Catholic Church Pilfering Prolific
Report: Embezzlement Reported by 85 Percent of Dioceses

By Genevieve Marshall
Morning Call [Pennsylvania]
January 6, 2007,0,3944934.story

Parishioners were shocked when longtime Bath Mayor Elizabeth Fields was charged in November with stealing $9,000 in Sunday collections from Sacred Heart Roman Catholic Church, where she served as secretary.

But a recent study by two Pennsylvania researchers has found that 85 percent of U.S. Roman Catholic dioceses that responded to a survey reported an embezzlement within the past five years.

Of the 78 dioceses that reported their financial information to Charles Zech and Robert West, 11 percent said they had been embezzled out of more than half a million dollars. Twenty-nine percent reported embezzlements of less than $50,000.

Police reports were filed in 93 percent of the cases where embezzlement was discovered.

"As faith-based organizations, we're very trusting of our people," said Zech, an economics professor and director of the Center for the Study of Church Management at Villanova University in Philadelphia.

"You wouldn't think a church person would embezzle, so we don't demand the internal controls," he said. "We figure that a lot of church workers would be insulted if you asked them to do the same things that are routine in the business world."

The study, believed to be the first of its kind to assess embezzlement in a denomination, attributes the high rate of embezzlement in the church to a lack of professionals in financial oversight positions, and an overly trusting attitude toward the people who handle church money.

The authors focused solely on Catholic dioceses, their area of expertise. But Zech said he believes the levels of financial mismanagement and misconduct would be similar in other denominations and nonprofit institutions.

Chris Cocozza, an associate professor of business at DeSales University in Center Valley, said he was "not surprised at all" by the report.

"This is no different than the crimes you see in a small business, a nonprofit or any other religious institution," said Cocozza, who teaches accounting at the Catholic university. "When you can't afford the financial rigors required by a giant like Merrill Lynch to keep track of every penny, things are going to slip through the cracks."

The problem of financial oversight within churches is compounded by the lack of expertise in accounting by the people handling the books, as well as the notion that "religious people don't steal," Cocozza said. Highly qualified chief financial officers are in demand and therefore more likely to seek the higher compensation offered outside the nonprofit sector.

The 15-page report, funded by the Louisville Institute in Kentucky, a program for the study of American religion, was released just before Christmas and first written about in the National Catholic Reporter. The article featured the embezzlement case at Sacred Heart in Bath.

Fields was secretly videotaped in the parish rectory placing rolls of money into her pocket after church officials suspected someone was altering collection tally sheets, according to court documents.

Although the Villanova survey didn't ask the dioceses who committed the embezzlements, Zech said most were discovered by a parish priest, followed by the parish bookkeeper, an internal auditor, and the parish finance council.

That led Zech and West to conclude that most of the reported thefts were by lay people.

"It's the people counting and depositing the money who usually skim off the top," Zech said. "It's not a sophisticated theft. A few hundred bucks here and there, but over time it adds up."

Parishes and high schools have many cash transactions that do not receive regular scrutiny, he said. Internal audits typically were triggered after a new pastor or bookkeeper came on board.

Zech and West, an accounting professor at Villanova, said they did not set out looking for embezzlement. They chose to look at internal financial controls in Catholic dioceses because one result of the clergy sexual abuse scandal was a new focus on financial transparency and accountability.

"There are plenty of folks who think that scandal would have been uncovered long ago if churches were more open with their financial records," Zech said. "Parishioners would have seen the large payouts for settlements much earlier and asked questions."

He and West sent their survey to chief financial officers in the nation's 174 Catholic dioceses, and the 78 responded.

Officials at the U.S. Conference of Catholic Bishops told The New York Times this week that they had seen the study. Bishop Dennis M. Schnurr, treasurer of the bishops conference and head of a Minnesota diocese, said church officials were not surprised, because they have been looking to improve local control of money by assisting parishes with accountability and transparency.

Matt Kerr, spokesman for the Allentown diocese, said he had seen the report and "the numbers seem high." The Allentown diocese regularly sends out 21/2 pages of recommended internal controls, he said.

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"They are common-sense things, like the person who signs checks should not balance the money statement and each parish should own a safe," Kerr said. "Deposits should be made on a regular basis and collections should be counted by teams, and those teams should change."

But those are just guidelines. The diocese can't mandate how parishes handle their finances because some parishes might have only one person on staff, he said.

In recent years, there have been at least four cases of embezzlement in the Allentown diocese, including the charges against Fields:

Jo-Ann Mary Dilullo, a former bookkeeper for St. Elizabeth of Hungary Church in Pen Argyl, was put under house arrest and ordered to pay restitution for the $121,000 she stole over four years beginning in March 2001.

In August 2005, the Rev. Ronald J. Yarrosh went to prison after he admitted to embezzling more than $23,000 from St. Ambrose Church in Schuylkill Haven, where he was an assistant pastor. During the investigation, police found evidence of child pornography on the parish computer's hard drive. He was also charged with 110 counts of sexual abuse of children for the images.

The Rev. Anthony M. Drouncheck, a former assistant pastor of St. Catharine of Siena Church in Reading, was sentenced in 2002 to two years of probation for tampering with the financial records of the church bingo game. He had also been accused of rigging the church's bingo game and keeping $8,000 in earnings, but eight of the charges, including the alleged theft, were dropped.

Dioceses that reported embezzlement to the Villanova researchers did so anonymously. There is no way to tell if Allentown participated in the study, the authors said. Kerr said he did not know if Allentown participated.

Cases of embezzlement outside the Allentown diocese include that of a former Washington, N.J., priest charged in September with stealing more than $600,000 in church raffle winnings and corporate donations. The Rev. Robert J. Ascolese pleaded not guilty in December to 32 counts of theft.

In 1998, a Catholic priest admitted he stole $1.3 million from two Allegheny County churches. The Rev. Walter Benz died at 72 in a Catholic nursing home. He was never formally charged.

The allegations against Benz prompted a review of all parish finances in the Diocese of Pittsburgh.

In the Villanova study, only 3 percent of the dioceses said they annually conducted an internal audit of their parishes, and 21 percent said they seldom or never audited parishes.

The Allentown diocese requires parishes to submit annual reports. It also sends the diocese's four auditors to the 151 parishes an average of once every three years, Kerr said.

Based on their findings, the authors issued a list of recommendations for all Catholic dioceses, among them:

Establish fraud policies.

Conduct annual internal audits of parishes, supplemented by external audits every three years.

Disclose the names and professions of all members of the Diocesan Finance Council and their conflicts of interest.

Have parishes and high schools submit financial data at least annually.

Follow a uniform budgeting process and use standardized software across the diocese.

Establish a way to report fraudulent activities anonymously.

The Archdiocese of Philadelphia released a statement Friday saying many of the recommendations made by the study are already in place.

"The loss of even one penny of parishioners' or donors' funds is unacceptable, which is why the Archdiocese of Philadelphia has stringent financial procedures and controls in place at every level and continually works to improve them," according to the statement.

Canon law requires parishes to have a financial counsel for oversight.

Each of the 270 parishes in the Philadelphia archdiocese completes an internal audit each year, and a detailed financial report is signed by all members of the parish finance council. Every five years, parishes receive a weeklong external audit by the archdiocesan auditing office.

Most of the financial policies prescribed by the bishops conference are practiced in the Archdiocese of Philadelphia, and in some cases diocese policies exceed the recommendations, according to the archdiocese's statement.

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