Diocesan director of Finance Larry French presents one of a series of 10 seminars to priests, personnel and volunteers on detecting and preventing fraud. (Catholic Herald photo by Jenny Snarski)

Jenny Snarski
Catholic Herald Staff

During late October and early November, the Diocese of Superior’s Department of Finance head Larry French offered 10 seminars – two in each deanery – presenting best practices for internal controls. The target audience was pastoral leaders, trustees, finance council chairs and members as well as parish and school bookkeepers. An average of 25 people attended each session; almost every parish and/or cluster was represented.

As Dan Blank, diocesan director of administrative services, said on Nov. 14 at the session offered in Tony, the seminars had been prompted by the embezzlement cases in the Webster and Rice Lake clusters; both cases have been finalized within the last 12 months.

Discussions between Bishop James P. Powers and the diocesan finance council resulted in an action plan to “help all the parishes realize the risks of running parish finances and help people have a nice, solid base of knowledge on some good best practices in hopes that no one else will ever go through something as horrible as that,” Blank said.

He added, “The betrayal and breach of trust of people in our parishes, especially when that betrayal turns into a crime, it really hits hard – not only the pastors, but council members and parishioners, too.”

Blank wanted to assure participants the series of seminars was not at all a reprimand, rather a way for the many employees and volunteers in diocesan entities to be encouraged and supported. He expressed thanks on behalf of the bishop for their hard work and dedication. He thanked the priests and, due to the current shortage of priests, various forms of acting parish managers.
Before introducing the finance director, Blank asked for continued prayers for vocations. He said “the youth and young adult ministry is really bearing fruit,” commenting on the recent steady stream of applications to the seminary, a testament to diocesan youth hearing and being open to discerning a call.

French began by saying, “We’re not here accusing anybody. But the opportunities in the church are so easy, we’re here to protect you … if policies are in place, you are protected. These policies are here … also to protect the Church … and protect our integrity.”

From fraud detection to fraud prevention

He proceeded to offer information on the vulnerabilities diocesan churches and institutions face, a prominent reality in rural dioceses. First, the small size can lead to easy opportunities, given the number of staff and volunteers. Second, the large cost of efforts to make these changes – again given the small numbers of personnel, often covering multiple roles.

Fiduciary responsibility was addressed as it is applied to the priests – laid upon them – and lay staff and volunteers, who willingly accept it. A fiduciary was defined as “a person who holds a legal or ethical relationship of trust with one or more parties whose duties are to manage other people’s money and manage the people who manage the money.”

French said when he’s asked the priests about how much accounting and bookkeeping training they received in the seminaries, he gets “a frowny face” reply.

“Our priest is here first and foremost for our salvation, for the sanctity of our souls, for the sacraments.” After a pause, French added, “and I’m happy to say that because I want to be sanctified … but we need to depend on the rest of us to support our priests in their pastoral role with the fiduciary responsibility.”

The next portion of the seminar addressed fraud prevention as one aspect of fiduciary responsibility. Much attention was given to common red flags – not crimes in themselves, but things that should prompt a closer look.

The first red flag discussed was noticing someone entrusted with parish funds living beyond their means. Also, financial difficulties and centralization of duties, especially where there is resistance to transparency and checks and balance systems.
Tips were said to be the number one factor in detecting fraud – someone noticing a red flag, or often more than one person. French said even audits detect only about 15 percent of fraudulent activity.

He confirmed the importance of tips with comments shared by Fr. Mike Tupa, pastor of the Webster cluster at the time funds were embezzled by parish staff. At the seminar Fr. Tupa attended, he confessed to the group that he was given tips that he ignored because he was too trusting. From his experience, this was the one factor that would have caught the fraud sooner.

Using his own personal example of meeting a man his daughter wanted to date, French advised, “Honor your feelings … and do not ignore red flags.”

In addition to tips as the top means for detecting fraud, French said internal controls were the predominant means of prevention.
Detailed content was given regarding clearly defined roles and responsibilities among the pastoral leader, trustees, bookkeepers, finance council members and chancery staff. Separation of duties, change of auditors every few years and succession planning among volunteers were highly recommended.

After a short break, internal controls were discussed. French spoke about financial reports with profits and loss and balance sheets, reconciliation of accounts, payroll sign-off and payroll reports.

Then the diocesan claims risk manager for 23 years, Paul Altmann of Catholic Mutual, spoke about the internal controls for offertory cash and the use of receipts. Catholic Mutual insures approximately 12,000 parishes in the United States, and their suggested best practices are rooted in widespread experience.

Numbered and tamper-proof bags were presented as the standard procedure for safeguarding offertory cash. He acknowledged the large amount of cash collected at Mass and the bags as a measure to respect and honor the church’s donors.

He shared that there have been known cases within the diocese where monies were skimmed from the offertory collection or individuals conspiring at the time of counting. He gave suggestions regarding the counting of Mass collections and acknowledged the hardships that might be felt by some of the smaller parishes to implement the requested changes.

“We’re trying to be good stewards of the money that people are donating to us,” Altmann said. He added that, Bishop Powers being the first interested in these safeguards, “We need everyone to be educated and on board … we need to prove that we are being good stewards of (our people’s) money.”

French recapped the seminar’s main points, restated where contact information for Chancery finance staff can be found, and spoke again to the renewed sense of stewardship on the diocesan level.

“We are called to good stewardship, right? We know that. But it’s a challenge to change procedure. We know that … it takes effort, and I want to support you in that effort that it takes to change,” French said.

Adding humor, as French did throughout the seminar, he asked, “How do eat an elephant? One bite at a time.”

Blank concluded by encouraging participants to use what they had learned.

“People have been very responsive and receptive. Some argumentative, and that’s good – we want it to be a safe place to have honest discussions, and we hope that’s the same in your parish and cluster,” he affirmed, before closing with prayer.