The San Diego Union-Tribune's caption on its homepage right now is "Audit Critical of Diocese Books." Clicking on that, I get an article titled "Report Says Diocese Accounting System Lacking." The article is about an audit provided by financial expert R. Todd Nielson, who was appointed by the Bankruptcy Court to perform an audit of the diocese and parishes after the bankruptcy judge found the number of accounts and other information from the diocese confusing. The abuse victims' attorneys are quoted by the article as making the sorts of comments they typically make, accusing the diocese of dishonesty. The attorney for the diocese is reported as asking people "to listen to and rely only on the comments of Mr. Neilson himself."
The Union-Tribune also provided a download-able copy of the lengthy report in pdf format. You can download it from this blog too: Download Nielson_Audit Report.pdf
The Diocesan web page about the bankruptcy offers downloads of both the entire audit report and a statement from the diocese in response to it. The Diocesan statement in response to the audit includes the following:
"Mr. Nielson's report praises the cooperation he and his personnel received from the diocese, parishes and schools. We appreciate his recognition of the fine volunteers and employees of the diocese and parishes who responded to Mr. Nielson's inquiries. The report also notes a small number of problems, all of which have been corrected or are in the process of being corrected. . . . [W]e encourage the media, the public and Catholics to listen to and rely only on the comments of Mr. Nielson himself."
I do not have time mid-week (if ever) to fully read and analyze a 176-page financial report on the Diocesan bankruptcy. However, the report did say many good things about the diocese and about most of the parishes whose records were reviewed (including mine).
Rather than comment (since the diocese asks that people read Mr. Neilson's Report and not other people's comments anyway!), here are a few excerpts from the actual report that I noticed in skimming it [my emphasis added]:
The Diocese and Parishes Cooperated With the Audit:
"During the course of preparing this report, the Expert met with various personnel from the Diocesan offices as well as a substantial number of Parish Priests and their accounting staffs. In conjunction with these meetings and interviews, the Expert reviewed thousands of documents in preparation for this report and both the Diocesan staff, as well as almost all of the Parish staff, responded quickly and professionally to the voluminous requests for records and supporting information."
The Diocese Only Has 38 Bank Accounts -- But If You Combine That With All of the Parish Accounts and Accounting Systems, It Does Get "Byzantine" (Confusing):
"In prior hearings before the Court the Debtor has referenced in excess of 700 separate bank accounts being maintained at the parish level. In addition, the Court previously referenced a possible further accumulation of 500 “accounts” purportedly being maintained at the Diocese level, prompting the Court to describe the accounting system at the Diocese as “Byzantine”. The Expert understands the Court’s frustration. The source of this frustration is probably based upon two factors. First, the term “account” can have a number of different but distinct meanings depending upon the circumstances in which the term is used. The Expert believes the Court naturally assumed the term “account” meant a bank account or savings account located at a financial institution which is not necessarily the same meaning perhaps ascribed to “account” by the Debtor. Secondly, for reasons described further within this report, there truly are a massive number of bank accounts collectively maintained at the Parish level. The Expert believes the number of bank accounts at the Parish level will ultimately exceed 900 upon completion of his analysis. The thought of analyzing 900 bank accounts is a daunting but manageable process. However, the potential existence of 500 separate undefined “accounts” maintained at the Diocese combined with 900 accounts at the parish level, clearly moves us into the realm of Byzantine. . . .
"In actuality, the number of bank accounts at the Diocese level does not even begin to approximate 500 separate bank accounts. When using the term account as being an account maintained at a financial institution, the Debtor had 35 bank or brokerage accounts at the date of petition and added three additional accounts post-petition, bringing the present number of accounts to 38."
Inconsistency in Describing the Diocesan Trust Bank Account:
"The Diocesan Office Funds Financial Statements contains all of the funds held by the Diocese, including the Diocesan Bank, makes no disclosure of a trust relationship and gives no indication that any asset in the Diocesan Bank belongs to anyone other than the Diocese. Any assertion by the Diocese that they are holding the Diocesan Bank funds in behalf of the individual parishes and schools in a trust capacity is in direct conflict with the representations made by the Debtor’s officers in the management representation letters . It should be further noted that the Debtor’s Bankruptcy petition did not list the assets of the PSDL Trust and accordingly, were filed in direct contradiction to the assertions with the management representation letters attested to by the Debtor."
The Parish Books and Records Were Well Kept, but by Different Systems:
"In practice, each parish and school is responsible for their individual method of accounting and bookkeeping leading to a lack of standardized accounting. This absence of a prevailing accounting system leads to an incredible array of accounting programs and methods to record their financial transactions. As a result, the accounting programs within the parishes range from a handwritten system of ledgers [footnote: It should be noted that the handwritten system was meticulously maintained.] to advanced parish accounting software packages.
"Regardless of the method used, the Expert found that the parishes and schools were reasonably well organized and sufficient detail was generally available to allow the Expert to analyze the receipts and disbursements of each parish or school. This availability is probably due, in part, to the fact that each parish and school is required to send an annual report to the Diocese."
Some Parishes Did Not Comply with Diocesan Instructions to Deposit Funds to the Diocesan Trust Account:
(This criticism is directed at certain individual parishes.)
The Diocese Instructed Parishes to Comply with Requirements to Make Deposits to the Diocese Trust Account, and Not All of Them Did So:
"There is a clear obligation on the part of the parishes to deposit excess funds into the Diocesan Bank/PSDL Trust and a goodly number of the parishes are attempting to comply with the guidelines as best as they can understand those procedures. However, there is an understandable, but clearly apparent, ambivalence on the part of the parishes to comply with that requirement. . . .The Expert has found a veritable plethora of interpretations at the parish and school level of the surplus funds requirement which range from good faith adherence to absolute disregard. . . . This disregard for the policy is even more troubling given a memorandum sent to the pastors, administrators and principals on May 24, 2007 by Monsignor Steven Callahan. [“Your cooperation is essential so that the diocese and parishes are in compliance with the commitment to the Court.”]"