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1999 Who's counting?: an institutional analysis of expectations of accounting in a nonprofit elir gious/ charitable organization within a changing environment Helen Irvine University of Wollongong
Recommended Citation Irvine, Helen, Who's counting?: an institutional analysis of expectations of accounting in a nonprofit er ligious/charitable organization within a changing environment, Doctor of Philosophy thesis, Department of Accounting and Finance, University of Wollongong, 1999. http://ro.uow.edu.au/theses/1034
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Who's counting? An institutional analysis of expectations of accounting in a nonprofit religious/charitable organization within a changing environment.
A Thesis submitted in fulfilment of the requirements for the award of the degree
DOCTOR OF PHILOSOPHY from the
UNIVERSITY OF WOLLONGONG by
Helen Irvine B.Com, M.Com.
Department of Accounting and Finance 1999
Volume 1 Certificate
I, Helen Joy Irvine, certify that this thesis has not been submitted previously as part of the requirements of another degree and that it is the product of my own independent research.
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1999 Abstract
In recent years the nonprofit sector has been increasingly influenced by commercial practices, following the lead given by the public sector, which has instituted a series of reforms. The greater emphasis on a business-like culture which has resulted has included the adoption of accounting practices in the nonprofit sector which have previously been used only by organizations which exist for profit-making purposes.
Institutional theory recognizes the influence on organizations of powerful expectations and pressures which require organizations to behave in certain defined ways. These expectations are deeply embedded in society and organizations. The adoption of business-oriented accounting practices is one such requirement. Organizations situated within the nonprofit sector, such as religious/charitable organizations, are highly dependent on governments and the public for funding, and therefore particularly vulnerable to these expectations. If fulfilled, they are capable of providing a legitimacy which enables organizations to receive the funding they need in order to continue their operations. Changes in societal expectations in recent years, particularly in accounting practices, have placed great pressures on such organizations which, by their very nature, have been unaccustomed to performing in a manner once reserved for the for- profit sector.
This thesis provides a study of the introduction of several of these accounting practices in one religious/charitable organization. Since accounting systems do not exist as self- contained independent entities, the backdrop to the study, the organization's own unique history and culture on the one hand and societal expectations on the other, has been carefully developed.
Against this backdrop organizational accounting practices and changes to those practices have been documented. These are the adoption of accrual accounting, the publication of corporate style financial statements, the change to a global budgeting system, the use of accounting information in decision making, the reliance on advice provided by external consultants and the introduction of benchmarking and business- oriented accounting practices.
These accounting techniques have not been adopted lightly. As the profile of accounting has been raised, increasing pressure has been placed on existing organization members and greater reliance has been placed on accounting professionals. The task for the organization has been to fulfil societal expectations and maintain its reputation as a worthy recipient of public funds, while at the same time developing expertise as an entrepreneurial provider of funds generated by means of business operations. As this task has been undertaken, the challenge for the organization has been to balance the application of commercialized accounting and business practices against the imperatives of its mission.
While the particular dynamics of these changing practices may be unique to this organization, it is to be expected that other organizations involved in this sector will be experiencing similar challenges. These changing institutional arrangements have the potential to alter dramatically the provision of services by charitable welfare organizations. Dedication
for Rod
"Your love is more delightful than wine"
(Song of Songs, 1:2) Acknowledgments
I wish to thank my family for their support in this endeavour, particularly my husband Rod and my children, Tom, David, Carolyn, Stephen and Richard. They have been unfailingly patient and understanding over the last few years.
Thanks are due to my supervisor, Professor Michael Gaffikin, for his willingness to allow me the freedom to think and explore. His support and advice have been a great help and his belief that I could do this has been a great encouragement. I also wish to thank Professor Warwick Funnell for his kind interest and wise advice, other members of the Accounting & Finance Department for their wisdom and encouragement and my fellow students, for sharing with me the joys and struggles of the research process.
Fieldwork is not possible without people, and I wish to thank all those people whom I interviewed and observed. I greatly appreciated their openness and honesty and their willingness to spend time with me. Note
Throughout this thesis frequent reference is made to the comments of people I interviewed. A list (using pseudonyms) of these people is found in Appendix 2.8. Within the organization it was common to use abbreviations when speaking of various positions held in the hierarchical structure, meetings and locations. Where possible, I have tried to limit the use of abbreviations to two, THQ (Territorial Headquarters) and DHQ (Divisional Headquarters) in order to avoid the confusion which could otherwise occur. Table of Contents
Volume 1:
Certificate ii
Abstract Hi
Dedication v
Acknowledgments vi
Note vii
CHAPTER 1. The programme: profiling accounting in a religious/charitable
organization. 1
The setting. 2
Society as the overall setting. 2 The third sector as the wider setting. 3 The Salvation Army as the specific setting. 7
The story. 9 A theoretical lens. 9 The sacred and the secular. 12 If all the world's a stage ... 19
The programme. 21
CHAPTER 2. Backstage: researching behind the scenes. 24
Why qualitative research? 25
Case studies in accounting. 28
The unique contribution of ethnography. 30
Choosing a research site. 33
Practical issues. 35 Gaining access. 35 Negotiating access. 38 The access agreement. 40 Preparing myself. 42 Fulfilling all the requirements. 42 Signing off. 43 Data gathering. 44 Interviews. 45 Observation and conversation. 51 Fieldnotes. 54 Documents. 55
How theoryfits in . 57
Data analysis. 60
Constructing a reliable and interesting ethnographic text 65
CHAPTER 3. The story: interpreting institutional elements. 69
Institutional theory. 70 The origins of institutional theory. 72 Elements of institutions. 75 The coercive pillar. 76 The mimetic pillar. 77 The normative pillar. 78 Identifying institutional elements. 79 Issues considered by institutional theory. 81 Institutional isomorphism. 81 Decoupling. 82 Organizational success. 84 The growth of bureaucracies. 85 How institutionalization happens. 86 The significance of the founding of an organization. 87 Nonprofit organizations as a special case. 88 Deficiencies and controversies of institutional theory. 90 The assumption of passive organizational response. 90 The neglect of the "micro" perspective. 94 The failure to consider how decisions are actually made in organizations. 96 The neglect of explanations of institutions. 97 Insufficient attention to identifying power holders. 102 Decoupling as a problematic concept. 106
Incorporating other perspectives. 107 Some other studies. 108 Resource dependence theory. 109 Combining viewpoints. 11' Some themes to be explored. 115
CHAPTER 4. The background: describing historical context. 121
Historical influences. 123
The early Salvation Army. 129 Birth of the Army. 129 An Army model. 131 Mission. 133 Fundraising. 136 Early financial credentials. 141
Pressures from outside the Army. 143 Politics and Persecution. 144 Issues of financial accountability. 147 Rumours about the Darkest England scheme. 147 Earlyfinancial practices . 149 The Army as a business. 150 Some specific criticisms. 151 Army response to criticisms. 155
Pressures from inside the Army. 155 A family matter. 155 The founder's influence. 159
A world-wide movement. 163 A dramatic expansion. 163 Legal structure. 164 Advisory boards and Army friends. 165 An international reputation. 167 Changing methods, unchanging mission. 168 Army accounting and accountability. 170
Moving forward. 172
CHAPTER 5. The company of players: organizational members andfunding._ 174
Players from history: early days of The Salvation Army in Australia. 176 A beginning. 177 Reaching out. 178 Attracting funds. 180 Financial reputation. 184 Prosecution and persecution. 186 Making friends. 188 Coming of age. 189
Players from the organization: the Australia Eastern Territory. 191 Salvation Army organizational structure. 192 Officers and employees. 194 Territorial Headquarters. 196 The Territorial Finance Department. 198
Understanding organizations through their structure. 201
Funding the company of players: Salvation Army income. 203 Government funding. 205 Red Shield Fundraising. 208 Client contributions. 210 Legacies and donations.__ 212 Sales. 213 Interest and dividends. 215 Fundraising issues. 216
Directions. 218
CHAPTER 6. The audience: image and institutions. 219
Promoting an image. 220
Societal influences on the audience. 225 Religious observance and religious organizations. 226 Social problems and responsibilities. 229 Religious/charitable welfare organizations. 231 Philanthropists and philanthropy. 233 Governments as providers of funds. 240
Accounting and society. 245 Accounting as an institutional element. 246 Accounting in the public sector. 252 The accounting profession. 257
Nonprofit organizations and accounting. 262
An institutional interpretation of the audience and their influence. 264 Volume 2:
CHAPTER 7. The performance (1): presenting accounting statements to the public. 2 70
Centre stage:financial reporting . 272 A new image. 272 Why change? 276
Backstage: the Army's accounting system. 279
Accounting for funds. 279 The Finance Department. 285 A computerized accounting system. 289
Changing the script: challenges to the system. 293
Accrual accounting. 293 Consolidations and year-end processing. 300 Auditing. 304
Maintaining the performance: keeping accounting up-to-date. 314
CHAPTER 8. The performance (2): following the budget script 318
The global budget script. 321
Last year's script: the 1996/97 budget 323
Writing the 1997/98 budget script 328
Setting the global budget deficit and the timetable. 328 Writing the script: trust or control? 332
Interpreting the script 334
Corps budgets. 334 Social centre and community services budgets. 338 DHQ and THQ budgets. 342
DHQ budget responsibilities. 344
THQ Budget Board revises the script 349
Dates, duties and composition. 349
Major Territorial Budget Board players. 351 The Secretary for Business Administration. 352
Finance Department members. 354 Other board members. 356
Scripting issues. 357 Timetables. 358 Training. 358 Hierarchical control. 359 Monitoring budgets. 361
An institutional reading of the budget script 362
CHAPTER 9. The performance (3): operating in a businesslike manner. 364
Financial decision-making. 367 Decision-making hierarchy. 367 Financial decision-making culture. 372 Availability and quality offinancial information . 375
Consultancies. 377 An academic study. 378 A computer systems study. 380 A report on Red Shield Industries. 384 An aged care study. 387 An organizational review. 388
The business of caring. 392 Motivations for businesslike performance. 392 Constraints on businesslike practices. 395 Balancing mission and money. 399
CHAPTER 10. The finale: a thematic review. 401
The audience. 401
The setting. 402
The actors. 404
The storyline. 405
What does the story mean? 407 Theme 1. 407 Theme 2. 410 Theme 3. 411
The impact of the story: who cares? 412
Bibliography. 415 Appendix 1.1. Top Ten Community Service Welfare Organizations by Income (and Assets) 1993/94. 468
Appendix 1.2. Zelizer's traditional and alternative money models. 469
Appendix 2.1. First letter to Divisional Commander. 470
Appendix 2.2. First letter to the Territorial Secretary for Business Administration.472
Appendix 2.3. Revised Research Proposal to the Territorial Secretary for Business Administration. 473
Appendix 2.4. Final Letter to the Territorial Secretary for Business Administration.477
Appendix 2.5. Sample questions for interviews with Divisional Headquarters personnel 479
Appendix 2.6. Sample questions for interviews with social centre personnel 482
Appendix 2.7. Sample questions for interviews with corps personnel 485
Appendix 2.8. Table of interviews conducted within The Salvation Army. 488
Appendix 2.9. Stories of interviews in their context 493
Appendix 2.10. Summary of interviews to date. 496
Appendix 2.11. NUD*ISTIndex Structure. 503
Appendix 3.1. Interpretation of institutional pillars as the result of ontological beliefs. 509
Appendix 3.2. Institutional Antecedents and Predicted Strategic Responses 513
Appendix 4.1. A glossary of Army terms. 575
Appendix 4.2. The Salvation Army. The Position of the Forces, October, 1890. _ 518
Appendix 4.3. The Salvation Army Balance Sheet for the year ending 30th September 1879. 521
Appendix 4.4. Financial accountability of The Salvation Army as portrayed in The Salvation Army Year Books up to 1935. 523
Appendix 4.5. International Salvation Army statistics. 529
Appendix 4.6. How can I help the work of The Salvation Army? 530 Appendix 4.7. Transcript of a letter from the Government of Victoria, 1889. 531
Appendix 4.8. Remember the Army in your will 532
Appendix 5.1. The Salvation Army's social and community services. 533
Appendix 5.2. Share Donations Australia Inc. scheme 535
Appendix 6.1. The Salvation Army's image: charity or church? 536
Appendix 6.2. Australian Census figures for religious affiliation 1976 - 1991. _ _ 539
Appendix 6.3. Business and Marketing Plan for the provision of outside school hours care. 541
Appendix 6.4. Characteristics of not-for-profit entities. 542
Appendix 7.1. Accounting Policies for The Salvation Army year ended 30th June 1994 543
Appendix 7.2. Dear friends and supporters. 547
Appendix 8.1. 1996/97 Deficit Funding Letter to Divisional Commander. 548
Appendix 8.2. Memorandum re DHQ Responsibility for Social Centre Budgets. 550
Appendix 8.3. Memorandum to Centre Managers re 1996/97 Budget 552 CHAPTER 1. The programme: profiling accounting in a religious/charitable organization.
BARBARA: Oh, what does that matter? We are all poor here. We never think of money or success. When all our money is spent on the Army we pray for more; and it comes: it always comes. Take your mind off such things [Shaw, 1945, 43].
Churches are not generally perceived to be at the cutting edge of financial activity and accounting, so the notion that accounting has a significant and interesting role to play in the everyday workings of a religious/charitable organization would probably be surprising to many people. If the linkage between accounting and churches has traditionally been low-key and is not immediately obvious, what interest there might be in such a linkage is probably even less obvious, judging by the paucity of either academic or accounting practice literature on the topic1. Especially at a denominational level, religious organizations represent a wide area of interest, consisting, as they often do, not only of a network of individual churches, but also of a centralized administrative structure and a variety of charitable activities such as aged care centres, welfare agencies and other social service outlets.
This thesis addresses this area of interest by considering the issue:
What is expected of accounting in a resource dependent nonprofit religious/charitable organization in times of change and uncertainty?
1 This paucity is not limited to Australia. While he did not consider the study of accounting in religious organizations, Jeavons [1994, xiv] observed, of the USA, that while there was an interest in nonprofit organizations, there was very little interest in any aspect of religious organizations. He found this surprising, given the "centrality of religion and religious organizations" to the tradition of philanthropy and nonprofit organizations. Nelson [1993, 655 - 656], in his study of authority structures in multinational churches, found it strange that churches, particularly multinational churches, while being "big business", were neglected in both organization and management studies. Chapter 1 The programme Page 2
The scene is set in this introductory chapter for a study of accounting in The Salvation Army Australia Eastern Territory, first by considering the societal, sector and organizational setting in which the accounting system operates. The central issue of the thesis, introduced above, is then explained in more detail, together with the notions of an institutional theory approach, a sacred/secular motif, and the use of a dramatic metaphor. An outline of the emphasis of the succeeding chapters is then provided.
The setting.
Accounting is not merely a technical activity which takes place in a vacuum, but is an activity of human endeavour, whose practice and impact is deeply rooted within multiple contexts.
Society as the overall setting.
It is the study of the interrelationship between an accounting system, an organization, and the society in which it functions, which adds to the richness and interest of accounting in any organizational setting. Figure 1.1 below, "Interpenetration between an accounting system, an organization, the third sector, and society" illustrates these levels of embeddedness2.
Figure 1.1. Interpenetration between an accounting system, an organization, the third sector and society.
2 The "third sector" follows the business and government sectors [Lyons and Hocking, 1998], and is discussed in more detail in the next section, "The third sector as the wider setting". Chapter 1 The programme Page 3
While this notion is not new, it will be shown to be of great significance in a rehgious/charitable organization, situated within the nonprofit (third) sector, whose agendas and culture are markedly different from those of for-profit organizations, and. it could be argued, significantly different from other organizations in the nonprofit sector3. In spite of these differences, religious organizations, along with the nonprofit sector in general, face increasing pressure to become more business-oriented, and, as a result, to place a greater reliance on accounting practices.
The third sector as the wider setting.
Religious organizations form part of the vast nonprofit sector, sometimes referred to as the third sector, which is often overlooked or thought inconsequential in economic terms. This has been an unfortunate and inaccurate oversight, since the influence of this sector is substantial, in both social and economic terms . Nonprofit organizations are not business or government, but are "an essential component of a lively democracy", constituting "the core of civil society", and acting as an important "counterpoint" to both business and government interests and organizations [Lyons and Hocking, 1998].
The nonprofit sector represents a major force in society. It is comprised of "a vast array of economic, educational, research, welfare, social and spiritual activities" engaged in by a variety of organizations, many of which are large-scale, "controlling substantial asset bases and employing a significant number of people" [Parker, 1998, 50]. For those involved in this extensive sector, its social and economic significance is well understood. Estimates of the size of its influence, in monetary terms, vary5. One
What makes a religious organization unique is discussed later in this section of the chapter. 4 In the USA it is estimated that there are over 1,000,000 nonprofit or tax exempt organizations, with the property they own representing 10% to 30% of all properties on tax rolls [Trigg and Nabangi, 1995, 259]. A recent report, "The Emerging Sector", from the Johns Hopkins University, in Baltimore, USA, described voluntary organizations as accounting for "an increasing portion of the economic activity of many countries". Annual spending by non-profit groups, according to this report, now exceeded $1.1 trillion in the 22 nations participating in the study [Greene, 1998]. 5 It would be impossible to capture data for the hundreds of thousands of nonprofit organizations which do not employ people, and are therefore largely unnoticed, at least in statistical terms. If the nonprofit sector is described as like an iceberg, then currently available statistics refer to the part that is above water and thus measurable, but ignores the vast number of nonprofits that are "not so clearly seen, nor Chapter 1 The programme Page 4
estimate is that there are currently in Australia "at least 92,000 non-profit organisations operating as formal legal entitites, plus another 325,000 unincorporated associations", employing 400,000 people and spending $15 billion per year [Cleary, 1998a, 3]. Preliminary data released by the Australian Nonprofit Data Project [Lyons and Hocking, 1998] suggests that these figures are conservative. It estimates operating expenditure by nonprofit organizations for 1995/96 to be between $27,000 million and $43,000 million, depending on the way the field is defined6. Some interesting statistics disclose that religious organizations capture a significant share of that sector's influence:
• Australians gave almost $2.8 billion to the nonprofit sector in 1997, and 36.8% of this went to religious organizations; • in 1994/95 Australians volunteered 374 million hours for nonprofit organizations, 18.9% of these hours being volunteered to religious organizations; • Australia's nonprofit sector in 1995/95 employed between 564,000 and 668,000 people, somewhere between 6.8% and 8.1% of the workforce. Of these, 17,000 were employed by religious organizations7; • it was estimated that religious organizations accounted for operating expenditure in 1995/96 of $1,000 million out of total expenditure for the nonprofit sector of $27,000 million8 [Lyons and Hocking, 1998].
The magnitude of these figures, in economic terms, indicates that accounting has a place in this sector, and within religious organizations, at least in terms of accountability . The potential profile of accounting in religious organizations becomes
so readily measured" [Lyons and Hocking, 1998]. What to include in the definition of the nonprofit sector is problematic. A core definition used by the Australian Nonprofit Data Project [Lyons and Hocking, 1998] includes organizations in health (including nursing homes), education and research (excluding public universities), community services, other human services (housing, legal services, employment services), religion, leisure (including sport, recreation, social clubs, arts and culture), interest organizations (including business, trade and professional associations, trade unions, political parties, lobby and advocacy organizations), and other organizations, such as accommodation at university colleges, school parent organizations, emergency service organizations, charitable trusts etc. An extended definition includes all these, plus public universities, nonprofit financial institutions (credit unions, building societies, friendly societies, mutual insurance companies), and other organizations such as trading cooperatives. The figure of 564,000 people relates to the core definition of nonprofit organizations. The extended definition results in an estimate of 668,000 employees. 8 This figure of $27,000 million refers to nonprofit organizations that fall within the core definition. The figure would be $43,000 million if the extended definition were adopted. 9 Trigg and Nabangi [1995, 259] suggested that considering the "influence and economic contribution" of nonprofit organizations to society, their financial records should be kept in an "appropriate manner". Chapter 1 The programme Page 5
even more striking when a linkage is made to the community service welfare group of organizations. These organizations make up one segment of the nonprofit sector, a segment in which churches are actively involved, in their capacity as service providers in thefields o f aged care, drug rehabilitation, counselling, emergency accommodation, and other areas where people are experiencing acute or ongoing social or financial need.
Appendix 1.1, "Top Ten Community Service Welfare Organizations by Income (and Assets) 1993/94" shows that of those top ten (by income) community service welfare organizations, four were described as churches, and together accounted for $358.6 million (44.8%) of the $800.7 million total income attributed to the top ten organizations [Industry Commission, 1995]. The asset base of these four churches amounted to $650.2m, or 64.6% of the total asset base for the same ten organizations. The Salvation Army Australia Eastern Territory figured in third place on this list in terms of income, and second place in terms of assets.
ReUgious/charitable organizations are therefore big business, and like other organizations within the service segment of the nonprofit sector, they face problems peculiar to that sector, and to themselves, due to a range of factors such as their belief systems, their mission of service, the variety of legal structures under which they operate, and their need to attract funds in order to continue operating. A religious organization, particularly, in this case, a Christian service organization, has a two- pronged mission [Jeavons, 1994, 46], distinct but separable, of providing a service and giving witness to the religious beliefs that inspire that service. This marks such an organization as clearly different from for-profit organizations, but also, in some ways, different from other philanthropic organizations10. It is important to understand these differences, and the impact they are likely to have [Jeavons, 1994, 56].
The religious belief system that undergirds Christian service organizations, according to Jeavons [1994, 46] encourages the integration of: "service and witness, faith and works, preaching and practice". This is one of the factors which marks them as different from other nonprofits: religious service organizations should be (almost by definition) "as concerned with the message their work sends as with the immediate practical effects of their service" [Jeavons, 1994, 59]. Chapter 1 The programme Page 6
Jeavons [1998, 79], in attempting to identify the characteristics of religious organizations, began with a dictionary definition of religion as "belief in a superhuman controlling power, especially of a God or gods ... [and] the particular system of faith and worship deriving from that belief. He then related religious values to the "dynamics of organizational life" considering several key issues", and presenting responses to them as a range of possibilities [Jeavons, 1998, 93 - 94]. Different "religious" organizations would manifest their belief systems in a variety of ways, in terms of the extent to which they incorporated their religious ideals into their structures, cultures and routines. These responses were notfixed, but were required to be made in an ongoing way as the environment in which any religious/charitable organization operates is a constantly changing one.
The Industry Commission [1995, 1] identified several challenges facing community service organizations . They were "changing relationships with the community and governments", fundraising from the public and governments, the use of volunteers, and "the rapidity of social, cultural, demographic, economic and political change". How do these organizations respond to such challenges? On the practical side, there were significant changes required in order to bring them into line with current expectations of the role accounting ought to play in organizations, in an age when the public required accountability13.
Herzlinger [1996, 98] suggested that the nonprofit sector, if it did not address the issue of accountability14, faced the risk of scandals which could potentially erode public
" The issues Jeavons [1998] considered were the organization's self-identity, participants and then- inclusion, sources of material resources, goals, products and services, information processing and decision making, power, and organizational fields. In each of these categories, the issue was whether the organization's claim to be religious affected the way it conducted itself. 12 Not all religious organizations are involved in community service, but at a denominational level most religious organizations, including The Salvation Army, incorporate some service roles, in the areas of aged care, hospitals, hostel accommodation, rehabilitation or counselling work. 13 Nonprofit management has been interested primarily in cash oriented issues in the past [Cameron and Thompson, 1997]. Now requirements are becoming more sophisticated, with issues of efficiency and effectiveness, and performance measurement, beginning to become important. 14 Herzlinger [1996, 98] identified problems faced by nonprofit organizations as being that they were ineffective, inefficient, plagued by private inurement, and took excessive risks. Chapter 1 The programme Page 7
confidence. Lacking the basic accountability mechanisms of business15, he [Herzlinger, 1996, 101 - 102] claimed that what was required within the nonprofit sector was a system whereby there was disclosure of performance information, analysis and dissemination offinancial information, and sanctions applied for lack of compliance with these standards. Developing accounting systems that can satisfy such demands is a challenge to organizations within the nonprofit sector, which have traditionally been recognized as having requirements different from other organizations, in terms of accounting records, internal control, andfinancial statements [Boyce, 1984].
Given the financial base of religious organizations involved in this field, the requirement for accounting and accountability, changing government regulations and requirements, and community expectations, accounting has the potential to play a larger, more significant, and potentially more diverse role in such organizations. Because of their unique function, and the increasingly competitive and commercialized environment in which rekgious/charitable organizations operate, it would be expected that their use of accounting would have changed significantly in recent years, and would continue to do so, and that the telling of this has the potential to be a fascinating story.
The Salvation Army as the specific setting.
The Salvation Army Australia Eastern Territory is the immediate setting of the accounting system which is the focus of this thesis. It is a unique organization, with its own distinct history and culture, developed over the last 134 years, since its founding in Victorian England in 1865. It is a church, a vast international religious organization with personnel, property and programmes in 103 countries world-wide [The Salvation Army Yearbook 1998, 1997,]. The Australia Eastern Territory in 1997 consisted of 638 active officers16 and 2018 employees, serving in 170 corps17, with 80 social service
15 The three basic accountabilities proposed by Herzlinger [1996, 101 - 102] were self interest, competition, and a profit measure. 16 Ordained Salvation Army personnel are referred to as officers, with Army ranks. See Appendix 4.1 "A glossary of Army terms". 17 "Corps" is the term used to denote a local church within The Salvation Army. See Appendix 4.1 "A glossary of Army terms". Chapter 1 The programme Page 8
institutions and dozens of community centres [The Salvation Army Yearbook 1998, 1997]. In spite of the fact that it is described as a church, it is for its social work that it is perhaps best known, and greatly admired, in Australia18.
What is probably less well known are the financial dimensions of the work of The Salvation Army. In monetary terms, the Army's service provision is huge19. For the year ended 30 June 1997, the income for the Australia Eastern Territory, excluding income from its local churches, was $137,395 million. The majority of this income was made up of funds from external sources, such as government funding, and donations from the public, as well as contributions made by social service clients. Total assets were listed at $397,146 rnillion [The Salvation Army Consolidated Financial Statements 1997, 1998, 3-4]. This, therefore, is an organization with a significant economic as well as social impact on the community. Furthermore, its continuing operations depend on its ability to maintain and increase funding from external sources.
Changes experienced by the Army over the last few years have emanated from both internal and external sources. From an internal perspective, there have been a number of factors which have had a significant impact on the accounting system, including an organizational restructure, the employment of a greater number of accounting professionals, the introduction of a global budgeting system, the commissioning of several management consulting studies, a reassessment of the computerized accounting system, and an increasing emphasis on operating in a business-like way. These changes have been overlaid on a unique culture which has emanated from the Army's origins and subsequent development. External changes include alterations to government funding systems, together with the requirement for the Army and other similar
18 In 1997 over 90% of the Australian public favourably identified The Salvation Army's distinctive military-style uniform, probably as a result of its social welfare work [McGillion, 1998, 1]. 19 For the year ended 30 June 1997, within Queensland, New South Wales, and the Australian Capital Territory (the Australia Eastern Territory), The Salvation Army provided: shelter for over 3,900 people every night, in crisis and supported accommodation (cost: $12.9 million); counselling, training, employment services, crisis intervention through Salvo care line, grief and suicide support groups (cost: $11.1 million); rehabilitation services for alcohol, drugs and gambling addictions (cost: $8 million); youth in crisis services (cost: over $7.3 million); chaplaincy services with emergency and disaster welfare (cost: $9.9 million) [Lift the Spirit, 1997]. Chapter 1 The programme Page 9
organizations to adopt accrual accounting. These have had a huge impact. Technological advances, and increasing competition for charity dollars, have also contributed to growing pressures on the organization. These influences will be explored in more detail in Chapters 5 and 6.
The story.
The major issue which this thesis addresses, "what is expected of accounting in a resource dependent nonprofit reUgious/charitable organization in times of change and uncertainty", is therefore to be considered within the context of The Salvation Army Australia Eastern Territory, the third sector, and Australian society in general. It is to be interpreted from an institutional theory viewpoint.
A theoretical lens.
Accounting can be viewed as not just a technical activity, but as evolving as a deeply embedded organizational and social phenomenon [Burchell et al 1980, 6, 19; Burchell et al, 1985; Laughlin, 1987, 479]. Laughlin stressed the importance of a "deep involvement of theory and theoreticians in practice" in order to understand the "complex historical, organisational and societal meanings" behind the technical practice of accounting [Laughhn, 1987, 484]. Hopwood observed that accounting played "a not insignificant role in embedding the social into the organizational" [Hopwood, 1983, 302], and Burchell et al [1985, 383] observed that accounting is "and certainty should be" a "reflective phenomenon", being required tofill different needs "as the environment develops or evolves" [Burchell et al, 1985, 393].
Institutional theory20 has the capability of considering the wider organizational and social context of accounting practice by emphasizing the influence of the institutions both of society and of the organization. It suggests that these institutions, which have
This thesis focuses on "new institutionalism", which is explained in more detail in Chapter 3. Chapter 1 The programme Page 10
been described as "societal expectations of appropriate organizational form and behavior" which take on "rule-like status in social thought and action" [Covaleski and Dirsmith, 1988a, 562], develop over a period of time. Instead of, or in addition to, technical considerations, organizations adopt institutionally acceptable practices in order to legitimate their existence [Covaleski and Dirsmith, 1988a, 562], and ultimately, to assure themselves of an inflow of funds by means of which they can continue to operate.
It has been suggested that accounting is one of these institutional practices [Hopwood, 1983, 289]. An institutional view of accounting, therefore, assists in understanding the way accounting is actually practised, within its organizational and societal contexts [Ahmed, 1992, 190], and the way "accounts and associated meanings are used to display a facade of rationality to external bodies, despite being used for different purposes within the organizations" which adopt them [Hopper and Powell, 1985, 447]. An accounting system, from an institutionalist viewpoint, would not be a "distinct and separable part of the total social system", but rather "an integrated aspect of a unified social whole", whose context would need to be understood in order to understand the way the accounting system operated [Ahmed, 1992, 190].
An institutional perspective highhghts the importance of culture, both the cultural system in which an organization sits, and the corporate culture, or "normative glue" that holds the organization together [Morgan, 1986, 135]. Culture highhghts the symbolic aspects of life [Morgan, 1986, 131, 135], and its influence, often unseen, but very much present, has the capability of defining problems, suggesting appropriate strategies, and specifying the kinds of people who can participate in the tasks of societal life [Zukin and DiMaggio, 1990, 17].
Since organization "ultimately resides in the heads of the people involved" [Morgan, 1986, 138], within an organization shared understandings must be developed and maintained if an organization is to continue to operate. These shared understandings or meanings make possible the stability of an organization, the routinization of day to day activities, and a sense of "commonality" that facilitates organizational action [Smircich, Chapter 1 The programme Page 11
1983, 55].
In order to understand the impact of change, therefore, the culture of an organization must be understood, because organizational change "implies cultural change" [Morgan, 1986, 138]. If organizations are thought of as "mini-societies that have their own distinctive patterns of culture and subculture" [Morgan, 1986, 121], then those patterns are likely to be much more obvious to an outsider, as organizational actors will usually be so deeply embedded in the internal scripts that they become unaware of their distinctiveness.
Particularly applicable to the study of religious organizations21 [Stout and Cormode, 1998; Dimaggio, 1998], institutional theory emphasizes not just the governing structures, but also the culture, values, symbols and ideas which have become so embedded in an organization, that they give it a "permanent personality"22 [Stout and Cormode, 1998, 65], i.e. a set of "routinized rules and routines" to administer the organization and a set of "values and goals" that legitimate those rules and routines [Stout and Cormode, 1998, 75].
Changes in organization theory in recent years have created "a more auspicious context for ... an attempt at cross-fertilization" between the study of religion and organizations [DiMaggio, 1998, 19]. An alternative to a rational model of organizational behaviour23,
21 Stout and Cormode [1998, 63, 66] advocated the use of a "new" institutionalist perspective in the study of religious history. They claimed that religion in the USA had been institutionalized in order to survive, and that it was valuable to consider the structure of religious organizations in their broader environment, or organizational field. DiMaggio [1998, 14] suggested that viewing organizations as institutions was helpful for considering: the effect of environment on organizational structure; institutional legitimacy, culture (taken-for-granted practices and routines made more of a difference in religious organizations than in many others, because of their "value-intensity"); and change, as normative expectations were diffused across religious organizations. 22 Once an organization has established a "permanent personality", people take it for granted, and it beings to exist as an end in itself [Stout and Cormode, 1998, 65 - 66]. It could be argued that many religious organizations have taken on this characteristic, including the Church of England, and The Salvation Army, both of which have established their own distinctive structures, cultures, and images which they project to the world. 23 DiMaggio [1998, 10] observed that organization theory is more relevant to the study of religion now, because it has gone "beyond rationality", to embrace a new view of goals, moving from consideration of formal systems to informal social relations, from organizational structure to organizational culture. Chapter 1 The programme Page 12
institutional theory therefore recognizes the social nature of organizations, and the influence of culture on organizational behaviour [Stout and Cormode, 1998, 66]. It proposes that organizational success and survival depend on factors which go beyond "efficient coordination and control" [Meyer and Rowan, 1977, 352], seeing an organization as not just a technical system, but a social system as well, deeply embedded in contextual settings [Scott, 1987, 508]. An institutionalist view, therefore, can assist in making some special contributions to the study of accounting practice:
• it may help in identifying the structural changes and processes that took place when that managerial practicefirst emerged ; • it may help in identifying the interests and values served by the practice at a specific time and place; • it may assist in identifying what other changes and developments followed, and how they affected the use of that practice [Ahmed, 1992, 192].
With this in mind, a case study approach, informed by institutional theory, provides an appropriate means of investigating this story about accounting in a rehgious/charitable organization. The desirability of using a theoretical structure, the philosophical underpinriings of institutional theory, and the way it relates to this case, are explored more fully in Chapter 3.
The sacred and the secular.
A motif which adds a special dimension to the study of a rehgious/charitable organization, and one which is consistent with institutional theory24, is the relationship between religion and money, with consequent ramifications for the relationship between churches and accounting. In the drama of organizational life, money has a major role to play. It is written in large letters into the scripts and agendas of any organization. Accounting systems exist to keep track of money, to plan for it, to assign various uses and responsibilities for it. An organization competes for it in its external world, by
and from closed systems to open systems. 24 Institutional theory considers the way institutions come into being. Whether religious organizations adopt institutionally acceptable practices may well depend on the strength of their religious convictions, and whether or not they are consistent with those practices. Chapter 1 The programme Page 13 establishing and mamtaining its legitimacy and, therefore, its worthiness to be allocated resources from the pool available within society. Internally, that competition continues, especially as evidenced within the budgetary process, where individuals in organizations seek to legitimize their claims to a share of the organization's resources.
Religious organizations, it has been shown, control large amounts of money. With money comes the requirement for both accountability and accounting. Is there some inconsistency, or some potential resistance, to the notion that a church, whose agenda is primarily spiritual, should be concerned with money and, as a result, make use of the practice of accounting, which has its roots in the secular world of money and business? How do nonprofit organizations, and religious organizations in particular, balance the pursuit of their missions withfinancial constraints when "additional resources may be available from sources that might distort mission" [Weisbrod, 1998c, 12]?
Laughlin [1988], in his study of accountability and accounting systems within the Church of England, began with some insights into the "central dynamic" of religious organizations, basing his work on Durkheim's division of all things into the "profane" and "sacred"25. This notion of a dialectic, a tension between opposing forces, formed the basis for his assertion that within religious organizations there was a potential for resistance to accounting, based on the tension between the need to rely on the secular world for the funding for religious work, and the desire to protect the "central sacred sanctuary" of belief from corruption by those very secular forces which helped to keep it going ILaughlin, 1988, 23 - 24].
Booth [1993, 50] observed that "the dominant ends in (religious) organizations are transcendental, which makes any empirical assessment of their achievement impossible". Accounting or management practices would therefore provide inappropriate measures of spiritual success. This tension was taken up also in Booth's [1995] study of the budgetary processes within a church, where he observed that the friction was
25 Durkheim noted that the major distinguishing characteristic of religion was that it dealt with sacred, not profane, things [Demerath and Hammond, 1969, 24]. Chapter 1 The programme Page 14
exacerbated in times of budgetary crisis, when belief systems were put to the test, faced with the supposed "rationaUty" of accounting systems.
The relationship between a church and money, therefore, could be thought of in dialectical terms as similar to a master-servant relationship. Hegel [1971. 175] considered the complex tension inherent in such a relationship, where the servant, in the very act of serving the master, eventually exceeded the master in worth. The master thus came to the realization that he or she was dependent on the servant, and was therefore not a master at all [Gadamer, 1976, 67]. While relying on money to fulfil its mission, a church's very spiritual nature requires an independence of belief and flunking, so a tension develops between two ways offlunking, bein g resolved by the interaction between the two opposing notions [Gaarder, 1996, 303]. The resolution, if made, however, is never set, as the dialectical process, "a clash between a purpose or standard and its attempted fulfilment" [Taylor, 1979, 59], is a continuous working out of the dichotomy between opposites. Morgan [1986, 266] described this "management of contradiction" as an inevitable and ongoing part of life, most obvious in times of crisis when "competing values and logics force their way to center stage, highhghting the contradictory tendencies shaping reality".
The difficulty in a Christian service organization is of balancing the mission/money tension in a way which preserves the character of its mission26 [Jeavons, 1994, 157 - 158]. This tension has implications for the way the organization embraces fundraising methods27, management principles28, and attitudes to accountability29, including
DiMaggio [1998, 14] suggested that in its quest for institutional legitimacy, an organization may face compromising choices. Presumably these would not be confined to the money/mission tension, but could be more widespread. !7 The implications are wide-ranging. To which human motives should an organization appeal when it is raising funds? Some "secular" fundraising methods, according to Jeavons [1994, 164 - 165], are directed towards people's self-interest. What if organizations are conducting revenue-generating activities in order to fund their mission? The tension may be that such ventures will divert time from the core mission, and therefore possibly affect the organization's sense of its mission [Jeavons, 1994, 179]. 28 Defining an organization's mission statement, defining effectiveness, developing human and material resource policies, and preparing for the future are key issues which illustrate the sacred/secular tension [Jeavons, 1994, 114 - 132]. These are complex issues, made more so because of the unique nature of a Christian religious/service organization. Chapter 1 The programme Page 75 attitudes to money and accounting.
In order to understand this tension, it is useful to consider what money is, why it is sometimes perceived to be a "secular" influence, and where it gets its power. Money has been described in various ways by economists, accountants, authors, playwrights, sociologists and politicians. In spite of the necessity of money and its obvious usefulness, it has been described in a variety of negative ways30, with attitudes to money determining attitudes to saving, consumerism, poverty, wealth and charity. These attitudes are institutionally informed, changing in response to the prevailing views and expectations within society. Adam Smith [1910, 385], for example, wrote in the 1700s, that "the great affair, we always find, is to get money". During the Victorian age,
'X 1 however, thrift was praised, and consumption criticized . Some economists around that time suggested ways of improving working class consumption patterns, by debt avoidance, careful spending, and modest living [Horowitz, 1985, 78].
Jeavons [1994, 216] suggested that, in order to be consistent with its belief system, a Christian service organization ought to focus on integrity in financial matters. He urged openness and honesty, and full disclosure of financial matters, which could be a tension when an organization is heavily reliant on external, public funding. An institutional viewpoint would suggest that the appearance of openness and honesty infinancial matters may be given, in order to establish legitimacy. Here again could be a potential tension for a religious organization. 30 Money has been variously described as: a "man-made device" which keeps people in slavery [Powell, 1932, 83, 15]; a "divisive force", as projected in the novels of Charles Dickens [Smith, 1968, 109]; a "homogenizing force" within capitalist economies, enjoying a "godlike status" [Guttmann, 1994, 17]; "an almost abstract or metaphysical force in the life of society" which threatens to dominate the very machinery of life which was created to make our lives easier [Smith, 1968, 68]; "the dragon Money, with his paper wings" [Emerson, 1966, 108 - 109]; "sterile" [Singer, 1993, 58]; "a social institution which integrates diverse economic activities" but which has an "impressive" potential for disruption [Guttmann, 1994, xviii]; and taking centre stage in "accounts of the instrumentalization and rationalization of modern life" [Zelizer, 1994,214]. 31 Veblen, an institutionalist economist in the USA, suggested in 1899 that conspicuous consumption was "socially functional but morally bankrupt" [Fox and Lears, 1983, ix]. Veblen questioned the assumption that once people experienced increased wealth they would choose "moral, elevating, and socializing objectives" [Horowitz, 1985, 38], and criticized the extravagant consumption of the leisured class. With social and cultural systems, he argued "there was no resolution of the tension between good production and bad consumption" [Horowitz, 1985,40]. 32 Horowitz [1985] discussed the work of Veblen, Patten and Gunton, all economists in the late 19th century and early 20th century. They considered the way Americans came to terms with a rising standard of living. There was a significant amount of "advice literature" suggesting the way people ought to spend their money. Richards, in 1910, urged the pursuit of "a restrained style of living", and saw as virtues "parsimony, respectability, and self-control" [Horowitz, 1985, 79]. Chapter 1 The programme Page 16
Consumerism gained legitimation again in the early 20 century, as "capitalists, advertisers, and psychologists ... set the ground rules for the game of consumption" [Horowitz, 1985, xxviii]. Two world wars and the Depression of the 20th century pulled people back again into thrifty habits, with consumption becoming gradually more acceptable until by the 1980s, greed had overcome its "unfortunate bad odour", and was "openly rehabilitated as a civic virtue that made everyone better off" [Singer, 1993, 83]. This attitude, however, did not continue, with a major recession and a rash of corporate collapses in the world's western economies in the early 1990s.
The accumulation of wealth, similarly, has been criticized by people who have non monetary ideals of what life ought to be about33. For members of The Salvation Army, the accumulation of wealth has been described as a temptation [Bolton, 1980]. The disparity in levels of wealth between members of society is, therefore, of great concern, especially for religious/charitable organizations, as it is usually people from the poorer segments of society which they are involved in helping through their social service programmes.
Perhaps the dialectic tension between churches and money can be resolved in practice, in at least two ways. First, it may be resolved through the orientation a church has with the world. Kaldor et al [1994, 70] made a distinction, based on the work of Weber and Troeltsch, between a church and a sect. A church, they maintained, had an open orientation to the world, and wanted to influence it. A sect, on the other hand, saw the world as evil, and drew a strict boundary around its members34. The historic orientation
Horowitz [1985, 4-6] cited people like Thoreau and De Tocqueville. 34 This is the "ideal-typical" church-sect distinction, with a church seeking to make peace with the secular society around it, and a sect being aloof or hostile [Demerath and Hammond, 1969, 157]. This distinction has been refined, with special attention being paid to the likelihood of a sect's becoming a church. Bryan Wilson's study of sect development [referred to by Demerath and Hammond, 1969, 158 - 161] suggested that "the theological mission of a sect helps to determine its likelihood of becoming a church and thus falling prey to organizational encrustations". The Salvation Army was a typical "conversionist sect", seeking to change the world by "altering individuals within it", and therefore a good candidate for becoming a church, with its orientation towards individuals rather than society at large. Innaccone [1998] maintained that the classic church-sect distinction, while having elements of truth, was limited. He criticized notions of the "ideal-typical sect" and the "ideal-typical church" as failing to account for or adequately describe the many nonideal, "mixed-type" cases. Whichever terminology is used, the central issue remains: how open is the sect/strict church to "worldly" practices, Chapter 1 The programme Page 17
of a religious organization therefore will be a deterniining factor in the extent to which this tension is felt, and the manner in which it is resolved. A Salvation Army officer urged the breaking down of the barrier between the "so-called sacred and secular", and a greater involvement of Army personnel in "that wicked world" [Watson, 1964, 274].
The response of actors in a religious organization to accounting therefore will have something to do with that organization's historic belief system and culture, and its openness to embracing "secular" practices. Swartz [1998, 324] suggested that many religious organizations were open to embracing these practices, as evidenced by the two broad institutional processes which were at work within those organizations. One of those was secularization, or "the idea that religious authority is in decline in the modern world", while the other was institutional isomorphism, which he defined as "increasing homogeneity in forms and practices of organizations that come to constitute organizational fields where interaction, awareness, information, and structures of domination and coalition are shared"36.
The second possibility for resolving the dialectic tension between churches and money is through the transformation of money through the practice of philanthropy37, or for other religious purposes. Jesus advised a certain rich young man to give away his wealth to the poor [The Bible, Matthew 19:21]. Members of the early Christian church held their property in common [Singer, 1993, 60], and saw the giving of alms to the poor "not as a matter of mercy, but of justice, for the earth was seen as belonging to all people, and no-one had a right to more than he or she needed" [Singer, 1993, 60]. Dickens embraced a somewhat idealized concept of charity, seeing it, in itsfinest form, as "a relationship, of however short a duration, which was as morally purifying to the
such as accounting and management techniques? 35 Swartz [1998] studied trustees in large nonprofit hospitals in the USA, and linked the concepts of secularization, religion and isomorphism. 36 These two pressures are illustrated in Jeavons' [1994, 127 - 129] example of US organizations which accept government funds for overseas aid work, and yet promise not to promote their religious views. Such a policy, he suggested, was incompatible with their mission. 37 Presumably, this transformation can also occur with accounting, as it makes a contribution to mission. Chapter 1 The programme Page 18
giver as it was practically beneficial to the receiver" [Smith, 1968, 23]. William Booth. the founder of the Salvation Army, believed that "the bad can be sanctified, the secular made sacred - the devil's tunes, the brewer's money, the trade in the market-place" [Watson, 1964, 96].
Zelizer's [1994] work on the philosophy of money suggested that very little is known about the significance of money in a social sense. She studied transformations in the "earrnarking'' of money in the United States between the 1870s and the 1930s, and observed that even though money was thought of as "the prototype of an instrumental, calculating approach" , as neutral, rational, and impersonal [Zelizer, 1994, 6, 7], it was used in an increasingly elaborate way as a social instrument [Zelizer, 1994, 205]. This notion challenged classical thinking about money, and replaced taken-for-granted assumptions about money with an alternative money model. It is summarized in Appendix 1.2, "Zelizer's Traditional and Alternative Money Models".
According to the "alternative" model, while money is physically indistinguishable, in a variety of social interactions, it takes on many different forms . Thus gifts to a religious organization could be seen as an antidote to the common perception that money was essentially corrupt. Churches could "sacredize" money by using it for purposes consistent with their central belief structure40. By this means money would be transformed. Bloom [1995, 6-7] took up this theme in his book, when he suggested that money had a "spiritual dimension", and needed to flow freely in order to be "healthy money". In advocating the practice of tithing41, he attempted to capture the possibility of getting money "dancing for God" [Bloom, 1995, 172]. Jeavons [1994,
38 Simmel [1978, 432 - 433], in his extensive essay on money (first published in 1900), described it as being neutral and having a "lack of character". Unlike Zelizer's work, his emphasis was that money bore no relation to the things for which it was exchanged, and that it had "no biased relationship to any subjective economic element" [Simmel, 1978,436]. 39 These included, for example, welfare payments (which established or maintained inequality), the payment of bribes (which were attempts to control others), fees, gifts or wedding presents (which marked rites of passage) [Zelizer, 1994, 26]. 40 Durkheim held that sacredness did not reside "in the object" but "in the mind of the beholder", i.e. it could be attributed to almost anything [Demerath and Hammond, 1969,24]. 41 Tithing was defined as "the habit of regularly giving away some of our income, no matter how small or large that income is". [Bloom, 1995, 173 - 174]. Chapter 1 The programme Page 19
157 - 179] went further, and maintained that it was not merely the use to which money was put, but the way it was raised by an organization that determined whether it was in keeping with the sacred purposes for which it was intended42.
A similar dynamic, or resolution of the sacred/secular tension, could be applied to the use of accounting within a reUgious/charitable organization. This would be a means of dealing with the tension between the sacred and the secular, to transform secular accounting and management practices by making them part of the sacred purpose of the church43. Once again, Jeavons [1994, 215 - 216] looked past the activity itself to the way it was conducted. Accounting, to be used in a manner consistent with the sacred purposes of a reUgious/charitable organization would need to be part of a Christian organizational culture, with a focus on integrity44. There may not be a simple dichotomy, however [Jeavons, 1998, 94], but rather a "spectrum of possibilities" for the way religious beliefs affect action. An organization might resolve a "sacred" or "secular" tension by developing its own response, somewhere along a continuum of possible action. That resolution would depend on that organization's own unique history, culture, and sense of mission and purpose. This notion is especially relevant when considering the extent to which a reUgious/charitable organization embraced/adopted/tolerated/shunned accounting and business practices.
If all the world's a stage ...
Applying a theatrical metaphor to the study of an organization is one way of assisting in the search for an understanding of "rich and deep" organizational life [Morgan et al,
42 Jeavons [1994, 165 - 177] noted that there might be temptations to engage in deception when fundraising, but urged the highest possible standards when going to the public for funds. Fundraising methods were as important as the way the funds were used [Jeavons, 1994, 214]. 43 Mother Theresa, for example, was described by Stuart Wilde [Bloom, 1995, 51] as being "a multi- million dollar business". 44 Jeavons [1994, 211 - 218] identified ten concerns with which a Christian service organization must grapple. These were developing a focus on: vocation, witness as well as service, means as well as ends, servanthood, stewardship, enagement in ministry, caring, creating and sustaining a Christian organizational culture, integrity, and leadership. While he did not consider accounting specifically, it fits within the broad categories of management, stewardship and integrity, and necessitates the same stringent standards. Chapter 1 The programme Page 20
1983; Morgan, 1986; Goffinan, 1959; Lovelock, 1991; Dandridge, 1983]. As organizational symbols are identified and their significance understood, the researcher is carried "beneath the objective surface of organizational life, into the underlying value structure and feelings inherently there" [Dandridge, 1983, 71]. While not a theory itself, this identification of the importance of symboUsm in organizational life is consistent with institutional theory, which recognizes that much organizational behaviour occurs as a result of conformity to institutionalized practices. By being highly self-aware, and adopting legitimizing behaviour, organizational players attempt to stage-manage their image and actions, not necessarily with ulterior motives. This symboUc aspect of organizational and management behaviour is often left unconsidered by traditional research in accounting [Morgan et al, 1983, 3].
Viewing organizations as theatre is a way of explaining and making sense of the intricacies of organizational life, and of exposing the hidden meanings behind organizational behaviour. Goffinan [1959, 187 - 192] outlined the concept of "impression management", whereby three mechanisms ensured the maintenance of organizational legitimacy. Dramaturgical loyalty required that team-mates must demonstrate group soUdarity, acting as though they had accepted the moral obUgations expected in the organization45. Dramaturgical discipline, similarly, imposed on team members the necessity of disciplining themselves to maintain the performance the organization required [Goffinan, 1959, 190], while dramaturgical circumspection referred to the loyalty and discipline required of team members in order to sustain the show being produced [Goffinan, 1959, 192]. Lovelock [1991, 63] described these techniques of "impression management" as being for the purpose of "creating a beUevable show for the audience's approval", and minimizing any untimely "scenes".
An organization can be conceived of as an "image machine", interested in decoupling the "formal image structure that the organization presents to its environment from its technical structure" [Covaleski and Dirsmith, 1983, 333]. This is consistent with the
45 Team loyalty in an organization can be ensured by changing the "audience" periodically, e.g. by moving ministers routinely, to avoid the formation of close ties with clients [Goffinan, 1959, 187]. Chapter 1 The programme Page 21
underlying philosophy of institutional theory, that an organization is concerned with mamtaining its image in order to enhance its legitimacy, and that practice is often "decoupled" from performance.
But of what relevance is this metaphor to accounting, as it is practised in an organization? ColviUe's [1989, 89 - 90] study of budgeting within a PoUce Authority proposed that "the part played by accounting only exists in terms of the whole play", i.e. in order to understand the way accounting was used, it was necessary to understand more than accounting. If, as institutional theory suggests, organizational players are very much aware of the organization's image and the perception its external constituents have of it, then the metaphor of organization as theatre is not only a relevant one, but is capable of adding considerable interest and understanding to the study of accounting. Accounting has a high profile in image projection, and is a means by which the legitimacy of an organization is established and maintained. If the notion is also accepted, from institutional theory, that an organization does not stand alone, but is deeply embedded within and influenced by its social context, then an accounting system is doubly embedded,firstly in the organization, and then, as part of that organization, within society. A study of accounting in any organization, according to this framework, wiU require attention to the multiple worlds in which it functions. It will not be one-dimensional, but a story with intricate and fascinating layers, as personaUties and practices are interwoven with circumstances and expectations.
The programme.
It has been suggested that over time, organizations become institutionalized, i.e. they incorporate institutional practices in order to gain or maintain legitimacy, and hence survival. Organizational control, therefore, is devoted not simply to technical performance, but to ritual and conformity with established institutional practices. The role of an accounting system within such an organization is not simply a technical one, but is much more complex, and constantly evolving, as an organization, with its own embedded institutional practices, interacts reflexively with its institutional environment. Chapter 1 The programme Page 22
This study will focus on organizational response to institutional pressures, not taking acceptance as a given, but observing the way the organization (in total, or its members as individuals) constructs its own expectations and uses of accounting. The notion of a sacred/secular dichotomy will shed fight on the process by which this construction occurs by considering
what is expected of accounting in a resource dependent nonprofit religious organization in times of change and uncertainty?
By using this approach, this thesis will make a unique contribution particularly to the existing Uterature in the areas of institutional theory and accounting in reUgious organizations.
While it has been recognized that accounting is growing as an institutional practice, the means by which that prevalence is growing, and its effects on individual organizations, have been largely neglected areas of academic interest. This study, by focusing on the appUcation of institutionalized accounting practices within one large reUgious organization, opens up the internal processes by which such practices are introduced and absorbed. It provides a rare opportunity to observe the dramatic impact of accounting as it is actuaUy practised at a time of significant change and upheaval. In a departure from most other institutional Uterature, this study treats institutional influences as moving from "out there" to "in here" in a profoundly individual way, challenging assumptions about institutionalized practices and their automatic adoption within organizational fields.
One of the factors which influences the manner in which a reUgious organization absorbs institutional practices must surely be its own unique system of reUgious behefs and practices. One would expect, given the work of Laughlin [1988] and Booth [1993] on sacred/secular dichotomies, that there would be some resistance to the wholehearted adoption of institutionalized "secular" accounting practices. This study links institutional theory and the sacred/secular divide in a way which has not been attempted Chapter 1 The programme Page 23
before, and exposes the manner in which one reUgious organization interprets its own beUef system in the context of increasingly powerful institutional expectations.
This thesis consists of nine more chapters. Chapter 2 details the research process, as the act of going backstage, and gaining an in-depth view of the organization, its players, and the way it functions. Chapter 3 explains in more detail the institutional lens through which the action of the play is to be viewed. It details the development of institutional theory, its relevance to this study, and breaks the research question down into three inter-related themes. Chapter 4 explores the historical contextual aspects of the case study, including attitudes to accounting and accountabiUty. FoUowing this theme, Chapters 5 and 6 describe the AustraUan setting, including some external pressures and an introduction to the current structure of The Salvation Army Australia Eastern Territory. Chapters 7, 8 and 9 detail the Army's performance by telling the story of how it produces itsfinancial statements, how its budgeting system functions, and how it attempts to ooperate in a businesslike manner. These chapters reveal the internal struggles which have ensued as the organization has attempted to come to terms with developing and changing institutional practices. Chapter 10 concludes the thesis by drawing together the main observations of the study, with suggestions for future research.
Any theatrical production, to create a lasting and significant impression, reUes not only on its main plot, but on a number of sub plots which weave their way through the drama, providing a backdrop, adding depth and significance, and aiding in the development of a central theme. Similarly, a study of accounting as it is practised in a reUgious/charitable organization, in order to portray the depth and richness of the organization's life and the context in which it is embedded, wiU not be a simple, one- dimensional study with a facile plot. As curtain after curtain is drawn back, accounting wiU be revealed as a fascinating, sociaUy constructed set of behaviours, not straightforward, not merely technical, not dependent simply on the information needs of the organizational actors, but on the influence of a multitude of scripts, both external and internal to the organization, and played out by a variety of actors, before an audience, the society in which it performs. CHAPTER 2. Backstage: researching behind the scenes.
CUSINS: You know, I do not admit that I am imposing on Barbara. I am quite genuinely interested in the views of the Salvation Army. The fact is, I am a sort of coUector of reUgions; and the curious thing is that Ifind I can beUeve them aU. By the way, have you any reUgion? UNDERSHAFT:Yes. CUSINS: Anything out of the common? UNDERSHAFT: Only that there are two things necessary to Salvation. CUSINS: [disappointed, but polite] Ah, the Church Catechism ... UNDERSHAFT:The two things are - CUSINS: Baptism and - UNDERSHAFT: No. Money and gunpowder. CUSINS: [surprised, but interested] That is the general opinion of our governing classes. The novelty is in hearing any man confess it. UNDERSHAFT. Just so. CUSINS: Excuse me: is there any place in your reUgion for honor, justice, truth, love, mercy and so forth? UNDERSHAFT: Yes: they are the graces and luxuries of a rich, strong, and safe life. CUSINS: Suppose one is forced to choose between them and money or gunpowder? UNDERSHAFT: Choose money and gunpowder; for without enough of both you cannot afford the others. CUSINS: That is your reUgion? UNDERSHAFT: Yes. [Shaw, 1945, 86 - 87]
The acknowledgment that accounting practices are embedded in organizational culture, and that the organization itself is embedded in an external environment, makes a simple, one-dimensional study of organizational behaviour inconceivable. Organizational performance, to be understood in aU its complexity and depth, cannot be taken at face value. It needs to be studied back-stage. The players need to be conversed with and observed, their interactions and relationships noted, the "props" of their organization investigated, their scripts analyzed, and their rehearsals viewed, in order to appreciate and understand their performance. This chapter sets out to provide this kind of background to this study, by considering the nature of quahtative research, the Chapter 2 Going backstage Page 25
relevance of case studies in accounting, the unique contribution of ethnography, practical issues (such as choosing a research site, gaining access and gathering data), developing and refining theory, analyzing data, and constructing an ethnographic text.
Why qualitative research?
QuaUtative research acknowledges the contextual nature of inquiry, and the desire "to do justice to that complexity, to respect it in its own right" [Glesne and Peshkin, 1992. 7]. It is therefore an ideal means by which research into an issue such as "what is expected of accounting in a resource dependent nonprofit reUgious/charitable organization in times of change and uncertainty" could be conducted. It is a tradition within social science that depends on observing people in their own environment, and interacting with them "in their own language, on their own terms" [Kirk and Miller, 1986, 9]. Its major components are data from various sources, including interviews and observations, analysis or interpretation of that data, and written and verbal reports [Strauss and Corbin, 1990, 20].
Distinguished from quantitative research, with its rehance on the power of numbers "to persuade and prompt action", the aim of quaUtative research is a "quest for meaning and significance" [MarshaU et al, 1991, 74]. QuaUtative and quantitative research are not necessarily mutuaUy exclusive46, yet while they may seem complementary, underlying both of these research traditions are different philosophical assumptions about what constitutes reaUty and knowledge, and therefore what the purpose of inquiry is.
Undertaking a quaUtative research project depends on the conviction of the researcher,
46 It has been suggested that field studies provide the input for quantitative studies by aiding in the development of hypotheses [Chapman, 1997, 203]. It has also been proposed that quantitative projects produce results which can be "ambiguous and misleading" if they are not supplemented with qualitative data [Weinholtz et al, 1995, 388]. Chapter 2 Going backstage Page 26
the nature of the problem to be investigated, the desire to gain a "fresh slant" on things, and the commitment to give "intricate details of phenomena that are difficult to convey with quantitative methods" [Strauss and Corbin, 1990, 19].
A quaUtative researcher is usually a person who does not like quantitative methods, who has a high tolerance for ambiguity, and who is prepared to accept the time demands of quaUtative research. In quaUtative research, there wiU be a continual interaction between the dimensions of reading, reflection, and the conduct of the research itself [Glesne and Peshkin, 1992, xhTJ.
There are many people who do not find numbers inherently intriguing or convincing, in their bald form. I confess to being one of those people. Even from an accounting point of view, I have always been much more interested in the "human" side of numbers: what lies behind them, how they were constructed, who produces them, who uses them, and who is affected by them. With this personal preference, qualitative research was an attractive option for me when undertaking a research project. I wanted to study accounting, not necessarily for the sake of technique, for its numbers and calculations, but rather to set it in its context, and to attempt to understand the complex interrelationships between an accounting system and the people who designed it, created it, and used it.
There are a large variety of approaches to field research and it is the nature of the phenomena being investigated and the objectives of the study which must determine "what approaches are taken and what materials are gathered by what methods"4 [Scott, 1965, 265]. QuaUtative research encompasses grounded theory, ethnography, phenomenological studies, life histories, narrative inquiry, naturalistic inquiry, ethnomethodology, case study research, and conversational analysis [Strauss and
47 Qualitative research implies an emphasis on "processes and meanings that are not rigorously examined, or measured (if measured at all), in terms of quantity, amount, intensity, or frequency" [Denzin and Lincoln, 1994, 4]. The personal inclination of the researcher has already been identified as a factor, in terms of the topic determined to be worthy of study, the underlying belief system which leads to such a determination, and the particular qualitative method which is chosen as a vehicle by which to pursue the research question. Chapter 2 Going backstage Page 2 7
Corbin, 1990, 21; Schwandt, 1997, 129]. This study most closely approaches an ethnography, whose distinguishing features are discussed later in this chapter.
In spite of these general comments about the nature of quaUtative research, there are many definitions of what it actuaUy is. It has been described as involving "watching people in their own territory ... interacting with them in their own language, on their own terms" [Kirk and MiUer, 1986, 9]. Its inteUectual roots go back well over a hundred years to the birth of social science itself [Tesch, 1990, 9]. It is currently identified as a successful and popular form of contemporary social research in the fields of sociology, cultural anthropology, poUtical science, and other disciplines, including education, nursing, and social work [Atkinson, 1995, 117]. Its focus is on "naturalistic", "ethnographic", and "participatory" forms of research [Kirk and MiUer, 1986, 9].
QuaUtative researchers emphasize the "value-laden nature of inquiry", and seek answers to questions that stress "how social experience is created and given meaning", in contrast to quantitative research, which emphasizes "measurement and analysis of causal relationships between variables", supposedly within a "value-free framework" [Denzin and Lincoln, 1994, 4]48. QuaUtative research is the most appropriate vehicle through which a researcher can remain open to reflexivity in the research process , and to the ambiguity50 which is a necessary part of such a process.
The reflexivity of this process provided constant surprises and challenges at the same time. In the midst of meeting people, and struggling to absorb and understand the
48 Where quantitative research relies on the "power of numbers to persuade and prompt action" [Marshall et al, 1991, 74], qualitative research uses qualitative data, i.e. "any information the researcher gathers that is not expressed in numbers" [Tesch, 1990, 55]. This data typically includes interviews, observations, meetings andfield diaries. 49 The emergent nature of qualitative research means that it cannot be standardized, and the researcher must remain open to the possibility of developing and changing interpretations during the research process [Glesne and Peshkin, 1992, 6]. 50 A qualitative researcher requires a high tolerance for ambiguity, since too early closure, in terms of interpreting data, will limit the range of interpretations possible. Chapter 2 Going backstage Page 28
culture of the organization, I had to try to remain open to new ideas and new interpretations of actions. This meant struggling against both forming opinions prematurely, and taking one person's viewpoint as necessarily true for everyone in the organization.
Case studies in accounting.
In recent years, there has been a dramatic increase in case-studies in accounting and management Uterature [Parker and Roffey, 1997, 242; Humphrey and Scapens, 1996a, 87], and it has been suggested that more case studies in accounting are needed, in order to capture "the dynamic and contextual complexity of "Uving" organizations" [Feeney [1997, 506]. Greater attention needs to be given to the actual practices of accounting in their contextual setting, in order to redress the "rather limited" attention given to these processes [Humphrey and Scapens, 1996a, 90].
Emphases of case studies differ, however51. Dent [1991, 707] caUed upon researchers to produce more "empiricaUy grounded research" which displayed "the multi-faceted interplay of accounting with organizations' cultural and technical systems". Hopper and PoweU [1985, 447] caUed for greater use of interpretive research methods, in order to understand better how accounting meanings are "sociaUy generated and sustained", and to allow research questions to be generated out of the actual case study, instead of being imposed upon it. Mouck [1998, 58] suggested that "quaUtative empirical studies" were important because an understanding of the way institutions52 evolve could not be "abstractedly deducted from some set of imagined universal laws". An institutionally informed case study, according to Ahmed [1992, 165], demonstrates a concern with "actual context" and "practical knowledge" by displaying the relevance of situating
51 Some researchers see case studies as paving the way for elaborate hypothesis testing, others are committed to developing "theoretical explanations" of accounting practices, while another view is that case studies help us to "obtain a better understanding of accounting practice and of the role and functioning of accounting in organizations" [Humphrey and Scapens, 1996a, 86 - 87]. 52 This was when using an institutional approach. Chapter 2 Going backstage Page 29
management accounting practices in their historic context [Ahmed, 1992, 191].
One of the most significant areas in which various accounting case studies differ is in the way they incorporate (or fail to incorporate) theory. The role of theory in case studies is by no means clear and unambiguous, depending on the researcher's view of what constitutes inquiry, and the relationship between theory and data. Humphrey and Scapens [1996a, 98 - 100] suggested that theories are "rhetorical devices for both interpreting case studies and convincing the research community as to the vaUdity of the case findings and interpretations", and advocated the use of multiple theories. Their argument was that theory should both inform, and be developed by, observation.
LleweUyn's [1996] response to this argument was that researchers needed to acquaint themselves with the world of practice. It would not be untU the theoretical frameworks of researchers "engage with the pre-understandings of the researched community" that a hermeneutic circle would be formed, i.e. that accounting theories would display "practical adequacy in the world" [LleweUyn, 1996, 115]. This was essential if there was to be any possibiUty of adjudicating between the claims of various theories. Accounting, she proposed, ought to be freed to be a more "enabling" discourse, and in order to achieve this, there ought to be a strong linkage between theory and practice [LleweUyn, 1996, 116].
Interpreting Humphrey's and Scapens' [1996a] suggestions as theoretical "promiscuity", and misleading, Young and Preston [1996] maintained that case study research in accounting had achieved a great deal, including a significant impact on accounting research methodology. They suggested that the reason there were so few explanatory case studies (an issue raised by Humphrey and Scapens) was twofold: there were structural barriers to entry within the academic accounting Uterature, and there were very few scholarly, explanatory accounting case studies. They contrasted the "inherently messy, contradictory and unwieldy" nature of case study research with the "technique- laden, highly structured and devoid of interpretation" case studies which had been Chapter 2 Going backstage Page 30
presented in the accounting research Uterature [Young and Preston, 1996, 110].
These views of accounting case study research suggest that there ought to be a stronger relationship between the development of theory and the data observed in the course of fieldwork. Jonsson [1998, 411] expressed similar ideas, suggesting that management accounting research had been "out of focus". Several reasons were given for this lack of engagement with managerial work. Empirical studies, he suggested, had been limited to "quick survey studies whichfit into the pubhcation requirements of the main stream", resulting in a lack of input from empirics to theories. Further, in his opinion, standard management accounting technologies were irrelevant to real world settings, and the kinds of studies which were limited to cross-sectional studies and statistical inferences were severely limited [Jonsson, 1998, 411]. Advocating an ethnomethodological approach, his aim was to focus on social phenomena, and to link management accounting studies more closely with actual managerial work, particularly by studying the way participants communicated through conversation.
This is one possible variant of quaUtative research. Ethnography is another, which encapsulates the possibiUty of relating theory and data in a reflexive manner. It holds promise for meaningful interpretive accounting research, where there is an engagement between theory and the data the researcher observes.
The unique contribution of ethnography.
An ethnography is "a description of the folk"53, and is both a process (i.e. a research technique) and a product [Boyle, 1994, 161]. Central to ethnography is the idea of extended participant observation [Sanday, 1979, 527], which involves an attempt, on the part of a researcher, to understand what it is like for people in a particular situation.
"Ethno" = folk and "graphy" = description. Chapter 2 Going backstage Page 31
Supplemented by other data coUection tools, such as interviewing and life histories [Glesne and Peshkin, 1992, 10], ethnography demands "complete commitment to the task of understanding" [Sanday, 1979, 527]. From an anthropological viewpoint, which is where ethnography originated, it can be conceived of as
... a written description of a people that focuses on selected aspects of how they lead their routine, remarkable, andritual Uves with each other in their environment, and of the beUefs and customs that comprise their common sense about their world [Muecke, 1994, 189 - 190].
The term "fieldwork" describes the way ethnography is undertaken. Reasons for choosing an ethnographic form of research include a recognition of the need for an empirical approach, the need to remain open to the unexpected, and a concern for grounding observations "in thefield". Th e concern is with how the "cultural whole" is depicted [Baszanger and Dodier, 1997, 10, 11]. Ethnography is "by no means a coherent, unified and monoUthic research genre" [Jonsson and Macintosh, 1997, 371]. It is instead a research tradition with several different aims and focuses54. TraditionaUy, ethnography has been based on the process (participant observation) of ethnographic naturaUsm, and the product of "ethnographic reaUsm" [Schwandt, 1997, 42].
Critical ethnography chaUenges this notion, and enables ethnographers to go beyond the production of narratives about the "natives", and to "include insights into the way these subjectivities come to be constituted" [Jonsson and Macintosh, 1997, 383]. There is thus wide scope within the ethnographic style for different theoretical paradigms. While there are different types of ethnographies [Muecke, 1994; Jonsson and Macintosh,
1997], they aU have certain hallmark characteristics.
54 Many different types of ethnographies can be identified, including classical, systematic, interpretive and critical [Muecke, 1994, 191 - 194], ethnohistorical, holistic, particularist, or cross-sectional. Chapter 2 Going backstage Page 32
First, ethnographies are hoUstic and contextual [Boyle, 1994, 162]. Describing behaviour is not sufficient for the ethnographer, who wants to understand the context of that behaviour55. With this goal, fieldwork is essential, because it is through fieldwork that the ethnographer gains the understanding which is the object of the study [Schwandt, 1997, 44]. Fieldwork must involve a concerted effort to work with people over a long period of time56, in order to come to a "rounded" understanding of the different interrelationships among the systems and subsystems within a particular social context [Boyle, 1994, 163]. A survey alone could not possibly lead to this type of understanding. Empathy is a natural and necessary part of this process [Baszanger and Dodier, 1997, 12].
Techniques for the analysis of the data gathered in this way are not as important as the nature of the data itself. Whether the data are treated in a quantitative manner, or whether they are analyzed manuaUy or by computer, is immaterial. What matters is whether that data, and its interpretation, presents a holistic picture of the social group being studied.
Secondly, ethnographies involve a reflexive process, since the ethnographer becomes part of the world that is being studied, and, therefore, cannot avoid being affected by it. The ethnographer is not just an academic researcher, not just a "remote, objective towering figure of authority deigning to move away from professorial grandeur in the academy briefly to rub shoulders with the grubby inhabitants of the world of factories and commerce" [Watson, 1995, 309]. Finding the "right distance" between him/herself and the group being studied is a dilemma for the ethnographer [Baszanger and Dodier,
1997, 12], and involves conscious work.
55 This means not just the actual physical locality and environment in which people live and relate, but rather the complex circumstances behind those lives and relationships. 56 Fieldwork by nature involves a much more in-depth study, only possible over a longer period of time. Chapter 2 Going backstage Page 33
Thirdly, whatever that "right distance" is, the reflexivity inherent in ethnography produces a combination of the "insider" and "outsider" view, a dimension which "rounds out the ethnographic picture" [Boyle, 1994, 166]. This dimension involves the emic (the insider's view) and etic (the outsider's view) perspectives. These are important, as together they assist the researcher in developing a conceptual picture and interpretation of what is going on [Boyle, 1994, 166]. The role of theory in this reflexive process may vary, depending on the researcher's particular emphasis.
Fourthly, ethnography is a product57. While not necessarily conforming exactly to anthropological traditions, it is enriched by anthropological notions of culture and data coUection and analysis.
An ethnography is therefore a study of human activities with an empirical approach, open to observation, and grounded in a specific context [Baszanger and Dodier, 1997, 19]. It incorporates a strong emphasis on exploring the nature of particular social phenomena, rather than setting out to test hypotheses about them; it Ulustrates a tendency to work primarily with unstructured data; it investigates a smaU number of cases, usuaUy one, in detail; and in the analysis of ethnographic data, the emphasis is on interpretations of meanings, in the form of verbal descriptions, with quantification and statistical analysis playing "a subordinate role at most" [Atkinson and Hammersley, 1994, 248]. Differences between types of ethnographies reflect differences in theoretical or epistemological positions [Atkinson and Hammersley, 1994, 257].
Choosing a research site.
CO QuaUtative research both requires and provides great flexibiUty in approach , and a
57 The ethnographic product is the descriptive and interpretive text which is produced as a result of the ethnographic process. 58 In undertaking qualitative research, a researcher needs a question or questions that will give Chapter 2 Going backstage Page 34
huge investment of time. By the time a researcher has gained access to an organization and has designed a project, a considerable amount of time has already been invested in the research, and from that point on, it would be difficult to abandon the activity. Making a wise choice of a research site is therefore vitally important.
The organization chosen is capable of having a strong influence on the nature of the quaUtative research undertaken, so the purpose of that research needs to be considered59. QuaUtative research has the potential not only to generate "new knowledge", but also to "inform criticaUy pubUc poUcies, existent social movements, and daily community life" [Fine and Weis, 1996, 264 - 265]. A research site ought to be chosen which offers scope not only for the coUection of rich data, but also flexibiUty about a research topic, and the potential at least to think radicaUy [Schwandt, 1997, xxi] about what is going on within the chosen organization.
Two more factors which strongly influence the choice of site are the area of inquiry which the researcher initiaUy finds appealing, and the possibiUty of gaining access. The concepts which inform early impressions and opinions of what constitutes a potential research area wiU probably emanate from previous research, or from current theoretical reading about issues which are thought to be significant. Alternatively, a research site might be chosen because of its very ordinariness, not because it is unusual or significant, but because it is typical, or undistinguished [Ragin, 1994, 85, 87]. While ease of access wfll probably not be the only consideration in choosing a research site, since it could be
"flexibility and freedom to explore a phenomenon in depth" [Strauss and Corbin, 1990, 37]. The flexibility is therefore in terms of setting the research agenda and developing theory, but it is also in the actual conduct of the research, since the "laboratory" of the qualitative researcher is everyday life, i.e., it cannot be "started, stopped, manipulated, or washed down the sink" [Morse, 1994a, 1]. 59 Some reasons for conducting qualitative research, outlined by Ragin [1994, 83 - 84] include: giving voice, i.e. representing groups which are not usually covered by other research approaches; interpreting the historical or cultural significance of practices or activities, i.e. to assist in the understanding of these aspects, which have sometimes been neglected in more traditional forms of research; to advance theory, i.e. to develop, during the course of the research, concepts and ideas which are identified as significant. Chapter 2 Going backstage Page 35
a chaUenge, having a contact within a particular organization could be a deciding factor.
My initial interest was in the area of budgeting in a church. I had been attracted by the notion of the sacred/secular dilemma highlighted in Chapter 1. Interested in fieldwork, and committed to qualitative research, initially I gave a great deal of thought to the various possibilities available to me. My supervisor suggested The Salvation Army as a potential research site which possessed a number of interesting aspects, including the Army's interesting history and culture, the fact that it was a religious, nonprofit organization, involved in charitable work, and also the fact that it had a high profile within the Australian community. It became one of several possibilities on my list of potential sites.
During a PhD meeting in our department, I made the bold (and naive) statement that I wanted to choose an organization as a research site and gain access to it within a month! I mentioned The Salvation Army as one of several possibilities I was considering, and following this meeting, a colleague informed me that he knew somebody who worked in The Salvation Army, and that he would be prepared to introduce me to him. From this one "second-hand" contact, the process of gaining access began. I was about to throw my lot in with "the Army".
Practical issues.
Gaining access.
Why would an organization grant access to a researcher? Why would any organization aUow an academic (or anybody else) to observe their innermost secrets, their ways of doing things, their mistakes, and their problems? Scott [1965, 275]60 suggested that reasons varied widely, from altruism to self-interest. It would be expected that there would be at least some resistance to an approach for the kind of access required in order to conduct quaUtative research, simply because very few organizations would be willing to be completely open.
60 Their willingness to participate, according to Scott [1965], depended on a number of factors, including their image, their confidence in their role and place in society, their history and culture, and their openness to ideas or to change. Chapter 2 Going backstage Page 36
The issue for a researcher when faced with the need to gain access is, how is this to be achieved with minimum inconvenience and maximum benefit? It needs to be done ethicaUy correctly [Glesne and Peshkin, 1992, 111 - 112], it needs to be done wisely, and it needs to be done in a way which wiU ensure, or at least open up the possibiUty of, flexibiUty in the matter of the research question.
Contacts within the organization will obviously be of great assistance61, but even if they are not in a position to grant access themselves, they may at the very least be able to advise the correct protocol for requesting access, and the people of whom such a request would need to be made. It is essential to identify the "gatekeepers" of an organization, bearing in mind that it could be risky to start anywhere but at the top [Glesne and Peshkin, 1992, 35]. Once the gate to access has been shut at a lower level, it is then difficult to have it re-opened later.
Negotiating an access agreement is crucial to the success of the project. There wiU be many issues arising during the course of a quaUtative research project which may be unanticipated, and which, if the ground rules for the relationship have not been wisely laid down, could cause the study to founder. It needs to be made quite clear, from the outset, that quaUtative research isflexible, that its practical value to the organization may not be as obvious as they would hope, and that any obhgations which are agreed to must be agreed to within these contexts:
In general, the researcher should realize that most organizational officials wiU have at best a vague notion of what social researchers do or how they do it, and many officials wiU be inclined to overestimate the practical value of the research results. Researchers must attempt to set realistic limits on these expectations [Scott, 1965, 276].
61 Dent's longitudinal study of railway culture, for example, took place over a period offive years . Access was achieved through "various channels and contacts" [Dent, 1991, 711]. Chapter 2 Going backstage Page 37
A powerful motivator for organizations in granting access for a particular study is the possibiUty that they might gain some benefit from it [Scott, 1965, 275]. Expectations and obUgations need to be itemized as carefuUy as possible at the time when access is being negotiated if ethical behaviour is to be achieved throughout the research project. There wiU undoubtedly be various ethical dttemmas that a researcher wiU face during this period of negotiation and later during the access period itself. In the stress of negotiating access, it would be easy to avoid confrontation or commitment, only to find later that unresolved issues might hinder or even jeopardize the continuation of the research project.
It must be understood that the relationship between the researcher and organizational members wiU change during the course of the research process. This is inevitable. Initially, when access is being arranged, the researcher and organizational gatekeepers have a one-sided relationship based on their situation rather than any knowledge they have of each other. In most cases, they reaUy do not know each other at aU. The researcher, in spite of any background knowledge of the organization, knows about it as an outsider. The organizational members who are negotiating the access agreement, unless they have been academics themselves, wiU have, at best, a fuzzy idea of the research process. The nearest experience they wiU probably have had wiU be through consultancies which may have been conducted in the organization.
Initially at least, in the desire to gain access, the hopeful researcher may be eager to please, keen to convince, and willing to compromise. The gatekeepers, in contrast, are in a strong bargaining position. They are able to make demands, however onerous. Once access is achieved, however, this relationship may shift. After a period of time, it may be that the researcher gains knowledge that those gatekeepers do not have, that the organization becomes an exploiter of the researcher's time and energy, or that the researcher attempts to exploit the organization. Depending on the level of involvement, the researcher may be tempted to intervene in organizational poUcy, or to speak up for some member whose case has perhaps not been heard, or has been misunderstood. The Chapter 2 Going backstage Page 38
role of the researcher, once access has been gained, can be ambiguous. Is the researcher simply an observer, or an exploiter, an intervener, a reformer, an advocate, an advisor, or afriend [Glesn e and Peshkin, 1992, 111-112]?
While I had read about negotiating access agreements, and had listened to stories others had told, nothing could ever have prepared me for the experience of gaining access, conducting the research, meeting people and developing relationships with them, fulfilling the access agreement in all its detail, coping with the physical and emotional demands of the research, handling the excitement of getting to know how the organization "ticked", and eventually, closing off the "official" relationship.
Negotiating access.
My colleague's contact in the Army was Henry Johnson62. Before I contacted him, I did some reading, so that I would not appear to be ignorant about what was going on in the Army. I noted the huge budget the Army had for its Eastern and Southern territories, and reflected on the Army's contribution to Australian society through its community social work, the implications of government funding, accountability, and budget constraints. I also thought about the sort of access I believed would be desirable: reading of reports, attending meetings, interviewing people, visiting local branches and service points. Henry offered to speak to his Divisional Commander on my behalf, and said that he would then contact me with his response. Perhaps I could send a letter of introduction from my supervisor, which he would forward on to the Divisional Commander. At this point, I felt quite relaxed about the project. I had not invested much time in it, and if I failed to gain the kind of access I was seeking, then I had other possible research sites.
When I rang Henry, he told me that the Divisional Commander wanted me to write a letter, outlining what my research would involve. At this stage, based on the reading I had done, I was forming a clearer picture of my research interest, that of the notion of money and mission, and how the budget contributed towards fulfilling the mission. The Divisional Commander was near the top of the hierarchy, but not quite at the very top. If he closed the gate on me, I realized I had no chance of getting in later.
The construction of a suitable letter62, was a time consuming exercise. It had to be
Like all other names of Salvation Army personnel in this thesis, this is a pseudonym. A copy of the letter is included in Appendix 2.1: "First letter to Divisional Commander". Chapter 2 Going backstage Page 39
exactly right. What I wanted at this point was for the door to be opened just enough for me to gain an interview. As I waited for a response to my letter, I did more reading on the Army, and became more and more convinced it could be a rich and fascinating study site. Eventually the Divisional Commander's secretary telephoned me and we set an appointment time. On the eve of the interview, I received an unexpected call from the Army's Territorial Secretary for Business Administration in Sydney. The Divisional Commander had forwarded my letter on to him, and he and the Territorial Financial Secretary were interested in meeting with me the next day, in order to discuss my research proposal.
The Divisional Commander was obviously not in a position to grant access rights, so this changed the tenor of my interview with him, and opened up the possibility of moving up the hierarchy with my request more rapidly than I had anticipated. Our interview was friendly and interesting, and helped me to prepare myself for the important interview later in the day.
I felt apprehensive as I approached The Salvation Army Australia Eastern Territory Headquarters (THQ) at Elizabeth Street, Sydney, for thefirst time. After being issued with a visitor's badge, I was ushered into the l(fh floor board room by the Assistant Territorial Financial Secretary. The walls were decorated with pictures from the Army's history, and we conversed amicably about these, and the Army's organizational structure, until the Secretary for Business Administration arrived, and the three of us settled down to discuss the issue.
The Secretary for Business Administration was very much in charge. He seemed slightly nervous about the project, giving the imperfections of their budgeting system as his reason. It wasn't "that great", according to him, and therefore they may be embarrassed about what I might find. Because of this, he was concerned especially about the issue of confidentiality, that no damage would be done to the Army through my study. He stressed their dependence on the financial contributions and goodwill of the public. The issue of the timeframe was also of interest to him. I suggested that I would spend two years within the organization, interviewing people and collecting data, and then write up the thesis in the following year.
He asked me to submit a plan of action, indicating the time-frame, my goals, how it would be of benefit to them, and the number of people at each level that I would anticipate interviewing. He would then submit the proposal to the Army's Territorial Finance Council, the Territory's topfinancial policy-making body. I said that I would be happy to provide such a plan, but pointed out that it was difficult, with this type of research, to specify in advance exactly what direction the research might take. The Assistant Territorial Financial Secretary promised me a copy of their organizational structure and a listing of their personnel, in order for me to prepare my proposal. Chapter 2 Going backstage Page 40
The use of the name "The Salvation Army" was of continuing concern to the Secretary for Business Administration. He asked who would read the thesis, and whether it was to be published. We talked about dissertation data bases, and the accessibility of theses. The confidentiality of interviews was also of concern to him. He wanted privacy for the interviewees, even if it meant (and I asked him this particularly) privacy from the hierarchy. He acknowledged that sometimes people would want to be assured of this before they offered any response to questions.
He was concerned that the Army should get some benefit from the study, and so made a request that I should present my "findings" at a conference for executive officers, which is held annually. He stressed that he wanted a written report, but did not want it to be just a written report which gathered dust on a shelf, but one which was discussed and which had an impact on their practice. By the time the meeting came to an end, we had agreed on a course of action. I would submit a more detailed proposal within the next few weeks, which he would then submit to the Finance Council. The project was looking promising.
The access agreement.
The construction of my research proposal was a demanding task. Given the multi- divisional, hierarchical structure of the Army, the number of interviews I may have to conduct was weighing heavily on my mind. It seemed an overwhelming task, and I questioned again the desirability offieldwork. By this stage, my investment of time was heavy indeed, and it was becoming more and more important to me that I be granted access. It was therefore in my interests to put a proposal that I was fairly sure would be accepted. After receiving some advice and feedback on my research proposal from colleagues, I polished the final document64 and posted it. It represented an enormous investment of time, not only in the writing of it, but in the time I had spent thinking, planning, contacting Army people, seeking advice, and doing background reading on the Army. To have to attempt to gain access to another organization at this stage would have been extremely demoralizing.
Eventually, after almost four weeks, I telephoned the Secretary for Business Administration. He expressed uncertainty about the two year time frame I had proposed, and suggested instead that I should begin the project almost immediately. Then I would have a chance to observe the entire budget cycle, and could present my report to the executive officers in October 1997. This meant I had to revise the time frame part of the proposal, and rework the appendix to include a shorter length of
64 See Appendix 2.2: "First letter to the Territorial Secretary for Business Administration". Chapter 2 Going backstage Page 41
time, about one year in total. I agreed to make these changes immediately, and forward them to him as soon as possible. I assured him that I was very keen to undertake the study, and that if agreeing to this new proposal was what it would take for me to be granted access, then I would be happy to do so. While I spoke positively and confidently, my inward reaction was mixed. Bringing the whole project forward like this was a shock, since I had planned out the background reading and research which I wanted to complete before beginning the access period. However, since it appeared it would be necessary to follow this time-frame, it made sense for me to accept it and to focus on the positive aspects of it. By the end of that day, I had revised and posted my proposaf5. The waiting game continued.
At the end of the following week, I met with the Secretary for Business Administration and the Territorial Financial Secretary at THQ. The Territorial Financial Secretary conducted the meeting, and was very focused. He turned immediately to what he saw as the central issues of the project. Attendance at Budget Board meetings did not appear to be a problem. They outlined the budget process to me, and the number of meetings that I was likely to be attending. The use of the name was more problematic. He said that he preferred to reserve his decision on that matter until I had presented my report to the Army66. I explained to him and the Secretary for Business Administration the nature of a thesis, and the fact that the Army would appear in a few chapters, but not every chapter of the thesis. I explained that the data would be discussed and analyzed in the context of a theoretical framework.
The Territorial Financial Secretary wanted me to record all interviews. This was to ensure their accuracy. Further, he required that they be transcribed and offered to interviewees to be signed as a correct record of the conversation. The issue of a contact person was raised, and I suggested that the way it was agreed for me to work might affect the identity of this person. I outlined a few suggestions of the way I might go about the project, beginning with several days a week at THQ, preferably with my own desk, or coming simply for meetings and then returning home. I stressed that I did not want to be in anybody's way, and did not want to interfere with anybody's work They were quite happy with the idea of my establishing myself in the Finance Department with my own desk
The Territorial Financial Secretary said that if the Army was going to get something out of it, he would have me therefive days a week, but if it was just my own personal study, then that would be very nice, but one day a week would be quite sufficient. He apologized for this attitude, but at the same time, was uncompromising in his desire
See Appendix 2.3: "Revised Research Proposal to the Territorial Secretary for Business Administration". 66 This caused me problems later. They are detailed in "Signing off", later in this chapter. Chapter 2 Going backstage Page 42
that the Army should receive some benefit from the study. I said I understood his concern and why it was an issue to him, and reiterated my earlier comment that this would not be primarily a management consulting exercise, but that there would be insights for them, because no matter how much they tried to remain in touch with what was happening in the organization, they were not at the grass roots. The Secretary for Business Administration suggested that they might get some benefit from the questions I asked them, and perhaps through not being satisfied with their own answers.
The two men seemed satisfied with all that we had discussed, and we consulted our diaries and worked out some dates on which I would visit THQ. I explained that after an initial period at THQ, I intended moving out to the divisions, concentrating on the Sydney East and Illawarra division, but visiting some of the others as well. The Secretary for Business Administration agreed that this was a good idea, since Sydney East was their largest division, with the most diversity within it.
The meeting ended on a very friendly note. I felt it could not have proceeded much better. Not only did I not have a "no", but it appeared I actually had a "yes". It had taken two months from the time of my first contact to work out the access arrangements. I wondered if all access agreements took that length of time and involved that amount of emotional energy!
Preparing myself.
Having completed the negotiation of access to the Army, I had two weeks in which to absorb the conditions of access before I began at THQ. Several issues seemed significant or onerous to me. The idea of transcribing all interviews was quite overwhelming. Gaining a grasp of the way the organization worked was another issue which seemed daunting. It had been obvious, in my initial contacts with officers, that they had no difficulty in talking about money. Another initial impression was that the Army was highly autocratic. Several officers had already mentioned that feature of their organization to me, spontaneously, as an almost humorous observation of the way they were. In addition, the way the Army's history, use of a military model, and ideas of money, power, and the budgeting system fit in with their mission, seemed to be potentially very interesting.
Fulfilling all the requirements.
As I moved through the access period, the most demanding and time consuming requirement of the access arrangements was that of transcribing all interviews. I knew this would take a long time, but was staggered by the amount of time it actually did take, not just in the transcribing itself, but in the administrative tasks associated with Chapter 2 Going backstage Page 43
sending transcripts out, following them up, and recording and filing them. Confidentiality aspects were of prime importance to those I was interviewing, and to me. At times, this was difficult, when people who had been helpful to me asked me for information or opinions about others whom I had interviewed. I was determined not to breach the confidence of anybody I had interviewed.
The final report was a huge anti-climax . I wrote it in the context of difficulty in communicating with the Territorial Secretary for Business Administration66, and while I enjoyed putting it together, knowing it was for an audience of one person, and that there was a strong possibility it would be ignored, made it difficult for me to be enthusiastic about it. However, I completed it and duly presented it69.
Signing off.
Glesne and Peshkin [1992, 60] described leaving the research site as a "bittersweet time", when feelings of reUef at finishing the exhausting process, and sadness at leaving the people and the action behind, are juxtaposed.
The finishing of my access time within the Army was a blurred rather than sharply defined time, and left me with a feeling that it had not ended exactly as I would have wished. There were a number of reasons for this. The original agreement had been that my access would end with my presentation of a report to the executive officers. Since this did not happen, and the report was almost a non-event, there was a sense of anti-climax. Since there were still some unresolved issues, which took a long time to finalize70,1 experienced a sense of dissatisfaction. I was finished, and yet I couldn't say I was finished, because it had not all beenfinalized in a satisfactory manner. While the majority of my relationships within the Army had been happy ones, there were one or
See discussion in the next section, "Signing off'. 68 During my year of access, most of the top hierarchy moved. The Secretary for Business Administration and the Territorial Financial Secretary who were there when I first gained access had both left and been replaced by the time I presented my report. 69 The report is not included, due to confidentiality issues. 70 One of these was the use of the name The Salvation Army. After numerous failed attempts at discussion, it was finally agreed upon by default, that the name would not be used in the title or abstract, but only in the main body of the thesis. Appendix 2.4 contains my final letter to the Territorial Secretary for Business Administration on this matter. I received no response, which I interpreted as agreement, all other attempts at obtaining resolution of the matter having failed. On reflection, it would probably have been better to request that a signed acknowledgment be returned, but this did not occur to me at the time. Chapter 2 Going backstage Page 44
two which caused me tension and disappointment.
As I reflect back on my year of access within the Army, it was an extremely busy time. 1 was constantly having to step outside my comfort zone, in arranging and conducting interviews, travelling from centre to centre, continuing negotiations, and attempting to work out what was happening from the Army point of view. The time that administrative tasks absorbed was something I had not been prepared for, and my feelings about my involvement with the people I observed and interviewed were something I had not anticipated.
Data gathering.
If the aim of social science is to produce descriptions of a social world, then those descriptions ought to correspond in some way to that particular social world [PerSkyla,
1997, 201]. The way such descriptions wiU achieve that aim is if they are based on interactions and observations of the way people actuaUy act and relate. A quaUtative researcher therefore gathers a variety of types of data, aU of which contribute to this understanding. Data gathered from interviews, observations, fieldnotes, and a study of documents, when combined, wiU form the reservoir of materials on which the quaUtative researcher wiU base his/her descriptions and analysis of a given social situation71. As the data is absorbed, the initial area of interest may change and develop into something quite different72. This provides exciting possibiUties.
/ went into The Salvation Army with an interest in studying their budgeting system. Budgets fascinated me because of their potential for bargaining and political behaviour, and also because the way an organization spends its money is, ultimately, a
71 Dent's [1991] railway case study relied on data which included descriptions and accounts by the participants, and his own observations of activities and interactions, in their context. Unstructured interviews, meetings, and information gathered from casual conversations and simply "being around" [Dent, 1991, 711] over two years, with follow up visits, provided a rich source of data on which he based his analysis of the change in culture in a railway organization. 72 Preston [1986] initially intended studying a firm's computerized production information system. Over a period of a year, in which he gathered data by means of documents, interviews, informal talk, and observations, the focus shifted to the way managers informed themselves. Chapter 2 Going backstage Page 45
measure of where its priorities lie. This is especially interesting in a religious organization, which has a spiritual agenda rather than an overtlyfinancial one. From my initial contact with the Finance Department, including conversations, observations, the study of Budget Board minutes and other documents, and early interviews, it quickly became apparent to me that the budget could not be seen as an isolated process within the organization. While it was a very specific task, it was deeply embedded in the Army's culture, its mission, the personalities and expertise of those involved, the hierarchical, autocratic structure, and, of course, the constant pressure of funding limitations. My research question therefore developed and changed as I was confronted by the data and reflected upon it.
Interviews.
Interviews offer a unique opportunity to explore the points of view of others, entering, at least in understanding, into their social world [MiUer and Glassner, 1997, 100]. The manner in which they are conducted is vital if this understanding is the aim:
I realized quite early in this adventure that interviews, conventionaUy conducted, were meaningless. Conditioned cUches were certain to come. The question-and-answer technique may be of some value in determining favored detergents, toothpaste and deodorants, but not in the discovery of men and women [Douglas, 1985, 7].
It is not cUched responses to set questions that help the quaUtative researcher gain understanding, but rather the possibihty of both letting people "offer their interpretations of reaUty" and aUowing the researcher freedom "to move in any direction that appears interesting and rich in data" [Tierney, 1991, 9]. Structured interviews, where the content and order of questions are specified in advance, are therefore of limited value, but semi-structured, unstructured [Walizer and Wienir, 1978, 288], or "creative" interviews [Douglas, 1985] offer much greater opportunities to tap into reaUties "beyond the interview context" [MiUer and Glassner, 1997, 102] .
73 Nondirective or open-ended questions encourage spontaneity, and open up the possibility that those being interviewed can raise issues that they see as important [Tierney, 1991, 9], rather than being pre- Chapter 2 Going backstage Page 46
The issue of how to conduct interviews, i.e. interviewing style, is therefore not simply a technical one, but rather a theoretical one, being determined by the researcher's understanding of the nature of quaUtative inquiry and its purposes and intentions74. Once the type of interview is detennined, based on theoretical considerations, then technical aspects of interviewing can be considered. These occupy a great deal of the researcher's time and energy. Choosing whom to interview, making contact, setting up appointments, deciding whether or not to tape-record, typing transcripts, taking notes, learning to listen, developing questions, learning to deal with the unexpected, establishing rapport, knowing how many interviews are enough, and attention to dress and body language, are aU important issues for the interviewer [Tierney, 1991; Douglas, 1985, Leedy, 1974; Glesne and Peshkin, 1992; Fontana and Frey, 1994; Altheide and Johnson, 1994]. Interviewing, or "asking questions and getting answers" is a much more difficult task than it may seem atfirst 75[Fontan a and Frey, 1994, 361].
// soon became obvious to me that a good interview is more than "good conversation". With many of the people I interviewed, there was no problem establishing rapport and getting them to talk. The problem was rather, moving from the "warming up" phase of the interview to the serious business of the interview, the part which I expected would provide "good data" as well as "good conversation"16. Since all interviews had to be transcribed, as a condition of the access agreement, the challenge was to keep them short, and to the point, without sacrificing rapport-building conversation. Achieving this delicate balance was by no means easy. Some people were suspicious, or reserved, initially, and it would often take some time to establish rapport, and thus convince them that they could share openly. Others launched immediately into in-depth conversations on issues they felt deeply about.
As time went on, and the number of interviews I had conducted increased, I developed
determined by the researcher. 74 It is the assumptions underlying the research which determine which "tools" are most appropriate [Tierney, 1991,9]. 75 The potential problems of using a tape recorder when interviewing illustrate this observation. Both a "reassurance of the seriousness of your pursuit" and, at the same time, "a brutal technological reminder of human separateness that undermines the intimate communion you are trying to create" [Douglas, 1985, 83], the recorder should be handled with sensitivity, since it can be distracting for the person being interviewed. 76 See Glesne and Peshkin [1992, 81]. Chapter 2 Going backstage Page 47
several "banks" of possible questions based around six areas of interest. Before conducting an interview, I tried to find out as much about the particular setting as possible, including what issues might be significant for the people I was interviewing. As much as possible, I tried to conduct interviews in an open ended style. The success of this approach varied, depending on the types of answers people gave. Sometimes they responded enthusiastically to my lines of inquiry, giving responses which contained many possible topics for further discussion. At times like this, the interviews flowed easily, and often I did not manage to cover all topics. On other occasions, the questions fell flat, and respondents answered in one-dimensional terms. There were very few interviews, however, where I did not feel, by the end of the interview, that we had established some sort of rapport.
The choice of whom to interview just "happened" initially, but I became much more intentional as my time in the Army progressed. While based at THQ, I began visiting various officers and employees, asking for their permission to conduct an interview. The Territorial Financial Secretary had provided me with a letter of introduction, which I photocopied, and handed to each person I approached. I found that a personal visit was the best way of gaining access to their time. This was not difficult while I was in the same building as my "subjects". On a few occasions, people agreed to an interview, provided I conducted it on the spot. Not willing to pass up any opportunity, I would rush to my desk in the Finance Department, grab my tape recorder and notebook, and return to conduct a hurried interview. Most often, though, people were happy to book a time ahead, and I began to get into a pattern of conducting three or four interviews a day, allowing time in between to write diary notes after each meeting.
As I moved out from THQ and began interviewing people in the divisions, my initial contacts were by telephone or letter, and the organization and coordination of interviews became a much more time-consuming and challenging task. I refined the process of making contact, booking interview times, and confirming appointments. Armed with a list of personnel and their locations, and a street directory, I usually made contact, initially, by telephone. If anybody displayed the slightest hesitation in wanting to spend time talking with me, I pulled back and suggested sending them a fax explaining what I was undertaking, and including the Territorial Financial Secretary's letter of introduction. This gave them time to absorb the nature of my research, and what their response might be. In most cases, when I followed the fax up with a telephone call, they were willing to talk, and the only difficulty was in setting a mutually convenient time.
77 See Appendices 2.5, 2.6 and 2.7, which include sample questions for interviews for DHQ, social centre and corps personnel. Some of the questions were similar, but some related to the different issues faced in the different situations. They were starting points for conversation. Chapter 2 Going backstage Page 48
Sometimes the effort of organizing interviews was quite frustrating, but in all the approaches I made to people, I received only one very negative reaction from an older officer at a social centre, who became quite agitated when I suggested an interview. I eventually gave up trying to make more contact with him, which was perhaps a mistake, because he may have had an interesting story to relate. I did not feel like risking my good relationship with the Army by annoying one particular officer. After this experience, I made more initial contacts through letters than telephone calls. This strategy worked well. I followed my initial letter with a telephone call within a few days, and usually got a very positive response.
One reason people gave for feeling apprehensive about an interview was that they did not know much about finances. I explained that the purpose of the interview was not to find out how much they knew, but rather, how they responded to financial matters within the Army. Sometimes, in spite of the fact that they had received an introductory letter, an explanatory letter, and an appointment confirmation letter, they were surprised at the kinds of topics we covered in the interview.
The issue of whom to interview, and how many interviews to conduct, challenged me throughout the process. Initially, at THQ, I probably got quite carried away interviewing people. I was enjoying it. I was learning a lot. I was excited at the prospect of meeting new and different people. After interviewing several officers, I realized that I needed to get the viewpoint of some employees. And, of course, I wanted to cover both men and women, from different departments, and of different ranks. By the time Ifinished most of my initial THQ work, I had conducted over thirty interviews, which was probably more than was necessary.
As I discovered when I launched out into the divisions, THQ officers and employees had a particular viewpoint which was not always shared by others outside THQ. With seven geographic divisions, and one functional division, I knew it would be impossible to saturate each one, so I chose Sydney East & Illawarra as my primary area of interest, but conducted a few interviews also in other divisions . While I began with an idea of the kinds of people I wanted to interview, my ideas were by no means fixed in advance. By the time Ifinished, I felt I had conducted more interviews than I needed, but the last few were interviews I really wanted to conduct, being of high profile Army people.
Apart from technical matters, interviews can also be thought of in terms of their ethical
78 See Appendix 2.8, "Table of interviews conducted within The Salvation Army". Pseudonyms have been used. Chapter 2 Going backstage Page 49
considerations, such as issues of confidentiaUty and anonymity. Since the "objects of inquiry" are human beings, extreme care must be taken to avoid harming them, and to ensure that theirright to privacy is respected [Fontana and Frey, 1994, 372]. EspeciaUy if the material is sensitive, people who agree to be interviewed arerisking a great deal by speaking about their situation, and the researcher must take great pains to estabUsh trust, and to maintain the confidentiaUty that has been agreed upon.
From the time of negotiating access within the Army, I was very conscious of the need for confidentiality in conducting interviews. As arranged, I recorded all interviews, and took great care to store tapes and transcripts in a secure place, to send transcripts in envelopes marked "confidential", and never to disclose the content of an interview to anybody else. My consciousness of the need for confidentiality grew stronger as I conducted more interviews. It became clear to me that people were taking a risk in talking to me, at least in their view. They needed constant reassurance that what they shared with me would remain confidential. Sometimes they would pause in the middle of the interview, ask me to stop the tape, and again require assurance that their identity would not be revealed. This seemed extreme, but was obviously a real concern to many people I interviewed.
As time progressed, I developed five stages at which I informed them of confidentiality and how it worked. First, when making the initial approach, I would sent a letter of introduction, and make sure that my covering letter mentioned the type of interview, and what use I would be making of it. Second, when I confirmed the appointment by letter, I would again mention the confidentiality of the interviews. Third, at the beginning of the interview, I explained what I would be doing with the transcripts, and how people would not be identified. Fourth, and a very crucial stage, was when I sent the transcript out to be read and signed. In spite of this information being included in another letter, this part of the process caused some anguish for a few people . A fifth reminder of confidentiality was necessary if people failed to return their transcripts. This could indicate that they were administratively inefficient, or that they were having difficulties in signing off on the interview. Whatever the reason, when making contact at this stage, either by letter or telephone, I reminded them again of the confidentiality of the interviews.
79 One senior officer told me he had not slept the night after receiving the transcript of his interview. Two other officers rang me at home, quite agitated after reading their transcripts, and begging for my assurance that I would not reveal their identity. Another man sent his transcript back with huge slabs of it crossed out, and a brief note telling me that he had made some "small but important changes ". Chapter 2 Going backstage Page 50
A third way of considering an interview is as a "linguistic event unfolding in particular sociopoUtical contexts" [Schwandt, 1997, 74 - 75]. This is the dynamic that it is not so easy to define or specify, the search for a "holistic understanding" of the situation from the point of view of the person being interviewed [Tierney, 1991, 9]. Technical aspects can contribute towards this, but ultimately, it may be that it is dependent on the quality of the interview itself, which may be difficult to control.
Transcripts of interviews do not always make plain what the context of an interview is, and in that sense, a transcript can never replace an actual event. If interviews are to be put to "honest and intelUgent use in theorizing about social life", they must be understood as not merely coUections of words which express an opinion, but, more than that, as stories produced in a particular setting at a particular time [MiUer and Glassner, 1997, 111]. A diary of the setting of each interview, including physical location, the apparent mood of the person being interviewed, any special problems or items of significance surrounding the interview, body language, or other significant factors wiU assist in the writing up process, to capture the situation and thoughts of the person being interviewed, so that the reader can share the understandings the researcher has arrived at. Several examples are included in Appendix 2.9, "Stories of interviews in their context".
Interviews produce more than data. Researchers speak of the "exhilaration" of conducting interviews, and of the excitement of meeting new people, and of coming "to understand some they thought they might not want to meet" [Glesne and Peshkin, 1992, 91].
A day spent travelling, meeting new people at new centres, conducting five or six interviews, and taking notes, was an exhausting day. But the thrill of making contact, of understanding somebody else's situation, of seeing things through their eyes, was enlightening. This feeling was reinforced as I listened to the cassette recordings of the Chapter 2 Going backstage Page 51
interviews as I transcribed them and coded them into the NUDVST*0 computer programme. I felt that I understood these people for a moment, and understood the Army culture which was like a palpable force in their lives. And yet at the same time, I had to acknowledge that I had only stepped into their world for a short time, and only to the extent to which they granted me admittance. I did not really know them fully. I had only been granted a small glimpse of their lives.
Observation and conversation.
In conducting interviews, it is an advantage to be a participant observer first, in order to assist with the chaUenge of creating useful questions, "ones whose answers provide you with pictures of the unseen, expand your understanding, offer insight, and upset any weU-entrenched ignorance" [Glesne and Peshkin, 1992, 67]. Participant observation involves the coUection of data in a "natural" or "field" setting [Walizer and Wienir, 1978, 333]. In seeking to answer the question "what's going on here?", "direct firsthand eye-witness accounts of everyday social action have always been regarded as essential" [Schwandt, 1997, 106].
This type of data is valuable for a number of reasons. It means that the perspective of the people being studied is understood, apart from the pubUc performance they give; great attention can be paid to details, such as interactions, events, personaUties and relationships; the social and historical context in which events and actions occur can be explained and understood; and the ongoing nature of personal relationships and behaviour can be grasped, being revealed not only as a set of separate events, but as a continuing saga of organizational life [Schwandt, 1997, 106].
If the degree of participation/observation is taken as being on a continuum, with observation on one end, and full participation on the other, the researcher positions
80 This is a computer programme designed for analyzing qualitative data, and is described in the later section in this chapter, entitled "Data analysis". Chapter 2 Going backstage Page 52
himself or herself somewhere on that line, depending on the theoretical viewpoint of what constitute the goals of the participant-observer. The image of a white-coated laboratory scientist observing people behind a one-way mirror, and jotting down notes on a cupboard, is a "detached and sterile" view rooted in "the quantitative observational paradigm" [Adler and Adler, 1994, 378]. It bears no similarity to ethnographic practice.
In the conduct of an ethnography, it would be unrealistic to suggest that the presence of an observer does not affect the dynamics of organizational behaviour. However, the more frequently the observer is present, and the more taken-for-granted it is to have that person there, the more likely it would seem that organizational members would behave in their normal way. If the goal is to visit backstage, to achieve an understanding of the research setting, the people being studied, and the way they behave [Glesne and Peshkin, 1992, 42], then participation may be something that occurs as part of that process, upon invitation, or upon being included in the workings or even the decision making of the group.
Like the pebble thrown into the pool, which causes ripples right out to the boundaries of that pool, the observer dives into organizational life, and affects it in unanticipated ways. People are met, meetings are attended, interviews are arranged, opinions are sought, events are observed, friendships are formed, alUances are cemented, cases are presented, and lobbying takes place. The very presence of the researcher in the everyday settings of organizational life means that mere observation is impossible. Participation wiU occur, even if it is unconscious on the part of the researcher. Balancing the costs and benefits of participation, while desirable, may not be an option, as certain activities wiU simply occur, perhaps unexpectedly, throwing the researcher into a theoretical spin. While in a sense the researcher stays at the margins of the organization, there may be times when he or she is very much in the centre of the action
[Glesne and Peshkin, 1992, 58].
While I was negotiating access with the Army, I saw myself as being an observer. It did Chapter 2 Going backstage Page 53
not take long, once I began my visits to the Finance Department, to realize that this was not possible. I could not hold myself aloof from what was going on, and what is more, I did not wish to. Even before I began conducting interviews or attending meetings, people initiated conversations with me, giving me their point of view about what was going on, and what they felt needed to happen. Often it required only a tentative comment or query on my part, for somebody to launch into a lengthy description of what they were doing, how the Army was run, and what they would do to fix it! In my naivete, at first I accepted these opinions on face value. Later, as I reflected more on my role there, and people's perceptions of me, I realized that I was probably being lobbied. It was known that I was going to write a report, and some organizational players who had their own agendas sought my opinion and approval, or used me as a sounding board to put forward their action plans.
