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Parallax and Paradox

There is a tendency to separately view accounting statements or money from the non-theological (merely economic and accounting) perspective and from the theological (God’s kingdom) point of observation. This split is the parallax. Often this attitude toward money and accounting is characterized by a paradox. On the one hand, existing economic and financial terms are integrated into the theological discourse through translation, while on the other a strict boundary between theology (pastoral concern) and economic rationality and reason (profit/efficiency concern) is drawn through demonization of money and business. For instance, redemption is an economic term that is translated into religious discourse, but when a business strives to redeem its investment in a very calculated and purposeful manner it might draw the ire of pastors and theologians. There is always parallax and paradox when theologians and pastors talk about money or business.

This book aims to reach a space of discourse and practical guidance that transcends the dual issue of parallax and paradox in order to engage the pastor in a comparative, creative sociolinguistic process of translation. In this regard, its purpose is to show how pastors can appropriate accounting and monetary language on the basis of their own theological ideas. In this way, the power of accounting and economic terms and ideas to derail and possibly control pastors’ leadership ethos is limited.

Accounting is Integral to Ministerial Leadership

In order to lead a church effectively, today’s pastor needs some training in basic accounting to equip her with the basic understanding required to appreciate church accounting. She needs to also know how to understand her ministry as an ongoing financial activity. The pastor is not only saddled with the spiritual needs of the congregation, but she must also oversee the legal and financial administrations of the church.1 The buck stops at her desk!

Now this does not mean that she must become a specialist in accounting and law; it means she must be conversant enough with the basics of this field to become an effective leader of her church or ministry. Such knowledge is required to increase her chances of making decisions that will strengthen the financial health of the organization, and improve her overall stewardship of the resources committed and entrusted to her hands.

Besides, she needs to understand accounting, which is the language of business, to communicate with a key constituency of her leadership world: the treasurers, accounting officers, bankers, tax experts, and investment officials who either work for the church or do business with it. Indeed, an understanding of the basic concepts and tools of accounting is essential to function as a competent pastor, who is the chief executive officer of the church.

As a leader the pastor can approach her existence as a “managerial-financial executive” at three levels of movements: acceptance, defense, and transformation.2 The first movement is the pastor to accept her situatedness into the world of finance and accounting as a leader of an organization that receives and disburses money; and she is required to be a good steward of the resources of the church. She needs basic orientation and language to become accepted as a respected leader in the world of accountants, treasurers, and board meetings and for finding her bearing in their tradition. Being respected does not mean being a competent finance manager, but as someone who has preliminary understanding of what the specialists are reporting and recognizing the possibilities of the church accounting function. It means she has made herself a member of the church accounting community, which is part of her purview, and she is in the process of learning. Like a child learning to be accepted in a community, her mistakes are forgiven in the expectation of rectification. Acceptance is the basis for the other movements. At this stage the financial executive-pastor is passive, merely accepting the activity of others. The understanding of the financial situation of the church comes not from the “I” but from the “You” of the experts. The pastor accepts the situation as it is and learns to get around in this environment. Every one of her learning and interactions with the specialists is subordinated to one referent or goal, the survival of the church.

The movement of acceptance as we have stated is only a preparation for later movements, phases of growth in ministerial leadership. The second movement is that of defense or work and struggle. The referent here is for the pastor to gain clarity of the church’s situation. The pastor concerns herself with the financial situation of the church, its interconnectedness to the mission and goals of the church, and what it reveals about what the church really is.

The next movement is opposed to these two church-bound movements. She attempts to break the dominance of mere survival or flourishing of the church for the possibility of relating the generation and use of the resources of the church to the whole earth and human existence. The referent here is the “whole ecology of the church” and the need to transform it. Her financial management is no longer focused on the mere flourishing of the church, but the earth, the whole of the human world as foundation for decision. It aims to change the world in which the church and the life of its members and constituents strive. The finances of the church or ministry, its sources and patterns of expenditures are not just accepted, but they are also questioned in order to know if they are really right and good. When this happens she is in the movement of transformation. She has transcended from the supervision of the “private household finances” to action, to an engagement in the public realm. Money, accounting, and finances are seen as part of the overall social relations of her world and what her church does with them, she believes, affect the social fabric of society. Not that the financial statements her accountant prepares will change, but she begins to interpret them differently in ways that condition her participation in the public realm. To understand the financial oversight or responsibility as a third movement is to integrate it concretely not only into the ministerial leadership, but also into the inner fabric of care of the soul of one’s society (care for justice, for truth; quest for ultimate meaning, movement toward God; life guided by an ideal).

