Wednesday, October 17, 2007

The American Red Cross and Hurricane Katrina, PR Case Study

Background
Hurricane Katrina, the costliest and one of the five deadliest hurricanes of all-time, not only took lives but destroyed lives as well. At least, 1,836 people lost their life in Katrina and the following floods; the storm is estimated to have been responsible for $8.2 billion in damage. Hurricane Katrina formed over the Bahamas on August 23, 2005 and crossed southern Florida as a Category 1 storm. The hurricane weakened before making its second and third landfalls as a Category 3 on August 29 in southeast Louisiana and at the Louisiana and Mississippi state line. The most severe loss of life and property occurred in New Orleans, which flooded as the levee system there failed.
The hurricane season in 2005 proved to be the most challenging for the American Red Cross (ARC) in disaster response. Expecting a major disaster before the landfall of Hurricane Katrina, the ARC enlisted 2,000 volunteers throughout the nation to be on a “stand-by” call list. According to the Red Cross, in response to Hurricanes Katrina, Rita and Wilma, they opened 1,472 different shelters and registered 3.8 million overnight stays. A total of 244,000 ARC workers, 95% of whom were volunteers, were utilized to provide shelter, casework, communication and assessment of services throughout the three hurricanes. Also, 346,980 comfort kits, which contain hygiene essentials such as toothpaste and soap, and 205,360 clean up kits, containing brooms, mops and bleach were distributed. The organization served 68 million meals and snacks to victims of the disaster and to rescue workers. The American Red Cross’s Disaster Health services met with 596,810 contacts and their Disaster Mental Health services met with 826,590 contacts. The ARC provided financial assistance to 1.4 million families, which equated to about 4 million people. Hurricane Katrina was the first natural disaster that the Red Cross utilized their “Safe and Well” location web site.
On February 3, 2006, five months after Hurricane Katrina’s devastation, the ARC announced that it had met its fundraising goals and would no longer engage in new 2005 Hurricane relief fundraising. The National organization urged the public to donate to their local Red Cross chapters or to help other charities engaged in hurricane relief work. A statement issued by the ARC stated that 91 cents of every dollar donated specifically for the Hurricane Katrina disaster will go directly to disaster relief. This is considered a low overhead for such a large organization. (http://en.wikipedia.org/wiki/Hurricane_Katrina)
The American Red Cross continues to aid victims of Katrina today through long-term recovery planning using case management, emotional support, mental health counseling and grief management and vital information sharing. (http://www.redcross.org/services/disaster/0,1082,0_294_,00.html)

Research
A critical element to this case study is to understand where the Red Cross fits in, is it part of government or a separate entity? The American Red Cross is 126 years old, the organization was originally founded by Clara Barton in 1881, and has been providing disaster services by volunteers ever since. The Red Cross assisted victims with food, shelter, referrals, physical and mental health services and financial aid. The Red Cross also has a mission of “helping people prevent, prepare for, and respond to emergencies through its Health and Safety, Armed Forces Emergency Services, Biomedical Services and International Social Services.”
There are many divisions that fall under the umbrella of the ARC. Some of those are blood services, disaster services, health and safety services and youth services. The most important department to this case study is disaster services. The Red Cross’s disaster services responds to hurricanes, floods, earthquakes, and fires, or other situations that cause human suffering. Each year, the American Red Cross responds to more than 70,000 disasters, the majority of which are house or apartment fires.
On a local and national level, the Red Cross partners with government, business, labor unions, religious and community organizations as well as other voluntary agencies. This is not a government agency; it is an independent, humanitarian, voluntary organization. All Red Cross assistance is given free of charge through the utilization of volunteers and use of donations.
Although the ARC is not a government agency, its ability to provide disaster relief was formalized in 1905. At this time the Red Cross was chartered by Congress to "carry on a system of national and international relief in time of peace and apply the same in mitigating the suffering caused by pestilence, famine, fire, floods and other great national calamities, and to devise and carry on measures for preventing the same."
(http://www.redcross.org/services/disaster/0,1082,0_319_,00.html)
Because the ARC has such power and is in such public light, their role of was critical in the aftermath of Hurricane Katrina. Research showed that on February 3, 2006 the Red Cross obtained the financial donations and pledges that would cover the estimated $2.116 billion costs for its response to Hurricanes Katrina, Rita and Wilma. The ARC stopped initiating fundraising and encouraged donors to give to their local Red Cross chapter or to other charities.
Information regarding the use of donors’ money was accessible on the Red Cross web site and is also found below. The fact sheet broke down the expected expenditures of Hurricane Katrina.
Food and Shelter – $227 million
Emergency Financial Assistance – $1.554 billion
Physical and Mental Health Services – $7 million
Additional Red Cross Support – $32 million
Hurricane Recovery – $198 million
Fundraising Costs/ Management & General Expenses – $95 million
Total Projected Cost: $2.116 billion