Some employees saw me as a potential ally as they shared their frustrations at working in a system which they felt was heavily geared towards officer appointments, and where they felt distinctly lower in the organizational pecking order. Trained professionals were often scathing of the lack of expertise of officers, while officers expressed concern that the organization ought not to be taken over by employees, who would not have the vision of the way the Army was and ought to be. It was interesting tofind out personal details of people, including their previous work experience, their background in the Army (some employees were soldiers), and their ambitions regarding training or future positions. All these details helped to understand how they formed their opinions, and why they conducted themselves as they did. Sometimes I think I noticed things that "insiders" missed.
Some of the most fascinating times occurred unexpectedly, as a result of some frustration or event which got people talking. On a few occasions there were dramatic moves, or strong disagreements which left people upset or alienated, and they were eager to have a listening ear. On many occasions, I had to hide what I knew about people, because information had been given to me in confidence. On one occasion, I became an active participant, and my action seemed to have long-term disadvantageous effects for me*\
The conduct of fieldwork can be exhausting and anxiety-producing. In fact, anxiety has been described as "a research companion", manifest in the "mental and physical fatigue from overdoing" [Glesne and Peshkin, 1992, 56]. The tension of remaining on one's
81 Appendix 2.10, "Summary of interviews to date", contains a description of the situation, my response to it, and what I perceived to be the outcome. Chapter 2 Going backstage Page 54
mental toes always, of being ready to grasp new opportunities, of battling to understand what is going on, of exercising self control in the face of disappointment and discovery. and of leaving thefield at the end, make the conduct of fieldwork like an emotional roUercoaster.
Fieldnotes.
Fieldnotes are a vital data source for the ethnographer. What they are exactly is open to debate, but they could be thought to include raw data or material such as notes, diagrams, or charts, field journals and everything else gathered in the course of fieldwork, such as documents, transcripts, and journals [Schwandt, 1997, 52]. They are prepared by an individual, and are therefore very much dependent on that individual's style and personaUty. Field observations are a reflection of the observer's "cognitive idiosyncracies", i.e. his or her thoughts and theories [Kirk and MiUer, 1986, 51].
From the beginningmy diary was a reflective document. Not only did I record my observations about people and events, but also my opinions about their actions and responses, and my theories and ideas about why they acted in the way they did. The act of committing these thoughts to paper was part of the research process, in that it assisted me in coming to some sort of understanding of what was going on, and helped me to make sense of what I had observed. In my diary I recorded telephone conversations, letters 1 wrote and received, transcripts I typed, observations about people, interactions I observed, and opinions Iformed.
The development of theory can be traced through my diaries. As I read and considered various explanations for the organization as I saw it, I recorded these, together with my reasons or reservations. The emotional roUercoaster of fieldwork is attested to also, with highs and lows recorded, enlightening or depressing interviews, the frustrations of administrative minutae and typing of transcripts, missed opportunities, mistakes and misapprehensions about people, and the delight of meeting interesting, dedicated, unpretentious individuals who shared a little of their lives and work with me. Chapter 2 Going backstage Page 55
Documents.
Even though ethnographic fieldwork was originaUy conceived as being for research in non-Uterate societies, in modern western society documentation is part of "the fabric of everyday social life" [Atkinson and Coffey, 1997, 45]. Paperwork, in the form of annual reports,financial accounts, minutes of meetings, and other documents, cannot be ignored. In fact, so reUant is our society on this sort of documentation, that to ignore it would be to distort the context in which organizational behaviour occurred. And yet they are not spontaneous, uncontrived representations of organizational action:
They construct particular kinds of representations with their own conventions. We should not use documentary sources as surrogates for other kinds of data. We cannot, for instance, learn through records alone how an organization actuaUy operates day-to-day. Equally, we cannot treat records - however 'official' - as firm evidence of what they report [Atkinson and Coffey, 1997, 47].
Once words are put into text form, the gap between the "author" and the "reader" widens, and difficulties of interpretation occur [Hodder, 1994, 394]. Words and their meanings can be changed when written down, because written text is an artifact, "capable of transmission, manipulation, and alteration, used and discarded, reused and recycled" [Hodder, 1994, 394]. Taken out of context, documents can take on a meaning or interpretation that was not originaUy intended .
Documents construct a particular view of reaUty, sometimes designed to put forward a case, justify a position, or present an image. They are often anonymous, which possibly
82 They can conceal or disguise events, sanitize meetings and decisions, or even manipulate records of what has actually occurred. They often enshrine "a distinctively documentary version of social reality", with their own conventions [Atkinson and Coffey, 1997, 47]. Financial statements, for example, "give a particular account of the affairs of the organization - which will be read and interpreted by individuals who share an understanding of the language and stylistic conventions" [Atkinson and Coffey, 1997, 51]. They provide a script of the organization's performance. Chapter 2 Going backstage Page 56
gives them a greater authority or perception as a factual account, than if they were attributed to a particular author. Readers may need to be expert in order to interpret them, or to understand the context in which they were written, but of course, there is not a great likelihood this wiU be the case. Once the words have been committed to paper, they are enshrined as an objective, official account [Atkinson and Coffey, 1997, 59 - 60]. Time stands still, and events are decontextualized, with the written record taking precedence over people's own recoUections of activities and events [Atkinson and Coffey, 1997, 56]. Documents are produced for a particular audience, with a particular viewpoint in mind.
During my research time in the Army, I studied Budget Board minutes from previous years, Salvation Army Year Books, letters, written instructions about budget procedures, consultants' reports, Disposition of Forces (personnel) manuals, Annual Reports, and internal memos and reports. I discovered that I am not, by nature, an archivist, but found it a fascinating activity nevertheless. Not only was what I discovered fascinating, but in situations when I attended meetings and later read the official minutes, it was interesting to note what was left unsaid, and the manner in which the meeting was recorded.
The power of the written word was amazing. It was almost as if, once words were committed to paper, they became enshrined in fact and history. Most departments had developed Mission Statements. They were displayed in pride of place, as a reflection of the reality of what went on within the Department. Few people questioned them, and with a few notable exceptions, few people seemed concerned about what strategies were to be attempted in order to actually achieve them.
Having attended many Budget Board meetings, it was fascinating to read, after taking my own "full" notes, the "official" minutes, as they were recorded. Spartan in their use of words, they recorded the bare bones of what went on, reducing what had often been fascinating and topical discussion to the simple record of the passing of a particular budget. At one meeting which I missed, the Accountant informed me that the members, frustrated at the unwieldy nature of the budgeting process, had had an in-depth discussion about what the role of the Budget Board ought to be, and what was its purpose for existence. Eagerly, I obtained a copy of the minutes, only tofind that there was no record of the discussion at all. Had I not heard of it from somebody who was there, I would never have been aware that it had taken place. And from this time forward, it is as though the discussion had not taken place at all. Having observed this, my viewpoint of minutes from previous years changed, and I found them to be of lesser value than I had previously believed. Perhaps the numbers were accurate, but Chapter 2 Going backstage Page 57
the tenor of what went on, the opinions, and the disagreements, had been eliminated. They had been sanitized.
Surely the fascination of documents for an ethnographer is in gauging the effect those documents have on organizational members, or the disparity between those records and organizational reality, as it exists, for members. My own experience, already shared (see Appendix 2.10, "Summary of interviews to date"), illustrates the effect of committing words to writing. Once written, they were there to stand forever, taken at face value, and not read as a testimony to another time and place, and another context. Taken out of context, and read by an audience different from the one intended, they had a very different effect from the one they were initially intended to have.
How theory fits in.
The need for flexibiUty and a high tolerance for ambiguity [Glesne and Peshkin, 1992, xn] on the part of a quaUtative researcher has already been mentioned. This is especiaUy relevant in the area of theory development. Issues which were originaUy thought to be important may be felt, during the research process, to be less interesting than others which emerge as of significance to organizational actors83. Theories, or ways of explaining what is happening, may not "gel" until weU into the research process. Their construction wiU be informed by what has been observed, not merely by studying what books say about them.
What constituted the initial 'reflexive turn' in academic theorizing resulted from a heightened self-awareness associated with the increasing realization that the researcher/theorist plays an active role in constructing the very reaUty he/she is attempting to investigate [Chia, 1996, 42].
Theory both informs observation, and is developed by it. Within the field of ethnography, this is a weU-estabUshed concept [Humphrey and Scapens, 1996a, 100].
83 Singh [1997, 30] made this observation. She initially began studying banking practices, but found as her research progressed, that it became a study of how "marriage money" was arranged. Chapter 2 Going backstage Page 58
The framing of an institutional theory "agenda" in this study has relied on this reflexive relationship between theory and my interpretations of the way the organization operated. The process of going backstage, beyond the onstage performance, to observe organizational behaviour, search for issues which were real to organizational members, and the resultant development of some sort of theory which could help to explain what was going on, is a lived demonstration of this relationship. It is very much the product of my interpretations of the data I have gathered. Somebody else might interpret it in an entirely different way.
My initial focus was on budgeting, but significantly, as I became immersed in the organization, even my first batch of interviews reflected the importance of the context of the budgeting process. As part of the established organizational performance, it did not stand alone. It was obvious that it was both the product of the distinctive culture and setting of the Army, and at the same time, produced certain effects within the Army. Hence I developed categories of questions, which reflected some of the issues people expressed as being significant™.
As I continued my research, I dabbled in various theories which might explain the way this organization functioned. None of them really seemed to offer the explanation I was looking for until I "discovered" institutional theory. Yes, the Army was, to a large extent, institutionalized. It had adopted procedures and practices in response to pressures not only from without (the environment) but from within (its own history and culture), and these had become enshrined and entrenched in organizational behaviour and structure. As I gained a greater understanding of institutional theory, I realized that while this was the case, there was also another factor present within the Army's workings, and that was the pro-active strategies they developed in order to raise funds to continue their operations. In this they were innovative and pragmatic. Hence the integration of certain aspects of resource dependence theory, as my theoretical QC structure began to take shape .
Even within the quaUtative research tradition, while there are similar concerns, there are also significant differences. At best, there can be said to be a "coUection of assumptions, methods, and kinds of data that share some broad family resemblances" [Atkinson, 1995, 120]. Because inquiry paradigms differ [Heron and Reason, 1997, 284], as a result, the purpose of quaUtative research, and the type of research chosen, can vary as
See Appendices 2.6, 2.7, 2.8. This is discussed more fully in Chapter 3. Chapter 2 Going backstage Page 59
weU. Case studies can span a wide range of ontological, epistemological and methodological beUefs [Heron and Reason, 1997, 284], which, whether acknowledged or not [May, 1994, 19], are present in any research undertaking:
The superficial attraction of our empirical research was the promise that a secure grasp of empirical reaUty would release us from the bonds of competing ideologies. In practice, however, we brought our own assumptions and beUefs to the work [Roberts and Scapens, 1990, 107].
Whether I acknowledged it or not, I had my own preconceived notions of theory when I began this research. Not only did I have an idea of what I was going to study, but I found, as I interviewed people, that my thinking about the way an organization "ought" to function was quite positivist. Almost ruthlessly, I analyzed the mission statement of the Army, and tried to discern whether it had been successful at achieving this mission. Time and again, the response I received from the people I interviewed was a definite yes! And yet, as I sometimes pointed out, the Army had not grown in the size of its membership base in Australia since World War I. How could this be construed as successful? While this was acknowledged, still the answer was made: the Army was successful. I began to realize that this required a different definition of "success" from the "objective", irrefutable one I had in my mind. The very fact that the Army had survived, that its influence had grown, that it had established itself as almost an icon in Australian society, all contributed towards this image of success. It had become legitimate, accepted, with an established reputation. It was a successful performer, and that perception of success had nothing to do with numbers, or with how efficiently or effectively it functioned, but with its image.
A trap in quaUtative research is to treat theory as fact. Theory, in fact, is created as nothing more than a "best guess" [Morse, 1994b, 32]. It gives structure to quaUtative data, maturing throughout the research process:
If one ever finishes, the final "solution" is the theory that provides the best comprehensive, coherent, and simplest model for linking diverse and unrelated facts in a useful, pragmatic way [Morse, 1994b, 32].
Much quaUtative research uses "grounded theory", i.e. theory which is grounded in the data, both in the sense that it emerges from the data and is sytematicaUy tested through the data. Chapter 2 Going backstage Page 60
The temptation could be, in theory development, to close in on a theory too early during the research time. The advantage, for me, in coming to a gradual awareness that institutional theory was relevant to the Army, was that I had a sizeable store of data which I had absorbed, which made it relatively easy to assess the applicability of that theory. Earlier in the process, I would not have had the same grasp of the organization. On the negative side, this meant that the formulation of my questions and discussion in interviews did not happen from an institutional perspective. I did not have "pat" answers from interviews which I could collate in order to present the "institutional case".
Data had to be re-arranged and re-formulated later, during the analysis process. So while my theory was grounded in my data, it was not grounded theory. My awareness that institutional theory was an appropriate means of explaining the phenomena I was observing emerged through the research process as I collected, sifted, sorted and analyzed data. I developed alterations to institutional theory so it would become a better description of my data, but still, the theory, while it is grounded in data, is not "grounded" theory. Figure 2.1 below, "The process of developing theory", illustrates how the data and my reading of theory both "informed" my perceptions and understandings of what was actually going on in the Army.
Data gathered from Theories as described the organization in books and journals
Institutional theory, informed by resource dependence theory
Figure 2.1. The process of developing theory.
Data analysis.
What does the quaUtative researcher do with the large amounts of data he or she Chapter 2 Going backstage Page 61
gathers? The "richness and complexity" of the data compounds the difficulty of interpretation and analysis [Roberts and Scapens, 1990, 107], but while initiaUy the data may seem confusing, puzzling and chaUenging, after the second or third interview, analysis of some sort wiU have begun, however informal. Data analysis conducted simultaneously with data coUection, and with theory development, helps the quaUtative researcher to understand and shape the study as it continues. This can be accompUshed by means of a reflective log or diary, thefiling of data by categories, simple coding schemes, monthly reports, the maintenance of some sort of control over the data in terms of organization, refinement of a coding system as the study becomes more focused, and the display of data by means of visual representations such as diagrams, spreadsheets or flowcharts [Glesne and Peshkin, 1992, 128 - 137].
For most of the time I conducted research within the Army, I never felt totally in control of the data I had collected. Sometimes I felt totally swamped by it. As the pile of memos, board meeting minutes, letters, reports, year book figures, interview transcripts, and diaries mounted, I struggled to develop an adequate sorting system, in myfiling cabinet, on the computer, and in my mind, as I tried to make sense of what I was observing. Time and again, I wished that I had been able to set up an appropriate filing system before beginning, but even as I articulated that desire, I realized it would have been impossible. It was not until I began uncovering information that I could ascribe categories to it, organize it, and reflect upon it. This was actually part of the analysis process. As categories of information developed in my thinking, the process became easier, and I began to find that when I absorbed some new piece of data, I had a place ready in which it could be stored.
Some quaUtative researchers beUeve that "the informants speak for themselves" and data should not be analyzed; others, seeking accurate description, organize data, select, interpret and present it as a descriptive narrative; stiU others use the data to buUd "a theoretical rendition of reaUty" [Strauss and Corbin, 1990, 21 - 22]. Given that analysis is both an art and a science, and can be accomplished by a variety of processes, it surely must be more than mere description [Schwandt, 1997, 4], in that it attempts to explain what the data means, not just describe what the data is. Discerning this requires the abiUty, on the part of the researcher, to step back and critically analyze situations, to recognize and allow for bias, to obtain vaUd and rehable data, and to think abstractly Chapter 2 Going backstage Page 62
[Strauss and Corbin, 1990, 18]. How can this be accomplished? It can only happen if the researcher is theoreticaUy and sociaUy sensitive, and is able to maintain a certain analytical distance, while also drawing on knowledge and experience to observe, interpret and interact with the data86 [Strauss and Corbin, 1990, 18].
Times of enUghtenment can be hastened by adopting a stance of active inquiry, making frequent and fuU notes, and keeping theoretical Uterature separate from the data [Morse, 1994b, 28 - 29], but even then, the researcher can faU to make connections because of underlying assumptions, experience, and theoretical expectations [Strauss and Corbin, 1990, 75]. It is a deUcate balance, keeping aUve and useful the tension between understanding and absorbing the data, and aUowing theoretical aspects to both inform and be informed by the process of data coUection and analysis.
Whatever else it is, quaUtative data analysis is not a "passive endeavour", but requires comprehension, synthesizing, theorizing, and recontextualizing87, by means of "astute questioning, a relentless search for answers, active observation, and accurate recaU" [Morse, 1994b, 25 - 34]. Sometimes acknowledged as the most important part of ethnography, the development of generalizations is not always held to be a necessary part of the process, with opinions on the generalizabiUty of theory derived from quaUtative research varying greatly [Schwandt, 1997, 57 - 59; Lukka and Kasanen, 1995, 73; Ragin, 1994, 91]. However far this process of analysis is carried, it is undeniably a cognitive struggle, which needs to be made expUcit, and which, if it is described, wiU dispel the notion that quaUtative research is "easy" [Morse, 1994b, 24].
Dent [1991] described how he was in danger of "drowning" in the data he had collected in his railway study, until a pattern began to emerge, and his understanding of the situation developed. 87 Within ethnographic method, the process of comprehending occurs by means of observations, interviews, and the use of documents. Synthesizing involves the sifting of data as content is analyzed and categories are developed. The development of theory is the next step, the final "solution" being the theory that provides "the best comprehensive, coherent, and simplest model for linking diverse and unrelated facts in a useful, pragmatic way". Recontextualization is the process of developing theory- based generalizations which can be applied to other settings [Morse, 1994b, 26 - 38]. Chapter 2 Going backstage Page 63
I envied researchers when they described how "things suddenly became clear" or "a pattern began to emerge". Nobody ever seemed to explain how much hard work and anxiety went into the process of data collection, study, and analysis before this "magical" occurrence actually took place. And yet, even in the early stages of interviews, I had begun to discern a pattern which helped me later as I developed the theoretical interpretation of the study. This was at the earliest stage of the research process, and demonstrated my first attempts, partly unconscious, at data analysis. 1 never called it that, but that is what it was. In my early conversations, I attempted to classify people's concerns into broad areas, which I eventually refined into six categories**.
Perhaps the most significant organizing factor which "emerged" for me, was that the budgeting system was deeply embedded within the organizational culture, that there were organizational structures and practices which had a profound impact on attitudes to money and fundraising, and, by extension, to the budgeting process. A further constraint, or category, was the expertise of the personnel involved in the process. This, in its turn, overlapped with the distinctive Army culture, and the officer/employee tensions I had observed. Developing these categories was the hard work of dealing with data. It was only as this "happened", that the physical aspects of data storage could be developed in a way that was meaningful and useful.
I wanted my study to be theoretically constructed. For me, describing what happened was not satisfying enough. I had to know why, or at least to have a plausible explanation of why things occurred. This was an ongoing struggle, as I lurched backwards and forwards from texts on various theories, to data, and back again to something new and previously unconsidered. It was hard work, and demanding, as I tried to grapple with various theories. Towards the end of my "search", enlightenment struck as I read a book on institutional theory, and found myself making constant notations in the margins of instances where I had observed similar practices within the Army. At last I was approaching something like explanations for the behaviour I had observed.
The organization of data precedes its interpretation, and together the two activities constitute analysis. If this is vague-sounding, it is because there is no standardized procedure for data analysis within quaUtative research, but rather a "fluid" process of making sense of data [Tesch, 1990, 4].
As referred to in Appendices 2.6, 2.7 and 2.8. Chapter 2 Going backstage Page 64
Just as organizations are different, so are researchers, and so are their individual preferences and styles of conducting research. Some like having everything set down and planned well in advance. I preferred a serendipitous approach, within broad guidelines, and while this worked well, it meant my tolerance for ambiguity had to remain high for a long time. Towards the end of the access period, I was almost desperately seeking closure on my method of data analysis, and my understanding and development of theory.
Faced with a huge amount of data, the quaUtative researcher has a dUemma. How can this be sorted, in a physical sense, into categories? Colour-coded folders, a file-card system, or electronic data handling are several options [Tesch, 1990, 128 - 134]. Folders andfile-cards coul d be unwieldy, but is it a contradiction of terms to analyze quaUtative data by means of a computer programme? Many researchers would suggest that it is not [Walker, 1993; Tesch, 1990; Parker and Roffey, 1997; Glesne and Peshkin, 1992; Singh, 1997]. From the use of word processors, and databases, to quaUtative analysis programmes, there is a large range of software which can assist the data analysis process [Tesch, 1990].
The NUD*IST (Non-numerical Unstructured Data Indexing, Searching and Theorizing) computer programme [QSR NUD*IST 4, 1997] is a quaUtative data analysis programme89 which "streamlines text analysis and searches for patterns and meanings which generate a parsimonious theory" [Parker and Roffey, 1997, 237]. Singh [1997] used NUD*IST for her analysis of data on marriage money, and observed that the use of a computer programme helped reveal some of her initial biases, and to keep track of how the analysis of her data was being shaped. QuaUtative computing, for her, was
central in the transformation of data to theory [Singh, 1997, 40-41].
The almost overwhelming volume of data I was accumulating was threatening to
89 Once an index structure (a system of "nodes") is developed, text data is formatted and introduced to the database. Text units are then coded at appropriate nodes, and once this has been completed, the database can be searched, connections established, and theory developed and tested [Parker and Roffey, 1997,237-239]. Chapter 2 Going backstage Page 65
drown me, but more than that, I could see no efficient way of sorting and accessing it. With 104 interviews, involving 114 people, I had recorded a vast number of comments, and while I had transcripts of each interview, the process of searching for opinions was a time-consuming and daunting task. The sheer volume of paper, and the haphazard means by which I would have to conduct any searches I undertook, together with advice from other researchers that once I had more than twenty interviews, I needed a qualitative data base, sent me on an investigative journey to discover whether there was a software package which would suit me.
My investigations led me to NUD*IST. With my interviews already stored in my computer, it was relatively easy to format them and introduce them into the database. What was a much greater struggle was developing an index structure. This went through several formations, with one major re-design, as I changed my classifications during the research process. The beauty of the programme was that it could be changed as my theory developed and the focus of my research issues changed. I felt it added rigour to my analysis, and ensured that I would not overlook any pieces of data which might be relevant. Appendix 2.11, "NUD*IST index structure" displays and explains the index system I devised.
Constructing a reliable and interesting ethnographic text.
Organizational writers need to acknowledge that their own accounts are, first and foremost, "linguistic constructions which operate according to established conventional linguistic codes" [Chia, 1996, 45]. Ethnographic narratives can be "powerful tools" for opening up new areas of inquiry, if they achieve the goal of being representative, interpretive and rhetorical [Jonsson and Macintosh, 1997, 370, 385]. They are representative in that they teU the stories of people in a particular culture, and provide the context in which those people Uve and act. They are interpretive because they attempt to "set forth categories, make comparisons, and interpret symbols and rituals", and they are rhetorical because they attempt "to bring the distinctive social world into some sort of textual order that not only pleases the reader but, more importantly, produces a concrete, sharp, and complex portrait of life in the community, one that persuades the reader that the narrative can be trusted" [Jonsson and Macintosh, 1997,
370].
The process of writing up the results of my research has been a challenge. Faced with Chapter 2 Going backstage Page 66
my own feelings and impressions, and with a huge amount of data, the difficulty was knowing how to present it in a way which was interesting and engaging, and gave the reader the opportunity to make sense of it. I realized that I could not possibly use all my data. It was important, therefore, to choose what I wanted to say, and to use illustrations from the fieldwork to illustrate that. By no stretch of the imagination would another researcher produce the same ethnographic "product" that I have produced. Somebody else might put similar interpretations on the events and personalities that I observed in the course of my research, but the sifting, the analysis, the reflexive consideration I have given to the writing process, as well as my own style, make this a unique product. The likelihood is also that at another stage of life, at another time, or in different circumstances, it would turn out very differently.
The extent to which an ethnographic narrative can be trusted is an issue of reliabiUty and vaUdity, not just at a practical level, but at a theoretical level as weU. To what extent is the ethnographer "artfuUy creating a text" [Watson, 1995, 302]? By including in a description of the setting, a narration of the stories of individuals, actual dialogue, the privUeging of objects of inquiry, and the recording by the writer of his or her own involvement in and response to the researched situation, an ethnography transcends a "scientific monograph". An ethnography instead invites the reader to come on an "exciting search", couched in rhetoric, in the "ancient sense of persuasive discourse" [Watson, 1995, 305, 307]. As ethnography has moved away from its traditional roots, requiring validity and objectivity [Denzin, 1996, 233], and has entered the terrain of fictional writers, the line between fact andfiction ha s sometimes been blurred, and the issues of reUabiUty and vaUdity, and generalizabiUty, have become problematic.
By taking into account the reflexive relationship between theory and data, and between researcher and researched, claims to accuracy are not as important, but the ethnographic product can be thought of as an interesting story, rather than a "privileged truth claim". The aim is that it ought to be an "inteUigible narrative" rather than a systematic attempt "accurately to describe and explain an external organizational reaUty" [Chia, 1996, 33]. Where once knowledge was said to rest on "unambiguous observations", theoretical concepts could now be viewed as growing out of the "soil" of observation. Chapter 2 Going backstage Page 67
Coming into the Army, as I did, as an outsider, I was in a position to have a bird's eye view of what happened, in a way that insiders would not have. As I conducted more and more interviews, developed my theoretical structure, and reflected on what I had observed, I became more and more confident in my interpretation of events and behaviours as I understood them. Not bound up in the Army's unique history and culture, I yet came to appreciate it as an almost tangible force within the Army, both empowering and constraining behaviour on the part, especially, of officers. I was aware that many of my interpretations found agreement with various people I spoke with.
With these criteria in rnind, quaUtative researchers often display an "unwillingness to generalize" [Ragin, 1994, 91]. The act of reasoning "from the observed to the unobserved, from a specific instance to aU instances beUeved to be like the instance in question" is traditionaUy held to be one of the criteria for "social scientific inquiry" [Schwandt, 1997, 57]. Several different positions on generalizations can be identified [Schwandt, 1997; Lukka and Kasanen, 1995], ranging from the radical postmodern view which denies the possibiUty of generalization, to the notion that "substantial results of a case study also hold true for other cases" [Lukka and Kasanen, 1995, 77].
The meaningful mobilization of the results of research is thus a problematic concept, since the fauure to provide each one of the three qualities of simpUcity, generality and accuracy is "inevitable and no cause for criticism" [Chapman, 1997, 190]. The recognition of this has impUcations for the use that is made of ethnographic work. Given that the individual situation is different and distinct, the principles, or underlying theory, may be appUcable to other situations. There is no such thing as a completely objective piece of research [Kirk and MiUer, 1986, 11; Glesne and Peshkin, 1992, 101; Douglas, 1985, 42], and therefore the "vaUdity" of a piece of research is more a matter of whether it is a reasonable account of what has been observed.
The next chapter explores institutional theory in more depth, and relates it to this case. It must be understood in the context of this chapter's explanation of the way an understanding and development of that theory was achieved. Chapter 2 Going backstage Page 68
Qualitative research, particularly ethnography, is, for me, a rich and exciting, but sometimes frustrating and exhausting, means by which to attempt to understand what is going on in the worlds of other people. I am grateful to the Army for allowing me access to their private world, and hope that the account I have prepared does justice to what actually goes on. Have I made an interpretation of the data I have collected in a way which does reflect the experience and behaviour of those within the organization? Have I produced an engaging and interesting account? Is it a believable and convincing account? Is the theory relevant to practice as I have observed it? That will be for the reader to judge. It is for me to issue the invitation: come with me into another world. Enter the Army with me, come behind the scenes, backstage, to see, and attempt to understand, what actually goes on. But first, I will attempt to explain the lens through which we will view the action. CHAPTER 3. The story: interpreting institutional elements.
UNDERSHAFT: ShaU I contribute the odd twopence, Barbara? The milUonaire's mite, eh? [He takes a couple of pennies from his pocket]. BARBARA: How did you make that twopence? UNDERSHAFT: As usual. By selling cannons, torpedoes, submarines, and my new patent Grand Duke hand grenade. BARBARA: Put it back in your pocket. You can't buy your salvation here for twopence; you must work it out. UNDERSHAFT: Is twopence not enough? I can afford a Uttle more, if you press me. BARBARA: Two million milhons would not be enough. There is bad blood on your hands; and nothing but good blood can cleanse them. Money is no use. Take it away ... [Shaw, 1945, 92].
How is accounting to be understood as part of the drama of organizational life? What is its significance and meaning? How does it impact on the actors who put it into practice, and what do they bring to it? The study of any individual organization can be guaranteed to uncover a rich lode of data, encompassing that organization's history, structure, personnel, personalities, aims, goals, relationships, interactions, resources, situations, context, culture, mission and practices. Gathering such a body of information is not the major problem for the observant and diUgent researcher. The dilemma is rather how, when confronted with an almost oveiwhelming weight and variety of data, the researcher can select what is relevant, and weave an interesting story out of it. How is the data to be interpreted?
This chapter establishes a theoretical viewpoint by means of which data about The Salvation Army's accounting system is to be interpreted. Institutional theory, as already suggested in Chapters 1 and 2, provides a flexible theoretical vehicle through which to organize and process information about an organization. An interpretive key, it asks "provocative questions about the world of organizations" [Scott, 1995, xni], concerned to explore deeply the way an organization relates to its environment, and its reasons for Chapter 3 An institutional story Page 70
adopting certain structures, cultures and routines. It has the capabiUty of providing generalizations about organizational behaviour, while acknowledging the individuality of specific organizations. Institutional theory is analyzed, with a focus on its essential character, history, elements, dominant issues and controversies. The usefulness of incorporating other perspectives, particularly resource dependence theory, is then outlined, and three themes, relating accounting to institutional theory, are developed.
Institutional theory.
Institutional theory is one way of looking at organizations, which exposes and explains the existence and power of underlying and taken for granted rules, norms and expectations. Institutionalization transcends technical factors:
It (institutionalization) is something that happens to an organization over time, reflecting the organization's own distinctive history, the people who have been in it, the groups it embodies and the vested interests they have created, and the way it has adapted to its environment [Selznick, 1957, 16-17].
Institutional theory, therefore, sees organizational structures as "reflections of rationalized institutional rules" [Meyer and Rowan, 1977, 340], or "shared knowledge and beUef systems" [Scott, 1995, 13]. Those norms are "rules of knowing" [Mills and Murgatroyd, 1991, 1], i.e. they are "bmlt into society as reciprocated typficiations or interpretations" [Meyer and Rowan, 1977, 341]. Such influences "provide blueprints for organizing by specifying the forms and procedures an organization of a particular type should adopt if it is to be seen as a member-in-good standing of its class" [Barley and Tolbert, 1997, 93 - 94]. Intangible elements, these influences are something which can be made visible by means of the tangible elements of organizations, when they are put into practice. While it is difficult to define expUcitly what institutions are, and while they may not be "substantive things" at all, since they are intangible, we think and Uve as though they are real [AUport, 1933,13]. Chapter 3 An institutional story Page 71
What is the significance of these institutions to organizations? Organizations want to be viewed as competent and acceptable. They, therefore, find value in compliance with institutional expectations, because through such comphance they receive the prestige, stabihty, access to resources, and social acceptance they require in order to survive [OUver, 1991; Ang and Cummings, 1997; Meyer and Rowan, 1977; OUver, 1997; Meyer et al, 1992]. Because of this, there is a tendency for organizations within a particular organizational field to become similar in structure and practices. This process, known as institutional isomorphism, leads to organizational homogeneity [DiMaggio and Powell, 1983; Booth, 1995; Powell, 1985; Covaleski et al, 1993, 66].
Institutional theory, therefore, provides a rationale, a theoretical lens or interpretive key, through which to view organizations, and raises some different and interesting questions about the world of organizations, questions which are capable of leading to generalizations about organizational behaviour [Scott, 1995, xiii - xiv]:
• Why do organizations of the same type, such as schools and hospitals, located in widely scattered locales, so closely resemble one another? • How are we to regard behavior in organizational settings? Does it reflect the pursuit of rational interests and the exercise of conscious choice, or is behavior primarily shaped by conventions, routines, and habits? • Why is it that the behavior of organizational participants is often observed to depart from the formal rules and stated goals of the organization? • Why and how do laws, rules, and other types of regulative and normative systems arise? Do individuals voluntarily construct rule systems that then bind their own behavior? • Where do interests come from? Do they stem from human nature, or are they culturaUy constructed? • Why do specific structures and practices diffuse through a field of organizations in ways not predicted by the particular characteristics of adopting organizations? • How do differences in cultural beUefs shape the nature and operation of organizations? • Why do organizations and individuals conform to institutions? Is it because they are rewarded for doing so, because they think they are moraUy obUged to obey, or because they can conceive of no other way of behaving? Chapter 3 An institutional story Page 72
The extent and variety of research which has been attempted under the umbrella of institutional theory is huge, drawing on an almost limitless pool of organizations and the social contexts in which they operate90, including studies relating to accounting91.
Given the almost confusing variety of topics and organizational settings to which institutional theory has been appUed, in an attempt to analyze and understand its major contributions to the study of organizations, and to apply it to this study of accounting in a reUgious/charitable organization, it is helpful to have a broad understanding of its inteUectual history, and the issues on which researchers have tended to focus.
The origins of institutional theory.
Institutional theory has its roots in economics, poUtical science, and sociology studies from the middle of last century onwards92 [Scott, 1995]. For institutionalists, understanding the past is seen as crucial in order to understand and explain the present,
Many studies with an institutional perspective focus on health issues [Montgomery and Oliver, 1996; Covaleski and Dirsmith, 1986; Meyerson, 1994; Goodrick and Salancik, 1996; Scott, 1992; D'Aunno et al, 1991]. Another area for institutional research has been education [Townley, 1997; Rowan, 1982; Meyer and Rowan, 1992; Meyer et al, 1992]. Other studies have focused on institutional aspects of building firms [Oliver, 1997], child care service organizations [Baum and Oliver, 1991], work/family programmes [Osterman, 1995]; the airline industry [Bacharach et al, 1996]; the newspaper business [Dacin, 1997]; a manufacturing industry [Dickson and Weaver, 1997]; and the Californian cattle industry [Elsbach, 1994]. 91 These have included a consideration of the State of New York's decision to adopt Generally Accepted Accounting Principles (GAAP) for external reporting [Carpenter and Feroz, 1992], which was held to be done in an attempt to gain legitimacy. Other institutionally focused studies related to accounting have included case studies of nonprofit organizations [Feeney, 1997, 506], a study of financial reporting practices at the Fortune 200 between 1962 and 1984 [Mezias, 1990], a study of hyper competition in the banking industry [Ang and Cummings, 1997], and a study of the "calculative practices and techniques including accounting" by the Governor of Wisconsin [Covaleski and Dirsmith, 1995]. 92 Three institutional economists from the turn of the century, Veblen, Commons and Mitchell, while differing in their individual views, were all critical of the conventional economic models of the day because of their "unrealistic assumptions and inattention to historical change" [Scott, 1995, 2]. Chapter 3 An institutional story Page 73
so that "rather than being deterministic and static, (an institutional perspective) should accommodate changes in poUcies, structures and institutions and integrate in its body of understanding new ideas and experiences" [Ahmed, 1992, 140].
The ascendancy of neoclassical economics prevailed until the 1970s , when the new institutional economics emerged as an inteUectual force. Institutional economists now see the economic system as part of the total social system, held together not by a set of equiUbrating market forces but instead by "a set of coherent social, poUtical and economic forces" that make up the "social fabric of economic phenomena" [Ahmed, 1992, 142]. Institutional theory thus chaUenges many of the assumptions underlying neo-classical economics94.
At least on the American scene, poUtical scientists early this century grounded institutional analysis in "constitutional law and moral philosophy"96 [Scott, 1995, 6]. There have been several strands of institutionalism within the discipline of sociology . According to Durkheirn, institutionaUy held systems of beUef take on a rehgious-like character, becoming "social facts" viewed as both "external" and "coercive" [Scott, 1995, 10]. Weber's influence on institutional theory has been vast. He, perhaps more than other institutional theorists, attended to "the effects of broader institutional forces in shaping and supporting differing administrative systems" [Scott, 1995, 14], i.e. he identified institutions as separate from the organizations which they influenced.
93 While the work of earlier institutional economists has been criticized as being largely descriptive, [Scott, 1995, 5], Hodgson [1998, 166] maintained that economists such as Veblen, Commons and Mitchell, had addressed "crucial theoretical issues", and that their achievements ought to be appreciated. 94 Denzau and North [1994], for example, challenged the assumption of the rational choice framework, that individuals make choices which maximize their self interest. They advocated opening the "black box" of the rationality assumption used in economics, and suggested a model based on the interaction between institutions ("the rules of the game of a society") and the mental models ("internal interpretations of the environment") of individuals [Denzau and North, 1994,4 - 5]. 95 Some "institutional" political scientists were Wilson, Burgess and Willoughby [Scott, 1995]. 96 Their work also was devoted mainly to descriptive studies of formal structures and legal systems, it was conservative, and it too was "largely nontheoretical", according to Bill and Hardgrave [1981, referred to by Scott, 1995, 6]. 97 These include the work of Freidson and Abbott, Durkheirn, Weber, Parsons, DiMaggio and Powell, Mead, Berger and Luckmann, and Meyer and Rowan [Scott, 1995, 8]. Chapter 3 An institutional story Page 74
Modern organization studies can be identified as beginning in the 1950s, when organizations were distinguished conceptuaUy as "distinctive types of social forms" [Scott, 1995, 16]. Institutional theories provided explanations of how these organizations were structured, and how they behaved98. Weick99 [1996, 567 - 568] noted that organizations were seen to be "externaUy controUed by their social contexts", which were determined by "what people take for granted, and consider legitimate, and are willing to pay as the price of being included".
The "new institutionaUsm", as it is known, began in the 1970s, with seminal papers by Meyer and Rowan [1977] and Zucker [1977]. Meyer and Rowan, drawing on the work of Berger and Luckmann [1966] proposed that institutional rules functioned as myths, which were adopted at the expense of organizational efficiency:
Institutionalized products, services, techniques, poUcies, and programs function as powerful myths, and many organizations adopt them ceremoniaUy. But conformity to institutionalized rules often conflicts sharply with efficiency criteria and, conversely, to coordinate and control activity in order to promote efficiency undermines an organization's ceremonial conformity and sacrifices its support and legitimacy. To maintain ceremonial conformity, organizations that reflect institutional rules tend to buffer their formal structures from the uncertainties of technical activities by becoming loosely coupled, building gaps between their formal structures and actual work activities [Meyer and Rowan, 1977,340-341].
This "macro" perspective was also adopted by DiMaggio and PoweU [1983], who identified three mechanisms by which institutional norms took effect within an organizational field. Their coercive, mimetic, and normative classifications of institutional forces have been the basis for much research and theory development since that time.
98 The inauguration of the journal Administrative Science Quarterly in 1956 also gave a boost to research on organizations. 99 Weick was reflecting on the contribution of Gerald Salancik to the field of organization studies, referring particularly to Salancik's emphasis on the importance of social context. Chapter 3 An institutional story Page 75
Porter [1996] suggested that, from a "micro" point of view, the study of organizations as "critical contexts" had been given too Uttle attention. He caUed for more research on the "internal, organizational environment affecting behavior", arguing that very Uttle research had paid attention to individual organizations [Porter, 1996, 264 - 265]. This study wiU be an attempt to contribute to an understanding of the way in which an individual organization, given its own unique history, culture and organizational structure, responds to institutional pressures.
Elements of institutions.
Institutional theorists have identified a number of different institutional elements, which have been emphasized to varying degrees. Scott [1995] adhered essentiaUy to the three elements identified by DiMaggio and PoweU [1983]100, and specified the means by which they became part of organizational behaviour:
(institutions consist of cognitive, normative, and regulative structures and activities that provide stabiUty and meaning to social behavior. Institutions are transported by various carriers - cultures, structures, and routines - and they operate at multiple levels of jurisdiction [Scott, 1995, 33].
As these institutions shape social behaviour, they are inevitably incorporated into organizations, and are such powerful forces that they appear as objective reaUty, even though they are sociaUy constructed [Scott, 1995, 34]. Not only are organizations supported and constrained by these elements, but they are deeply infused with institutionalized beUefs and practices, i.e. they are incorporated into organizational
fabric by means of cultures, structures and routines
100 He retained the three elements, but re-named coercive influences "regulative", and mimetic "cognitive". "Normative" influences retained the same label. 101 The "carriers" of institutions are the means by which institutions are embedded and perpetuated in organizations, and involve both structure and action. Action "operates to produce - to reproduce (perpetuate) or alter - structure". This notion rests on Gidden's theory of structuration, emphasizing "the reciprocal relation of structure and action in all social behavior" [Scott, 1995, 52]. Chapter 3 An institutional story Page 76
While acknowledging that an integrated conception of these pressures was possible , Scott [1995, 34] saw value in separating them, in order to understand their specific elements, the basis on which organizations compUed with them, how they attained legitimacy, and the assumptions, mechanisms and indicators on which they were founded. While the categories by which these elements are identified vary in some ways, the original classification of cognitive, normative and mimetic institutional elements by DiMaggio and PoweU [1983] is taken as the starting point for the summary in Table 3.1, "Three viewpoints of institutional pressures" below:
Researcher(s) 'Coerciv e Mimetic Normative Isomorphism i Isomorphism 103 Isomorphism DiMaggio Political influence. Uncertainty Professionalization of and Powell Formal and encourages the work force. More [1983, 150 4 informal imitation. concern with status 154] pressures. than efficiency. Scott [1995, Regulative: Cognitive: taken Normative: Social
34 - 52] :f coercive rules, for granted, beliefs and norms. laws, and symbolic, mimetic sanctions. aspects of social life. Covaleski Formal and A more passive Normative: and informal coercive response. legitimation of Dirsmith pressure. professional autonomy. [1988a]
Table 3.1. Three viewpoints of institutional pressures.
The coercive pillar.
Coercive isomorphism, or the regulative piUar [Scott, 1995], is perhaps the most obvious type of institutional element. A feature of such an institutional environment is an "elaboration of rules and requirements ... elaborated state jurisdiction and pressures
102 Sometimes the source of institutional pressures may be difficult to discern, especially since organizational actors may themselves be unsure of the nature of expectations. Appendix 3.1 "Interpretation of institutional pillars as the result of ontological beliefs" analyzes perceptions of institutional pressures. 103 Institutional isomorphism is the process by which organizations become similar to each other. It has already been referred to, and is discussed more fully later in this chapter. Chapter 3 An institutional story Page 77
for conformity to pubUc expectations and demands" [OUver, 1997, 101]. This environment leads to both formal104 and informal pressures on organizations which require funding, or which are subject to regulation if they are to continue in operation.
Organizations gain and maintain legitimacy by conformity with these rules and regulations, and by being acceptably organized, from a legal point of view, even if the changes made in response to those regulations are more ceremonial than actual [DiMaggio and Powell, 1983, 150]. The rationale underlying this institutional influence is primarily that offinancial dependence. Organizations will change isomorphicaUy to resemble the organizations on which they are dependent for resources, and the greater the dependence of an organization, and the greater the centralization of its resource supply (e.g. reliance on government funding, or a major donor), the more similar it will be to that organization in structure, climate and "behavioral focus" [DiMaggio and PoweU, 1983, 154]. Conformity with institutionaUy acceptable practices leads to legitimacy, which in turn enables an organization to attract resources.
The mimetic pillar.
DiMaggio and PoweU [1983] proposed the notion of mimetic institutional forces, identified later by Scott [1995] as the "cognitive piUar". Organizations modeUed after other organizations in theirfield wer e perceived to be more legitimate and successful [DiMaggio and PoweU, 1983, 152], and this was especiaUy important in situations of uncertainty. Organizations do not want to stand out as being different, and they therefore behave in ways that are socially acceptable. The more organizations that exhibit certain behaviour, the more pressure there wiU be on other organizations to copy that behaviour. The more uncertain the relationship between means and ends, or
104 Formal pressures could include specific rules, systems of monitoring, or even sanctions, whereby organizations have their funding cut if they do not adhere to regulative requirements. 105 Informal pressures may include conformity with the organizational structures of donor organizations, and any other organizational behaviours calculated to ensure political acceptability and eligibility for funding. Chapter 3 An institutional story Page 78
the more ambiguous the goals of an organization, the greater the reUance an organization wUl place on modelling itself on "successful" organizations, in order to conceal that uncertainty.
Perceived by some researchers as being imposed on organizations, and adopted in a rather passive way [Covaleski and Dirsmith, 1988a; Meyer and Rowan, 1977; DiMaggio and PoweU, 1983], nevertheless some would see individuals constructing a social identity for themselves and their organization in an interactive and negotiated way [Scott, 1995, 45]. It foUows from this observation, and from the DiMaggio and PoweU [1983] proposition that mimetic pressures are more likely to be accepted in situations of uncertainty, and that where an organization has a strong perception of its own goals and purposes, and a strong sense of identity and culture, it may weU resist such pressures if they do not conform to that defined and understood identity. Organizations attain legitimacy by relying on "estabUshed, legitimated procedures (which) enhance organizational legitimacy and survival characteristics" [DiMaggio and PoweU, 1983, 155].
The normative pillar.
If regulative institutional influences are obvious in an organizational context, normative influences are less easily identified. The normative piUar emphasizes "the stabilizing influence of social beUefs and norms that are both internalized and imposed by others" [Scott, 1995, 40], values that may be unspoken, or expectations that have gained acceptance within organizations. Perhaps the most striking demonstration of normative institutional influences is in the growth of a large, professionaUy trained labour force. DiMaggio and PoweU [1983, 152 - 153] suggested that "the coUective struggle of members of an occupation to define the conditions and methods of their work" had led to a similarity with their counterparts in other organizations
106 This was thought to occur through university courses, professional networks, and by the development of a pool of people with a similar orientation. Chapter 3 An institutional story Page 79
Within organizations, the effect of this increasing professionalization of the workforce has been the estabUshment of common promotion practices and skiU level requirements, and the institution of human resource departments, with the result that in different organizations, those who reach the top of their professions are "virtuaUy indistinguishable"107 [DiMaggio and PoweU, 1983, 153]. The development of this professionalized work force, it could be suggested, has more to do with status than efficiency. DiMaggio and PoweU [1983, 155] proposed that the more highly professionalized a workforce became, in terms of academic qualifications, and participation in professional and trade associations, the greater the extent to which that organization would become sirrular to other organizations in the same field108. Using this concept, the growth of the accounting profession, and its diffusion throughout society, could be interpreted as an example of such normative isomorphism.
If a regulative view grants legitimizing authority as a result of conformity to rules and regulations, and a mimetic view stresses conformity with orthodox structures and identity, the normative pillar rests its claims for legitimacy on deeper, moral values. Where regulative controls may come from external sources, normative controls are more likely to be internal, with "incentives for conformity ... likely to include intrinsic as weU as extrinsic rewards" [Scott, 1995, 47].
Identifying institutional elements.
Some researchers see a differentiation between these three pillars as highly significant. This could be because such interpretations rest on philosophical interpretations of the
107 This means that professionals view problems in a similar way, and institute similar policies, procedures and decision making structures. They serve on similar boards, have similar career paths, and their employment and promotion guarantee to their organizations a certain legitimacy and acceptance, as they attract rewards "for being similar to other organizations in theirfields" [DiMaggio and Powell, 1983, 153]. 108 Professional networks were found to be influential in the establishment of work/family programmes [Osterman, 1995, 683], US health care organizations [Scott, 1992], the treatment of AIDS patients [Montgomery and Oliver, 1996], and the rejection of a business model of performance appraisal for University academics [Townley, 1997]. Chapter 3 An institutional story Page 80
world and the nature of reaUty [Scott, 1995], or, according to the view adopted here, because different responses may result from institutional pressures which stem from coercive, normative or mimetic systems109. PoweU [1991] suggested that the type of institutional pressure influenced whether it was "accepted with enthusiasm or actively resisted" [PoweU, 1991, 197]. Perceptions by organizational actors, in such cases, would be a vital determinant of organizational response.
However, while it may be convenient to package institutional pressures neatly into these three "divergent" dimensions, or pillars, it could also be that together they contribute, in "interdependent and mutuaUy reinforcing ways, to a powerful social framework" [Scott. 1995, 34]. The labelling may, therefore, be problematic, or perhaps even pointless110. Because of the constantly changing nature and perceptions of social institutions, these influences are likely not always to be discrete, but rather to merge together into the social and economic fabric in which organizations are embedded, and which, in turn, estabUsh themselves in those organizations in a reflexive manner. Not only wiU such pressures overlap, but they wiU be subject to the interpretation of the researcher, and, from the point of view of organizational response, to the perceptions and responses of organizational actors111. The significance of the pressures may not only be in their source, but in the perceptions of organizational actors and the consequent response made to them.
109 Ang and Cummings [1997, 249], for example, found that in the case of banks, institutional influences evoked different responses, depending on their source. The banks were likely to conform to regulatory sanctions, but would temper their response to mimetic institutional pressures, depending on their size. 110 In her study of the influence of state and professional associations in shaping an organization's legitimacy and performance in the construction industry, Oliver [1997] described voluntary government agencies and professional associations as normative/mimetic institutional pressures. 111 There is the possibility that these may sometimes be inaccurate and misinformed, with institutional demands being interpreted, for example, as regulative requirements of government agencies, when they may be cognitive, or mimetic, responses to funding pressures. This is referred to in Appendix 3.1 "Interpretation of institutional pillars as the result of ontological beliefs". Chapter 3 An institutional story Page 81
Issues considered by institutional theory.
Whether or not specific institutional pressures can be identified, there are some common threads running through institutional Uterature.
Institutional isomorphism.
Institutional isomorphism, the process by which "organizations are driven to incorporate the practices and procedures defined by prevailing rationalized concepts of organizational work and institutionalized in society" [Meyer and Rowan, 1977, 340], has already been introduced as a fundamental concept of institutional theory. The driving force which ensures this process is the struggle by organizations for survival in an increasingly organized and inter-connected society.
Institutional theorists talk of the "survival value of conformity", and how compliance to institutions such as regulatory structures, government agencies, rules, laws, and professions leads to "enhanced stabiUty, legitimacy, social support and prestige" [OUver, 1997, 101 - 102]. Success, then, is defined not merely in economic terms, but in terms of survival, which in its turn depends on conformity to institutions. The nature of organizational success may, therefore, be difficult to define [Meyer et aL 1992, 65 - 66], depending as it does, in the case of institutionalized organizations, on "conformity with larger rules".
Legitimacy is a central tenet of institutional theory, and it is presumed that organizational isomorphism wiU lead to increased legitimacy . Because of the legitimacy isomorphism grants, it has been put forward as the best explanation of why
112 Deephouse [1996] tested two types of legitimacy, that granted by regulatory (i.e. agencies of the state) and public (i.e. the acceptance of the general public) endorsement. He concluded that both these groups recognized organizations that conformed to the strategies used by other organizations as being "more legitimate than those that deviate from normal behavior" [Deephouse, 1996, 1033]. Chapter 3 An institutional story Page 82 organizations in modern society are structuraUy similar. DiMaggio and PoweU [1983] identified a paradox, that societies are "smart", but organizations are "dumb":
How can it be that the confused and contentious bumblers that populate the pages of organizational case studies and theories combine to construct the elaborate and weU-proportioned social edifice that macrotheorists describe? [DiMaggio and PoweU, 1983, 156 - 157].
Their explanation of the structural sunilarities they observed, was the theory of institutional isomorphism. It explained the irrationality of how organizations actuaUy worked, identified the struggle for organizational survival and had potential imputations for social poUcy, i.e. the encouragement of poUcymakers to consider the impact of their poUcies on "organizational fields as a whole and not simply on the programs of individual organizations" [DiMaggio and PoweU, 1983, 157].
Decoupling.
The adoption of institutionaUy acceptable practices may not enhance the efficiency of an organization's operations, and yet presenting an acceptable pubUc image is important to organizations if they are to survive. Meyer and Rowan [1977, 356 - 359] suggested three strategies for resolving this potential conflict. These were decoupling (or loose coupling), the logic of confidence, and ceremonial inspection and evaluation. Decoupling is the activity whereby "to maintain ceremonial conformity, organizations that reflect institutional rules tend to buffer their formal structures from the uncertainties of technical activities ... building gaps between their formal structures and actual work activities" [Meyer and Rowan, 1977, 340 - 341]. Formal structure, in this scenario, has more to do with "the presentation of organizational-self than with how things actuaUy transpire within the organization", a kind of "symbohc window-dressing" [Carruthers, 1995, 315], a costume adopted for the drama of organizational life.
In addition, internal and external displays of confidence and good faith demonstrate organizational commitment to the institutional structures adopted, becoming "sacred Chapter 3 An institutional story Page 83
rituals that give meaning to the whole enterprise" [Meyer and Rowan, 1992]. Organizations, faced with the possible loss of legitimacy through inspections and evaluations, minimize and ceremonialize these functions. Such is the legitimacy conferred on organizations which are isomorphic with their institutional environment, Meyer and Rowan [1977, 359] claimed, that not only wiU the organizations themselves avoid inspection and evaluation, but external constituents too wiU "accept ceremoniaUy at face value the credentials, ambiguous goals, and categorical evaluations that are characteristic of ceremonial organizations". Figure 3.1, "How institutional isomorphism is achieved by organizations" below, iUustrates these responses.
The decoupling of structural subunits from each other and from activity Isomorphism with an elaborated institutional Rituals of confidence and good faith environment (in order to achieve legitimacy) The avoidance of inspection and effective evaluation
Figure 3.1. How institutional isomorphism is achieved by organizations. [Source: Meyer and Rowan, 1977, 360].
Other researchers have acknowledged the notion of decoupling. Ahmed [1992, 150] drew attention to the dichotomy between ceremonial and instrumental values, which he described as being intertwined in a "complex set of relationships"113. Barley and Tolbert [1997, 93] proposed that efficiency was not the driving force behind decision making, and that formal structure changes were not "rational adaptations to technical and environmental conditions". Meyer and Rowan [1992], in their work on schools in the USA, noted that "loose" coupling of structure and activities occurred, whereby
113 Ahmed [1992, 153] proposed that institutional economists would take a dialectical view, with structures conforming to one or the other values, or being comprised of both. Chapter 3 An institutional story Page 84
outcomes were uninspected and uncontroUed, the system lacked internal linkages, in the form of standards of procedures, and there was Uttle control over instructional work.
Organizational success.
Going hand in hand with the notion of institutional isomorphism and the means by which it is achieved, is the notion of what constitutes organizational success. What can conformity with institutional pressures offer an organization, in terms of benefits? Legitimacy, primarily, and by default almost, success. In an institutionalized environment, success is not perceived to be greater efficiency, but rather the long term survival of an organization, through resource acquisition, faciUtated by conformity with institutional rules [Meyer et al, 1992, 65]. Organizations compete for "social fitness rather than economic efficiency" [PoweU, 1985, 565], so adhering to institutional expectations ensures survival, and hence success114 [Baum and OUver, 1991; Meyer et al, 1992; D'Aunno et al, 1991].
Elsbach [1994] studied the speeches of spokespersons for the Californian cattle industry, and found that references to institutional links lent legitimacy to industry claims. One of the charades which had been institutionalized in corporations, according to Maclntyre [1981, 102] was a beUef in managerial expertise, whose "moral and poUtical legitimacy" he questioned [Maclntyre, 1981, 83]. Conformity with institutional rules and expectations, institutional theorists have suggested, is required to ensure an organization's survival, as much as is achieving "high levels of production efficiency and effectiveness" [Covaleski et al, 1993, 66].
114 Oliver [1997, 118] suggested that there was a broader range of benefits associated with institutional isomorphism and adherence to "legitimating institutional linkages". Such linkages, she maintained, improved performance, assisted in competition for resources, and offered "strategically useful information", through business and professional contacts, enhancing an organization"s acceptability. Chapter 3 An institutional story Page 85
The growth of bureaucracies.
The growth of bureaucracies has been attributed to the existence of an institutiona] environment. DiMaggio and PoweU [1983, 147] identified as the "iron cage"115 the rationaUstic bureaucratic order which imprisoned humanity. Bureaucratization, they maintained, led to "homogeneity in structure, culture, and output", but not necessarily to greater efficiency. The institutional environment demands rationalization of organizational structures, and so bureaucratic growth occurs, not as an outcome of utiUty maximization, but rather as "a product of institutional structures permitting conduct that is apparently rational to yield inefficient outcomes", for the sake of legitimization [Meyer, 1990, 168]. Organizations are therefore much more than just efficient, technical systems, but are elaborate social systems, whose ends and means are defined and shaped by institutional frameworks116 [Scott, 1987, 508]:
... there may ensue, in particular vocations and in particular types of organization, the process of sanctification ... through sentiment- formation, emotional dependence upon bureaucratic symbols and status, and affective involvement in spheres of competence and authority, there develop prerogatives involving attitudes of moral legitimacy which are established as values in their own right, and are no longer viewed as merely technical means for expediting administration [Merton, 1968, 256].
Such organizational structures become mandatory. As organizations respond to institutional pressures, certain bureaucratic structures and practices attribute legitimacy through more than adherence to a set of rules. They become almost a moral necessity.
115 Originally Weber's terminology. 116 Adler and Borys [1996, 62] identified three types of bureaucracies as coercive, technically efficient, and "a third, institutionalist branch (which) focuses on the purely symbolic functions of bureaucracy signaling submission to cultural norms of rationality". They described it as "mock bureaucracy", a sham, or a hollow shell, instituted to maintain conformity to institutional expectations. Chapter 3 An institutional story Page 86
How institutionalization happens.
Institutional isomorphism was seen by DiMaggio and PoweU [1983] to occur in a four stage structuration process, reflective of the formation of an organizationalfield. Ther e was first an increase in the interaction among similar organizations, foUowed by sharply defined interorganizational structures of domination and patterns of coaUtion, an increase in the information load for organizations, and eventuaUy a mutual awareness in a set of organizations of a common purpose. During this process, organizations developed "a concern for self-maintenance" [Scott, 1995, 18], as they saw themselves as part of an organizationalfield competing for scarce resources. The stage was then set for increasing institutionalization of those organizations.
How did this process occur? Scott [1987, 501 - 507] identified several possibiUties which might explain organizational structure. The obvious ones related directly to the coercive, normative and mimetic influences identified by DiMaggio and PoweU [1983], but in addition he proposed some other possibiUties. Organizational actors might choose a particular organizational structure, it could be "imprinted" at the time of an organization's founding, occur over time as a process of evolution, or be bypassed, with the orderliness of the organization being based on institutionaUy denned beUefs rather than organizational structure.
Environmental complexity is a factor which has a bearing on conformity to institutionalized norms. If an environment demonstrates formaUy organized interests and groups, the likelihood is that the administrative burdens of organizations wiU be greatly expanded [Meyer et aL 1987]. In his study of the a Zucker [1977, 741] identified the notion of cultural persistence, and proposed that the Chapter 3 An institutional story Page 87 "persistence of cultural understandings ... var(ies) directly with the degree of institutionalization". The greater the degree of institutionalization, the more persistent that particular culture would be. Consistent with the notion of an evolutionary process, institutionalized cultures would be transmitted and maintained, with change being resisted. Once social knowledge had been institutionalized, she claimed, it existed as a fact, an objective reaUty, and was "transmitted directly on that basis", from generation to generation [Zucker, 1977, 726 - 728]. Institutional theory would therefore propose that the process of institutionalization occurs because of a variety of factors and influences, including the founding and history of an organization, its dependence on funds, cultural expectations about what practices and solutions to problems are acceptable, and, of course, the networking of professionals across organizations. The significance of the founding of an organization. One of the institutional elements identified by Scott [1987] as affecting organizational structure has been described as its "imprinting" at the time of its founding. He [Scott, 1995, 18] later suggested that over the "natural history" of an organization, it developed "distinctive structures, capabiUties and UabiUties". Historical features, therefore, were highly significant, since at the founding of an organization, institutional forces drove selection criteria, being "more important than market forces in shaping the characteristics" of that new organization" [Dacin, 1997, 47]. Hodgson [1998, 189] acknowledged the influence of institutions, but cautioned that whfie their historic influence was undoubtedly important, it also had to be acknowledged that institutions, "knowingly or unknowingly, are formed and changed by individuals". Organizations are situated in a broad sociocultural environment, and hence while there may not always be a strong degree of connection within an organizationalfield, i n the case of newly forming organizations, there wiU, at the very least, be strong social structures and norms to which it is critical that a new organization must match its Chapter 3 An institutional story Page 88 structural features, if it is to be successfuUy established [Dacin, 1997, 52]. Founders117 therefore have a huge influence on the structure of the organizations they set up. It is vital that their organizations are seen as "legitimate subunits of the larger social system" if they are to receive the funding necessary to begin [Dacin, 1997, 74]. Funding impUcations for already estabUshed organizations wiU be quite different. Such is the enormity of the founding process, that not only do new organizations become isomorphic with their sociocultural environment at the time of founding, but in adopting institutionaUy acceptable characteristics they set a pattern for their future. Nonprofit organizations as a special case. These influences are so persuasive that they affect aU organizations, both those operating for profit and those with other motivations118. Voluntary organizations, Booth [1995, 52] claimed, had not been exempt from these pressures, including the institutionalization of accounting control systems. In highUghting the usefulness of accounting in terms of offering organizational legitimacy, Carruthers [1995, 323] observed that such strategies went "weU beyond for-profit corporations, or even organizations in a capitaUst economy", to include nonprofit organizations. Like for- profits, they also designed accounting systems to comply with formal rules, or offer rationalizations for decisions already taken [Carruthers, 1995, 323]. 117 There are other ways of considering the influence of founders, i.e. not from a primarily institutional perspective. Pettigrew [1979], for example, studied the role of the founding headmaster of a private British boarding school. This was an illustration, he suggested, of how purpose, commitment and order were created, and how they were translated into the organizational culture of the school. In a sense, then, the character and attributes of the founder were institutionalized within the school's culture. This notion has implications for a religious organization such as The Salvation Army, which had a strong, charismatic founder (see Chapter 4). 118 Possibly because nonprofit organizations are so obviously dependent on governments or other external agencies for funding, a great deal of research from an institutional theory perspective has concentrated on organizational fields such as schools [Rowan, 1982; Meyer and Rowan, 1992; Meyer et al, 1992], universities [Townley, 1997], health care organizations and related issues [Montgomery and Oliver, 1996; Covaleski and Dirsmith, 1986; Goodrick and Salancik, 1996; Scott, 1992; D'Aunno etal, 1991]. Chapter 3 An institutional story Page 89 Attitudes of funding agencies towards accounting, for example, greatly affect the organizations to whom they provide those funds. As the "symboUc, power, and legitimation roles of accounting information" [Carpenter and Feroz, 1992, 615] in governments and funding agencies are understood, it becomes possible to understand the similar roles played by accounting in the organizations who receive those funds, as they respond to institutional pressures for conformity to established norms and practices. Funded organizations work towards conformity with the governments and agencies on whom they depend for funds, in order to attain the status of legitimate recipients of resources. According to Feeney [1997, 490], nonprofits were "under pressure for efficiency and accountabiUty", and standard management models were inadequate for explaining or understanding how they operated. He suggested that it was criticaUy important to understand the "rich, complex and dynamic external environment" in which they operated [Feeney, 1997, 491], and put forward institutional theory" as a means by which these organizations could be understood "more holisticaUy", as weU as having potential to solve practical organizational problems [Feeney, 1997, 506]. More specificaUy, there was a need to examine reUgious organizations and the institutional forces at work in thatfield, accordin g to Stout and Cormode [1998, 66 - 70]. By identifying coercive, mimetic and normative120 pressures for isomorphism, the broader structural environment of reUgious organizations would be understood, and the tendency of churches to resemble one another, both structuraUy and culturally, exposed 119 He identified organizations are social systems within a larger social system, urged the analysis of cultural influences in the form of "values and norms", emphasized the variety of constituencies influencing organizational behaviour, suggested that coercive influences could be imposed by "external mandates", and highlighted the possibility of coercion through interorganizational horizontal and vertical networks [Feeney, 1997,491 - 492]. 120 In the USA, coercive pressures were obvious in matters such as Internal Revenue classification, government funding, the influence of the judicial system and local governments. From a mimetic perspective, when institutional "role models" acted other organizations were sure to follow, whether the action was appropriate or not, since any action was "more legitimate than inaction". Theological training and the professionalization of "religious" personnel were a normative pressure [Stout and Cormode, 1998,69-70]. Chapter 3 An institutional story Page 90 [Stout and Cormode, 1998, 68]. Although institutional theory consists of "not one but several variants" [Scott, 1987, 493], and is capable of being viewed in a number of different ways, there are, as established, some commonaUties. It highUghts the influence of culture on decision making and organizational structures [Barley and Tolbert, 1997, 93], explains the homogeneity of "organizational forms and practices" [DiMaggio and PoweU, 1983; Ang and Cummings, 1997, 237], identifies the sources of influence on organizational structures [DiMaggio and PoweU, 1983], establishes "key constituents" in an institutional environment, including representatives of the state and professions [OUver, 1997, 101 - 102], exposes the "charade" of rationaUty in organizations, suggesting a distinction between technical and institutional functions [Meyer et al, 1992; Scott, 1987; Meyer and Rowan, 1977], and proposes accounting as having a symboUc role in organizational structure [Carpenter and Feroz, 1992]. Deficiencies and controversies of institutional theory. The notions of organizational inertia, institutional isomorphism, and the "legitimacy imperative", therefore, form the basis of much work based on institutional theory, and yet it has been suggested that there has been Uttle attention devoted to the limits of these assumptions [Kraatz and Zajac, 1996, 812]. A number of issues have been identified as having been largely neglected by institutional theory, or at least having had scant coverage. WhUe they overlap to a great extent, the foUowing discussion attempts to separate significant aspects of each of these controversial issues. The assumption of passive organizational response. Institutional theory, by taking for granted institutional isomorphism, has been criticized for its "overly passive conception of individual action" [Roberts and Greenwood, 1997, 368, referring to PoweU, 1991; Covaleski and Dirsmith, 1988a], for its downplaying of Chapter 3 An institutional story Page 91 "organizational innovation and adaptation" [Davis and PoweU, 1992, 342] and its passive view of human agency [Davis and PoweU, 1992, 363]. Adler and Borys [1996, 62], in considering explanations for the rise of the bureaucratic form of organization, dismissed an institutional theory approach as one that focused on the "purely symboUc functions of bureaucracy signaling submission to cultural norms of rationaUty". By assuming that organizations were passive players, Ang and Cummings [1997, 235] suggested that researchers often disregarded "individual organizations' abiUty to respond proactively, creatively, and strategicaUy to institutional influences". Goodrick and Salancik [1996] extended institutional theory arguments to include considerations of interest and agency, and proposed that organizational influences on practice (i.e. the resistance of the organization to pressure for institutional isomorphism) would be greatest when institutional expectations were most uncertain. In this situation, organizations could exercise strategic choice without losing legitimacy [Goodrick and Salancik, 1996, 4]. Montgomery and OUver [1996] observed that institutional isomorphism was not straightforward, with institutional elements being adopted to varying degrees, based on varying organizational responses. OUver [1988] considered three different theoretical perspectives on why organizational isomorphism occurred, including institutional theory. She suggested that a strategic choice perspective was most consistent with her findings, since organizations seemed to be only "loosely coupled" to their environment. Thus, while the principle of isomorphism predicted a "unilateral imposition of environmental constraints on organizations as a whole within any niche", there may be selection processes within organizations which either resisted or adopt homogenizing pressures [OUver, 1988, 558]. The process of conforming is, therefore, compUcated, and does not necessarily involve the organization in its entirety, so that organizations may develop pockets of acquiescence or resistance, depending on the nature and intensity of the institutional pressures they face. Environmental pressures are complex, as are organizational responses, so institutional isomorphism cannot be assumed to be a straightforward and inevitable consequence of the presence of institutional elements in an organization's Chapter 3 An institutional story Page 92 environment. Ahmed [1992, 158] described a firm, for example, as being "a system of conditions of existence, constraints and obstacles rather than a unitary functioning agency with a unitary goal". According to an institutional perspective internal conflicts of interest would be possible, as weU as "partial objectives, constraints and ambiguous mechanisms and practices" [Ahmed, 1992, 159]. The response of an organization, therefore, would be made in response to institutional pressures, within the constraints of those organizational ambiguities. While institutional isomorphism has been portrayed as a "source of binding constraint", PoweU [1991, 194] suggested that each form of constraint was also a form of enablement, and that institutional theory had portrayed organizations too passively, concentrating on the constraints of environments, rather than focusing on internal responses to these pressures. There were varieties of responses from organizations121, as they frequently attempted to "resist or alter external demands that are placed upon them" [PoweU, 1991, 195]. Demerath [1998] identified a case which he described as an exception to institutional isomorphism within the field of reUgious organizations. He suggested that culture strongly affected the isomorphic process in several ways: an organization would be likely to choose which organizations it would interact with, due to its own cultural commitments and self-image; some reUgious organizations may be culturaUy restrained from copying the behaviour of other organizations within the reUgiousfield; an d culture could be a deinstitutionalizing force, with the reUgious community becoming fragmented [Demerath, 1998, 168-169]. In his study on multinational churches, Nelson [1993, 675] observed that the internal 121 These responses vared, Powell [1991, 195 - 197] explained, for several reasons: resource environments differed greatly; there were key differences in industry structures and how organizations related to the state; organizational structures and responsibilities displayed great variations; government requirements were not always felt by organizations as direct coercion; occupational and professional projects varied; and sources of constraint varied in direct relation to die capability of organizations to shape or influence the nature of institutional expectations. Chapter 3 An institutional story Page 93 dynamics of some churches generated resistance to "bureaucratic isomorphism". This was contrary to most institutional Uterature, and to the church-sect notion that reUgious organizations become more bureaucratic as they grow older. He suggested that there was a connection between institutional theory and the sociology of reUgion that had not been "exploited", and that "institutional theorists may need to pay more attention to the sources of resistance to isomorphism in addition to factors that favor isomorphic 1 00 response" . This is consistent with the notion that the culture of a reUgious organization, and its beUef system, may be powerful factors in determining whether that organization wiU acquiesce to institutional pressures, or respond in some other way. Other responses to institutional pressures have been proposed. OUver [1991] maintained that organizational response to institutional pressures depended on resource dependencies, and, therefore, a passive response could not be assumed. Ang and • 10"\ Cummmgs [1997] claimed that functional complexity, technical uncertainty and organizational size influenced conformity to institutional influences. Other factors identified as affecting organizational responses to institutional pressures include the desire for organizational effectiveness, autonomy over decision making,flexibility, or satisfying conflicting internal demands [Townley, 1997, 262]. Studies of isomorphism should consider the type of environmental constraint, the "elaborate processes of influence", and should detail the type of organizational structure affected [Townley, 1997, 262]. The existence of multiple environments could affect responses to institutional pressures, with an organization having the abihty either to react to its environment, or to "enact or construct its environment" [Bordt, 1997, 136]. Even an organization which turned its coUective back on the institutional demands of the day1 \ Nelson's study [1993] compared and contrasted the Christian Congregations, the Assemblies of God, and the Church of Jesus Christ of Latter Day Saints in the USA and Brazil. It led him to suggest that isomorphic pressures differed by nation, and that "organizational susceptibility" to these pressures varied by authority type, i.e. whether the church was organized under traditional authority, charismatic authority, or rational-legal authority. 123 This was based on a study of banks' conformity with institutional influences for Information Systems outsourcing [Ang and Cummings, 1997]. 124 In her study of feminist collectives, Bordt [1997] related the notion of passive organizational response to institutional pressures to the existence of a "unitary environment". If feminist collectives embedded themselves within the "alternative environment", and buffered themselves from technical Chapter 3 An institutional story Page 94 however, faced the distinct possibiUty of institutionalizing its own alternative organizational structures and culture. With their interpretation of isomorphism in the "new institutionalism" as a fairly static and stagnant state, the chaUenge to Kraatz and Zajac [1996, 833] was to "incorporate elements from alternative perspectives of organizational sociology whUe mamtaining a core set of logicaUy consistent beUefs that distinguish it from other perspectives". Their study of private nonprofit Uberal arts coUeges in the USA125 makes quite a powerful impact, more consistent with "old institutionaUsm", which emphasized "organizational adaptation, change and uniqueness", rather than "inertia, persistence, and conformity" [Kraatz and Zajac, 1996, 833]. As an organization is "institutionalized", it takes on a special character, as various "distinctive forms, processes, strategies, outlooks, and competences" emerge through a process of interaction with and adaptation to the environment [Selznick, 1996, 271]. Surely this could not be assumed to be a stagnant process. Isomorphism, then, should be seen not only as a state, but as a process subject to constant development and change. Once organizations have adopted institutions, those institutions must be either maintained, or changed, or eliminated, and even if they are maintained, fresh institutional behaviours wiU be being added to the repertoire of organizational structures and processes. The neglect of the "micro" perspective. One of the reasons why institutional isomorphism has been assumed perhaps could be institutional pressures, such as notions of bureaucracy, then their alternative ideas and structures were likely to become institutionalized. 125 The study focused on a number of resource dependent colleges which needed to be sensitive to factors such as consumer preferences and local environmental conditions, in order to survive. The incorporation of professionalization education programmes was thought to be more likely to bring in resources than conformity to existing institutional expectations about what programmes ought to be offered, and were in fact offered by the more prestigious colleges [Kraatz and Zajac, 1996]. Chapter 3 An institutional story Page 95 the emphasis given in much institutional theory to a "macro" perspective rather than a "micro" view, which focuses on individual organizations. Focusing on the organizationalfield, "or even society at large, as the primary unit of analysis" [Roberts and Greenwood, 1997, 353], institutional theory stresses conformity, not diversity. And yet there is a need to understand "the complexity of the ways that firms learn of and adopt new forms of organizing" [Roberts and Greenwood, 1997, 368], which would require attention to the micro processes of institutionalization, to date largely neglected within institutional theory [Scott, 1995]. Zucker [1991, 105] suggested that at a micro level there was a variabiUty of organizational strategic responses to sirmlar institutional environments, which indicated "differentiation rather than isomorphism". There were important differences between macro and micro viewpoints about organizations, she claimed, and micromeasurement strategies were needed when considering institutional theory versus resource dependence, which considered organizational responses and strategies. It would be difficult to assess whether organizational response constituted institutional isomorphism, or simply "clever strategic responses to external constraint", but a micro level study would highUght the variabiUty of organizational strategic responses to simuar institutional environments [Zucker, 1991, 104 - 105]. It has been said that macroeconomic behaviour "depends on the behaviour of the underlying micro units which make up the economy" [Levacic, 1976, xii], and in the same way, in studies of organizational behaviour, it is essential that many "micro" studies of organizations are undertaken. Meyerson [1994, 628] maintained that there had not been much study done on applying an institutional lens to "the more mundane and micro classes of organizational behaviors", and in his analysis of social worker stress experiences, claimed that "these data reveal concrete ways in which institutional systems take form in the mundane, everyday actions and interpretations of individuals embedded in these systems" [Meyerson, 1994, 650]. Chapter 3 An institutional story Page 96 The failure to consider how decisions are actually made in organizations. Interlocked with the faUure of much institutional theory to acknowledge a variety of possible organizational response to institutional pressures, and its seeming lack of interest in individual organizations, is its faUure also to consider the dynamics of decision making. It has focused primarily on the capacity of institutional elements to constrain, rather than the links between actions and institutions [Barley and Tolbert. 1997]126. Roberts and Greenwood [1997] observed that actors consciously restricted their choices in the decision making process. They identified postconscious and preconscious institutional influences in the adoption of organizational design. "Postconscious" decisions were made if organizational actors were aware of the need to change, but actively considered only a "limited range of alternatives", thus consciously restricting their choices in the decision making process [Roberts and Greenwood, 1997, 356]. "Preconscious" influences were not consciously recognized, but were those which were taken for granted. These taken for granted elements, therefore, were potentiaUy more binding than cognitive constraints, because they tended "to restrict initial design searches to a smaUer set of legitimated designs" [Roberts and Greenwood, 1997, 359], i.e. they were not considered and discarded as being institutionaUy unacceptable, but rather, were never considered in the first place. It was imperative, according to Roberts and Greenwood [1997, 368 - 369], that institutional writers address "how decisions evolve in both the pre- and postconscious phases, and uncover the witting and stochastic effects of competitive and institutional factors during each phase". Building on this suggestion, perceptions of institutional influences can be identified as a vital factor in organizational response and subsequent decision making. Perceptions 126 Barley and Tolbert [1997, 94] claimed that while these cultural constraints did restrict the "opportunities and alternatives" that were perceived, they did not "completely determine human action". Chapter 3 An institutional story Page 97 identify problems, suggest alternatives, and determine responses. Mezias and ScarseUetta [1994, 655] described the decision making process as a "garbage can process embedded in a large institutional environment", since there were a number of possible organizational responses and a set of institutional constraints. The relationship between institutions and organizations was therefore "dynamic, reciprocaL and complex, far more so than is impUed in the static models that until recently have pervaded the institutional Uterature"127 [Mezias and ScarseUetta, 1994, 655]. By neglecting the perspective of individual organizations, institutional theory has failed to consider how decisions are actuaUy made in those organizations, and therefore fails to explore the way that new institutions are bom or adopted. The neglect of explanations of institutions. Rather than taking institutions as givens, interesting questions which could be considered would focus on how they are developed or changed, and how they are maintained or diffused [Scott, 1995, 64]. Institutionalization could be seen as either an entity, i.e. a "cultural or social system", with variance theorists asking questions as to the "whys" of institutions, or as a process, with a concentration on the "hows" of institutions, i.e. on the development over time of regulative, normative, or cognitive systems which are capable, to varying degrees, of "providing meaning and stability to social behavior" [Scott, 1995, 64]. These two approaches, although closely related, differ. However, if, as Zucker suggested, [1977, 728], msthutionalization is both "a process and a property variable", then they both provide valuable and complementary insights into the creation, change, maintenance and diffusion of institutions. While institutional theory has been criticized in the past for paying too little attention to Three possible responses to decision making were resolution (choices which resolved problems), flight (choices associated with problems unsuccessfully) or oversight (the overlooking of problems) [Mezias and ScarseUetta, 1994, 658, referring to Cohen et al, 1972]. Chapter 3 An institutional story Page 98 change in institutional systems, recent studies have addressed this aspect, from different theoretical viewpoints [Scott, 1995, 66]. Roberts and Greenwood [1997, 353] identified two puzzles within institutional theory. The first was how to reconcUe "technological imperatives", and the second was "how new practices replace estabUshed ones". Early adoption of technological practices, they suggested, could be driven by technical considerations, but could easUy become institutionalized, and change their significance. A distinction could be made between technical and institutional environments, but they were not always opposites. The notion that institutionalization focused on symboUc aspects of technology was, therefore, not inconsistent with the introduction of technological advances into organizational structures. The interesting question would be how much the environment specified the structure, level and nature of technology imposed, and the mechanisms whereby it was introduced [Meyer et al. 1992, 61 - 64]. Perceptions of institutional constraints are important factors which determine to what extent organizational change wiU occur: ... any theory of organizational change must also take into account the fact that the leaders of organizations watch one another and adopt what they perceive as successful strategies for growth and organizational structure. The picture one obtains is that organizational change wiU occur in a murky environment guided by what key powerful actors perceive and their abiUties to implement change [FUgstein, 1985, 389]. Barley and Tolbert [1997, 94] proposed that individuals and organizations could "deUberately modify and even eliminate institutions", in a combination of choice and action. Since most empirical work had concentrated on "the diffusion of particular poUcies and practices", the chaUenge was to study institutionalization as a process, and to document the "behaviours and decision-making processes that underwrite diffusions" [Barley and Tolbert, 1997, 112], i.e. to study the maintenance and/or change of institutions in organizations. Bordt's [1997] study on the institutionalization of "alternative" ideas and structures, highUghted the role of "human agency and interest" in the formation of institutions: ... an institution does not materialize out of the blue; nor is the process of institutionalization inevitable. It is the result of the work of individuals or Chapter 3 An institutional story Page 99 a group of actors with particular interests; the process is poUtical and often highly contested. Therefore, if alternative organizational forms are able to surface and eventuaUy become institutionalized themselves, it should be viewed as a result of the actions of interested parties [Bordt, 1997, 136]. Thus the development of a new institution could be deliberate and poUticaUy accompUshed128. Institutional theory, it is claimed, has emphasized change within a population of organizations, to the neglect of emphasis on "the intraorganizational transformation process itself' [Bacharach et al, 1996, 501]. Bacharach and coUeagues129 suggested that organizational actors at the institutional level adopted "a new logic of action", likely to be "inconsistent with the logics held by actors at the core level of the organization". The dissonance which foUowed meant that the existing logic had to be rationalized or adapted, with the possibiUty of increasing dissonance as the various hierarchical levels of the organization were brought "into aUgnment" [Bacharach et al, 1996, 502]. Davis and Greve [1997], in their study of two particular governance practices within corporations in the United States during the 1980s, combined neoinstitutional theory and the notion of diffusion through networks. They suggested that two factors miUtated in favour of isomorphism across organizationalfields. One was the network structures within organizational populations, which affected the means and speed by which practices spread. The second was the cultural embeddedness of various practices, which determined whether practices spread and how far their influence was felt. Practices with a "ready rationale" spread quickly, but those which lacked "a legitimating account" spread either slowly "among peripheral organizations", or did not spread at aU [Davis 128 Halliday and Carruthers [1996] talked of the political construction of market morality within the United Kingdom. By means of the English Insolvency Act 1986, they claimed that the privatization and professionalization of business and insolvency practitioners were "mutually contingent developments that were designed to enhance the perceived morality of the market" [Halliday and Carruthers, 1996, 374]. 129 This was as a result of their study on the processes of change in the airline industry [Bacharach et al, 1996]. Chapter 3 An institutional story Page 100 and Greve, 1997, 8]. They concluded that an understanding of the structure and culture of the social system in which organizations were embedded was essential if the spread of institutionaUy acceptable practices was to be studied [Davis and Greve, 1997, 34]. Institutional logics help us to understand resistance to institutional isomorphism. An organization may operate under different institutional logics, which "may be important sources of resistance to pressures for change, because they constitute a repertoire of material practices and symboUc constructions avaUable for individuals and organizations to draw upon" [Townley, 1997 264]. Responses to isomorphic change, therefore, may be related to differing institutional logics, rather than to external environmental constraints", Le. the pressure against change may come from within the organization, rather than from without. PoweU suggested that things that were institutionalized tended to resist change, because it was both difficult and costly: Major changes often occur when legal or other mle-mamtaining boundaries are relaxed. But once an institutional order is back in place, it tends to reconstitute itself, walling itself off from outside influences. This, in turn, can lead to highly rigid institutional arrangements, which may develop internal contradictions and again become vulnerable to chaUenge [PoweU, 1991,197 - 198]. While it is acknowledged that change can occur in an organization within an institutionalized environment, opinions vary as to how that change wiU occur. Zucker [1977] proposed that the notion of "cultural persistence" involved uniformity, maintenance and resistance to any change in cultural beUefs. Later, she also suggested [Zucker, 1991, 105] that institutionalization could occur accidentally, but "deinstitutionalization", the process by which institutions were changed or eliminated, was "seldom accidental". The notion of cultural persistence suggested that once structures or activities had been institutionalized, they became embedded in networks, and pressure to change them was strongly resisted. However, unless organizational structures were actively maintained, the tendency would be towards organizational entropy [Zucker, 1988]. Scott [1995, 79] suggested organizational entropy was most likely to be the tendency, and that it was the persistence of institutions which should Chapter 3 An institutional story Page 101 require explanation, since it required continuing effort - "talking the talk" and "walking the walk" in order to ensure that structures did not erode or dissolve. The notion that persistence occurred because of inertia, he maintained, was "too passive and nonproblematic to be an accurate aid to guide studies of this topic" [Scott, 1995, 90]. An interesting study referred to by Scott [1995] Ulustrated the maintenance of institutions over a long period of time, within the Basel Mission. MiUer [1994], examining records of the mission over a one hundred year period, argued that institutional constraints were present, which ensured the longevity of the mission: ... participants were recruited from a relatively homogeneous social base; were given intensive socialization so that participants came to share sirrdlar beUefs and values; were placed in a strong authority structure combining aspects of charismatic, traditional, and bureaucratic control elements together with formalized procedures of "mutual surveillance"; and were encouraged to develop a sense of "specialness and separation" that insulated them from the corruption of the secular world [Scott, 1995, 81]. The tension between two institutional practices which competed for ascendency was Ulustrated in a study by Dirsmith et al [1996]130. It described the way social agents could change an institutionalized organizational setting, as tension developed between two institutional practices. Management by Objectives (MBO) promoted an image of rationaUty and efficiency, and professional autonomy promoted an image of stability and reUability. The study focused on the socio-poUtical dynamics of change, exposing it as a "profoundly poUtical" practice [Dirsmith et al, 1996, 21]. Ansari and Euske [1987], in their study of the use of cost accounting information within the US Department of Defence, observed that the nature of information use in 130 This focused on the competing use of mentoring and Management by Objectives (MBO) in "Big 6" accounting firms. As MBO was increasingly used in the administration of those firms, the professional autonomy of practitioners was delegitimated and deinstitutionalized. They responded by manipulating the application of MBO through the use of mentoring [Dirsmith et al, 1996]. Chapter 3 An institutional story Page 102 organizations was "fluid and changing", and at the time of writing, had become institutionalized, and concerned with external legitimation. In terms of accounting information, then, the introduction of accounting systems and the use of the accounting information generated would indicate whether it was being used for technical-rational purposes, for poUtical purposes, or for external legitimizing purposes, which were the three categories considered by Ansari and Euske. They suggested that an interesting research question for future consideration was the notion of how ideas and procedures become institutionalized over time, i.e. "how do external legitimating functions become internal reaUty?" [Ansari and Euske, 1987, 564]. The process this involved in any organization would be highly dependent on its own structures, culture and routines, including decision making processes. The diffusion of institutional elements, i.e. the extent to which they are prevalent in an organizationalfield, could be viewed either as an indicator of the extent of institutional influence, or as an effect of institutionalization on organizations [Scott, 1995, 84]. The more prevalent particular organizational structures become, the more they are legitimized, and consequently, the greater the pressure for further adoption, so that other organizations conform with expected behaviours and structures. The adoption of these institutional practices by organizations is by no means a straightforward process. Insufficient attention to identifying power holders. Is the new institutionaUsm too concerned with "culture and taken for granted meanings to be able to discern the conflicts that abound in organizational life", or does a focus on myth and ceremony lead to a neglect of issues of power and control [Carruthers, 1995, 325]? It has been claimed that institutionalized systems of interest "greatly modify the operation of power in modern societies", since, as holders and mobilizers of resources, they are systems of "massive power" [Jepperson and Meyer, 1991, 214]. Much power in such a system, Jepperson and Meyer argued, was structural power, i.e. it was tied to roles and legitimated authority. In spite of this, institutional analysis has largely ignored the notions of power and interests, according to Davis and PoweU [1992]. They Chapter 3 An institutional story Page 103 suggested that there was much power to be had within organizationalfields, and once acquired, that power needed to be maintained by specific strategies [Davis and PoweU, 1992, 363]. The role of the state, Fogarty [1996, 261] claimed, was a central factor in the conception of power within institutional theory. His study of peer review of auditors in the US highlighted the role of the Securities Exchange Commission (SEC) in the provision of an audit market for accountants. He suggested that the government played a role in promoting the "iUusion of professional soUdarity" [Fogarty, 1996, 262]. It was consequently difficult to pinpoint exactly where this power emanated from, and exactly how it was exercised, so diffuse was its effect. Similarly, power holders, because power was not exercised directly and specificaUy, claimed they were "highly constrained in their maneuver and influence" [Jepperson and Meyer, 1991, 214]. PoweU [1991, 191] proposed that the exercise of power was one of the means by which institutions were reproduced. It was clear to him that "eUte intervention may play a critical role in institutional formation". Once estabUshed and in place, those practices and programmes are "supported and promulgated by those organizations that benefit from prevailing conventions" [PoweU, 1991, 191], with the result that eUtes may be both the "architects and products of the rules and expectations they have helped devise". This is Ulustrated by reference to the establishment and influence of professional groups: A good deal of the influence of the modern professions stems from their control over the selection of new recruits, the socialization of successors, and control over the conditions of incumbency. Once such a system of control and reproduction is in place, it almost inevitably attempts to expand its jurisdiction ... SkiUed institution builders who gain from such a system of power wiU typicaUy expend considerable effort to maintain their dominance [PoweU, 1991, 191]. Where institutions exist, there wiU be manipulation and reinterpretation of institutionalized symbols and practices: Chapter 3 An institutional story Page 104 Sometimes rules and symbols are internalized and result in almost universal conformity, but sometimes they are resources manipulated by individuals, groups, and organizations [Friedland and Afford, 1991, 254], This notion was borne out by Elsbach's [1994] study of the verbal accounts of Californian cattle industry spokespersons, who "constructed and effectively used verbal accounts to manage perceptions of organizational legitimacy foUowing controversial events" [Elsbach, 1994, 57]. Whenever the industry experienced trouble, it was found that emphasizing institutional links offered a greater chance of re-establishing industry legitimacy. Covaleski and Dirsmith [1995] departed from institutional analysis to include poUtical considerations in their study of the use, by the then Governor of Wisconsin, at the turn of the century, of calculative practices and techniques, including accounting. They claimed that institutional theory had failed to explain power and interest-based behavior. Pettigrew [1973, 20] proposed that "as long as organizations continue as resource- sharing systems where there is an inevitable scarcity of those resources, poUtical behaviour wiU occur". Sinularly, wherever institutions are being established, or maintained, or diffused, or even abandoned, there must be poUtical behavior involved, as organizational interests vie for ascendancy. Therefore, any study of the origins or transformations of institutions should not ignore the dynamics of power relationships [Brint and Karabel, 1991, 346; Dirsmith et al, 1996], since they are one of the factors involved in institutional developments131. Stinchcombe's [1968] work on institutions made specific the role of power. He defined an institution as "a structure in which powerful people are committed to some value or interest" [Stinchcombe, 1968, 107]. Those who held power, he claimed, worked to preserve it and some of the ways they achieved this were through selecting successors, and processes of general 131 Brint and Karabel [1991, 346], in their study of American community colleges, specifically identified three power centres which "decisively shaped the environment faced by leaders of the junior college movement". Those power centres were the group consisting of the most prestigious colleges, the structural power enjoyed by businesses which had the capacity to influence the actions of other institutions without direct intervention, and anticipatory subordination behaviour which was calculated to gain the favour of a more powerful organization. Chapter 3 An institutional story Page 105 communication and socialization [Scott, 1995, 20]. Claims to resources, or the use of resources, imply the exercise of poUtical power, and institutional theory has much to say about resource dependent relationships within an institutional environment. An attempt at institutional change, Friedland and Alford [1991, 254] claimed, "depends not only on the resources controUed by its proponents, but on the nature of power and the institutionaUy specific rules by which resources are produced, aUocated, and controUed". In his study on the prevalence of the multi divisional form of organization, FUgstein [1985, 379] based his theory on power, suggesting that power entered into "aU important organizational decisions" and "must rest on some structural claim over resources", since organizational actors generated claims on the control of valued resources, such as "capital, information, organization, and outside ties". Covaleski et al [1993, 66] also observed that the process whereby institutionalization occurs can be seen as a "profoundly poUtical" process, reflecting the relative power of interests and actors. They suggested that the decoupling of symboUc and practical accounting systems was not harmless or ineffective, but that, once established, accounting systems which were intended to be symboUc, actuaUy transcended that status, and were found to influence the way "external and internal constituents think about and act concerning the organization" [Covaleski et aL 1993, 67]. An interesting research question, therefore, becomes "to what extent do institutionalized legitimation practices ... penetrate and influence internal organizational practices?" [Covaleski et aL 1993, 68]. Does the enforcement of formal organizational practices which have come about as a result of institutional pressures result in "merely cosmetic changes", or do they have an impact on, for example, internal resource aUocation decisions [Covaleski and Dirsmith, 1988a, 565]? Issues of power and the way it is used in the creation, 132 This was a study of case-mix accounting systems used in the health care industry to monitor "product lines" once patients had been categorized, and considered the impact of decoupling [Covaleski et al, 1993]. Chapter 3 An institutional story Page 106 adoption and maintenance of institutional practices, are, therefore, of great importance. Decoupling as a problematic concept. The notion that formal structure is adopted in order to achieve organizational legitimacy, while actual structures and routines continue along a separate plane, has been referred to already. It was established by the work of Meyer and Rowan [1977] on schools, and is a central tenet of institutional theory, yet the linkage between technical and institutional factors is not simple or straightforward [Carruthers, 1995, 316; Covaleski et al, 1993]. In organizations where it is possible to measure output easUy, reUance on technical efficiency is not just an elaborate organizational performance, but a requirement for continued success. Scott and Meyer [1991] proposed that organizations were subject to both technical and institutional pressures at the same time, with the result that it was often hard to distinguish between the two. The more ambiguous and difficult it was to measure organizational output, the more likely it would be that structures would be decoupled from procedures. The internal management of decoupled processes requires much stage-management [Carruthers, 1995, 319], since if an organization aUowed it to be seen or known that structures were decoupled from actual processes, its claims to legitimacy would be under threat. The danger of too obviously decoupling accounting procedures from the actual use of accounting provides a good example of this: If accounts are being used more to justify decisions than to generate them, however, or to make decisions look good rather than to make them rational, then we would say that the rationalized form of accounting is decoupled from actual organizational decision-making. But to the extent that financial accounts are obviously manipulable, or are seen to be poUticized symboUc window-dressing, their credibiUty as "neutral", "impartial", or "objective" measures of organizational performance is undercut. Whatever accounting manipulations are being performed, they must be done "backstage" in order to be effective. It is hard to maintain Chapter 3 An institutional story Page 107 appearances if the decoupling becomes too transparent [Carruthers, 1995,319]. The notion of "loose coupling", rather than "decoupling" may weU provide a softer alternative, recognizing that there are sometimes both technical and institutional elements at work concurrently. It is not always easy to separate them, since "the real world keeps confusing the two" [Carruthers, 1995, 318]. Institutional theory makes a valuable contribution to the study of organizational behaviour, presenting, as shown, many different faces in terms of topics, emphases, and issues considered [Scott, 1987 ]. It can be seen as a "process of instilling value" [Scott 1987, 493 - 495], whereby institutions are shown as more than technical structures. Institutional elements, by their adoption and maintenance, provide greater stabiUty and persistence to organizations. Institutionalization can also be seen as a process of creating reaUty. Drawing on the work of Berger and Luckmann [1966], Scott [1987, 495] suggested that institutionalized practices which were repeated over time were "assigned siimlar meanings by self and others". An historical approach, therefore, wiU be vital to understanding the development and appUcation of institutions within an organization. Institutional systems also can be viewed as a separate class of elements, defined in contrast to technical aspects, as emphasizing cultural aspects [Scott, 1987, 497 - 499]. Adherence to these institutional systems brings rewards, and, therefore, these systems determine action in the organization. Incorporating other perspectives. It has been suggested that studies of organizations should not be constrained by "any single theoretical framework", and that in order to appreciate the rich individuaUty of organizational behaviour, and to ensure "a complete understanding of any phenomenon, including strategic response to institutional influences", we ought to inform our conceptual models with "synthesized formulations of explanations from disparate theories" [Ang and Cummings, 1997, 251]. Ulrich and Barney [1984, 471] proposed that "one can know the fuU implications of a particular theory only if it is contrasted Chapter 3 An institutional story Page 108 with the impUcations of others". Or, as Tolbert [1985, 12] suggested, theoretical approaches are "not truly competitive", but "more likely simply to be appUcable under different conditions". Organizational phenomena, he claimed, was much too complex to be capable of being described by one theoretical approach alone. Some other studies. Some of the limitations of institutional theory have already been highUghted. By perceiving those gaps or deficiencies, a number of researchers have attempted, in interesting ways, to incorporate, compare, or contrast other theories. Some have included rational choice theories [Dickson and Weaver, 1997133], population ecology theory [Baum and OUver, 1991134], the notion of organizational sustainabiUty [Jennings and Zandbergen, 1995135], poUtical theory [Covaleski et al, 1993136], the sociology of professions (structuration theory) and power distributions [Dirsmith et al, 1996] and task environmental theory [OUver, 1997]. OUver's [1997] conclusion, after a study of building firms in the Canadian construction industry, was that institutional conformity resulted in benefits which exceeded "social endorsement and legitimation" [OUver, 1997, 118]. Perhaps it is hardly surprising that organizations perceived to be legitimate wiU actuaUy perform weU, particularly in the case of nonprofit organizations, which rely on donations and government support, in the area of funding. After aU, the reason for conformity to institutional elements is surely in order to obtain resources. A theory, therefore, which considers an organization's dependence on acquiring resources, should 133 This study considered the effects of perceptions of environmental uncertainty and key manager entrepreneurship in determining alliance use. 134 This study of the mortality of child care service organizations in Toronto considered points of convergence between institutional theory and population ecology theory. 135 They suggested that institutional theory was of value in considering which institutions might support ecologically sustainable organizations, but that it required modifications. 136 This study, which added a political dimension to an institutional study of the use of case-mix accounting systems in the health care industry, has already been mentioned. Chapter 3 An institutional story Page 109 have a significant contribution to make to institutional theory. Resource dependence theory. Resource dependence theory brings a power and poUtical dynamic to considerations of organizational survival, suggesting that the existence and survival of organizations is problematic, with the key to survival being the abiUty of those organizations to acquire and maintain resources. The problem for such organizations is that since they are dependent for those resources on an environment which is unreliable [Pfeffer and Salancik, 1978, 3], they can't always succeed by internal adjustments, but need to manage their environment in such a way that they are assured of an increase in their flow of resources. Four kinds of response can be identified: • meeting or seeking to avoid the demands made by its resource- contributors; • changing the pattern of dependency by buUding alternative coaUtions or by increasing its influence over contributors; • making arrangements of varying degrees of conformity with other organizations; and • attempting to change the rules of the game through legaL poUtical or social action [Loasby, 1979, 969]. Since the external environment needs to perceive an organization as effective if it is to provide it with the resources it needs to continue, from a resource dependence point of 1 ^7 view, legitimacy can sometimes be treated as "simply a different kind of resource" [Scott, 1995, 45]. Management of the external environment is, therefore, critical to the continuation of an organization. Resource dependence theory highUghts as significant, organizational response to external environmental pressures, offering more scope in terms of a variety of possible responses to pressures for institutional isomorphism, including active management of the external environment [Stern, 1979, reviewing 137 By contrast, from an institutional perspective, legitimacy is not a commodity to be possessed but "a condition reflecting cultural alignment, normative support, or consonance with relevant rules or laws" [Scott, 1995,45]. Chapter 3 An institutional story Page 110 Pfeffer and Salancik, 1978; DiU, 1981, reviewing Pfeffer and Salancik, 1978]. With this over-arching issue as a focus, organizational studies informed by a resource dependence perspective have considered topics such as the abihty of CEOs to manage the external environment and the flow of resources [Heimovics et aL, 1993, 419], the importance of boards in managing "environmental uncertainty" [Boyd, 1990, 419], an analysis of the different dimensions in the organizational environment and their impact on resourcing [Aldrich, 1976], and the relative salaries, within the university and coUege population in the USA, paid for positions determined to be critical in terms of resource acquisition [Pfeffer and Davis-Blake, 1987]. A similar study demonstrated the payment of salary differentials to employees who gave evidence of power to control scarce resources [Balkin and Bannister, 1993], the emphasis being on their abihty to generate resources from the external environment. Ulrich and Barney [1984, 477] suggested that "stable, low cost resource relations" were a "precursor to organizational survival over time", and studied the way in which organizations worked towards acquiring control over resources that minirnized their dependence on other organizations, wlule 1 \H maximizing the dependence of other organizations on themselves OUver [1991, 151] identified convergent assumptions as weU as divergent foci between both institutional and resource dependence perspectives, and suggested that too much emphasis had been given in institutional theory to the assumption that organizations would conform to institutional pressures. Her typology of strategic responses to institutional processes outlined a range of possible responses organizations could make, from acquiescence, through compromise, to avoidance, and then defiance and manipulation. She further devised a schema for predicting strategic organizational responses to institutional pressures, suggesting five institutional antecedents - cause, constituents, content, control, and context. These, she argued, corresponded to the five 138 Ulrich and Barney [1984, 472] cited the example of the United Way, a combined nonprofit fundraising organization in the USA, and explained how agencies actively sought to generate alternative funding. Chapter 3 An institutional story Page 111 basic questions of why pressures were being exerted, who was exerting them, what the pressures were, how they were exerted, and where they occurred [Oliver, 1991, 159 - 160]. Her adapted table is shown in Appendix 3.2, "Institutional Antecedents and Predicted Strategic Responses". It provides an interesting way of looking at organizational response to institutional pressures, and of predicting how an organization is likely to respond, given certain features of the institutional environment. Ingram and Simons [1995] took up OUver's [1991] framework, and appUed the notion of five strategic responses to explain the way organizations in Washington State responded to work-famUy issues. They concluded that "organizations wiU choose strategies for institutional response by weighing institutional pressures against the abihty to use countervailing power and the extent of the expected technical benefit of work- famuy responsiveness" [Ingram and Simons, 1995, 1470]. Combining viewpoints. WhUe this framework makes an interesting contribution to an understanding of the possibiUty for various organizational responses to institutional pressures, it pays no attention to the internal struggles an organization may encounter in devising a response to institutional elements, or in carrying out that response. A micro organizational study has the potential to reveal those internal struggles. They may occur because organizational actors are unable to make accurate assessments of the institutional environment in which they are operating, or because of perceptions about how consistent those pressures are with organizational goals and beUefs. Organizations, because of their different histories, cultures, and perceptions, wiU differ in the way they interpret institutional pressures to conform [OUver, 1991, 173]. Further, within any organization, there wiU be people whose viewpoints about desirable strategies wiU differ markedly. In fact, the unity or cohesiveness of the organization, its sense of identity and mission, and its reUance on external agencies for its survival, wiU Chapter 3 An institutional story Page 112 aU be factors which affect its response to institutional pressures. It may be that as a result of these tensions, organizations wiU respond in unexpected ways that do not appear to advance their legitimacy and consequent abihty to obtain resources. Tensions wiU, therefore, exist at two levels, in the relationship between the organization and the institutional environment in which it operates, and between organizational members who differ in their perceptions of what the pressures are, and what the organization's response to those pressures ought to be. The resolution of those pressures wiU be a complex, multi-dimensional dynamic, one that wiU be constantly changing and evolving, with the potential to cause internal conflict and disagreement. At the same time, the organization wiU need to stage-manage its image to society, so that its abihty to maintain its reputation as a legitimate organization is unimpaired. Institutional theory would propose that institutional elements push an organization towards a state of conformity with those elements, and that there is, therefore, an inevitable tendency towards isomorphism with the institutional environment. And yet OUver [1991, 173] proposed that an institutional framework can accommodate a variety of responses to institutional pressures. Strategic choice advocates maintain that in spite of the imposition of external forces, those constraints wiU not necessarily lead to isomorphism, since organizations can exercise a considerable amount of discretion in designing and altering their own structures [OUver, 1988; ChUd, 1997]. This would suggest that since each organization is a unique structure, with its own culture, leadership, resource dependencies and beUef systems, the possibiUty that there would be a range of possible responses should hardly be surprising. Reasons why organizations may resist this pressure towards isomorphism have already been proposed. Within a reUgious nonprofit organization, "sacred" forces are likely to oppose, or at least resist, some institutional pressures, and may lead resource dependent organizations to seek out alternative sources of funding, in order to reUeve them of the necessity of complying with institutional pressures which threaten their core reUgious beUefs. Laughlin's [1988] study of accounting systems in the Church of England revealed that in spite of a massive resource crisis, the concern was to preserve the Chapter 3 An institutional story Page 113 sacred core of the church, in terms of its sacred centres and their sacred worlds (churches and their parishes and dioceses and their cathedrals). WhUe other organizations may have been prepared to compromise these central sacred elements, at the point of his study, Laughlin observed that "any change which seriously chaUenges these sacred elements is rejected out of hand" [Laughlin, 1988, 40]. Given the possibUity of such a sacred/secular tension, an institutional explanation of why such a clash is a reality, provides a fascinating layer in the study of accounting in a reUgious/charitable organization. Depending on the nature of those beUef systems, and the degree to which they have become institutionalized within the organization, organizational actors may display different interpretations of what constitute sacred beUefs and practices and whether they are under threat. Certain practices may have been institutionalized within an organization as sacred, at least in the minds of some organizational members. MiUs and Murgatroyd [1991, 11] adopted a dialectical approach, which stressed the process "through which organizational arrangements are produced and maintained". They maintained that contradiction and praxis "constantly threaten and undermine existing institutional arrangements". This would seem to suggest that within an organization, response to institutional forces is by no means settled and stable, but that change is an "inevitable" feature of organizational life [Mills and Murgatroyd, 1991, 98]. Organizational response wiU be worked out in the context of that organization's history, mission and beUef system and structural arrangements. Table 3.2 "Contrasts between Institutional Theory and Resource Dependence Theory" below, sets out some contrasting organizational features from institutional theory and resource dependence viewpoints. It suggests that whUe institutional and resource dependence theories highhght simUar issues as significant, they offer divergent interpretations of how organizations are likely to respond to those issues. Chapter 3 An institutional story Page 114 Feature Institutional Theory Resource Dependence Theory Institutional pressures Isomorphism Alternative Strategies (conformity to (resistance to institutional institutional pressures) pressures) Environmental constraints Conformity Manipulation of constraints Organizational response Limited range of Active choice behaviours responses (strategic adaptation, (passive acquiescence, resistance, political compliance, accepta nee) manipulation) Power Power of the Power of the organization environment The environment Keeping the Managing the environment environment happy Success Efficiency (internal Effectiveness (external emphasis) emphasis) Management Symbolic role Managerial action Boundaries Organizational men ibers Area of control Resourcing By compliance with By attempts to control control conditions important resources Response to problems Seeks internal solution s Seeks external solutions Accounting Symbolic role Information role (decoupled or loosely coupled) Table 3.2. Contrasts between Institutional Theory and Resource Dependence Theory [Adaptedfrom Oliver, 1991]. Institutional theory emphasizes isomorphism, and resource dependence theory emphasizes active choice behaviour, opposite ends of the spectrum, in terms of organizational acceptance, of, or resistance to, institutional norms. Some organizations wholeheartedly embrace institutional rules and expectations, thereby assuring themselves of legitimacy and acceptance, and ultimately, success. Others instead proactively initiate means whereby they can independently assure their future. Organizational response to the various features of the institutional environment would appear to depend not only on its resource dependencies, but also on the strength of Chapter 3 An institutional story Page 115 agreement about organizational identity between organizational members, and its decision making structure. An organization, depending on the strength of agreement about what constituted "sacred" beUefs, and perceptions about whether institutional pressures conflicted with those beUefs, could respond in a variety of ways. Some themes to be explored. Issue Explanation » I Institution An institution is an established, legitimated procedure, which transcends the technical and incorporates additional, unseen, taken- for-granted societal values. These values emanate from a number of I sources (coercive, normative and mimetic), and exert pressure upon :M-:i::/:'-•: •'• '•'.'