Center Director, Center for Church Management & Business Ethics
Welcome to the Spring 2016 edition of Villanova’s Center for Church Management and Business Ethics Newsletter.
In this edition we cover four topics: how a parish can develop a system for choosing contractors and vendors, concerns about fraud within our churches, some best practices for supporting retired priests, and the results of a survey that examined generational differences in opinion about our parishes.
Michael Castrilli is an adjunct professor in our MS in Church Management program and a presenter in our Church Management Certificate program. Michael teaches pastoral planning and finance in our Villanova program. He has also been a frequent contributor to our newsletter. In this volume he outlines a simple and easy-to-follow system for selecting appropriate contractors and vendors.
Colin May is a Certified Fraud Examiner with over 10 years as a financial investigator and forensic auditor. Is is also an adjunct instructor of forensic studies at Stevenson University. Here, Colin takes an alarming look at the potential for fraud and "scam artists" taking prey on unsuspecting church-goers. Colin's reflection gives an outline that includes some warning signs and red flags for fraud, as well as resources to react to a con artist among the flock.
In a new segment this month, our Faculty Director, Dr. Chuck Zech sits down to Matt O'Rourke to talk about best practices in supporting retired priests. Matt is a retired partner of PricewaterhouseCoopers, and was subsequently a director of three public companies. He is also a member of the National Advisory Council for Villanova's Center for Church Management. Matt has been involved in the Church for many years, and particularly supports retired priests.
Our regular look at data, “And The Survey Says”, looks at generational differences in views on parish life. According to the data, views of parish life may change drastically depending on age range.
I would like to remind you of the educational opportunities available through the Center for Church Management & Business Ethics. There is still time to apply for this year’s class in our very successful on-line master’s degree in church management (http://MSCM.Villanova.edu)
awarded through the nationally-ranked and fully accredited Villanova School of Business. You might be interested to know that US News & World Reports has ranked our MS in Church Management as the 10th best online program in the country among ALL graduate business programs.
We also, in partnership with Our Sunday Visitor and AmericanChurch, offer a series of webinars on church management topics. This series presents the opportunity for an individual to earn a certificate in church management through the Villanova School of Business. The series began its fifth year in September, but it is not too late to join us. Individuals interested in particular topics may participate in one or more of the specific webinars without pursuing the certificate. For more details, see http://www1.villanova.edu/villanova/business/centers/churchmanagement/programs/webinar.html
We hope that you find the information in this newsletter useful. We appreciate your previous feedback and are happy to hear your feedback about the topics covered in this issue as well as topics that you would like to see covered in future issues.
Contractor/Vendor Selection Made Simple for Parish Managers
Michael J. Castrilli
Selecting a company or individual to do major work at the parish can be overwhelming. From short and long-term impacts on money, time, and people, along with oversight responsibilities, resources are always limited (scarce). Investing in the right people, places, or things are critical for effective parish management.
This article will describe a step-by-step process churches can use for evaluating and selecting a vendor, contractor, or service provider. Recognizing this can be a complex topic, the goal is to break the process down into manageable parts. After learning the method, you can right size the concepts to fit the needs at your church.
Examples where you might like to use a selection strategy include large–scale projects like choosing an architecture firm to put blueprints together for a parish facility or deciding which builder to hire for repairing the church roof. This type of process can also be used for major purchases like choosing which church management software to buy.
To simplify the terminology, throughout this article I’ll use the words “contractor/vendor” as an all-inclusive term to include any external product or service being purchased by the church. For example, this term encompasses service providers (e.g. architecture firm, lawn care company), builders/manufacturers (e.g. construction company), Jane/Joe self-employed business, and/or vendors (e.g. church management software company).
One of the main reasons selecting a contractor/vendor can be so complex in the church environment is that at times, the lines between pastoral care and business interest get blurred. Let me use an example of a local church that is seeking to hire someone to replace the roof.
Church Roof Replacement: The parish administrator made a presentation to the parish council on the need to replace the church roof. The estimated cost for the current roof to be removed and a new roof to be replaced is in the $100,000 ballpark. After the presentation, a member of the council approaches the administrator and says, “My company would be happy to do this work. I’ll even try to get you a discount.” At first glance, this may seem like the perfect solution to the problem. However, going forward with this generous offer, without considering other options can be a major mistake.
