THE ROLE OF FINANCIAL MANAGEMENT AS PART OF THE CHURCH MANAGEMENT
PROCESS
INTRODUCTION: Managing a
church of the 21st century is not just challenging but a dynamic
business. It involves managing men (members) materials and money. The Bible
confirms that money answereth all things! Therefore, the role of financial
management as a critical part of the church management process cannot be
underestimated. Although a church is not a profit making organization whose
primary objective is to make profit and maximize the value of its shares.
However, a church has a similar objective of achieving both spiritual and
physical growth of the church in general and its members in particular. It
appears that money is at the centre of achieving these objectives. The early church,
even Jesus Christ recognized this fact as he created a port folio (i.e
treasurer/minister for finance) during his ministry. Judas Iscariot was the
treasurer of the disciples of Jesus.
DEFINITION / ROLE OF FINANCIAL MANAGEMENT
Financial management is that part of the total
management function which is concerned with the effective and efficient raising
and use of funds. It is concerned with making decisions about the provision and
use of an organization’s finances. The essential role of financial management
is to provide a basis for assessing the financial implication of decisions made
in the areas of management. Such decisions will be judged according to:
a.
The
church’s financial goals
b. How they affect the overall valuation of the
church
c.
How they
affect the overall performance of the church. Such performance will be measured
against a determined target or standard.
For instance, if the band / choir wishes to
acquire new instruments, then the finance manager (Finance chairman /
Committee) will be able to provide the following information for assessing the
worth of the venture.
1.
What
source of finance (from the point of view of the members) should be used? That
is, for members to contribute the money or to borrow from the bank or other
lenders? And at what cost?
2. The effect
on the overall growth of the church
3.
Will there
be income from the band through engagements etc?
FUNCTIONS OF THE FINANCIAL CHAIRMAN / COMMITTEE
The specific functions of the finance chairman /
committee are to ensure that funds are:
a.
Made available
at the right time
b. Made available for the right length of time
c. Obtained at the lowest cost
d.
Used in
the most effective / efficient way.
In other words, the finance committee / chairman must ensure
a.
Optimum financing: That is, the need to develop a financial strategy, which includes
determining financial objectives
b. Management
of working capital: This
includes cash budgeting, planning and control of cash, debtors, stocks and
creditors
c. Managemet
of capital assets: For
instance, the head of finance needs to consider the best policy for asset
acquisition e.g outright purchase, hire purchase, leasing and the replacement
cycle, here, capital budgeting is required.
d. Financial
reporting: How is the performance
of the branch, district, provinces, CMCs etc measured? How regular or frequent
are reports prepared and made available to members? What kind of reports?
e. The
effects of inflation, risk and uncertainty etc: Here, the finance committee / chairman may make use of techniques such
as sensitivity analysis, expected value criterion, inflated discount factor or
port folio theory.
These functions are interrelated. The correct
timing of the raising of funds for example, depends, on the requirements of the
proposed uses. Conversely, whether or not a particular use of funds is both
feasible and attractive depends on the cost and availability of those funds.
The consequences of a band financial management can be very serious. E.g let us
suppose that a decision has been taken by a branch to buy a new bus for
commercial purposes, and that this will require N5m in six months time. It is
then expected to give a return of 10% per annum over a period of 5yrs. In other
to make this plan possible N5m must be made available at the required time.
a.
The amount
made available was N6m. The result is that N1m will remain idle and had to be
paid for (interest charges) but there no guarantee that there will be any
profitable use for it. It may merely be wasted.
b.
The amount
N5m did not become available until after one year. The start of the project
will therefore be delayed. Other plans following from this one e.g income which
could have been earned during the period of the delay will not be earned.
c.
The amount
was raised by means of a bank loan repayable within one year. As the project
will be running for long after this, new loan / finance will have to be found
when the loan runs out and this lays up a difficult problem for the future.
d.
The agreed
rate of interest is 15% per annum. Since the project yields only 10% per annum
we are bound to suffer loss. The project is not in these circumstances
worthwhile.
SOURCES OF INCOME FOR THE ESOCS CHURCH
a.
Tithes (b)
Thanksgiving (c) Collections / offerings (d) Special funds e.g building funds
etc (e) Donation (f) Ordination
(g). Investment
income: Interest on deposits, rents, musical income, royalties, patents,
dividends, trading income, profit from business ventures e.g schools,
transport, bookshops, stores and supermarkets (where olive oils, candles, whit
garments, girdles, staffs, staffs, hymn books, incense etc are sold) Absent in
many branches / districts / provinces.
