The Financial Mess of the Archdiocese of Miami Continues

“Whoever has ears ought to hear” – Matthew 13:43

Spirited Lay Action Movement previously reported and warned on many occasions during the past several years about the financial mismanagement and difficulties facing the Archdiocese of Miami, as well as the lack of transparency and accountability by the hierarchy to the Church – the People of God. These warnings have been ignored by the hierarchy, but have not gone unnoticed.

We warned about the more than $11 million dollars in unaccountable funds from Vision 2000. We reported about the purchasing of expensive and unnecessary residences for some of the clergy without prior consultation with the Parish finance council as required by Canon law. We reported that during the past two years the Archdiocese of Miami has borrowed several millions of dollars from local area banks that will have to be repaid. Imprudent financial investments have dissipated. There have been unprecedented closings of schools and parishes. The Archdiocese has warned that further parish closings are on the horizon. Various property of the Archdiocese of Miami is now up for sale.

The Archdiocese of Miami issued earlier this month its unaudited financial report for the period ending June 30, 2008, presenting outdated information more than a year old!¹ With the prevalent availability and use of computer accounting software, there is no excuse why the Archdiocese of Miami does not provide a more current financial report; especially in view of the Archbishop’s repeated pronouncements concerning the continuing deterioration of the Archdiocese of Miami’s financial state of affairs.²

The need for stewardship, financial accountability, and transparency by dioceses and parishes is not new. It just has not been routinely and systematically followed by the Archdiocese of Miami and some Parishes within this Archdiocese.

For example, in 2002 the United States Conference of Catholic Bishops (USCCB) approved and issued Diocesan Financial Issues. The 2009 revised version of this document can be downloaded from http://www.usccb.org/finance/index.shtml ³

The USCCB recognized:

The Church is responsible for the financial resources which have been entrusted to it.  This responsibility includes safeguarding Church assets, exercising prudence in financial matters, accountability to those who provide monetary support to the Church and to regulatory authorities, and compliance with all civil regulations.  As such, the Church is committed to the highest standards of fiscal integrity and accountability.  Strong systems of internal controls are needed to safeguard assets by reducing the risk of fraud, misuse, waste or embezzlement.     It is important that all diocesan officials and all employees within a diocese be sure that best financial practices are being followed.  Best financial practices dictate that diocesan organizations review their policies and procedures in light of the continuing developments and those recent developments outlined below. (emphasis added).

The USCCB recommends that each diocese enact a written fraud policy and provided a suggested form for use in that regard including the following statement concerning “actions constituting fraud”:

The [name of Diocese or Archdiocese] defines fraud as the intentional misuse or misappropriation of an (Arch)diocesan entity’s resources or assets for the personal enrichment of the perpetrator or others.  Fraud also includes the intentional false representation or concealment of a material fact relating to the misuse or misappropriation of an (Arch)diocesan entity’s resources or assets.  Additionally, fraud also includes any intentional falsification of, or misrepresentation in, financial statements.  Actions constituting fraud include, but are not limited to:

• Misappropriation of funds, securities, supplies or other assets;
• Impropriety in the handling or reporting of money or financial transactions;
• Breach of fiduciary duty, including disclosing confidential information to outside parties;
• Seeking anything of value from contractors, vendors or persons providing (or seeking to provide) services/materials to an (Arch)diocesan entity for one’s or another’s personal benefit;
• Accepting anything of value from contractors, vendors or persons providing (or seeking to provide) services/materials to an (Arch)diocesan entity for one’s or another’s personal benefit, in violation of the (Arch)diocesan Conflict of Interest Policy;
• Bribery;
• Inappropriate use of computer systems or other property of the (Arch)diocesan entity;
• Unauthorized destruction or removal of records, furniture, fixtures and equipment;
• Intentional falsification of, or misrepresentation in, financial statements; and
• Any dishonest act. (See I-4; Exhibit I-D). ⁴

Included in Diocesan Financial Issues is a detailed section, with recommended guidelines and forms, pertaining to “Parish Financial Governance” [I-I-1 thru 30].  Included in this section are suggested procedures and forms certifying that the Parish has a finance council as required by Canon law, that  the finance council regularly meets and reviews the Parish’s financial condition, and that they have prepared budgets and issued financial reports that are disclosed to the Parish’s parishioners at least on an annual basis.  The document also includes suggested guidelines and procedures for the training of members of the finance council, detailing its duties and responsibilities, as well as providing checklists and resources to guide the council. 

Diocesan Financial Issues also provides procedures and guidelines pertaining to “Diocesan Finance Councils” [VIII-1 thru 12]. 

Diocesan Financial Issues contains a section dealing with “Fundraising, Diocesan Appeals and Gift Acceptance” (XII).  This section specifically requires:

11. Annual fund-raising reports are to provide both financial information and a review of the apostolic work for which the funds were raised.  They are to set forth, at the least, the amount of money collected, the cost of conducting the fund-raising effort, and the amount and use of the funds disbursed. (emphasis added).

