Red Cross Fundraising Changes

Many Americans who poured money into the Liberty Fund were angry when they learned those donations might not be used for Sept. 11 relief. From now on, reports CBS News Correspondent Barry Bagnato, the American Red Cross will spell out that contributions benefit a variety of causes.

If you say you want your money used for a specific disaster, "your gift will be restricted for that purpose," said Michael Farley, the Red Cross's Vice President for Chapter Fundraising.

However, if too much money comes in for one relief effort, said Farley, "then we will publicly disclose that we have received enough funds for the purposes of this disaster."

The Red Cross has traditionally linked fund-raising for its multipurpose disaster relief fund to a specific event. While the charity will still gear up its fund raising to meet the needs of a particular flood or earthquake it will no longer mention the calamity in the headline of solicitations, and will make clear that money may be used for future disasters.

For instance, a flier that once read "Mississippi Tornado Victims Need Your Help" will now read "Disaster Victims Need Your Help."

The Red Cross will also put safeguards in place to ensure that donors' intent is being honored, charity officials said.

The reforms are slated to take effect July 31.

"One of the lessons from September 11th is that the Red Cross must do a better job of educating donors about how we fund our disaster relief services while honoring their intent," the charity's chairman David McLaughlin said Wednesday.

The Red Cross drew fire last fall for its Liberty Fund, set up as a special account to aid the victims of the Sept. 11 attacks at the World Trade Center and the Pentagon. Donors were upset to learn the charity planned to use tens of millions of dollars for things unrelated to the attacks, such as a blood reserve and an upgrade to the charity's telecommunications system.

Then-Red Cross Chief Executive Officer Bernadine Healy said the charity always made clear that some of the money would be used for "future critical priorities."

But critics said the charity's ads were misleading and money poured into the Liberty Fund because donors believed they were helping victims of the attacks.

The Red Cross reversed course in November and said it would donate all the money raised by the fund to those directly affected by the attacks. The controversy helped prompt Healy — who set up the special relief fund and was featured prominently in television ads seeking donations for it — to resign.

The Liberty Fund has raised $967 million and distributed $570.4 million of that, the charity reported.

"The Red Cross made a mistake, acknowledged it and has now built safeguards into its fund-raising policy to prevent these kinds of problems from occurring again," House Commerce Committee spokesman Ken Johnson said. "Obviously, from our perspective, identifying donor intent is critically important."

The Commerce Committee's oversight panel held a hearing in November looking into the Red Cross handling of Liberty Fund donations.

McLaughlin said Tuesday it is "very unlikely" that such a segregated fund would be formed again. Fundraising will instead be far more generic.

For example, a Red Cross ad once read, "Please right now help the victims of this and other disasters by making a financial contribution to the American Red Cross disaster relief fund."

The new version would read, "You can help the victims of this disaster and countless other disasters across the country each year by making a financial gift to the American Red Cross disaster relief fund."

The charity will also put checks in place to inform each donor about its disaster relief fund; clarify the intent of the donation; confirm the donor still wants the donation to be directed to the disaster relief fund; and acknowledge the donation was directed as requested. Once the charity believes it has raised enough money to cover the costs of a particular disaster donors will be alerted.

The Better Business Bureau's Wise Giving Alliance President H. Art Taylor called the change "a step in the right direction." After receiving complaints about the Red Cross Liberty Fund, the philanthropic watchdog group requested information from the Red Cross to see if it still met its giving guidelines.

Taylor said the Red Cross made the changes after testing reaction to its ads.

"They realized that people may not be reading their ads as clearly as they intended," Taylor said.