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 and spent just over $3 billion

in operating expenses the same year.

When you look at charities in the United States, most

are quite small.

$0 to $5 million 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 one 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.

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 one of the few selected

congressionally chartered non-profits in America,

frequently collaborating with federal institutions

like FEMA and the U.S.

military.

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.

One 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.

And it can often do this before some of the other

non-profits 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% 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 $3.2

billion in operating revenue.

A third of that, about $1 billion, 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 costs them 17.8 cents to

raise $1.

But the majority of their revenue, just over $1.8

billion, 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 is

operating expenses, just over $2 million, 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

through all these places. All of that costs money.

I think one 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 and first aid.

The American Red Cross 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, and 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.

When you need it, you spend it.

The Red Cross also claims that it spends an average

of $0.90 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% of total

expenses.

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.

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% of the $490 million collected was

invested in programs, while just 9% 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

response, and you see these huge numbers.

That's great. But what does that actually mean?

And it's not in their interest to break that

down and explain what that means.

So in Haiti, the Red Cross was saying, we

provided 130,000 people with new homes.

Well, that's not true.

The Red Cross built six 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 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.

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 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. They're highly visible.

And that visibility, plus their size, plus the fact

that we have a dependance 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