FINANCIAL MANAGEMENT OF CHURCHES IN GHANA: A CASE STUDY OF LEGON INTERDENOMINATIONAL CHURCH

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ABSTRACT

This paper reviews the financial management system of the Legon 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 interview, 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.

The strengths of the church are evident in its formalized structure and procedures. The crystallized processes, professionally trained staff and volunteers, a corporate governance system (COE) who guide and monitor all activities, a good records-keeping culture and a good brand name with regards to its integrity in all of its dealings strengthen the framework of the church. However, they face a few weaknesses; the lack of a functional manual and the nature of appointment unto the COE. There also seems to be an information gap where some significant is unknown to key personnel due to time lapse. The church is also presented with opportunities in light of this global and technological age that yields resources that would support a financial system to be as firm and transparent as possible. . For instance, the use of cloud servers and other technological advancements, stable cash flows and little intervention from political and other regulatory authorities. The main threats are the political and economic variables that could affect operations or standards.

The study proposes a review of the management policy of the church as it is out-of-date. The basis of selection unto the main church board should also be reviewed to accommodate the constant presence of a financial management professional. They are also encouraged to continue investing in the resources that they currently possess such as technology, skilled staff, among others so as to maintain a robust system.

Chapter One Introduction

                        Background Of The Study

The church has been identified as the largest and one of the most significant groups in the world (Harris 1990; Booth 1993). The world is estimated to be composed of about 2.3 billion Christians, which is 33% of the overall population, and is expected to reach 3 billion by 2050 (Pew Research Centre, 2017). In Ghana, 71.2% of the population professes Christianity, as at the 2010 national census (Ghana Statistical Service, 2010; Worldatlas, 2017). The main object of the church has been the spiritual and moral development of its members. However, focus has also been on the development of their mental, social and economic well-being. Consequently, a number of churches are embarking on developmental projects in their communities and even on a national scale (Mpesha, 2003; Amoah & Gyimah, 2014). They also invest in the educational and psychological needs of their members and the society at large. The church has hence gradually become a development partner in all societies. In order to undertake these activities, the church requires funds.

The church receives its funds from members, donor groups and indeed the general public (Lightbody, 1999; Gruber, 2004; Ahiabor & Mensah, 2013; Mitchell, 2015). There is therefore the need to account for the use of funds to the funding sources. Despite the many favourable attributes, the church has been engaged in many financial scandals. In 2007, Rev Michael Jude Fay was sentenced to 37 months in jail after he pleaded guilty to pilfering $1.3 million from his church in Darien, USA (New York Times, 2006. Also, Prince Dzah, an associate pastor of Winners Chapel International, Aflao was arrested for stealing GHS 18,000 from the church (Ghanaweb, 2013). In addition, the National Executive Council of Voice of

the Lord Church fired their President for misapplication of funds and poor financial management. He was accused of misallocating funds, unilaterally acquiring loans for projects on the church’s behalf, running down the education fund, among others (Ghanaweb, 2018). According to the Centre for the Study of Global Christianity (2015) an estimated $50 billion of funds from Christians was lost to fraud and embezzlement with about $1.3 billion perpetrated in Africa. The Religious Financial Fraud report (2017) also recorded that Christians committed crimes worth about $ 59 billion in 2017.

These events have further intensified the scrutiny on the financial management system of churches. The leadership of some churches has sought to prioritize their general management approaches (Shaibu, 2013; Ahiabo & Mensah, 2013). This has led to the rise in expectation of the church to improve its financial management systems so as to guard against losing its reputation as the trustworthy custodians they were seen to be in the past. The church aims to manage funds above reproof by maintaining high standards (Shaibu, 2013) so they could be the benchmark for society, they are meant to be in Matthew 5:13. Consequently, it is prudent that adequate and effective financial management systems and processes are adopted and implemented (Harris, 1990; Booth, 1993; Shaibu, 2013; White & Acheampong, 2017). Moreover, the further rise in interest of the church’s financial management system is also attributed to the large amounts the churches’ receive from the public. This makes stakeholders and the public concerned about the management of such large amounts. The funds made available to churches by their members and donors continuously experience exponential growth as the years go by. Church members have thus begun to show more and more interest in how these funds are managed. At general meetings the churches hold to account for activities and resource usage, a lot more of the enquiries made were financial management. For instance enquiries about the rising operational costs of the church, the

nature of insurance adopted the methods of accounting presentation used, among others. The table below illustrates the cash flows of the church for the period 2013-2018.