Diocesan Financial Issues also contains a section specifically dealing with “Investments” [XIV]. The document states:

All institutions with investments should develop written investment policies governing significant investment criteria for each class of funds being invested. Among the matters which should be included in the investment policy are the following:

• Asset allocation – setting the minimum and maximum amount of each asset class, (e.g. fixed income, small cap stock, mid cap stock, large cap stock, foreign equity, foreign debt, etc.) that the institution may hold

• Expected investment return – usually this will be expressed as a comparison to a specified benchmark or as a percentage above a standard such as the consumer price index and will include a time frame over which the return will be measured, usually a period of several years

• Diversification – restrictions on the size of an investment in a particular company and industry to assure that the portfolio remains diversified

• Quality ratings – minimum quality ratings acceptable for investments. This is particularly applicable to fixed income investments but can also apply to the minimum market capitalization necessary for investing in the stock of publicly traded companies

• Prohibited investments – specific investments or categories of investments that will not be held by the institution

• Socially responsible guidelines –guidelines for a socially responsible investment policy should be developed and should be modeled on the guidelines published on the website of  the USCCB

Other matters that should be considered in preparing any written investment policy or guidelines include: 1) what is the purpose and the priorities of investing the funds, 2) once the purpose and priorities are established, what is the acceptable level of risk the diocese is willing to take in investing the funds, 3) will the funds or the earnings be used for any cash flow needs, 4) does the diocese have any investment style preferences, and 5) are the funds part of a program that is subject to ERISA?
Institutions are increasingly making use of alternative investments such as hedge funds, private equity funds, real estate funds, venture capital funds, etc. to increase both yield and diversification of investments. Prior to investing in such alternatives, institutions should investigate if there will be problems with valuation, unrelated business income taxes, etc. They also should be aware that it may be very difficult to determine if Social Responsibility guidelines are being observed by alternative investment funds.

The Church’s administration is subject to the Code of Canon law.  Canon 1284 § 1 states all administrators, including the Archbishop of Miami is “bound to fulfill their function with the diligence of a good householder [steward].”  Pursuant to Canon 1284 §2 the Archbishop of Miami and Pastors of Parishes “must…keep well organized books of receipts and expenditures” and “draw up a report of the administration at the end of each year.”  Canon 1287, dealing with “accountability,” requires “[a]ccording to norms to be determined by particular law, administrators [such as the Archbishop of Miami and Pastors of Parishes] are to render an account to the faithful concerning the goods offered by the faithful to the Church.

Appendix A to Diocesan Financial Issues discusses the requirements for “Financial Statements and Notes” to be provided by dioceses, such as the Archdiocese of Miami.  This document provides:

In addition to financial reporting requirements resulting from outside debt arrangements, or any state and local regulatory requirements, or other church Norms, the [Archbishop of Miami] should issue particular law to provide periodic communications to the Christian-faithful concerning the financial position and the results of activities of the [the Archbishop of Miami] subject to his power of governance.  This particular law(s) should provide that these periodic financial reports be in a format and provide reasonable information to enable the Christian-faithful to understand and appreciate the stewardship that these [administrators] exercise with respect to the funds entrusted to them by the Christian-faithful.

Consultative bodies, especially the diocesan finance council, should be consulted to determine the frequency, format, content and modes of distribution for these financial reports. 

Undoubtedly, these consultations will result in many and varied options to accomplish these financial accountings, including the need for independent reports of compilation, review or audit.  In addition to considering the requirements of generally accepted reporting practices, each diocese should endeavor to accomplish reasonable norms of accountability and transparency with respect to the financial activities of each [administrator]. (See A-1)

Diocesan Financial Issues provides forms of financial statements and examples of information contained in these statements for use and issuance by Dioceses, such as the Archdiocese of Miami.  The statements include details concerning assets, liabilities, revenues, expenses, and cash flows, together with detailed notes concerning the preparation of these financial statements. (See A-3 thru A-16; emphasis added). 

Diocesan Financial Issues also offers a variety of resources to assist the Diocese in accomplishing these financial reporting goals. (See Appendix B).

There is no reason why these guidelines as detailed in Diocesan Financial Issues, and its predecessor approved manuals, should not have been followed by the Archdiocese of Miami for the past several years. Had the Archbishop of Miami followed these practices and procedures, the Archdiocese of Miami may not be in the critical financial state of affairs that now exists.

1. The Archdiocese of Miami financial report for the period ending June 30, 2008 can be found here at: (accessed July 15, 2009)

2. Spirited Lay Action Movement is in the process of reviewing the Archdiocese of Miami’s June 30, 2008 financial report and it will issue its separate comments concerning this report at a later time.

3. In 1971 the USCCB’s predecessor, United States Catholic Conference, published a manual entitled Diocesan Accounting and Financial Reporting.  That Manual was revised in 1981 and the USCCB adopted a new manual titled  Accounting Principles and Reporting Practices for Churches and Church-Related Organizations.  The 1981 manual included illustrative financial statements to be used by Diocese.  With changes in 1993 to the “generally accepted accounting principles” and later changes to “generally acceptable auditing practices” applicable to non-profit organizations, the USCCB felt the need to update its accounting manual and adopted Diocesan Financial Issues in 2002.

4. Diocesan Internal Controls, published by the USCCB in 1995, was an attempt to have the Dioceses, such as the Archdiocese of Miami, institute internal controls to prevent fraud. embezzlement, misuse and mismanagement of Church funds and property.