The Mediating Role of Level of Formalisation on the Relationship between Church Planting Phases and Financial Reporting of the Tanzanian Local Churches.

Abstract

The accounting profession has shown increased interest in accounting for not-for-profit organisations in several countries over the past few decades, which has a corresponding influence on churches’ financial reporting. Many churches struggle with financial mismanagement and a lack of transparency in their financial reporting, leading to mistrust among congregants. The purpose of this study was to assess whether the relationship between church planting phases (surveying, preparing, sowing, cultivating, and reaping) and financial reporting is mediated by the level of formalisation at the local church level. The study collected data from 374 Tanzanian local churches’ accountants, evangelists and pastors in Dodoma, Arusha and Dar es Salaam cities from selected denominations such as the Tanzania Assemblies of God, Evangelistic Assemblies of God Tanzania, Evangelical Lutheran Church of Tanzania and the Anglican Church of Tanzania. Based on Institutional Theory, hypotheses were formulated. The study employed a self-administered questionnaire while using a purposive sampling technique to select participants. To get the sample of interest, the study used probability sampling, namely stratified and simple random sampling techniques. The data was analysed for measurement and structural model analyses using Smart-PLS version 4.0. The study findings reveal that the level of formalisation negatively mediates the relationship between church planting phases and financial reporting of the Tanzanian local churches. This is in lieu that the formalisation suppresses the relationship between church planting phases and financial reporting. Meaning that as church planting increases, the financial reporting tends to decrease due to a low formalisation level. This suggests that the more emphasis or progress there is in planting activities, the less effectively financial reporting is applied or adhered to due to a low formalisation level. For the attainment of effective financial reporting during the establishment of a new church, the local churches should improve their formalisation level. In addition, the study informs Christian denominations on the essence of formalisation to improve the financial reporting of local churches.