Table 1: Income Statement of Legon Interdenominational Church

 2018 (GHS)2017 (GHS)2016 (GHS)2014 (GHS)2013 (GHS)
  INCOME  4,120,442  3,606,840  3,609,759  1,953,639  1,531,181
  EXPENDITURE(2,485,392)(2,488,908)(2,083,231)(1,539,805)(1,183,386)
  EXCESS        OF INCOME OVER EXPENDITURE      1,635,050      1,117,932      1,526,528      413,834      347,795

Source: Annual General Meeting Documents

There is the need for a framework that clearly specifies how funds should be managed. The framework may include; policies, strategies, procedures and processes guiding mobilization; banking and cash management; investment, disbursement, auditing, records and information management activities (Public Financial Management Act, 2016). This framework is what is usually referred to as the financial management system. It must however be noted that the financial management systems and standards of the church have to be unique and tailored to suit their operations as they are nonprofit organizations. Various churches have thus put procedures and systems together over the years to suit the technicalities of the church’s operations.

Financial management considers how to plan, operate, control and account for all the financial resources in an organization. Mainly through policies, the goals of the organization are expressed and implemented in financial terms and facilitates goal attainment. The main financial components of the church that have been of interest to researchers are cash management, investment management, internal controls and accountability (Leach, 1960; Laughlin, 1988; Harris 1990; Booth, 1993; Gruber, 2004; Agyei & Kusi, 2006; Shaibu, 2013). These components deal with how to manage finances even before receipt, to how the usage is reported to the stakeholders. The identification of each component allows for a complete insight into the whole financial management system of the organization, giving a more reliable expression of the quality of the management of financial resources.

                        Problem Statement

Many studies have been undertaken all over the world aimed at understanding the unique management systems of the church (Leach, 1960; Laughlin, 1988; Harris 1990; Booth, 1993; Gruber, 2004; Agyei & Kusi, 2006; Shaibu, 2013). Most of these studies have however focused on discrete aspects of the financial management scope such as accounting and communication, internal controls, investment policy, among others instead of considering the whole system, hence failed to bring in-depth understanding to how the entire financial system operates. That is, evaluating a single financial management component is not enough to give a true reflection of the efficiency and effectiveness of the financial management practices of an entity.

The number of studies carried out to enable the understanding of the financial management in churches, especially in Ghana, is inadequate compared with the exponential growth the church is experiencing, and the perception of increasing financial mismanagement and malpractices associated with them (Agyei & Kusi, 2006; Ahortor, 2009; Shaibu, 2013;

Ahiabor & Mensah, 2013; White & Acheampong, 2017). Justification for the lack of such studies over the years is the difficulty in accessing available and accurate data. The few studies done as stated above also focus mainly on the orthodox churches (especially the Catholic, Anglican, Methodist and Presbyterian churches).

The findings of some studies identified inadequate financial management practices, poor stewardship, lack of internal control systems and generally low interest or investment in financial literacy in the respective churches (Leach, 1960; Laughlin, 1988; Harris 1990; Booth, 1993; Agyei & Kusi, 2006; Shaibu, 2013).

                        Purpose Of The Study

The reliance of the church on financial contributions from members, which can be likened to reliance of banks on deposits from the public, places an onus on the church to be accountable and effective in all its dealings. The perception is that, effective financial management has not been practiced over the years especially as many church leaders focus on spiritual matters and are of the notion that giving attention to matters that were not ‘spiritual’ would let the church stray from its core mandate, which is spiritual guidance and teachings. The lack of or inadequate interest and resources in this area have led to many church scandals as well as mistrust in the operations of churches.

This study thus sought to explore the untapped area of financial management of churches in Ghana. Using the case of a single church to describe a financial management system of the church, the study focused on three main components which are cash management, investment management and internal controls and accountability. The study sought to identify and evaluate the main financial management components of a non-orthodox church to give a comprehensive understanding to its financial management system.

                        Research Questions

The study would therefore answer these questions.

  • What is the cash management system of the church?
  • What is the investment management policy of the church?
  • How effective are the internal controls and accountability measures in place