## The American Red Cross: A Closer Look

The Red Cross has long been recognized as a universal symbol of humanitarian services, and it's an enormous operation. The American Red Cross has about 230 chapters nationwide, with almost 18,000 employees and more than a quarter of a million volunteers, responding to more than 60,000 disasters every year. It's really the preeminent organization in the wake of domestic national disasters like floods, hurricanes, wildfires.

In 2022, the American Red Cross had net assets of about 2.7 billion dollars and spent just over 3 billion dollars in operating expenses the same year. When you look at charities in the United States, most are quite small. 0 to 5 million dollars is where the vast majority of American nonprofits sit today. So the American Red Cross really is at a different size and percentage than just about everyone else.

### Funding and Criticisms

When the White House starts raising money, when big corporations, the NFL, Hollywood, A-listers, When they're raising money in the aftermath of a disaster, it's most likely targeted towards the American Red Cross. But the sheer size of their budget has also raised concerns over the years. There is controversy swirling around 1 of the biggest charities of all, the Red Cross. There are critics raising questions about transparency and about how the money you give is spent. They're the biggest player. They're receiving the lion's share of the funds. And so, of course, the focus is going to be on what they're doing with that money.

### Programs and Services

The American Red Cross is a large and established and very well-funded organization. And so it's really able to have its hand in a lot of different programs. Their most well-known efforts are arguably in disaster relief. This can range from responding to small house fires to multi-state natural disasters such as hurricanes, floods and wildfires. 1 of the primary things it does is that it mobilizes volunteers to provide boots on the ground aid in the wake of domestic national disasters. And so it helps to transport and distribute aid to people in emergency situations. It can often do this before some of the other nonprofits can come in and do what they do best, such as medical professionals.

But the organization's biggest operation is actually in blood supply. The American Red Cross is essentially responsible for about 40 percent of the blood supply in the United States. It's central to the supply chain for blood transfusions. So it collects and tests volunteer blood donations, and then it's responsible for distributing these blood donations to about 2,500 facilities and hospitals across the country.

The American Red Cross also performs other lesser known services, such as providing training and certification, assistance for military families and international aid and support. When you've been around for over 100 years, you start growing into the areas that you really can contribute. And the American Red Cross has clearly done that in a very effective way.

### Financials and Transparency

In 2022, the Red Cross generated over 3.2 billion dollars in operating revenue. A third of that, about 1 billion dollars, comes from contributions. These include donations from corporations and individuals, contracts from the federal government, as well as donated materials and services. The American Red Cross is quite effective in their fundraising. And we look at the fundraising efficiency and essentially how many cents on the dollar does it cost you to raise a dollar. And in 2022, it cost them 17.8 cents to raise 1 dollar.

But the majority of their revenue, just over 1.8 billion dollars, comes from what their financial statements refer to as biomedical services. Predominantly funded by programs oriented on the sale of biomedical products, which is really their blood business. The American Red Cross essentially collects blood from donors And then as part of the way it raises revenue to recover costs, it then sells that blood to about 2,500 hospitals and medical facilities across the country.

The American Red Cross further clarified that it does not charge for the blood itself, but instead is reimbursed by hospitals and transfusion centers for the costs associated with providing blood products. A majority of the American Red Cross's operating expenses, just over 2 billion dollars, are also spent on collecting blood, about $139 million more than the revenue they make from biomedical services. Drawing blood is actually a medical intervention that requires certain levels of certification by the people doing that work, the preservation of that blood, sort of keeping it refrigerated, making sure that it actually stays clean, gets to all these places. All of that costs money.

### Criticisms and Accountability

The American Red Cross has faced numerous criticisms regarding the utilization of funds and its effectiveness. A 2007 government accountability office report said the Red Cross lacked adequate plans for providing shelter and temporary housing to victims of catastrophic disasters such as hurricanes Katrina and Rita. After 9-11, government officials criticized the Red Cross for diverting relief funds to its general operating fund. Criticism surrounding the American Red Cross's response to the 2010 Haiti earthquake led Senator Chuck Grassley to release a memo in 2016. His inquiry revealed that a quarter of the raised funds for relief were spent on other expenses.

Senator Grassley eventually introduced the American Red Cross Transparency Act in 2016 and 2019 to allow for more government oversight over the organization. Previously in 2015, GAO published a public study concluding that no regular independent evaluations are conducted of the impact or effectiveness of the Red Cross's disaster services.

Experts suggest that such a level of scrutiny is inevitable for organizations like the Red Cross. I think the American Red Cross comes under scrutiny much more than other organizations, primarily because they tend to be everywhere there's a problem. They're highly visible. And that visibility, plus their size, plus the fact that we have a dependence on them, we do hold them to a higher standard. But criticisms could help Red Cross to grow even further. It's really important for people to understand we are all stakeholders, either as donors or as taxpayers in the Red Cross as well as other charities in terms of we do need to hold them accountable for operating efficiently and effectively because we're essentially as taxpayers subsidizing this and other charities' ability to exist. When it's well-placed criticism, that's part of what helps a nonprofit to evaluate how it's operating and to improve and to get better. So while it does receive some criticism because of the huge volume of work that it does across the country, you know, the best thing it can do is to take that criticism to heart and kind of self-reflect and find ways to improve its transparency, to improve the way it operates, and to mitigate any sort of fraud or mismanagement or theft that does go on during natural disasters. There's all kinds of ways to improve.

The American Red Cross: A Closer Look

It’s the season of giving with Thanksgiving and Christmas on the horizon, and the American Red Cross has long been recognized as the universal symbol of humanitarian services. It’s an enormous and expensive operation. The American Red Cross has about 230 chapters nationwide with almost 18,000 employees and more than a quarter of a million volunteers, responding to more than 60,000 disasters every year. In 2022, the American Red Cross had net assets of about $2.7 billion and spent just over $3 billion in operating expenses the same year. So how exactly does the American Red Cross make and spend its billions?

Chapters:
01:35 American Red Cross
03:32 Finances
07:44 Transparency

Produced by: Juhohn Lee
Edited by: Nora Rappaport
Animation: Andrea Schmitz
Supervising Producer: Lindsey Jacobson
Additional Footage: Getty Images, American Red Cross, Library of Congress
Additional Sources: Nobel Prize, United States House of Representatives, Congressional Research Service

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Why The American Red Cross Sells Blood For Billions

The Red Cross has long been recognized as a universal symbol of humanitarian services, and it's an enormous operation.

The American Red Cross has about 230 chapters nationwide, with almost 18,000 employees and more than a quarter of a million volunteers, responding to more than 60,000 disasters every year.

It's really the preeminent organization in the wake of domestic national disasters like floods, hurricanes, wildfires.

In 2022, the American Red Cross had net assets of about 2.7 billion dollars and spent just over 3000000000 dollars in operating expenses the same year.

When you look at charities in the United States, most are quite small.

0 to 5000000 dollars is where the vast majority of American nonprofits sit today.

So the American Red Cross really is at a different size and percentage than just about everyone else.

When the White House starts raising money, when big corporations, the NFL, Hollywood, A-listers, When they're raising money in the aftermath of a disaster, it's most likely targeted towards the American Red Cross.

But the sheer size of their budget has also raised concerns over the years.

There is controversy swirling around 1 of the biggest charities of all, the Red Cross.

There are critics raising questions about transparency and about how the money you give is spent.

They're receiving the lion's share of the funds.

And so, of course, the focus is going to be on what they're doing with that money.

So how does the American Red Cross make and spend its billions?

In 1863, the International Red Cross movement first began in Geneva, Switzerland, to help protect the sick and wounded during combat.

A nurse by the name of Clara Barton later brought the idea to the U.S.

In 1881 and established the American Association of the Red Cross.

Today, it's 1 of the few selected congressionally chartered nonprofits in America, frequently collaborating with federal institutions like FEMA and the U.S.

The American Red Cross is a large and established and very well-funded organization.

And so it's really able to have its hand in a lot of different programs.

Their most well-known efforts are arguably in disaster relief.

This can range from responding to small house fires to multi-state natural disasters such as hurricanes, floods and wildfires.

