Church Tackles $46m Gap Financial Disclosures Win Praise, by Michael Paulson, Boston Globe, April 20, 2006

Church Tackles $46m Gap
Financial Disclosures Win Praise

By Michael Paulson
Boston Globe
April 20, 2006

http://www.boston.com/news/local/massachusetts/articles/
2006/04/20/church_tackles_46m_gap/

Cardinal Sean P. O'Malley released audited financial reports, which included aggregated parish data, for the last two fiscal years. O'Malley has also pledged to require every parish to release financial reports annually starting this fall.
Photo by the David L. Ryan/ Globe Staff

Cardinal Sean P. O'Malley is pledging to cut spending, improve fund-raising, and balance the church's budget within 18 months, as he attempts to strengthen a storied archdiocese financially hobbled by years of scandal and debt.

Saying he was seeking to rebuild trust by disclosing information, O'Malley released a torrent of financial data yesterday that the archdiocese believes is the most ever disclosed by any Catholic diocese in history. And he pledged full financial transparency on an ongoing basis -- continually updated data on the Internet and annual financial reports about the archdiocese, its 303 parishes, and dozens of related Catholic organizations.

The multiple reports released yesterday reveal the stunning breadth of the Archdiocese of Boston, which claims nearly 2 million adherents in 144 communities. The archdiocese owns 1,500 buildings in Eastern Massachusetts, with an estimated replacement value of $2.8 billion; it employs 3,000 people and oversees hundreds of parishes, schools, cemeteries, hospitals, and social service organizations.

The archdiocese and its parishes have $330 million in assets, but officials said financial restrictions and debt total $376 million, resulting in a $46 million gap. Despite having laid off dozens of employees and stabilizing fund-raising in the last several years, the archdiocese is also running an annual operating deficit, and it faces serious ongoing problems from diminished attendance at Masses, decreased school enrollment, a shortage of priests and nuns, and massive building maintenance costs. The measures announced yesterday are mainly aimed at addressing the annual operating deficit.

"The motivation for the transparency is to help people feel a part of the archdiocese," O'Malley told a packed news conference at St. John's Seminary in Brighton. "We're not trying to keep secrets from people. We're not trying to deceive them. We're trying to use the limited resources we have for the mission of the church."

Some of the data released by O'Malley yesterday were already available, either by request to the archdiocesan offices or through public filings, but much of it has not been seen by the public before, and the archdiocese has never before attempted to explain, in as much detail, the complex financial structure of its operation.

The archdiocese has been under pressure from lay Catholics and legislators to explain how it has managed contributions, especially as it has cited financial problems as a reason for parish closings and program cuts.

O'Malley released audited financial reports for the last two fiscal years. He also released data on what he called the entire history of the archdiocese's spending related to clergy sexual abuse, an explanation of the archdiocese's organizational structure, and about 1,000 pages of audited financial reports for all but seven of its associated organizations.

"This is, by far, the most extensive release of information by a diocese ever," said John H. McCarthy, an accountant who oversaw the financial information release for the archdiocese. McCarthy headed the education and nonprofit practices at PricewaterhouseCoopers for many years, and is now an adjunct lecturer in public policy at the Hauser Center for Nonprofit Organizations at Harvard's Kennedy School of Government.

The archdiocese has also printed a one-page, question-and-answer brochure that will be distributed to all parishes this weekend, and is planning a special edition of the Pilot, the archdiocesan newspaper, to be distributed the following weekend.

The initial reaction, even from the archdiocese's sharpest critics, was positive yesterday.

"I'm very impressed with the depth of information that's been released," said Cynthia Deysher, cochairwoman of the Council of Parishes, a group of lay Catholics resisting some parish closings. Deysher, an accountant, is the former chairwoman of her parish finance council and has worked as the chief financial officer at several public companies.

"We've never seen this level of financial disclosure from the archdiocese before," Deysher said. "Of course, there are a lot of issues, but the first step is to understand the problem. The cardinal really did fulfill what he said he would, and I'm really very pleased and encouraged to see that."

Steve Krueger, a former executive director of Voice of the Faithful and frequent archdiocesan critic, agreed, saying, "Today marks a victory for all Catholics who have been working for financial transparency in the church since the cascade of crises emerged in the church over four years ago."

And Dorothy Kennedy, chairwoman of the Boston Council of Voice of the Faithful, said, "This is a first step by archdiocesan leadership toward the full accountability and transparency needed to regain the trust of the people in the pews."

O'Malley has also pledged to require every parish to release financial reports annually starting this fall. But yesterday's report, which included aggregated parish data, says that, overall, parish collections are falling.

The report cites examples, without naming churches: Some parishes attract as few as 100 people weekly and take in as little as $60,000 annually in collections, while others draw more than 3,000 and generate $1.5 million a year. One parish has $6.9 million in the bank, while another is $5 million in debt, the report says.

At the archdiocesan level, the annual fund-raising campaign has been rising slightly from the lows it hit immediately after the abuse crisis erupted, but the archdiocese's central administration is still projected to spend $7.8 million more than it is taking in during the current fiscal year.

O'Malley repeatedly made clear that change is necessary, saying, "Our revenue is inadequate to fund our ministries." He has set up a number of committees to review archdiocesan operations, and many cuts in personnel and programs are expected.

O'Malley, cloaked in the brown hooded habit that distinguishes him as a Capuchin friar and the red zucchetto that signifies his status as a cardinal, sounded a hopeful tone, saying, "We will find the way forward." The archdiocese plans to cut about 50 of about 500 positions in central administration, and about $4.5 million in other spending next year. It also plans to reduce the size of the cardinal's Cabinet, from 12 people to eight, and to regionalize the delivery of many services. The report did not offer savings figures for those measures.

"The central administration of the archdiocese is not sustainable in its current form," Chancellor David W. Smith wrote in an introduction to the report. "While we do have liquidity, we have little left to sell, and we are faced with substantial obligations."

The Catholic Church's finances have been the subject of much controversy and criticism; this year, the Legislature, spurred by Catholic lawmakers unhappy with the archdiocese's management of the abuse crisis and parish closings, debated a law that would have required financial disclosure by religious organizations. The bill was defeated only after Protestant churches and other non-Catholic groups launched a massive lobbying effort against it. Many Protestant denominations already fully disclose their finances and allow laypeople to vote on their budgets.

O'Malley committed himself to financial transparency in 2004, as he attempted to build public support for a reconfiguration effort that would result in the closing of 62 of 357 parishes. Then, in October, he pledged to release the data by the end of the first quarter of this year. He missed the deadline by 19 days because of his trip to Rome when he was named a cardinal and because the archdiocese wanted to wait until after Holy Week.

In addition to improving fund-raising and cutting spending, O'Malley is in the midst of a slow overhaul of the archdiocesan administration. He is planning this year to replace all of the archdiocese's top financial officials -- Chancellor David W. Smith is retiring in July; the development director, Kenneth J. Hokenson, is resigning at an unspecified time; and Vicar General Bishop Richard G. Lennon is being installed as bishop of Cleveland in May.

And O'Malley has turned increasingly to lay businesspeople to help him plot the church's financial recovery.

The transparency project was led by McCarthy, and the archdiocese's effort to develop a strategic plan for the future is being overseen by James F. O'Connor, managing director and CEO of The Chartwell Company, a private bank. Jack Connors Jr., the chairman and cofounder of the advertising firm Hill Holliday, is overseeing an effort to restructure the parochial school system, while Neal Finnegan, director of Citizens Financial Capital Inc., is heading the search for a new archdiocesan chancellor.

Michael Paulson can be reached at mpaulson@globe.com.