Sal Army continues processing burger queen's gift.

For an organization noted for its red kettle fundraising program, the Salvation Army sure knows how to net more than the shiny nickels.

Nearly two years ago, the nonprofit became the recipient of the largest chunk of what philanthropist Joan Kroc left to charity. Yet, it readily acknowledged

Though the organization posted a total of $3.1 billion in Fiscal Year 2004, that represented only a 2.1 percent increase above the previous year. With the Kroc gift in tow, exactly why has the organization realized such moderate growth in revenue? It's a combination of taking the time to select the future locations of the Kroc centers, collecting the entire gift and disbursing it equally among the organization's four territories--Eastern, Southern, Central and Western.

"The original amount that has been received thus far is $1 billion," explained Colonel Al Ward, secretary for business administration at the Salvation Army Southern Territory in Atlanta. "Each of the four major regions of the Army has received one-fourth. It actually turns out that we each received $247 million. National headquarters has retained a little bit of the $1 billion original amount because there were expenses that they have to cover. Mrs. Kroc had some houses, you know?"

The "houses" Ward referred to include two pieces of property: a home in Indian Wells, Calif., valued at approximately $6 million and a 12-acre, $20 million estate near La Jolla, Calif. When each are sold, the funds will be divided equally among the four territories.

For the Southern Territory, its segment of the Kroc gift was listed as a footnote in its FY'04 numbers. Since the actual receipt of the funds occurred in Fiscal 2005, the financial impact will be seen more in next year's statements.

The initial stages of selecting sites for the Kroc centers are underway at each of the territories. Ward believes that the Southern Territory will erect the second Kroc center in the country, the first currently operating in San Diego.

"The money has already been allocated for it and we are in the process of getting building permits," Ward said. "It's located in Southwest Atlanta. We had a project on the drawing board before we knew about the gift and what the gift enabled us to do was to greatly expand our plans for that area of Atlanta."

Funds that had been raised previously to build a smaller location are now being transformed into a "quasi-endowment" to help with the cost of running the Southwest Atlanta Kroc Center, Ward added. It's a $13 million building that will require an additional $13 million for endowment. The $26 million center will be the first center built by the trust as opposed to the San Diego-based center, which was completed through direct donations from Mrs. Kroc. The construction documents were sent to the city mid-October and Ward anticipates that physical construction will begin around the first of the New Year.

McPlus or McMinus?

"It's going to take a while for it all to get sorted out because there will be a difference, either plus or minus, between the estimated value of the estate and the ultimate liquidation that will show up to us in cash," explained Bob Bonesteel, territorial financial development director at the Salvation Army Central Territory in Des Plaines, Ill. "Much of the gift is by virtue of the entire estate, which involves some real estate assets that need to be sold and things of that nature. That process will take a couple of years, especially where you have real estate markets involved. It's definitely going to take a while for the entire gift to get into the organization."

Since the Kroc gift was very specific and must be spent in a prescribed way, the Central Territory implemented a process of stages, of which it is currently in the development phase. Each of the communities selected in the preliminary process are now putting its presentations together to show that a center could function well in their area. There's a bunch of loops that each location needs to jump through in order to demonstrate that, including a site location and sustainability, Bonesteel added.

The Salvation Army Eastern Territory utilizes a three-stage process, the first two being competitive stages and the final stage non-competitive. During its first stage, a feasibility stage, it is reviewing 29 applications that have arrived from communities throughout its region. Each is requesting funds for Kroc facilities. The Eastern Territory has divided prospective facilities into three levels: Those that are $10 million and under, $10 million to $30 million, and $30-million-plus, according to Major Hugh Steele, community relations and development director at the Eastern Territory in West Nyack, N.Y.

"Once it's been determined what communities have been awarded those funds, the monies should start flowing to them for the next phase, which is the development phase," Steele said. "That's when they begin the construction design and the programmatic design and they'll need money up front for that phase. We expect to be able to announce the locations by the New Year. We anticipate six, maybe eight, locations being approved and expect to have $200 million-plus to allocate for the construction side."

Steele admitted that the expenditures from the Kroc gift will not show up on financial reports until the organization begins awarding locations in 2006. That will begin the individual development processes, but don't expect construction dollars to begin flowing until 2007, Steele added. He cited issues such as site control and the purchasing and cleaning up of properties as additional reasons for the delay in constructing the centers.

When it comes to the pacing of the Kroc projects, each of the territories essentially echoed the comments of Steele who said, "This is an extremely large and generous gift that has to be disbursed equally among the territories. Sure it's going to take time but it's an amazing opportunity not just for us as an organization, but for communities across the country."