Associated Press

Red Cross interim Chief Executive Officer Harold Decker gestures during a news conference at the Red Cross in Washington yesterday to announce the Red Cross will use all money donated to the Liberty Fund for people affected by the Sept. 11 terrorist attacks, reversing a plan to set aside some money for other needs.

WASHINGTON - The American Red Cross said yesterday it will use all the money donated to the Liberty Fund for people affected by the Sept. 11 terrorist attacks, reversing a plan to set aside some of the money for other needs.

The Liberty Fund has collected $543 million. The Red Cross had planned to put about $200 million aside for use in the event of future terrorist attacks. That move drew a sharp rebuke from critics, who said the money donated to the fund was given under the assumption only people affected by the Sept. 11 attacks would get it.

"We deeply regret that our actions over the last eight weeks have not been as sharply focused as the American public wants or the victims of this tragedy deserve," Red Cross interim CEO Harold Decker said at a news conference.

Decker called the change a "course correction" and said among those eligible for the money will be survivors of the attacks and their families, those with homes damaged in the attacks and those unemployed because their workplaces are in lower Manhattan.

He said $275 million would be paid out by the end of this year. Grants to families, which had been restricted to just three months of living expenses, will be extended to one year.

About 9 percent of the total fund will pay overhead and administrative costs for distributing the money. Decker said it could take many years before all the money is spent.

The Red Cross has stopped accepting donations to the fund, saying the amount collected so far is sufficient. The charity already has distributed about $121 million in direct aid to Sept. 11 victims and their families.

Red Cross President Bernadine Healy is stepping down as head of the charity at the end of the year in part because of criticism of the fund. Healy took the unusual step of setting up the fund as a separate account to deal with the attacks, over the objections of some Red Cross board members.

Healy was lambasted at a House hearing on charitable contributions last week after two widows who lost their husbands in the World Trade Center attack described how they have had to fight a maze of bureaucracy to obtain financial help.

Lawmakers from both parties said they believed donors to the Liberty Fund contributed as generously as they did because they thought their money would be channeled quickly and directly to the victims and families of the attacks.

Since Sept. 11, about 2,500 families have received Liberty Fund benefits, averaging about $25,000 per household. On Monday, the Red Cross said it would return donations to any contributor who requests a refund.

The 37,000-employee American Red Cross administers almost half the nation's blood supply and provides relief to victims of disasters.