Regulator assesses serious incident report from The Salvation Army after payment problems

The charity's new accounting system has led to long delays in paying suppliers and two senior finance staff have resigned

The Charity Commission is assessing a serious incident report from The Salvation Army after changes to the charity’s accounting system created problems paying bills and two senior finance officers resigned.

The commission said this morning that the charity had reported a serious incident with its new accounting system and the regulator was weighing up how to respond.

The charity confirmed that Caroline Emerton, its territorial finance director, and Hilary Pearson, its chief accountant, had resigned on 11 August after the organisation experienced problems with the new system, but declined to say why they had left.

However, the charity rejected a claim made in an article in The Mail on Sunday newspaper yesterday that the accounting system had created a financial crisis at the charity. The article said charity was "in chaos", staff were in despair and thousands of bills had been left unpaid.

The charity first admitted its new system had caused problems last month in a statement on its website in which it apologised unreservedly for delays in paying some suppliers. It said these had been caused by the sheer scale of implementing the new system.

The statement said the new accounting system had been designed to relieve the burden of heavy financial administration from its front-line centres to help them focus on helping beneficiaries.

"Big changes do take time, but in the long term we know that the new system will improve our efficiency of operations, particularly for our officers, staff and volunteers, who work to serve on the front line in their communities," the statement said.

"In the meanwhile our teams are fully committed to working through the challenges of implementing this new accounting system as swiftly as possible. We’d like to thank everyone for their patience and understanding."

The statement said the charity had taken on temporary staff to help clear the backlog and was satisfied that outstanding payments were being processed.

It said donations had not been affected.

Today, a spokeswoman for the charity told Third Sector the accounting system "has not created a financial crisis".

She said: "In the interests of transparency, The Salvation Army notified the Charity Commission of the technical issues arising from the new system and reassured the commission that there was no threat to the finances of the Salvation Army nor to the coherence of its accounting processes.

"We have made clear that the fundamental issue is one of system failure and that the relevant supplier is very much engaged with us to resolve the issues."

She said it would be inappropriate to speculate on why Emerton and Pearson had resigned, but the charity had appointed a new finance director.

A Charity Commission spokeswoman said: "It is up to charity trustees to make considered administrative decisions that are in the best interests of their charity.

"The Salvation Army has reported a serious incident to us regarding problems with a new accounting system. We will assess the information to determine whether regulatory advice or other action from the commission is required."

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