ABSTRACT
This paper reviews the financial management system of the Legion Interdenominational Church in light of the financial mismanagement issues of misconduct arising in recent times. It focuses on the cash management, investment management and internal control and accountability mechanisms of the church as they present a more reflective depiction of the entire system. It was a qualitative study that employed the use of interviews, observation and document reviews as tools to appraise the system of the church. McKinsey’s 7S model was used to analyse LIC as an organization and thematic analysis was used in the analysis of the data in order to attain a detailed understanding of each component in the system. Data validity, reality and saturation are ensured to improve the quality of the findings.
1.1 Introduction
Church financial management in recent time has become inevitable owing to widespread proliferation of
churches and the attendant economic as well as financial activities engendered by these churches.
Although churches are disallowed by the land and property Act from engaging in enterprises with the
aim of making profit, churches nowadays are beginning to look inward by engaging in financially
rewarding ventures. The result of this is that churches are now engaged in owning properties that earn
income such as landed properties, houses, hospitals, schools, transportation business, buying and selling
of shares, etc. The difficulty arising from improper accounting for resources and funds generated
thereof has led to a series of cleavages, legal and embarrassing tussles in some churches. Olusola
(1998) attributed this misnomer to poor financial management methods, cultural and ethical disorientation and the
dearth of the spirit of stewardship, transparency and accountability.
The church is a non-profit organization and the nature of this enterprise implies that any increase in net assets arising from the
activities of the enterprise must be applied to improve the community services rendered by the specific
organization. The increase in net assets of the entity does not accrue to the members supporting the
organization because of the distinctiveness and natural history of these organizations. Edagbo (1984)
argued that the primary aim of financial management and/or financial reporting should be to promote or provide
control over resources by means of responsibility accounting and stewardship. Church financial management is
founded on the belief for proper record keeping and accountability as a basis of x-raying the integrity of
the Christian character. In one of the church seminars held on the 27th May 2008, a provincial
financial management highlighted the need for proper and orderly records. He quoted from Revelations 20:12-15
stating that God himself is a ‘Record Keeper’ and/or the ‘First Accountant’. Secondly, good record
keeping is identified as a proof of our integrity as children of God (2 Cor. 8:21). This implies that
doctrinally, church financial management is recognized as a precondition for achieving the ultimate goal which is
spiritual contentment and sanctity.
The financial management problems common in churches have been identified by Armstrong (1989) to
be: weak internal control, embezzlement of church funds, lack of financial management education, over reliance
on individuals and volunteers’ boards, antediluvian accounting methods, etc. This study was aimed at
determining the appropriate accounting practices to be adopted by churches in Nigeria and to attempt to
proffer solutions to the major problems faced by churches in financial management for resources within their
control as well as examining pecuniary problems, prospects and implications of proliferation of
churches. Church accounting is a relatively new area in financial management research.
Specifically, the study was set out to identify core financial management practices in churches and relate them with contemporary
standard practices for non-profit making organizations. It was also geared at examining the extent to
which the following problems affect church accountability, transparency, function; weak internal
control, over dominance of leadership, emphasis on enterprise objective at the detriment of profit,
inability to operate in a business fashion, lack of accounting education, etc. The study also sought to
establish the relationship amongst accounting practices, church revenues, sources and utilization.
2.1 Framework of church governance and financial management
Governance is vital to the success of any organization from small domestic organization to
large international organization. But what exactly is governance? In its simplest form, governance
refers to group decision making that addresses shared problems. Within the context of the international
organizations, governance describes the processes and institutions that guide and restrain the collective
activities undertaken by it and its members. In addition, governance is more about process through
which a decision is made, rather than the substance of the decision itself. In other words, governance is
not necessarily about making an international organization stronger; rather, governance describes an
international organization’s rules and procedures that the organization uses to accomplish its goals.