ESOCS
FINANCIAL ACCOUNTING
ACCOUNTING:
Is the act of recording, summarizing, reporting
and analyzing financial transactions. It involves a complete record of all
activities of the church with details of every aspect of the church
transactions from origin to present and insight into the future. It consists
three basic activities, identifying, recording and communicating the economic
events of the church. Theses economic events are transactions and investments.
In broad terms, INVESTMENT can be described as any action which beings about changes in a church’s
income stream. The form of investment may be in stocks and shares, farming,
land and building, plants and equipments etc.
USERS OF
ACCOUNTING INFORMATION: Two broad
groups use financial statements of any organization.
a. INTERNAL
USERS: Need the accounting data to run the church. Users
in the group include.
- His most eminence, the baba Aladura
- The CMCs
- Provincial heads
- The district / Branch heads
- Chairman of finance committee at all levels
- All members
- Internal auditors
b. EXTERNAL
USERS: This group needs accounting data for investment or
other legal and / or regulatory reasons. Users in this group include investors,
government agencies (for regulatory reasons) competitors, external auditors
etc.
ACCOUNTING EQUATION: Accounting financial records
describes what the church own and what it owes as assets and liabilities
respectively. Asset = liabilities. This is the basic equation that accountants use
to record and report financial information. Accounting red flag goes up if
assets fail to equal liabilities.
ESOCS ACCOUNTING YEAR
ESOCS accounting years runs from Oct-Sept each year
COMPOSITION OF THE FINANCE COMMITTEE TO LAGOS
PROVINCE
Chairman, Secretary, treasurer (Female)and four (4) others. Nominated
and forwarded to his most eminence for ratification and final appointment. The
same structure exists in the branches with the provincial chairman giving final
appointment
ELDERS-IN-CHARGE AND 40% REMITTANCE TO LAGOS
PROVINCE
All elders in charge have the obligation to remit only 40% of their
branch income from tithes, thanksgiving/collectors/offerings to the province
which remits 25% of the amount to the national headquarters. This remittance ought
to be made or before the 2nd Saturday of the subsequent month. This
obligation is being abused by several elders in charge who sometimes default as
long as three or more months before remittances are made. This is wrong as all
branches are deemed to be the property of the national headquarters, the
provinces being trustees. Any elder in charge who fails to remits 40% of it’s
branch income to the province is actually fighting the Baba Aladura/ church and
is really applying for his removal. Finance chairman are to ensure that these
remittances are done promptly. Money has time value.
RETURNS ON INVESTMENT
Returns on investment (ROI) is a concept used to evaluate the
efficiency of an investment or to compare the efficiency of a number of
different investments. Return on investment (ROI) is calculated by dividing the
benefits (returns or gains) of an investment with the cost of an investment,
the result is expressed as a percentage or a ratio.
ROI= Gain from investment or
gain from investment x100
Cost of
investment cost of investment
In the above formular, gain from investment refers to the profit
obtained from investing in any project while cost of investment refers to the
capital outlay i.e money / fund invested in the project. The purpose of returns
on investment is to measure per period, rates of returns on money invested in
an economic entity in order to decide whether or not to undertake an
investment. It provides a snap shop of profitability, adjusted for the size of
the investment asset tied up in the enterprise.
FINANCIAL MANAGEMENT / GARDEN OF EDEN
The primary purpose of any church is the spiritual / physical growth of
it’s members. In other words without adding value to the life of its members,
the church, the has failed. Without books and records, it is difficult to
measure performance in order to ascertain whether the church is growing or not.
It is therefore necessary to have time or period for accounting in order to
determine the return on investment and ultimate position of the church. This
concept has been as old as genesis in the holy bible as man is required to give
account of investments under his care. The church is put under the care of man
and man must give account to God. The garden of Eden was like a church under
the care of man which he mismanaged by eating the forbidden fruit. When God
visited the garden to see how well man was doing, man could not give account of
his position in the garden. He has failed and the garden (the church) has
collapsed while Adam tried to pass the bulk to his wife (Gen.3v3-9)
FINANCIAL MANAGEMENT/PARABLE OF THE TENANTS
MATTHEW 21VS33-43
There was a certain householder (Jesus Christ) who planted vineyard
(church) and hedged it round about, and dug a wine press in it and built a
tower and let it out to tenants (church members) and went into a far country.
When the time of the fruits (accounting) drew near, he sent his servants to the
tenants that they might receive the fruits (returns on investment) of it. The
tenants did not only fail to pay rents (returns on investment) but destroy the
house, attacked the landlord’s agents etc” he will miserably destroy those
wicked men and will let out his vineyard unto other tenants who shall render
hi, fruits in their season. Therefore, I say unto you, the kingdom of God shall
be taken from you and given t a nation bringing forth the fruit thereof.
