January 25, 2007 | Read Time: 3 minutes
Employees or volunteers have embezzled from many Catholic dioceses in recent years, a new study of nearly 80 Catholic dioceses has found.
The study, conducted by Villanova University in Philadelphia and paid for by the Louisville Institute, is based on data provided by 78 chief financial officers, representing about half the nation’s dioceses. Among the respondents, 66 reported embezzlements from 2000 to 2005, with seven reporting that their diocese had been bilked $500,000 or more.
The thefts result largely from a lack of appropriate financial controls, according to the researchers. Lax controls, coupled with the fact that church collection plates include large amounts of cash, produce ideal conditions for embezzlement, they say.
“As a faith-based organization, we’re very trusting of our people. Nobody would ever think of a priest embezzling or a church volunteer embezzling,” says Charles Zech, director of Villanova’s Center for the Study of Church Management and a co-author of the study. “We’ve been too trusting, and we have to learn from our mistakes.”
Abuse Scandals
The findings come at a time when the Catholic Church is working to rebuild trust with followers following multiple scandals involving the sexual abuse of minors by the clergy.
The Villanova study was started after some Catholics said they believed the public would have learned of the sexual-abuse cases sooner if the church had been forced to disclose financial information. Many archdioceses paid settlements to victims that were not disclosed.
Mr. Zech says the study sought to determine the effectiveness of internal financial-control mechanisms in canon law that Catholic dioceses are required to follow. While the Catholic Church’s Code of Canon Law outlines rules that govern management and financial practices, it leaves much of the authority for managing money to the bishops who oversee each diocese.
The U.S. Conference of Catholic Bishops has also created guidelines for diocesan financial management, but the guidelines are not hard-and-fast rules. Individual bishops have the final say in whether they follow any of them in their diocese. As a result, Mr. Zech says, money is handled in different ways from diocese to diocese, and from church to church.
“In some parishes, one person is responsible for counting the collections. The same person deposits the money, and the same person reconciles the checkbook,” Mr. Zech says. “Well, you’re asking for trouble if that is your practice.”
To combat embezzlement, the Villanova researchers recommend that every diocese follow the financial-reporting guidelines of the bishops’ conference. In addition, they write, parishes should conduct annual internal audits that are supplemented with reviews by qualified outside auditors every three years at a minimum, use standardized accounting software, and create fraud hotlines so that church members and employees can anonymously report theft and other financial irregularities.
Guidelines Adopted
The U.S. Conference of Catholic Bishops created its guidelines for financial reporting in 2003, so they covered the later years in the Villanova study, says Kenneth Korotky, the conference’s chief financial officer. They are updated annually, and Mr. Korotky says a growing number of dioceses are using some or all of the group’s recommendations.
“These are guidelines that our accounting-practices committee has routinely put out as best practices,” Mr. Korotky says. “Anecdotally, in terms of the CFO’s I’ve dealt with, quite a few of them have implemented the things we’ve listed.”
The Archdiocese of Philadelphia, for instance, says it has adopted most of the financial practices recommended by the bishops’ conference. In some cases, the Archdiocese says, it exceeds those policies. It gives its parishes a maximum of 24 hours to deposit parish contributions in the bank and requires them to rotate teams of people to make those deposits, ask different groups of workers to count contributions, and assign a separate person to record them.
“The loss of even one penny of parishioners’ or donors’ funds is unacceptable,” the Archdiocese said in a written statement, “which is why the Archdiocese of Philadelphia has stringent financial procedures and controls in place at every level and continually works to improve them.”
A copy of the report is available online.
