Where does $1 to the Salvation Army go?

During the holiday season, The Salvation Army operates its Red Kettle Campaign throughout the nation. Local volunteers (often working with their families) and paid workers stand by the iconic red kettle ringing a bell, and smiling while donations are placed in the red kettle.

It’s hard for anyone to walk by without placing a $1 or loose change in the kettle of one of the most recognizable charitable fundraisers in this country. But, where does $1 to the Salvation Army go? That’s the $4 billion dollar (the amount of revenue reported in the US in 2014) question, keeping in mind the Salvation Army organizations in the US have more than $11 billion in net assets. 

In the United States, The Salvation Army does not have one organization but several which is confusing. The “Salvation Army” in the USA is overseen by The Salvation Army National Corporation which is also known as The Salvation Army USA or The Salvation Army National Headquarters (who is overseen by The Salvation Army’s International Headquarters in London). This organization primarily provides support to the other Salvation Army organizations in the USA, similar to a corporate office.

The entire USA organization is referred to as a territory within the organization (the organization divides itself into geographic territories). The territory includes The Salvation Army National Corporation, The Salvation Army World Service Office (which primarily collects revenue in the US and distributes funds overseas) and  four division territory headquarters (which is the heart of the organization in the USA):

• The Salvation Army Central Territory
• The Salvation Army Southern Territory
• The Salvation Army Western Territory (also called The Salvation Army USA, Western Territory and Affiliates)
• The Salvation Army Eastern Territory

Within each of the above territories is a state division (some of which file an IRS Form 990 under protest because some states require organizations receiving public funds to file a 990). Because the Salvation Army is a “church,” the IRS does not require the submittal of a Form 990 but the organization does submit a 990 for one of the six organizations: The Salvation Army World Service Office (SAWSO). The remaining five organizations have annual audited financial statements although these statements are not made available on-line through the Salvation Army organization sites (to request copies of the audited financial statements, e-mail:  donations@usn.salvationarmy.org, Jennifer_Byrd@usn.salvationarmy.org, or Ashley.Carter@usn.salvationarmy.org or call 703-684-4123).

Instead, the organizations offer what they call “Statements of Financial Position, “Statements of Activities” and/or an “Annual Report.” These statements don’t provide the financial detail that a 990 provides including the compensation package of key executives, total staff compensation, the number of staff who receive $100,000 or more in compensation, a list of the organizations that received grants exceeding $5,000, and more. Neither do the audited financial statements although they do provide more information than what is provided on the websites.

Any organization that receives federal government funds must release information under the Freedom of Information Act. The audited financial statements of the four territories (Eastern, Western, Southern, and Central) report $345 million was received in fees and grants from government agencies in 2014 but the statements do not disclose if these funds were from state or federal government agencies. So, there is no information on highly compensated staff in this post.

Based on the audited financial statements for the year ending September 30, 2014, the key financial information for the four territory organizations (which report and spend most of the revenue) is summarized as follows (a detailed analysis of all six organizations follows this summary):

• The four territories (Central, Southern,Eastern, and Western) raised $4.1 billion dollars in 2014.
• The four territories spent $3.5 billion in 2014: $3 billion on program services, management, fundraising, and support services (with $1.6 billion of these funds spent on salaries and allowances, benefits, and payroll taxes and  $545 million on occupancy, furnishings, and equipment), and $500 million on “specific assistance” which is also called “direct assistance”  (primarily “other social services) to individuals.
• $600 million was left unspent, strengthening their respective balance sheets.
• The four territories report $15 billion in total assets, $4 billion in liabilities which makes net assets $11 billion, most of which are investment securities and land, buildings, and equipment.
• The territories have two primary liabilities (of the $4 billion in liabilities): $2 billion in estimated pension and post retirement benefits for employees and $1.2 billion in mortgages.

In summation, the Salvation Army is a very wealthy “church” with most of the revenue and assets concentrated in the four territory organizations. With $15 billion dollars concentrated in investments that produce nearly 40% of the revenue annually (in the form of investment income, sales to the public, program service fees, gains, etc),  The Salvation Army does not rely as much on donations and contributions as other non-profits  (51% of the revenue comes from public support and about 9% from governmental agencies).

