The Impacts of Accounting Information on Non-profit Makings Organization (a Case Study of Grace of God Mission Awkunanaw)
Chapter One
Objective Of The Study
Noted hereunder are specific objectives, which the project is designed to achieve:
- To find out the impacts of accounting on non-profit making organizations.
- To find out importance of accounting information to the church
- To see how accounting information could b e applied in the church
- To identity the problem created when accounting information is not used in the church
- To find out the problem associated with unqualified hand handling accounting information.
CHAPTER TWO
LITERATURE REVIEW
THE CONCEPT OF FINANCIAL RECORD-KEEPING/EVOLUTION OF RECORD KEEPING
The origin of recording according to Okafor et al (1996:1) can be traced back to ancient civilization in Babylon, Egypt, Rome and Greece. Early Babylonians had begun by 4500BC, to levy and collect taxes and records the receipts and disbursements. The development of “papyrus” and “calamus” as paper and pen respectively by early Egyptians is a great impetus to record keeping.
Before the advent of writing, man could talk and could express himself in drawing but he could not write. Therefore, record keeping could be dated back to about 300BC with the discovery of
“hieroglyphics and cuneiform” writing by early Egyptians and Babylonians respectively. The introduction of the decimal system by the Arabs as early as 850AD greatly enhanced the development of recording keeping.
The emergency of money as a medium of exchange has provided impetus for development of accounting and record keeping (Okafor, 1996:1). It becomes necessary to record business events on monetary aspect rather than on physical quantities. Moreover, the industrial revolution of 18th century which brought about ample growth in the world trades and industry provided an important stimulus to accounting and record keeping.
The businesses have been on continuous growth and expansion, resulting in increased need for information through proper recording. Before this era, businesses were on small scale and individual proprietors were so personally involved in the business tat the need for information was less required. The industrial revolution was in effect the basis of the modern business enterprises ranging from partnership to joint stock companies. In view of Okpe (1998:1), described business organization as the vehicle for mobilization of funds and human resources”. He further stressed that it involves the principle of stewardship or accountability which marks a step further in the development of accounting and record-keeping.
There is great need for effective and efficient communication network between the enterprises and the interested parties especially for showing how the resources are utilized.
In the opinion of Okpe, (1998:1), he stressed that of the man or an entity just going into business, experience has clearly indicated that an adequate record keeping system helps to increase the chances of survival and reduces probability of early failure. Similarly, for established industrialist, it has been clearly demonstrated that a good record keeping system increases his chances of staying in business and or earning desirable profits.
Record-keeping can help owner managers of small enterprises keeping their business on a sound basis.
THE NATURE AND CHARACTERISTICS OF FINANCIAL SYSTEM OF NON-PROFIT ORGANIZATIONS
The non-profit making organizations are established mainly to render services and not to make profits (Freeman, 1988:14) the objectives of most non profit organizations are to provide as many goods or as much service each year as their financial and other resources permit. They typically operate on a year-to-year basis, raising as much financial resources as possible and expending them in serving their constituency. The non-profit organizations include a wide variety of organizations in the present social and economic environment. They include government units – Federal, State and other educational institutions, hospitals and health care organizations, voluntary association, research organizations, foundation and other social and cultural organizations.
According to Freeman (1988:16), he observed that financial management of a non-profit organization typically focuses on “acquiring and using financial resources upon sources and uses of working capital, budget status and cash flow rather than on net income or earning per share”. There is no profit motive and there is no individual share holders to whom dividends are paid.
In essence, businesses are organized for profit, the church for Christian services. Again businesses may be re-organized, sold or liquidated, churches are difficult to re-organize or liquate and their properties are rarely considered as cash assets. The use of funds is restricted when given by donor for specific purpose. In other words, some assets are restricted for a particular purpose like in a club, the members may be assessed for certain capital improvements such as the construction of a swimming pool, the proceeds from the assessment will be set in a restricted fund to be used only for that particular purpose.
In view of James et al (1976:24) in their handbook titled “The Modern Accountant Handbook” the measurement of the benefits resulting from sacrifices of the non-profit organizations are much ore difficult since the attainment of goals can be measured only in term of “performance” to compare to that of commercial enterprises which can be measured as net income. The commercial organizations do have the responsibilities to report on the stewardship of their resources, the emphasis of their accountability is on the utilization of the resources to earn a profit. But in non-profit organization, the emphasis is placed on accountability and stewardship.
