Accounting Standards and Transparency Protect Church Funds, Reassure Parishioners

Business-proven best accounting practices reassure parishioners and reduce risk of fraud, embezzlement and misuse of church funds.

Parishes and dioceses can strengthen the trust of their parishioners and protect themselves from financial mismanagement by using accounting practices currently in place in private business. These best practices establish more secure, transparent and accountable ways to share information, process money, convey expectations and address concerns.

An erosion of trust

There are more than 19,000 Catholic parishes in the United States, and in 2007 USA Today reported they handled $6 billion in donations. That report followed a Villanova University study that revealed widespread financial mismanagement at the parish level. Eighty-five percent of respondents – representing 38 percent of Catholic parishes nationwide – said they’d experienced embezzlement in the preceding five years. In response, the United States Conference of Catholic Bishops’ (USCCB) accounting practices committee recommended dioceses hold their parishes accountable for the way they do business. But public backlash continues. In March 2009 the Connecticut legislature introduced a bill that would have forced parishes into financial oversite and changed the legal, financial and administrative structure of the Catholic Church.

This means you

“The church is committed to the highest standards of transparency,” said William Weldon, CFO of the Diocese of Charlotte and chair of the United States Conference of Catholic Bishops’ accounting practices committee. “It’s important so that we can provide assurance to our donors that resources are being used prudently, and as they are intended.”

The American Competitiveness and Corporate Accountability Act of 2002, know as the Sarbanes-Oxley Act, was enacted in response to corporate and accounting scandals like those at Enron and WorldCom.

Although the law was written for public companies, some of its provisions – specifically those regarding whistle-blower protection and record retention – apply to all organizations. Dioceses can also benefit from considering Sarbane-Oxley’s requirements, regarding independent audits, financial reports, internal controls and governance.

In its 2008 revision of Diocesan Financial Issues, the USCCB’s accounting practices committee concludes that it behooves the church to develop best financial practices with the Sarbanes-Oxley Act in mind.

Embrace policies that promote openness

Standardized, professional procedures improve oversight, and by extension, credibility.When parish finance councils meet monthly there’s less chance of issues being “swept under the rug.”

The Diocese of Des Moines recommends its parish finance councils meet at least quarterly and provide detailed budgets and financial reports to their parishioners. Some prefer to exceed the recommendations. The finance committee at St. Theresa Catholic Church in Des Moines has met monthly for the last 15 years, a practice that parish accountant John McMichael says keeps financial issues from being neglected.
Detailed reporting sets tone for accountability

“What we are really trying to achieve is excellence for the sake of mission,” said Diocese of Des Moines Bishop Richard Pates. “(By using best practices) we can enhance the mission of the church and the utilization of financial resources for ministry.”

On its website, the Diocese of Des Moines provides annual audit reports for the administrative offices, Catholic charities, endowment funds and foundations. Diocesan accounting director Tammy Mason says it’s part of a constant dialogue with parishes. Through reporting, workshops and one-on-one education, the diocese fosters transparency while empowering parishes.

The Diocese of San Bernardino collects pledge and progress information for each of its 94 parishes, but rather than hide those numbers away in a file, the diocese posts them on its website. Each parish has a page that includes, among other things, its size, its pledge goal and the amount of money raised toward the goal.
At St. Edward the Confessor in New Fairfield, Conn., database administrator Paula Hart sends parishioners detailed billings for religious education tuition using ParishSOFT’s Religious Education and Tuition software. The software lets her itemize fees and easily track balances for the 25 percent of parishioners who pay in installments, reducing confusion about what people are paying for and where they stand.
Online giving on the rise

According to the Philanthropic Giving Index produced by the Indiana University Center on Philanthropy, online giving rose from less than 10 percent in 2000 to 22 percent in 2007.

Nearly 60 percent of the parishes in the Diocese of Bridgeport allow parishioners to make their offerings by credit card or direct debit from their bank accounts. Parishioners like the convenience, says Pat Krause, project manager in the Diocese of Bridgeport’s Parish Financial Services office. The diocese is gradually implementing ParishSOFT’s Online Giving module in parishes that request Electronic Funds Transfer (EFT) capability. Church offices like the consistency of knowing how much money is coming in each month. Count teams appreciate the lighter burden, and the security of moving money directly from one account to another helps achieve basket-to-bank transparency.

Consistency aids decision-making

By establishing a standard chart of accounts, the dioceses and parishes in Bridgeport and Des Moines are able to base decisions upon apple-to-apples comparisons. The accounting version of “a place for everything, and everything in its place,” the chart of accounts assigns named and numbered accounts to each line on the financial statement. This gives finance councils, pastors and parishioners a consistent frame of reference for all income and expenses and makes reporting easier and more meaningful.

Integrated software saves time, money

The fewer times information must be entered, the less chance there is for misrecording – either intentional or unintentional. When choosing church management software, look for easy integration between programs that handle offerings, pledge drives, tuition and accounting.

Suzanna Colella, census administrator at St. Edward the Confessor in New Fairfield, Conn., dramatically cut the amount of time she spent preparing parishioner tax letters after the parish began using a software package, in this case ParishSOFT’s Offering & Pledges module, to manage its offering information. Colella used to hire a $100-an-hour computer consultant to pull data for the letters. The job involved 6-8 hours of work beyond his existing church contract and the entire project spanned about a month. Now it takes Colella about an hour to end-of-year statements by herself. Offering & Pledges can automatically post batch totals to the ParishSOFT Ledger & Payables module, where a passcode protects accounting period totals from tampering.

“Grace builds on nature,” St. Augustine says. And the mission of the Church rests on the shoulders of those whose natural abilities run her day-to-day operations. Standard business procedures and the technology that makes them easier to accomplish may be the tools of a less obviously spiritual world, but they, too, are the fruit of grace acting on nature—creativity enlisted to solve problems. It only makes sense to take advantage of these tools…and thank God for them.