Their largest liability is not to the people they serve but to their employees in the form of $2 billion in estimated pension and post retirement benefits. It is also important to note that the value of the organizations’ assets are partially due to the tendency of not spending all the revenue collected or earned in any given year (i.e. in 2014, nearly $600 million of the $4.1 in revenue (or 15% of revenue) reported was not spent, which strengthens their respective balance sheets).

So, how is $1 in revenue spent? It depends (and varies based on each Salvation Army organization) but generally $1 in revenue is spent as follows in the USA:

  $1.00:  Revenue

-$0.40:  Salaries, allowances, benefits, and payroll taxes

-$0.14:   Occupancy, furnishings, and equipment

-$0.07:   Supplies, communication, postage, org dues, awards, and miscellaneous expenses

-$0.04:   Travel, conferences, meetings, and major trips

-$0.04:   Professional fees

-$0.02:   Printing and publications

-$0.01:    Support (World Service Support)

-$0.72:   Subtotal of Functional Expenses

 $0.28:   Amount Remaining

-$0.13:    Direct Assistance to Individuals (primarily “Other Social Services”)

-$0.15:    Amount Unspent

THE SALVATION ARMY NATIONAL CORPORATION 

Collected $60.3 million of which $28.7 million (47%) came from public support, $25.8 million (43%) from other sources (investment income, gain on sale of assets, sale of publications, etc), and $5.8 million (10%) from territory assessments.

Functional expenses were $45.3 million (75% of revenue), of which $44.8 million ($0.5 million was depreciation, a non-cash expense) or 74% of revenue – was spent on program services, management, and fundraising:

• $20.1 million was spent on printing and publications;
• $7.9 million was distributed to affiliates;
• $7 million was spent on professional fees;
• $5.9 million was spent on salaries, allowances, benefits, and payroll taxes;
• $1.4 million was spent on travel, conferences, meetings, and major trips;
• $1.4 million was spent on occupancy, furnishings, and equipment; and
• $1.1 million was spent on supplies, communications, postage and shipping, organization dues, awards, and misc.

The remaining funds – $15 million (25% of revenue) – were not spent allowing the balance sheet to strengthen. Total assets were $196 million at year-end, most of which are in assets held under split-interest agreements (trusts where The Salvation Army has the right to the income and/or assets) and investments. Liabilities were $67 million, most of which are trusts held by others, leaving net assets of $128 million at year-end.

THE SALVATION ARMY WORLD SERVICE OFFICE – SAWSO 

Collected $25.7 million of which $13.2 million (51%) came from related organizations (primarily the four US division territory offices), $7.8 million (30%) in other contributions, $3.3 million (13%) from the sale of assets, $0.9 million (4%) from investments, with the remaining $0.5 million (2%) from federated campaigns and government grants.

Functional expenses were $20 million (78% of revenue) with $5.8 million spent on management, fundraising, and program service expenses:

• $2.3 million spent on compensation and benefits;
• $1.7 million on construction supplies and equipment(why these are expensed as opposed to being an asset and amortized is not explained);
• $1.2 million on office, occupancy, travel, conferences, conventions, and meetings; and
• $0.6 million on other expenses, accounting, and legal.

The remaining $14.2 million was given in grants and other assistance – all outside the country and most ($12.7 million) in what is described as “general support” followed by $1.5 million in disaster relief and recovery, health programs, and community development.

The remaining funds – $5.7 million – were not spent allowing the net assets/fund balance to increase from $54.1 million to $60.9 million.

THE SALVATION ARMY CENTRAL TERRITORY

Collected $916 million of which $437 million (48%) was from public support (i.e contributions, donations, etc). $93 million (10%) came from government agencies while $386 million (42%) came from investment income, sales to the public, program service fees, gains and other sources (no detail provided).

