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Church Finance, Accounting and Reporting - Part 4

Historically, churches have not been run much on professional grounds. Their records have mostly been kept on small papers and exercis...

Historically, churches have not been run much on professional grounds.

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Their records have mostly been kept on small papers and exercise books, which in most cases disappear without proper accountability.

The chaos associated with church accounting and finance has cast a shadow of doubt even on the motives behind the establishment of some of the ministries. Considerable membership has been lost along the way, splits have been witnessed; with people pointing fingers at each other for misuse of public funds!

5. Source Documents:
One of the key components of proper accounting and reporting is the ability to produce primary sources of data. The presence of source documents help to authenticate the genuineness of recorded transactions. They are valuable components of audit trail for both internal and external audits. No matter how “small” a transaction is assumed to be, people must be taught the importance of providing source documents to back up their claims.

Some of the common source documents that the church should be familiar with include:
  • Receipts
  • Invoices
  • Bank deposit slips
  • Bank statements
  • Bank transfer slips
  • Mobile money statements
  • Petty cash vouchers
  • Petty cash returns
  • Cash counting forms
  • Cash submission forms
  • Delivery notes
6. Bookkeeping:
The bookkeeping arm is a primary function that ensures the church’s accounting records are captured in the books of original entry. This function should normally be carried out just after the main church service when transaction memories are still fresh. There church should assign administration officers who possess basic accounting skills for this task. Where available people do not possess accounting qualifications, at least they should receive basic training before embarking on this task. Bookkeeping forms the primary records that will be used in preparing the church’s financial statements, therefore once an error happens at the primary source of entry, chances are very high that it will not be detected along the chain of reporting. Bookkeeping include manning of the cashbook, recording of credit transactions in journals and compiling of asset registers.

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7. Financial Statements:
The administrator and his team should be able to produce basic financial statements at least on a monthly basis. The good practice will be to present a summary of the church’s monthly performance during Big Sundays, with more detailed reports being provided on a quarterly basis. This practice gives the congregants an assurance that their leadership is accountable over its stewardship role on the church’s resources. Most of the congregants may not even understand the financial statements of their church, but the habitual and consistent practice of giving them feedback gives them the much desired comfort!

The set of financial statements should at least include the following key reports:

(a) Income and Expenditure Statement (for church operations)
(b) Profit and Loss Statement (for business operations)
(c) Balance Sheet (showing the church’s assets and liabilities)
(d) Cashflow Statement (showing summary cash movements)
(e) Notes to the Financial Statements (notes on key transactions/records)

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The series continue in Part 5.

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