The Seven Elements of Church as an Organization

In order for the pastor to appreciate what it really takes to transform accounting into an act of care of the soul of society, she will need to conceptualize her managerial role in ways that can create and sustain resources, and build bridges with ways by which modern organizations are conceived, perceived, and experienced. I realize that the church is a unique organization, but for the sake of learning and acquiring a new set of competence for effective management, I want us to put aside for a moment the idea that church as an organization (not necessarily as a spiritual entity) is unique and has special problems. I want to take you to the place of the common elements of all businesses or organizations. (Business is used here not in the sense of a profit-making organization, but any entity that receives and gives resources in order to realize its set goals in an effective way.) Every business has seven elements. To change the business or its management style is to change the way we view these elements (severally or jointly) and configure and reconfigure them. The seven elements of church are:

Franchise Recognition

Brand name recognition in the society is the usual form of franchise recognition. Qualitative words such as integrity, holiness, justice, quality, knowledge, history, and strength are important. This recognition creates economic goodwill, which enables a church to better withstand competition and, perhaps, also earn above-average payback on invested efforts. Coca-Cola is noted for its Coke brand, consumers associate Macdonald’s with hamburgers and Sony with electronics. For all these companies, there is a high name-recognition of their brands (service brands as Macdonald’s will say) in the market.

Relationship Strengths

Relationship strengths comprise the membership (client/customer) base that knows the church (and its products and services) as well as the senior people running the church. This strength also refers to the relationships with suppliers and customers.

Personnel

Personnel is the labor force of the church, including the pastor, staff, and volunteers. They represent the human skills and energies of the organization. These people create the relationship base and provide the service (product) skills. A skillful, trained, and well-mannered staff force is a pillar of membership’s loyalty program.

Service (Product) Strength

This is the skill-set that creates competitive niches. The strength of a product depends on technology, quality, pricing (dues and pledges), product range (sacraments, prayers, counseling, liberal or conservative theologies, daycare, short mission trips, environmental actions, deliverance, etc), research and development, and marketing (membership drive and recruitment, reputation management, social justice image).

Capital

Here we reference working capital, equity capital (net assets) and borrowing facilities necessary to run the church.

Organization

The organization includes management, management structure, and infrastructure systems that lead and support the church’s activities.

Global Strength

The facilities outside the church’s country or in the relevant “outside” centers of operation that would enhance product and service capabilities, and build an increasing flow of denominational membership as the “international” market expands are considered global strength. This is the kind of “international” presence that enables it to leverage its infrastructure to benefit from economies of scale and increase and diversify its revenue base. For a business corporation, geographical relationship also refers to regions and areas where the products and services are sold within or outside the country of domicile.

Of the seven we will focus only on just two for now in order to understand the dynamics of interactions of a pair: relationship strengths and products. Not that the other five are not important, but that the insights we will offer on relationship strengths and products will provide analytical framework for the others.

The Relationship-Product Format of the Firm

Every church starts from Box A, which has set of products (services) that it offers to an existing base of membership. When many pastors talk about change processes in churches, they think of only how to deliver current products and services reliably and efficiently. But the pastor wants to either increase membership or draw more resources from the society or both. There are three ways to do that, according to this model. If she decides to work with Box C, she will offer new services (products) to the existing members and in exchange members give more resources (time, money, commitment, satisfaction) to the church. Here the pastor goes further than her counterpart in Box A to better understand what her members need and provide the services and products that meet such needs. She can even revolutionize her organization, searching for products and services that the members might need or truly value in the future but have not yet asked for. Staying ahead of her members is the best way to ensure they do not outgrow her or the church.

