Reducing the gap
Reducing the gap
31 July 2016
The opportunity to pause and reflect on the things we are doing and the reasons why we do them is no longer a luxury we grant ourselves only if and when time allows. It is a requirement if we are to make our business systems more effective and if we are to be held accountable, particularly so for an organisation such as The Salvation Army that is kept in high esteem by the public – people who place great trust in us.
Four key values underpin the mission of the Finance Work Stream – one of the four pillars of the Accountability Movement – under the direction of Business Administration at International Headquarters:
Stewardship - We are custodians of God’s gifts to be used for his mission – they are not ours to control.
Shared resources - We have concern for all God’s children wherever they are in the world and we seek the common good and justice for all. The Salvation Army has a particular calling to poor and marginalised people
Efficiency and effectiveness - We must ensure the most efficient and effective use of resources (see Matthew 25:14-30, the parable of the talents).
Integrity (including transparency) - The stewards of God’s gifts should conduct themselves in a way that honours him.
The assignment of the Finance Work Stream is being fully embraced by all those involved. Of particular encouragement is the opportunity provided for those with specific expertise and skills around the world to contribute in a team and partnering approach, making a difference far beyond their immediate sphere of work and influence. There is a host of expertise within our officer and employee ranks to be tapped into, and the Accountability Movement is providing an environment for that to happen.
There are a number of strands attached to this work.
TOWARDS SELF-SUPPORT
One major piece of work under way is the Towards Self-Support programme, which encourages territories and commands that still continue to receive financial support in the form of mission grants from IHQ to reduce their dependency on this fund.
Some values underpinning this process have been set.
- For so long the Army has been dependent on a few economically stronger territories to largely support the majority. This is both worthy and reflects great generosity. Yet such help needs to be selective so that it is administered in a way that helps a territory grow from within and become sustainable. Dependency is recognised by all as something that needs to be addressed if we are to continue to mature as a movement and maximise the spiritual and human potential of every country where we work.
- The Self-Denial Appeal remains at the heart of the vision to take the gospel to the whole world, which has been foundational to the mission of the Army from its beginnings. It is first and foremost an appeal that represents spiritual values. It is a pragmatic response to issues of justice, provides givers the opportunity to exercise spiritual disciplines in ways they choose and, in some countries, is associated with the season of Lent. In others the harvest metaphor has become a more meaningful link. In that every Salvationist is invited to participate it underlines the values of One Army and has fostered a sense of identification and mutual responsibility from all territories/commands/regions. Worthy of note is the 500% increase in the giving of Salvationists in Africa to the International Self-Denial Fund over a period of five years since 2007.
- Salvationists around the world want to help each other and the principle of ‘mutual benefit’ needs to be maintained. Appropriate opportunities should be given to Salvationists to share resources with each other and to make a difference. Not every aspect of work can ever be fully self-supporting if we are to make a difference on issues of social justice and human poverty.
- All territories/commands have an equal right to participate as full members of the Army with their influence not being based on financial strength. A donor territory has a responsibility to ensure funds are used correctly and the benefitting territory has a responsibility to do exactly the same. There is a relationship of trust between the two, which does not make one partner superior to the other.
The International Self-Denial Fund contributes US$19 million in grants to territories and commands each year. After a three-year period of preparation, mission grants paid to territories will be reduced by US$1 million (or 5%) of the overall budget during 2016 with similar reductions projected for future years. Of 62 territories/commands/regions, 51 continue to receive support from the International Self-Denial Fund for operational costs. Ten have agreed to work towards a position of no longer requiring support from this fund within 10 years and a further 20 are committed to reducing their dependency on this funding. This is more than wishful thinking, although it will present tremendous challenges, requiring an increase in local giving, other local income generating activities and a careful review of spending.
The funds saved are being redirected into longer-term sustainability projects, aimed at supporting a territory to grow from ‘within’, and to new openings around the world. Some funds are also being redirected to make officer training programmes more established in parts of the world where the cadet intake is growing but the infrastructure is not yet in place to support this evidence. Therefore, Towards Self-Support is a policy to divert funding into more sustainable and growth purposes, not simply maintaining the status quo. The USA Western Territory is partnering with IHQ in support of this strategy and has invested in several situations, most noteworthy in both the professional and financial support of recycling and thrift stores.
FINANCIAL AND ACCOUNTING STANDARDS
A major review of financial and accounting policies and standards is currently underway. It was 1989 when the current ‘Manual of Accountancy Policies and Procedures’ (MAPP) was first published, and internal and external audits of territories are still being undertaken to this standard. It has stood the test of time remarkably well, but is no longer fit for purpose, having been compiled in an era when manual bookkeeping was still widespread throughout the Army world, and does not reflect more recent changes such as the development of Internet-based accounting, the updating of international financial reporting standards and the formulation of specific international standards for non-profit organisations.
