Archdiocesan Accounting and “Fuzzy Math”

The Gospel reading from yesterday, Luke 16:10, said, “The person who is trustworthy in very small matters is also trustworthy in great ones; and the person who is dishonest in very small matters is also dishonest in great ones.”   By coincidence, we will explore this reading in a real-world situation below.

Q. If something costs you $1.1 million one year and $1.4 million the next year, has the cost increased or decreased year to year?

A. The cost has decreased–that is, if you are paid $250,000/year to run finance for the Archdiocese of Boston and issue the annual report a year after the fiscal year has closed.

Read on to see how the Gospel reading and the Q&A might coincidentally be related.

Events of last week brought out much of what is good happening in Boston Archdiocese, as one commenter (“Catholic School Advocate“) observed on our last post. But, unfortunately, our most recent posts and the associated flood of comments and emails also brought out much of what is holding back or even threatening the archdiocese from being able to continue its good works. First the good, then the not-so-good.

The good. The Daughters of St. Paul event to raise money for evangelization, and a challenge from an anonymous donor who offered $100,000 if the Daughters can match his/her donation by the end of 2010. The ordination of two new auxiliary bishops, Bishop Arthur Kennedy and Bishop Peter Uglietto. The Priest Appreciation Dinner on Thursday evening. The “shout outs” of appreciation to more than 70 priests on this blog. This Wednesday, September 22 is an under-publicized garden party fund-raiser to raise scholarship monies for seminarians studying at Blessed John XXIII Seminary in Weston.

Now the not-so-good. Read Lending Money: Part 2, and check out some of the comments, especially this one that talks about the failed promises of the 2010 Initiative, and this one, which talks about how the leadership of the archdiocese, Cardinal O’Malley in particular, could become even further beholden to certain large donors if the role of a new secretary for development goes, as expected, to yet another crony of Jack Connors. Even more not-so-good comes as we touch on topics that concern managing money and moving money around.

Yesterday’s Boston Globe article about the exhausted appeals and parish vigils at closed/suppressed churches prompted a number of readers to ask us exactly how much money has been spent maintaining closed churches. We went to the “transparent” annual reports from the archdiocese from recent years transparently found on the finance website and here is what we found. The sum total between 2005-2009 appears to be in the range of $9-10 million dollars. And, someone responsible for the annual reports would benefit from having someone else proofread the report for “fuzzy math” errors before it is published, or maybe even within 1-2 years after it is published.

Here is what the audited annual reports show for Reconfiguration Operation Expense. Some of this is no doubt administrative, but most of it is the heating, cooling, electrical, taxes, snow removal and other facilities-related expenses associated with the closed parishes:

2005:   $2,693,860
2006:   $2,917,245
2007:   $1,785,000
2008:   $1,377,617
2009:   $1,496,277
Total: $10,269,999

If we look at the 2007 and 2008 reports, there is a place in the notes where the exact amount is detailed. P. 14 of the 2007 report says the amount was $1.1 million, and page 29 of the 2008 report says it was $1.4 million, so we feel comfortable deriving from the archdiocese’s own audited numbers that the total is somewhere in the range of $9-10 million. Anybody else curious as to where that $9-10 million came from to pay those bills?

Besides that, there is the matter of why 2009 increased instead of decreased if reconfiguration is winding down. And why is there an explanation of the expense in the 2007 and 2008 reports, but no explanation in 2009 whatsoever, let alone for the increase in the expense? Then there is the “fuzzy math” error.

The 2007 report says “The $1.1 million or 39% decrease in expenses in 2007 is a reflection in the reduction of the number of properties being maintained as the reconfiguration process nears an end.” (see below, click to enlarge)

The 2008 report says, “The $1.4 million expense for the year ended June 30, 2008 was a 23% decrease as compared to the prior year.” (see below, click to enlarge)

Does anyone else wonder how you can spend $1.4 million for something in 2008 vs $1.1 million for the same something in 2007 and communicate it as a 23% DECREASE in expense?  Does anyone feel the statement that reconfiguration expenses decreased is an “unfounded claim.”  In fact, by my math, it works out to be a 27% INCREASE.  Now, I do not profess to have the accounting or financial management skills of a $250,000/year Chancellor and former president of a bank sold for $1 billion. I do not claim to have the skills of a highly-paid audit firm.  Math was, shall I say, never exactly my strongest subject in school. Yet, one cannot help but wonder if they cannot get correct something as simple as conveying the difference between an expense increasing vs decreasing from year to year in telling us about the financial condition of the diocese, what else are they getting wrong or communicating in a deceptive way?

Maybe it was a typo or an honest error–people are not perfect.  Maybe it was an inadvertent omission that the detail in the notes about reconfiguration costs that appeared in the two previous years is inexplicably absent in the 2009 financials.    Yet, oddly, this minor problem with communicating a decrease vs an increase and a number in the explanation consistent with the audited report is found not by the $250K/year Chancellor, who along with his staff cost an estimated $1.6M per year in salaries.  Instead it is found by the anonymous  blogger trying to simply add up year-to-year total reconfiguration costs to serve the needs of the blog readers, who feel they have nowhere to turn in the archdiocese for a straight answer without fear of repercussions.  Critics of this blog will call it a nit or say it is “absurd” that the blog is complaining about an error in the financial report like this.  Yes, it may be a small thing.  So be it.  We simply will prayerfully ponder the passage from Luke 16:10: “The person who is trustworthy in very small matters is also trustworthy in great ones; and the person who is dishonest in very small matters is also dishonest in great ones.”

Besides that, why did the expense go up in 2009 if the reconfiguration process is nearing an end? And what was it in 2010?

The bigger issue which came up in the last post and the associated comments regarding whether it is permissible to take parish funds from Reconfiguration, move them to the Revolving Loan Fund, and then revolve them out to the Campaign for Catholic Schools will be taken up again in the next post.

