Wednesday, June 19, 2013

Church money leads to temptation -Trust is key in big religious organizations

Allegations of $1 million in misspending at St. Leo Catholic Church in Bonita Springs once again highlight the struggles even well-established institutions face in safeguarding their money.

Organizations may have strict financial policies, such as the 87-page Diocese of Venice financial manual governing St. Leo's. But those rules amount to little if they are not strictly enforced at all levels of leadership, fraud experts say.

Religious organizations, often awash in cash, sometimes forget unmonitored spending authority is too tempting for some, said Verne Hargrave, an Arlington, Texas-based accountant who specializes in church financial audits and investigations.

"In many respects, they're easy targets," Hargrave said.

"They have a trust and forgiveness philosophy. It makes it hard for them to believe it could happen at a church."

Religious and charitable organizations were victim to about 2 percent of U.S. fraud cases in 2008 and 2009, according to a survey last year of fraud examiners. The median loss was about $75,000.

They tend to be inside jobs, commonly involving improper billing and reimbursements or thefts of on-hand cash, the survey found. Often, news of wrongdoing is not made public and handled internally.

Some high-profile Florida cases:

- St. Vincent Ferrer Catholic Church in Delray Beach fell victim to two embezzlement schemes by priests funding lavish homes, vacations and even a mistress, according to reports at the time. The Rev. John Skehan was sentenced to 14 months in prison in 2009 for stealing more than $370,000. The Rev. Francis Guinan was later sentenced to four years for stealing as much as $100,000 from the same church.

- A 2007 investigation at Episcopal Church of the Advent in Leon County turned up more than $500,000 in missing funds, according to news reports at the time. Former church bookkeeper Rosanne Stone was later sentenced to two years in prison after pleading no contest to the charges.

- The Diocese of Palm Beach revealed in 2002 it had kept quiet the embezzlement of $400,000 in the early 1990s by financial manager Robert J. Schattie. Schattie used the money to buy a fishing boat, Rolex watch and property, according to the church.

Fraud is a particular risk for charitable and religious organizations, which rely heavily on donors, area church leaders say.

"There is a strong public trust there," said Russell Howard, executive pastor at McGregor Baptist Church in Fort Myers. "We have to be above reproach."

St. Leo's

Bishop Frank Dewane, head of the Diocese of Venice, told parishioners last week St. Leo's pastor, Rev. Stan Strycharz, used about $665,000 in church money for his personal credit card bills over the past five years, according to an outside audit.

Dewane also accused Strycharz, who is on administrative leave, of providing another $171,877 to a former church business manager for her children's education, $149,705 to Strycharz's brother and another $43,000 in unspecified misappropriations.

Strycharz's supporters claim the credit card was issued by the church and used for parish-related expenses, something the diocese denies.

It is not clear how Strycharz would possess a credit line that would allow for $665,000 in personal charging. He receives a salary, but the church has not revealed it.

His supporters also said the educational expenses cited by Dewane benefited 25 children each year for the past five years, which the diocese also denies.

The church and Strycharz's supporters have threatened legal action. But no criminal charges have been filed in connection with the allegations.

The audit itself, which might clear up the conflicting stories, has not been made available outside of church circles. A 2009-10 audit makes no mention of financial improprieties.

Diocese spokesman Billy Atwell said the document contains proprietary information and, for now, won't be released.

Strict rules

The diocese has strict rules on spending, but they grant broad fiscal authority to a parish pastor under the heading of "ordinary administration."

That administrator is supposed to administer those finances with assistance of a parish finance council, whose duties are to periodically review spending and other financial operations.

A pastor's financial authority includes collecting and banking money, paying salaries, replacing supplies and other purchases needed for day-to-day operations. That last item comes with a limit of $30,000 or 5 percent of a parish's operational income, whichever is less.

Anything more expensive must get clearance from the bishop, according to diocese policy.

Atwell, the diocese spokesman, said he does not know St. Leo's operational income.

The diocese, which governs parishes in multiple Gulf Coast and central Florida counties, has assets totaling more than $160 million. That includes cash, land and investments, according to a 2010 financial audit.

Rules allow for parish credit cards but state they are discouraged. Those with credit cards are required to submit receipts for all purchases.

When asked why the financial council did not detect and stop inappropriate spending, Atwell released this statement that reads, in part:

"Father's financial irregularities were recognized in the years leading up to his being placed on administrative leave, and he was told what to fix by a peer review committee. Clearly he ignored many of the Diocese's policies and procedures and the specific corrective actions he was told to take - and as such over $1 million in questionable or unsupported expenses remain."

Atwell also said Strycharz refused to cooperate with auditors and allow them to review his credit card information. Strycharz backers insist the priest cooperated and provided documentation in a timely manner.

Strycharz has been instructed by the church to not speak publicly on the matter while it remains under investigation.

Many hands

Other large religious organizations in Southwest Florida have their own strict rules for spending.

First Assembly of God in Fort Myers, a multi-million dollar operation with 6,000 members, requires multiple approvals for any significant purchase, said David Thomas, senior assistant pastor.

It too has a finance committee charged with reviewing church books and undergoes an annual audit.

Takes from the Sunday collection plate are counted and banked by multiple church staffers, he said.

"People are making donations to this organization on a daily basis," Thomas said. "If they're not going to trust this organization and the financial integrity of it, they're not going to make donations to support our ministries."

The key is to not place spending authority in the hands of too few people, said Doug Pigg, associate pastor of church administration for 8,000-member First Baptist Church in Naples.

In such cases, "you've opened the door for a problem to take place," Pigg said. "If you have control of the money and you write the checks, then you've got trouble."

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