers, an evidence-based, best practice in disaster response. On top of this, Australian Red Cross has only committed/budgeted 26% of donations to directly help the victims. The rest of the money will meet longer-term and future rebuilding needs. Donors are rightly outraged, yet should have known better.
“The money’s needed now. We need a real change, very quickly … people are on their knees and we can’t have a drip-feed.” Watch MP Andrew Constance’s interview
Australian Red Cross is the slowest of the major disaster charities in getting aid out. It has distributed 6%, Vinnie’s (St. Vincent De Paul) has spent 9% of its $11.5 million and Salvation Army has spent 24% of its $44 million.2
To date, Australian Red Cross has paid out 559 grants of $10,000 to people who lost their homes in the bushfires. If 2,000 homes are burnt down, that would be $20 million in Red Cross funding.
Australian Red Cross is committing to spend only $30 million (26% of its donations) on immediate assistance for the victims of the bushfires. The remainder of donations are budgeted for longer-term rebuilding and community supports out to 2023.
Why is Australian Red Cross not doing fast cash transfers?
Skeptics quip that “the cheapest form of charity is just handing the money out”3 and “piss the whole $115 million away without checks and balances”. Cash handouts are cost-efficient, "cheap", they are not wasteful and, most importantly, they are effective.
Cash handouts, otherwise known as direct cash transfers, are the evidence-based, most impactful way to help people in disaster response. Cash empowers each person to best meet their immediate needs.
Charities ask that people give cash rather than donate stuff. People affected by disasters also prefer receiving cash rather than stuff and services they may not need. Cash is the best aid in disaster recovery.
The human spirit is resilient. Trauma, domestic violence and suicide rates will rise if the response is delayed. People whose homes have burnt down can camp out, live in temporary housing, tents, or cars for only so long. There is a two-year window. After this time, despair sets in.
A current trend in disaster response is to put greater weight on long-term rebuilding. This is a deep concern. No evidence shows that money spent later is better. In fact, research proves that immediate cash payments have more impact than later rebuilding aid.
Canadian Red Cross best practice in Fort McMurray response
In the May 2016 Fort McMurray wildfire response, Canadian Red Cross got 30% of donations received out to victims in the first 30 days. Working with Canadian banks, Canadian Red Cross did an initial direct cash transfer on Day 5. With additional donations, it distributed a second cash transfer on Day 25. Through corporate partnerships, Canadian Red Cross e-transferred a total of $75 million to more than 38,000 registered households in less than 30 days.
“We are keen to get the money out but we also need to make sure it’s getting where it’s needed. We must manage the money so we are not scammed … we want to make sure we are protecting donors’ funds.”
Noel Clement, Director, Australian Programs at Australia Red Cross4
Universal distribution, namely cash for everyone affected, is critical in speed and efficiency. Doing individual needs assessments, finding those “most vulnerable, those most in need” takes too much time. Most people’s documents are in ashes. Without papers, how does one prove need? It takes far too much time for a charity to identify those “most in need”. Furthermore, what qualifies someone to be more in need than their neighbour? And what is any disaster charity’s criteria to make this judgment? One of the greatest lessons learnt recently in disaster response is that universal cash distributions are far cheaper, faster and effective.
Fears of scams are vastly overstated and unjustified. There is little need for checks and balances. In the Fort McMurray fire, Canadian Red Cross transferred $75 million, yet only $46.7 million was deposited - $28.3 million was not accepted.5 Put another way, 38% of people who were offered charitable aid, didn’t take it. They didn’t take what was theirs, perhaps because they knew of others who were worse off, and so others could have more.
The vast majority of people are good. Trying to screen out the few bad apples is not worth the additional cost and delays. Charities ask people to trust them. Charities should also place more trust in people.
What this means for donors: Research before you donate – you have to read the fine print
“This is not in the spirit of what Australians gave that money”,
New South Wales Emergency Services Minister David Elliott said.6
In July 2019 Australia Red Cross specifically launched a general fund for “Disaster Relief and Recovery”. As such, Australian Red Cross can legally use donations received for bushfire aid, future disaster responses, or a broader pool of needs. Other charities launched appeals for donations specifically for people affected by the bushfire. Australian Red Cross was conspicuous in not making promises.
“Usually donors would get some information about where your money is going. It isn’t there,”
former staff with Australian Red Cross said anonymously.7
Subsequently, Australian Red Cross promises that donations will be for Australian disasters and relief, rather than overseas responses.
Once a donation is made, there is no recourse. It is absolutely gutting that your giving is not doing what you thought it was going to do, but it is a valuable lesson for next time.
Donors need to read the fine print. However moved you are to support a disaster appeal by media coverage, you must look around, check out what different charities are promising, and weigh your options. This includes knowing whether your support is restricted for a specific purpose or a general fund.
1. Luke Henriques-Gomes, “Australian Red Cross defends spending 10% of bushfire donations on office costs: Charity faces criticism from a MP who nearly lost his home in a fire for taking too long to distribute $115m in donations”, The Guardian, January 23, 2020
2. Donations received and spending by St. Vincent De Paul and Salvation Army Paige Cockburn and Kevin Nguyen, “Andrew Constance slams Red Cross, Salvation Army and St. Vincent De Paul for bushfire relief delays”, ABC News January 22, 2020
3. David Crosbie, CEO of Community Council for Australia quoted in Kelly Burke’s “Bushfire crisis: Red Cross defended over $11 million admin cost fracas”, 7 News Australia January 24, 2020
4. Paige Cockburn and Kevin Nguyen, “Andrew Constance slams Red Cross, Salvation Army and St Vincent De Paul for bushfire delays” ABC News, January 24, 2020
5. Jean-Philippe Tizi, Vice-President, Disaster Management, Canadian Red Cross “2017 Pre-Budget Consultation: Submission to the Standing Committee on Finance”, Canadian Red Cross, August 2016
6. Melissa Lemieux, “Red Cross accused of withholding millions of dollars in donations meant for Australian bushfires”, Newsweek, January 22, 2020
7. Rick Morton, “Red Cross employees speak out: As the Australian Red Cross faces criticisms over its bushfire efforts, current and former employees question the broad scope of its fundraising appeal.” The Saturday Paper, January 25, 2020