FINANCIAL RECORD KEEPING IN RELIGIOUS ORGANIZATIONS- A CASE STUDY OF CATHOLIC CHURCH IN ENUGU DIOCESE

FINANCIAL RECORD KEEPING IN RELIGIOUS ORGANIZATIONS: A CASE STUDY OF CATHOLIC CHURCH IN ENUGU DIOCESE A PROJECT REPORT BY OZOTAMBGO CHRISTOPHER O PG/MBA/06/45965 IN PARTIAL FULFILMENT FOR THE AWARD OF MASTERS DEGREE IN BUSINESS ADMINISTRATION (MBA) IN ACCOUNTANCY DEPARTMENT OF ACCOUNTANCY FACULTY OF BUSINESS ADMINISTRATION UNIVERSITY OF NIGERIA ENUGU CAMPUS MARCH, 2009 TITLE PAGE FINANCIAL RECORD KEEPING IN RELIGIOUS ORGANIZATIONS: A CASE STUDY OF CATHOLIC CHURCH IN ENUGU DIOCESE A PROJECT REPORT BY OZOTAMBGO CHRISTOPHER O PG/MBA/06/45965 DEPARTMENT OF ACCOUNTANCY FACULTY OF BUSINESS ADMINISTRATION UNIVERSITY OF NIGERIA ENUGU CAMPUS MARCH, 2009 CERTIFICATION The work embodied in this project report is original and has not been submitted in part or in full for any other diploma of this any other university ……………………………………… OZOTAMGBO, CHRISTOPHER O PG/MBA/06/45065 This is to certify that OZOTAMGBO, CHRISTOPHER O a post graduate student in the Department of Accountancy and with registration number PG/MBA/06/45065 has satisfactorily completed the requirements for project research in partial fulfillment of the requirements for the Award of Masters of Business Administration (MBA) in Accountancy …………………………… DR [MRS.] R.G OKAFOR SUPERVISOR ………………………… DR [MRS.] R.G OKAFOR HEAD OF DEPARTMENT DATE……………………… DATE:……………………… DEDICATION This project is dedicated to all men and women of goodwill ACKNOWLEDGEMENTS To accomplish an academic research of this nature, many people must have contributed in one way or the other towards the success To start with, this project would not have been made possible without the research and writings of many authors, researchers and academicians and clerics Attempts have been made to recognize them by citing where appropriate the authors whose work have been helpful to the successful accomplishment of this project I feel indebted I am particularly grateful to my supervior and HOD of Accountancy, Dr Mrs R.G Okafor for the able way she has supervised this write up to its conclusion I cherish her knack for thoroughness and objectivity In fact I enjoyed every bit of my tutelage under her My thanks goes to other lecturers and staff of the Department of Accountancy, University of Nigeria Enugu Campus for their contributions collectively and individually in making me who I am Thanks to Rev Fr Louis S.C Ndulue, the Parish Priest of St Jude’s Parish 9th Mile Corner Ngwo, Enugu, Bro Chivu Joe Catechist, Our Lady of Lourdes Imezi Owa and Sir Pius Onyia, Secretary C.M.O Enugu Diocese Holy Ghost Cathedral Ogui Enugu and the Vicar General Rev Fr Msgr Onaga, the director (CIDJAP); Catholic Institute for Development, Justice, Charity and Peace, Rev Fr Msgr Obiora Ike for their immense contributions My thanks also go to my employers – State Universal Basic Education Board, Enugu and Ezeagu Central LGEA Aguobu Owa for having tolerated me while combing this programme with my work I extend much grace to my colleagues in the Department of Accountancy – Ogbonna Ogbu, Esom Stanley, Agu Betty, Angela, Ngozi Obeta and especially Innocent Okonkwo of Department of Banking and Finance who was also the General class rep for is enviable contributions Thanks go to other innumerable friends for their personal material contributions which I found quiet useful for my research My appreciation goes to the members of my family and relations for their love and understanding of my position during this time of work Finally, my thanks and supplications go to the Almighty god for His infinite mercy and kindness Ozotamgbo Christopher March, 2009 ABSTRACT This research project concerned a study of the financial record keeping of religious organizations: A Case Study of Catholic Churches in Enugu Diocese A sample of sixty-three parishes was made from the diocese Investigations were carried on their financial control used both internally and externally, the accounting system and financial decisions/reporting adopted This showed whether there was an efficient and effective financial record keeping in the church Since rth research aimed at investigating existing financial record keeping or practice the employment of descriptive method of research was found adequate The main instruments used for the collection of primary data were the structured libraries and other research units served as secondary data The researcher ensured that