Functional expenses were $786 million (86% of revenue) of which $33 million was depreciation (a non-cash expense) leaving $753 million, $635 million of which was spent on functional expenses for program services, management, fundraising, and support services:

• $385 million was spent on salaries and allowances, benefits, and payroll taxes;
• $28 million was spent on travel, conferences, meetings, and major trips;
• $100 million was spent on occupancy, furnishings, and equipment;
• $64 million was spent on supplies, communication, postage, org dues, awards, and miscellaneous expenses;
• $31 million was spent on professional fees and interest;
• $18 million was spent on printing and publications; and
• $9 million was spent on World Service (National Headquarters?) support.

$118 million (13% of revenue) was spent on “direct assistance” which is primarily “other social services” – again, with no further information provided.

$130 million was not spent ($163 million if depreciation, a non-cash expense is added back) which contributed to the organization increasing their assets from $3.139 billion to $3.302 billion (most of which are investments and land, buildings, furniture and equipment). Liabilities increased from $798 million to $859 million (most of which – $472 million – is for the estimated liability for retirement benefits, $208 million are mortgages, and $128 million are accounts payable and accruals), allowing net assets to increase by $102 million to $2.443 billion at year-end.

In summary, the Salvation Army Central Territory reported $916 million in revenue, nearly half of which came from the public (about 40% came from investment income, sales to the public, program service fees, gains and other sources, while 10% came from government agencies). They spent $635 million (69% of revenue) on program, management, fundraising, and support services (the largest category of which was salaries and the associated expenses). $118 million (13% of revenue) was spent on “direct assistance” (“other social services) leaving $130 million (of the $916 million reported) or 14% unspent, allowing the balance sheet to further strengthen. At year-end the organization had more than $2.4 billion in net assets (even after considering nearly $500 million for retirement benefits for their employees).

THE SALVATION ARMY SOUTHERN TERRITORY

Collected $1.090 billion of which $623 million (57%) came from public support (i.e. contributions, donations, etc), $73 million (7%) from governmental agencies, and $394 million (36%) from sales to the public, investment income, program service fees, and other sources.

Functional expenses were $1.007 billion (92% of revenue) in 2014, of which $847 million was spent on  program services, management, fundraising, and support services:

• $457 million was spent on salaries and allowances, benefits and payroll taxes;
• $183 million was spent on occupancy, furnishings, and equipment;
• $93 million was spent on supplies, telecommunications, postage and shipping, org dues, awards, and misc;
• $41 million was spent on professional fees;
• $40 million was spent on travel, meals, conferences, meetings and major trips;
• $29 million was spent on printing and publications;
• $4 million was spent on support services (National Headquarters?).

$160  million (16% of revenue) was spent on specific assistance to individuals described as “other social services” with no further detail.

The difference between total revenue ($1.090 billion) and the amount spent ($1.007 billion) was $83 million which was left unspent.

The Salvation Army Southern Territory increased their total assets from $3.755 billion to $3.863 million – an increase of $108 million. Assets primarily consist of investments in securities ($1.8 billion) and land, buildings, and equipment at $1.1 billion). Liabilities increased by $90 million from $662 million to $752 million. The organization’s primary liability is $457 million for the estimated liability for retirement benefits followed by $132 million for mortgages payable. The net result is the Salvation Army Southern Territory increased their net assets by $18 million to $3.111 billion at year-end.

In summary, the Southern Territory collected more than a billion dollars in 2014, most of which came from public support followed by other sources (investment income, sales to the public, program service fees, gains and other sources.  They spent $847 million (78% of revenue) on program, management, fundraising, and support services (the largest category of which was salaries and the associated expenses). $160 million (15% of revenue) was spent on specific assistance to individuals (“other social services”) leaving $83 million left to strengthen their balance sheet. At year-end, the organization had more than $3 billion in assets (even after considering $457 million for retirement benefits for their staff).

THE SALVATION ARMY EASTERN TERRITORY

Collected $968 million in 2014 of which $407 million (42%) came from public support, $106 million (11%) from governmental agencies, and $455 million (47%) from investment income, sales to the public, program and service fees, gains, and other sources.