• '•,. prgajaJzatipiis. . Institutionaliz Institutionalization is the process whereby an organization adopts the -ation unseen institutions of society. It is by no means a straightforward or guaranteed process, and occurs in response not only to external institutional pressures, but also to those which have been developed internaUy, as a result of an organization's own unique founding, history and culture. Legitimacy Organizations are concerned to maintain their image as legitimate in] order, uhimately, to obtain the resources necessary to survive. If institutional values are adopted by an organization, they establish ^ that organization as a legitimate claimant of economic resources. Isomorphism Organizations tend to conform to institutional expectations, but there is scope for a variety of organizational responses to those expectations, depending on the nature of both external pressures and internal organizational factors. Decoupling There is a tendency for organizational structures to be decoupled or loosely coupled in relation to actual processes. If structures are decoupled or loosely coupled, there is a concern to maintain an image of legitimacy. The greater an organization's reliance on technical factors, the more likely it is that decoupling wiU be . , , constrained. Accounting Accounting is more than a technical craft, but is an institutional element in itself, with powerful legitimizing potential. The professionalization of the accounting function within society reinforces the institutionalization of accounting within organizations. Table 3.3. Summary of institutional concepts adopted for this study. Table 3.3 above, "Summary of institutional concepts adopted for this study" outlines a Chapter 3 A n institutional story Page 116 view based on institutional theory, but also informed by Resource Dependence theory. The issue this thesis seeks to explore, as outlined in Chapters 1 and 2, is therefore to be considered in the Ught of these assumptions: What is expected of accounting in a resource dependent nonprofit religious organization in times of change and uncertainty? By combining institutional theory with some of the dimensions of resource dependence theory, this study proposes that many of the features of each represent opposite responses (or strategies) by which an organization strives both to maintain legitimacy, and, on the other hand, also pro-actively to acquire the resources it needs in order to ensure its survival. Accounting, it is beUeved, has a significant role to play in the achievement of both these goals. If accounting, budgeting, and other related matters, such as organizational structure, management styles, human resource programmes, and pubUc relations strategies, are viewed as institutional "givens", expectations, or requirements for success, then applying the notion of a sacred/secular dichotomy to a consideration of how reUgious organizations, in particular, respond to such institutional pressures, is a fascinating issue. The work of Booth [1995] and Laughlin [1988], on the sacred/secular tensions involved in using accounting in churches, has already been referred to. Demerath's [1998] observations on the way the cultural commitments of reUgious organizations could work against isomorphism within the reUgiousfield, coul d be interpreted as being in a sirmlar vein. The response of such organizations may not be dependent merely on whether certain rules or practices offer legitimacy and, therefore, benefits in terms of resources, but also on whether those rules or expectations are consistent with the organization's core beUef structure, cultural identity, unity and resourcing status. The issue, from an institutional theory viewpoint, then becomes whether the organization is content to become isomorphic with its external institutional Chapter 3 A n institutional story Page 117 environment, i.e. the secular forces of the world, or whether it is prepared to offer resistance to such pressures, which it would interpret as rnamtaining its sacred dimension, or answering the caU to be faithful to its internal dynamics and beUefs. Pressures are being exerted concurrently, from both inside and outside the organization. The stage is thus set for arich huma n drama within an organizational setting. In the offering of resistance to pressures towards isomorphism, an organization may decide to manipulate its environment actively in order to obtain resources. Expectations of accounting, should such a scenario occur, wiU differ significantly from the role and expectations in a "de-coupled" (or loosely coupled) situation, where its value Ues primarily in its legitimating potential. Once an organization has granted admission to accounting, as part of its acquiescence to institutional pressures, it is maintained that its role wiU not remain static. Pressures for the significance of accounting to change wiU be felt from at least two areas. First, as the accounting function grows, its administration wiU become professionalized, and the professionals who perform accounting functions wiU exert pressure, as they seek to increase the domain and method of practice of accounting within the organization. Secondly, pressure wiU come from strategies the organization devises to assist it in managing its environment and pro-actively obtaining resources. Requirements of accounting in this situation wiU be very different from those expected to ensure the isomorphism of the organization with institutional patterns of accounting. Three themes foUow from the research question outlined above. First theme: Will there be pressure, in times of change and uncertainty, for the profile of accounting to increase? If so, would this be in order to exhibit greater conformity with institutional practices and thereby to maintain the legitimacy of the organization? Accounting has already been demonstrated to offer a badge of legitimacy to organizations. A situation of ambiguity could exist in the organization's external Chapter 3 An institutional story Page 118 environment, about issues such as funding, government reporting requirements, pubUc perceptions, or general uncertainty about the future of the organization. InternaUy, there may be disagreement about organizational goals or culture, or what constitutes acceptable organizational behaviour, or responses to external institutional pressures. In such ambiguous situations, an organization may respond by re-asserting its legitimacy in a number of ways. Accounting would be one potentiaUy powerful way to demonstrate this. If these uncertainties existed, then the adoption of institutional practices is likely to be far from an automatic or agreed-upon occurrence. Second theme: As expectations of accounting increase, will the role of professional accountants also increase? If it does, what impact will this have on established organizational structures, cultures and routines? An increase in the profile of accounting in an organization wiU put pressure on existing employees to perform accounting tasks for which they may be unqualified . In order to fulfill new accounting expectations, there wiU be a growing need for the expertise of trained accountants. The professionalization of a work force has been identified as an example of normative institutional pressure. Trained professional accountants can be expected to perceive organizational problems and solutions in a unique way, influencing existing organizational structures, cultures and routines in a way which could be in conflict with the deeply held reUgious convictions or the historicaUy informed culture of organizational members. Feedback would be likely to bounce back from the environment into the internal workings of the organization, with the result that as non qualified employees are replaced or supplemented with trained accountants, internal organizational dynamics wiU change significantly. 139 This may have a greater impact in a religious/charitable organization which has traditionally not placed a high reliance on accounting techniques, and therefore may not have suitably qualified personnel. Chapter 3 An institutional story Page 119 Third theme: If an organization undertakes active choice behaviours in relation to its resource base, will expectations of accounting change? Will organizational actors be satisfied for accounting to play a decoupled, symbolic role, or will there be pressure exerted for accounting to play a greater technical role? Organizational response to pressures for institutional isomorphism is not always positive, uniform or agreed-upon. For a variety of reasons, an organization may resist pressures for confonnity, instead initiating pro-active behaviour with the aim of securing and assuring its resource base. In such a case, accounting may be required to play more than a legitimating role. Where accounting structures and actual practice were previously de-coupled or loosely-coupled, there may now be pressure for a re- coupling of these structures and activities. Accounting does have a technical role to play in organizations. It is certainly not its only role, but it can be significant when an organization begins to define and measure its output in numeric terms. The three aspects of accounting's profile, its professionalization, and its technical role, are inextricably linked in a combination of reflexive relationships. There have been numerous caUs for more research on accounting as it is practised within an institutionalized environment140, and this study of The Salvation Army AustraUa Eastern Territory represents a response to those calls. The focus of the study wiU be the organization's attitudes to accounting practices, described and interpreted in the context not only of external institutional influences, but of its own internaUy developed structures, cultures and routines, the result of its unique founding and history141. In order to gain an understanding of these issues, this study will attempt to draw back curtain after curtain from the visible, on-stage production, to reveal the elaborate system of sets, costumes, stage designs, playwrights, scripts and actors who make up this team of players, and who contribute to its performance. 140 Booth [1995] called for more stories about accounting as it was practised; Covaleski and Dirsmith [1988a] called for more historically informed case studies to investigate why accounting may come into a setting, and how it may be determined and affected by various institutional and societal forces; Meyer [1994] urged more research into the expansion of accounting activity in organizations. 141 Meyer [1994a, 32] described organizations as being "immersed" in environments. Chapter 3 An institutional story Page 120 The next chapter (Chapter 4) examines the founding and history of The Salvation Army, considers the influences which were in place at that time, and highUghts their impact on the development of the Army's unique culture, including attitudes to accounting and accountabiUty. CHAPTER 4. The background: describing historical context. BARBARA: The starvation this winter is beating us: everybody is unemployed. The General says we must close this shelter if we can't get more money. I force the coUections at the meetings untU I am ashamed; don't I Snobby? PRICE: It's a fair treat to see you work it, miss. The way you got them up from three-and-six to four-and-ten with that hymn, penny by penny and verse by verse, was a caution. Not a Cheap Jack on MUe End Waste could touch you at it. BARBARA: Yes, but I wish we could do without it. I am getting at last to think more of the coUection than of the people's souls. And what are those hatfuls of pence and halfpence? We want thousands! Tens of thousands! Hundreds of thousands! I want to convert people, not to be always begging for the Army in a way I'd die sooner than beg for myself [Shaw, 1945,92]. As an organization evolves over time, it faces constant pressures from both outside and inside which determine the nature of the performance it gives for its audience, the society in which it exists. Institutional forces at the time of its founding, its early history, and the distinctive personaUty and style of its founder, wiU aU have a significant influence on its scripts, players, settings and performances. In seeking to understand the way The Salvation Army responds to institutional pressures today, particularly in relation to money,financial accountabiUty and accounting, these historical influences must be understood. The farmly tree of The Salvation Army AustraUa Eastern Territory stretches back to England in 1865, when William Booth began the Christian Mission in London. The product of one man's vision and the society of his times, as weU as the countless influences which have been brought to bear on it since, the modern Salvation Army operates today in a multitude of different social, reUgious and economic contexts. Throughout its often turbulent history, the Army has struggled to develop and maintain its own distinctive identity and to present itself to the society of its day as a legitimate Chapter 4 Historical influences Page 122 organization worthy of being entrusted with the funds it must receive from the pubUc in order to fulfiU its mission. As one of the planks upon which the Army's unique culture has developed, accounting has had a significant influence. Figure 4.1, "An institutional view of the historical context of The Salvation Army1 below, portrays diagramaticaUy the emphasis of this chapter: External pressures: politics and persecution, financial accountability Structure Historical influences: s 't ^v British empire, social problems, Early Salvation Army: corporations law, birth, Army model, mission, fundraising, financial A world religion, poverty, Culture _ wide charity credentials * movement - Internal pressures: ' family matters \ / founder's influence V / Routines Society • v Y Time Figure 4.1. An institutional view of the historical context of The Salvation Army. The historical context in which The Salvation Army began in England wiU be outlined, foUowed by a consideration of the Army's early development and spread world-wide, including the influence of its founder142. WiUiam Booth died in 1912, so the focus wiU be primarily on the years 1865 - 1912, and later emphases as the Army spread throughout the world. Historical and founding influences have contributed to the Founders are known to have a profound influence on organizations [Scott, 1987; Scott, 1995]. Edge [1993] highlighted the powerful influence of William Booth's own unique personality and mission on The Salvation Army, both in terms of his actual influence and people's perceptions, in later years, of what he would have done. Chapter 4 Historical influences Page 123 development of the Army's unique culture, structures and routines. Historical influences. Scene 1. The curtain opens on a scene in London, in Victorian England, over 100 years ago. It is a London of great contrasts. Side by side are enormous wealth and desperate poverty, well-being and deprivation, luxury and unemployment, political power and lack of representation, church-going and spiritual malaise, high morality and utter degradation, corporate sophistication and back-breaking physical work. As we stroll through the streets observing the people, we note their attitudes and occupations, taking in the marks of affluence in some quarters, being aghast at the filth and poverty in others ... The era in which The Salvation Army began was an age of turbulence in England. The Victorian empire was expanding rapidly world-wide, and in the mid 1800s, with a growing industrial base, and a rapidly expanding world-wide empire143, England was enjoying what has probably been the most prosperous period in its history. Emerson, on one of his visits there144, became convinced that it was "the most powerful nation in the world", a country where homage was paid to wealth [Emerson, 1966, xvi, 99]. And yet beneath this affluent surface bubbled a melting-pot of economic, social, legal, financial, poUtical, and reUgious ferment. The development of factories and the expansion of industry produced a major social and economic upheaval [ChappelL 1980, 113 - 119], with the population of Greater London growing from about 1 milUon people in 1801 to over 5.5 milUon in 1891, and other industrial towns growing rapidly also. [Hibbert, 1987, 568]. As people migrated from rural areas to London and these other industrial areas, problems arose with housing, pubUc sanitation, and factory and mine working conditions. Disease spread rapidly in the cramped and unsanitary housing which grew 143 Wellington's defeat of Napoleon in 1815 established England as a formidable power, reinforced when Victoria ascended to the throne in 1837. England's foreign empire continued to expand. 144 In the mid 1800s. Chapter 4 Historical influences Page 124 up in the industrialized towns. Chadwick's report of 1842, the result of a Royal Commission on health in towns, eventuaUy led to the Health of Towns Act of 1848. WhUe its scope and effectiveness were limited, it was the probably thefirst admission that the state had some responsibihty for the health of the people [Hibbert, 1987, 581]. If workers' homes were squaUd, their working places were just as bad or worse. While some factory owners treated their workers fairly145, most workplaces were "dark, Ul- ventilated, rowdy and wretched factories from whose grim discipline many workers recoUed in horror" [Hibbert, 1987, 577]. Hard work, appalling conditions, and the growth in the number of sweat-shops were possible because of the fear of unemployment. Child labour in factories and the use of "climbing boys" as chimney sweeps, sometimes as young asfive o r six years of age, were common [Hibbert, 1987, 595; ChappeU, 1980, 120]. Robert Owen, a miU owner, was committed to establishing good working conditions for factory workers [ChappeU, 1980, 123], and various pieces of factory legislation were passed in the 1800s as a result of the reforming work of Lord Shaftesbury146. After a stormy beginning147, the Trade Union Act was passed in 1871, but it was not untU the 1876 amendment of the law that trade unions increased in strength and prestige and were able to negotiate for better wages and conditions for their members [ChappeU, 1980, 152]. Dickens, in his books, drew attention to the large sections of the English population which were untouched by the prosperity of the day. He described the country as one which had "an enormous black cloud of poverty in every town" [Smith, 1968, 655]. Each sub-system of EngUsh society, according to him, was held together by money, 145 Fry's chocolate and cocoa works at Bristol, according to a government report of 1866, was "well run". Thomas Adams & Company, a lace warehouse, "paid close attention to the welfare of its employees" in 1863 [Hibbert, 1987, 576 - 577]. These factories were unusual. 146 His main triumphs were the Ten Hours Bill of 1847 and the Factory Act of 1874 [ChappeU, 1980, 123]. 147 The most famous trade union setback is perhaps what occurred in the village of Tolpuddle in 1834. Six trade unionists, whose wages had been reduced from 9 shillings to 6 shillings, "administered oaths to their fellow-workers" and were sentenced, as a result, under the Mutiny Act of 1749, to seven years' transportation [Hibbert, 1987, 492]. Although begun, these sentences were later commuted. Chapter 4 Historical influences Page 125 bent on mamtaining its status and privUege and contributed towards "a vast complext of social, political and economic oppression [Smith, 1968, 138]. PoUtical controversy raged during the 1800s, with pressure from the Chartists148 to obtain for the populace a voice in the making of the laws they were compeUed to obey [Hibbert, 1987, 494]. In spite of its 1842 petition of 3 million signatures, Chartism only just survived after the 1848 revolution on the Continent, its planned huge demonstration convincingly squashed by the government. The reforms it sought were "slow to come" [Hibbert. 1987, 495], and meanwhile poUtical power continued to be exercised by the upper classes149. The Institute of Chartered Accountants began in 1880, the existence of an accountancy profession giving a stimulus to developments in auditing, with exarninations being conducted, recommendations on professional conduct of audits instituted, and articles on auditing produced in The Accountant'50 from the 1880s onwards [Chatfield, 1977, 121]. From the 1890s, auditing was graduaUy upgraded in terms of analysis rather than detaUed "routine verification" [Chatfield, 1977, 120]. Even at this early stage of its history, the accountancy profession was subject to pressures from competing interests, with the development of corporations, the principle of limited UabiUty, the expectations and requirements of creditors and shareholders, and the increasingly large amounts of money that were being invested in these corporate structures. Accounting practices such as the writing off of bad debts, depreciation aUowances, and the creation of equity reserves were, in a sense, "substitutes for codified accounting principles, a way of identifying and giving pubUc approval to the better accounting methods in use at the time" [Chatfield, 1977, 83]. Corporate officials often made up their own minds about what disclosure to provide in financial statements [Chatfield, 1977, 99], with 148 The People's Charter of 1838 demanded "annual parliaments, universal male suffrage and vote by secret ballot, equal electoral districts, an end to property qualifications for Members of Parliament and the introduction of salaries for them" [Hibbert, 1987, 494]. 149 In the 1865 House of Commons, for example, "over three-quarters of the members were connected with the peerage by marriage, descent or interest" [Hibbert, 1987, 557]. 150 The official journal of the Institute. Chapter 4 Historical influences Page 126 conservatism151, stressing the anticipation of possible losses rather than the overstatement that had occurred in previous years152. It was a time of incredible change and development in the financial world. In the midst of the increasing complexity in the industrial and financial world, and the rapid expansion of wealth, the oppressive power of money produced a spiritual effect which was obvious to critics of Victorian society, that of "isolation, loneliness, aUenation" [Smith, 1968, 69]. WhUe reUgion during the Victorian age was a "dominant force" in the lives of most middle-class people153, the church faUed to reach the predominantly working class people in large towns, the Church of England being seen as a middle class church [Hibbert, 1987, 641]. The clergy were described as "moneyed men", attracted to the church for material gain [Emerson, 1966, 146]. The 1851 census154 on church-going shocked people of the day, because of the large numbers of people who did not attend church services. It seemed that the industrialized age had ushered in changes deeper than industrialization: "beUefs and values - the components of the human conscience - were becoming secularized" [Grugel, 1979, 35]. Those who refrained were mainly "working-class people Uving in large towns many of whom were inclined to beUeve that the Church of England was for the middle classes" [Hibbert, 1987, 641]. Charles Booth, a social researcher155, discovered that in London there was very Uttle 151 It was seen as better to err on the side of caution or understatement than over-statement of profits, at the same time anticipating losses rather than deferring them [Yamey, 1977, 28]. 152 The speculation which characterized the inception of the railroads was fuelled by deliberate overstatement of profits [Chatfield, 1977, 99]. 153 It was estimated in the census of 1851 that 7 million out of a population of 18 million attended a place of worship [Hibbert, 1987, 641]. 154 Clergymen of all denominations were required to record church attendance on 30 March 1851, in order to provide a general picture of religious observance. Only 10 million out of a population of almost 18 million attended any form of church service and only 52% of those who attended did so in an Anglican Church, even though the Church of England was the church of the day [Grugel, 1979, 35]. 155 Charles Booth was a wealthy man, the co-founder of the Booth Steamship Company [Hibbert, 1987, 570], and no relation to William Booth. For seventeen years he immersed himself of a detailed study of poverty in London, "Life and Labour of the People of London", published in 1871 [Grugel, 1979, 48], Chapter 4 Historical influences Page 127 church attendance among the poor156. To working class people, a Nonconformist chapel was a more likely place to go for a Christian service [Hibbert, 1987, 641]. The new revivaUsm of Moody and Sankey157 in the USA spread to England, and saw the emergence of a holiness movement there, with the formation of several new evangeUcal organizations . Like many other Victorian social institutions, "the churches were placed under severe strains by the demographic consequences of the Industrial Revolution" [Grugel, 1979, 49]. The trend, at least amongst the middle and working classes, appeared to be away from the mainstream churches to an alternative expression of Christianity. So whUe Great Britain benefited from the wealth created by the factories and mines, and its expanding world-wide empire, it was wealth enjoyed by a relatively smaU proportion of the population. The riches of the most wealthy of English landed famines were "prodigious"159. There were forty-four "great landowners" who owned over 100,000 acres each, and many more whose annual income exceeded £100,000 [Hibbert, 1987, 542]. In contrast, Charles Booth asserted that over 30% of the population of London Uved "on the verges of his poverty line or below it160" [Hibbert, 1987, 570 - 571]. Emerson observed that in England, to be self-supporting and solvent was of "vital importance" [Emerson, 1966, 101], since poverty was a great reproach, the last term of 156 Charles Booth's study confirmed what an earlier researcher, Henry Mayhew, had highlighted in his survey published in 1851. He discovered that the poor had "precious little religious knowledge and almost no contact with church or chapel" [Grugel, 1979, 48]. 157 Moody (1837 - 1899) was an American evangelist, known as an entertaining and simple preacher [Piggin, 1996, 59]. Sankey (1840 - 1908) was Moody's partner in evangelism. Based at a church in Chicago, together they conducted numerous revival meetings, both in America and England, and wrote many famous hymns. Sankey's Sacred Songs and Solos was published in 1873, and sold 50 million copies [Modern World Encyclopaedia, 1935, Vol. 7, 511; Vol. 6, 353 - 354]]. 158 Some of those organizations included "the Mildmay and Keswick conventions, the China Inland Mission, the Children's Special Service Mission and the Scripture Union, the Salvation and Church Annies, evangelical public schools, and evangelical theological colleges at Oxford and Cambridge, the 'Forward Movement' in English Methodism in the 1880s, training colleges for laymen, and numerous large churches and welfare institutions" [Piggin, 1996, 57]. 159 The Duke of Bedford's annual income, in the reign of Queen Victoria, reputedly exceeded £300,000 [Hibbert, 1987,541]. 160 These consisted of people described as having "small regular earnings", "intermittent earnings", "two or three days' work a week" or "occasional labourers" who lived the "life of savages" [Hibbert, 1987,570-571]. Chapter 4 Historical influences Page 128 insult being "a beggar" [Emerson, 1966, 99]. Two disgraces he identified were first, disloyalty to the Church, and second, "to be born poor, or to come to poverty" [Emerson, 1966, 100]. The number of women involved in prostitution during the 1800s was beUeved to be huge, especially in the middle years of the century161. They were driven to prostitution by "cruel, biting poverty", and included young girls162. The church offered Uttle help to such people. ReUef for poor people was minimal, and having to depend on a local authority for a UveUhood was a daunting prospect [Hibbert, 1987, 593]. The Poor Law Amendment Act of 1834 provided for a "pitifuUy meagre dole from the parish" in cases of severe necessity [Hibbert, 1987, 493], and sought to discourage people from remaining idle. In a speech in 1844, Dickens described the new Poor Law as having "a spirit of cold and hateful utiUtarianism" [Smith, 1968, 25]. Workhouses employed the poor, but under horrifying and harsh conditions . Prisoners were similarly badly treated. The Prison Act of 1877 failed to correct the problem of cruelty highUghted in the Royal Commission of 1854, and the incidence of "recommittals" was noted to be serious [Hibbert, 1987, 669]. In the 1700s, charities had grown in number, with charity often seen as a means of converting the idle, and acting as "an evangelizing means of improving the social environment, making it a better place in which to trade, seU, borrow and lend" [McKendrick et al, 1982, 228 - 229]. People were blamed for being poor, and charity was given usuaUy with the purpose of economic reformation. WilUam Booth [1890, 67] maintained there was no existing machinery in place within England of the day, "by which Society, whether through the organisation of the State, or by individual endeavour, attempts to deal with the submerged residuum". He dismissed the Poor Law 161 In 1885 it was estimated that there were 60,000 prostitutes in London alone [Hibbert, 1987, 634]. 162 The age of consent until 1885 was 13, and it was estimated that there were thousands of prostitutes under the age of 13. At the same time, child abuse remained a "horrifying problem", stimulating the foundation of the National Society for the Prevention of Cruelty to Children in 1889 [Hibbert, 1987, 636]. 163 Respectable poor people and foundlings were often incarcerated with criminal types; rations were meagre; officials were often incompetent [Hibbert, 1987, 493]. Chapter 4 Historical influences Page 129 as inadequate, and saw charity as a desirable, but insufficient solution to the poverty of England, since there was "no attempt at Concerted Action" [Booth, 1890, 73], Dickens highUghted the problems of poverty, drunkenness, crime, an unfair legal system, and incredible inequities in the distribution of wealth in England during the 1800s. Corporations flourished, and England'sfinancial empire expanded, but in spite of the efforts of social reformers to legislate better Uving and working conditions for EngUsh people, life was a grim business for the poor. WhUe it was the official denomination of the country, The Church of England was very much a social and economic, perhaps more than a reUgious, institution, having Uttle effect on the rising tide of poverty and the social upheaval going on around it. It was into this England that WiUiam Booth and Catherine Mumford were born in 1829. The early Salvation Army. Scene 2. Our perambulation around the streets of London leads us to a dismal slum. Here, in a side street in East London, The Salvation Army is about to be born, in an environment of poverty and deprivation. And yet this Army will have a spirit that is determined to overcome the disadvantages of birth, not by achieving wealth and power for its own sake, but by reaching out to those alongside whom it lives and works. It will have a heart to spread the love of God, and a keen sensitivity to the pain and suffering of its fellows. It will want to help, but its goals will often be misunderstood or thwarted. Just to survive will not be easy ... and sometimes in its eagerness to achieve its goals, it will be almost overcome by its own ambition and determination, and the need to ensure its survival... Birth of the Army. From a poor background, WiUiam Booth was converted to Christianity as a young man. His working life began in a pawn shop, whUe he preached in his spare time. In 1851, Edward Rabbits, the owner of a chain of boot stores in South London, offered to Chapter 4 Historical influences Page 130 support him for three months, at a rate of twenty shillings per week, in order to aUow him to preach [CoUier, 1965, 33 - 34]. By 1855, Booth had become a Methodist New Connexion travelling campaigner, on a wage of £2 per week. In that year he was married to Catherine Mumford, a committed Christian with strong feminist views, and ordained as a Methodist New Connexion minister three years later. Catherine was a powerful preacher, preaching for twenty eight years as Wilham's faithful partner in his life's work [CoUier, 1965, 42]. In 1861, WiUiam Booth resigned from the New Connexion. He formed the Christian Revival Association, which was later absorbed into the East London Christian Mission, which, in turn became The Christian Mission. He was keenly aware of the pitfaUs of the society in which he Uved and preached, and was deeply committed to ministering to the poor. Few clerics of the day "sought to grapple with their (the poor's) problems", and over 6,000 parsons "owed their Uvings to wealthy private patrons" [CoUier, 1965, 46]. Only one man in twenty-four had the vote, and the cut-throat competition of the day had bred "a harsh ruthlessness that scorned poverty and idoUsed success" [CoUier, 1965, 46]. WiUiam Booth's sole aim, in 1865, at the foundation of The Christian Mission, was "to convert the outcasts the clergy did not reach" and then pass them onto other churches. He often came home "bruised and bloodied", and found that his converts would not go to established churches [CoUier, 1965, 48 - 52]. When the Christian Mission began in 1865 times were difficult for Booth, his wife and four chUdren, who Uved in the East End of London, on less than £400 per year, which they raised from coUections. After one year, they had only sixty faithful foUowers, with many "casualties and desertions". Even in those early days, Booth was always authoritarian, and "not always easy to agree with" [Watson, 1964, 19]. In spite of Booth's authoritarian nature, the Christian Mission had a democratic constitution, and its Annual Conference made decisions about the running of the rninistry [Watson, 1964, 22]. After years of abiding by the decisions of a committee of thirty-four people, Booth became increasingly frustrated, so that when in 1876 he was approached by a deputation of evangeUsts, with grievances, demanding an autocracy Chapter 4 Historical influences Page 131 [CoUier, 1965, 64 - 65], he agreed. He confessed that he did not want to found a new sect, but nevertheless, in 1878, at the annual conference of The Christian Mission, it was resolved by a three quarters majority to scrap the mission's Deed PoU, create a new Deed Poll, and put control of aU mission property and operations in Britain, or any other country, in WiUiam Booth, as General Superintendent, "or his nominee"164 [CoUier, 1965, 65]. As General Superintendent, Booth had enormousfinancial powe r to expend money which had been contributed to the Christian Mission, provided he should annuaUy "pubUsh a balance-sheet duly audited of aU such receipts and expenditure" [The Salvation Army (New South Wales) Property Trust Act 1929, 1959]. An Army model. Booth had been a keen foUower of the careers of Wellington and Napoleon, and foUowed the concept of miUtant Christianity. The stirring hymn "Onward Christian Soldiers" was written in 1865, and with the recent American CivU War and the Russo- Turkish war, miUtary terminology had become popular. Booth spoke of "siege operations" against the DevU and was described in 1876 as the "General of the HaUelujah Army" [CoUier, 1965, 62 - 64]. His mission was taking on an Army-like culture and graduaUy was referred to as a volunteer Army, untU his son BramweU disagreed, preferring to be a "regular". He suggested that it was not a volunteer Army but a Salvation Army [CoUier, 1965, 66]. It was formed as a Salvation Army with eighty-eight members in 1878: The Christian Mission under the superintendence of the REV. WILLIAM BOOTH is a SALVATION ARMY recruited from amongst the multitudes who are without God and without hope in the world, devoting their leisure time to aU sorts of laborious efforts for the salvation of others from unbehef, drunkenness, vice, and crime [Christian History, 1990, 25]. 164 This Deed Poll was dated 13* August 1878. The General Superintendent under that deed poll had the duty of determining and enforcing the "discipline and laws", and superintending the operations of the Christian Mission, and "to conserve the same to and for the objects and purposes for which it was first originated" [The Salvation Army (New South Wales) Property Act 1929, 1959, 2]. Chapter 4 Historical influences Page 132 The young Army was very much Booth's child, and WiUiam Booth was its "autocratic general". With his wife Catherine, the "Army Mother", beside him, and his chUdren behind him, "his people weU nigh worshipped him, but it was God's Army too, at war against the devU and sin and poverty" [Bolton, 1980, 29]. In that year, Booth composed his "Orders and Regulations for the Salvation Army", mamtaining that he could not run his "army" without a system [CoUier, 1965, 75 - 76]. A combination of rules, and homiUes about the Uves Salvationists were required to Uve, it was uncompromisingly strict: marriage outside the Army was forbidden for serving officers; officers were compeUed to meet the expenses of their work before they were entitled to receive even the set modest wages165; Salvationists were urged to be reUgious in their own homes first, to keep their expenditure "a Uttle lower" than their income, and to make their homes dwelling-places of love, characterized by Salvation [Barnes, 1960, 120 - 125]. In 1879 in Salisbury, a Salvationist and his three sons, flunking the movement "lacked something", brought brass instruments along to their meeting, and accompanied the singing of songs. This was an ingenious addition to the fledgling army's unique culture, as the hit tunes of the day were adapted into songs the Salvation Army could sing. Booth's comment "why should the DevU have aU the best tunes?" indicated his willingness to use whatever methods were necessary to reach people with his message [CoUier, 1965, 67 - 69]. Within a year, a music department had begun, and there were 400 Salvation Army bands, with a repertoire of eighty-eight hit tunes [CoUier, 1965, 70]. The Army was now an army in aU but name. In 1880, the name was changed officiaUy from the Christian Mission to The Salvation Army, and the title "General Superintendent" was changed to "General", with successors of WilUam Booth to be designated "General" [The Salvation Army (New South Wales) Property Act 1929, 1959]. The Army model continued to gain 165 It was claimed [Manson, 1906, 51] that, whether or notfield officers were successful as evangelists, they had to be adept at collecting money if they were not to be "graded as a failure". Chapter 4 Historical influences Page 133 momentum, with the use of Army terminology and the introduction of uniforms. A perusal of Appendix 4.1, "A glossary of Army terms" wiU show the extent to which Army terminology has infiltrated the organization and culture of the modern Salvation Army. The Army grew, according to WiUiam Booth, because of an "unqualified acceptance of rniUtary government and discipline" [Booth, 1890, Appendix 2], "the government that God himself has invented" [Wiggins, 1964, 237-238]. Mission. Early in his rninistry, William Booth recognized the difficulty of preaching the Christian gospel to people "whose whole attention is concentrated upon a mad, desperate struggle to keep themselves aUve" [Booth, 1890, 45]. WhUe his intentions were, at grass roots, uncompromisingly spiritual, he saw evangeUcal conversion as "a concomitant of drastic social and economic change - less a reUgion of stained-glass windows and the music of J. S. Bach, than of soap and a square meal, with noise, cheerful songs, and everyone so busy that they could not be bored" [Watson, 1964, 21]. Feeding the starving and finding homes for the homeless was one step towards this spiritual purpose, which was the saving of souls [Barnes, 1960, 38 - 39]. 1868 was the last Christmas the Booth famUy spent together as a faimly unit. The next year, Booth distributed 300 Christmas dinners to the poor, and that became the pattern of their Uves, as they sought to respond to social needs as they saw them [CoUier, 1965, 58]. His "random attempts at social work" included the establishment of "Food-for-the milUon shops", where the poor could buy hot soup day and night and "a three-course dinner for sixpence". EventuaUy abandoned because of "administrative headaches", they were nevertheless an attempt to set into place a strategy for offering substantial and tangible 166 Army uniforms were introduced in 1880, when Captains could apply for them and pay for them out of their own pocket; some bandsmen wore second-hand military uniforms; the weekly newspaper of the Army was "The War Cry"; banners and flag proclaimed the motto "Blood and Fire", the crimson flag symbolizing the blood of Christ and blue standing for purity; recruits needed "stamina and faith" when they signed on to become officers; and their General sentenced them to "hard labour" for the rest of their natural lives [Collier, 1965, 67, 73 - 75, 89]. Chapter 4 Historical influences Page 134 assistance to the poor [CoUier, 1965, 58]. In 1890 WiUiam Booth's treatise "In Darkest England and the Way Out" was pubUshed. and became, overnight, a runaway best seUer167 [CoUier, 1965, 187]. A stupendous undertaking, it was an attempt to apply the Christian faith to an increasingly industrialized civilization, a recognition that England was sociaUy bereft. In it Booth "made practical poUtics of the social impUcations of Christianity" [SandaU, 1966, 76]. There was no need to look to "darkest Africa" to confront problems in desperate need of attention. He maintained that of the 31 milUon population of Great Britain (apart from Ireland), 3,000,000 Uved in "darkest England" as paupers, often homeless, and starving. They were the "submerged tenth"168, and he likened their condition to the slavery which had been so justly condemned in England sixty years earUer [Booth, 1890, 23]. His famous "cab horse charter" proposed that human beings were worth at least as much as a cab horse, of whom it was said, "when he is down he is helped up" and "whUe he Uves he has food, shelter and work" [Booth, 1890, 20]. Booth went on to formulate a detaUed three-stage plan for dealing with the most pressing social problems of the day, proposing a City Colony, a Farm Colony and an Over-sea Colony, the purpose of which was to form people into "self-helping and self-sustaining communities ... governed and disciplined on the principles which have already proved so effective in the Salvation Army" [Booth, 1890, 91]. Strategies for achieving this ambitious plan included cheap food depots (which had already begun in 1888); shelters; workshops and labour yards; labour bureaux; household salvage brigades for coUecting, mending and recycling; hospitals; prison reform programmes; programmes for rescuing drunkards, lost people, and street chUdren; the formation of agricultural and industrial villages and 167 Thefirst edition , of 10,000 copies, sold out on 20th October 1890, thefirst da y of publication. The second edition of 40,000 sold out a month later, with third, fourth and fifth editions being equally popular. Profits made from the sale of the book were donated to the scheme [Sandall, 1966, 79]. 168 Much later, one writer complained that this problem had still not been dealt with, because "the submerged tenth of the nineteenth century ever grows" as a result of the unfair distribution of wealth in society [Soddy, 1921, 15 - 16; 110 - 111]. Chapter 4 Historical influences Page 135 co-operative farms; the establishment of a "poor man's bank" and a "poor man's lawyer"; a matrimonial bureau; the provision of cheap seaside excursions; and the settling of a colony over the sea, where emigrants could board a "Salvation ship" and set off for foreign shores, "proclaiming the reUgion of the Love of God and the Brotherhood of Man" [Booth, 1890, 155]. Many of these strategies had already begun and "In Darkest England" was characterized by the stories of scores of individuals who had been helped by the Army through their prison gate brigade, their rescue homes for women, a scheme for rescuing chUdren from prostitution169, the "ceUar, gutter and garret brigade", food and shelter centres, their labour bureau, the creches for the chUdren of women who worked [SandaU, 1966, 20 - 21], and countless other social schemes. Prior to 1890 the social work was not particularly weU organized, but in that year, the Social Reform Wing of The Salvation Army was established. While the Army was described as "not a social reform organization", it was one which appUed social reform and welfare work "to the principles on which it was founded" [SandaU, 1966, 74]. Booth was drawn to the poor [CoUier, 1965, 53], and became convinced of the theological justification for a doctrine of salvation that included "both personal salvation and social salvation" [Green, 1990, 29 - 30]. As he saw it, "a man'sfirst ste p towards salvation was to gain his self-respect - so that even men who had touched zero could earn the price of a night's bed and board" [CoUier, 1965, 186]. In 1910, on his 81s" birthday, Booth described the linkage between the spiritual and the social work as being essentia^ the "outcome of the spiritual life of its members" [SandaU, 1966, xiv]. Not all these schemes were instituted by General Booth. The prison gate brigade, for example, was begun in Melbourne, Australia, by Major James Barker in 1883, and launched in London the following year. Rescue homes for women began in Glasgow under the leadership of Major Henry Edmonds [SandaU, 1966,5-11]. Chapter 4 Historical influences Page 136 Fundraising. This social work had to be funded, and various fund-raising methods had been tried since the Booths began their mission work in East London in 1865. Raising the finances necessary to keep the Army going, and fund its ever-expanding social work, had always been a struggle, and with the launching of the "Darkest England" scheme, Booth's request for money reached a crescendo. When Booth started his mission in 1865, his base consisted of just his fanuly, and almost no money. And yet, by 1890, twenty-five years later, the Army was a world-wide movement, with almost 2,900 centres, over £775,000 in property (mostly mortgaged), and had raised more than £18,750,000 for its work. Such was the extent of its influence, that by 1890, the Army was receiving 600 telegrams and 5,400 letters each week [CoUier, 1965, 185]. This incredible expansion in the work and influence of the Army had occurred by combining with the vision a vigorous fund-raising style and an attempt to keep expenses as low as possible. From its earnest days, the Army gained a reputation for its constant efforts at money-raising. A music-haU chorus of the eighties Ulustrates this: General Booth sends round the hat; Samson was a strong man, but he wasn't up to that [Booth, 1977, 115]! Early donations came from several phUanthropists170, but in spite of their generosity, financial pressures were always acute. In 1881, Booth managed to raise £15,000 to buy the London Orphan Asylum, but thefinancial strain of keeping it and other rninistries going meant the Army had to rely on "the whims of phUanthropists" [CoUier, 1965, 89]. The object of many of the ministries became that of self-funding, which was not always possible. The coUection box became a regular accompaniment to Salvation meetings, but new strategies were needed in order to maintain existing ministries and expand into 170 Mr. Samuel Morley, of Nottingham, promised £100 a year to the Christian Mission, and strong moral support also came from other sources, including Lord Shaftesbury, who was initially friendly, but later "cooled off' [Watson, 1964, 21]. Chapter 4 Historical influences Page 137 new areas. BramweU Booth described money as the "sinews" of the Salvation war [WoodaU, 1995, 18; Thompson, 1985, 21], an essential component of the work that was to be accomplished. The need for a supply of money to support the Army's ambitious undertakings was "a continual source of anxiety to William Booth" [Wiggins, 1964, 225]. Because of this pressure, the abihty of Army officers to raise funds to sustain their ministries was crucial171. In 1886, the Army was under considerable financial strain172 and, in response to a suggestion from an officer who declared he was willing to forego his pudding for a year in order to provide money for Army ministry [Thompson, 1985, 17], WiUiam Booth instituted thefirst Self-Denia l Appeal. Introduced in The War Cry on 14th August 1886 in a letter from the Founder, the first Self-Denial appeal was to raise money to be used to expand the Army's work in Europe. Fifty thousand people were invited to join the "Self-Denying League" and to register their pledge to boost the contents of the "War Chest" [Wiggins, 1964, 216]. They were to go without "some article of food or clothing, some Uttle luxury, some ornament, some pleasure" [Thompson, 1985, 18]. Thefirst targe t of £5,000 was short by a mere £180. Two years later, the appeal was more successful, raising a total of £15,000, including nearly £5,000 from "friends of the Army" [Thompson, 1985, 18]. After that, self-denial week became a regular annual event in every Army command and territory, even the poorest countries remitting their gifts to London to be used by the Army leaders where the needs were considered to be the greatest [Thompson, 1985, 18]. The appeal graduaUy increased in its sophistication and scope, and the appeal income continued to rise steadUy, "always being strictly accounted for pubUcly in its 171 In 1883 Major Henry Edmonds set up the Army's first rescue home for women, in Glasgow. When he left at the end of that year, the home was closed because offinancial difficulties . The officers who had followed him "had not possessed his faculty for interesting wealthyfriends i n the Army's work, nor his capacity for financing it" [SandaU, 1966, 12]. He re-established it on his returnfifteen month s later. 172 In December 1884, corps debts were £10,000, and the Army's foreign fund was £1,300 overdrawn. Meanwhile, the Army was accumulating property at "a terrifying rate", in spite of the fact that the Booths were notfinancially minde d [Collier, 1965, 146]. Bramwell Booth spoke of being "terribly tried about getting in money" [Booth, 1977, 111]. It was a constant pressure for the Army. Chapter 4 Historical influences Page 138 amount and use" [Thompson, 1985, 20]. A spiritual exercise as weU as a fundraising method, by 1895 it was accompanied by a week of prayer and singing173, "breaking down aU pride, coldness, back-sUding and selfishness so as to achieve a week of heroic effort and sacrifice" [Thompson, 1985, 19]. Four envelopes of different colours were issued174, each soldier being asked to distribute up to fifty envelopes, and to be responsible for coUecting them. Envelopes were sent to the various provincial headquarters, and counted there, andfield officers counted time spent on behalf of the appeal as "visitation" [Thompson, 1985, 19]. Not only was the appeal focused on Salvationists, but the pubUc were being asked to contribute to the work of the Army. General Booth, in 1908, said of the self-denial scheme, that it had proved to be one of the "greatest reUgiousfinancial successes of the age", having attracted the admiration of "almost every reUgious and phfianthropic organisation in existence" [Thompson, 1985, 19]. Also in The War Cry in 1886, General Booth announced a new scheme for "obtaining or erecting suitable corps buUdings" [Wiggins, 1964, 232], the Salvation Army Property League. The proposal was that there would be 20,000 members of the League, who would aU contribute one shilling per quarter. This would bring in £4,000 each year, to which would be added other gifts and legacies. Once the league was established, the plan was that if corps could contribute one sixth of the cost of their proposed new buUdings, the Property League would furnish the remainder. The result of this was that in 1887, the Salvation Army acquired "more property than in aU its previous seventeen years of history" [Wiggins, 1964, 234]. The "Universal Exhibition of Thank-Offerings" in 1887 was organized by the Army in order "to give every corps, officer, soldier and friend an opportunity of presenting to the Lord a portion of their goods (smaU or large) as a token of their thankfulness to 173 The two needs, of religious sacrifice and fundraising to meet the needs of the Array, were "inextricably bound together" [Thompson, 1985, 19]. 174 These were white (for soldiers and recruits), terra cotta (for junior soldiers), straw (for "every known friend"), and grey (for "house to house distribution") [Thompson, 1985, 19]. Chapter 4 Historical influences Page 139 Him for raising up The Salvation Army and sending forth its officers into this and other lands" [Wiggins, 1964, 242]. A temporary buUding was constructed to house the exhibition, which included furniture, overcoats, sheep, shawls, cushions, and many other items. At a banquet for eight hundred people, £2,000 was raised for the work. The pressure to raise funds increased greatly as the Army went through a rapid growth phase. From 1886 to 1887, according to statistics published in The War Cry, new corps were springing up "like mushrooms in the cities, towns and viUages of the United Kingdom", with 476 new corps being added in that year, bringing the world total to 2,262 corps. In the same period, 1,492 new officers were commissioned, bringing the world total of Army officers to 5,684 [Wiggins, 1964, 184]. At this stage in the Army's history, one hundred officers were going out from training homes every month [Wiggins, 1964, 242]. They were responsible for raising their own finances. Tithing was promoted as a desirable spiritual andfinancial practice for aU Army officers, soldiers and friends, and other creative fund-raising efforts were devised, including harvest festivals, the Tea League175, and the Lord's corner176. At the end of 1888, General Booth presented a "memorial" to the British Home Secretary, outlining the situation of "vast numbers of men and women" in East London slums. His assertion was that such shocking conditions in which people were Uving demanded some "special and extraordinary effort on behalf of the state". This was the Army's first request to the government for aid, but their request for £15,000 was denied. It was to be several years before the British government foUowed the example set by the Victorian Government in AustraUa in the early 1890s [Fairbank. 1983, 90 - 91], when it provided funds for The Salvation Army to perform charitable works. With the 1890 pubUcation of "In Darkest England", Booth now proposed that the city, 175 The Salvation Army packaged tea, and at one stage had 43,344 customers [Wiggins. 1964, 225]. 176 The idea behind this was that a corner of the garden be utilized for growing produce, which would then be sold, with the proceeds going to the Army's work [Wiggins, 1964, 225]. Chapter 4 Historical influences Page 140 farm, and over-sea colonies could be estabUshed for a cost of £1 milUon. He asked for £100,000 initiaUy, to get the city colony estabUshed, with a further £30,000 in subsequent years. Once estabUshed, he maintained that the scheme would be financiaUy self-sustaining, through such schemes as the household salvage scheme [Booth, 1890, 246, 250]. To anybody else, this might have seemed an extraordinary amount of money, but in spite of the fact that WiUiam Booth had been "bedevilled by money troubles" since the early days of the Army [Watson, 1964, 93], he was unapologetic about his request for funds to put his scheme into operation. He gave examples of the cost to Britain of various war expenses177 which greatly exceeded the £1 milUon he was requesting, and which were paid without hesitation by a government committed to extending its world-wide empire: When John Bull goes to the wars he does not count the cost. And who dare deny that the time has fully come for a declaration of war against the Social EvUs which seem to shut out God from this our world? [Booth, 1890,251]. Booth's logic was that, faced with the possibiUty of accomplishing "a vast deal of good", people would hasten to supply thefinancial needs of the scheme. Further, as the scheme progressed, he thought it would not be "irrational" to expect that the government, or some local authorities, would assist in the plan, since it could ultimately be expected to provide rehef in the rates and taxes of the country. At the time, he estimated that something like £10 milUon each year was being spent through the Poor Law and Charitable ReUef "without securing any real abatement of the evU" [Booth, 1890, 246 - 250]. He conceded that perhaps the scheme was so vast that it ought to be undertaken by the Government itself, but since nobody appeared to be doing anything about such a vital work, the Army was prepared to undertake it if thefinancial help was provided [Booth, 1890, 267]. The Army was thus willing to be a channel for the funds provided by concerned donors, and possibly the government, in order to undertake the 177 Two examples Booth quoted were the Egyptian campaign, which cost a reputed £5 million, and the Afghan war, whose cost was a staggering £21 million. He suggested that "nothing is impossible when Britain is in earnest" [Booth, 1890,251]. Chapter 4 Historical influences Page 141 work for which they had the vision. Early financial credentials. The Army, according to Booth, had the credentials necessary for putting the Darkest England scheme into action [Booth, 1890, 241 - 245]. Its size, its zeal, its rehance on the power of God, its successful record so far, and its Army discipline, aU made it capable of foUowing through the grand plan. In an appendix to his book, Booth hsted the qualifications of the Army for administering the Darkest England scheme. His choice of information to be included was interesting: the number of "Officers or Persons whoUy engaged in the Work", a Ust of property vested in the Army, a catalogue of the social work of the Army, including the number of officers then managing those social branches, detaUs of weekly and monthly circulation of Army pubUcations, a Balance Sheet, and an explanation of the system of producing audited Balance Sheets for International Headquarters, for "every corps in the world", and every Divisional and Territorial headquarters. Appendix 4.2, "Salvation Army, the position of the forces, October, 1890" contains much of the information from Booth's appendix. The emphasis seemed to be on accountabiUty to the pubUc, and a desire to be frank and open about the Army's dealings in the world, including financial management. The Darkest England trust deed provided for the General to be a "genuine legal trustee", with aU properties vesting in him as trustee. The moneys and properties raised through the Darkest England scheme were to be kept separate from those of The Salvation Army, and any breach of trust by the General would be proceeded against by the British Attorney-General [SandaU, 1966, 97]. According to his son BramweU, William Booth never touched any of the Army's money after thefirst ten or twelve years of the movement. WhUe financial arrangements were in his name, they were "attended to by others", because the founder realized "the necessity for exactness and economy in dealing with money, both private and pubhc" [Booth, 1977, 116]. Within three months of Booth's caU to "arise in the name of God and humanity, and Chapter 4 Historical influences Page 142 wipe away the sad stigma from the British banner that our horses are better treated than our labourers" [Booth, 1890, 282], £102,559/l/2d. had been contributed to the scheme. Thefirst financia l goal had been achieved, but, sadly, further contributions of £30,000 per annum were not forthcoming [SandaU, 1966, 149]. What the Army desperately needed was a permanent annual income. Members of the Social League were committed to contributing either five guineas or one guinea each year, whUe the Darkest England Light Brigade made contributions through their "grace before meat" boxes [Wiggins, 1964, 222]. When the scheme wasfirst proposed, a large number of institutions and agencies had already been firmly established. They were able to continue operating only by applying the poUcy of self-support "to the fuUest extent possible" [SandaU, 1966, 151]. This was one of the pillars of the scheme, that after being set up with an initial grant, the scheme would pay for itself. The Army became involved in financial institutions, with its Deposit Bank being set up • 17R in 1890 . There were sixty four branches in England, Scotland, Wales and Jersey, and one third of deposits were invested in government securities, with the remaining deposits being lent on mortgage on real estate. Interest paid was 2.5% per annum, and aU profits went towards The Salvation Army [Wiggins, 1964, 220]. The foUowing year, General Booth took over the Methodist and General Assurance Society Ltd. The Army turned it into a "self-formed, self-sustained organization with an administrative staff" [Wiggins, 1964,227]. Trading was another source of funds for the Army. General Booth had expressed the desire that the Army's social work should become self-funding over a period of time. There was no shame in being involved in business activities, providing they adhered to strict ethical standards. The War Cry of 19th AprU 1902 detailed reasons why the Army ought to indulge in such activities, and why they ought to be supported. The Salvation Army uniform needed to be produced, The War Cry and other periodicals needed to be 178 When the Army's bank began, it had no capital. Its only security was "Booth's good name' [Watson, 1964,98]. Chapter 4 Historical influences Page 143 produced, the Army wanted its people to procure "the best possible goods at a reasonable price", and since profits went towards international missionary work, buying from the Army would assist in promoting "the work of salvation throughout a sin-cured world" [Wiggins, 1964, 224]. According to the General, wherever his soldiers were given the freedom to act, they so swiftly proved their worth "to the hUt" that the authorities would soon step in to subsidize their work [CoUier, 1965, 149]. The Army was not averse to accepting pubUc or government funding to establish or maintain their work, and this attracted attention to them, sometimes in a negative way. They desperately needed to be perceived by the pubUc as a reputable organization, if they were to continue to receive the funding they required, but their requests for pubUc money, together with the Army's unusual methods, unfortunately led to a considerable amount of detrimental pubUc sentiment. Pressures from outside the Army. Scene 3. In a London street, Salvation Army musicians are being pelted with eggs, tomatoes, and anything else the rowdy crowd can put their hands on. A violent scene, it encapsulates the public s antagonism towards the young Army. Its controversial methods attract attention, but in its zeal and youthful enthusiasm, it treads on the toes of the institutions of the day, and some of the attention attracted is unwelcome. Marching in the streets, setting a bold vision, asking the public for huge amounts of money, even if it is is for the alleviation of human suffering - all these things have made the Army unpopular and misunderstood. And as well as these physical onslaughts, charges of financial mismanagement, or even fraud, threaten to overtake the Army... From its earhest days, The Salvation Army has had a strange and intense relationship with its pubUc, because it has always been a high-profile pubUc movement. It did not confine its activities to church buUdings, but went out onto the streets, preaching, marching, and making music. Speaking in 1903, about the time when the Army began, WiUiam Booth said "I was laughed at, mocked at, ridiculed and given the cold shoulder Chapter 4 Historical influences Page 144 by all sorts of people179, reUgious and otherwise, but I went forward" [Wiggins, 1964, 251]. In the early days of the "HaUelujah lasses"180, any pubUcity that kept the Army's purpose before the pubUc was thought to be "good pubUcity", including beU-ringing, a crimson-draped donkey, and other stunts designed to attract attention and enable the Army to present its message [CoUier, 1965, 77]. Politics and Persecution. But the Army was not merely putting on a show. Its message was not without effect. WhUe WiUiam Booth maintained in The War Cry in 1886 that Salvationists were not to mix themselves up with poUtical parties181 [SandaU, 1966, 263], nevertheless, the Army was highly poUtical. Outspoken in its condemnation of the evUs of alcoholism and prostitution especiaUy, the Army early attracted the anger of pubUcans and brothel owners, who accused them of taking away their customers [CoUier, 1965, 104]. For years, Salvationists faced persecution in the form of peltings with sticks and stones, mud, egg yolk, and other missUes. One day in 1882, in Great Britain alone, nearly seven hundred Army personnel were "brutaUy assaulted on the streets, simply for preaching the gospel" [Barnes, 1990, 16], whUe sixty Salvation Army buUdings were wrecked by mobs [CoUier, 1965, 107]. PubUcans and brothel owners launched "a savage aU-out counter-attack" aimed at annihilating the "too-powerful Salvation Army" [CoUier, 1965, 104 - 105]. On one occasion, as Salvationists were battled and bleeding, with buckled instruments covered with blood and egg-yolk, WiUiam Booth, always eager to capitalize on any opportunity for pubUcity, urged, "Now's the time to get your photographs taken!" [CoUier, 1965, 106]. ParadoxicaUy, in 1882 the Archbishop of York, Dr WiUiam Thomson, proposed 179 One of the people who condemned The Salvation Army was the social reformer, Lord Shaftesbury, who had earlier been supportive [Collier, 1965, 198]. 180 This was the nickname given to young Salvationist women. 181 In 1887 General Booth issued a General Order which forbade the use of Salvation Army barracks for political meetings of any kind. Later, in 1900, he said that while officers were free to vote, the Army was "neutral", and politics was "not its work" [Wiggins, 1964, 190]. Chapter 4 Historical influences Page 145 amalgamating the Salvation Army with the Church of England182, since they were reaching people the Church of England was "powerless to reach"183. There were some meetings regarding this proposal, but it was reported that Booth "would not relinquish one iota of his control"184 [CoUier, 1965, 103]. In spite of the fact that this merger was under consideration, and the Army was defended, sometimes from unexpected 185 quarters , pressure mounted to prevent the Army from marching through the streets. Through the 1880s, aU over the country Salvation Army people were attacked, persecuted, and arrested186 [Wiggins, 1964, 283]. The Western Daily Mail in 1886 was critical of the unfairness of this persecution. The Salvation Army had done "too much good work" to deserve such treatment [Wiggins, 1964, 266]. This conflict came to a crescendo in Torquay in 1888 when ninety-nine Salvation Army men and women were arrested for marching with music through the streets. Penalties includedfines an d imprisonment. FinaUy, the conflict was overcome, and The Salvation Army were granted the right to conduct their meetings in the pubUc streets on Sundays. The strife over the right to march had been long and difficult, but the Army had grown as a result of this persecution, according to W. T. Stead, a London journalist and active Salvationist. The greatest danger the Army now faced was that of becoming respectable [Wiggins, 1964, 279]. In a sense, such opposition did make the Army what it became. An anonymous Army officer "of seventeen years standing", wrote a "sketch" of The Salvation Army, which was included as part of Appendix 1 in Booth's Darkest England 182 The Archbishop of York reportedly wanted to explore "how far it was possible for the Church to recognize the work of The Salvation Army", and to this end negotiations were arranged between the founder and a group of Anglican bishops. The idea of making William Booth a bishop was apparently inconceivable to the bishops, but he would not give up control of the Army [Booth, 1977, 73]. 183 It was reported that on one week-night in London in 1882, 17,000 people worshipped in Army barracks, but only 11,000 in churches [Collier, 1965, 103]. 184 William Booth was reported as saying in 1894: "The Salvation Army is not inferior in spiritual character to any Christian organization in existence" [Booth, 1977, 82]. 185 The Bishop of Durham, Dr Joseph Lightfoot, in 1882, defended the Army: "They have ... recalled us to the lost ideals of the work of the Church - the universal compulsion of the souls of men" [Collier, 1965, 108]. Rev Dr Barry, a Catholic, advocated social action to transform the lot of ordinary people. He said that "Christianity has not kept pace with the population" [Booth, 1890, xxx]. 186 In the United Kingdom, there were 762 prosecutions and 549 convictions. Abroad, there were 243 prosecutions and 112 convictions [Wiggins, 1964, 245]. Chapter 4 Historical influences Page 146 book187. He described the opposition that had been encountered, but maintained that, in spite of this opposition, the Army, in country after country, had made its way to a position of "universal respect" [Booth, 1890, vi]. During these early years, The Salvation Army was imphcated in another highly poUtical case. In 1885, Stead pubUshed a series of shocking revelations about an active white slave market in young girls in Britain188. Stead and BramweU Booth, William Booth's eldest son, an active Salvation Army officer, set up a secret plan to expose the traffic in young girls, and in the outworking of that plan they were both arrested and tried. Stead received a sentence of three months without hard labour, and BramweU Booth was acquitted. The trial did not harm The Salvation Army. On the contrary, "it sent their prestige soaring to the highest peak in its stormy twenty-year saga". FoUowing the trial, a benefactor gave a donation of £2,000 so that the work of rescuing girls could continue [CoUier, 1965, 144], and the Government passed the Criminal Law Amendment Act, which raised the age of consent for girls from thirteen to sixteen. The Salvation Army had worked for the passing of this legislation, having presented to Parliament a petition two and a half miles long with 393,000 signatures [SandaU, 1966, 36]. WiUiam Booth's response was to "thank God for the success he has given to the first effort of The Salvation Army to improve the laws of the nation" [CoUier, 1965, 139]. The Army had become a poUtical force. Within five years, they had established thirteen homes for girls in the United Kingdom, housing more than 300 girls, with seventeen more homes abroad [CoUier, 1965, 145]. 187 The officer wrote: "In each country it (the Army) has to face universal prejudice, distrust, and contempt, and often stronger antipathy still. This opposition has generally found expression in systematic, Governmental, and Police restriction, followed in too many cases by imprisonment, and by the condemnatory outpourings of Bishops, Clergy, Pressmen and others, naturally followed in too many instances by the oaths and curses, the blows and insults of the populace" [Booth, 1890, vi]. 188 "The Maiden Tribute of Modern Babylon" was published in the Pall Mall Gazette [SandaU, 1966, 25]. Chapter 4 Historical influences Page 147 Issues of financial accountability. Rumours about the Darkest England scheme. The Darkest England proposal put the Army in the spotUght once more. Response to this bold new initiative was not universaUy positive. A number of critics spoke out against it, including Professor T. H. Huxley, a weU-known biologist and agnostic189. Figure 4.2 below, "A caricature of William Booth", is typical of the "abusive cartoons" about WUUam Booth that were published in the 1890s190 [Ervine, 1934, 544 - 545]. NOW, MR. BOOTH, LET US KNOW WHAT YOU ARE GOING TO DO WITH ALL THIS MONEY! Figure 4.2. A caricature of William Booth. Rumours began to circulate about the financial aspects of the scheme, and the Army in particular. The officer who had been in charge of the City Colony resigned, and it was beUeved that there were irregularities in the way the finances raised were being 189 Huxley described it as "socialism in disguise" or "autocratic socialism". "Fewer evils," he wrote, "are of greater magnitude than unobstructed and unchastened religious fanatacism" [SandaU, 1966, 82 -83]. 190 Other critics described William Booth as "Field Marshal von Booth", a "brazen-faced charlatan and a "pious rogue" [Collier, 1965, 194]. Chapter 4 Historical influences Page 148 accounted for and used191. One rumour even suggested that Booth was planning to abscond with £2 milUon of funds from the Darkest England scheme. General Booth wrote in The War Cry of 6th August, 1892: ... I have been charged definitely with using the money given for the poor for my own glorification, luxurious indulgence and family aggrandizement... The accounts of the social scheme it has been aUeged are imperfectly kept ... and the whole of ourfinancial statement s are unreliable ... It has been said that the money has not been spent at all, or not as proposed ... [SandaU, 1966, 92]. The London Times suggested a five man committee should check on the fund's legal and financial aspects, and that inquiry was held in 1892192. The committee considered whether the money raised was devoted exclusively to the Darkest England scheme, whether it was expended in a "businesslike, prudent and economical manner, with properly kept accounts" and whether the property so raised was secured from "misappUcation" [SandaU, 1966, 94]. The result of their findings vindicated Booth, finding that he had "drawn no income from mission or Army funds in twenty-seven years as an evangelist" [CoUier, 1965, 195 - 196]. Further, the committee held that "... books are kept on a proper double-entry system ... audited by a firm of very competent chartered accountants ... vouchers of aU payments are kept"193 [SandaU, 1966, 94]. The Times, however, suggested that whUe the social wing of the Army was substantiaUy in debt, the "spiritual wing" was so prosperous that it could advance the money to keep the social work going [SandaU, 1966, 96]. Commissioner Frank Smith apparently objected to the association of the social wing with The Salvation Army, and rumours grew that funds raised from the Darkest England scheme were being merged with the general funds of The Salvation Army [SandaU, 1966, 101 - 102]. 192 The inquiry began with five members, one of whom was Mr. Edwin Waterhouse, then the President of the Institute of Chartered Accountants. They held eighteen meetings, and called thirty witnesses [SandaU, 1966, 93]. Access to all records was given, and sixteen of the social centres were visited. The committee found that the money was being "properly spent", and gave the scheme their full approval [Watson, 1951, 19]. 193 The Deed Poll declaring the Trusts of the Darkest England Scheme gave the General power to "determine and enforce the laws and to superintend the operations" of the scheme, provided that "full accounts of all moneys contributed collected or received for the said Scheme and of the application thereof shall be kept in such manner as to keep the same always distinct and separate from the accounts of all other funds of the Salvation Army" [SandaU, 1966, 328 - 329]. Chapter 4 Historical influences Page 149 Early financial practices. Financial accountabUity and the proper keeping of accounts were important to the Army even before these aUegations were made. It has already been noted that Balance Sheets were required under the terms of the Christian Missions' Deed Poll of 1878, and this requirement remained in force when the name was changed to The Salvation Army in 1879194. The pubUcation of the Balance Sheet for the year ending 30th September 1879 [The War Cry, 1880, 3] included an explanation of the poUcy of producing annual Balance Sheets, and an assurance that "every penny received and spent in connection with the Army has thus been pubUcly accounted for from thefirst day s of The East London Christian Revival Society till this day". Appendix 4.3, "The Salvation Army Balance Sheet for the year ending 30th September 1879" presents a copy of the contents of this Balance Sheet. Refuting the charge that the Army had never pubUshed Balance Sheets, it was pointed out that this Balance Sheet, for 1879, was actuaUy the 14th that the Army had produced, and that "a firm of auditors of the highest respectabiUty have audited our books for years past" [The War Cry, 1880, 3]. Several years earUer The Times had contained an article about The Salvation Army's 1887 Balance Sheet, aUeging that it was the first Balance Sheet the Army had published. The Field-Secretary, in his War Cry response, noted that "The General has written to them reminding them of their previous article195, and enclosing balance sheets for ten years. Surely that old tale about our issuing no balance sheets is not going to start again!" [Wiggins, 1964, 213]. It has been suggested that since its early days, the Army has highly valued financial accountability, and has sought to implement an accounting system so rigorous that it has earned "the unqualified commendation offinancial expert s and authorities who had 194 The original deed poll remained intact: "... everything in the within Deed contained relating or referring to The Christian Mission shall be taken as relating or referring to "The Salvation Army"' [The Christian Mission Deed Poll, 1878]. 195 The Times had earlier published a comment on the 1885 Balance Sheet. Chapter 4 Historical influences Page 150 cause to study its workings [Wiggins, 1964, 212-213]. William Booth was reported to place great trust in the Army's pubUc auditors who looked after their accounts [Booth, 1977, 116]. A story BramweU Booth recounted was about Henry Labouchere, the editor of the paper Truth, who was openly critical of the Army's finances, aUeging that it had no accounts to show. After one of his attacks, William Booth invited him to visit the Army's headquarters, and he arrived to find one of the partners from the Army's auditing firm there, with aU the accounts ready for his perusal. After one and a half hours of "going over the books, examining the Vouchers, and talking to members of the Staff', he was apparently quite satisfied, and after that, became "more or less afriend". Th e chief value of his approval of the Army's finances, according to BramweU Booth, was in the fact that "he was so great an authority on such matters that when he took a thing up and even faintly praised it people accepted its credentialsright away" [Booth, 1977, 119 - 120]. The Army as a business. During the mid 1890s in England, there was criticism from the English press196 about the Army's Life Assurance Company197, due to the sale of poUcies on the Uves of chUdren [Wiggins, 1964, 229]. It was the Army's practice that the positions of Superintendent and Assistant Superintendent were held by officers with Army ranks. WiUiam Booth defended this practice in 1900198, urging Assurance officers to be "God's 196 Bramwell Booth described the press of Fleet Street as maintaining a 'Very hostile" front towards The Salvation Army for a long time. It was difficult to get newspapers to correct misstatements. With the death of Catherine Booth in 1890, there was a "widespread change in the attitude of the press"[Booth, 1929, 160]. The Army was well aware that the influence of the press was huge, and that it was to its advantage to have their support. 197 The Army alleged, in its 1931 Year Book, that criticisms were unfounded. The "wrong impression'1 was held that children were being neglected, and their deaths hastened, so that they would die and their insurance policies be collected. Attempts were made to ensure this could not be the case, and these too drew criticism. The purpose of the society was to help "the poor man" [The Salvation Army Year Book 1931,1931,29]. 198 In 1935 officers still held all directors' and management positions in The Salvation Army Assurance Society, Limited. Booth's motives for defending the Assurance Company were threefold [Burrows, 1957, 40 - 41]: the encouragement of thrift, the evangelistic opportunities provided by the Chapter 4 Historical influences Page 151 agents", ideaUy aUying "business principles" with "reUgious practice" [Wiggins. 1964, 230-231]. Appendix 4.4, "Financial accountability of The Salvation Army" details this and other defences made by The Salvation Army about itsfinancial practice s in its Year Books up to 1935. In 1896, The Salvation Army's Financial Secretary's department at International Headquarters was merged into its office of the ChanceUor of the Exchequer, which effectively united aU the fund-raising departments with the spending departments, under the one authority [Wiggins, 1964, 222]. Criticism was made of the Army's running as a business, but by the turn of the century, the tide of persecution and misunderstanding about the Army, its work, and what it stood for, appeared to have turned. By then, governments "began to understand what the Army set out to do", and to make a major reassessment of its value to society [Barnes, 1990, 16]. Some specific criticisms. Manson [1906], a critic of The Salvation Army, published a book entitled "The Salvation Army and the PubUc". He was not persuaded by thefindings o f the 1892 committee , by the increase in positive pubUc perceptions about the Army, or by other claims that the Army was financiaUy open and accountable. His book contained a stinging rebuke to the Army, centred not only on itsfinances, bu t on a range of other issues. He maintained that the pubUc ought to be more interested in what the Army was doing, since, unlike other denominations or sects, it reUed very heavUy on the pubUc to supply the funds necessary for its work [Manson, 1906, 2]. He questioned whether the work of the Army was actuaUy being accomplished200, citing the faUure of the Army to agents' entering the homes of policy holders, and the possibility of financial support for the Army. 199 Manson [1906, 298 - 299] criticized the scope of the inquiry as being too narrow. He maintained that it did not examine the principles, government, teaching, or methods of the Salvation Army. Further, he highlighted a recommendation of the committee "that the real property holdings and the investments in stocks should be held in the names of independent trustees with the limited powers expressed in the preceding portion of the report", and saw no indication that the recommendation had ever been adopted by General Booth. 200 Manson highlighted Booth's detailed instructions for obtaining the salvation of souls in his Orders Chapter 4 Historical influences Page 152 pubUsh statistics about its numerical strength201 [Manson, 1906, 14]. He enumerated several other shortcomings of the Army's organization and financial accountabiUty: 1. The Army had faUed in its reUgious undertakings in London202, while claiming success, and depending on the pubUc to support its work. Other missions had experienced greater success, but reUed on their own internaUy generated funds, whUe the Army coUected from the pubUc, which was unaware of the purpose for which the donations were used. [Manson, 1906, 21-22]. 2. Local corps had very Uttle involvement with the social work for which the Army was weU known, and the money they raised went primarily to finance the reUgious activities of the Army. This impression was stage-managed by the Army [Manson, 1906, 37]. 3. Salvationists made a very smaU contribution to the overaU finances of the Salvation Army203, in spite of being urged to tithe [Manson, 1906, 63]. Furthermore, the Army's involvement in financial money-making schemes had caused it to lose its soul204 in "worldly enterprises" [Manson, 1906, 92]. 4. One of the most striking effects of the Darkest England scheme was to "rescue" the reUgious work of the Army, which had been steadUy decreasing in the two years preceding 1890205 [Manson, 1906, 96]. Sixteen years after its inauguration, the social scheme, it was claimed, had failed to produce the results that were claimed in 1890 [Manson, 1906, 93 - 150]. and Regulations, and asserted that "the Army, then, permits no one to doubt its ability to succeed" [Manson, 1906, 11]. 201 See Appendix 4.5, "International Salvation Army statistics". Only in recent years have statistics on membership been made available to the public on a regular basis. 202 This claim was based on figures from a census of church attendances in London, conducted by the Monthly Review in November 1904. The Army only attracted between 1.9% and 3.4% of attendances in London [Manson, 1906, 26]. 203 Corps were encouraged to be self-sufficient, and to display generosity towards the Army's general funds. It was acknowledged that Salvationists were not usuallyfinancially secure, in fact "probably no other religious community numbers so small a proportion of members who are, even in a very modest sense, well-to-do" [The Salvation Army Year Book 1928, 1928, 21]. 204 This assertion was always refuted by The Salvation Army, where money was not seen as an evil influence, but something which could assist the Army in its mission to save men and women. The Army was described as being in the "big business" of salvation [The Salvation Army Year Book 1927, 1927, 19]. 205 Manson [1906, 96 - 97] claimed there had been a diminution in the Army's effectiveness before the launching of the Darkest England scheme, and a consequent improvement in Army effectiveness after it began promoting its social work assiduously in 1894. Chapter 4 Historical influences Page 153 5. The fanatical reUgion put forward by The Salvation Army, whUe it was claimed to result in the conversion of many thousands of people, had faUed to result in the increase that might be expected in Army members206, if stories of these conversions were true. In any event, it was the members, not the pubUc, who ought to be funding the Army's work [Manson, 1906, 190]. 6. The autocratic nature of the Army structure, together with the vesting of aU control in the General, and the poor treatment of officers, had resulted in the number of officers growing from 4,506 in 1890 to only 4,859 in 1901, despite the training of at least five or six thousand officers during that time [Manson, 1906, 207 - 208]. The number of resignations and dismissals of officers was a closely guarded Army secret207 [Manson, 1906, 208]. 7. WhUe conceding that the Booth famUy were honest, Manson argued that "the general financial principles governing the whole complex Salvationist machine" ought to be the subject of a thorough inquiry [Manson, 1906, 269]. The objects of the original deed poU of 1878 had since been completely recast by WUUam Booth, whose autocratic leadership style had imposed on the Christian Mission a system and discipline completely foreign to its original structure208 [Manson, 1906, 277]. 206 See comments in Appendix 4.5, "International Salvation Army statistics". Even today, the number of members is currently not large compared with the number of employees, or even the number of officers. 207 Manson's [1906, 350 - 365] Appendix V deals with stories and statements by officers, ex-officers, and employees of The Salvation Army. He maintained that "The Salvation Army is the only sect indigenous to British soil whose members are either afraid to express their opinions about its system or, having expressed them, to have them published" [Manson, 1906, 356]. He catalogued stories of neglect, unfairness, and ill-treatment. One of the criticisms was the large amount of money diverted to the top levels of the unwieldy bureaucratic army system, while ordinary officers struggled on meagre pay and worked in poor conditions. 208 The foundational Christian Mission Deed Poll [1878] stated its purpose as being 'Tor the purpose of enjoying religious fellowship and in order to continue and multiply such efforts as had been made in the tent to bring under the Gospel those whow ere not in the habit of attending any place of worship by preaching in the open air in Tents Theatres Music Halls and other places and by holding other religious services or meetings". The General Superintendent was given power to oversee, direct and control the Christian Mission "and to conserve the same to and for the objects and purposes for which it was first originated". It is certainly true that there was no mention of charitable work in the original Deed Poll. The Deed Poll declaring the Trusts of the "Darkest England" scheme, however, extended the stated objects of the organization by assigning control of operations to the "General" of the Salvation Army "with a view to the social and moral improvement and regeneration of such as are destitute or needy whether they are or are not degraded or criminal". This would have been in force when Manson [1906] wrote his book. Interestingly, by the time of the incorporation of The Salvation Army Trustee Company in 1931, The Salvation Army was described as the organisation carrying on the Charity founded by William Booth" [Salvation Army Trustee Company Memorandum of Association, 1931, (11)]. Chapter 4 Historical influences Page 154 8. Because of the contribution of the pubUc to Army funds, and the structure of the Army, a "complete annual pubUcation of the receipts and expenditure of aU the Army's financial departments from the corps upwards (is) absolutely essential" [Manson, 1906, 281]. 9. The existence of only one trustee left General Booth free to "seU and mortgage the property of his trust without any restriction" [Manson, 1906, 282]. The trading activities of the Army were very extensive, and included goods for which the Army competed with other traders, which went against the original foundation deed, as did the Army's involvement in banking or life assurance [Manson, 1906, 283 - 284]. The completely autocratic system which saw General Booth controlling aU the property and activities of the Army, without any real accountabiUty was, according to Manson [1906, 308], something which ought to concern the pubUc. He also claimed that the presentation of local (corps) balance sheets was most inadequate209, leaving the pubUc in ignorance of thefinancial affairs of the Army to which they contributed so much. The balance sheets which were produced, he claimed, showed nothing of the principles of financial administration by which the Army was governed, and "the imposing provision of afirst-class firm of chartered accountants to audit them" did not aUow the pubUc to see whether the return to the pubUc was "in due relation to their sacrifice", being outside the scope of a firm of chartered accountants [Manson, 1906, 41]. The pubUc, he claimed, therefore had no reason to suspect that anything was wrong. He beUeved that the pubUc were entitled to know much more, including the total ordinary income and expenditure, the amount contributed by members or adherents, the amount contributed by the pubUc, the proportions contributed by members and by the pubUc to special funds, such as Self-Denial and Harvest Festivals, and the principal items of expenditure such as rent, salaries etc [Manson, 1906, 40]. 209 If they were produced, which they were supposed to be, nobody from the general public knew of their existence or publication. Chapter 4 Historical influences Page 155 Army response to criticisms. The Army was very much aware of these and other criticisms, and sought to correct these impressions at every opportunity. Appendix 4.4, "Financial accountability of The Salvation Army", already referred to, provides an analysis of articles which appeared in Salvation Army Year Books up untU 1935, showing how the Army was concerned to refute possible aUegations offinancial mismanagement or lack of accountability of Army funds. WhUe not responding to specific aUegations, the tenor of these articles was to present the Army as a financiaUy reliable organization. The primary claims to financial reUabiUty rested on the auditing of the accounts by a reputable firm of auditors, the separation of various funds in order to ensure that donations were used for the purposes for which they were given, and the existence of a reliable accounting system, including a stringent budgeting process, and strict monitoring of expenditure. Pressures from inside the Army. Scene 4. An old man, bent and bearded, sits alone in his study, deep in thought. He is the General, the founder of The Salvation Army Sometimes it must seem as though everybody is against him. While storms rage outside the Army, and onslaughts of persecution batter it, there are rumblings from inside as well. From within his Army, or God's Army, as he likes to call it, and even from within his own family, murmurings of dissatisfaction are arising. Not everybody in the Army is convinced that his ways are the right ways. In spite of this, his spirit is indomitable. He always moves ahead, no matter who deserts him, because that is the kind of man he is A family matter. Manson [1906, 208] referred to Ul-treatment of Army officers210, indicating that 210 He described field officers as "unfortunate", with hundreds every year "remorselessly broken in body and in spirit on the wheel of its (The Salvation Army's) insatiable financial system" [Manson, 1906, 91 Chapter 4 Historical influences Page 156 dissatisfaction with Booth's autocratic style and the Army's centralized structure were not unknown within the Salvation Army. This was certainly true, and appUed even to the General's own chUdren. Most of his large famUy were involved in the Army, but by the time he reached the age of seventy, Booth was estranged from almost aU his children [CoUier, 1965, 209]. In 1892, bis son BramweU disapproved of the position of Divisional Officer211 which Booth had created in 1880, complaining that the Army was "overdone" with staff. He favoured saving the salary and putting it towards more field officers in "hard places" [Wiggins, 1964, 194]. BramweU's disapproval was short Uved, however. He remained a faithful and obedient son, and when his father died in 1912, became the next General of the Salvation Army212. In 1896 Booth's son, Ballington, who had been sent to the United States of America as an officer of the Salvation Army, founded arival organizatio n known as Volunteers of America, at the same time denouncing the General's "despotism" [CoUier, 1965, 209]. He had been summoned to leave his US post, and refused. The formation of Volunteers of America was his response [Wiggins, 1964, 355 - 360]. In 1901 Booth's daughter Kate also resigned as an Army officer, claiming that the Orders and Regulations "strangled a Territorial Commander's initiative". The foUowing year her brother Herbert resigned. He was the Commander of The Salvation Army in AustraUa, and reportedly was "obsessed by the thought that the Army's government needed a radical change". He had sent his brother BramweU a detailed criticism of the Army's methods, urging him to consider greater decentralization [Wiggins, 1964, 364]. Booth's response to these dramatic resignations gave nothing away. He was not prepared to change his leadership style, even in the face of this family opposition. "I am not the "General" of the famUy. I am the General of the Salvation Army", he was -92]. 211 The General had decided that Britain should be divided into eleven provinces, each with its headquarters in a city or town. Within each province were three or four divisions. A Provincial Officer was in charge of each province, and the proposal was now for a Divisional Officer to be in charge of each division [Wiggins, 1964, 194]. 212 This was by the authority of the Salvation Army Deed Poll of 26th July 1904. Chapter 4 Historical influences Page 157 reputed to have said [CoUier, 1965, 209]. As he became older, the issue of succession became a problem. The Army's Deed PoU of 1904 gave the General the power to appoint his successor. His choice was Bramwell, who had proved himself to be an able and dedicated officer, bis father's right-hand-man for many years. During the 1920s, however, BramweU's health began to faU, and some problems of an autocratic structure became evident. Eva Booth213 pressed for reforms. Her contact with leaders in America convinced her that an autocracy, "however benevolent", was inappropriate in the twentieth century. Herfifteen point memorandum of October 1927 argued that "it is almost universaUy hoped that the present General wiU be the last one to be appointed by his predecessor" [CoUier, 1965, 268]. Why should not future Generals be appointed by a High CouncU214, with the provisions that a General must be elected by a two-third majority, retire at the age of seventy, and be capable of being removed, also with a two-thirds majority. This resolution was passed, with the provision that each General must be elected by the High CouncU. In 1929, the new system was put to its first test, with the High CouncU voting BramweU215 out of office as General of the Salvation Army [CoUier, 1965, 271]. Edward Higgins was elected as General in his place. The Booth influence, whUe not over, was no longer absolute. Since 1929, the General of The 01 ft Salvation Army has been elected by the High CouncU . The resignation of Commissioner Frank Smith, who had been in charge of the Army's City Colony, over the association of the "social wing"217 with the Salvation Army, has already been referred to. It highhghts the tension between the social and the spiritual , 213 The fourth daughter of William and Catherine Booth, Evangeline was, at the time, an Army officer in the USA. She was later elected General of The Salvation Army by the High Council, and served as General from 1934 -1939. 214 This was to be an enclave of top lieutenants [Collier, 1965, 268]. 215 Bramwell had been suffering from ill health, and it was thought he was incapable of fulfilling his responsibilities. The vote in favour of replacing him was 55:8 [Collier, 1965, 271]. 216 See Appendix 4.1, "A glossary of Army terms" for a description of the High Council. 2,7 The social work of The Salvation Army, as distinct from the church, or corps work. 218 An alternate interpretation of his resignation was that he simply was not granted as much freedom Chapter 4 Historical influences Page 158 which appears to have been something Army officers, including William Booth, were conscious of, and anxious to explain. Booth developed his theology in urban England, having experienced poverty in his chUdhood, and having seen the "dark side of the Industrial Revolution" [Green, 1990, 27]. His object was spiritual, as he maintained in his eightieth birthday letter [Barnes, 1960, 167]. But his theology did not focus on spiritual aspects alone. Deeply concerned with the Wesleyan219 concept of sanctification, he saw it as both personal and institutional. He beUeved the Kingdom of God was the "ultimate hope for the work of social reformation", convinced by 1889 that "salvation also had social dimensions" [Green, 1990, 28 - 29]. At the same time, he was aware of a potential "pitfaU" in his theology if it were not understood properly. This was "the setting loose of The Salvation Army's social work from its theological moorings" [Green, 1990, 29]. If this happened, the Army would lose its focus. Perhaps this is what Commissioner Frank Smith feared would happen, or had already happened, when he resigned. That this was a potential problem was recognized by both Booth and his wife Catherine. As he was preparing "In Darkest England' for pubUcation, she was dying of cancer. After her funeral, he quoted her as saying of the Darkest England scheme: "This is a new development... not a new departure ... But mind, it is aU one Army. We haven't a Social Army and a Salvation Army" [Wiggins, 1964, 306]. Success, to the Army, has always been based upon "spiritual transformation" [Sandall, 1966, 320], not just social transformation. The chaUenge for the Army, from a theological viewpoint, has been to keep the two aspects integrated, and not to set one loose from the other. From a financial point of view, the chaUenge has been to keep them separate. Manson [1906, 34] criticized the Army's use of its funds, and claimed that of the proceeds of the Self Denial Appeal in 1904, less than one-fifth was devoted to the "social" purposes of the as he would have liked in the administration of the social wing [Fairbank, 1983, 137]. 219 John Wesley (1703 - 1791) was an English evangelist and the founder of Methodism. William Booth had been a Methodist New Connexion preacher. See the earlier section in this chapter on "Birth of the Army". Chapter 4 Historical influences Page 159 Darkest England Scheme , the remaining funds being spent on "reUgious objects". The founder's influence. William Booth was a passionate man with a spiritual mission. The Salvation Army was his great passion. He stamped his charismatic, autocratic personality on the Army in its mission, its unique theology, its structure and government, its methods, its style of leadership, its attitude tofinancial accountabiUty , and even its practice of accounting. "If it is ever true that any movement is but the lengthened shadow of its founder, it is true of the Salvation Army" [Watson, 1964, 24]. In 1889 he stated that his aim was to win 100,000 souls [Wiggins, 1964, 163]. Booth traveUed the world, but aU his travels were undertaken in pursuit of this supreme mission [Wiggins, 1964, 142]. On June 24, 1904, eight years before his death, the General was granted an interview with King Edward VII. This was an historic event, thefirst royal interview granted to a General of The Salvation Army. In the King's autograph album, Booth was reported to have written these words: "Some men's ambition is art, some men's ambition is fame, some men's ambition is gold. My ambition is the souls of men" [Barnes, 1960, 141]. Booth was a social reformer. His discovery that the social and the spiritual were tightly enmeshed, led to his pubUcation of his grand social scheme, "In Darkest England and the Way Out". It led to his undertaking social projects such as his match factory. The 1891 "Lights in Darkest England" scheme saw the setting up of a factory which would produce matches made with harmless red phosphorous instead of the yeUow phosphorous that had caused so much sickness in workers. He employed 120 workers in his East London factory, and at its peak, the factory produced 6 milUon boxes of 220 He claimed that £55,861/9/10 was collected in 1904 by the Army's congregations in the United Kingdom, and only £10,966/19/11 was spent on social work. General Booth himself, in his Orders and Regulations, put forward the proceeds of Self Denial week as being "mainly in aid of the International Funds of the Army" [Manson, 1906, 34]. Chapter 4 Historical influences Page 160 matches in a year. He was out "to reform the industry from top to bottom" [CoUier, 1965, 195]. Booth was a pragmatist221. He realized early in his niinistry the necessity of resourcing his great mission. He needed money, and he needed recruits to help him in his work. He managed to attract both. Although he was from a humble background, he "mixed readUy with men in high places", realizing that "only a lavish torrent of donations could keep his mighty ship afloat" [CoUier, 1965, 215 - 216]. He did not appear to care where the money came from. Shaw [1945, xv], in his introduction to Major Barbara, commented that Booth "would take the money from the DevU himself and be only too glad to get it out of his hands and into God's". Booth was once criticized for accepting a donation from the notorious Marquis of Queensberry, a professed agnostic, and reportedly said, "We wiU wash it in the tears of the widows and orphans and lay it on the altar of humanity" [CoUier, 1965, 217]. He did not see capitalists as the enemy of labour and the human race, but rather, believed that capital was good, and therefore "one of the great aims of the social reformer ought to be to faciUtate its widest possible distribution among his feUow-men" [Booth, 1890, 229]. The founder's innovative efforts at fundraising have already been discussed, as weU as his willingness to try almost anything to advance his cause. He always beUeved that "the bad can be sanctified, the secular made sacred - the devU's tunes, the brewers' money, the trade in the market-place" [Watson, 1964, 96]. His aim was to make the Army indigenous [Watson, 1964, 97]. His attitude to music foUowed this tenet. He unhesitatingly accepted the tunes of the day in order to attract the people of the day: "Take it, consecrate it, and use it for God" [Watson, 1964, 91]. To him, the need outweighed any reservations he might have had about "cadging" for money [Watson, 1964, 103]. 221 While he was "rock-like in principle", Booth was described as "fluid in method". He was quite happy to take other people's ideas and innovations and make use of them [Watson, 1964, 107]. Chapter 4 Historical influences Page 161 It was certainly not the desire for personal wealth that drove Booth. There is no doubt that large sums of money came into the Army's funds, and were expended, but Booth himself Uved on "the income of a £5,000 legacy", and died a poor man [Watson, 1964. 94]. His desire to raise funds for the Army was insatiable, and he insisted on a poUcy of openness andfinancial accountability, and was always able to withstand any criticisms of the Army'sfinancial methods. Hisreliance o n auditedfinancial statement s at a time when such statements were not mandatory, reinforced this. Booth was a tough but inspirational leader. He was weU aware that his Darkest England scheme would require vast numbers of recruits. His volunteers would not earn large salaries, or enjoy a soft life. The Salvation Army under Booth offered recruits hard work, low pay, and often poor conditions. This was what Booth described as a "real war" [Wiggins, 1964, 258]. He was uncompromising in his caU for commitment to a rigorous life, acknowledging the need for discipline and devotion [Booth, 1890, 284]. These recruits were sent aU over the world. They required "love ... courage ... backbone" and a "daring, reckless Calvary spirit", according to their General [Wiggins, 1964, 208]. Convinced that it was God who had founded the Army and not WiUiam Booth, his drive and beUef in its abihty to continue was an inspiration to his followers. In 1904 at the Army's third international congress, Booth stated his beUef that the Army would succeed by surviving. In spite of incredible opposition, the Army had stood firm, being buUt on sure foundations, as Ulustrated by Figure 4.3 below, "Booths foundations": mutual interest love to God and love to man the foundation of a rational organization the rocks of Eternal Truth, of the Word of God GOD Figure 4.3. Booth's foundations. [Source: Wiggins, 1964, 255J. Chapter 4 Historical influences Page 162 Within his own lifetime, Booth was caricaturized, criticized, and castigated, but whatever he was, he was undoubtedly noticed. Nobody could ever have said he was a nonentity. A consummate showman, his personaUty made a huge impact on the England of his day, on the world of his day, and on The Salvation Army that continued after his death. In 1895, as he was preparing to leave on an overseas trip to inspect his forces in other countries, a FareweU to the General in London attracted 30,000 people, with a picnic, singing, a marchpast, and 500 instrumentalists [Wiggins, 1964, 245 - 246]. In 1907 he was honoured with an honorary degree by Oxford University. This degree22 recognized the "singular achievement" of a man who had spent most of his life in the London slums, a man who was stiU considered by many people to be nothing more than a "vulgar revivaUst" [Grugel, 1979, 74]. At his last pubUc address, deUvered in the Royal Albert HaU, London, on May 9th, 1912, WiUiam Booth pledged his intention to keep onfighting, an d urged his foUowers to do the same: ... whUe women weep, as they do now, I'U fight; whUe Uttle chUdren go hungry, as they do now, I'Ufight; whU e men go to prison, in and out, in and out, as they do now, I'Ufight; whUe there is a drunkard left, whUe there is a poor lost girl upon the streets, whUe there remains one dark soul without the Ught of God, I'Ufight - I'Ufight to the very end [Barnes, 1960, 171]! By the time of Booth's death in 1912, significant changes had occurred within the poUtical and economic structure of England. There was a greater acceptance of the notion of providing welfare through taxation, with increased social services in the form of programmes for unemployment reUef and old age pensions [ChappeU, 1980, 193 - 194]. The British government of 1906 was perhaps the forerunner of the later welfare state, giving recognition to Booth's long-argued beUef that the conditions of the poor ought to be aUeviated [ChappeU, 1980, 199]. By 1912 The Salvation Army had overcome the persecution it had experienced in its early days, it had withstood attacks on its methods offinancing an d the way it accounted for its funds, its social ministry 222 Even with this degree, Booth was viewed as an outsider within mainstream Victorian society [Grugel, 1979,77]. Chapter 4 Historical influences Page 163 had gained credibiUty, and it was estabUshed as a reputable weU-known world-wide organization. A world-wide movement. Scene 5. Our scene now takes in the world. England is not the only home for The Salvation Army. It has become an international organization. All over the world its officers travel, making friends (and enemies), preaching, establishing homes, raising money, helping the unfortunate, and building an organization vast in its size and influence. Now the Army has its own family, united in a common parentage, proud of their humble beginnings and unique history, and still under their powerful influence. Its officers face many challenges as they try to look to the future, negotiating their way through the minefield of current expectations, opinions and practice, but at the same time experiencing a strong pull back to their roots and their own unique culture ... A dramatic expansion. From its humble beginnings, the spread of the Army was dramatic223. In 1879, one year after the Army had taken on its new name, corps were begun in both Scotland and the Channel Islands. In the foUowing year, thefirst contingen t of Salvation Army officers arrived in the United States of America, and the Army commenced work in Ireland and AustraUa. In the next few years, the Army extended its influence to France, Canada, India, Switzerland and Sweden [The Salvation Army Year Book 1982, 1982, 35]. By the time of its 1886 First International Congress, the Salvation Army was established as a world-wide movement224, with prominence given to its social work [Wiggins, 1964, xiv]. In that year, 110 officers left London to consoUdate the work begun overseas, at 223 The Salvation Army Year Book 1996 [1995, 24] attributed the "rapid deployment of the first Salvationists" as being aided by the adoption of its "quasi-military command structure". 224 At that stage, the Army was involved not only in England, but also in Scotland, the Channel Islands, the United States of America, Ireland, Australia, France, Canada, India, Switzerland, Sweden, Sri Lanka (then Ceylon), South Africa, New Zealand, Isle of Man, Pakistan, St Helena, and Newfoundland [The Salvation Army Year Book 1996, 1995, 27 - 28]. Chapter 4 Historical influences Page 164 no little cost to the young and poor organization. The foUowing year, another fifty officers went overseas. They werefitted out and transported for £15, with an annual ongoing support cost of £5. At the same time, other missionary organizations were spending £250 a year for the upkeep of their missionaries [Wiggins, 1964, 80]. 1898 saw the estabUshment of the Salvation Army's International Headquarters in London, made possible by generous donations from Army "friends", contributions from auxiliary members, profits from the publishing and trade departments, and from some funds raised through Self-Denial week [Wiggins, 1964, 205]. Since then the work has expanded to include 103 countries225 [The Salvation Army Year Book 1998, 1997, 38 - 39], with 15,989 corps, 17,470 active officers and 76,767 employees world-wide (see Appendix 4.5, "Some international Salvation Army statistics"). International Headquarters (IHQ) provides oversight from London. Legal structure. The legal structure of The Salvation Army underwent a significant change when The Salvation Army Act 1980 received Royal Assent on 1st August of that year. It reflected the changes which had occurred in Army organizational structure since its early days, replacing three Deed Polls and three Acts of Parhament . Its purpose was described as "a tidying of administrative desks in readiness for the exciting and demanding days that Ue ahead for the Army and the Kingdom of God" [Baird, 1981, 9]. Providing a new constitutional framework for the Army in Great Britain and Northern Ireland, its purpose was described as three-fold. It fiUed in omissions about what the Army did, replaced archaic language with something more intelligible, and clarified the position of the General, distancing him/her from the routine decision-making of "buying and selling A country in which the Army serves is defined (a) politically, and (b) by the General's approval of the work. This approval ensures the work has legal identity, and a Deed Poll acknowledges this [The Salvation Army Year Book 1996, 1995, 35]. 226 The original Christian Mission Deed Poll (1878), the Darkest England Deed Poll (1890) and the 1904 Deed Poll which provided for a High Council to elect the Generals of The Salvation Army. 227 Including The Salvation Army Act, 1931. Chapter 4 Historical influences Page 165 properties, making investments and controlling financial affairs". Previously, the General's personal authorization had been required for aU significant business decisions228, but the new act transferred such responsibiUty to The Salvation Army Trustee Company, which became the trustee of aU Army assets in the UK, and of some overseas. The Act stressed the international status of the General, being a Corporation Sole, and thus having perpetual succession and an official seal [Baird, 1981, 8 - 9]. World-wide Army operations have continued to be directed from International Headquarters (IHQ) since then, with territories having operational autonomy, but being accountable to International Headquarters, and Territorial Commanders answerable to the General229. Advisory boards and Army friends. One aspect of the Army's operations which has assisted it in developing a reservoir of expertise in most of its territories, and which opens it up to the use of current commercial techniques, is its use of Advisory Boards230. The participation by non- Salvationists in Army endeavour by means of these boards is wide-spread, and is an indication of the influence of external business practices in the administration, pubUc relations, welfare work and fundraising undertaken by the Army. These boards provide "active aids to Salvation Army service, exerting considerable influence upon the Salvation Army where the Army is faced with tremendously complex legal, social, administrative, property, labour and other problems" [Watson, 1964, 305]. From its earnest days, the Army was conscious of the need to attract the interest and support offriends. Appendi x 4.6, "How can I help the work of The Salvation Army?" The Salvation Army Year Book 1916 [1916, 5] described the General's role at International Headquarters as being to control the Army's world-wide operations. 229 The Army world-wide is divided into territories, and each territory is headed by a Commissioner, appointed by and answerable to the General. 230 See Appendix 4.1, -'A glossary ofArmy Terms". Chapter 4 Historical influences Page 166 details a list of possibiUties put forward earner this century. WhUe most are related to personal donations in one form or another, one at least suggests the possibiUty of coUecting donations for the "Work" from "friends and acquaintances". In 1947 an Advisory CouncU to the General was commenced, for "study, research, exploration and guidance on matters on which the Army's supreme commander seeks to formulate a directive" [The Salvation Army Year Book 1970, 1970, 48]. Since that time, advisory boards have become a feature of most territories, world-wide231. Perhaps the Army's acceptance in society today owes something to its abihty to recruit and enthuse such groups of people. Writing in 1950, an American Salvationist described the Army's "friends" as its "champions", who defended it and spoke out on its behalf232 [Pitt, 1950, 18]. The Advisory Boards grew out of informal groups which kept the Army in touch with "the best elements in community life", providing not only support, but wise advice [Pitt, 1950, 21]. WiUiam Booth estabUshed this practice, as he involved people of "influence, of authority and wealth, of pubUc spirit and community compassion, in the work to which he had given himself' [Brown, 1968, 34]. The terms of reference by means of which Advisory Board members are invited to participate are wide enough to include people of a variety of reUgious persuasions, but, hopefuUy, narrow enough to exclude any "with vested interests, ulterior motive, or lack of personal integrity" [Brown, 1968, 35]. WhUe the situation has changed in recent years , the Army has traditionally used its officers in specialist business, financial and 231 In The Salvation Army Year Books 1968 - 1974, an extensive list of Advisory Board Chairmen for every territory in the world was included. These included influential business people who voluntarily donated their time and expertise to the Army in an advisory capacity. Since 1974, the list has been omitted, but the groups continue their influence. 232 The Auxiliary League in America was first mentioned in 1883, its purpose being to unite those sympathetic to the Army, and to help with fundraising and public relations [Pitt, 1950, 20]. 233 The Manual of Guidance for Advisory Board Members in the United Kingdom described Advisory Board members as men and women who "are interested in the spiritual, moral and physical well-being of their fellow citizens and who: 1. Have confidence in The Salvation Army as a vehicle for community service. 2. Believe in its programme of spiritual, character-building and social activities for the amelioration and relief of need of all kinds. 3. Are joined together for the purpose of assisting the Army in the carrying on of this work" [Brown, 1968, 34 - 35]. 234 The Army now employs several times more employees than it has active officers (See Appendix 4.5, Chapter 4 Historical influences Page 167 welfare activities235, so the role of Advisory Boards has been crucial in tapping expertise, fundraising opportunity, and pubUc goodwiU. By means of these boards, the Army has remained open to influences from the marketplace. WhUe some might have the opinion that such Uaisons could be damaging to the Army's sense of mission236, experience in the United States and Canada, according to Watson [1964, 305], proves this to be an unfounded beUef, with mutual benefits being enjoyed by both the Army and those who serve on Advisory Boards. An international reputation. The emphasis in The Salvation Army Year Books231 is of an international organization, with a ministry of concern world-wide238, and an acceptance by church and state alike . Approval by government was early identified as a positive feature. William Booth [1890], in his Darkest England pubUcation, included a copy of a letter from the Government of Victoria, praising the work of The Salvation Army in working with prisoners released from jaU, and chUdren "found in brothels"240. General Arnold Brown addressed the Army's International Congress in Toronto in 1979, and urged the Army's leaders not to coUect survival kits, but rather to claim new combat gear, since The Salvation Army's front line ran through "the agony of the world" [The Salvation Army Year Book 1981, 1981, 1]. Currently, The Salvation Army "International Salvation Army statistics "). 235 Most often, Army officers are not trained in these specialist fields. 236 The 1990 Annual Report of The Salvation Army Australia Eastern & Papua New Guinea Territory included a list of members of Advisory Boards and Advisory Committees. Eleven cities in the Territory were listed as having an Advisory Board [The Salvation Army 1990 Annual Report, 1990, 36]. 237 Thefirst Salvation Army Year Book was published in 1906. 238 If there was a typhoon in The Philippines, a cyclone in Fiji, a drought in Bangladesh, or a tornado in the USA, the Army would be there [The Salvation Army Year Book 1981, 1981, 4]. 239 At the International Centenary Congress in June, 1965, for example, a Public Welcome was given by "leaders of Church and State in British national life, together with representatives from overseas lands where the Army is at work" [The Salvation Army Year Book 1965, 1965, 10]. Queen Elizabeth II attended the commencement proceedings [The Salvation Army Year Book 1996, 1995, 30]. 240 A copy of this letter is displayed in Appendix 4.7, "Transcript of a Letter from the Government of Victoria, 1889". Chapter 4 Historical influences Page 168 enjoys recognition as a non-governmental organization which is in consultative status with the Economic and Social CouncU of the United Nations [The Salvation Army Year Book 1996, 1995, 36]. A quaint article in The Salvation Army Year Book 1930 [1930, 16 - 17] portrayed the Army as "a handmaid of governments", giving expert assistance to governing and local authorities in the treatment of "social evils", a "veritable bulwark to any Government when a worthy cause is at stake" [The Salvation Army Year Book 1930, 1930, 17]. Changing methods, unchanging mission. As governments have taken on more and more responsibility for social work since Booth's original Darkest England scheme, the Army's partnership with governments has been inevitable, from both a funding and a professional viewpoint. ReUance on government funding, and the accountabiUty requirements attached to that, together with the development of social work as a profession in the 20th century, have had a profound effect on the type and quaUty of work performed by The Army, and on the accounting methods employed in social centres. Thirty-five years ago, The Salvation Army in the United States of America was feeling these pressures, and becoming aware of the impact these factors would have in the dehvery of its services [Wrieden, 1964]. The separation of the spiritual and the social aspects of the Army's work would be an anathema to an organization whose 'Toundation truths" see social service as "an expression of our devotion to Jesus Christ" [Wrieden, 1964, 15]. While methods and professional requirements may change, this essential reUgious base had to remain constant. The mission of the Army is constantly stressed in the Year Books, with a focus on international ministry achievements241, ministries and financial requirements of the 241 All yearbooks present a short report from every Territory in the world-wide Army. These reports include statistics on the numbers of officers, cadets, employees, corps, outposts and institutions, as well as highlights of the year for that Territory. In the 1996 yearbook, for thefirst time, the number of senior soldiers, adherents, and junior soldiers was included [The Salvation Army Year Book 1996, Chapter 4 Historical influences Page 169 current year being presented. In the 1965 Centenary Yearbook, for example, General Frederick Coutts242 discussed the unchanging mission, but "ever-changing methods" of the Army's missionary people. The Salvation Army, he reminded his readers, had a "stated body of doctrine, a trained and commissioned leadership and a disciplined world membership", adaptable to its domestic structure "as God may guide" [Coutts, 1965, 13 -14]. The 1989 Yearbook of The Salvation Army presented a world-wide movement "engaged in a multitude of tasks directed to the betterment of our feUow human beings", not just a phUanthropic organization, but a Christian movement with a responsibiUty to confront government, local authorities and vested interested, in order to bring about change in society [Cox, 1989, 1-3]. The Articles of War, or soldier's covenant, originaUy devised by William Booth, were re-written, and introduced in 1989. Faithful to the original Articles, they include statements about Christian truths, growth, values, integrity, relationships, marriage and stewardship, and a commitment by aU who sign them to abstinence, the upholding of the Army's mission, and the local corps. They demonstrate the intensity of commitment required of aU who undertake fuU membership as soldiers of The Salvation Army. A record of "caring and commitment", the 1996 Year Book was recommended by General Paul A. Rader as highUghting the diversity yet unity of the Army throughout the world, giving a brief glimpse of the Army's life and work, and reinforcing once again the mission of The Salvation Army world-wide [Rader, 1995, 1]. The Army's International Mission Statement [The Salvation Army Year Book 1996, 1995] confirms this: The Salvation Army, an international movement, is an evangehcal part of the universal Christian Church. 1995]. 242 General Coutts was the General of The Salvation Army from 1963 - 1969 [The Salvation Army Year Book 1990, 1989,41]. Chapter 4 Historical influences Page 170 Its message is based on the Bible. Its ministry is motivated by love for God. Its mission is to preach the gospel of Jesus Christ and meet human needs in his name without discrimination. Army accounting and accountability. The Army has always faced, head on, the need to raise funds for carrying out its mission, and has promoted itself as competent to receive and manage those funds243. Undergirding this notion of pubUc accountabiUty is the usuaUy tacit acknowledgement that an accurate accounting system ought to track fund raising and expenditure. In her brief sketch of Salvation Army finance, Lieut-Colonel Ann WoodaU [1995, 18-20] stressed the necessity of maintaining control over the spending of donated funds, and claimed technical accuracy and reUabiUty in Army accounting. Her simplistic description of Army accounting methods skimmed over issues of ethics and accountabiUty, yet claimed reUabUity, accuracy, and trustworthiness. In early editions of the Army's Year Books (See Appendix 4.4, "Financial accountability of The Salvation Army"), this theme of reliabUity offinancial record s was a recurring theme, perhaps an indication of the necessity of reassuring the pubUc that the Army'sfinances were reputable. Over and over again, the Army was at pains to reassure its pubUc that proper accounts were kept in line with accepted accounting principles. These claims were summed up in General Eva Burrows' foreword to The Salvation Army Manual of Accounting Policies [1989]. WhUe highUghting the international nature of The Salvation Army, she described the financial records and procedures of the Army as being "of the highest standards" since its earnest days, with their "structures and expressions ... held in common. Uniforms, orders and regulations, ceremonies, doctrines, methods of worship and service, business and accounting procedures, are aU internationaUy expressed". Detailed manuals for both Secretaries of Business 243 The Salvation Army Year Book for example, regularly invites donations of legacies: "The Salvation Army is competent to receive bequests of money and property for its general purposes and for the benefit of any branch of its world-wide evangelistic and social services" [The Salvation Army Year Book 1989, 1988, 3; The Salvation Army Year Book 1986, 1985, 21]. Chapter 4 Historical influences Page 171 Administration and Financial Secretaries set out these procedures and practices in greater detaU244. The Army's business arms have also been promoted as being expressions of the highest of Christian ideals, in spite of earUer criticisms. The Salvation Army's ReUance Bank, for example, has a fuU banking Ucence under the UK Banking Act 1987245, and provides its services to the Army free of charge, and donating its profits to the Army's work. This is its motivation for success, not growth for growth's sake, but growth in business through good stewardship and increasing profitabUity, in order that The Salvation Army can enjoy its profits [Birkett, 1997, 8]. Sirnilarly, the Army's recycling business now represents the largest international network of "coUection centres, retaU stores and exporters of recycled clothing and textUes", driven by a commitment to recycling246 [Henderson, 1996, 15]. Thefinancial needs of the Army in its world wide mission are constantly promoted in The Salvation Army Year Books. Based on the Army's unique history and dependence on externaUy donated funds, it has always adopted innovative and lucrative methods of raising money in order to pursue its mission objectives. Many of these began in the early days of the Army, and continue to this day. Others have evolved over time, such as the recycling businesses referred to above, the Red Shield Appeal247, and the constant and increasing emphasis given to developing bequests and legacies . In its early years, the 244 Large territories within The Salvation Army have a Secretary for Business Administration, in charge of the overall financial workings of the Army in that territory. A Financial Secretary, hierarchically beneath the Secretary for Business Administration in the organizational hierarchy, has responsibility for the accounting and financial records of the territory. Each territory is usually divided into several divisions, with each division also having a Financial Secretary. 245 The Reliance Bank offered chequing and savings accounts, overdrafts, loans, mortgages, and foreign services to its customers [Birkett, 1997, 7]. 246 This commitment to recycling is based on a desire to be good stewards of the world's resources, to provide opportunities for clients in rehabilitation programmes, and an appreciation of the funds that recycling projects raise for the Army's welfare work [Henderson, 1996,15 -17]. 247 The Salvation Army in Canada instituted this annual appeal, and Australia adopted it in the 1960s. 248 See Appendix 4.8, "Remember the Army in your will". From its earliest days, the Army has invited people to leave bequests in their wills, and bequest and annuity promotion has grown in importance as a specialized fundraising method since then [Abrams, 1959, 14]. Chapter 4 Historical influences Page 172 Army's financial accountability was consistently linked to the need to raisefinances for Army work249. In the AustraUa Eastern Territory, Financial Reports are presented with a report on the Army's social work250. Moving forward. Scene 6. Time has passed, and the Army has become middle-aged. Those things which were so challenging before - controversy, scene-stealing, and notoriety - are not so attractive now. For now the Army has a large family to support, mouths to feed, a reputation to uphold, money to raise, and an organization to sustain. It has become respectable and trusted... Faced with the international spread and influence of The Salvation Army251, one could be excused for pondering exactly what was it that WiUiam Booth began. The Salvation Army has been described as a "naive reUgious movement"252, or "a movement of the reUgious poor". It was not a social or reUgious awakening, since Booth was "neither a Francis nor a Wesley" [Niebuhr, 1970, 75]. However, it was a powerful force in its early years, and has survived to the present day. It has been suggested that sects become traditional. Once thefirst generation members have children, the sect takes on a different role, that of an educational and disciplinary See "Significant Comments" in Appendix 4.4, "Financial accountability of The Salvation Army ". 250 The Salvation Army Australia Eastern Territory's Consolidated Financial Statements for the year ended 30 June 1996, for example, were issued together with a booklet entitled "Taking it to the Streets", a promotion of the Army's social work, with testimonies from six high-profile Australians. [The Salvation Army Consolidated Financial Statements 1996, 1997]. 251 The Salvation Army was reputed to have 5 million members in 99 countries in 1994. In the USA, in 1993, it raised $26 million from private donations, served at least 69 million free meals, and provided shelter for 9.5 million homeless people [Tisdale, 1994]. The figure of 5 million members seems to be at odds with the membership as reported in The Salvation Army Year Book (see Appendix 4.5, "International Salvation Army statistics "). 252 The Salvation Army has been compared to the Primitive Methodists, so named because they were street preachers, who marched singing through the streets. Also known as "Ranters", they suffered persecution for their unconventional behaviour [Chadwick, 1971, 386 - 387]. Chapter 4 Historical influences Page 173 institution, in order to bring the new generation into line with established ideals and customs [Niebuhr, 1970, 19-20]. Perhaps the Army was never a sect, in the true sense of the word, but more of a movement. WhUe deeply committed to their own beUefs, its members have had an open orientation to the world253. Whatever it once was, it has now perhaps become a denomination, a more conservative force, a friend of Governments and the pubUc254, with its own property, bureaucratic organizational structures, established culture, and reputation. The product of its own unique history and the culture that has produced, it has absorbed some of the influences of the world, and rejected others. Its attitudes towards finances, financial accountabiUty, and accounting, have been formed as a result of those influences, from both outside and inside. It is in the context of these observations that the next two chapters (Chapters 5 and 6) focus on the AustraUa Eastern Territory, by describing its historical roots in Australia, outlining significant issues in its current social and economic environment, and introducing the Army as it operates in that territory today, basing its performance on its own distinct culture, itsfinancial needs, and the responses of its audience, the general pubUc. 253 This orientation is demonstrated by the Army's original use of music, its operation as a business, its innovative fundraising methods, its presentation of auditedfinancial accounts, and the existence of Advisory Boards which contribute expertise from the business and commercial world. 254 The British accept the brass bands of The Salvation Army as "part of a delightful and varied scenery" [Chadwick, 1971, 387]. CHAPTER 5. The company of players: organizational members and funding. LADY BRITOMART: (speaking of her daughter Barbara) I don't know how Barbara wiU take it. Ever since they made her a major in the Salvation Army she has developed a propensity to have her own way and order people about which quite cows me sometimes. It's not ladylike. I'm sure I don't know where she picked it up [Shaw, 1945, 64]. Central to institutional theory is the notion of organizational legitimacy, which is achieved by means of institutional isomorphism255 [DiMaggio and PoweU, 1983; Scott, 1995; OUver, 1997; Deephouse, 1996; Kraatz and Zajac, 1996]. The institutions to which organizations are expected to conform in order to achieve legitimacy cannot begin, continue, or change without people, who exert influence from both outside and inside organizations. Developing an understanding of the way an organization responds to institutional pressures for conformity demands an understanding of the social actors who determine that legitimacy externaUy256, and of the unique structure, culture and routines257 which determine organizational response to external expectations, and resulting organizational 255 "Legitimacy" and "isomorphism" are defined in Table 3.3, "Summary of institutional concepts adopted for this study". 256 Deephouse [1996, 1025] agreed with other researchers, including Baum and Oliver [1991] in arguing that "only certain actors have the standing to confer legitimacy". He identified two sets of such actors, government regulators and public opinion, and defined the types of endorsement which potentially flowed from these actors as regulatory endorsement ("the acceptance of an organization by the state agencies that formally regulate it"), and public endorsement ("the acceptance of an organization by the general public"). 