The Salvation Army's Leaky Kettle

Just when the agency needs more cash, retailers are foiling its fund-raising strategy

These are tough times for the Salvation Army's bell-ringers. On Nov. 25, giant discounter Target Corp. (TGT ) began enforcing a longstanding ban that prevents charities from collecting donations outside its stores. Making an exception for the Salvation Army might force the chain to welcome other charities that don't sit well with customers. The move was a big blow to the nation's largest charity: Last year kettle-ringers outside Target stores collected $9 million, about 10% of the Salvation Army's holiday take.

Target isn't the only one. Rival Wal-Mart now limits the kettle drive outside its stores to just 14 days each year. Indeed, with a growing number of stores banning or limiting the Salvation Army and its once ubiquitous kettles, the charity finds itself in a serious fix. Even as the money it needs to fund its traditional homeless shelters and soup kitchens is drying up, it also must come up with a huge new pot of cash to operate plush community centers that will be built with a $1.5 billion bequest from McDonald's Corp. (MCD )heiress Joan Kroc. The upshot: The Salvation Army will have to modernize its fund-raising efforts. Says Dwight F. Burlingame, a fund-raising expert at the Center of Philanthropy at Indiana University: "They need to professionalize what has been a volunteer effort."

BAKE SALES

The Salvation Army acknowledges that will be quite a challenge. After all, the organization has been raising funds pretty much the same way for its entire 139-year history. The group relies on grassroots efforts organized by local community centers -- bake sales, radio requests, and the like, along with donations from local businesses and community members. And once a year, bell-ringers man their stations in pursuit of holiday shoppers' pocket change. All told, those efforts brought in $1.42 billion last year.

It all sounds like quite a kettleful. But those resources, which fund the Salvation Army's 9,027 local centers, are already stretched thin. And now the agency must come up with roughly $70 million more to match the money Kroc put up to run the 30 to 50 new Kroc Centers. She stipulated that her gift cover half the expenses and challenged the Army to foot the rest. That might not seem like much, but the charity's decentralized fund-raising means money isn't shared among regions. Money raised locally is spent locally. So the communities where Kroc Centers will be built have to come up with the cash on their own.

With Mrs. Kroc's money expected to start arriving early next year, there's little time to lose. Fund-raising experts say the Army's national headquarters must take a stronger role. Apart from the kettle drive, no programs to raise cash are run nationally. The Army headquarters could also use more professionals trained in the art of raising money.

New programs, such as a cohesive online-giving drive or efforts geared to garnering support from corporate donors and individuals like the Krocs, would go a long way toward filling the gap. In fact, working with companies is crucial: Target says it asked the Salvation Army to come up with a new fund-raising strategy but the charity has so far failed to offer an alternative.

Salvation Army stalwarts are almost certain to resist change, since hiring highly paid professionals could undermine a culture largely defined by an implicit vow of poverty. But other institutions have made such a shift. The Catholic Church, for one, brought in fund-raisers.

The Kroc gift -- however magnanimous -- could force the charity to choose between big-budget Kroc centers with swimming pools and some of the traditional programs that last year served 33 million people. Only by bringing its fund-raising techniques into the 21st century can the Salvation Army afford to do both.

By Jessi Hempel in New York

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