From the Summer 1998 Watchdog Report
Army Rates High on Finances but Low on Governance
After repeated requests from AIP, The Salvation Army
has prepared consolidated audited financial statements of its 9,347
centers of operation that provide counseling, shelter and other
assistance to nearly 27 million people. AIP is particularly pleased
with this development since The Salvation Army, unlike most other
major charities, is not required to file public information because
it is considered by the IRS and state authorities to be a church.
These statements show over $2 billion in income and $1.6 billion
in expenses for fiscal 1996.
The Salvation Army of the United States consists of
six corporate entities: four regional territories, the National
Corporation (headquarters) and the World Services Office. Since
the Headquarters and the World Service Office do not report fundraising
costs, and their expenses account for only about 2% of the Salvation
Armys total budget, AIP is not presently rating these entities.
While the parts of The Salvation Army that have been
evaluated receive a high rating from AIP based on their financial
performance, AIP members should be aware that the organization lacks
an independent governing board. AIP encourages all religious and
secular nonprofit organizations to demonstrate good governance by
electing an outside board of directors that consists predominately
of members who do not receive compensation or other financial benefits
from the organization that they are governing. Otherwise, nonprofit
directors may be tempted to place their own interests over the best
interests of the organization. The absence of outside directors
at any nonprofit could also lead to serious problems being swept
under the rug and away from public scrutiny.
The Salvation Army has a national advisory board and
each local chapter has its own advisory board. Although these advisory
boards do not have governing powers, according to the Lieutenant
Colonel Tom Jones, Community Relations and Development Secretary
of The Salvation Army, they do carry moral weight or suasion. Nonprofit
advisory boards can offer advice to charity employees but do not
have the authority to set organizational policy, hire or fire the
executive director, approve the audit or budget, or perform other
functions of a governing board.
The Commissioners Conference is the governing
board of The Salvation Army USA. It consists of ten Salvation Army
officers, who are all ordained ministers: the National Commander,
Robert A. Watson, four territorial Commanders, and the chief national
and four chief territorial Secretaries. Even though the ten Conference
members are paid by the Salvation Army and work for the group full
time, Lt. Col. Jones says, technically they are not employees
but are self employed and work full time for The Salvation Army.
Many people believe that The Salvation Army is as
American as apple pie but in actuality it is a global organization
with its headquarters in London, England. The U.S. Salvation Armys
National Commander and governing board are appointed by the General,
Paul A. Rader, who is the top ranking official at the Salvation
Army International headquarters in London. The General is elected
for a five year term by a group of senior Salvation Army officers
called the High Council.
AIP asked Lt. Col. Jones if he foresaw any changes
in The Salvation Armys governing structure. He said no. After
AIP communicated its concern that The Salvation Armys governing
body is rather insular for such a large charity, he said that to
get to the position that The Salvation Army is in they must have
the absolute integrity and that considerable checks and balances
have been put in place over 30 years. He also said that the Salvation
Army is very much a military-style organization and that people
are given marching orders that they follow.