the questionnaire possessed to a large extent the characteristics necessary and adequate for the purpose of validity and reliability Data collected were analyzed and presented with percentages and tables and hypothesis were tested with the chi-square (X 2) statistics and the following results emerged The study revealed that the church keeps proper record of its accounts and that there is accountability and responsibility, every member of the finance council has to give account of the money entrusted to him It also showed that the church makes yearly budget before expenses are incurred and that authorization and control of church expenditure is vested on the management team Based on the finds, both short and long term measures were recommended as ways of enhancing financial record keeping in religious organizations TABLE OF CONTENTS Title page ……………………………………………………… i Certification……………………………………………………… ii Dedication ……………………………………………………… Iii Acknowledgement……………………………………………… iv - v Abstract…………………………………………………………… vi Table of Contents……………………………………………… vii List of Tables……………………………………………………… viii CHAPTER ONE: INTRODUCTION 1.1 Background of the Problem……………………………… 1-4 1.2 Statement of the Problem………………………………… 4-5 1.3 Objectives of the Study…………………………………… 1.4 Research Questions………………………………………… 5-6 1.5 Statement of the Hypothesis ……………………………… 1.6 Scope of the Study ………………………………………… 1.7 Limitations of the Study …………………………………… 7-8 1.8 Significance of the Study ………………………………… 8-9 1.9 Definition of Terms ………………………………………… 9-12 References CHAPTER TWO: 2.1 REVIEW OF RELATED LITERATURE (A) Origin of Catholic Church in Nigeria………………….14-15 (B) The History of Catholic Church in Igbo Land……… 15-17 2.2 The Growth of Catholic Church in Enugu Diocese……… 17-21 2.3 The Administrative Set Up of the Diocese………………….21-23 2.4 The Diocesan Financial Management Procedures…… …24-28 2.5 The Concepts of Financial Record Keeping/Evolution of Record Keeping…………………………………………….29-31 2.6 The Nature and Characteristics of Financial System of Non-Profit Organizations………………………………… 31-36 2.7 The Church Accounting Manaual……………………………37-41 2.8 Financial Decision Making Procedures in Religious Organizations…………………………… ……… 42-51 2.9 Financial Control: Internal and External…………………….48-51 2.10 Financial Reporting and Accounting Records in Catholic Organizations………………………………………………….52-59 References…………………………………………………….60-61 CHAPTER THREE : RESEARCH METHODOLOGY AND DESIGN 3.0 Introduction…………………………………………………… 62 3.1 Sources of Data……………………………………………… 62-63 3.2 Data Collection Method………………………………….……63-64 3.3 Population and Sample Size……………………………… 64-65 3.4 Method of Data Analysis……………………………………… 66 3.5 Re-statement of Hypotheses………………………… …….66-67 3.6 Statistical Method of Data Analysis………………………….67-68 References…………………………………………………… 69 CHAPTER FOUR: ANALYSIS OF RESEARCH RESULTS 4.1 Presentation and Analysis of Data………………………………70 4.2 Analysis of Questionnaire…………………………………… …71 4.2.1 Parishes Returns to the Dioceses……………………………….71 4.2.2 How the Church Keeps its Money……………………………….72 LISTS OF TABLES 2.0.1.1 Diagram of Financial Function…………………………… 46 4.2.1.1 Parishes Returns to the Diocese……………………………71 4.2.1.2 How the Church Keeps Its Money………………………… 72 4.2.1.3 People that forms Signatory to Church’s Account………….74 4.2.1.4 Authorization of Church’s Expenditure………………… ….75 4.2.1.5 Method Used as Good Financial Management………… 76 4.2.1.6 How the Church’s Fund are Accounted for…………… ….77 4.2.1.7 Maintenance of Proper Books of Accounts…………… ….78 4.2.1.8 Types of Accounting System in Use……………………… 79 4.2.1.9 Preparation of Budget………… …………………………….79 4.2.10 Audited Account……………………………………………….80 4.2.11 Observing Church Accounting Manual…………… ………81 4.3.1 Contingency Table on Proper Record Keeping as Financial Control………………………………………………82 4.3.2 Contingency Table on Budgetary System as a Financial Management Strategy……………………………………… 83 4.3.3 Contingency Table for Testing Hypothesis ………… .89 4.3.4 Contingency Table for Testing Hypothesis 4……………….91 4.2.3 People that Form Signatory to Church’s Bank Account…………………………………………………….73-74 4.2.4 Authorization of Church’s Expenditure………………….74-75 4.2.5 Method Used as Good Financial Management…… …75-76 4.2.6 How The Church’s Funds are Accounted for………… 76-77 4.2.7 Maintenance of Proper Books of Accounts………… …77-78 4.2.8 Types of Accounting System in Use…………………… 78-79 significance revealed that there is no difference between proper financial