Salvation 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 Army’s 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 Army’s 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 Army’s governing structure. He said no. After AIP communicated its concern that The Salvation Army’s 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.