257 Scott [1995, 33] identified the three "carriers" of institutions within organizations as being culture, structures and routines. The notion was discussed in Chapter 3, that cultural belief systems apply to individuals as well as organizations, and society as a whole. It is so deeply embedded, that it can be conceived of as existing "in the heads of organizational actors" [Scott, 1995, 53]. These are the people who make decisions in organizations, and hence understanding their perceptions and beliefs will be important if organizational response to institutional pressures is being studied. Culture cannot be viewed as a distinct entity, fixed and bounded, but an ongoing process [Morgan, 1986, 131], with individual and organizational response constantly shaping and forming it. Chapter 5 Organizational players Page 175 behaviour. Together these three "carriers" of institutions embed institutional influences into organizations. But exactly what becomes embedded is by no means straightforward. It would be expected that organizations would enjoy a high degree of success and legitimacy258 if there were a strong match between their practices and culture and those of government and society. But, on the other hand, there may be instances where organizations deUberately resist institutional pressures to conform, and go against the tide of pubUc opinion of what is acceptable or desirable, because of their own particular beUef systems or culture. Changes experienced by the Army's Australia Eastern Territory over the last few years have already been referred to, as emanating from both external and internal sources259. Understanding the external context in which organizations exist and operate is therefore an essential starting point in understanding institutional expectations. Understanding the organization from an inside perspective is also vital, given that institutional isomorphism cannot be assumed, but wiU depend on the response the organization makes to institutional pressures, a response generated by internal perceptions of external pressures, and organizational culture. Chapter 4 introduced the historical context in which the Army began and developed in its early years, with the purpose of iUustrating the institutional pressures which contributed towards the formation of its unique culture. This chapter moves the focus In his study of three different denominations in both the USA and Brazil, Nelson [1993, 674] suggested that different organizational styles could be expected to fit different societal contexts. A particular social environment, while not "rigorously homogeneous in the authority types that support (its) institutions", could favour one authority type rather than another. He proposed that charismatic, bureaucratic and traditional churchesfit different societal contexts, and displayed different behaviours and growth rates within those particular contexts. 259 These were mentioned in Chapter 1. From an internal perspective, they included an organizational restructure, the employment of a greater number of employees to undertake tasks once performed by Army officers, the introduction of a global budgeting system, the commissioning of several management consulting studies, a reassessment of the computerized accounting system, and an increasing emphasis on operating in a business-like way. External pressures for change have included alterations to government funding systems (together with the requirement for the Army and other similar organizations to adopt accrual accounting), technological advances, and increasing competition for charity dollars. Chapter 5 Organizational players Page 176 to The Salvation Army in Australia, tracing its beginnings here, the development of the AustraUa Eastern Territory, its organizational structure, and the sources of its funding. The purpose of this chapter is to explain both the Austrahan historical influences that led to the development of The Salvation Army AustraUa Eastern Territory as it is today, and the resource dependencies under which it currently operates. Players from history: early days of The Salvation Army in Australia. Profile 1. The young Salvation Army officer faces a difficult situation in the colony of Australia in the late 1800s. Catapulted out of the London slums, where he joined the General's Army as a youthful recruit, he was quickly trained, and has embarked, with his new wife, on a journey to the other side of the world. It has quickly became obvious that he will need all the energy he can muster, because the same problems of poverty, drunkenness, unemployment, crime and vice are obvious here in Australia, just as they were in England. His heart goes out to these people. They must be helped. But while there are the same needs as in England, there are the same problems too. Money must be raised, friends must be gained in order to support the work, persecution must be overcome. There is so much to do ... The AustraUan Centenary Charter of The Salvation Army, written in 1980, commemorated one hundred years of Army work in AustraUa, and renewed the commitment of Army foUowers to its original ideals: Whereas, in this year of Our Lord One Thousand Nine Hundred and Eighty The Salvation Army celebrates the centenary of the commencement of its operations in AustraUa, And whereas, in accordance with the principles laid down by its Founder WiUiam Booth, it has sought both to proclaim the gospel of the Lord Jesus Christ and to extent His kingdom on earth by a ministry of practical compassion based upon His teachings, We hereby renew our commitment to those ideals, and pledge ourselves particularly: to a continued emphasis on the maintenance of spiritual values in aU areas of society, and to the fostering of stability and security in famUy life, and to the encouragement of social justice and compassionate concern in the community [The Salvation Army Year Book 1981, 1981, 82]. Chapter 5 Organizational players Page 177 This charter looked back to the founding of Army work in AustraUa in 1880, and looked forward to the Army's future role in AustraUan society, a society very different from the one in which its Australian workfirst began . Formed under the command of The Salvation Army's International headquarters, the organization and administration of the Army in Australia foUowed the pattern set in England, but there were other striking simUarities, not only in the social work undertaken, but the financial struggles, persecution, and eventual acceptance that the Army experienced in Australia. A beginning. It was a Sunday afternoon on 5th September 1880 when John Gore, a raUway ganger, stood up in the Botanic Gardens in Adelaide, and issued his invitation, "If there's a man here who hasn't had a square meal to-day, let him come home to tea with me" [Dale, 1952, 1]. This was thefirst pubUc meeting of The Salvation Army in AustraUa, and it was held by Gore and Saunders, two men who had come under the influence of the Army in England several years earner. AustraUa, at that time, was considered a fertUe field for the evangeUstic and revivalistic "experiments" which emanated from the new revivaUsm of the USA and England. The gold rushes of the 1850s had led to a swelling of the population, untU by 1880 there were 3 milUon people in the various AustraUan colonies. Wealth from wool, wheat and mining was increasing, but in spite of this, large sections of the population knew poverty and unemployment. And things were to become worse, because depression was already looming on the horizon [King, 1976, 70]. Less industrialized than England, nevertheless the young colonies were places of burgeoning investment, and the corporate form became a much more common means by which investment funds were raised. Companies legislation foUowed the English pattern, with acts of the various AustraUan colonies being developed after the English Joint Stock Companies Act of 1856. In the same way as the English act provided a model set of articles, the AustraUan acts did so, providing for a statement of income and Chapter 5 Organizational players Page 178 expenditure and balance sheet [Gibson, 1971, 26 - 27]. The period 1870 - 1913 has been described as "the high noon of AustraUan Protestantism", with about 40% of the population attending church each Sunday [Piggin, 1996, 49]. Adelaide, known as the city of churches, was an ideal place for The Salvation Army to begin its work in Australia. Without officers, Gore and Saunders had contacted General WUUam Booth several months earner, and had received an encouraging response from his son BramweU. The foUowing year, on February 17th, Captain and Mrs. Thomas Sutherland arrived to lead the first AustraUan corps at Adelaide [Dale, 1952, 4]. They were met by sixty-eight converts and Army foUowers. In 1882, Major and Mrs. James Barker arrived in Melbourne, to take up their appointment as principal Officers in Australia. More officers arrived later that year to assist in the expansion of work due to the favourable reception the Army had been receiving in South AustraUa [Dale, 1952, 8]. The first Salvation Army meeting in Victoria was held in Melbourne on Christmas Eve 1882. Expansion occurred rapidly, • ")r\0 into Tasmania, New Zealand , and the other mainland Australian states. In 1883, it was announced thatfifty-six corps had been opened, and there were 133 officers, and this after beginning the year with only three helpers [Dale, 1952, 16]. Reaching out. As in England, and as demonstrated by John Gore's invitation, ministry to social needs was an integral part of The Salvation Army's work in AustraUa from the very beginning, where newfields o f social work were pioneered. The gold rush of 1851 heralded a long boom in AustraUa which lasted untU the depression of 1891. And yet not everybody experienced the boom. Poverty was commonplace261, and, as in Britain, there was a New Zealand was a part of the Australian command at this stage. 261 An 1875 select committee report on the condition of working class children in Sydney was as shocking as anything Dickens wrote about in England [Stannage, 1994, 151]. Chapter 5 Organizational players Page 179 beUef amongst the weU-to-do that the poor were poor because of "intemperance and/or idleness and improvidence" [Stannage, 1994, 155]. The effectiveness of the mainstream churches in aUeviating poverty was limited, it has been suggested, because of this beUef, and an aUied fear, that reUef encouraged pauperism [Stannage, 1994, 155]. The Salvation Army's theology of social assistance did not make reUef shameful, but saw the "submerged" members of society as people worth saving262. There was plenty of scope for their efforts in the Australian colonies of the late 1800s. Salvation Army officers in AustraUa began Prison-Gate work263 in 1883 under the direction of Major Barker. He had been visiting the Melbourne jaU regularly, and attending the PoUce Courts, in order to assume responsibUity for men and youths who would have been sent to prison without his intervention [Dale, 1952, 19]. Out of this personal ministry of concern thefirst Salvatio n Army Prison-Gate Home in the world was opened, when a residence in Melbourne was rented to accommodate men who had just been released from prison. The Army made such an impact during the great strikes of 1890 - 1904 in its work with the unemployed of Melbourne that during the large-scale unemployment in the depression of the 1890s, the Victorian Government approached The Salvation Army and asked it to organize rehef265 and a labour bureau [SandaU, 1966, 134 - 135; Bolton, 1980, 116, 126]266. Other social ministries developed, including reformatory homes for 262 The Army's early social work in Australia was experimental, a direct response to the need of a society with no government social services, and where "divisions between poor and rich could be acute and dreadful" [Bolton, 1980, 113]. 263 This was later adopted in England. Major Barker returned to London to oversee thefirst Prison Gate home there [Collier, 1965, 153]. 264 Beginning with the maritime strike of 1890, four years of wide-reaching and disturbing industrial disputes followed. They involved workers in many industries. The conflict hinged on employers' insistence on "freedom of contract" and union demands for the "closed shop". The unions were defeated every time [Crawford, 1970, 124-125]. 265 In 1892, the Government of Victoria provided £400 with which The Salvation Army was able to provide 700 free meals daily in Melbourne,find job s for 1,776 persons, and issuefree railway passes so that men could get to work in country districts [Dale, 1952, 92; Booth, 1890, 275 - 276]. 266 "Grudging" subsidies such as these did not acknowledge unemployment as "a problem requiring official policy" [Crawford, 1970, 126]. Chapter 5 Organizational players Page 180 boys267, emergency reUef work268, district nursing work269, homes for iinrnarried mothers and babies270, homeless men's shelters271 and an Eventide home for aged men. William Booth, as part of his In Darkest England book [Booth, 1890, 275 - 276], referred to a letter from the Minister of the Interior in the Government of Victoria, to a Salvation Army officer. It was an example of a Government which recognized "the secular uses of the Salvation Army" and the high estimation in which it was held as an organization272. The result of this high esteem was an annual grant to The Salvation Army, not as a "reUgious endowment", but in recognition of its service in reclaiming .criminals. In spite of this government grant, the work which grew so dramaticaUy in response to the social needs of the day, was the cause of constant financial demands on the young and far from affluent Army in Australia. Attracting funds. As it had been in England, fundraising for Army projects in AustraUa was a constant strain and burden273. From its earnest days, the Army had to rely on donations from the pubUc, and from governments. In Adelaide in 1880, Mr. James Hooker erected the first Salvation Army barracks, at a rental of £130 per year. Dr John Singleton, a weU known Melbourne pbilanthropist, provided thefirst Missio n HaU in Melbourne in 1883 [Dale, 1952, 11 - 12]. In Queensland in 1885, the Army was in a seriousfinancial position , 267 In October, 1892, at the request of the Victorian Government, the Army set up its first home for reformatory boys at Heidelberg, Victoria [Dale, 1952, 79]. 268 The Salvation Army gave emergency help to victims of the disastrous floods of South Brisbane in 1891, rendering "useful aid" [Dale, 1952, 92]. 269 This began in Melbourne in 1903, and led to the establishment of the Bethesda Intermediate Hospital in Richmond [Dale, 1952, 91]. 270 Thefirst maternity hospital set up by The Salvation Army was established as early as 1895, and was thefirst o f a chain of maternity hospitals [Dale, 1952, 81]. 271 In 1896, shelter was provided for homeless men in Sydney during winter, and later men's homes were set up there and in Melbourne. 272 See Appendix 4.7 "Transcript of a letter from the Government of Victoria, 1889". 273 Major Barker wrote to London: "I am doing it all on faith. Have not got a penny but the dear Lord will send it. I don't intend to draw any more from you". Even in Collingwood, whose residents were charity recipients, he took up collections at open-air meetings in 1883 [Bolton, 1980, 18]. Chapter 5 Organizational players Page 181 with the leader about to pawn both his watch and musical instrument in order to buy food. A donor offered a £10 donation, and the same amount regularly each month, and the tide was turned [Dale, 1952, 25], opening the way for the work to expand into country towns. The early grant from the Victorian Government has already been mentioned. A 300 acre fuUy stocked farm in New South Wales was also donated, in order that the Army could begin work on its Farm Colony [Booth, 1890, 276]. ReUance on such donations became the pattern for Army work in AustraUa, and it became known as an organization unafraid to broach the matter of fundraising with the pubUc on whom it depended. When William Booth visited AustraUa in 1891, he was portrayed in a cartoon in the Sydney Bulletin receiving an I.O.U. from Sir Henry Parkes274, the then Premier of New South Wales, for Army work. This is shown in Figure 5.1, below, "The General's fundraising in AustraUa": Figure 5.1. The General's fundraising in Australia. [Source: Wiggins, 1964,159]. 274 Apparently Henry Parkes was known for being careful with money, hence the IOU was a humorous touch. Chapter 5 Organizational players Page 182 From Boxing Day 1891 untU 1909, the Biorama Department provided a sociaL reUgious and fundraising activity275 for the Army, by showing moving pictures around the countryside. Herbert Booth276 was responsible for developing the lantern show. Reportedly thefirst fil m ever made in Australia, Soldiers of the Cross, was premiered in 1900, and became extremely popular with audiences wherever it was shown. Travelling companies of Salvationists took the film from town to town, often providing music as weU as operating thefilm equipmen t [Dale, 1952, 153]. Commissioner James Hay began his term of service in Melbourne in 1909, in command of the entire Australian and New Zealand Army work. A man in his mid-forties, he spearheaded the trend for senior Army officers to be older. He described the era in which he served in AustraUa as a time of falling away in church life, a time when "worldly prosperity had captured many" [Hay, 1951, 48]. Nevertheless, he set about a programme of expansion in "soul-saving and soldier-making" [Hay, 1951, 49], as weU as additional social ventures. He closed down the Biorama Company, which had been responsible for LimeUght film production, sceptical of its apphcabihty for Army purposes: It should be noted that the cinema, as conducted by The Salvation Army, had led to weakness and a Ughtness incompatible with true Salvationism and was completely ended by me. This had affected at the time many aspects offinance, bu t within two years the income of every department was greater than ever [Bolton, 1980, 66, referring to Hay's autobiography, "Aggressive Salvationism" ]. For The Salvation Army in AustraUa, with the arrival of Commissioner Hay, an era of consoUdation and maintenance had begun [Bolton, 1980, 66]. The rapid expansion in property development which occurred in the twelve years of 275 The money raised in these shows was reported to be "vital" to the Army [Bolton, 1980, 66]. 276 At the time, Herbert Booth, a son of William Booth, was the Australian Salvation Army Commissioner. Chapter 5 Organizational players Page 183 Commissioner Hay's command was probably the achievement for which he is best remembered. In order to fulfill the demand for increased facilities needed by the rapid expansion of the Army's work, he urged donors to consider several means by which they could assist in thefinancial burde n of this expansion: • donations of cash, bonds, or property. "We should be glad to permanently associate the name of the donor with a place so provided"; • a donation to assist in a scheme, or to "improve some existing buUding''; • an advance to the Army as a deposit in "our Property Funds, or on mortgage", with the Army being prepared to pay "reasonable interest"; • in a wiU or bequest, by leaving the Army "funds for additions to any existing Institution for any specific purpose you might desire" [Hay, 1951,11]. These fundraising efforts must have been successful, because by 1921, at the end of his term of command, hundreds of new buUdings had been added to The Salvation Army's Ust of properties. By that time they had a book value of £1,011,813, and mortgages of £245,908277 [Hay, 1951, 7]. The Army had managed to raise two thirds of the cost of those buUdings, a testimony, according to Commissioner Hay, of "marked Divine assistance, and also, of splendid enthusiasm on the part of many Officers, Soldiers and Friends" [Hay, 1951,3]. Also during this time, 98 new corps were opened, there was an increase of 110% in aU finance, an increase in the giving of Salvationists of 300%, and an increase in the total expenditure on social work in that period from £70,000 to £140,000 per year [Hay, 1951, 62 - 63]. When Commissioner Hay produced a book describing his command in AustraUa, he highUghted the need of the Army forfinance, and expressed pleasure that "we are slowly buUding up a people who in their personal giving are systematic, ungrudging, and almost bounteous" [Hay, 1951, 74]. Perhaps it was because they came 277 In September 1909 the Army's Australian properties were recorded at a value of £271,776. There was an increase over the next 12 years of £740,037. 426 new buildings were constructed, 32 existing buildings were remodelled, and 91 additional officers' quarters were built [Hay, 1951, 7]. Chapter 5 Organizational players Page 184 from the lower socio-economic levels of society, but Salvationists had not always been generous at supporting the Army's work, relying heavUy on funding from the pubUc and government grants . No opportunity to attract funds for Army work was ever missed. When Lieut-Colonel Bond's book was pubUshed, as was usual with Army pubUcations, opportunity was given to readers to help by providing donations in various ways280. WhUe help was put in terms of the Army's social work, the wording of suggested bequests281 gave the Army power to use and apply gifts at the discretion of the Officer "for the general purposes of The Salvation Army in the said Commonwealth". This would include reUgious work, and, as was specified "for the general purposes of the work of The Salvation Army in foreign lands" [Bond, 1919, 188]. By way of justification for such donations, Army statistics were provided, with an emphasis on the number of social institutions and the people who were helped as a result of their operation. Financial reputation. As the Army's work expanded, and donations and government grants were received, and had to be administered, the Army's financial record keeping and reporting became more and more complex, but was stiU undertaken by officers. One exception was the employment of Mr John McPhee, thefirst clerica l helper in The Salvation Army in AustraUa, described as "a Scot with keen business instincts and an evangelistic outlook282" [Dale, 1952, 11]. 278 Manson [1906, 62] described The Salvation Army as not only ineffectual, but costly, with two-thirds to three-fourths of its total cost as a religious organization "being borne by the public, for no other reason than that they are unable and are not encouraged to distinguish between the Army's religious and its "social" departments". 279 The Army That Went With The Boys [Bond, 1919]. 280 See Appendix 4.6 "How can I help the Work of The Salvation Army?" 281 See Appendix 4.8 "Remember the Army in your will". 282 Known as Mr. Secretary McPhee, or Paymaster McPhee, he later claimed that he had been Chief, Secretary, Accountant and Cashier when the Australasian headquarters was in a Melbourne bedroom, then later in two small offices [Dale, 1952, 11]. Chapter 5 Organizational players Page 185 The pubUcation of 77*6? War Cry2*3 was the Army'sfirst Australian business activity. Commissioner T. B. Coombs was described as having "shrewd business acumen", which was an asset during the early expansionary days of the Army and its pressures for continued fundraising [Dale, 1952, 50]. The Army's presentation of itself as competent to receive donations from the pubUc assumed a high level of financial accountability and reporting. Disclosure requirements of pubUc companies in AustraUa in the late 1800s, in the same way as the various Joint Stock Companies Acts provided in England, left the details of accounting and auditing "to be decided by the individual company". The model articles could be adopted or modified as the directors saw fit, the main concern being the protection of the company's creditors [Gibson, 1971, 29]. There was a growing realization, however, that the pubUcation of an audited balance sheet ought to be compulsory if relevant information were to be provided for the protection of creditors. Auditors required some control also, since their auditing of a company's balance sheet meant nothing if they were uncontroUed284. Plagued as it was by its constant need for funds, accompanied by rumours of financial downfall285, the early Salvation Army in AustraUa had to rely, as it had done in England, and was stiU forced to, on the support of prominent donors, and its own constant assurances to the pubUc that rumours about its financial affairs were unfounded286. The This newspaper wasfirst publishe d in 1883, and then an improved publication began in 1889 [Dale, 1952; Wiggins, 1964]. 284 Mr (later Sir) Isaac Isaacs (who later became Chief Justice of the High Court of Australia and the Commonwealth Governor-General) was largely responsible for developing corporations legislation in Australia in the late 1800s and early 1900s. In 1894, in the Victorian Parliament, Mr Isaacs said: "It strikes me that it is a perfect farce to direct that a company shall have balance sheets, and that those balance sheets shall be audited, unless some control is got over the auditors themselves" [Gibson, 1971, 32, 39 - 40]. 285 Manson's [1906] criticisms have already been considered in Chapter 4. After the Darkest England scheme was put forward, according to Bolton [1980, 35], rumours of the Army's financial downfall were rife, because of the expense of Booth's new "anti-poverty war". 286 See Appendix 4.4, "Financial accountability of The Salvation Army as portrayed in The Salvation Army Year Books up to 1935", for a summary of the Army's response to criticisms about its finances. Many Year Books also contained quotations from notable citizens who supported the Army. In 1934, for example, Sir Isaac Isaacs (the Australian Governor General) was quoted: "The Salvation Army is Chapter 5 Organizational players Page 186 AustraUan Territories came under the samefinancial requirement s of the Army in England and elsewhere throughout the world in terms of the presentation of annual accounts. WhUe they were prepared, and were available, they were not widely circulated. Prosecution and persecution. In spite of the acceptance of its social work, the Army experienced difficulties similar to that experienced by the young organization in England, in the form of both prosecutions and persecutions. After an encouraging beginning in Adelaide, Captain Sutherland was imprisoned for two hours in 1881 for singing in the streets. The foUowing week, the local corps were stopped and warned to proceed sUently. The South AustraUan parUament criticized the poUce action, and from that time there were no more prosecutions of Army personnel in Adelaide [Dale, 1952, 37]. Prosecutions occurred in other AustraUan settlements, with arrests, fines, and even imprisonment being a common occurrence. In 1907, several Army officers were prosecuted for obstruction288 in Sale, Victoria. The arrested escaped with fines. After this, the arrests seemed to be over at last: During the twenty-six years from 1881 to 1907 over one hundred AustraUan Salvationists were fined or imprisoned for street marching or holding open-air meetings for the uplifting of the name of Jesus Christ [Dale, 1952,40]. WhUe these prosecutions and legal actions were being brought against The Salvation one of the noble bands of devoted men and women of various creeds who have accepted and are faithfully executing the Divine commission of rescuing their fellow-creatures from the bondage of sin or sorrow, and of helping them to rise on stepping-stones of their better selves to higher things" [The Salvation Army Year Book 1934, 1934, 21]. 287 There was one Australian command until 1921, when the Southern and Eastern Territories were formed. 288 They had been attempting to preach in the streets. The Magistrate said no obstruction had been proved, but a technical breach of the town's by-law had occurred. The officers were fined [Dale, 1952, 40]. Chapter 5 Organizational players Page 187 Army, there was an almost constant stream of physical persecution from the crowds who were always present at the Army's open-air marches and meetings. Salvationists were pelted with a variety of unpleasant missUes, from flour and soot, to rotten eggs, mud, stones, and even stale fish [Bolton, 1980, 23]289. The persecution was often violent, with Salvationists frequently injured. Officers were kicked or struck, and women officers were knocked over in the streets290. Ruffians and pubUcans seemed to be the main sources of these persecutions [Bolton, 1980, 67, 71 - 72]. Sydney pubUcans were particularly incensed because the Army's stance against drinking had reportedly caused them to lose some of their best customers [Dale, 1952, 35]. In Queensland, it was reported that the Licensed VictuaUers' Association notified business people that "if employment was given to any person who joined the Salvation Army, the pubUcans would withdraw their custom" [Dale, 1952, 25]. The same influences were causing the Army problems in England, as pubUcans there incited crowds to persecution of Salvationists. Along with these prosecutions and persecutions, pubUcity for The Salvation Army was not always positive. The Sydney Morning Herald in 1882 predicted that it was "bound to come down at last and bury aU beneath it" [Bolton, 1980, 267]. Its aggressive advertising style291, stormy marches, and rowdy meetings, attracted some criticism from traditional church people, but in spite of this, in its early days, the Army continued to be colourful [Bolton, 1980, 57]. A telegram from Brisbane in the early 1880s read - "Storms raging. The Devil doing his best to upset us. Not a night passes without his servants trying to stay our progress. The larrikins throw mud, stones, and stale fish at us. They knock our lasses down in the streets" [Dale, 1952, 34]. 290 A Bathurst newspaper recorded these occurrences at Salvation Army meetings: "The ruffianism at the meetings is of an atrocious, gross description, and the actions of the mob are a disgrace to a civilised community. Yesterday their audacity went so far as to prompt them to enter a private hall engaged by the Army and disturb the services in an abominable manner" [Dale, 1952, 35]. 291 Major Barker advertised in the daily papers. For example: "HALLELUJAH! HALLELUJAH! HALLELUJAH! Now then, cheer up! Come to the SALVATION ARMY FIRST ANNIVERSARY, MELBOURNE EXHIBITION, NEW YEAR'S DAY. Admission, One Shilling. Refreshments at moderate charge". 10,000 people attended this celebration on New Year's Day 1884 [Bolton, 1980, 21]. Chapter 5 Organizational players Page 188 Making friends. In contrast to these setbacks, the Army was gaining friends in high places, who were prepared to speak out in its defence292. If the Army's reUgious fervour was not always appreciated, its social work appeared to be highly valued. William Booth's reference to a letter from the Chief Secretary of the Victorian Government in 1889 to The Salvation Army, praising the rehabUitation work which had been done with criminals293, has already been referred to, as has the Government grant which foUowed this praise. Booth described the Victorian Government as "probably the most democratic of our colonies", thus ckirning that the approval of that government showed that the work of the Army posed no threat to democracy [Booth, 1890, 276]. The willingness of Army officers to face deprivation and to give themselves unstintingly to their work was an inspiration to many Australians who benefited from their care, and to the governments under whom they Uved294. As part of the international Salvation Army, the Australasian command earned praise from General BramweU Booth: The Salvation Army in Australia has never given the International Leaders one moment of real concern. Between 1886 and 1920 there were five Commissioners for Australasia ... Each of these was the man for the moment - their work forming a patterned mosaic [Dale, 1952, 49]. A ministry which perhaps gave the Army more credibiUty and legitimacy than any other was its work with the Armed Forces. This had commenced several years before World War I, with Army officers being chaplains to the Citizen Forces. At the end of the war, General Sir WiUiam Birdwood,first Commander of the AustraUan Forces wrote: Many people, while they approved of the Army's social work for needy people, did not necessarily want them "blasting salvation down their streets". As the persecution continued, sympathy swung to the Army [Bolton, 1980, 79]. 293 See Appendix 4.7, "Transcript of a letter from the Government of Victoria, 1889". 294 Dale's book [1952] includes many testimonies from Governors, churchmen, and publicfigures abou t their admiration for the work of The Salvation Army. Chapter 5 Organizational players Page 189 For unsparing and successful efforts the Chaplains werefirst class , and appreciated by aU ranks. I am deeply grateful to them and their Organisation for self-sacrificing and substantial assistance pale, 1952, 97]. The work with the troops became known as Red Shield work. In the last year of the First World War, the Salvation Army, among other activities, had in operation "182 hutments in the camps of the Allies; 87 Hostels or Soldiers' Hotels; 220 Rest Rooms; 57 Ambulances, manned and officered by Salvationists; over 800 Salvationists devoting their entire time to work in the mUitary camps; forty-five Chaplains on active service" [Bond, 1919, ii]. In 1915, King George V wrote of the Army: On the occasion of the JubUee of The Salvation Army, I heartUy congratulate you and the members on the mighty achievements of the system founded half a century ago by your distinguished father. By its work of love and mercy, both in peace and in war, The Salvation Army has become honoured and endeared in the hearts of the nations of the world [Bond, 1919, Ui]. The King was not alone. Statesmen and generals alike eulogized the work of The Salvation Army, praising the dedication of its officers and their willingness to meet the "moral and physical needs of the men in a spirit which has been understood and appreciated ... one of true Christianity" [Bond, 1919, 10]. Coming of age. The Salvation Army in AustraUa was originaUy estabUshed in Adelaide, but when the first principal Officer295 arrived, he and his wife settled in Melbourne and established a corps there, in 1882. With the establishment of more new corps, and the inclusion of New Zealand as part of the Australasian command, the first headquarters for Major and Mrs James Barker arrived in September 1882 [Dale, 1952, 7]. Chapter 5 Organizational players Page 190 Australasia was opened in Melbourne in 1883, evidence of "permanency and progress" [Dale, 1952, 15]. The expansion and development of Army work throughout the colonies in the late 1880s and early 1900s has already been discussed. This section is more concerned with the administrative arrangements which accompanied this growth up untU the division of AustraUa into two separate territories in 1921296. In 1884, Colonel Ballington Booth297 and Major Howard arrived in AustraUa, to check on the Army, and found that officers were not very weU trained. Major Barker was so busy in Victoria that he had no time to supervise other colonies. When Colonel Booth returned to England in 1886, Major Howard remained as chief-of-staff in AustraUa [The Salvation Army Year Book 1924, 1924], and Major Barker was appointed in charge of Victoria. Major Howard was reputedly not popular, but acknowledged to be a competent administrator, under whose leadership better training facUities were estabUshed, and evangehsm and pastoral care of officers were reportedly strengthened [Bolton, 1980, 33]. He was succeeded by Commissioner Coombs in 1889 [The Salvation Army Year Book 1924, 1924], and then foUowed Commandant Herbert Booth298 in 1896, and Commissioner Thomas McKie299 in 1901. Commissioner James Hay took command in 1909, and led The Salvation Army in AustraUa through its division, in 1921, into two separate territories, the Southern and Eastern. When the Australasian command was divided in 1921, the Army had been in AustraUa for forty-one years. It had taken that length of time for the Army to "forge its own identity, to shape its legends and build its tradition" [Bolton, 1980, 30]. The Salvation Army in Australia had come a long way. Perhaps it had lost something too, since it had reached the second generation. It was a strong and healthy organization, but "no longer The Australia Southern Territory and the Australia Eastern Territory are based in Melbourne and Sydney respectively. 97 William and Catherine Booth's second son, then Marshall for the Colonies [Dale, 1952, 24]. 298 The youngest son of William and Catherine Booth, Herbert inspired Salvationists with his "Move-on Manifestos", published in the War Cry. He attracted influentialfriends t o the Army during his time of leadership in Australia, 1896-1901 [Dale, 1952, 50-51]. 19 He was credited with beginning a benefit fund for sick officers, a salary supplement scheme, and pension and travelling funds [Dale, 1952, 51]. Chapter 5 Organizational players Page 191 novel, shocking or controversial" [Bolton, 1980, 39]. Its miUtary structure, whUe it produced efficiency, discipline and dedication, did not necessarily produce creativity. Bolton [1980, 39] speculated that perhaps after the First World War, it entered a period of spiritual malaise, its passion depleted. In its early days, it had nothing to lose. Now it had everything to lose: position, influence, acceptance, and property. It had come of age. The next section introduces members of the organization today, focusing on the organization structure and the way officers and employeesfit into that structure. Players from the organization: the Australia Eastern Territory. Profile 2. Beside the suburban railway station, the Salvation Army officer looks friendly but tired. As if to explain his presence, across the railway tracks a billboard reminds the world that the Red Shield Appeal is happening next week. Neatly dressed in his uniform, he gives a kindly smile to the constant stream of commuters as they rush to the platform to catch trains, mostly to the city. He is ready to talk if anybody has the time to stop. Occasionally someone passes the time of day, but usually everybody is in too much of a hurry. Rushing past, they drop their loose change in his collection box. Nobody seems to take the time to look more closely at him, a man in his mid-thirties, standing on a railway platform, and wonder: Who is this man - really? Where is he going? What makes up his days? What motivates him to stand here every Friday morning? Is he married? Did he have to train to join The Salvation Army? What did he do before? Is he knee-deep in people's problems? Did he get to bed at all last night, or was he out rescuing alcoholics from the gutter? What is his future? Is he happy with his lot in life? Does he have aspirations and aims, plans and goals, disappointments and frustrations? Is he religious? What's it like to be a Salvation Army officer? What is this Army he belongs to, and how does it operate? Chapter 5 Organizational players Page 192 Salvation Army organizational structure. When The Salvation Army in Australia divided its work into two territories in 1921. The AustraUa Eastern Territory covered the Army's work in Queensland, New South Wales, and the Australian Capital Territory, a geographical area of command which has basicaUy continued untU the present time300. By 1997, the territory covered this same area, and consisted of eight divisions, as it had done for many years. In many significant ways, however, things had greatly changed. The difference by 1997 was that the territory had undergone a significant restructure in 1990, under the command of Commissioner Robert Bath, the then Territorial Commander. Basing the new structure on organizational structures which operated within the Army in the USA and Canada, Commissioner Bath set up a cabinet system. The cabinet consisted of the Territorial Commander, the Chief Secretary, and the Secretaries by responsibiUty, for Program, Personnel, Business Administration, and Social work. At that stage, there were still eight geographical divisions. The restructure meant that each Divisional Commander was now responsible not only forfield work , but also for the social and rehabiUtation centres within the geographic boundaries of each division. A later refinement, from 1995, saw RehabiUtation Services30, become a separate command, administered from Sydney, with responsibiUty for the various RehabiUtation centres and Red Shield Industry outlets throughout the entire Territory. At that time, the geographic divisions were reduced from eight to seven [Disposition of Forces, 1973, 1984, 1989, 1990, 1992, 1993, 1994, 1995, 1996, 1997]. The current structure is demonstrated in Figure 5.2 below, "Salvation Army AustraUa Eastern Territory 300 In 1956 the Army's work in Papua New Guinea was begun, and the Australia Eastern Territory took on supervision of this region until it became a separate territory in 1995 [The Salvation Army Year Book 1996, 1995, 58]. 301 The term "field work" refers to the Army's corps (church) work, in distinction from its social work. 302 This covered the Army's drug and alcohol rehabilitation work, and the industries which suupported that work. Chapter 5 Organizational players Page 193 Organization Chart". It Ulustrates the hierarchical structure of the Army, and its organization into eight divisions, seven geographical, and one functional (Rehabilitation Services Command). Australia Eastern Territory Territorial Headquarters (THQ) 7 geographical Rehabilitation Servic Divisions Command 13 rehabilitation centre 64 outposts Red Shield Industri 67 social centres Family stores Figure 5.2 The Salvation Army Australia Eastern Territory Organization Chart [Source: Disposition of Forces, 1997] The various Divisional Headquarters have responsibiUty for the corps, outposts, and social and community centres within their designated area, and are accountable upwards to Territorial Headquarters, and to the Territorial Commander. As an international organization, aU territories of The Salvation Army world-wide are accountable to International Headquarters, based in London. RehabiUtation Services Command functions as a separate division, also accountable to Territorial Headquarters and the Territorial Commander, and responsible for the rehabilitation programmes and Red Shield Industries businesses under its command. Chapter 5 Organizational players Page 194 The seven divisions cover the states of Queensland, New South Wales, and also the AustraUan Capital Territory. The corps and the outposts304 are church-based Salvation Army centres, with a single officer or married officer couple305 posted there for a period of anything from two to four years306. The social centres operate separately, usuaUy with an Army officer in charge, and many with business managers to oversee the day- to-day adrninistration. Community centres are mostly staffed with salaried or voluntary staff, and provide a variety of services. Appendix 5.1 "The Salvation Army's social and community services" provides a comprehensive list of Army services, including those offered under the auspices of RehabiUtation Services. Officers and employees. The company of players within this organization is incredibly varied, and the quality, length of tenure, and expertise of personnel aU have a huge impact on the design and implementation of accounting poUcy and practice, and on the use of accounting information for management decision making. According to the Salvation Army Yearbook 1996 [1995], there were, at 31 July 1995, 604 active officers and 1,947 employees within the AustraUa Eastern Territory [The Salvation Army Year Book 1996, 1995]. The trend in terms of the relative numbers of officers and employees over the past 35 years can be demonstrated below, in Figure 5.3, "Relative size of officer and employee numbers, 1960 - 1995". The number of officers has remained relatively The seven divisions are: ACT & South New South Wales, Central and North Queensland, Newcastle & Central New South Wales; North New South Wales; Parramatta and West New South Wales; South Queensland; Sydney East & Illawarra. 304 See Appendix 4.1, "A glossary of Army terms". 305 Officers may only marry other officers. They are both in the work together. Consequently, married officers are appointed to a corps as a couple. 306 Some of the appointments have been very short in the past. There was a strong feeling expressed in interviews that they were too short to be effective. Perhaps The Salvation Army is an illustration of Selznick's observation that there is pressure for "institutionalization of relationships", so that individuals will be "interchangeable", and so that the work of the organization can go on, irrespective of the personal qualities of individuals. He argued that formal structures would never succeed in "conquering the non-rational dimensions of organizational behavior" [Selznick, 1948, 25]. The Army model, while it promises great efficiency and easy transferability, has the potential to fail at the level of human relationships, which is, arguably, what the business of a religious/charitable organization is. Chapter 5 Organizational players Page 195 constant, whUe the number of employees has increased dramaticaUy in that time. This has brought with it its own particular tensions, which will be explored in more depth in succeeding chapters. 2500 2000 1500 • Officers 1000 • Employees 500 0 «£umM\ & A^ & Q?> <& oS> bfc> Figure 5.3. Relative size of officer and employee numbers, 1960 - 1995. [Source: The Salvation Army Year Books 1960,1965,1970,1975,1980,1985,1990, 1995] In spite of the greater number of employees, the officer culture was very strong, an almost palpable force within the organization. GeneraUy, the dedication expressed by officers interviewed, towards the Army's mission, and their own contribution to it, was impressive. Many officers regularly worked long hours, under great pressure, in an endeavour to meet the needs of those to whom they were rninistering, in an attempt to Uve up to the expectations that were made of them by the pubUc |Trvine, 1997]. Appointments of officers were made without a great deal of consultation with the officers concerned, although that was changing. The usual practice had been to place officers in a position where they were needed, for a fairly short period of time. WhUe some older officers saw this in a positive Ught, expressing appreciation of the variety of service they had seen, for many it was seen as a problem, having a disruptive effect on corps, and on the discharge of responsibiUties, when there was Uttle or no training given. With the increasing sophistication of information and management requirements in social centres especiaUy, officers often did not have time between appointments to gain the skiUs necessary to fulfiU their duties in a satisfactory manner. There was a very strong behef, amongst older officers, that the command system was a good one, but younger officers favoured a more consultative style of making Chapter 5 Organizational players Page 196 appointments, and appreciated having some input into the decision. They also recognized the need for specific training and a career path which enabled them to develop an area of interest and expertise. This would require a system where they were aUowed to remain in the same, or a similar, position for a longer period of time. The Army model is a distinctive culture, rooted very strongly in the past, and relying on a model of authority and leadership which was appropriate in Victorian England in the late nineteenth century. Captain CUve Adams [1996] observed that in society today "there is scepticism about hierarchical structures and opposition to institutionalized authority". This is the context in which The Salvation Army is working, ministering and fundraising, and yet it is a very different environment from the traditional Salvation Army model. Territorial Headquarters. Within territorial headquarters, the organizational structure is Ulustrated in Figure 5.4, "Territorial Headquarters responsibiUties". While the Territorial Commander has ultimate authority, there is provision for responsibiUty in the four areas Ulustrated, Personnel, Program, Business Administration and Women's Organizations. Chapter 5 Organizational players Page 197 Territorial Commander Advisory Board (TC) Chief Secretary I- Secretaryfor Personnel : Secretary for Program: Secretary for Business Women's Organizations: Departments: Departments: Administration: Departments: Departments: • Pastoral Care - Planned Giving Finance — Women's Ministries - Missionary Fellowship - Social Services Audit — League of Mercy • College of Further Education - Field Services — Computer Services - School for Officer Training - Program for Growth — Property - School for Leadership Training -Youth — Public Relations - School for Biblical and General Studies - Emergency Services — Salvationist Supplies : Youth Leadership - Red Shield Defence Services Figure 5.4. Territorial Headquarters responsibilities. [Source: Disposition of Forces, 1997] The role of the Advisory Board has already been referred to in a number of contexts. Its work is very different from that of traditional nonprofit boards, since it has no formal decision making role. Its abUity to influence decisions, however, is substantial. Members of the board offer not only advice, but also access to services and expertise from business, the media, and professional networks. They provide an Ulustration of DiMaggio's and PoweU's [1983, 147] contention that structuration in organizational fields leads to "homogeneity in structure, culture and output". There is no doubt about either the fact that the Army is a bureaucracy, or that it was already one before the advisory board was instituted. However, the presence of such a board ensures that the Army is being influenced constantly and powerfuUy by the norms of society, and not just by its own history, culture and mission. The responsibiUties of the Secretary for Business Administration were very wide- ranging, encompassing financial planning and budgeting, financial operations, legal matters, expenditure and boards, banking, financial reporting, relationships with external bodies, and oversight of the departments and staff which fulfiUed those functions [The Salvation Army Secretaries for Business Administration, 1995]. These activities were to be conducted in "an efficient and effective way in accordance with the Chapter 5 Organizational players Page 198 highest business and Christian principles" [The Salvation Army Secretaries for Business Administration, 1995, 1]. The Territorial Finance Department. The structure of the Finance Department, which represents one of those responsibilities, and which performs the territory's accounting functions, is outlined in Figure 5.5 below. Territorial Financial Secretarial Assistant Secretary (Officer) (Employee) Assistant Territorial Financial Secretary (Officer) — Legal Officer (Employee) — Legacies/Estates (Officer) Secretary/Typist (Employee) Chief Accountant (Employee) Social Finance Assistant Chief Officer (Employee) Accountant (Employee) Assistant Social Finance Officer (Employee) Assistant (Employee) — Assistant (Employee) Insurance Officer Data Entry (Officer) Supervisor (Employee) Assistant Insurance Officer — Data Entry (Employee) r(Employee ) — Data Retrieval (Employee) — General Clerk (Employee) — Cashier/Payroll (Employee) General Fund Social Fund Property Fund Accountant (Employee) Accountant (Employee) Accountant (Officer) Creditors Clerk Assistant Assistant (Employee) I(Employee ) I(Employee ) 1— Assistant (Employee) Figure 5.5. THQ Finance Department structure. [Source: Finance Department Organisation Chart, 1996] It was in this department that the "nuts and bolts" of the accounting work was accompUshed, by a staff comprised mostly of employees. The department grew in size even during the period in which I had access, a reflection of an expansion in its Chapter 5 Organizational players Page 199 responsibiUties and functions. Positions which had been traditionaUy established within the Army were weU defined, in terms of their responsibiUties, but not in terms of specific accounting instructions. This was partly because the rules and regulations were written in a way which acknowledged the vast range in Army activities, and in accounting abihties between officers, who have traditionaUy performed these roles [Manual of Accountancy Policies and Procedures, 1989]. A manual [The Salvation Army Territorial Financial Secretaries, 1995] set out theresponsibiUties o f the Territorial Financial Secretary in detaU. As a trustee, and a member of the Finance CouncU, the person who occupied this position carried an enormousfinancial responsibiUty. His (or her) signature appeared on the Army's annual financial statements [The Salvation Army Consolidated Financial Statements 1997, 1998,11]. In addition, the responsibiUty for the running of the Finance Department, including reporting to the Secretary for Business Administration, meant that the Army's entire accounting system came under the scrutiny and direction of this person. He or she was to have a reputation "beyond question", to be "exact and businesslike" in the running of the territory's finances, to be "free from self-interest", and at aU times ''unchallengeable in the financial or business affairs under his control, or in which he has any interest or influence" [The Salvation Army Territorial Financial Secretaries, 1995, 1]. Particularly highUghted amongst these responsibiUties were the Army's annual budget and the control of oqpenditure within that budget. An overarching responsibiUty which went with this position was that the Territorial Financial Secretary ought to "consider the whole" in relation to the Army'sfinances, i.e. he or she was responsible for ensuring that the "financial conditions of every separate proposal do not in any way weaken the real security of the Army's overaU financial position" [The Salvation Army Territorial Financial Secretaries, 1995, 3]. Some impkcations of this wifi be considered in Chapter 9, in the section on decision-making. One of the responsibiUties set down for the Secretary for Business Administration, in Chapter 5 Organizational players Page 200 relation to departments and staff, was that future personnel needs ought to be forecast. This would involve identifying "officers with potential for appointments requiring speciaUsing, technical, professional or administrative competence", and encouraging and developing those officers [The Salvation Army Secretaries for Business Administration, 1995, 11]. A senior THQ officer acknowledged the shortage of accounting-trained officers: ... people who are attracted to fuU-time service in the Army are not necessarily those who have the analytical skills ... there are some. We have accountants. Those are not the people who are necessarily often found in the ranks of Salvation Army officers. And it's gotten so much more complex ... [Colonel WiUiam Anderson]. The notion of a career path for future Territorial Financial Secretaries was a relatively new one, but one which the new Territorial Financial Secretary embraced. He suggested gathering together officers with accounting expertise, and providing them with opportunities to develop skills which would equip them for responsible DHQ or THQ finance positions. WhUe he thought it a good idea, nothing had been accompUshed towards this aim. One senior officer who had previously been a Divisional Finance Secretary told me of the instruction he was given for his position: I was told, there's your computer, that's the on switch, best of luck mate ... [Major WendeU Grant]. Some officers who possessed accounting qualifications told me that they had turned their backs on that kind of work, and were committed to being in a people-oriented ministry. One [Captain Gary Dent] said he kept very quiet about his accounting training, and hoped nobody knew about it. There was definitely a shortage of accounting-trained officers, given the demand at THQ and the requirement that each divisional headquarters, and RehabiUtation Services Command, had to have a Divisional Finance Secretary. These were, in the majority, Army officers, with one DHQ and one Red Shield Command employing trained Chapter 5 Organizational players Page 201 accountants in this role. By the time my study in the Army had come to an end, another division had also made the shift from an officer Divisional Finance Secretary to an employee/accountant Divisional Finance Secretary. But these were at divisional level, and therefore the financial responsibiUty was not as great, and nor was the potential to influence the direction of the Army's mission in the territory. The Assistant Territorial Financial Secretary's role [Assistant Financial Secretary, 1996] was as secretary to the Finance CouncU and Property Trusts, and as an assistant in the management of the Finance department, especiaUy in relation to legal, legacy and investment matters. This was a role which required financial and legal expertise, but perhaps not specific accounting training. Understanding organizations through their structure. Can an organization be understood in terms of the formal aspects of its organizational life, i.e. "organizational charts, job descriptions, and handbooks for procedures" which specify "what the people in particular positions are supposed to do, how they should relate to one another, and what they can be held accountable for in the world of the organization, and by whom, regardless of the personal attributes of the individuals filling those positions" [Jeavons, 1994, 62]? Perhaps not, but an organization's structure makes a good starting point for beginning an understanding of how it "ought" to function, and then, of how it actuaUy does function, of what sense its members make of it, and of how society's institutions are embedded in it. Further, the organizational structure adopted says a great deal about its adherence to organizational myths, and its desire to provide an "account" of itself that prevents its conduct being questioned [Meyer and Rowan, 1977, 349]. By foUowing institutionaUy acceptable practices, an organization's leaders make sure it wiU survive by observing and copying successful strategies from other organizations [Fhgstein, 1985, 389]. It is interesting to understand how an organization's formal structure comes into being. Is it derived from adaptation to "specific elements" of the environment, or from Chapter 5 Organizational players Page 202 "unencumbered, logicaUy conceived design efforts" [Jeavons, 1994, 63]? Scott [1987, 501 - 507] identified seven ways in which institutional elements could affect organizational structures, several of which307 could be interpreted as referring to The Salvation Army: 1. imposition of organizational structure (through authority relations, and legitimate coercion); 2. authorization of organizational structure (which results in higher organizational survival rates, because of legitimacy); 3. inducement of organizational structure (organizations are presented with incentives to conform, e.g. by a funding agent); 4. acquisition of organizational structure (the choosing of structure by organizational actors); 5. imprinting of organizational structure (new forms of structure in vogue at the time of the organization's founding are adopted and taken for granted); 6. incorporation of organizational structure (evolution of structure over time); and 7. bypassing of organizational structure (orderliness of the organization is based on institutionally defined beUefs rather than organizational structure). The Salvation Army began with, and has maintained, an army model, but it is no stranger to organizational restructures. A notice on the waU of one Salvation Army corps officer308 seemed to sum up this experience: The army structure was imprinted at the inception of The Salvation Army (No. 5), but recent societal trends for divisionalization and organizational structures which are wider and flatter have probably influenced its current structure (No. 2). In another sense, the organization structure has evolved over time, with several restructures since the Army's beginning in Australia (No. 6). 308 Captain Allan Kaldor. Chapter 5 Organizational players Page 203 We trained hard ... but it seemed that every time we were beginning to form up into teams we would be reorganized ... I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the Ulusion of progress whUe producing confusion, inefficiency and demoralization. Chaves' observation that most denominational structures are dual structures, comprising a reUgious authority structure (the church part) and an agency structure (aspects such as pension funds, pubUshing, etc) does not apply to the Army. Instead, there is a single line of authority, under which aU organizational activities, both "Uturgical" and "worldly" M [Chaves, 1998, 190]. TypicaUy, organizations like this begin with charismatic leaders who buUd their organizational structures around their personal authority. The Salvation Army appears to be such an organization. This Army, the company of players, has been extremely effective in raising the funds necessary for it to keep going. Not only has it maintained its presence in AustraUa, but at 30 June 1997, its Balance Sheet listed Net Assets of $363,073,000 [The Salvation Army Consolidated Financial Statements 1997, 1998, 4]. The wider and more varied a philanthropic organization's "donor base" is, the more responsive that organization is likely to be to a wide range of different people and influences. This has "powerful impUcations" for organizational structure [Jeavons, 1994, 64], and for other aspects of the organization's culture and routines. The next section focuses on the sources of these funds. Funding the company of players: Salvation Army income. Profile 3. The young Salvation Army officer surveys her living room. At one end her small daughter sits watching a children's television programme. All around the floor, and on the dining room table, in neat piles, are Red Shield Appeal literature and collectors' packs. She and her husband have only been in this appointment for a few months, and virtually as soon as they arrived, they had to organize the local appeal, which is being held next week Time is running out. It's been difficult settling into a new home and trying to adapt to being a full time Army officer, as well Chapter 5 Organizational players Page 204 as organizing meetings and recruiting and enthusing people to collect in the Appeal. They've been given a target. She hopes they can reach it. According to its consoUdated financial statements for June 30 1997 [The Salvation Army Australia Eastern Territory Consolidated Financial Statements 1997, 1998, 3], the Salvation Army's income came primarily from state and federal government grants, foUowed by social services cUent contributions, and donations made to the Red Shield Appeal. Figure 5.6, "The Salvation Army Australia Eastern Territory Income by categories (for the years ended 30 June 1995, 1996 and 1997)" below displays these income sources, comparing them to those of the previous two years: 45 Government Red Shield Appeal Client Other Income Grants Contributions Figure 5.6. The Salvation Army Australia Eastern Territory Income by categories (for the years ended 30 June 1995,1996 and 1997) [Sources: The Salvation Army Financial Statements 1995,1996, 3; The Salvation Army Australia Eastern Territory Consolidated Financial Statements 1997,1998, 3] There was an increase in income between 1995 and 1997 in each category except "Other Income". In proportional terms, the picture is sUghtly different, as indicated below in Table 5.1, "The Salvation Army AustraUa Eastern Territory Proportional Chapter 5 Organizational players Page 205 Income Changes, 1995 - 1997" [The Salvation Army Financial 1995, 1996, 3; The Salvation Army Consolidated Financial Statements 1997, 1998]: Income Category 1997 Increase/ 1996 1995 c/.) Decrease (%) (%) (%) Government Grants | 29.89 * 32.17 29.62 Red Shield Appeal 14.12 * 16.15 14.98 Social Services CUent Contributions | 15.26 * 15.11 14.45 Legacies and Donations 12.82 * 8.17 14.24 Sales | 11.00 * 11.64 10.09 Interest and Dividends 7.63 * 5.22 4.75 Other Income | 9.28 * 11.54 11.87 Total 100 100 100 Table 5.1. The Salvation Army Australia Eastern Territory Proportional Income Changes, 1995 -1997. [Source: The Salvation Army Consolidated Financial Statements 1997, 1998, 3J. There have been decreases, over these three years, in the proportion of total income received from the Red Shield Appeal, legacies and other income, and increases in government grants, social service cUent contributions, sales, and interest & dividend income. Significant changes have occurred in this time in external funding structures. There has been an acknowledgment that raising money from the pubUc has become increasingly difficult309, and that government funding is becoming harder to obtain, being increasingly linked with restrictive funding requirements. Government funding. On 30 July 1996, the first agreement between The Salvation Army Emergency Service (SAES) and the New South Wales Government was signed by the then Territorial Commander, Commissioner John Gowans. It was described as "a sign of goodwiU indicating Salvation Army support of government action in emergencies. It is a 309 In recent years, there have been many door-knock appeals from a variety of charities. The Salvation Army has had to work hard to recruit people to collect for their Red Shield Appeal. Chapter 5 Organizational players Page 206 commitment which extends beyond initial disasters to assisting the long-term recovery of victims" [The War Cry, 1996, 4]. The Army is in this kind of partnership with both Federal and State governments to the extent that in 1997, it reUed on government funding for nearly 30% of its total income (see Table 5.2 above). A US study, sponsored by the American Sociological Association [Philanthropy Journal, 1998], revealed that church congregations were wary of government funds because of "concerns over possible restrictions of reUgious practices or how their reUef efforts are run". Federal money310 accepted by The Salvation Army in the US was now less than 1% of its annual budget, because of this concern. The Army did not want to separate spiritual and secular work, so that if the government pushed on the church- state separation, it would resist the pressure by returning the money and refusing any more with strings attached [Tisdale, 1994]. In the AustraUa Eastern Territory, many officers expressed simUar misgivings about the Army's reUance on government funds. One of these was Major WiUiam Evans, an experienced officer: I do devotions, and I've been chaplains to places, and I've observed the frustration of social officers in those places more and more. They're corning down on how you use the chapel. You can't have a chapel. And they're dictating more and more and more. And I reaUy beheve that our original mission in the social is being stifled, and if we're not careful, we won't have a voice out there, unless we've very careful. And if we could do without government funding -1 guess we're locked into it. But I see that as a major problem. Other concerns included social justice issues311, and the difficulty of meeting the increasingly stringent reporting requirements associated with government funding. Bert Grosse, an Army employee, observed that "the more government funding is given, the These were federal funds, as distinct from funds from other governments. 311 George Dickson, an Army employee, expressed deep concern at changes to the governments employment service, describing it as part of the "new right philosophy" which had captured both the major political parties. At the same time, he acknowledged the Army's reliance on government funding to operate employment schemes without the profit motive of a commercialfirm, so that they could employ "people who are unemployable elsewhere". Chapter 5 Organizational players Page 207 more accountable they are now holding organizations". At a Divisional Budget Board [27 May 1997], it was noted that because of errors in the vaUdation of expenditure, some government funding had to be returned. WhUe there was interest in the Army's taking an active role in applying for government funding , there was also a beUef that sometimes reUance on government money held the Army back from fulfilling its spiritual goals: ... I have a personal concern about the amount of government funding. I always have. And I guess my concern is that we don't become just another agency for the government. Anybody can do that [Colonel Simon Laughlin]. ... I think we've become so entrenched in government monies, that we've lost some form of control, not just in the welfare scene, but in aU aspects of social work within the Army [Susan Barnes, employee]. ... the difficulty is that when you get government funding, you basicaUy are sUenced on the reUgious side of it [Travis Greig, employee]. It was acknowledged that these perceptions were not always accurate, and that "sometimes we use government criteria as a stick to beat ourselves with, or as a fence we put around ourselves" [Major Sharon Girling]. Some divisions, such as rehabiUtation313, did not rely as heavUy on government funding as areas such as aged care, and consequently it was not as intense an issue. WhUe the government's right to demand accountabiUty was acknowledged, there were some elements of government funding which officers beUeved the Army ought not to become involved in: What's happened is that the government has rightly said that if you're 312 At a Territorial Budget Board meeting [15 August 1997] it was suggested that a business manager, if employed in the Army's counselling service, could bring in more funding, and help to offset the deficit under which the service was currently operating. 313 The Salvation Army's drug and alcohol rehabilitation programme did not rely heavily on government funding because, as one officer expressed it, "we've got opposing views on rehabilitation" [Lieutenant Samuel Cohen]. Chapter 5 Organizational players Page 208 going to use government funding, then your people must be qualified, and they must be up to required standards ... on the main, it doesn't diminish our spiritual work [Major Warren Roberts]. There are some elements of government funding I would refuse to involve myself with, because of the constraints that are placed on us ... so I choose not to chase it, because we can't cohabit [Major Sharon Girling]. I hope that the Army would say, if it ever came to the crunch ... that the Army would say we'U take no funding [Lieutenant Samuel Cohen]. Red Shield Fundraising. The Salvation Army reUes heavUy on the funds it raises through its annual Red Shield Appeal, a style of fundraising adopted by both the Eastern and Southern Territories in the late 1960s. This style of appeal, a national door-to-door coUecting campaign, had been rurining successfuUy for The Salvation Army in Canada, and AustraUan Army officers went to Canada and brought back the scheme, together with the slogan "thank God for the Salvos" [Thompson, 1985, 21]. The original scheme was later supplemented by direct maU appeals, which also originated overseas (in the USA), and which are now common amongst fundraising groups. In 1997, Red Shield fundraising accounted for 14% of the total income of the Australia Eastern Territory (see Table 5.2 above), a reflection of the Army's heavy dependence on the goodwiU of the general pubUc. Over the years, the Red Shield Appeal has increased in sophistication"14, but there has been an acknowledgment that as a fundraising method, pubUc giving is becoming more difficult315. A senior Army officer [Colonel WiUiam Anderson] observed that in his 314 The annual appeal is launched in the territory's capital cities and major centres with a lunch and a high-profile speaker. At the 1997 business launch in Wollongong, for example, Rod McGeoch, from the Olympic Games organizing committee, urged corporate representatives to give, and The Salvation Army's Annual Financial Report [The Salvation Army Consolidated Financial Statements 1996, 1997] was distributed, including its publication "Taking it to the Streets'" [1996]. 315 A Business Sunday programme noted that the Salvos were "at or near the top" of the hierarchy of Chapter 5 Organizational players Page 209 analysis of Red Shield giving over the previous five years316, whUe the gross amount raised had increased, the net amount after inflation had declined. He described the setting of a target (the beginning of the budgetary process) as a "fine line", involving a tension between setting a reachable goal which would encourage volunteers, or setting a goal for the amount that was needed, but might be unachievable. Another officer was convinced "the doUars are out there" [Major Alistair Rowan], and that the Army simply needed to do what was necessary to raise those funds. This involved having professional people in pubUc relations317, who were able to relate to the business and professional world. AU officers interviewed acknowledged the Army's need for the funds suppUed by the Red Shield Appeal. While the appeal was totaUy supported by Army officers318 [Colonel Jerry Deephouse], in terms of the tasks they undertook, it was a duty they had no choice about [Captain Peter King], and it was sometimes felt that it was too much responsibiUty, on top of aU their other duties [Lieutenant Rose DUlon]. Some questioned the relevance of doorknocking319, and others beUeved that it could be done "a lot better" [Major Tom Denton] in terms of the involvement of Salvationists320. charities, with "brand recognition" and major donors, but even they were "doing it tough" [Moore, A., 1998]. 316 Five years prior to 1997, when the officer was interviewed. 317 Fred Tesch, for example, a prominent advertising executive, sat on The Salvation Army Advisory Board, was Chairperson of appeals for advertising agencies, and chaired the media advisory committee for The Salvation Army. He had gathered around himself a group of high-profile people from business and the media. 318 All officers were given responsibility for a specified area. This involved gathering public support, encouraging business and service club involvement, organizing a team of collectors, and co-ordinating the distribution of collection bags and receipt books. The overall target was broken down into regional and area targets. Harry Johnstone, for example, was given a target in 1997 of $338,000 for his area. At the time of his interview, several months after the main Red Shield Appeal, $316,000 had been raised. 3,9 Captain Stephen Dent observed that "every dog and his cat is now doorknocking". Captain Erwin Davis observed that the "Red Shield" style "has had its day now", and that people were sick of it. 320 Some officers described the difficulty in recruiting collectors [Envoy Paul Fontaine; Captain Philip Schmidt; Captain Stephen Dent]. Captain Ryan Lago observed that Salvationists were not as willing to go out and collect, because they did not "own" the appeal. According to him, they saw it as having little relevance to their local church, because they themselves had nothing to do with the social work for which the funds were being raised. Chapter 5 Organizational players Page 210 Funds raised from the Red Shield Appeal were coUected aU year round, but there were two main appeals, the doorknock campaign in May/June each year, and the Christmas appeal in November/December. These were supplemented by four mailings of On The Scene, a glossy, colour newsletter which actively promoted the kinds of work that would attract donations. An officer involved in pubUc relations stressed the professionaUsm he was aiming for: I want to see this Red Shield Appeal being a McDonalds. It's got to be the best. And if you can do things that make it look professional, but not commercial, people wiU respond to it321 [Major Terry Roberts]. Red Shield funds were to be spent solely on the Army's social work322, although it was noted that what was raised today was "always used for tomorrow ... people think what we get for today is for today" [Captain Belinda Lee]. In the Army's pubUcity, it was claimed that 85 cents in every doUar went to the "point of need", the remaining 15 cents representing the cost of conducting the fundraising campaign. Once the funds had been raised, however, there were apportionments made from the Army's social fund towards property and adrninistrative costs [Captain Lee Pierce]. These wiU be discussed in more detaU in the foUowing chapters. Client contributions. Client contributions paid to The Salvation Army for its social work amounted to just under half what was received in the form of government grants in 1997, approximately 15% of total income (see Table 5.1 above). Child care centres, homes for the aged, homeless men's and women's shelters, and counselling services were some of the 321 The issue of On The Scene which focused on the Army's presence at Port Arthur, for example, resulted in donations of $1 million. 322 Several officers comments on the lack of distinction, in the mind of the public, between Red Shield collections, and collections made in the street by Army corps officers. Funds raised through this "street ministry" went to the Army's corps, and therefore do not appear in the Army's consolidated financial statements. The Red Shield Appeal, in contrast, was not asking the public to support the church work, but the social work [Major Hendrik Bowen]. Chapter 5 Organizational players Page 211 services the Army offered for which it made charges to cUents. Changes in government funding , and the development of a business culture324, had put pressure on the Army in recent years to increase fees for services. The tension was always to attract fees325, and yet to maintain a niinistry to cUents who were unable to make a significant financial contribution for the services they received326. Residents' fees were a source of contention in one aged care centre, where residents complained about the high cost of fees. According to Major Maurice Jeffreys, the centre manager, changes to government funding now meant that centres had to aUocate funds towards buUding replacement, with the result that there were fewer funds available to provide services for residents. Given that aged centre budgets had to be approved by residents, this caused some difficulty for Bert Grosse, a social employee. Residents had beUeved the Army would look after them for life, and now found their contributions were providing fewer tangible benefits. The difficulty in some of these centres was in balancing government funding, cUent contributions, and the Army's mandate for social service. The extent to which the Army ought to be run as a business had wide-ranging impUcations for the provision of services327. 323 Changes to child care funding in the future would mean that government relief would be given to parents, who would then pay full fees, instead of the government subsidy going straight to child care centres [Major Hendrik Bowen]. This could substantially change the make-up of Army income. 324 An advisory board member told one senior officer "you are no longer a tinpot show. You are big business" [Colonel Bramwell Richards]. 325 Captain Rosemary Johnson complained that her budgeted estimate of client fees that could realistically be collected in the social centre she managed was always increased at divisional or territorial level. This was unrealistic, since a high client income from homeless people was very difficult to achieve. Consequently, client income was always below budget at her centre. 326 The aim at her homeless shelter, according to Major Louise Elliott, was to keep fees inexpensive. Captain Robert Capps observed that at his centre, fees had not increased for three or four years, but there was a fee structure review under way. Fees at Captain Harry Carruthers' homeless shelter were under what he could have charged, a recognition of the poor state of the buildings. 327 The Uniting Church, according to Bert Grosse, a social employee, was clearing $3 million - $4 million a year out of aged care. Even the Jewish aged care network, which he said needed to provide two kitchens and two laundries for every centre, managed to run at a profit. Chapter 5 Organizational players Page 212 Legacies and donations. From its earUest days, The Salvation Army has advertised itself as "competent to receive bequests of money and property for its general purposes and for the benefit of any branch of its world-wide evangeUstic and social services" [The Salvation Army Year Book 1986, 1986, 21]. Ultimately, the Army would like to increase its legacy income, and in recent years has instituted a poUcy which would see that happening. Legacies and donations are recorded on a cash basis, when received by Territorial Headquarters, and are accounted for in the General Legacy Reserve. At 30 June 1997, the balance in this reserve stood at $24,470,000, with aUocations made from this reserve by Finance CouncU that year of $6,579,000 [The Salvation Army Consolidated Financial Statements 1997, 1998, 7, 8]. These aUocations are a reflection of the Army's need to rely on legacies and donations to support general funds. In this capacity, they have made a "vital contribution to the Army's social and community work" [Gittins, 1996, 4]. WhUe, in theory, they were to be used for capital purposes328 [Colonel BramweU Richards], in practice, the Army in this territory could not survive without dipping into its legacies reserves each year [Captain Bob Greeley]. Consequently, when new legacies were received, they were often already "spoken for" [Colonel Stephen Carpenter]. Bert Grosse, an accounting employee, observed that the operations for the social centres (in 1996) were "eating into" $2 milUon to $3 milhon of legacy funds each year. The Public Relations department had increased its goals for legacies, with the appointment of fuU-time officers devoted to that task [Major Terry Roberts]. Early in 328 At one meeting, when $4 million was required for two building projects, Colonel William Anderson observed "the only place where that kind of money could come from would be legacies". 329 Captain Lee Pierce observed that "when we get to the bottom line, we then have to use the legacy reserve". He felt that people acted as though the General Legacy Reserve was a bottomless bucket, their attitude being "oh, take it out of general legacies". This was far from the truth, however. Chapter 5 Organizational players Page 213 the new legacy campaign, fifty people had made wills in which they were leaving bequests to the Army, with another seventy expressing interest [THQ Budget Board 29 August 1997]. The growth in property owned by the Army330 was attributed almost entirely to such wiUs and bequests, according to Major Warren Roberts. Sales. Sales from donated goods and farm produce made up 11% of total income for the territory in 1997 (see Table 5.2 above). While the Army is weU known as the recipient of donated clothes and furniture, it is probably less weU known that it operates as a business, relying on those funds to support its drug and alcohol rehabiUtation work in particular. Red Shield Industries is a recycling and sales business, whose aim is to generate funds for the Army's drug and alcohol rehabiUtation programme. Income from these sales has risen steadUy over the last three years, as depicted in Figure 5.6 above. A study prepared by a consultant in 1996331 presented an in-depth analysis of the profitabihty of each aspect of the Army's industry arm. One officer estimated that the downsizing which foUowed as a result of implementing the report could save the Army about $1,500,000 in costs. He highUghted the Army's commitment to virtuaUy double its profit-making component in the next three years, adding, "and we're going to do it too" [Major WiUiam Barnes]. The notion of running as a business was acceptable to most officers and employees, an acknowledgement of the hard economic reaUties of fundraising in order for the Army to be able to carry out its mission: ... I see that as more of a business that we have to compete with everybody else, and therefore we have to run it that way. That means hard decisions have to be taken, to ensure that we can compete [Hans As at 28 October 1996, property held had increased by $20 million each year over the previous six years. 331 The Cammerman [1996] Report on Red Shield Industries was commissioned by The Salvation Army, and presented in August 1996. It was a comprehensive study of each aspect of Red Shield Industries, including retail stores, production and transportation. It made extensive recommendations on benchmarking in each of these aspects of the industry. Chapter 5 Organizational players Page 214 Robey, employee]. While the pressure to operate as a successful business was present, the tension of keeping that in balance with the Army's mission was recognized. The Army's US experience had obviously made a big impact on officers working within the rehabiUtationfield, an d the propensity of The Salvation Army in the USA to emphasize money-making at the expense of mission was highlighted. In the Eastern Territory, the emphasis was on a very good programme, which was there to serve the cUents in the form of work therapy, not on using rehabUitees in order to make the business profitable [Lieutenant Samuel Cohen]. Keeping that balance, however, was not easy in practice, especiaUy in situations where Army officers, with their mission-orientation, were not conversant with the principles of running a business: ... for instance, an operational side where a manager is an officer who is administering and running a centre, you might get some problems. In many cases, I think we've got officers probably running various centres, but are not qualified to do so. They haven't had any exposure to business, and accordingly, they do things in an unbusinesslike way [Hans Robey, employee]. Income from its business arm is one way the Army has of potentiaUy releasing itself from the constraints associated with government funding, and its reUance on fundraising from the general pubUc. It is not alone in the nonprofit sector in placing a growing reUance on sales revenue. In the USA the same trend is occurring, within a climate of increasing commerciahsm332 in the nonprofit sector [James, 1998, 271]. 332 "Commercialism" is defined as "the degree of reliance on sales revenues rather than donations or government grants, the production of goods for sale that compete with goods produced by for-profit organizations, collaborations and partnerships with for-profits, and, ultimately, conversion into for- profits" [James, 1998, 271]. Chapter 5 Organizational players Page 215 Interest and dividends. Another way the Army has of generating its own independent income stream is through interest and dividend income. The Territory's Balance Sheet for 1997 [The Salvation Army Consolidated Financial Statements 1997, 1998, 4] listed Short Term Investments333 and Investments334 as $21,434,000 and $84,763,000 respectively. Share Donations AustraUa Inc. have recently instituted a scheme in which The Salvation Army is a partner. Shareholders of smaU parcels of shares are invited to donate the shares to any one of four charities, one of which is The Salvation Army. Appendix 5.2 "Share Donations AustraUa Inc. scheme" includes a description made by The Salvation Army about itself.335. The target is an estimated $20 milUon of dormant, smaU shareholdings which often cannot be sold because they are not marketable parcels [The West Australian Business, 1998; The Australian, 1998]. This increasing sophistication in fundraising methods, and greater reUance on dividend and interest income indicates an intentional slant towards running the Army as a business. A retired high-ranking Army officer described the influence of the Army's Advisory Board: ...(they said) ... you've got $50 milUon invested. Are you investing it wisely? I said, oh, we've got four or five projects on the go. They said that's not the way to do it. If you're going to grow, and use other people's money, invest money, then you've got to get the best possible return. So what we were saying was, we were pushing authority down, we were spreading responsibiUty, we were adopting business methods of the day and age in which we Uve ... [Colonel BramweU Richards]. As Bert Grosse, an Army employee, expressed it, the Army was accountable to both government and the pubUc, and therefore it was essential to run efficiently, and to get the best value out of their avafiable funds. Alice Lamont, another employee, spoke of ,33 These were made up of short term deposits. 334 These consisted of Shares in public companies (at market value): $6,690,000; Unit trusts (at market value): $10,177,000; Managed portfolio (at market value): $67,896,000. 335 The other three charities in the scheme are Australian Cancer Society, Heart Foundation, and Society of St Vincent De Paul [Share Donations Inc., 1998]. Chapter 5 Organizational players Page 216 the breaking down of barriers, on the part of churches, to talking about money: ... not any more, because they do realize one very important fact: there are 1,200 registered in New South Wales alone, and we are aUfighting ... we are not direct competitors in providing community services, but we are actuaUy fighting for a share of the same sUce of... that Uttle bit of disposable income. The article about The Salvation Army's stockmarket investments, already referred to [Hooper, 1998, 76], pointed out that members of the pubUc may not be aware of the extent of the Army's portfoUo. This then raises a dUemma for the Army: to what extent do they pubUcize their financial expertise, as opposed to their caring ministries? WiU the pubUc be as willing to "dig deep" for an Army which has substantial stockmarket holdings? Fundraising issues. Jeavons [1994, 157] acknowledged the difficulty of balancing money, management and mission concerns, with the possibiUty of a charitable organization's mission being subverted by those outside the organization who controUed resources336. He urged that out of these three "m"s, , the right "m" should be putfirst. Th e issue was who should define the mission, those who began the organization, or the consumers [Jeavons, 1994, 114- 116]? This was an issue frequently highUghted within The Salvation Army, where an increasing emphasis on running as a business, in particular, could threaten the Army's mission of caring: ... okay, it's efficiently run, but there is that care, and there is that extra 336 He [Jeavons, 1994, 159 - 179] identified several crucial factors in fundraising for a Christian service organization, including the challenge of balancing theological and historical considerations, and societal expectations. Chapter 5 Organizational players Page 217 dimension. There must always be that extra dimension [Major Wendy Marcy]. A study of giving trends in Australia [Annual Giving Trends in Australia Summary Report, 1998], noted that whUe more AustraUans give to social welfare organizations than to any other type of charity337, donors are aware of charitable marketing methods, and are demanding more accountabiUty of the nonprofit organizations they support338 Nonprofit organizations are having to be increasingly market-oriented, and aware of customers, competitors, and the context in which they are operating [Brennan et al, 1998]. The Salvation Army has worked hard in this area, with its professional approach to pubUc relations and marketing. According to one employee, it ranks at the forefront in aU aspects of fundraising, and is "the envy of pretty weU every other major charity" [Daniel Peters]. Its officers are acutely aware of the necessity of presenting a favourable image before the pubUc, of mamtaining the Army's image as a reputable, responsible, caring organization. Diversity in fundraising is an issue within the Army. Trends in pubUc giving, government funding, and the development of a business culture mean that the Army is constantly looking out for different ways of raising money, including industry and investment income: I think the industry is a very good way of raising funds to do our work, and I think we should probably, maybe, look in other areas to do that as well, because we can't rely on the pubUc forever. You've only got to look at how many doorknocks you've got to do, or how many vans you've got to drive around (a city). We've got to diversify and find other 337 Respect for what a charity does was the highest motivating factor in the welfare sector, with The Salvation Army rankingfirst over the ten years from 1988 to 1998 [Annual Giving Trends in Australia Summary Report, 1998]. 338 Charities have had bad press world-wide, with consequent increases in the financial reporting requirements made of them. In Hong Kong, following a fraudulent charity case, audit reports were proposed for charities that carried out fundraising drives greater than $50,000. In 1993, a record number of United Kingsom charities were involved in fraudulent activities. In New York, the credibility and integrity of charities' financial statements was described as being "under threat" [Miller, 1997,71]. Chapter 5 Organizational players Page 218 ways of raising funds [Lieutenant Samuel Cohen]. The kinds of resources organizations like the Army pursue, and how they pursue them have impUcations that are more than financial: ... the choices made and poUcies implemented may help sharpen and sustain the organizations' missions, or undermine and subvert them. It is thus critical that matters of material resources, like matters of human resources, be considered in broader contexts [Jeavons, 1994, 129]. Directions. This chapter has concentrated on the players who form part of the drama of The Salvation Army AustraUa Eastern Territory There were players from history, who helped to estabUsh the Australian Army's unique culture. There are players from society today, who define what is appropriate and legitimate organizational behaviour, and who, directly or indirectly, provide the funds the Army needs in order to continue its work. And there are players from the Army itself, who are caUed upon to negotiate the often conflicting expressions of their own beUefs, their organization's culture and mission, and society's expectations. There have been very few studies which highUght the dynamics of how individual organizations adopt (or adapt) practices determined by society to be institutionaUy acceptable. This study seeks to address that gap. The next chapter, Chapter 6, wiU explore what those societal expectations are, and the foUowing three chapters, Chapters 7, 8 and 9, wiU present stories of the Army's accounting system and consider the themes highUghted in Chapter 3 • the profile of accounting within the Army (presenting an acceptable image); • the extent to which the accounting function has been professionalized (managing the interaction between expertise and calling); and • the impact of technical accounting requirements in the running of Army business (the interaction of money, mission and management). CHAPTER 6. The audience: image and institutions. CUSINS [in a white fury] Do I understand you to imply that you can buy Barbara? UNDERSHAFT: No, but I can buy the Salvation Army. CUSINS: Quite impossible. UNDERSHAFT. You shah see. AU reUgious organizations exist by selling themselves to the rich. CUSINS: Not the Army. That is the Church of the poor. UNDERSHAFT: AU the more reason for buying it. CUSINS: I don't think you quite know what the Army does for the poor. UNDERSHAFT: Oh yes I do. It draws their teeth: that is enough for me as a man of business. [Shaw, 1945, 90] The societal setting in which an organization exists serves as a backdrop for organizational leaders and foUowers to construct a charismatic relationship with their audience. This results in a "team performance" directed towards third parties who control vital resources [Gardner and AvoUo, 1998, 35 - 36]. WiUiam Booth, while he was controversial in the way he conducted The Salvation Army, contributed greatly towards its worldwide acceptance. The continuation of the popular image he gained for The Salvation Army is vital to its abihty to survive. Chapters 4 and 5 described the spread of the Army world wide, and its entry onto the AustraUan scene. As the Army has established itself in a particular setting, William Booth's foUowers have taken up his cause, influenced not only by his unique leadership style and the organization structure he devised, but by the social systems in which they perform. It could be argued that they have shaped their identity and behaviour in response to their audience, the general pubUc, and to the institutions prevalent in the society in which they perform. This chapter considers the Army's image, societal attitudes which affect the Army's response to its audience, and the institutionalization of certain accounting practices which, it is beheved, wiU impact on accounting practice within the Army. It provides the institutional context in which stories of the Army's accounting system, to be told over the next three chapters, are to be understood. Chapter 6 Society as the audience Page 220 Promoting an image. Profile 1. Ray sits in his car, waiting at the traffic lights. His gaze wanders to the billboard on a bus shelter. Thank God for the Salvos! The picture is of a crying child being comforted by a uniform-clad middle-aged woman, plump and matronly. He feels pleased to think that there is somebody who is looking after disadvantaged people. He wouldn 't have the time or the inclination to do it himself but the Salvos - they care. He's seen their advertisements on television, and he's seen them collecting in the shopping centre. He usually puts a few coins in the box because he knows they go to the slums and rescue drug-addicted homeless young people. He's heard of the way they comfort and care for families subject to domestic abuse. In AustraUa the pubUc recognition and support enjoyed by The Salvation Army for its social work [Watson, 1964, 218] is in direct contrast with the persecution its members endured in the Army's early days in the colony. The Army has reached almost iconic status. Its work with missing persons, suicide support groups, street kids, chUdren, youth crisis and employment training, drug and alcohol rehabiUtation, famines in crisis, disaster reUef and accommodation for the homeless has earned it high praise from governments and the pubUc alike [Crisp, 1989; Pitt, 1996, 2; Thurlow, 1996, 2; The War Cry, 1997b, 7; Kunkler, 1997, 5; Kiely et al, 1994, 5]. It is seen as "Christianity with its sleeves roUed up, constantly at the front line helping the needy" [Thurlow, 1996, 1]. Its officers are respected for the practical and spiritual assistance they offer to people [de Brito, 1996, 116]. To the AustraUan pubUc, The Salvation Army is comprised of an "extraordinary group of dedicated and compassionate people" who have given it "universal acceptance and respect" because it has never dropped its standards or principles [Jeffrey, 1997, 4]. Instantly recognizable because of their distinctive Army uniform, Salvation Army Chapter 6 Society as the audience Page 221 officers are accorded tremendous respect and trust339 [Tisdale, 1994]. WhUe shunning direct poUtical involvement, the Army nevertheless voices a social conscience on occasions. Its poUcy document on unemployment, "A Working Society", expressed concerns with economic poUcy on unemployment, suggesting that "social poUcy has become subservient to economic poUcy rather than economic poUcy being harnessed to fulfil our social objectives" [The War Cry, 1997a, 4]. Itsfrontline work with social problems gives it the credibiUty340 to comment on concerns about "angry cities" [Warneminde, 1990, 42], brothels legislation [Woodland, 1996, 4], aboriginal reconciUation341, drug use342 [Jamal, 1998, 6], and deteriorating government funding for famUy support and long term unemployment [Kiely et al, 1994, 59]. Criticism of the Army is rare, and when it does occur343, the response has usuaUy been to ignore it. Army officers, especially senior officers, are acutely aware of the need to present a good image to the pubUc. One senior officer, Colonel Warren Coates, was aghast at a newspaper report which stated that the "kitty" was drying up for charitable work, including Salvation Army work, and said that he did not beUeve in negative pubUcity, since people wanted to join things that were "happening". Another retired senior officer told of an encounter with a former Governor of New South Wales344, who said that the reason why the people of AustraUa supported the Salvation Army was The uniform of The Salvation Army contributes to its favourable identification by over 90% of the Australian public [McGillion, 1998, 1]. 340 A Salvation Army Advisory Board member described the public's perceptions of The Salvation Army: "they're very quiet, they're trustworthy. They're always there. They're the one organization, more than any other in Australia, that demonstrates what they do, day in, day out, at thefront line" . 341 The Army's position was that as Christians, they could not be indifferent to the needs of others, oppression, or the exploitation of minority groups [Linsell, 1996, 1]. 342 Major Brian Watters, head of The Salvation Army Australia Eastern Territory's Rehabilitation Services Command, criticized the decision by Ansett Airlines to fit its planes with syringe disposal bins, claiming that this action sent out a "tacit message of acceptance of drug use on the aeroplane". He urged a reconsideration of the decision. It was an unusually strong response from the Army. Major Watters is the chairman of the National Council on Drugs, whose purpose was "to provide advice on strategies to combat legal and illegal drug use" [Allard, 1998a, 3]. 343 When The Salvation Army closed down an employment-training scheme for long-term unemployed people, which operated out of "Banjo's Bistro", a coffee shop attached to a local Salvation Army corps, the local press was critical. Government funding cutbacks had necessitated the cutting back of the scheme, but the editor of the local newspaper commented: "I hope it wasn't another one of those Sydney-based decisions" [Cullen, 1997, 6]. 344 Colonel Bramwell Richards related this about Rear Admiral Sir David Martin. Chapter 6 Society as the audience Page 222 because they had never found a "stain" on it. The officer admitted that there were stains, on the inside, as there would be in any organization, but the concern was that they ought not to damage the pubUc image the Army enjoyed. The Secretary for Business Administration, when discussing access for this project, wanted to ensure that no damage would be done to the Army's image, since they were heavUy dependent on the financial contributions and goodwill of the pubUc. There were concerns also that sometimes the media incorrectly reported stories about the Army345, and with the annual Red Shield Appeal for the Southern and Eastern territories setting a goal of $40 milUon, there was a need to guard against anything that might jeopardize that fundraising initiative. Recent negative pubUcity about charities and their involvement in the stockmarket centred around the practice of investing money not immediately needed for long-term capital growth [Hooper, 1998, 76]. WhUe it was claimed that The Salvation Army's Sydney-based AustraUa Eastern Territory had a portfoUo of $6.6 milUon in shares346, it was acknowledged that The Salvation Army was AustraUa's "most favored charity for more than a decade"347. The chief accountant for the Army's southern territory commented that the Army was now "big business", and had to be "prudent as weU as efficient in running the business of the Salvation Army" [Hooper, 1998, 76]. The high regard in which the Army is held in AustraUa has been achieved not only by the genuine work they do in the community, but also by the careful promotion of the One officer, Captain Douglas Neilson, stated that an editorial in a newspaper about redundancies at Banjo's Bistro, an Army employment-training sponsored coffee shop in Wollongong, contained "elements of truth", but did not reflect the true picture of the events. The Army ignored the news report. 346 It was suggested that "some of the Army's community donors and supporters would possibly be surprised to learn that an organisation that frowns on gambling and preaches temperance is playing a more sophisticated game of chance" [Hooper, 1998, 76]. 347 Public sympathy for the Army was demonstrated when afire, th e result of a "grudge" arson attack, destroyed the Army's Wollongong family store [Lawson, 1997, 1, 4]. The response by the public, in making up some of the $lm in damage and lost stock was described as "tremendous", with donations flooding in. [Pitt, 1997, 19]. Chapter 6 Society as the audience Page 223 Army's work through a sophisticated pubUc relations department348. Employing professionals, as weU as Army officers, that department is responsible for the promotion of the Army's image and aU its fundraising. One Army employee [Daniel Peters] described the Army's "tremendous goodwiU and community support", its reputation of being second to none in terms of its charity work, and its consciousness of the need to maintain and develop that image: ... you've got to realize that every senior officer - I'm not saying that about every Salvation Army officer, but certainly anybody who gets to any sort of rank, gets there because they are, in many ways, focused on marketing, on promotion, because reaUy that's the Salvation Army, the fact that they wear their uniform, and we're good at blowing our own trumpet, UteraUy ... there would hardly be an hour of any day, any one day that a Salvation Army officer, a senior Salvation Army officer, is not thinking about how they can promote the Army. They are particularly focused on marketing and pubUc relations. In fact, I have no problems whatsoever in terms of encouraging a focus on PR and promotion within aU ranks of the Salvation Army, and that is gratifying. The Salvation Army receives miUions of doUars each year in free advertising349, as weU as benefiting from the services of weU-known personaUties350 who lend their support to the Army's pubUcity campaigns. While the Army is often approached by other organizations which are interested in joint projects, they are inherently conservative, and cautious about becoming involved in such programmes, their name being, in a sense their most precious commodity. In terms of pubUcity and fundraising, the Army has been described as "very outward thinking in the way that they seek the advice of The Army makes use of professional marketing and advertising techniques. It was recently reported that Advertising Partners, a Sydney advertising agency, would use Waltzing Matilda for the latest Salvation Army campaign, free of charge (since local copyright has lapsed) [Sydney Morning Herald, 1998, 28]. 349 An Advisory Board member estimated that the "free exposure" received by The Salvation Army for their Red Shield Appeal was valued at about $1.6 million. 350 The Salvation Army's booklet "Lift the Spirit was issued as part of its annual accounts in 1998 [The Salvation Army Consolidated Financial Statements 1997, 1998]. It included statements of support from five high-profile Australians: Jillian Broadbent (Executive Vice-President of Bankers Trust Australia), Councillor Kathryn Greiner (Sydney City Council), Cameron O'Reilly (Chief Executive Australian Provincial Press), John B. Fairfax, A.M. (Trustee, Vincent Fairfax Family Trust), and David Lowy (Westfield Group). This was similar to the pattern of previous years, where statements of support were given by other well-known identities. Chapter 6 Society as the audience Page 224 consultants, and the way they take that advice, and the way that they implement it" [Daniel Peters, employee]. WhUe the concern is that the pubUcity is accurate and honest, there is no doubt that some aspects of the Army's work are singled out for particular attention in the pubUc arena. In the past, this has been the social work, which is easy to promote, not only because the Army is doing a considerable amount of work in those areas, but because there is pubUc sympathy for those particular ministries. The On The Scene pubUcation, for example, focuses on issues such as the Army's presence at Port Arthur [On The Scene, 1996c], famUy crises [On The Scene, 1996b], youth unemployment [On The Scene, 1995; On The Scene, 1996d; On The Scene, 1997a], homelessness [On The Scene, 1997b], and suicide [On The Scene, 1996a]. An Advisory Board member [Fred Tesch] described the three "triggers" that make people want to give to any charity as being famines, homelessness and street kids. Salvation Army advertising therefore focuses on those areas, and surveys have revealed a marked improvement as a result of this concentration of advertising focus. WhUe this intentionaUy professional focus has been successful for the Army, it is not the only thing which has contributed to the Army's great acceptance. There was a concern by officers that the work done by the Army ought not to be compromised, or inflated in any pubUcity that went out. "It's nice to be popular, but popularity is not the most important thing. It's whether we're doing the job or whether we're not doing the job, which I see as important" [Major Eric Nelson]. Any hint that the Army might use false information to promote its activities was deplored351, but most unease was expressed over the issue of the image of the Army that was promoted. Many officers described with dissatisfaction the Army's image as 351 Major Tom Denton, a corps officer, spoke with great concern about the time he heard Major Paul Cooper, a Public Relations officer, interviewed on the radio. Major Cooper, according to Major Denton, misrepresented the Army's financial position, in order to stimulate people to give more to the Army's appeal. Chapter 6 Society as the audience Page 225 focusing on its social work, to the detriment of its church work. In spite of the fact that recent advertising campaigns have promoted the Army's role as a church352, the overwhelming pubUc image was that of a charity, an image of which aU Salvation Army officers and employees are acutely aware. Appendix 6.1 "The Salvation Army's image: charity or church?' provides responses from employees and officers to the pubUc's perceptions of what the Army actuaUy is. It would be impossible to separate the image of The Salvation Army from its fundraising initiatives, because the two are inextricably linked. The PubUc Relations Department of The Salvation Army's AustraUa Eastern Territory is its fundraising department, responsible for conducting the massive Red Shield Appeal each year, and. untU recently, responsible for promoting giving by Salvation Army members through its Planned Giving programme. The employment of professionals, trained in pubUc relations and fundraising, has resulted in the Army's carefuUy crafted image, for the purpose of raising funds for its social work. In order for the Army to capitalize on its carefuUy developed image, it needs to respond to the norms of society in an appropriate way. The next section introduces some of these taken-for-granted institutions, all of which have changed in recent years, and aU of which have a profound bearing on the way The Salvation Army operates and is perceived by its societal audience. Societal influences on the audience. Profile 2. Ray, as a middle-aged man, notices with some confusion the huge changes that have happened since he was a boy in the 1950s: many of 352 The phrase "more than a helping hand, a place to worship", devised by the Army's professional publicity team, was designed to highlight the Army's religious work, in addition to its social work. Major Clark Lyons, a social officer, was excited about these advertisements because "we never have been just a social Army. It's been one of our big thrusts, but it's not just that". Chapter 6 Society as the audience Page 226 his friends have experienced family breakdowns, and the local high school is plagued with drug abuse problems. Gambling addictions, unemployment and crime are increasing, according to what he reads in the newspapers and sees on television. His neighbourhood has changed too. His new neighbours are Vietnamese, and the shops at his local shopping centre now have a distinctly multicultural appearance. He finds it hard to keep up with the political scene. Everything seems to be changing so fast. He does feel quite strongly about some matters, though, such as the GSf", and aboriginal reconciliation. New governments, he notices, have come and gone, and along with them, new social policies. Ray used to attend his local church, but now he only goes at Christmas, if he has time. There just seems to be so much to do! Religious observance and religious organizations. The focus and make-up of reUgious observance in AustraUa have changed greatly over the last forty or more years354, and are a reflection of wider changes occurring in the institutions of society: The social, cultural, poUtical and economic landmarks which we have traditionaUy used as reference points for defining the AustraUan way of life have either vanished, been eroded or shifted [Mackay, 1993, 17]. How have the churches coped with these changes in society?355 In the ten years from 1981 to 1991, when the total AustraUan population increased by 15.8% [Australia in Profile, 1993, 1], mainstream Protestant denominations enjoyed modest growth rates, whUe Pentecostal churches and non-Christian reUgions such as Buddhism and Islam 353 Goods and Services Tax, a tax proposed by the Liberal/National parties in their 1998 Federal election campaign. 354 Australia has never been noted as having a "golden age" for religious observance in its white history, but there have been changes in the levels of church attendance. In the 1950s and early 1960s, for example, about 40% - 45% of Australians claimed to attend Christian churches "at least monthly". By the early 1980s, this was reduced to 25%, with about 50% saying they had not attended church for "over a year" [Kaldor and Kaldor, 1988, 14]. 355 The churches were described as being caught "flat-footed" by the changes occurring around them [Kaldor etal, 1992, xiii]. Chapter 6 Society as the audience Page 22 7 experienced much more dramatic growth rates356. While Christianity is still the major reUgious influence in Australia, the multi-cultural composition of AustraUan society has obviously had an impact on reUgious observance, with many mainstream Christian churches failing to keep up with changes in society [Kaldor et al, 1994, xiv]: Some have the feeling that our churches are like ocean liners sailing the high seas. To change course a few degrees requires many kilometres of preparation and slow adjustment. In the swirling currents and weather shifts of a rapidly changing AustraUa that would be an unfortunate description of institutional inflexibihty [Kaldor et al, 1994, 1]. At a deeper level, it could be argued that the inabiUty of the major churches to keep abreast of changes in society is more than a matter of church organization, but that it goes deeper, to the difficulty of churches in legitimating their existence within an increasingly secular society357. AU organizations have difficulty in re-orienting themselves to the changing patterns within society, but churches especiaUy have difficulty in the latter half of the twentieth century in legftimizing themselves at all [Paul, 1973, 209]. Historic forms of institutional reUgion have declined [Habgood, 1983, 18 - 19], and the effect of denominationaMsm has been to render Christianity moraUy ineffective in the West, through "the domination of class and self-preservative church ethics over the ethics of the gospel" [Niebuhr,1970, 21]. Writing twenty-six years ago about the Church of England, Paul [1973, 175] maintained that it was traditional church structures which stood in the way of "the proper deployment of human and material resources". Clinging to the traditional ways, and mamtaining the status quo, he argued, was inappropriate in the Ught of "the rapidity of social change ... and disrespect for institutions (which is) so characteristic of our cities" [Paul, 1973, 167]. Where church structures have taken over from church mission, there has been a According to Appendix 6.2 "Australian Censusfigures fo r religious affiliation 1976 - 1991", The Salvation Army grew 1.1% in the years from 1981 to 1991. 357 A secular society has been defined [Habgood, 1983, 27] as one in which "organized religion is treated as being of only marginal significance, a private pastime for those who like that sort of thing". Chapter 6 Society as the audience Page 228 resulting inabiUty to make a connection with society. Perhaps the scenario Berger painted [1967, 42], of reUgion legitimating social institutions358, has now been reversed, with reUgious organizations looking to society for legitimacy within an increasingly secular world359. Perhaps there are "secularizing tendencies" in the existence of bureaucracy itself, with reUgious bureaucratic structures needing to be broken down in order to serve the ends of local Christian communities, rather than dictating them [Habgood, 1983, 122]. Currently, AustraUan reUgion is in an era of change. Old traditions no longer hold the power that they once held, and denominations which are locked into traditional structures struggle to maintain their place in society360. There is a growing recognition that the expression of their mission needs to keep pace with the changing peoples, cultures and context in which they operate [Kaldor et al 1995a, xvU]. The National Church Life Survey was first conducted in 1991, in over 6,000 participating Christian congregations361, in order to obtain a "major evaluation" of church life in AustraUa [Kaldor et al, 1992, 4]. Designed to help congregations "to reflect on their own life and involvement with the wider community, and on mission directions for this decade and into the next century", data was coUected on various aspects of congregational life and community involvement362. A second survey in 1996 made comparisons possible between the two sets of data363. It was clear from the data Berger [1967, 37, 42] suggested that religion had played a "strategic part" in "the human enterprise of world building, and that it legitimated social institutions by "bestowing upon them an ultimately valid ontological status, that is, by locating them within a sacred and cosmic frame of reference". 359 Durkheirn [as expressed by Habgood, 1983, 19] suggested that the role previously fulfilled by churches, i.e. maintaining "social cohesion", is nowfilled b y other means. 360 It has been suggested that we live in a post denominational age, where denominational loyalty has all but evaporated, an observation underlined by the levels of "denominational switching" [Kaldor et al, 1992,90-91]. 361 The study did not claim to be a study of overall church attendance patterns in Australia, but focused on Anglican/Protestant denominations. The Salvation Army was included. [Kaldor et al, 1992, 5, 11]. 362 Data was gathered on these aspects: the congregation's relationship to the wider community; attender perceptions of their growth in beliefs, understanding and application of their faith; the nature of congregational life; the social context in which a congregation seeks to minister [Kaldor et al, 1992, 5]- 363 Of the eighteen denominations surveyed, numerical growth rates varied between -1.6% to 50.0%, with the The Salvation Army increasing in size, between 1986 to 1991, by 17.2%. These figures seem at odds with the Census figures outlined in Appendix 6.2 "Australian Census figures for religious affiliation 1976- 1991". Chapter 6 Society as the audience Page 229 coUected that the "savage" declines in church attendance in the 1960s and 1970s were not evident in the late 1980s and early 1990s. Congregations which were growing were those which were able to assess and respond to the changing social conditions in which they were located [Kaldor et al, 1997, 33 - 34]. Various aspects of congregational life were identified as being indicators of how weU churches adapted and survived in their environment [Kaldor et aL 1997, 259]. Most churches rely on members for their survival, both existing members and new members. If the flow of new members is absent, then churches wiU find it difficult to provide the resources to do their work. To a certain extent, then, churches need to be aware of and open to their environment if they are to maintain their existence. This necessity could pose a dUemma for churches, as they struggle to gain the approval and legitimacy necessary for survival, whUe not wishing to compromise their beUef systems: ... ideological convulsions in reUgion have their roots in social and inteUectual changes at large, that Christianity has to adapt itself to new and compelling world views ... of which the non-metaphysical world view is, in the west, the most powerful of contemporary attitudes [Paul, 1973, 229]. Social problems and responsibilities. The shifting social environments that Mackay [1993] spoke of have led to huge changes in the areas of demographics, labour markets, the economy, education, health, and famUy life365. A report by The Salvation Army [Kiely et al, 1994] in the International Year of the Family (1994) described the symptoms of "unmanaged, unsupported change": ... famUy violence, famUy breakdown, issues of pubUc safety, inequitable 364 These included size, activities, methods of operation, leadership, resources, and organizational identity. 365 According to an Australian Bureau of Statistics survey in 1992, it was estimated that there were 4.7 million family households in Australia, 3 million with children [Kiely et al, 1994, 8], Chapter 6 Society as the audience Page 230 geographic and socio-economic distribution of long term unemployment, growing homelessness, arise in mental illness, the emergence of a "new poor" and generational poverty [Kiely et al, 1994, 9]. These issues are not unique to Australia366. Speaking of the situation in the USA, Miringoff [1990, 36, 37] described society as being affected by many problems367, all acting on each other to result in a decline in the nation's social health [Miringoff, 1990. 35]. The issue then becomes who is responsible for solving or aUeviating these problems, i.e. who is to provide the programmes (and ultimately the money) needed to address issues such as poverty, drug addiction, domestic violence, and homelessness? Many of the problems highUghted by WiUiam Booth [1890] have since been taken over by governments as their responsibiUty, with increasing reUance being placed on welfare payments, supplemented by the services of community welfare organizations. One researcher [Connors, 1991, 14] urged a complete reappraisal of society's response to pubUc welfare, suggesting that a broader base of stakeholders was required, in order to deal with the "maelstrom" of human need which would inevitably occur. There is no doubt that welfare needs have grown dramaticaUy, just as there is no doubt that there wiU never be enough reUef avaUable to meet those needs [Connors, 1991, 4; Brennan, 1992, 11]. Increasingly, the community sector is having to make do with fewer resources, and to make them stretch over a greater needs base. The supposed neutrality of neo-classical economic decision making regarding welfare was criticized by Guttmann [1994, 10 - 12] as limiting the scope of investigation, and pre-determining what could be said. Macro economics, he maintained, was more than the sum of the "micros", because if it were to be conceived in that way, it ignored the social nature of Connors [1991, 14] observed that in the depression of the early 1990s, many of the social structures that had been in place in the depression of the 1930s were now absent: "the society of extended families, of long-standing neighbourhood ties, of community caring and oversight, has almost vanished. Lost too are the values that melded that society together". 367 Some of the areas Miringoff [1990, 36] referred to were: infant mortality, child abuse, drug abuse, unemployment, homicides, and highway deaths due to alcohol. Connors [1991, 11 - 12] forecast a similarly gloomy picture of the US social scene during a depressed economy: "pervasive unemployment, widespread mortgage foreclosures, perhaps urban violence will loom as the noose tightens". Chapter 6 Society as the audience Page 231 the economy, and became a "consciously nonsocial" analysis. The provision of welfare is therefore a poUtical as weU as a social issue. Increasingly, reUance is being placed on charitable welfare organizations to take over services once provided by government. and to initiate new services. Religious/charitable welfare organizations. An Industry Commission Report [1995, 4] described the nonprofit charitable sector, in its role in deUvering social welfare, as "a crucial partner with business and government, with which it is both complementary and contrasting". Predating government social services, ... it arose from the compassion, goodwiU and foresight of men and women of phUanthropic, humanitarian and reUgious convictions and has continued to serve, expand and diversify since early colonial days [Industry Commission, 1995, xvi]. The report was prepared in order to strengthen the sector's contribution to AustraUan society, and to aid in its effectiveness by strengthening its capacity to provide services for its cUents and to raise its own resources, by establishing and maintaining a professional relationship with governments, and by improving management and service practices by creating opportunities to evaluate itself against its own members, government agencies and for-profit firms [Industry Commission, 1995, xv]. These aims, of quality of service, together with increasing emphasis on fundraising, a "professional" relationship with governments, and greater management and financial accountabiUty, stress what wiU be an increasingly demanding role for charitable organizations. As their profile in the community increases, due to poUtical initiatives and agendas, and their reUance on corporate donors grows, they wiU be expected to achieve higher levels of efficiency and effectiveness, in order to improve performance and to eliminate organizations which do not maintain acceptable levels of stewardship. Chapter 6 Society as the audience Page 232 This is Ulustrated by the EngUsh example, where one of the roles of the Charity Commission is to investigate claims of fraud and mismanagement in charities. Many charity managers displayed a "lack of experience and suitable skills for running a charity" [Francis, 1996, 18 - 19]369, or worse, were guUty of maladministration and malpractice. The workload involved in monitoring the performance and management of organizations which go to the pubUc for funds is huge and growing370. Increasingly, charities wiU be monitored to ensure that they conform to acceptable financial practices. ReUgious/charitable organizations represent a substantial subset of the nonprofit community. If the "reUgious" side of reUgious organizations is facing threats and uncertainty, then the charitable side of such organizations is powering ahead, according to studies of the nonprofit world. Forced to take their place alongside and to compete with secular charities, they have had to embrace modem management techniques371, as business and professional groups, and governments, exercise influence over their practices, and demand certain levels of performance. In spite of this, nevertheless they have their own unique set of parameters, including a primary purpose of achieving "social and spiritual aims"372, a relationship with other nonprofit organizations which is more cooperative than competitive, a greater use of volunteers, and a spiritual dimension which distinguishes them from secular enterprise [La Barbera, 1991, 217]. That they play a major role in society is undisputed373 [Jeavons, 1994, xiU; La Barbera, 1991], and they are particularly vulnerable to the need to promote an image which 368 The Charity Commission in England was formed with two divisions, one to conduct investigations into charity fraud, and the other to support charities. The Charities Act 1993 gave the commission powers to gather information on charities suspected of fraud [Francis, 1996, 19]. 369 Mismanagement and poor financial controls contributed to the need for 609 investigations of charities by the Charity Commission in 1995, 398 of which gave "cause for concern" [Francis, 1996, 18]. 370 Francis [1996, 19] suggested that a clearer financial commitment to the Chanty Commission from the government was required. With 170,000 registered charities and a staff of 45 in the investigation divisions' offices, it was impossible to meet the requirements of the Act. 371 See later sections in this chapter. 372 La Barbera [1991, 217] gives as examples, evangelism, provision of membership services, and economic development. 373 According to La Barbera [1991], in the US, religious groups represent 40% of all nonprofits. In Australia, 36.8% of total giving to nonprofits went to religious organizations [Lyons and Hocking, 1998]. Chapter 6 Society as the audience Page 233 appeals to members or donors . Their chaUenge is to set a balance between efficiency and effectiveness objectives, striving towards achieving their mission by means of operational objectives that are supported by financial procedures, rather than aUowing the financial objectives to drive the organization [Parker, 1998, 50, 52]. A growing body of research in this area has highUghted the unique set of parameters in which these organizations operate [La Barbera, 1991; Jeavons, 1994]. Organizations within this sector in the past certainly have done things differently from those within the for-profit sector, although it could be demonstrated that in many cases, in terms of financial management, the gap is closing rapidly [Parker, 1998, 50]. The increasing sophistication of fundraising strategies, and the increasing pressures and restrictions placed on government funding have huge impUcations for reUgious/charitable organizations in terms of financial reporting and accountabiUty. These organizations are being forcibly shifted from the practices of the pure nonprofit sector into the world of corporate highfinance, and are being required more and more to compete in that arena, and to conform with corporate and government expectations. Whether or not it is appropriate simply to copy strategic management practices from the commercial sector is problematic, and consideration needs to be given to the nature and unique characteristics of these organizations, and the potential stress that the imposition of business practices wiU have. Certainly, they need funds if they are to continue, but increasingly their abihty to generate those funds is tied to their image, not only of caring, but of responsible management. Philanthropists and philanthropy. Funding for reUgious/charitable organizations will come from the government, private donations, and, increasingly, ought to come from the business sector, according to the 374 Parker [1998, 52] identified three categories of nonprofit organizations as "has-been", "celebrity" or "star". This status referred to the organizations' image and consequent attraction of funds from donors. Chapter 6 Society as the audience Page 234 Prime Minister375. He caUed for a greater commitment by corporate AustraUa376 to developing a "philanthropic tradition", as a recognition of its obUgation to contribute to the community [Cleary, 1998b, 1]. Drawing on an economic argument, and the notion of "mutual obUgation", the Prime Minister suggested that because they depend for their success on thriving communities, businesses ought to contribute more than they were currently contributing to charities377. A simUar argument was advanced earUer by Phelps [1975, 3], who attempted to analyze where altruismfitted int o economic theory. He suggested that adherence to altruistic principles by actors in the world of commerce made a "crucial contribution to the national income and thus (led to) economic welfare". Whatever the motivation for giving on the part of donors, the pressure is on welfare organizations to attract business sponsorship and donations37 as part of their fundraising strategy. This has impUcations for their use of professional fundraisers and fundraising techniques, in order to attract corporate sponsorship and donations. Increasingly, there is competition between reUgious/charitable organizations for the right to attract and distribute funds from both government and other donors. Nowhere is this pressure more obvious than in the phUanthropy "industry" in the USA379. Statistics on donations given to nonprofits in 1997 revealed that those 375 John Howard made this clear in a speech to the Australian Council of Social Service on Thursday 5 November 1998 [Cleary, 1998b, 1]. 376 It appears that as governments cut back on spending on social programmes, the burdens being borne by nonprofit charity groups are increasing. They are now seeking corporate donations "to ensure the books remain balanced and the services continue" [Chulov, 1996, 7]. 377 Howard claimed that corporate Australia contributed "less than 5 percent of donations to charities" [Cleary, 1998b, 1]. 378 The responses of three welfare representatives to the Prime Minister's speech on 5 November 1998 illustrated prevailing attitudes. A spokesman for the Royal Blind Society said that "there was a prevailing view among business people that social welfare was the responsibility of the government". The St Vincent de Paul Society in New South Wales reported "a poor interest from business in supporting its work for the needy and destitute". In contrast, the chief executive of the Sydney City Mission spoke of developing successful "partnerships" with business [Cleary, 1998b, 1]. 379 The big growth in philanthropy in the USA took place in the 19th century, because the social structure of that time required a great deal of philanthropic support. Large foundations were founded which established, for example, universities and colleges. Charitable giving by these foundations was run on business lines, with application proposals and assessment boards [History of Charity, 1998]. Chapter 6 Society as the audience Page 235 organizations listed on "The Pliilanthropy 400"380 raised a total of $29.3 biUion381 [Blum et al, 1998]. Many of them budgeted large amounts of spending on developing new fundraising strategies, including expanding the size of their professional fundraising staff, and increasing the number of meetings they held with donors. ReUgious groups TOO enjoyed a modest success , relying more on individual donors than on gifts from foundations, governments, or corporations. The Salvation Army, however, described as a "social services group" , topped the Ust of PhUanthropy 400 organizations, by raising almost $1.2 biUion, more than twice the amount raised by the organization second on the Ust384 [Blum et aL 1998]. The 1997 fundraising success of The Salvation Army was attributed385 partly to the pubUcity given to their charity work, but primarily to their success in meeting the emerging needs of poor Americans [Blum et al, 1998]. Students of phUanthropy in north America speak of a new generation of givers, interested in supporting educational and environmental causes. The attitude of the "Microsoft rnilUonaires"386, for example, is "you have it, you share it" [Sydney Morning Herald, 1997, 4C]. In spite of some high profile corporate donors387, AustraUa undoubtedly lags behind the That trend has continued into the late 20th century in the USA. 380 The Philanthropy 400 is a list of the 400 nonprofit organizations which are on the top of the fundraising list. In order to be included, groups had to raise a minimum of $21.3 million in 1997. In the previous year, the qualifying amount was $18.5 million. Gifts to these charities accounted for one out of every $5 donated to nonprofit organizations in 1997. 381 This would not have included the donation of $80 million made to The Salvation Army's San Diego division by Joan Kroc, heiress to the McDonalds fortune. Mrs. Kroc was reportedly moved to make the gift after touring a "dilapidated" section of the city with its former mayor in late 1997 [Marchetti, 1998]. 382 In the USA in 1997, according to the Philanthropy 400 list, religious charities reported a 6% rise in gifts compared with 1996. 383 Social Services nonprofit organizations experienced a 17% increase in donations between 1996 and 1997 [Blum et al, 1998]. 384 The Salvation Army raised $1,171,801,000 from private support, while YMCA of USA, second on the list, raised $493,874,000 [Blum et al, 1998]. 385 The quotation is from Lieut. Col. Tom Jones, The Salvation Army's "national community relations and development secretary" [Blum et al, 1998]. 386 Peter Dobkin Hall, a researcher in the Program on Non-Profit Organizations at Yale University, was quoted as saying that "the techno-millionaires are reaching a critical mass" [Sydney Morning Herald, 1997, 4C]. Their potential to re-write records for philanthropic giving was beginning to be felt in the nonprofit world of the USA and Canada. 387 Dick Smith, founder of Dick Smith Electronics, believing he has led "a fortunate life", is a well- Chapter 6 Society as the audience Page 236 USA and Canada in corporate sponsorship [Lamont, 1998a, 4] and the sophistication of the phUanthropy "industry". Nevertheless, it appears to be heading in that direction, with "the serious business of fundraising (increasingly) taking place in the glass towers of corporate AustraUa" [Lamont, 1998b, 4]. One fundraiser388 expressed it as an "interchange of management between corporate AustraUa and phUanthropic AustraUa, so that one can see what's happening in the other one's court" [Lamont, 1998b, 4]. It is estimated that of $5 biUion given in AustraUa to charities, $2 biUion is from individuals, and $3 bilhon is from corporations. Examples of innovative corporate giving include the "matching gifts program" at Bankers Trust , and the National AustraUa Bank's initiative390 in lending an executive to The Salvation Army391 [Lamont, 1998b, 4]. A report on Giving Trends392 led to a meeting between the Prime Minister, charities and corporate leaders in 1998, the purpose of which was to examine any tax impediments to phUanthropic giving by corporations and trusts [Lamont, 1998a, 4]. With fundraising now more difficult393, corporations increasingly had to justify the financial return they obtained through making donations to charitable groups [Lamont, 1998a, 4]. The movement, worldwide, seems to be from patronage to partnership, a mutual exchange as corporations share knowledge and skiUs, and charitable organizations share their culture, values and experience [Community Business, 1998, 3]. Attitudes to philanthropy encompass a variety of images, including its spiritual aspects known and generous donor to charities, particularly The Salvation Army [Bowen, 1982, 28]. 388 Major Ray Allen of The Salvation Army Australia Eastern Territory [Lamont, 1998b, 4]. 389 Whatever Bankers Trust staff donate, the BT Foundation will match [Lamont, 1998b, 4]. 390 The Strategic Executive Advice and Learning Programme (SEAL) offers a strategy whose aim is to forge a relationship between business corporations and local communites, by means of "loaning out" executives [Community Business, 1998, 3]. 391 The National Australia Bank (NAB) and The Salvation Army worked together on the Crossroads homeless network programme. The result was that two NAB executives devised a model investment programme which turned a $400,000 bequest into a self-funding pool of $1.2 million [Community Business, 1998, 3, 6; Lamont, 1998b, 4]. 392 This 1998 report was compiled by consultants O'Keefe and Partners [Lamont, 1998a, 4]. 