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13 Responses to Archdiocesan Accounting and “Fuzzy Math”

  1. Angry Parish Council Member says:

    Are Annual Appeal dollars going to pay for these ongoing vigils? $1.4M per year and $10M over five years is not small potatoes. That money could have gone to fund clergy and lay pension benefits funds. I’d have thought the cost would be dropping each year down to $0 eventually. I would also like to know why did the costs increase by $300K from 2008 to 2009 and what were they in the year ended June 30, 2010? After expenses (including facility, food, full-time staff salaries) are paid on the Priest Appreciation Dinner, my guess is they will make $500-600K, so every few hundred thousand dollars makes a difference.

    Thank you for the “absurdity” of this blog being the one to catch the error and most importantly, helping make us aware of what’s going on by highlighting this line-item of large expense.

  2. Quality Guy says:

    accounting 101 clearly explains that when a ‘…amount increases, there is an increase …” or was that simple logic ??

  3. Quality Guy says:

    at the Priest Appreciation dinner there was a statement made [ I think it was by John Kaneb ] that over $1 Million was raised. I don’t know if that was gross or net.

  4. Hetero Ortho Theo says:

    I think the flaw is the 1.1 in the 2007 report should read 1.7 on page 13 (not 14 when I looked at it – perhaps there was a layout issue in the pdf?) of the 2007 report. All the rest of the numbers make sense then.

    • Hetero Ortho Theo, If the $1.1 million in the 2007 report is a typographical error, then the math would work out for that year. Still unexplained are why 2009 went up and why the explanation of this item disappeared.

  5. PriestsForTransparency.com says:

    Quality Guy – The Priest Appreciation Dinner raised $1MM+ gross. Pretty solid that the dinner in its 2nd year raised that, but several hundred thousands I think were from the 100 parish tables that were purchased…

    It’s interesting to compare the comments from the last blog entry about the “strategy” of making the Cardinal/RCAB further dependent on benefactors with the Priest Appreciation Dinner group/committee. I’d like to give the committee our thanks/gratitude for the gifts of their time, talent and financial resources. But the last posts made me wonder if it’s all part of a “plan.” What a sad thought to ponder…

    Thank you to the blog writers for doing this painstakingly detailed analysis and reading of the financial reports. For a church with limited resources, it does seem like a huge waste to spend it to keep buildings open to allow 5-10 protestors to remain there…

    It makes sense to pause for a moment and acknowledge that it is a good thing that you/we have those financial reports to analyze and review. That is better than most dioceses – even if the docs reveal a lot of questions.

    To “Angry Parish Council Member” – It doesn’t look like the Appeal contributions go to these vigils. You can go to http://bostoncatholicappeal.org/programsSupported.shtml. As the bloggers have indicated, these charges seem to come from the Reconfiguration fund.

    Thanks to everyone that “shouted out” to priests over the past week and supported the Priest Appreciation Dinner. Your ongoing support of us in the trenches is very meaningful.

  6. Michael says:

    Two thoughts:

    1. Even though you are not known for your math skills, I was wondering if the Archdiocese would like to hire you and your team as sort of an internal audit department … or do they already have one of those? And if the answer is that they do, then what the heck are they being paid for? Do these bloggers have to do ALL of the jobs over there at the Archdiocese? I mean seriously … keep it up and someone is going to eventually ask you guys to go to Rome instead of Cardinal Sean.

    [Your diligence, persistence, and concern for the Archdiocese exudes from this blog.]

    2. Maybe the 5-10 protesters at those remaining churches are throwing in tens of thousands of dollars in the basket every week? I mean … they do contribute to the upkeep of their “closed church” don’t they?

  7. Accountant says:

    I believe the 2008 report has a typo and it should actually show $.4 million not $1.4 million. Which would equal the 23% decrease.
    Here’s the math:
    2006: $2,917,245
    less 2007: $1,785,000
    equals $1,132,245 or $1.1 million or 39% decrease in expenses from 2006 to 2007.

    2007: $1,785,000
    less 2008: $1,377,617
    equals 407,383 or $.4 million or 23% decrease in expenses from 2007 to 2008.

    Shame on the public accountants for not catching the error.

    • Accountant says:

      I just re-read the reports and realized it’s not a typo. In 2007 the amount and percentage are both related to the decrease in expenses, while the 2008 amount refers to the total expense for the year and the percentage relates to the decrease in expense from 2007 to 2008 (i.e. the $400k decrease). Just to confuse readers…

      I agree that it’s suspicious to not comment on the increase of over $100k in expenses in 2009.

  8. Keep in Mind... says:

    … that when Reconfiguration got going, there were employees whose salaries and benefits were funded entirely or partially by Reconfiguration funds. Also, property management expenses and the priests’ moving costs were paid. There may have been other costs as well. By the end of FY08, most of that had gone away. There were far fewer buildings, and as far as I can tell, no employees being expensed to Reconfiguration. So, apart from continuing to fund the heat, plowing, landscaping and repairs for sit-ins, what could account for expenditures at all, nevermind an increase in expenses? And why would fewer buildings and no employees make costs go up? What was draining Reconfiguration funds after July 1, 2008?

  9. anon says:

    Fuzzy Wuzzy Wasn’t Fuzzy Wazhe.

  10. [...] the past few posts, you may find our recent Lending Money Part 1, Lending Money Part 2, and Archdiocesan Accounting/”Fuzzy Math” posts useful background for our post today. Today we revisit the 26-million-dollar question:  [...]

  11. [...] costing millions of dollars a year.  The archdiocese’s own annual reports show more than $10 million in costs over the past 5 years and $1.5 million in 2009 alone toward reconfiguration-related expenses.    And that expense is [...]

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