If you GOOGLE or BING “Catholic Diocese and audited financial reports” you will find pages and pages of dioceses in the United States that provide annual CPA audits on their website or in separate reports available on the internet. Yet if you personally ask to see your own diocese’s audited annual report you maybe refused. So what is going on? ANSWER: It all depends on the diocese and the bishop.
The following information from Villanova University gives an excellent primer how American Catholic diocese are as open and transparent as the local bishop allows. http://www.villanova.edu/business/assets/documents/excellence/church/catholicchurchfinances.pdfI
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Internal Financial Controls in the U.S. Catholic Church
One of the by-products of the recent U.S. Catholic Church clergy sexual abuse scandal
was a new focus on the Church's financial transparency and accountability. As the
scandal unfolded, parishioners learned that in some dioceses, payments related to the
scandal had been taking place for years. Some of the payments went to victims in the
form of settlements or to pay for counseling; some went to pay for the "rehabilitation" of
priests accused of pedophile; and some funds were paid out in lawyers fees. The vast
majority of Catholics was unaware of these payments, and therefore surprised by the
magnitude of the scandal. A number of parishioners pointed out that, if the Church had
been more open in its finances, the expenses associated with clergy sexual abuse, and
hence the nature and magnitude of the problem, would have been uncovered much sooner
than it was. This might have caused church leaders to take action sooner and prevent
some of the abusive behavior, especially that by repeat offenders.
As parishioners became more aware of the lack of financial transparency and
accountability, they clamored for some institutional controls and mechanisms to address
this issue. After further investigation, it was learned that Catholic dioceses (and to a
lesser extent, Catholic parishes) were subject to a variety of internal financial control
mechanisms embodied in canon law. Once this became well-known, the focus shifted to
the degree of effectiveness of these mechanisms.
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Diocesan Financial Controls
From a doctrinal perspective the Catholic Church is highly centralized under the authority of
the pope and his bishops. However, from an administrative perspective the church is quite
decentralized with each diocese and each parish within the diocese having a fair amount of
autonomy. Dioceses have virtually no external or regulatory oversight of their financial
statements. 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. Many dioceses voluntarily post their audited annual
financial statements on their website at the conclusion of the year-end audit. Additionally,
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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. But many other dioceses do neither.
Since they are not required by law to be transparent and accountable in their finances, they
choose to keep their finances private.
The primary document governing the Catholic Church is the revised Code of Canon Law,
which became effective in 1983. Canon law contains a number of provisions directed at
good management and financial practices. For example canon 1284 requires Church
administrators to carry out their responsibilities with the prudence of a "good householder".
As a hierarchical church, the buck stops with the bishop, who can delegate authority but not
responsibility. Hence, it is imperative the bishop take responsibility for ensuring that an
effective system of internal controls is in place.
The primary diocesan institution to monitor diocesan finances is the diocesan finance
council (DFC). According to canon 492, each diocese is required to establish a DFC, to be
presided over by the bishop or his delegate. Other canons delineate the DFC's
responsibilities. These include:
• Final preparation of the annual diocesan budget (c. 493)
• Examine the diocesan annual income and expense report (or annual audited financial
statements (c. 494)
• Advise the bishop on the appointment of (and if necessary, removal of) the diocesan
finance officer (c. 494)
• Assist the bishop in reviewing annual reports submitted by clerical and lay
administrators (c. 1287.1)
• Advise the bishop on both real and financial investments (c. 1305)
• Approve the sale of property at or above the amount established by the United States
Conference of Catholic Bishops ($1 million for dioceses with more than 500,000
Catholics, $500,000 for smaller dioceses) (c. 1295).
In addition to the activities specified by canon law, bishops might also consult with their
DFC's on other important financial matters, such as the appointment of an external auditor,
employee compensation and benefits, property management, fundraising, and banking
arrangements.
There must be at least three members on the DFC, and each is appointed to a five year term
(c. 493).
In addition to canon law, the United States Conference of Catholic Bishops (USCCB) has
established recommended guidelines for diocesan financial management. Unlike canon law,
with which in theory bishops are required to comply, the USCCB guidelines are just that --
guidelines. Individual bishops can abide by them in whole or part, or reject them entirely.
In 1995, the USCCB's Committee on Budget and Finance published Diocesan Internal
Controls, which was meant to serve as a framework for dioceses. In addition to providing
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guidance on specific issues faced by dioceses, the Committee recommended that the
USCCB develop a structure for bishops to provide support for one another while still
respecting the right of each bishop to manage his own diocese.
Based on this recommendations, the USSCB in 2001 approved a resolution requiring each
bishop to submit to his metropolitan archbishop the names and professional titles of each
member of the DFC, the dates of their meetings during the last fiscal year, and a statement
signed by the DFC members that they have reviewed and discussed the financial statements
of the diocese.
In 2002 the USCCB approved Diocesan Financial Issues, a 213 page handbook that was
meant to supplement the Guide to Preparing Nonprofit Financial Statements (Cline,
Paschall, Eason, 2006). The handbook covers a variety of issues, including those affected
by both Church and civil law, but also includes the role of DFC's and the effective use of
internal controls.
Church law grants the diocesan bishop ultimate responsibility for managing his diocese.
Each bishop chooses the extent to which he abides by USCCB guidelines.
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