It is important to understand that the standard of reporting for non-profit organizations have developed differently from commercial accounting standards because there is a difference in emphasis in the objectives for recording the date and because of legally binding restrictions in non-profit organizations which have no real counterpart in business enterprises. One of the characteristics of non-profit organization is that those contributing financial resources to the organization do not necessary receive or proportionate share of its goods or services (Freeman, 1988:40).
The non-profit organizational financial reporting should provide the economic resources, obligations and net resources of an organization and the effects of transactions, events and circumstances tha change resources and interests in those resources
(Harry, 1993:16). The performance of an organization during a periodic measurement of the changes in the amount and nature of the net resources of a non-business organizations, and information about its service efforts and accomplishment provided that the information most useful in accessing its performance. How an organization obtains and other factors that may affect an organization’s liquidity should include an explanations and interpretation to help users understand financial information provided.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
In this chapter, we would describe how the study was carried out.
Research design
The study employs quantitative descriptive research design to examine the impact of accounting information on a non-profit making organization
Sources of Data
The data for this study were generated from two main sources; Primary sources and secondary sources. The primary sources include questionnaire, interviews and observation. The secondary sources include journals, bulletins, textbooks and the internet.
population and sample size
The population for this research work was based on the district as a whole. The sample size was based on selected parishes. The researcher distributed 63 questionnaires of which 50 respondents were gotten or received and 13 were returned back unattended. Equally, oral interview which serves as a follow up to the questionnaire were asked and defined by the researcher to the appropriate respondents.
However, the total number of branches is 75.
CHAPTER FOUR
ANALYSIS OF RESEARCH RESULTS
PRESENTATION AND ANALYSIS OF DATA
Having collected the necessary data, the researcher has adopted a systemic approach to analyze the data. Some of the questions in the questionnaires distributed were examined to evaluate the frequency of responses and what they reveal concerning the financial record keeping of non-profit organization.
The answers to the research questions were analyzed using simple percentages. The calculations of the percentages were done based on 50 successfully completed questionnaires.
Those who had the same opinion to each type of question asked wee placed over the total number of respondents and thus multiplied by hundred.
CHAPTER FIVE
SUMMARY, RECOMMENDATIONS AND CONCLUSION
This chapter presents a resume of the findings conclusion arrived at by the researcher and some recommendations regarding the form of financial record-keeping the church should employ where appropriate, so as to meet up to its financial needs.
SUMMARY OF MAJOR FINDINGS
Having analyzed the questionnaires, some of the major findings on the research work are:-
5.1.1 The study revealed that districtes make returns to the diocese yearly, semi-annually and also on quarterly basis so as to ensure that proper accounts are kept and returns are made when appropriate.
5.1.2 The study showed that the church keeps its money in eth bank and otherwise operates bank accounts. It does not leave it money with the priest. Only the money collected from the offertory is used for the welfare of the priest.
5.1.3 As the church keeps it money in the bank, it was observed that only three people form the signatories to the account; comprising the district priest, treasurer and any other person that may be authorized by the council. The priest does not form only the signatory as well as its assistant, this will ensure that the members of the District Finance Council is made aware when any money is to be deposited or withdrawn from the church’s bank account.
5.1.4 The study revealed that only the District Finance Council which the district priest is the chairman authorizes the expenditure to be made by the church, he works in conjunction with the District Finance Council to ensure that the money available are utilized in the appropriate ways.
5.1.5 In order to ensure a good financial management, it was observed that the church adopts budgetary system so, as to curtail its expenditures. Also in line with the budgetary system, the District Finance Council discusses any expenditure to be incurred and approves the budget.
5.1.6 The accountability of the church’s fund is important and the members of the church are always notified on any amount realized for its growth. This is done either by oral announcement by a member of the District Finance Council or by preparing a statement of account. In short, the two of them work together.
5.1.7 The study revealed that only the District Finance Council maintains proper books of account of the church and also are in custody of them.
5.1.8 It was revealed that the accounting systems in operation by the church are income and expenditure, receipt, payments and balance sheet. These form the basis for financial statement analysis. There is no profit and loss account for the church because it is not profit-oriented.
5.1.9 The study revealed that the Church prepares budget which can be made quarterly, semi-annually and yearly. This is used to curtail incurring expenses higher than the actual money at hand. Indeed, the church operates a surplus budget where revenue is always greater than the expenditure.
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 finance should help to the system the more.
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 the 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 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.
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