III | Questions of Finance
1. Claims
The word “claim” as used in the relief accounting was applied to anything from a time check for a day’s work to a ten thousand dollar demand for goods seized, a usage that arose from the fact that for the first few days, when there was no available cash, many obligations were incurred that were a proper charge on the relief funds though not authorized by the Finance Committee.
Some claims were made by those who suffered a change of sentiment toward contributing relief. During the hours of urgent need men donated their goods, workmen gave their labor, and professional men, their services, who when later they saw the size of the relief funds could not resist the insidious craving to have a share of the big whole. There is the instance of men belonging to one of the building trades who did work for which they expected no pay but later were not satisfied to take the $4.00 a day offered as payment by the Finance Committee. They demanded $6.00 because other men were receiving that amount for a day’s work. Business houses within and without the city evinced the same spirit.
Day by day the flood of claims swelled. Claimants and their attorneys laid siege to the Finance Committee and tried by bribes and threats of lawsuits to collect their claims. A large force of clerks and a special committee were kept hard at work trying to learn the merits of the claims. The Finance Committee itself day after day was compelled, instead of discussing necessary relief measures, to give the greater part of its sessions to the hearing or to the discussion of these claims.[93]
[93] See Sixth Annual Report American National Red Cross, 1910, p. 160.
The circumstances of seizure had varied. Often when the fire was almost upon a store somebody would assume authority and break it open to give the stock to the people. In such a case the stock would have been destroyed by fire and there was no justice in the claim for seizure except where the owner as a consequence lost insurance. Irresponsible individuals who had no connection with relief committees had seized goods and impressed vehicles. Those who suffered loss through such lawless acts were unfortunate, but they had no real claim to reimbursement from the relief funds.
The same may be said of the individuals, the business houses, and the transportation companies whose goods were stolen, not seized, from freight cars and warehouses. Many claims for regrettable losses which might have been legitimate if brought against state, city, or person, were unjust when brought against the relief funds. Fraudulent attempts were also made to collect from the relief funds for losses that had no connection with the relief work and for losses that had never occurred. It was a perplexing problem to deal with these thousands of claims, the difficulties of which were increased by the insistence of those with the least valid claims.
The last report of the Department of Bills and Demands dated March 16, 1907, gives the following figures:
TABLE 27.—DISPOSAL OF CLAIMS ACTED UPON BY THE DEPARTMENT OF BILLS AND DEMANDS, TO MARCH 16, 1907
| Disposal of claims | CLAIMS PRESENTED | |
|---|---|---|
| Number | Amount claimed | |
| Claims rejected as a whole | 1,164 | $451,369.59 |
| Claims cancelled, withdrawn, etc. | 101 | 13,269.54 |
| Claims donated | 18 | 10,528.20 |
| Claims approved in whole or in part | 9,669 | 2,242,003.00 |
| Total | 10,952 | $2,717,170.33 |
TABLE 28.—PAYMENTS UPON CLAIMS ACTED UPON BY THE DEPARTMENT OF BILLS AND DEMANDS, TO MARCH 16, 1907
| Disposal of claims | CLAIMS PRESENTED | PAYMENTS MADE | ||
|---|---|---|---|---|
| Number | Amount claimed | Amount | Per cent of amount claimed | |
| Claims approved in whole or in part | 9,669 | $2,242,003.00 | $1,501,781.52 | 67.0 |
| All claims | 10,952 | 2,717,170.33 | 1,501,781.52 | 55.3 |
After March 16, 1907, a few long pending and new claims were paid. Some law suits had been settled, and a few were still pending against the Corporation when this report was prepared.
It thus appears that the trustees of the relief funds paid over a million and a half dollars for expenditures, many of which they had not authorized and were unable to control. They tried to pay only such part of the claims as represented supplies and service used in relief work. Just claims were cut down as a rule, so that a comparatively small number of claims were paid in full.
In deciding the merits of claims the supervising and judicial committees appointed sub-committees of experienced men to supplement their own technical knowledge. Many claims for liquor destroyed by soldiers and citizens were presented, but the Finance Committee decided to pay no liquor claims. The enormous disbursements for automobile service and for transportation of supplies were made chiefly in payment of emergency claims. Claims of various sorts were paid by the War Department out of the Congressional appropriation of $2,500,000. Other claims were paid by the state. As the Relief Corporation could get no information about such claims it is possible that there were duplicate payments.
