Saturday, December 30, 2006

Money Trouble

A shocker of a stat, from a recent academic report:
A whopping 85 percent of U.S. dioceses have detected embezzlement over the past five years, according to Villanova University researchers. “No question about it, it’s a large number,” said Charles Zech, director of the school’s Center for the Study of Church Management and coauthor of the 15-page paper, “Internal Financial Controls in the U.S. Catholic Church,” that details the findings. Supported by a grant from the Louisville Institute, Zech and Villanova accounting professor Robert West surveyed 174 diocesan chief financial officers. Seventy-eight responded.

The researchers don’t put a precise dollar figure on how much was embezzled, but the range indicates it’s significant. In 11 percent of the dioceses at least $500,000 was stolen over the last five years (meaning that a minimum of $4.3 million went missing) while one-third of the dioceses reported thefts of under $50,000. “You can only wonder about those [96] dioceses that didn’t respond to our survey,” said Zech.

Dishonest church employees and volunteers are the immediate cause, but the heart of the problem lies elsewhere, say the researchers.

“Unlike corporations which provide quarterly financial statements to the SEC and hold quarterly conference calls with outside analysts, the church is subject to almost no recurring outside financial scrutiny,” according to the report. Further, while “many dioceses provide parishioners with an annual financial and administrative newsletter, which provides a highly summarized view of the cash flows for the year and the results of social and spiritual programs offered by the diocese -- many other dioceses do neither.”

While external oversight of diocesan and parish finances is virtually nonexistent, internal checks are hardly any better. “Only 3 percent of the dioceses conducted an annual internal audit of their parishes,” while “21 percent of the dioceses indicated that they seldom or never audit their parishes.” When such reviews do occur, the researchers say, it’s frequently because a pastor or bookkeeper has ceased working in the parish.

Meanwhile, in more than 10 percent of the dioceses, the chief financial officer is responsible for hiring the external auditor, whose job it is to review the work of -- the chief financial officer. The bishop or the diocesan finance council should hire the external auditor, say the researchers. “It’s one of those controls that is so obvious that you wonder why it isn’t being done,” said Zech.