ABOUT THE SALVATION ARMY
The Salvation Army (“the Army”) exists to share the love of Jesus Christ, meet human needs and be a transforming influence in the communities of our world.
As an international organization, the Army is at work in 126 countries. In Canada, the Army began its work in 1882 and has grown to become the largest non-governmental direct provider of social services in the country. In Bermuda, the Army has been at work since 1896.
The Army gives hope and support to vulnerable people every day in 400 communities across Canada and Bermuda. Salvation Army staff and volunteers offer practical assistance for children and families, often tending to the basic necessities of life, provide shelter for homeless people and rehabilitation for people who have lost control of their lives to an addiction. When you give to the Army, you are investing in the future of marginalized and overlooked people in your community.
The Salvation Army is also a branch of the Christian church, with over 300 corps or congregations in Canada and Bermuda. The Army is diligent in stewardship of donations so that funds solicited in its public appeals are used to fund community and social services programs and activities, rather than corps and congregational ministries unless the donor designates otherwise.
Legal and Corporate Structure
The Salvation Army has its international headquarters located in London, England. Leading the international Salvation Army is the General, who is elected by a High Council comprised of senior Salvation Army leaders from around the world.
The Governing Council of The Salvation Army in Canada (“Governing Council”) was incorporated by an Act of Parliament in 1909. Unlike conventional not-for-profit corporations that have both members and directors, the Governing Council has only members, who are appointed by the General. All members of the corporation are commissioned Salvation Army officers or employees of The Salvation Army who hold senior leadership roles.
Most of the Army’s operations in Canada are established as unincorporated entities of the Governing Council. Other corporations controlled by the Governing Council include The Salvation Army Corporation of Bermuda, The Salvation Army William and Catherine Booth University College, The Salvation Army Golden West Centennial Lodge and The Salvation Army Grace Communities Corporation.
Supplementing the oversight of Army operations provided by the corporate bodies are various other boards and committees, comprised of officers and employees, as well as volunteers who provide an independent voice to assist the Army. These boards and committees exist at the national, regional and local community levels across Canada and in Bermuda.
The Salvation Army is a religious, charitable and not-for-profit organization, registered by the Canada Revenue Agency for tax-deductible contributions. The Army’s territorial headquarters in Toronto, Ontario is the main charity and all other Salvation Army entities are registered as associated charities of territorial headquarters. In Bermuda, the Army is also recognized as a charitable organization.
About the Financial Statements
These financial statements present the assets, liabilities, fund balances, revenues and expenses of the Governing Council and all of the entities it controls. All separate incorporated entities are consolidated into these financial statements because they meet the definition of controlled entities for financial reporting purposes under Canadian accounting standards.
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, 2014
Overall, operations were stable in the current year, and the results achieved are similar to those of the prior year, with the exception of the change in investment income. During the year, the Army realized an excess of revenue over expenses of $115 million, compared with $59 million in the prior year. Charitable donations increased slightly from $183.7 million last year to $185.3 million. The increase is attributed to generous donations received from the public to support Alberta flood relief efforts.
During the year, a change in accounting standards for employee future benefits was implemented which significantly impacted the liabilities and operating fund balances from previously issued financial statements. Under the new standard, actuarial gains and losses and past service costs are not deferred and amortized over future periods. The full actuarial liability net of assets is now recorded in the balance sheet, the annual benefit cost is recorded in the consolidated statement of operations and the change in unamortized gains and losses is recognized in the statement of changes in fund balances. The impact of the change from the prior year issued statements included the elimination of the accrued pension asset of $20.3 million, an increase in the employee future benefits from $45.3 million to $142.7 million, operating fund balance decline from a surplus of $113.6 million to a deficit of $4.0 million and a decrease of $5.2 million in other expenses reported in the statement of operations.
The operating fund, which represents the general operations of all Salvation Army units in Canada and Bermuda, reflects a surplus of $60.4 million, compared with a surplus of $13.9 million in the prior year. This increase is directly related to the improved investment income this year. Total operating expenses increased by only 2.2%, in line with general inflationary pressures.
As of March 31, 2014, the Army’s total assets were $1.64 billion, compared to $1.52 billion in the prior year. The current ratio (current assets / current liabilities) of 0.78 should not be interpreted as meaning the Army will have difficulty meeting its short-term obligations, as short-term investments maturing in less than 1 year and totaling $29.9 million have been classified with securities. When included with current assets, the current ratio becomes 1.12.
