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VOTF National Representative Council
Resolution on
Effective Church Financial Management Systems
August 2007 - Recent media disclosures and an important university study provide
compelling evidence that secrecy, ineffective internal financial controls,
inadequate
disclosure, and insufficient oversight characterize the financial activities,
records, and reports of too many Catholic parishes, dioceses, and Catholic
Conferences (the public policy and lobbying arms of the Church).
Establishing effective Church financial management systems will provide the
financial transparency and accountability necessary to solve these problems.
Moreover, 89 percent of American Catholics want a substantial voice in the
financial decisions of their Church (the National Catholic Reporter, September
30, 2005).
Therefore, VOTF calls on lay Catholics to work in partnership with pastors
and bishops to provide the responsible management of Church financial resources
that justice and good stewardship demand.
Background
The Center for the Study of Church Management at Villanova's School
of Business reported in January 2007 that 85% of U.S. dioceses responding said
that they had uncovered embezzlement schemes over the past five years. More
than 10% reported that the amounts stolen exceeded half a million dollars.
The study reported that the Catholic Church has some of the most rigorous financial
guidelines of any denomination, but found that the guidelines were often ignored
in parishes. Some of the cash that goes into the collection plate does not
always get deposited into the church's bank account because of high-living
clerical life-styles or embezzlement or both.
In January 2007, the Diocese of Bridgeport, Conn., removed the pastor of a
Greenwich, Conn., parish over the expenditure of some $500,000 without proper
documentation. That follows the revelations last year that a prominent Darien,
Conn., priest, Michael Jude Fay, had walked off with $1.4 million to bankroll
a luxurious lifestyle of New York trips and Florida vacations with a male friend.
In Virginia, a priest was accused of stealing $600,000 to help support a woman
who may be his wife, while last September two Palm Beach, Fla., priests were
arrested for allegedly stealing $8.6 million from their parish. In Boston,
priests’ trust has been shaken by pension fund mismanagement.
On January 18, 2007, the Accounting Practices Committee, a group of lay experts
who advise the United States Conference of Catholic Bishops (USCCB), called
for tighter internal controls over finances in the nation’s more than
19,000 parishes.
Many of the recommendations of the Villanova Center for the Study of Church
Management, as documented in Internal
Financial Controls in the U.S. Catholic Church, and of the bishops’ Accounting
Practices Committee
have been incorporated in the general and specific recommendations that follow.
General Recommendations
-
VOTF strongly advocates the establishment of sound financial management
systems, policies, procedures, controls, and practices at all levels of the
Catholic Church, including parishes, dioceses, and Catholic Conferences,
that provide enhanced financial accounting, full disclosure of financial
information, and effective oversight.
-
Policies, procedures, controls, and practices should be documented,
maintained current, available on the Internet, and provided to Church
members upon request.
Documentation should include a detailed description of financial controls,
tools, standards and procedures.
-
At all levels, financial statements should be prepared on a consistent
basis from year to year, in accordance with Generally Accepted Accounting Principles
(GAAP), published on a timely basis including comprehensive and informative
footnote disclosure. Disclosure of financial information should be accurate,
detailed and comprehensive.
-
At all levels, policies should be implemented to guard against fraud
and embezzlement, protect whistleblowers (e.g., by establishing communication
channels
for church workers to report suspected irregularities or fraudulent activities
while protecting their anonymity), and report all suspected cases of fraud
to law enforcement authorities.
-
At all levels, policies and procedures should be designed and implemented
to provide effective oversight, with significant participation by knowledgeable
lay persons, in the development, monitoring, and improvement of financial management
systems.
-
At all levels, high priority should be given to identifying and correcting
deficiencies in current financial systems. Specifically, VOTF recommends that
initial improvements to parish, diocesan, and Catholic Conference financial
systems be completed by December 31, 2008.
-
Catholic conference financial policies should ensure full disclosure
of all expenditures for legislative initiatives.
Specific recommendations for parishes, dioceses, and Catholic Conferences:
Parishes
Parish financial management systems should provide
for:
-
Effective parish finance councils, as required by canon law. The council
should include members with knowledge and experience in parish finances and/or
financial management (e.g., financial managers, accountants, or business
managers and owners). Members of the council should represent a cross section
of the
parish community and include members that are elected by the parish community.
-
Thorough training for parish finance council members relative to their
roles and
responsibilities.
-
An open budgeting process that solicits input from all members of the
parish
community.
-
Effective security controls over all revenue and disbursements, especially
with
respect to cash and cash equivalents. Examples of such controls include church
ushers securing money in tamper proof bags with numbered seals; rotating money-counting
teams; separation-of-duties standards, such as ensuring that bookkeepers recording
the funds aren't the ones counting and depositing them; pre-numbered receipts;
and two signatures on checks for large disbursements.
-
A system of internal controls, including those to prevent embezzlement.
-
Preparation of annual audited or compiled financial statements by an independent
CPA in conformity with Generally Accepted Accounting Principles (GAAP) and
made available to the parish community.
-
Full, supplemental disclosures including:
-
- Monthly or quarterly financial reports including a balance sheet
and income statement (receipts and disbursements.)
- Preparation of an annual budget (approved by the parish finance
council) that is made available to the parish community.
- Annual report to parishioners from the parish finance council containing:
i) the names, brief background, and expertise of parish finance council
members; ii) dates when the council met; iii) date(s) when the approved
parish financial
statements and budget were made available to parishioners during
the preceding fiscal year and when they will be made available during
the
current year.
- Periodically, but at a minimum, every 5 years, a detailed statement
itemizing the estimated fair market value of assets owned by the
parish.
