The Financial Reporting Council (FRC), the government's year-old regulatory agency that replaced the defunct Nigeria Accounting Standards Board (NASB) recently announced that the financial transactions of religious organisations would come under its scrutiny from January next year.
With this development, all religious centres and non- profit organisations would be bound by law to render account of financial transactions of their business subsidiaries. The legal provisions are broad; mosques and churches are among organisations required to make their financial books available for scrutiny by the FRC and, where appropriate, tax assessed and payment demanded. By definition under the FRC, a trading subsidiary is a profit-making venture established by a not-for-profit organisation to meet obligations other than what are specified in its Memorandum of Association filed with Corporate Affairs Commission (CAC).
Speaking during the presentation of Statement of Accounting Standard (SAS) 32, a guide for not-for-profit organisations, Mr Obaze Osayande, FRC Executive Secretary, disclosed that non-profit organisations were expected to key into the International Financial Reporting Standard (IFRS) by January 2013 with a view to ensuring national uniformity in the disclosure of accounts for easy accessibility.
According to him "It had been noticed that a number of entities operating on commercial lines, with charity, are claiming exemption on their income on the ground that the totality of the outfits are charitable institutions". The Companies and Allied Matters Act (CAMA) provides that an organisation is registered either as a public company limited by guarantee, or limited by share. Section 373 of CAMA provides that organisation/company shall prepare account and file report with the Corporate Affairs Commission. On the other hand, non- profit organisations are registered as limited guarantee and do not declare profit.
The enabling legislation for the FRC became operational in 2011 through a bill passed by the National Assembly, repealing the NASB Act of 2003. By the new law, the FRC serves as an independent regulatory body for accounting, auditing, actuarial, valuation and corporate governance in the country. However, the new initiative could present a tough job for the FRC, bearing in mind the sensitive nature of religion in Nigeria. Though neither Holy Books of the big religions explicitly prohibits tax, the Nigerian law, and indeed the laws of most countries, routinely do not tax churches, mosques and other places of worships.
However, the FRC decision is not without merit, given recent innovations in places of worship where substantial income is generated on a regular basis. Added to this, is the growing propensity to affluence on the part of the leadership of non-established church organisations through the soliciting of donations from the public for one project or another.
Those who make such donations deserve to know how their contributions are deployed and into what ventures. There have also been questions raised in recent times regarding the propriety of collecting tithes from poor congregants. Indeed, Pastor Tunde Bakare once noted that certain pastors had become tyrants, oppressors and leaders without care for followers who dutifully and frequently pay tithes but are ignorant of how the collection is spent.
Most places of worship have today gone outside their main calling of ministering to the weak and poor, and providing solace to tortured minds, and are instead engaging in practices that are inimical to real faith. As a matter of fact, some in this category have reacted negatively to the new provisions, likening them to efforts to tax God!
On the contrary however, the law actually grants 100 per cent tax-exemption status to places of worship, but not their investment arms where profit is made and spent without account being rendered to the sources. And it stands to reason too.
Many businesses are now registered and being done under the name of the churches, or mosques, and have ipso facto become tax havens for many businesses under the religious umbrella. This is why the FRC initiative, requiring such profit-making ventures cloaked in religious garb to publicly render their accounts is welcome and deserves the support and cooperation of all. It is important too for the FRC to embark on public enlightenment before enforcing the law, explaining why it is necessary, where it would apply, etc., in order to avoid it being misinterpreted.