ABOUT THE SALVATION ARMY
The Salvation Army in Canada and Bermuda (“the Army”) is an international Christian organization that began its work in Canada in 1882 and has grown to become the largest non-governmental direct provider of social services in the country. The Salvation Army gives hope and support to vulnerable people today and every day in 400 communities across Canada and more than 120 countries around the world. The Salvation Army offers practical assistance for children and families, often tending to the basic necessities of life, providing shelter for homeless people and rehabilitation for people who have lost control of their lives to an addiction. When you give to The Salvation Army, you are investing in the future of marginalized and overlooked people in your community.
The Governing Council of The Salvation Army in Canada (“Governing Council”) was incorporated by an Act of Parliament in 1909 for the purposes of administering the property, business, and other temporal affairs of The Salvation Army in Canada. The Salvation Army is a religious, charitable and not-for-profit organization, registered by the Canada Revenue Agency for tax-deductible contributions.
The Salvation Army is an international Christian Church. Its message is based on the Bible; its ministry is motivated by love for God.
The Salvation Army exists to share the love of Jesus Christ, meet human needs and be a transforming influence in the communities of our world.
ABOUT THE FINANCIAL STATEMENTS
These financial statements present the assets, liabilities, fund balances, revenues and expenses of the Governing Council and each of its controlled entities, both incorporated and unincorporated. In addition to these consolidated statements, many of the controlled entities produce separate financial statements for presentation to local stakeholders, including government agencies, donors, members, and others.
FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED MARCH 31, 2012
Overall operations were stable in the current year, and the results achieved are very similar to those achieved in the prior year. During the year, the Army realized an excess of revenue over expenses of $12.7 million, compared with $35.3 million in the prior year. The key factor contributing to the decrease was lower investment income which, while modest, was in line with general market conditions. Charitable donations decreased slightly from $182.6 million last year to $180.2 million, as $1.5 million was received in the prior year to support Hurricane Igor relief efforts in Newfoundland, with no similar major disaster relief campaign undertaken in the current year. In addition, the Army experienced a slight decline in major gifts received during the past year. Offsetting this was an increase of $1.3 million in the National Red Shield Appeal.
The operating fund, which represents the general operations of all Salvation Army units in Canada and Bermuda, reflects a deficit of $31 million, compared with a deficit of $8.2 million in the prior year. The drop is directly related to the decline in investment income. Total operating expenses increased by only 2%, in line with general inflationary pressures. In both years, these deficits are more than offset by transfers from reserves.
As of March 31, 2012, the Army’s total assets were $1.5 billion, which is the same as in the prior year. Operating fund balances stood at $104.2 million, compared to $91.9 million in the prior year, or on average, about $225,000 per unit. The Army has set a policy of expecting each unit to maintain an operating reserve sufficient to fund at least three months’ expenses. As of March 31, 2012, approximately 52% of units have achieved the target reserve level, and efforts are underway to build reserves in the remaining units within the next five years.
The compensation package for all commissioned officers of The Salvation Army includes housing accommodation, with furnishings and utilities provided by the Army, a leased vehicle or vehicle allowance, and a cash allowance based on years of service. The cost of compensation provided to senior officers is comparatively lower than that paid to executives in other similar organizations. The employment income for tax purposes reported in 2011 for the five most senior commissioned officers of The Salvation Army in Canada, ranged from $32,041 to $38,638, with an average of $36,696.
The size and scope of the Army’s operations creates a level of complexity that requires the hiring of highly skilled professional and technical staff to supplement the skill sets found in its commissioned officer ranks. While these salaries are typically less than comparable positions in the for-profit sector, there is increased competition for professional staff, and as a result, compensation for executives in the sector has increased in recent years.
In 2011, 39 non-officer staff were positioned in professional and technical roles at the Army whose total employment income for tax purposes was above $100,000. Their income for tax purposes ranged from $100,049 to $248,765 with an average of $135,283.
