Wednesday, 22 August 2012

Australian Church finances: in a mess like the US?

A reader drew my attention yesterday to an Economist article and a response to it on the (seriously messed up) state of US Church finances, in large part due to huge payouts for abuse claims and a long history (it is claimed) of mismanagement and misappropriation.

The Economist story

The main point of the story was that in some dioceses, it is claimed, bishops raided parish accounts, priest's pension funds, misused donations and attempted to asset strip their dioceses in order to avoid the bad publicity of ending up in court or to otherwise meet the costs of abuse claims.

In other places, The Economist suggested, dioceses have pushed money out of central funds and into other diocesan entities in order to avoid having to give the money up when declaring bankruptcy (as eight US dioceses have to date).

All this could happen, the Economist argues, because of often poor financial management processes, and because while parishes and other diocesan entities may be technically separate from the diocese, in reality the diocesan authorities have a great deal of control over them through trustee and other such arrangements.

Did the Economist get it wrong?

Using a combination of guestimates and what hard evidence is publicly available, such as bankruptcy filings, the Economist did one of its excellent 'paint the big picture' stories trying to give an idea of the size of net worth of the Church's financial operations in the US, and then teas out some of the issues in its operations.

Overnight, the issue has exploded in the US, with conservatives denying that there are any problems, and claiming the Economist has misunderstood the nature of the Church as an entity. 


Personally I'm with Rod Dreher on this.  The Economist wasn't, as far as I can see, suggesting that the US Church was one legal entity or operated as such, or that it should operate like Walmart as one respondent has claimed. 

Moreover, it does act in a co-ordinated fashion at times - like say in resisting Obamacare's contraception coverage requirements!

Indeed, in Australia we have just celebrated the fiftieth anniversary for the 'Goulburn strike', where Catholic schools obtained state funding by threatening to flood the state system with students (and actually doing it in the town of Goulburn for a few weeks to make the point).

It seems to me to be naive indeed to suggest that the overall size of the Church's operations isn't something it uses for lobbying and other purposes, or that the Church should only focus on data like the number of ordinations rather than also keeping track of how much it costs to actually ordain  a priest! 


Moreover, there are many more examples the Economist could have cited of what looks awfully like outright malfeasance.

Archbishop Rembert Weakland of Milwaukee's (still listed as Emeritus Archbishop of his diocese) payout of $450,000 from diocesan funds to his former male 'lover' immediately springs to mind for example.

And indeed this case illustrates the tensions around the financial pressures of the abuse crisis.  On the one hand, at least some of the victims seem entitled to some financial reparation for what happened to them.

On the other, neither the priests who were abusers, the bishops and other officials who covered it up, or the seminary instructors who failed to teach morality/weed out unsuitable candidates are likely to have much by way of personal assets.

Instead the funds being used to compensate victims are those built up from the contributions of the laity, who are thereby twice victimised in this whole sorry saga.

Sound management practices

But in any case, the real point of the story, it seemed to me, was that sound financial management practices wouldn't go amiss given the size of the assets Church entities are dealing with and the pressures it faces from abuse claims amongst other things.

The Archdiocese of Boston has  denied the specific allegations, which go to the term in office of the now disgraced Cardinal Law.  Well, everyone seems to agree at any rate, that in wake of what happened there, the diocese has cleaned up its act.

But is that true across the board?  And is it true in Australia?

Canon and civil law structures: Australia

There are differences between the Australian and US civil law structures of course.  And indeed, in Australia, the situation differs slightly between each State, due to State and Territory Acts which set out church property and related matters.

But the systemic issues - a lack of transparency and accountability, and the dependence of the system on having an able (and honest) administrator in the form of the bishop - are the same.

Indeed, there are a couple of factors that probably make them worse here.

First, there is the system under civil law of vesting all church property in trustees, who in the ACT for example, are the bishop and his priest consultors. 

Secondly,  there is the predilection here for appointing parish 'administrators' rather than parish priests, or using time limited appointments for parish priests, thus reducing the canonical protections available to priests that might assist them in resisting an improper raid on parish assets by the diocesan administration.

Thirdly there are the diocesan 'Catholic Development Fund' arrangements which provide centralized banking/treasury services in many dioceses, which operate outside the controls and protections that would be imposed on them if they were secular entities.  Indeed, the Melbourne CDF website specifically says:

"CDF is not subject to the provision of the Corporation Act 2001 nor has it been examined or approved by the Australian Securities and Investments Commission. Neither CDF nor the Trustees of the Roman Catholic Trusts Corporation for the Archdiocese of Melbourne is prudentially supervised by the Australian Prudential Regulation Authority. Contributions to CDF do not obtain the benefit of the Depositor Protection Provision of the Banking Act 1959."

Instead, you deposits are guaranteed by the diocese:

"The Catholic Archdiocese of Melbourne has indemnified the CDF against any liability arising out of a claim by investors in the CDF through CDPF Limited, which is a company established by the Australian Catholic Bishops Conference. In essence, this means that your deposit, investment and any interest payable is guaranteed by the Catholic Archdiocese of Melbourne."

Yep, very reassuring!

There are of course some protections, in the form of the canonical requirement to have diocesan and parish finance councils, and take advice from them.  But these are as effective as the people involved - who are of course, appointed by the bishop.  The scope for cronyism is there, regardless of whether or not it is exercised in practice in each case.  And in the past at least, one suspects many of those on such councils operated on a principle of deference to the bishop's wishes and gave him the benefit of the doubt in dubious cases. 

The case for change

The Economist article suggests that in the US, there is a case for parishes and other diocesan entities to ask some hard questions about just what bank accounts their money is held in (ie make sure it is separate from the dioceses), make sure their asset registers are up to date, and ensure that standard internal controls are in place.

It also implies the need for a serious overhaul of the legal and canonical structures.

Hear hear.

A good start, in Australia, would surely be to put those CDF's under the prudential supervision of those bodies with the appropriate expertise set up for the purpose.

1 comment:

b_d said...

Hi Kate

I was wondering what organisational structure the Pentecostal and Charismatic Churches fall under in Australia?

And how financially accountable are they to their members and to the government?