The Church and the Accountability Question

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The recent resignation of the General Overseer of the Redeem Christian Church of God (RCCG), Pastor E. A. Adeboye, has generated so much controversy and raised a number of questions. Foremost among these questions are:

  1. Should the Church open its accounts for public scrutiny?
  2. Should the Church pay tax?

But let us, first of all, understand that the issue that led to the resignation of Pastor Adeboye has much to do with corporate governance legislation and nothing to do with financial regulations. The question of whether or not the State has the power to enact legislations to regulate the internal administration of the Church is a constitutional matter. However, let it be known that the Church, being a part of the organized society, cannot operate without any form of official guidelines. The Jonestown massacre is not a myth and it can happen anywhere, especially with the current state of despondency in our society. That is where I do not agree with those who say that the Church is only accountable to God.  Isn’t every Church supposed to be registered with the Corporate Affairs Commission?

The Church may be accountable to God on spiritual matters, but when it comes to the management of its finances, every Church is under obligation to render accounts to its stakeholders (members) who are the primary financiers. The Church, after all, is run by human beings who are fallible. A few years ago, we had the case of a popular UK-based Nigerian pastor who ran foul of the UK’s tax law and had to be called to answer questions just because his church finances were not being handled in a manner compatible with its status. In fairness to all, I do know that the Anglican Church, for example, has a tradition of reading financial statements to its members every Sunday during service.

However, the issue I want to address in this article is not that of corporate governance; it is the issue of whether or not the Church should pay tax. And let us know that what applies to the Church also apply to the Mosque.

Based on accounting Standards and policies, there are five categories of accounting entities:

  • Publicly-quoted (or Listed ) companies
  • Companies with significant public interest
  • Small and Medium Enterprises (SMEs)
  • Public Sector Entities
  • Not-for-Profit Entities (NFP)

Due to the need to safeguard other peoples’ investments, publicly quoted entities have come under more scrutiny than any other category. When the International Accounting Standards Board (IASB) issued the International Financial Reporting Standards (IFRS), the primary target was publicly quoted companies. Apart from the stringent recognition and disclosures requirements imposed by the IFRS, there are national regulators watching and monitoring activities of these entities. Why? It’s all in the interest of the public, especially those who invest in these companies. The same IFRS policies apply to both the listed entities and entities with significant public interest.

The International Accounting Standards Board (IASB) has also issued a scaled-down version of its standards for Small and Medium Enterprises (SMEs), called IFRS For SMEs. This version of the IFRS has fewer disclosure requirements with simplified measurement policies.

Public Sector accounting and budgeting, on the other hand, are guided by the International Public Sector Accounting Standards (IPSAS). IPSAS, which is administered by the International Public Sector Accounting Board (IPSAB), stipulate all the policies and criteria for measurement, recognition, and presentation of financial information by public sector entities (the three tiers of government and all Ministries, Departments and Agencies of government) for the benefit of the “People.” Nigeria adopted both the IFRS and IPSAS on July 28, 2010.

Under the Non-for-Profit (NFP) entities we have the Church, Mosque and Non-Governmental Organizations (NGOs). Although IASB has recognized the need for issuing a separate set of Standards for the NFP sector, no such Standards exist at the moment. Not-for-Profit entities are, however, encouraged to apply IFRS for SMEs. The absence of distinct Standards for NFP entities could also open the door for national accounting standards setting bodies, like FRCN, to promulgate standards for NFP entities.

Accounting standards deal more with the classification, recognition, measurement and presentation of financial information, while taxation is more of a legislative matter. The Church, as an institution, is not exempted from taxation; the only issue is what should be taxed and what should not be taxed. To avoid multiple taxations the Church must be exempted from paying tax on revenue from Non-Exchange Transactions, which include:

  • Offerings
  • Titles
  • Donations
  • Levies
  • Pledges
  • Other contributions by members

However, any revenue which arises as a result of Exchange Transactions (transactions which involved the provision of goods or services in exchanged for money) must be taxed according to the relevant corporate laws. So, the challenge before the Church, Mosque and NGOs now is for them to separate revenue from Exchange Transactions from that of Non-Exchange Transactions. This separation will also enable proper application of Withholding Tax. Value-Added Tax (VAT) is applicable to all VATable goods and services, irrespective of whether they are meant for spiritual or temporal use.

Another tax which the Church and related institutions are obligated to pay is Personal Income Tax, also known as Paye As You Earn (PAYE), from its employees. No church worker, including the pastors, is exempted from PAYE except those rendering voluntary services without any compensation either in cash or in kind.

Nigeria’s problem is not really that of legislation; it is the absence of enforcement or selective enforcement. What is good for the goose is not always good for the gander here. We need a uniform and consistent enforcement, which must begin with government obeying its laws. For example, the government expects private companies to comply with the International Financial Reporting Standards (IFRS) which is designed to protect a minute percentage of the populace, but the same government is yet to comply fully with the provisions of the International Public Sector Accounting Standards (IPSAS), which are meant to bring transparency and accountability to public finances, for the benefit of the general public. The Medium Term Expenditure Framework stipulates quarterly publication of its reports. How often does the government do this?

Most Nigerians are law abiding citizens who will gladly and willingly contribute to the growth of the economy. But the government has openly encouraged lawlessness and laziness by not complying with its own laws and, quite often, through selective enforcement of its laws. Our government should be ready to lead by example. Change must begin with the government!

About Uso Etim

Etim Uso is a systems analyst and a programmer with over 20 years of experience in the design and implementation of financial and business solutions. He is an IFRS/IPSAS systems specialist, and holds a Bachelor of Technology degree in mathemetics and computer Science from the Federal Univeristy of Technology, Owerri, Nigeria. He also holds a Certificate in Entrepreneurial Management from Enterprise Development Centre (EDC) of Pan-Atlantic University, Lagos. He has contributed to a number of discourses on important national and international issues, including the Nigeria Leadership Initiative's (NLI) White Paper (Volume 2) on Nigeria tax system. He was a guest columnist for the Nigeria's Businessday Newspaper throughout 2012, writing weekly on International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS). Mr. Uso has written a number of books and eBooks on accounting, including the following, all of which are available in the Amazon Kindle store: 1. IFRS Accounting Manual for Small Businesses 2. IFRS Accounting Manual for the Real Estate 3. How to Master IFRS Accounting for Hotels with 3 Easy Steps. is his blogging and marketing platform on financial and business solutions.

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