1 of the primary things it does is that it mobilizes volunteers to provide boots on the ground aid in the wake of domestic national disasters.

And so it helps to transport and distribute aid to people in emergency situations.

It can often do this before some of the other nonprofits can come in and do what they do best, such as medical professionals.

But the organization's biggest operation is actually in blood supply.

The American Red Cross is essentially responsible for about 40 percent of the blood supply in the United States.

It's central to the supply chain for blood transfusions.

So it collects and tests volunteer blood donations, and then it's responsible for distributing these blood donations to about 2,500 facilities and hospitals across the country.

The American Red Cross also performs other lesser known services, such as providing training and certification, assistance for military families and international aid and support.

When you've been around for over 100 years, you start growing into the areas that you really can contribute.

And the American Red Cross has clearly done that in a very effective way.

In 2022, the Red Cross generated over 3200000000.0 dollars in operating revenue.

A third of that, about 1000000000 dollars, comes from contributions.

These include donations from corporations and individuals, contracts from the federal government, as well as donated materials and services.

It's really sort of the charity of choice.

When the White House starts raising money, when big corporations, the NFL, Hollywood, A-listers, when they're raising money in the aftermath of a disaster, it's most likely targeted towards the American Red Cross.

And that puts them in a really unique position as sort of the main recipient of donations in this immediate aftermath.

The American Red Cross is quite effective in their fundraising.

And we look at the fundraising efficiency and essentially how many cents on the dollar does it cost you to raise a dollar.

And in 2022, it cost them 17.8 cents to raise 1 dollar.

But the majority of their revenue, just over 1.8 billion dollars, comes from what their financial statements refer to as biomedical services.

Predominantly funded by programs oriented on the sale of biomedical products, which is really their blood business.

The American Red Cross essentially collects blood from donors And then as part of the way it raises revenue to recover costs, it then sells that blood to about 2,500 hospitals and medical facilities across the country.

When CNBC inquired about the pricing of these products, the American Red Cross responded that prices for a unit of red blood cells is proprietary information.

The pricing is determined by purchase volumes, by blood type, service levels and delivery requirements, as well as other agreed upon terms with a hospital.

The more transparent an organization can be, the greater the possibility, I think, for trust to be established between that nonprofit and its donor base.

If it appears that you're withholding information or you're being a little bit closed with some of your practices, that can raise concern.

The American Red Cross further clarified that it does not charge for the blood itself, but instead is reimbursed by hospitals and transfusion centers for the costs associated with providing blood products.

A majority of the American Red Cross's operating expenses, just over 2000000000 dollars, are also spent on collecting blood, about $139 million more than the revenue they make from biomedical services.

Drawing blood is actually a medical intervention that requires certain levels of certification by the people doing that work, the preservation of that blood, sort of keeping it refrigerated, making sure that it actually stays clean, gets to all these places.

I think 1 should take comfort in the fact that they're trying to run a sustainable business so that they can also provide aid and disaster recovery and then help train us in the different areas of, let's say, CPR at first aid.

The American Red Cross's revenue has always surpassed its operating expenses every year since 2020.

That has allowed the organization to build up its net assets to about $2.7 billion.

Nonprofit organizations, they don't have a quote unquote profit per se.

They do have increases and decreases in their net fund balance.

And so what that means is that in some years an organization might take in more money than it spends, in another year it might spend more than it takes in.

They have to have money on hand so that they can act instantly when a hurricane hits or a fire starts burning somewhere.

You can't start looking for money when you need people on the street instantly and you're sending out ambulances and trucks and whatever it is that needs to happen there.

So generally, the American Red Cross is not different than any other working charity.

When you have an excess, you put it in reserves.

The Red Cross also claims that it spends an average of 90 cents for every dollar it spends on those who are in need.

Based on their financial statements for 2022, overhead expenses like fundraising and management accounted for just 9.3 percent of total expenses.

And when you look at in a global way, how does it spend, how efficiently does it spend its resources overall?

Nevertheless, the American Red Cross has faced numerous criticisms regarding the utilization of funds and its effectiveness.