393 A Red Cross representative complained about having to work harder, and spend more, in order to receive the same amount [Lamont, 1998a, 4]. Chapter 6 Society as the audience Page 237 [Bloom, 1995]394, and its creativity as a positive community force [Martin, 1994, 172]. Defined as "voluntary private giving for pubUc purposes", it carries moral dimensions in several areas395, exercising a force as a catalyst for change in society [Martin, 1994, 7, 12]. Philanthropy does have some pitfaUs. WhUe self-sacrifice has been said to promote self- development, it is not a simple straightforward activity, because "in the hands of swindlers they are formulas forfleecing th e guUible" [Martin, 1994, 151]. Some of the dangers of phUanthropy include the freedom to harm third parties, the potential tyranny of gifts396, manipulation of givers397, exploitation of women398, and the distortion of phUanthropic motives399 [Martin, 1994, 95 - 122]. PhUanthropists ought to be viewed as much more than "resources", and phUanthropy ought not to be an impersonal transaction, but rather an "expression of caring" [Martin, 1994, 130]. Reflecting American experience, Peter Dobkin HaU [1990a] highlighted the pitfalls of new business voluntarism400, suggesting that it posed a threat to the integrity of nonprofit enterprise. In nonprofit organizations with boards drawn from the business world, he maintained there were "intrinsic conflicts" between "the goals and managerial 394 Bloom [1995, 172] described healthy money as "flowing money", and recommended the practice of tithing, i.e. regularly giving away some of our income [Bloom, 1995, 173-174]. 395 Four areas identified by Martin [1994, 2] were: (1) social and political, encompassing its overall impact on society; (2) professional ethics, as related to fundraisers and officials in charitable organizations; (3) the ethics of recipients, in forming grant proposals and following donors' intentions; and (4) the ethics of philanthropic giving, i.e. its ideals, virtues and responsibilities. 396 Gifts can exert tyranny through maintaining attitudes of pauperism, damaging self-respect, promoting paternalism, coercing recipients, manipulating people, and harming nonrecipients [Martin, 1994, 99 - 105]. 397 Givers can be manipulated by deception, by coerced giving, by the exercise of duress, violations of privacy, or by means of exploiting lessened autonomy [Martin, 1994, 95 - 122]. 398 Women are likely to be exploited through philanthropy by means of the promotion of sexism, and the maintenance of existing benevolent orders [Martin, 1994, 110-115]. 399 If philanthropic ideals were eroded, or giving was done in a coercive context, the virtues of philanthropy could be distorted [Martin, 1994, 115 -120]. 400 Hall [1990a, 154 - 155] attributed increasing corporate involvement in nonprofit boards in the USA, and to the policies of President Reagan, whose administration promoted business sponsorship in order to compensate for cutbacks in government funding. Chapter 6 Society as the audience Page 238 cultures of nonprofit and business enterprise' , which had been exacerbated by the increasing professionalization of nonprofit management. And yet these tensions and difficulties were rarely seen because of the commitment of organizational players to help the organization to "look good" and to "do their best to assure the world that aU is weU" [HaU, 1990a, 156]. Organizations thatfit withi n the philanthropic tradition, i.e. organizations which rely on donations in order to provide charitable services, are subject to particular expectations from the wider community in which they operate, and sometimes these may be in contradiction with their mission, especiaUy in an age of accountabiUty, with increasing sophistication in phUanthropic practices402. In considering Christian service organizations in the United States, Jeavons [1994, 58] suggested that whUe they were expected to provide a service, they were also expected to maintain and honour the ideals by which they were formed403, and which provided the inspiration for their service. Society's expectations of phUanthropic organizations were high, but were even greater if such an organization had a reUgious base, partly because the outward expression of reUgious values was an "essential facet" of their mission. Christian service groups thus also needed to accommodate and uphold elements of both pragmatism and idealism as organizations thatfitted within , and were viewed as part of, the tradition and practice of phUanthropy [Jeavons, 1994, 58]. So whUe such organizations were expected to provide a service, and to do it as efficiently and effectively as possible, they were also expected to honor, nurture, and promote the specific moral and spiritual 401 His study of the "Widget Museum" illustrated the conflicts of managerial cultures between a nonprofit organization and its business-oriented board chairman [Hall, 1990a, 157 - 161]. 402 A recently released report from the Johns Hopkins University in Baltimore, USA, part of a project to map the scope and nature of the non-profit sector world-wide, identified a special challenge for the developed countries of the West. Greater reliance by non-profit groups in the West on business and government support, it was suggested, exerted pressure for non-profits to become too bureaucratic and commercial, and thus potentially to compromise their missions and lose touch with their constituencies. To counteract this, they needed to encourage private philanthropy [Greene, 1998]. The report is titled "The Emerging Sector Revisited: A Summary". 403 Jeavons [1994, 69] observed that charitable services were originally provided to individuals by "informally structured, religiously oriented, often church-based service groups", but were now in the control of "more formally structured, "scientifically" oriented, professionally controlled charitable agencies", with the essential nature of the service provided being altered. Chapter 6 Society as the audience Page 239 ideals which provided the particular inspiration for their service, and which motivate the pubUc to provide the resources in order for this to happen404. A sacred/secular tension may exist between adopting management and financial techniques from business, and yet mamtaining actions which are appropriate for a caring, reUgious/charitable organization, whose concern is not primarily profit and financial considerations. "Adaptation through assimilation" has been highUghted [Jeavons, 1994, 74 - 77] as an issue of growing significance for Christian service organizations, one which threatens to undermine the distinctive character of their work. Such pressures emanated from at least three sources. First, reUgious/charitable organizations were often operating in areas of service deUvery where secular organizations also provided services, and therefore competed for funding with those organizations. The pressure, because of this, was to operate in a sirrdlar manner to their competitors, and to their flinders. The adoption of modem management practices, therefore, became crucial to an organization's "legitimacy", even though it may be more suited to a secular environment. The second pressure towards adaptation through assimilation, Jeavons [1994, 75] saw as the presence of businesspeople on the boards of reUgious/charitable organizations. Success in business, and the use of profit-oriented management techniques, whUe appropriate in the boardrooms of secular organizations, may not be as suited to the mission and goals of a reUgious organization. The third pressure, more subtle, was the tendency for reUgious notions to become secularized405, with the result that there could be confusion about the role and mission of the organization, and its interpretation and 404 Many religious people involved in charitable work have rejected the techniques of "scientific philanthropy", believing that there was more to Christian charity than simply providing services in an economical way [Hall, 1990b, 52]. 405 Jeavons [1994, 76] gave as an example the word "stewardship", whose meaning, he maintained, had been secularized, and had lost much of its potency. Based on a shallow conception of stewardship as being "efficiency in the use of money", rather than the wise use of all we have in order to 'lurther God's intentions for the creation", choices may be made which were inappropriate for a religious organization, and which, while promoting a less-expensive approach, might deny the very reasons why an organization exists. Chapter 6 Society as the audience Page 240 appUcation to the strategies and actions that were undertaken. Within a reUgious organization, not aU members wiU perceive these issues as pressures which have to be resisted, so the potential exists for tension not only between the organization and the world in which it operates, but also between organizational members. The current economic reaUty is that the increasing involvement of business and business methods in nonprofits represents a "fundamental shift in our institutional arrangements" [Hall, 1990a, 161]. With government spending cutbacks, corporations are being sought as donors of funds and expertise for the benefit of nonprofits, and thus for the aUeviation of social problems. ReUgious and charitable organizations are often the means by which this is accompUshed, but the adoption by these organizations of management andfinancial technique s from the world of business can result in pressure to compromise their mission and reUgious orientation. Governments as providers of funds. The government funding environment has been undergoing considerable change in recent years406 [Lyons, 1997b, 206 - 207]. In the USA, and in Australia, government subsidies have faUen over the past twenty years [James, 1998, 284], and as a result "more pubUc pressure is being placed on nonprofits to increase their activities to offset government cutbacks" [Weisbrod, 1998c, 20]. In Australia the caU for competition for government funding within the charitable organizations sector4 7 indicates a shift in the phUosophy underlying government funding408. The government's commitment to a three 406 Adams [1997, 118] described the new funding environment as being one in which the community sector was "further drawn into a national 'market' of community services", and where funding agreements became "the instruments of the new contract nation". O'Neill's [1997, 121] observation was that government funding in Victoria was also experiencing "prolonged and fundamental change", which was seen as a reflection of public sector reform in that state. The result was that the government was becoming more entrepreneurial and market driven". 407 "Differences that distort competition may lead to an inefficient allocation of resources in the economy. A less efficient organisation may be able to rely on special treatment... to take business away from a more efficient firm. As a result, society's resources are not being put to their best use" [Industry Commission, 1995, Kl]. 408 This has already been referred to in the earlier section on philanthropy. Chapter 6 Society as the audience Page 241 way partnership between business, the community sector, and government409 [Lyons, 1998, 1], refers not just to the source of funds for nonprofit community organizations, or to the need to buUd a more co-operative society410, but is a reflection of the managerial culture which has been estabUshed within the pubUc sector, which wiU be considered hi more detaU later in this chapter. This culture is now being absorbed into organizations which receive government funding411, as a result of the changes in the government's funding practices and the consequent management and reporting expectations placed upon community organizations which receive that funding. Lyons [1997c, 9-11] highUghted several models of government funding, aU of which lead to different attitudes of government towards service providers, and different levels of sophistication in the reporting required of those providers: • The phUanthropist model sees the government as phUanthropicaUy contributing towards organizations which increase the well-being of society. There is Uttle formal reporting required of these organizations. • The submission model involves the government's taking the initiative, and inviting submissions from community organizations for projects. Negotiation and more demanding reporting are features of this model. • Under the planning model, the government plans where services are needed, and organizations are invited to provide those services. The government funds outputs, and funding agreements are increasingly complex. 409 In its 1998 Commonwealth budget, the government provided for $16 million over 4 years to develop a "series of initiatives" to enhance partnership between the business and community sector [Lyons, 1998, 1]. 410 The Prime Minister, Hon. John Howard, claimed in 1997 that joint business and community projects created "social capital", and in so doing, "strengthened society and contributed to a thriving economy" [Lyons, 1998, 1]. 4,1 The experience of nonprofit, charitable organizations in the USA, had been that their relationship with governments changed dramatically from 1980s onwards, when government funding cuts began. As a result of their dependence on externally-generated funds, such organizations needed CEOs which could use a "political frame", and work entrepreneurially, building links and finding resources [Heimovics, 1993, 419]. A study of South Australian government funding practices noted a "quasi- market" approach to welfare, which necessitated a fundamental restructuring and the introduction of market practices into the community sector [Robbins, 1997, 67 - 68]. Chapter 6 Society as the audience Page 242 • The competitive tendering model brings government funding in return for the provision of services onto a commercial contract basis, with Uttle or no community consultation. Reporting requirements increase under this model. • The quasi-voucher model sees the provision of a voucher, redeemable by an approved provider. Funding arrangements now vary, and are often described as contracts. Three important concepts which emerge from this new "contracting culture" are the notion of privatisation (or outsourcing), the practice of competitive tendering , and the existence of a legaUy binding contract, which must be seen in the wider context of trends in the pubUc management of "health and other human services" [MelvUle and Nyland, 1997, 45, 47]413. Such changes in government funding could be attributed to concern about the huge increases in government expenditure going into the financing of community organizations414 [Lyons, 1997c, 11], and also to the effects of pubUc sector reform, where the agenda is increasingly tied to "the quest for economic prosperity" [Lyons, 1997c, 11], and the notion of managerialism, or economic rationalism [Lyons, 1997b, 208]. Government funding is now being linked to outputs415, rather than inputs416, with contracting for government funding leading to a "substantial 412 Contracts denote an intention to use "competitive processes" to allocate funding for either a new service or the renewal of an existing service [Lyons, 1997c, 7]. 413 This article [Melville and Nyland, 1997] explored the concept of contracts, specifically linking them to New South Wales government funding arrangements. It highlighted the confusion, uncertainty, and mixed opinions about whether that state ought to "dive into these waters" [Melville and Nyland, 1997, 47]. 4,4 The emphasis now was on controlling growth in such expenditure by making organizations more accountable, more efficient, and more business like [Lyons, 1997c, 6]. 4,5 Ryan [1997, 23] described the movement of government funding in Queensland from "good causes" to "measurable outputs". Up to the late 1980s, government funding was seen as a contribution to the charitable works of church organizations, rather than an obligation of government. Since the late 1980s the trend had been for new funding standards, with funding allocated on the "strength of applications" for resources [Ryan, 1997, 29]. In New South Wales, the Department of Community Services' arrangements for funding reflected an "increased emphasis on ideologies derived from the doctrines of total quality management", with an emphasis on outputs. Previously, it was argued, funding had been input-based, with a lack of performance measures and monitoring, and little concern for "client outcomes" [Melville and Nyland, 1997, 49]. 416 This was the case in the USA, where the funding of outputs was seen as the best opportunity for the government to achieve big savings, and for business to earn the best return. The result had been that many services, such as unemployment schemes, were now provided by for-profit as well as nonprofit organizations, with funding being provided on the basis of "lasting jobs secured for people on welfare rather than on the number of clients seen, as was the practice in the past [Goldsmith, 1997, 117]. Nonprofit and for-profit organizations operated in competition with each other m such a scenario. Chapter 6 Society as the audience Page 243 transformation of our pubUc institutions" [Meltz, 1997, 181]. Service providers are now obUged to deUver service to the pubUc in a way which is consistent with "administrative norms"417, and to be accountable to the government, by means of constant monitoring of their activities418 [Meltz, 1997, 191]. These new arrangements pose certain chaUenges for nonprofit organizations which are dependent on government funding. 1. The uncertainty surrounding the shift to contracting-out leaves community groups unsure of the nature of their new relations with governments. WhUe they might want to be in partnership with government, the possibihty of a master/servant relationship could be resisted419 with greater emphasis on accountabiUty. The nature of contract agreements is sometimes unsure420. 2. The introduction of competition to a sector which has traditionaUy met needs in areas where markets have faUed, also represents a huge culture shift [Lyons, 1997b, 212], especiaUy when confidentiaUty clauses in contracts prevent organizations from comparing or discussing funding agreements [O'NeUl, 1997, 136]. The move to output-based funding heightens this sense of competition, and puts pressure on organizations to predict future needs [O'NeUl, 1997, 131 - 132]. It also opens up the reaUty of competition not just within the nonprofit sector, but between the nonprofit and profit sectors, with the likelihood that the interests of people for whom services are being provided may not be met in the best way. It has been suggested, for example, that under the New Job Network421, some agencies are disadvantaging Some of these norms are non-discrimination, disability provisions, equal employment opportunities [Meltz, 1997, 190]. 418 This occurred by means of progress reports, audited accounts, and the right of the funding government department to inspect records [Meltz, 1997, 191]. 419 There was concern in Victoria, that the possibility for negotiation between service providers and government departments would disappear, with agencies being dictated to, and a culture of co operation changing into a master/servant relationship [O'Neill, 1997, 133 - 134]. Studies in the USA have not supported this notion, with nonprofit organizations sometimes controlling the government funder, depending on the "self image" of the nonprofit, its religious affiliation, and other contingencies [Lyons, 1997c, 14 - 15]. It could be argued that in certain areas of social need, the government relied on nonprofit providers of care, and would have no desire to take over the provision of those services. 420 O'Neill [1997, 131 - 132], considering new service agreements in Victoria, highlighted the lack of "independent conflict resolution procedures", the absence of written agreements, and the uncertainty of the duration of the agreement. 421 Under the old system, the Commonwealth Employment Service (CES) had the central role as a labour exchange, with no expense for job seekers, regardless of their status. The new system, which operated from May, 1998, saw more than 300 private, community and government firms allocated Chapter 6 Society as the audience Page 244 ineUgible job seekers by hoarding job vacancies and advertising them only when they have been fined [Allard, 1998c, 7]. This poses an ethical dUemma for agencies which undertake such work422. Funding arrangements under the Aged Care Act 1997 have seen the introduction of accommodation bonds [Aged and Community Care, 1998], which are expected to cause hardship for elderly people, and put some nursing homes under additional pressure [Jopson and Brough, 1997, 1]. On a practical level nonprofit organizations are now faced with the necessity of providing increasingly complex documentation of financial and non- financial information, which places substantial burdens on organizations where administrative resources are usuaUy already "stretched" [O'NeUl, 1997, 130; Ryan, 1997, 33]423. Changes to funding arrangements for out of school hours care services Ulustrate this424. Organizations seeking funding for such programmes are now required to develop a Business and Marketing Plan, which must "as a rninimum" address and report on a variety of areas, as shown in Appendix 6.3 "Business and Marketing Plan for the provision of outside school hours care". The complexity of the plan, for organizations which have not traditionaUy operated in a business-oriented manner, will pose a significant chaUenge. 4. The potential loss of autonomy of nonprofit organizations which rely on government funding is a real concern to many organizations, in some cases providing a chaUenge to the fulfilment of their mission. As service agreements change the relationship between governments and nonprofits from "patronage to incorporation" [Ryan, 1997, 33], it is feared that they could result in greater control over both "the strategic direction and internal operations of community organisations without imposing greater demands on the performance of funding agencies"425 [Ryan, 1997, 33]. The provision of nursing home care by nonprofit organizations, for example, now faces uncertainty, with Uttle government support for items of capital Federal Government contracts, where they receive payments only to place unemployed people on benefits in jobs. Agencies therefore compete with each other to find jobs for these people [Allard, 1998d, 39]. For one-third of the clients of the former CES, who are not on social security benefits, there will now be a fee for finding them a job [Cleary, 1997a, 10; Allard, 1998d, 39], as job agencies now operate as entities "seeking profit without recourse to government subsidy" [Allard, 1998b, 4]. 422 One Chief Executive of a community enterprise was quoted as saying of the scheme "We are paid on a dollar outcome and when these dollars are in short supply and you are under pressure financially, your ethics tend to be eroded and the sincere concern that you may have for that person is replaced by this false corporate service ethic" [Allard, 1998c, 7]. 423 This referred to concerns in Victoria. 424 The new Childcare Assistance scheme was to commence operation from January 1998 [Commonwealth Department of Health and Family Services, 1997]. 425 This related to a study of government funding in Queensland. Chapter 6 Society as the audience Page 245 expenditure426, and the necessity of requiring entry contributions427 [Lyons, 1997a]. The pressure for nursing homes would therefore be to take a higher percentage of residents who could afford to make such a contribution. A conflict between professional and bureaucratic models of behaviour428 has been observed wdtbin pubUc hospitals in Australia because of increasing pressures to improve "the efficiency and effectiveness of resource utilization" [Abernethy and Stoelwinder. 1990, 19]. A similar pressure is becoming apparent within the nonprofit sector, where, with the introduction of contracts and output-based funding, there could be a conflict between the accountabiUty due to the government as a hinder and the accountabiUty due to the organization's own objectives and philosophy [Robbins, 1997, 76]. This section has highUghted the societal environment in which The Salvation Army exists, and some possible issues which may have a bearing on the Army's performance in that environment. The next section focuses on accounting, which has a profound impact on aft organizations, and a growing impact on nonprofit organizations. Accounting and society. Profile 3. Ray sometimes wonders what happened to all that extra leisure time he was expecting. He is working longer hours now than he did ten years ago! It doesn 't seem fair, but he consoles himself with the fact that at least he has a job. He spends a lot of time thinking about his job prospects. His position in middle management in the public service is constantly under threat, with all the "restructures" over the last few years. If he's not plagued at work by management pressures, the 426 It was estimated that between 1997 and 2000, nursing homes in Australia would need to spend $1.56 billion 'just to bring the buildings up to date, maintain them and meet new demand" [Brough, 1997b, 10]. This represents a huge challenge when government contributions towards capital works are not forthcoming. 427 Interest on these entry contributions would be put towards nursing home refurbishment [Lyons, 1997a]. 428 Physicians have been increasingly integrated into hospital management, and have thus been forced to become more aware of "the economic consequences of clinical decision making" [Abernethy and Stoelwinder, 1990, 17]. Chapter 6 Society as the audience Page 246 accountants are always there, demanding more and more information, and setting him tasks that are just a bit too difficult. "I may as well be an accountant myself," he thinks, "with all the numbers I have to put together every day ". Accounting as an institutional element. Perceived to be a rational, calculative instrument, accounting represents an institutional pressure whose adoption by every organization is mandatory. Questions about accountabiUty, technological expertise, rational decision making, and scrutiny of performance aU find expression in the craft of accounting. The "buUding blocks" of institutions, which Meyer and Rowan [1977, 345] described as being "Uttered around the societal landscape", surely include accounting. Institutional expectations are "powerful elements in the environment (which) can create demand for expanded accounting", according to Carpenter and Feroz [1992, 622, referring to Meyer, 1986], and accounting could be regarded as a powerful "social and institutional practice" [MiUer, 1994, 1]. Hoskin and Macve [1994, 67] described accounting as "an ancient practice with a distinctive modern power", and suggested that the emergence of accounting in the form in which it is now practised, is not just a practical response to entrepreneurial chaUenges or a means of making rational decisions, but "a powerful new way of'writing the world'" [Hoskin and Macve, 1994, 91]. Given this pervasive occurrence of accounting, organizations which adopt "rational" accounting and management practices are more likely to be rewarded, and since organizations require funds in order to continue, this is the kind of legitimacy they seek Pent, 1991, 707]. Accounting, therefore, becomes another expected practice which must be incorporated into an organization's structure, cultures and routines in order to satisfy its need for institutional legitimacy. It is much more than a "simple technique", but rather a powerful legitimizing tool [Carruthers, 1995]. As a technology, accounting can claim a legitimacy that sets it apart from "poUtical interests and intrigue", since "the elegance of the single figure provides a legitimacy that, at least in certain Western societies, seems difficult to disrupt or disturb" [MiUer, 1994, 2 - 3]. As a rationale, accounting articulates ways of knowing organizations, managing them, and making Chapter 6 Society as the audience Page 247 judgments on their success. Once established, these rationales become truths, and are taken for granted [MiUer, 1994, 3 - 4]. As a way in which the economic domain is constituted and reconstituted, accounting translates abstract economic concepts into tangible forms, and makes economic processes "visible infinancial terms " [Miller, 1994, 4]. By presenting a facade of impartiaUty, accounting can, at the same time, masquerade as a neutral activity: By avoiding discussions of moral and accountabiUty issues, claims about the neutraUty and apoUtical nature of accounting practices and disclosures and the processes by which new practices and disclosures are required can be maintained. Yet, these actors deceive themselves [Young, 1996, 509]. A link between calculative techniques and broader macroeconomic poUcies was highlighted by Tomlinson [1994], in a study on therise i n the concept of productivity as an economic factor in the UK. Accounting has played a major role in the way productivity has been measured. It has been institutionalized into everyday management activity at a micro level, and at a macro level has provided the means by which macroeconomic goals have been measured [Hopwood et al, 1994]. Accounting can be seen as a partner with government in the measurement and counting of values which are subject to macroeconomic poUcy. SimUarly, the idea of efficiency, and the discourse on "national efficiency" in Britain and the USA between 1900 and 1930, according to MiUer and O'Leary [1994], created an environment in which cost accounting developed andflourished. As efficiency was promoted as a component of desirable social order, accounting provided a means by which it could be made visible, not only at an organizational level, but at an individual level [MiUer and OLeary, 1994, 100]. It became more than a technical modification, but a new way of governing people and economic activities, and a central plank in poUtical argument [MUler and O'Leary, 1994, 108]. The partnership between accounting and corporations has provided another arena in which the impact of accounting's calculative techniques have been studied. Armstrong [1994] considered the linkage between accounting and industrial relations in the post Chapter 6 Society as the audience Page 248 World War II period in Britain. Corporate structure and accounting control systems painted a portrait of the "budget-drive, line management-dominated approach to substantive industrial relations" which has emerged in many large British companies, as management accounting has played an "increasing role in linking corporate poUcy and establishment level industrial relations" [Armstrong, 1994, 191]. Bougen [1994] claimed that accounting contributed to the disintegration of industrial relationships in one particular factory through the implementation of a profit sharing scheme. In his historical study of the Renold Company, he observed that accounting, whUe it had the appearance of being an "innocuous" technical activity, had the capacity to integrate the organization at every level. It was capable of being "tacticaUy mobilized" by management to further their own ends, and therefore was impUcated, in a poUtical sense, in the power relationships of the firm. The growing prevalence of accountants and accountings was not, according to Meyer [1986, 345], a "progress in rationaUty", but rather an "expansion of bureaucratic restrictions on life and choice". Accounting technologies and professions, he suggested, had been institutionalized by a process of creating such practices in the first place. making it "easy and necessary for organizations to use them" [Meyer, 1986, 346], and bestowing legitimacy on those organizations which incorporated them into their structures. Weber proposed that "the rationalization of activity in a cultural setting leads to, and is historicaUy affected by, the spread of countings and accountings" which, when incorporated into organizations, lead to "orgies of countings" [Meyer, 1986, 347]. It was on the basis of conformity to established accounting practices, and other institutional expectations, that organizations became "easier to construct and legitimate" [Meyer, 1986, 347]. Accounting and financial abiUty were seen as sources of legitimation to organizations [Fhgstein, 1987, 44]. Accounting, therefore, is not "some technical, context-free phenomenon" [Laughlin, 1995, 82], but rather, could be viewed as a "social symbol", a form of invented language that aids in the spread and enforcement of values, within the organization, and the wider society [Dirsmith, 1986, 358]. But accounting could be argued to offer more Chapter 6 Society as the audience Page 249 than legitimacy. Once it has been introduced, accounting is a remarkable tool, capable ofredefining organizationa l agendas. Accounting can be seen as much as a process of "organisational construction", as of "organisational realisation and enablement" [Hopwood, 1989, 145]. Accounting offers economic explanations of organizations and their activities, and has become "centraUy impUcated in the modern form of organizing" [Hopwood, 1983, 287], determining the way organizations are viewed. Management accounting and control systems have been described as playing a role in the production, regulation, and transformation of the social fabric of organizations429, i.e. not only does accounting possess technical aspects, but it also affects the world we Uve in, in wide ranging ways [Macintosh and Scapens, 1991, 131; Macintosh, 1994; MiUer, 1994]. Accounting's development as "an influential component of modern organizational and social management" has linked it not only tofinancial management , but also to the creation of "a particular conception of organizational reaUty" [BurcheU et al, 1980, 5]. Accounting has enabled money to shape the reaUty of organizations, through the routine, seemingly technical operation of ubiquitous financial information systems, which give accounting a quite unexpected influence. Morgan [1986, 132] observed that accountants ... can shape the reaUty of an organization by persuading others that the interpretive lens provided by the doUar should be given priority in determining the way that organization is to be run. Thus, by appearing to be a rational, objective system, "the force and tenacity accounting can bring to bear in technicaUy masking and mystifying the existing power network go unsuspected" [Covaleski and Dirsmith, 1986, 197]. Budgeting systems, for example, are an integral part of the poUtics and power of organizational life. Because of their power to grant legitimacy, and their supposedly rational, objective status, the impUcation must 429 As part of the "rational" management structure, accounting played a major role, Dent [1991] claimed, in the transformation of Euro Rail from a railway-oriented, financially dependent organization to a business-oriented, enterprising organization. Chapter 6 Society as the audience Page 250 be "that any faUure to conform to this ideal (the budgeting system) is the failure of a subunit or an individual" [Covaleski and Dirsmith, 1986, 196]. SimUarly, in a study of the budgeting process employed by the University of Wisconsin, Covaleski and Dirsmith found that behind the external manifestation of the budgeting process was a coercive, poUtical undercurrent: Power relationships and the reproduction of the control structure are to be found in the uneventful routines of organizational life, such as budgeting and other symboUc displays [Covaleski and Dirsmrth, 1988a, 585]. Institutional theory thus makes a contribution to understanding the symboUc role of accounting information in the budgeting process, whereby the interests of various actors can be expressed and enforced [Covaleski and Dirsmith, 1995, 148]. Behind the language of objectivity and neutrahty, accounting language, in particular budgeting discourse, "is ultimately directed toward establishing and mamtaining hierarchies of authority and status" [Covaleski and Dirsmith, 1988a, 585]. Because a budgeting routine can seem like such an uneventful aspect of ordinary, everyday organizational life, it estabUshes an apparently "technical zone of control and calculation rather than a zone of poUtical conflict among interests", thus masking and mystifying the poUtical forces which underUe it [Covaleski and Dirsmith, 1988a, 586]. One example of the pervasive influence of accounting in society has been presented by Power [1994], who proposed that the notion of audit had become so institutionalized within the social world, that it has gained the status of a "cultural logic", deeply embedded in what has become an "audit society" [Power, 1994, 299]. This had happened because of a demand for assurance regarding accountabiUty, which had been met by a reUance on expert auditing. A further dimension of this notion is that the financial accountabiUty model, as demonstrated through the appUcation of accounting measures, and particularly now in the pubUc sector, has "refrained" pubUc accountabiUty in terms of goal setting, efficiency and effectiveness, and financial performance and competition [Power, 1994, 302]. Further, auditing has become a Chapter 6 Society as the audience Page 251 pubUc rhetoric, to the extent that it has become a symboUc activity. Not only a technical activity, it has been invested with other institutionalized values to the extent that the very fact that an audit is done is more important than the manner and expertise with which it is done [Power, 1994, 304]. Hopper et al [1987], drawing upon labour process theory, pointed out the ideological nature of accounting and the role that accounting measures and controls, which have been increasingly institutionalized, played in governmental organizations in the U.K.: Whilst not denying possible benefits in terms of information and the elimination of waste, their concomitant emphasis on a business culture and style of management, rather than upon pluraUstic accommodation, and their emphasis on efficiency and economy rather than effectiveness, have ramifications for the nature of governmental institutions and the distribution of income [Hopper et al, 1987, 449]. Thus, once institutionalized, accounting has the power to change the way of looking at organizations and society, the kinds of issues that need to be considered, and the means of tackling organizational issues. It has the power to set the agenda: ... accounting systems set forth values and ideals about what ought to count, what ought to happen, what is deemed fair, and what is thought to be important. They institutionalize the reciprocal obUgations andrights of managers throughout the organization [Macintosh, 1994, 174]. Fogarty [1996, 243] suggested that institutional theory was highly appUcable to accounting issues, chaUenging the "more conventional interpretations" of accounting offered by the profession, and separating "functional rationality and political reaUty for social actors". A study of peer review procedures is an illustration of this separation, since the symbols of peer review create a "logic of confidence" which maintains and restores the image of accounting professionals as consistent performers [Fogarty, 1996]. There is a need to understand, question and expose the role of accounting, and this Chapter 6 Society as the audience Page 252 could take only place if it werefirst recognize d that it had been institutionalized and therefore poUticized, according to Covaleski and Dirsmith [1995, 170]: It remains for us to recognize that whUe accounting is compUcit in the constitution of a social and political reaUty, and that accounting as a symbol is itself a sociaUy and politically constructed and influenced process, they are in the end social constructions which human beings need not take for granted, but rather, in interpreting their existence, may rule. Accounting in the public sector. Cooper [1997, 30], in considering pubUc sector reform over the last ten to twenty years, suggested that "the ideology of capitaUst neo-classical economics works through accounting and prevents other ideologies from being expressed". Accounting, and the major accountancy firms, according to this perception, have helped to develop "the climate of commercialization" within pubUc sector culture, i.e. have aided in the changing of the agenda of government. MiUer [1994, 24] made a simUar observation about changes in UK's pubUc sector. Certainly, accounting seems to have become a preeminent tool of governments in pushing economic reforms in recent years. Over the last two decades430, foUowing several reviews431 of the pubUc service in AustraUa, significant reforms432 have been implemented [FunneU and Cooper, 1998, 80; Everingham, 1998, 33; Adams, 1997, 99; Guthrie and English, 1997], which have placed Australia at the forefront of a world-wide trend towards managerialism in pubUc 430 Thefirst Thatche r government in the UK (1979 - 1983) introduced the idea of improved financial management in the public sector, and this had reverbations throughout the Western world [Guthrie and Humphrey, 1996,288]. 431 These reviews were undertaken because of a concern with the level of government expenditure, a perception that public and parliamentary accountability had diminished, and a belief that public service practices were "inefficient and ineffective" [Everingham, 1998, 33]. In Australia, the first Hawke Labor government (1983) launched several public sector administrative reforms, beginning in the 1980s with a desire to restrain public expenditure, and leading to the notion of managerialism by the early 1990s [Guthrie and Humphrey, 1996, 290]. 432 The purpose of these reforms has been to increase the performance of government [Everingham, 1998,33]. Chapter 6 Society as the audience Page 253 sector management [Hopwood, 1990b; Van Peursem and Pratt, 1998; Hopwood, 1990c; Budaus and Buchholtz, 1996; Guthrie, 1998; Guthrie and Humphrey, 1996]. These changes have been described as "revolutionary" [FunneU and Cooper, 1998, 80] and "far reaching" [Guthrie and EngUsh, 1997, 154], and their effect has been fundamentaUy to redefine both the nature of pubUc service "business", and the way that "business" is carried out [Adams, 1997, 99]. Based on an economic rationaUst approach433, these reforms434 have resulted in a cultural shift towards performance435 and outcomes436 [Adams, 1997,99], or "results- oriented management" [Shand, 1990a, 80]. The new plulosophy of manageriaUsm embraces the characteristics of clear consistent objectives, greater managerial autonomy, performance evaluation, rewards and sanctions for senior pubUc service managers and "competitive neutrahty" for commercial authorities [Guthrie and EngUsh, 1997, 155]. As these reforms have been adopted, there has been a significant re-construction of the notion of accountabiUty, which is now more performance related. It now means more than a simple concern with regularity and legaUty in government processes (fiduciary accountabiUty), but has become increasingly linked with the concepts adopted by the 433 This involves resource allocation decisions being made on the basis offinancial cost s and benefits [Funnell and Cooper, 1998, 80]. Its proponents would argue that the public sector needs to be financially sound and efficient if social policies are to be carried out without waste, while its critics would argue that an overreliance on economic criteria "has been at the expense of the social cohesion and the wellbeing of the broad community as citizens rather than customers" [Funnell and Cooper, 1998, 80]. 434 The Financial Management Improvement Program (FMIP) has been the "umbrella mechanism" by which managerial reforms have been implemented [Guthrie and English, 1997, 154]. 435 The introduction of performance bonuses for heads of government departments (Federal) was heralded by the recommendation of the Remuneration Tribunal (the body which sets the salary rates for senior public service office holders) that an extra 15% of their salaries be provided as a performance bonus. The announcement received a mixed response. It was suggested that determining whether such a bonus had been earned was not as simple a matter within the public service as it was in the private sector, from where the practice had been copied. On the other hand, a former head of the Premier's Department in Victoria had introduced such a system in that state from the early 1990s, and claimed that it was possible to determine what performance was expected to be achieved [Seccombe, 1999, 10]. 436 Adams [1997,99] suggested that the new focus of public service management was to seek out opportunities for "corporatisation, commercialisation and privatisation of government business". Chapter 6 Society as the audience Page 254 new pubUc sector managerialism, such as economy, efficiency and effectiveness43 [FunneU and Cooper, 1998, 33]. There is pubUc interest not only in the legality of the way government funds are spent, but in the issue of whether those funds are spent in a manner which reflects value for the money expended. Accounting has played a central role in the implementation of new financial management practices in the pubUc sector, both in AustraUa and world-wide . As this process has occurred, the emphasis on accounting, and the type of accounting employed, has changed significantly. The desire to make pubUc sector organizations more efficient, to save pubUc funds, and yet stiU to provide quaUty services, has resulted in the pubUc sector's now using accounting measures previously associated with the corporate sector [Van Peursem and Pratt, 1998, 123]. With the shift in focus from cash budgets, compliance and expenditure control to accrual accounting, performance indicators, and performance auditing, pubUc service providers have been increasingly exposed to accounting technologies [Guthrie and Humphrey, 1996, 294], and accounting professionals have become indispensible members of "corporate management" teams in pubUc sector organizations [Shand, 1990a, 89]. As a result of the Federal Financial Management Improvement Program (FMIP), accounting "reforms" have becomefirmly entrenched within pubUc sector organizations in AustraUa439. They include changes to cash management systems, financial management information systems, greater reUance on professional accounting concepts 437 Funnell and Cooper [1998, 33] described three levels of performance accountability, beginning with economy (control of the level of inputs), and increasing to efficiency (the relationship between inputs and outputs), and effectiveness, which links puts to "the achievement of policy outcomes", the highest level of performance accountability. 438 The Griffiths report into the National Health Service (NHS) in the UK recommended putting mto place more evaluation of performance, including the use of accounting controls, through management budgets. In this way, accounting would take on a higher role in the management of the service [Bourn and Ezzamel, 1986, 215]. Broadbent [1992, 343] described accounting as having a central role m the management changes which followed. 439 With the new emphasis on management reform, including commercialization and contracting, new "information sets" were needed if managers were to implement these reforms. Now, for thefirst tune , "full costs" and liabilities of public sector agencies needed to be idenUfied and controlled IGutnne, 1998,7]. Chapter 6 Society as the audience Page 255 and standards, greater emphasis on external financial statements, more commerciaUy minded asset management, the use of accrual accounting for internal budgets and external financial reporting purposes, the development of charging systems for pubUc services, performance measurement, changes to budgetary process and reforms to internal and external audit functions [Guthrie and Humphrey, 1996, 285]. One of the central tenets underlying the implementation of these functions has been the notion of providing managers with opportunities for decision making, by devolving decision-making authority from central departments, and down through aU levels of the organization [FunneU and Cooper, 1998, 107; Shand, 1990a, 82]. The opportunites for the use of management accounting in the "new" pubUc sector, in order to achieve "weU- managed, results-oriented" organizations has been greatly increased. It is now desirable to hold managers accountable not only for the costs of their programmes, but also for the outputs they produce [Shand, 1990a, 81 - 82]. Global budget aUocations have enhanced this responsibiUty and flexibUity, by aUocating a single amount instead of aUocations for specific items [FunneU and Cooper, 1998, 107]. Another area in which management accounting's profile has increased is in the constant monitoring, by managers, of actual costs with budgeted costs, and outputs with targets440 [Shand, 1990a, 82]. Accrual accounting was introduced into the pubUc sector because of a growing awareness of the "lack of usefulness" of cash-based systems for decision making by both the government and the general pubUc [FunneU and Cooper, 1998, 131], and a desire to make governments more accountable, and their finances more transparent [Slamet, 1998, 60]. And yet its merits are by no means agreed upon. Claiming that accrual accounting reforms in AustraUa had been accorded privUeged status441, Guthrie 440 This involves establishing realistic output/outcome measures, which Shand [1990a, 82] acknowledged was a "difficult area". 441 There was a relative lack of assessment of the impact of changes brought about by the introduction of accrual accounting, and yet it had been presented as a "good thing", since it focused on "efficient and effective outputs and outcomes". It did not, however, acknowledge the reality that "accounttng statements are themselves focused on inputs" [Guthrie, 1998, 15]. It seemed to be a "paradox' that Chapter 6 Society as the audience Page 256 [1998, 13 - 14] asserted that the adoption of accrual accounting for the pubUc sector contained several unresolved difficulties or unexplored impUcations for pubUc sector management. These included the unsuitabiUty of accrual financial reporting for pubUc sector settings, confusion among managers about differences between cash based and accrual based accounting information, uncertain benefits of accrual financial reporting and ambiguous differences between government cash appropriations and accrual budget figures. The apparent rationaUty of accounting442 and notions offinancial management have had the effect of legitimating the pubUc sector reforms which have been adopted in recent years in Australia . Not only have accounting practices previously appUed in the private sector been adopted and accepted as legitimate and useful in the pubUc sector, but their adoption has raised the profile of accounting, and encouraged the recruitment of more managers to handle the "ever burgeoning accounting and performance evaluation tasks" [Guthrie and Humphrey, 1996, 295, 297]. Because of their reUance on funding provided by governments, reUgious/charitable organizations, such as The financial management practices had been applied to the public sector (in the UK and Australia), since the limited number of studies of such reforms did not reveal "a very positive story" [Guthrie and Humphrey, 1996, 295]. Problems were assumed to be "teething" problems, and there was a limited evaluation process, with the underlying presumption that there were no alternatives to "financial management". The result was that the implementation of such systems became an end in themselves [Guthrie and Humphrey, 1996, 95]. 442 Accounting-based reforms were not just "neutral" activities, but a means by which the "old" public sector culture had been replaced with a culture of managerialism and market-based philosophies. The "buzz-words" now were "efficient", "effective", "accountable" public services [Guthrie and Humphrey, 1996, 284]. Funnell and Cooper [1998, 84 - 45] contrasted the philosophy of individualism and self- interest which was the basis of managerialism, and the notion of citizenship rights and collective sanction which were the basis of social equity and social justice. The new managerialism of the public sector, with its image of "good management", effectively shielded investigation of the underlying philosophies on which it was based. Tomlinson [1994] highlighted the UK government's attempt to exert pressure for changes in scientific management techniques aimed to increase productivity. The greater the acceptance and legitimacy of those techniques, the less likely it was that the underlying rationales and policies would be questioned. 443 Official literature promoted these reforms, but there had been very little investigation about how they had been applied and their implications, in terms of problems and issues, according to Guthrie and Humphrey [1996, 286]. So far, reforms had not extended to all the dominant nations in the world (e.g. Japan and Germany had not embraced them), but "the implementation of Financial Management reforms in countries governed by parties from different ends of the political spectrum and with differing perspectives on the role and functioning of the welfare state could suggest a considerable narrowing in appropriate governance structures" [Guthrie and Humphrey, 1996, 286]. Chapter 6 Society as the audience Page 257 Salvation Army, are profoundly affected by this new managerialism in the pubUc sector , particularly by the adoption of accrual accounting, as those practices become institutional expectations which they must fulfil. The accounting profession. With the accounting reforms in the pubUc sector in recent years, there has been an increasing emphasis on the need for accounting skiUs, not just in a technical sense, but as a highly professionalized activity which is increasingly interwoven throughout society. The accounting profession and the major accountancy firms have helped to develop the "climate of commercialization" within the pubUc sector [Cooper, 1997, 30], with a growing emphasis on professional accounting standards445. These standards affect nonprofit organizations in at least three ways, both directly and indirectly. First, employees of nonprofit organizations who are members of either The AustraUan Society of Accountants or The Institute of Chartered Accountants in AustraUa have a responsibiUty to comply with accounting standards and the performance codes of their professional bodies [ASCPA Members' Handbook, 1998, CPC]. This means working to the highest standard of professionalism, attaining the highest levels of performance, and generally, meeting the requirement of serving the 444 The Keys Young [1995] report, for example, illustrates this. It was an evaluation of the Inner City Hostels Redevelopment Program (ICHRP), a 5 year programme which was conducted from 1990 - 1995 in Sydney. It represented a partnership between 4 State (New South Wales) government departments and 4 large voluntary agencies (The Salvation Army, Sydney City Mission, St Vincent de Paul, and Wesley Mission), and was described as "one of the most ambitious projects yet undertaken in Australia to address the problem of homelessness" [Keys Young, 1995,1]. A recommendation was that "agencies should give much higher priority to data collection and analysis which they should incorporate into service planning, management and evaluation" [Keys Young, 1995, vi]. Since 1993, each agency in the project had supplied to the Department of Community Services an annual service report, including an agency annual report; a service report on the redevelopment project for 12 months; a service plan for next 12 months; and audited financial statements. Previously, few accountability mechanisms had been in place, but now the emphasis was on increasing agency accountability. [Keys Young, 1995, 28]. 445 The Australian Accounting Research Foundation prepares Statements of Accounting Concepts, Australian Accounting Standards, Accounting Guidance Releases, and other mandatory professional reporting requirements. Chapter 6 Society as the audience Page 258 pubUc interest [ASCPA Members' Handbook, 1998, CPC]. As a result of these requirements, both the external reports and the management accounting of nonprofit organizations which employ professional accountants are subject to professional standards. The increasing prevalence of accountants within the pubUc sector, and the increasing need for accounting work in the nonprofit sector have already been referred to. By means of these influences, it could be expected that professional accounting practices wiU be adopted increasingly by nonprofit organizations. Secondly, some aspects of the standards and statements of accounting concepts apply directly to nonprofit organizations (referred to as "not-for profit entities" in the standards). Appendix 6.4 "Characteristics of not-for-profit entities" contains a definition and description of nonprofit entities, as distinct from for-profit entities. The differences Ue in nonprofits' objectives, their lack of concern with the generation of profit, and the nature of their funding arrangements, which show a dependence on grants or donations for their long-term survival. Statements of Accounting Concepts (SACs), whUe not mandatory themselves, form part of the conceptual framework for the "development and amendment to Accounting Standards" [ASCPA Members' Handbook, 1998, APS1]446. SAC1 Definition of the Reporting Entity specificaUy tackles the issue of the type of reporting entity to which it refers. It transcends the type of organization, applying equally to the pubhc or private sectors, and to business or non-business, profit or not-for-profit entities. The concept is 446 Paragraph 21 of APS 1 ("Conformity with Accounting Standards and UIG Consensus Views") points out that Statements of Accounting Concepts have been approved by the Australian Accounting Standards Board and the Public Sector Accounting Standards Board to establish the conceptual framework for the development and amendment to Accounting Standards. Although by themselves Statements of Accounting Concepts are not mandatory in the preparation, presentation or audit of a general purpose financial report, they are one of the sources of guidance to which members should make reference if there is no Accounting Standard or UIG Consensus View dealing with an accounting treatment or disclosure issue. Chapter 6 Society as the audience Page 259 tied in to the objective of general purpose financial reporting, and requires aU entities "with users dependent on general purpose financial reports" to prepare such reports [SAC1, 1998, 13]. SAC2, Objective of General Purpose Financial Reporting, states that "general purpose financial reports shall provide information useful to users for making and evaluating decisions about the aUocation of scarce resources" [SAC2, 1998, 43]. It makes frequent reference to reUgious/charitable organizations, specificaUy referring to its appUcabUity to "churches, foundations, professional associations and charities" [SAC2, 1998, 9]. Because of the economic benefits of the "efficient and effective" use of scarce resources, and the reUance by reUgious/charitable organizations on donors for resources [SAC2, 1998, 12], it is desirable that managements and governing bodies are held accountable, by means of general purposefinancial reporting [SAC2, 1998, 14]. Such reports should also reveal to providers of resources whether the entity concerned is achieving "the objectives which formed the reason for the provision of resources in the past and is operating economicaUy and efficiently and using resources as prescribed" [SAC2, 1998, 21]. SimUarly, the recipients of goods and services provided by the entity need to be able to assess whether its objectives are being achieved [SAC2, 1998, 22]. SAC3 QuaUtative Characteristic of Financial Information [1998, 48 - 49] requires that "general purposefinancial reports shaU include aUfinancial information which satisfies the concepts of relevance and reUabUity, and which passes the materiaUty test", and shall be presented "on a timely basis and in a manner which satisfies the concepts of comparabiUty and understandability." It appUes to aU reporting entities [SAC3, 1998, 2], but makes no specific provisions for nonprofit or reUgious/charitable organizations. SAC4 Definition and Recognition of the Elements of Financial Statements [1998] makes specific reference to nonprofit entities. It identifies the criteria for recognition of the elements offinancial statements as appUcable, even though nonprofit entites "do not Chapter 6 Society as the audience Page 260 pursue profit objectives" (paragraph 20), do not charge fuUy for the goods and services they provide (paragraph 21), and do not have defined ownership interests447 (paragraph 84). Nevertheless, the fiduciary responsibiUties of nonprofit entities mean that they ought to be using contributed assets "efficiently and effectively in pursuing the objectives of the entity" (paragraph 106), they have a resrx>nsiDility to report on their performance (paragraph 110) and, therefore, can readUy apply the "matching technique" to revenues and expenses, even though there may be some specific adjustments required (paragraph 138). Thirdly, some of the changes to pubUc sector accounting required by accounting standards have been demonstrated tofilter through to nonprofit organizations which are dependent on government funding, in terms of financial reporting required in order to achieve and maintain funding, and the adoption of accrual accounting. The PubUc Sector Accounting Standards Board (PSASB) was established in 1983 by the AustraUan professional bodies because of concerns about the "quaUty and relevance of information in pubUshed governmentfinancial statement s [Shand, 1990b, 139]. At the time, the private sector model was not necessarily thought to be the answer, as it had its own deficiencies [Shand, 1990b, 140], but since then, the Conceptual Framework project has led to the promotion of accrual General Purpose Financial Statements (GPFS) for "local government, departments and reports at the whole of government level" [Guthrie, 1998, 7]. The result of this project is the requirement that, for reporting periods on or after 30 June 1999, fuU accrual accounting448 is to be adopted by governments449 in order to provide users with "a comprehensive summary of their financial performance, financial 447 In the absence of "defined financial interests of an ownership group", it is "the community ... which holds the ultimate ownership rights" of both profit-seeking and nor-for-profit entities (paragraph 84). 448 This means that "assets, liabilities, revenues and expenses arising from transactions or other events must be recognised in thefinancial statement s when they have an economic impact on the government, regardless of when the associated cash flows occur" [AAS 31, 1998]. 449 It applies to the Commonwealth government, state governments, the Australian Capital Territory (ACT) and Northern Territory (NT). Chapter 6 Society as the audience Page 261 position, andfinancing and investing activities [AAS 31, 1998, 3.2.1]. Walker [1990b, 256 - 257] identified several possible motivations for the development of accounting rules for the pubUc sector. Thefirst was an apparent desire to improve pubUc sector accounting by applying technologies from the private sector (such as accrual accounting), the second was that the profession was involved in standard setting as a means of rriamtaining and enhancing its prestige and influence, and the third was that the spread of private sector accounting techniques to the pubUc sector could expand the market for accounting services to government450. One example of the profession's encouragement of the adoption of private sector accounting technologies by the pubUc sector was the presentation of Victorian PubUc Sector Accounting Award by the ASCPA to Parks Victoria [Slamet, 1998, 60], referred to earUer. Some of the difficulties of applying accrual accounting and other private sector-related accounting techniques to the pubUc sector have already been identified. AAS 1 to AAS 18 have been endorsed for "pubUc sector business undertakings", even though they were prepared primarily to meet the needs of the users of financial statements of private sector reporting entities. AU Statements since AAS 18 have been developed "jointly" by both the Accounting Standards Board (AcSB) and the PSASB, and identify the pubUc and private sector reporting entities to which they apply [AAS Introductory Statement, 1998]. The development of a culture of managerialism in the pubUc sector over the last ten years has already been highUghted. This development has enjoyed the approval of, and some would say, has happened at the instigation of, professional accounting bodies. Because of the influence of pubUc sector practices on nonprofit organizations reliant on 450 Hopwood [1990b, 404] described the speed of implementation of "new accountings" into organizations of "amazing diversity" in the public sector as incredible: "Although a consulting boom has been based on such speedy transformations, a phenomenon that might itself further change the nature of the accountancy profession, the speed of implementation contrasts sharply with the slow and often agonising process of change confronting those who have sought to instil a conception of economic reasoning into the detailed management functioning of very similar organisations". Chapter 6 Society as the audience Page 262 government funding, and the pervasive influence of the accounting profession, it could be argued that there have been increasing institutional demands for the introduction of business practices, including accrual accounting, into nonprofit organizations. The issue of whether such practices are appropriate in nonprofit organizations, whose objectives and agendas are so different from those of for-profit organizations, is one which begs to be addressed. The next section wUl highhght some of the issues involved. Nonprofit organizations and accounting. Profile 4. As a government employee, Ray has found recent restructuring and cutbacks difficult to cope with, but he has to admit it is only fair that the government ought to be more accountable to taxpayers. Years ago, he thought he had a job for life, and a good one at that. Now, nothing is certain. But if that's what it takes - after all, the government are responsible for using taxpayers' money, and now for generating their own as well, with the constant push to operate successfully. And if the government is going to be hit with greater demands for financial accountability, charities and churches ought to be able to justify their financial practices, or so it seems to him. He remembers some financial scandals of the past, so thinks it's only fair that they should have to keep proper records and let people know how much money they have. In 1974 Moonitz [1974, 146] suggested that the accounting profession should stay out of the nonprofitfield for a long time, as far as accounting principles were concerned451. He drew a distinction between the nonprofit sector and the profit-seeking sector on the grounds of their interest in the concept of net income: it was of Uttle importance to nonprofit organizations, but was "crucial and critical" to profit-oriented organizations in the profit-seeking sector. Fifteen years later, Mautz [1989, 66] claimed that the nature and importance of differences between the two sectors appeared to have been unacknowledged, with the result that inadequate attention had been given to accounting for nonprofit organizations. He argued that nonprofits were so significantly different 451 He hinted that things might be changing "at the highest levels" [Moonitz, 1974, 146]. Chapter 6 Society as the audience Page 263 from business entities that they required additional elements and "quite a different reporting system", and that it was possible to carry accruals "too far", resulting in confusion [Mautz, 1989, 66]. In spite of these differences, the need for adequate financial reporting by nonprofits must be acknowledged, if only to counter negative pubUcity from nonprofit disasters452 [Herzlinger, 1996]. Another argument stressed the similarities between business and nonprofit accounting, chiming that people interested in nonprofit organizations had no indicator such as stock prices, and therefore had a greater need for "rehable, clear accounting information as a basis for making judgments aboutfinancial performance" [Anthony, 1995, 44]. Operating transactions, it was claimed, were simUar in both types of organizations, and therefore nonprofits ought to be required to present a report of operating performance, since their ami, whUe not to earn a profit, was to have "a smaU excess of revenues over expenses" [Anthony, 1995, 45]. The senior management of nonprofit organizations, it has been claimed, are interested primarily in cash-oriented questions, such as "give me the bottom line", "what funds have I got to spend?", or "what are the reserves we have for a particular project or service?" [Cameron and Thompson, 1997]. They were quite different from profit- oriented businesses in theirfinancial goal s and reporting characteristics, and yet, as has been pointed out in this chapter, increasingly nonprofit organizations are required to adopt the accounting practices of the for-profit sector. Nonprofit organizations cannot be "closed systems", because they must be open to, and are dependent upon, the flow of resources from their external environment. From a resource dependence perspective, the context of the operations of nonprofits needs to be understood, including the way they engage in "interchanges" with their environment453 [Heimovics et al, 1993, 425]. Institutional theory454 would suggest that Herzlinger [1996] referred to nonprofitfinancial scandals in the USA. This would include the "boundary spanning" roles they establish and use, such as the hiring of Chapter 6 Society as the audience Page 264 nonprofits will be concerned about "bolstering their reputations, good standing and desirabihty as fund recipients in order to enhance and stabilise their resource flows", which would involve modelling themselves after successful nonprofit organizations455, or enhancing their legitimacy by "participating in coUective efforts with other non profits to address community issues or problems" [Bielefeld, 1992, 52 - 53]. The way an individual organization wiU respond to pubUc sector reforms wiU depend on its own culture and agendas. An institutional interpretation of the audience and their influence. Profile 5. Ray read in the paper that The Salvation Army had its annual Red Shield Appeal on the weekend. What a pity he wasn 't home. They left an envelope in his letterbox, but he's not sure whether he'll send in a donation this year. He read a few months ago that the Salvos owned a lot of shares, and wondered if they really needed his few dollars. All those charities seemed to be such a big business these days - so professional - he supposed they had to be, but he hoped they still cared about what they did. That was the image he had of the Salvos: people who cared. He hoped they hadn 't changed. The conventional view that accounting information acts like a mirror which "neutraUy and objectively records the 'facts' about what has happened" in an organization is a reified view, which fails to recognize the notions that accounting projects an image [Roberts and Scapens, 1985, 453 - 454], and that it is a sociaUy constructed practice. Organizations can harness this image-creating potential for their own ends, with the profile given to accounting "less likely to reflect mlrinsicaUy necessary technical work specialized personnel like development officers, fundraisers, or grant writers, to "monitor developments in the funding environment and to manage relations with hinders" [Bielefeld, 1992, 51]. 454 Bielefeld [1992, 66], based on his study of the vulnerability of non-religious public charities to their environment, concluded that both theories had "gaps" in their coverage, and that the two theories needed to be "reconciled". This would be mimetic behaviour, and would probably occur more frequently in an uncertain environment. Chapter 6 Society as the audience Page 265 processes than environmental constraints, resources, or opportunities" [Meyer, 1986, 346]. The rationalization of activity in any cultural setting contributes to the spread of "countings and accountings", and accounting activity in the nonprofit sector is no exception. Booth [1995, 50] suggested that institutional isomorphism meant that management control practices had spiUed over from the commercial sector to the voluntary sector, by means of the requirements of funding operations, institutionaUy acceptable practices and solutions, and professional networks. The growing and increasingly complex relationship between governments and nonprofit organizations, overlaid on general societal trends in reUgious observance, social problems, reUgious/charitable organizations and phUanthropy, have made pressures for conformity to acceptable financial management practices enforceable and essential. Nonprofits are highly dependent on both government funding and on "the efforts of their top executives to find resources for and to revitalize the missions of their organizations" [Heimovics et al, 1993, 419], which increasingly occurs at the executive level of commercial organizations. The accountabiUty that is demanded from nonprofit organizations as a consequence of these influences has had a major impact on the management and accounting practices nonprofit organizations have employed. Government expectations, in terms of funding requirements and the imposition of accounting practices, can be identified as coercive or mimetic456 institutional elements. The more subtle, yet highly influential and significant influences that come from the business sector457 represent a normative or mimetic force, resulting in the practices employed in the commercial sector being adopted by voluntary organizations. 456 Sometimes the government enforces certain accounting practices, and sometimes organizations model themselves on the organizations from which they receive funding, even though there may be no prescription on the kind of practices required. 457 This can happen in a variety of ways, including the senior executives of commercial organizations serving on the boards of nonprofits, or professional accountants being employed by nonprofit organizations. Chapter 6 Society as the audience Page 266 Accounting is increasingly being appealed to as an indicator of good management. providing value and legitimacy by its very presence, whether or not it is coupled with the "detaUed processes of organisational functioning" [Hopwood, 1990b, 405]. Since the prevailing poUtical discourse favours the adoption of accrual accounting and other accounting technologies from the private sector458, it is these techniques which provide value. The caU for greater accountabiUty in pubUc sector459 management460 gained impetus during the 1980s , as expectations changed, and the role of pubUc sector managers became more concerned with proactive management, rather than "passive stewardship" [Guthrie et al, 1990, 5]. The result has been an adoption, by the pubUc sector, of a manageriaUst approach to pubUc management [Broadbent, 1992], and an incorporation of many of the tools of the corporate sector, such as "performance measurement, performance auditing, program budgeting, improved annual reporting, responsibiUty accounting, and a commitment to the pursuit of the principles of economy, efficiency and effectiveness" [Guthrie et al, 1990, 5]. The 1990s have seen the implementation of various practices in governments which were designed to enhance both accountabiUty procedures462 and to provide increased efficiency and effectiveness in the management of financial and human resources. This rational-technical purpose of accounting has been chaUenged by Dirsmith [1986, 458 Hopwood [1990b, 405] described as a "perplexing question", the observation that techniques borrowed from the private sector could provide legitimacy for the public sector, when the private sector itself had an "equivocal record of economic performance". 459 Funnell and Cooper [1998] highlighted the difficulty of defining the public sector, due to the blurring of the distinction between it and the private sector. 460 Moore [1990, 27] suggested that accountability to parliament and the community was more than "finding a scapegoat when something goes wrong", but that it meant "accounting for the continuing performance of public business". Greiner [1990, 31] saw accountability as central to his government"s (the government of the State of New South Wales) commitment to "honesty, openness, adequate disclosure and careful, effective application of resources". 461 Appeals were made to the apparent "inefficiency, lack of cost-effectiveness, and unprofitabihty associated with activities that reside within the public sector" [Hopwood, 1990b, 392]. 462 Hood [1995] pointed out that the new view of accountability was in terms of results, rather than the process by which the public sector conducted itself. Accounting, he suggested, played an important role in implementing this style of accountability. Chapter 6 Society as the audience Page 267 357], who suggested463 that accounting was constructed "in response to societal expectations"464 rather than being a rational, technical operation. It has certainly had a powerful influence in the pubUc service's transition to a business orientation, and the estabUshment of the legitimacy of pubUc sector reforms465 [Hopwood, 1990b, 394]: ... accounting has been appealed to as much, if not more so, for what it is rather than for what it might help the organisation to become. Accounting seemingly has been seen as a manifestation of sound economic management, of appropriate organisational arrangements and of a commitment to the objective of efficiency. In the midst of the urgency to change, accounting has been provided with a symboUc rather than a technicaUy instrumental role. It has been impUcated in the management of appearances - a pecuUarly important phenomenon in the British scene [Hopwood, 1990b, 404]. Accounting has had a central role in the adoption by the pubUc sector of "new" management466, and its infiltration into the voluntary sector. One of the powerful means by which these influences have been transported through aU three sectors is that of professional accounting networks467. Cooper [1997, 30] identified the accounting profession as playing a highly significant role in the reformation of the pubUc sector. This influence is described in Figure 6.1 "Institutional influences on accounting practice in the nonprofit sector " below, with professional networks shown at the centre of 463 Dirsmith's arguments were based on Meyer's [1986] paper "Social Environments and Organizational Accounting", in which he took accounting to be "problematic and contested" [Meyer, 1986, 357], a construction based on societal expectations rather than on technical considerations. 464 Citing the example of health care delivery, Dirsmith [1986, 358 - 359] argued that by means of expectations about cost containment, and the regulations, constraints on capital expenditures, and budget and rate setting programmes set in place in order to achieve this, society was "directly impacting" on accounting in hospitals. By adopting accounting systems and hiring professional accountants, hospitals were demonstrating their orientation to societal values (so that they could receive the support of society), rather than developing their own internal accounting systems. 465 The position and legitimacy of boundaries between the public and private sectors have changed over the last two decades, and accounting has had a role to play in the shifting of these boundaries [Hopwood, 1990b, 394]. 466 Broadbent [1992, 343], in her paper on the National Health Service (NHS) in the United Kingdom, maintained that changes in the management of that and other public sector organisations was accomplished largely through the use of accounting, whose role was "extended and enhanced". 467 Professional values are internalized by means of the programming of individuals to adhere to professional guidelines. The result is that professionals tend to identify similar problems, and propose similar solutions. Chapter 6 Society as the audience Page 268 societal expectations in both determining and reinforcing those expectations in commercial, pubUc and nonprofit sectors. Expectations for efficiency, effectiveness Management and and "business" practices accounting Management and practices in the accounting commercial practices in the sector Accounting standards public sector and professional networks Funding and Funding and accounting voluntarism (expertise) Management and requirements (coercive and (normative and accounting mimetic) mimetic) practices in the nonprofit sector Figure 6.1. Institutional influences on accounting practice in the nonprofit sector. This chapter has introduced the audience for which The Salvation Army AustraUa Eastern Territory performs and has considered the expectations that audience makes. The pubUc, as that audience, defines what is appropriate and legitimate organizational behaviour, and directly or indirectly provides the funds the Army needs in order to continue its work. Governments and commercial sector practices, filtered through the influence of the accounting profession, set organizational agenda by deteimining the funding and financial reporting environment in which nonprofit organizations like The Salvation Army operate. The next three chapters wiU focus on the practical implementation of accounting routines into the Army's organizational structures. As this process is documented, the theory and organizational information provided by this and previous chapters wiU Chapter 6 Society as the audience Page 269 provide a rich backdrop for a consideration of three themes identified in Chapter 3: the profile of accounting within the Army, the extent to which the accounting function has been professionalized and the impact of technical accounting requirements in the running of Army business. Who's counting? An institutional analysis of expectations of accounting in a nonprofit religious/charitable organization within a changing environment. A Thesis submitted in fulfilment of the requirements for the award of the degree DOCTOR OF PHILOSOPHY from the UNIVERSITY OF WOLLONGONG by Helen Irvine B.Com, M.Com. Department of Accounting and Finance 1999 Volume 2 CHAPTER 7. The performance (1): presenting accounting statements to the public. BARBARA: [tears coming into her eyes as she ties the (money) bag and pockets it]. How are we to feed them? I can't talk religion to a man with bodily hunger in his eyes. [Almost breaking down] It's frightful. JENNY: [running to her] Major, dear - BARBARA: [rebounding] No: don't comfort me. It will be allright. We shall get the money. UNDERSHAFT:How? JENNY: By praying for it, of course [Shaw, 1945, 93]. It was early afternoon and the dining room was full. Lunch had been enjoyable, and there was a buzz of relaxed conversation. It appeared to be like any other business lunch, except for the presence of Salvation Army officers in their distinctive uniforms, dotted around the room. The invited guests relaxed in their seats, ready to hear from the speaker, a well-known Sydney business and legal identity. Known as the man who brought the Olympics to Australia, Rod McGeoch was assisting in the business launch of the Army's 1997 Annual Red Shield Appeal in the Illawarra. He spoke passionately about the Army's social work, and the necessity of having such an organization to pick up the people who "fall through the cracks " in our society. His appeal was to the hearts and the hip pockets of the guests, but also to their corporate resources. There was no reason why we had to go out and rescue street people. The Army would do it. We did not need to assist drug addicts or alcoholics to reform. That was the Army's job. It was not our task to lend assistance to broken families. That too was the Army 'sjob, and the Army was very good at what it did. We needed to allow dedicated Army officers to do what they did best. But what could we, the lunch guests, do, both as individuals, and as a business community? Give money! Two glossy booklets were distributed to the guests. One was entitled "Taking it to the streets ", and was a summary of the work of The Salvation Army as seen by six high- profile Australians469. The other was a colour-coordinated companion book, designed The date was Tuesday 29th April, 1997. The venue was The Salvation Army's Wollongong corps premises, in Burelli Street. 469 They were: Dee Wilson, Managing Director, John Fairfax Publications; Kieren Perkins, OAM, Olympic Gold Medallist; M. A. Besly, A0, Chairman, Commonwealth Bank; Rod McGeoch, AM, National Chairman, Corrs Chambers Westgarth; Helen Lynch, AM, Director, Coles-Myer; and Ham M. Miller, promotions entrepreneur, of Harry M Miller & Co [Taking it to the Streets, 1997]. Chapter 7 Financial reporting performance Page 271 to slip into the back cover of "Taking it to the streets". It was entitled "The Salvation Army Australia Eastern Territory Consolidated Financial Statements June 30 J996". It was a corporate-style set of annual accounts, glossy and well presented, complete with notes, a statement by the trustees, and an independent audit report by Coopers & Lybrand. Accounting had been invited to the launch of the Red Shield Appeal. Tucked into the back of the annual report was a sheet of pink paper with the heading "1997 Red Shield Appeal Investment Slip ". It invited guests to "dig deep " by investing in the future of others through the Red Shield Appeal, and gave them the opportunity to donate as an individual or a company, by cheque or credit card. Salvation Army people positioned strategically at the tables guided discussion and followed up the queries of guests. The approach was caring yet professional, people-focused yet business-like, mission-oriented yet realistic about the money needed to fund that mission. The Salvation Army has been shown to be acutely aware of the image it presents to its public, especially in financial matters. Not only does it need to be seen to be using donated funds responsibly, but its accounting practices must be beyond reproach. Army accounting has traditionally stressed the accurate recording of funds received, the careful tracking and control of expenditure, and the presentation of financial reports within the guidelines of currently acceptable financial reporting. As accounting practices have changed over time, it has been essential for the Army to present a financial image in keeping with that which is valued and esteemed by society. But what kind of internal accounting system is required if an image of being up-to-date with current acceptable accounting practice and at the cutting edge of financial statement presentation is to be established? Can such an image rely on presentation and performance alone? This chapter considers the extent to which the adoption of institutionalized forms of financial reporting has required a transformation of the Army's accounting system, and the special challenges and difficulties there have been in achieving that transformation, as accounting practices, implemented increasingly by employed professionals, have been juxtaposed against the existing "sacred" culture, structures and agenda. First, the image that the Army's annual accounts present is described, with possible Chapter 7 Financial reporting performance Page 272 reasons for the changes in emphasis in recent years. Next, the Army's accounting system is considered, with a focus on traditional fund accounting, the responsibilities and abilities of the finance department, and the Army's unique computer system. Challenges to this system are then detailed, in terms of the switch to accrual accounting, and the production of consolidated, audited accounts. The re-design of the accounting system is shown to be an ongoing process, one which has not occurred without pain and difficulty, and one which must be constantly evolving if the Army's performance as up-to-date in financial accounting terms is to be sustained. Centre stage: financial reporting. A new image. Up until, and including, the year ended 30 June 1994, the annual financial reports of The Salvation Army Australia Eastern Territory included a Balance Sheet, Income and Expenditure Statement, and a Statement of the Movement in Reserves for each of three funds, the Army's Social Trust, its Property Fund and its General Fund. In addition, there was included a summary statement of the income, expenditure, and deficit or surplus for every social centre within the territory, a report of the income and distribution of the annual Red Shield Appeal and a Statement of Income and Expenditure for the Red Shield Defence Services and the Self Denial Fund. [The Salvation Army Financial Statements 1994, 1995]. The financial statements were audited by a "Big Six" accounting firm470, and were produced, according to the Audit Report, "for distribution to The Salvation Army" [The Salvation Army Financial Statements 1994, 25]. The report was not to be relied on by any person other than those within The Salvation Army or "for any purpose other Since (and including) the financial statements were prepared for the year ended 30 June 1991, Coopers & Lybrand have been the external auditors for The Salvation Army Australia Eastern Territory. Chapter 7 Financial reporting performance Page 273 than for which it was prepared" [The Salvation Army Financial Statements 1994, 1995, 25]. Accounting policies on which the reports were based were outlined in a note to the accounts, and an example of these is reproduced in Appendix 7.1, "Accounting Policies for The Salvation Army year ended 30th June 1994". A primarily cash basis of accounting471 was used, the accounts were not consolidated, and a Statement of Cash Flows was not prepared. The audit report was qualified: As is common for organisations of this type, it is not practicable for The Salvation Army to maintain an effective system of internal control over donations until their initial entry in the accounting records. Accordingly, our audit in relation to donations was limited to amounts recorded [The Salvation Army Financial Statements 1994, 1995, 25]. This had been the pattern of the Army's annual financial accounts for several years until those produced for the year ended 30th June 1995. In that year, for the first time, consolidated accounts were produced. They included, also for the first time, as part of the financial statements, a letter from the Territorial Commander, addressed to "Friends and Supporters" of the Army. It was a letter which highlighted the social needs The Salvation Army was meeting, thanked friends for their support, and included an appeal for more friends to help the Army raise the funds to continue its work. The letter was dated 29 April 1996, ten months after the year end to which the accounts related. It is reproduced in Appendix 7.2, "Dear Friends and Supporters". A much more streamlined set of accounts followed, including a consolidated Income Before accrual accounting was adopted by the Army, depreciation had been charged against fixtures,fittings and equipment for several years. 472 The consolidated financial statements were an aggregation of these Salvation Army Australia Eastern Territory entities: The Salvation Army Social Trust, The Salvation Army Property Fund, The Salvation Army THQ General Fund, The Salvation Army Red Shield Defence Services, The Salvation Army (Australia) Self Denial Fund (for Overseas Aid), and The Salvation Army Red Shield Appeal. Note 1 (b) stated that "the balances, and effects of transactions, between the above mentioned entities have been eliminated". Corps and Divisional General Fund financial statements were not included in Chapter 7 Financial reporting performance Page 274 and Expenditure Statement, Balance Sheet and Statement of Cash Flows. Brief reports on the income and expenditure for both the Red Shield Defence Force and the Self Denial Funds were included at the back of the report. Note 1, Statement of Significant Accounting Policies [The Salvation Army Financial Statements 1995, 1996, 6 - 7], highlighted the major change as being ... the presentation of general purpose statements for thefirst time which has required the implementation of a number of accounting standards ... Comparative figures for prior years have been provided for the balance sheet only. For the first time, depreciation on additions to freehold buildings473 was adopted as a policy [The Salvation Army Financial Statements 1995, 1996, 6 - 7]474. The move towards accrual accounting had begun for the Army. By 30 June 1997, the collectibility of trade and sundry debtors was assessed at year end, and provision was made for doubtful debts [The Salvation Army Consolidated Financial Statements 1997, 1998, 7]. Where earlier sets of accounts had included a statement by the Territorial Financial Secretary, the new style accounts included a statement by the trustees, signed by the Territorial Financial Secretary and the Chief Secretary, stating that the financial statements presented a "true and fair view" of the results and cash flows for the year, and that they had been drawn up "in accordance with applicable Australian Accounting Standards" [The Salvation Army Financial Statements 1995, 1996, 16]. the consolidation [The Salvation Army Financial Statements 1995, 1996, 6]. 473 Additions to motor vehicles, furniture, fixtures and equipment for Territorial Headquarters and Officers Staff Quarters had previously been capitalized, and depreciation applied using the straight line method. Costs of those items for social centres were expended in the year of purchase [The Salvation Army Financial Statements 1994, 1995, 4]. From the year ended 30 June 1995, all additions for furnishings and equipment were capitalized and depreciated, except for items under $500. By the year ended 30 June 1997, the depreciation policy had been extended to include social centres [The Salvation Army Consolidated Financial Statements 1997, 1998, 6]. 474 The new policy began from 1 July 1994, and as a result, a depreciation charge of $3,798,000 was recognized and expensed for the year ended 30 June 1995, with a prior adjustment of $43,185,000 [The Salvation Army Financial Statements 1995, 1996, 7]. Chapter 7 Financial reporting performance Page 275 The Independent Audit Report was qualified as it had been in earlier years4 5, but in a departure from previous years, this time the audit opinion highlighted the preparation of the statements "in accordance with applicable Australian Accounting Standards and other mandatory professional reporting requirements" [The Salvation Army Financial Statements 1995, 1996, 17]. They were financial statements much more overtly designed for distribution to the general public, and to prompt a response in the form of donations: the cover featured a well known Australian film star, and some business identities; a letter from the Territorial Commander asked for donations; the accounts were in a format consistent with those produced by corporations; and Australian Accounting Standards had been adopted. In addition, the last page provided a confidential response slip to be forwarded to the Territorial Director, Wills & Bequests, outlining various means by which a bequest could be made to the Army. As afinal reminder of thefine work the Army did in the community, the back page included a list of all social and community service centres in the territory. This trend towards using the financial statements as a fund-raising aid has continued, as evidenced by their distribution at the Illawarra business launch of the Red Shield Appeal in April 1997. A territorial Finance Department employee [Travis Greig] revealed that there were 5,000 copies produced by the Army's Public Relations Department in that year, as compared with the 500 copies which had been published the year before. It was, he acknowledged, an exercise designed to attract corporate sponsorship. Apart from this aspect, the other parties interested in the annual accounts had traditionally been the government476 and a limited number of members of the public. One territorial The qualification in the 1995 accounts read: "It was not practicable for The Salvation Army to establish accounting control over all sources of donation income prior to its receipt at headquarters and accordingly, it is not possible for our examination to include audit procedures to extend beyond the amounts of donations recorded in the accounting records. In our opinion, monies recorded as receipts from donations have been properly accounted for by The Salvation Army Australia Eastern Territory" [The Salvation Army Financial Statements 1995, 1996, 17]. The Army was supposed to submit a copy of their annual financial statements up to 30 June in any year with their audit certificates for government funded entities, by September of the same year. The Chapter 7 Financial reporting performance Page 276 employee expressed the opinion that the general public were not particularly interested in the Army's publishedfinancial statements: I suppose as long as there's no scandal, no money that can't be accountable, or anything else, and everything else is legally above board, the public couldn't care less. It's only when something happens, and then the public stand up and say, huh, that's our money they've been misusing, or something silly like that [Len Aldrich]. While this may be the case, the Army has not been taking for granted public acceptance and its lack offinancial scandal . Instead, as an organization, it has been creating a certain visibility for itself in recent years, in the corporate arena, with the publication of its annualfinancial statements . These reports are not just prepared to fulfill the strict letter of the law (the Army's trust deeds and government requirements), or to deflect any criticism of the Army's financial practices, but to pro-actively create an image of an up-to-date,financially responsibl e organization conforming with generally accepted accounting principles. This image has been overlaid on the Army's excellent existing reputation for social action, and has been overtly linked with requests for donations. The next section outlines some possible reasons why these changes were made to the Army's financial statements. Why change? Chapter 6 highlighted various societal influences which impinge on The Salvation Army and similar organizations. The influence of the corporate world on nonprofits, as well as the significant changes which have occurred in government in terms of accounting and financial reporting, have led to pressures on nonprofits to adopt forms of accounting which are in the process of becoming institutionalized within society. Accrual accounting is one aspect of these changes, and the reasons why it was introduced into The Salvation Army illustrate these pressures. Army had always failed to meet this deadline, without any penalties. Chapter 7 Financial reporting performance Page 277 Once announced by the Army, accrual accounting had to be applied, but its announcement appeared, to an extent, to precede the setting in place of an effective accrual accounting system. "With the presentation of general purpose accounts. providing for depreciation on freehold buildings has been adopted as a policy from 1 July 1994"477 [The Salvation Army Financial Statements 1995, 1996, Note 1 (1), 7]. This simple statement made in the Army's financial statements for 1994 - 1995 introduced thefirst stag e in a major shift in the Army's accounting practices, as the organization moved to adopt accrual accounting more fully. It gave no hint as to the upheavals which would follow within the organization. In the Army's guidelines to social centre managers about their budgets for 1996/97, a mere two sentences established accrual accounting as the "Basis for Budgeting", and a brief explanation of depreciation was given: Accrual accounting is to be used as a basis for budgeting. It needs to be noted that accruals for leave liabilities need to be accounted for in the budget [Budget Guidelines, 1996, 2]. The cost associated with using any durable asset is termed "Depreciation", an item of expense to be accounted for. Assets over $500 need to be capitalised and depreciated accordingly [Budget Guidelines, 1996, 3]. This too gave an impression of relative simplicity, with no hint of the tensions and difficulties such a change would cause. The introduction of accrual accounting into the Army's accounting system from 1 July, 1995 appeared to be a response to pressure from various sources. According to one Army social employee [George Dickson], accrual accounting "just appeared" in government contracts, not across the board, but here and there. In the audited returns the government required from aged care centres, for example, salaries and wages had to be shown for 365 days, so accruals had to be 477 In that year, a prior year adjustment for depreciation of $43,185,000 was made against reserves [The Salvation Army Financial Statements 1995, 1996, 7]. Chapter 7 Financial reporting performance Page 278 calculated. Thus while there appeared, initially, to be no overall government policy, it became obvious that accrual accounting was highly likely to become a general requirement. In addition, it was recognized that the accounting profession was already foreshadowing the mandatory adoption of accrual accounting, and so it was in the Army's interests to adopt it [Bert Grosse, THQ employee]. Another factor instrumental in the Army's initial adoption of depreciation was attributed to the government's cutback in the funding of capital works programmes for charitable organizations [George Dickson, social employee]. Where once the government could be relied on to provide funds towards the replacement of buildings, this was no longer the case, and there was a need for the Army to set aside its own funds for building replacement478. Depreciation was the means by which such an amount was calculated. The Chief Accountant stated at a training day479 for social centre finance staff that over the next few years, $200 million of assets would need to be replaced, hence the establishment of Asset Replacement trusts was vital to the Army's continuation of its mission. The Secretary for Business Administration, an officer with experience of accrual accounting within the Army in the US, described how nonprofit organizations there were being dragged, "kicking and screaming" into the accrual accounting arena. The "fairly simple" cash based system the Army once used belonged to an earlier era, he said, where government regulations were simple, unlike the complex arrangements that had now been introduced. It was acknowledged that accrual accounting was the "trend", with most similar organizations moving in that direction [Tom Evans, social employee]. The Army has adopted a system where depreciation is not only charged, but the various centres are required to set aside cash funds equal to the amount of the depreciation charge, in order to provide a fund for building replacement. These funds are lodged with Territorial Headquarters. 479 This was held at the Rockdale Salvation Army corps, on 14 May, 1997, and was organized by Territorial Headquarters Finance Department. Chapter 7 Financial reporting performance Page 279 Similarly, the production of consolidated accounts which were consistent with accounting standards, was another response to a growing trend within society for non corporate organizations to adopt corporate-style accounts. The government, as a major funder of the Army, had already moved in that direction, and the presence of an Advisory Board with members drawn from the corporate world, reinforced this influence. The appointment of a Chief Accountant who was a professional accountant, rather than an officer, committed the Army to moving in that direction. Auditing, while it had been a feature of the Army'sfinancial statement s since its inception, now took on a more complex role, as cracks in the Army's accounting system showed up under the increased pressure that accrual accounting and the consolidation process imposed. This new image was one the Army wanted to project, but it came at a cost. The next section considers the old system and the way it worked, in order next to detail the special challenges imposed by the new style of accounts. Backstage: the Army's accounting system. Accounting for funds. With its distinctive Army heritage, The Salvation Army has historically based its accounting structures on the rules and regulations laid down in its various manuals. The Manual of Accountancy Policies and Procedures [1989], for example, requires the establishment of separate funds, General, Property, Social, and Trade480, into which relevant receipts are recorded, and out of which all expenditures relating to those funds flow. It was these three funds which formed the basis of the territory's earlier financial statements. A trade fund would refer to activities related to supplies, purchasing, printing and publishing. It is often required to be separately earmarked because some of the Army's activities incur tax obligations. This is not the case in the Australia Eastern Territory, which has traditionally used three funds, General, Social and Property. 3 0009 03254487 1 Chapter 7 Financial reporting performance Page 280 This separation has been seen as vital from an accountability point of view, with The Salvation Army (New South Wales) Property Trust Act 1929 establishing the General as the director of the Army's social work, and stressing the separation of the financial aspects of the social work from other Army work: ... for the purpose of identifying or ear-marking the trust property and the income thereof and of keeping the same distinct from all property of The Salvation Army full accounts of all money contributed collected or received for the Social work and of the application thereof should be kept in such manner as to keep the same always distinct and separate from the property of The Salvation Army. Accuracy in the recording and reporting of movements into and out of these funds has historically been one of the primary requirements of the Army's accounting system, with an Income and Expenditure account for each fund traditionally prepared each year. It was on the basis of careful stewardship in accounting for these funds that earlier claims to financial accountability and reliability were made'*7. Until the financial statements for the year ended 30 June 1995, when the Army's accounts were consolidated''*2, these funds were always shown separately. Figure 7.1, "Territorial reporting structures by funds", illustrates the breakdown of the three funds within the Australia Eastern Territory's organizational structure. 481 See "Army response to criticisms" in Chapter 4, and Appendix 4.4, "Financial Accountability of The Salvation Army as portrayed in The Salvation Army Year Books up to 1935". 482 The consolidation did not include corps or DHQ General Funds. Social Trust figures were shown separately in the annual report as well as consolidated figures. Chapter 7 Financial reporting performance Page 281 Main Fund 120 Social Centres (35 main - Red Shield departments) Defence Services Motor Vehicle -DHQ Social Fund (380 cars) Administration Red Shield Appeal Fund Self Denial Appeal Fund Salvo Supplies (Sydney, Brisbane) 'roperty Fi — Insurance Department — Property Department — Retirement Fund 1 RSC across states 4 NSW Divisior Qld Divisions 1 ACT Division I Community Services Aged Care (Nursing homes, hostels, self care, home care) Relief Crisis Accommodation (Community housing, case management) — Administration Youth Training (Case management) — Shops Children's Services Other Figure 7.1. Territorial reporting structures by funds [Source: Existing Financial Reporting Structure, 1996]. As the structure demonstrates, transactions for all Army organizational units, including divisions, social centres, corps and community centres, as well as THQ and DHQ administrations, flow through these three funds. The General fund is the largest and most complex. A major concern in accounting for these funds appeared to be adherence to the Army's financial regulations, which were extremely detailed in terms of accountability. The concern in accounting for these funds was primarily that of separation of funds received for social purposes, as already mentioned, authorization, according to set hierarchical responsibilities, and accuracy in the recording of transactions. For example, an Official Minute set out strict rules for the authorization of expenditure: Chapter 7 Financial reporting performance Page 282 funds must be available, they must be within the budgeted amount, and expenditure "must be approved by the appropriate Boards and authorised in accordance with Manuals, Guidelines, Official Minutes and Orders & Regulations governing finance expenditure" [Authority for Expenditure Official Minute, 1995, 1]. These boards were listed as the Corps Finance Board (made up of the Corps Commanding Officer and Corps Finance Locals), the Centre Expenditure Board (Social & Community Services and Rehabilitation Services Centres), Divisional Headquarters Finance Board (DFB), and Rehabilitation Services Command Finance Board (CFB). The number of quotes required for varying levels of expenditure was set out clearly, and the authority structure for expenditure was similarly clearly spelled out, following hierarchical guidelines. Divisional and Rehabilitation Services Command Headquarters were authorized to approve expenditure up to $10,000, including grants over budget, provided they were within the global budget of that division or command. Items between $10,000 and $20,000 had to be submitted to the territorial General Maintenance Board or the Social Expenditure Board, and items over $20,000, or requests for budget grants which exceeded a division's global allocation, were required to be submitted to the Territorial Finance Council. In addition, it was clearly stated in an Official Minute [Authority for Expenditure Official Minute, 1995, 2] that if a requisition were made to a higher board, it had to be accompanied by "an explanation and identification offimding". Requests for increased budget grants required "an up-to- datefinancial report , variance report, details of unpaid creditors and debtors and full explanations". The emphasis of the fund system was on stringent adherence to rules and regulations, in order to ensure proper authorization, accountability, and accounting of all receipts and expenditures. This was what was expected to be achieved, but the actual practicalities of how the accounting function was to be performed were not spelt out in detail. The assumption appeared to be that if these regulations were being fulfilled, then "proper" accounting would automatically follow. Chapter 7 Financial reporting performance Page 283 The conduct of several expenditure boards at THQ provided an interesting demonstration of the way this system worked in practice. I was given permission to attend these meetings483 on one day. They followed each other in rapid succession, and consisted mainly of lists of cheque requisitions, in order to satisfy Army regulations. An exception was the Computer Expenditure Board, where the discussion was more wide- ranging, but unrelated to its official role. It was a relatively small meeting, the four members present being all either officers (two) or employees (two) who were directly involved in the accounting and finance functions of the Army at THQ level. This discussion got to the heart of the matter: what was the guarantee, if these regulations were in place, that the accounting function was being adequately performed? The monitoring of spending was the issue which occasioned some discussion. With all the time and effort devoted to budgeting and authorization of expenditure, whose responsibility was it to keep track of whether centres actually stayed within their budgeted allocations? The Territorial Financial Secretary believed the General Fund accountant performed that function, but when challenged by the Chief Accountant (Chief Accountant) for details about how that function was actually carried out, was unable to answer. The Chief Accountant expressed doubt that such monitoring was actually happening. The lack of understanding of the process seemed to be an amazing state of affairs, given the makeup of the committee. The potential for expenditure to be made which either exceeded guidelines or budgets, given the stringent rules and regulations, and the seeming close attention to detail, was a surprising aspect of the system. The script was written in intricate detail, but there seemed to be doubt as to whether it was actually being followed. If the concern of the Army's fund accounting system was accuracy of recording, and the control of expenditure, then an interesting aspect of this was the manner in which "apportionments" were made between the three funds. These apportionments were 483 The meetings I attended were of the General Maintenance Board, the Officers Health and Benefits Board, the Social Expenditure Board, and the Computer Expenditure Board. Chapter 7 Financial reporting performance Page 284 adjustments made for administrative expenses which covered more than one fund. Their effect was that the expenses of running the various THQ departments and the training college could be shared between the general, social and property funds. An implication of this was that, ultimately, Red Shield funds, which were donated for the social work of the Army, were legitimately able to be used for supporting the administrative structure relating to that social work. Apportionments were made from the Social fund to the General and Property funds, and from the Property fund to the General fund, as Figure 7.2 , "Fund apportionments" illustrates: Figure 7.2. Fund apportionments. [Source: Apportionments Working Papers, 1996] For the year ended 1996/97 apportionments into the General Fund amounted to well over $3 million [Apportionments Working Papers, 1996]. The way these apportionments were set484 was that people in each department at THQ were asked how much of their time they regularly spent on various aspects of the Army's operations, and their response was broken down into a departmental percentage 484 At the time of this study, the apportionments were based onfigures devise d in 1993 by the General Fund Accountant. Chapter 7 Financial reporting performance Page 285 apportionment from the various funds. The department of Business Administration, for example, had its expenses apportioned between all three funds: general (45%), social (40%), and property (15%). The cost of running the Finance Department was apportioned between the general (40%), social (40%) and property (15%) funds [Memorandum General Fund Apportionments, 1993]. Once approved by the Finance Council, these apportionments were made every month, when the General Fund accountant "billed" the Social and Property Fund accountants, and adjusted at year end. There seemed to be a paradox here: the system for authorizing and recording expenditure was heavily reliant on the Army's hierarchical structure, with its intricate system of boards and councils, and its emphasis on strict adherence to procedures, but the system of apportionments was relatively subjective, and not built into the formal structure. Even though the scrutiny of expenditure, for example, was more of a formality than a reality, the process was part of the system. With the apportionments, this was not the case, since they were almost completely ignored as far as the official system was concerned. The Finance Department. The actual accounting for the General, Social and Property funds was accomplished by the territory's Finance Department, under the auspices of the Secretary for Business Administration485. The structure of that department was described in Chapter 5486. The presence of accounting expertise within the department, and the people in whom this expertise was to be found, provided an interesting illustration of the huge changes that were taking place even during the time of this project. The Army's Manual of Accountancy Policies and Procedures [1989] recognized the huge disparity in the financial understanding and training of those who held See Figure 5.4 "Territorial Headquarters responsibilities". See Figure 5.5 "Territorial Headquarters Finance Department structure" and the text following. Chapter 7 Financial reporting performance Page 286 responsibility for the Army's accounting systems. It was written both as an acknowledgment of the "extreme range of experience and qualifications of the personnel who would expect to benefit" from such a manual, and of the "wide diversity of the Army's work in many contrasting circumstances". When I began this study, the position of Territorial Financial Secretary was held by an officer who had been a Chartered Accountant. During my time in the Army, he was replaced by an officer who had previously held the position of Assistant Territorial Financial Secretary. While he had some accounting training, he did not have that level of expertise. Filling this particular position seemed to pose somewhat of a dilemma for the Army, with relatively few officers possessing current accounting qualifications. Because of this, an option was to use a professional accountant (not an Army officer) in this position. There was speculation within the department, at the time of the Territorial Financial Secretary's departure, about whether the new Territorial Financial Secretary would be an employee, a trained accountant. Opinion was divided about whether the Territorial Financial Secretary ought to be an officer or an employee, with the attributes of accounting ability and the calling and devotion of an officer vying for ascendancy. Ideally, if both these aspects were present in an officer, that would be the kind of person, it was believed, who ought to fill the post. As Figure 5.5 "THQ Finance Department structure" demonstrates, the majority of positions within the Finance Department were held by employees, several of whom were trained accountants, or were studying accounting part-time. This had been a relatively recent trend, especially with the positions of Chief Accountant, Assistant Chief Accountant (a recently-created position), Social Finance Officer, and Assistant Social Finance Officer (another recently-created position). The job descriptions of these positions, which were under review, indicated a range of accounting functions which previously had been unfulfilled, and which greatly expanded on the traditional fund accounting system, with its emphasis on accuracy of recording and fiduciary responsibility. Chapter 7 Financial reporting performance Page 287 The Chief Accountant, a qualified Certified Practising Accountant (CPA), saw his role [Chief Accountant, 1996] as not limited to the supervision of the accounting functions of the department. He was also concerned to investigate other organizations and their practices; to develop official accounting policies; to incorporate changes (technical, legal accounting standards, and insurance matters); to develop training programmes for DHQs and social centres; to develop accounting manuals for THQ, DHQ, corps, and social centres; to co-ordinate hardware and software needs for the computer system; to attend twelve THQ boards or committees; and to liaise with other departments and bodies, such as the Army's Southern Territory, the external auditors, and the internal audit department. He described himself as a "big picture" person, who wanted to build time into his programme to look outwards. He was the person who had been entrusted with introducing accrual accounting, consolidating the Army's various funds, and producing financial statements in keeping with Australian Accounting Standards. His vision was to progress even further, now that the financial accounting aspects were well in hand. He saw his next goal as being the replacement of the outdated computer generated accounting system (CGAS) used at THQ, and the development of the management accounting function, by improving the quality and timeliness of accounting information. It was hoped that the creation of the new position of Assistant Chief Accountant [Assistant Chief Accountant, 1996] would help him to achieve this, particularly by providing assistance in the preparation of procedural manuals for budgets. The Social Finance Officer's487 responsibilities [Social Finance Officer, 1996] involved developing social centre benchmarks, ensuring adherence to government recording and reporting parameters, and offering assistance to social centres in the budget process. The employment of an assistant to this position was an indication of the importance of this role, particularly in the light of recent changes to government funding requirements, and the Army's struggle to achieve the accountability the government required. This will be discussed in more detail later in this chapter. He was also a trained accountant, with experience in industry. Chapter 7 Financial reporting performance Page 288 The three fund accountants were responsible for the day-to-day accounting work of the Finance Department. Two were employees, with accounting training and extensive accounting experience. The Property Fund Accountant was an officer, with more limited accounting expertise and training. The property fund was the smallest fund, and the least complex, however, and the other fund accountants were adjacent and available if needed. While The Salvation Army is one single legal entity, legally required to separate social welfare activities and resources from the Army's church work [Wand and Dasan, 1997a], it actually operates as separate "quasi" entities, including the provision of aged care services, employment and training services, services to the homeless, drug rehabilitation, sale of donated second goods and farm produce, missionary work, educational institutions, and the Army's church network and ministries. It is necessary to provide accounting information for each of these diverse activities and entities, and for the Army as a whole [Wand and Dasan, 1997b, 1]. Since there were over 500 of these entities, with separate ledgers and bank accounts for each one, with the operation of the three funds, this system necessitated a considerable volume of intra-Army transactions and cash movements. While some had been regularized by bank account direct debit/credit arrangements, ledger entries were still generated at the individual centres for these electronic movements. These entries were forwarded to THQ for incorporation into the fund system, hence the quality of accounting work done in the centres and the DHQs was a vital determinant of the way the system operated overall. This aspect will also be highlighted in later sections of this and following chapters. The expertise and hence the accuracy of accounting work done out of THQ, and the reliance of THQ on that accounting work, has been the source of recurring frustration within the finance department. 488 These were the General, Social and Property Fund Accountants. See Figure 5.5 "THQ Finance Department structure". Chapter 7 Financial reporting performance Page 289 A computerized accounting system. The Army used an internally developed computer generated accounting system (known as CGAS) at THQ. Dataflex software had been developed for use in the DHQs and social centres, and corps were gradually making use of this system, as they acquired computers. These systems had been developed by the computer services department, with relatively little input from the finance department in earlier years, although that was changing during the time of this study. It was hardly surprising, given the history of its development, that the computer system did not reflect accounting concepts properly [Hey-Cunningham, 1997, 23], or that the Charts of Accounts was inadequate. One senior divisional officer described his frustration with the system: ... that's how I understand that our system is wrong, our system of accounting is wrong. So I took myself off to TAFE and I learnt computer accounting [Major Wendell Grant]. With approximately 10,000 accounts held on CGAS, the Army's computer generated accounting system, apart from the social centre data on dataflex, as well as spreadsheets which were used to convert data into management information, the system was not well integrated, and was inflexible [Management Report Memo, 1997]. The Secretary for Business Administration instructed the Territorial Financial Secretary [Chart of Accounts Working Party Memorandum, 1996] to create a special working party in order to create a "unified Chart of Accounts for all Salvation Army units" in the territory. The memorandum reminded the Territorial Financial Secretary both of his responsibility for "the accounting practices of the territory", and of the fact that "the Chart of Accounts structure is a foundation of those practices". Some frustration had been expressed by the Chief Accountant, and by officers and employees, about the deficiencies of the present Chart of Accounts, both in terms of its lack of relevance for categories, and in terms of the difficulty of bringing dataflex accounts into line with CGAS (Computer Generated Accounting System) accounts during the consolidation process [Wand and Dasan, 1997b; Chart of Accounts Working Party Memorandum, 1996]. Chapter 7 Financial reporting performance Page 290 A discussion paper prepared by the Chief Accountant [Discussion Paper re Finance, 1996], as a result of his visits to two DHQs, drew attention to the deficiencies of the Charts of Accounts for both CGAS (Computer Generated Accounting System) and dataflex. In referring to the Secretary for Business Administration's intention to form a Chart of Accounts Working Party, he urged a more considered and complete study: The Chart of Accounts is the driving force of the accounting system and should not be rushed. All avenues should be examined, e.g. what other churches/charities use, what is available in the commercial world. This is a lengthy exercise but an extremely important one [Discussion Paper re Finance, 1996]. The Chief Accountant saw this as an opportunity to conduct a major overhaul of the Army's accounting system, a system which was causing him considerable frustration. The computer services manager and his staff, located next to the Finance Department at THQ, had been responsible not only for the development of the current system, but for servicing and maintaining all computers in the territory. I heard frequent and often bitter complaints about the system and the way it was administered. The system itself was complicated. While a few people found it acceptable, most people expressed the opinion that it was "not user friendly" [Captain Harry Carruthers], "not like commercial packages" [Captain Helen Kirk], "cumbersome" [Hugh Dacin, social employee], "too far out of the mainstream" [Major Leslie Gambling], "archaic" [Captain Mark Wreiden], "as complicated as all outdoors and ... worse than useless" [Captain Lance Collier], "slow" [Captain Philip Schmidt], a source of great frustration [Bernard Jeffreys, social employee], inadequate for providing information [Damien Jackson, social employee], and unreliable [Major Maurice Jeffreys]. The problems were not restricted to the system itself, but also centred around the Army's administrative structure, and the manner in which the computer services department operated. The Army, with its reliance on rules and regulations, had specified their own system as the only one DHQs and social centres were permitted to use. This led to enormous frustrations. One social employee [Damien Jackson] prepared his own Chapter 7 Financial reporting performance Page 291 reports on an unauthorized spreadsheet programme, because he could not access meaningful information from the Army's dataflex system. A social officer [Kevin Ingram] described the Army's refusal to endorse any word processing programme other than Word Perfect, in spite of his explanation of the need to use current versions of Microsoft Word in the employment training scheme he was managing. He referred also to his frustration with a system which required all computers to be purchased centrally, and then to be sent to THQ for repairs. This resulted, he maintained, in social centres' not being able to take advantage of attractive packages from local retailers, or to be able to obtain service locally. Social centres required an integrated payroll system and report writer, which was not available [Hugh Dacin, social employee]. It was felt by some users that commercially produced systems would be better, in order to make the system more user friendly [Bernard Jeffreys, social employee], and so that the Army was not trying to "reinvent the wheel" [Major Benjamin Rowen]. The time taken by the computer services department to get a new programme up and running was veryfrustrating for centres which were waiting, and yet unable to go out and purchase one off the shelf which had the potential to meet their needs [Lieutenant Samuel Cohen]. When asked what kind of computer system he would like to see installed, one officer replied "one that works" [Captain Lance Collier]. At the time of this study, all social centres and some corps were operating with computerized systems, although some were still doing certain functions manually, such as payrolls. One older officer [Major Rod Brough] voiced the opinion that the computer system ought to be disbanded, and hand ledgers adopted. He maintained that from those old ledgers, "you got the information you needed, not loads and loads of information that nobody wants to see". His view was extreme, and was not one expressed by anybody else, although it was acknowledged that in some cases the old hand-written system produced more meaningful information. It was not the desire to return to a manual system that officers and employees shared, but a desire to have a system that worked, that was flexible, and that met their information needs. The computer services Chapter 7 Financial reporting performance Page 292 department was reported to be slow infixing problem s and was blamed for holdups with the annual budgeting process, with disks arriving at centres late [Major Simon Kiely], and service being unsatisfactory. One social officer [Lieutenant Samuel Cohen] complained "it's never doneright th efirst time. Nothing ever works'*. As a backdrop to these complaints was the tension which existed between the finance department and the computer services department. The computer services manager and the Secretary for Business Administration appeared to agree about computer matters, with the Chief Accountant and other finance department members experiencing the frustrations of the system. From outside THQ, one senior officer [Major Hendrik Bowen] acknowledged that computer services were blamed for budgeting holdups, but implied that it was convenient for some people to be able to blame them. Another senior officer [Major Wendell Grant] observed that not all of the problems were attributable to the computer services department, some emanating from the finance department. He described a lack of communication between the two departments. This was certainly obvious to me. On at least one occasion, formal lobbying, in the form of a letter, took place from the finance department to a senior THQ officer who was unconnected with both departments [External Audit Issues Memorandum, 1996]. The writer of the letter described his motivation as being a desire to get a senior THQ officer on his side in the matter of computers. At another time there was a serious break in communication between the two departments, following the failure of the system at a time when the external auditors were waiting on information. Finance department members obviously felt that they required more input into the design of the chart of accounts and the computerized accounting system, than they had had up to that point of time. The Army's accounting system is complex, hierarchically driven, a combination of computerized and manual functions, and relying heavily on inexperienced and untrained personnel, especially in the centres, and a slow and outdated computer system. Such a system was not well placed, either structurally or culturally, to cope with the changes Chapter 7 Financial reporting performance Page 293 necessitated by the switch to the consolidation of the various funds, the adoption of accrual accounting, and the production of general purpose financial statements. According to the General and Social Fund accountants, the system's inability to cope with these changes has resulted in consolidation complexities, the inefficient use of cash resources, audit complexity, lack of standards and inconsistent practices, problems caused by different software systems for different entities, and an overall cumbersome and inefficient movement of accounting records [Wand and Dasan, 1997b, 1-2]. These challenges to the system, and the difficulty of adopting accrual accounting, will be considered in the next section. Changing the script: challenges to the system. Accrual accounting. With the adoption of accrual accounting announced, what remained was for the system to be put into practice. That it has taken a considerable time for the new system to be "digested" is hardly surprising, given the strength of Army procedures and culture [Hey-Cunningham, 1997, 1], and the initial absence of any meaningful training. The result has been that changes have not been implemented "completely and effectively" [Coopers & Lybrand, 1997, 12], but have resulted in a "half-way situation between cash and accrual accounting" [Hey-Cunningham, 1997, 18], with managers and officers confused about the relationship between accrual and cash-based figures: ... it's hard for a person for me, who doesn't have an accounting or financial background, to understand accrual accounting anyway ... so I come out to (assistant) every so often and say how much money have we got in the bank? [Bernard Jeffreys, social employee]. The result is that while there has been an acknowledgment among those officers and employees who understood government funding requirements and accounting, that the introduction of accrual accounting was a necessary undertaking, response within the Army to its adoption has been mixed. A social officer [Belinda Lee] described it as "a Chapter 7 Financial reporting performance Page 294 good way to go", and Bert Grosse, a finance employee, said it was a "good move". Previously, he said, the attitude of the divisions and the centres had been to spend, spend, spend, and to get THQ to bail them out489. Now they would be forced to make provisions for the future. Another social employee [Georgie Robbins], who was doing accountancy studies, described it as "terrific", because what she was learning, she could now put into practice. Positive responses seemed to be almost entirely from those who had some sort of financial expertise and/or accounting training, and yet even these were able to recognize the difficulty that many officers and employees had with the adoption of accrual accounting: ... we've gone from cash accounting, manual books, to computerized accrual accounting. Well, two jumps, computers and accrual accounting. And not everyone is qualified, either formally or informally, to deal with that. So that's something we must address, and as part of our work, just in the few instances that I've been involved with, we have addressed that. Training is something that simply must be done [Garry Thurlow, THQ employee]. Stimulated by the Year 2000 computer problem, but also by a raft of underlying frustrations and complaints, the Army commissioned Coopers & Lybrand in 1997 to provide a review of the existing computerized accounting system. They presented their report in April of that year [Coopers & Lybrand, 1997], and in it they highUghted the negative impact of accrual accounting within the Army. The report stated that "most centre and DHQ staff can not cope with the accrual accounting system and the accounting issues surrounding the transactions being processed", which affected the financial information the accounting system produced. The reasons they gave were: I certainly observed a culture of dependence by DHQs, social centres and corps on THQ. It was THQ which held the legacy reserves, and the idea seemed to be widely held that there was money there that could be made available. The Army culture of command, and the autocratic nature of the hierarchical structure, also contributed to the notion that decisions would be made "higher up", and therefore the responsibility, particularly of officers, was limited. Chapter 7 Financial reporting performance Page 295 lack of understanding of the accounting issues and changes required in many centres and DHQs; lack of developed accounting policies and procedures and practically useful accounting instructions from THQ ... leads to confusion in processing transactions through to the general ledger; difficulty for centres and DHQs to obtain accurate answers from the correct source within THQ for accounting problems; differences between government accounting reports and Army reporting requirements ... leads to confusion ...; lack of adequate and extensive training; bottlenecks occurring in the auditing process conducted by DHQs ... not all of the staff conducting the audits know how to audit effectively in an accrual environment and in a timely fashion [Coopers & Lybrand, 1997, 1997, 12]. These observations were borne out by my observations, and by the responses of both officers and employees in interviews. Most of them were negative. Their negativity appeared to stem from a lack of knowledge and expertise, and inadequate training and preparation. Accrual accounting was described as: much more technically demanding [Elaine Linsell, corps officer]; just impossible [Bernard Jeffreys, social employee]; not very clear [Hugh Dacin, social employee]; confusing [Leslie Gambling, DHQ officer]; much more complex [Benjamin Rowen, DHQ officer]; and requiring additional supervision [William Anderson, THQ officer]. Benjamin Rowen, a DHQ officer, was critical of the THQ Finance Department and the way they implemented the introduction of the new system. According to him, they failed to "read" the organization correctly, expecting much more of both officers and employees than they were capable of doing: You can't introduce accrual accounting a fortnight before the year end. and bring it into line. So there was insufficient time to train not only the Chapter 7 Financial reporting performance Page 296 managers, but the bookkeepers, in accrual accounting ... we've also got a problem in that most of the managers are basically there because of their people skills, not because of their accounting skills. So that under the old cashbook system, under cash accounting, it was all right to have somebody who could write up a cash book ... but that's no longer feasible, it's no longer practical. One employee [Bert Grosse] spoke positively of the training that was begun initially, when accrual accounting was first introduced. This was discontinued, on the advice of a senior THQ officer, a decision which was acknowledged, in hindsight, to have been a mistake. The officer involved was reported to have described the transition to accrual accounting as a problem for the officers and the employees who were implementing it, and not his problem, and as a result recommended that the training programme be stopped. This attitude seemed to emanate from the Army culture of command, and the "sink or swim" attitude to appointments and responsibilities490. One of the difficulties for the Army has been that with its budgetary constraints, it has tended to employ people "at the bottom end of the market" [Susan Carmody, THQ employee]. This has meant that with the introduction of accrual accounting, even the bookkeepers have been unable to cope with the new system without additional training or resources. Where they had been able to cope with a cash system, which was based on common sense and concrete concepts, they struggled with an accrual system. At some centres, some employees "panicked and left because they couldn't cope with accrual accounting" [Major Benjamin Rowen, DHQ officer]. The result was that at every level of the organization, the gap between accountants and non-accountants was startlingly obvious. The Chief Accountant491 explained to the 490 A bookkeeping trainer who was employed by the Army to conduct training workshops observed: '"Thrown in at the deep end' was a typical comment. Officers spoke of how they are moved from one kind of position to another without any training. Thus an officer in a corps might be moved to look after a nursing home without receiving any training. Employees spoke of not receiving any training in the accounting function. Our bookkeeping seminar was said to be thefirst trainin g in the general ledger" [Hey-Cunningham, 1997, 6]. 