INTERNAL CONTROL AS A TOOL FOR EFFECTIVE MANAGEMENT IN RELIGIOUS ORGANISATION
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Abstract
This study examined internal control as a tool for effective management in religious organisation, using the Redeemed Christian Church of God, Abundance Parish in Akwa Ibom State as the case study. The study employed survey research design on a sampled of one hundred and thirty three respondents from the church. Two hundred copies of questionnaires were distributed and only one hundred and thirty-three copies retrieved. Data were presented and analyzed using simple percentage method and tables. Hypotheses formulated were tested using 0.05 percentage. The result of the finding revealed that internal control system significantly relate to fraud prevention in Redeemed Christian Church of God, Abundance Parish. It was also revealed that Internal Control System impact on the overall performance of the church leadership of the Redeemed Christian Church of God, Abundance Parish. It concluded that internal control and fraud prevention have a high influence on personnel need of the organization. The study recommended amongst others that internal control department must be closely involved at the church management level where organizational plan is formulated and information obtained about the direction of the religious institution.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF STUDY
Religious organizations today are vested with numerous financial resources which have been entrusted to them, these resources were meant to provide social services and welfare to the church and their host to communities. Despite the availability of these resources, there is always lack of funds for the church to carry out its missionary work due to poor or lack of proper internal control systems. The success of any organization be it religious or educational is not necessarily how much money comes into it but how well the organization manages the funds. The efficient use of these financial resources that accrue to an organization promotes and sustains its growth. It is therefore very essential to manage financial resources of the church effectively and efficiently to derive maximum benefits for the members of the church and society as a whole (Jurado, 2013).
The inability of the church to provide social services due to inefficient management of funds will negatively affect society as a whole. Several recent high profile cases of financial mismanagement in religious organisations have highlighted the need for all religious non-for-profit organisations (NFPOs) to have strong internal control systems. Although researchers have explored the factors that contribute to occupational fraud (Kassem & Higson, 2012; Orimoloye, Austin, & Keys, 2015), there has been little research on fraud in church organizations. As a result, there is limited understanding of management control mechanisms that may contribute to the effective stewardship of church resources.
There are various definitions of internal control as it affects a variety of constituencies (stakeholders) of an organization in various ways. Internal control according to (Osita, 2002, p. 106) is the whole system of controls, financial or otherwise, established by management in order to secure as far as possible, the accuracy and reliability of the records, run the business in an orderly manner and safeguard the company’s assets, its objectives being the prevention or early detection of fraud and errors. It may include internal auditing.
According to Jurado (2013), internal control in the church is essential for the church’s credibility and sustainability. However, financial fraud in churches is on the increase globally (Wood & Wood, 2014) even though many perceive that church leaders have high moral values (Shaharuddin & Sulaiman, 2015). Although church organizations are not businesses, they operate like business organizations from the marketing, financial, operational and human resources perspectives (Seide, 2013). However, church organizations may not be applying business principles and practices in their operations. This may make church organizations vulnerable to occupational fraud that may negatively affect their reputation, donation appeal, future funding of their operations, and their ability to advance their missions to meet planned organizational goals (Greenlee, Fischer, Gordon, & Keating, 2007).
Internal control of not-for-profit organisations is similar to financial management in the for-profit management organisations in many respects; however, certain key differences shift the focus of a not-for-profit financial manager. A profitmaking enterprise focuses on profitability and maximizing shareholder value. A not-for-profit organisation’s primary goal is not to increase shareholder value; rather, it is to provide some socially desirable need on an ongoing basis. A not-for-profit organisation generally lacks the financial flexibility of a commercial enterprise because it depends on resource providers that are not engaged in an exchange transaction (Blackbaud, 2011).
These organisations are also often small, relying on a great deal of volunteer support, and as a result may not have the professional oversight to adequately monitor the resources of the organisation or the behaviour of its leaders. After studying the practices of the Catholic Church, Rev. Beal and Cusack (2008)said that the ability of Catholic dioceses, parishes and NFPOs to raise the revenues necessary to support the ministry programs through which they carry out their mission depends upon public confidence and public support. Public confidence can be won if there is proper accountability and good internal control procedures in place. It is against this background that this study seeks look at the effectiveness and inevitable nature of internal control system on the survival and growth of religious organization.
1.2 STATEMENT OF PROBLEMS
Many churches in Nigeria do not see the need for internal controls in their organisations. However, (Colossians 3 verse 23–24) admonish believers that in “Whatever you do, work heartily, as for the Lord and not for men, knowing that from the Lord you will receive the inheritance as your reward. You are serving the Lord Christ”. Despite all the financial resources of the church, church leaders always complain about lack of funds for the church to carry out its missionary/social services work. This is evidenced by many uncompleted projects spread around the various dioceses. This motivated the researcher to investigate into how the church manages its funds so that suitable financial management practices could be recommended. There is lack of research undertaken that explains the impact of internal control in religious organisations in Nigeria. Thus, the issue regarding accountability and internal controls in religious organisations in the region have been generally unexplored. Most of the research on church accounting has been conducted in developed economies like, USA, Canada, the UK, etc. and none has been conducted in a developing country setting. The study on internal control as a tool for effective management in religious organization is undertaken to fill this gap.