A 2007 government accountability office report said the Red Cross lacked adequate plans for providing shelter and temporary housing to victims of catastrophic disasters such as hurricanes Katrina and Rita.

After 9-11, government officials criticized the Red Cross for diverting relief funds to its general operating fund.

Criticism surrounding the American Red Cross's response to the 2010 Haiti earthquake led Senator Chuck Grassley to release a memo in 2016.

His inquiry revealed that a quarter of the raised funds for relief were spent on other expenses.

The Red Cross immediately disputed these claims, arguing that 91 percent of the $490 million collected was invested in programs, while just 9 percent was spent on overall management, general and fundraisers.

Experts suggest that matters like these are often due to a lack of transparency.

You can look at Red Cross annual reports, monthly reports, updates from their different disaster spot and you see these huge numbers, that's great.

And it's not in their interest to break that down and explain what that means, right?

So in Haiti, the Red Cross was saying, you know, we provided 130,000 people with new homes.

The Red Cross built 6 new homes in Haiti.

What that number actually is including are families that got rental subsidies, people who got training in construction techniques right across the board.

These things don't necessarily actually put a roof over anybody's head.

They're broadly involved with the shelter sector.

Senator Grassley eventually introduced the American Red Cross Transparency Act in 2016 and 2019 to allow for more government oversight over the organization.

Previously in 2015, GAO published a public study concluding that no regular independent evaluations are conducted of the impact or effectiveness of the Red Cross's disaster services.

I think not just the Red Cross could benefit from greater government oversight, but NGOs across the board.

It's a sort of Wild West out there, right?

These groups bring in hundreds of millions of dollars and are spending it all over the world.

And there's very little accountability for what they're spending it on, how they're managing that money.

And so I think any step that can lead towards, first off, greater transparency and second off, greater accountability, you know, should be welcomed by these organizations.

Experts suggest that such a level of scrutiny is inevitable for organizations like the Red Cross.

I think the American Red Cross comes under scrutiny much more than other organizations, primarily because they tend to be Everywhere there's a problem.

And that visibility, plus their size, plus the fact that we have a dependence on them, we do hold them to a higher standard.

But criticisms could help Red Cross to grow even further.

It's really important for people to understand we are all stakeholders, either as donors or as taxpayers in the Red Cross as well as other charities in terms of we do need to hold them accountable for operating efficiently and effectively because we're essentially as taxpayers subsidizing this and other charities' ability to exist.

When it's well-placed criticism, that's part of what helps a nonprofit to evaluate how it's operating and to improve and to get better.

So while it does receive some criticism because of the huge volume of work that it does across the country, you know, the best thing it can do is to take that criticism to heart and kind of self-reflect and find ways to improve its transparency, to improve the way it operates, and to mitigate any sort of fraud or mismanagement or theft that does go on during natural disasters.


Speaker 0: The Red Cross has long been recognized as a universal symbol of humanitarian services, and it's an enormous operation. The American Red Cross has about 230 chapters nationwide, with almost 18,000 employees and more than a quarter of a million volunteers, responding to more than 60,000 disasters every year.

Speaker 1: It's really the preeminent organization in the wake of domestic national disasters like floods, hurricanes, wildfires.

Speaker 0: In 2022, the American Red Cross had net assets of about 2.7 billion dollars and spent just over 3000000000 dollars in operating expenses the same year.

Speaker 2: When you look at charities in the United States, most are quite small. 0 to 5000000 dollars is where the vast majority of American nonprofits sit today. So the American Red Cross really is at a different size and percentage than just about everyone else.

Speaker 3: When the White House starts raising money, when big corporations, the NFL, Hollywood, A-listers, When they're raising money in the aftermath of a disaster, it's most likely targeted towards the American Red Cross.

Speaker 0: But the sheer size of their budget has also raised concerns over the years.

Speaker 4: There is controversy swirling around 1 of the biggest charities of all, the Red Cross. There are critics raising questions about transparency and about how the money you give is spent.

Speaker 3: They're the biggest player. They're receiving the lion's share of the funds. And so, of course, the focus is going to be on what they're doing with that money.