Situation Analysis
The American Red Cross put in a great effort to support the victims of Hurricane Katrina and to rebuild the south. Whenever there is such a large-scale disaster attracting national attention, though, the weaknesses and shortcomings of disaster relief organizations are brought into light. Two major issues came into play as the American Red Cross responded to Hurricane Katrina. The first issue was the inability of the ARC to react to the needs of the victims. The second issue was the fraud surrounding the Red Cross’s hurricane relief efforts. Both of these issues were highlighted in the news, and still are today, as assessments of Hurricane Katrina’s relief efforts are still being made.
The first issue was the ARC’s slow response to the disaster. Complaints ranged from busy Red Cross phone lines to inadequate or late responses to the catastrophe. In an article found in the September 20, 2005 edition of the New York Times, many victims’ concerns were voiced as the Red Cross was missing during their worst hours of need. The organization did not open shelters in flood-prone areas and was then unable to provide food and other necessities to the people closest to the coast destroyed by Katrina. Even two days after Hurricane Katrina struck, the ARC still only had two shelters in Hancock County, and none in New Orleans.
"It's purely a safety issue," responded Armond T. Mascelli, Vice President for Response Operations at the Red Cross. "People expect a Red Cross shelter to be safe, not to be at risk of flooding." People were angered that the Red Cross waited to provide aid, the public expected the ARC to be better prepared for the disaster and for a quick response. While victims were suffering, with no drinking water, the American Red Cross was waiting for flood levels to go down. The ARC lacked a plan for the distribution of services and had mismatches between what victims actually needed and the ARC could supply.
The Red Cross collected the bulk of contributions, nearly three-quarters of $1 billion dollars that Americans had donated (as of Sept. 2005), including endorsements from President Bush, Corporate America and other non-profit organizations. Many victims feared they would never actually see those donations because of the initial lack of response of the ARC.
The Red Cross’s duty, mandated by Congress, is to provide immediate assistance, a need that rapidly diminished as victims left shelters. Some people questioned whether the Red Cross could use all its money effectively as its role wound down.
“Responding to the complaints from coastal Mississippi, Winnie Romeril, a spokeswoman for the Red Cross in the disaster area, said the organization was unprepared for the scope of the disaster and initially lacked enough fuel and supplies. She added that the Red Cross had 23 shelters in three of the most affected counties in Mississippi.”
In some of the nation's biggest disasters, the ARC has raised more money than it has needed. On Oct. 30, 2001, the Red Cross said it had received $547 million in Sept. 11 pledges, which would be enough. But pledges continued and the total swelled to twice that amount as donations rolled in for victims of the attacks. As of June 2005, the Red Cross still had roughly $40 million of the more than $1 billion it collected for a fund created after the Sept. 11 attacks.
Having learned a lesson from the 9/11 disaster, the New York Times reported that, “Devorah Goldburg, a Red Cross spokeswoman, said that it would take many organizations to address the needs of the hurricane victims and that the Red Cross had told CBS and MTV not to raise money on its behalf and to find other charities. During the broadcast of the Emmy Awards on Sunday by CBS, donations were solicited for Habitat for Humanity.” (http://www.nytimes.com/2005/09/20/national/nationalspecial/20cross.html)
The Red Cross’s delayed response to the disaster and unorganized use of funds in past catastrophes led the American people to question the organization. The ARC received such a large amount of donations in such a short period of time it prevented them from getting organized and meeting victims’ needs. Following all of the initial chaos of the disaster, though, was a second controversy about to strike the American Red Cross.
