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Use of Discretionary Funds for Personal Purposes

Misuse of church funds can lead to legal problems.

Key point 7-21. Embezzlement refers to the wrongful conversion of funds that are lawfully in one's possession. Embezzlement is a common occurrence in churches because of weak internal controls.

A Florida appeals court affirmed the conviction of a parish priest for embezzlement of church funds.

A Catholic priest was charged with grand theft of funds from his church based on his use of church funds for his own personal benefit, rather than for the benefit of the church. The evidence at trial included the following:

  • Testimony of the church bookkeeper, who stated that the priest asked to see the cash collected in the offerings, and would keep some cash and return a reduced sum to the bookkeeper to be deposited into the church's operating accounts.
  • Testimony of another church employee, who stated that the priest would keep cash from the weekly offering and would instruct her to deposit only a part of the weekly offering. She testified that the priest retained $4,600 in cash from just one week's offerings.
  • Testimony that to avoid detection, the priest instructed the bookkeeper to create fake deposit slips to send to the diocese to hide the fact that cash was given directly to him. The priest was present when the cash from the offerings was counted.
  • Testimony of a church employee that she gave the priest a shoebox with about $11,000 in cash, and the priest returned the box with only $2,000 in cash remaining. After this employee attended a bookkeepers' training class sponsored by the diocese, she informed the priest that she could no longer participate in counting the offertory. When the priest cursed at her, she resigned the same day.
  • The church paid the priest's travel expenses for frequent trips out of state, to places such as Las Vegas, Ireland, and the Bahamas.
  • An internal audit by an outside auditor revealed that expenses listed as reimbursements for credit card payments were, by and large, "not church-related expenses." The auditor found checks written directly to the priest for $30,640 without any accompanying receipts or documentation to justify payment to the priest. The priest also wrote checks to the bookkeeper from his previous parish. A diocesan official questioned the priest about these payments and told him that the former secretary was not entitled to payments from the church's accounts. Despite this admonition, the priest wrote checks totaling $43,000 to his former secretary. The priest also wrote checks to a Catholic high school to cover the tuition expenses for his former secretary's son.

A diocesan official testified that priests draw both a salary and a car allowance. The funds to pay salaries and automobile allowances are derived from the general fund raised at each church. Although the diocese has no particular control over church accounts, the official stated that a priest's personal expenses would not be paid out of the parish's operating account since the priest receives a salary package.

The diocesan official also testified that the priest is allowed to make distributions from parish accounts, without permission of the bishop, as long as the distribution does not exceed $50,000 and the distribution is "for the good of the parish." However, priests were instructed to keep records of distributions, and these accounts devoted to charitable works were required to be reported to the diocese quarterly.

The chief financial officer for the diocese testified that the diocese promulgated explicit written procedures regarding how offerings were to be counted and deposited. The diocese, according to the CFO, monitored the finances of each parish to ensure that each priest was properly administering his duties. However, he conceded that some parishes would hold funds in unreported accounts to keep reported account balances low to avoid incurring larger fundraising goals during the diocese's annual fundraising appeal.

A forensic examiner testified for the prosecution that during the priest's tenure as pastor, there was a "cash shortfall" of roughly $372,343, and almost $487,000 in parish funds were misappropriated by the priest.

The defense presented the following exculpatory evidence:

  • A forensic examiner employed by the defense testified that the priest deposited $134,000 in cash in other church accounts.
  • Another priest testified that parishes keep "slush funds" in separate accounts, either to help needy parishioners or to reduce the amount of money they would be expected to remit to the diocese as part of the annual fundraising appeal.
  • The defense presented other witnesses who stated that parish priests have substantial discretion in spending church funds. A former diocesan official testified that a parish priest would have the discretion to pay for a past employee's child to attend a Catholic high school and to pay for vacations for the pastor out of the parish's operating account.
  • The defense also presented the testimony of a former parishioner who decided to make a $100,000 gift to the priest out of appreciation for the priest's past services. The parishioner wrote checks both to the priest and the parish to avoid the priest's liability for federal gift taxes, but the parishioner intended that the checks written to the parish were for the priest's use "as he so chose."
  • The priest offered justifications for the expenditures. For example, he testified that he paid his former secretary out of church funds in order to prevent her from suing the diocese. He also testified that he paid many church employees in cash, and that he believed he had unfettered discretion to spend parish funds.

A jury convicted the priest of the lesser offense of grand theft of property valued between $20,000 and $100,000. The priest appealed, claiming that the state's evidence was insufficient for a conviction. He insisted that the discretion accorded to priests foreclosed any inference that he took the property of another. The appeals court rejected the priest's arguments, and affirmed his conviction. It observed:

In this case, the state presented evidence from officials of the diocese that a parish priest is supposed to use parish money only for parish purposes. [Diocesan officials] testified that the priest's expenditures for [his former secretary and her son] and for vacations would not be valid parish purposes. Further, the forensic examiner testified that thousands of dollars in cash from the offertory were unaccounted for and that a significant amount of parish money was spent on items that [diocesan officials] testified were not parish related. Significantly, [these officials] testified that money collected from the offertory is collected from the parish members for parish purposes. There was also testimony from staff at the parish that fake deposit slips were used to cover up the fact that cash was taken from the offertory.

The state has introduced evidence inconsistent with the priest's claim of innocence. The case rises and falls on the intent of the priest when he used parish money and removed cash from the weekly offertory and whether it was for his personal benefit, not related to parish purposes. Ultimately, intent is a question of fact to be decided by the jury. We find that there was sufficient competent evidence of grand theft for the jury to find the priest guilty.

The court also rejected the priest's contention that the prosecution of this case led to an "excessive entanglement with religion" in violation of the First Amendment. It observed: "Purely secular disputes involving religious institutions and third parties do not create excessive entanglement of church and state when they involve neutral principles of law."

What this means for churches

Many churches have established discretionary funds that their pastor can use at his or her discretion, often with little, if any, oversight or accountability. This case illustrates that such arrangements can lead to the expenditure of church funds for personal purposes having little, if anything, to do with the furtherance of church purposes, and this, in turn, may lead to criminal liability. Guinan v. State, 65 So.3d 589 (Fla. App. 2011).

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Posted:
  • July 1, 2012

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