Financial Transparency Report released

BRIGHTON — Cardinal Seán P. O’Malley characterized the financial condition of the Archdiocese of Boston as “dire” at an April 19 press conference held to unveil extensive financial disclosures and a fiscal recovery plan for the archdiocese. Among the information released was a 2005 financial report revealing a $46 million deficit and a plan for balancing the archdiocese’s budget within the next 18 months. The press conference was held at St. John’s Seminary in Brighton.

“With a $40 million deficit, I think it is quite obvious that the situation is urgent,” Cardinal O’Malley said. “I don’t think there are any quick fixes but we are poised to stop the bleeding and hopefully our fundraising efforts will continue to generate the kind of capital we need. We’ll probably sell more property. But everyone I have spoken to is very hopeful that we’re going to turn this around, not immediately, but in the short term.”

The cardinal said he hopes fulfilling the promise of financial transparency he made last October will help restore trust in the archdiocese. He also committed to providing updated reports in the future.

“I’m hoping that this will help people to understand exactly what our situation is, how we got here and how we hope to move forward,” he said.

The financial report shows that the assets of the archdiocese exceed the liabilities by $330 million, according to John McCarthy, an accountant who headed the Financial Transparency Project Committee that compiled the information. The committee was comprised almost entirely of lay volunteers, many of whom are experts in the fields of finance and accounting.

McCarthy himself recently retired from a 37-year career with PricewaterhouseCoopers where he worked exclusively with non-profit organizations. McCarthy is now a principal at Harvard University’s Hauser Center for Non-profit Organizations and an adjunct lecturer at the Kennedy School of Government.

According to McCarthy, most of the archdiocese’s assets are tied up in enterprises. Over 70 percent of the $156 million cash shown in the report belongs to individual parishes. Other assets include funds from reconfiguration, insurance programs and other monies earmarked for specific uses.

The archdiocesan liabilities amount to $135 million and do not include the deferred maintenance of parishes and shortfalls in the lay pension plan that have since been paid, he said.

The largest deficit the financial report shows is in the clergy pension plan. That deficit is a result of problems in the stock market and decreased interest rates, said Chancellor David Smith, asserting that none of the money from collections taken for the pension plan was misallocated.

Currently there is a group of clergy assembled to study the pension plan and propose changes going forward. A report on the matter was mailed to all members of the Boston clergy three months ago, he said.

Overall, the archdiocese faces a $46 million deficit that is the accumulation of repeated losses, said McCarthy.

The data released included information on how clergy abuse settlements were paid for and how money from closed parishes are being used. The cardinal emphasized that no money from the sale of closed churches or parish collections were used to pay for abuse settlements or ongoing support of victims.

The total of clergy abuse related expenses for the Archdiocese of Boston has been $150.8 million. Settlements with victims comprise 84 percent that amount. The funds to pay clergy abuse related expenses came mostly from the sale of property to Boston College, which brought in $68.8 million. The rest has come from insurance coverage, archdiocesan insurance reserves and proceeds from the sale of other archdiocesan properties not part of reconfiguration.

“Certainly we have promised that the monies from reconfiguration would not be used in the sex abuse crisis,” the cardinal said.

Rather, those funds have gone toward the lay pension fund, the parish revolving loan fund, new parishes that have been erected through reconfiguration, and grants to parishes in debt, said Smith.

Cardinal O’Malley also clarified that parishes were not closed merely to raise revenue. Aging clergy, the cost of building maintenance and the close proximity of many parishes necessitated many parish closings, he said.

Plans to reverse the archdiocese’s financial woes were also unveiled at the press conference.

The organization and management review committee, which has been studying ways to bring the archdiocese back to financial health, has gained four additional members to form an implementation committee to outline a plan for balancing the budget within the next year and a half. They began meeting in March and will continue through the summer.

Jim O’Connor, who heads the committee, said the archdiocese’s central administration will be restructured and more functions will be handled in the archdiocese’s five regions. The archdiocesan cabinet will be reorganized, programs will be consolidated or merged and 50 positions will be eliminated.

In addition the reducing costs, the changes will allow more services to be administered closer to the parish level, Connors said.

Cardinal O’Malley stressed that, despite challenges, the archdiocese was committed to plan for the future in a manner that is within its means as well as disclosing financial information.

“We will rightfully be judged by our actions, not just our words,” he said. “I hope our presentations today provide substantive evidence that the archdiocese is fulfilling the promise of transparency in word and deed and in living our faith. We are committed to upholding that promise in the name of Jesus Christ.”

The cardinal added that it is important for people to understand the difficult situation that the archdiocese is in but also know that there are signs of hope. He cited increased Mass attendance after years of decline, the participation of 8,000 Catholics in this year’s Men’s and Women’s Conferences, an increased interest in vocations to the priesthood represented by higher attendance at seminary retreats as well as more donors to the annual appeal, which after years of shortfalls has reached its goal for the last two years.

“Today marks a critical moment and new beginning for our local Church. For more than four years we as an archdiocese, we have experienced much hurt, disappointment and sorrow,” he said. “It is encouraging to see the first signs of renewal.”