For new readers or those not following 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: how did that $26M loan to the Campaign for Catholic Schools come about and get approved? (More hyperlinks and references to be added later, so check back).
In short, the archdiocesean Revolving Loan Fund, a virtual savings and loan intended not long ago primarily for parishes who need money on a short-term basis for various expenses, loaned about $26 million to the Campaign for Catholic Schools in the 2009 fiscal year to help build a new $70 million dollar Catholic academy in Dorchester, one of many inner-city areas where the Catholic population has been dropping for years. The loan was secured against promised pledges, and as the Campaign’s 3-year fund-raising initiative nears its end, it appears that the campaign is still about $20 million short of their fund-raising goal based on most recent published information. One key question is how the loan will be repaid if the money has already been spent on construction and the pledges simply are not there. Equally important are the questions over where the funds originated, who actually approved this loan, and how it was determined that this was the best use of funds vs something like, funding employee pension plans, for example.
The blogging research team is still hard at work trying to verify everything, so we will just get you the high points in this post.
Way way back in the 2003-2006 timeframe, the archdiocese closed 66 parishes. A lot of property was sold, and at first, it seemed canon law dictated that the welcoming parishes should assume the assets and liabilities of the closed parishes. (Here is how the The Pilot reported on that canonical conundrum in October 2005, and here is a separate report in 2006 from Catholic News Service.) That would have had problematic results for a variety of reasons—the forgiveness of parish debts in the Jubilee Year 2000 left the Revolving Loan fund at a deficit; employee pension plans for parish, school, and chancery employees were underfunded; and there would be inequities of merging two poor parishes with debt into one very poor debt-laden parish while two wealthy parishes merged to make one very wealthy parish. The archdiocese solved this problem by jumping through a big canonical hoop and getting most pastors to agree that the archdiocese could assume the assets of the closed parishes. A special fund, the “Reconfiguration Fund” was established, separate from other archdiocesan central funds. The idea—at least, in principle–was that it would receive and manage these monies and assure they were used for the appropriate past, present, and future parish obligations and programs. There was even a Reconfiguration Fund oversight committee formed. Sounded fine in principle.
Many people thought the closings were about the Archdiocese of Boston getting money, and so to address the “considerable pain and misunderstanding” over this, then-Vicar General, Bishop Richard Lennon, wrote a letter in July of 2004 to clarify the usage of the funds. See page 6-7 of this document distributed at the March 2006 Archdiocesan Pastoral Council meeting. Note how the document coincidentally opens on page 1, “Communication Builds Trust.”) Here is what Bishop Lennon said:
The funds raised from the sale of suppressed properties will be used to address past due obligations and employee benefits of the suppressed parishes, including:
1. Monies due employees of suppressed parishes for past work and separation assistance;
2. For vendors who are owed monies from suppressed parishes;
3. For amounts for past employee benefits and parish insurance due from suppressed parishes;
4. For run-out costs of health insurance for separated employees;
5. For repayment of revolving loans from suppressed parishes; and
6. For expenses involved in the closure of suppressed parishes.
In addition, these funds will be used to assist in rebuilding our Archdiocese as we go forward:
1. For assistance to parishes that are unable to fund needed church repairs;
2. For expenses to provide current direct and indirect support services to parishes;
3. For establishing an endowment fund for parish support for those parishes that cannot beself-supporting;
4. For covering unfunded pension liability for lay employees and clergy of all parishes; and
5. For restoring the $28 million of equity to the various funds that provided “Jubilee Year”debt forgiveness
If you look at the annual reports and the Reconfiguration report, we see parishes sold and assets and liabilities assumed by the archdiocese. Debts to pension funds and to the Revolving Loan Fund were repaid. In the 2006 Annual Report and 2006 audited results we see a gain of about $40 million from sale of properties, and the Revolving Loan Fund was paid-back $14 million from the sale of properties. But something noteworthy happens after the Reconfiguration Fund Oversight Committee was disbanded and subsequent reconfiguration funds were moved to the Central Fund, like the archdiocese disclosed would happen. Once centralized, it became possible for those funds to be granted or loaned to parishes or other entities outside the decree zone or unnamed in the decree without anyone really watching. For example, in the 2008 annual report we see this:
“On August 13, 2007 as part of the parish reconfiguration process $2.5 million was transferred to Trinity Catholic Academy Brockton, Inc.” a newly formed related organization that consolidated the operations of certain parish schools in Brockton.”
Maybe we missed something. How did Jack Connors’ new Catholic Schools program suddenly become part of the previous “parish reconfiguration process”? Does this mean that funds originally intended for parishes were instead directed to the Brockton project, a newly formed “related organization”? Then in 2009, when the Campaign for Catholic Schools, Inc., another separate but “related” corporate entity, needed cash to pay construction bills, somehow $26 million in Revolving Loan funds–some of which came through the revolving door from Reconfiguration–revolved right back out the door to Jack Connors’ pet project. We keep going through the list of 11 usages for reconfiguration funds and must be missing something. Can anyone point out where building new non-parish-affiliated archdiocesan Catholic academies by a different but “related” corporation fits into this list of usages? Maybe we are dead wrong and auditors can show where absolutely zero reconfiguration-related funds were used to finance this grant, but based on what we described in our last post, we would be surprised if that is the case. Have any and all reconfiguration funds been used consistent with the original decrees? Who has provided independent oversight and accounting for use of those funds since the oversight committee was disbanded in 2006? Was any canonical approval needed and granted, or was the repurposing of these assets totally fine once the archdiocese claimed the money?
So to summarize where we are, we have a $26 million loan made with Revolving Loan funds (principally intended for parishes) to a separate but “related” corporate entity and for a purpose rather different than what we were told any reconfiguration-related part of those funds would be used for when parishes were closed. $70 million is spent on one school that may never reach the envisioned potential due to known demographic shifts and other reasons. We have some portion of $26 million loaned to that school from parish-based funds which may never be repaid, while we have hundreds of hard-working school and parish employees who got an anonymously-signed letter a few weeks ago telling them their pensions are being cut because the archdiocese doesn’t have the money to keep funding them.
Which Cabinet official or officials made the recommendations and decisions to use parish and donor funds this way? We do not know but we can guess. Who are all of the current members of the Finance Council who approve of this manner of moving around and managing donor funds? We do not know because the current membership is about as anonymous as the people blogging at Boston Catholic Insider. (At least with this blog, you can send us an email and we will respond. How do you write to the Finance Council?) Was an assessment conducted to compare a variety of ways to use this money, and this project of all possibilities was determined to best advance the mission of the Catholic Church in Boston? Who is in a position to inform Boston Catholics as to the likelihood of the loan being repaid and the consequences if it is not? Regardless of whether there was or was not any canonical “cutting of corners” to make this happen, does anyone besides this blogging team feel as though this use of funds represents a breach of trust with donors?
But not to worry. This is just another day with business as usual in the Archdiocese of Boston.