Alternatively, she can offer the same old set of services and products to new members, as shown by Box B. This is what churches typically do when they want to expand. They increase their membership drive. Box D is the most difficult place in which to be. The church is both fashioning new services and products as a way to attract new members. The pastor is dealing with new membership and new products.

Accounting and Ministerial Leadership Judgment

All the knowledge we have put forward in this introduction will not be of much help if the pastor cannot “speak” the language of business, of accounting. The pastor needs at least basic training and information to enable her to interpret the church’s financial statements and form a perspective on its future economic well-being. Accounting translates economic relationships between the church as an entity and its members and larger society into quantified concepts and numbers that are easy to grasp. Accounting numbers and ratios are often meaningless if they do not provide the user with a perspective and projection of the future. For accounting ratios and analyses are only needed to guide decision-making that produce future costs and benefits, not to predict the past.

Ratios are supposed to answer as well as provide numeric quantity to questions. Hence the value of a ratio depends on its ability to provide the answers to worded questions. If you don’t ask the right questions you cannot develop the right ratios. If you discover that a particular ratio you are familiar with cannot properly answer a well-worded question, don’t try to twist the ratio. It is just not the right ratio for the problem you are confronted with.

Accounting numbers could be descriptive and normative. Some ratios or numbers allow us to make immediate value judgment, whereas others only describe the organization we are analyzing and do not allow for immediate judgment. Ratios such as growth in equity (net assets; do not worry about it now, it is explained below) are normative. Some may think that a church that is accumulating surplus year in and year out might be doing something wrong. A church that is accumulating interest income on its bulging endowment might be seen as a good steward or as sequestering wealth instead of using it to further the mission of Christ. On the other hand, the net interest margin between its investments and its loans do not allow for immediate judgment. They merely describe the church at a given date.

The pastor also needs to note that accounting numbers or ratios are always about time and relationships. Time ratios measure changes in a particular category in the financial statement over a specific period. But relationship ratios indicate relation between any two items at a particular time. For instance, the ratio of operating expenses to revenues (offerings, tithes, and contributions). As the pastor becomes familiar and experienced with her church’s financial statements, she will gain better knowledge of a church’s economic well-being if she asks two sets of pertinent questions experienced analysts always ask: What is the level? What is the trend? Then she will ask what are the reasons for changes or stability in the ratios identified. With experience, she will develop a knack to identify which ratios to select and examine more closely, and avoid getting buried in the plethora of ratios.

The preceding discussions are meant to whet the appetite of the students and pastors to delve more into accounting and are not meant to turn them into accountants. In fact, this book will not turn you into an expert financial analyst or manager, but give you the basic competence which will allow you to translate the language of your treasury department and finance committee into the ordinary language you understand and thus use financial data for the spiritual and managerial guidance of the church. Do not be afraid, I will hold your hands as we take our first lesson together in the basics of accounting in the next chapter. Relax, I am not throwing you into the deep end; you will only touch the edge of the water with your toes.

A Word on Combined Theology of Accounting and Money

This book aims to provide pastors and seminary students who have no training in accounting and economics with the basic competence they need to understand financial statements and monetary issues in order to lead their organizations and lead them very well. Information and ideas in each chapter will be presented in such a way that the reader does not only gain training in technical matters of accounting and money (economics), but also garner theological-ethical understanding of social issues relating to the disciplinary fields and practices of accounting and monetary economics. Every chapter will have a discussion of an idea or practice, showing that the intersection of accounting/money with lived social life is important for theological-ethical reflection. Unlike some of the leading books on accounting and money for pastors, which put the technical knowledge of finance and theology of money in separate silos, this book integrates them from the beginning. The theological reflections offered in each chapter flow from the discussions of the chapter and are integral to the whole conception of ministerial leadership in the age of finance.

We will start this exercise with a discussion on monetary policy and the rituals that pertain to its enactment and implementation. Even a brief study of monetary policy by pastors and ethicists may serve as a mind or horizon expansion exercise pressed into the service of ministerial leadership and social justice. The issuance of money, the channeling of money as savings, the power of government and banks to create credit and financial instruments to promote productive tangible investments, and the price of money as the orchestra director of inter-temporal decisions are all at the heart of economic growth, poverty alleviation, and social justice.