491 This was at the budget training day held at Rockdale Salvation Army corps on 14 May 1997. It was organized by THQ's finance department. Chapter 7 Financial reporting performance Page 297 managers and bookkeepers of social centres at a budget training day that assets must now be capitalized (amounts over $500) rather than put into expense accounts. He said some people were still expensing these amounts, but pointed out that it was "morally and ethically wrong" to expense them in this way, since the accounts were now presented as annual reports, and the auditors had to sign to say they gave a "true and fair" view. At the same training day, lack of accounting expertise was evident, with one officer manager asking about the difference between an Income Statement and a Balance Sheet, concepts of which he had no understanding. During the session, participants were taken through the process of adjusting for annual leave accruals, which proved to be a difficult concept for some. Observing the difficulties some managers were having with basic accounting concepts, I wondered how those at THQ could have assumed that accrual accounting could be adopted with little or no training, fuss or bother. It seemed an extraordinary assumption, one probably grounded in the Army system of command, which was basically a "sink or swim" system, and a lack of knowledge of the expertise (or lack of expertise) in the DHQs and centres. The concept of replacement funds for assets caused problems at a centre level in the matter of reconciling depreciation expense with the funds that the Army required centres to put aside. While the two items were supposed to match, this was not always the case, staff not having the expertise to reconcile them. Payroll reconciliations were also a difficulty, sometimes with unfortunate consequences, if government funds had to be repaid [Major Benjamin Rowen, DHQ officer]. Garry Thurlow, a THQ employee, described the difficulty of the transition: ... while the cashbooks were manual, and you could see literally on the page what you were doing, you didn't need to know debits and credits. Now that we have accrual accounting, and it's computerized, you need to know debits and credits, and I did explain to one person what journals were. They weren't aware of that. Now they could do their bookwork, fine, but they weren't aware of the reason for the accounting side of it, or how the accounting side worked. So that's a culture change, as much as anything. If employees and officers at the bottom of the organizational hierarchy were having Chapter 7 Financial reporting performance Page 298 difficulty in implementing the practical aspects of accrual accounting, then those at the top levels of the hierarchy were also having difficulties in making decisions about matters which required an understanding of accounting principles. Officers who held top ranks in the territory, in most cases, had come through the Army under a cash system, and that was the system that was familiar to them. At one THQ Budget Board meeting [THQ Budget Board 22 August, 1997], in the context of approving budgets for new capital items, a question was raised about the replacement of assets, and whether the replacement fund could be used for this. The Chief Accountant explained that there was a lag between the cash and accrual systems, that the changeover was "evolving", and that policies and procedures were overlaying practice. This explanation did not satisfy the Secretary for Personnel, who reiterated his question: in the depreciation replacement funds money was accumulating, so surely the replacements currently being discussed could be taken from that fund? Further, he wanted to know where the funds were actually held. The Chief Accountant explained that the funds were held in trust in the divisions, and that over the next 5-10 years there would be many assets having to be replaced, for which there would be no replacement funds. Items which had been purchased recently, for which a replacement fund had been put aside, would be covered by the fund when they came up for replacement. The Personnel Secretary then asked whether these "old" assets could be put on the asset registers, with the Chairman (the new Secretary for Business Administration) asking if the "old" assets could now be depreciated. Another finance department employee, an accountant, spoke up and explained that the "old" assets had already been expensed when they were purchased, under the cash system in operation at the time. At this point in the meeting, the accountants and the non accountants appeared to be at odds, one group understanding the principle that was being applied, with the other group obviously not grasping the concept. The Chief Accountant asked for a financial policy to back up the discussion, but the Chairman interjected at this point and said that this "philosophical, technical discussion" would be better conducted after the budgets werefinished fo r the year. Chapter 7 Financial reporting performance Page 299 My observations about the poor implementation of accrual accounting coincided with the negative comments from the Coopers & Lybrand report [1997], and with responses from officers and employees who were interviewed, who seemed to base their opinions on two factors. One was a lack of expertise of officers and employees involved in performing accounting functions within the Army, and the second was an insensitivity. on the part of THQ, particularly the finance department, to this lack of expertise. As regards lack of expertise, particularly on the part of employees, the Army had a dilemma. While employees often did not have the expertise required, being a charitable body, the Army did not want to put most of its bookkeeprs at social centres out of work [Garry Thurlow, THQ employee]. On a pragmatic note, the Army did not have the funds necessary to greatly increase salaries and attract the kind of expertise the new system would require, although the Chief Accountant sometimes expressed the opinion that the payment of higher salaries and the increased expertise which would result, would be small in comparison with the cost, in economic terms, of the current inaccuracies and inefficiencies. The Coopers & Lybrand [1997] report also highlighted evidence of substantial logistical problems with the Army's reporting system492, the consolidation process, and the levies charged by THQ on social centres and DHQs. It observed that the need to perform many tasks manually led to time pressures; that users were frustrated by the Army's failure to develop and integrate additional software modules493; and that the budgeting system was cumbersome and time consuming [Coopers & Lybrand, 1997, 12 - 18]. The report recommended replacing the computer generated accounting system (CGAS), and taking the opportunity to consider the Army's system requirements as a whole. This recommendation was taken up in May 1997, with the finance department being given responsibility for implementing the changes. This was a major "breakthrough" for that 492 Information was frequently lost in the process; because source documents were sent by corps and social centres to DHQs, centres later had problems in trying to access the information they contained; auditing of social centres by DHQs was time-consuming because of the number of centres, and the difficulty in locating required information [Coopers & Lybrand, 1997, 13]. 493 There was an urgent need for software to handle debtors, creditors, and residential records and purchasing [Coopers & Lybrand, 1997, 16]. Chapter 7 Financial reporting performance Page 300 department, but led to continuing tension between it and the computer services department. The Accounting Systems Review Committee began the process of designing and integrating a new system. Various computer users meetings were held, with representatives from social centres, the finance department, and the computer services department. By the time my research in the Army came to an end, the process was still continuing. Contact since has revealed that it has been a difficult task, slow and cumbersome, but that an attempt has been made to listen to the needs of users and to attempt to incorporate them into the new system Consolidations and year-end processing. It is hardly surprising, given the degree of difficulty there has been in absorbing accrual accounting into the Army's accounting system, in coping with the computer system and an inadequate and incompatible Charts of Accounts, that the consolidation process also would be difficult to implement. At the time of this study, the consolidation of the social fund was performed annually, at THQ. Excluded from the consolidation were corps and community centres, but the Chief Accountant expressed a desire to work towards consolidating those in the future [Diary 29 May, 1997]. The consolidation process was slow and unwieldy, with 250 ledgers of social centres and DHQs, and about twenty others from various chaplaincy departments and League of Mercy [Coopers & Lybrand, 1997, 14]. Because of the lack of expertise demonstrated by officers and employees at centres and DHQs, thefinance department , particularly the fund accountants, experienced a great deal of frustration when performing the consolidation process. With a deficient understanding of how to implement accrual accounting, staff at centres and DHQs were transmittingfigures t o THQ which were unreliable, inaccurate, and late494. Two of the fund accountants 494 A THQ finance department employee explained that the divisions had been "making a mess of it" [Diary 24 September, 1997]. Coopers & Lybrand [1997, 5] highlighted the dependence of THQ on information from DHQs and the various centres: "A large part of the Army's accounting information is sourced from transactions initiated at various centres. The transactions are keyed into ledgers in Chapter 7 Financial reporting performance Page 301 highlighted the need for accounting information to be timely, accurate and complete, and suggested setting up one ledger for the entire Army, one bank account, centralized payroll and salary accounting, centralized asset accounting495, and the decentralization of other external cash transactions [Wand and Dasan, 1997b, 2]. The Chief Accountant, who formerly worked for a large international company, felt this pressure [Diary 15 November, 1996], since his professional reputation was involved. He described how he used to have fully audited accounts prepared three weeks after the year end [THQ Budget Board 30 September, 1996]. "It can be done" was his assertion. And yet, to hisfrustration, it was not happening in the Army. Further, one THQ officer [Major Lee Pierce] expressed a lack of concern when he described how the Army's financial reports for the year ended 30 June 1995 came out in April of the following year. "It's crazy," he agreed, "but on the other hand, who cares? Nobody seemed to be worried about it". Some of the reasons for the difficulty of the process were identified by Coopers & Lybrand [1997, 14] as being: the large number of ledgers to be consolidated; time pressures, with information arriving late from centres and DHQs; confusion regarding year-end processing, with instructions sometimes late or unclear; computer disks being lost in the process; Dataflex and sent to DHQs for monthly review and THQ for yearly consolidation in the CGAS (Computer Generated Accounting System) system". Errors at the centres and/or DHQs would therefore cause major frustrations for staff at THQ. 495 This had proved to be a problem in thefield, accordin g to their report [Wand and Dasan, 1997b, 2]. Chapter 7 Financial reporting performance Page 302 incompatibility between CGAS (Computer Genertated Accounting System) and the Dataflex system, and incompatibility between centre and DHQ code structures. The same report recommended consolidation of the social fund more frequently than annually, beginning with quarterly consolidations, and working towards consolidating monthly. The recommendation recognized the necessity of planning in advance, and outlined procedures in such a way that the various DHQs were able to understand them and follow them. This was an acknowledgment that DHQ staff required specific training and well developed procedures, if they were to undertake consolidation procedures at a DHQ level. Obviously, the relevance and compatibility of the chart of accounts would have a considerable bearing on the ease with which this process could be undertaken. Under the existing system, this would seem to be an optimistic view. Inaccuracies in information received by THQ from the DHQs hampered consolidation and audit processes for the year ended June 30 1996, for example, with adjustments required in all of the 250 ledgers throughout the territory [Management Report Memo, 1997, 1]. The Chief Accountant claimed that the extra time taken by THQ staff to correct these inaccuracies, and to get to the site of the various problems, could conservatively be estimated at $120,000. The inability of centre and DHQ staff to cope with the Army's accounting procedures was cited as a significant part of the problem: "Switching from cash books to accrual accounting was a bigger step than had been envisaged by all involved" [Management Report Memo, 1997, 2]. Regarding the computer system, the rekeying of data from the dataflex system into the computer generated accounting system (CGAS) took a great deal of time, and risked further entry errors. This also incurred additional costs, in terms of overtime forfinance department staff and external auditors. The fund accountants were the ones who were responsible for completing the consolidation process, and for them it was a very difficult and time consuming task. Wand and Dasan [1997b] suggested a model where the Army had one ledger which Chapter 7 Financial reporting performance Page 303 recognized separate organizational units, one bank account, centralized payroll and asset accounting, and the decentralization of data entry for other external cash transactions. This, they maintained, apart from offering significant benefits in terms of the elimination of many cash movements and the possibility of optimizing investment returns, would simplify the consolidation process and improve accuracy. The Chief Accountant similarly suggested [Management Report Memo, 1997, 3-4] centralizing data at THQ, thereby speeding up the consolidation process496. Finance department staff involved in the consolidation process seemed in agreement that it was a time- consuming and frustrating task, made difficult by the poor quality of accounting information they received, and by the incompatibility of the computer generated accounting system (CGAS) and dataflex systems. The negative comments by Coopers & Lybrand [1997, 12] about inaccuracies in information from DHQs, as well as the dissatisfaction of finance department members, particularly the Chief Accountant, with the standard of accounting functions performed at DHQ level497 precipitated an interesting development during this study. In May 1997, a decision was made at THQ level that the Divisional Finance Secretary function would be split into two parts, one to concentrate on corps and general administration responsibilities, with the other focusing on the accounting aspects of the role [Diary 29 May, 1997]. The intention was that those officers presently working in Divisional Finance Secretary positions would take on the general responsibilities, with professional accountants being employed to focus on the accounting aspects. Response to this It was claimed by the Chief Accountant [Management Report Memo, 1997, 4] that the centralization of data at THQ would not take away the "ownership" of the DHQs and centres, which, he argued, was not evident, given the quality of information they had been forwarding to THQ. DHQs had demonstrated a lack of ownership in the way they had asked assistance of THQ. 497 A finance department member told me of one Divisional Finance Secretary who allegedly left the year end submissions from social centres on his office floor for six weeks, and then sent them in to THQ unchanged to be corrected [Diary 14 April, 1997]. When I asked one finance department employee if he was helping the social centres with their year end accounts, he replied that he was doing it for them [Diary 24 September, 1997]. It was reported to me that the DHQs had not fulfilled their responsibilities at the year end, and therefore the social fund accountant had to do it [Diary 5 November, 1996]. There was considerable intolerance from the finance department towards divisional staff they perceived to be either inexpert or inefficient. Chapter 7 Financial reporting performance Page 304 proposal was mixed, with some DHQ staff being in favour, but at least one Divisional Finance Secretary expressing a sense of betrayal, disappointment and anger498 [Diary 18 June, 1997]. It seemed to me that this incident represented a clash between the old Army culture and the new professionalized accounting culture. The Divisional Finance Secretaries were products of the old system, and they were perceived to have become outdated and incompetent, when faced with the increasing demands being placed on accounting personnel within the Army. I understood the need to improve the quality of accounting work being performed at the DHQs, but at the same time, I felt sorry for the Divisional Finance Secretaries who were caught in a changing system into which they no longer fitted. If the Army is to take up the suggestion made by Coopers and Lybrand [1997, 20] that the social fund be consolidated more frequently499, with the DHQs responsible for the first level of the consolidation process, then the onus will be even more on DHQ accounting staff to possess the expertise necessary to fulfill that expectation. There will be no room in the Army, if this scenario is adopted, for officers to be simply "parked"5 in positions for which they do not have the relevant training and expertise [Hey- Cunningham, 1997, 5]. Auditing. From its earliest days, The Salvation Army has taken great pride in presenting financial statements which have been audited. "Early financial accountability" in Chapter 4 498 One Divisional Finance Secretary told me that the Divisional Finance Secretaries had been "crucified", and that the announcement of the split in the Divisional Finance Secretary position had caused "quite a stir" for the Divisional Finance Secretaries he had spoken to. He alleged that the Chief Accountant "told me I was incompetent" [Diary 18 June, 1997]. 499 The suggestion was that initially the new timing be quarterly, for a trial period, but that once centres and DHQ were accustomed to the new timetable, "consideration should be given to monthly consolidation" [Coopers & Lybrand, 1997,20]. 500 Hey-Cunningham [1997, 5] observed that this practice was very expensive for the Army, with the annual cost of a single officer between $40,000 and $50,000 and of a married couple, up to $60,000. He suggested that a "parked" officer could be "a very significant overhead to cany". Chapter 7 Financial reporting performance Page 305 highlighted William Booth's responsibility to publish annually an audited balance-sheet [The Salvation Army (New South Wales) Property Trust Act 1929, 1959], and described the great trust he put in the Army's auditors to ensure that all financial dealings were scrupulously honest, accurate, and defensible. This tradition has continued to the contemporary "audit society" in which the Army exists, and in the context of those expectations, parts of the Army now experiencing three or four audits of theirfinancial affairs . Figure 7.3, "Audit structures of The Salvation Army" below shows these in diagrammatic form. Figure 7.3. Audit structures of The Salvation Army. Once every five years, International Headquarters (THQ) conducts an audit of each territory, world wide. In order to accomplish that, before their arrival, the finance team from IHQ collate each territory's annualfinancial statements, as well as numerous other schedules and detailed accounts. Conducted by Army officers from the finance department of IHQ, the purpose of the audit is to report on thefinancial statu s of the territory. Between these five year episodes, within each territory, the Territorial Financial Secretary has the authority to write to IHQ if he/she believes that the financial Chapter 7 Financial reporting performance Page 306 affairs of the territory are not being handled in a correct and responsible manner. One of the matters which ought to receive IHQ approval is the use of legacy reserve funds for the running of the territory. This appears to have happened within this territory without proper authorization, but, as one senior THQ officer said, to write officially to IHQ would be a huge undertaking, and "it would have to be fairly serious" to be attempted. Figure 5.4 "Territorial Headquarters responsibilities" shows the territory's internal audit department as coming under the direction of the Secretary for Business Administration, a situation which one audit employee [Garry Thurlow] found inappropriate. He believed its position in the organizational structure ought to come under the Chief Secretary's office, in order to maintain the independence required of the internal audit function. With its own charter "to check and report on the system of internal controls within the Army" [Garry Thurlow], its responsibilities took in THQ departments, divisions, offshoots from THQ (such as the training college) and social centres, but did not include corps, which are audited by DHQs. Moving from the old system of 100% checking of vouchers and documents, the scope of the Army's internal audit department has now increased enormously, both in terms of the kind of items that are audited and the number of centres now needing to be audited. While they don't consider the "big picture"501, but leave that to the external auditors, they include in their brief checking of employment agreements and vehicle log books, for example [Garry Thurlow]. In spite of these changes, the issue of the usefulness of the Army's internal audit was raisedfrequently 502, and at least two external reports commented unfavourably on the quality and scope of internal audit work done [Hey- Cunningham, 1997; Management Report Memo, 1997]. 501 One audit employee [Garry Thurlow] described the auditing of apportionments between the social, general and property funds as being part of the "big picture". 502 Some officers spoke of significant disruption to their daily activities during the conduct of the Army's internal audit. One [Captain Hugh Richards] expressed extreme disapproval of the "unprofessional" manner in which the audit was conducted, and the severe disruption to his staff. Another senior THQ officer expressed the opinion that the competency level of internal audit staff needed to be raised [Captain Lee Pierce], and a social centre manager [Joel Pitt] suggested the Army would be better off handing the internal audit function over to the external auditors. Chapter 7 Financial reporting performance Page 307 Hey-Curmingham [1997, 16 - 17] raised several concerns about internal audit based on feedback he received. He observed that the external auditors were no longer prepared to rely on the work of the internal audit department503, and suggested that the Army consider outsourcing the internal audit function; he queried the experience of the internal auditors and their ability to review computer systems; he raised the issue of the internal audit workload and the inability of that department to keep pace with time demands; he noted that internal audit was not detecting "significant errors" at social centres, but was majoring on minor infringements504; and he pointed out the difficulty of auditing centres when the system required that all their documents be sent to THQ. The increasing use of professionals in the audit role has been promoted by senior THQ officers. In speaking of his desire to see the level of competency in both thefinance an d internal audit departments raised, Captain Lee Pierce observed that ... it's no good putting officers there just to give them a job ... the Army's too big now. The world's - we're too commercial. We've just got tofit i n with things. We've got to have the right sort of people. This recognition, while sensible in a business sense, brought tensions within the territory, with the Army's strong officer culture evident in perceptions about internal audit work. Even though the current head of the internal audit department was not the first professional accountant to be employed in this position, the presence of a non- officer in this role occasioned some negative feedback. One senior THQ officer from overseas [Colonel William Anderson] described how, in his home territory, he was the first to employ a non-officer auditor, a trained accountant. He admitted there was 503 The Chief Accountant [External Audit Issues Memorandum, 1996, 2] stated that the internal audit reports had not been useful to the external auditors because they concentrated on "procedures and control rather than auditingfinancial statements up to a particular period". He pointed out that this had necessitated a great deal of additional time from finance department staff at THQ, as they reviewed and corrected the accounts from centres throughout the entire year, rather than relying on accounts from the date of the latest internal audit. 504 A finance department employee [Bert Grosse] observed that the internal audit department was more interested in "policies and procedures" rather than "finances and capability". This he attributed to the strong officer culture. Chapter 7 Financial reporting performance Page 308 initially "some resistance" to her appointment, but stressed that there were simply not enough officers to do the auditing. One Salvationist DHQ employee [Wilson Robbins], summed up his concerns about the Army's non-officer internal audit staff: ... professionally, probably quite sound, and I can see they're trying to work in with the Army's philosophy, but sometimes the attitudes, the phraseology, the language, belies their suitability. It goes beyond true professional ability. Now the auditing one is probably one where you can get away with it, because everyone hates auditors anyway ... but if we carry that through, and just simply select people because they're good at perfonning the basic tasks of their position and they don't have a very strong affinity with the Army, and are not keen on promoting its cause through their lives, sure, our image will drop. DHQs have responsibility for auditing the financial accounts of corps and community centres. These take place once a year, with DHQ finance staff travelling to the various corps to conduct their audits. Community centres typically send their documentation to their DHQ, and the audit is conducted there [Wilson Robbins, DHQ employee]. One DHQ officer [Major Rod Brough] expressed concern at the workload that now rested on DHQ finance staff, with corps audits required to be completed before the Divisional Commander or Divisional General Secretary conducted the annual corps review. In a division with 50 corps, he suggested, there would be difficulty for DHQ finance staff in completing corps audits within the time frame required. While DHQ audit responsibility is limited to corps and community centres, since the territory's restructure, they now have additional responsibility to monitor the financial affairs of the various social centres, to complete their annualfinancial returns, and to review their audit reports [Wilson Robbins]. With social centres often relying on deficit funding from THQ, the DHQs had the responsibility of ensuring that theirfinances were being handled in an accurate and reliable manner, and that their spending was within their approved budget levels, before deficit funding was released. When accounts come in to the DHQs from social centres, DHQ finance staff go through them to make sure they have been completed correctly, following a basic check list. "It's thorough enough, but we can't dig everything out," Wilson Robbins observed. Chapter 7 Financial reporting performance Page 309 If the territory's plans to computerize and consolidate accounts from corps and community centres eventuate, it would be expected that this would place more pressure on finance staff at DHQ level, a factor which contributed towards the split of the Divisional Finance Secretary function referred to above. That action was a preparation for greater sophistication of accounts at local corps and DHQ level. The appearance on the annual financial statements of The Salvation Army of an audit report by Coopers & Lybrand establishes it as afinanciaDy legitimate organization, even if the report is qualified. The grounds on which the qualification was made related to the collection methods employed by the Army, which as a DHQ officer [Captain Lance Collier] pointed out, were adequate up to a point, but involved a lot of trust, especially with collections taken in the course of street ministry505. Issues picked up by the external auditors for the year ended 30 June 1996 included the quality of information the Army provided, its timing and materiality, comparative statements, and internal audit reports506. The Chief Accountant composed a response to these issues [External Audit Issues Memorandum, 1996]. In it he considered each one separately, and suggested an explanation of why they had arisen. The poor quality of information has already been explained as emanating from a combination of lack of understanding of basic accounting concepts by staff at social centres and DHQs, and the heavy reliance of THQ on information from those sources. The timing issue highlighted often strained relations between THQ and the DHQs, with deadlines constantly being neglected. The result was frustration and time pressure for accountants at THQ as they struggled to "clean up" information and reconcile it in time for the external auditors to do their work [External Audit Issues Memorandum, 1996, 1]. A senior THQ officer [Colonel Jerry Deephouse] responded to this issue by suggesting that "as long as With street ministry, ordained officers or local Salvationist officers collect beside railway stations, on the street, or in hotels. The boxes are locked, and procedures are in place for the proper handling of money collected in this way. Captain Collier pointed out that while the system was as thorough as it could be, there were opportunities for the theft of collections, which caused not "major problems" but "problems". 506 The lack of usefulness of these reports to the external auditors has already been discussed. Chapter 7 Financial reporting performance Page 310 management and DHQs feel that accountability to THQ is an infringement of their 'autonomy' this attitude will continue". As regards the materiality of information, there had been problems in getting centres to complete their audits, with year end instructions either not read or not understood. Colonel Deephouse suggested the same THQ/DHQ tension may be the cause of this difficulty. The Army's current software did not allow for comparative information, and the focus of the internal audit department has already been described as not being concerned with the audit offinancial statements. The process of completing the external audit involved a huge time and financial pressure507 for the Army's finance department. It was a struggle to meet the audit deadline of late October or early November, because of the issues outlined above, and yet it was highly desirable to achieve this deadline, for a number of reasons. Government audit certificate requirements, the staffing requirements and schedules of the external auditors, and the publication of the public relations department's annual report in November508, all provided strong reasons why this pressure had to be applied. The identification of these external audit issues came as a relief to staff in THQ's finance department, who, as professional accountants, saw the problems very clearly. That they had been spelled out by Coopers & Lybrand was an acknowledgement that the issues were not merely the complaints of a few accountants, but genuine problems the Army had to address if it was going to survive financially in the current environment. Now the Chief Accountant saw the problem as finding a "politically acceptable solution" to the identified deficiencies [Diary 14 April, 1997]. The systems review became an integral part of that process, with the finance department's steering of the systems review committee an acknowledgment that it was accounting solutions which were required. 507 A social officer [Captain Rosemary Johnson] told me that the Chief Accountant informed her that it cost the Army $300 per hour to have the external auditors fix faulty accounts. This was in the context of complaints about the quality of information from social centres. 508 The annual financial statements were to be included in the PR department's annual report. Chapter 7 Financial reporting performance Page 311 As regards the scope of the external audit, a DHQ officer [Major Sharon Girling] told me of how she had received a "rocket" from THQ about the books of a particular social centre, which they described as "a disgrace". Both the internal and external audits had failed to pick up any deficiencies in the centre's accounts. A similar case was described to me by Joel Pitt, a social employee, who cited the failure of the auditors to identify mistakes in his centre's government returns. When I asked an internal audit department employee [Garry Thurlow] whether his department audited the apportionments made between the general, social and property funds, he replied that that was not his concern, but would be within the province of the external auditors. However, when I asked the Social Fund accountant (see Figure 5.5 "THQ Finance Department structure") how the external auditors went about checking these apportionments, I was surprised when he replied that as far as he knew509, they paid no attention whatever to the manner in which the apportionments were made, or even to the fact that apportionments were made at all [Diary 3 October, 1996]. This was clearly a matter which had surprised him as well. Once the list of apportionment percentages was established, there appeared to be no time at which these were checked, either by being re-surveyed, or by observation. Because they were a "transaction" between the various fund accountants, the only authorization required was the initial approval of the rates by the Finance Council, and the ongoing validation of the various funds for reporting purposes. In a discussion with several finance department employees, the issue of whom would be affected by inaccurate apportionments was raised. It was agreed that the major effect would be on public perception, which was unlikely, since nobody knew about the apportionments. As it has since its inception, the Army appeared to place heavy reliance on the auditing function, particularly the external audit, as the final "proof of the accuracy of its accounting system. However, as essential and desirable as the annual external audit 509 He would have known, since he was heavily involved in getting materials ready for the external auditors. Chapter 7 Financial reporting performance Page 312 was, it was obvious it was becoming more and more difficult to complete it, given the limitations of the Army's current accounting system. The increasing use of professionals in an auditing and advisory financial role was a concern to at least one officer [Captain Hugh Richards], who expressed caution at the perceived benefits of using the external auditors for advice onfinancial matters: I just hope the Army leaders are wise enough to take advice in the context of our spiritual mission, and not allow the business side of things to dominate. External governments and agencies are increasingly placing requirements on organizations like The Salvation Army for audits. The Department of Employment, Education and Training required financial records and accounting procedures to be in place for employment schemes which provided an adequate audit trail [DEET Agreement, 1995], with the department reserving the right "to conduct random audits by auditors independent of the organisation" [DEET New Work Opportunities, 1995, 2]. Retirement Villages were required by the Office of Real Estate Services to comply with the Retirement Village code of practice, which involved providing residents with audited accounts "no later than by the end of October" [Budget Cycle Memorandum, 1996] . Government funding requirements511 for audit certificates and a set of audited annual accounts from nursing homes by 30 September each year represented another audit demand which the Army had to meet. It is hardly surprising to learn, given the preceding discussion, that the Army has struggled to meet these audit demands. Bert Grosse, from THQ's finance department, spoke of "tremendous problems" with the audit certificates for one particular centre This deadline assumed afinancial year which ran from July to June. 511 The Commonwealth Department of Health and Family Services lists The Salvation Army as an "approved provider" of aged care. The Salvation Army then applies for bed allocation usages, and is allocated those on a demographically calculated formula. The submission of an audited return annually by 30 September is required if Commonwealth funding is to continue. Chapter 7 Financial reporting performance Page 313 [THQ Budget Board 30 September 1996]. Bernard Jeffreys, a social employee, complained that problems with the Army's computer system had held up his audited returns to the government, which were at that time two months late. He predicted a cash flow problem for his centre if they were not able to complete the audit certificate and release the next instalment of government funding. It was an "onerous" process, according to Major Simon Kiely, a social officer, who explained that the Army has rarely, if ever, achieved the set deadlines. He was relieved that the government was "at least sympathetic" to the Army. A finance department employee [Travis Greig] was not as confident in the government's acceptance of tardiness. Usual Army practice was to send the audited annual report "whenever we get them done", which, at the time of our interview, was in May, eleven months after the year end. He was concerned that the government, which had been "slack", was tightening up. ... and also, their understanding is why should they give the Salvation Army funding when other people can be more efficient with their money. and I think that's where our big headaches are going to come in the future, because our efficiency rates will not be as good as the private sector. One corps officer [Lieutenant Kerry Connors] who received government funding for welfare payments, acknowledged the need for the Army to keep faith with the government, to be more "business-oriented", and to get away from doing things "like we've generally done up to this stage". The Chief Accountant expressed similar concerns [Management Report Memo, 1997, 3] at the Army's failure to meet its government auditing requirements: The government funding that we currently enjoy represents over one quarter of our total income. With the tightening up of government funding, if we continue to treat the government's criteria of accountability with disrespect by continually failing to meet our deadlines, then this funding is in jeopardy. Some of our centre managers are ignorant of their financial obligations regarding the funding agreements, some have not read them, or inherit them with the appointment changes. In this case ignorance is not bliss as funding can be stopped. THQ stafffield man y calls from the government regarding our non-compliance with their requirements. Chapter 7 Financial reporting performance Page 314 Failure of many officers in particular to meet requirements [Bert Grosse, finance department employee] seemed to emanate from the officer culture which has already been discussed, and from THQ/DHQ tensions as regards timetables and deadlines. Maintaining the performance: keeping accounting up-to- date. The Salvation Army made a huge leap when it moved to produce general purpose consolidatedfinancial statement s based on an accrual accounting system, in line with accounting standards. While the statements have been produced, the organization has struggled to achieve a performance at such a level. Plagued with an outdated accounting system, with personnel who are often not expert in the use of accounting, and with an unwieldy computer system, it has had to come to grips with a number of revolutionary changes. None of these has been accomplished easily. Many of the aspects of this saga did not make sense to me. Why did the finance department fail to continue with the accounting training it initially began when accrual accounting was introduced? Why was it assumed that the new system would simply be adopted? Why was there a sense of competition between THQ and the various DHQs? These issues could not be explained simply in technical terms. I came to the belief that the Army's difficulties in implementing accrual accounting, and the ongoing problems it was facing, emanated from the Army's distinctive culture, a culture which almost guaranteed it would struggle to make the changes that were required. The organization structure of the Army was described in Chapter 5, as well as the changes which have taken place in the 1990s. While there has been an attempt to pass decision making down the hierarchy, there has been some resistance to that notion, rooted in the strong Army-style structure, the bureaucratic, autocratic nature of the organization, the issue of expertise, and the presence of tension between officers and employees at many levels of the organization. Chapter 7 Financial reporting performance Page 315 The Army's system of using officers in financial and administrative roles, even though they were not trained in such roles, set up many of its officers for failure when the new reporting format was introduced. Many felt quite acutely their lack of expertise in the areas into which they were placed [Irvine, 1997], and some felt threatened by the presence of trained professionals whom they were often in a position of having to supervise. The traditional values of obedience and willingness to go wherever they were sent, to move frequently when called upon to do so, the lack of a designated career path, and the lack of a system of accountability, all combined to produce officers who, while they had extremely high levels of dedication to their calling, were out of place in an environment where technical financial expertise and understanding were required. The attributes which had seemed to be valued so highly, now seemed to belong to an earlier era. The dramatic growth in the number of employees has been described in Chapter 5, and has probably exacerbated tensions between officers and employees. While generally they got on well together, many officers expressed reservations about the responsibilities that employees ought to be given. There was a strong belief that officers should maintain control over policy setting and general directional issues [Irvine, 1997], the emphasis being on fulfilment of the Army's mission, which employees, it was believed, would not fully comprehend or be committed to. To a certain extent there was a resistance to the employment of professionals in some roles which had traditionally been performed by officers. Employees often expressed a sense of awkwardness at working with officers. They identified a "pecking order", with officers at the top, followed by Salvationists, and then other employees. Sometimes officers seemed to assert their authority strongly, and this caused problems512. The comment of the Chief Accountant in his Discussion Paper re Finance [1996], while 512 Hey-Cunningham [1997, 9] observed in his report that lay staff felt they were "second class" citizens, with officers most influential, and Salvationists carrying more weight than non Salvationists. His concern was that the Army did not listen to all its people, with officers' opinions carrying more weight than those of employees. Chapter 7 Financial reporting performance Page 316 it would have seemed practical and obvious to him, from a professional point of view, represented a significant departure from the Army's culture of dealing with officers and their appointments: This visit513 highlighted the need to have staff that understand accounting and have the drive and expertise to oversee the budget process and year end process. A competence level must be displayed in managing the whole division from getting the centre's cooperation through to giving THQ accurate and timely information that they quire. Managers at some Social Centres do not display afinancial competence and a feedback system from finance to personnel needs to be investigated. Some details of the officer's track record regarding fiscal management may not be known or documented. Tensions also existed between THQ, the various DHQs, and centres514. Positions for officers at THQ level were seen as rewards, with the system of promotion valuing administration over corps or social work. The roles of THQ and the DHQs, especially since the restructure, were undefined and ambiguous. While the old authority/control role seemed to be being replaced with a resourcing role, at least in theory, the reality was that this was far from the case. There wasfrustration expressed at every level that THQ was not acting in the capacity in which it was thought it ought to be. It was sometimes perceived as operating in a punishment mode [Major Simon Kiely, THQ officer], with the emphasis on discipline, but not rewards [Hey-Cunningham, 1997, 9]. In the DHQs, the weight of increased administrative responsibilities, including accounting, was felt very heavily. Consequently, DHQs struggled to fulfill expectations, and those at THQ were often disappointed, or even antagonistic, at the seeming lack of care the various DHQs took in sending in required information. If consolidated reports are to continue to be produced, and the consolidation process is to be extended to include the corps, then significant changes will be required in order 513 The discussion paper was written in response to visits to two of the territory's divisions. 514 The largest gap in the organization was between THQ and the DHQs. Within THQ there was friction between some departments, sometimes involving a protection of "kingdoms" [Hey- Cunningham, 1997, 9]. Chapter 7 Financial reporting performance Page 317 for this to happen. Unless the backstage activities can cope with the public performance, in terms offinancial statements , the organization will continue to struggle and experience internal discord and difficulties. While many officers and professionals within the Army are aware of the changes required, and are working towards achieving them, the process of change is not merely technical. It involves a definite and sometimes painful engagement between the accounting institutions of society and the Army's unique culture, structures and routines. The next chapter takes up these themes, considering them in relation to the Army's budgeting system. CHAPTER 8. The performance (2): following the budget script. UNDERSHAFT: ... and now to business. CUSINS: Pardon me. We are discussing religion. Why go back to such an uninteresting and unimportant subject as business? UNDERSHAFT: Religion is our business at present... [Shaw, 1945, 88]. I had not known quite what to expect when I arrived at the XX corps for the Army's budget workshop day in May 1997. It was a day promoted as being to assist social centre managers in preparing their annual budgets. Having already visited quite a number of centres and interviewed several managers, I knew that budget preparation was a major headache to many of them. They had complained of an inadequate computer system, of budget instructions which were difficult to follow, of deadlines which were impossible to keep, of a lack of assistance with their budgeting difficulties, and of a distinct lack of sympathy for their own particular problems from THQ in particular. From the other point of view, I had also heard stories from THQ's finance department about the incompetence of various centre managers, about wilful disobedience by managers who showed no respect for budgeting deadlines, and about a generally poor understanding of accrual accounting. Caught in the middle, DHQ staff were in the difficult position of trying to help the centres, liaise with THQ, and keep everybody happy, within the context of their own limitations and pressures. I knew that the day would be interesting at least, organized as it was by the territorialfinance department, with DHQ staff in attendance, and social centre managers required to be present! When I arrived, the large upstairs room was a hive of activity, with people setting up computers and generally getting themselves organized for the workshop. As 1 looked around the room, I saw many faces I knew, with representatives from fifteen centres present, as well as threefinance department staff and three representatives from DHQ. The Divisional Finance Secretary welcomed everybody and then handed the proceedings over to the Chief Accountant, who spoke, on and off, for most of the day. People had been asked to bring in their own computers, and were to work on their own budgets. The fact that budgets were supposed to be lodged with DHQ the day before the workshop did not escape notice, and it was agreed that there would be an extension of that deadline. Chapter 8 Budget performance Page 319 One of the "big picture" issues the Chief Accountant raised was the need for the territory to make a strategic decision about whether data was to be centralized at THQ, or whether more authority would be devolved to the divisions. This would have implications for the new computer system which was to be designed. A second issue was the limit of $14 million available for deficit funding. It had to be shared around the territory as fairly as possible, and with aged care centres being brought to a zero deficit, there would be tensions about allocations. Further, the drying up of government funding meant that centres had to look at raising their own income, possibly through increasing residents' or clients' fees. In order to be able to fund the replacement of $200 million worth of assets over the next few years, all the "flab " would have to be squeezed out of budgets. The emphasis was on careful control of costs and responsible, complete and accurate budgeting. The pressure was definitely on! The Chief Accountant acknowledged that sometimes in the past finance department instructions had been accounting-oriented, and that it had been difficult for people to understand them. Several times during the day he referred to a comment one officer had made to him on a previous training day, when she accused him of being unfairly negative and critical of the efforts of centre staff. He was obviously anxious not to appear negative today, and made a great effort to try to be sympathetic to centre managers' difficulties and lack of expertise. The programme for the day was to load the budgets by morning tea time, tackle the expense accounts by lunch, and then spend the afternoon doing accounts which required entries. This sounded good, but it became obvious that to achieve that level of expertise by the end of the day would be beyond some of the participants. Even if they managed to get their budgets into an acceptable shape by the end of the day, no attempt would have been made to address some fundamental deficiencies in their understanding of accounting procedures or their ability to put them into practice: • Major Hal Dandridge was confused about the difference between an income statement and a balance sheet. • When the Chief Accountant asked who used the cash flow management component of the dataflex system, nobody did. I asked Captain Rosemary Johnson, who was sitting next to me, how she managed cashflows at her centre, and she told me that she used her bank statements: when they showed an overdraft, she knew she was in trouble. A finance department employee who was listening agreed with this. According to him, most centre managers had no idea about managing cashflows. • One Army captain described how he had been working for several months, new to his centre, without full staff, his bookkeeper having resigned. Chapter 8 Budget performance Page 320 • A social centre employee had been working with a broken-down computer for several weeks. On this day, he made a trip to THQ to get a temporary replacement so he could attend the budget workshop. • A lieutenant from a social centre needed constant assistance. She appeared to be struggling to cope with the budget. I discovered later that she had gone on sick leave. Apparently the demands of the job were too intense for her. DHQ staff were assiduous in their efforts to help and the message was given quite clearly that the correct approach for assistance was through them, not through THQ. This was difficult for some of the older officers, since the Army's social work had been supervised directly by THQ until the last couple of years. Their preference was to deal directly with THQ staff. The day left me with the impression that THQ staff were anxious to make up for the mistakes they had made in previous years when they had assumed too much about centre managers' accounting expertise, and had been too impatient and unsympathetic about assisting them with those difficulties. In spite of these efforts, it seemed there would be troubled times ahead, as the centres struggled to achieve the budget expectations which had been placed upon them. Chapter 7 described the production of The Salvation Army's annual financial reports as documents for a public audience, the contents of which were determined to a great extent by societal expectations. The preparation of corporate-style reports, in keeping with Australian accounting standards, was shown to have a profound effect on the internal workings of the Army, and to place significant pressures on an organization whose culture was very much at odds with the more stringent demands of accrual accounting, in particular. This chapter demonstrates that annual financial reports are not the only accounting function influenced so powerfully by the norms of society. The focus now moves to the Army's budgeting system, which is also strongly determined by those expectations. The notion that budgeting is not just a technical, rational activity515, but is determined also by a variety of organizational and environmental factors, is not new [Covaleski and 515 Pettersen [1995, 220], in his study of budgeting in Norwegian hospitals, observed that it was a "political process" rather than a control process. Cooper et al [1981, 182] highlighted the role of budgets and accounting systems as reflections of power. Chapter 8 Budget performance Page 321 Dirsmith, 1983, 324]. Much more than an accounting control activity516, budgeting involves a complex interplay of "institutionalized forms of ratiormhty induced by the environment" [Covaleski and Dirsmith, 1983, 325], whose purpose is to present an image of the organization consistent with the norms and expectations of society. The changes already referred to in earlier chapters help to portray an image of an organization in which information flows upward, decision-making is shared, and accounting functions are up-to-date. Chapter 6 identified these attributes as being valued by society, as evidenced by their implementation within government and corporations, vital providers of funds to nonprofit organizations. Nonprofit organizations are experiencing growing pressures as they seek to reinvent themselves to keep up to date with the changing expectations of society, in order to maintain or increase their funding. The budgeting system of the Army is a good example of the introduction of accounting practices believed by society to be desirable. Global budgeting represents an upward flow of information and the assigning of areas of responsibility to organizational members. Accrual accounting was discussed in Chapter 7. But these techniques have not been adopted without some cost to the organization. This chapter explores the reflexive impact between global budgeting, as it was scripted to be implemented, and the Army's internal culture. While the budgeting script was written, and the production was undertaken, the actual performance, in some instances, was decoupled from the script,finding it s expression in the actions of Army personnel who often made up their lines as they went along, and who performed within the constraints of their own understandings, training and expertise. The global budget script. Perhaps the most time-consuming, all-embracing, wide-ranging accounting task 16 The rational view of budgeting portrays it as "a master plan for action in ensuing period of time", a quantitative expression of organizational goals" [Cooper et al, 1981, 180]. Chapter 8 Budget performance Page 322 undertaken within The Salvation Army, the preparation of its annual budget has undergone revolutionary changes in recent years. These changes have been the result of organizational restructuring, the apparent desire to devolve authority from THQ to the various DHQs, the introduction of accrual accounting, an increasing emphasis on computerization of accounting, and the influence of accounting professionals. All these factors have coalesced in the Army's global budgeting system. Their impact on Army actors and culture has been huge, as has the impact back from actors and culture to the budget script. The recognition by Salvation Army members that funding is necessary for the continuation of the Army's mission has already been highlighted, as has their willingness to broach the matter of money. It costs money to run social programmes, to maintain or "plant"517 new corps, and to administer the whole production. Because there seems to be barely enough money just to maintain existing ministries, there is a high consciousness within the territory of the importance of budgeting, at least from the point of view of controlling costs. The Army culture of doing things as economically as possible, and of applying stringent criteria to expenditure, comes to the fore in the budget process. And yet there has also been a culture of dependence for funding, on government, the public, and even territorial headquarters. There has been a growing realization that with current changes to the funding arrangements of nonprofit organizations, and increasing competition for charity dollars, money may not continue to flow into the Army in the future as it has in the past. Because of this, there has been an attempt to encourage organizational units to take on more responsibility for their ownfinances. The budgeting process has been seen as one way of achieving this. As a result it has grown in importance, complexity and sophistication in recent years. 517 New churches begun by the Army are called "plants". Chapter 8 Budget performance Page 323 With the organizational restucture that took place several years ago, and the move to global budgeting, one of the major concerns seems to have been to make divisions, social centres and corps aware, in afinancial plannin g sense, that there is a "limited bucket of money" available [Heather Collins, social employee]. No longer will the "great bucket" at 140 Elizabeth Street518 [Captain Stephen Dent, social officer] be available for bailing centres out when they get intofinancial difficulties. Instead, there needs to be practical action taken to acknowledge the fact that this so-called "bucket" is not "bottomless" [Major Wesley Davidson, social officer]. The "bucket" at THQ, while it may not be bottomless, does in fact exist, since it is THQ which co-ordinates the annual Red Shield Appeal and receives all Red Shield donations; it is THQ which receives the many legacies and bequests which are willed to The Salvation Army every year and it is THQ which earns investment income from funds held on behalf of the territory. These various sources of income which go into THQ's "bucket" are used to to provide funds for the running of the eight DHQs, and to "deficit fund" many corps and social centres throughout the territory which could not continue withoutfinancial assistance. The system of global budgeting is an attempt to share these central "deficit" funds out in a way which places responsibility for their allocation onto the various DHQs. Under the global budgeting system, each DHQ receives a designated amount and has the task of dispensing it [Lieut-Colonel Stephen Carpenter, DHQ officer]. Last year's script: the 1996/97 budget. Beginning with the budget year 1996/97, the territory's budget system became fully global, in the sense that the eight divisions were given responsibility for administering all their own deficit funding, including social deficit funding, which had previously been allocated by THQ. In March 1996, the eight Divisional Commanders were sent a letter by the Territorial Financial Secretary in which their allocated deficit funding amount A reference to the territory's headquarters in Sydney. Chapter 8 Budget performance Page 324 was set out, divided into various components [THQ Budget Letters 1-8, 1996/97]. One of these letters is reproduced in Appendix 8.1 "1996/97 Deficit Funding Letter to Divisional Commander". For the geographical divisions, deficit funding was divided between DHQ General, DHQ Public Relations, DHQ Social, Corps, Community Services and Social519. Rehabilitation Services Command deficit funding was divided between its command headquarters and its hostels and farms. The total amount of deficit funding allocated between the eight divisions was $13.1 million. The letter reproduced in Appendix 8.1 contains some interesting material, given that this was thefirst year that global funding was applied in this way, and that significant extra responsibilities had been added to the divisions, particularly the Divisional Finance Secretaries. One territorial finance department employee observed in hindsight that there was a distinct lack of information sent out to the divisions regarding global budgeting. While these letters advised Divisional Commanders of their divisions' global budget amounts, no detailed procedures were given, and there was nothing to tell the Divisional Finance Secretaries exactly what they should be doing. The use of the term "zero based budgeting" was "just jargon", in that it meant very little to many of them, and was totally out of their range of expertise and experience [Diary 24 September, 1996]. Following these letters, on 15 April 1996 a memorandum was sent out to all Divisional Finance Secretaries and Rehabilitation Services Command, giving more specific details of divisional responsibilities regarding social centre budgets. It is reproduced in Appendix 8.2, "Memorandum re DHQ Responsibility for Social Centre Budgets". The instructions related mainly to computer processes, but included a reminder that "h is the 519 DHQ General referred to general administrative expenses of running the DHQ; DHQ Public Relations referred to all PR expenses in the division, including staff salaries and other expenses; DHQ Social referred to divisional social expenses; Corps referred to deficit corps within the division; Community Services referred to all community centres within the division which were not self- funding; and Social referred to deficit social centres within the division. DHQs were permitted to allocate funding within the General and Social categories, but deficit amounts specified for all categories had to be adhered to. Chapter 8 Budget performance Page 325 responsibility of the Divisional staff to review and adjust or re-allocate the allowable divisional deficit", and (point 5) that "ALL budget deficits must come within the Global deficit Budgetfigure" [TH Q Social Memorandum Budget 1996/97]. During the next month (May 1996), another memorandum, reproduced in Appendix 8.3, "Memorandum to Centre Managers re 1996/97 Budget", was issued. The original instructions were modified, and the responsibility for accurate and complete budget preparation by centre managers was stressed. The changes required by the new system were acknowledged, because "we need to work together on this process seeing we have changed the system quite considerably", and the DHQs and Rehabilitation Services Command were highlighted as being the proper source of feedback and, in supplementary documents, of assistance [Social Centre Budget Guidelines, 1996/97, 7]. These same supplementary documents briefly alluded to the use of accrual accounting, the painful introduction of which has already been discussed. A further document produced on 1 May 1996 set out more detailed computer instructions for the fulfilment of budget requirements [General Ledger Budgets, 1996/97]. Later that month, on 16 May 1996, the computer services department sent a memorandum to all Divisional Commanders advising that the budget package for social centres would be forwarded within a week [Computer Services Budget Memorandum, 1996/97]. According to the budget timetable [THQ Budget Timetable Guidelines, 1996/97], social centres were to have submitted their completed diskettes to their DHQs by 17 May, one day after the memorandum was issued. It was obvious there was no chance social centres would be able to comply with the budget timetable. There was a marked lack of coordination of materials and instructions sent out to DHQs and centres. The memorandum reproduced in Appendix 8.3, "Memorandum to Centre Managers re 1996/97 Budget" refers to flow charts which compared the budget cycle of previous years with the new budget cycle. These two cycles are reproduced with additional numbered sequences below in Figure 8.1 "Budget Cycle Previous Years" and Figure 8.2 "Budget Cycle This Year". Chapter 8 Budget performance Page 326 (Centre) l.GLs for March (DHQ) 2. DHQ checks and completed and sent to DHQ forwards to THQ . DHQ checks and forwards 1 Centre 3. THQ prepares Budget Files (Centre) * and produces diskettes 6. DHQ checks budget 5. Centre prepares budget & sends and forwards to THQ (THQJ DHQ 7. THQ adjusts & approves Budget and produces diskettes I C GT1 tie ) 8. DHQ checks and forwards to Centre Figure 8.1. Budget0 Cycle Previous Years. [Source: THQ Budget Cycle Previous Years, 1996/97] Under the scenario in Figure 8.1, the DHQs were intermediate agencies checking and forwarding budgets backwards and forwards between THQ and the centres (Steps 2, 4, 6 and 8), in a sense an unimportant step in the process. Now, as demonstrated in Figure 8.2, they were given a much greater role. They now had responsibility for receiving a budget deficit amount for their division and for allocating that amount between all the centres, corps and divisional activities which came under its ambit (Step 3). Once that had been done, they were to consolidate centre budgets and send a summary to THQ (Step 4). Thefinal checkin g of budgets and forwarding them onto centres (Step 6) then became a relatively small part of its function in the budget process. Chapter 8 Budget performance Page 327 2. GLs for March completed Budgetfiles create d Centre prepares budget & sends to DHQ 1. THQ advises DHQ of global budget deficit 4. DHQ consolidates Centres budgets & repares /sends summary to THQ 3. DHQ reviews & adjusts centre budget in line with global budget 5. THQ approves Budget 6. DHQ checks and forwards to Centre Figure 8.2. Budget Cycle This Year. [Source: THQ Budget Cycle This Year, 1996/97] The rationale for pushing this responsibility out to the divisions was generally understood to be that if divisions were given the responsibility for sharing out deficit funds and if their division's budgets were accepted, divisional staff would "own" them and be forced to "make ends meet" [Major Humphrey Jonsson, DHQ officer]. A retired senior officer reflected on the increased sophistication and complexity of the new budgeting process. It was "too elaborate" according to him, compared to what it used to be when "everyone used to just prepare a single page budget, corps and institution, and they were submitted" [Colonel Bramwell Richards]. A detailed 1996/97 budget timetable [THQ Budget Timetable Guidelines, 1996/97] was produced by thefinance department at THQ, and according to that document approved budgets would be advised to DHQs by 28 June 1996. The budget scenario was generally that in March the Budget Board calculated how much was available for deficit funding, and notified the divisions by the end of that month. Then, on the basis of nine Chapter 8 Budget performance Page 328 months "actuals" and three months "estimates" of expenditure for the previous year, centres and corps would submit their budgets to their DHQs. This was to happen by the end of May, when they would be forwarded to THQ for Budget Board approval and Territorial Finance Council ratification. The reality was far from this according to the Chief Accountant, who recalled that 1995/96 budgets were notfinally approved at THQ until September 1996 [Diary 1 May, 1997]. Certainly, by the end of August 1996 only three divisions had had their budgetsfinally approved . This leftfive whose approval had either been deferred or who had not yet submitted them to THQ. Writing the 1997/98 budget script. The 1997/98 budget time scenario was not greatly different. Once again, instructions were difficult to understand, time schedules were unattainable, and the process stretched out until November 1997, much to the frustration of everybody involved. Setting the global budget deficit and the timetable. The first THQ Budget Board signalled the beginning of the process for the 1997/98 budget year. It was held on 14 March 1997, and chaired by the Secretary for Business Administration. Its purpose was to set a territorial perspective on the 1997/98 budget, by detennining the amount of budget deficit funds available, and the breakdown of funds to the various divisions. This discussion was led by the Chief Accountant, who used the previous year's deficit funding figure as a basis, adding in additional out-of- budget grants made by Territorial Finance Council520, and considering any extra programmes that were to be added for the next year, any programmes that had ceased, increases in wages and salaries anticipated, and updated Red Shield Appeal figuresS21 Since the previous year's budget had been approved at territorial level, an extra $735,222 budget grants had been approved. 521 At this meeting, the PR Secretary reported that the Red Shield Appeal was $1 million down on its anticipated goals. However, he stated that they were working hard to make up that deficiency [THQ Budget Board 14 March, 1997]. Chapter 8 Budget performance Page 329 [THQ Budget Board 14 March, 1997]. Divisions needed to be advised by 15 April of their global funding amount. The meeting ended that day with the Chief Accountant being given the task of working out individual amounts for divisions522. A new Budget Minute was to be issued which concentrated on deadlines and guidance for budget prepration and THQ heads of departments were to be notified that there were to be no increases above a 2.5% increase for salaries. The discussion at this meeting revealed some interesting dynamics: • the observation by one of the THQ Budget Board members that the corps had not been asked what plans they might have for the year to come, which might impinge on territorial budgeting decisions, was passed over as fairly insigificant, with the Chief Accountant commenting that the meeting was making decisions unilaterally, without giving the divisions any say; • the issue of a CPI increase in all budgets was dismissed, due to the observation by the Chief Accountant that if the meeting did that, social centres would not try to contain costs; • how Red Shield Appeal funds were to be shared between divisions was vigorously debated, with some board members being in favour of "rewarding" successful divisions by allowing them to keep a portion of any funds they raised in excess of their budgeted amount. The idea was that this would provide a significant incentive to divisional Public Relations personnel, to "get up and do something". Other members were strongly against the idea, not on principle, but on the grounds that "it wouldn't work". The Chief Accountant showed a column of figures on the overhead projector screen, which indicated the impossibility of making such a formula work in practice [THQ Budget Board 14 March, 1997]. These incidents revealed the presence of factions within the board, with some members being in favour of giving the divisions more freedom and power in decision making, and others more in favour of centralized control, particularly in relation to handing over authority over money. They also revealed, on the part of those who were against the devolution of more power to the divisions, a distinct lack of trust in the divisions' and centres' ability to act in a financially responsible way. A further observation was that the 522 In the meeting, the Chief Accountant described the year's budget as being a "level platform" with the previous year, with no changes. Chapter 8 Budget performance Page 330 Chief Accountant's input was highly regarded. He and the Territorial Financial Secretary appeared to be of one mind regarding a lack of trust of the divisions. His was the responsibility of working out divisional amounts by the time of the next meeting, which was held on 11 April 1997 [THQ Budget Board 11 April, 1997]. Before that meeting the Chief Accountant sent out letters to each of the seven Divisional Commanders, to the Commander of Rehabilitation Services Command, and to the principal of the Army's College of Further Education, dated 9 April 1997, enclosing eight sets of instructions [THQ Budget Letters 1 - 9, 1997/98]. Some observations of significant items from these documents are listed below: • DHQs were given responsibility for liaising with their own social centres, including sending out budget guidelines [DHQs and RSC Budget Guidelines 1997/98, 1]; • corps budgets were to be processed through dataflex, where appropriate [DHQs and RSC Budget Guidelines 1997/98, 1]; • aged care centres were expected to break even, i.e. no deficit funding would be given to these centres [DHQs and RSC Budget Guidelines 1997/98, 1]; • a schedule of submission dates for budgets was enclosed, but divisions were advised that they were to submit to THQ what they had received by the specified date, rather than waiting for the last budget to arrive [DHQs and RSC Budget Guidelines 1997/98, 2]; • corps budgets which were to be prepared manually were to follow the procedure from the previous year [Corps Budgets 1996/97]; • social centres were urged to adhere to the budget timetable, to budget for no increases in budgeted expenses, and to consider expenses from a "zero base perspective". This meant that "each expense line needs to be reviewed and built up from zero and not merely taken from a continued upward momentum perspective as generated by the computer programme" [Social Centre Budget Guidelines 1997/98, 1]; • if assistance was required by social centre managers, they were instructed to consult their respective DHQ or Rehabilitation Services Command [Social Centre Budget Guidelines 1997/98, 7]; 523 The significance of the fact that the Chief Accountant sent out the letters in this year, rather than the Territorial Financial Secretary, was not great, since the Territorial Financial Secretary had been transferred, and left to take up his new position in early April 1997. Chapter 8 Budget performance Page 331 an official budget minute [Official Minute FDA 1094 Budgets, 1997] specified the dates by which the steps of the budgeting process were to be completed. Approved budgets were to be notified to DHQs by Territorial Finance Council by 21 June 1997. It would be up to individual DHQs to set timetables for the social centres and corps under their command; the aim of every corps was to be self supporting [Official Minute FDA 1094 Budgets, 1997]. a new flow chart, shown below in Figure 8.3, "Budgeting Process 1997/98", set out the steps in the annual budgeting process. The only significant change from the 1996/97 budget year was (3), the sending of an approved copy of its budget by a centre to THQ directly. THQ Department Heads were also advised that no general CPI increase in budgets was to occur, but that they were to employ a "zero base perspective" when constructing their budgets, which were to be submitted to their departmental heads by the end of April. Assistance was to be obtained, if required, from territorial finance department staff [THQ Budget Guidelines 1997/98, 1,5]; I )l K.)review; & adjusts centre budget in line with divisional global budget GLs for March completed: Budgetfiles created; ^GK Centre prepares budget & sends to DHQ DHQ consolidates centres budgets & 'sends summary to THQ New procedure: Centre sends ' approved copy to THQ ^r THQ approves divisional global summary DHQ checks andforwards to Centre Figure 8.3. Budgeting Process 1997/98. [Source.THQBudget Cycle This Year, 1996/97]. six budget workshop days were proposed for the territory, covering four different divisions. It was acknowledged that due dates for budgets occurred before the latest workshop day, and it was suggested that divisions absorb those due dates. [Budget Workshop Memorandum 1997/98]. Chapter 8 Budget performance Page 332 Writing the script: trust or control? A THQ Budget Board meeting followed the production of these documents, on 11 April 1997. It was chaired once again by the Secretary for Business Administration, with the new Territorial Financial Secretary524 unable to attend. He had sent his apologies. The Chief Accountant advised that deficit funding had increased overall by about 10%, with the total territorial global budget deficit set at an anticipated $14,047,925. He presented a schedule which broke this total down into various classifications [Territorial Proposed Deficit Grants, 1997/98]. The meeting worked through these various deficits, with the item which occasioned the most discussion, in terms of time and significance, being that of new corps plantings. The territory had made an undertaking to plant a number of new corps, which would initially be fully funded from the global deficit, with funding gradually decreasing until the corps becamefinancially self sustaining525. One of the board members raised the issue of divisions which "played games" withfinances, and might perhaps use some of these corps planting funds for other purposes if they were not required for corps. A senior officer expressed the opinion that he would not want to see existing corps "propped up" at the expense of new corps. This drew immediate agreement from the board member who had raised the issue originally. He expressed his concern about mixing the divisional operating deficit and the corps deficit, since if the Divisional Commander had automatic access to corps deficits, it might open up a 'Tandora's box" of troubles. He feared a "weakness" of staff at divisional level. Other board members disagreed with this idea. The PR Secretary expressed the opinion that if the divisions were going to look after themselves, then THQ should give them the money and trust them with it. 524 The former Territorial Financial Secretary had been transferred off THQ to a divisional position. The new Territorial Financial Secretary was the former Assistant Territorial Financial Secretary. 525 The meeting was informed that thefigure o f $50,000 which a new corps plant received in its first year was to be reduced by 20% per year, until it was relying entirely on its own funds afterfive years [THQ Budget Board 11 April, 1997]. Under the Mobilise 2000 programme, it was proposed to begin 40 new plants by the year 2000. Chapter 8 Budget performance Page 333 The chairman then brought the discussion back to the issue of how the deficit grants were to be given to the divisions: as a block grant, or as segregated amounts? The fear appeared to be that DHQ staff would manipulate the finances if they had unspecified access to block grants, sacrificing corps needs to increase adininistrative expenses. It was suggested after some discussion that if the restructuring process were to be taken further, then "we must go ahead with it". This was a matter in which we had to be very careful, another officer felt, because "the ultimate control of this headquarters is money". Handing over that control would be a leap of faith to some extent, and would be a risk. The Public Relations Secretary proposed immediately that the divisions be given "the lot" and allowed to manage it as they sawfit. Yet another senior officer said that he did not trust the divisions. The PR Secretary responded by saying that this lack of trust, to which the Chief Accountant had earlier referred, had been going on for years, in spite of the Army's being referred to as "one Army" by the new Territorial Commander526. This was not just a matter of trust, another officer suggested, but a legitimate control issue, Any system of releasing funds ought to be accompanied with sufficient checks and balances. Money given for corps plants should be used for that purpose. The Chief Accountant eventually curtailed the discussion by bringing the meeting back to the issue of total global funding amounts, which were his concern. The big question, he suggested, was whether they could fund this $14 million of global deficit funding? This discussion revealed a great deal about attitudes towards the increasing devolution of authority to the divisions and perceptions about the lack of financial responsibility of divisional staff. It explained much about the frustration that was expressed at divisional level, which will be referred to later in this chapter. 526 This was a reference to the induction of the new Commissioner, Hillmon Buckingham, on the previous evening (10 April 1997). Chapter 8 Budget performance Page 334 Interpreting the script. THQ wrote the budget script for 1997/98, and it looked good. Global budgeting was to be employed, from a zero based perspective, with budget responsibility being devolved to the divisions. Their responsibilities for a greaterfinancial an d decision making role in the distribution of territorial deficit funding were spelled out. Social centres, corps and community centres had their schedules and their budget requirements. Organizational players had been given the script, but again, the annual budget process was a painful one, with many departures from that script. Even on a superficial level, some budgets were not approved by November 1997, almost five months after the date proposed for final notification of approved budgets. The reading and interpretation of the budget script depended heavily on a number of factors, some of which were outside the control of organizational actors. Constrained as they were by their training and expertise, and the culture in which they were steeped, they gave interpretations far removed from the intentions of THQ's budget board. Or did they? Was it intended that the script should be adhered to, or was it in place simply as a "wish list", or a desirable sequence of occurrences? Did the territorial budget board members actually believe the script would be followed? "Hoped" might have been a better description. Corps budgets. The timetable set out for corps budgets in the 1997/98 budget year required corps to submit their budgets to DHQ by 30 April 1997 [Official Minute FDA 1094 Budgets, 1997]. As with all Army budgets, they were to be prepared based on nine months actuals from the previous year (July to March), and three months anticipated expenditure (April to June). Some corps were required to submit more than one budget, depending on whether they also included a Community Welfare Service, or a Red Shield Family Store. Deficit corps were those whose budgeted expenditure exceeded their income, and they were funded by means of the THQ General Fund. Within the Chapter 8 Budget performance Page 335 territory for the 1997/98 year, proposed deficit grants for corps totalled $1,115,440 over seven divisions [Territorial Proposed Deficit Grants 1997/98]. Divisional combined corps budgets were to be submitted to THQ by 31 May, and were anticipated to be returned to command heads by 21 June, a week before the end of the financial year. Instructions to corps for the preparation of 1997/98 budgets consisted of a photocopy of the instructions from the previous year [Corps Budgets, 1996/97]. These were forwarded to DHQs, and it was their responsibility to pass them on to the corps within their divisions. They were not detailed, but set out budget requirements in broad terms. Income and Expenditure were broken down into categories527, with many of the expenditure items consisting of levies528. Provision was made on attached pages for explanations if there were "significant increases or decreases in income and expenditure items of budget figures compared with actuals" [Corps Budgets, 1996/97]. Captain Gary Dent believed that DHQ was looking for "detail, plenty of detail, foresight, obviously, that there's plenty of income to meet the expenditure". These corps budget forms were sent out late to corps for the 1997/98 budget year [Lieutenant Rose Dillon; Major Ralph Jeavons], which put more pressure on corps to complete the budgets in time for the deadline to DHQ. Most corps officers found the process difficult and time consuming. Those in small corps often had to complete the budget themselves, a problem when they had no financial or budgeting expertise. Training at the Army's college took two years, but of that time only a very minor emphasis was given to training on budget matters529. Major Sam Withycombe expressed 527 Collections referred to money in the collection plate at Salvation Army corps meetings; Planned giving/cartridges referred to money given by corps members as part of the Army's planned giving programme; Donations referred to money donated to the corps; Public Giving represented money collected by Army members in public places, such as hotels, railway stations, race tracks. 528 A training levy of 2% of income was applied, as well as levies for Officers' Health and Benefits Fund (OHBF), Retirement Fund, Computers, insurance, superannuation (for employees), and a long service leave levy [Corps Budgets, 1996/97]. 529 Captain Bob Greeley said that he spent one half hour in training college on budget matters. Lieutenant Marcus Pallot assessed his budget knowledge when he left college as almost none. Another Chapter 8 Budget performance Page 336 the opinion that officers needed some basic understanding of "debits and credits" so they were able to do "their finance side of their administration, without it being too big of a deal". The sophistication of budget preparation in corps varied greatly. Some small corps budgets were prepared by the commanding officer; larger corps often had experienced treasurers who were able to prepare the budget; while some large corps had formed their own budget boards, and the budget setting process was a corps-wide undertaking. With scant knowledge of budget preparation or generalfinancial achninistration, officers who were in small corps where there was little lay assistance with bookkeeping found great difficulty in preparing budgets. One lieutenant [Elaine Linsell] had "no idea" how to construct the budget for a corps plant, so went to the Divisional Finance Secretary and asked for assistance, with great success. He took over the preparation of the budget, for which she was very grateful. Lieutenant Kerry Connors went to officerfriends fo r assistance, and to his Divisional Finance Secretary, since he found some instructions were not clear. Lieutenant Rose Dillon was disappointed, when she constructed her corps budget, to find that she had taken it back into a deficit funding situation. She approached DHQ for assistance and observed that in a corps with an experienced corps treasurer she would have had no problems. Officers in corps which had such assistance were usually happy to leave the detailed work of budget preparation to them, but most took some interest in the budget. Even Major Frank Allard, who described preparing the budget as a "mundane, horrible job", was interested in the overallfinancial picture for his corps. Most people saw the budget as a necessary activity, helpful in some ways, but unnecessarily complex. The sending of all corps budgets to DHQ and on to THQ for recent college graduate [Lieutenant Ronald Guthrie] remembered spending one day in two years on financial matters. A more experienced officer [Captain Philip Schmidt] remembered one session on bookkeeping in his two years of officer training. Chapter 8 Budget performance Page 337 approval seemed of dubious value to some corps officers, who believed that there was no point unless a corps required deficit funding530. For some it was a technical activity. and it was important to get it just right, with all the levies and charges correctly calculated, but for a few it was much more, afinancial expressio n of their vision for the corps ministry. • Major Ralph Jeavons questioned who was serving whom in the budget process. He did not think corps should adjust to suit "the accountants and the systems people", but felt that corps budgets ought to be audited not just on expenditure but on their "values and priorities". • Captain Grant Ezzamel described the budget as "a faith and mission goal statement" which involved all section leaders within the corps. The corps budget board saw budget setting in terms of mission. The result was that the corps "owned" the budget. • Captain Allan Kaldor described bis corps treasurer's budget as "what we'd expect an accountant to do", and stressed the need to see "a little more faith in income projections". Attitudes to changes made to budgets also varied greatly. People who saw the budget as a technical activity generally did not mind if DHQ altered theirfigures. Mos t changes had been minor, or accepted with relief if there had been problems in calculating amounts. Sometimes the change was discussed, with areas for further consideration highlighted [Captain Charles May]. Some officers, however, became angry with changes made to their budget [Captain Grant Ezzamel]. Captain Ryan Lago described most of the changes made at THQ level as "minor", but remembered how his budget for evangelism had been rejected over fifteen years ago, since there was no budget category for it. People at DHQ or THQ level who made decisions about corps budgets were "far removed from corps life" according to Major Ralph Jeavons. The pressure was to work towards bringing corps off deficit funding, and making themfinancially self sufficient. While most people found preparing the budget a useful exercise, done as it was within Captain Mark Wreiden thought the submission of budgets from corps which did not require deficit funding was an issue of autonomy: "do they want to allow us to become more autonomous, or are we still part of a whole big group of people who have to do it this way because that's the way it's always been done". Captain Grant Ezzamel questioned the sending of corps budgets to DHQ: '^e are people of integrity and responsibility. We're accountable." Chapter 8 Budget performance Page 338 the time frame of the Army's budgeting system, in the format required by THQ. its value was questioned. Social centre and community services budgets. If the preparation of corps budgets was difficult for some people, then budgets for the Army's social work531 were several degrees more sophisticated and complex, and required a greater level offinancial expertise and actual bookkeeping training. Social centres and community service centres operated under the same budget time schedule as corps. Social and community services budget deficits were to be met from Red Shield Appeal funds, in keeping with the Army's policy of keeping social and field (corps) funds separate. The projected THQ deficit grant allocated to social centres for the 1997/98 budget year was $7,151,567, more than half the total territorial budgeted deficit grants of $14 million [Territorial Proposed Deficit Grants 1997/98, 1997]. That amount represented a decrease from the equivalent figure for the previous year of $7,380,234, which underlined the Army's emphasis on cost containment532, and its policy to make more of its social centres self-funding, and less reliant on deficit funding. Community Service Centres were to receive deficit funding of $2,502,460 for 1997/98, exactly the same as they had received in the previous year. As well as absorbing changes in government funding arrangements, people responsible for preparing social centre budgets for the year 1997/98 were, therefore, required to manage several internal budget system factors: accrual accounting, which was fairly new and still being absorbed into the social centres; budget deficits, which were even 531 For the purposes of this discussion, social work includes the Army's various social centres and its rehabilitation centres. 532 The Budget Board advised in its Social Centre Budget Guidelines [1997/98, 1997, 1] that "no general CPI figure for expenses will be given. It is expected all Centres will find savings in their budgets and will look at their expenses from a zero base perspective". Chapter 8 Budget performance Page 339 tighter than usual; a computerized system, which was also fairly new; liaison with DHQs rather than THQ, as part of the devolution of responsibility to the divisions; and a demanding budget time schedule. Recognizing the problems involved with adopting accrual accounting, the increasingly stringent demands of government agencies and departments from whom funding was received, and the paucity of accounting or bookkeeping training amongst social centre managers, THQ arranged for an external consultant to provide some social bookkeeping training days in early 1997. These were run as two-day workshops with the help of the Assistant Chief Accountant, whose job description included the development of staff training. Following the success of these days, the finance department arranged a series of social budget workshop days, to which centre managers and bookkeepers could bring their computers and receive assistance on their own specific budgets. A description of one of these days is included in the prologue to this chapter. Social centres vrithin the territory covered a wide range of activities, including aged care (independent living, hostels and nursing homes), youth work, drug and alcohol rehabilitation, employment training centres, crisis accomomodation and child care facilities. Each of these areas had its own particular operational requirements and funding arrangements, and within these areas, the size of various facilities varied considerably. Most centres were managed by officers, and unlike the corps, many had at least one administrative employee, usually a bookkeeper or business manager. Earlier comments about the expertise of social centre staff need to be kept in mind when considering the budget process. Community services centres were run mainly by employees, under the direction of the Divisional Community Services Secretary. Since most of these employees came from a community or social work background, they relied heavily on their DHQ to assist with budget preparation. In most social centres, the budget was prepared by the officer manager and the bookkeeper or business manager, with the business manager doing most of the Chapter 8 Budget performance Page 340 preparation, and the officer giving guidance and setting direction. Technical problems were apparent, with budget instructions sometimes unclear [Captain Rosemary Johnson; Hugh Dacin; Mavis Lyons], help not forthcoming [Major Hal Dandridge; Dianne Weiss], training inadequate or too late533, computer difficulties, and the late approval of budgets [Captain Stephen Dent] being the most common. Problems which caused deeper concern534 were the increasing pressure to cut costs and decrease deficit funding, the irrelevance of the budgets for the day-to-day operations of the centre, the lack of consultation in the approval process, the need to bring budget preparation back to a consideration of ministry goals, and false economies. Most social officers and employees appeared to be very cost conscious, contrary to the opinions expressed at THQ. Major Wendy Marcy described her strong sense of stewardship about the budget: "I can't be frivolous with money". However, the policy to run aged care centres in particular at least on a break-even basis put huge pressures on centre managers. Georgie Robbins, a social centre bookkeeper, described the "razor cut" she and her social centre manager did on the budget before they submitted it. Similarly, Major Maurice Jeffreys was very cost conscious, and spent a great deal of time with his business manager, cutting costs. Funding pressures were acute, he said, with the pressure to retain clients for longer in hostel accommodation, in order to receive a higher government subsidy for them. DHQ wanted more money, and the pressure was on his centre to achieve a larger surplus. With the Aged Care Code of Practice requiring that the budget be taken to the residents, there was sometimes difficulty negotiating budget cuts. Driven as these income generation and cost cutting measures were by government funding cutbacks and the necessity to make Red Shield Appeal money go further than before, they were understandable, and yet they put increasing pressure on social centre officers and employees to bring in a budget which 533 Even though the deadline for budgets to DHQ was extended, the feet that the social budget workshop was held the day after social budgets were due to DHQ was a sore point with some social centre officers and employees. Captain Rosemary Johnson expressed the opinion that unless she received training, her budget would "never be acceptable". 534 This is not to imply that the earlier problems listed were not a serious concern to those interviewed. Some of them were. These •'deeper" problems reflect on the philosophy behind the budget process. Chapter 8 Budget performance Page 341 was acceptable. While it was generally recognized that there was a need to plan for the year ahead, and to be realistic about where funding was coming from, there was also an opinion expressed quite strongly from some quarters that the budget itself had little relevance for the centres. Captain Stephen Dent described it as a budget designed not to suit the centre, but to suit DHQ. He suggested that it could be more realistic to individual areas, since it was "pretty generic"535. It was therefore not a management tool, and according to Kevin Ingram, a social employee, "they're (DHQ and THQ) not interested in real costs, they're interested in Mickey Mouse figures that look good". He had attempted to distribute costs to show what a client cost in his service, but bis figures were not accepted, and he had $50,000 taken off his budget without negotiation. The apparent lack of negotiation in the budget approval process was a hurtful and illogical aspect of the budgeting system to many people interviewed. Where this had not been a great problem with corps budgets, it emerged in social centres as being highly significant, probably because of the increasing pressure to run centres with as little deficit funding as possible. Major Maurice Jeffreys, who with his business manager, put a great deal of effort into preparing his budget and making it as lean as possible, wondered why he should bother when it was changed at DHQ. Without consultation, he was required to raise $50,000 more income at his centre. Captain Erwin Davis wondered the same thing. Why should he bother, when he knew it was going to be "hacked to bits"? He spoke of the practice of some centres, whose managers built in "slack" in order to make thefinal budget a little easier to live with. Kevin Ingram could not see any point to the budget approval process. His budget had been approved by DHQ, but was then cut at THQ level. He felt that THQ should have 535 Captain Stephen Dent, faced with no budget lines for some of his expenditure items, had to slot them into categories which did not really make sense. He expressed the intention of leaving a detailed brief for his successor, to explain the "hidey holes" where he had distributed budget amounts. Chapter 8 Budget performance Page 342 accepted DHQ's decision if global budgeting was really being applied. Captain Rosemary Johnson observed "my comments haven't been listened to", and wondered why the Army kept repeating the cycle time after time. Lieutenant Marcus Pallot raised the issue of achievement of his centre's mission, in relation to the budget. It was important to understand where the resources were being used, since different methods of treatment cost different amounts: But we still need to keep asking ourselves those questions, is what we're doing the most effective for (the clients)? Is it the most cost effective for what we can do? Those sorts of questions are going to still be there, and I don't think you can divorce those questions from looking at budget preparation and budget considerations. The imposition of a business-oriented budget system onto the Army's traditional culture caused many problems. It was not just a technical matter, but a deeper, philosophical approach to budgeting, that of breaking even, and thinking about the ministry in economic terms, in a more stringent way than had been done in the past. The practice of false economies [Captain Robert Capps] indicated an emphasis on satisfying short-term budget requirements, rather than looking at the longer term issues. DHQ and THQ budgets. DHQ and THQ heads of department and others had to prepare their own budgets for their departments, apart from their role in the budget approval process. They were well placed to accomplish this, since they were close to the source of accounting assistance and many had staff to assist them. Guidelines for THQ budgets proposed a zero based perspective with emphasis on stringent constraints on expenditure [THQ Budget Guidelines 1997/98, 1997]. The fear that had been expressed in the territorial Budget Board [THQ Budget Board 11 April, 1997] about DHQs which might be tempted to siphon corps funds off for Chapter 8 Budget performance Page 343 administration was not hinted at in the official literature. However, The Salvation Army appeared to have a tolerant view towards administrative functions536, and a realistic view of the cost of maintaining those. The deficit budget for DHQ General, Social and PR expenditure for 1997/98 amounted to $3,278,458 [Territorial Proposed Deficit Grants 1997/98], an increase over the previous year of $250,705. THQ's budget for 1997/98 was projected at $2,052,628537 [COFE538 and THQ Funding 1997/98, 1997]. These amounts represented significant increases over the previous year, in a budget climate when other deficit funding areas were experiencing little or no increases. As the focus of a huge amount of activity, over seven or eight months of the year, the budget setting and approval process was regarded as a serious matter. One finance department officer saw that department's responsibility as being the "leader" of THQ departments, so tried to treat it "fairly seriously". A finance department employee, Travis Greig, saw the budget as necessary in order to put a restriction on the behaviour of officers and managers. For many THQ and DHQ people, much of the budget was out of their control [Major Tess Jordan; William Stephenson, THQ employee; Harry Johnstone, Public Relations employee; Major Barry Vance] consisting largely of salaries and compulsory levies. With set requirements, each department's budget was strongly constrained539. Major Paul Cooper from THQ saw it as a somewhat limiting process which did not allow much creativity. According to him "funding for new development, funding for new programmes, funding for extension is the issue that budgeting hasn't addressed". While they may have questioned the mechanics of the budget system, few people It was generally accepted that the Army was fairly top-heavy in terms of officers in administrative positions. Such positions were regarded as a reward for service [Major Sam Withycombe]. The Commissioner was reported to have said that one in eight officers was involved in administration. 537 The original budget for the previous year was $ 1,311,930. 538 College of Further Education. 539 Colonel Anne McCourt observed that two third of her budget consisted of levies over which she had no control. Chapter 8 Budget performance Page 344 questioned the philosophy behind it, except for Captain David ChappelL who maintained that the budget system did not help people set goals. He questioned how much of the budget was related to "keeping the wheels turning" against "how much of the budget is really thought about in terms of new mission and new ministries". The budget did not enlighten anybody about how much a programme cost, or how a salary was broken up. Captain Bob Greeley agreed when he observed "our whole costing and budgeting process does not help goal setting and mission focus". The use of budget variance reports appeared to be limited. Some people said they went through them carefully, but their usefulness was doubtful since they did not recognize the sporadic incurrence of many expenses. Consequently, they had to be read with a knowledge of exactly what budgeted expenses had been incurred. While the Chief Accountant was reported to go through them and highlight unfavourable variances [Captain Lee Pierce], to most people they were not useful at alL or if they were, it was only because extra knowledge of spending patterns had to be incorporated into their interpretation. They were part of the official script, but appeared to have little or no significance in the performance of the budget process. DHQ budget responsibilities. According to the official script, DHQs were required to send out to their social centres, corps and community centres the budget guidelines which they received from THQ, and to offer assistance where required to enable those units to complete their budgets and submit them to DHQ by 30 April 1997 [DHQs and RSC Budget Guidelines 1997/98, 1997; Official Minute FDA 1094 Budgets, 1997]. Each DHQ was then required to evaluate those submitted budgets, and to allocate their share of the global budget deficit according to the notification they had received from THQ. This meant a heavy burden fell on the Divisional Financial Secretaries, the Divisional Financial Secretaries and the members of Divisional Budget Boards to sift requests for funding and to prioritize the Chapter 8 Budget performance Page 345 limited amount of funds they had available, within the parameters which had been set What happened in practice was that thefirst divisiona l budgets541 began to arrive at THQ in late June 1997 [THQ Budget Board Time-Frame Progression Schedule Operating Mark 3, 1997], and the last ones were received at THQ by late July 1997 [THQ Budget Board Time-Frame Progression Schedule Operating Mark 15, 1997]. Approved divisional budgets werefinally notifie d to DHQs by middle or late September 1997, three months later than the expected date [THQ Budget Board Time-Frame Progression Schedule Operating Mark 18, 1997]. There were many reasons why the official time-frame was not adhered to, and why the actual procedure of sifting budgets through the DHQs did not happen in accordance with the official script. As with any organization, personalities played a large part in the budget process, but more than that, the officer/employee culture provided an added texture. There was also a distinct THQ/DHQ tension, which seemed to be based on the perception which professional staff at THQ level had of thefinancial expertis e of DHQ officers, and on the opinion at DHQ level that THQ's role ought to be that of service and support rather than control. DHQs were let down by THQ with unclear, late or conflicting instructions542, by the failure of computer services to provide budget disks when required, and by the faults which were apparent in those disks once DHQs and their various centres tried to use them. All those factors, when added to the requirement to adopt accrual accounting and global budgeting, meant that divisional officers and As mentioned earlier in the discussion about the setting of the territorial global deficit, DHQs did not receive one global figure and make allocations as they sawfit. Instead, their global amount was divided between DHQ General, DHQ Public Relations, DHQ Social, Corps, Community Services and Social activities [Territorial Proposed Deficit Grants 1997/98, 1997]. 541 Geographic divisions submitted their budgets for six separate deficit funding areas: general, social, corps, community centres, social centres and community relations. Red Shield Command submitted three groups of budgets: command headquarters, Red Shield Industries and social centres. There were therefore forty-five groups of budgets to be submitted to THQ and passed through the budget board and on to the territorialfinance council . 542 A finance department employee [Diary 1 October, 1997] admitted that there was confusion at divisional level because of changes in directions from THQ's finance department. He expressed the opinion that people at the centres needed more training. Chapter 8 Budget performance Page 346 employees were put under unrealistic and almost intolerable pressure to perform. Many were incapable of doing this. The proposed split in the Divisional Finance Secretary function, already referred to, brought to a head these perceptions of the inadequacy of the Divisional Finance Secretaries to perform the tasks required of them. The THQ understanding was that government funding would dissipate if the issues of the reliability and timeliness of financial accounts were not addressed [Diary 23 June, 1997]. The resulting eruption on the part of one Divisional Finance Secretary, who reacted angrily to the proposal, was embarrassing to the Army on at least one occasion. An interesting aspect of the proposal was that some divisional staff were quite happy to think that accounting for the social centres, at least, would be performed by a professional accountant, on a professional basis [Diary 25 July, 1997]. Divisional budget board meetings for the X Division for the 1997/98 budget year began in late May 1997 [DHQ Budget Board 27 May, 1997], and continued through to July 1997 to "mop up" outstanding budgets [DHQ Budget Board 18 June, 1997]. They were generally harmonious, with the Divisional Finance Secretary, an officer, doing a great deal of work with his assistant, in assisting corps and social centre staff to prepare their budgets, in some cases taking over budget preparation completely. His preparation for budget boards appeared to be thorough, and he appeared to be very knowledgeable about using the dataflex system and assisting officers and managers to prepare their budgets. Some negative comments about his style were made, but it could be argued that he saw his role and thefinancial expectations the system made of him from a traditional Army viewpoint, and was trying to fulfil that in the best way he could. Several observations made over the course of the divisional budget board meetings highlight some of the dynamics and tensions of Army organization and culture: • The computer system let the division down on a number of occasions [DHQ Budget Board 27 May, 1997]. Chapter 8 Budget performance Page 347 The suggested time frame for budgets did not work, with some corps and social centres being very late in submitting their budgets. Significantly, deficit corps budgets were submitted by thefirst DHQ Budget Board [DHQ Budget Board 27 May, 1997], probably because they were anxious that their deficit funding should be approved. Reasons given by the Divisional Finance Secretary for late submission of some budgets were sickness, time pressures, organizational "upheaval", difficulties with preparing the budget, irresponsibility, time pressures, and computer problems. Some centres appeared not to care much about the time deadline, and were criticized for having too casual an attitude to budget preparation [DHQ Budget Board 27 May, 1997; DHQ Budget Board 3 June, 1997]. Five corps out of twenty-nine in the division required deficit funding, making up projected total deficit funding of $77,500 for the 1997/98 year. Corps which managed to befinancially sel f sustaining were praised. This appeared to be a mark of success [DHQ Budget Board 3 June, 1997]. Overall, corps in this division relied on the public for 33% of their funding [Sydney East & Illawarra Division Corps Budgets 1997/98b]. Their own congregations provided 37% of their funding. They were therefore heavily reliant on the generosity of the general public in their own areas. Social centre deficit funding was under a great deal of pressure, with the Cammerman report requiring social centres to operate without deficit funding in the future. With changes in government guidelines, it was becoming more and more important that managers get their "mix" of clients correct in aged care centres. The divisional Community Services budget relied heavily on government funding, but it was not immediately apparent in the DHQ Budget Board meeting exactly how much that government funding amounted to. The Divisional Commander PHQ Budget Board 3 June, 1997] observed that in some cases it seemed to cost almost as much to administer the relief as the dollar value of relief given544. The Army was heavily reliant on government funding for the fulfillment of its community services rninistry. Brian Cammerman was an external consultant who had already prepared a report on Red Shield Industries. That report had apparently been well received, and was being adopted in an effort to make Red Shield Industries operate along business lines. At the time this budget was being prepared, he was conducting a study of social centres, and preparing his recommendations. It was generally accepted that he would recommend a cutback in deficit funding, and would require social centres to operate at a surplus eventually. 544 Figures produced by the Divisional Finance Secretary at the meeting [DHQ Budget Board 3 June, 1997] revealed that this was infeet correct. For the budget projected for 1997/98, anticipated relief to be given was $675,449, with the administration budget set at $546,065. Of that relief budget of $675,449, the Army was to provide $223,949 through its deficit funding system, with the remaining $451,500 coming from government sources. Chapter 8 Budget performance Page 348 • Some budgets appeared to require substantial adjustments before they could be presented to the meeting. The Divisional Finance Secretary put in a significant amount of work on these before presenting them to the board. Some figures were incomplete, incorrect, or it was "hard to get thefigures t o work" in some cases [DHQ Budget Board 3 June, 1997]. • Several social centre managers had great difficulty in coping with the budget process [DHQ Budget Board 18 June, 1997]. Some business managers were good, but others struggled with their responsibilities, not possessing the expertise to prepare government reconciliations correctly. This posed quite a threat to the Army's continued funding for its social centres. • Various suggestions were made at board meetings regarding how to address deficiencies in social centre accounting in particular. It was thought that this bureau style of management might work fairly well [DHQ Budget Board 18 June, 1997]. A salary bureau, the Divisional Finance Secretary observed, could save the Army thousands of dollars in litigations and over payments545. • Relations with THQ appeared to be strained. Finance department was held responsible by the Divisional Finance Secretary for failing to "do their homework" on accrual accounting, and how the new system ought to be implemented [DHQ Budget Board 18 June, 1997]. • The divisional budget became a controversial issue at the DHQ budget board when the split of the Divisional Finance Secretary position was announced by THQ. The long termfinancial implication s of that could mean that costs would go "through the roof [DHQ Budget Board 18 June, 1997]. • The division worked to secure itself the best possible financial arrangements from THQ. It was proposed by the Divisional Finance Secretary that the division ought to put in a request for the maximum amount claimed by the social centres for capital items, and if it could get infirst, "common wisdom" would prevail, and they would get "thefirst bit e of the cherry" [DHQ Budget Board 18 June, 1997]. Major Wendell Grant agreed that if anything went back to THQ, the division had lost it: "If we don't have it, we can't use it!" [DHQ Budget Board 27 May, 1997]. Most of the work done by the divisional budget board was undertaken by the Divisional Finance Secretary and his assistant prior to the meetings, but the board members displayed a good knowledge of the various centres which were being discussed, and a 545 The Divisional Finance Secretary was referring to a previous employee who was paid out at enormous cost, which could have been avoided if people had known more of what they were doing. [DHQ Budget Board 18 June, 1997]. Chapter 8 Budget performance Page 349 willingness to offer assistance if required. While the Divisional Commander chaired the meetings, the Divisional Finance Secretary organized the agenda, and pushed through the items for discussion. It became obvious in talking to divisional staff later that there was a marked lack of consultation in the way he adjusted the budgets before presenting them to the board [Major Wendell Grant; Major Sharon Girling]. His was the in-depth knowledge and expertise, and it was difficult to query that or challenge it during the meetings. The DHQ budget board was responsible for forwarding its approved budgets on to THQ. They were received by the finance department, and then brought before the territorial budget board. Thefinal step in the budget approval process was ratification by Territorial Finance Council, the territory's highest financial decision making board. The next section focuses on the working of the territorial budget board, especially considering its duties, the various people who make up that group, and the impact they have on the budget approval process. THQ Budget Board revises the script. Dates, duties and composition. According to the Army's Official Minute [Official Minute FDA 1094 Budgets, 1997] for the 1997/98 budget year, command heads were to be notified of their global funding amount by 15 April 1997. Later in the budget preparation and approval cycle, budgets from DHQs, and from cabinet members at THQ, were to be submitted to the Territorial Financial Secretary by 31 May 1997. The Territorial Finance Council was then to notify final approval of budgets back to command heads by 21 June. The THQ Budget Board was involved in both these stages of the budget setting and approval process. Oversight of the preparation of the Army's annual budget was one of the responsibilities assigned to the Secretary for Business Adniinistration [The Salvation Army Secretaries for Business Administration, 1995]. As the cabinet member to whom Chapter 8 Budget performance Page 350 the Territorial Financial Secretary reported, the Secretary for Business Adrninistration had direct oversight over the Army's annual budget process, and the THQ Budget Board was set in place by him (or her) to assist in that process. The board was composed chiefly of Army officers (including the Secretary for Program, the Assistant Secretary for Program, the Secretary for Personnel, the Assistant Secretary for Personnel, the Secretary for Planned Giving, the Social Services Secretary, the Public Relations Secretary, one finance department officer and the Financial Secretary), and three finance department employees, the Chief Accountant, the Social Finance Officer, and the Assistant Chief Accountant. The responsibilities and expertise of the officers covered a wide area, including major fundraising, personnel administration, corps and social work. For most of the 1997/98 budget process, only three of the members, the finance department employees, had accounting training. The "old" Territorial Financial Secretary, a trained chartered accountant, was farewelled at the first meeting of the board for the 1997/98 budget [THQ Budget Board 14 March, 1997], and from that point onwards, the "new" Territorial Financial Secretary took over, an officer with some accounting expertise but no formal qualifications. Even though it had a significant role, in terms of the number of meetings, the time frame over which meetings were held and authority to make recommendations, THQ's Budget Board did not rate a mention in the official budget minute, nor on the flow chart the Chief Accountant prepared to describe the territory's annual budgeting process [Budget Flow Chart 1997/98, 1997]. In fact, in the official budget literature, it hardly appeared at all. Nevertheless, the body existed, being formed in March 1997 in order to determine the total amount of deficit funding to be allocated to the various divisions, and how that allocation was to be broken down (see Step 1 in Figure 8.3 above, "Budgeting Process 1997/98"). Later in the budget approval process, between the dates when budgets were to be submitted to the Territorial Financial Secretary, andfinally approve d by Territorial Chapter 8 Budget performance Page 351 Finance Council, the THQ Budget Board was to perform the major part of its work, as an intermediary body responsible for sifting through budgets and recommending their acceptance by Territorial Finance Council. Its position in the budget flow sequence is shown below in Figure 8.4, "THQ Budget Board as part of the budget flow process", which expands on THQ's role between Steps 4 and 5 of Figure 8.3 above, "Budget Process 1997/98". DHQ Consolidates centres LBudgetssentto budgets & prepares/sends Territorial Finance 4 A^urnrnarytoTHQ Department 2. THQ Budget Board sifts budgets and passes THQ reccnxnendations to TFC 3. Finance Council ratifies Budget recornrnendations from THQ Budget Board .5 iTHQapproves divisional global summary Figure 8.4. THQ Budget Board as part of the budget flow process. [Source: Budget Flow Chart 1997/98,1997] Achievement of this stage of the budget process took far longer than the official script projected. Instead offinal approva l of budgets being made by 21 June 1997 [Official Minute FDA 1094 Budgets, 1997], THQ Budget Board meetings continued into November of that year. Major Territorial Budget Board players. Members of the Territorial Budget Board have already been mentioned. This section analyzes the role of the Secretary for Business Administration, members of the Finance Department and other members. Chapter 8 Budget performance Page 352 The Secretary for Business Administration. The "old" Secretary for Business Administration began the 1997/98 budget cycle by chairing thefirst two meetings of the THQ Budget Board [THQ Budget Board 14 March, 1997; THQ Budget Board 11 April, 1997], but was then replaced by the "new" Secretary for Business Administration, a man who, it was reported, was not a "finance person", but a "competent administrator" [Diary 14 April, 1997]. From the very beginning of taking up his new position, the Secretary for Business Administration was assertive and obviously seeking to be in control. The previous Secretary for Business Administration had chaired the budget board meetings, but had appeared to be quite content to let the Chief Accountant have most of the running of them, giving him fairly free rein to present figures line by line for discussion [THQ Budget Board 14 March, 1997]. The new Secretary for Business Administration's style was very different. One finance department employee expressed the opinion that he "took the bull by the horns and did his own thing", mostly by wanting what he described as the "big picture" or the "global view" [Diary 13 June, 1997]. One of the changes the new Secretary for Business Administration instituted was the introduction of "staff work", which was performed prior to budget board meetings. Finance department employees adapted to this as much as possible and earned praise in meetings when the "staff work" was competently and thoroughly done prior to the meeting. The Secretary for Business Administration spoke with approval about one group of budgets which, after the prior staff work had been done, had been passed in only twenty-five minutes [THQ Budget Board 27 June, 1997]. The Secretary for Business Administration's "time-frame progression schedule" appeared at every budget board meeting, in a regularly updated version. It was a spreadsheet which attempted to show the progress of every budget in the territory and the stage of completion it had reached. Items were numbered in sequence, e.g. Item 4.5.1, 4.5.2 etc., which sometimes caused confusion at meetings, when there were Chapter 8 Budget performance Page 353 voluminous numbers of subsidiary schedules. The constant updating of this schedule illustrated the Secretary for Business Administration's concern with the overall budget approval process, and his anxiety to grasp exactly the point which each budget had reached. By the time the last budget board meetings were being held, they were being conducted by going through the time-frame progression schedule in sequence. The Secretary for Business Administration talked of change. He was obviously frustrated with the time it took to get the budgets approved. In future years, he informed the board, he would like to see all budgets in and approved before 1 July [THQ Budget Board 4 July, 1997]. It was of more value, according to him, to have "a slightly inaccurate budget out in the paddock", than to be refining it constantly [THQ Budget Board 27 June, 1997]. He was convinced that nobody wanted two months of Budget Board meetings. By streamlining the budget approval process, there would be some mistakes, but they would get things approved on time. He was sometimes apologetic about the time things took to gain approval. At more than one board meeting he said there would never be another budget process like this one (THQ Budget Board 8 August, 1997; THQ Budget Board 22 August, 1997), but that next year it would be smoother, so that budgets could be used as "a strategic and management planning tool". He sent a letter to all the Divisional Commanders about this, outlining changes in the budget process which ought to happen (THQ Budget Board 22 August, 1997). Probably with this goal in mind, he would often push items through, even if board members did not appear to understand them, or if they thought there were broader issues which needed to be addressed. Tensions between THQ and DHQ have already been highlighted, and these were obvious at budget board meetings. The Secretary for Business Administration had formerly been a Divisional Commander, so had a divisional perspective of the way the system operated. His viewpoint now, however, was very much that of THQ, as he was faced with the responsibility of allocating funds rather than of asking for them for his own division [THQ Budget Board 27 June, 1997]. Discussion about one division focused on THQ grants for deficit corps. Territorial Finance Council had approved one Chapter 8 Budget performance Page 354 amount, but the deficits actually came in at one and a half times that amount. One board member asked who was to carry the difference, to which the Secretary for Business Administration replied that the division could carry it from their good corps. He observed that they "should be able to cope with it" and they needed to create income. He asked further that the corps deficit summary for divisions be included on the front page of divisional budgets to be approved, so that he could have the "global picture" immediately [THQ Budget Board 27 June, 1997]. His hope was that in the future the THQ budget board would not be involved in approving deficit grants for individual corps, but that the overall amount would be allocated to the division, who would then distribute it as they sawfit. H e was quite definite in stating that this board did not want to get involved in the distribution of those deficits [THQ Budget Board 27 June, 1997]. At the same time, it needed to be aware of the reserves that were held by the various divisions of which THQ might not otherwise be aware. [THQ Budget Board 27 June, 1997]. In discussion about the community services budget for a division, it was suggested that the Divisional Finance Secretary at that division had money to "play with" [THQ Budget Board 8 August, 1997]. The Secretary for Business Administration agreed that he was "doing well" for his division, and that the board was not aware exactly what thefinancial situation was in that particular division, in terms of their reserves. While divisions were to have the freedom and responsibility to allocate their own deficit funding, the budget board had the power to change those allocations, and was also concerned that deficit funding ought not to be provided if the divisions had "secret" reserves of their own. Finance Department members. The Territorial Financial Secretary and his professional staff presented a united front at board meetings. There had been a degree of tension between the "old" Secretary for Business Aclministration and the finance department, possibly the result of differences in opinions about the way the computer services department was administered and the way the Army's accounting system was designed, based on that system. There was also Chapter 8 Budget performance Page 355 a degree of tension between the "new" Secretary for Business Administration and the members of the finance department, both officers and employees, at the way the Secretary for Business Administration conducted the budget board meetings. They were described by one employee as a "disgrace", with discussion being stifled. Eventually, this employee observed, everything would be done as "staff work", with the board simply rubber stamping it [Diary 8 August, 1997]. There was concern on the part of finance department members that if the staff work were not done thoroughly before the budget board meetings, "we'll be in trouble (at the board meeting) and he'll make us look bad" [Diary 8 August, 1997]. Finance department members were frustrated that this sometimes happened because not enough time was allowed to go through the budgetfigures prio r to the meetings [Diary 15 August, 1997]. The Secretary for Business Administration required the finance department to present information to the budget board in particular formats, so he could get a global view. On one occasion the Chief Accountant was asked to resort THQ budgets by cabinet secretaries, so that the Secretary for Business Adrninistration could understand the figures better (THQ Budget Board 27 June, 1997). The professional accounting staff adapted to these requirements quite easily. On one occasion, the Assistant Chief Accountant was praised for the way he presented a schedule on capital budgets. The Secretary for Business Administration's response was that it was a "momentous document" (THQ Budget Board 22 August, 1997). The territorial social officer adopted the same format when he presented a massive schedule on bids for capital items for social centres (THQ Budget Board 22 August, 1997). Another frustration demonstrated by finance department members was the refusal of the Secretary for Business Administration to allow discussion at budget board meetings about matters they felt needed to be addressed, which were not receiving a forum anywhere else in the organization. The Chief Accountant highlighted a dilemma, that figures came to the board on balance sheets which did not reflect the true state of the Army's assets (THQ Budget Board 22 August, 1997). The breakdown in the way the system was working affected the finance department most of all, because they were Chapter 8 Budget performance Page 356 responsible for taking budgets submitted by DHQs and making sure they were prepared in the correct format, that thefigures wer e accurate and that they had been completed. This involved long and tedious work, and attendance at budget board meetings in addition to this huge task seemed to be an activity most of them would have avoided if at all possible. Other board members. The Secretary for Business Administration was in a position to require finance department members to meet with him and go through budgetfigures prio r to board meetings. Other board members, drawn from non-finance areas, did not usually have this opportunity546, and at almost all meetings, were presented with vast quantities of data, sometimes incomprehensible to them. From time to them they all had items on which they could express an opinion, but for the most part they were at the mercy of the Chair and the way the meetings were conducted. Sometimes they quite obviously did not know what was happening in the meeting, or what was being discussed, and on one occasion, laboured on, trying to understand the numbers which were being presented, until somebody discovered there was a page missing [THQ Budget Board 15 August, 1997]. The summary figures with which the Secretary for Business Administration was content were supported by eight or nine pages of supplementary figures, to which the board did not have access. They had to rely on the explanations given at the meeting. The issue of "rubber stamping", which has been referred to previously, seemed to be a salient one. Most board members seemed to be quite astute in their own areas, and sometimes their lack of understanding of the budget highlighted deficiencies in the system. On one occasion, as the Secretary for Business Administration went through budgeted capital 546 On one occasion, the Secretary for Business Administration met with the Secretary for Personnel, and went through his personnel budget with him, in order to provide a breakdown of changes to the budget, and an explanation of why they had occurred. Once this was done, he was satisfied with the figures [THQ Budget Board 27 June, 1997]. Chapter 8 Budget performance Page 357 items for social centres, a member inquired whether the divisions were not supposed to prioritize these items. It was agreed that the Divisional Social Services Secretary and Divisional Finance Secretary were meant to do that, to which the board member replied that "we have to have global funding for capital purchases" [THQ Budget Board 22 August, 1997]. The whole notion of global budgeting ought to have streamlined approval at THQ level, but instead, it seemed more drawn out than ever. It seemed as though THQ was not prepared to loosen control. Sometimes other issues were raised at the budget board meetings. On one occasion the Secretary for Business Administration inquired of the Chief Accountant how the oncosts associated with new positions were monitored. The reply was that they were already done very month. The matter was not taken up further, but the actual monitoring process appeared to be limited to the Chief Accountant's going through budget printouts with a highlighter, and marking negative variances. There was great trust by the board that the system was working well, even though most of them did not understand exactly how that was occurring. Members were concerned at the length of time it took to get budgets approved. After a meeting one day, a senior office complained that he had a manager who was asking when his budget would be approved, because he had an employee who might need to look for another position. He insisted that the speed at which the approval process was completed was vital for some centres in such situations. The longer the budget approval process took, the more difficult it was for centres to manage when their new budget was finally received. The Territorial Financial Secretary commented that the length of time was not his fault, and the officer agreed. It was perceived to be the "fault" of the system or the Secretary for Business Administration, or perhaps both. Scripting issues. Many issues or deficiencies of the budgeting process have already been highlighted. This section draws together some of the main concerns which officers and employees Chapter 8 Budget performance Page 358 expressed. Timetables. Budget timetables were a problem. They seemed to be prepared with no acknowledgment given about the impossibility of achieving them, and yet they provided a highly desirable scripting of the way the budgets ought to be prepared. If everything went according to the schedule, then the budget process would appear to be efficient and well run, with the various DHQs, social centres and corps receiving their approved budgets by the end of thefinancial year, ready for the teginning of the next one. There were a number of reasons why these timetables could not be adhered to. Some have already been highlighted. They were entirely unrealistic, given the lack of coordination at THQ level, the lack of expertise at grass roots level, and the lack of preparedness at DHQ level to undertake the kind of budget responsibility that was required within a global budgeting scenario. In spite of this, it was highly desirable to have a budget schedule. The official script was in place, even if it was not followed. Training. Attempts made to train personnel in order to complete the 1997/98 budget were better than any such attempts in previous years. Yet even these attempts failed to allow for the lack of expertise of many officers in particular. To offer a formal programme of training was culturally quite an innovation for the Army. The old culture was one of "sink or swim". Officers were assigned to commands, and were expected to get on and do the job. The whole ethos of training for a specific task was quite new, and the implications of it for career paths and more specialized career training, length of appointments, and input by officers into their placements, were significant. Changes in government funding arrangements and accounting requirements, which placed a great deal of stress on relatively untrained officers and employees, together with changes in societal views about the value of human resource management. Chapter 8 Budget performance Page 359 combined to force change on the Army model. Such change will usually be difficult for any organization, but it is proving to be especially so in the Army because of its own distinctive, strong officer culture. Younger officers are expecting, and beginning to demand, more specific training, more say in where they are sent, and a greater desire for a career path, rather than simply being sent to a variety of short-term positions, often quite unrelated in terms of skills and training required. Officer training has a huge impact on staff training and the kinds of staff the Army needs to employ. More and more the emphasis is on qualified professionals, particularly within the accounting area, to supplement the dedication of Army officers. This has created an internal hierarchy within the organization, with various classes of personnel. As the older officer culture begins to break down, this will change the dynamics of the organization even more in the future. Hierarchical control. The divisional structure of the Army in this territory has lent itself to devolving certain decision making authority out to the divisions. However, while the script was in place for this, other factors which were required in the performance of such divisionalization, were not. The ultimate test of the devolution of power is in the handing over of money, and this is something the Army has found difficult. Control over the Army's resources has traditionally been tightly held, probably because of the hierarchical perceptions involved in the allocation of funds. The Army has traditionally placed great value on adrninistrative positions, seeing them as rewards for performance, or promotion. In an organization where there is little in the way of financial reward, promotion to a DHQ or THQ position offers a recognition and authority which is substantial. These promotions appear to have been based on perceptions of "success" that have been culturally determined. Ability to handle the responsibilities assigned, to demonstratefinancial responsibility , and above all loyalty to the Army and its practices are all highly regarded. Once these positions of responsibility Chapter 8 Budget performance Page 360 have been attained, it seems to be important to many officers to keep the hierarchical structure in place. Junior officers were expected to understand the hierarchical order and to respect it. This attitude of hierarchy, together with the history of the Army's organizational restructure, and the largely unrealistic expectations which were placed on DHQ staff, meant that some DHQs were perceived to have failed to discharge their duties in the manner required, particularly in financial and budgeting areas. The fact that the restructure was badly handled, that DHQ staff were required to perform tasks outside their areas of expertise and ability, and that THQ staff sometimes displayed an arrogant attitude towards DHQ staff, meant that there was a distinct lack of trust which operated in both directions. Some THQ staff were reluctant to hand over to the divisions control of monetary resources, and DHQ staff often felt that the restructure had not achieved what it was supposed to achieve. Where responsibility was supposed to be devolved, that had happened, but the authority required in order to fulfill that responsibility had not been passed down the organizational structure. Where THQ's role was supposed to be that of service and support, it was still one of control, and divisions were prevented from fully taking over the responsibilities which the restructure seemed to imply. They had been given much more responsibility, but were lacking the resources or the authority to discharge it properly. The budgeting approval process provided a vivid illustration of these frustrations and tensions. According to the script, the divisions were to receive a deficit funding amount and allocate that to the organizational units within their areas. However, THQ maintained its control by insisting that those deficits be apportioned to specific categories, and by subjecting divisional budgets to a level of scrutiny which did not seem appropriate, given the divisions' mandate to allocate their deficit amount themselves. THQ simply did not trust the divisions to get it right. In spite of the script, real budget authority had not been devolved to the divisions. Chapter 8 Budget performance Page 361 Monitoring budgets. Once the budgets had been set and approved, the budgeting system seemed to become somewhat of a non-event. An incredible amount of energy was expended in setting and approving budgets, but relatively little energy went into monitoring them or ensuring that budgets were adhered to. Monthly variance reports were prepared by THQ's finance department for all THQ departments, by DHQs for their departments, and by social centres for themselves on their computers. Corps, if they had computers, also had the capability of producing monthly budget reports. These reports identified variances, but little use appeared to be made of them by most people interviewed. While a few people described them as useful, some also admitted that they could not understand them547, or even that they had never seen one [Captain Doug Nielson]. Most people acknowledged that they had to read them in the context of their own budget preparation, and with an understanding of the timing of budgeted expenditure during thefinancial year . The budget variance reports did not take into account when expenditure was incurred, and included general classifications which may not apply to individual centres. As a result, variance reports were lengthy and often irrelevant. Most people kept their own mental notes on spending as they worked through the year548. Some even constructed their own spreadsheets, cutting out unused accounts and making reports shorter and more relevant to their own particular spending 549 categories . 