By Fr Martin Sirju Archdiocesan Finance Officer

Investment was the buzz-word on Wednesday morning. CADFO delegates were urged to remind their bishops of the importance of long-term investment.

Some dioceses have already started on this but a few are still in the initial stages. To delve further into the matter we listened to an effective presentation by Ben Salmon and Ken Hall of Rensburg/Sheppards (London, UK) entitled “Creating An Investment Portfolio”.

Salmon has 14 years in the investment business while Hall has 26. The company traces its origins back to the 1820s and at present manages over 11 billion pounds with admirable returns.

This makes it one of the largest independent private client investment managers in the UK. They boast of being “old enough to have an experienced perspective; young enough for fresh ideas; large enough to be properly informed; and small enough to care.”

Rensburg/Sheppards has been handling pensions and medical for priests of the Port-of-Spain archdiocese for about 30 years. The average investment (deposits, bonds, equity funds) they undertake is about US $400,000 but they also manage as little as US $50,000. They write reviews to clients monthly, quarterly or biannually and their charges amount to about 1% of the invested sum.

Factors that affect performance of one’s investment include oil prices, the US dollar, interest rates and peak earnings. Of the many charts shown to us, one was particularly interesting; it showed the compound effect of investing US $100 per year at the peak of the US stock market for the years 1926-2004. This resulted in a whopping US$3,278,596 return on the investment.

On an average Rensburg/Sheppard looks for an 8-9% return on their US investment. “The global market,” remarked Ben Salmon, “is considerably more liquid than the Caribbean market” even though there are some investments in the Caribbean market.

In answer to a question posed by a delegate, Salmon assured all present that their companies maintain restrictions if required (e.g. re contraceptives, the environment and certain drugs).

The UK team concluded their presentation by assuring us that they were open to the AEC bishops making a collective investment with similar ethical restrictions.

The moderator for this session, Fr Rochard, urged investors to be disciplined i.e. not to touch invested money for structural maintenance but rather leave it for some years to mature. He added there may be some bad years but in the end things will even out and the investment will become profitable.

He pointed out that investment is no longer optional considering the reduction in Vatican subsidies and the smaller amounts coming from Adveniat.

Coming on the heels of our UK investors was Angela Lee Loy, a chartered accountant and a member of the Archdiocesan Finance Committee.

She spoke on “Management Procedures for Diocesan Finance Offices, Departments and Parishes”. Her main thesis was that good management was directly related to proper procedure and policy.

She spoke a lot about the control environment – foundational principles that guide transparency and accountability. Lee Loy spoke of risk areas like collections and control activities like budgeting.

A 3-page handout was given out on how to monitor the environment in which financial activities are conducted. This comprised a list of 46 questions, for example:
• Does the Church have an up-to-date accounting procedures manual?
• Are facilities locked when not in use?
• Are members encouraged to use offering envelopes?
• Do money counters verify that the contents of the offering envelopes are identical with the amounts written on the envelopes by parishioners?
• Is ALL cash received deposited in the bank?
• Are invoices checked for accuracy before being paid?
• Are invoices for goods and services approved by a person in authority before payment is made?
• Are vouchers prepared for all disbursements from petty cash fund?
… and many more! Perhaps too many for a small to medium-sized parish.

Lee Loy spoke of the segregation of duties i.e. we ought not to have one person handling an important transaction from beginning to end. She stated that fraud is hard to perpetrate once there are several levels of authorisation and linkages between these levels.

In the area of fraud she advised getting all original invoices and studiously avoiding consistently late financial reports. She had many of us laughing when she said that we must ensure that people handling Church finance must take vacation.

She was dead serious when she revealed that many instances of financial irregularity were discovered when people went on vacation.
As for Church flaws in the area of finance, she discovered four common ones:

1. Priests tend to think everything will fall from heaven i.e. the Lord will provide. In the area of finance she thinks that is rather naïve.
2. Priests need to tap the talent in their parish: find the people in the parish who will make a good management team. They are often there e.g. bank workers
3. Somebody needs to follow up on Catholic News sales: too often parishes are in short supply.
4. Exercise care with cash  

In response to a question of signatories for the parish account we discovered some dioceses still have the system where the priest signs alone, but they also have finance committees in which any two persons can sign.

Renee Knowles (Nassau) pointed out in a place like the Bahamas with hundreds of little islands mandatory double signatures would often be difficult. She gave us a little equation she found useful: need + opportunity = potential for fraud. Lesson learned: reduce opportunity!