2. System of Accounting—A Note
The accounting system of the Relief and Red Cross Funds has been criticized because it did not readily yield information as to the amounts expended for various purposes, and because it was complicated. The first seems a fair criticism, for contributors to funds and the public in general are more interested in the cost of various forms of relief than in the state of the appropriations. The system of appropriations to the departments for different purposes was based on carefully prepared budgets. It was good for controlling expenditures and for keeping a check on departments and bureaus. For those not directly connected with the work, additional information in simple form might easily have been given. The intricacy of the accounting, however, seems justified by the results. It was devised to make the handling of the money as secure as possible. So far as the local auditors and the auditor of the War Department have been able to discover there was only one transaction that looked like misappropriation of money. About $1,000 received by a camp employe from certain authorized sales was for a short time kept back. The apparent shortage, easily detected by the accounting department, was made good.
Considering the extraordinary conditions under which the work was organized, such a showing is remarkable. When men undertake the thankless task of handling a large relief fund, if they have a keen sense of responsibility and a realization of the difficulties ahead they will wish to disburse the fund through a system which is as safe as possible. It is worth while for them not only to prevent misappropriation but even the appearance of it. The employes of such a committee will find satisfaction, when accused of graft and stealing,—an accusation suffered many times by the San Francisco workers,—in showing their accusers just how the money is guarded and that it is impossible for them to steal. A system that insures such security is worth the extra cost.
3. the Control of Donations
As a result, primarily, of the publication of sensational stories in the press of the country, the plans of the Corporation were at times seriously embarrassed by the withholding of funds by eastern committees and by the possible danger of those funds being dispensed by independent agencies.
The studies in rehabilitation show that the suspension of grants on August 20, 1906, the period of arrested progress, had a serious effect upon the rehabilitation work. It caused a change of relief policy so that families given grants in one period were treated differently from those in another. It meant for many families a long wait from August 20 to the middle of October when the embargo was lifted. The Corporation had worked out a wise, comprehensive program on the basis of estimated income and then suddenly had to question whether the income might not be $3,000,000 less. Inevitably every department suffered from uncertainty and hesitation. The results of such an intolerable condition were more clearly perceived in rehabilitation than in the other work, but what the withholding of funds meant in reduced efficiency would be hard to estimate.
The two most important funds, those of Massachusetts and the New York Chamber of Commerce,[94] were eventually transferred, the latter with the restriction that it be used for business rehabilitation. Only a number of small funds were permanently held, but the harm was done. The warning should be heeded in future disasters. It is possible for a relief committee, when its work is hardest, to be tied up because of a few newspaper stories which may or may not have foundation in fact.
[94] Action of the New York Chamber of Commerce taken October 2, 1906, and transmitted in the form of a resolution to the San Francisco Relief and Red Cross Funds.—The resolution provided for the transfer of $500,000 to the Corporation “to be devoted by said Corporation for the purposes and uses of making grants of money or its equivalent, to individual sufferers from the disaster for purposes of rehabilitation, in such sums and by such methods as its Rehabilitation Committee may approve; and that no part of it should be used for the payment of any pending claims or obligations incurred prior to such transfer of funds, or for the maintenance of camps, or for ordinary emergent relief, or for the erection of barracks or cottages, or for the maintenance of persons therein, it being assumed that the contribution already made from this fund ($267,500) and the sum subscribed in other ways will enable the Corporation to accomplish these necessary and worthy objects.”
The investigator sent by the Massachusetts committee because of the newspaper stories, after investigation cordially endorsed the work of the Relief Corporation and made but few criticisms.