Speaker 0: So how does the American Red Cross make and spend its billions? In 1863, the International Red Cross movement first began in Geneva, Switzerland, to help protect the sick and wounded during combat. A nurse by the name of Clara Barton later brought the idea to the U.S. In 1881 and established the American Association of the Red Cross. Today, it's 1 of the few selected congressionally chartered nonprofits in America, frequently collaborating with federal institutions like FEMA and the U.S.

Military.

Speaker 1: The American Red Cross is a large and established and very well-funded organization. And so it's really able to have its hand in a lot of different programs.

Speaker 0: Their most well-known efforts are arguably in disaster relief. This can range from responding to small house fires to multi-state natural disasters such as hurricanes, floods and wildfires.

Speaker 1: 1 of the primary things it does is that it mobilizes volunteers to provide boots on the ground aid in the wake of domestic national disasters. And so it helps to transport and distribute aid to people in emergency situations. It can often do this before some of the other nonprofits can come in and do what they do best, such as medical professionals.

Speaker 0: But the organization's biggest operation is actually in blood supply.

Speaker 1: The American Red Cross is essentially responsible for about 40 percent of the blood supply in the United States. It's central to the supply chain for blood transfusions. So it collects and tests volunteer blood donations, and then it's responsible for distributing these blood donations to about 2,500 facilities and hospitals across the country.

Speaker 0: The American Red Cross also performs other lesser known services, such as providing training and certification, assistance for military families and international aid and support.

Speaker 2: When you've been around for over 100 years, you start growing into the areas that you really can contribute. And the American Red Cross has clearly done that in a very effective way.

Speaker 0: In 2022, the Red Cross generated over 3200000000.0 dollars in operating revenue. A third of that, about 1000000000 dollars, comes from contributions. These include donations from corporations and individuals, contracts from the federal government, as well as donated materials and services.

Speaker 3: It's really sort of the charity of choice. When the White House starts raising money, when big corporations, the NFL, Hollywood, A-listers, when they're raising money in the aftermath of a disaster, it's most likely targeted towards the American Red Cross. And that puts them in a really unique position as sort of the main recipient of donations in this immediate aftermath.

Speaker 2: The American Red Cross is quite effective in their fundraising. And we look at the fundraising efficiency and essentially how many cents on the dollar does it cost you to raise a dollar. And in 2022, it cost them 17.8 cents to raise 1 dollar.

Speaker 0: But the majority of their revenue, just over 1.8 billion dollars, comes from what their financial statements refer to as biomedical services.

Speaker 2: Predominantly funded by programs oriented on the sale of biomedical products, which is really their blood business.

Speaker 1: The American Red Cross essentially collects blood from donors And then as part of the way it raises revenue to recover costs, it then sells that blood to about 2,500 hospitals and medical facilities across the country.

Speaker 0: When CNBC inquired about the pricing of these products, the American Red Cross responded that prices for a unit of red blood cells is proprietary information. The pricing is determined by purchase volumes, by blood type, service levels and delivery requirements, as well as other agreed upon terms with a hospital.

Speaker 2: The more transparent an organization can be, the greater the possibility, I think, for trust to be established between that nonprofit and its donor base. If it appears that you're withholding information or you're being a little bit closed with some of your practices, that can raise concern.

Speaker 0: The American Red Cross further clarified that it does not charge for the blood itself, but instead is reimbursed by hospitals and transfusion centers for the costs associated with providing blood products. A majority of the American Red Cross's operating expenses, just over 2000000000 dollars, are also spent on collecting blood, about $139 million more than the revenue they make from biomedical services.

Speaker 2: Drawing blood is actually a medical intervention that requires certain levels of certification by the people doing that work, the preservation of that blood, sort of keeping it refrigerated, making sure that it actually stays clean, gets to all these places. All of that costs money. I think 1 should take comfort in the fact that they're trying to run a sustainable business so that they can also provide aid and disaster recovery and then help train us in the different areas of, let's say, CPR at first aid.

Speaker 0: The American Red Cross's revenue has always surpassed its operating expenses every year since 2020. That has allowed the organization to build up its net assets to about $2.7 billion.