record keeping and its expenditure A good record keeping or accountability reduces the church’s expenditure because each amount has to be accounted for 5.1.12 The study revealed that majority of the churches adopts budgetary system as a financial management strategy As finance is a major problem of religious organization, the church deems itr necessary to make yearly budghet before expenses are incurred This budget is normally reviewed by the Parish Finance Council to curtail extravagant spending by the church A chi-square test of independence showed that preference for budgetary system is dependent on a good financial management This means that budgetary ensures good financial management 5.1.13 Findings from hypothesis three: The chi-square test of the hypothesis three revealed that accounting records keeping is in conformity with the diocesan accounting manual This shows that the financial record keeping of the church is in consonant with the accounting records keeping of the church as shown in table 4.2.7 5.1.14 The study revealed that only the Parish Financial Council which the parish priest is the chairman authorizes the expenditure to be made by the church and this is proved by testing hypothesis four of this research question by accepting the alternative that authorization and control of Catholic Church expenditure is vested on the management team of the church 5.2 OTHER FINDINGS Every parish must send its annual financial statement to reach the Diocesan Finance Council before 28 th February of the year following the end of the financial year The parish annual budget brings together estimated or proposed expenditure (recurrent expenditure) to be incurred by the budget period (1st January to 31st December) and a capital to attain a given objective(s) The Parish Finance Council shall from the month of July send budget call to zone, societal organizations and pastoral council in the parish for inputs into next financial year’s budget of income and expenditure both recurrent and capital The church adopts or uses security documents which comprises of official receipt books, payment vouchers/petty cash vouchers (a) The official receipt book shall be serially numbered, issued serially, entered in receipt book register and shall be kept in safe custody by the parish priest (b) The payment voucher/petty cash voucher shall be serially numbered, issued serially, if in a book form shall be entered in payment voucher register and kept in after custody by the parish priest The approved budget estimate now called the Annual Approved Budget is signed by the parish priest, assistant parish priest, secretary to the Parish Finance Council, the vice chairman of the parish, pastoral council and the secretary of the parish pastoral council and is sent to the diocesan bishop through the diocesan finance administrator The accounting system for those in institutions, hospitals or projects and those on salaries should have governing council which must include a diocesans representative They should send approved budget to the diocesan finance council and it is returned at the half of the year The researcher observed from the information in table 4.2.11 that the Catholic Churches in Enugu Dioceses adopt the use of accounting manual 5.3 RECOMMENDATIONS Having highlighted some of the major findings it would be appropriate and logical to tender the following recommendations for achieving effective financial record keeping There should be an in-built and automatic feedback network embedded in the system-both financial and administration This will make for quick responses to current issues requiring management attention The church should consider computerizing its affairs and documents since it is large in size and controls many parishes The line of authority for expenditure should be explicitly defined and strictly adhered to Funds should as much as possible be applied to what they are meant for, to ensure the growth of the church The issue of internal control system should be properly addressed There should also be a management supervision and review of expenses Also chartered accountants and accountants who are experts in the areas of accounting and management of fincance should help to the system the more 5.4 CONCLUSION The inefficient financial management hampers the performance and threatens the existence of any organization be it business or religious organizations, that is why the study of this is very important and