How many stories have you heard where a parishioner (or their company) is hired for a project, there is a problem (maybe with schedule or cost) and then one party feels stuck with limited recourse. Whether it is the result of unclear boundaries or simply one party deciding to avoid conflict altogether, this can be a slippery slope. Of course, there are always exceptions, but, why risk misunderstandings, hurt feelings, and poor outcomes because no process existed to ensure that the right company, individual or product was purchased?
Creating a clear and transparent selection process benefits everyone involved. The process benefits the parish management team by creating a structure to make informed decisions. The process benefits contractors/vendors because all are fairly evaluated on clearly defined criteria.
Church Roof Replacement: Even though the parish administrator decides to hold off on accepting the parishioner’s offer, this does not mean that the parishioner’s company will not be considered for the job. Yet, if the company decides to put in a bid for the work, they will have to participate as part of the broader contractor selection process.
Selecting an Award Recipient
Let’s use a simple example to help understand how the process will work. Two teachers have been appointed to choose a winner of a student essay contest. The award is based on the following criteria: essay content, clarity of the student’s writing, proper use of grammar and the inclusion of a formatted bibliography. Recognizing that these criteria are not of equal weight, the teachers create a grading rubric that assigns points based on the relative importance of each criterion to the total grade.
Using the points system, the teachers then individually grade each student’s paper. The summary of the total possible points per criteria along with the teacher’s individual assessment of the essays are displayed in Table 1.
Step 1 – Define Requirements
Typically, organizations will refer to the initial phase of buying anything (whether a product or service) as procurement planning. Procurement planning is the process of deciding what, when, and how to purchase (buy) goods or services. This process involves the development of documentation to solicit (request) quotations, bids, and/or proposals from companies or individuals to complete a program, project, or task. Like any type of investment at the parish, whether large or small, getting clear on goals, needs, and requirements is critical.
Church Roof Replacement Example: Depending on whether the replacement of the roof is an immediate or longer-term need, the parish administrator and pastor discuss the timing for initiating for project. They discuss and decide that the work should be completed by November so that the roof is protected for the winter months. They also discuss the desire to work with a company that has previously worked with churches and comes highly recommended from a neighboring parish.
By brainstorming requirements, you establish some guideposts for the next step in the process. If you are unsure where to begin, many dioceses have resources available to help parishes in this phase of the process. There are also organizations that offer tools and templates to assist churches with defining requirements related to procurement decisions.
Step 2 – Establish and Weight Criteria
Once requirements have been developed, it is important to brainstorm and establish criteria to evaluate potential contractors/vendors. Like the example of the teachers creating a rubric for essay evaluation, what are the driving factors that will help you make the decision on which contract/vendor to choose? To determine priority weights, consider the relative importance of each criterion and the impact this criterion should have on the overall score. Table 2 displays some sample criteria and weights to start your creative brainstorming.
Some hints when developing criteria and weights:
- Prioritize. Initially you may have a large list of requirements and criteria. Take time to narrow the list down so that you have only the most critical items. Otherwise, you might fall into the trap of ‘information paralysis’ where it is difficult to differentiate any information.
- Ensure that you have clear criteria definitions. Definitions will ensure precision around what has been developed so that you can return to this information in the future. Have you ever attended a meeting, a decision is made, and then a month later everyone gets back together and forgets what was decided? If this sounds similar, you are not alone, it happens in every organization.
- Keep rating scales simple. Whether you decide to use a 1-100 (A+) or 1-10 (high) scale to rate proposals, simplicity will help reduce any confusion. You may also consider creating definitions for the scales. For example, “To receive a score of 10, the proposal must include X, Y, Z.”
- Collaborate! Use a team approach and get others involved in this process. No need to let all of the responsibility for this process fall on one person. Allow this process to be a shared responsibility.
Step 3 – Solicit Bids
Next, you are ready to seek contractors/vendors to bid on the work. The solicitation document that is commonly used to seek bids from service providers is called a Request for Proposal (RFP). The RFP will typically include answers to the following questions:
- What is the nature of the project? What are the requirements and expected deliverables for the work?