Speaker 1: Nonprofit organizations, they don't have a quote unquote profit per se. They do have increases and decreases in their net fund balance. And so what that means is that in some years an organization might take in more money than it spends, in another year it might spend more than it takes in.

Speaker 2: They have to have money on hand so that they can act instantly when a hurricane hits or a fire starts burning somewhere. You can't start looking for money when you need people on the street instantly and you're sending out ambulances and trucks and whatever it is that needs to happen there. So generally, the American Red Cross is not different than any other working charity. When you have an excess, you put it in reserves. When you need it, you spend it.

Speaker 0: The Red Cross also claims that it spends an average of 90 cents for every dollar it spends on those who are in need. Based on their financial statements for 2022, overhead expenses like fundraising and management accounted for just 9.3 percent of total expenses.

Speaker 1: This is a very large organization. And when you look at in a global way, how does it spend, how efficiently does it spend its resources overall? It's a highly efficient organization.

Speaker 0: Nevertheless, the American Red Cross has faced numerous criticisms regarding the utilization of funds and its effectiveness.

Speaker 5: A 2007 government accountability office report said the Red Cross lacked adequate plans for providing shelter and temporary housing to victims of catastrophic disasters such as hurricanes Katrina and Rita. After 9-11, government officials criticized the Red Cross for diverting relief funds to its general operating fund.

Speaker 0: Criticism surrounding the American Red Cross's response to the 2010 Haiti earthquake led Senator Chuck Grassley to release a memo in 2016. His inquiry revealed that a quarter of the raised funds for relief were spent on other expenses. The Red Cross immediately disputed these claims, arguing that 91 percent of the $490 million collected was invested in programs, while just 9 percent was spent on overall management, general and fundraisers. Experts suggest that matters like these are often due to a lack of transparency.

Speaker 3: You can look at Red Cross annual reports, monthly reports, updates from their different disaster spot and you see these huge numbers, that's great. But what does that actually mean, right? And it's not in their interest to break that down and explain what that means, right? So in Haiti, the Red Cross was saying, you know, we provided 130,000 people with new homes. Well, that's not true, right?

The Red Cross built 6 new homes in Haiti. What that number actually is including are families that got rental subsidies, people who got training in construction techniques right across the board. These things don't necessarily actually put a roof over anybody's head. They're broadly involved with the shelter sector.

Speaker 0: Senator Grassley eventually introduced the American Red Cross Transparency Act in 2016 and 2019 to allow for more government oversight over the organization. Previously in 2015, GAO published a public study concluding that no regular independent evaluations are conducted of the impact or effectiveness of the Red Cross's disaster services.

Speaker 3: I think not just the Red Cross could benefit from greater government oversight, but NGOs across the board. Right. It's a sort of Wild West out there, right? These groups bring in hundreds of millions of dollars and are spending it all over the world. And there's very little accountability for what they're spending it on, how they're managing that money.

Right. And so I think any step that can lead towards, first off, greater transparency and second off, greater accountability, you know, should be welcomed by these organizations.

Speaker 0: Experts suggest that such a level of scrutiny is inevitable for organizations like the Red Cross.

Speaker 2: I think the American Red Cross comes under scrutiny much more than other organizations, primarily because they tend to be Everywhere there's a problem. They're highly visible. And that visibility, plus their size, plus the fact that we have a dependence on them, we do hold them to a higher standard.

Speaker 0: But criticisms could help Red Cross to grow even further.

Speaker 1: It's really important for people to understand we are all stakeholders, either as donors or as taxpayers in the Red Cross as well as other charities in terms of we do need to hold them accountable for operating efficiently and effectively because we're essentially as taxpayers subsidizing this and other charities' ability to exist. When it's well-placed criticism, that's part of what helps a nonprofit to evaluate how it's operating and to improve and to get better. So while it does receive some criticism because of the huge volume of work that it does across the country, you know, the best thing it can do is to take that criticism to heart and kind of self-reflect and find ways to improve its transparency, to improve the way it operates, and to mitigate any sort of fraud or mismanagement or theft that does go on during natural disasters. There's all kinds of ways to improve.

See all CNBC transcripts on Youtube

Why The American Red Cross Sells Blood For Billions