constitutes one of the major reasons the researcher wants to know if such exists in religious organization A lot of muddling up is seen in some churches (and of course in every non-business organization) Personal interests tend to over-ride the parish management of the church Indeed, the church just as any other non-business organization is regarded to be very poor; everything associated with it is equally poor But when you take a critical look at the make up of the church funds, you will believer that it has various sources of funds, the problem being the cost it incurs and control of such funds Nevertheless, the system of operation, that is the financial record-keeping of Catholic Church is said to be good, after going through the analysis and system of their operation The church is a well organized body and takes authority based on their hierarchy The man at the apex of the Catholic churches, the Pope gives orders and directives on how the churches are to be run financially and otherwise The other leaders of the church like the Bishops and priest work along with the law guiding the church and administer its affair in truth and in faith However, the church being a large organization should adopt a computerized system of account and where such exists should be properly maintained On the issue of auditing the account, the charted accountants and the accountants who are experts in these areas should be properly maintained On the issue of auditing the account, the charted accountants and the accountants who are experts in these should help to guide the system BIBLIOGRAPHY Anyafo, A.M.O (1997), God’s People’s Finance, UNEC Enugu, B&F Publications Babalola, E.O (1976) Christianity in West Africa (A Historical Analysis), Ondo, Bamigboye and Co Press (Nig.) Ltd Baridam Don M (1995), Research Method in Administrative Science, Second Edition, Choba, Port Harcourt: University of Port Harcourt Publishing House Cannon Law Society of Great Britain and Ireland (1976), The Code of Cannon Law, India: Collins Theological Publications Catholic University of America (1967) The New Catholic Encyclopedia, Washington: Printed in USA Emekekwue, P.E (1993), Principles of Public Finance, Kinshasa Zaire, African Bureau of Educational Sciences Special Agency of the Organization of African Unity Eneasato, M.O (1985) Advent and Growth of Catholic Church in Enugu Diocese, Enugu, Jet Publishers Nigeria Ltd Freeman, J.R., Griag O.S and Lynn S (1988), Government and NonProfit Accounting Theory and Practice, Third Edition, New Jersey: Englewood Cliffs, Prentice Hall Inc Harry, L.B (1993), Design and Maintenance of Accounting Manuals, Second Edition, Heinemann: USA, John Wiley and Sons Inc James, D.E and Horner A.B (1976), The Modern Accountants Handbooks, USA, Jersey Inc Jerome, K.P (1979) The Encyclopedia of Accounting System, New York: Litton Educational Publishing Inc Melicher, and Welshans (1986), Finance: Introduction to Markets, Institutions and Management, Eighty Edition, Ohio, South-West Publishing Company Millichamp, A.H (1986), Auditing: An Instructional Manual for Accounting Students, Fifth Edition, London: D.P Publications Ltd Shepherds Bush Green Okafor, K.O and Okoye E.I (1996), Principles and Practice of Financial Accounting, Nkpor, Baset Printing and Publishing Limited Oye, A (2002), Financial Management, Papa Ajao Mushin Lagos, El-Toda Ventures Limited Okpe, I.I (1998), Principles and Practice of Book Keeping and Accounts 1, Enugu, Ochumba Printing and Publishing Limited Ogunbiyi, M.B (1992), Understanding Researcher in the Social Sciences, Ibadan: University Press PLC Olademeji, A (1985), Financial Management of Local Government in Nigeria, Ibadan, Fourth Dimension Publishers Osisioma, B.C (1996), Studies in Accountancy: Text and Reading, Enugu, Acene Publishers Limited World Bank (1989), Statistics: An Introductory Analysis, Third Edition, New York: Harper and Row Publishers Yamane, (1964), Statistics: An Introductory Analysis, Third Edition, New York: Harper and Row Publishers Ubesie, M.C (1998), Advanced Financial Accounting, Enugu, Computer Edge Publishers APPENDIX A Department of Accountancy School of Post-Graduate Studies Faculty of Business Administration University of Nigeria Enugu Campus st Dec., 2008 Dear Sir/Madam, QUESTIONNAIRE I am a post-graduate student of University of Nigeria, Enugu Campus in the Faculty of Business Administration, Department of Accountancy, carrying out a research work on financial