FINANCIAL MANAGEMENT / PARABLE OF THE TALENTS.
MATTHEW 25 VS 14 -30
Again, in the parable of the talents, the kingdom of heaven is as a man
travelling into a far country who called his own servants and delivered unto
them his goods. The different talents here represent investment. The servants
here are the elders in change/finance chairmen/provincial chairmen and other
church leaders/ elders/members and the man (God) was the investor.
After a long time, the Lord of those servants came and settled accounts
with them” while some grew their investment, one failed. The man who failed was
referred to as wicked and his talent was received from him and give to the most
profitable servant. Condemning the wicked and unproductive servant (bad
financial manager) the master said “you ought therefore to have put my money to
the exchangers (bankers) and then at my coming, I should have received my own
with interest (return on investment)
RETURN ON INVESTMENT/THE WITHERED FIG TREE MATTHEW
21 VS 18 -20
Also, the story of the withered fig tree epitomizes the importance of
returns on investment (ROI) “And when he saw a fig tree in the way, he came to
it and found nothing thereon, but leaves only, and he said, let no fruit grow
on you again forever, and presently the fig tree withered away. Here again, any
elder in charge/ branch that fails to grow the members/yield returns has failed
and is clearly a wicked servant and should be in the outer darkness, weeping
and gnashing his/her teeth.
THE RISK /UNCERTAINTY FACTOR IN FINANCIAL
MANAGEMENT
Risk may be defined as the probability that a prediction will turn out
to be wrong. If there is a high probability that a prediction will prove to be
considerably in error, then the risk is high and vice versa. Risk should be
managed as it can hardly be avoided in business decision.
Risk may be reduced for a church investment through the policy of
diversification. The key is that risk varies directly with rewards. In other
words, the more the risk, the higher the rewards and vice versa. Uncertainly
refers to a situation where there is no basis to make predictions. It is a
clueless situation.
RELEVANT BOOKS OF ACCOUNT
1.
The cash book: This records the total cash receipts and payments made each
day/Sunday. This must be kept.
2.
The unified cash book: The unified cash book is a customized cash book designed for use in
ESOCS church (see attached proforma) it is designed to accommodate cash receipt
and payments for the convenience of the provinces/districts and branches
calculate their 45% 40% 25% 10% etc as the case may be.
3.
Tithes book: This is a several column cash book that is used to record tithes in
all branches. This record must be property kept in all branches.
HIGHLIGHTS / OUTLINE OF RECOMMENDED INVESTMENTS IN
THE PROVINCE / DISTRICTS / BRANCHES
- Farming: poultry, fish pond, pig rearing, grass
cutter, snails, palm tree / oil, cassava, yams, banana, plantain, orange,
pawpaw, pineapple, guava, mango, apple star etc
- Micro finance
- Business centre, cybercafé, photocopy, typing,
building, computer training etc
- Transportation: Buses, cars, keke Napep, motor
bike, bicycle etc
- Schools: kinder garden – university professional
examination training e.g ACA, ACCA, ACIB, ACIA, ACTI, NIM, TUTORIAL CENTRES FOR
GCE, WACE, NECO, JAMB, classes etc
- Hostels: Houses for rent, shops etc
- Leasing: wheel barrows shovels, knives,bus,cars,
keke napep, motor bikes, plates, chairs, canopy, tables etc
- Viewing canters for football, games etc
- Cold rooms: chicken, turkeys, fishes etc
- Bookshop: primary, university / ptofessional
- Restaurant and bar
- Bakery
- Hospitals, pharmacy, chemist
- Nylon production
- Water production: sachet and bottle
- Clothing/ foot wears
- Mother care: babies etc
- Newspapers / periodicals
- Borehole drilling and servicing
SUMMARY / CONCLUSION
The role of financial management as part of the church growth process
cannot be over-emphasized. The 21st century church and its members
cannot neglect the issue of finance as it appears to be a major pillar for its
growth and survival.
Thank you for listening and may the good Lord bless you all. Amen.
SNR. APOSTLE (DR.) RAY UBA JP, PhD, FCA, FCIB, FCTI
REFRENCES
Holy Bible King James
version
Raymond Brokington
Financial Management 5th Edition
Okigbo P.N.C.
Nigeria’s Financial System Longman Group 1987
Nwacho C.F.O
The Nigerian Financial System
London Macmillan Int’l 1987
I.F. Johnson
Financial Management
No comments:
Post a Comment