Audit finds problems with San Diego parishes’ accounting

WASHINGTON – While much of an audit of the finances of the San Diego Diocese showed recordkeeping was above-board, it found some cases of parishes moving tens of thousands of dollars around at the time of bankruptcy filing – in ways that apparently violated diocesan policies.
The 175-page first report of R. Todd Neilson, a forensic certified public accountant who conducted the audit on orders of the judge overseeing the diocese’s bankruptcy case, included an analysis of the records of 48 of 93 parishes and 26 of 43 schools.
The audit was ordered in April by U.S. Bankruptcy Judge Louise DeCarl Adler, who said she was mystified by what she called “the most Byzantine accounting system I’ve ever seen,” involving hundreds of bank accounts.
Attorneys for some of the people suing the diocese over allegations of sexual abuse by priests have said the diocese has not been forthcoming about its assets.
An undated statement on the diocesan Web site by Auxiliary Bishop Salvatore Cordileone said the diocese has been open about diocesan assets, but that “market values of these properties are not relevant to our mission” so there is no accounting of the market value of schools, churches, rectories and other property.
The auditor’s report released July 30 singled out peculiarities at several parishes, ranging from a parish presented as impoverished but with $1.2 million in its bank accounts, to two parishes that apparently moved cash out of accounts at the time of the bankruptcy filing, putting checks for tens of thousands of dollars into parish safes, where the amounts would not be factored into data included in the bankruptcy material.
It noted that parishes employ a myriad of accounting systems, ranging from handwritten ledgers to sophisticated computer programs. While the diocese has standard policies for what information must be kept and annual reports are sent to the diocese, Neilson’s report said, absent a personal visit to each parish there’s no system for analyzing full parish or school accounting information.
“As a result, they are often woefully unaware of the specific financial operations of the individual parishes,” he wrote.
Neilson praised the cooperation he received from the diocese, saying he could not “recall an assignment where he has had more complete and positive cooperation.”
His report said that while most of the audits yielded “occasional lapses in judgment and intermittent deficiencies in accounting expertise … the preponderance of pastors and the lay personnel assisting them demonstrated a good-faith attempt to comply with the general parameters of the (diocesan policies).”
However, it noted, “a few parishes engaged in openly questionable activities which the (auditor) feels should be brought to the attention of the court.” Those included “a series of transactions which deliberately concealed $49,685.47 from the Bankruptcy Court” by Our Lady of Guadalupe Parish in Calexico. At St. Mary Parish in El Centro, he said he found a $300,000 donation was parceled into six separate cashiers checks, which were then stored in the parish safe.
“It is especially unfortunate that just eight days after the debtor’s bankruptcy the pastor and the parish finance council would engage in such deliberately misleading behavior,” said the report of the St. Mary transactions.
He also cited “perplexing” information about the finances of Our Lady of Mount Carmel Parish in San Ysidro.
“The parish has consistently maintained that they are one of the poorest parishes in the diocese, yet the parish held $1.2 million in the local banking accounts of the parish …, which sum is only exceeded by one other parish in the entire diocese. The parish also holds the largest number of private bank accounts (22) which far exceeds the normal range of parish bank accounts.”
In a July 31 statement, Michael Webb, in-house attorney for the diocese, cited Neilson’s praise for the cooperation of the diocese, parishes and schools and said the report “notes a small number of problems, all of which have been corrected or are in the process of being corrected.”
“When even the most sophisticated enterprises are subjected to the scrutiny of rigorous audits, things are identified that could or should be improved,” the statement said. “Given that our diocese and the parishes are not businesses, it is not surprising that Mr. Neilson found some room for improvement.”
Despite the problems noted, the statement said Neilson’s report “demonstrates that the cash management system of the diocese is effective and competently processes and monitors the finances of the diocese, parishes and schools. The report clearly states that all funds are accounted for and that the accounting system can be accessed with ease. We expected no other result.”
Meanwhile, a group called Parishioners for Churches and Schools filed a motion July 26 asking for legal standing in the bankruptcy case. Adler declined to grant the group standing, but said she would keep in mind their interest in preventing the closure of churches or schools in the course of resolving bankruptcy.
Neilson is scheduled to present his findings to the bankruptcy court at an Aug. 23 hearing.
Webb told Catholic News Service in a phone interview that scheduled bankruptcy hearings stretch into at least September, for the submission of legal documents and filing of motions. He said the judge overseeing lawsuits against the diocese for sexual abuse claims has ordered the parties not to discuss even the dates of scheduled court hearings in public.

Catholic Review

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