The second major issue involving the organization was the large amount of fraud by ARC volunteers or employees. The response of the Red Cross to Hurricane Katrina was poorly planned and relied too heavily on inexperienced workers, adding to the possibility of fraud during a crisis situation. Specific problems included disappearing rental cars, generators and some 3,000 of 9,000 air mattresses donated by a private company. Acts of fraud also included the unauthorized possession of Red Cross computer equipment that could be used to add money to debit cards and manipulate databases. In one case a kitchen manager swapped 300 prepared meals for parking spaces for Red Cross employees. (BBC News http://news.bbc.co.uk/2/hi/americas/4851428.stm )
In a scheme played out in Bakersfield, CA, a call center was set up for hurricane victims to call the Red Cross and make damage claims to collect money. Up to 16,000 people a day called the hotlines and because of the volume, Red Cross workers said they only asked victims to provide their name, address and date of birth. $360 would be issued for individuals making a claim and $1,500 for families.
Red Cross employees and volunteers took advantage of the lack of controls in the system and had family members or friends call to place fake claims. About 4,000 cases of assistance were investigated as of 2005, involving about $400,000 of the $1.4 billion the Red Cross distributed (as of 2005).
The ARC was criticized for having fraud safeguards in place that were not stringent enough. A Red Cross spokesman, Steve Cooper, responded to the criticism.
“We put the appropriate safeguards in place as best we could, but we made the decision to take that risk in order to help as many people as possible.” (CNN http://www.cnn.com/2005/LAW/12/28/katrina.fraud/index.html)
Harsh reports turned up in the months following Hurricane Katrina detailing mismatches between the needs of the hurricane victims and the supplies actually provided by the ARC. The Red Cross had no plan to guide them in the distribution of supplies and there was a lack of record keeping, which allowed inventory to get lost in the shuffle or fall victim to fraud. These reports, provided to the New York Times by a former American Red Cross official, closely echoed concerns raised by volunteers in the disaster area.
The ARC, which had about 235,000 volunteers in the field after the hurricane, received roughly 60% of the $3.6 billion that was donated for hurricane relief. (New York Times http://www.nytimes.com/2006/04/05/us/nationalspecial/05cross.html)
A Fox News report in April 2007 said more than 600 people were charged of fraud during the Hurricane Katrina tragedy. The frauds committed ranged in value from a few thousand dollars to more than $700,000 (not just involving the ARC). Red Cross cases involving fraud came mostly from the Bakersfield, CA call center. Some 2,500 other fraud cases have been referred to law enforcement as potential cases to prosecute. These cases represent about $5 million in losses from the Red Cross. 21,000 Allegations, totaling another $34 million, are being checked out. 104 people have been charged as of April 2007, and 86 convicted of hurricane-related fraud according to spokeswoman Devorah Goldburg. The Red Cross has recovered $2.6 million in overpayments or fraudulently obtained funds, some of which returned in anonymous envelopes. (FOX News http://www.foxnews.com/story/0,2933,263206,00.html)
In a letter from Senator Chuck Grassley, he noted the ARC board governance, scope of the ARC work and the ARC culture (discouraging employees to come forward with issues) as major problems with the organization. Grassley asked for a detailed outline of specific ARC employees’ responsibilities and financial reports and threatened to revoke the organization’s charter if it did not thoroughly overhaul its operations. Now, as the lead disaster relief organization for the country, Grassley asked the Red Cross to be “as open and transparent as possible.” (http://www.ombwatch.org/article/blogs/entry/3196/40)