Functional expenses were $836 million (86% of revenue) of which $51 million was depreciation (a non-cash expense) leaving $785 million. Of this amount, $689 million was spent on program services, management, fundraising, and support services:

• $395 million was spent on salaries and allowances, benefits, and payroll taxes;
• $134 million was spent on occupancy, furnishings, and equipment;
• $60 million was spent on supplies, telecommunications, postage and shipping, org dues, awards, and misc;
• $35 million was spent on travel, meals, conferences, meetings, and major trips;
• $34 million was spent on professional fees;
• $19 million was spent on printing and publications; and
• $12 million was spent on World Services (National Headquarters?) support.

$96 million (10% of revenue) was spent on specific assistance to individuals, described as “other social services” with no further detail.

The difference between the total amount of revenue reported ($968 million) and the amount spent ($836 million or $785 million if depreciation, a non-cash expense is added back) is $132 million (with depreciation) or $183 million (with depreciation not included).

Total assets increased from $4.004 billion to $4.218 billion, most of which are investments and land, buildings, and equipment.  Liabilities increased from $1.241 billion to $1.376 billion and primarily consist of pension and post retirement benefits ($528 million) and mortgages payable ($493 million). The net result is that net assets increased from $2.763 billion to $2.841 billion at year-end.

In summary, the Eastern Territory collected $968 million in 2014 most of which came from  investment income, sales to the public, program service fees, gains and other sources (no detail provided), followed by public support. They spent $785 million (not counting depreciation, a non-cash expense) or 81% of revenue reported, of which $689 million (71% of revenue) was for program, management, fundraising, and support services (the largest category of which was salaries and the associated expenses). $96 million (10% of revenue) was spent on specific assistance to individuals (“other social services) leaving $132 million (14%) left to strengthen their balance sheet after considering $51 million (5% of revenue) in depreciation. At year-end, the organization had $2.8 billion in assets (even after considering $528 million for retirement benefits for their officers).

THE SALVATION ARMY WESTERN TERRITORY

Collected $1.096 billion in 2014, of which $646 million (59% of revenue) came from public support (i.e. contributions, donations, etc), $73 million (7%) from governmental agencies, and $377 million (34% of revenue) from investment revenue, sales to the public, program service fees, gains and other sources.

Functional expenses were $827 million (75% of revenue) of which $43 million was depreciation, a non-cash expense, leaving $784 million. Of that amount, $664 million was spent on program services, management, fundraising, and support services:

• $355 million was spent on salaries and allowances, benefits, and payroll taxes;
• $128 million was spent on occupancy, furnishings, and equipment;
• $52 million was spent on supplies, telecommunications, postage and shipping, org dues, and awards;
• $42 million was spent on professional fees and interest;
• $41 million was spent on travel, meals, conferences, meetings, and major trips;
• $26 million was spent on World Services (National Headquarters) support and other expenses; and
• $20 million was spent on printing and publications.

$120 million (11%) was spent on specific assistance to individuals, described as “other social services” with no further detail.

The difference between the total amount of revenue ($1.096 billion) and the amount spent ($827 million or $784 million if depreciation, a non-cash expense is added back) is $269 million (with depreciation) or $312 million (with depreciation not included).

Total assets at year-end were $3.756 billion (a $312 million increase), most of which are investments and land, buildings, and equipment. Liabilities were $1.181 billion ($62 million more than the year prior) and consist primarily of the estimated liability for the pension plan, retirement, and post retirement benefits ($558 million), and mortgages payable of $337 million. The net result is that total net assets increased by $250 million to $2.575 billion at year-end.

In summary, the Western Territory collected $1.096 billion in 2014, most of which came from public support followed by investment income, sales to the public, program service fees, gains and other sources. They spent $784 million (not countering depreciation, a non-cash expense) or 72% of total revenue, of which $664 million (61% of revenue) was for program, management, fundraising, and support services (the largest category of which was salaries and the associated expenses). $120 million (11% of revenue) was spent on “direct assistance” (primarily “other social services”), leaving $269 million to strengthen their balance sheet. At year-end, The Salvation Army, Western Territory and Affiliates had $2.575 billion in net assets (after considering $558 million for the pension plan, retirement, and post retirement benefits).

Click here to review the 2013 IRS Form 990 of The Salvation Army World Services Organization

For more information, click on “Why the Salvation Army Should File a Tax Return“