APPLICATION OF BUDGETING AND BUDGETARY CONTROL TECHNIQUE IN NON-PROFIT MAKING ORGANIZATION A CASE STUDY OF THE REDEEMED CHRISTIAN CHURCH OF GOD

CHAPTER ONE

INTRODUCTION

1.1. BACKGROUND OF THE STUDY

For many churches, planning and financial budgeting is a way of life while for others it can be seen simply as a ‘business tool’ with no place in church whatsoever. Every non-profit making organization is unique and has its own operating environment and sets of Policies, Visions and Mission statements. As a result, the execution of the policies, vision and mission is subject majorly to the application of budgeting and budgetary control techniques that determines the commencement or progression of its operations, which invariably have significant impact on its overall performance. By definition, non-profit making organization refer to any organization that is dedicated to a given cause and it’s not profit driven. The organization often depends on the employees or volunteers who believe in their cause because it is practically difficult to compete with the private organization or sector`s salaries/wages. Although the executives’ salaries may be high as a way of competing with their contemporary positions in the private sector. To fund non-profit making organization can be a serious matter as they often rely on the external sources, such as gifts, offerings and donations. Successful management of these funds relies greatly on the application of budgeting and budgetary control techniques. Ideally, every non-profit making organization should detail their plans of action – that will ensure a successful running and effective management and control. The process of preparing budget is known as budgeting and this prepared budget is meaningful when it has been executed and a control is put in place to checks whether or not the plans are realized, and a standardized corrective measures deviating or shortfall is occurring.

A non-profit organization is organized for purposes other than generating profit and in which no part of the organization’s income is distributed to its members, directors, or officers. Non-profit organizations are often termed “non-stock corporations.” They can take the form of a corporation, an individual firm (for example, individual charitable contributions), unincorporated association, partnership, foundation, or condominium. Non-profit making organizations include churches, public schools, public charities, public clinics and hospitals, volunteer services organizations, political organizations, legal aid societies, labour unions, professional associations, museums, research institutes and some governmental agencies. Non-profit entities are organized under state law. Some non-profit organizations may also be a charity or service organization; they may be organized as a non-profit corporation or as a trust, a cooperative, or they exist informally. Budgeting has been described as “a complex behavior that has little impact in a sacred environment” (Kluvers, 2010), and a division between the sacred and the secular has been proposed (Laughlin, 2012).

At the same time, it has been suggested that this division can be reduced, but there has been little coverage of this possibility in research on accounting in churches, let alone the concept that budgeting could actually be used to further spiritual goals. While some studies have focused on the acceptance of budgeting in specific religious organizations (Faircloth, 2012), it has been proposed rarely that budgeting has the potential, as a manifestation of holistic stewardship, to be consistent with a church’s sacred agenda and to assist it in achieving its spiritual goals. Berger (2015) asserted that “every human society is an enterprise in world-building” and “religion occupies a distinctive place in this enterprise”. If the prevalence of religion and, by extension, the significance of religious organizations, is accepted, then the way budgeting is treated in these organizations ought also to reveal, at a profound level, something of the inherent nature of accounting. This study of a budgeting system in a church uses Booth’s (2013) framework to consider these issues. Following this, Booth’s three factors are introduced and considered in relation to the church’s budgeting process: the religious belief system; church members and occupational groups; and organizational resources. Each of these is viewed from the perspective of the church’s budget, and assessed in the light of existing research on accounting in churches. This research project will provide an overview of practical approach in the application of budgeting and budgetary control techniques in non-profit making organization using The Redeemed Christian Church of God as the case study.