- Where is the location of the work? Who is the organization that is making the purchase?
- How will proposals be evaluated and what are the submission guidelines?
- When are proposals due?
- Who is the main point of contact?
In the Catholic Church, many dioceses will also have particular laws (financial policies) in place that require parishes to participate in specific bidding processes. For example, some dioceses require that for contracts over a specific dollar amount, the parish must request bids from at least three companies. It is imperative to be aware of what diocesan protocols may be required when examining these issues at the parochial level.
Step 4 – Evaluate Proposals
Once proposals have been requested and submitted, gather the team, and score the proposals using the criteria and weights that have been established. In choosing who should take part in the evaluation process, consider key people that will be most involved in working with the contractor/vendor.
Church Roof Replacement: Companies A, B, and C have submitted proposals for the roof replacement project. The pastor, along with the parish administrator and a member of the church maintenance staff review the proposals and score them against the established criteria. Once the ratings have been completed, the group will gather to discuss the results.
There are many ways to tabulate the results but a straightforward approach is recommended. Recall the method used by the teachers to grade essays in the example above. The process can be simple:
- Individually grade the proposals (essays)
- Average the grades per proposal
- Summarize and discuss the results.
Step 5 – Select Winner
Bring the evaluation team together and discuss scoring results for each proposal. At this point, the hard work you have completed in earlier steps of the process will pay off. You have all of the information you need to make a great selection decision.
Church Roof Replacement: Company A and B came out with the highest scores. After reviewing the information the team decided to go with Company B. Although the bidding price from Company B was slightly more expensive than Company A, the differentiating factor came down to Company B’s excellent references and their extensive work with churches.
In this step, be sure to allow raters to confer on why they chose certain ratings for the various proposals. Rating or metric based systems are only one means of evaluation. Subjective data from individual experiences, organizational history, and general knowledge of a topic should never be discounted. The key is to bring people together, recognize and openly discuss any biases and celebrate the fact that there are always differences of opinion. “No one of us is as smart as all of us.”
Create a process, even a simple one, to evaluate and select contractors/vendors for major purchases of products or services. By defining requirements, establishing criteria, and developing a simple, yet clear evaluation and selection process, many positive results occur. First, the process will promote a spirit of equity, openness and accountability both internally for the parish management team and externally for those working with the church. Second, although every decision will not have the same requirements, by following this systematic approach, you will have created a strategy that you can transfer and repeat for future purchasing decisions. Finally, the results of this process promote a church management structure that is efficient, effective, and transparent in conducting the business of the church.
Question/Comments? Feel free to contact Michael Castrilli at firstname.lastname@example.org or (202) 262-7969.
Fraud Amongst the Flock—Affinity Frauds in Churches
Colin May, M.S., CFE
Colin May, M.S., CFE is a Certified Fraud Examiner. He has over 10 years as a financial investigator and forensic auditor. A parishioner at St. Maria Goretti Catholic Church in Westfield, IN, he holds an adjunct faculty appointment at Stevenson University in the Forensic Studies program. He is a frequent contributor to Fraud Magazine (http://www.fraud-magazine.com). His email is email@example.com.
One of the most enduring and important characteristics of any church is the community of faith that brings people together. Praying together, breaking bread together (both literally and every Sunday), and having a common set of beliefs can unify a diverse set of people. But what happens when a fraudster exists among the flock? What happens when this fraudster tries to get fellow congregation members to “invest” in his new “promising business opportunity”? The effect on a congregation and the church at large can be wide-spread and deep. It shakes the faith and forces people to re-evaluate their previous trusting relationships. In some instances, it can even cause the congregation to break apart.
Fraudsters and scam artists are constantly on the lookout for people they can prey on and they often find a welcome invitation in churches. Affinity fraud is defined by the Securities and Exchange Commission (https://www.sec.gov/investor/pubs/affinity.pdf) as fraud schemes that “prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups.” Affinity fraud targets the common set of beliefs held by the group.
Religious groups and churches are often targets of affinity fraud scams, based on the common faith (or purported faith) of the fraudster and members of the parish. It is the ultimate “wolf in sheep’s clothing” that enables the scam artist to infiltrate the church and obtain the trust and funds of the victims. The fraudsters pounce on the very characteristics that make churches open and convivial for newcomers. This article will explore a few cases involving the exploitation of church members and give some suggestions to ensure the flock is protected.
Con men (and women) often target the faithful of their own parish first, sometimes as a testing ground, because they can obtain a high level of trust that they couldn’t otherwise get from another, non-religious venue. Because church members often feel they don’t need to worry as much with other members, they can be more open and giving. In one case from the Indianapolis area, a man convinced his fellow church members to invest with his business after he persuaded them of his stock investing experience. [http://www.wbiw.com/state/archive/2015/09/man-sentenced-to-prison-for-investment-fraud-involving-relatives-church-members.php]
Ultimately, the church members lost $484,000 to the fraud; the fraudster spent almost $390,000 on himself. He pleaded guilty to federal wire fraud charges and was sentenced to over two years in prison. But he likely knew that he could use their common faith and membership in the church to obtain their trust. He also likely knew that the victims would ask few questions or conduct appropriate due diligence regarding the investment, like others might do in a non-church setting.
Once the fraudster has the targets hooked into the scam and starts obtaining the money, the scammer often continues to rely on their common faith to keep the scam going. They hide key documents, make false statements, and re-assure the victims on the financial security of the “investment.” In some cases, this is even easier since the worshipers may not ask the right questions or even be financially able to understand the situation.
In a case involving the Church of Jesus Christ of Latter Day Saints (Mormon), a Mormon community leader, called a Bishop, lied to his victims who had invested with him and his son in a real estate scam. According to a news article detailing the case, the fraudster leveraged his connections with the church to conceal and misrepresent how the victim’s funds were being used. [http://www.deseretnews.com/article/865631452/Father-son-used-LDS-Church-membership-in-investment-fraud-prosecutors-allege.html?pg=all] The Utah Attorney General, working with the FBI, the IRS, and the Securities and Exchange Commission, filed charges against the father-son duo, and alleged that the pair made false statements to investors, created a complex web of companies to hide the funds in, and promised investors significant returns, when in fact they didn’t have any. [http://attorneygeneral.utah.gov/uncategorized/ago-files-charges-in-200-million-alleged-affinity-fraud-scheme]
Sadly, it’s not enough to be lied to, deceived, and left with no money. Even worse is that many victims had placed their hard-earned life savings with these scammers, and they have nothing left. Suddenly, they have no money, the fraudster has left town, and the victims are destitute. The harm to the parish is now actually three-fold:
- A financial loss: the victims have lost much, if not all, of their funds
- A psychological loss: they have lost their trust in others
- A faith loss: a void has been created, since the church was the platform from which the fraud occurred
A small parish may also be affected even more, because now the church has to deal with the loss of the revenue from the victims, the loss of revenue from other parishioners who may now need to help support the victims, and the congregation’s growing suspicions of others, not just outsiders. It creates a rift that some churches just cannot recover from. In some instances, the very core of the parish has been ruptured and cannot be repaired. Congregation members drift to other parishes, other faith communities, or leave the faith altogether.
The financial pressure forces some churches to consider merging, dissolving or winding down operations, thus forcing the expenditure of a large amount of resources to liquidate the real estate or other assets of the parish.
As church leaders and business managers, we have a unique opportunity to help protect our parishes and church communities from fraud and theft. We are situated in a leadership position that can assist in three main aspects of fraud prevention, both from within and without.
First, we can educate parishioners on the risks associated with scams; second, we can alert the congregation when we become aware of a scam (either in the region or a certain type of scheme); finally, we can provide a safe place to talk if people have concerns or issues.
It is important to have good internal controls in our own churches to ensure we as an institution are not taken advantage of. We must trust—and verify. But we can also be transparent, so parishioners know how their funds are going to serve God—not someone’s pocket.
Communication is key in this respect. Parish leaders should arrange for periodic bulletin notices, website postings, homilies, and even seminars to help educate the congregation. Topics could include “red flags,” how to handle suspicious inquiries, resources to conduct due diligence on potential “opportunities” and other, specific fraud-related topics. Guest speakers from local police departments, the FBI, or other agencies who handle fraud cases can discuss trends and how to prevent fraud.
Pastors, parish business managers, and parish finance committees can educate themselves by reading a variety of excellent publications that detail the issues surrounding affinity fraud. Here are a few good resources, from the Ohio Department of Commerce, the Securities and Exchange commission, and the Iowa Department of Insurance, the Association of Certified Fraud Examiners and the Federal Bureau of Investigation:
As the sports metaphor goes, the best offense is a good defense and this is certainly true in preventing affinity fraud among church groups. It is helpful to share stories and experiences with other local congregations to warn them if members have fallen victim. It is important to not let a fraudster off the hook, because they will continue to prey upon other victims until they get caught.
The best advice for everyone: when in doubt—ask lots of questions. You’ll never get a straight answer fraud a fraudster. They will “get back to you” or are “really busy right now,” but in the end, a legitimate investment will be able to produce consistent documents and information, and a fraud will not. Some fraudsters go to elaborate trouble to present forged or fraudulent documents too, but legitimate investments can be independently verified and explained.
Fraudsters look to exploit the very religious foundation that brings churches together, and ultimately try to tear them apart with their lies, deception, and appeals to vanity. As the faithful, we are called to welcome new people and accept them into our community. We must continue to maintain our vigilance against those would infiltrate our midst as agents of evil. As Pope Francis recently said, “There is always a danger of corruption within the Church. This happens when the Church, instead of being devoted to faith in Our Lord…becomes dominated by money and power.” [http://en.radiovaticana.va/news/2015/11/20/pope_francis_the_church_must_not_worship_%E2%80%9Choly_bribery%E2%80%9D/1188213]
Fraudsters are always looking for strays amongst the flock, and they exploit our human weakness. Through prayer, communication, and a welcoming, yet vigilant posture, our churches and flocks will be safer and more secure from fraudsters.
Best Practices in Church Management: Supporting Retired Priests
Charles Zech, Ph.D. and Matt O'Rourke
Chuck Zech, Professor of Economics and Director of the Center for Church Management , at Villanova’s Business School (VSB), leads off this column that will feature his introduction of a member of the Center’s National Advisory Council (NAC).
Chuck Zech: This interview is with Matt O’Rourke who has been a member of our NAC for more than three years . Matt is a retired partner of PWC and subsequently a director of three public companies. For many years he has been involved in Catholic Church leadership positions in dioceses and church related organizations, principally in California.
Matt was member of the San Jose (CA) Diocese Finance Committee and Priests Retirement Board for 12 years. Since 2007 he has been a Director of Laity in Support of Retired Priests, Inc.(LSRP). This not-for-profit organization consulted with and provided national surveys and research information, including Best Practices, to US Catholic dioceses, bishops and priests, regarding priest retirement. Matt is also a graduate of the VSB and currently resides in Naples, Florida.
Since this is our first column on Best Practices in Church Management it seems appropriate that we review with Matt what it is and in particular how specific information has been shared by his organization, LSRP.
Matt O’Rourke: Identifying Best Practices is not a new idea. It is an outgrowth of documenting policy, operational and financial procedures, first seen in large organizations years ago. Government bodies and well run large companies relied on internal and external auditors to point out to management where there were deficiencies in the stated policies and procedures and in their application. This led to evaluations or reports —on business units or departments—by auditors. Audit findings, citation of failures to follow approved policy and procedures, and remedial recommendations, were periodically summarized and shared with the board of directors or equivalent overseers.
Over the past 25 years evolving corporate governance standards led to federal legislation that requires US SEC registrant companies to document, evaluate and report on the effectiveness of their company wide system of controls and compliance with internal policies and procedures.
As you might expect professional advisors and industry associations, saw the need to support their member companies— or clients— in complying with these laws and regulations. Industry specific forums provided for informal sharing of of how best to: identify, document and evaluate the effectiveness of key business controls.
Aided by advances in computer based methodology, particularly data base management, comparisons of financial policies and practices of say companies in the same industry, became common place in investment analysis, and in financial reporting and accounting.
Determining the most effective policies and practices, say by functional business activity—-like those in place in human resources departments across an industry or sector, is an example of how Best Practices can be identified.
Management of organizations of all types, including private companies of all sizes, government entities and not-for-profit organizations, can learn and benefit from knowing what the Best Practices are in key business processes, for organizations in their industry or in their peer group.
As mentioned earlier LSRP carried out surveys and research pertaining to diocesan priests in retirement. This included financial information—-adequacy of pensions, housing and benefits provided by US dioceses, Social Security payments and other income ; in addition, quality of life and care, particularly long term health care.
There are 195 Catholic archdioceses / dioceses in the US. The Vatican appointed bishop is responsible for the welfare of all incardinated priests in his diocese. There is no national or regional standard for priest compensation, benefits and pensions. LSRP supported the (voluntary) tri-annual survey conducted under the auspices of National Federation of Priest Councils, entitled The Laborer is Worthy of His Hire, which includes priest compensation and benefit information for participating dioceses. We were also able to gather additional information — for other dioceses and even other religions, that allowed us to broaden our base of knowledge. We engaged nationally know compensation experts to help us develop a Model Retirement Plan based on local cost-of-of-living information. We then offered our services to selected dioceses where we and our consultants aided such dioceses in evaluating the adequacy of their retirement arrangements for priests.
Through these processes we were able to broadly categorize dioceses based on the adequacy of their retirement practices. Our plan to directly engage those dioceses that appeared to have the most inadequate retirement plans was put aside and we decided to “accentuate the positive”—promote the Best Practices we found in our work and use these as teaching tools. This proved to be a much more acceptable approach. ( The late retired Aux. Bishop of Cleveland, the Most Reverend A. J. Quinn, then a a director of LSRP, encouraged this change. His wisdom and willingness to promote our ideas to his fellow bishops were invaluable.)
LSRP has summarized their Best Practices findings in a report that is available on the web site of the Center for Applied Research in the Apostolate (CARA)— http://cara.georgetown.edu/services/dioceses/. The specific Best Practices described in that report include:
- Importance of Having a Human Resource Function Within each Diocese
- Diocesan Staff Involvement in Catholic National Associations—information sharing opportunities
- Creating and Maintaining a Retirement Preparation Manual for Catholic Priests
- Providing Diocesan Sponsored Seminars for Priests Focused on Retirement and Planning
- Importance of Open Communication with Priests on Retirement Questions
- Creating a Just, Equitable Pension and Benefit Plan for Retired Diocesan Priests:
- Protecting Pension and Benefit Fund Assets
- LSRP’s Model Retirement Plan for Diocesan Priests
- Funding the Model Pension Plan
- Best Practices in Priest Pension Plan Administration
- Create Formal Written Policies
- Importance of Legal protections afforded by a Trust
- Effective Oversight and Governance
- Addressing Special Healthcare and Support Services for Priests/Analysis of Long Term Care Programs
- Annual Programs : Reaching Out to Laity for Support
- Advising Retiring Priests on Income Tax : Exclusion for Housing Expenses
And the Survey Says… Differences in Generational Opinions
Much has been made in recent years about the differing attitudes towards church by the various generational cohorts. Some light can be shed on these differences from data collected for The Emerging Models of Pastoral Leadership Project, a collaborative effort by five Catholic national ministry organizations interested in pursuing pastoral excellence through research and dialogue. It was funded by the Lilly Endowment Inc. Research supporting the project was provided by the Center for Applied Research in the Apostolate (CARA).
One of the reports issued by the project was, “Views from the Pews: Parishioner Evaluations of Parish Life in the United States, Co-authored by Mark M. Gray, Mary L. Gautier, and Melissa A. Cidade. Each of the views they studied were broken out by generational cohort.
The data are based on 14,437 parishioners surveyed in pews in 2011-12.
The generational cohorts were identified as
- Pre-Vatican (born before 1943)
- Vatican II (born 1943-60)
- Post Vatican II (born 1961-81)
- Millennial (born 1982 or later)
Parishioners were asked to rate various aspects of parish life on a four-point scale: poor, fair good, or excellent. Table 1 shows the percent of respondents rating each aspect as excellent.