Money gathered during the Offertory goes to the parish. The money given does not go back to the diocese or to any other parish in the diocese.
The parish uses this money to pay things like electric bills, wages for staff members, Mass supplies, and so forth.
Money is also given to charities and different outreach causes. Most parishes denote a percentage of collected funds for charitable giving. If you want more specifics on how your parish divides up what it takes in, ask your parish business manager for more details.
Most, if not all, parishes also have a finance council that is comprised of the pastor, the business manager (if there is one), and several lay members of the congregation. It is this council that makes the decisions on where funds will go. If you don’t like how things are being done, then run for the finance council and try to do something about it.
Sometimes a second collection is taken at Mass. This collection goes entirely to the cause that’s stated before the collection. Second collections are done at the pastor’s consent, or the bishop’s if they really want to throw their weight around I suppose.
All parishes I’ve seen post a financial report on a regular basis to account for how they’ve managed the funds they’ve taken in. Always remember that your church has real expenses just like you; and what we give determines if our parish keeps the lights on, or can help families in need.