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Yes, the Red Cross does spend most donations on community services and disaster relief

The American Red Cross spends about 90% of its money on services that support communities and individuals impacted by disasters, according to recent tax filings.

INDIANAPOLIS — Following a series of devasting tornadoes that ripped through Kentucky and other parts of the country, the American Red Cross and other charities are asking for donations to help provide relief to victims of the disaster.

Before clicking the “Donate now” button on the Red Cross home page, some 13News viewers have contacted VERIFY to ask questions about where the disaster relief money really goes.

“Does my money really go to help families impacted by these storms, or does it pay for executive salaries and bonuses?” asked Thomas.

“When you donate to the Red Cross what percentage actually goes to help humanitarian needs?” asked another viewer, Pat. 

THE QUESTION

When you donate to the American Red Cross for disaster relief, does a large percentage of your donation actually go to help disaster relief and humanitarian needs?

THE SOURCES

  • American Red Cross
  • Internal Revenue Service
  • Charity Navigator

THE ANSWER

   

This is true.

While the charity does spend millions of dollars on overhead, salaries and fundraising, recent tax filings by the American Red Cross show approximately 90% of money spent by the organization goes towards services that support communities and to assist individuals impacted by disasters.

WHAT WE FOUND

Charitable organizations that are classified as 501(c)(3) charities are required to file annual tax returns with the Internal Revenue Service. Those documents are available to the public to inspect online, and they tell a lot about how an organization spends its money.

The most recent 990 tax return filed by the American Red Cross shows the organization earned more than $2.8 billion during the 2019-2020 fiscal year, and it spent nearly $2.7 billion of that revenue.

The key statistic that details how much of a charity’s spending goes to its mission – in this case, to prevent and alleviate human suffering in the face of emergencies – is called “program service expenses.” For 2019-2020, the Red Cross reported its program service expenses as more than $2.42 billion, and they are outlined in more detail within the tax documents.

If we divide that $2.42 billion for program services by the charity’s total spending of $2.68 billion, that equals about 90.4% of the Red Cross' 2019-2020 spending that went toward helping communities and providing aid to people affected by disasters.

RELATED: Helping tornado victims in Kentucky, other states

Charity Navigator, an online charity watchdog organization, likes to see organizations’ program service expenses exceed 70% of total expenses. It says achieving 90% is really good.

“At the end of the day, it’s really important that as much of the money is going toward the cause as possible,” said Charity Navigator spokesman Kevin Scally. “So at 90%, that is an excellent program-to-expense ratio, as far as we’re concerned.”

Of course, charities do have other expenses, and the Red Cross is no exception.

The organization spent more than $172 million on fundraising and nearly $90 million on salaries, office expenses and other management fees during its 2019-2020 fiscal year. Six American Red Cross executives earned annual compensation of more than $500,000, including CEO Gail McGovern who was paid $737,971, according to the charity’s most recent tax return.

While those salaries may appear to be jaw-dropping, charity watchdogs say that compensation is consistent with executive salaries at other large national organizations, adding that the Red Cross has made improvements in recent years to ensure a larger percentage of its revenue is directed towards program services.

RELATED: Study reveals Indiana's most charitable cities

“In the past, they’ve made some mistakes and they’ve also learned from those mistakes and owned up to them,” said Scally. “At the end of the day, the Red Cross is an efficient and effective nonprofit and they’re highly impactful.”

The American Red Cross currently receives three out of a possible four stars from Charity Navigator, which rates the charity as “highly rated,” earning the watchdog’s “give with confidence” designation.

If you want to direct where your Red Cross donation is going, the charity allows you to select a category – such as disaster relief – when you donate on its website.