1.3 OBJECTIVE OF STUDY
The primary aim of this study is to examine internal control as a tool for effective management in religious organization. The sub objectives are;
- To ascertain if the Redeemed Christian Church of God, Nigeria have adequate internal controls systems on the disbursement of funds.
- To examine whether the Redeemed Christian Church of God, Nigeria have adequate internal control systems on the receipt of income.
- To investigate if the Redeemed Christian Church of God, Nigeria have adequate budgeting and budgetary control systems in place.
- To proffer possible solutions to the issues of fraud and mismanagement of church funds in Nigeria.
1.4 RESEARCH QUESTIONS
The following shall be the research question to be treated;
- Does the Redeemed Christian Church of God, Nigeria have adequate internal control systems on the receipt of income?
- Does the Redeemed Christian Church of God, Nigeria have adequate internal controls systems on the disbursement of funds?
- Does the Redeemed Christian Church of God, Nigeria have adequate budgeting and budgetary control systems in place?
- Does the Redeemed Christian Church of God, Nigeria carry out internal check or vouching?
1.5 SIGNIFICANCE OF STUDY
The findings of the study will provide useful and pertinent information for the management, members and beneficiaries of RCCG and other religious denominations in Nigeria. The findings of the study would expose the fraudulent church leaders and stewards thereby preventing fraud in religious organization. The study will provide valuable insights and understanding of financial fraud prevention strategies which will create greater awareness among church leadership and workers and lead to a positive change in attitudes and behaviors. These organizational changes may empower church leadership and workers to deter, prevent, and detect financial fraud in church organizations. The findings may also help the religious leadership of church organizations to adopt business and financial management practices as necessary tools for achieving organizational goals that benefit their members, members’ families, and communities. Future researchers and students will generally benefit from the study findings.
1.6 SCOPE AND LIMITATION OF STUDY
This study on internal control in religious organization shall cover the use of financial auditing in ensuring that orderly efficient manner of operation, adherence to church policies, safeguarding of assets and receiving as far as possible the completeness and accuracy of the records in religious organization. Therefore the researcher limited the study to the Redeemed Christian Church of God, Abundance Parish in Uyo, Akwa Ibom State.
In the cause of the research, there were some hitches that were encountered. These hitches have in one way or the other, directly or indirectly caused some limitations in the research work. Some of the limitations encountered were;
Members Reluctance: In most cases the church leaders and members of the Redeemed Christian Church of God often feels reluctance over providing required information required by the researcher. This result in finding information where the structured questionnaires could not point out.
Researcher’s Commitment: The researcher, being of full time student spent most of her time on other academic activities such as test, class work, assignment, examination etc which takes average focus from this study.
Inadequate Materials: Scarcity of material is also another hindrance. The researcher finds it difficult to long hands in several required material which could contribute immensely to the success of this research work.
1.7 DEFINITION OF TERMS
Internal control: Internal control, as defined by accounting and auditing, is a process for assuring of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. A broad concept, internal control involves everything that controls risks to an organization.
AUDIT TEST: – Test is carried out in the process of auditing to determining the trueness and failure of the transaction.
Financial statement: They are report that summarize the business transaction of a specific time or period usually a year its shows the financial position of the business
COMPUTATION: Checking the arithmetical accuracy of the accounting records or seeking independent calculations.
INTERNAL AUDIT: This is an independent appraisal function within an organization for the review of system and the quality of performance as a services to the organization. It objective is to examine adequacy and internal control as contribution of the proper economic efficient and effective use of resources.
INTERNAL CHECK:- This is an aspect of internal control which is exclusively concerned with the prevention and detection or errors this involve the arrangement of book keeping and other clerical duties in such away as to ensure (1) that no signal fraud is encountered from its beginning to its conclusion by only one person (2) that the work of each clerk engaged upon a task is subject to an independent check in the source of another duties.
FRAUD: the crime of deceiving somebody in order to get money or goods illegally.
VOUCHING: This is comparing the original documents with the entries made in the books.
RELIGIOUS ORGANIZATION: religious organizations are groupings of religious individuals that have a variety of different goals and purposes. In this lesson, churches themselves are the first type of organization. Churches, whether traditional or modern, have structures just like any other organization. Other organizations exist to help the church itself accomplish its goals. Some of these organizations are linked with a particular faith, while others are not.
1.8 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study. Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.
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