Public Opinion
In an op-ed article, “The Red Cross Money Pit,” (Sept. 25, 2005 LA Times) Richard M. Walden, president and CEO of a relief agency in Los Angeles, expressed his feelings about the American Red Cross. He wrote that the Red Cross was a “money pit” for Americans. He noted that the ARC spent $111 million in fundraising alone in the year 2004. Walden also wrote about the ARC and their fundraising during the aftermath of 9/11.
“When New York Atty. Gen. Eliot Spitzer asked for documentation of 9/11 expenditures, the Red Cross' response was that it is federally chartered and not answerable to state government regulators. The clamor rose, however, when the media began dissecting Red Cross activities in the 9/11 aftermath. This resulted in the resignation of the organization's president and chief executive, Dr. Bernadine Healy, and the appointment of ex-Sen. George Mitchell (D-Maine) to oversee its 9/11 fund and help clean up its image. Funds were then pushed out the door — including millions to New York limo drivers who said they lost income after 9/11, and to upscale residents of lower Manhattan to help pay their utility bills.”
Walden made his opinion on the Red Cross, in regards to hurricane relief, clear to LA Times’ readers. He wrote:
“The Red Cross expects to raise more than $2 billion before Hurricane Katrina-related giving subsides. If it takes care of 300,000 people, that's $7,000 per victim. I doubt each victim under Red Cross care will see more than a doughnut, an interview with a social worker and a short-term voucher for a cheap motel, with a few miscellaneous items such as clothes and cooking pots thrown in.” (http://www.commondreams.org/views05/0925-28.htm)
Another opportunity to see the disaster through the publics’ eyes was when CNN.com posted comments in response to a poll of their readers. They asked: “Government response was sharply criticized at all levels. CNN.com asked readers whether government—at any level—should be restructured to respond better to the next disaster.”
Some of the responses can be found below:
- If the governor and mayor had implemented the emergency plans, prior to and after the disaster, New Orleans' people would be in much better shape. Many would still be alive. (Cathy Guynes, Leesburg, Virginia)
- The lack of response was very bad; this never should have happened. I do not think any one government was to blame, all were slow to respond. This was a catastrophe that could have been prevented, if they had just planned ahead.(Lois N., Mt. Shasta, California)
- I volunteered in Houston for the American Red Cross for Katrina and Rita. The infrastructure was chaotic at best. There was no plan of action to assist victims' long-term so they were and are still being shuffled around to different states and different shelters. (Melanie Hardt, Wabasha, Minnesota) (http://www.cnn.com/2005/US/10/18/feedback.restructure/index.html?iref=newssearch)
Overall, the public was disappointed with the response to Katrina. People expected disaster plans to already be in place, not to see the government scrambling to get its act together and aid victims. Not only did the American Red Cross not hold up to expectations; the government as a whole failed its people.