There is a tension between paying competitive salaries to attract the right people on the one hand, and ensuring that executive compensation does not reach unreasonable levels on the other. This tension is particularly acute in the not-for-profit sector where organizations and donors are both concerned about keeping administrative costs low so as to maximize funds available for direct service delivery. We believe that The Salvation Army is managing this tension well.
The Salvation Army recognizes its accountability for the financial resources placed at its disposal by its contributors for the furtherance of its mission to serve the most vulnerable in our society. Donations from the public at large, which includes money from individuals, foundations, corporations and all levels of government, are used for our community and social service programs.
ETHICAL FUNDRAISING AND FINANCIAL ACCOUNTABILITY CODE
The Salvation Army has adopted Imagine Canada’s Ethical Fundraising and Financial Accountability Code. In doing so, the Army undertakes to adhere to the standards set out in the Code in its treatment of donors and the public, its fundraising practices and its financial transparency, and to be accountable for doing so. A copy of the Code is available at www.imaginecanada.ca or may be requested in writing from The Salvation Army, 2 Overlea Boulevard, Toronto, ON M4H 1P4.
HOW EFFICIENT IS OUR FUNDRAISING AND ADMINISTRATION?
Much attention is focused today on fundraising and administrative costs that charities incur, with the message carried in the media being that the lower these costs are, the better the charity is at delivering its programs and services. The Army agrees the more efficient an organization is, the lower will be its overall costs of fundraising and administration, and as a result more funds will be available for charitable programs. These financial statements reveal that in the year ended March 31, 2012, the Army’s total administration costs incurred at its territorial and divisional headquarters amount to $46.4 million, compared to $45.8 million in the prior year, an increase of 1.3%. As a proportion of total funding sources (see pie charts Facts and Figures page), headquarters operations represented 8.9% this year and 8.5% in the prior year.
Public Relations and Development costs totalled $21 million, compared with $21.6 million in the prior year. As a proportion of charitable donations, these costs represented 11.7%, compared with 11.8% in the prior year. This compares favourably with the upper limit of 35% set by the Canada Revenue Agency. The Salvation Army believes that this is the best measure to use at the present time, recognizing that it does have some limitations. First, no donations of materials or services are included in these financial statements, even though costs are incurred in obtaining these donations. Second, as the name implies, some of the activity these costs represent relates to general marketing and communications functions, rather than fundraising activities. Given our holistic approach, it is not possible at present to provide any further breakdown.
Combined, fundraising and administration costs equal $67.4 million, which is exactly the same as the prior year. As a proportion of total funding sources (see pie charts Facts and Figures page), these costs amount to 13% in the current year and 12.5% in the prior year. The Salvation Army believes that it is managing its administrative and fundraising costs in a reasonable manner given the size and scope of the organization, and that it is ensuring the maximum possible return on that investment in order to provide the best possible programs and services that result in transformative outcomes for the people we serve.
MANAGEMENT RESPONSIBILITY FOR FINANCIAL REPORTING
These financial statements are the responsibility of management. They have been prepared in accordance with Canadian generally accepted accounting principles for not-for-profit organizations as established by the Accounting Standards Board of the Canadian Institute of Chartered Accountants. The preparation of financial information is an integral part of the ongoing management of the Army. Management has established internal control systems to ensure that all financial details are objective and reliable, and that the organization’s assets are safeguarded.
The Governing Council has overall responsibility for the financial statements, assisted by the Territorial Finance Council, which meets regularly with management as well as internal and external auditors to ensure the adequacy of internal controls, and to review the financial statements and auditors’ report. The Governing Council appoints the auditors and approves the financial statements, based on a recommendation from the Territorial Finance Council. The financial statements have been audited by external auditors KPMG LLP, Chartered Accountants. Their report outlines the scope of KPMG’s examination as well as their opinion on the financial statements.
Neil Watt, Lt. Colonel
Territorial Secretary for Business Administration and Treasurer of The Governing Council
R. Paul Goodyear, MBA, CMA, FCMA
Territorial Financial Secretary and Secretary of The Governing Council
Click here for a downloadable PDF of the 2011/12 Consolidated Financial Statements.