Accounting and Money for Ministerial Leadership. Nimi Wariboko
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(or net asset) by showing movements in revenues and expenses. The statement of cash flows explains the changes in the cash and cash equivalents in the balance sheet in a given period of time.
Fund Accounting
This statement shows the sources of fund of the church and how it was used to achieve its goals and objectives. Usually a separate chart of accounts is maintained for each of the funds of the church. The report is designed not to show the profitability of the church, but to highlight accountability.
Auditor’s or Accountant’s Report
It is often surprising how many people ignore the Accountant’s Report. It should be the first thing to check, to see how well the church has followed generally accepted accounting principles (GAAP) in preparing the report. The auditor’s opinion, if there is one, should also be read whether it is clean or otherwise. The auditor’s opinion does not assure that the numbers in the Annual Report are 100 percent correct, but at least it is comforting to know that somebody has taken a look at them before you and there are no material errors.
Footnotes
The footnotes are very important. Accountants often tuck away important information in the fine print in the footnotes. Read everything. To be able to give a reasonable verdict on the quality of a church’s financial statements and indeed its economic health, you have to comb the footnotes.
This concludes our brisk survey of the Annual Report. But remember, this book is not aimed at making you an expert on the understanding and interpretation of financial statements. You are not an expert yet; so do not fire your church accountant or treasurer.
Sample Balance of Andover Hill Church
Andover-Newton Hill Church
Balance Sheet
May 31, 2013
| 2013 | 2012 | |
| Assets | ||
| Current Assets | ||
| Cash and Cash Equivalents | $161, 586 | $119, 427 |
| Noncurrent Assets | ||
| Property and Equipment | ||
| Parsonage | 375, 501 | 360, 186 |
| Musical Instruments | 33, 862 | 16,000 |
| Office Equipment | 28, 553 | 26, 444 |
| Other Assets | 15, 678 | 13, 650 |
| Less Accumulated Depreciation | (28, 740) | (31,500) |
| Net Property and Equipment (P&E) | 424,854 | 384,780 |
| Total Assets | $586,440 | $504,207 |
| Liabilities and Net Assets | ||
| Current Liabilities | ||
| Prepaid Pledges | 16, 277 | 10, 838 |
| Account Payable | 22, 580 | 15, 093 |
| Total Current Liabilities | 38, 857 | 25,931 |
| Long Term Liabilities | ||
| Mortgage and Loans | 38,954 | 30,600 |
| Total Liabilities | $77,811 | $56,531 |
| Equity (Capital, Net Assets) | ||
| Unrestricted Assets | 65,146 | 50,998 |
| Donor Restricted | 18,629 | 11,898 |
| Represented by P&E | 424,854 | 384,780 |
| Total Equity | $508,629 | $447,767 |
| Total Liabilities and Equity | $586,440 | $504,207 |
As you might have noticed, the numeraire or the “programming language” of accounting is all about money. It is the preferred method of recording information about a church’s or corporation’s activities. The structure of the flows of economic resources manifests itself to us only as dollar signs. Money is the key to the structure of existence of a corporation, and even its manifest potentials and latent possibilities. For a resource to be at all and be manifest to the reader of accounting it must be monetized.
In the world of accounting we have assets and liabilities, which are recorded in ledgers and journals. The entries in the ledgers and journals presuppose dollar values, economic worth. The values presuppose numbers (exchange ratios). Accountants see money as mere numbers. There is a whole pattern: numbers, ledgers, things. Money is a relation between things. But this is not the only way to understand money—at least for pastors and theologians who do not want to take mathematics as the model according to which we can measure relations between human beings. Thus, it is germane to take a moment to grapple with an alternative conception of money.
What is Money?
Neoclassical (mainstream) economists have a simple definition of money, in spite of their ever-raging debates about how to measure and account for fluctuations in the demand and supply of money and how to specify the appropriate quantity of money an economy needs to generate and sustain inflation-free full employment. Money is any convenient commodity (good, paper, thing, etc.) that serves the following functions: acts as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment.16 This is a very functionalist definition of money—for money is what money does. Economists consider money as anything that performs the functions of money. In this way, economists link the existence and nature of money to functions of money.
The theoretical understanding of money in modern capitalist economies is centered around the “intrinsic” commodity nature of money; that is, money as representing only exchange ratios, as a neutral veil, and as only a medium of exchange. In the mainstream (neoclassical) economic view, money is essentially either a natural commodity or a symbol of a natural commodity: a commodity that can be traded for all other commodities. Whether this commodity is gold, cigarette, or paper is not really the issue; whatever it is, it merely symbolizes the underlying exchange ratios between tradable commodities. It is a veil over the “real” economy, having no economic force sui generis. Eminent economist and Nobel laureate Paul Samuelson writes: “even in the most advanced industrial economies, if we strip exchange down to its barest essentials and peel off the obscuring layer of money, we find that trade between individuals or nations largely boils down to barter.”17
The economists’ definition of money views money as serving as universal measure of values (in its unit-of-account function) by which all qualitative differences are converted into quantitative difference, thus desiccating all social ties. Classical social thinkers like Karl Marx, Max Weber, and Georg Simmel in different ways interpreted money as “the very essence of our rationalizing modern civilization” and “a tool of rational cost-profit calculations.” It is a rational instrument without much “cultural significance” (that is, without much qualitative differentiation, earmarking, personalizing, and non-homogenization), focused only on “arithmetic problems.”18 The general idea is that money and monetization, the twin battering rams of capitalism, have been very successful in transforming “products, relationships, and sometimes even emotions into an abstract and objective numerical equivalent” all over the world.19 Though Marx argued that the objective relations between commodities are the phantasmagoric forms of social relations between people, he still viewed money, a “god among commodities,” as the radical, frightful leveler that desiccates all social ties and spaces.20
Against this extraordinarily narrow concept of homogenous money, some sociologists, namely Viviana Zelizer, have attempted to formulate a more substantial institutional and cultural account of money. They have vigorously put forward the notion of the diverse nature of money, asserting that monetary exchanges are thickly social, cultural, and relational. Sociologists have argued that all monetary phenomena are socially contingent. They posit that money is not a neutral, nonsocial substance and that it is influenced everywhere by culture. They have countered the mainstream neoclassical economic perspective that regards money as a given and as nothing more than a lubricant between “real” goods in order to reveal the meaningful social relations among persons or groups in monetary transactions.
For instance, Zelizer