547 One senior THQ officer [Major Simon Kiely] complained that there were problems with the reports, in that the figures they produced were "wrong". He expressed a need for budgets to be recast when staffing was changed during the financial year, if budgets were to continue to be relevant. Major Tess Jordan, another THQ officer, said she did not understand them, and took her report to the finance department, to ask the General Fund accountant to explain them to her. 548 Daniel Peters, a THQ employee, said that he read the reports but found them to be not useful. Instead, he kept his own mental record. He complained that there could be a case for "putting in place procedures and mechanisms that are easy to follow, and indeed at times Ifind the m quite confusing". 549 Damien Jackson, a social employee, constructed his own spreadsheet because many of the lines on the official variance report were "useless". Chapter 8 Budget performance Page 362 It appeared that no action was taken on the basis of the monthly variance reports. according to a finance department employee [Diary 21 October, 1997]. While the Chief Accountant did go through them and highlight negative variances, the employee admitted that doing that was not fair, as the percentage alone took no account of the timing of expenditure, and the Chief Accountant was not aware of how spending patterns fell in the various departments. Another THQ employee [Garry Thurlow] confirmed this view: "there's nothing to stop them spending ten times their budget on phone calls, or something". The budgets, according to him, were "largely self monitored". Social centres needed to look after their own interests and ensure they did not run out of funds, since their deficit funding, if they received any, was paid regularly. It was, therefore, their responsibility to ensure that spending fell within budgeted guidelines. The lack of expertise of centre managers in this area has already been discussed. An institutional reading of the budget script. Cutbacks and changes in government funding, a heavy reliance on public giving, and uncertainty about how its operations were to be funded into the future have all been factors which, it is believed, have stimulated the Army to adopt institutionally accepted forms of accounting. This chapter has focused on the Army's introduction of global budgeting. Overlaid on the recently introduced accrual accounting system, it has put enormous pressure on existing organizational arrangements. As there have been more demands for accounting tasks to be performed at every level of the organization, organization members have struggled to come to terms with what has been expected of them. Untrained, unprepared, and unaware of the technical aspects of accounting, many officers have been trapped in a cultural system where training was general and on the job, and positions were held only for a short time. This culture has been inappropriate and inadequate when faced with the new budgeting system, which requires more technical expertise than has been required in the past. The traditional lack of accountability of Army officers in particular has not prepared Chapter 8 Budget performance Page 363 them for the demands of the new system. This has been especially noticeable at a divisional and social centre level, where specific demands have been made. The increasing number of professional accountants, business managers and bookkeepers employed by social centres and in administrative positions at DHQs and THQ, has meant that many officers are in a position of not understanding the tasks performed by people who operate under their authority, and of being unskilled in corporate accounting and management techniques. As these become increasingly valued within the organization, this is becoming threatening for some officers, and a cause of concern, that these techniques may become more important than the achievement of the Army's spiritual mission. Among some groups of officers and employees, there has been considerable dissatisfaction with a budgeting system which does not seem geared to be of use to their particular centres or corps. Instead, seen as an instrument of control, it appears to be designed to satisfy THQ requirements, and to enforce the existing hierarchy. Budget schedules described as ridiculously unachievable, instructions which are too general and incomprehensible, and an approval process which some organization members see as an insult to their autonomy and decision making ability, underline an emphasis on a prepared script which often has no relevance to the tasks which organization members are required to perform. Increasingly, officers and employees want their budgets to be designed around their own particular requirements, to provide them with useful information, and to be reflections of their goals. The next chapter continues the consideration of The Salvation Army's accounting procedures, with a concentration on the use of financial information for decision making and operating in a businesslike manner. CHAPTER 9. The performance (3): operating in a businesslike manner. MRS BAINES [taking the cheque]: The longer I live the more proof I see that there is an Infinite Goodness that turns everything to the work of salvation sooner or later. Who would have thought that any good could have come out of war and drink? And yet their profits are brought today to the feet of salvation to do its blessed work [She is affected to tears] [Shaw, 1945, 104]. The board room was on the tenth floor, the top floor of the building, the same floor on which the Territorial Commander had his offices. A large board table dominated the room. Around the walls hung photographs of previous Territorial Commanders, and various pieces of Salvation Army memorabilia. From the windows, one could look out at the city skyline, or down into the busy street below. But in the boardroom on this morning, sightseeing was not on the agenda. It was strictly business, at least for fifteen of the sixteen people present . This was a meeting of The Salvation Army's Territorial Social Property Board551. There were five items on the agenda, all focused on the property used by the Army for its social work. Some staff quarters for the Army's social staff needed refurbishing; a decision had to be made about whether an existing senior citizens' residence was to be redeveloped; a replacement residence was to be purchased for the manager of another social centre; an aged care hostel project was awaiting approval; and commemorative plaques were to be approved for the opening of a residence for homeless men. It was the second item on the agenda which occasioned most discussion, the proposed redevelopment of the inner city senior citizens' residence. The inner city hostel accommodated forty-two men, all of whom would be homeless if it were not for the facilities the Army provided for them. Many suffered dementia, and it was acknowledged that it would be difficult to find alternative accommodation for them, particularly in the inner city. The decision before the board on this day was whether to approve the replacement of the old building. It was desperately in need of renovation, and plans had been prepared for a $4 million rebuilding project. 550 There were fourteen Army officers at the meeting of the Army's territorial Social Property Board, apart from the Commissioner, who was the chairman of the Board. I was the sixteenth person. My business was observation. 551 The meeting was held on 24 September 1996, and was sandwiched in between several other board meetings which ran consecutively throughout the morning. Chapter 9 Business performance Page 365 In earlier days, the government would have provided the capital funds necessary for the project, but times had changed, and the Territorial Commander informed the board that there was no way the Army would receive any more money from the government for this new facility than had already been agreed upon. In order to go ahead with the project, the Army needed to find another $1.5 million. Three options were presented: to agree to the project at a cost of $4 million; to refer the matter to the Territorial Finance Council, who would have to provide the extra $1.5 million required; or to abort the project. From the beginning of the discussion, the Territorial Commander obviously leaned towards approving the project, stating that this was exactly the sort of programme that was different and needed. Nobody else looked after people like these, since there was simply nowhere else for such men to go. He argued that there would be a gap in the service offered by the Army if this facility did not exist. Changes to government funding arrangements entered the deliberations of board members. With the government no longer providing funds for capital works, once constructed, the building would have to be maintained by the Army. Residents who were 100% financially disadvantaged would make no entry contributions, and hence there would be no revenue for maintenance552. Members of the board were obviously concerned at the prospect of walking away from a project such as this, but also needed to face the financial realities. The Territorial Commander summed up the feeling: "We 're not necessarily saying we won't do it, just that we go in with our eyes open ". Various options were suggested. Could the division fund it? The answer was clearly that they could not, since they carried a heavy burden for social centres, having the largest number of all the divisions in the territory. Could the resident "mix" be designed carefully, with the "right" combination of financially disadvantaged men, including some who could pay an entry deposit? This too was difficult, since this type of clientele could not really be mixed. Many were emotionally disadvantaged, and there was no doubt that this particular centre would carry a higher than average percentage of financially disadvantaged residents. Could the project be built in stages? "Does the whole Taj Mahal have to be put up at once"? asked a senior officer. This had been suggested originally, but with the government money which had been offered, there was a pressure to spend it within a set timeframe. Also, the nature of the land and the existing buildings did not lend themselves to a staged project. The discussion turned next to where the money was to come from. The Secretary for Business Administration suggested that the only place such funds could come from was legacies. Somebody asked whether legacy funds could be used for ongoing 552 This was a reference to the contributions residents made on entering such a hostel. Their entry contribution, which was means tested, was invested, with the funds providing income for maintenance. Chapter 9 Business performance Page 366 maintenance, by changing trustee arrangements? This was a good idea, the Territorial Commander agreed, but it would require time, which was not an option here. Another senior officer said that he regretted not having proceeded with a capital appeal. Would it be possible to sell the staff quarters and the land, and buy something that was "up and running"? There was a strong feeling expressed that this inner city location was crucial for the men and for the neighbourhood. What if the project were aborted, asked the Territorial Commander? Where would the men go? It would be impossible to house them in other Army residences. One centre which could cater for such men could only take them one at a time, not in a large group, since it was already filled to capacity. It was agreed that this could be a major public relations exercise. A woman officer suggested that this was exactly the sort of project that gave the Army credibility. People wanted to give money for this kind of residence she suggested, since other organizations ran nursing homes, but this was unique. A senior officer disagreed, saying that people were not particularly sympathetic to old men. Women and children were "more appealing" from the public's point of view. The Commissioner finally alerted board members that he was going to have to make a decision that "some ofyou won't like ". He decided to refer the matter to the Finance Council. For this project, if they could find the money, it could go ahead. It would be left to the Finance Council. The meeting proceeded with the next item on the agenda. Chapters 7 and 8 described the Army's own unique accounting and budgeting systems, and highlighted the changes that have been introduced in recent times. Various forces from society were shown to impinge on established structures and Army culture as the organization struggled to adopt acceptable forms of annual report presentation, to change to accrual accounting, and to adopt a budgeting system which emphasized a devolution of authority to divisional centres. These changes continue to take place within an external climate of funding cutbacks, tightening of accounting requirements, and pressures to develop alternate sources of funds in the future. Based on the foundations laid in these two chapters, this chapter explores the way financial decisions are made at territorial level, the role external consultants have played in the Army's organization structure and operations, and the challenges the Army has faced in developing a business orientation. Chapter 9 Business performance Page 367 Financial decision-making. With the Army's intricate system of accounting, and the expanding number of qualified accounting professionals working at THQ in particular, an interesting consideration was the extent to which accounting information was used for making decisions at THQ level. The proceedings of the various expenditure boards have already been mentioned. Accounting information at those boards consisted simply of printouts of cheques which had been requisitioned. In spite of these existing structures, there were pressures for accounting to make a greater contribution at board level. Wand and Dasan [1997b, 1], in their discussion paper, highlighted the need for accounting information to permit and facilitate management planning and control, and external reporting to service users, supporters, government and the public. This information, they stressed, in order to be useful, had to be timely, accurate and complete. At the time of this study, the system was incapable of producing information of this quality. Why was this the case? Several factors came into play, including the Army's hierarchical authority structure, its decision-making culture, and the availability of financial information relevant for decision making. Decision-making hierarchy. The hierarchical nature of the Army has already been stressed, and the culture which this type of structure engenders. Figure 9.1 below, "THQ Boards", is an attempt to display the system by whichfinancial decision s are made: Chapter 9 Business performance Page 368 Tentorial Commander Property Trust (NSW) Property Trust (QM) J •Territorial Commander -Territorial Commander • Chief Secretary Chief Secretaiy Assistant Chief Secretary Secretary for Personnel Secretary for Personnel -Secretaiy for Program Secretary for Program - Secretaiy for Business Administration Secretary for Business Administration -Territorial Financial Secretary Territorial Rnancial Secretary - Divisional Commander (SE Queensland) Finance Councsl Various Boards -General Property Board -Social Property Board -General Maintenance Board -Officers Health and Benefits Board -Social Expenditure Board - Computer Expenditure Board -Territorial Budget Board Secretaryfor Busines s Administration Secretary for Personnel Secretary tor Program President of Women's Organizations Territorial Program Planning Council Divisional Boards (8 divisions) Figure 9.1. THQ Boards. [Source: Organization charts, observations] According to this structure, from the top, the ultimate decision-making power in the territory in all matters, financial and nonfinancial, was vested in the Territorial Commander (Territorial Commander). With the Power of Attorney from the General at International Headquarters in London, the Territorial Commander had the authority to make decisions at territorial level on all matters, financial and non-financial. A senior officer involved in territorial administration [Colonel Peter Buckley] described the hierarchical structure as potentially very autocratic, and said the extent to which power was exercised within the territory was like an "elastic band" which went in and out. Chapter 9 Business performance Page 369 depending on the personality of the current leader. The various boards, and the cabinet, could be used as decision-making bodies or as sounding boards, depending on the leadership style of the Territorial Commander. Another officer, from a corps (Major Tom Denton), described the territorial hierarchy as an incredible bureaucracy, where the exercise of power and position made it difficult to streamline processes [Diary 24 February, 1997]. The exercise of hierarchical power was demonstrated by the Territorial Commander's dealings with the six other trustees and the Finance Council. The trustees were legally responsible for all Salvation Army property within the territory. Since thefinancial yea r ending 30th June 1995, when consolidated accounts were presented for the first time, they (two trustees) have made a statement that, in their opinion, the territory's annual accounts were drawn up "so as to give a true and fair view of the results and cash flows ... of the Social Trust and the Consolidated Funds" for the territory [The Salvation Army Financial Statements 1995, 1996, 16]. It was the trustees who signed funding agreements with the government [DEET Agreement, 1995], thereby agreeing to abide by the government's financial recording and accounting requirements. In the words of one employee, if anything went wrong "it's their (the trustees') problem" (Len Aldrich). While the legal responsibility of trustees was equal, within the Army system, they did not vote. In terms of their legal status as trustees, this seemed strange, because while their discussion provided input in trust matters, the Territorial Commander made all decisions. With the hugefinancial portfoli o they were responsible for, it was hardly surprising that a senior officer expressed concern at the way the system worked: ... if seven people are trustees, all trustees legally responsible to run the show, and one fellow's got all the say, that's not good government [Captain Lee Pierce]. Another senior officer felt that some trustees were unaware of the weight of the fiduciary duty they held [Major Sam Withycombe]. If a trustee disagreed with a Chapter 9 Business performance Page 3 70 particular course of action, or felt that a decision was not in the bestfinancial interests of the territory, he or she could have that dissent noted in the minutes, or, ultimately, write to International Headquarters and express disapproval of the way the territory's financial affairs were being handled. International Headquarters had authority over the territory also, in terms of the internal audit it conducted of every territory, world-wide, every five years. This audit was an evaluation of thefinancial statu s of each territory, and relied on figures generated by that territory's accounting system, analyzed and scrutinized by a team of officers from International Headquarters. Since the Territorial Financial Secretary was responsible for the overall financial management of the territory, and for ensuring that nofinancial transactions weakened the territory's overall financial position [The Salvation Army Territorial Financial Secretaries, 1995, 3], there was potential for conflicting responsibilities in the context of the Army's Property Trusts. One employee [Travis Greig] described the situation as an "intimidatory tactic", where trustees virtually had no choice about the financial government of the territory. The Finance Council comprised no more than five members, the Territorial Commander, the Secretaries for Personnel, Program and Business Administration, and the Territorial Financial Secretary. The Territorial Commander was ex officio president of the Finance Council [Orders and Regulations, 1982], and was the ultimate authority regarding thefinancial affairs of the territory. The function of the council appeared to be that of discussion, and the airing of views and advice to the Territorial Commander. Ultimately, however, and officially, it was responsible for the raising and expenditure of funds. It considered yearly budgets, needed to be kept informed of bank and other balances, and was thefinal authorit y onfinancial matters, being the only body which had the power to make transfers to and from reserves . 553 A senior officer at THQ [Captain Lee Pierce] said that if a territory wished to use their general legacy funds for the general workings of the territory (i.e. to fund deficits in other areas), they were supposed to write to International Headquarters and ask for permission. According to him, the Chapter 9 Business performance Page 3 71 I was permitted to attend one Finance Council meeting, whose duration was forty five minutes. There were eight other people present, the Territorial Commander and seven officers. Five of those people were members554, and during the meeting, there was a constant and bewildering (to me, but not to others, apparently) passage of documents for signature. The agenda included items such as the implications of Fringe Benefits Tax for officers, travel grants to officers, the approval of unbudgeted corps expenditure, the financial aspects of certain legal and insurance matters, and the notification of a legacy. Even at this level, the hierarchical order was strongly in evidence, with the Territorial Commander very much in control, directing the meeting. A member later described the meeting arrangements as too frequent (once a week), with decisions having to be rushed through with too little information, just to have matters passed. From the point of view of an outside observer, given that the Finance Council was the ultimatefinancial decision making body for the territory, a striking feature was the absence of accounting information at THQ board level, and the general uncertainty aboutfinancial arrangements . This impression was shared by one THQ employee, who, when he heard I would be attending a Finance Council meeting, said, "you'll be amazed at the level of expertise and ineptitude". He expressed frustration at the lack of financial expertise possessed by people who had responsibilities within the Army which involved large financial resources. The prologue to this chapter illustrates the Territorial Commander'sfinal decision-makin g responsibility. The passage of approval up through the organization led to considerable frustration from officers (and employees) lower down the hierarchy, who often had to wait for extended periods for approvals. One THQ employee with a responsible position Southern Territory did this, and after a considerable time, received approval. The Eastern Territory, however, had never sought such approval, but went ahead with the transfer of general legacy funds to the territory's general operations. He suggested that they "got away with it" because they were a "financial" territory. 554 The members of the Finance Council were the Territorial Commander, the Secretaries for Business Administration, Personnel and Program, and the Territorial Financial Secretary. Chapter 9 Business performance Page 3 72 [William Stephenson] described his "ceiling" for expenditure approval as being too low at $1,500. Kevin Ingram, a social employee, suggested [Diary, 6 February, 1997] that not enough authority had been devolved to the divisions, who were still tied up for far too long, waiting for THQ approvals. The whole system of boards and approvals occasioned some negative comments: ... Everything must be in writing, and must go through Divisional Headquarters to Territorial Headquarters, and be considered by a divisional board, be considered by a territorial board. They will send you back their decisions in writing, which are usually draconian, and there's no consultation in them [Damien Jackson, social employee]. ... no-one takes the responsibility. You can always blame the board [William Stephenson, THQ employee]. Financial decision-making culture. The two THQ property boards, General and Social, dealt with matters pertaining to outlays on properties, such as refurbishments, repairs and maintenance, and new property projects. The social property board meeting described in the prologue to this chapter, was an interesting illustration of the Army's decision-making culture. The discussion centred around the desirability of continuing such a programme, rather than on where the money would come from. While the financial challenge of maintaining the building, once it was built, was acknowledged, it was the mission aspects, in terms of the provision of the service, which occupied the majority of the discussion. Given that the Territorial Commander was the final authority in the Finance Council, his decision at this meeting to refer the matter to the Finance Council, was an interesting passing of a decision up the hierarchy. Since the funds would have to come from legacy reserves, and the Finance Council was the only body with the power to allocate such reserves, the procedure demonstrated a strict adherence to rules and regulations. Presumably, wearing a different "hat" in that meeting, the Territorial Commander would then make another decision. The extent to which he would base his decision on the discussion that occurred around the board table would be impossible to assess. One board member Chapter 9 Business performance Page 3 73 observed during the meeting , when the Territorial Commander made a decision on another agenda item556, that some people knew where to lobby. He replied that he was lobbied by everybody, but that he was not open to the "big push", and had to be convinced. The financial expertise of board members, or of any Army officer, was incredibly varied. Some officers had limited education, and in the two years they were required to do in the Army's training college, there was very little attention paid to financial matters. By the time they reached a THQ position, which was seen as a prestigious promotion, according to Major Sam Withycombe, they could be assumed to have survived the Army system at least. In spite of a possible lack of training or expertise, officers were frequently put into positions where they had control over extensive asset portfolios, and where they were required to make financial decisions which carried significant consequences. Many officers described the Army's system of appointments as a "sink or swim" system, where those who had initiative and were able to cope with the demands placed upon them succeeded, but those who were unable to cope stayed on anyway, causing problems within the organization. The definition of success was unclear. It was very difficult to assess whether an officer had done his or her job well, a combination of the short appointment periods, limited or non-existent evaluation procedures, and a culture of non-accountability for decisions made. This seemed a paradox, since the notion of accountability was much discussed. It appeared to be little put into practice. At levels of the organization below THQ level, there was the feeling that THQ would "bail us out", while at THQ level, there were always the legacy funds or properties which could be sold in the event of a desperate financial situation. Significant barriers were placed in the way of officers' being able to make well-informed financial decisions. Accounting 555 The THQ Social Property Board meeting [THQ Social Property Board, 1996]. 556 The Territorial Commander on this occasion prefaced his decision by saying "Will you listen to me, ladies and gentlemen? I have taken a decision" [THQ Social Property Board, 1996]. Chapter 9 Business performance Page 374 information was simply not available, or if it was, it was indecipherable. This was particularly noticeable at THQ level, probably because of the magnitude of the financial decisions being made. The presentation of accounting information was often either absent altogether, or difficult to understand and follow, let alone to use as the basis for making an informed decision. And yet, by virtue of the hierarchical decision making structure, these officers, because of their position, were being required to undertake responsibility for decisions on which they were often ill-informed. Group responsibility, in these instances, was a protection for officers, with no one person ultimately accountable for the decisions of a particular board. It was also evident at several THQ budget board meetings, where there was often shuffling of papers, and difficulty for Army officers to keep up with thefigures whic h were being discussed. At one THQ Budget Board meeting in particular [THQ Budget Board 8 August, 1997], as the chairman proceeded through the agenda by following the time-frame progression schedule, the discussion centred on chaplains, and there were a number of questions about the amount budgeted for this item. Apparently one Army officer had retired, and there was provision in the new budget for a new appointment, as well as a consultant. At one end of the table, seated next to the Secretary for Business Administration, the accounting people attempted to explain the intricacies of thefigures. A t the other end of the table, where I was sitting, one officer said to a senior colleague, as an aside, "you have to have a degree in accounting these days". Another, referring to the accountants, added "they could tell us anything", to which yet another senior officer chimed in with "I quite agree". The first officer said it was the way the form was filled out. It was very difficult to understand and follow, he suggested, let alone to use as the basis of making an informed decision. At this there was considerable merriment. The item was passed, and would proceed to Territorial Finance Council for itsfinal approval . Chapter 9 Business performance Page 3 75 Availability and quality offinancial information. One THQ employee [Travis Greig] described the various THQ boards' decision making styles as involving virtually nofinancial information. One of the reasons for this was that there was not an "accounting information system" as such. Not only did board members often not possess relevant expertise, according to a THQ officer [Major Gavin Baird], a Finance Department employee admitted that even if board members asked the Finance Department for financial information, it would be outdated, and "not necessarily correct" [Travis Greig]. There was, therefore, virtually no financial information available for decision making at board level. Financial information was produced to fulfill Army and legal requirements, and to satisfy notions of accountability, rather than to provide information with which board members would make decisions. Many examples of this deficiency arose during the course of my access time in the Army. At one Territorial Budget Board meeting [THQ Budget Board 8 August, 1997], in the context of a discussion about various divisional headquarters, a senior THQ officer asked why they did not know what it cost to run a division. The Chief Accountant replied that when the new software was installed, they should have access to information on a timely basis. This was his primary concern, that the system would produce information which could be used. He feared that because not everyone who had accounting responsibilities knew how to do their job, the reliability of their work was dubious. It was widely acknowledged that accounting expertise, or at least some sort of financial expertise, was desirable: ... training in accounting "simply must be done" [Garry Thurlow, THQ employee]; ... all officers need to understanding accounting principles, or, at least, "basic bookkeeping principles" [Harry Johnstone, divisional employee]; Chapter 9 Business performance Page 3 76 ... having nofinancial trainin g is okay for a novice, but in the long run, is "definitely needed" [Captain Lynette Jones, social officer]; ... the Finance department needs to change its culture, and needs to train people [Major Simon Kiely, THQ officer]. In spite of this acknowledgment, the lack of ability of many officers to fulfill the accounting tasks which they were required to perform led to accounting information being late and inaccurate. This was felt to be a severe problem at THQ level, with the Finance Department meeting head-on the problems it caused, in terms of end of period balancing and the consolidation process. Another contributing factor to the untimeliness and unreliability of accounting information was the computer system. The system in operation at the time of this study was one which had been developed in-house, and which seemed to have enormous problems, both in accounting terms, and in operational terms. Its focus, according to Travis Greig, was on the computers themselves rather than the information they produced, which was generally agreed to be outdated (due to the operational deficiencies of the system) and not useful (due to the design of the system). The issue of whether accounting information would be used was a separate one, affected by the notions of board members about the basis on which decisions were made. Were they mission-oriented decisions, or money-oriented decisions? The temptation seemed to be, that while the Army possessed the vast property resources it did, and while there was a constant stream of legacies and bequests flowing in, there would be funds available to mop up the consequences of unwisefinancial decisions . And, after all, the mission needs were seen to be paramount. On occasions when board members asked for accounting information, it was usually unavailable. Some board members who had difficulty with the accounting figures presented, understood the Army's operations, and were able to ask probing questions about, for example, what it actually cost to run a corps, what it cost to run a division, how much divisions were holding in reserves, whether budget estimates were accurate, who monitored budgeted Chapter 9 Business performance Page 377 spending, and what happened if budgets were exceeded. They may have had difficulty in deciphering accounting information as it was presented, but some understood that there would be some accounting information which would be useful to them. Almost invariably, this kind of information was never presented. In 1997 the Chief Accountant delivered a paper at the Australian Society of CPAs Not for Profit Skills Day in Sydney [Cameron and Thompson, 1997]. He identified common information requirements of senior management in nonprofit organizations as being "give me the bottom line", "what funds have I got to spend?' or "what are the reserves we have for a particular project or service?", basically cash oriented questions. According to him, more ought to be provided, particularly information relating to reserve fund movements, whether they were backed by assets, and the relationship between investment strategies and restrictions on certain reserves. This, he said, was crucial. Further, financial reports to management ought to be simple, easily understood, timely, accurate and meaningful. He was obviously committed to raising senior Army officers' awareness of the need for change, and the possibility of using accounting information in a dynamic way in the decision-making process. One of his frustrations was that he was operating with an outdated system, and had to progress slowly and carefully with change. Consultancies. The Salvation Army's use of advisory boards has already been considered. For several decades, the Australia Eastern Territory has relied on advice from high-profile members of the business and corporate world, not necessarily Salvationists, who have viewed service on such a board as a worthwhile charitable endeavour. Through such contacts, senior Army officers have been introduced to corporate personalities and business methods. This donated expertise has had a profound impact on the Army's fundraising methods in particular, and has stimulated the organization to employ a growing number of marketing and fundraising professionals. Similar relationships with prestigous accounting firms and corporate leaders have led to a greater awareness of corporate Chapter 9 Business performance Page 3 78 and business practices. The adoption of some of these practices has been shown to have significantly impacted Army organization and culture. This awareness of the wider world and its accounting practices in particular, coupled with a funding imperative, have made the Army open to employing consultants to advise on matters which senior officers have believed show a need for improvement, or at least for consideration of different methods of operating. Even during the time when I had access to the Army, there were several consultancies occurring, and reference was frequently made by people I met to these current consultancies557, and to those which had been commissioned in the past. The reasons behind the seeking out of such advice, and the extent to which this advice has been adopted, have varied. An academic study. In a sense my study was, initially at least, a form of consultancy, but at no cost to the Army. From the very begirining of negotiations, already discussed in detail in Chapter 2, the concern of senior Army officers was what the Army would get out of it. I was granted access on the condition that I present a report on the Army's budgeting system at the end of a year's research. When my report was finally prepared558, it occasioned little interest, and was presented to an audience of one person, destined to have little or no effect on the organization. It had even been suggested at one stage that no report would be required [Diary 2 July, 1997]. The difficulties in the Army's budgeting system that had been highlighted at the outset 557 Colonel Stephen Carpenter told me on one occasion that there were five consultancies currently being conducted [Diary 1 September, 1997], and Colonel Jerry Deephouse asked me if I was aware of the number of consultancies the Army was undergoing [Diary 29 August, 1997]. The implication was that this was a good thing, and indicated the Army's willingness to embrace new ideas and move forward. 558 It was presented finally to the Secretary of Business Administration in October 1997. The original requirement was that a written report be submitted, accompanied by an oral presentation an annual senior officers' conference. In the end, no oral presentation was required. Chapter 9 Business performance Page 3 79 by the Secretary for Business Administration and the Territorial Financial Secretary still existed, but there was a marked lack of enthusiasm in embracing any further revelations or suggestions for change. In the end, perhaps it was thought that my comments would become an embarrassment or an inconvenience. While I had identified fifty-six dissertations, world-wide, which were either based on the Salvation Army, or which referred to it, only one of these was actually written about the Australia Eastern territory. That was a study on the Western Sydney Division, in 1986, by Herbert Green, an Army officer, as part of his D.Min. from Fuller Theological Seminary559. Apart from this, all consultancies had been privately contracted, and thefindings were therefore the property of the Army, private and confidential. There may have been a lack of appreciation of what constituted a study for academic purposes, and of the fact that such a study was not primarily a management consulting exercise, even though that had been made clear originally. My report was presented as a management consulting report rather than an academic thesis, but by that stage, interest in it had virtually ceased. It could also have been a fear that private and damaging information about the Army might be set loose within the community. This had certainly been a concern during the initial negotiations, when the Army's heavy reliance on external funding was emphasized. At my last meeting with the Secretary for Business Administration [Diary 6 April, 1998], the only specific reservation he expressed with the report was with a section entitled "Putting theright people in theright places" . The emphasis there was on ensuring the accountability of officers, revising the system of short appointments, setting up training systems, and releasing officers from many of the administrative positions they currently occupied by employing well qualified professionals. That the agenda of seeking suggestions for improvement in the budgeting system changed, was probably a combination of these factors, as well as being a reflection of 559 This information was included in a letter to the Secretary for Business Administration dated 24 July, 1996, in which I submitted my original research proposal. Chapter 9 Business performance Page 380 personalities , and the fact that at the same time, several other consultancies had been commissioned . These included a study of the computer system by Coopers & Lybrand, a report on aged care centres by Brian Cammerman, and an organizational review, conducted by Paul Comey562, an independent management consultant. A computer systems study. Problems that people experienced with the Army's unique computer system have already been referred to in the previous two chapters, particularly in Chapter 7. Frustrations at social centre level, and at THQ level, with a slow and unwieldy system and inaccurate data, came to the attention of David Hey-Cunningham, when he conducted a series of training workshops throughout the territory [Diary 14 April, 1997]. He recommended the introduction of a commercially developed system, instead of the in-house system the Army currently used [Hey-Cunningham, 1997, 24]. As Coopers & Lybrand conducted the annual audit for the year ended 30 June 1996, similar problems came to the surface, with one of the main issues highlighted in their management report being the computer systems, which were described as 'Hinintegrated and inflexible" [Management Report Memo, 1997]. The Chief Accountant responded to this report by sending a memo to the Territorial Financial Secretary in which he discussed each of Coopers & Lybrand's criticisms. He agreed with their comments on the computer systems, and noted that the Army had limited time in which to establish another software system before the year 2000. The Chief Accountant went on to propose four possible solutions for dealing with the extensive accounting and computer system problems which had come to light, 560 As described in Chapter 2, the key THQ players in approving my period of access moved to other positions, and their replacements were less than enthusiastic about the study. 561 A senior THQ officer pointed this out to me towards the end of my time with the Army, when he asked if 1 was aware of all the consultancies that were currently being conducted [Diary 29 August, 1997]. 562 This is a pseudonym. Other consultants have been referred to by their actual names. Chapter 9 Business performance Page 381 favouring an option which would centralize data at THQ. It was suggested that this would speed up the collection of data by means of several strategies, including "converting the data to a more powerful and useful database, allowing for easier and quicker access to information" and "having the data in one format rather than two" [Management Report Memo, 1997, 4]. He stated that he was sensitive to the need to maintain a sense of "ownership" at a local level, but was also concerned that THQ should provide a "betterfinancial service " to the DHQs and centres. An interesting aspect of his memo was that this option was the one he favoured, and was the only one which he mentioned as having been "discussed with C&L (Coopers & Lybrand)" and having their "endorsement" [Management Report Memo, 1997, 3]. As a prestigious chartered accounting firm, their approval of his suggestion provided a certain legitimacy. At the end of his memo, the Chief Accountant included a page on which he outlined a proposed study of the computer system. He highlighted the year 2000 imperative, and described having had "extensive discussions ... with various accounting and computer systems experts". The result of these discussions was that a study ought to be performed "to assess the best way to collect the data from the centres and process the data to meet our statutory obligations" [Management Report Memo, 1997, 5]. Apparently Coopers & Lybrand observed that, in their experience, "government is becoming far more selective with their funding and that we need to meet our contractual obligations to maintain our level of funding" [Management Report Memo, 1997, 5]. The budgeting system was implicated also, because budgets were prepared on three months estimations, not on actual data. Even the "actuals" were inaccurate, with the result that the Army's financial management suffered. Based on these powerful reasons, reliance on government funding, a need for accuratefinancial information, and the desire to offer high qualityfinancial management, the Chief Accountant called for a formal study, which he proposed would cost less than $15,000. The memo was addressed to the Territorial Financial Secretary, and he was requested to submit the proposal to the Territorial Finance Council, based on this information: Chapter 9 Business performance Page 382 • three organizations had expressed an interest in carrying out the study, including Coopers & Lybrand; • "ball park" estimates of both software and hardware were between $60,000 and $120,000, with an annual fee of less than $15,000 [Management Report Memo, 1997, 5]. Coopers & Lybrand were awarded the consultancy project, due possibly to some advisory board advice. Lobbying occurred within the Army about the extent of the review , and after some discussion, it was agreed that it would include social centres. The review was required to provide recommendations on "short term improvements in the reconciliation and consolidation process", "short term improvements in the accuracy and timeliness of information collections and consolidated" and a longer term "vision" on the "infrastructure and process best suited to the collection and consolidation of information". As well, it was to satisfy "high level requirements for the Army's general ledger system" and to provide "a plan to be followed to select and implement financial systems to replace CGAS (the computer generated accounting system)" [Coopers & Lybrand, 1997, 7]. After interviewing twenty-five key staff members at several social centres, DHQs, and THQ564, several recommendations were put forward when the review was presented in April 1997: • the consolidation process should be performed monthly, and should roll up from centres to DHQs to THQ; • the use of a standardised chart of accounts structure throughout the Army would greatly enhance the consolidation and reporting process; • in the short term, responsibility for data entry and reporting should be taken away from those centres that do not have the necessary skills; • centres should be provided with more support in discharging their reporting responsibilities; 563 It was reported that the Secretary for Business Administration tried originally to exclude the social centres from the scope of the review, in order to keep the Army's computer system as it was, but it was eventually agreed that would be too limiting a restriction [Diary 14 April, 1997]. 564 Only four of those interviewed were Army officers, one at a social centre, two at DHQs, and one at THQ [Coopers & Lybrand, 1997, 9-10]. Chapter 9 Business performance Page 383 • responsibility for data entry could be moved back to centres in the longer term when policies and procedures are fully developed, and knowledge levels increase; • as a longer term strategy, more use should be made of packaged systems to cater for user needs; • the project to replace CGAS provides an ideal opportunity to select packaged systems for centres and DHQs; • computer services role would then become one of more co-ordination and support565 [Coopers & Lybrand, 1997, 20 - 23]. Because the computer system had a wide impact on every level of data capture and management within the organization, the opportunity therefore existed to put in place a system which would answer the specific problems the Army was experiencing. The use of packaged systems, it was suggested, would provide, among other things, an opportunity to involve key users in "the documentation of requirements for the replacement of systems" [Coopers & Lybrand, 1997, 22]. This idea was taken up, and a series of computer users meetings began. Significantly, the choice of the software package was given to THQ's finance department, with the computer services department being required to implement it566 [Diary 27 June, 1997]. The Chief Accountant had expressed a desire for "ongoing" support from Coopers & Lybrand, and this was arranged so that he could have consultancies at will, as needed. As regards the implementation of the computer systems review, a Coopers employee was to come in at cost plus out of pocket expenses. It appeared to be important for the Chief Accountant to have this external support for the implementation of the new system, since, as already mentioned, it lent the project a legitimacy and authority that perhaps it would not otherwise have had. The introduction of the new computer system was fraught withfrustration, a s the users 565 This had previously been a design, implementation and service role, which had led to an accounting system designed by non-accountants. If these recommendations were followed, computer services resources could be refocused to maintain strong relationships with vendors, support the technical aspects of user requirements, produce and maintain templates for more effective reporting, co-ordinate software release and change, and provide a "help desk" facility for accounting system and related technology problems [Coopers & Lybrand, 1997,23]. 566 Given the strained relations between the two departments, this was a triumph for the finance department. Chapter 9 Business performance Page 384 group metfrequently, an d trialled its implementation at one centre in particular, with the aim of refining it before it was introduced at other centres. Even by August 1998 [Diary 24 August, 1998], ten months after my study finished, it was described as "rough", with difficulties in implementation. In the meantime, however, validations were required from aged care centres in receipt of government funding, with more stringent requirements than ever before. This was apparently becoming the pattern, that the more government funding was received, the more accountable organizations were being held. This put incredible strains on an organization such as the Army, with a great number of untrained personnel, according to Bert Grosse, a social employee [Diary 24 August, 1998]. These pressures provided a powerful incentive for the Army to push ahead in applying the suggestions made in the computer systems review. This was a series of recommendations it could not afford to ignore, in spite of the fact that the application of those recommendations put a great strain on the Army's resources, both in terms of finances and personnel. A report on Red Shield Industries. The Army's Red Shield Industries, under the auspices of Rehabilitation Services Command, is responsible for generating a significant amount of profit each year through the operation of retail outlets selling donated clothing, furniture, household goods and brie a brae, as well as through the manufacture of industrial wipers, using rags. In 1996, the then head of Red Shield Command commissioned a report from Brian Cammerman & Associates, the purpose of which was to provide "a fresh and objective look at the industry's operations and to make recommendations which would improve the overall efficacy and effectiveness of the industry whilst simultaneously improving profitability and controls" [Cammerman, 1996, 3], Red Shield Command oversees the territory's drug and alcohol rehabilitation programme, and Red Shield Industries, for the twelve months ended 30 June 1995, the Chapter 9 Business performance Page 385 period immediately preceding the study, contributed a surplus of approximately $2.9 million, which went towards the maintenance of that programme. This is an industry with great potential, and with a growing need to provide funding, the Army has developed the strategy of funding its own programme through its business endeavours. The report, presented in August 1996 [Cammerman, 1996, 3], focused primarily on: • retail profitability, shop presentation and controls, stock holdings, discounting and sales policy, security, and expansion possibilities; • production, including quality, productivity and a review of current operational processes; • transportation, including fleet management, size and cost; • raw material collection, including clothing bin analysis, location and required levels for current and future requirements; • administration and organizational structure. The findings of the report were based on the establishment of benchmarks and key performance indicators (KPIs) in the areas of retail, production, transportation, raw materials and administration. These benchmarks had been developed as a result of observations in the Eastern and Southern territories567. The report contained detailed observations of all stores and production centres, and presented vast numbers of figures and KPIs. One aspect of the report was to highlight overstaffing at a significant number of outlets, possibly the result of the Army's charitable view of employing people who needed jobs. It was proposed that an experienced sales and marketing employee be engaged in the near future, that the general manager take on responsibility for security, and that the general manager should also oversee bin placement and raw material management. These strategies would lift the performance of Red Shield Industries to the level of the "big business" which it had become568, by managing and controlling it according to "sound business practices" [Cammerman, 1996, 118]. It was suggested that 567 Cammerman had conducted a similar study in the Southern territory eighteen months earlier, and had fine-tuned the benchmarks set in that study and applied them to the Eastern territory [Cammerman, 1996,6]. 568 The report [Cammerman, 1996, 118] described turnover at the time as being nearly $15 million, and expected to climb to $18 million in the near future. Chapter 9 Business performance Page 386 "quantifiable cost reductions" of approximately $1.8 million could be achieved, bringing the industry into an increasingly profitable operation through "increased efficiency, retail activity and productivity" [Cammerman, 1996, 119]. It was recognized that it would be a huge organizational commitment if these targets were to be achieved: ... the task ahead requires a commitment and acceptance at all levels in the Salvation Army, from the Finance Council to the RSC (Red Shield Command) and its advisory board as well as from all centre managers ... A challenging time lies ahead [Cammerman, 1996, 119]. Significantly, the head of Red Shield Command who commissioned the report, took up his new position at THQ from 1 August 1996, so was not there to oversee the implementation of the recommendations, or to push it through. The new head was described by one THQ employee as being more interested in programmes than finances. Therefore, he had not pushed it as it would have required, with the result that the system had not been changed as suggested [Diary 29 August, 1997]. Kevin Ingram, a social manager, when speaking of another external report the Army had commissioned, which relied heavily on benchmarks, described them as a "catch phrase" which the Army was keen to embrace, but not to eager to implement [Diary 6 February, 1997]. One finance department employee described the Cammerman report, with its setting of benchmarks, as promoting a "more businesslike way of operating" [Diary 27 November, 1996]. Another said he had "a few reservations" about the report, an opinion which was shared by more than one Red Shield Industries officer. Lieutenant Samuel Cohen observed that in his opinion, some things in the Cammerman report were "a bit unrealistic", in terms of the benchmarks set569. With Army officers receiving modest living allowances, the payment of $850 per week to a manager in one RSI centre seemed to some officers to be excessive. Lieutenant Cohen pointed out that under that manager's leadership, sales had been raised in a four year period from 569 Another officer said that staff in his centre were supposed to pricefifty items per hour [Diary 1 May, 1997]. Chapter 9 Business performance Page 387 $750,000 to $2 million. He felt the large salary (in Salvation Army terms) was more than covered [Diary 3 March, 1997]. Even though the report was embraced warmly in most quarters, and applied to a certain extent, without the impetus from the person who saw the need for it in thefirst place , the process of change was definitely hampered. An aged care study. Changes in the government's funding of aged care centres, and the tightening of reporting requirements imposed on those centres, have necessitated a re-think of the way such centres are managed. Following the success of his Red Shield Industries report, and of reports he prepared for the Army's Southern Territory, Brian Cammerman was appointed by the Army in 1997 to prepare a report on its aged care centres. Apparently several years earlier, another report on aged care centres had been commissioned, but it had not been implemented570. Now, faced with tougher external pressures, the Army had to face up to its goal of eliminating deficit funding for aged care centres, and requiring them at least to break even. By the time the report was released, my access time in the Army had finished, but during my time there, I noticed a definite sense of anticipation that this report would achieve some substantial savings, savings which it was acknowledged were greatly needed. The Chief Accountant, in a THQ budget board meeting [THQ Budget Board 14 March, 1997], said he expected present deficit funding of $1.4 million for nursing homes and hostels to be eliminated, a substantial saving. He warned social officers and employees at a training workshop that aged care centres were to be brought back to a zero deficit [Diary 1 May, 1997]. The report was referred to also in a DHQ budget board meeting [DHQ Budget Board 18 June, 1997], when it was pointed out to DHQ 570 Major Maurice Jeffreys, a social officer, told me that the Manning Report was produced by a paid consultant, but nothing had been done with it [Diary 10 February, 1997]. Chapter 9 Business performance Page 388 personnel that once it wasfinalized, ther e would be no more deficit funding for aged care centres. Everybody seemed aware that aged care centres had to start to pay their own way, and that more stringent accounting and operational practices had to be adopted. Major Maurice Jeffreys, an experienced social officer, had had some interaction with Brian Cammerman several years earlier, and respected his knowledge about aged care centres, and his reputation, from previous consultancies he had conducted, for being incisive regarding that changes that would have to be made. Major Jeffreys predicted that the rest of the territory would get a shock when the report wasfinally released, and they realized the standard of performance and accountability that would be required of them. An organizational review. Of all the consultancies being conducted during my time in the Army, Paul Corney's 7 was potentially the most far reaching, and probably the most politically controversial. When the then Secretary for Personnel came to his new position at THQ , he was concerned that in an organization with over 3,000 people, there was only one industrial relations officer. He asked Territorial Finance Council for another, and was refused. At that point, he said he would be prepared to undergo an audit of personnel. Tenders were called for, and four applicants submitted proposals. One, Paul Corney, stated that a personnel review was not broad enough, and that it ought to be an entire organizational review, encompassing the whole of THQ, and DHQs as well. This obviously made sense to the Territorial Finance Council, and he was granted the commission [Diary 29 August, 1997]. Corney set about bis task with great vigour, interviewing over one hundred Army 571 Paul Corney (a pseudonym) was a management consultant. 572 He came to that position on 1 August 1996 [Disposition of Forces, 1997], Chapter 9 Business performance Page 389 personnel, and workshopping about three hundred. As he moved through the organization, he gathered together groups of people, both officers and employees, from all sections of the Army. Reports about the workshops indicated they were lively at least. A senior officer [Colonel Carl Dienemann] who attended a workshop for employees, described how vocal they were, and how they "letrip" abou t the hierarchy, seeing it as clearly defined, with officers at the top, Salvationist employees next, and other employees at the bottom [Diary 23 June, 1997]. That same officer said that responses of people during interviews had been enlightening rather than surprising, with most people being extremely frank in expressing their opinion about the way they saw the Army [Diary 2 July, 1997]. One finance department employee, who attended workshops for finance, audit and social personnel, commented that from his point of view they were a "waste of time", because there were not the competent officers required to put any of the proposals into practice [Diary 15 August, 1997]. Another employee said he was disappointed at the type of questions officers asked at the workshop he attended, since their focus appeared to be chiefly on what they could get out of the changes, rather than how the changes could help the Army move into the future [Harry Johnstone]. From my point of view, the Corney report coincided with mine, and, as Colonel Dienemann expressed it, he could not promote both of them to the new Territorial Commander when he arrived573, so he chose to set mine aside and concentrate on the one which had been commissioned as an organizational review574 [Diary 2 July, 1997]. In late August 1997, the Corney report was scheduled to be presented as an options paper, with a workshop following for cabinet members and Divisional Commanders. Then, the next month, another workshop would follow with the purpose of settling on a 573 The Corney report had originally been requested by the previous Commissioner, who left in April 1997. Once again, the Army had an external consultant preparing a report for a "new" officer, one who had not commissioned it in thefirst place . Colonel Dienemann described the importance of getting the new Commissioner "on side" [Diary 2 July, 1997]. 574 Some of the dynamics of this process are considered in Chapter 2. Chapter 9 Business performance Page 390 strategic framework, which was to be implemented over the next three tofive years. The report was presented confidentially, and I never saw it, so had to rely on the impressions of others. I had already met with Paul Corney myself, and ascertained that many of our observations overlapped, particularly regarding the powerful nature of Army structure and culture [Diary 15 July, 1997], the emphasis on control and the lack of accountability [Diary 27 June, 1997]. Colonel Dienemann spoke in glowing terms about the study, even before the report was released, which was hardly surprising, since he had been attending workshops and interviews with Corney from the beginning, and was deeply committed to the project. His impression was that Corney wanted the Army to change from being a crisis management organization to a strategy oriented organization [Diary 1 August, 1997]. He acknowledged that this had been the focus, and approved of this change in orientation. When I asked Colonel Deephouse for his impressions of the report, after he had attended its initial presentation, he was guarded in his comments, stating that there had been no response yet to the recommendations, referring to the lack of an official response at that stage. He did volunteer the observation that some of the cabinet, when presented with certain pieces of information in the report, responded that they were the comments of radical people in a minority, with a loud voice. In spite of this, he said nobody was particularly surprised by the report [Diary 29 August, 1997]. It was interesting that similar comments were made about some of my observations, that they were the observations of a few vocal, disenchanted people, and not representative of the Army as a whole. Captain David Chappell, a THQ officer, said that the aspect of the report which impacted on him most was that the role of THQ had to change, from being a control centre to a resource centre [Diary 16 October, 1997]. Colonel Carpenter agreed with this observation, seeing THQ's role as advisory rather than operational, based on what the report had presented [Diary 12 December, 1997]. He expressed frustration at the lack of impetus to carry through the suggestions from the report. The fact that the Chapter 9 Business performance Page 391 Territorial Commander had changed in the meantime meant that it would not have the same impetus it might have had . There was debate for some time about how the report would be implemented, and who would be responsible for that implementation. Would Paul Corney be employed to manage the change necessary, or would an officer lend it an authority which an employee would not have [Diary 29 August, 1997]. Travis Greig, a THQ employee, expressed the opinion that the report would stall, since officers were not prepared to step outside their comfort zone [Diary 15 August, 1997]. When I spoke to Paul Corney the following year, his response encapsulated some of these comments. He had left the Army in January 1998, and said somewhat sadly that his report had been "politicized" since that time. The Army had decided to implement it over afive yea r period, which he feared would cause it to lose much of its impetus. He had had high hopes, and felt he had softened up the organization, but unfortunately, resistance to change had overtaken it. He was not surprised, but disappointed. The problem was finding a leader within the Army who could see the project through. It would have to be somebody with hierarchical authority, and that posed difficulties, since those at the top of the organization were not necessarily committed to achieving the aims of the report [Diary 29 April, 1998]. What significance did this report have for Army accounting systems? Simply that the cultural factors which led to resistance to the implementation of the report were also at play in the accounting arena. Financial decision making, accountability, the adoption of accrual accounting, the meeting of external reporting requirements, and the adoption of a new computer accounting system, were all dependent on the Army's own structures, cultures and routines, which were deeply embedded. The extent to which external consultancies would impact on these unique features perhaps determined the extent to which their advice was adopted. There appeared to be some resistance, at a deep level, to far-reaching cultural changes. While the necessity for some change, in terms of 575 Major Paul Cooper actually expressed the opinion that the system was much "tighter", i.e. less open to change, since the new Commissioner had taken up his command [Diary 8 August, 1997]. Chapter 9 Business performance Page 392 fundraising and meeting the requirements of external agencies such as government, was a driving force, changes which affected the fabric of the organization were more likely to be resisted. The organization was forced to bow to institutional pressures, but it did not necessarily have to adopt them wholeheartedly and unreservedly. The business of caring. Consistent with the observations of James [1998, 271] that nonprofit organizations are not reluctant to embrace commercial activities, there was little disagreement with the notion that the Army needed to be run along businesslike lines. A report presented in 1990 to the then Territorial Commander by the Greater Sydney Commission516 [1990] proposed action regarding the adjustment of programmes, property, locations and personnel within the Sydney area. Its focus was on community and social services programmes, institutions and centres, and excluded corps and outposts. Essentially a programme and business-oriented agenda, it was concerned to make recommendations for "extending, adjusting, discontinuing or relocating" those services. The recommendations were to be accompanied by budgets, costing, valuations and staff requirements [Greater Sydney Commission, 1990, 2]. One part of the report emphasized the Salvation Army Charter, and the need for The Salvation Army to be "loyal to its first principles" [Greater Sydney Commission, 1990, 34]. Another stressed the need to apply Christian stewardship in the "utilisation of resources" [Greater Sydney Commission, 1990, 69]. Motivations for businesslike performance. People interviewed in the course of this study expressed different reasons as to why they believed the Army ought to be run as a business. Funding imperatives were a major 576 Chaired by the then Secretary for Business Administration, the Commission consisted of nine other senior officers, an invited representative from the Advisory Council of Salvation Army Officers (ACSAS), and two invited representatives from the territorial Advisory Board [Greater Sydney Commission, 1990,3]. Chapter 9 Business performance Page 393 reason why The Salvation Army, like other nonprofit organizations, increasingly relies on commercial sources of income [Young, 1998, 209]. Some people placed emphasis on the need for accountability because of the reliance on public funding [Len Aldrich, THQ employee; Major Benjamin Rowen, DHQ officer577; Major Pauline Morphett. THQ officer; Bert Grosse, THQ employee]. Some were concerned about the increased government requirements made of organizations which received government funding, and maintained that meant the Army had to raise its reliance on business methods of operation [Diary 24 August, 1998578; Captain Bob Greeley, THQ officer579; Major Gavin Baird580; Lieutenant Kerry Connors, corps officer]. Major Humphrey Jonsson, a senior DHQ officer, spoke of the Army's responsibility to run in "a businesslike fashion", particularly in the light of changes in the nonprofit sector. Current government policy, he maintained, had changed the emphasis from co-operation between groups to competition, with the tendering for services system. The trap was that inexperienced groups could submit lower tenders, and run into trouble. The emphasis was on thefinancial aspects, but these, he suggested, were not the only aspects which ought to be considered. Others emphasized the size of Army operations, and maintained that necessitated a businesslike orientation, a need to adopt "business methods of the day and age in which we live" [Bramwell Richards, senior officer581; Bert Grosse, THQ employee; Fred 577 With divisional budgets of $25 or $26 million, the organization had to be run as a business, or it was not being faithful to the public, who gave the money in order to run it. 578 According to Bert Grosse, THQ employee, the government was requiring the Army (and other aged care providers) to make a profit. Accrual accounting provided a fuller cost of services and enhanced the ability to run as a profitable enterprise. 579 Because of its reliance on government funding, Captain Greeley expressed the opinion that the Army needed to be seen to operate in a responsible and accountable way. There were not enough officers trained in business, and therefore business managers employed by the Army needed to understand Army "principles and practice". 580 Given the special demands made by government, if it did not operate as a business the Army would not survive. 581 An Advisory Board member was reported as describing the Army as a huge concern: "... you are no longer a tinpot show. You are big business ... you've got to account in a big business way". Chapter 9 Business performance Page 394 Tesch, Advisory Board member , Garry Thurlow, THQ employee ]. A senior THQ officer, for example, spoke of the need to bring in a professional accountant from outside the Army tofill a position which had traditionally been held by an Army officer: ... I think we need the objective view of somebody who has not, up to this stage, been mixed up in the Salvation Army at all, and will enlighten us about the best way to do it (run efficiently) [Gerard Jones]. Even some corps were devising business plans or employing business managers [Major Tom Denton, corps officer; Captain Mark Wreiden, corps officer]. Another motivation for adopting businesslike practices, based more on the internal culture of the Army and the scarcity of resources available for running its various ministries, was the notion of Christian stewardship [Captain Harry Carruthers, social officer; Harry Johnstone, DHQ employee], or "merchandising for the master" as one social officer expressed it [Major Louise Elliott]. "This is the Lord's business," said Joel Pitt, a social employee. The main purpose of running the Army's business arm, according to one social officer [Major Eric Nelson] was to produce funds that would go into the Army's general funds, to be allocated wherever they were needed. He defended the Army's practice of selling goods that were donated by the public by saying that "every dollar that's got in is precious". Captain Ryan Lago, a corps officer, observed that the Army's emphasis on profit making enterprises over the last few years had been borrowed from the US Army experience. He attributed it to the Territorial Commander's desire to help the Army to be viable in the longer term, i.e. to set up business systems which would help to make the Army self sustaining in a financial sense. At a THQ Budget Board meeting [THQ Budget Board 15 August, 1997], the subject of 582 In speaking of making a difficult decision about one of the Army's social centres, Fred Tesch said "we've got to treat it like a business. We've got to stop treating it like a charity". 583 The size of the Army's property and interests was so large, that "you just can't do this on an exercise book accounting system. It's got to be run properly". Chapter 9 Business performance Page 395 employing a business manager for the Army's counselling arm was raised. It was agreed that somebody was needed who had a "good business brain", and could generate more funding for the service. At a THQ board meeting, a social centre manager was praised because of his ability to generate a profit for the Army [THQ Social Property Board, 1996]. Constraints on businesslike practices. While it was generally agreed that it was a good thing to run as a business, there were a number of constraints on this emphasis, some practical and some philosophical and cultural. While the Army had been concerned since its earliest days with making limited funds stretch as far as possible, as an organization it had not been used to operating on strictly business lines. Strict accounting had been used as a measure of accountability, and a source of accuracy and legitimacy, rather than a tool for businesslike decision making. The increased emphasis in recent years on running as a business contrasted with the Army's previous tendency, as a charitable organization, to apply those same charitable motivations to its own business practices. An example of this was the employment of what one DHQ officer described as "limited folk" [Major Sharon Girling]. She spoke of the Army's responsibility to use resources wisely, and questioned the "wrong balance" of current employment strategies, accusing the Army of employing "a whole host of people who we can'tfit anywher e else". Joel Pitt, a social employee, agreed with this, suggesting that the social centre in which he worked had "an overdose of niceness ... if you have ten or a dozen people extra that you can't afford ... no facility can carry on with those sorts of losses". Following the Cammerman report into Red Shield Industries, one centre had its staff reduced by fourteen. Overall, the implementation of the report, even at an early stage, resulted in a saving of $1.5 million through the elimination of "inefficient practices, inefficient use of equipment, ovei-staffing, featherbedding, jobs for the boys" and other practices, and, on the revenue side, through increased production [Major William Barnes]. Chapter 9 Business performance Page 396 With a growing awareness of these sorts offinancial constraints and demands for greater revenue generation, expectations of managers had changed in recent years [Colonel Jerry Deephouse], with the result that there were not many officers in particular within the Army who had the accounting training or business acumen necessary to meet those demands [Hans Robey, social employee; Captain Morris Gittins]. One social employee was appalled at the prospect of working under the direction of an ordained corps officer, since he believed bis centre had to be run as a business, and corps officers, who typically had no business training, were "out of touch with the business world" [Kevin Ingram]. A senior THQ officer [Colonel Kris Woodall] admitted that "if we were in the business world, we'd go broke". A social employee [Bernard Jeffreys] observed that, in terms of accounting and business training, "the Army is trying to operate in a businesslike way, but I don't think they do it". Travis Greig, a THQ employee, had a cynical view of the ability of many Army business managers, both officers and employees. In his opinion, some were well meaning but ignorant, but some deliberately falsified information in order to maintain an appearance of operating efficiently or to avoid accountability. Major Clark Lyons questioned the Army's ability to run as a business, since officers were trained as pastors. In social centres in particular, were they supposed to be pastoring or managing? A sound approach, according to a DHQ officer [Major Simon Laughlin], would be to take a businesslike approach to administration by employing well qualified people, and releasing officers for pastoral work. Lieutenant Edward Jopson, a corps officer, said he believed it was acceptable to run as a business, but not just in order to make money. The goal was to make money "because you have a welfare programme or something to spend it on". The money was not the end goal. Rather, the end goal was ministry, and money funded the ministry. To put it bluntly, "in the Army financial decisions are necessary in that we can't do programmes if we don't have the money" [Colonel Jerry Deephouse]. If profit was there to be had, as in the recycling arm of the Army's operations, "why shouldn't we have the profit, and then we can help people?" [Major Eric Nelson]. Chapter 9 Business performance Page 397 There was an acknowledgment by officers that the Army's primary mission was one of practical and spiritual care. When starting any programme, it was essential to have this purpose "clearly in mind", so that the mission was always the dominant, driving force behind business activities [Captain Charles May, corps officer]. There was a recognition that they were not just running a business, but a church, a "sacred thing" [Captain Gary Dent, corps officer]. It was acceptable to run the Army in a businesslike manner, "provided it was balanced with care, and not just run as a business" [Major Simon Kiely, THQ officer]. "We have to be professional, and we have to do itright, but let's not forget what our main mission is" a corps officer suggested [Captain Ryan Lago]. One DHQ officer was reported to have been criticized by a THQ officer for being "too businesslike" [Diary 14 April, 1997], but when he referred to his job description, it was concerned with looking after the business of the division [Diary 12 February, 1997]. Rather than being a pastoral officer, he was an administrative officer, with a more tenuous link with the Army's primary mission. The strategy, previously mentioned, of employing lay people to perform administrative tasks, had its drawbacks, according to Major Anne McCourt, a THQ officer. To her the issue with employing lay people was that the Army "can't surrender (its) mission by having too many lay people". Officers brought to the Army dedication and commitment to its mission. Without that, she feared the Army would be "just another NGO (non government organization)". In order to guard against losing the mission, Major William Barnes suggested, officers needed to keep control, i.e. be in positions where the major decision making was in their hands. There was a reservation on the part of most officers against becoming too preoccupied with the business side of the Army's activities, and yet the pressure to follow that direction was acknowledged, due to government funding guidelines584 pHQ Budget 584 Before recent government funding changes for aged care centres, the Army's policy had been to take any patient, but now the emphasis was on getting the "patient mix" right, in order to maximize funding within the centre, to ensure it could break even [DHQ Budget Board 18 June, 1997]. Chapter 9 Business performance Page 398 Board 18 June, 1997] and other external constraints . "I get concerned," said a senior THQ officer [Major Kris Woodall] "that sometimes decisions are dollar driven". Major Paul Cooper expressed the same concern to preserve the primacy of the mission in all Army activities: ... if God's not in it, whether it be the running of a succesesful Red Shield recycling service for old clothes ... if that's not facilitating mission, we're not involved, we're not interested. One employee made a similar observation when she said "we're in the business of working with people, and sometimes in that, we forget what we're really out to achieve" [Mavis Lyons, social employee]. Advisory boards, while useful, were acknowledged by a senior officer [Colonel Bramwell Richards] to have their limitations. His comment that "we don't have to take their word as gospel" was apparently understood by one advisory board member, who suggested that "we will give you the advice, but you (the Army) have got to balance our business advice with your dedicatory service". Employees acknowledged the Army's "other" role. While they did not have to be Salvationists themselves, they realized that they had to recognize the Army's mission of care, and have "empathy" with its goals. So while there was a need to run as a business, the goal was not necessarily profit [Garry Thurlow, THQ employee]. The Army was there "to look after the souls of people", and this must not be lost, even though it was "essential to run as a business" [Bert Grosse, THQ employee]. It had to be a business with compassion, so that the spiritual aspects of the work were not neglected: "we're here to help people in crisis" [Georgie Robbins, social employee]. The Army's decision to operate its Red Shield Industries arm in a more businesslike 585 A THQ officer [Captain Lee Pierce] observed "we're too commercial... we've just got tofit in with things" in the business world. He saw this as a challenge to the preservation of the Army's mission. Chapter 9 Business performance Page 399 way was acknowledged to be a good move from a strategic point of view, but a number of officers were critical of that emphasis in the US Salvation Army586, and expressed a strong desire that it should not take that direction in this territory. One Army employee with a strong commitment to social action, expressed the opinion that he did not want to see the Army go "the way it has in the US", where, according to him, the huge social work was "almost a business", with a very small corps work [George Dickson]. An officer [Captain Philip Schmidt] who recently had visited The Salvation Army in the USA, also described it as highly "business orientated", and stressed the need for a balance. Within Red Shield Industries this was a special problem, as the programme is funded by the industry, which, in turn relies on participants in the programme to provide labour for the industry. The work should be undertaken primarily for therapy, according to Captain Schmidt, not primarily in order to earn income for the Army. Here, the emphasis was that the industry was there for the men (drug and alcohol rehabilitees), not vice versa. Major William Barnes, a rehabilitation officer, said he was excited about the money the Army was making, but that he was "more excited about the changed lives and families". Another officer [Captain Samuel Cohen] who also had seen the Army's US rehabilitation industry in action, described Army officers there as "businessmen in Salvation Army uniforms ... they were retail men more than they were officers". Balancing mission and money. In a sense, the struggle between the institutional forces which emanated from both external influences (in terms of funding, reporting requirements and accountability in particular) and internal influences (in terms of the trend towards the professionalization 586 Major Benjamin Rowen, a DHQ officer, referred to an Army report 6 - 7 years earlier, which allegedly had proposed that the Army should not adopt "American business methods". He felt they had [Diary 22 April, 1997]! Chapter 9 Business performance Page 400 of many of the Army's functions) and the Army's own unique culture, could be interpreted as a struggle between the sacred and the secular, in spite of the fact that most Army personnel did not see a conflict between these two forces. Their founder had made no such distinction. He had talkedfreely abou t money, and had not hesitated to engage actively with the world of his day both in terms of ministry and fundraising. The modern Army is similar, and yet there was a recognition on the part of officers in particular, that there were some dynamics of the organization which ought not to change, some aspects which had to be preserved intact in order for the Army's mission to be fulfilled. While not articulated as a desire to maintain the sacred in the face of pressure from the secular, that is what it seemed to be, a fear that in the business of caring, the Army's primary mission and responsibility would be neglected or forgotten, and a desire to guard or protect that mission from the unwarranted intrusions of society. Some intrusions, it was accepted, were necessary and helpful, but others threatened the very fabric of the Army and its ministry orientation. The next chapter concludes this thesis, and attempts to draw together the threads which have been woven through the script. This will be achieved by analyzing the three themes which were developed in Chapter 3 in the light of the data about the organization which has been presented. CHAPTER 10. The finale: a thematic review. BARBARA:... I was happy in the Salvation Army for a moment. I escaped from the world into a paradise of enthusiasm and prayer and soul saving; but the moment our money ran short, it all came back to Bodger: it was he who saved our people: he, and the Prince of Darkness, my papa. Undershaft and Bodger: their hands stretch everywhere: when we feed a starving fellow creature, it is with their bread, because there is no other bread; when we tend the sick, it is in the hospitals they endow; if we turn from the churches they build, we must kneel on the stones of the streets they pave. As long as that lasts, there is no getting away from them. Turning our backs on Bodger and Undershaft is turning our backs on life [Shaw, 1945, 167]. The issue of whether accounting in a nonprofit religious/charitable organization could be interesting or significant was raised at the beginning of this thesis. Can any organization's accounting performance be of interest to anybody, and will it attract an audience, especially if it is known that it relates to a religious organization? What is the setting? Who are the actors in the play and what do we know about them? What is the story and how is the plot developed? Is it a human interest drama or an action-packed thriller? Is it going to be a superficial production, forgotten as soon as it is over, or will it provide some meaningful interpretations of life? What will its impact be? All the ideas and data necessary for addressing these issues have been presented in the preceding chapters. This chapter will now attempt to draw these threads together and review the performance. The audience. This is a unique story which considers what is expected of accounting in one particular resource dependent nonprofit religious/charitable organization in a time of change and uncertainty. That organization is The Salvation Army Australia Eastern Territory. The Salvation Army is an organization known to everybody in Australia because of its high profile in making a substantial contribution to the well being of Australian society. It Chapter 10 Finale Page 402 achieves that performance not only by means of the dedication of its own officers and employees, but also by means of a significant reliance on government and public funding. The way an organization such as this develops and uses accounting systems ought to be of great significance to the public, at least from the point of view of understanding how it operates and whether it will continue to do so. The size and significance of The Salvation Army Australia Eastern Territory, in both social and economic terms, was established in Chapter 1. Its social service clients, the recipients of its services, together with Army officers, church members, employees, the government, major corporations and the general public, are all stakeholders in the fortunes and future of The Salvation Army. Since an Army does not march without rations, funds are required to continue the Army's work. The major sources of this funding are outlined in Chapter 5. Where money is involved, especially large amounts of public money, there is a call for accountability and a need for accounting. From the point of view of public accountability and understanding, the manner in which a large religious/charitable organization such as the Army manages and accounts for its funds, and any problems, difficulties and adjustments that requires, given societal expectations, should therefore attract the attention of a wide audience. The setting. The play has two settings, juxtaposed on each other. First, it is set within a unique organization. The historical development of The Salvation Army was detailed in Chapter 4 and its early days in Australia and current organizational arrangements in Chapter 5. The influence of the Army's founder, William Booth, has been profound and continues today. His institution of an army model set the Army on a course and developed a culture through which organizational practices are assessed, often filtered through people's interpretations of what the founder would have said or done. No longer a young risk-taking organization, the Army today is big business, with vast assets, thousands of employees and a reputation that has given it iconic status in the Chapter 10 Finale Page 403 eyes of the Australian public. Secondly, the play is set within the Australian nonprofit community. As a church and Christian charitable service organization, The Salvation Army is embedded within a vast sector of society which has undergone profound changes in recent years. Chapter 1 introduced this sector and its particular dynamics. A growing body of research has highlighted the unique set of parameters in which organizations such as this operate. They are subject to conditions and pressures unlike those experienced by for-profit organizations. While it could be demonstrated that organizations within this sector do things differently from those within the business and public sectors, in many ways the gap between for-profit and nonprofit organizations is closing rapidly, particularly in relation to accounting practices. Chapter 6 outlined the wider societal influences which have impinged on the nonprofit sector in recent years and described some of the changes in funding arrangements, attitudes and accounting practices which have developed in that time. Organizations within this sector now have to operate in a manner once reserved for for-profit organizations, as they adapt to changing funding arrangements and societal attitudes. The nonprofit environment is therefore one undergoing significant change and while its future seems to be moving in an increasingly business oriented direction, the implications of this for nonprofit organizations are uncertain. The interplay between these two settings provides an interesting backdrop to the drama which unfolds. On the one hand there is The Salvation Army, a traditional, conservative religious organization with a traditional conservative nonprofit cash based accounting system. On the other hand there is the nonprofit sector, changing at a rapid rate and forcing new and challenging practices on organizations like the Army. As a result of attempting to meet those expectations, the Army has experienced a huge impact from the adoption of new accounting practices which have burst into its existing organizational structures, providing the stories which are the subject of this study. Chapter 10 Finale Page 404 The actors. Since accounting systems are not merely "technical phenomena" [Laughlin, 1987, 498], but are elaborate social processes, any dramatic presentation of these systems should involve a study of the actors who both affect its practice and are in turn affected by that practice. While events occur and systems are introduced, it will be a human interest drama because accounting is a human process. While technical practices are involved, within any accounting system the performance of its actors is not straightforward, but depends on a variety of factors, including their hierarchical position, information needs, and their own agendas, interests, abilities and personalities. The Salvation Army is made up of officers, members and employees. They were introduced in Chapter 5 and their actions were described in Chapters 7, 8 and 9 as they implemented and interacted with the Army's accounting system. Army culture has a profound effect on the way these groups relate, on officer training and expectations and on the way professionals, particularly in the area of accounting, have been employed in greater numbers in recent years. The consciousness, especially of officers, of the Army's image, was highlighted in Chapter 6. Any resource dependent organization is likely to be self conscious about the image it presents to the paying public. Within the Army organizational actors have worked hard on building and mamtaining that image, even to the extent of stage managing it. While the aim is to portray honestly what the Army does, it is nevertheless necessary to project an image which will provide the legitimacy necessary to attract funding. Gofi&nan's [1959, 187 - 192] notion of impression management through dramaturgical loyalty, discipline and circumspection, highlighted in Chapter 1, could be applied to the Army, with its cultural and hierarchical insistence on image-worthy behaviour and publicity. It is believed that the adoption of societally acceptable accounting practices is one manifestation of the desire to enhance that image. Chapter 10 Finale Page 405 The storyline. Under the main storyline of "what is expected of accounting in a resource dependent nonprofit religious/charitable organization in times of change and uncertainty" this thesis has related several stories of The Salvation Army's accounting system. The focus has been mainly on accounting practices adopted in response to the environmental influences identified in Chapter 6. One story, presented in Chapter 7, was about the Army's presentation of consolidated audited corporate style financial statements. Promoting an image of the Army as a successful, accountable organization, they adhered to professional accounting standards and were based on accrual accounting. The difficulties of implementing an accrual accounting system highlighted the lack of expertise of many officers who had previously performed accounting functions within the Army and emphasized a growing reliance on professional accountants. Accounting was no longer a simple straightforward cash- based system but a complex and demanding activity not understood by the majority of organizational members. Overlaid on these difficulties were problems associated with the design and implementation of an effective computer system and with meeting the financial reporting requirements of government funding agencies, both of which emphasized the disparity between professional and non professional accountants. Another story, related in Chapter 8, concerned the Army's budgeting system. Also now based on accrual accounting, it posed huge challenges in its implementation. The introduction of global budgeting promoted the image of an organization which devolved authority and control down the organizational hierarchy and which was concerned to use limited resources in as effective a manner as possible. To a great extent the budgeting script was very different from actual budget performance. As many officers and employees grappled with what was for them a complex process, the Army organized some training sessions, but still failed to enforce the deadlines set in the budget timetable. Tensions between Territorial Headquarters Chapter 10 Finale Page 406 and the divisions became obvious as THQ continued to impose hierarchical control in spite of an organizational restructuring programme which promised greater control to the divisions. Disparities between the technical expertise of accounting professionals and Army officers highlighted a huge gulf in understanding of accounting matters and sometimes also a lack of appreciation, on the part of employees, of the distinctive culture in which officers were steeped. Little consideration was given to assessing whether the budget actually achieved the Army's mission. It was viewed primarily as a technical procedure and while some actors saw it as having implications for the Army's mission and vision, its main purpose seemed to be the allocation, over the entire territory, of a limited pool of resources. Chapter 9 contained three short stories. One was about financial decision making in the Army. It emphasized the tensions for senior officers in knowing how much to rely on financial criteria when making policy decisions. There was a reluctance on the part of officers to turn mission-related decisions over to employed professionals, due to their concern that the Army should remain faithful to its spiritual and social purposes. The increasing commercialization of many of the social service activities in which the Army is involved meant that choices in favour of a mission and service orientation could lead to significantfinancial disadvantages. The Army's use of consultancies, described in Chapter 9, was a demonstration of its reliance on the business methods of the age, or at least to be seen to be embracing those methods. Not all results were welcomed or followed through, often due to movements of key personnel within the Army, to difficulties in implementing recommended courses of action and to cultural agendas. The lack of expertise of many officers in business matters was increasingly obvious. One area in which the Army seemed anxious to adopt business methods and management accounting practices concerned its business operations, as related in Chapter 9. These represented a significant source of funding for the Army's drug and alcohol rehabilitation programmes, and were placed on a distinctly business footing, Chapter 10 Finale Page 407 sometimes drawing criticism because of this. The recommendations of one consultant included the adoption of key performance indicators and benchmarks in an attempt to cut costs and increase revenues. This was an example of the Army's pro-actively taking an initiative to ensure an inflow of funds in the future. With cutbacks in government funding and the need for continuing efforts in public fundraising, the Army's recycling business represented a worthwhile venture. Here accounting techniques were believed to be useful because they offered tangible benefits in terms of cost cutting and monitoring of performance. What does the story mean? By applying institutional theory to this story of The Salvation Army's accounting practices, fresh insights are provided into the way changes have occurred in expectations and uses of accounting and into the tensions those changes have brought. There is still much to be learned about accounting as an institutional practice and this study seeks to highlight the multiple roles of accounting, especially its role in portraying to the outside world an image of rational, legitimate organizational behaviour. The powerful institutional influences emanating from society, including accounting practices, have already been identified. Organizations situated within the nonprofit sector in particular are highly vulnerable to these influences, requiring the affirmation of society if they are continue to receive the funds needed to continue their work. Three themes relevant to a nonprofit religious/charitable organization were identified in Chapter 3. They were based on institutional theory modified by the notion of active choice behaviour from resource dependence theory. Theme 1. Will there be pressure, in times of change and uncertainty, for the profile of accounting to increase? If so, would this be in order to exhibit greater conformity with institutional practices and thereby to maintain the legitimacy of the organization? Chapter 10 Finale Page 408 There is no doubt that The Salvation Army operates in an environment where huge changes in institutional arrangements have occurred and are occurring, particularly in relation to expected accounting practices. Accounting is receiving a higher profile in the public sector, and this hasfiltered throug h to The Salvation Army, which is heavily reliant on government and public funding. This higher profile was demonstrated by the increased amount of activity generated by accounting requirements, the increase in the amount of training in accounting offered by the Army and the recognition by many Army officers and employees that accounting had grown in complexity. The Army's corporate style of financial reporting appeared to be very much concerned with image promotion and its global budgeting system similarly was borrowed from the corporate world. To a certain extent these practices appeared to be decoupled from the image they presented, with disparities between the official script and the actual practice, as already highlighted. They appeared to be adopted as a result of normative and mimetic institutional pressures. The need to satisfy government financial reporting requirements reflected coercive institutional pressure exercised by government funding agencies. The Army had no choice but to adhere to these requirements or it faced the possibility of losing its funding. It was acknowledged that this might happen if deficiencies in this area were not addressed. If the Army could not meet government deadlines with accurate accounting information, even its good name and reputation might not be enough in the future as government requirements were tightened. Would the Army acquiesce to the heightened profile of accounting, which was being thrust onto it by the society in which it operated? Obviously, for its survival, it had to accommodate significant changes to its accounting system Analyzing this acceptance from a sacred/secular viewpoint, by using Booth's [1993, 59] "mediating factors", several observations could be made which emphasize the uniqueness of this study: • The general tendency within religious organizations for resistance to the "secular" Chapter 10 Finale Page 409 practice of accounting has very little historic precedent within The Salvation Army. Unusually, perhaps, for religious organizations, from its inception, the Army has embraced the use of accounting as a means of legitimizing its existence and ensuring the flow of funds so that it can continue to fulfil its mission. Whether this attitude was theologically or practically driven, nevertheless it continues to the present day. Any resistance noted in this study occurred not at an overall level, but in specific instances, when reliance on accounting techniques threatened the practical outworkings of the mission itself. This is perfectly consistent with the thesis, from institutional theory, that organizations will adopt practices which aid them in their quest for legitimization. A significant explanation for this could be in the Army's dependence, from its early days, on public funding. • In its unique organizational structure, until recent times, The Salvation Army made little distinction between tasks which could be performed by officers and those which would require professional expertise. There was a seamless relationship between administration and other "sacred" activities, all being perceived to be part of the overall mission. This is explored in more detail in Theme 2 below. Resistance to accounting was therefore reduced. It has been seen as an activity necessary for the survival of the organization, and has not been perceived as being of any lesser value than other more overtly evangelistic roles. • Booth's [1993, 59] observation that the sacred/secular divide may be weakened or strengthened by membership or financial resources is particularly interesting in the context of The Salvation Army. The Army has always had limited financial resources, and its membership base has similarly been stagnant, particularly this century. These factors, according to Booth's discussion, would force the sacred and the secular into "closer contact" [Booth, 1993, 59]. The difference in this organization is that the sacred/secular relationship appears always to have been the same, by the very nature of the organization itself, and the outworkings of its theology and practice. Chapter 10 Finale Page 410 The Salvation Army has always kept up to date with accounting requirements, throughout its history. There would be no reason to suggest that it would do any differently when faced with the current requirements for accrual accounting, and its desire to present corporate stylefinancial report s and rely on the expertise of external consultants. Any resistance to accounting appeared to be based not on an interpretation of business practices as being inherently "secular" but rather on any threat to the stated mission of the Army. If accounting served that mission, it would be acceptable. Given its powerful role in bestowing legitimacy, accounting could be seen as an important building block in establishing the Army's credentials in the arena of public fundraising. The level of accounting and accountability required was being lifted significantly. However, the increasing reliance on accounting techniques in the running of the Army's business operations was concerned with more than legitimacy. The reasons for this and their implications will be explained in greater detail under the third theme below. Theme 2. As expectations of accounting increase, will the role of professional accountants also increase? If it does, what impact will this have on established organizational structures, cultures and routines? The very distinctive culture of The Salvation Army has been described, as well as the significant growth in the number of employees in recent years. This has caused a cultural disruption which has been particularly noticeable in the accounting arena. In response to the higher profile of accounting and the need for more accounting expertise, several key positions in the Army are nowfilled by accounting professionals rather than officers. The existence of professional networks and the increasing professionalization of the workforce has been recognized as a normative institutional influence. Because of these professional networks, the adoption of accounting standards and the presence of professionals at the highest decision making levels in the Army, there has been a change Chapter 10 Finale Page 411 in expectations of what accounting ought to achieve in the organization. Accountants who have come into the Army from industry or the public sector have brought with them expectations that the accounting system will be up to date, relevant and will provide useful information for decision making. Faced with a system which does not achieve those goals, some experience a sense offrustration. This was in evidence during the consolidation and budgeting processes. There was a desire on the part of professional accountants to improve accounting techniques, increase the use of accounting for decision making and set agendas for organizational structure and the development of an effective system. Much more interested in achieving objectives and making accounting useful, they were pushing the Army into a greater awareness of the uses to which accounting could be put. Another effect of professional networks was an increasing knowledge within the organization of what practices were occurring in other organizations in the nonprofit sector. This opened up the possibility for mimetic influences to have an even greater effect. The issue of who makes decisions has been referred to and this is especially pertinent in relation to professional accountants. While it is recognized that employees ought to be in harmony with the mission and purpose of the Army, the gap between officers and professional accountants is wide, both in terms of culture and expertise. While professionals were welcomed into the Army by most officers, there was a distinct feeling that their decision making authority ought to be limited. Theme 3. If an organization undertakes active choice behaviours in relation to its resource base, will expectations of accounting change? Will organizational actors be satisfied for accounting to play a decoupled, symbolic role, or will there be pressure exerted for accounting to play a greater technical role? As outlined in Chapter 6, changes in funding arrangements in the nonprofit sector have posed significant challenges for organizations such as The Salvation Army. The operation of its recycling industry on a business basis offers it the opportunity to Chapter 10 Finale Page 412 provide much needed resources required for its social service work. There is the added bonus that funds raised in this way have no strings attached to them and so can be used for any purposes. While nonprofit organizations have sometimes been portrayed as engaging in commercial activities "marginally and reluctantly" [James, 1998, 271], this does not appear to be the case with the Army's Red Shield Industries. In spite of the fact that the Army's mission is spiritual, caring and nonpecuniary, it has wholeheartedly embraced the idea of business operations, subject to some reservations and limitations regarding the primacy of the Army's social programme. This business activity represents an active choice behaviour in relation to Army funding. The need to operate profitably produces a different dynamic as far as accounting is concerned. One consultant's report, which recommended the use of accounting measurements, was highly regarded because of the cost savings it promised. Accounting in this context was perceived to be useful and relevant to the goal of operating within revenue and expense constraints. No longer did it represent tedious meetings, incomprehensible reports and irrelevant information, but instead it involved measurable performance indicators and real cost savings. As long as the operation of the business was linked to the raising of funds for ministry, there did not seem to be an unbearable tension between accounting methods and mission imperatives. This is consistent with the perception that it represented an active strategy designed to bolster Army funds and reduce reliance on other funding sources which may be perceived to be unreliable or uncertain. Accounting in this scenario was expected to be useful, not simply symbolic. The impact of the story: who cares? Hopwood [1990b, 406] argued that "more attention needs to be placed on the specific manifestations of accounting in specific organisations", i.e. to question the generality of accounting practice. The Salvation Army is one specific organization and this has been its specific story. But this story has revealed occurrences and pressures which one could Chapter 10 Finale Page 413 expect other Australian nonprofit organizations to be experiencing to some extent. Organizations such as the Army are deeply embedded in the society in which they perform. This is a central tenet of institutional theory. Because of this, the micro view of this one organization and the macro view of Australian society, and the nonprofit sector in particular, need to be considered at the same time. This thesis has sought to consider both those views, with the societal setting being described in some detail. To see this as a story of one organization alone would be to trivialize what has been related in the preceding chapters. After such a performance, a thoughtful theatre goer would reflect on the implications of what has been presented and its relevance. Having followed Hopwood's [1990b, 406] advice and focused on the stories of what accounting actually does, there is a need to step back and look at the wider picture. The micro story has revealed an organization whose existing culture, structures and routines have been deeply impacted by changes in accounting practices. The macro story is of a society in which there is an increasing pressure towards commercialization and the adoption of what have been regarded as for-profit accounting practices. These changing institutional arrangements have the potential to alter dramatically the provision of services by charitable welfare organizations. As the distinctions between nonprofit organizations and private firms are being blurred, nonprofit organizations are being faced more and more with the real dilemma of making difficult choices when faced with commercialization and behaviour that may be inconsistent with their mission [Weisbrod, 1998a, 288 - 289]. This sacred/secular tension was explained in Chapter 1. Such organizations face the real dangers of "goal displacement", as the social mission "slips from sight in the drive for revenue" [Weisbrod, 1998a, 304]. The tension is that if business practices are emphasized, nonprofit organizations risk losing sight of their operational objectives and therefore their mission. It is highly desirable, for the wellbeing of society, that organizations such as the Army maintain operational efficiency, while at the same time fulfilling their social role. On a societal scale, any diminution of the social influence of the nonprofit sector Chapter 10 Finale Page 414 could have a devastating effect. All the stakeholders in The Salvation Army and, by extension, in Australian society, should care about these possible implications of the changes that have occurred in the sector in recent years. The expectations of accounting in a resource dependent nonprofit religious/charitable organization within a changing environment are growing, and are raising the profile and interest level of accounting. 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THQ Budget Board documentation. 15 August 1997. DCSS Letter. 1997. Letter from Divisional Community Services Secretary South Queensland Division to Helen Irvine. 13th June. DEET Agreement. 1995. Department of Employment, Education and Training Agreement between the Commonwealth of Australia and The Salvation Army for New Work Opportunities Program Services. 5th December. DEET New Work Opportunities. 1995. First payments, Training allowance instalments & Reporting Requirements. Deferred Giving Budget 1997/98. 1997. THQ Budget Board documentation. 15 August. Deficit Grants - The Greater West Division Corps. 1997. Budget for 1997/98. THQ Budget Board documentation 1997/98. 22 August. Deficit Grants - The Greater West Division. 1997. Budget for 1997/98. THQ Budget Board documentation. 29 August. Deficit Grants South Queensland Corps 1997/98. 1997. THQ Budget Board documentation. 8 August. Deficit Grants. 1997/98. Central & North Queensland Division. THQ Budget Board documentation. 27 June. DHQ Budget Board 18 June. 1997. Minutes. DHQ Budget Board 27 May. 1997. Minutes. DHQ Budget Board 3 June. 1997. Minutes. DHQ Budget Board Agenda 18 June. 1997. Agenda for The Salvation Army Sydney East & Illawarra Division Divisional Budget Board 1997/98. DHQ Budget Board Agenda 27 May. 1997. Agenda for The Salvation Army Sydney East & Illawarra Division Divisional Budget Board 1997/98. DHQ Budget Board Agenda 3 June. 1997. Agenda for The Salvation Army Sydney East & Illawarra Division Divisional Budget Board 1997/98. DHQ Deficit Corps 1996/97. 1996. ACT & South New South Wales Division. 21 June. DHQs and RSC Budget Guidelines 1997/98. 1997. 7 April. Diary 1997. Field diary kept by H. Irvine during access time in The Salvation Army Australia Eastern Territory. Bibliography Page 458 Diary 1998. Field diary kept by H. Irvine during access time in The Salvation Army Australia Eastern Territory. Diary. 1996. Field diary kept by H. Irvine during access time in The Salvation Army Australia Eastern Territory. Directorship Management Report Nursing Homes. 1996. Salvation Army Social Services Department. May 13. Directorship Management Report Senior Citizen's Hostel. 1996. Salvation Army Social Services Department. May 13. Directorship Management Report Senior Citizen's Units. 1996. Salvation Army Social Services Department. May 14. Discussion Paper re Finance. 1996. Prepared by the Chief Accountant. Disposition of Forces. 1973. Sydney: The Salvation Army Australia Eastern Territory. Disposition of Forces. 1984. Sydney: The Salvation Army Australia Eastern Territory. Disposition of Forces. 1989. Surry Hills: The Salvation Army Australia Eastern and Papua New Guinea Territory. Disposition of Forces. 1990. Sydney: The Salvation Army Australia Eastern and Papua New Guinea Territory. Disposition of Forces. 1992. Sydney: The Salvation Army Australia Eastern and Papua New Guinea Territory. Disposition of Forces. 1993. Sydney: The Salvation Army Australia Eastern and Papua New Guinea Territory. Disposition of Forces. 1994. Sydney: The Salvation Army Australia Eastern and Papua New Guinea Territory. Disposition of Forces. 1995. Sydney: The Salvation Army Australia Eastern Territory. Disposition of Forces. 1996. Sydney: The Salvation Army Australia Eastern Territory. Disposition of Forces. 1997. Sydney: The Salvation Army Australia Eastern Territory. Divisional Budget Summary Sheet 1997/98. 1997. THQ and DHQ Responsibilities. April. Divisional Corps Budget 1996/97. 1996. South Queensland Division. 8 July. Divisional Finance Board Official Minute. 1992. April 28. Existing Corps Reporting Structure. 1996. Existing flow structure. Volume. Management Reporting Requirements. Consolidation Requirements. Bibliography Page 459 Existing Financial Reporting Structure. 1996. Prepared by Chief Accountant. External Audit Issues Memorandum. 1996. Prepared by Chief Accountant. October 2. Finance Department Organisation Chart. 1996. 5 July. General Fund Deficit Funding Summary by Division 1997/98. 1997. THQ Budget Board documentation. 15 August. General Ledger Budgets 1996/97. 1996. Release Notes. 1 May. General Ledger Budgets Application. 1996. Instruction manual for computerized budgeting procedures. Gowans, Commission J. 1997. Letter to Cabinet Members, Departmental Heads, Rehabilitation Services Commander. 17 January. Greater Sydney Commission. 1990. Report to the Territorial Commander (Commissioner R. Bath). Sydney: The Salvation Army Australia Eastern and Papua New Guinea Territory THQ. Greater West Social Budget 1997/98. 1997. THQ Budget Board documentation. 8 August. Group Summary Report. 1997. THQ Budget Board documentation 1997/98. 11 July. Hey-Cunningham, D. 1997. Draft Discussion Paper for the Salvation Army. Observations, Comments and Suggestions Arising from Undertaking Bookkeeping Training. March. IHQ Overseas Department Budget. 1997/98. THQ Budget Board documentation. 11 July. Income & Expense Analysis. 1996. Rate per bed per day for nursing homes, senior citizen's hostel, senior citizen's units. Irvine, H. 1997. Observations of The Salvation Army Australia Eastern Territory Budgeting System and Related Matters. An unpublished report prepared for the Salvation Army Australia Eastern Territory Secretary for Business Administration. October. Keys Young. 1995. Evaluation of the Inner City Hostel Redevelopment Program. Prepared for The Supported Accommodation Assistance Program/Crisis Accommodation Program Joint Officers Group. 19 December. Management Report Memo. 1997. From the Chief Accountant to the Territorial Financial Secretary. A memorandum on the Management Report from Coopers and Lybrand for the year ended June 30 1996. 17 February. Manual of Accountancy Policies and Procedures. 1989. London: The Salvation Army. Bibliography Page 460 Memorandum DFS to Corps Officers 1996/97. 1996. Budget. 8 July. Memorandum General Fund Apportionments. 1993. From General Fund Accountant to Territorial Financial Secretary. 4 June. Moneycare Service Budget 1997/98. 1997. DHQ Budget Board documenation. 3 June. Newcastle and Central New South Wales Division Corps Budgets 1997/98. 1997. THQ Budget Board documentation. 29 August. Official Minute FDA 1094 Budgets. 1997. Schedule of Dates for Budget Preparation 1997/98. Orders and Regulations. 1982. Relating to Salvation Army Territorial Finance Councils and Expenditure Boards. London: The Camperfield Press. Personnel Administration Budget. 1997. THQ Budget Board documentation 1997/98. 27 June. Property Fund Departmental Expenses. 1996. 30 June. Property Schemes and Maintenance - Social. 1997. Official Minute. Red Shield Industries Explanatory Memorandum 1997/98. 1997. THQ Budget Board documentation. 15 August. Rehabilitation Services Command Budget Comparison 1997/98. 1997. THQ Budget Board documentation. 15 August. Rehabilitation Services Command Budget Memorandum 1997/98. 1997. Memorandum from Financial Controller RSC to Chief Accountant/Secretary Territorial Budget Board. THQ Budget Board documentation. 15 August. Reporting Suggestions. 1997. Chief Accountant. Year to date Income and Expenditure, Cash Flows, Legacy Reserve, Retirement Reserve. Social Budget Variance Report 1. 1997. South Queensland Division. Glen Haven Hostel. 7 March. Social Budget Variance Report 2. 1997. Parramatta & West New South Wales Division. Macquarie Fields Administration. 5 February. Social Budget Variance Report 3. 1997. Parramatta & West New South Wales Division. Macquarie Fields After School Programme. 5 February. Social Budget Variance Report 4. 1997. Parramatta & West New South Wales Division. Macquarie Fields Vacation Centre. 5 February. Social Budget Variance Report 5. 1997. Parramatta & West New South Wales Division. Macquarie Fields Welfare Relief. 5 February. Bibliography Page 461 Social Budget Variance Report 6. 1997. Parramatta & West New South Wales Division. Macquarie Fields Welfare Administration. 5 February. Social Centre Budget Guidelines 1996/97. 1996. Attachment to THQ Social Centre Budget Memorandum. 14 May. Social Centre Budget Guidelines 1997/98. 1997. 7 April. Social Finance Officer. 1996. Job description. Social Fund Deficit Funding Summary by Division 1997/98. 1997. THQ Budget Board documentation. 15 August. Social Service Budgets Memorandum 1997/98. 1997. Memorandum from Divisional Finance Secretary, Sydney East & Illawarra Division to Territorial Financial Secretary. 19 June. Social Trust Budget 1. 1996/97. Social Trust Budget Samaritan House. Social Trust Budget 2. 1996/97. ACT & South New South Wales Division.Mountain View and Karingal Court. Social Trust Budget 3. 1996/97. Sydney East & Illawarra Division Aaministration Budget. Inner City Community Centres. Social Trust Budget 4. 1997. Sydney East & Illawarra Division. Montrose Senior Citizens Accommodation. 24 February. Social Trust Budget 5. 1997. Parramatta & West New South Wales Division. Macquarie Fields Child Care Centre. Social Trust Budget 6. 1997. Parramatta & West New South Wales Division. Weeroona Village Hostel. 29 January. Social Trust Budget 7. 1997. Parramatta & West New South Wales Division. Weeroona Village Units. 29 January. Social Trust Budget 8. 1997. South Queensland Division. Youth Outreach Service. 4 March. Solomons, P. 1997. Systems Development Computer Software Programs. The Salvation Army Aged Care Residential Faculties. South Queensland Division Deficit Grants 1997/98. 1997. THQ Budget Board documenttion. 29 August. Standard Chart of Accounts Group Memorandum. 1996. From Secretary for Business Adrninistration to Territorial Financial Secretary. October 8. Summary of Accounts. 1997. Sydney East & Illawarra Division. Oasis Youth Care Bibliography Page 462 Centre. 1996/97 Accounts. February. Summary of Maintenance Procedures. 1997. Action and responsibility. Sydney East & Illawarra Budget Report 1997/98. 1997. DHQ Budget Board documentation 1997/98. 18 June. Sydney East & Illawarra Division Approved Social Deficits 1997/98. 1997. DHQ Budget Board documentation. 18 June. Sydney East & Illawarra Division Corps Budgets 1997/98. 1997a. DHQ Budget Board documentation. 3 June. Sydney East & Illawarra Division Corps Budgets 1997/98. 1997b. DHQ Budget Board documentation. 18 June. Sydney East & Illawarra Division Social Assets 1997/98. 1997. DHQ Budget Board documentation. 18 June. Sydney East & Illawarra Division Social Group Summary Report 1997/98. 1997. DHQ Budget Board documentation. 18 June. Sydney East & Illawarra Social Budget Report 1997/98. 1997. DHQ Budget Board documentation. 18 June. Sydney East & Illawarra Social Budgets 1997/98. 1997. THQ Budget Board documentation. 29 August. Sydney Moneycare Proposed Budget 1997/98. 1997. THQ Budget Board documentation. 15 August. Territorial Headquarters Organisation. 1995. Organisation chart. May. Territorial Proposed Deficit Grants 1997/98. 1997. From the proceedings of the Territorial Budget Board 11 April. Territorial Social Capital Budget. 1997/98. THQ Budget Board documentation 1997/98. 22 August. The Greater West Division Divisional Budgets Letter. 1997. Budgets for 1997/98. 20 August. The Greater West Welfare Budget 1997/98. 1997. THQ Budget Board documentation 15 August. The Salvation Army (New South Wales) Property Trust Trustees. 1997. June 3. The Salvation Army (Queensland) Property Trust Trustees. 1997. June 3. The Salvation Army Chart of Accounts. 1995. October 30. Bibliography Page 463 The Salvation Army Manual of Accounting Policies. 1989. By authority of the General of The Salvation Army. London: The Salvation Army International Headquarters. The Salvation Army Orders and Regulations. 1982. By authority of the General. London: The Salvation Army International Headquarters. The Salvation Army Secretaries for Business Administration. 1995. Memorandum of instructions to Secretaries for Business Administration. By authority of the General. London: The Salvation Army International Headquarters. The Salvation Army Territorial Financial Secretaries. 1995. Memorandum of instructions to Territorial Financial Secretaries (for use in territories where a Secretary for Business Administration is appointed). By authority of the General of The Salvation Army. London: The Salvation Army International Headquarters. THQ Asset Purchases. 1996/97. Territorial Headquarters Budget. THQ Budget Board 10 September. 1997. Minutes 1997/98. THQ Budget Board 11 April. 1997. Minutes 1997/98. THQ Budget Board 11 July. 1997. Minutes 1997/98. THQ Budget Board 14 March. 1997. Minutes 1997/98. THQ Budget Board 15 August. 1997. Minutes 1997/98. THQ Budget Board 18 July. 1997. Minutes 1997/98. THQ Budget Board 22 August. 1997. Minutes 1997/98. THQ Budget Board 25 July. 1997. Minutes 1997/98. THQ Budget Board 27 June. 1997. Minutes 1997/98. THQ Budget Board 29 August. 1997. Minutes 1997/98. THQ Budget Board 3 October. 1997. Minutes 1997/98. THQ Budget Board 30 September. 1996. Minutes 1996/97. THQ Budget Board 30 September. 1996. Minutes 1997/98. THQ Budget Board 31 July. 1997. Minutes 1997/98. THQ Budget Board 4 July. 1997. Minutes 1997/98. THQ Budget Board 5 September. 1997. Minutes 1997/98. Bibliography Page 464 THQ Budget Board 7 November. 1997. Minutes 1997/98. THQ Budget Board 8 August. 1997. Minutes 1997/98. THQ Budget Board Territorial Expenditures/Deficits. 1995/96. General, Property and Social Funds. Proposed Deficit Grants 1996/97. THQ Budget Board Time-Frame Progression Schedule - Capital Mark 1. 1997. THQ Budget Board documentation 1997/98. 22 August. THQ Budget Board Time-Frame Progression Schedule - Operating Mark 15. 1997. THQ Budget Board documentation 1997/98. 10 September. THQ Budget Board Time-Frame Progression Schedule - Operating Mark 14. 1997. THQ Budget Board documentation 1997/98. 5 September. THQ Budget Board Time-Frame Progression Schedule - Operating Mark 18. 1997. THQ Budget Board documentation 1997/98. 7 November. THQ Budget Board Time-Frame Progression Schedule - Operating Mark 12. 1997. THQ Budget Board documentation 1997/98. 29 August. THQ Budget Board Time-Frame Progression Schedule Mark 10. 1997. THQ Budget Board documentation 1997/98. 15 August. THQ Budget Board Time-Frame Progression Schedule Mark 11. 1997. THQ Budget Board documentation 1997/98. 22 August. THQ Budget Board Time-Frame Progression Schedule Mark 13. 1997. THQ Budget Board documentation 1997/98. 29 August. THQ Budget Board Time-Frame Progression Schedule Mark 4. 1997. THQ Budget Board documentation 1997/98. 18 July. THQ Budget Board Time-Frame Progression Schedule Mark 5. 1997. THQ Budget Board documentation 1997/98. 25 July. THQ Budget Board Time-Frame Progression Schedule Mark 7. 1997. THQ Budget Board documentation 1997/98. 31 July. THQ Budget Board Time-Frame Progression Schedule Operating Mark 3. 1997. THQ Budget Board documentation 1997/98. 11 July. THQ Budget Board Time-Frame Progresssion Schedule - Operating Mark 16. 1997. THQ Budget Board documentationl997/98. 3 October. THQ Budget Board. Budget Handouts. 1997. General Fund by Account, Department, Account Income, Department Income, Account Expenses, Department Expenses, Secretary. Property Fund, Public Relations Fund, Social Fund, Red Shield Defence Services Consolidated, Chaplaincy Consolidated, THQ Bibliography Page 465 Social Consolidated. From the proceedings of the Territorial Budget Board 1997/98. 27 June. THQ Budget Cycle Previous Years. 1996/97. Flow Chart. THQ Budget Cycle This Year. 1996/97. Flow Chart. THQ Budget Guidelines 1996/97. 1996. 24 April. THQ Budget Guidelines 1997/98. 1997. Territorial Headquarters Budget. 14 April. THQ Budget Letter 1 1997/98. Letter from Chief Accountant to Divisional Commander, Central & North Queensland Division. 9 April 1997. THQ Budget Letter 1. 1996/97. Letter from Territorial Financial Secretary to Divisional Commander, Central & North Queensland Division re 1996/97 Deficit Funding. 27 March 1996. THQ Budget Letter 2 1997/98. Letter from Chief Accountant to Divisional Commander, Newcastle & Central NSW Division. 9 April 1997. THQ Budget Letter 2. 1996/97. Letter from Territorial Financial Secretary to Divisional Commander, Newcastle & Central NSW Division re 1996/97 Deficit Funding. 27 March 1996. THQ Budget Letter 3 1997/98. Letter from Chief Accountant to Divisional Commander, North NSW Division. 9 April 1997. THQ Budget Letter 3. 1996/97. Letter from Territorial Financial Secretary to Divisional Commander, Parramatta & West New South Wales Division re 1996/97 Deficit Funding. 27 March 1996. THQ Budget Letter 4 1997/98. Letter from Chief Accountant to Divisional Commander, Parramatta & West NSW Division. 9 April 1997. THQ Budget Letter 4. 1996/97. Letter from Territorial Financial Secretary to Divisional Commander, North New South Wales Division re 1996/97 Deficit Funding. 27 March 1996. THQ Budget Letter 5 1996/97. 1996. Letter from Territorial Financial Secretary to Divisional Commander, Sydney East & Illawarra Division re 1996/97 Deficit Funding. 27 March. THQ Budget Letter 5 1997/98. Letter from Chief Accountant to Divisional Commander, South Queensland Division. 9 April 1997. THQ Budget Letter 6 1996/97. 1996. Letter from Territorial Financial Secretary to Divisional Commander, South Queensland Division re 1996/97 Deficit Funding. 27 March. Bibliography Page 466 THQ Budget Letter 6 1997/98. Letter from Chief Accountant to Divisional Commander, Sydney East & Illawarra Division. 9 April 1997. THQ Budget Letter 7 1996/97. 1996. Letter from Territorial Financial Secretary to Divisional Commander, Rehabilitation Services Command re 1996/97 Deficit Funding. 27 March. THQ Budget Letter 7 1997/98. Letter from Chief Accountant to Divisional Commander, Rehabilitation Services Command. 9 April 1997. THQ Budget Letter 8 1996/97. 1996. Letter from Territorial Financial Secretary to Divisional Commander, ACT & South New South Wales Division re 1996/97 Deficit Funding. 