The ways these factors and matters are handled in any society have a huge distributional impact on people and on the spread of the fruits of growth and development to various classes. Monetary policy should therefore not only be a target of ethical analysis but also of the study of development ethics. Any theologian that takes economic development, income distribution, and poverty seriously must bring monetary policy into the sphere of theological-ethical attention.

Theology in Motion: Rituals of Masters of Washington Monetary Temple

Monetary policy is the mobilization of a people’s monetary resources for the preservation, promotion, and ordering of its work.3 Productive and reproductive work—organization and distribution of rewards thereof—maintains the structure of mutuality of life through which a people shape their lives and cope with their day-to-day problems. Work is therefore a communal moral category, which depends for its sustenance and progress not only on the moral web of interpersonal relationships but also on capacities of persons to participate and on the right relations that are to be maintained among them. The control of the money supply in the economy conditions which work prospers and which work weakens; and so determine “who shall benefit and who shall sacrifice.”4

By affecting work (that is, work and how its rewards can be shared) monetary policy affects the balance of relations arising from the “mutuality of shared being” in the web of communal bonding. This directly makes monetary policy a power or instrument for justice or injustice. “Justice presses the question of concern for the whole network of relations and persons.”5 This notion of justice rejects the impersonal view of justice which limits it to rules and principles in balancing of competing interests in a detached perspective of human relations. It adopts the biblical view of justice as right relations and “the practical unfolding of concern in our relationships and activities.”6

Monetary policy always embeds within it a vision of the moral order and a framework of moral discourse. The goal of the ethical analysis of monetary policy is to identify and expose both the philosophical foundation of that moral order and the thread that holds the framework together.

The making and implementation of monetary policy is an element of group conflict or class struggle. The struggle is not going on visibly as confrontation between bourgeoisie and proletariat, bankers and peasants, “cross of gold” and silver pitchfork, or rich and poor. It is manifesting itself especially in moral terms. The particular moral code that informs and undergirds monetary policy effectively shows on whose side monetary policymakers stand. For instance, many may have failed to notice that the significant preference of the Federal Reserve Board of the United States to fight inflation in place of unemployment has the net effect in the long run of benefiting persons and institutions whose value of financials assets is inversely related to the level of inflation. Falling levels of inflation favor lenders and holders of bonds.7 No central banker or apologist of inflation-targeting central bank would present the matter in this obviously “crude and tactless” way as I have done. He or she would couch the argument in the language of democracy, sound money, rights, and battle against inflation. As Martin Wolf, an editor of the Financial Times of London, puts it: “The inflation tax is the most covert and obscure form of taxation. It is a breech of trust. It is inconsistent with the fundamental democratic principle that taxes should be voted in parliament.”8

The monetary-policy struggle is both mooted and accented by “ceremonies of innocence” and the “rituals of struggle.” Richard Madsen defines ceremonies of innocence as rituals that integrate a wide range of different points of view.9 Ceremonies of innocence is able to unite people of diverse points of view because there is a wide range of possible interpretations that people attach to the acts or dramas performed in a ritual and thus not immediately see diversity in political, social, or economic interest. In America we are used to seeing the Federal Reserve Board make quarterly (periodic) announcements about fundamental interest rate changes; its chairman giving reports on the state of the economy to Congress every six months, and once in a while stepping out of his high temple to make public speeches like warning against “irrational exuberance.” In these acts and speeches, most Americans see a non-politician, “neutral” technocrat making decisions about the directions of the economy and view themselves as different from the other countries where matters of money supply are politicized. The Fed’s rituals is an expression of a “sharply focused sacred” free market doctrine and Americans see themselves or their representatives united on the basis of a common theme of less government. It is not obvious to them that the Fed’s monetary policies are calling them to take a well-defined moral responsibility. They interpret the Fed’s policies in flexible ways and react to them in ways that suit their economic and political strategies.

