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COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

Chapter I

THE PROBLEM AND ITS BACKGROUND

1.1 Background of the Study

1.1.1 Introduction

Management in ecclesiastical organizations are under-studied due to its

different nature compared to business organizations. Because of the assumed sacred

nature of their activities, it has led to a distinct sense of the inferiority to accounting

issues to any non-monetary issues that often result to ignorance of managerial control

of churches’ finances (Myers, 2012; Ahiabor & mensah, 2013).

Internal controls are processes designed to provide reasonable assurance

about the achievement of an entity’s objectives in effectiveness and efficiency of

operations, reliability of financial reporting, and compliance with applicable laws and

regulations (Mawanda, 2008). According to Myers (2012), internal control which is

studied rarely enough in non- profit context has an additional issue to deal with when

placed in a religious non-profit context, called the sacred-secular divide. This divide is

said to lie between spiritual issues in a religious non-profit organization, and the secular

business systems that exist solely to support the sacred issues and other more

important matters of the organization. To make it more complicated, voluntary

relationships and obligations when dealing with financial matters exist in this type of

organization.
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COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

The focus of this study deals with churches, specifically those non-roman

catholic ones that are now very common in the Philippines. Although its relationship

with its members is voluntary or informal, it may affect the organizations financial

actions if an outside party or organization is involved (Petrovits, Shakespeare, and

Shih, 2011). Such as the presence of an audit in the organization may affect or improve

the internal control environment of its financial system.

The different denomination of non-roman catholic Christian churches’ existence

vary to when they were founded and corresponding to its age and population, it may

affect the management control of the organization.

1.2 Objectives of the Study

General Objectives

To assess the internal control and management status of Non-Roman

Catholic churches in the area of Metro Manila regarding the

effectiveness of it to their organization.

Specific Objectives

The study specifically aims to:

1. Identify if some components such as age, members and presence of audit

affects the internal control status of this organizations.

2. Be knowledgeable regarding the different internal control and management

of every denomination of Non-Roman Catholic churches.

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COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

3. Explore if the different Non-Roman Catholic churches have the same

internal control and management status.

1.3 Significance of the Study

A. To future researchers

In line with the objective which is to be knowledgeable regarding the

different internal control and management status of every denomination of non-

Catholic churches. This study will serve as a foundation for future researchers

to spread awareness for them to come up new studies that will improve their

perspective about internal control and management of the said organization.

B. To students

With its focus to assess their knowledge, this study will provide

information to understand and discovering new ideas about the internal control

status of Non-Roman Catholic churches.

C. To minister

This study will provide information regarding the internal control and

management of different denomination of non-Roman Catholic churches. This

study will serve as new ideas for them to be aware about the different internal

control status of Non-Roman Catholic churches in Metro Manila.

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COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

D. To the academe

The study can support the university’s future researchers through the

outcome of the research by providing insights and recommendations in its

objective to be knowledgeable or to widen the information of the public on the

internal control of Non-Roman Catholic Churches. This will help future large-

scale studies in gathering advanced information about the said topic.

E. To the general public

With its focuses to assess their knowledge, this study will provide

information through explaining; predicting, and to fully understand the significant

effect of internal control of the Non-Roman Catholic churches.

1.4 Scope and Limitations

The study will be focused on the Internal Control Status of Non-Roman Catholic

churches in Metro Manila. Different Non-Roman Catholic churches in Metro Manila will

be given surveys to assess their internal cash management.

The study will be based on explaining the information in a descriptive manner

rather than experimental, as no actual experimentation will be performed. The survey to

be given to different Non-Roman Catholic churches contains questions that will help in

assessing the internal control of Non-Roman Catholic churches.

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The research will be limited to selecting 30 respondents from Non-Roman

Catholic churches in the Metro Manila. The purpose of this study is to give information

about the internal control of Non-Roman Catholic churches in Metro Manila.

1.5 Definition of Terms

The following terms were operationally defined in this paper:

Congregational – a form of church government; recognizes the authority of the

people in the church in making the decisions of the church (Duncan et al)

Ecclesiastical – relating to the Christian Church (Myers, 2012; Ahiabor &

mensah, 2013)

Episcopal –  is a hierarchical form of church governance in which the chief

local authorities are called bishops (Duncan et al)

Methodist – a Protestant Christian dedicated to the principles of evangelical

Christianity taught by John Wesley (Merriam-Webster, n.d.)

Presbyterian –  is a method of church governance typified by the rule of

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assemblies of presbyters, or elders (Duncan et al)

Stakeholder – an accountant, group, organization, member, or system that

affects or can be affected by an organization's actions (David Myers, 2012)

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COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY