Financial crisis in DioNJ underscores larger issues of lack of accountability/urgency within the church

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New Jersey bishop Sally French recently admitted what many have known for a long time: The Episcopal Diocese of New Jersey (DioNJ) is in a financial crisis.

But French’s announcements, made in a February 27 letter to the Diocese and a March 9 speech to the diocesan Convention, miss the point, which is that the problems at the Diocese transcend sloppy financial recordkeeping and implicate organizational and individual integrity and accountability.

Even worse, French’s pronouncements serve to perpetuate the mess, thanks to their inappropriate efforts to deflect criticism from her predecessor, Chip Stokes, her premature claim that there is “no indication of any financial malfeasance or fraud,” and her avoidance of the underlying issues that led to this meltdown.

Defining the problem

So, what exactly is going on at DioNJ?

It’s hard to know with specificity.

In a demonstration of Episcopal doublespeak at its finest, French commits to financial transparency, even as she shares absolutely no meaningful detail about the diocesan financial crisis.

French identifies the following general challenges confronting the Diocese:

• We have not maintained appropriate financial and administrative controls,” French wrote.
• “We know that we have not made substantial progress toward completing overdue diocesan audits.”
• The Diocese has not “maintained canonical protocols and financial controls regarding disbursements from diocesan trust funds.”
• It has not “provided updated and accurate information to the Trustees of Church Property.”
• “We also face errors in our financial recordkeeping.”
• French also noted that “many of our congregations have not regularly been receiving payments due to them from the proceeds of mortgage held by the diocese.”

Tellingly, French omits a key data point, which is that the Diocese is in a cash crunch, as manifested by a successful request for a one-year hardship reduction of its financial assessment to the national church. In granting the waiver–which was not as generous as the reduction the Diocese sought–the Executive Council’s Finance Committee described the situation as a “short-term financial crisis.”

In absolving previous bishop Chip Stokes of responsibility for this appalling mess, French says her predecessor began addressing the matter in the final weeks of his tenure, even as she opaquely admits that some of the issues only became known shortly before her announcements.

In other words, Stokes finally took matters seriously as he began making for the door in the form of retirement.

Spare us.

What’s being done

As is often the case when the Episcopal Church hits a pothole, there’s a problematic lack of detail into what the Diocese is doing to address this appalling s***-storm of mismanagement. Thus, even as French deploys the obligatory boilerplate about transparency, we’re seeing next to nothing of this much-vaunted openness and accountability.

For example:

• We know that the acting diocesan CFO, Canon Phyllis Jones, has been let go. But there’s no information on who, if anyone, now occupies that role. Knowing who’s responsible is an essential component of accountability.
• The Diocese says it has brought in an accounting firm to clean up its financial records, but we don’t know the identity of the firm. Nor do we know the scope or scale of its engagement. For instance, it would be helpful to know: Is the firm doing a forensic audit? We hope the answer is yes, and that this isn’t a case of just rebuilding internal processes and fixing accounting errors. And we see signs that suggest there’s a concern about staff possibly deep-sixing incoming financial records–otherwise, there would be no reason for the new diocesan post office box. In other words, we’re not the only ones feeling profound discomfort with this situation, both at the strategic and transactional levels.
• The Diocese is not specifying what errors it has found in its financial records. Bigger than a breadbox, smaller than a car, anyone? That said, we can safely say that these are not minor issues.
• We have no data on the size of the budget shortfall. But it’s got to be significant, given the decision to reduce the diocesan assessment to the national church by one-third.
• The Diocese has not published preliminary financial reports, provided updates from the accounting firm, or otherwise provided any meaningful detail, either on the scope of its problems or the steps it’s taking to fix them.
• We know the Diocese has not completed a financial audit in several years, is making no progress towards this goal, and has not complied with canonical requirements about its finances. That raises the question: Why have canons if no one enforces them?

In other words, this is a case of the Diocese saying, “We’ve screwed up, and we promise to do better next time.

“In the meantime, trust us, because we’re the Diocese.”

Um, no.

Thus far, the Diocese has shown itself to be an indifferent steward of the gifts entrusted to it, and until we see evidence to the contrary, we’re going with the evidence in front of us.

In short, we have seen no specifics, and nothing that would suggest we should ignore the available data, which makes clear that, when it comes to finances, the Diocese is a circular firing squad.

Our take

We’re calling BS on French and the Diocese.

Why?

We’re calling BS on the whole sorry lot because they:

1. Miss the point, which is that this problem came about because of organizational issues, including lack of urgency/accountability, lack of personal responsibility, and reckless indifference to the fiduciary obligations of trustees, standing committee members, and diocesan employees.
2. Continue the usual Episcopal games of “that happened before I got here,” and “it’s not Chip’s fault. He even started to address the issues in the weeks before he left” (while conveniently overlooking the prior years of Chip’s tenure). Even worse, much like Tennessee officials saying that Grant Solomon’s death wasn’t a murder, even though they haven’t actually investigated, there’s not enough evidence for French to say that there’s no sign of “malfeasance or fraud.” Indeed, where there’s chaos, there’s often malfeasance and/or fraud, and there’s plenty of misfeasance and nonfeasance to go around. So, any statement about these issues is premature, unwarranted, misleading, and runs the risk of the Diocese having to eat its words.
3. Canned the canon for finances, while blithely ignoring their own role in meltdown. To be clear, we don’t know Canon Phyllis Jones, the previous acting CFO. Nor are we saying she’s without fault—far from it. But this sort of meltdown is not the result of any one person. Instead, it’s the failure of multiple layers of safeguards and accountability, ranging from the bishop, to the standing committee, to the vestries of churches within the diocese. Additionally, the failure includes the individual actions and inactions of members of these committees, for a committee, ethically speaking, is nothing more than the sum of the ethics of its members. In other words, stop with the scapegoating and take responsibility, people.

To be clear, the hot mess of DioNJ finances has been around for a long time. And it’s been around for a long time because Stokes, the standing committee, and the trustees have all been busy clutching their pearls and muttering, “Oh dear,” versus insisting that the Diocese fix these issues.

In other words, Stokes is absolutely responsible, as are many others, for this meltdown.

Indeed, we know of no other non-profit organization where a leader could allow this sort of lingering mess and keep their job. The situation is shocking, appalling, and makes a mockery of the notion of Christian stewardship. And French does no one any favors by giving Stokes a pass on his egregious nonfeasance.

Meanwhile, by posturing this as a case of sloppy recordkeeping and broken internal controls, instead of the real issue, which is a broken church culture, French and her minions miss the chance to put in place genuinely transparent processes and procedures, which are an essential part of an effective organization. This process begins with absolute openness, including publishing financials, audits, and other indicia of accountability on the diocesan website.

Tellingly, French’s statements make clear that the Diocese is not considering any meaningful change beyond cleaning up its financial reporting.

Specifically, the bishop’s comments include weasel-worded language, probably from diocesan attorneys, in which she discusses “appropriate access” to diocesan financial information. That’s a warning sign that the Diocese wants to have it both ways: Officials want to proclaim financial transparency, even as they decide what others get to see.

Doesn’t work that way, and the “trust us, we’re the Diocese,” routine hasn’t worked in several decades. “Appropriate access” involves members and non-members seeing any financial information they want, whenever they want, with the possible exception of a few, very limited, pastoral expenses.

Moreover, while transparency incentivizes donors, opacity is a big turn-off, especially to younger persons, who rightly see this lack of candor as an effort by insiders to maintain power and control. If you want people to trust you, everything needs to be on the table. That means no blended budgets, artfully contrived to hide specific salary information and other details. No off-budget financials a la Jon Bruno and his Corp Sole. Nothing outside the scope of financial audits a la Episcopal Church Women. And the audit reports, including recommendations, need to be posted on the diocesan website.

While we’re on the topic, we’d note that a careful reading of French’s communications suggests that, eight months into her tenure as bishop, the financial meltdown came to an abrupt head, versus evolving over time. Specifically, French states that she delayed her departure from the House of Bishops over the matter, even as she states that some issues had only become known in the weeks prior to her announcements. Yet French even noted, in her candidacy for bishop, the need to clean up diocesan finances.

That begs the question: Just how long was French going to go before she put her foot down and insisted on change? Specifically, urgency isn’t the first word to come to mind when we examine her actions.

That’s alarming, because the Diocese itself notes that it has not been making timely payments to its constituent parishes and doesn’t have records adequate to sort through this mess without outside help. In other words, long before things blew up in their faces, French and others well knew that diocesan finances were in a dire way.

Nor is this mess solely that of DioNJ.

Thanks to the waiver of one-third of the Diocese’s obligation to the national church, all church members now are picking up the tab for the DioNJ’s feckless financial management. So, it’s one thing to create a mess and then live with the results. It’s another thing altogether to run to the rest of the church, looking for a bailout. Anglican Watch resents the notion that other church members should pick up the tab for diocesan incompetence, particularly when there is no notion of accountability or remorse among diocesan leaders.

What we’d like to see

As the Diocese works to fix its financial hot mess, there are a number of things we’d like to see it do. These actions would go a long way toward promoting transparency and accountability and would be a welcome beam of light in the murky mess of diocesan finances.

Among the items we ask the Diocese to make publicly available:

• The contract with the accounting firm, indicating the scale and scope of the work it’s doing for the Diocese.
• Any preliminary findings or recommendations from the accounting firm to the Diocese.
• The package of information the Diocese presented as part of its request for a waiver of assessments.
• Interim financial statements.
• Correspondence between the bishop, the trustees, and the standing committee regarding diocesan finances.
• Regular updates and next steps on the turnaround.
• Information showing that the Diocese is addressing root causes, including a culture of indifference, complacency, and conflict avoidance. Specifically, the financial meltdown should serve as a warning klaxon about the need to build a culture of accountability, transparency, and ethical governance. And yes, it’s an ethical issue when so-called leaders ignore financial controls and reporting.

Of course, right about now, there’s a contingent of church members peering down their noses at us, saying, “That information isn’t public, and it’s none of your business.”

That response underscores the corruption within the denomination.

Indeed, as a non-profit, the church has an ethical obligation to transparency. And if it wants people to trust it, and willingly give money to it, the Diocese must recognize the importance of transparency, urgency, and accountability.

Things in the denomination being what they are, we have scant hope that the Diocese will come clean, publish financials, be accountable, and act to engender trust with the public. But the church needs to recognize that it reeks of hypocrisy to babble on about building beloved community, even as it can’t operate its tiny sliver of community with transparency and accountability. In other words, if the Episcopal church wants to be trusted, it needs to act in a manner that engenders trust.

Right now, the Diocese’s actions do nothing to build trust. Indeed, we’re being treated to more of the same, namely, “We’ll tell you what we want to tell you, and you need to trust us. After all, we’re the church.”

But as we’ve long noted, if you’re looking for best practices, the last place to find them is the church. Even as bad as things are with executive compensation and insider shenanigans, we’re far more likely to find integrity in corporate America, versus the church. Indeed, the Episcopal Church is a leading example of worst practices.

A side note: In her communications with the Diocese, French talks about consulting with the diocesan legal team. And while it’s entirely appropriate to run key issues past attorneys, the risk-averse approach of many attorneys can fly in the face of the critical matters of honesty and accountability.  When this happens, lasting damage to the church ensues.

Moreover, as we learned from the abuse crisis at Vienna Presbyterian (cited above), not having a central point of accountability can lead to the endemic lack of accountability and urgency we see in the Episcopal Church. That central point of accountability is, or should be, the bishop diocesan, but far too many hide behind their standing committees and say, “But I have no real power.”

In other words, to use a line from law enforcement, there are times when someone has to do something. Thus, when all else fails, it falls to the bishop to step into the fray, make things happen, and be a leader. Yet we are not seeing that in French’s conduct. Or in the behavior of any other bishop in the denomination, for that matter.

Thus, we caution French and the standing committee not to get so caught up in protecting the Diocese and its apparatchiks that they lose sight of the long-term best interests of the church, including engendering trust and transparency.

Looking forward

Will the Episcopal Diocese of NJ change? Not likely.

Will some see this post as an attack on the Diocese and its bishop? Folks being what they are, of course, they will. Right now, there undoubtedly are folks who are puffing up and saying, “I never take Anglican Watch” seriously. They have an axe to grind.”

But if the Episcopal Church is to survive, it must realize that it is dying. The longer it clings to old ways of doing things, the faster it dies.

Thus, the church’s only hope of survival rests in being willing to ask tough questions, being willing to let go of the past, and dropping the notion that its critics are its enemies.

Let’s hope that DioNJ uses this epic meltdown as an inflection point that points towards renewal, rebirth, and resurrection. There is a profound need for ethical governance in the Diocese that transcends organizational survival.

Photo of Trinity Cathedral courtesy of Wikipedia