Chaired by Dr Matthew Carpenter, Head of Finance at IHQ, a task force of 11 people representing each zone has worked tirelessly over the last year to prepare an update to the MAPP, to be known by the new title of ‘International Financial and Accounting Standards’ (IFAS). This new set of international standards for financial operations in The Salvation Army includes management and accounting policies, reporting statements and key indicators.
Mindful of the challenges of drafting a single set of financial and accounting standards for implementation in 127 countries, the IFAS will deliberately differentiate between mandatory requirements and best-practice guidance. It will also contain new financial statements that all territories will be required to prepare as a new basis for IHQ reporting. These statements will be used to generate new and enhanced key financial indicators for territories, which should allow more regular and accurate reporting to IHQ. It is anticipated the new IHQ reporting framework – to be implemented in 2017 – will be less onerous for territories than previous arrangements.
Alongside the updating of the Army’s international financial and accounting standards, a further need is recognised to update the accounting software used by financially supported territories. Mr Ian Minnett, Chief Financial Officer, Australia Eastern Territory, has kindly agreed to chair a task force to determine appropriate software support. Central to this process will be the collection on a real-time basis of the key financial indicators contained within the IFAS, which will give an immediate picture of the financial health and progress of a territory. IHQ can then better respond and support with such information.
The update of financial systems will only result in positive outcomes if the required capacity of personnel on the ground is available. The lack of suitably qualified and experienced finance personnel is recognised as a key weakness that needs addressing. Funding is being made available for capacity building and training course/apprenticeship programmes are to be developed.
THREE LINES OF DEFENCE
Another dimension to the Finance Work Stream is to improve and better coordinate our audit processes. A strategy known as the Three Lines of Defence has been launched which seeks to form an environment for a team approach and inter-support between external and international audits, and the internal audit function. The Chief International Auditor at IHQ, Colonel Knud Welander, oversights this strategy that aims to do away with duplication and make the audit tool more robust. The Canada and Bermuda Territory has offered to partner with IHQ in the support of this initiative. Later this year it is planned to hold a conference specifically for internal auditors serving in the Africa Zone with the aim of building and sharing knowledge and experience.
PROPERTY
As a result of partnering with a donor, IHQ has recently established an international property project consultancy role with the aim of maximising property resources the Army owns internationally. As an organisation, historically we have been property ‘rich’, yet the property we own has not always been well maintained nor its use maximised. Often international funding support for operational costs has been given to a territory that continues to own underutilised property resources. The stated aim of the International Property Strategy is to develop a proactive property management programme that will flexibly meet the ongoing requirements of the Army.
In practical terms this involves working with and supporting the territories by sharing knowledge and experiences, reducing duplication, developing tools and streamlining processes as these relate to property matters. It is considered that this strategy will gradually move the Army from a position of reactive management of these resources through a deliberate and proactive approach to a position of effective stewardship of our property resources. Already this programme enhances property schemes in Zambia, India, Moldova and Brazil. IHQ is also assisting its Programme Resources colleagues working on hospital and school developments in Bangladesh, the Democratic Republic of Congo, Zimbabwe and the Indian territories.
INFORMATION TECHNOLOGY
And finally, we would not survive without IT services. IBM Lotus Notes has been the preferred communications product for the Army for more than 20 years, but again it is timely to ask if this is the right product for our future needs. Internationally we have a fine and progressive team of IT directors who somehow manage to keep pace with this fast-moving and ever-changing world. IHQ recognises something of the complexity of finding a solution for ‘One Army’ where parts of the world struggle with basic connectivity issues whilst other parts move forward ready to embrace the latest innovative developments.
Every territory, even in the poorest economies, has a right to have the benefit of IT opportunities, because every officer and employee has a right to make a contribution to the whole Army as an equal participant. IT has the potential to bring the Army closer together as a community by making communication with the farthest parts of the world no more difficult than communication with our colleague officer serving in the next corps. IT has the potential to encourage consultation and participation at all levels at much greater speed than has ever been the case before to help better-informed decision-making. Yet IT needs to serve and not be served, nor distract from mission. Sometimes it is a fine balance, yet the benefits to the Accountability Movement are significant. The challenge for us is to try and reduce the gap that exists between those with limited IT capacity and others who can move ahead to take advantage of the latest opportunities. IHQ has a role to ensure that the gap does not become wider.
Therein lies a final principle that underlines what we are trying to achieve with the scope of the Finance Work Stream – that the gap between rich and poor is consistently reduced rather than widened. That is a matter of social justice and must be one of the key distinctions of our movement in this day and age. If we cannot model that ourselves it is difficult for us to make a stand on the same issue in the wider world.
Commissioner John Wainwright is the International Secretary for Business Administration.
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