2011 Annual Report Analysis by Former Chancellor

Boston Catholic Insider
February 2, 2012

http://bostoncatholicinsider.wordpress.com/2012/02/02/2011-annual-report-analysis-by-former-chancellor/

Last Thursday, the Boston Archdiocese released the annual report for the 2011 fiscal year. Cardinal O’Malley stated that “The Archdiocese of Boston has greatly benefited by the financial management of recent years that has achieved and sustained a balanced budget.” Chancellor Jim McDonough said, “We have made great progress in moving the Archdiocese from a position of financial freefall just a few short years ago to one of stability, fully committed to supporting our parishes, schools and ministries.” That reflects one perspective, and BCI thought our readers might be interested in another perspective.

BCI received an email a few days ago from former Chancellor, David W. Smith, with his analysis of the 2011 Annual Report. BCI thought the analysis from someone familiar with archdiocesan finances was interesting, so we are sharing it with you:

Last week I was asked by the Boston Globe to comment on the Archdiocese of Boston’s release of financial information. I tried to provide “instant analysis” but it is just not possible to review hundreds of pages of information on a same day basis.

On the assumption that your readers may want some more analysis of these complex statements, here is a little more analysis.

The Chancellor’s letter indicates that Central Funds had a balanced budget of $33.9 Million and that there was a 13% improvement in expenses since FY 2006 when I retired. Below is a summary of the two years operating performance of the unrestricted Central Funds extracted from the audited financial statements on the Archdiocesan web site:

AMOUNTS IN MILLIONS OF DOLLARS


Given that unrestricted operating revenue was $35.6 million, unrestricted operating expenses were $39.8 million and there was an operating loss of $4.2 million, I can’t figure out how the budget was balanced at $33.9 million. I guess some revenue and expenses just don’t count? Neither can I find a 13% reduction in operating expenses, since they were actually up $.5 million from 2006.

What I find disturbing was that Management and Overhead was up $8 million or 71% and Pastoral Programs were down $6.1 million or 27%. Apparently, pastoral programs, which in my day were more than twice administrative costs, are now outpaced by administrative spending.

And that’s just what we see on the books.

The Chancellor says that central fund headcount is down 50 folks. That may be correct, but we know that some staff has been shifted from central funds to other legal entities. We know, for example that Clergy Funds now has employees at total salaries of $428,000 and an administrator line item cost at $231,000. When I retired, RCAB’s service fee of $400,000 took care of all three clergy funds. They now pay $436,000 in service fees plus the salaries and a plan administrator for a total of nearly $1.1 million.

The financials for the RCAB lay pension fund don’t break out salaries, so we don’t know how much payroll costs have been transferred to that fund, but the RCAB service fees have gone up anyway. The Caritas Christi pension fund statements were not released.

It was good to see that insurance funds are being used to provide educational workshops for parishes. It was a little disappointing to see that equity in that fund has dropped from $15.3 million at 6/30/2006 to $700,000 today. It makes you wonder where the $2.6 million in sexual abuse victim counseling costs are coming from this year and why those costs have been transferred out of the RCAB budget process altogether.

David W. Smith

Former Chancellor, Archdiocese of Boston

BCI is not in a position to explain, defend, or elaborate on the above analysis–we are publishing it for the edification of our readers, the archdiocese, and those who are may be trying to gain their own understanding of the financial condition of the archdiocese. If you have questions or comments on this analysis, feel free to post them, and we will ask Mr. Smith to respond.

With the news that Chancellor Jim McDonough is leaving his role, this gives Cardinal O’Malley, the Vicar General and archdiocese a chance to take a fresh look the financial condition of the diocese. We hope and pray that the Cardinal, Vicar General, and those around them will be guided by the Holy Spirit in deciding how precious resources will be used to most effectively continue the saving ministry of Jesus Christ, give Glory and Honor to God, and serve Christ and His Church.