Operating fund balances at year end totaled $17.7 million (negative $4.0 million last year), representing operating fund balances of $115.0 million from operating units offset by a negative fund balance of $97.3 million for re-measurement and other items related to employee future benefits. 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, 2014, 60% of units have achieved the target reserve level compared to 57% in the prior year. Efforts are underway to build reserves in the remaining units within the next three 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 2013 for the five most senior commissioned officers of The Salvation Army in Canada, ranged from $32,552 to $40,102, with an average of $36,883.
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 2013, there were 56 non-officer employees whose total employment income for tax purposes was above $100,000.
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 Army is managing this tension well.
In addition to paid staff, The Salvation Army’s operations are aided by some 165,000 volunteers who give dedicated and exemplary service to their communities by helping deliver programs and services through Salvation Army facilities. Whether serving as board members, specialist advisors, food hamper packers, greeters, chaplains, or in a host of other roles, these volunteers are the army behind the Army. The contributions of these volunteers are invaluable to the success of The Salvation Army’s program and service delivery.
A Risk Committee is in place with responsibility to monitor the direction and trend of all major types of risks relative to mission strategy and market conditions. It also reviews emerging risks to the Army and monitors activities to appropriately mitigate those risks.
The Salvation Army has a strong internal control environment to protect the Army’s assets and ensure accuracy in financial reporting.
The Territorial Finance Council has overall responsibility for internal controls, with assistance provided by the Internal Audit Advisory Committee as it relates to the oversight of the internal audit function and plan.
Both a Code of Conduct and a whistleblower policy are in place. The former sets out expectations for behaviour by all staff and volunteers, while the latter provides a mechanism for making anonymous complaints when violations of the code and other key policies are observed.
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 solicited from the public at large, which includes funds from individuals, foundations, corporations and all levels of government, are used for our community and social service programs. Corps and congregations are financed by donations from Salvationists and other funds.
Ethical Fundraising and Financial Accountability Code
The Army places accountability at the core of its relationships with its donors and members of the public. The Army has formally subscribed to 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.
To review the Code, please see our Fundraising Ethics page.
Fundraising Methods and Outcomes
For more than 130 years, faithful donors have helped The Salvation Army carry on its tradition of caring for vulnerable men, women and children in Canada, Bermuda and around the world. The Salvation Army is deeply grateful for their generosity and for the trust they have shown to use their investment wisely.
During the fiscal year ended March 31, 2014, supporters made donations to The Army totalling $185.3 million, compared to $183.7 million the previous year. Fundraising costs for the same period were $22.0 million, compared to $21.9 million last year. As a proportion of charitable donations, these costs represented 11.9%, which is identical to the prior year. This compares favourably with the upper limit of 35% set by the Canada Revenue Agency.
At the same time, it should be recognized that this measure has 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.
The Army is committed to protecting the privacy of its donors, customers, clients, volunteers, employees, and members, and is always concerned with treating personal information carefully and with appropriate confidentiality. Personal information is not used or disclosed for purposes other than those for which it was collected, except with consent or as required by law. This information is retained only as long as necessary and The Army does not trade, rent or sell any personal information to third parties.
The Army will accept unrestricted gifts, as well as gifts restricted for specific programs and purposes, provided that such gifts are not inconsistent with its stated mission, purposes, and priorities. Gifts may be restricted to specific Salvation Army programs/purposes or communities throughout Canada and around the world where the Army has established operations. After a gift has been accepted, if circumstances should at any time make it, in the view of The Army acting reasonably, impractical to apply the gift to the designated purpose, it may re-designate the purpose of the gift using its best efforts to adhere as closely as possible to the original intent of the gift. Where possible, The Army will seek input from the donor before the re-designation is made.
Except as directed by the donor, the Army uses funds raised in public appeals for its community and social services programs and activities, rather than for its corps and congregational ministries.
The Salvation Army is managing its fundraising costs in a reasonable manner, in order to provide the best programs and services that deliver transformative outcomes for the people we serve. For details of how the funds are used, see What We Do at the top of our home page.
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.
Lee Graves, Lieut.-Colonel
Territorial Secretary for Business Administration
and Treasurer of The Governing Council
R. Paul Goodyear, MBA, FCPA, FCMA
Territorial Financial Secretary
and Secretary of The Governing Council
June 25, 2014
Click here for a downloadable PDF of the 2013/14 Annual Review.
Click here for a downloadable PDF of the 2013/14 Consolidated Financial Statements.