What is the remedy? It cannot be too plainly stated that there must be only one relief committee or corporation.[95] There must be no division of responsibility for distribution. If there must be reform it must be within the relief corporation itself. If one of the eastern committees in command of large funds had set up its own agency in San Francisco, it would have been guilty of improper trusteeship. That much is evident. The suggestion has been made that the committees in charge of the larger funds should each have had a representative on the Finance Committee. Mr. Bicknell, for instance, came first to San Francisco as the representative of the Chicago Commercial Association and the Mayor’s committee funds. But such representation would not include the smaller fund committees. A more inclusive plan is desirable. The gradual strengthening of the American National Red Cross seems to point the way. The Red Cross should become so fully recognized as the national agency for all disaster funds that it should eventually, in any given case, receive all funds not sent directly to a local committee. Its relation to local committees will be strengthened and it can be relied upon to suggest and whenever necessary push changes in relief measures. In San Francisco and each subsequent disaster of any proportions, the American National Red Cross has been represented by its expert agents. Its strength has been materially increased by the appointment of a permanent director. The withholding of funds once subscribed for a particular disaster should become an impossibility as the status of the national agent is recognized.
[95] See Sixth Annual Report American National Red Cross, 1910, p. 156. See also section on The Incorporation of the Funds, Part I, p. 25 ff. of this volume.
We have alluded to one form of restriction, that of requiring that a specified fund be used for a specified form of rehabilitation. Such restriction must of course be accepted after an effort has been made, and has failed, to persuade the forwarding committee to lift the restriction. But restrictions upon relief in kind are doubly dangerous and ill-advised. In the San Francisco disaster the “flour” episode gives an apt illustration. Certain forms of food were donated in quantities in excess of the needs. These were flour, potatoes, and condensed milk, all three of them valuable forms of food in an emergency. The potatoes, as it was the end of the season, did not keep well in large masses and the refugees, living in tents or in basements or attics, had little room for storage. Besides, the universal practice in San Francisco and the vicinity where fresh vegetables can be bought the year round, is to buy in small quantities from day to day or week to week and not store in the fall for winter use. The Finance Committee, unable to dispose of the potatoes to refugees, decided to sell the surplus stock. The sale does not appear to have been made, perhaps because they were unsaleable. At any rate large quantities spoiled and had to be thrown away.
It was natural to think that condensed and evaporated milk would be necessities of prime importance. They were valuable, but on account of local conditions were not needed in great quantities. The supply of milk from the ranches outside the city was not much diminished by the earthquake. By confiscation and by arrangement with dealers an abundant supply of fresh milk was secured for distribution to the refugees.
Many committees throughout the country sent flour as the most useful form of food. It came so fast that for lack of warehouses in which to store it (practically all city warehouses having been burned) part of it was put aboard three transports and in the army warehouses, and finally a vast quantity was stacked up in the open air. The transports were not adapted to preserving flour in good condition so they could not long be used as storehouses. The Finance Committee, confronted by the problem of finding storage for the vast supply received, and knowing that it was several times as much as could be reasonably distributed, decided on May 17 to sell 4,000,000 pounds. This was vigorously objected to by the Minneapolis committee which had sent 15 per cent of the 16,000,000 pounds received. It insisted that its flour should be distributed,—the very flour sent, not flour purchased later with cash from the sale of Minneapolis flour. This episode led to newspaper publicity and protests. The lesson is, that restrictions upon relief in kind are unsatisfactory and embarrassing and should always be placed upon a discretionary basis. The Minneapolis committee claimed that title to its flour had been transferred to the destitute of San Francisco, not to the Red Cross or to the Finance Committee, who were apparently to be considered solely as the servants of distribution. The position is an impossible one in which to place a self-respecting committee.
Many donors of money gave specific directions as to the use to which they wished it put. There was the man who sent $1.00 with a request to hand it to some worthy sufferer and let him report to the donor; and there was the refugee who, after he had found employment elsewhere, sent a small sum, more than enough to pay for the three days’ rations he had received in the bread line, with the request that the balance be given to a soldier who had been kind to him. Jewelers sent money for jewelers, artists for artists, teachers for teachers, physicians for physicians, the people of one town for their fellow townsmen in San Francisco.
Money was also sent to individuals connected with the relief funds to be applied to specific purposes. Fortunately, there were enough unrestricted funds available to assist all classes and carry out the intent of all donors. It was not necessary to open a special account for each of these trusts.
No actual restriction as to the purpose of expenditure, imposed either by donors directly or by the custodians of large funds, was in itself onerous to the relief authorities, but the circumstances attendant upon the remittance of restricted funds caused more or less embarrassment during nearly the whole period of the relief work.