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February 2, 2022

Where Does $100 to the American Red Cross Go (2020)?

by Anne Paddock

When most people think of the American Red Cross (ARC), they often think of blood collection, testing, and distribution and/or disaster services – both domestic and international and in the most simplistic terms, this is what the ARC is about.

Formally known as the American National Red Cross (the organization is the designated affiliate of the International Federation of Red Cross and Red Crescent Societies), ARC was established by Clara Barton in 1881 and given a charter by Congress in 1900 and again in 1905 to carry out humanitarian services. Since that time, the charter has been amended nine times, with the most recent in 2009 to address reforms to the organization.

ARC receives widespread public support having raised $2.8 billion (for the year ending June 30, 2020) compared to $2.8 billion in 2019 and $3.7 billion in 2018. Most of the organization’s revenue ($1.7 billion or 61% of revenue) came from the sale of biomedical services (i.e. blood and plasma collected through donations and sold) with the remaining revenue obtained primarily through contributions, gifts, and grants ($900 million or 32% of revenue) and investment and other income ($80 million or 3% of revenue).

Although contributions, gifts, and grants only comprise 32% of total revenue (or $900 million), it is still important to remember the revenue stream of biomedical services is dependent upon donations (i.e. blood and plasma) so although one donation is tax-deductible (revenue) and the other isn’t (blood),  donors and potential donors still need to understand where revenue dollars are spent.

Expenses are best understood by looking at the big picture where costs are grouped into four categories: program, management, fundraising, and grants; or by line-item (i.e. salaries, office, advertising, etc) which provides a more detailed explanation of how revenue was spent. Both are important although the detailed line-item approach provides a more comprehensive understanding of where revenue is spent.

Expenses by Category (Program, Management, Fundraising, and Grants)

Expenses totaled $2.6 billion (for the year ending June 30, 2020) not including depreciation ($85 million) – a non-cash expense, broken down as follows:

$2.1 billion or 75% of revenue:  Program Expenses

$0.1 billion or $90 million or 3% of revenue:  Management Expenses

$0.2 billion or $173 million or 6% of revenue:  Fundraising Expenses

$0.2 billion or $245 million or 7% of revenue:  Grants

$2.6 billion:  Total Expenses

Based on the above information, every $100 in revenue was spent a follows:

$100:  Revenue

-$ 75: Program Expenses

-$  6: Fundraising Expenses

-$  3: Management Expenses

-$  7:  Grants

-$ 91:  Total Expenses

$  9:  Revenue Remaining:  To General Fund

Expenses by Line Item

Expenses totaled $2.6 billion for the year ending June 30, 2020 (not including $85 million in depreciation) categorized as follows:

$1.360 billion (or 49% of revenue):  Salaries, Pension, Benefits, Payroll Taxes

$  438 million (or 16% of revenue):  Biomedical Supplies

$  228 million (or 8% of revenue):  Other Fees for Services and Program Supplies (no detail provided)

$  234 million (or 8% of revenue):  Office, IT, Occupancy, Insurance

$  235 million (or 8% of revenue):  Grants

$   52 million (or 2% of revenue):  Travel, Meetings and Conferences

$   37 million (or 1% of revenue):  Interest

$  14 million (or 1% of revenue): Advertising and Fees for Services (management, legal, accounting, lobbying)

$2.598 billion:  Total Expenses

Based on the above information, every $100 in revenue was spent as follows:

$100:  Revenue

-$ 49:  Salaries, Pensions, Benefits, Payroll Taxes

-$ 16:  Biomedical Supplies

-$  8:  Other Fees for Services and Program Supplies (no detail provided)

-$. 8:  Office, IT, Occupancy, Insurance

-$  8:  Grants

-$  2:  Travel, Meetings and Conferences

-$  1:  Interest

-$  1:  Advertising and Fees for Services (management, legal, accounting, lobbying)

-$ 93:  Total Expenses

$   7:  Revenue Remaining:  To General Fund

As illustrated above, nearly half the revenue reported was for salaries, benefits, pensions, and payroll taxes for the 18,984 employees (which equates to about $72,000 per employee). Given that the organization is primarily collecting, testing, and distributing biomedical supplies (i.e. blood and plasma), high staff expenses are to be expected. Most revenue is going to support the staff and office costs associated with collecting, testing, and distributing biomedical supplies.

It is important to note $8 of every $100 (or $228 million) was spent on other fees for services with no detail provided.

And, finally it is very important to note that ARC had $1.4 billion in net fund assets at the beginning of the year. At the end of the year, net fund assets were $1.8 billion – a $400 million increase which is  substantial.  This increase was due to spending about $200 million less than the organization received and a $200 million adjustment to assets (due to a change in pension and post retirement benefits).

To read the IRS Form 990 (2019 for the year ending June 30, 2020), click here.

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