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Quake Increases Financial Difficulties of Red Cross

October 06, 1987|CAROL McGRAW | Times Staff Writer

The Los Angeles chapter of the American Red Cross, which has provided more than $1 million in relief services to about 10,000 Whittier earthquake victims, does not know how it will pay the bills, officials say.

The charity has been strapped financially for the last two years because of increased costs, a larger caseload of clients and relief efforts for the recent Mexico and El Salvador earthquakes and the flooding in Northern California.

Further, in the last two years, the Red Cross has suffered a $750,000 cutback from its main funding source, the financially troubled Los Angeles United Way, according to Red Cross spokesman Ralph Wright. United Way's campaign fell nearly $9 million short of its $90-million goal this year after disclosures of financial improprieties regarding employee loans.

And to make matters worse for the Red Cross, two local chapter buildings in Alhambra and Whittier sustained more than $100,000 in damage in last week's quake, officials said.

"We are hurting. It's a million-dollar headache," Wright said.

Since Thursday's earthquake, the Red Cross has set up and operated 13 shelters and provided food, temporary lodging and medical treatment for 10,000 earthquake victims. Eight of those shelters remain open. The agency has also been running a telephone hot line for victims, and has been overwhelmed by telephone requests for earthquake preparedness educational material and information.

Along with a public appeal, the local Red Cross officials are considering dipping into its $3 million in operating reserves, and will ask its national organization for help.

Another possibility is getting a special grant from United Way, which provided $350,000 to the Red Cross for earthquake relief in Mexico in 1985.

"These prospects are uncertain," Wright said, noting that dipping into operating reserves "is not financially prudent" and that the local United Way has had its own financial problems. And while the American National Red Cross will assist local chapters with such financial difficulties, that group has also been burdened in recent years with numerous disasters throughout the nation and the world.

"The bottom line is that our own citizens should be helping each other out," Wright said. United Way officials blamed its own campaign shortfall on changing conditions in the Southland economy and donor concern about the controversy, which centered on loans to United Way executives. Since then the loans have been repaid and new management has taken charge.

In contrast to the situation in Los Angeles, Orange County's Red Cross chapter has money on hand.

Despite a $200,000 budget cut by United Way, the Orange County chapter, located in Santa Ana, is working with a $1.2-million budget this year, public relations director Barbara Lohman said. Though the Orange County chapter has been providing assistance to earthquake victims, so far only one family has needed financial aid, Lohman said, and the local chapter is not financially strapped.

The Los Angeles chapter of the Red Cross and 14 other health charities participate as partners with United Way in the annual fund-raising campaign, sharing proceeds, campaign costs and any losses. Because of the campaign shortfall, the Red Cross received $10 million instead of the $10.5 million it expected, Wright said. The year before it had received $200,000 less than expected from United Way.

Help Not Certain

Compounding the problem, Wright said, is the fact that the charity finds itself in an unusual predicament because of its partnership in the fund-raising efforts of United Way.

Under its agreement with United Way, the Red Cross does not usually conduct fund-raising drives in October through December, when United Way makes its appeal. While technically it can do so in emergency situations--and will do so in this case--it is like robbing Peter to pay Paul, Wright explained, because the Red Cross receives 84% of its funds from that umbrella organization.

United Way officials said Monday that they have talked with Red Cross officials and are aware that they will be conducting a public appeal for the emergency situation. United Way spokesman Tony Harris said they will meet with Red Cross officials soon to discuss "possibilities of United Way support."

Since such requests must be approved by United Way leadership, Harris said he could not indicate if such help was certain to come.

"While the earthquake is an extraordinary cost, the Red Cross is a vivid example of the type of agency we were not able to support as fully as we would have liked because of the campaign shortfall," Harris said.

"We are starting a new campaign this month and hope that the community will make this fund-raising effort whole again."

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