Let's Examine That 18% Overhead Claim

The Salvation Army states the organization has an 18% overhead cost, claiming 82% of the dollars you donate go directly to the benefit of those in need.  Let's examine that claim.  It is very misleading.   

The organization claims that it submits to annual audits, performed by Arthur Andersen, yet those audits are not public record.  The claims that The Salvation Army submits to annual audits is very public, but the annual reports you can access on the organization's website contain only unaudited financial statements.  Check online, you will not find an audit financial statement.  Why not put the audited financial statements online?

Why does The Salvation Army submit to an annual audit?  The organization claims it is under no obligation to do so.  That is a false claim.  The Salvation Army has state and federal government contracts that require the organization to have annual audits, conducted by an outside audit firm.  So, why not release those financial statements to the public?  What is The Salvation Army hiding from the public that it cannot hide from state and federal government agencies?

The Salvation Army is hiding a lot!  With respect to this blog, the organization buries overhead expenses in a category called program expenses.  Program expenses are not reported as overhead.

For example, anything paid for an officer, as part of his/her compensation package, is considered program expenses.  The Salvation Army sees its officers as gods over the corps they manage.  As such, they are the administrative managers and fund raisers for the corp, as well as the chaplains.  There is no question that administrative and fund raising expenses are overhead expenses.

Most officers claim to spend at least 50% of their time on administrative and fund raising matters.  It follows that the same percent of officers compensation should be considered as overhead expense, but The Salvation Army does not report any part of officers' compensation as overhead expense.

Let's take a look at that compensation package.  Officers in The Salvation Army say that there compensation is slightly above minimum wage.  I truly believe they are taught that in officer train school.  The fact that it is a bold face lie seems irrelevant.  It sounds good when the officer is asking for donations.

It is true that most officers receive money allowances that are close to minimum wage.  There are no taxes taken from that allowance.  The Salvation Army calculates the tax liability for the officer and gives the officer a grant to pay that tax liability.

In addition to a cash allowance, The Salvation Army pays all living expenses, transportation, medical insurance costs and retirement plan costs for its officer.  It also treats them to luxury vacations, such as cruises disguised as conferences.  The Salvation owns the homes the officers live in, pays all utilities, insurance and upkeep on the home.  The Salvation Army owns the vehicle (s) driven by its officers, pays all gasoline, insurance and maintenance costs.

Salvation Army officers enjoy a higher standard of living than most who donate money to the organization.

The Salvation Army officer's compensation package is bullet proof with respect to downturns in the economy.  When utility costs rise, The Salvation Army pays the increase.  When gasoline prices rise, The Salvation Army pays the increase.  Actually, your donations pay the increased costs.

All officer compensation is reported as program costs by The Salvation Army.  At least 50% of these costs should be reported as overhead, which would change the 18% overhead claim dramatically.  There is no way 82% of the money you donate makes it to those in need.

Two other expenses The Salvation Army does not report as overhead are "Support Services" and "Statewide Services".  These two expenses total 11.8% of all money received by Salvation Army Corps from donations, grants and agency contracts.  If you donate $1.00 to The Salvation Army, the organization's Divisional Headquarters offices and Territorial Headquarters offices skim nearly 12% of that dollar off the top, as administrative overhead.

This percentage is left out of the equation when calculating a minimal 18% overhead.  This does not follow Generally Accepted Accounting Principles.  Why is the Salvation Army allowed to make the 18% overhead claim?  You allow them to without questioning the claims!  Start asking questions.  Your questions will not be answered.  The Salvation is not a transparent organization.  It's attractive public image is manufactured by very well oiled public relations firms.  The view is much less attractive within the organization.

 Another issue with respect to costs reported as program expenses, is the "expense" category, "Gifts In Kind".  This represents donated food, clothing and supplies, charged to program expenses at market value.  Public volunteer hours are also valued at $15 to $20 per hour and charged to program expenses.  (This hourly rate is higher than the hourly pay rate of most The Salvation Army employees).

Also it is questionable as to whether gifts-in-kind should be classified as a program "expense". The Salvation Army pays nothing for these items, but values them as expenses to the organization.  The Salvation Army also books income for these gifts-in-kind, equal to the amount of the expenses charged to program expenses, but does not include that income when it calculates the percentage of income to expenses that go directly to those in need.  This definitely inflates that claim that 82% of all donations go directly to those in need.  Remember, The Salvation Army pays nothing for gifts in kind, but accounts for these items as program expenses, at market value. 

You should be aware of these facts before you choose to believe The Salvation Army's claim that it holds its overhead costs to 18% of your donated dollars.  Whether, or not, you donate to The Salvation Army is a choice you should make based on all the facts. The Salvation Army spends much more of your donated dollars on overhead than the organization reports.  How do you think The Salvation Army built a net worth of $8.8 billion?  That net worth came from your donations!

