Abstract: Since its inception the Salvation Army has relied heavily on external funds to survive. There is evidence to suggest that at the time of its founding, in 19th century England, and in its early years, financial statements played a powerful legitimizing role. This was crucial to an organization like The Salvation Army, newly formed and in desperate need of funds. This view is consistent with institutional theory, which emphasizes the importance of such legitimacy. However, it challenges the notion, prevalent in academic literature on accounting in religious organizations, that there is a resistance to the use of accounting as a "secular" activity in an organization with a "sacred" mission. The societal context of the early Salvation Army, the unique characteristics of William Booth, its founder, and its struggle for survival in its early years, all demonstrate an emphasis on an image of financial responsibility, and a reliance on the Army's audited financial statements to convey that image.
The Salvation Army is a religious/charitable organization, part of a world-wide Christian church, probably better known today for its social work than its evangelistic work. It was founded in England in the mid 19th century. In that era, when poverty and social injustice were rife, the new Christian Mission, the forerunner of The Salvation Army, became an organization with a focus on good works and a reliance on the public for funding. Even in those early days, the presentation of a sound financial image was vital to its ability to attract funds and to deflect criticism of its unconventional methods.
This paper, which is based on institutional theory and the notion of a sacred/secular tension in religious organizations, proposes that in the Army's early years (1865-1892), the organization used its financial statements to enhance and legitimize an image of financial reliability as a church and welfare service provider. These dates are significant because The Christian Mission began in 1865, and 1892 was the year in which The Salvation Army successfully defended its financial practices in an inquiry that was held into its "Darkest England" scheme. The paper begins by providing an institutional view of legitimacy and the importance of financial statements in creating a legitimate image. Next, the notion of a sacred/secular tension is briefly explored. The significance of the historic setting, Victorian England, is then outlined, followed by a history of the early Salvation Army which focuses particularly on its influential founder, William Booth. The fundraising activities, reporting practices and controversies surrounding financial management in the Army are subsequently discussed. Finally, conclusions are drawn about the significance of a sound financial reporting image to resource-dependent religious/charitable organizations such as The Salvation Army.
AN INSTITUTIONAL VIEW OF ORGANIZATIONS AND ACCOUNTING
Institutional theory offers an interpretation of 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 been described as "societal expectations of appropriate organizational form and behavior", take on "rule-like status in social thought and action" [Covaleski and Dirsmith, 1988, p. 562], and develop over a period of time. Instead of, or in addition to, technical considerations organizations adopt institutionally acceptable practices to legitimate their existence [Covaleski and Dirsmith, 1988, p. 562], and, ultimately, to receive the prestige, stability, access to resources, and social acceptance they require in order to survive [Oliver, 1991; Ang and Cummings, 1997; Meyer and Rowan, 1977; Oliver, 1997; Meyer et al, 1992]. Because of this, there is a tendency for organizations within a particular field to assume similar structures and practices. This process, known as institutional isomorphism, leads to organizational homogeneity [DiMaggio and Powell, 1983; Booth, 1995; Powell, 1985; Covaleski et al, 1993, p. 66]. Consequently, in an institutionalized environment, organizations compete for "social fitness rather than economic efficiency" [Powell, 1985, p. 565], so conformity with institutional rules ensures survival, and contributes to success [Baum and Oliver, 1991; Meyer et al, 1992; D'Aunno et al, 1991].
The pervasive nature of accounting means that organizations which adopt "rational" accounting practices are more likely to be rewarded [Dent, 1991, p. 707]. Any organization that does not conform to societal expectations about how accounting ought to be performed, and about the accountability and transparency required in financial reporting, risks showing to disadvantage against its competitors, losing legitimacy and ultimately funding. Financial reporting, therefore, and the accountability it purports to exhibit, is an institution whose legitimizing power organizations must recognize if they are to survive.
Churches, particularly those dependent on the public for funds, cannot afford to ignore societal requirements for accountability, as demonstrated by the presentation of financial statements, auditing and systems of internal control. If they set themselves apart from the legitimizing institutions of society, they risk the achievement of their own mission. Churches cannot be closed systems because they are dependent on the flow of resources from their external environment. (1) Bielefeld [1992, pp. 52-53], referring to nonprofit organizations, of which religious/charitable organizations are a subset, suggested that churches must be concerned about "bolstering their reputations, good standing and desirability as fund recipients to enhance and stabilize their resource flows" [ibid]. Booth  suggested that institutional isomorphism meant that management control practices had spilled over from the commercial sector to the voluntary sector, by means of the requirements of funding operations, institutionally acc eptable practices and solutions, and professional networks. The accountability that is demanded of religious/charitable organizations as a result of institutional expectations, has had a major impact on the management and accounting practices of nonprofit organizations. Accounting is increasingly being appealed to as an indicator of good management, providing value and legitimacy by its very presence. It therefore has a role that goes beyond mere technical considerations, being a practice constructed "in response to societal expectations" [Dirsmith, 1986, p. 357]. It is a powerful legitimizing tool [Carruthers, 1995], and nowhere is its visibility more apparent than in the presentation of an organization's financial statements. This paper suggests that this is not a recent phenomenon. The early financial reports of The Salvation Army demonstrate accounting's legitimizing role during the 19th century.
