As the treasurer lauds supply-side economics, a once-controversial recovery theory is gaining traction.This is the essence of modern monetary theory – that government budgeting is nothing like household or business budgeting, for the simple reason that government can create money.
Exclusive: Red Cross employees speak out
In July last year, the Australian Red Cross launched a disaster appeal that caught the attention of some current and former employees.
Unlike previous appeals for specific events, this campaign carried no “statement of intent”. It was a significant departure from prior policy, according to current and former Red Cross employees who spoke to The Saturday Paper.
Funds donated to the appeal were not bound to a specific cause but instead flowed into a broader pool of money for future, as yet unrealised, disasters.
At first, these donations came as expected. Then the bushfire crisis enveloped eastern Australia.
As fires destroyed more than 10 million hectares of bushland, killed 32 people in three states and destroyed more than 2600 homes, donations flooded in from across the country and around the world.
But concerns have been raised about how that money will be used, and if enough of it will reach people in need and reach them quickly.
The charity faced a wave of criticism on Wednesday when it was revealed just a third of the $95 million of bushfire donations had been committed to help those affected with their immediate needs.
The Saturday Paper spoke to seven past and current employees about how the charity behemoth handles vast sums of donations.
All the people interviewed have requested, and were granted, anonymity so that they could speak freely.
“I know when I asked what Red Cross actually does during a disaster, there was never a decent answer,” one said.
Another said it was “difficult to get precise details about who had been helped and how”.
Three of the former employees independently raised concerns about why the Red Cross would have launched a general appeal and nothing tied specifically to the bushfires, as has been its practice in the past.
“I’ve looked for the appeal wording and it’s not there,” one person with knowledge of the organisation’s disaster processes told The Saturday Paper.
“Usually you would get some extra information about where your money is going to and that isn’t there.”
Australian Red Cross director of Australian programs Noel Clement said the charity had chosen not to launch a specific appeal as the fires progressed because “this has been a rolling series of emergencies”.
“This one has been a very difficult one to work out at what point you would launch a [quarantined] appeal,” he said. “We hadn’t identified a need and an interest in a specific appeal but obviously we had already started to receive lots of donations. So, for us, it was better to commit the funds that were already coming in to bushfire-affected communities than to start again.”
He said the Disaster Relief and Recovery Fund was set up with a “broad intent”. “We were very clear [that fund] was for this and other disasters,” he said.
“We have two ways that donors can support our work. One is a very specific appeal such as the Black Saturday appeal, which is for a defined period, a specific event.
“The other is we encourage people to give to our work … in our Disaster Relief and Recovery Fund.”
Clement said that apart from $5 million for general disasters, including possible cyclones later this year, the “balance of the fund will be going to the bushfire emergency”.
But the nature of the appeal means the money raised is available for the Red Cross to spend on a vast array of projects and future disasters. There is no legal wording about how much of the money raised will be spent on current bushfire victims or how much will be quarantined.
In the past, money raised under specific appeals could be legally spent on only that cause. This was a historical quirk of the Red Cross charter.
“Before an appeal can accept any donations, the [senior leadership] had to ensure that the money would be used in a very precise way,” a former Red Cross worker said. “They are incredibly limited in what they can do in an emergency.”
The committee process required a statement of appeal intent, meticulously detailing where the money would be spent. But before the bushfires, the organisation began brainstorming ways to do things differently.
When the current Disaster Relief and Recovery Fund was set up in July last year, it had no such set of rules.
Casting such a wide net for donations appears to be a response to the challenges the Red Cross faced after previous disasters.
The organisation was reprimanded following the 2002 Bali bombings, in which 202 people died, including 88 Australians, because it struggled to spend all the money raised for victims and their families.
“They copped a lot of criticism for that because they raised so much money they could not spend it legally,” one former staff member said.
“As far as I know, there is still some of that Bali money sitting around in bank accounts today.”
Clement denied this, saying all the Bali money was “spent on appeal intent”.