Dioceses
Diocesan financial management systems should
provide for:
- Diocesan financial councils including members with experience and expertise
in financial management (e.g., financial managers, accountants, business
managers). VOTF recommends that diocesan financial councils include significant
representation
by persons elected by parishioners, parish councils, parish finance
councils, priests and religious communities.
- An open budgeting process that solicits input from parish councils,
parish finance councils, and other members of the diocese.
- A system of internal controls, including those to prevent embezzlement.
- Preparation and issuance of audited financial statements conducted
by an independent CPA in conformity with Generally Accepted Accounting
Principles
(GAAP). VOTF recommends that the CPA firm be changed periodically
(e.g., every 3-5 years)
- Diocesan policies should include a conflicts of interest policy
and require selection of the diocesan auditor by a person other
than the diocesan chief
financial officer.
- Financial accounting and reporting systems should comply with
the existing guidelines in the Diocesan Financial Issues document
approved
by the
United States Conference of Catholic Bishops. In addition, we recommend
the use,
as appropriate, of the work products of the National Leadership
Roundtable on
Church Management and VOTF’s Structural Change Working Group,
and other best practices (e.g., Business Administration - Best
Parish Practices
published
by the Archdiocese of Chicago).
- Full, supplemental disclosures including:
- A description of the ownership/affiliation structure of all
diocesan and parish entities.
- Receipts and disbursements of diocesan appeals and appeals
of all diocesan-related entities.
- A description of the pension plan for priests and
other Church workers including financial statements,
vesting rules,
actuarial
assumptions and portfolio performance.
- Financial disbursements to other Church entities,
including the Vatican.
- A schedule of financial support provided to and
by Catholic Conferences for lobbying activities,
including with regard
to legislation designed
to extend, temporarily suspend, or eliminate civil
or
criminal statutes of limitations
on child sexual abuse suits, reporting child abuse,
or other legislation designed to protect children
from sexual
abuse.
- Payments to and contracts with public relations
firms and a description of the activities for
which these firms
were
engaged including amounts
paid to defeat legislation designed to extend,
temporarily suspend, or eliminate
civil or criminal statutes of limitations on
child sexual abuse suits, reporting child abuse, or other
legislation
designed
to protect children
from sexual
abuse.
- Costs and detailed information associated
with all insurance policies, and any amounts
invested
in self-insurance
programs.
- Description of lawsuits and liability claims
filed against the diocese, the costs of defending
such
claims, including
fees paid
to lawyers, any amounts
paid to claimants, and receipts from insurance
companies in settlement of claims.
- The number, names, and costs associated
with each known, admitted, or credibly
accused priest
and/or
other church worker
who has
been credibly accused of
sexual crimes against children and vulnerable
adults and who are still receiving financial
support from
the Catholic Church.
- Periodically, but at a minimum every
5 years, a detailed statement itemizing
the
estimated
fair market
value of
assets owned by
the diocese.
Catholic Conferences
Catholic Conference (and other similar Church lobbying
organizations) financial management systems should provide for:
- Full annual disclosure, on a line item by line item basis, of all
receipts and sources of receipts for all legislative initiatives.
Full annual disclosure,
on a line item by line item basis of all expenditures made for legislative
initiatives. The disclosure of expenditures should include, but not be
limited to, payments made to legal, lobbying and public relations
firms as well as
the purpose of such expenditures.
- Full annual disclosure of the amount of financial or other support
each state (or inter-state) Catholic conference receives from each
diocese.
SPONSORED BY
- Frank Douglas, VOTF National Representative Council, Region 13 (AZ, CO, NM,
UT, WY); frankdouglas62@yahoo.com
- Robert M. Bell, VOTF, Sedona, AZ; rmsbell@esedona.net
- George Bouchey, VOTF Greater Philadelphia, PA; georgebouchey@comcast.net
- Don Brophy, VOTF-New York City; d.brophy@rcn.com
- Tom Byrne, VOTF Cleveland-Akron, OH; Member, Legislative Accountability
Advisors; byrne351@yahoo.com
- Terry Carden, VOTF-Tucson, AZ; tscii@comcast.net
- Betty Clermont, VOTF-Atlanta, GA, Vice Chair; bettyclermont@hotmail.com
or bettyclermont@yahoo.com
- Daniel E. Dick, VOTF, Worcester, MA, Victim Support Person;
d.dick51@verizon.net
- Lynette Frankovich, VOTF-Midland, MI; frankovich4@yahoo.com
- Herman Guenther, VOTF-Tucson, AZ; hermanguenther@aol.com
- Jim Jenkins, VOTF National Representative Council, Region
11 (CA, HI, NV); jjenkinsphd@earthlink.net
- Chuck Miller, VOTF National Representative Council,
Region 4 (DC, DE, MD, VA); chuck-judy@starpower.net
- Judy Miller, Chair, VOTF Montgomery County Maryland
Affiliate;
chuck-judy@starpower.net
- Rich Moriarty, VOTF National Representative Council,
Region 4 (DC, DE, MD, VA); moriarty80@cox.net
- Ken Nielson, VOTF of Palm Beach County (FL);
kennielson@aol.com
- Hugh O’Regan, VOTF National Representative Council, Region 11 (CA,
HI, NV); hughsf164@comcast.net
- Stephen A. Sheehan, St. Ignatius of Loyola
Parish Affiliate and Boston Sidewalk Affiliate;
Co-Founder,
Survivor
Support National
VOTF Working
Group; sheehan1777@aol.com
- Patricia Leonard Shumate, Member, Pax Christi
Catholic Church, Littleton, CO; shumatesco@att.net
- Dom Tomasso, VOTF-Tucson, AZ; tomassotucson@cox.net
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