Voluntourism, as discussed in a previous blog, To Go Or Not To Go, provides a unique impact and scope compared to traditional donations. The second part of the series seeks to uncover the road of donations as compared to voluntourism in terms of reaching the destination, community impact, and the values of overhead. The analysis of voluntourism was shown to not only expand the value of the dollar by nearly 500% but also allow 93% of value to have direct impact and use to the destinations of interest. Alternately, the financial performance of donations, particularly the Red Cross Haiti Relief and Development Fund, presents significantly more hurdles to uncover the behavior and value of donations. I will attempt to unravel the highly politicized, somewhat confusing, and sometimes misleading information regarding the Red Cross’ spending in Haiti to present a balanced view as much of that contentious speculation is outside the scope of this comparison.
Charity Navigator, as well as the Better Business Bureau, both report the Red Cross’ Administrative and Fundraising Spending to total 8%, while 92% is spent on direct programming. While these were relatively easy figures to find they do not provide a complete picture of the donations’ financial activity. Researching reports provided by the Red Cross, directly, proved to be a daunting task as they are not, at this time, obligated to provide transparent and detailed financial data. Of the many publications, press releases, and responses to corruption claims, the Haiti: Three Year Progress Report published by the Red Cross provided the most detailed information although continues to require a critical lens. The allocations of spending only one year after the earthquake are represented in a pie chart identifying 7 categories, however does not indicate the extent or services acquired through that spending. Furthermore, what this pie chart fails to identify is that the Red Cross had only spent 245 of 479 million USD raised for Haiti, or roughly 51%.
So as can be seen from the previous article, the $2500 donation one year after the submission can be seen as $225 going directly to the Red Cross administration costs and never seeing the destination, $1262.5 sitting in an investment account collecting interest, which at this time was being diverted back into the Red Cross General Funds, and $1012.5 being allocated according to the pie chart above. The pie chart however does not indicate what was acquired for the money spent, where it was acquired from, and the sustainability of the spending.
To acquire useful knowledge of this pie chart requires further digging into the policies of the Red Cross. Up until this point, the Red Cross has historically been a “first-responder” in disaster relief, providing immediate supplies, volunteers, and clean-up. Haiti has brought a new focus to the Red Cross endeavor and implemented long-term planning as well as a broader focus of relief. With this long-term planning and broader focus brings a new aspect to funding. Initially, the Red Cross provided services as usual so the financial spending had not essentially changed. Meals-Ready-to Eat(MREs) were provided, volunteers coordinated, and fundraising conducted, however faced with long-term strategy and the maiden voyage of Disaster Relief 2.0, the Red Cross began long-term projects and essentially acted as a grantmaker to agencies with the infrastructure to conduct rebuilding, etc. This shift to grantmaking brings with it the administrative costs of grantmaking as well as the organizations receiving aid adding their administrative costs to the donations. In fact, the Chronicle of Philanthropy reports that most of the the donations received by the Red Cross had been distributed to 15 other groups working in the region, which successfully implements hidden overhead. Furthermore, moving into semi permanent housing brought with it the policies of import in Haiti, which levies up to a 40% tax.
With this in mind, incorporating the expenses and cost of funding another NGO, as well as their overhead, levies an average of another 10% onto the donated funds, while studies have shown that in Haiti only 2.3% of aid went to Haitian firms, and effectively locked them out of their own reconstruction. Likewise, providing MRE’s as opposed to cash for food purchase effectively collapsed local markets which did indeed have food to sell. So far, it appears that of the $2500 donation, $177.98 has gone to support Haiti’s economy, or roughly 7%, compared to the voluntourism trip which ironically injected 93% of funds directly into the destination’s economy.
In this analysis, I’ve been compelled to piecemeal generalities together to conclude a rough performance of the donated dollars. Unfortunately, without transparency from the charitable organizations it is somewhat impossible to compare the performance of dollars with voluntourism, it is nearly impossible to understand the performance and effectiveness of spending at all without this transparency. Several questions have arisen for me in exploring this financial performance. Is it ethically sound to provide support to an injured nation without consideration of their economy? Is it ethical to raise funds for a disaster imploring for assistance “Now!” and then withhold the funds for up to five years and collect interest? And should charitable organizations be required to impart greater transparency and accountability of funding? I’d love to hear your thoughts below and if you’re interested in exploring these topics further, Transparency International, focuses on this lack of oversight in public and private sectors.