Saturday, July 6, 2013

Salvation Army's Pension Liability

For the fiscal years 2008 - 2011, The Salvation Army reported a $1.6 billion deficit, (expenses over income).  The annual average income for the four fiscal years was $2.7 billion.  These numbers come from the organization's unaudited annual reports.

The Salvation Army states that the organization has annual audits by an outside audit firm.  It would be nice to see the auditor's opinions with respect to the operations for those years, but the audited financials are not available to the public.  Unaudited financial statements reflect an operating deficit (loss) of almost $250 million for the fiscal year ending September 30, 2009.

During that fiscal year many hourly employees were told to reduce their hours from a 40 hour workweek, to 36 hours.  They were also told The Salvation Army could not give raises that year, yet  Salvation Army officers got raises and were treated to a luxury cruise, courtesy of your donations and sacrifices made by hourly employees.  Salvation Army officers made no sacrifices when the economy was at is lowest point, during the recession.
One item on the most current unaudited balance sheet, the fiscal year ended September 30, 2011, is a liability for pensions, approaching $1.8 billion.  The liability for unfunded pensions is 67% of the organization's average annual income for the past four years.  Is The Salvation Army breaking the law by not paying this liability?

The answer is actually no.  Since The Salvation Army offers its retirement plan as a benefit, and does not ask for participation from employees and officers, the organization cannot be held accountable for failure to fund the retirement plan.  However, is it Trustworthy (one of the organizations five core values)?  Is it ethical? Is it moral?  The answer to those questions is also no.

The Salvation Army is booking a liability for pensions, but from where will that money come to pay that debt?  It will come from potential future donors.  The Salvation Army is hoping you, and many like you, will donate enough money in future years to bail them out.  At some point, The Salvation Army will divert money you donate for those in need to fund its officers and employees retirement.

Donors beware of this organization, especially if you are responding to one of The Salvation Army's disaster pleas, such as the tornado in Moore, Oklahoma.  The money you donate does not go to the victims of the disaster.  The money goes to The Salvation Army.  The Salvation Army sells disaster relief at a profit.  You may think you are donating to the victims of disasters; in reality your donations may be diverted to pay Salvation Army officers' retirements.

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