Angel Tree vs Red Kettle Campaign

There is a misconception about two programs run by The Salvation Army during the Christmas season.  Yesterday, a friend told me she thought the purpose of both programs was to help the needy with Christmas.  This is not the case.  The only thing these two programs have in common; both are run by The Salvation Army.

The Angel Tree program is provides a  way for you to give gifts to a person in need at Christmas time.  It is a program worthy of your donation because you do not give money to The Salvation Army.  The gifts you buy do go directly to the person whose name you take from the Angel Tree.

Angel Tree locations are normally sponsored and manned by volunteers from local companies and churches.  You can find an Angel Tree set up in many malls around your local area.  Most people who donate in this way take a name from the tree and buy the items on that person's wish list that day,  while shopping for other gifts in the mall.  Then you take the gifts to the location where the recipient name was selected.

If you wish, you can buy the gifts somewhere other than the location where you picked up the name, then take them to any Angel Tree location, or any Salvation Army facility.  I recommend you take them to an Angel Tree location.  If you take them to a Salvation Army facility, such as a Corp location, there is a chance the items will not make it to your intended recipient.

Local Corps sometimes divert gifts to other programs and there are news reports every year, somewhere in America, about Salvation Army officers and workers stealing Angel Tree gifts.  Every Salvation Army program is open to corruption and there will always be those who take advantage of it.  So, take the added few minutes and make sure you drop off your Angel Tree gifts at an Angel Tree location.

After you drop off your gifts The Salvation Army arranges for recipient pick-up from one of the organizations warehouses.  My girlfriend and I have each bought Angel Tree gifts for years, and we plan to continue.  We drop off our gifts at and Angel Tree location.  The likelihood of the gift getting to our intended recipients is as close to 100% as it can be.
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The Red Kettle Campaign program run by The Salvation Army is an entirely different matter.  The money you drop into a red kettle goes into the general fund of The Salvation Army.   That money is spent however The Salvation Army sees fit.  There is a common misconception that money is spent on the needy at Christmas time, since it is a campaign that takes place during the Christmas season.  Not so.  The Salvation Army merely uses the time of year to beg for money while you are in a giving frame of mind.

The Red Kettle Campaign is big business for The Salvation Army.  In early 2013, the organization announced collecting around $300 million in its 2012 "Red Kettle Christmas Campaign".  The organization worded its announcement, incorporating the word "Christmas" because it wants you to think of the program as being one that helps the needy at Christmas time.  The more you hear the word Christmas connected to the words Red Kettle Campaign, the more money you will drop into the red kettles, believing you are helping the needy at Christmas time.

Actually, The Salvation Army rakes 11.8% of your kettle donations right off the top.  For example; in Texas, The Texas Divisional Headquarters in Dallas and The Southern Territorial Headquarters in Atlanta take 11.8% of the red kettle donations for support services.  This overhead is not included in the numbers when The Salvation Army states that 82% of the money you donate goes to the clients the organization serves.  There are many issues with that 82% claim, but that is covered in another blog.

The only program run by The Salvation Army, and local volunteers, that is designed to give 100% of its donations to those in need is The Angel Tree program.  Why?  Because you do not give money to The Salvation Army.  You actually buy gifts for the recipients.  No money donation runs through a Salvation Army bank account, which is known to cause shrinkage in the donation.  There is no money for The Salvation Army to skim off the top. 

If you plan to participate in the Angel Tree program this year, you should do it.  The chances of your gifts getting to the right person are greater than them not getting to that person.  It is a risk worth taking. 

However, do not drop your money into a red kettle believing you are helping those in need at Christmas time.  You may be helping The Salvation Army pay for a luxury cruise for the organization's officers, or you may be helping subsidize the almost $2 billion shortfall in the organizations pension plan.

All Salvation Army pleas for money are very carefully worded.  Wording in plea advertisements for your donations to specific disasters, for example, never state that your donations will go to the victims of the disasters they reference in the advertisements.  The money you give goes to The Salvation Army, not disaster victims, but the advertisement is worded so you will assume the money is going to disaster victims.  It's not illegal, but it is deceptive.

The same is true for pleas to give to the Red Kettle Campaigns during the Christmas season.  There is no claim that the money will go to help those in need at Christmas time, but the wording makes it easy for you to assume the money you give will go to help those in need at Christmas time.  It's not illegal, but it is deceptive.

Read Salvation Army advertisements very carefully before you donate and you will realize that there is no representation by The Salvation Army that your donations will be used for program to which you thought you were donating.  The Salvation Army offers no reporting on monies received vs monies spent for specific programs.  There is no public accountability as to how your donations are spent.  The Salvation Army relies on public relations, instead of public accountability.  Don't fall for a smoke and mirrors advertising campaign!