Monday, June 17, 2019

How could Bishop Bransfield misuse funds for years without raising red flags? by Ashley McKinless

I thought I had lost the capacity to be surprised by the misconduct of bishops after the past year of scandal. But as I read The Washington Post's report on the financial abuses committed by Bishop Michael J. Bransfield, who was recently removed as head of the Diocese of Wheeling-Charleston in West Virginia, I could not believe what I was learning. Fueled by revenues from a Texas oil field donated to the diocese over a century ago, the bishop in one of this country's poorest states was living a life of luxury and cutting four- and five-figure checks to fellow clerics-including certain priests who accused Bransfield of sexual harassment.
I knew who I needed to talk to process this news: my mom. And not just because she is the reason I am Catholic. Kathy McKinless also happens to have served as the acting chief financial officer for the Archdiocese of Washington, served on the volunteer finance council of the Diocese of Arlington, was an expert witness in a banking fraud trial and, as a partner at the accounting firm KPMG, audited dioceses and religious organizations. If anyone could explain to me how exactly a bishop could travel by chartered jet and decorate his office with $100 worth of fresh flowers each day-or at least reassure me this was not normal behavior-it was she.
I started by asking her if she, too, was surprised by the news. She said she was "shocked and appalled." An hour after we finished our conversation, however, she texted me, asking if she could "change [the] adjectives to disappointed and dismayed. Because it is really not that surprising given the lack of oversight in the church's current structure." Not exactly reassuring.
But, she added, "a bishop being reimbursed by his diocese for personal gifts that he made and then accounting for the cost as salary is definitely an outlier." The fact is few dioceses have the kind of wealth Bishop Bransfield had access to because of the oil field royalties-which reportedly generated up to $15 million annually. In addition, the diocese had investment income on an endowment of $230 million-exceptionally rare for a diocese with fewer than 80,000 parishioners.
I asked her how common gift-giving between dioceses is.
"There are legitimate ways of giving gifts to other dioceses," she said, adding that, in fact, canon law explicitly allows wealthy dioceses to support needier ones: "When Hurricane Katrina devastated the Gulf Coast, many dioceses that weren't affected sent funds to Louisiana and to Texas. Those were legitimate diocesan charitable contributions."
"What was odd about [Bishop Bransfield]-and they clearly knew it was out of the ordinary in West Virginia-was the bishop making gifts to other bishops and other priests as individuals. They weren't charitable contributions by any definition, as they were not made to the church. They were personal gifts. And based on the reporting to date, this fact was acknowledged because the expense was ultimately characterized as 'salary' to the bishop-justifying his use of the funds at his personal discretion."
She said that at the Archdiocese of Washington, such gifts were never made, to her knowledge, to individuals but to a diocese. The recipient diocese would then have the obligation under U.S. tax law to show that the funds were subsequently used for charitable purposes. "Part of any sound control for a charity making gifts is having evidence that the receiving party is a qualified beneficiary or an approved charity itself," she explained. "If it was a person, we just would not write the check."
So how, I asked, could Bishop Bransfield misuse diocese funds for years without raising red flags?
"It's just that there is too much authority over use of funds vested in the bishop," she said. The Diocese of Wheeling-Charleston, like a number of other dioceses in the United States, is set up as a corporation sole. "In a normal corporation you have stockholders, and in the corporation sole you have one stockholder," she said. The bishop, as the only stockholder, has complete ownership of all the assets in the diocese. Bishop Bransfield is reported to have repeatedly told people "I own this," in reference to the Texas oil fields.
While that is technically true, saying so suggested a level of unquestionable authority over all spending decisions. "I'm sure I've never heard Cardinal Wuerl or Bishop Burbidge say, 'I own the cathedral.' Well, they do as a matter of law, but they understand they are stewards of assets for the benefit of the faithful. It doesn't appear Bishop Bransfield acted with that assumption."
Ultimately, she said, the problem is not one of corporate structure but one of governance structure, and it is not limited to extreme cases like West Virginia. Under canon law, "It is the responsibility of the ordinary to carefully supervise the administration of all goods." That is, the bishop is both the pastor of his flock and the chief executive officer of the diocese.
"In any for-profit corporation or a not-for-profit corporation-other than the church-the number one responsibility of the board is the hiring and firing of the chief executive officer," my Mom said. "The problem in the church is that that power exists only in Rome, not locally."
Another issue, she noted, is that there is not a separation of duties. "Normally, let's say I wanted to buy a new cartridge for my printer at the office. I would initiate it, but I have to get I.T. to acknowledge that I really needed it and sign off on the same piece of paper."
"It seems like in West Virginia, the bishop could initiate a payment to himself and approve it because he's the ultimate authority," she said. "Just one of the most basic of internal controls-separation of duties-is missing."
Having worked in many different nonprofit and church settings, my mom also pointed out that a culture of deference can also lead to financial mismanagement.
"Staff, volunteers and parishioners have been taught-and want-to believe the priest or bishop has been called by Christ and knows what is right, and they are more likely to defer to him," she said. "Some may even think it is wrong or sinful to challenge a priest's authority."
Thoroughly demoralized by this point, I asked my mom what reforms she thinks could bring greater accountability and transparency to church finances.
While the hiring and firing of bishops by a lay board of directors is a nonstarter, "we could have a situation where the temporal goods were overseen by the laity and the spiritual goods overseen by the cleric," she suggested. A lay diocesan administrator could essentially serve as the chief executive officer-and be subject to real oversight by a board. She admitted this would be a radical step and said she does not expect to see it in our lifetimes.
There are, however, intermediate steps that could prevent abuses like those uncovered in West Virginia. She recommended a separation of duties so that a bishop could not initiate and approve payments. She also pointed to measures that some dioceses already have in place that could be more widely adopted. In Washington for example, the auditors recommended as a best practice that all payments initiated by the bishop be recorded and reviewed once a year by the audit committee.
She held up Boston as a good model of financial transparency. Following the Boston Globe investigation into systemic abuse and cover-up there, the diocese brought in experts from major U.S. companies to help create a reporting document that is very similar to what public companies must submit to the Securities and Exchange Commission, providing in detail information like the pay of top executives and major financial transactions. "That is totally voluntary," she said, "and it should be a best practice, but I do not know any diocese that has gone to the same length as Boston."
She said canon law on the administration of goods needs to be updated to reflect current practices. Currently, canon law requires all dioceses to have a finance council with at least three lay experts in areas like accounting and civil law. There are a limited number of activities that require the approval of the finance council, including major property sales; in other areas, the bishop is required to hear from the council but is not required to take their advice. She thinks updating canon law to give the council explicit authority over a wider range of financial transactions would be a good first step toward putting in place the checks and balances that are the norm at most nonprofits and companies.
My mom said the resources are there for bishops who want to bring best practices to their dioceses. "The Leadership Roundtable, the Diocesan Fiscal Managers Conference and the accounting practices committee of the U.S.C.C.B. have a ton of talent that would be able to make recommendations, including how the separation of the administration from the spiritual realm could work," she said.
"You'll be surprised how much guidance there is on the bishops' website about how the administration of a diocese should be," she added. "The problem was Bransfield didn't want to follow it."
This week, the U.S. bishops are gathered in Baltimore for their annual meeting where they will vote on procedures for holding themselves accountable for sexual abuse. After talking to my mother, it is clear to me that accountability-for both sex abuse and financial misconduct-will require delegating real oversight powers and authority to lay people willing to make sure bishops and staff are held accountable. Thankfully, there are plenty of faithful Catholic men and woman with the expertise to show them the way. I would be happy to pass along my mom's number
Ashley McKinless is an associate editor at America.

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