Any reflection on financial management in the Catholic Church in the US could easily focus on policy, on USCCB guidelines, Canon Law or similar matters. My focus here is to make five points about the culture and practice of financial management in parishes and dioceses in the US today and to point toward key features of the future of Catholic financial management. Financial management in Catholic parishes and dioceses is relational, pastoral, and mission-driven and will increasingly be part of living as a synodal Church.
Financial management problems are relationship and pastoral problems
The first point is best made with two quick stories. Some years ago, an archbishop of a large archdiocese called and asked for some help because he knew something was not right about the financial reports he was getting, and he could not find the underlying cause of it. He knew something was wrong but did not know what that was. After we talked, he sent me the latest financial reports he had, and I worked out fairly quickly what the issues were. Fundamentally, the systems he had in place for financial management — the software and the financial controls they were using — were a long way out-of-date. The result was that the capacity for transparency, for accurate reporting, and for financial planning was extremely limited. The archbishop then asked me to meet with his CFO and his vicar general. I did that and as the meeting with them progressed, I was subjected to an hour and a half of discourse from the two of them about how what they were doing was the best way of doing things, that they were just fine and that they did not need the help of any outsider. I met with the archbishop later that afternoon and told him what had transpired in the meeting. “They spent the whole of the time telling me that what they are doing is the ‘best among the financial management of any archdiocese in the US,’” and that they did not need any help at all. The archbishop was silent for quite some time. He then said, and I quote: “So, I not only have a financial problem, I have an arrogance problem as well.”
My second story is about one of my students in a graduate church management course I taught. It was an asynchronous online format with ordained and lay students from multiple continents. This student was from a northern African country. He was a pastor who had a canon law degree from a pontifical university in Rome. We were on a Zoom call one evening and he was asking me about cash flow statements, profit and loss statements, balance sheets and financial reporting in general. In the background I could hear some kind of loud noises, and it was distracting to me. He told me not to worry, that it was the army outside the building. He told me that the ongoing civil war had ramped up in the previous few weeks, and that the army had burned a parishioner alive outside the church that morning. He asked me to help him with the financial reporting because, he said, “If I get this wrong, the western NGO that feeds most of my parishioners will stop sending food and they will starve. I need to account for the money in a way that meets US standards.”
My point here, in sharing these two somewhat extreme stories, is that if you are involved in church financial management, you had better know both the relational and the pastoral contexts of what you are doing. Catholic Church financial management is a relational activity requiring humility and rigorous honesty about both your capability and your limitations as much as it is one of analysis, projection, budgeting, or simply paying the bills. The pastoral context is necessary to high quality financial management in the Catholic Church because that is what gives the numbers meaning and purpose. If you lose sight of the relational and the pastoral contexts, then you are a poor financial manager for your parish or diocese, and the mission will suffer.
Just by the way, my conversation with the north African pastor continued. I asked him how he copes with being a pastor in the midst of civil war, when he sees parishioners burned alive. He told me, with tears in his eyes, that the only response he has to what was happening was to encourage his parishioners to love those who perpetrate those atrocities as best they can, as Jesus would love them. He tells his parishioners that the love of Christ, that salvation and forgiveness, is just as available to those who do these things as it is to them. He asks them to at least be willing to work on forgiveness and not be ruled by hate. And all he asked of me was to teach him how to keep the western NGOs happy so that his parishioners will not starve. That is Catholic Church financial management at its best and most mission focused.
Financial solutions are always both pastoral and financial
My second point is explained with an example of Catholic schools and vouchers that have been adopted by multiple States in the US. Those are voucher systems that help with tuition and make attending Catholic schools possible for many kids from poorer families.
