Church communities are built on fellowship and understanding. And because religious organisations depend on human beings to function, they are often vulnerable to fraud, precisely because of the trust and forgiveness that define them.
Abuse of financial resources invariably results when ‘conduct risk’ in any organisation, whether profit or non-profit, is managed poorly. Conduct risk refers to the possibility that an individual’s behaviour, acts or omissions deliver a poor or unfair outcome for the organisation and its stakeholders.
Archbishop Charles Scicluna has commissioned an audit into the finances of the Marsaxlokk parish after its parish priest was charged in court with misappropriating large volumes of parishioners’ donations. While the priest is pleading not guilty to the charges, the Church appears as an injured party in the case.
The archbishop’s decision to appoint the Archdiocese’s chief audit executive to conduct a financial audit is the right one. However, more needs to be done to ensure that the Church has the right processes, scrutiny and supervision that can help deter fraud. The Church leaders also need to make clear who is to be held accountable when processes fail, tarnishing the Church’s reputation.
By their very nature, internal auditors cannot be entirely independent of the organisation being audited. The people performing an external audit, on the other hand, should have no relationship with the party being audited. The lack of a relationship eliminates the possibility of bias entering the audit findings.
The risk management auditors should also understand not just accounting, mainly non-profit accounting, but also operational risk management. Choosing someone with the time available to start and finish the audit promptly is crucial. It may be tempting to go with the first person who volunteers for such a demanding task but that might not be the best option.
Avoiding a lax control environment may prevent someone from being tempted to commit fraud. Proper controls can also protect Church leaders from inaccurate accusations and ensure that the Church isn’t caught up in an unnecessary scandal that causes reputational damage.
While the internal audit function is the first line of defence against abuse by potential fraudsters, it is always recommendable to conduct a regular independent audit of an organisation’s risk management function. The Church should not be an exception.
The key benefit of an independent audit that delves into the risk management processes of the Church is the information it yields. The audit report should address the interests of different audiences. A report to the congregation then confirms whether the Church finances have been appropriately managed or whether any significant issues of concern need to be addressed.
A more detailed report needs to be given to the Church’s governing bodies with specific data, information on any discrepancies and recommendations from the auditors.
A final report should be addressed to the managers involved in the Church’s day-to-day operations, containing specific and detailed information needed by the management team to help the Church’s higher authorities assess and apply the auditors’ recommendations.
An independent external audit is a crucial first step towards accountability in the Church’s financial management.
The court case against the Marsaxlokk parish priest is in progress. The public interest in this case is understandable as a parish priest is an important public figure in any local community. However, everyone should refrain from equating a court of law to a court of public opinion on public figures’ moral standards and behaviour.
The law courts must be left to decide on the legal issues. It is up to the Church authorities to scrutinise the behaviour of priests according to their moral standards.