The biannual collective ritual of the Fed’s chairman before Congress only blurs the “boundaries of their different beliefs and hopes.” If this “ceremony of innocence” is not wrong, it is at best only a half-truth. Many economists have shown that the ritual of monetary policies in America is not a ritual of ceremony of innocence but a real ritual of struggles. Monetary policies “celebrate one narrow set of ideas and turn those who hold them against everyone who does not,”10 dividing Americans into sharply composed camps, those who benefit from the inflation fighting focus of the Federal Reserve Board and those who suffer in the unemployment hangover. There are differential impacts of monetary policies on classes, races, and regions. There are the bankers who share with the government the power of money creation and hence huge profits, and those who do not. Monetary policies pit the present generation (or consumption) against the future generation (investment), the environment against capitalist production. For these economists the moral center does not hold and words of William Butler Yeats rings loud for America: “The ceremony of innocence is drowned;/The best lacks all conviction, while the worst/Are filled with passionate intensity.”11

This notwithstanding, America, like many advanced capitalist nations attaches a sacred aura to its central bank, making it stand for the deepest shared symbol of highest hopes and aspirations of its economy.12 The members of the Federal Reserve Board constitute a technocratic body with individual terms running as much as fourteen years; none is subject to the election cycle and takes no order from anybody.13 It is perched at the top of the “food chain.” It is charged with the sacred duty of protecting the dream of an expanding economy that serves all people as a whole and draws them into a unified intercourse as one big family. The central bank is suspended in a web of significance and meaning which economists, bankers, and politicians have spun. This web constitutes a set of moral discourse with a solid conscious consensus about what is the proper and morally right way to conduct public economic policies.

When even monetary-policymakers and bankers alike are not overtly conscious of their ethics, their decisions and predictions are premised on values and norms that shape their decisions. At the minimum, they harbor views on the determinants of economic outcomes. Contextually, and in general, Americans tend to explain economic outcomes with more emphasis on individual efforts than on luck (partly because of perceived opportunities for social mobility). Alberto Alesina et al have shown that this is not the situation in Europe where the emphasis tends to be put on luck.14 This difference in attitude has definite ethical implications. Americans, unlike Europeans who favor some protection schemes and income redistribution, are willing to tolerate more income inequality and prefer focusing their gaze on equality of opportunity.

Exercises

1. Define and explain the seven elements of business.

2. Describe the importance of accounting to ministerial leadership in the twenty-first century.

3. Using the model of relationship-product for corporation, explain how your church can increase its membership.

4. What do you understand by monetary policy and what are some of the “ceremonies of innocence” deployed to increase public buy-in of actions of the Federal Reserve Board of the United States?

1 For a discussion of the effective management practices of the church, see Wimberly, Business of the Church.

2 I am here drawing from the work of Czech philosopher Jan Patočka (1907–1977).

3. Generally central bankers have significantly pared down this definition, making monetary policy to be only decisions and actions taken to control the quantity and price of money and credit in an economy. They have basically limited themselves to using only three tools: open market operations, setting of discount rate, and bank reserve requirements, and perhaps a very weak fourth tool, moral suasion. “Using these three tools, the Federal Reserve influences the demand for, and supply of, balances that depository institutions hold at Federal Reserve Banks and in this way alters the FFR [federal fund rate]. The FFR is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. Changes in the FFR trigger a chain of market events that affect other short-term interest rates, foreign-exchange rates, long-term interest rates, the amount of money and credit, and ultimately, a range of economic variables, including employment, output, and prices of goods and services.” Liu, “More on the US Experience,” 7.

4. Winter, Community and Spiritual Transformation, 104.

5. Ibid., 45.

6. Ibid., 41.

7. Taylor, Confidence Games, 27–28.

8. Wolf, Why Globalization Works, 274.

9. Madsen, Morality and Power, 22.

10. Ibid., 22.

11. Yeats, “Second Coming,” 211, quoted in Madsen, Morality and Power, 166.

12. Central banking may be described as a form of civil religion—especially in the former West Germany and in the United States. For a good description of civil religion in America, see Bellah, Beyond Belief, 168–89.

13. There are nineteen persons on the board. The President of the United States appoints seven of them for fourteen-year non-renewable terms. The remainder is appointed by the twelve Federal Reserve banks appointed by banks subject to approval by the seven. Only five of the twelve can vote in the Open Market Committee, giving the seven appointed by the president ultimate authority.

14. Alesina et al, “Inequality and Happiness.”