In 2003, the then vice-chair of Red Cross, Brian Ward, told ABC Radio National that the charity was cleared by auditors PricewaterhouseCoopers of any wrongdoing, but conceded it may have been able to do more sooner.
“If we have added to the suffering of Bali victims, we are extremely upset and we regret that … but on balance, I think we will be judged in the fullness of time as being a compassionate organisation that lived up to its compassionate mandate.”
The past two years have been rocky for the Australian Red Cross. The organisation announced mass redundancies in both 2018 and 2019 and discovered it had also been underpaying staff. This matter was disclosed to Fair Work Australia in May 2018 but the Red Cross has still not repaid in full the estimated $20 million owed to employees.
“I don’t know how much I was underpaid, and they won’t tell me or when I can expect to see that,” one former staff member said.
“It’s a secret and there is no time line on when it will all be out in the open.”
Meanwhile, the organisation has refused to join the National Redress Scheme for historical child sex abuse cases, claiming on its website that “Red Cross has its own rigorous process for investigating and responding to complaints in a caring, compassionate and prompt way”.
Clement echoed this sentiment, telling The Saturday Paper, “The amount of support we have been providing, we believe, has been commensurate or higher than the National Redress Scheme.”
But he said the charity is now reconsidering its position on the scheme with a view to “most likely joining the redress scheme”.
There are other signs the Red Cross is aware of its shortcomings, at least internally.
On October 16 last year, Australian Red Cross president Ross Pinney sent a frank internal memorandum to staff, which talked about the need to change in the face of “challenges and vulnerabilities like we’ve never seen or experienced before”.
“Alongside … external trends, we have internal drivers for change,” Pinney wrote. “We are not able to invest as much as we need where it matters most … our costs are not competitive [and] we need to ensure sustainability.”
Clement told The Saturday Paper this refers to internal concern that “we end up being fairly broad and not deep enough compared with what we could be”.
He said the organisation is looking to narrow its focus so it is more able to support “communities to adapt to a changing climate, getting more communities prepared for disasters”.
According to former staff with knowledge of the Australian Red Cross disaster appeal co-ordination processes, there have been other changes made, relating to administration fees.
“They used to have a statement saying, you know, ‘in the instance we raise more than X amount of dollars, we will cap our administrative expenditure at $500,000’,” one former employee said.
“And it was a sliding scale depending on how much money they raised but there was usually a maximum on admin costs of about $1 million and they would tell the public that.”
Clement says he is not aware of an appeal where such an administration cap was flagged in advance.
There is no such cap announced for the current fundraising effort. The Red Cross said no more than 10 cents in the dollar will go towards administration fees such as grant management, IT support and legal and privacy obligations.
With no absolute cap on administration fees, however, the potential amount for the charity to spend on this measure is now beyond $11 million.
“All organisations have administration costs, every charity has admin costs, and the Red Cross will need to pay auditors and bank account fees and co-ordinate volunteers,” a former employee said.
“But there needs to be transparency.”
Clement said resolutely: “I would say we have been [transparent].”
Frustration with the Red Cross’s handling of donations boiled over on Wednesday when the New South Wales state MP for Bega, Andrew Constance, slammed the charity for holding on to money when it was most needed.
“The money is needed now, not sitting in a Red Cross bank account earning interest so they can map out their next three years and do their marketing,” he said.
“We need a very real change, very quickly so that the money can get to those who need it most … people are on their knees and we can’t have a drip-feed.”
One of those people who had yet to receive any assistance, from the Red Cross or any level of government, was local Bega resident Greg Franklin. He and his family only have a place to stay now because of the support of Find A Bed, an organisation formed in response to the unfolding bushfire crisis.
“We literally bought beds for the family and found a house for them to rent after they lost everything,” Find A Bed co-founder Erin Riley told The Saturday Paper.
“So far we have raised $7500 for the Franklins. We are working with a retired couple in Queensland who are living in a burnt-out bus, an actual burnt-out bus, because they lost their home months ago and everyone has forgotten about those victims.”