27 March. THQ Budget Letter 8 1997/98. Letter from Chief Accountant to Divisional Commander, ACT & South NSW Division. 9 April 1997. THQ Budget Letter 9 1997/98. Letter from Chief Accountant to Principal, College of Further Education. 9 April 1997. THQ Budget Timetable 1996/97. THQ, DHQ, Corps, Community Services, Social Centres. THQ Budget Timetable Guidelines. 1996/97. THQ Computer Expenditure Board. 1996. Minutes of meeting. 24 September. THQ Departmental Budget Report for General Fund Income. 1996. Finance Department. 27 September. THQ Finance Council. 1996. Minutes of meeting. 24 September. THQ Finance Department Budget. 1997/98. THQ General Fund Expenditures/Deficits. 1996/97. Territorial Budget Board. 12 July 1996. THQ General Maintenance Board. 1996. Minutes of meeting. 24 September. THQ General Property Board. 1996. Minutes of meeting. 24 September. THQ Group Summary Report. 1997/98. THQ Budget Board documentation. 15 August 1997. THQ Ledger and Investment Reconciliation. 1997. June. THQ Officers Health and Benefits Board. 1996. Minutes of meeting. 24 September. THQ Property Fund Expenditures/Deficits. 1996/97. Territorial Budget Board. 12 July 1996. Bibliography Page 467 THQ Social Budget Guidelines. 1997/98. 7 April 1997. THQ Social Budget Letter. 1996/97. Memorandum to all Social Centre Managers from Territorial Financial Secretary. Re Budgets 1996/97. 15 April 1996. THQ Social Budgets Timetable. 1996/97. THQ Social Centre Budget Memorandum. 1996/97. To all Centre Managers from Territorial Financial Secretary. 14 May 1996. THQ Social Expenditure Board. 1996. Minutes of meeting. 24 September. THQ Social Fund Expenditures/Deficits. 1996/97. Territorial Budget Board. 12 July 1996. THQ Social Memorandum Budget. 1996/97. Memorandum to all Divisional Finance Secretaries from Territorial Financial Secretary re Responsibility for Social Centre Budgets. 15 April 1996. THQ Social Property Board. 1996. Minutes of meeting. 24 September. USA Object Code Accounts. 1996. Corps and Thrift Chart of Accounts. Wand, R. and R. Dasan. 1997a. The Salvation Army Accounting System. Paper 1. Unpublished paper prepared by the Social and General Fund Accountants at The Salvation Army Australia Eastern Territorial Headquarters. Wand, R. and R. Dasan. 1997b. Accounting Model for The Salvation Army. Paper 2. Unpublished paper prepared by the Social and General Fund Accountants at The Salvation Army Australia Eastern Territorial Headquarters. Appendix 1.1. Top Ten Community Service Welfare Organizations by Income (and Assets) 1993/94. [Adaptedfrom: Industry Commission, 1995, C25] Organization Legal Structure Affiliation Total % of Assets % of Income top $m top 10 $m 10 1. Australian Red Royal Charter International Cross Society Red Cross 176.4 22.0 129.1 12.8 2. Salvation Army Church Salvation Southern Command Army 129.1 16.1 305.1 30.3 3. Salvation Army Church Salvation Eastern Command587 Army 126.4 15.8 152.7 15.2 4. World Vision of Company World Vision Australia International 88.5 11.1 19.1 1.9 5. Wesley Mission Church Uniting Sydney Church in 60.3 7.5 121.1 12.0 Australia 6. Silver Chain Incorporated None Nursing Association Association 50.6 6.3 33.7 33 7. Care Australia Company Care International 43.8 5.5 11.6 1.2 8. Anglican Church Anglican Retirement Villages Church of Australia 42.8 53 71.3 7.1 9. Endeavour Company None Foundation 42.3 S3 152.2 15.1 10. Royal District Company None Nursing Service 40.5 5.1 UJ 1.1 800.7 100 1007.2 100 587 Officially known as The Salvation Army Australia Eastern Territory, the subject of this study. Appendix Page 469 Appendix 1.2. Zelizer*s traditional and alternative money models. [Source: Zelizer, 1994,11 - 12,18 - 19] Assumptions uriderrying the absolute Alternative model of money model of market money (traditional) 1. Money is a strictly economic 1. Money is a key rational tool but phenomenon. It is homogeneous, also exists outside the sphere of the mfinitely divisible, liquid, quanty-ffee. market. Cultural and social structures influence it profoundly. 2. In modern society, all monies are the 2. There is no single money, but same. Only differences in quantity are multiple monies. Currencies are possible. "earmarked" for different social interactions. 3. There is a profound distinction 3. Economic definitions of money's between money and non-money values, functions are limited. Money is a Money is profane; sacred values are social medium, and is qualitatively qualitatively distinct, unexchangeable heterogeneous. and ^divisible. 4. Money corrupts all areas of life. It 4. There is a false dichotomy between will lead to the inevitable money and non-pecuniary values. commodification of society. Money can be singular and unexchangeable. 5. Money transforms nonpecuniary 5. Money does not have unchecked values. Any reciprocal transformation is power and freedom. Limits are set by ignored. cultural and social structures through controls and restrictions. Appendix Page 470 Appendix 2.1. First letter to Divisional Commander. My Address. Lieut. Colonel XXX, His Address. 13 June 1996. Dear Colonel XXX, The recent Red Shield appeal has again highlighted the great affection and esteem with which Australian people view The Salvation Army, and the way they are willing to support its mission. This has partly stimulated my interest, about which I understand Henry Johnson has spoken to you, in conducting what I hope would be a study of mutual interest. This year I began a PhD in Accounting at the University of Wollongong, as the recipient of an Australian Postgraduate Award. My scholarship is for a period of three years, so I anticipate spending that length of time researching and writing up my thesis. From some of my Masters work, I developed an interest in the way accounting is actually used in organisations, particularly religious or nonprofit organisations, and completed a study of a local Wollongong church, a copy of which I could make available to you if you would like it. My particular interest in The Salvation Army, if you approve my request, would be in conducting a case study which focuses on the role that budgeting plays in mamtaining the Army's mission. This interest has grown as I have read some of General Booth's writings. I have been impressed with the nature of the mission and the strong community presence which has been maintained. Because of the nature of this type of study, I also anticipate that my work would give a deeper understanding to Salvation Army participants, about the role of the accounting system, and especially the budget, in achieving goals. This would highhght the diverse perspectives of people and their reactions to accounting, including observations about the impact of budgeting on the part individuals play in the achievement of the Army's mission. Such a research project would involve, initially, a study of the financial reports, historical writings, and organisational structures of the Salvation Army, together with interviews with those responsible for both finances and the development of the vision. From there, as I developed an understanding of the organisation and the flows of financial information and accountability, I would anticipate interviewing people Appendix Page 471 involved in either preparing or working with that information, hopefully at a local, divisional, and territorial level. I would appreciate the opportunity to visit local sites and divisional and territorial offices, and to observefirst han d the work that was being undertaken. Also, if you felt it was appropriate, I would be keen to attend meetings as an observer. You could be assured of complete confidentiality in all my dealings with the Army, and with anonymity to the extent which you require. I would be happy for someone from your organisation to read the material I write before completion. As a mature-age student, with experience both as a church member, and also in conducting a case study on another church, I am aware of potentially sensitive areas of inquiry. I would therefore be careful to conduct myself in as unobtrusive a manner as possible, and to acknowledge and accommodate the time constraints people would inevitably have. I would appreciate the opportunity to visit you and discuss this matter. On Wednesday 26th June, I will be in Sydney on another matter, and would be happy to see you then, or on any other day you choose to nominate. If you could let your secretary know if this is agreeable to you, I could ring and make an appointment. I look forward to meeting you. Sincerely, Helen Irvine. 13 June 1996 Telephone: (xx) xxxxxxxx (home) (xx) xxxxxxxx (university) Appendix Page 472 Appendix 2.2. First letter to the Territorial Secretary for Business Administration. My Address. Lieut. Colonel YYY, Territorial Secretary for Business Administration, His Address. 24 July 1996. Dear Colonel YYY, I appreciated the discussion I was able to have with you and the Territorial Assistant Financial Secretary recently regarding my desire to include a study of the Salvation Army's budgeting system in my PhD thesis. You may be interested to know that since I spoke with you, I have identified 56 dissertations, world-wide, which are either based on the Salvation Army, or which refer to it. One of these was actually written about the Western Sydney Division, in 1986, by Herbert Green, as part of his D.Min. from Fuller Theological Seminary. The changes taking place in the Army, which you outlined, made me realize what a worthwhile and interesting study this could be, both from my point of view and yours. While it would not be primarily a management consulting exercise, valuable insights will undoubtedly be exposed over the period of the study, which I would hope would help you to understand the dynamics of your budgeting system, and facilitate the changes you are in the process of making. As a result of that interview, as agreed, I now present a proposal for research, which addresses the issues you raised. It includes a suggested time-frame, and discusses the topics of confidentiality and interviews, also including an agreement for a presentation to your financial committee at the end of the research period. I have made it as concise as possible, so naturally if you have any questions, or require any further information, I will be happy to provide it. Thank you for presenting this proposal to your cornmittee. I look forward to hearing from you. Sincerely, Helen Irvine. Phone (xx) xxxxxxxx (H) (xx) xxxxxxxx (W) Appendix Page 473 Appendix 2.3. Revised Research Proposal to the Territorial Secretary for Business Administration. To: Lieut. Colonel YYY From: Helen Irvine Subject: (Proposed) The significance of budgeting in mainlining the mission of the Salvation Army: A study of the Australia Eastern Territory. 1. Goals. From my point of view, the goal is to study the workings of the budget system of the Salvation Army, and the way it attempts to express the mission of the organization. From your point of view, it should provide rich data on the actual workings of the budget system and the way those involved in it perceive it and use it. The issue of change, both internal and external, will most likely be a major factor, as well as individuals' perceptions of the mission of the Army. It needs to be stressed that during a piece of research such as this, the particular focus sometimes shifts slightly, depending on the issues which are revealed to be most interesting and relevant. 2. Time frame. It is proposed that the project, from the point of view of the Salvation Army, be conducted over a period of a year, as outlined in the attached Appendix. In principle, it is intended to follow a complete budget cycle, beginning from the time when budgets are approved at a territorial level, following through to next year when individual divisions and organizations will formulate their own budgets, and the budget approval process will resume again. 3. Extent of the project. It is proposed to focus in depth on the Eastern Sydney and Illawarra Division, with interviews being conducted in at least half of the corps, community service centres and social centres. It would also be desirable to interview a selection of people from some of the other divisions, at divisional, corps, and social centre levels. The number of these interviews would be much more limited, with perhaps a handful from a few of the other divisions. In addition, at a Territorial level, interviews would be appreciated, in the areas of personnel, program, women's organizations, and of course, business adrmhistration. As well as interviews, a study of financial reports, including those of previous years, Appendix Page 474 and the accounting system, would be undertaken. I would appreciate the opportunity to attend meetings, where you consider it appropriate, as an observer. 4. Conduct of interviews. Confidentiality would be respected at all times. This would be guarded by several strategies: * Privacy of names. Names could be changed to preserve the confidentiality and anonymity of those being interviewed. * Recording of interviews. Interviews could be recorded, or notes taken, or a combination of both, depending on your preference. The recording of interviews is probably the best from the point of view of removing any inaccuracies in the writing up of interviews. If required, these could be signed as a correct record by those interviewed. * Final interviews would become part of the thesis, but would be included in a separate volume, to be seen only by the examiners. This volume would not be made available to the university library. 5. Confidentiality. The inclusion of the name "The Salvation Army" is an issue which requires some consideration. Several points are relevant: * It would be possible to describe it as, for example, "a large charitable/religious organization", rather than use the name "Salvation Army", or to include the name in the body of the thesis only, and not in the title or abstract. * There are already a number of theses, world-wide, on the Salvation Army. I located 56. These are stored in the libraries of the universities where they were submitted, can be located on electronic databases, and can be procured on the payment of a fee. * It is possible to put a "freeze" on a thesis once it is completed, so that it is not released into the university library, or to any database, for a specified period of time, such as two or three years. I would be willing to agree to this if it was your desire. Then, once it was released, the study would be at least three or four years old. This would make it of interest primarily to the academic world, rather than the general public. * Even if the name "The Salvation Army" did not appear in the title or the body of the thesis, it would be possible for a well-informed person to identify it, especially in view of the unique nature of the hierarchical system of the Army. * An academic piece of work such as a thesis is usually set in a theoretical framework, i.e., a theme or issue from academic literature. The actual organizational study would not occupy every chapter of the thesis. In view of these considerations, I propose including the name at least in the body of the thesis, and preferably in the title, with the thesis having a hold placed on it for two years on completion. Appendix Page 475 6. Presentation. On completion of the thesis, I agree to present a report to your Cabinet meeting, which I understand meets annually in October, on the results of my research. This would be an oral presentation, with accompanying notes if required, and time available for questions. 7. Approval. I look forward to hearing from you. Let me assure you of the deep interest and commitment I have for this project. At any time during the life of the project I would be willing to meet with you and discuss my progress, and future plans. Sincerely, Helen Irvine. 23 August 1996 Appendix Page 476 Appendix to Amended Research Proposal: Proposed Research Plan. Stage Time Goal Strategy Stage 1 September 96 - Observation of Interviews at Territorial October 96 budget approval level; attendance at process meetings; study of financial reports. Stage 2 November 96 - Familiarization with Study of current and past March 97 organization; financial reports; observation of identification of budget budget process; extensive implementation interviews (study of reporting in Sydney East and Ulawarra Division with isolated interviews from other divisions); territorial contact where necessary. Stage 3 April 97 - June 97 Observation of Meetings; interviews (local, budget formulation territorial and divisional); process study of reports. Stage 4 July 97 - September Observation of Interviews (territorial); 97 budget approval study of budget proposals. process Stage 5 October 97 Feedback to Report to Committee. | Salvation Army (Note: This plan is a proposal. It may change over time once the research is commenced. It is intended, at this stage, to be a broad guideline, and to set the general goals for which the study is to be conducted.) Appendix Page 477 Appendix 2.4. Final Letter to the Territorial Secretary for Business Administration. My address Colonel ZZZ, His address. 20 May 1998. Dear Colonel ZZZ, As I've been analyzing the data I collected during my time of study within The Salvation Army, it's been interesting to be reminded of the dedication Army officers have shown in exercising their ministries. In the words of some of them ... * "It's God's Army and it's God's work." * "We work from our mission statement to our goals and strategies". * "I think ... we can become advocates of the poor". * "I love and believe that God brought the Army into being." * We're "an evangelical mission, dedicated to rescuing people, raising the dignity of life, regardless of race, creed or background." * "I think that the Army adds to every community." * "... we're tecoming more money management responsible." It's several weeks since we last spoke, and I have now reached the point of writing up my thesis. I am therefore having to make a decision about the use of the name "The Salvation Army", and the possiblefreezing of the thesis on its completion. We discussed these issues originally last November, and subsequently by telephone and letter. I am now working on these assumptions: • I will not use the name "The Salvation Army" in the title, the chapter headings, or the abstract of the thesis, but will restrict my usage of it to the content of the chapters. • I will not require that the thesis be "frozen" when it has been marked. After a great deal of consideration, I feel that these responses are the most mutually advantageous to The Salvation Army and to me. By restricting the usage of the name to the content of chapters, its identity will not be highlighted. The time lapse between the start of the access period and the completion of the thesis will mean that data will be substantially out of date when the thesis is eventually released after examination. Further, academic theses have an extremely narrow breadth of circulation. For me, my period of study within the Army has been a fascinating time, as I've observed the way a large religious organization, such as the Army, tackles the accounting and budgeting pressures and constraints itfinds itself operating within. Appendix Page 478 I recognize that you are balancing many demands on your time and attention, and therefore if I don't hear back from you within two weeks, by 5th June, I will assume that these arrangements are satisfactory to you. Let me reiterate how much I have enjoyed meeting the various Army officers at headquarters, corps and social centres. The oveiwhelming impression I have received is of a group of dedicated men and women, who really want to make a difference by bringing the love of God to the community, in a practical way. It's been a privilege to have been given an opportunity to have that inside view. I wish you well in the fulfillment of your responsibilities within the Army. Helen Irvine. Phone: (xx) xxxxxxxx (H) (xx) xxxxxxxx (W) Email: [email protected] Appendix Page 479 Appendix 2.5. Sample questions588 for interviews with Divisional Headquarters personnel. 1. Mission of the Army/ Personal background. What is the mission of the Army? Can success at achieving this mission be measured? Why did you join the Army? What are your personal background and expertise/areas of interest? Your current responsibilities: how do they fit into the mission of the Army? Do you feel in this position you can make a significant contribution to the Army's mission? What is the relationship between the social and corps work of the Army? Is it true that the corps have hardly grown in the last fifty years? Is any attempt made to monitor the performance of corps? Is goal setting encouraged, if so, by whom? Do many officers set goals? How does a Divisional Commander set goals? How does a social centre manager set goals? How does a corps officer set goals? 2. Organizational Structure. Is the Army's system an autocratic system? How do you feel about the devolution of authority and responsibility to divisions? Do you feel divisional authority matches these responsibilities? Divisional spending authority: how much? Is this appropriate? Social centres previously directly under THQ, now under divisions? Has there been a change in the responsibility of divisional staff, especially the Divisional Commander? Is it more of an adrninistrative role now, where once it was mainly pastoral? Decision making at territorial level: are you confident in the division that THQ personnel understand the issues and the background to questions? Do you do any lobbying of THQ personnel regarding decision making? Administratively, there seem to be extra layers going in now, while other organizations 588 These questions provided a guideline only. Sometimes they were followed fairly carefully, but on other occasions, one or other of the areas was emphasized. The interviews were semi-structured. Appendix Page 480 are becoming more centralized, with wider, flatter structures. Do you feel this is so? Has it led to more Army personnel in administration? It has been said that one in six Army officers are either on THQ or in THQ related activities. Programme Planning Council: what is its role? Are there any holdups from divisions? Is it appropriate that such decisions go through this council? Cabinet structure: in operation in USA and Canada. Do you feel it is appropriate here? 3. Money and Fund Raising. Do you have any objections to the professional nature of the Army's fundraising? Is there any danger of losing the mission and vision of the Army? Centralized Red Shield Appeal: is this appropriate? Each division has a target to raise, BUT some divisions don't get to keep what they raise. Do you see this as a problem? Is there competition between divisions in the allocation of Red Shield Appeal money? Planned giving scheme: is it popular? What are corps responses to it? 4. Financial Matters/Budgeting. Global budgeting: divisions now get a deficit amount in March. Corps and social centre budgets are now sent into DHQ, and brought into the global budget. Is this a good idea? Any benefits? Disadvantages? Frustrations? What do you see as the purpose of the budgeting system? Goal setting, control, limitation of spending? Does it enhance goal setting and mission focus? Is it difficult to get social centres and corps to comply with budget deadlines? How does DHQ go about auditing the accounts of corps? How should THQ go about getting divisions to comply with time limits on budgeting process? Financial incentives,financial penalties ? Is the 5% management fee ever withheld if the budget is not submitted on time? Budgeting process: is it clear and understandable? Do the social centres find the computer disk and the system easy to use? Are there resources to help them? Does it need to be started earlier than early April? Budget reports: are they useful and understandable? Salvation Army financial reports: who reads them? Who undertakes responsibility for cash management? What is the role of Divisional Financial Secretary? What qualifications are necessary in order to be able to perform this task? Is the division provided with personnel adequate to perform this task? Appendix Page 481 One third of corps in the territory are deficit corps. What incentive is there for corps to become self sufficient? 5. Personnel Issues. Divisional structure: do you think there is an appropriate number of officers involved in administrative roles? Are some tasks better done by lay people? For example? Are there any roles that should be done only by officers? Have you experienced any tensions between officers and lay people/employees? Career paths seem to be a fairly new idea. There is more training now. What evaluation is made of officers? What form does this take? One senior officer told me he asked and insisted that he be put back into corps work from a divisional responsibility. Would this be an appropriate course of action for other officers? 6. The Future for the Army. Do you see any specific challenges the Army is facing? Do you think the Army needs to make any changes? Appendix Page 482 Appendix 2.6. Sample questions for interviews with social centre personnel. 1. Mission of the Army/Personal background. What is the mission of the Army? Can success at achieving this mission be measured? Why did you join the Army? Personal background and expertise/areas of interest and training? Current responsibilities - how do they fit into the mission of the Army? Do you feel in this position you can make a significant contribution to the Army's mission? Relationship between social work and corps? Any tensions? Your corps involvement? Any attempt to monitor the performance of corps? Is goal setting encouraged, and if so, by whom? Do many officers set goals? How do you set goals? How does a corps officer set goals? 2. Organizational Structure. Autocracy? Devolution of authority and responsibility to divisions? What impact has this had on the social centres? Now, social centres managed more by divisions than THQ? Is the help available when necessary for fmanciaVadministrative/pastoral matters? Decision making at territorial level - confident in social centres that THQ understand the issues and the background to questions? Lobbying of THQ personnel who are making decisions? Extra layers going in now, while other organizations are becoming more streamlined and centralized? Does it use up too many personnel in adrninistrative tasks? Cabinet structure - used in USA and Canada. Appropriate here? Any frustrations with it? 3. Money and Fund Raising. Professional fund raising? Attitudes? Appendix Page 483 Is the Salvation Army a business? Is money tighter now? How Would it be appropriate for all officers to go back into corps work every few years, to get their feet on the ground? much of social officers' duties are managerial? e.g. deciding on the "mix" of clients, financially disadvantaged or not, and getting the "right mix". Aie social centres agencies that manage government money, and are therefore not managing the gospel? Response to this? Where does your funding come from? Does your centre do any other fund raising, and if so, what? Is there the feeling, in social centres (and maybe in corps) that THQ will bail you out? Does this encourage centres and corps to be self sufficient? 4. Accounting/Budgeting. Global budgeting - divisions now get a deficit amount in March. Corps and social centres send budgets to DHQ, and they bring them into the global budget. Is this a good idea? Your response to this system? Put in budget in April - based on figures at the end of March (nine months actuals, and three months estimates). Any confusion with the budgeting process as it's outlined by THQ? Difficulty getting budget into DHQ on time? Would it be better slightly earlier in the year, so it didn't interfere with year-end accounting? Who prepares the budget? How is it done, and how long does it take? Zero based budgeting (ZBB)? What do you understand by the term? Do you think it's a useful way of looking at the budget? Is the computer disk okay? Questions, who do you ask? Are they helpful? Do the divisions need more people with this kind of expertise? Would it be helpful to have a full-time employee, out of THQ, who went around and gave two or three centres a day or so each week? Once budget is approved, budget reports? Are these helpful? Who monitors spending? Who is in charge of cash management? How important is it for the manager of a social centre to have financial ability? Using an accruals system - does this mean more trained staff are necessary? Is it easy to get up to date information for decision making? What sorts offinancial informatio n Appendix Page 484 do you use when making decisions, e.g. about cash management, about spending, about costing alternatives, about budget preparation? What do you feel is the purpose of the budgeting system, as it operates at present? Planning, control? Do you feel you receive (or your centre) any benefits from the budgeting process? Army puts out an annual report with a financial report. Do you read this? Do you think many members of the public read it? Why is it published? 5. Personnel Issues. Back to earlier question, why did you join the Army? Is there a case for employing more lay people to do technical tasks, such as accounting? Are there any roles that should only be done by officers? What about an employee as the manager of a social centre, with an officer as chaplain? What about a similar system for officers as the Hay grading for employees? i.e. a skill level required for each management position in a social centre? Tensions between officers and lay people? Training of officers: system now? Opportunities for you to have a career path? Are you undertaking any more framing? What? Do you feel the Army will put you in a position where you can make use of this training? Would you consider doing some sort offinancial training? Has the system of placement of officers been a sink or swim system? Have you ever gone into a position, and not really felt that you knew what was expected of you, or how you would go about your tasks? 6. The Future for the Army. Challenges? Changes the Army needs to make? Appendix Page 485 Appendix 2.7. Sample questions for interviews with corps personnel. 1. Mission of the Army/Personal Background. What is the mission of the Army? Can success in achieving this mission be measured? Why did you join the Army as an officer? What work did you expect to be doing? Personal background and expertise/areas of interest? Current responsibilities - how do they fit into the mission of the Army? Do you feel in this position you can make a significant contribution to the Army's mission? What is the relationship between the social work and the corps? How do you feel about the observation that the size of the corps hasn't grown in overfifty years ? Will Vision 2000 make any difference? Is any attempt made to monitor the performance of corps? Is goal setting encouraged, and if so, by whom? Do many officers set goals? How do you go about setting goals? Whose goals are they? Short time m appointments? Does this make goal setting difficult/irrelevant? 2. Organizational Structure. Autocracy? Devolution to divisions? Impact on corps, if any? What do you perceive the DHQ role to be? Is pastoral help still available, or have the DHQs become more managerial and administrative offices? Decision making at territorial level: are you confident in the corps that THQ understand the issues and the background to questions? Do you conduct any lobbying of THQ personnel who are making decisions? Extra organizational layers going in now - against the tide of the ™™™j*™* government worlds. They are centralizing! One in six Army officers either on THQ or THQ related activities. Is this appropriate? 3. Money and Fund Raising. Is the Salvation Army a business? Appendix Page 486 Professional fund raising? This is for social centres. Have the corps been left behind? A third of corps are deficit corps. Is this corps financially self sufficient? Is there incentive given to local corps to become self sufficient? Have you ever used the planned giving programme in a corps? Is there a relationship between stated goals and congregational giving? Is there a perception that THQ will bail out any corps or social centres that are short of funds? New corps are supposed to be financially self sufficient afterfive years . Is this realistic? Employing other people, e.g. lay people, to be secretaries, etc. How easy is this? What is the procedure? Do you have to receive Finance Council approval? What about Red Shield Family Stores? What happens to the profits? Can the corps use them to keep "afloat"? Is this a good thing? Responsibility for your building. Property Department - is it appropriate to have to go through them for extensions, renovations, etc. What about financing? Grants, loans, how are such building projects financed? 4. Accounting/Budgeting. Salvation Army annual report. Do you read it? Is it relevant or interesting? To whom? Global budgeting - how does that impinge on your corps? Putting in the budget in April. Filled out manually on a form. Any difficulties with this? Any confusion with the budgeting process? Difficulty getting the budget in on time? Assistance needed? Would it be better if done slightly earlier in the year? Who prepares your budget? How is it done, and how long does it take? What do you see as the benefits of preparing a budget? Does it help you to set goals? Is it a visionary document, or a control measure? How do you monitor your spending? How complex are your corps finances? Are your corps accounts audited? How important is ability in financial matters in a corps officer? In other officers, in other positions? 5. Personnel Issues. In other parts of the Army, would it be better to have lay people who were experts in, for example,financial matters, to take over some of the roles traditionally held by Army officers? Appendix Page 487 Are there any roles that should only be done by officers? What about an employee as manager of a social centre, with an officer as chaplain? Do you have any experience in social centres, or divisional headquarters? Have you experienced any tensions between officers and lay people? Training system for officers: system now? Do you have a career path? Are you planning to undertake more training? Do you feel confident you will be placed in a position where you can make use of this training? Would you consider doing some sort offinancial training ? Do you have an annual review? Who does it? Is it helpful? Is any consideration given to your ability to manage the corps financially? How do you feel about the method of placement of officers? Have you ever experienced frustration in a position, or disappointment that you have been put in a position that wasn't really "you"? Would it be appropriate for all officers, from THQ to DHQ, to social centres, to go back to corps work every few years, to keep them in touch? 6. The future of the Army. Any challenges the Army is facing? Can you think of any changes the Army needs to make? Appendix Page 488 Appendix 2.8. Table of interviews conducted589 within The Salvation Army. Name&9U Sex"" Status592 Rank593 Division Function 594 595 Aldrich Len Male Employee n/a THQ THQ Allard Frank Male Officer Major SydE Corps Anderson William Male Officer Lieut-Col. THQ THQ Baird Gavin Male Officer Major THQ THQ Barnes Susan Female Employee n/a SydE Social Barnes William Male Officer Major RSC DHQ Bowen Hendrik Male Officer Major SQId DHQ Brough Rod Male Officer Major RSC DHQ Buckley Peter Male Officer Lieut-Col. Parra DHQ Capps Robert Male Officer Captain SydE Social Carmody Susan Female Employee n/a THQ THQ Carpenter Stepher1 Male Officer Lieut- Col SydE DHQ Carruthers Harry Male Officer Captain SydE Social 589 These interviews were conducted with officers, employees, members and friends of the Army between September 1996 and October 1997. 590 These names are all pseudonyms, devised to protect the confidentiality of interviewees, according to the access agreement with The Salvation Army. 591 Figure 2.9.1 (Interviews by gender) displays this in graph form. 592 "Status" classifies interviewees according to whether they were full-time Army officers, employees (who may have been Salvationists or non Salvationists), lay people (Salvationists who worked in a voluntary capacity in a local corps), or other (friends or advisers of the Army who performed some other service in a voluntary capacity). 593 An officer begins as a Lieutenant (Lieut.), and then after five years, progresses to the rank of Captain. After fifteen more years, the rank of Major is attained. Ranks based on length of service end at this point, and higher ranks, Lieutenant-Colonel (Lieut-Col.), Colonel, and Commissioner (Comm.), are assigned on the basis of appointment. The rank of Envoy is a courtesy title given to Salvationists who work full-time in the Army in a leadership position. Appendix 4.1 "A glossary of Army terms" shows a definition of Auxiliary Captain as "a mature Salvationist, beyond the age-limit for full officer- training, who holds a warrant of appointment as distinct from commissioned rank, and who may undertake corps or social work similar to that of a commissioned officer". Figure 2.9.2 (Interviews by Rank) in this appendix displays these graphically. 594 Interviews were conducted with people from Territorial Headquarters (THQ), Rehabilitation Services Command (RSC), Sydney East & Illawarra Division (Syd E), Parramatta Division (Parra), South East Queensland Division (S Qld), Central and North Queensland Division (Nth Q), Australian Capital Territory Division (ACT), and two people who have an unofficial attachment to THQ but have been classified "other". 595 This category refers to the type of responsibility the interviewee holds, e.g. is he/she a social officer, in a corps position, or in a position at either Territorial Headquarters (THQ) or a Divisional Headquarters (DHQ)? Figure 2.9.3 "Interviews by function" illustrates the proportional representation of interviewees from these various functions. Social and Rehabilitation Services Command (RSC) have been combined. Appendix Page 489 Castle Heather Female Officer Major SydE Social Chappell David Male Officer Captain THQ THQ Childs Anna Female Officer Captain SydE Corps Cohen Samuel Male Officer Lieut. RSC Social Collier Lance Male Officer Captain Parra DHQ Collins Heather Female Employee n/a THQ THQ Connors Kerry Male Officer Lieut. Parra Corps Cooper Paul Male Officer Major THQ THQ Dacin Hugh Male Employee n/a Parra Social Dandridge Hal Male Officer Major SydE Social Davidson Wesley Male Officer Major THQ THQ Davies Taya Female Officer Major SydE Social Davis Erwin Male Officer Captain SQId Social Deephouse Jerry Male Officer Lieut-Col. THQ THQ Dent Gary Male Officer Captain ACT Corps Dent Stephen Male Officer Captain SQId Social Denton Tom Male Officer Major SydE Corps Diamond Wilma Female Officer Captain SydE Corps Dickson George Male Employee n/a THQ THQ Dillon Rose Female Officer Lieut. SydE Corps Earle Stephanie Female Officer Major THQ THQ Elliott Louise Female Officer Major SydE Social Emerson Frank Male Lay persori n/a Parra Corps Evans William Male Officer Major Parra Corps Ezzamel Grant Male Officer Captain Parra Corps Fontaine Paul Male Officer Envoy SydE Corps Fox William Male Officer Captain THQ THQ Gambling Leslie Male Officer Major SQId DHQ Girling Sharon Female Officer Major SydE DHQ Gittins Morris Male Officer Captain Parra Corps Grant Wendell Male Officer Major SydE DHQ Greeley Bob Male Officer Captain THQ THQ Green Richard Male Officer Captain Parra Social Greig Travis Male Employee n/a THQ THQ Grosse Bert Male Employee n/a THQ THQ Guthrie Ronald Male Officer Lieut. SydE Corps Ingram Kevin Male Officer Envoy Parra Social Jackson Damien Male Employee n/a SydE Social Jeavons Ralph Male Officer Major SydE Corps Jefferson Norris Male Officer Colonel THQ THQ Jeffreys Bernard Male Employee n/a SQId Social Jeffreys Maurice Male Officer Major ACT Social Jersey Wanda Female Employee n/a SydE Social Johnson Female Officer Captain SydE Social Rosemary Johnstone Harry Male Employee n/a SydE DHQ Appendix Page 490 Jones Gerard Male Officer Comm. THQ THQ Jones Lynette Female Officer Captain Parra Social Jonsson Male Officer Major ACT DHQ Humphrey Jopson Edward Male Officer Lieut. SydE Corps Jordan Tess Female Officer Major THQ THQ Kaldor Allan Male Officer Captain SydE Corps Kensington Wally Male Officer Captain SydE Corps Kiely Simon Male Officer Major THQ THQ King Peter Male Officer Captain SydE Corps Kirk Helen Female Officer Captain SydE Social Lago Ryan Male Officer Captain SQId Corps Lamont Alice Female Employee n/a THQ THQ Laughlin Simon Male Officer Lieut-Col. SQId DHQ Lee Belinda Female Officer Captain SQId DHQ Linsell Elaine Female Officer Lieut. SydE Corps Lovelock Patricia Female Officer Envoy SydE Corps Lyons Clark Male Officer Major SydE Social Lyons Mavis Female Employee n/a SQId Social Mackay Ellen Female Officer Captain Nth Qld DHQ Manders Female Officer Captain SQId Social Stephanie Marcy Wendy Female Officer Major RSC Social Martin Wilma Female Officer Lieut-Col. THQ THQ May Charles Male Officer Captain ACT Corps McCourt Anne Female Officer Colonel THQ THQ Montagna Julia Female Employee n/a SQId Social Morgan Suzanne Female Officer Aux-Cap THQ THQ Morphett Pauline Female Officer Major THQ THQ Nelson Eric Male Officer Major SydE Social Nielson Doug Male Officer Captain SydE DHQ Pallot Marcus Male Officer Lieut. SydE Social Peters Daniel Male Employee n/a THQ THQ Pierce Lee Male Officer Captain THQ THQ Pitt Joel Male Officer Envoy SydE Social Rex Phillip Male Officer Major RSC Social Richards Bramwel 1 Male Officer Comm Other Other Richards Hugh Male Officer Captain Parra Social Robbins Georgie Female Employee n/a SydE Social Robbins Wilson Male Employee n/a Parra DHQ Roberts Terry Male Officer Major THQ THQ Roberts Warren Male Officer Major THQ THQ Robertson Male Officer Major SQId Corps Matthew Robey Hans Male Employee n/a RSC DHQ Rowan Alistair Male Officer Major THQ THQ Appendix Page 491 Rowen Benjamin Male Officer Major SydE DHQ RyanMarcella Female Officer Captain Parra Corps Sanday Matthew Male Officer Captain Parra Corps Schmidt Philip Male Officer Captain RSC Social Stephenson Male Employee n/a THQ THQ William Tesch Fred Male Other n/a Other THQ Thurlow Garry Male Employee n/a THQ THQ Vance Barry Male Officer Major THQ THQ Vanders Mary Female Lay person n/a SydE Corps Weiss Dianne Female Employee n/a ACT Social Withycombe Sam Male Officer Major THQ THQ Woodall Kris Male Officer Lieut-Col. THQ THQ Wreiden Mark Male Officer Captain SydE Corps Appendix Page 492 Figure 2.8.2 Interviews by Rank 35 25 |D Sen e^ N°- ,„ 20 15 10 5 I 1 0 Commissioner Major Captain Lieutenant Envoy n/a Colonel Aux-Captain Rankinas Figure 2.8.3. Interviews by Function. Appendix Page 493 Appendix 2.9. Stories of interviews in their context. These stories of actual interviews conducted illustrate the importance of understanding the context of interviews. The transcript alone cannot reveal the reason why an interview "turned out" the way it did. 1. Bernard Jeffreys: preoccupied with his immediate problem. When I visited Bernard Jeffreys, an employee in a social centre, he was in the middle of a frustrating episode with his computer system. Time and again, he had experienced problems with both hardware and software. His requests to THQ had, according to him, been ignored, and he had received no help at all. The text of the interview reveals his preoccupation with this issue, to the exclusion of almost everything else. And yet even that does not capture the extent of his frustration, and the reason why the conversation took that particular turn. 2. Colonel Anderson: never really interested in building rapport. I had been looking forward to my interview with Colonel Anderson. Yet when I arrived, I found he was in the middle of another meeting, which he left in order to talk to me, and to which it was quite obvious he was anxious to return. When I suggested that we reschedule the interview, he said that would not be a good idea, and that I ought to conduct itright then . Aware of his preoccupation, I agreed to make it a short session. He never really warmed up. His focus during the entire interview was on the tape recorder. We barely made eye contact, and he constantly looked away, obviously eager to bring the interview to a close. It was clear that he chose his words carefully, and was never at risk of opening up any of his inner thoughts and feelings. It was a dull, predictable interview, with no spark of contact. This was obvious because it was so different from most other interviews. 3. Major Earle: touching a raw nerve. Major Stephanie Earle, an older officer, almost broke down and wept when I asked her about the professional fundraising of the Salvation Army. Taken aback, I saw the signs of distress, but was not quite sure of her response until she confessed that I had touched a raw nerve with her, and she needed time to compose herself. This was an unexpected reaction from a dignified, self-contained mature woman. Appendix Page 494 4. Lieutenant Connors: a blinding revelation. The text of my interview with Lieutenant Kerry Connors would fail to show what a watershed occurred in my thinking and understanding as we spoke. Lieutenant Connors was not a particularly interesting person to interview. His answers were one dimensional, and the interview, as a result, consisted mainly of technical questions on budgeting. I was hot and bothered when I arrived, having gone to the wrong place for the interview at first. He had not told me that he was expecting me at his home. By the time I eventually arrived, time was short, I had another interview to conduct, and to my surprise, he launched into our conversation with other people working in the room. These factors did not produce an atmosphere conducive to rapport and deep sharing. However, during our conversation, as I studied his corps budget, something hit me like a blinding light. I struggled not to let Lieutenant Connors see how enlightening it was for me, and to take it in my stride. What emerged, through my questioning of him, was that this was not a "deficit" corps, i.e. it was not funded by means of a grant from THQ, which approximately one third of the corps are. As I questioned him further, I found out that there were only about fifteen families in the corps, a total of about forty-five people. Knowing that it cost at least $50,000 a year to keep a corps afloatfinancially, I commented that they must be very generous givers to their church, but discovered, much to my amazement, that what kept the corps going was the tremendous amount of money they collected on the street, the railway stations and the racecourse. Basically, the public was contributing most of the money needed to keep the local church going, with most of the officer's time going towards the church work. It was a short interview, and when it ended, Lieutenant Connors asked me how his answers compared with those of other people. I told him that there weren't any "correct" answers, but that I expected everybody's answers to be different, depending on their own background and experience. Little did he know how important and revealing this short and simple interview had been. It certainly gave me food for thought in conducting future interviews. 5. Captain Philip Schmidt: a man under pressure. Captain Philip Schmidt managed an Army centre, and the circumstances of my interview with him were interesting, to say the least. I had to wait some time before being admitted to his office. Once there, we had at least six interruptions, even though he had asked his secretaiy to leave us undisturbed. Some of the interruptions were of his own making. Quite simply, he was never still. He appeared to be under tremendous pressure, and jumped up and down from his desk during the interview, checking on telephone calls, giving people instructions, and generally running the centre as we talked. While he wasfriendly and welcoming to me, he appeared to be a very stressed man, and this was partly reflected in his comments about the Army's inability to function efficiently. When he received the transcript, he rang me, in quite an agitated state. Appendix Page 495 anxious for assurance that nobody would be able to put together his identity and his comments. Appendix Page 496 Appendix 2.10. Summary of interviews to date596. TO: Lieutenant Colonel Carl Dienemann FROM: Helen Irvine SUBJECT: Preliminary Observations based on interviews conducted within the Salvation Army DATE: Wednesday 4 June 1997 SOURCES: These observations are based on reflections after interviewing 90+ officers and employees at THQ, some DHQs, social centres and corps. (Note: No thorough analysis has yet been undertaken, so these comments must be seen as preliminary and incomplete.) A. Overview of Interviews. 1. Mission. There has been almost unanimous agreement that the mission of the Army is spiritual, and that the socialfits int o that in an indivisible way. There is a strong reliance on the teachings of William Booth, the founder, as regards the importance of a social ministry, and its link with the spiritual aspects of the work. Opinions have varied as to whether it is possible to judge the success of the Army in achieving that mission, some people embracing the idea of measurement by numbers, while cautiously adding that qualitative growth is also important. A few are adamantly opposed to the notion of using numbers to judge the success of the spiritual mission. While a number of officers say they set goals, progressing to the stage of developing strategies, and remaining accountable about the achievement of those goals, appears to be doubtful. There seems to be a general agreement that it is probably a good thing, and often at least the early stages of goal setting are undertaken. A difficulty here is the short length of time officers remain in a position. The expectation they have of being moved seems to affect their accountability regarding goal setting. This will be referred to more under "Personnel". 5<* This summary was sent to Colonel Carl Dienemann after a lengthy telephone conversation, in which most of these issues were discussed. A description of the background to this letter, and m> perceptions of the ramifications of it, follows at the end of this Appendix. Appendix Page 497 2. Organizational Structure. It seems to be widely acknowledged and accepted that the basic structure of the Army is that of an autocratic bureaucracy, although there is a growing realization, especially amongst younger officers, that a more consultative style of leadership is appropriate, especially at a corps level. The restructuring which took place a few years ago has impacted negatively on many officers from several standpoints. Firstly, many feel the volume of paperwork has grown. Secondly, there is a greater time lag between, for example, putting in a request and having it filled. Thirdly, there is an awareness that the role of DC, which is now more heavily administrative, has decreased in a pastoral sense, through no fault of any individual DCs, but because of the change in the structure. Fourthly, many feel that the change wasn't managed very well, in that responsibilities greater than officers' abilities, were placed on officers, often without adequate training. Fifthly, there is a perception that the number of officers involved in administration has grown greatly. Some officers feel this has been at the expense of the corps. Sixthly, as to the future of the divisions, regarding their autonomy, opinion seems to be divided. Some officers feel very strongly that it is an American system, and inappropriate here, because of the relatively small size of our population, and the geographical isolation of many areas. The problem of dividing up Red Shield Appeal donations also seems to come into this as a practical issue. On the other hand, others feel it hasn't gone far enough, and that the purse strings should be loosened. They feel the divisionalization process should be taken to its logical conclusion, and not left half way. At the very least, some officers felt, the approval amounts should be increased, to eliminate the necessity to gain approval for so many items as is presently the case. Overall, there seems to be a lack of trust evident between the higher levels of administration and the "ordinary" corps or social officers, in a financial sense. 3. Money and Fund Raising. Most people interviewed acknowledged that the Army needed to be run in a business like way, although they often stressed that it had to be done with compassion. People who had had some contact with the American Salvation Army seemed keen that it didn't follow that path, where, apparently, it is run much more like a busmess/charity. Almost all officers are happy, overall, with the professional nature of the fund raising undertaken, although there are small areas of concern here and there. A small number of older officers don't like it at all. It is recognized that the publicity used in order to raise funds has promoted the Army as a social organization rather than a church, and this is a concern to many people. Appendix Page 498 There was a general agreement that money seemed tighter now than it used to be, and there was a huge awareness of the need to keep costs contained. The reliance on government funding upset some officers, who felt that in some ways it limited the Army's spiritual mission, although others disagreed strongly with this. All agreed that there could come a point when the Army should turn its back on government funding if there were constraints on the ability to exercise a spiritual ministry. The issue of the reliance by corps on public collections in order to survive provoked varying reactions. Some justified it by considering the amount of their time spent on social and welfare work within their area, saying that the Salvation Army exists not just for its soldiers, but for the community as a whole. However, many corps officers are uneasy about it, and would like their corps to be funded by their own internal giving. Some account separately for public collections, and try to be stringent about the way they're spent. 4. Accounting and Budgeting. The accounting system appears not to be much use to many of the people interviewed. Information is often slow, the computer system lets them down constantly, and many simply don't have the skills necessary to perform the functions they're required to perform. Help is sometimes available from their DHQ, and when this happens, it's greatly appreciated. There is an acknowledgment that requirements are much more sophisticated now. Very few of the people interviewed saw the budget as a visionary statement. It is so structured that many feel it is hard to be creative with it. For many people, preparing the budget is a major problem. There is a widespread feeling that demands made are unreasonable, as regards deadlines in particular, and that those in authority should be better organized with their time schedules. Many feel that more training should be made available. There was often a sense that administration set the agenda, rather than being the other way around. People felt that the role of THQ, for example, was to be a resource centre, but this didn't seem to be the role it was playing. 5. Personnel. A number of issues are of great concern in this area. The most startling seems to be the short length of time many officers spent in their appointments. This seems to be felt most keenly at corps level, where officers acknowledge the difficulty of achieving much within a corps in only two or three years. Goals can be set, but there is difficulty in achieving much within the length of stay of most appointments. Some officers feel this has a disruptive effect on the corps members, unless they have been consulted in the Appendix Page 499 formation of goals and strategies, and have therefore "owned" them Officers who have gained more senior positions don't seem as worried about this, and have usually thought they've had a wide range of experience. Older officers have often been happy to go wherever they've been sent, and have actually enjoyed it. There seems to be a need amongst younger officers to have more of a say in where they go, although some who have been very unhappy about their appointments, have simply gone without complaint. There are often tensions between officers and lav people, especially where an officer is made a manager and is over a lay person in authority. Some officers feel quite acutely their lack of expertise in the area into which they've been placed. It is generally agreed that it's been, in the main, a sink or swim system. Some officers have the ability to rise to the occasion, but others flounder and end up moving from one position to another, often without any sense of accomplishment. The use of lay expertise was acknowledged to be essential, but a few qualifications were made on that notion by most officers. One was that the person must be in line with the mission of the Army, and must show a level of commitment which is in keeping with the nature of the organization. It must be the "right" person, which presumably means a certain level of commitment, and having the skills required for the position. There were some positions which always ought to be filled by officers, and it has been generally thought that these positions are those which involve pastoral work, or policy making and direction setting. Some corps officers, particularly, feel that the corps have been robbed, in favour of administrative positions. This seems to some to be a reflection of a down grading of corps ministry, although many acknowledged that Mobilise 2000 was an attempt to address that. While many perceive this in a positive light, there is the realization that it is a top driven programme, and needs to be adopted with enthusiasm by the local corps. 6. Challenges for the Future. The most common response to this issue is that the Army needs to be relevant. This seems to be a recognition that it has become largely irrelevant. There is a common feeling, usually amongst corps officers, that there should be freedom for corps to express their own individuality, although some officers feel the traditions of the Army need to be maintained. All acknowledge this is a problem the Army has to grapple with, in order to discover what kind of Army it is going to be in the future. Other people interviewed have expressed the opinion that the Army needs to be as good as people think they are. There is a very heavy feeling of responsibility to maintain the public image the Army enjoys. Appendix Page 500 B. Observations and Suggestions. • The pivotal decision seems to be how far to take the process of divisionalization. Future decisions about staffing will depend on this. If divisions are to be given control over money, requirements of expertise will be quite exacting, and the personnel implications will need to be understood and planned for, both in the short and long term. It is suggested that if this road is taken, more use be made of lay people in executive positions, accountable to the DC or Divisional General Secretary. Salary implications need to be thoroughly studied. It can be a false economy to employ officers who are inexpert and supposedly less expensive, when securing the services of expert employees, at a higher salary, may offer substantial savings in the longer term. Even if the divisions' authority is not to be extended, the possibility of using more employees for roles which require particular expertise, especially in financial matters, ought to be considered. • The people base of the Salvation Army is quite small, relative to the size of the total organization. This refers to the numbers of people who are either soldiers, or attending local corps. This has huge implications for the future of the Army. Firstly, potential funding from this source is limited. I believe the Army should work hard at making corps financially self sufficient, internally, and maintain strict controls on the use of public donations. While the present practice of most corps can be explained, in an era of accountability, it is something to be worked on and changed in the future. Secondly, local involvement is limited, not only for local welfare and social programmes, but also in terms of collections. Thirdly, future officers come from corps, and therefore the strength and size of local corps play a large part in the quality and quantity of men and women entering the College with a view to becoming Army officers. With larger numbers of officers retiring over the next five to ten years, relative to the numbers of officers entering their officership, this could pose a problem, which could be partially offset by the employment of more lay people in specific roles. It is believed that, longer term, this people base could be strengthened by a number of strategies. If the number of officers in administration was cut, then more gifted officers could be put in corps positions. This would add to the perceived lustre and importance of corps ministry, and would provide positive role models for men and women considering Army officership. If terms of appointment were lengthened considerably, there would be greater opportunity for corps officers to set goals and strategies, in consultation with the corps, and to be there long enough to work through them. The present system offrequent moves , while culturally accepted, is Appendix Page 501 not conducive to the long term growth of the corps, I believe. • Much about the Army model is not relevant to today's society. While it has its strengths, in terms of mobility and flexibility, it seems often at the cost of stability and growth. Younger officers are recognizing the need to develop more consultative styles of leadership. This should not be seen as a threat to the authority of officers, but rather an opportunity to develop leadership skills in a team environment. There has been a tendency, in local corps particularly, to leave much of the work to the officer. • The legal implications of the relationship between trustees, at territorial level, and the Territorial Commander, as far as decision making is concerned, I believe, need to be addressed. While it is accepted that much of this structure is what makes the Salvation Army the Army it is, where possible, it ought to be adapted to local culture. If corps, in particular, were given more autonomy, in terms offinances, the budgeting process could be streamlined at a divisional and territorial level. Helen Irvine. Phone: (xx) xxxxxxxx (work) (xx) xxxxxxxx (home) Email: [email protected] The background to this letter: A senior officer at THQ, Colonel Carl Dienemann was new to the job, and involved in assisting with the organizational review which was currently being conducted. Hearing of my research from a member of the finance department, he rang me at home one evening to chat about my initial impressions of the Army. Cautiously, I made one or two observations, waiting for his reaction. He agreed with me, so I continued, and, finding him in agreement with everything I said, we had a most enjoyable and enlightening discussion. As our conversation drew to a close, he asked if I would set out some of these ideas for him, and I replied that I would be happy to do that. As a result, I drafted the letter above to him in which I summarized some of my initial observations and suggestions. My perceptions and reflections on the ramifications of this letter: If I had known the ramifications of this letter, I would probably never have written it. I believe it rebounded on me in a most unexpected way. I discovered about two weeks later that the new Secretary for Business Administration had spoken about me to Appendix Page 502 somebody in the finance department as "that negative woman". It became apparent that Colonel Dienemann had passed on the letter, which I had written to him, to the Secretary for Business Administration, who, reading it outside the context of my conversation with Colonel Dienemann, took it as being negative, and became somewhat defensive about it. Not only was the context different, but the two men had very different personalities, and responded to feedback in different ways. My relationship with the new Secretary for Business Administration was never an easy one, from that point onward. He seemed to avoid contact with me, tried to divert my telephone calls to another officer, and denied me access to a meeting. While he was personally gracious to me when we met, these strained relations made the preparation and presentation of my report a very difficult time. I often reflected on how different our relationship might have been, had he not had this initial impression of me. It would have been good to get alongside him as he grappled with his new role, and to hear of his strategy for streamlining the budgeting process, which was one of his areas of responsibility. The unsatisfactory nature of our relationship (at least from my point of view) was a disappointment and a tension to me. While Colonel Dienemann told me not to worry about it, it did concern me, and left a feeling of sadness over my last few months within the Army. This made the disengagement period especially frustrating, because rather than leaving on a positive note, I felt that the whole tenor of the project had changed. While my relationship with everybody in the finance department was unaffected by this, and they continued to be supportive and helpful, nevertheless it was a disappointing time. Faced with a similar situation again, I would never commit anything to writing until the access period was finished. Appendix Page 503 Appendix 2.11. NUD*IST597 Index Structure598. Node l599: (1) /BaseData (11) / BaseData/interviews (111) / BaseData/interviews/status (1111) / BaseData /interviews/status/officer (1 1 12) / BaseData/interviews/status/lay (1113) / BaseData /interviews/status/employee (1114) / BaseData /interviews/status/advuser (112) / BaseData/interviews/gender (112 1) / BaseData/interviews/gender/female (112 2) / BaseData /interviews/gender/male (113) / BaseData/interviews/rank (113 1) / BaseData /interviews/rank/lieutenant (1 13 2) / BaseData/interviews/rank/captain (1 13 3) / BaseData/interviews/rank/envoy (113 4) / BaseData/interviews/rank/Major (1 13 5) / BaseData /interviews/rank/lay (1 13 6) / BaseData/interviews/rank/LieutCol (1 13 7) / BaseData /mterviews/rank/Commissioner (1 13 8) / BaseData/interviews/rank/Colonel (1 13 9) / BaseData/interviews/rank/AuxCaptain (114) / BaseData/interviews/division (114 1) / BaseData/interviews/division/SydE (114 2) / BaseData/interviews/division/Pmat (1 14 3) / BaseData/interviews/division/SQld (1 14 4) / BaseData/interviews/division/ACT (114 5) / BaseData/interviews/division/RSC (1 14 6) / BaseData/interviews/division/CNQld (1 14 7) / BaseData/interviews/division/other (114 8) / BaseData/interviews/division/THQ 597 Q.S.R. NUD.IST Power version, revision 4.0. 598 The NUD*IST index structure is based on a system of "nodes", which make up an index "tree". Each node (and its children and grandchildren) has a number. It is by means of these numbers that slabs of text, documents, etc. are coded into these nodes, as a storage place for information relating to that node. 599 This node provides "base data" on the four sources of data brought into the database: interviews, documents, diaries, and budget board minutes. Interviewees are classified according to status, gender, rank, division and category (function), similar to the classification in Appendix 2.8, "Table of interviews conducted within The Salvation Army". Documents, diaries and budget board minutes are coded simply at node 1 to show that is their source. Appendix Page 1 15) / BaseData /interviews/category 115 1) / BaseData /interviews/category/Corps 1152) / BaseData /interviews/category/DHQ 1153) / BaseData /interviews/category/Other 1154) / BaseData /interviews/category/Social 1155) / BaseData /interviews/category/THQ 12) / BaseData /documents 13) / BaseData /diaries 14) / BaseData /boards Node 7600: (7) /structure (7 1) /structure/org structure (7 11) /structure/org structure/hierarchy (7 111) /structure/org structure/hierarchy/role of ihq (7 112) /structure/org structure/hierarchy/role of thq (7 113) /structure/org structure/hierarchy/role of dhq (7 12) /structure/org structure/legal (7 13) /structure/org structure/mission (7 14) /structure/org structure/goals (7 14 1) /structure/org structure/goals/setting (7 14 2) /structure/org structure/goals/achievement (7 15) /structure/org structure/decision making (7 15 1) /structure/org structure/decision making/boards (7 15 2) /structure/org structure/decision making/adv boards (7 16) /structure/org structure/administration (7 17) /structure/org structure/consultancies (7 18) /structure/org structure/publicity (7 19) /structure/org structure/change (7 2) /structure/personnel (7 2 1) /structure/personnel/appointments (7 2 2) /structure/personnel/deployment (7 2 3) /structure/personnel/training (7 2 4) /structure/personnel/careers (7 2 5) /structure/personnel/expectations (7 2 6) /structure/personnel/conditions, pay (7 2 7) /structure/personnel/employees (7 2 8) /structure/personnel/accountability (7 2 9) /structure/personnel/grievances (7 2 10) /structure/personnel/expertise (7 2 11) /structure/personnel/FinancialResponsibilities 500 This node was renumbered when the index structure was changed in a major reorganization, hence the "jump" to 7. It is defined as "structural aspects of the organization, i.e. the way it works". Appendix Page 505 Node8601: (8) /Financial Activities (8 1) /Financial Activities/accounting (8 11) /Financial Activities/accounting/audit (8 1 2) /Financial Activities/accountmg/benchmarking (8 1 3) /Financial Activities/accounting/accrual (8 1 4) /Financial Activities/accounting/reporting (8 1 5) /Financial Activities/accounting/govt requirements (8 1 6) /Financial Activities/accounting/Assistance (8 1 7) /Financial Activities/accounting/insurance (8 2) /Financial Activities/budgeting (8 2 1) /Financial Activities/budgeting/system (8 2 2) /Financial Activities/budgeting/instructions (8 2 2 1) /Financial Activities/budgeting/instructions/late (8 2 3) /Financial Activities/budgeting/setting (8 2 4) /Financial Activities/budgeting/approval (8 2 4 1) /Financial Activities/budgeting/approval/Social Capital Works (8 2 4 2) /Financial Activities/budgeting/approval/corps (8 2 4 3) /Financial Activities/budgeting/approval/divisional (8 2 4 4) /Financial Activities/budgeting/approval/social operating (8 2 4 5) /Financial Activities/budgeting/approval/community services (8 2 4 6) /Financial Activities/budgeting/approval/Rehabilitation (8 2 4 7) /Financial Activities/budgeting/approval/Capital budgets (8 2 4 8) /Financial Activities/budgeting/approval/THQ Departments (8 2 4 9) /Financial Activities/budgeting/approval/Other (8 2 5) /Financial Activities/budgeting/reports (8 2 6) /Financial Activities/budgeting/help (8 2 7) /Financial Activities/budgeting/budget board (8 2 7 1) /Financial Activities/budgeting/budget board/Attendance (8 3) /Financial Activities/fundraising (8 3 1) /FmancidActivities/fundraising/conscience (8 3 2) /Financial Activities/fundraising/professional (8 3 3) /Financial Activities/fundraising^usiness (8 3 4) /Financial Activities/fundraising/money (8 3 5) /Financial Activities/fundraising/government (8 3 6) /Financial Activities/fundraising/corps (8 3 7) /Financial Activities/fundraising/red shield (8 3 8) /Financial Activities/fundraising/wills,bequests (8 4) /Financial Activities/reporting (8 5) /Financial Activities/computerization 601 This node, Financial Activities, is defined as "routines associated withfinancial aspects of the organization, i.e. anything to do with money or the recording of it". Appendix Page 506 (8 6) /Financial Activities/consultancies (8 7) /Financial Activities/expenditure (8 8) /Financial Activities/accountability Node 9602: (9) /non financial activities (9 1) /nonfinancial activities/welfare (9 2) /non financial activities/social programmes (9 3) /non financial activities/corps programmes (9 4) /non financial activities/mobilise 2000 (9 5) /nonfinancial activities/rehabilitatio n (9 6) /nonfinancial activities/chaplaincy (9 7) /nonfinancial activities/emergency (9 8) /nonfinancial activities/administratio n (9 9) /non financial activities/record keeping Node 10603: (10) /contexts (101) /contexts/history (10 1 1) /contexts/history/founder (10 1 2) /contexts/history/general (10 2) /contexts/culture (10 2 1) /contexts/culture/Army (10 2 2) /contexts/culture/society (10 3) /contexts/access (10 3 1) /contexts/access/pre- (10 3 2) /contexts/access/during (10 3 2 1) /contexts/access/during/setup interviews (10 3 2 2) /contexts/access/during/conduct interviews (10 3 2 3) /contexts/access/during/transcribe interviews (10 3 2 4) /contexts/access/during/observations (10 3 2 5) /contexts/access/during/documents (10 3 2 6) /contexts/access/during/meetings (10 3 2 7) /contexts/access/during/theory (10 3 2 8) /contexts/access/during/continuing access (10 3 2 9) /contexts/access/during/data analysis (10 3 2 10) /contexts/access/during/my report (10 3 2 11) /contexts/access/during/thesis (10 3 3) /contexts/access/post- 602 This node, "Non financial activities" represents "routines that are not associated with financial aspects of the organization, i.e. programmes and ministries. 603 Contexts are defined as "situations from the past, or settings, or background idea(l)s. Appendix Page 507 Node ll604: (H) /persons (ill) /persons/positions (nil) /persons/positions/dc605 (1112) /persons/positions/financial secretaries606 (1113) /persons/positions/tc607 (1114) /persons/positions/SECBUSADMTN*08 (112) /persons/officer ranks (112 1) /persons/officer ranks/lieutenants (112 2) /persons/officer ranks/captains (112 3) /persons/officer ranks/majors (112 4) /persons/officer ranks/lieut.colonels (112 5) /persons/officer ranks/colonels (112 6) /persons/officer ranks/generals (113) /persons/employees (113 1) /persons/employees/Chief Accountant (113 2) /persons/employees/THQEmployees (113 3) /persons/employees/DHQEmployees (113 4) /persons/employees/OtherEmployees (113 5) /persons/employees/FinanceDeptEmployees (114) /persons/others (114 1) /persons/others/hji Node 12 609. (12) /focus (12 1) /focus/descriptive (12 2) /focus/issues, opinions (12 3) /focus/suggestions Node 13610: (13) /responses (13 1) /responses/acceptance 604 Persons" are "people who are talked about, i.e. a collection of information about either ranks in general, employee categories in general, or specific people. 605 Divisional Commander(s). 506 Financial secretaries, either at THQ or DHQ level. 607 Territorial Commander(s). 608 Secretary for Business Administration. 609 "Focus" means if something else has been said, this describes what its focus was, i.e. descriptive, giving an opinion, or a suggestion. 610 "Responses" include instances where people have responded to situations, procedures or occurrences, i.e. with concern, conflict, or acceptance. Appendix Page 508 (13 2) /responses/concern (13 3) /responses/conflict Appendix Page 509 Appendix 3.1. Interpretation of institutional pillars as the result of ontological beliefs. An interpretation of institutional theory adopted by Scott [1995], which was not included in the identification of institutional influences by DiMaggio and Powell [1983], and which is not relied on in this thesis, depended on the ontological beliefs of the researcher. Assumptions of regulative institutional theorists. According to Scott [1995, 50], theorists who stressed the existence of regulative institutional elements usually embraced a "social realist ontology", i.e. the environment was real, actors were real, and they acted in a rational manner to preserve their interests. In the context of regulative pressures, actors would act in a rational way which maintained the legitimacy of their organization, in order to secure the funding or acceptance necessary for their organization to survive. Success would be viewed as the survival of the organization, rather than the efficiency with which the organization operated. Under such a scenario, the adoption by an organization of regulative institutional requirements would often be dissociated from the actual operation of the organization, taking on an almost charade-like status. Institutional theorists who focused on regulative institutional interpretations would regard cultural carriers in terms of rules, conventions and laws. Governance and power systems would be the structures, and protocols, or standard procedures would be the routines by means of which institutions were adopted and maintained in the organization. Assumptions of cognitive institutional theorists. If this interpretation of institutional pressures were followed, with regulative institutional interpretations seen as the outworking of a social realist ontology, then cognitive theorists would be more likely to work from a social constructionist set of assumptions, and to take a broader view of "social choice and action" [Scott, 1995, 49]. Social actors, according to this view, would construct or invent social reality, that invention arising from "existing social arrangements and beliefs" [Scott, 1995, 50]. As to the manner in which actors would make choices, it would not be in a rational manner, as the regulative stance would assume. Rather "... cognitive theorists emphasize the extent to which choice is informed and constrained by the ways in which knowledge is constructed. The social construction of reality is seen as ongoing, continuously, at macro-, meso-, and micro-levels. At the broadest levels, science, the professions, and the mass media operate to create new categories, typifications, and causal connections. At the intermediate levels, individual operate within particular social arenas, such as educational, work, and family settings, which carry with them many codified cultural rules and social routines. And in everyday interaction, at the microlevel, individuals appropriate and employ these broader cultural frameworks but also improvise and invent new understandings and interpretations that Appendix Page 510 guide their daily activities. Individuals are not simply constrained but informed and empowered by these preexisting knowledge and rule systems" [Scott, 1995, 51]. Cognitive theorists, in terms of identifying cultural carriers of institutions, would focus on categories, distinctions, and typifications [Scott, 1995, 53], with an emphasis on structural isomorphism, and, in terms of routines, performance programmes. In terms of the organization and the way it is embedded in its environment, cognitive theorists could add the assertion that "the very concept of an organization as a special purpose, instrumental entity is itself a product of institutional processes - constitutive processes that define the capacities of collective actors" [Scott, 1995, 55], i.e. the distinctions between organizations and their environment would be blurred, such would be the extent of almost unconscious isomorphism that occurs. Assumptions of normative institutional theorists. Normative theorists, in ontological terms, would be somewhere between the social realist views of regulative theorists, and the social constructionist views of cognitive theorists, but closer to the social constructionist view [Scott, 1995, 49]. The rational, instrumental behaviour of actors, according to the regulative dimension, would be softened under the normative pillar, where "choice is seen to be grounded in a social context and to be oriented by a moral dimension that takes into account one's relations and obligations to others in the situation. A logic of appropriateness replaces, or sets limits on, instrumental behaviour" [Scott, 1995, 51]. This perception is summed up in the illustration below: Institutional pressures Institutional pressures Institutional pressures Ontological filter Figure 3.1.1. Scott's [1995] interpretation of institutional pressures. Appendix Page 511 The organization is embedded in society, and the nature of the institutional pressures which affect the organization are a matter of belief and the perception which follows that belief. The ellipse represents a filter of ontological beliefs through which various pressures are screened. It is at this point that they are interpreted as being regulative, normative or cognitive in nature, according to the ideas outlined above. The view of this thesis. This thesis follows the notion of institutional pressures explicated by DiMaggio and Powell [1983], where three elements (coercive, normative and mimetic) are in force concurrently. While their identification may be difficult, due to a blurring of boundaries and understanding in some cases611, they are nevertheless discernably different, their existence not a matter of ontological perception, but rather of recognition. Some pressures could therefore emanate from coercive sources, e.g. government reporting requirements to be fulfilled by organizations in receipt of government funds. Others could be mimetic in nature, e.g. the desire by a charitable organization to present the best face to the world, and therefore to publish a glossy annual report, similar to those prepared by the organizations which are leaders in the charity world. Still others could be normative in nature, e.g. the pressure felt as a result of the professionalization of the workforce in the delivery of social services. The identification of the three pressures may be difficult, but it is an issue of identification, not interpretation based on ontological beliefs. This understanding of institutional pressures is summed up in Figure 3.1.2 below: 6,1 For example, members of a charitable organization may be under the impression that the government demands certain standards forfinancial reporting , but these expectations may be the result of -best practice" adopted by other organizations in the charitable sector, rather than a direct government requirement. The source of the pressure may have been incorrectly identified. Appendix Page 512 Coercive pressures A Identified as Normative regulative, normative pressures and cognitive Mimetic ^ Organization pressures ' Identification filter Figure 3.1.2. The interpretation of institutional pressures used in this thesis (based on DiMaggio and Powell [1983]). The organization is embedded in society, and the nature of the institutional pressures which affect the organization are a matter of understanding and identification, not of the ontological beliefs of the researcher. The ellipse in this figure represents a filter of understanding, by means of which various institutional pressures are identified. All three pressures may impinge upon an organization concurrently, in fact it is highly likely that an organization will be subject to a great number of pressures from different sources at the same time. Appendix Page 513 Appendix 3.2. Institutional Antecedents and Predicted Strategic Responses [Source: Oliver, 1991,159 -160] Predictive Factor , %Acquiescenc e Compromise Avoidance Defiance Manipulation Cause (Why?) Legitimacy High LOW '-t;M Low Low Low Efficiency High Low Low Low '<-k'Lo w Constituents (By whom?) Multiplicity Low High High High High Dependence High High Moderate Low Low Content (what?) Consistency High Moderate Moderate Low Low Constraint Low Moderate High High High Control (how?) Coercion High Moderate Moderate Low Low Diffusion High High Moderate Low Low Context (where?) Uncertainty High High High Low Low Inter- High High Moderate Low Low connectedness Five possible responses were predicted: acquiescence, compromise, avoidance, defiance and manipulation. Oliver proposed that they would vary according to whether their institutional source was related to their cause, the constituents by which they were initiated, the nature of their requirements, how they were controlled, and the context in which they occurred. The higher the value placed by an organization on social or economicfitness (legitimac y and efficiency), for example, the more likely it would be to acquiesce to institutional norms. If it was perceived that such conformity was futile, or differed from the interests of the organization in any way, there would be more likelihood that the organization would adopt strategies to either compromise, avoid, defy or manipulate those institutional expectations. Acquiescence would be likely to be low if there were many constituents Appendix Page 514 institutional environment, since there would be no single group which demanded conformity, but rather, a diffusion of influence. In such an environment, the likelihood that an organization would exercise manipulative behaviour would be high. If the institutional norms which pressured an organization were united in their consistency. the pressure to acquiesce would be high, with little opportunity for manipulation. Conversely, if constraints were discretionary, opportunity for manipulation could be expected to be high. If institutional norms were exerted by means of legal coercion, there would be a high likelihood that organizations would acquiesce. If such coercion were less intense, it would be more likely that organizations would employ other options, apart from compliance. Within the environmental context, it would be expected that an organization would defy or manipulate institutional pressures when uncertainty and interconnectedness ("the density of interorganizational relations" [Oliver, 1991, 170]) were low. Appendix Page 515 Appendix 4.1. A glossary of Army terms. Adherent: A person who regards The Salvation Army as his/her spiritual home but has not made a commitment to soldiership. Advisory Board: A group of influential citizens in a town or district who, believing in the Army's programme of spiritual, moral and physical rehabilitation and amelioration, undertake to assist in promoting and supporting local Army projects. Articles of War: The statement of beliefs and promises which every intending soldier is required to sign before enrolment. Auxiliary-Captain: A mature Salvationist, beyond the age-limit for full officer-training, who holds a warrant of appointment as distinct from commissioned rank, and who may undertake corps or social work similar to that of a commissioned officer. Balance Sheet or Statements of Account: Published annually with respect to the Army's central funds, showing moneys received and expended during the year, and present financial position. A similar statement is issued annually for the social fund, and for each territorial fund. At every corps a statement of accounts is prepared annually and read at a public meeting. •Blood and Fire': The Army's motto; refers to the Blood of Jesus Christ and the Fire of the Holy Spirit. Cadet: A Salvationist in training for officership. Candidate: A soldier who offers to devote his or her life to officership. Cartridge: The regular contribution of Salvationists toward corps expenses. Citadel: A hall used for worship and as a base for corps operations. Colours: The tricolour flag of the Army. Its colours symbolize: the Blood Appendix Page 516 (red), the Fire of the Holy Spirit (yellow) and purity (blue). Command: A smaller type of territory, directed by an officer commanding. Commission: A document conferring authority upon an officer, or upon an unpaid local officer, e.g. secretary, treasurer, band master, etc. Congress: Central gatherings held annually and attended by most officers and many soldiers of a territory, region or division. Conversion: (See Salvation). Corps: A Salvation Army centre established for the propagation of the gospel; generally with its central meeting-place and under the leadership of one or more officers. Division: A number of corps grouped together, under the direction of a divisional commander. Envoy: A local officer whose duty is to visit corps, and particularly societies and outposts, for the purpose of conducting meetings. An Envoy may be appointed in charge of any such centre. General, The: An officer elected to the supreme command of the Army throughout the world. All appointments are made, and all regulations issued, under his authority (see High Council). Grace-before-meat: A scheme for raising funds for the Social Services by means of sums placed in a box, in private home, office or shop. High Council: Composed of the Chief of the Staff, all active Commissioner, and Colonels of two years' standing who hold territorial commands. The High Council elects the General in accordance with The Salvation Army Act 1980'. International Headquarters (IHQ): The officers in which the business connected with the command of the world-wide Army is transacted. Appendix Page 517 Officer: A Salvationist who has left ordinary employment and, having been trained and commissioned, is (until retirement) engaged in full-time Salvation Army service. Outpost: A locality in which Army work is carried on from time to time, and which it is hoped will eventually develop into a society or corps. Ranks of Officers: Lieutenant, Captain, Major, Lieutenant-Colonel, Colonel, Commissioner. Red Shield Appeal: An annual financial appeal to the general public in Australia and Canada. Salvation: The work of grace which God accomplishes in a repentant person whose trust is in Christ as Saviour, forgiving sin, giving meaning and new direction to life and strength to live as He desires. The deeper experience of this grace, sometimes known as Sanctification, is the outcome of wholehearted commitment to God, by His help living a Christ-like life, in harmony with His love and holiness. Self-Denial Appeal: An annual effort to raise funds for the Army's world-wide operations. Soldier: A converted person at least 14 years of age who has, with the approval of the census board, been sworn-in as a member of The Salvation Army after signing Articles of War. Senior soldiers are adults; junior soldiers are young people. Territory: A country, part of a country or several countries combined, in which Salvation Army work is organized under a territorial commander [The Salvation Army Year Book 1981, 1981, 32 - 34]. Other terms used in the early days of The Salvation Army included: Barracks: a place where Army meetings were held. Fire a volley: to cry hallelujah. Fix bayonets: to raise a hand in public declaration. Source: [The Salvation Army Year Book 1998, 1998]. Appendix Page 518 Appendix 4.2. The Salvation Army. The Position of the Forces, October, 1890. A summary of information included in Booth's book "In Darkest England and the Way Out" [Booth, 1890, Appendix 1J. Property now vested in the Army Country £ France and Switzerland 377,500 Sweden 10,000 Norway 13,598 U.S. 11,676 Canada 6,601 Australia 98,728 New Zealand 86,251 India 14,798 Holland 5,537 Denmark 2,340 South Africa 10,401 Total 644,618 Value of trade effects, stock, machinery and goods on hand, £130,000 additional. Social Work of the Army. Type of Social Centre Number Rescue homes (fallen women) 33 Slum posts 33 Prison gate brigades 10 Food depots 4 Shelters for the destitute 5 Inebriates/ home 1 Factory for the "out of work" 1 Labour bureaux 2 Officers and others managing those branches 384 Appendix Page 519 Salvation and Social Reform Literature. Publication At home Abroad Circulation Weekly newspapers 3 24 31,000,000 Monthly Magazines 3 12 2,400,000 Total 6 36 33,400,000 Officers or persons wholly engaged in the Work. Country Corps or Outposts Officers or persons Societies wholly engaged in the Work United Kingdom 1375 - 4506 France and Switzerland 106 72 352 Sweden 103 41 328 United States 363 57 1066 Canada 317 78 1021 Australia 270 465 903 New Zealand 65 99 186 India and Ceylon 80 51 419 Holland 40 8 131 Denmark 33 - 87 Norway 45 7 132 Germany 16 6 75 Belgium 4 - 21 Finland 3 - 12 Argentine Republic 2 - 15 South Africa 52 12 162 Grand Total 2874 896 9416 Sum raised annually from all sources by the Army: £750,000. Appendix Page 520 Audited Balance Sheets. "Balance Sheets, duly audited by chartered accountants, are issued annually in connection with the International Headquarters. See the Annual Report of 1889 - "Apostolic Warfare". Balance Sheets are also produced quarterly at every Corps in the world, audited and signed by the Local Officers. Divisional Balance Sheets issued monthly and audited by a Special Department at Headquarters. Duly and independently audited Balance Sheets are also issued annually from every Territorial Headquarters." Appendix Page 521 Appendix 4.3. The Salvation Army Balance Sheet for the year ending 30th September 1879. Dr RECEIPTS £ s. d. EXPENDITURE Cr £ s. d. To Total Subscriptions and Donations for - " General Work, including Advance (£500) obtained By balance overpaid September 30th. 1878 last year for Completion of New Halls 4,548 13 0 479 19 10 " Sick and Wounded (D.S.) 375 12 4 Advances to 108 Stations (see Schedule below) " Millwall New Hall 70 19 1 2.020 2 "Training of Evangelists 1012 0 " Relief Given to Sick and Wounded, "ThanksgivingFund 12 0 0 together with Cost of Special Appeals 422 6 6 " Amounts received from and on Account of certain " Cost of Monthly Magazine, Books, Tracts, &c for Stations (see Schedule below) 56115 9 nine months together with Grants of " Amounts received for Books, Magazines, &c, sold Books 1.623 17 by Book Room during 9 months 1,419 8 8 " Cost of Plant, Machinery, Stock, &c, in Printing " Balance overpaid September 30th, 1879 Department, together with Payments for 104 16 1 necessary Alterations of Premises 524 17 10 " Training of Evangelists, together with Expenses of NOTE.- That the total amount received from Evangelists on Trial 353 14 9 Outside sources towards our General Expenses is " Expenditure at Councils of War. Cost of Special only £4,723 10s. 5d. Evangelistic Effort, and Special Charges 166 18 1 That out of this Fund has been paid towards " Reconnaissance ("Searching out the Land") and relief of the Sick beyond the Special Fund for Northern District General Expenses 322 1110 their assistance, £46 14s. 2d. " Office Expenses, Salaries of Clerks. Stationery, For establishment of our Printing Department, Repairs, Furniture, Auditors' Fees, &c. 444 1 6 £324 17s. lOd. " Expenditure on Millwall New Hall 125 19 5 Towards cost offitting u p Millwall Hall, in " Legal Charges, with Salaries of Secretaries excess of the money specially contributed for 286 2 7 that object, £35 0s. 4d. " Travelling Expenses 162 16 11 Thus leaving available for General Spiritual " Postage and Telegrams 135 2 11 Purposes, only £4,096 18s. Id. " Printing and Postage of Annual Balance That our payments have exceeded our receipts by Sheet, Cost of Appeals, &c. 126 4 11 £104, and that we owe a deal more since then. Audited and found correct JOSIAH BEDDOW & SON, Public Accountants, 2, Gresham Buildings, Basinghall St., E.C £7,194 6 7 £7,194 6 7 NOTE.- Should these statements leave any Officer or man in uncertainty or doubt, as to any matter, write at once to Headquarters, as we wish every one connected with the Army thoroughly to understand what funds it has, and how they are spent. Appendix Page 522 The publication of this Balance Sheet was preceded with a reference to the "multitudes of false reports which have been industriously circulated in all directions" regarding Army finances. It also included a list of "Amounts Received and Paid by Headquarters on Account of 108 of the Stations" (corps). Consett Corps was praised for contributing £67 to Headquarters: "If every corps were equally well-to-do and generous, in 1880 we could easily spring from 130 to 1,300 (corps)" [The War Cry, 1880, 3] Appendix Page 523 Appendix 4.4. Financial accountability of The Salvation Army as portrayed in The Salvation Army Year Books up to 1935. Year Book Reference Significant comments Reliance Bank [1913, 52]. 1. The Salvation Army issues an annual audited Balance Sheet, in spite of the "thousands of people in all walks of life" who accuse The Salvation Army of not accounting for the money they receive. Atherley-Jones [1913]. 1. The Salvation Army has had to endure "an ordeal of misrepresentation, contempt, ridicule and calumny" about its financial affairs. 2. General Booth receives no salary from The Salvation Army, but relies on "a modest private income". 3. "Every penny received for the purposes of the Organization is strictly accounted for, a Balance Sheet is annually published, and all the receipts and expenditure are submitted to the audit of a firm of accountants of high repute and respectability". Glossary of Terms [1915]. 1. Balance Sheet: "A statement of Accounts is published as to the income and expenditure of International Headquarters. A copy of this Statement, with a List of the Subscriptions made during the year, is forwarded to every subscriber. A Balance Sheet is also included, which shows the value of all The Army's property in the United Kingom, and the amount of its liabilities or debts. A similar statement of Income and Expenditure is issued annually by every Territory and by every branch of our Social operations throughout the whole world". The Government of the 1. Social funds are distinct from general funds (in Army [1916]. harmony with the Trust Deed). 2. The General, while having financial authority, has nothing to do with the everyday workings of the Army finances. Appendix Page 524 3. The finances of the Army can be divided into International Headquarters Finance, Territorial Finance, Divisional Finance and Corps Finance. 4. Annual Balance Sheets are published for all Army funds. 5. All Army accounts are "subject to systematic audit by the International Headquarteres Audit Department, and by independent Public Auditors". This guarantees "both the accuracy and the honesty of the financial administration of The Army". The Finances of The 1. General Booth in theory has "absolute control over the Salvation Army [1917]. finances of the Army", but in practice has "nothing ; whatever to do with it", being surrounded with an "ironclad system, devised and controlled by some of the ablest accountants in London". 2. The accounts of The Salvation Army have only been attacked by the "most ignorant". Investigation is welcomed. 3. Army finances are divided into International finances, Territorial Finance, Divisional Finance and Corps Finance. 4. Social funds are kept separate from General Funds. 5. Each department and command "estimates its income and expenditure, and works to an annual Budget". 6. Annual Balance Sheets are "subject to systematic audit" which "guarantees both the accuracy and honesty of the financial administration of The Army". Glossary of Our Terms. 1. This Glossary of Terms included many references to [1918]. financial aspects of the Army's operations, including definitions of: Accountant; Audit; Auditor-General; Balance Sheet; Bank; Chancellor of the Exchequer; Expenditure Board; Funds; and Property. This was the most extensive Glossary of Terms in any Salvation Army Year Book, and included more financial terminology than any since. Appendix Page 525 Some Aspects of Salvation 1. Originally Army financial records consisted of a simple Army Finance [1919]. cash book and ledger, but now there are "scores of much ; larger books required every year in many Territories". 2.Contributors from the past can know that sums invested in property for the "furtherance of the Work" have been wisely dealt with and have grown, and also liabilities have decreased. 3. Reserve funds have been set aside and "invested against the maturity of certain leases, repayment of loans, depreciation of stocks, superannuation of Officers, and other specific purposes as desired by legators and others", i.e. capital is being augmented. 4. The accumulation of property has led to the attraction of money, by means of loans and by increased contributions. 5. There are no proprietary rights, since selfishness does not come into Army finances. Any surplus is invested in the Work. 6. People who leave legacies can be assured that their funds will be fruitfully employed. 7. Finances throughout the Army have been carefully and responsibly administered, not only in England, but world-wide. Misconceptions about 1. Perceptions that the Army is "a rich and prosperous Salvation Army funds body" are false, because while it holds considerable [1924]. property, its cash resources are "always small". M30S, 2. The Army has no "endowments or secret reserves", but depends almost entirely on donations. 3. While amounts required for the Army's work may seem large, they are small in comparison with what could be spent by an organization other than the Army. The Finances of The 1. Money is not an evil thing in itself, but is "a passive Army. How the "big thing which can be utilized for the help or hurt of business" of salvation is mankind". run [1927]. Appendix Page 526 2. Financial experts and authorities have praised the care and thoroughness of Army finances. Former criticism of Army finances is "grotesquely ill-formed". 3. The Army financial system is designed to demonstrate "strict economy", "exceptional control over expenditure" and "detailed accounting and audit". 4. The Army's budget is directly related to its "strenuous quest for souls". 5. Expenditure Boards scrutinize all items of expenditure, and thus a financial conscience is created in the Staff. 6. The skilled professional finance work of the Army is coveted by corporations. 7. The Army is a first-class investment, and needs "a river of financial replenishment". The purpose of the Army must not be forgotten, and it is for this purpose that money is required. The Finances of The Army 1. The Founder is trustee of all The Army's funds and [1928]. property. 2. A system has been devised within the Army whereby every expenditure is subject to the "most careful and strict audit". In Britain, a well known firm of accountants are the auditors. 3. Accurate record-keeping (ledger and balance sheet) helps the Army achieve its goal. 4. Expenditure boards scrutinize all expenditure. 5. The Army's accounting system requires skilled, professional work. 6. While the Army owns substantial property holdings, much of it is mortgaged, and the Army requires a constant flow of income. 7. There is a distinct and direct relationship between money and the Army's primary mission, of "saving men and women". Appendix Page 527 Salvation Army Finance 1. The importance of keeping "reliable accounts" was L19301- recognized by the Founder early in the Army's life. 2. Moneys received are recorded accurately, and receipts are issued. The system relies on "competent, trustworthy accountants" and a "complete and highly-approved system". 3. Army accounts are audited regularly, and the accounts of International Headquarters are audited by a firm of chartered accountants. 4. An annual Balance Sheet and statements of account are issued. Statements are also issued for the Social work, and for each Territory. 5. The finance of each part of the Army is regulated by an annual budget. Monthly, actuals are compared with the estimated figures, in a "modern and businesslike method". 6. Finance Councils and Expenditure Boards ensure economy, guard against unnecessary outlay, and ensure that Budget provisions are adhered to. 7. All the funds raised, and the accounting methods employed, are for the purpose of fulfilling the Army's mission. Is the Army a Wealthy 1. Present estimations of the value of corps halls and Corporation [1931]? social institutions in the UK are about £3 million. World wide, the value of such "plant" is about £20 million. Mortgages are held against these items. 2. This equipment is necessary for the maintenance and extension of the evangelistic work of the Army. 3. The more property that is acquired, the greater the ongoingfinancial burde n on the Army. 4. The financial system adopted by the Army is "both businesslike and economical". Its accounts are reliable, subject to regular examination, and are audited "by a firm of chartered accountants, Messrs. Knox, Cropper & Co." Appendix Page 528 5. The various funds of the Army are: the central fund (THQ based), the Darkest England fund (distinct from the Army's other funds), various territorial funds, and various divisional funds. 6. An annual budget is the means by which each section of the Army's work is regulated. 7. Expenditure is subject to the scrutiny of a Finance Council or Expenditure Board, whose business is "to ensure economy, guard against unnecessary outlay, and see that the Budget provisions are adhered to". Business Principles Allied 1. The Founder acquired The Salvation Army Assurance to Religious Practice Society Ltd. because of its "wonderful possibilities". [1937]. 2. Its agents perform a myriad of helpful tasks as they visit people. Over 2,000 officers and agents visit an estimated 350,000 people each week. 3. Running such a business does not constitute a departure from the Sermon on the Mount. 4. The Army has been misunderstood in its handling of the Assurance business. 5. Further information can be obtained on request. The Salvation Army 1. The society's legal charter and history are outlined. Assurance Society, Limited [1935]. 2. Funds are managed in accordance with the provisions of the Assurance Companies Act. 3. A valuation of the business is made every year by a firm of valuers, who are members of the Institute of Actuaries. 4. Funds have increased steadily from 1894 (£14,220) to 1933 (£5,372,607). 5. A list of directors (all Army officers), staff of office departments (all Army officers), and divisions and managers is included. Appendix Page 529 Appendix 4.5. International Salvation Army statistics. Data 1890 618 1904 1918 1924 1949 1962 1974 1985 1998 612 613 614 615 616 617 619 620 Countries 18 49 63 79 94 86 81 86 103 Corps and 3700 7210 9859 13577 17329 16623 16304 14611 15989 outposts Officers 9416 14291 17374 21064 26511 19794 17196 16772 17470 (active) Employees n/a n/a 6291 7197 14122 29064 36516 59956 76767 621 622 Salvationists n/a n/a n/a n/a n/a o ™ n/a n/a 88203 z m. A 623 4 Social 89 644 1231 1406 1681 2047 n/a n/a n/a institutions 612 Source: [Booth, 1890]. Officers were "wholly engaged in the Work" [Booth, 1890, Appendix iii]. 613 Officers (retired and active) and cadets: 14,291 [Wiggins 1964, 256]. 614 Source: The Salvation Army Year Book 1918 [1918]. No mention is made of retired officers. 615 Source: The Salvation Army Year Book 1924 [1924]. 516 Source: The Salvation Army Year Book 1949 [1949]. 517Source: The Salvation Army Year Book 1962 [1961]. 618 Source: The Salvation Army Year Book 1974 [1974]. 519 As at 1 January 1985 [The Salvation Army Year Book 1986, 1985, 53 - 54]. 620 Source: The Salvation Army Year Book 1998 [1997]. 621 The following table (based on thefigures above ) shows the dramatic growth of employees as a percentage of active officers: Category 1918 1924 1949 1962 1985 1998 Active Officers 17374 21064 26511 19794 16772 17470 Employees 6291 7197 14122 29064 59956 76767 % 36% 34% 53% 146.8% 357.5% 439% 622 In Collier [1965, 285]. 623 This refers to "Senior Soldiers". The number of members of The Salvation Army was not recorded in annual Year Books until 1995. Numbers recorded do not match the 2 million claimed by Wiggins [1964. 285], but over the last four years, there has been a slight increase in worldwide membership: Year Senior soldiers Junior soldiers Adherents Total 1995 797910 348885 162375 1309170 1996 807287 355527 779027 1341841 1997 858694 380683 157262 1396639 1998 882034 378244 159880 1420158 Appendix Page 530 Appendix 4.6. How can I help the work of The Salvation Army? 1* By giving a donation to any branch of the Social Work that may appeal to me. 2. By making an Endowment to assist a Home, or a Bed in a Home, or a section of any Institution. 3. By giving a substantial Donation to clear the Building Debt of any Home I may be interested in. 4. By pledging a certain part or the whole of the income from certain land, or stock, or houses, etc. 5. By collecting from my friends and acquaintances donations for the Work. 6. By depositing money in The Army's Property Fund to enable The Army to build Institutions for the Social Work. (The Army allows 5 per cent. Interest on such deposits.) [Source: Bond, 1919,188] Appendix Page 531 Appendix 4.7. Transcript of a letter from the Government of Victoria, 1889. Government of Victoria, Chief Secretary's Office, Melbourne. July 4\ 1889. Superintendent Salvation Army Rescue Work, Sir, - In compliance with your request for a letter of introduction which may be of use to you in England, I have much pleasure in stating from reports furnished by Officers of my Department, I am convinced that the work you have been engaged on during the past six years has been of material advantage to the community. You have rescued from crime some who, but for the counsel and assistance rendered them, might have been a permanent tax upon the State, and you have restrained from further criminal courses others who had already suffered legal punishment for their misdeeds. It has given me pleasure to obtain from the Executive Council authority for you to apprehend children found in Brothels, and to take charge of such children after formal committal. Of the great value of this branch of your work there can be no question. It is evident that the attendance of yourself and your Officers at the police-courts and lock-ups has been attended with beneficial results, and your invitation to our largest jails has been highly approved by the head of the Department. Generally speaking, I may say that your policy and procedure have been commended by the Chief Officers of the Government of this Colony, who have observed your work. I have the honour to be, Sir, Your obedient Servant, (Signed) ALFRED DEAKIN. [Source: Booth, 1890, 275 - 276] Appendix Page Appendix 4.8. Remember the Army in your will. Do you intend to make a will? If so, while considering your friends and relations, will you remember The Salvation Army? We have received legacies in days gone by, and have deeply appreciated the interest which promptedfriends to remember us; but we are quite sure that there are others who only need to know the great and growing needs of The Army, and they will do likewise. All kinds of property, without exception, may be willed to The Salvation Army. A legacy of money or other personal property may be made in the following terms:- "I bequeath to the Officer for the time being in command of The Salvation Army in the Commonwealth of Australia, the sum of £ , to be used and applied by him at his discretion for the general purposes of The Salvation Army in the said Commonwealth." I bequeath to General Bramwell William Booth, or other, The General for the time being of The Salvation Army, the sum of £ , to be used and applied by him at his discretion for the general purposes of the work of The Salvation Army in foreign lands, the receipt of the said William Bramwell Booth or other, The General for the time being aforesaid to be a sufficient discharge to my trustees for the said sum." Any enquiries regarding the above may be addressed to Commissioner Hay, at 69 Bourke Street, Melbourne. [Source: Bond, 1919, 188] Appendix Page 533 Appendix 5.1. The Salvation Army's social and community services. [Source: Lift the Spirit, 1997] Category of Service ^ Programmes offered Family day care, child care and after-hours care Family and children's After-school and holiday child care services Camps for economically disadvantaged children Short-term residential care for children Camps for single mothers Refuges for women and children Crisis and supported Crisis accommodation for families accommodation Hostels for homeless men, women and youth Supported accommodation Referral programme for street people Alcohol and drug detoxification Rehabilitation services Alcohol and drug rehabilitation programmes Work therapy and industrial and rural centres Youth care accommodation centres Youth services Hostels for teenage boys and girls Youth outreach programmes for street kids Youth employment programmes Student accommodation Health care Emergency family assistance with food, clothing, Community services firrniture and advice Professional individual and family counselling Red Shield family stores Visits to hospitals, nursing homes and the Visitation services housebound • 24-hour Salvo Care Line telephone counselling Counselling # Professional individual and family counselling • Moneycarefinancial counsellin g service Appendix Page 534 • Grief and suicide support groups ~. . , . J' • Court and prison chaplains Court and prison support • Support for those on court bonds or community service orders • Farm for working of community service orders Employment traimng * EmPl°ymeiA 2000> Joblink ^ Mature Workers —^ j ^g, programmes • Furniture factory for young people who have never worked Tracing service for missing family members Family tracing service • Support and practical assistance at disaster scenes Emergency and disaster welfare Chaplaincy service • Chaplains for police, fire brigades and defence services _, . , • Language classes Ethnic and migrant _. . . . , ,, , ., • Financial, material and legal aid services • Counselling and personal support Aged care • Day care and self contained units, hostels and nursing homes Services for the disabled • Social education and training for the intellectually disabled Appendix Page 535 Appendix 5.2. Share Donations Australia Inc. scheme624 Share Donations Australia Inc. invites shareholders of small shareholdings to donate their shares to the organization. The funds go to four charities, to be nominated by the donor: Australian Cancer Society, Heart Foundation, Society of St. Vincent De Paul, and The Salvation Army. The scheme is sponsored by Chartpac Stockbrokers, who have donated their services for the pooling of share parcels. The letter includes a brief description of the four charities and the work in which they are involved. It says this about The Salvation Army: "Changing the World One Life at a Time.The Salvation Army's purpose is to advance the cause of Jesus Christ in the world on two levels - Spiritual and Social. Salvationists share the beliefs of most mainline Christian Churches. The "corps" is the local "church" unit that embodies the total Salvationist mission of joyful worship, fellowship and community service. There are 1,350 officers and 34,000 lay people who attend 500 Corps (Church) worship meetings throughout Australia. Such meetings can be attended by anyone. It seeks to advance the future of persons by building stronger character, encouraging Christian values, training in the Christian lifestyle, promoting emotional health and stimulating creative abilities. It addresses issues of public concern and seeks to awaken the social and moral conscience of the general public by taking and furthering Biblically based positions on social issues that profoundly affect the quality of human life like abortion, alcohol, gambling, pornography and euthanasia." 624 Source: [Share Donations Inc. 1998]. The patron of the scheme is Mr Bernie Fraser, of the Reserve Bank of Australia. Appendix Page 536 Appendix 6.1. The Salvation Army's image: charity or church? [Source: Interviews, QSR NUD*IST4 database625] Employees. Garry Thurlow, an employee: "To me, the social works are the works that the Army is noticed for. Before I joined, I wasn't aware the Army was a church". Harry Johnstone, an employee: "... there's a very strong perception that we're a social organization ... we are a victim of our own publicity. We've publicized the welfare side of it so much, people think that's all we are". Mavis Lyons, an employee: "... definitely, because of the Red Shield Appeal and the advertising, we're known more for what we do socially". Susan Barnes, an employee: "... one of my counterparts ... she spoke at a women's church group, and they didn't realize that we are a church. We've got to sell that better, I think". Officers. Lieutenant Kerry Connors: "they don't realize we're church backed". Lieutenant Samuel Cohen: "... blokes who come in here don't perceive me as being a minister of religion. We've got to work better in that area, that we are a church". Lieutenant Rose Dillon: "And at Christmas time, we put our calendars ... and it had a Salvationist on thefront, jus t some person, but there was nothing on that little calendar ... not even we are a church, nothing. And people really got their backs up about that". All names given are pseudonyms. Appendix Page 537 Captain Harry Carruthers: "... the Public Relations Department is not a public relations department, it's a fund raising department, and very little time and effort and money is actually invested in lifting the image of the Army, apart from the social side of things, before the people". Captain Allan Kaldor: "if only we could have the same emphasis on our spiritual work, sell it in the same way". Captain Anna Childs reported comments from people in higher positions than she, that "it doesn't pay for us to advertise the fact that we're a church ... I think that's unethical, but they capitalize on it". Captain Lynette Jones: "I'm very much aware of the fact that a lot of people don't understand that the Salvation Army is primarily a church, a Christian denomination". Captain Marcella Ryan: "... the Army as a whole, in this country, is perceived as a welfare organization in general. I think that's a challenge, and they're trying to address it in some of the advertising...". Captain Walfy Kensington: "... a lot of people out there are helped by the Salvation Army every day, therefore when you ask thern, what comes to mind when you hear the words Salvation Army, they will say, helping the needy. I wouldn't want that to be the first description of the Salvation Army. We are a worshipping church, you know". Major Matthew Robertson: "I think it's because of the way we present ourselves. We present ourselves as a social organization when we do our fundraising". Major Phillip Rex: "... they just think you do good things because you're good people, without seeing the motivation behind what you're doing". Major Rod Brough: "Many people don't know that we are a church. We do try to counteract that". Major Ralph Jeavons: "I used to worry about that. I don't worry about that quite as much now, because I think that in many Australians' minds, church has very negative connotations". Major Sharon Girling: "... I think it's fairly disturbing when even our employees aren't Appendix Page 538 always aware of who or what the Salvation Army is". Major Taya Davies: "... I think the majority of people think it's a charity, although I think in recent years, they've been educated to the fact that it's a church". Major Tom Denton: "When we put on all this guff, that doesn't talk about the fact that we're a church, I think that we're not honouring, we're not honouring at all, ourselves or anything". Major Hendrik Bo wen, senior officer: "... I agree with you, the advertising has all been focused on the social area, and that's principally been because of the Red Shield Appeal thrust". Gerard Jones, a senior officer: "... (it) is nevertheless true that people know the Army best as a charitable social organization than they do as a church". Colonel Anne McCourt: "A lot of people think we're just a social organization". Colonel Peter Buckley, senior officer: "We may well be a victim of our own publicity. We need to publicize, market our social side in order to gain funds, and therefore I think that has the effect, whereas there is no public profile for the church, or corps, side". Colonel Simon Laughlin: "... I guess our marketing people sing that song so loud and clear ... there's been a drive for some time now, to push the church side of it". Appendix Page 539 Appendix 6.2. Australian Census figures for religious affiliation6261976 -1991. Nominal Religious 1976627 1981628 1991629 Growth % Affiliation %of %of %of 1981 - population population population ] 99] 630 Christian: Anglican (Church of 27.69 26.1 23.8 5.5 England) Baptist 1.29 1.3 1.7 47.1 Catholic631 25.7 26.0 27.3 21.7 Churches of Christ .64 .6 .5 -12.5 Jehovahs Witness .31 .4 .4 44.4 Lutheran 1.41 1.4 1.5 25.6 Orthodox 2.75 2.9 2.8 12.7 Pentecostal .28 .5 .9 108.8 Presbyterian 6.64 4.4 4.3 14.8 Salvation Army .47 .5 .4 1.1 Uniting632 7.26 8.2 8.2 15.3 Other Christian633 4.13 4.1 2.0 -43.3 634 TOTAL CHRISTIAN 78.57 76.4 74.2 L 12.0 Non-Christian: Islam .33 .5 .9 92.1 Buddhism635 n/a .2 .8 298.6 626 626 £ensus data on religious affiliation has been criticized as being of low reliability, because of the inclusion of a "not stated" category. According to the original Census and Statistics Act (1905), "no person shall be liable to any penalty for omitting or refusing to state the religious denomination or sect to which he belongs or adheres". Another criticism is that nominal religion does not measure activity in that denomination [Hopkins, 1983, 52]. 627 Source: Australian Bureau of Statistics [1979, 3]. Slight adjustments have been made for different categories. 628 Source: Australia in Profile [1993, 26]. 629 Source: Australia in Profile [1993,26]. 630 Source: Australia in Profile [1993, 26]. 631 The classification in the 1976 census divided Roman Catholic (1,520,011 - 11.22%) from Catholic (1,962,836 - 14.49%) [Australian Bureau of Statistics, 1979, 3]. 632 In the 1976 census, the Uniting Church classification did not exist. An approximation has been made by including Methodist in this category for 1976. 633 Based on 1976 figures, this category includes: Brethren, Congregational, Seventh Day Adventist, Undefined Protestant, and Other Christian. 634 This does not add up exactly, according to Australia in Profile [1993, 26]. 635 Buddhism was not specified separately in the 1976 census [Australian Bureau of Statistics, 1979, 3]. Appendix Page 540 Judaism .39 .4 .4 19.5 Other .23 .3 .5 254.4 TOTAL NON .95 1.4 2.6 CHRISTIAN Indefinite .38 .5 .3 -32.2 No Religion 8.34 10.8 12.9 38.0 Not Stated 11.76 10.9 10.2 7.3 TOTAL NO 20.48 22.2 23.4 RELIGION OR NOT STATED Appendix Page 541 Appendix 6.3. Business and Marketing Plan for the provision of outside school hours care. [Source: Commonwealth Department of Health and Family Services, 1997] The Business and Marketing Plan must as a minimum address and report on the following specific areas: i.Budgeting, fee setting and monitoring - develop budget options - review/formalise booking arrangements ... -income/expenditure review -monitoring of allowable absences -review the need for discounts for siblings in care -break even fee required based on number of Childcare Assistance clients -expected client profile and eligibility for improved Childcare Assistance -fee setting practices... -accounting procedures (cash flows; accrual accounting) -regular payment of group tax -use of Sales Tax Exemption -regular payment of accounts eg. insurance, telephone -prepare a budget; ii.Debt management ... iii.Staffing and salary ... iv.Utilisation ... v.Service promotion and marketing ... vi.Capital improvements... Appendix Page 542 Appendix 6.4. Characteristics of not-for-profit636 entities. [Source: AASB1010,1998, Accounting for the Revaluation of Non-current Assets] Not-for-profit entities include all entities whose objectives do not include the generation of profit, including a surplus, for distribution to members [AASB 1010,1998,12.1.2] Not-for-profit entities are frequently characterised by the absence of defined ownership interests that can be sold, transferred and/or redeemed, and are frequently formed for social, educational, religious, health or philanthropic purposes. Private sector entities which would be classified as not-for-profit entities would include charitable organisations and those clubs and societies whose overallfinancial objective s do not encompass the generation of profit. Private sector not-for-profit entities do not include clubs, credit unions, co operatives, member service organisations and other organisations which generate profit for the benefit of members. An entity which ostensibly operates on a not-for-profit basis but which is part of an economic entity whose objective is to generate profit would in substance be an entity concerned with profit seeking and, accordingly, would not meet the definition of a not-for-profit entity [AASB 1010, 1998, 12.1.3]. Not-for-profit entities may sell particular goods and services to consumers at charges greater than the full cost of those goods and services, and may fund future acquisitions of plant and equipment from surpluses generated by such sales. However, the continuing long-term operation of not-for-profit entities largely depends on grants, parliamentary appropriations, membership subscriptions and/or gifts, donations and bequests, rather than on the sale of goods and services at a profit [AASB 1010, 1998, 12.1.4]. 636 Throughout this thesis, the term used has been "nonprofit" entities, but "not-for-profit" is adopted because that is the way such entites are referred to in the Australian Accounting Standards. Appendix Page 543 Appendix 7.1. Accounting Policies for The Salvation Army year ended 30th June 1994 (Australia Eastern and Papua New Guinea Territory) [Source: The Salvation Army Financial Statements 1994, Note 1, Accounting Policies 3] 1.Accounting Policies These special purpose financial statements have been prepared for distribution to The Salvation Army and have been prepared on the basis of historical costs and therefore do not reflect changes in the purchasing power of money or current valuations of non monetary assets, unless otherwise stated. The financial statements have been drawn up in accordance with The Salvation Army accounting policies which are consistent with previous years and are described below. The requirements of Australian Accounting Standards promulgated by the accounting profession do not have mandatory applicability to The Salvation Army in relation to the year ended 30 June 1994 because The Salvation Army is not a "reporting entity" as defined therein. The Salvation Army has, however, prepared the financial statements in accordance with all Australian Accounting Standards with the following exceptions:- (I) Profit and Loss Account (AAS 1): Legacies and certain income and expenditure are taken directly to reserves and are not recorded in the income and expenditure statement. Reserves are established for maintenance of properties, and expenditure is recorded against these reserves as incurred; (ii) Depreciation (AAS 4): buildings and improvements as set out below are not depreciated; (iii) Disclosure of Operating Revenue (AAS 15): An operating revenue note has not been prepared; (iv) Financial Reporting by Segments (AAS 16): A note disclosing segment information has not been prepared; (v) Related Party Disclosures (AAS 22): there is no disclosure of transactions with related parties; (vi) Consolidated Financial Reports (AAS 24): A consolidated financial report is not prepared; Appendix Page 544 (vii) Statement of Cash Flows (AAS 28): a statement of cash flows has not been prepared. a) PROPERTIES, FURNITURE, PLANT AND MOTOR VEHICLES Freehold properties purchased prior to 30 September 1904, are stated at valuation at that date plus any additions at cost. Freehold properties purchased after 30 September 1904 are stated at cost of purchase plus any additions at cost. Freehold properties gifted to The Savlation Army or transferred between Funds are stated at independent valuations at the date of the gift or transfer. Leasehold properties and improvements are stated at cost. The acquisition of properties will result in a corresponding credit to the Property Contributions Fund. The accounting records do not distinguish between the values for land, buildings and improvements, and depreciation has not been provided on buildings and improvements. Upon disposal of freehold properties for which a contribution or grant has been received, the amount is transferred from the Property Contributions Fund and included with sales proceeds in determining profit/loss on the sale of the property. The profit/loss on sale of the property is taken directly to a Capital Property Reserve and is not brought to account in the Income and Expenditure Statement. Costs of additions of motor vehicles, furniture, fixutres and equipment for Territorial Headquarters and Officers Staff Quarters are capitalised and depreciation is applied using the straight line method. Costs of additions of motor vehicles, furnishings and equipment for Social Centres are expended in the year of purchase. Some motor vehicles used by The Salvation Army are leased under a fully maintained master lease arrangement which is regarded as being of an operating nature. b) RED SHIELD APPEAL The 1993 Christmas Appeal is incorporated into the 1994 Red Shield Appeal. Net income from this Appeal is allocated after 30 June 1994, and will be reflected in the financial statements for 1995. c) INVESTMENTS Investments in Government Stock, Secured Debentures, Bank Bills etc. are stated at lower of cost and face value. Investments in Public Company Shares are recorded at net market value. Shares in the Salvation Army Auxiliary Company of Australia Pty. Ltd. are not included in the Balance Sheets, being vested jointly in The Salvation Army Property Trusts incorporated in the several Australian States, on behalf of the General of The Salvation Army for the benefit of The Savlation Army in Australia. Appendix Page 545 d) LEGACIES Bequests received by way of distribution from deceased estates are allocated to appropriate Reserves and other Accounts by the Finance Council according to the terms of the Will of the testator. Allocations of these amounts have been or will be made toward capital cost of the purchase and additions/improvements of properties and to areas of need as determined from time to time in accordance with Salvation Army policy. e) STOCK At cost Stock, including uniforms, books and musical equipment is included in the accounts at weighted average cost. Provision is made against inventory to reflect estimated realisable value. At Valuation Livestock is included in the accounts at management valuation having regard to current market prices. f) INCOME TAX The Salvation Army is a religious, charitable and not for profit organisation and accordingly is exempt from income tax. g) UNSECURED LOAN Loan from The Salvation Army Australia Southern Territory to fund portion of National Secretariat building in Canberra. h) RESERVES, TRUSTS AND SPECIAL PURPOSE FUNDS Certain cash receipts are credited directly to Reserves, Trusts and Special Purpose Funds and certain cash payments are made directly from Reserves, Trust and Special Purpose Funds without being included in the Income and Expenditure Statement. Such receipts and payments are deemed to be capital in nature rather than income. i) BANK ACCOUNT The Salvation Army operates one bank account through which receipts and payments for the Social Trust, Property Fund and General Fund are processed. The resultant balances of these inter-Fund cash movements are recorded by each Fund as Current Assets (Cash at Bank and Short Term Deposits) in the respective Funds' balance sheets. j) FINANCIAL STATEMENTS Appendix Page 546 Thefinancial statement s include the income and expenditure of Divisional Social Funds, but do not include income and expenditure of the various Divisional General Funds and Corps and Papua New Guinea. Separatefinancial statements are prepared for these sections. Appendix Page 547 Appendix 7.2. Dear friends and supporters. [Source: The Salvation Army Financial Statements 1995,1996, 2] The Salvation Army AUSTRALIA EASTERN TERRITORY Office of the Territorial Commander 29 April 1996 Dear Friends and Supporters: It is with a great deal of gratitude and a keen sense of our stewardship responsibilities that we issue the Financial Statements for The Salvation Army Australia Eastern Territory, for thefinancial year ended June 30, 1995. The million and one needs of this hurting world are frightening and increasing! The Salvation Army cannot pretend to be the answer to all the problems of society but it proudly insists that it is part of the answer and perhaps a quite important part at that! Someone has said that if The Salvation Army didn't exist it would need to be invented and from my advantaged view of what the Army is doing I can only agree. Happily the Army is not without friends who see what we are about and move heaven and earth to help us! We thank God for them! Without this army behind the Army our work would have to be drastically reduced and some distressing needs would have to go un-met. You are probably already counted among the number of our supporters and we are grateful to you. But we need more friends. The simple fact remains that if we received more we could give more and do more. We have plans for expansion of our work which are held up for lack of funds. If you could encourage someone else to help us please assure them that the Army has a gift for making a dollar go a very long way! We have been around for quite a while now... trust us! John Gowans Territorial Headquarters: 140 Elizabeth Street Sydney 2000 Postal Address: P.O. Box A435, Sydney South 2000 Telephone: (02) 264 1711 Fax: (02) 266 9638 WILLIAM BOOTH, Founder PAUL A. RADER, General JOHN GOWANS. Commissioner Appendix Page 548 Appendix 8.1. 1996/97 Deficit Funding Letter to Divisional Commander. [Source: THQ Budget Letter 6,1996/97] TO: Lt. Colonel XXXXXX Divisional Commander XXXXXXXX DIVISION DATE: 27 March 1996 FROM: XXXXXX FINANCIAL SECRETARY SUBJECT: 1996/97 DEFICIT FUNDING The Finance Council has approved the recommendations of the Budget Board for the provision of deficit funding for 1996/97 as follows.637 . D.H.Q. General 35,600 DHQ Public Relations 350,800 DHQ Social 368,405 Corps 213,050 Community Services 590,600 Social 1,770,975 $3,329,430 The above General distributions can be varied between the General categories and the 637 DHQ General referred to general administrative expenses of running the DHQ; DHQ Public Relations referred to all PR expenses in the division, including staff salaries and other expenses; DHQ Social referred to divisional social expenses; Corps referred to deficit corps within the division; Community Services referred to all community centres within the division which were not self-funding; and Social referred to deficit social centres within the division. DHQs were permitted to allocate funding within the General and Social categories, but deficit amounts specified for all categories had to be adhered to. Appendix Page 549 Social distribution between the Social categories at your discretion as some of the areas may require less funding than others. We are not suggesting a percentage increase as has occurred in previous years. It is suggested that for 1996/97 you work on what is known as zero based budgeting. Rather than adding a percentage to the current year'sfigures, eac h income and expense item should be examined separately and the best estimate of each item should be included in the budget. You will be aware of the decision that has been made that the management fee from Social centres will now be paid to DHQ rather than THQ and that the DHQ Social deficit funding will be reduced as a result of this. In doing our calculations it was noted that THQ receives approximately $700,000.00 from the Territory for this management fee. The above DHQ Social deficit funding has been reduced by a proportionate amount using the assumption that THQ has received only $600,000.00 from the management fee. Accordingly, throughout the Territory there should be an extra $100,000.00 spread across divisional proportionately, which will increse your income during 1996/97. Another change this year, particularly for Social and Community Service Centres will be that capital items,i.e. capital purchases over $500, will not be included in the budgets for operational costs, but should be listed separately in priority order for each centre. Funds have been set aside at THQ and the capital listings will be reviewed and amounts advised for your division in due course. There will be a depreciation charge to be included in the 1996/97 budget expenses. Thank you for the extra efforts that will be made in the coming weeks to cope with the budgeting and year end process. XXXX FINANCIAL SECRETARY Appendix Page 550 Appendix 8.2. Memorandum re DHQ Responsibility for Social Centre Budgets. [Source: THQ Social Memorandum Budget, 1996/97] MEMORANDUM AUSTRALIA EASTERN TERRITORY TERRITORIAL HEADQUARTERS FINANCE DEPARTMENT 15 April, 1997 To All Divisional Finance Secretaries and Command Sydney East and Illawarra Division Parramatta and West NSW Division ACT & South NSW Division Newcastle and Central NSW Division North NSW Division South Queensland Division Central & North Queensland Division Rehabilitation Services re D.H.Q. Responsibility for Social Centre Budgets It is the responsibility of the Divisional Finance and Social Staff to ensure that the Budgets are completed reviewed and kept within the budget deficit allocated. The procedure is as follows: 1 When the initial budget disks are received from T.H.Q. the total deficit funding for all centres in the division will equal the total Deficit allocated to the division. 2. The D.F.S. should load all disks onto the Divisional system so that a copy of the budget for each centre is obtained. Appendix Page 551 3. The Disks should be forwarded to the respective centres so that the review can be undertaken by the manager and staff. All work sheets must be completed so that the total of each work sheet can flow through to the main budget. 4. When the budget has been completed by the management it must be returned to the relevant D.H.Q. or Command and again the disks are loaded onto the divisional system and reviewed by the divisional staff. It is the responsibility of the Divisional staff to review and adjust or re-allocate the allowable divisional deficit. 5. When the Divisional Review is completed the computer disks are to be returned to T.H.Q. where the final consolidation will be done and the budgets presented to the Territorial Budget Board. It must be remembered that ALL budget deficits must come within the Global deficit Budget figure. Yours sincerely XXXXXX FINANCIAL SECRETARY Appendix Page 552 Appendix 8.3. Memorandum to Centre Managers re 1996/97 Budget. [Source: THQ Social Centre Budget Memorandum 1996/97,1996] MEMORANDUM AUSTRALIA EASTERN TERRITORY TERRITORIAL HEADQUARTERS FINANCE DEPARTMENT TO: ALL CENTRE MANAGERS FROM: XXXXX FINANCIAL SECRETARY DATE: 14 May 1996 SUBJECT: 1996/97 BUDGET Accompanying this letter you will find a complete set of materials for the annual 1996/97 budget for your Centre. The procedures in our memorandum of 15 April 1996 have been modified slightly as Computer Services have developed a way for the Centre to create their own budget disks. The other major change is that we will no longer require the Centre budget disks to be forwarded to THQ. These will instead be forwarded to your DHQ or Command, where a consolidated disk will be prepared and forwarded to THQ for processing for the Budget Board. Attached is a flow chart of the budget process as in previous years and a flow chart showing the new procedure. You will notice there is a lot more liaison between the Centres and your DHQ or Command and a streamlining of the process, as described above. We would request that you review the budget material before sending it to the DHQ or Command to ensure that you have covered all the points that are necessary for your Centre's budget to be complete. We need to work together on this process seeing we have changed the system quite considerably. The software release notes detail the modifications made. We look forward to your feedback via your DHQ or Command and trust that the budget cycle works efficiently. FINANCIAL SECRETARY