Bucking the trend of overspending on disasters and underspending on prevention and preparedness, the Red Cross attempted to divert some of its 9/11 relief monies to more underfunded projects. Outraged donors, however, thwarted the agency’s plans.

Soon after the Sept. 11 attacks, the Red Cross created the Liberty Disaster Relief Fund to handle the surge in donations. After using the funds for immediate disaster relief, including food, water, and health services, the agency still had a lot of...

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