Objectives
The main objective of the American Red Cross is to uphold their mission of ARC Disaster Services: “ensuring nationwide disaster planning, preparedness, community disaster education, mitigation and response that will provide the American people with quality services delivered in a uniform, consistent, and responsive manner.”
To carry on with their mission, the Red Cross must continue to receive positive support from the American people. With out the help and donations from the public, the American Red Cross could not provide the service that it does. The objective of the ARC is to restore their positive image to the public so that they continue to have support.

Programming
The day following Hurricane Katrina’s destruction, August 30, 2005, the president of the American Red Cross appeared on ABC News to make a statement regarding their relief efforts. In the days, weeks and even months after the tragedy, the ARC sent out press releases in response to the criticism on their delayed response to as well as in response to the fraud taking place within their organization. In these releases the Red Cross reiterated the actions they were taking to relieve hurricane victims. They also reinforced their commitment to fighting fraud and warned donors of Katrina scams surfacing around the nation.
In the weeks following Hurricane Katrina the American Red Cross released an update regarding their response to the disaster. On September 8, 2005 the ARC sent out a fact sheet responding to the criticism and letting the American people know what they were doing to help the victims of the hurricane. The fact sheet also included a hotline phone number to call to locate separated family members.
The Red Cross addressed specific attacks made at them with direct, point-by-point responses. They released an open letter to the American people immediately following Sen. Grassley’s letter challenging the ARC’s organization. The letter from the Red Cross noted that they welcomed Grassley’s inquiry regarding governance and board size, but said that Congress actually created the standards for the ARC board. It also stated that the American Red Cross is for the American people and will continue to be committed to serving the American people. The ARC also released a point-by-point refute to a misleading op-ed piece written in the Los Angeles Times by Richard M. Walden. In this release the Red Cross picked through the op-ed and showed where Walden was misleading the public in his accusations.
The American Red Cross revamped their web site. They added a section completely dedicated to the 2005 hurricane season and instituted a Hurricane Recovery Program (HRP). The goals of the HRP included improving the quality of life for hurricane victims and enhancing the level of services provided to those impacted by disasters. At the bottom of the web page, the ARC added a note to its publics:
“The Red Cross HRP [Hurricane Recovery Program] is committed to careful stewardship and accountability of the resources entrusted to it by the American public. It has utilized the extensive experience gained during recent major national disasters, including but not limited to 9/11. The program is built upon the successes from these experiences as well as lessons learned. The survivors of the 2005 Gulf Coast hurricanes are not forgotten.” (http://www.redcross.org/services/disaster/0,1082,0_296_,00.html)
Another page included on the web site was a fact sheet of what the American Red Cross provided throughout the aftermath of Katrina. Though the ARC was criticized for its late response, the Red Cross launched the largest mobilization of supplies and relief ever to a single disaster. The hurricane was the costliest ever and the fact sheet illustrates all of the services provided by the American Red Cross. The Red Cross released “Compassion in Action,” a colorful fact sheet highlighting all of the help that the ARC provided victims and continues to provide. A link on the page shows a pie chart and gives a specific break-down of how donor’s dollars were spent to aid Katrina victims. Also found on the web site, a link for donor inquiries and a call line to obtain a tax receipt or ask other questions pertaining to donations.
The American Red Cross released reports on the first and second year anniversaries of Hurricane Katrina reflecting on the natural disaster. These reports included pictures of ARC volunteers serving food and helping victims. They also included facts on the positive impact that the American Red Cross had in providing hurricane relief.
Since the hurricanes of 2005, the American Red Cross reports that it continuously updates internal controls and assists in the detection and prevention of fraud. They have instituted a mandatory background check for all staff and volunteers to better protect ARC assets and the safety of shelter residents. They have enhanced the Concerned Connection Line (a 1-800 hotline) in an effort to encourage whistleblowers to bring forward allegations of potential fraud, waste, abuse and safety concerns. The American Red Cross also created a new response activity to disasters, RICE. The acronym stands for Response, Investigation, Compliance and Ethics and is deployed to all major disaster events. The RICE unit seeks to avoid losses due to fraud, waste and abuse through the use of fraud prevention controls and proactive fraud detection. As of August 17, 2007, the American Red cross has received $2,519,640 in returned funds. (Wikipedia http://en.wikipedia.org/wiki/American_Red_Cross#Hurricane_Katrina_controversy)

Media
During the aftermath of Hurricane Katrina the American Red Cross received a lot of unfavorable press. First, they were criticized because of their delayed response and then later because of the scandals involving their organization and fraud. Other large organizations, such as FEMA, also received negative press during this tragic time.
The ARC seemed to have more press focused on the fraud taking place, however, most of their press releases centered on what they were doing as far as the relief effort was concerned. Criticisms of the Red Cross came from across the media spectrum. Stories about the ARC’s slow response to the disaster and the fraud by their employees and volunteers were in newspapers, television news and blogs on the internet. The controversies surrounding the non-profit organization could be seen virtually anywhere.

Evaluation
Through the use of many press releases and updating their web site, the American Red Cross was able to prove to the American public that they can get organized, provide the necessities to victims and keep the public informed. The American Red Cross depends on the support of their volunteers and donors and can not afford to have a negative image in the media. If they had not made the changes that they did, people would have lost faith in an organization that has been around for over a century. With fraud from Katrina still being investigated, it is important that the Red Cross continues to keep the public informed on all issues. Not only should the Red Cross focus on upholding their image, they should make changes to better the organization.
Increasing communications with FEMA and keeping an updated disaster plan, with specific guidelines for where and how to get food, supplies and support to victims is crucial. Allowing the public to access disaster plan information through their web site could also be beneficial. Letting their audience see their strategy in writing and then watch it actually unfold when disaster strikes will allow the public to see the Red Cross follow through in each step. It will be harder for the media to place blame when the ARC’s disaster response plan is drawn out clearly.
Overall, changes that the ARC have implemented will make a difference for now. The public will continue to hold them in positive light because they were able to recover, but that may not be the case if a controversy like this arises again. For the future, the Red Cross needs to be better prepared for such disasters. They are aware of the fact that fraud follows natural disasters and have seen it in both the cases of September 11 and Hurricane Katrina. Also, they should have a plan for a timely response to victims and know that the public is looking toward them for support when disaster strikes. Working in the field of disaster is a complex business; people count on the American Red Cross in the most trying of times, but judgments will always be made even when a strong effort is put forth.

