Judge orders San Diego diocese to disclose parish accounts

National Catholic Reporter, April 27, 2007

At a federal bankruptcy hearing April 11, Judge Louise DeCarl Adler ordered the San Diego diocese to refile its financial disclosure statements and to include this time the balances in the 770 bank accounts held by the 98 parishes of the diocese.

She also indicated she will appoint an expert to analyze the accounting system in the diocese and its parishes.

Adler asked why any organization would have 770 bank accounts. "I've had billion-dollar corporations in this court without this kind of accounting," she said.

Lawyers for the diocese explained that each parish is a separate entity that needs its own bank accounts, and when dealing with money that is dedicated to one purpose and cannot be commingled with other funds, a parish may place that money in a separate account.

The San Diego diocese fried for Chapter 11 bankruptcy protection Feb. 27, the day before the first of 143 clergy sex abuse claims against the diocese was to go to trial.

Adler had called the April 11 hearing demanding that two San Diego priests and three diocesan attorneys show cause why she should not hold them in contempt of court for conspiring with parishes to create new bank accounts and transfer church funds into them without court authorization.

Her order was based on information that Fr. Bruce Osborn, on behalf of the newly formed Organization of Parishes, and Fr. Michael Gallagher had written letters urging parishes to create new bank accounts with new tax identification numbers and transfer parish funds into them.

At the hearing, diocesan attorneys Susan G. Boswell and Jeffrey Davis explained that in the initial bankruptcy hearing March 1, when Adler questioned the use of the single diocesan tax identification number on all the parish bank accounts and suggested that separate tax identification numbers would be a good idea, they understood it as a directive to make such a change. Adler said she had given no such order. She did not find the attorneys or the priests in contempt.

Like the other dioceses that have made Chapter 11 filings, the San Diego diocese did not include parish assets in its financial disclosure because it says those assets belong to the parishes themselves and not to the diocese.

Charles Zech, director of Villanova University's Center for the Study of Church Management, told Catholic News Service that a parish may need more than one bank account, especially if a school is involved, "but eight separate accounts (the average reported for parishes in San Diego) strikes me as excessive."

He said a need to avoid commingling funds could explain some multiplication of accounts, but having too many accounts "indicates a lack of good internal financial controls."

However, Ernest W. Armstrong, finance director for the Denver archdiocese and president of the national Diocesan Fiscal Management Conference, said it is easy to understand how a parish with a school, a youth ministry program or a parish men's club or women's guild could have multiple accounts.

By CATHOLIC NEWS SERVICE

San Diego