recordkeeping of religious organizations A Case Study of Catholic Churches in Enugu Dioceses Through this medium, I forward with this letter a copy of the attached questionnaire for you to complete Kindly help in this important research by supplying honest answers to the questions as contained here in the answers will help us to offer some useful suggestions for future improvement and reliability on the research work Every information provided will be treated with strict confidence and used purely for academic purposes God bless you and thanks for your co-operation Yours faithfully, …………………………… Ozotamgbo Christopher O Researcher APPENDIX B INSTRUCTION: Please fill in the information and tick like this ( ) in the blank spaces provided for each question as appropriate As part of financial control, how often the parishes make return to the diocese? (a) Yearly ( ) (b) Quarterly ( ) (c) Semi-Annually ( ) (d) Occasionally ( How does the church keep its money? (a) With the parish priest ( ) (b) In the bank ( ) (c) Through lending to those in need ( ) If in the bank, how many people form the signatories to the ) accounts? (a) Parish priest ( ) (b) Parish priest and his Assistant ( ) (c) Parish priest, treasurer and any other person authorized ( Who authorizes the expenditure of the church? (a) Parish priest ( ) (b) Parish Finance Committee ( ) (c) Building Committee ( ) ) (d) Laity Council ( ) What method does your church use to adopt as its financial management? (a) Budgetary system ( (b) Expenditure is discussed by parish finance council before it is incurred ) ( ) (c) Parish priest incurs any cost ( ) How is donation received, launching fund or thanksgiving offering accounted for in the church? (a) Oral Announcement ( ) (b) Statement of Accounts ( ) (c) Issuance of Receipt ( ) (d) No record ( ) What type of accounting system is kept by the church? (a) Income and expenditure account ( ) (b) Receipt and payment accounting ( ) (c) Balance Sheet ( ) (d) Profit and Loss Account ( ) special Who maintains proper book of accounts of the church? (a) Parish priest ( ) (b) Treasurer ( ) (c) Parish Finance Council( ) (d) Financial Secretary ) Does the church prepare budget? (a) Yes ( ) (b) No ( ) 10 If yes, who makes and initials budget? (a) Parish Priest ( ) (b) The societies/association leaders ( ) (c) The church committee ( ) (d) Parish Finance Council ( ) 11 Do you prepare financial account? (a) Yes ( ) (b) No ( ) 12 If yes, is the account being audited? (a) Yes ( ) ( (b) No ( ) 13 If yes, what is the nature of the audit? Please specify………………………………….…………………… ………………………………………………………………………… 14 Is the church observing any accounting manual? (a) Yes ( ) (b) No ) 15 If yes, what are the make up? ( Please specify………………………………….…………………… ………………………………………………………………………… 16 Is the financial reports of the church being signed? (a) Yes ( ) (b) No ( ) 17 If yes, who signs the reports? (a) Diocesan Ordinaries ( ) (b) Member of Finance Committee ( ) (c) Parish Finance Committee ( ) (d) Parish Priest and his assistant ( ) (e) All of the above ( ) 18 Do you think that proper financial and accounting recording of the church’s expenditures and its projects ensure a good financial control or does it deter its financial capacity? (a) Proper financial records entail good accountability of the church funds ( ) (b) Deters financial capacity of the church ( ) 19 What method you use in collecting members contributions? (a) Through church wardens ( ) (b) Through membership cards ( ) (c) Through addressed envelopes ( ) (d) All of the above ( ) 20 Under the issue of inadequacy of funds in religious organization, would you prefer your church to adopt a budgetary system as a method of financial management or would you prefer them to incur any cost as they arise? (a) Prefer budgetary system ( ) (b) Satisfied with the method of incurring cost as they arise ( ) ... importance of finance, its adequacy to the church and how these are managed and controlled has led to the topic of the study financial record- keeping of religious organizations, a case study of Catholic. .. organizations, its administration has to be well accorded financial records keeping Finance at the macro level is the study of financial planning, assets management and fundraising for business,... This research project concerned a study of the financial record keeping of religious organizations: A Case Study of Catholic Churches in Enugu Diocese A sample of sixty-three parishes was made from