Internal controls, financial accountability: How does your parish or school rate?

By KATIE LEFEBVRE, Globe staff reporter
July 14, 2005

Parishes and schools in the Diocese of Sioux City have a fiduciary responsibility when it comes to protecting their assets.

At a recent meeting of 34 dioceses, including the Diocese of Sioux City, who collectively self-insure a portion of their liability insurance exposure, the topic of protecting the assets of their parishes and schools was discussed at one of the sessions. The group is called The Catholic Umbrella Pool (CUP).

Royce Ranniger, director of operations for the diocese, attended the meeting. During this particular session, discussion surrounded the internal controls that the respective dioceses and their parishes and schools have in place.

"We have funds disappear every year," said Ranniger. "We just don't know it many times. We have had several examples of this in our parishes and schools in the past few years. It isn't always that significant and in most cases the parish or schools do not want the bad publicity that it happened to them. They are worried that supporters would discontinue their contributions."

Ranniger noted that some of the larger dioceses (Providence, New York for example) use tamper proof bags for their collections during their weekend masses. In other words, immediately after the offertory collection is received the envelopes and loose collections are put into this sealed plastic bag and then after mass is taken to the local bank.

The following morning the bank counts the collections and returns the weekly envelopes with the amount included in each envelope noted on the outside to the parish business office with the deposit receipt.

"In some parishes they have realized a 10 percent increase in their offertory collection. Maybe this is coincidental but I doubt it," said Ranniger. "In this day and age, the people who support our churches and schools want to know it is being taken care of. If your financial statements are credible and if you have reasonable internal controls in place, people will support your mission. It actually increases contributions."

According to Ranniger, internal controls really means having checks and balances in handling funds. There needs to be more than one person involved in handling procedures.

"Our parishes and schools have a responsibility to protect the funds given to them and to expend them for the intention they were given," said Ranniger. "This includes not only our weekend collections, but also the tuition we pay to our schools, the activity (including athletics) funds being raised by our local activity clubs, the SCRIP programs and the special campaign funds to name a few examples."

Diane Donnelly, director of parish and school accounting for the diocese, is in charge of doing financial reviews of the parishes and schools. One of the components of this process is to review the internal controls in place.

"It is like at a bank; don't go into the vault by yourself," said Ranniger. "We used to see the parish bookkeeper count the funds after church, make the deposit and then reconcile the bank statement. These are horrible internal controls."

It is diocesan policy to have volunteers count the offertory after the weekend Masses. These volunteers should rotate and there must be more than one volunteer counting the collections.

"We ask about what procedures they have in place and give recommendations of ways they can enhance their controls," said Donnelly. "We do a lot of bank verification. It is probably our most useful tool for determining whether all the accounts are recorded on the books."

Bank verifications are when the bank is asked to provide all the accounts that are held in the name of the church, school and tax payer identification.

"I think the church and it's community thinks that they are immune from embezzlement and fraud," said Ranniger. "We really do need to take a more focused look at our internal control structure and putting into place certain procedures which will reduce the risk. You are never going to prevent all of this. If people really want to get it done and they work hard enough at it, there is probably a way to get it done."

Ranniger hopes that schools and parishes will do a self-evaluation of what they have in place for their processes and procedures and what kind of checks and balances do they have in place to try to prevent embezzlement and fraud.

He added that each parish is required to have a finance committee that meets at a minimum of quarterly.

"One of their responsibilities is to review the financial reports, make sure that they are credible and make sure that the funds that they received are being expended in the fashion that they were given," said Ranniger.