Riley said the work is extremely difficult and has sympathy for the scale of the disaster and the effect it must be having on charities.
“I feel bad for the guys on the ground because they are doing the best they can. It’s the model that is outdated; they are not set up for the scale of these disasters nor to deal with the reality of what is needed.”
Riley said she is most concerned about bushfire victims who have lost everything but fall between the gaps of strict eligibility criteria for charities offering grants, including the Red Cross.
“The people who have the least secure forms of accommodation are also the ones least likely to qualify,” she said. “People who are sublessors, living in a shed or a caravan on someone else’s property with no formal rental agreements – they do not qualify but they have been hit hard.”
Despite fundraising since July 2019, the Red Cross only made grants for victims available from January 6 this year.
“Back to September, this was not assistance that we were providing. So it’s the generosity of donors that has enabled us to be able to do this,” Clement said.
“This goes back to what we were raising funds for. We were raising money for our teams on the ground and they absolutely were on the ground for months.”
A spokesman for the national charity regulator, the Australian Charities and Not-for-profits Commission, said it expects all organisations to use funds for their stated charitable purposes.
“The ACNC considers a number of risk indicators in our approach to charity regulation,” the spokesman said in a statement. “A sudden influx of significant funds may be difficult to manage for some charities and could pose a risk to proper financial management and governance processes.”
To that end, the Red Cross has convened a “panel of experts” to advise on getting the money to people in need. The group only held its first meeting this week.
Late on Wednesday, the Red Cross posted this update on its website: “Our panel has both professional expertise and lived experience of disaster recovery and will advise us on the best use of funds to meet people’s immediate needs and support communities in their long-term recovery.”
To many, the difficulties faced by charities in such a sprawling disaster is the logical outcome of governments vacating the field in favour of “civil society”.
Part of the overwhelming response from the public, which across multiple charity appeals and direct donations has now raised more than $400 million, was a reaction to the lethargic response from the federal government to the worsening crisis.
Prime Minister Scott Morrison, after first insisting when asked about compensation that volunteer firefighters wanted to be on the fireground, announced a scheme to provide income support to those who had been battling blazes for weeks and months while losing money.
The Saturday Paper has obtained a copy of an “internal knowledge article” drafted to help Service NSW respond to calls from firefighters trying to access the scheme, which is administered by state governments.
The document notes that volunteers can claim compensation only after they have served at least 10 days on a fireground and if they “have suffered a loss of income resulting from volunteering as a NSW Rural Fire Service volunteer.”
People who volunteer outside their usual business hours cannot claim compensation and people who work for businesses with turnovers of more than $50 million or more than 250 staff are not covered.
“Large businesses have more capacity to support their staff to help their community and are being encouraged to do so,” the document tells Service NSW staff.
A spokesman for federal Emergency Management and Natural Disaster Minister David Littleproud could not name any such large businesses that have stepped into the breach and provided that support.
A NSW public servant told The Saturday Paper he was “disgusted with all the caveats and exclusions that have deliberately been built into the system”.
Anne Leadbetter, an independent disaster consultant who has been appointed to the Red Cross expert panel, told The Saturday Paper she was frustrated by the government because “it’s like we start from scratch every time this happens”.
“It’s like we’ve never had a disaster before,” she said.
“I don’t think governments could, or that it would be desirable to, do everything during a disaster because they just don’t have the capacity in the right places.
“But it’s very true, I think, that we don’t resource our communities in times that are good, so they have what they need when the times become terrible. That is what we are seeing now.”
In the face of mounting criticism, former Red Cross employees say the funds should be dispersed to other charities and local organisations to help people in desperate need. They question the Red Cross holding money in bank accounts.
“All of those are options that we’ve still got on the table,” Noel Clement said.
“We are always open to who has got the best approach. It’s certainly an option, it’s not one that we have got a clear plan for at the moment.”
This article was first published in the print edition of The Saturday Paper on Jan 25, 2020 as "Exclusive: Red Cross employees speak out".
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