An archbishop in a southern state asked for help with a Catholic school situation in a geographical region of his archdiocese that had fourteen parishes and five Catholic schools. One of the schools was thriving. I looked at the data, and it was immediately clear that four of the schools were in imminent danger of having to close. The archbishop was really looking for a pastoral solution to a financial problem. This is how we approached the issue. We had gathered the data from the schools and the parishes. Clearly, aligned with what was happening in the public schools, there were simply not enough kids in the area to sustain five Catholic schools. Just as clearly, the demographic analysis showed that families could not afford tuition. No Catholic school families were paying full tuition. We asked each parish involved and each school involved to send ten representatives to three meetings that were held two weeks apart. At the first meeting the participants were asked to sit at tables with people whom they did not know. In other words, we mixed up the participants so that people sat with others who were not from their own parish or school. We presented the data in ten slides and unfortunately the first thing we discovered was that the data supplied by the administrations of the schools was wrong. The admissions directors had one set of data, the school administration had another, and they were not connecting. The admissions directors had correct data, and we were able to set the record straight within the meeting with little fuss. The picture that emerged was actually worse than anyone imagined. We asked each of the groups representing a cross section of schools and parishes to discuss and report to the larger meeting on one question: What does the data tell you? Each and every group came back with the same conclusion: We cannot stay as we are. All participants were asked before they left the meeting to talk to ten other parishioners and/or school parents about what they experienced at the meeting. They received the correct data by email the day after the meeting so they could share it with others.
At the second meeting they were asked to discuss one question: If we cannot stay as we are, what are the options? The meeting was given some guidelines before they got into discussion: options had to solve the problems for more than five years, options they recommended had to be congruent with Catholic teaching, options had to maximize access to Catholic Schooling while allowing parish life to thrive. There was a list of ten guidelines that had been approved by the archbishop prior to the meeting. Between the second and third meeting each of the options arising from the second meeting was put to a small committee whose members were chosen for their expertise. They looked at the options from a perspective of: “Does this recommendation solve the problem?” and “Does this recommendation meet the guidelines set by the archbishop?”
At the third meeting the committee presented three options that survived the criteria of solving the problem and meeting guidelines approved by the archbishop. The participants were asked once again to consider just one question: “Consider each of these three options and make your best recommendation for the archbishop to consider.”
In the end two options went to the archbishop for his decision. He pondered and prayed about their work for a few weeks before meeting with the participants. He told them that both of the options would, in his opinion, be viable. He chose one of them. What is worth noting here is that afterward, not one parishioner or school parent raised any objection to the closure of two of the schools and three of the parishes. The parishes were not originally in the scope of agenda, but the insightfulness of the participants bought them into the conversation. When asked about how they felt about the outcome at the end of meeting with the archbishop, the overwhelming response was “hopeful.”
The point here is that relationships drive good financial management in the Church. The lessons from this story for financial management in the Catholic Church are many. The first lesson is to trust the people of God to be smart and capable with good information. The second is that the meetings were relational exercises far more than organizational. If they had not met multiple times with people from other parishes and other schools, they would have remained parochially oriented instead of mission oriented: As one participant put it and was applauded for saying it: “We have shifted our focus from defending our turf to expanding the mission of the Church.” The process expanded their notion of communio and linked communio to missio. In our Catholic worldview, communio exists for missio and missio flows out of communio. A stronger communio, as was encouraged by this process, means a stronger missio. Whenever we do financial planning, it is pastoral planning. Whenever we do financial planning, a core outcome has to be a stronger communio for missio, not just a set of numbers. The Catholics around those tables and those with whom they shared their experience understood that. The financial questions in this case were addressed in a synodal frame of reference, not in a corporate board frame of reference. That is Church at its best. Important questions of mission and financial priority are best addressed with the engagement of the wider community. The process of financial planning and otherwise addressing financial issues should strengthen the communio. Financial managers need to recognize that the Church is a community of communities, and the more closely those communities are coupled, the better we can serve the mission give to us by Jesus Christ.
Good solutions to financial problems are mission driven
Another lesson is that the presenting problem was financial, and the easy solution was to fix that issue without considering the mission of the Church. It is far more important to further the mission of the Church than it is to preserve a particular expression of the mission or Catholic institution. Some schools closed, some parishes closed, all in service of a stronger mission. The “numbers” question could have been “Which schools do we close?” The mission question was “How do we sustainably maximize access to Catholic education?”
Financial reporting must include all assets and liabilities, not just cash
My fourth point relates to the thousands of parishes and diocesan financial reports, in particular balance sheets, that I have reviewed over the years. It has been my experience that so many of them only report cash, not other assets. This has been so frequent that I can say it has been a regular practice in many dioceses and parishes.
There are many problems associated with only reporting cash assets. The particular problem I want to highlight here is related to the fact that the Catholic Church in the US had its last building boom in the 1960s and 1970s, meaning that the Church has significant assets that are now more than fifty years old. That creates a two problems.