Professional Opinion
Public relations professional, Emily Reynolds (Marketing Manager, Flaster/Greenberg Environmental Law Firm), commented on how the American Red Cross could have improved their communications during the situation:
“The Red Cross should have implemented more crisis PR. The CEO should have immediately issued a public statement acknowledging the severity of the situation, expressing empathy for the victims, and assuring people that they would do everything in their power to provide assistance as soon as possible. Public statements and press conferences should have been provided on a regular basis to inform the public of the status of supplies, when people could expect deliveries, etc.”
Reynolds noted that, “The Red Cross should have had a crisis PR plan in place so they would have been prepared with a plan to distribute supplies.”
Emily Reynolds also found the hot line and processing of fake claims to be a complete disaster and stated that the Red Cross should have admitted that they were not prepared for such a natural disaster and owned up to their inadequate response.
Personal Opinion
Working in non-profit is not always easy. Non-profit organizations, such as the American Red Cross, do not always have the large amount funds that other companies do, which causes them to overlook organizational details and expenditures that do not affect them in the present, but will in the future. The ARC needs to put money aside to make disaster plans and to organize workers and volunteers so that when disaster does strike, the organization is not chaotic.
Eye Witness
Working as an intern with the American Red Cross Blood Services in State College, Pa, has allowed me to witness first-hand some of the disorganization of a non-profit group. Not having the appropriate funds for the most updated technologies and working in an office where different volunteers are in and out, things can get a little hectic. Running an organization in such a fashion is fine when there are no crises; however, when a situation does arise, the ARC will be in major trouble. The Red Cross needs to realize that crises will occur and they need to put money in ahead of time to have a strategic plan in place for when the next Hurricane Katrina strikes.
Organization is Key
As far as the ARC and Katrina goes, they responded well by first releasing a statement from the current president. However, she needed to have a plan ready to share with the public, not tell us that the Red Cross will provide aid when flood waters decrease. A disaster plan is critical, the ARC needed to have their response to disasters laid out ahead of time; how they will get in to the disaster area, what services they will distribute and where, how they will handle various scenarios. One person interviewed used the excuse that Hurricane Katrina was a natural disaster, and disaster meant that it was unexpected and could not have been planned for in advance. While I can see some logic in this statement, I have to disagree. Part of a disaster relief service is to be prepared for such events, expected or not the service should have a plan ready. Hurricane Katrina was on the radar, people knew it would hit; and hit hard when it did. The American Red Cross should have been much more organized in deploying relief services immediately.
Too Little, Too Late
Throughout the Hurricane Katrina relief, the ARC did well with shedding positive light on their organization by constantly reiterating what they were doing to help victims. While this is a good thing, it would have been much better if the Red Cross was a little more publicly visible, especially about the fraud. More news articles and appearances on newscasts to share what they were doing during the situation, not after, would have gotten people to sympathize with the ARC instead of question it as a trustworthy organization. The call center fraud issues were a disaster for the Red Cross and could have completely been avoided had there been a disaster plan in place.
By the Red Cross just allowing each situation during Katrina to unfold in the news and then back-pedaling, telling the public too late what they were doing to fix the problem, the American Red Cross lost the respect and trust of the American people. The ARC should have been straight forward and let the public know the steps they were taking as each issue occurred, not after it happened.
Actions Speak Louder
The Red Cross needed to immediately make changes. While it is comforting for the public to see pictures of Katrina victims receiving food from a Red Cross volunteer, of donation bins for Katrina relief and of ARC workers hugging a survivor, the Red Cross must still follow through and learn from their mistakes. It is important to worry about image when one talks about publicity, but words must be backed with actions. The ARC needed to show the public they would make changes to their organization; a lot could be learned from the Hurricane Katrina catastrophe.
Final Note
Since the hurricane, the Red Cross has made a complete turn around. The organization has definitely learned from this experience, and they had to or else they would not receive support from the nation, which their existence depends on. The updates to their web site were crucial in restoring American’s faith in the ARC. New programs that the Red Cross put in place will serve them well when the next natural disaster strikes. The key to the American Red Cross having success is planning ahead; putting the appropriate amount of funds aside so that they can have a disaster plan in place far in advance and then respond immediately if disaster does occur (and it will again!). Hurricane Katrina was not only a natural catastrophe, but a public relations catastrophe, as well. Though the American Red Cross has recovered, the American public may not be so forgiving of another PR disaster.

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