By ARTHUR JONES
NCR Staff

Although Catholic bishops cannot be forced to conduct annual audits of their diocesan finances, a committee of bishops studying the problem has recommended stiffer accountability measures. Their final recommendations came in January in the wake of several severe financial crises that have hit U.S. dioceses, including the $30 million fiscal meltdown of the Santa Rosa, Calif., diocese in 1999-2000.

Canon law, while outlining some financial accountability measures, does not require an annual audit, nor does it require that a diocesan financial statement be made public.

The U.S. bishops’ Ad Hoc Committee on Diocesan Financial Reporting, however, has recommended such audits. In addition, Fort Worth, Texas, Bishop Joseph Delaney, committee chair, said the committee’s resolution urges that each diocesan bishop annually submit a report to his archbishop with a letter that lists:

• Names and professional titles of finance council members;
• The dates on which the council has met;
• A financial statement signed by council members and the diocesan finance officer;
• Recommendations, if any, made by the auditors.

Archbishops aren’t off the hook. They are called on to submit the same reports to the senior bishop in the region, the committee said.

The sort of diocesan financial setbacks the resolution hopes to prevent stem from internal mismanagement or neglect, not from the huge financial shortfalls that have to be confronted when dioceses have suddenly been hit with multi-million dollar pedophilia lawsuit settlements.

Had such controls been in effect in Santa Rosa in recent years, a $30 million crisis might have been averted. As it was, 140,000 Catholics in 42 parishes were saddled with bailing the diocese out after financial mismanagement by Bishop G. Patrick Ziemann, who resigned.

Ziemann, who had secret European bank accounts, exited the diocese as it was hemorrhaging money through risky investments in the United States and Europe. When the Vatican sent in Archbishop William Levada of San Franciscso as temporary administrator, he had to borrow $6 million from other California bishops to meet immediate salary, operating and pension obligations. (Ziemann was also involved in a lawsuit concerning an alleged sexual abuse incident.)

Levada told NCR at the time, “I don’t see any evidence of wrongdoing, anything other than a very serious lack of oversight, of mismanagement. I don’t know if every CEO of a company whose company goes bankrupt goes to jail, I don’t think so.”

Ziemann had almost bankrupted several parishes and schools, spending reserves and funds built up by parishioners for local parishes. In a reaction destined to chill the heart of any bishop, many Santa Rosans pledged not to give to future diocesan fundraising schemes, only to their parishes.

Delaney said the ad hoc committee’s new resolution, unanimously approved at last November’s meeting of the National Conference of Catholic Bishops, tackles the fact that “there’s been a series of problems over the years. The bishops have attempted to put some kind of financial reporting model in place since 1971. This is kind of a next step in a series of recommendations.”

Last year, following the Santa Rosa crisis, “the bishops wanted suggestions or recommendations on how to get dioceses to report,” Delaney said. “What we found though is canonically there really is no way to require a bishop to do anything outside of what canon law requires. That’s where we were stymied.”

Said ad hoc committee member, Erie, Pa., Bishop Donald Trautman, “I think the key to all the problems we’ve had in the church is there hasn’t been proper accountability. In the resolution, we’re saying that there’s got to be an audit -- not a management review, but an audit. And our resolution is to give greater status and support to that.”

The resolution is also attempting to give greater muscle to diocesan finance councils, the majority of whose members are usually laypeople drawn from the banking, legal, accounting and business realms.

“We want these council members to have direct access to the fiscal report, sign their names to it and take responsibility for it,” said Trautman. And that means going further than canon law’s limited requirements.

Canon law, revised in 1983, governs the establishment of diocesan financial councils and the responsibility of diocesan finance officers and metropolitan archbishops, but there was still no outside audit demanded. That means the diocesan bishop ends up basically reporting only to himself. If his finance council is packed with cronies or no meetings are called and poor or risky decisions are taken, no one is the wiser.

Until the next disaster strikes. In the 1970s and ’80s there were fiscal management problems in dioceses including Reno, Nev., and Fresno, Calif. Such problems occurred in Corpus Christi, Texas, as well as Santa Rosa in the ’90s.

Delaney, whose diocese made its financial report public earlier this month, said U.S. bishops in the past have urged publication of diocesan financial statements, but the current recommendations did not tackle that issue.

Bishop Robert Banks of Green Bay, Wis., an ad hoc committee member, said he did not see publication as “a big thing. What I like about the resolution is that bishops should report to a board of financially astute people, just like a corporation. And if it’s a good board -- and that’s what we’re asking for council members’ official positions -- that sounds to me like the American way.”

Committee chair Delaney said his own diocesan finance council of 12 includes three clergy, and nine laymen and laywomen involved in financial and legal fields. Trautman’s council has bankers, lawyers and CPAs as well as representative pastors and women religious.

Other members of the ad hoc committee were current Santa Rosa Bishop Daniel Walsh and retired Orange, Calif., Bishop Norman McFarland. McFarland has intimate knowledge of diocesan fiscal reverses. In the early 1970s, he was a San Francisco auxiliary bishop when sent into Reno as apostolic administrator after the diocese experienced money troubles.

Reno had invested in St. Joseph’s Trust, a religious organization that went belly-up leaving the diocese holding $3.5 million in indebtedness. Short-term, dioceses around the country helped bail Reno out of its debt, and McFarland, later named Reno’s bishop, returned the diocese to financial stability.

In 1990, McFarland, by that time bishop of Orange, was called in when the Fresno diocese was plagued by money troubles, stemming in part from debt incurred to buy a local for-profit television station. The Fresno diocese had to lay off staff, cut back on programs and close its newspaper.

Neither Walsh nor McFarland was available for comment.

Arthur Jones’ e-mail address is ajones96@aol.com

National Catholic Reporter, March 30, 2001

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