- Many of these facilities unacknowledged in financial reporting have unfunded maintenance needs and replacement costs that are huge liabilities. The absence of these facilities in financial reports has so often meant, in my experience, that the liability of unfunded maintenance does not appear in any financial plan or budget.
- The absence of these assets in reports that show debt capacity of a parish or diocese mean the absence of the unfunded liabilities from financial reports submitted to a lender. Leaving out the full positive or negative effect when calculating debt capacity is simply bad practice. For example, I have too often seen pro forma documents that offer lenders a financial projection without consideration of the liabilities created by these older structures. I have seen all too often the financial life of a parish or diocese in jeopardy by this poor practice.
Failure to record facilities as assets or liabilities in our financial statements does not serve the Church well.
Transparency and accountability can only happen if the capacity for them exists
The fifth point I want to make relates to the capacity for transparency and accountability. I was asked to assist an archdiocesan office some years ago with their financial situation and discovered they could not tell me the cost of salaries or benefits. Further discussion revealed that their entire bookkeeping was done on an excel sheet with over two hundred columns and was unsearchable. The spreadsheet had been set up by the IT person who knew nothing of financial management for accounting. His formulae had become corrupted over time. Their financial reporting on their $19,000,000 budget was clearly not accurate or helpful. While the Archbishop was calling for transparency and accountability, the systems in place were not up to the task. That could be referred to as a structural problem preventing transparency and accountability.
What I have also seen as a recurring pattern is that even when we begin to embed a culture of transparency and accountability, the actual capacity of the systems and personnel to deliver high quality transparency and accountability is limited by certain cultural imperatives related to clericalism. What I want to highlight here is the culture that allows a pastoral leader whose financial competence is underdeveloped compared to his authority combined with an unwillingness to either become educated in financial matters or to ask for help that is readily available if only he would ask. Many dioceses are now requiring those who want to be appointed pastor to undergo some form of preparation in pastoral management and offer ongoing formation, education and training. Pastoral leaders themselves need to develop their capacity for transparency and accountability because without that, the structural capacity will remain underutilized.
The future of Catholic financial management
We have made progress. During the late 1990s dioceses and parishes started employing a different kind of CFO and business manager. Dioceses and parishes were increasingly consistent in employing people with deep financial and business management background. The impact of this shift has been profound. Dioceses more consistently used standardized accounting software and charts of accounts, and most dioceses adopted comprehensive policies that standardized good practice. This progress was enriched by an almost nationwide re-engagement of the laity in finance councils at diocesan and parish levels. Pastors became increasingly cognizant that their priestly identity did not require them to be the experts in everything. They asked for and received help from competent laity. Around that same time dioceses got serious about ongoing formation of clergy that included learning the basics of financial management and that allowed pastors to let go of doing all the financial management themselves.
It was at this time the non-profit I served for many years, Leadership Roundtable, started offering a flexible, adaptable program called “Toolbox for Pastoral Management” to dioceses and religious orders. At that time very few pastor attendees claimed any background in financial matters. Now it is common for more than half of the group to claim some financial management background. In other words, clergy are far more comfortable asking for help and know better how to leverage that help for the good of the parish. Clergy are far more open to ongoing formation that includes financial management than they were in the past. A lesson in this is that dioceses and other Catholic organizations are well served by investment in their people, especially clergy, so they can make sense of financial matters that are necessarily part of leading a community in mission. This progress has laid the foundation for the future of Catholic financial management.
The future of Catholic financial management is found in living as a synodal Church. It lies in practicing financial transparency as an expression of trust in the people of God. The whole of the Church shares responsibility for the mission, including for the financial well-being of the local Church. Catholic communities that claim to be in strong communion in every aspect of Church life need to include sharing by synodal means responsibility for the financial health of the Church. The mission given to us by Jesus Christ is too important for us to diminish it through poor financial management. Including synodal means in the financial management of the Church brings together the relational and pastoral context of Catholic financial management.
The future of Catholic financial management can be characterized by several key words and phrases: transparency, accountability, co-responsibility, and living as a synodal Church. Financial management guided by these principles means that dioceses and parishes will be aligned with Vatican II, the Holy Father and best practice. It is part of clergy and laity in being in proper relationship for the sake of the mission, in building stronger communio for the sake of missio. When these watchwords are made the basis for “how we do things around here,” we can then say that the culture as well as practice surrounding our Catholic financial management is truly Catholic.
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