THE SACRED AND THE SECULAR
In spite of the prevalence of accounting as an institutionalized activity, it has been proposed that there is 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. Laughlin , 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". This notion of a dialectic, a tension between opposing forces, formed the basis for his assertion that within religious organizations there was a potential resistance to accounting, based on the tension between the need to rely on the secular world for the funding of religious work, and the desire to protect the "central sacred sanctuary" of belief from corruption by those very secular forces which helped sustain it [Laughlin, 1988, pp. 23-24].
Booth [1993, p. 50] made the observation that "the dominant ends in (religious) organizations are transcendental, which makes any empirical assessment of their achievement impossible". Accounting and management practices, he asserted, would therefore provide inappropriate measures of spiritual success, and provide a powerful example of a sacred/secular tension.
Perhaps the relationship between a church and money could be thought of as similar to a master-servant relationship. Hegel [1971, p. 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, thereby reversing the two roles. While relying on money to fulfil its mission, a church's spiritual nature requires an independence of belief and thinking, so a tension develops, being resolved by the interaction of the two opposite notions [Gaarder, 1996, p. 303]. The resolution however, is never set as the dialectical process, "a clash between a purpose or standard and its attempted fulfillment" [Taylor, 1979, p. 59], is a continuous working out of the dichotomy between opposites. The difficulty in a Christian service organization is to balance the mission/money tension in a way that preserves the character of its mission [Jeavons, 1994, pp. 157-158]. This has implications for the way the organization embraces (or resists) fundraising methods, management principles and attitudes to accountability and accounting.
Perhaps this dialectic between churches and money is resolved in practice in at least two ways. Firstly, it may be resolved through the orientation a church has with the world. Kaldor et al [1994, p. 70] made a distinction, based on the work of Weber and Troeltsch, between a church and a sect, with the former having an open orientation to the world in the hope of influencing it, and the latter seeing the world as evil, and drawing a strict boundary around its members. The historic orientation of a religious organization therefore will be a determining factor in the extent to which this tension is felt, and the manner in which it is resolved [Irvine, 1999, pp. 16-17].
The response of members of a religious organization to accounting will therefore have something to do with that organization's historic belief system and culture, and its openness to embracing "secular" practices. Swartz [1998, p. 324] suggested that many religious organizations were open to embracing these practices, as evidenced by the two broad institutional processes at work, secularization and institutional isomorphism. This openness has been observed in other research on the use of accounting in religious organizations. Irvine  challenged the notion of resistance to accounting in the context of the budgeting system in a local church, observing that accounting enhanced the church's ability to achieve its goals. Accounting has been shown to assist members of a religious community in the ordering of their lives, including their financial affairs [Jacobs and Walker, 2000]. The results of a study of internal control systems in US churches by Duncan et al  also challenges the distinction between t he sacred and the secular. They found that the notion that accounting was somehow a secular" activity was not at issue. Rather than displaying a resistance to internal control as a "secular" practice, the emphasis placed on internal control by churches varied according to their size and the "polity and hierarchical structure" [Duncan et al, 1999, p 142].
The second possibility for resolving any potential dialectic tension between churches and money is in the way money is transformed through the practice of philanthropy, or used for other religious purposes. Jesus advised a 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, 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, p. 60]. William Booth, the founder of The Salvation Army in England, saw his mission as spiritual but also one that involved the movement in the wider community. This emphasis attempted to break down any perceived barriers between the "so-called sacred and secular", with a great involvement of Army personnel in "that wicked world" [Watson, 1965, p. 274]. Booth 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" [ibid., p. 96].
This holistic view is more consistent with the "multidimensional" notion of Christian stewardship, which has been described as "nothing less than a complete lifestyle, a total accountability and responsibility before God" [Westerhoff, 1983, p. 15]. The steward "stands in a relationship of entrustedness whereby there is a responsibility of diligence and faithfulness in the administration of resources" [Mohon, 1999, p. 4], not just in monetary matters, but in the whole of life [ibid., p. 45]. The Iona religious community in Scotland provides a current example of the way this stewardship obligation is interpreted in practice, with biblical teachings on economics being emphasized as important in the ordering of money and the control of personal finances [Jacobs and Walker, 2000, p. 9]. As part of this responsibility, individuals also "give account of and for their daily lives" [ibid., p. 4], since money and its management cannot be separated from the whole of life. William Booth appeared to have this attitude in the way he practised his Christian faith: he was responsible to God for the way he conducted himself in every aspect of his life, and the way he managed money, particularly money donated by others to the cause, was a …