Some features of church operation and management in Hungary: accounting aspects

Abstract

Churches are classified as NGOs (non-governmental organization) based on their operation, as they are self-organized social organizations that operate in a non-profit and independent manner independently of government and serve the public good in a voluntary manner. They manage in a non-profit way, since the results of their operation are not distributed, but reinstated for the purposes specified in the charter. The principles of bookkeeping and reporting are set out in Act C of 2000 on Accounting (‘the Accounting Act’). According to Section 3 (1) of the Accounting Act, these churches also fall into the category of "other organizations". The speciality of churches is that there is a segment in their management where external control is not implemented; such are religious incomes. In the case of enterprises, all revenue and expenditure must also be controlled by external entities. The authorized share capitalis "the property made available to the ecclesiastical legal person at the time of its foundation and given to him by the ecclesiastical legal entity" (Government of Hungary, 2013). The subscribed but unpaid capital thus does not exist among the established churches. The change in capital is an element replacing the capital and profit and loss reserves specified in the Accounting Act. The valuation reserve is only the value adjustment reserve because the rules for real-world valuation cannot be applied by the established Church. The ecclesiastical legal entity does not have to prepare an additional annex, business report, nor does it have to deposit its accounts. Churches can decide on disclosure and its form in their accounting policies, instead, whereas companies are obliged to disclose their results,  in particular a public body can also control over their management.