Thursday, October 4, 2012

Episcopal Church finances


The Economist recently featured a scathing indictment of how the Roman Catholic Church manages its finances (“Earthly Concerns,” pp. 19-23, August 18, 2012). Settlements in child abuse cases totaling $3.3 billion over the last 15 years, which have averaged more than $1 million per case, and the bankruptcies of several U.S. dioceses combined to pique the authors’ curiosity about the Roman Catholic Church’s finances.

 

The Roman Catholic Church has 196 dioceses in the U.S., divided into 34 metropolitan provinces with 270 bishops and about 100 million members. They comprise approximately 18,000 parishes, served by 40,000 priests and 17,000 married deacons.

 

Estimates for 2010, the latest year for which data is available, show that the Roman Church spent $171 billion. Healthcare institutions, colleges, and universities spent almost $150 billion of that total. Only $11 billion went to parish ministry and a relatively paltry $4.7 billion to charity, although Catholic Charities provides important services and is the nation’s largest charitable organization. Altogether, the Catholic Church has about 1 million employees in the U.S. By way of comparison, General Electric’s 2010 revenues were $150 billion and Wal-Mart employed 2 million people that year.

 

The Roman Church routinely comingles funds, mixing operating, pension, endowment, and other accounts. Dioceses facing bankruptcy move funds offshore, beyond the reach of claimants and creditors. The Roman Church provides no public accounting of its funds; a corporation sole holds all of the assets of each diocese, over which the diocesan bishop has complete authority, subject only to the Vatican.

 

The recent Vatican scandal over leaks from the Pope’s butler suggests that financial problems extend across the Roman Catholic Church. No for profit entity could legally manage its finances using the unorthodox methods, accounting principles and secrecy upon which the Roman Catholic Church routinely relies.

 

The secrecy is counterproductive. The lack of transparency discourages donor support, a conclusion ample anecdotal evidence supports. The lack of transparency also promotes a culture of deceit and tacitly suggests that laity, clergy, and members of religious orders lack the spiritual maturity and intellectual ability to comprehend ecclesiastical finances.

 

Evil flourishes in the dark; light dispels the darkness and brings health. The Roman Catholic Church, of all institutions, should understand this basic spiritual concept that is so deeply rooted in the Christian faith. Financial management and use of funds express values and beliefs more powerful than can any amount of verbiage.

 

So, how well does The Episcopal Church manage its finances? Errors in budget proposals for the next triennium that were published before this year’s General Convention implicitly raised questions about the competence of our financial management. From my review of national documents, reading several dioceses’ financial reports, and hearing complaints about a lack of financial transparency in at least some TEC congregations, I know that our financial management is much better than what happens in the Roman Catholic Church (e.g., we  require regular audits) but leaves room for significantly improving transparency.

 

No good reason exists to keep TEC finances shrouded in mystery. Shadows invite, even encourage, wrongdoing. Dioceses should publish a full accounting of their income and expenses – with three exceptions. First, financial reports rightly aggregate assistance provided to individuals into a single line item. Identifying the individual recipients of such aid demeans the recipients’ dignity and provides no essential information to donors or other interested parties. Annual audits and appropriate oversight can ensure that the funds do not benefit the wrong people.

 

Second, financial statements rightly aggregate staff salaries and benefits – except for key employees. Donors and other interested parties do not have any legitimate need to know how much an office assistant or receptionist earns. Budget committees, managers, and auditors appropriately manage such matters. Organizations with salary scales or wage guidelines will usefully publish that information to promote transparency, demonstrate good stewardship, and model paying living wages with benefits.

 

However, financial reports should specify salaries and benefits for key employees, e.g., bishops, canons to the ordinary, etc. Making this information public helps to ensure that leaders do not manage the institution for personal benefit. I have served in key leadership positions where donors knew my pay. Although I’m an intensely private person, I knew of no other way to establish appropriate accountability and transparency. Conversely, religious organizations that have not followed this policy have too often experienced shattering scandals.

 

Finally, the diocese should report aggregated unrestricted gifts from individual persons without identifying the individual donors or the amount each gave. The diocese should identify donors and amounts of restricted gifts because the donor’s restrictions, when the diocese accepts the gift, impose a form of control on the diocese and its operations. Similarly, a diocese should identify any grants, loans, or other funds received from foundations, corporations, or other entities because acceptance of these funds almost always entails an obligation to spend the funds in a particular way or use them for a particular program.

 

These same principles apply to TEC’s national offices, its provinces, and all of its congregations. Most people will ignore published financial reports. Some will read the reports and find the reports uninteresting or too difficult to understand. But making a full public reporting of ecclesiastical is an essential step in establishing the transparency and accountability that God's people deserve. TEC and its constituent components have no “proprietary” or “trade” secrets to hide from the competition. We do have an obligation of full disclosure to our various stakeholders.

 

Full accountability and fiscal transparency are essential elements of good stewardship. Thankfully, TEC, its dioceses, and its congregations have had relatively few documented instances of financial wrongdoing. Regular audits help to ensure fiscal integrity and to encourage sound accounting methods and financial management.

 

Promptly acting to meet the standard of good stewardship through greater financial openness is the right thing to do, will proactively reduce the opportunity for fiscal abuses, promote healthy conversations about mission, and avoid both attempts to circumvent our democratic decisions making processes and ill-informed conflict about who has access to what information.

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