Steward’s Super Bowl Sunday Spending

February 6, 2011

We were not sure whether to call this post by the name you see in the title, or something more like “Connors Continuing Caritas Coincidences.” We went with the Super Bowl title, and with game-time upon us, we will keep this one short.

On Friday, Steward Health Care System, the new entity formed to oversee the Caritas Christi hospitals, announced they were sponsoring a 30-second Super Bowl ad to launch themselves.  Here is the article in the Boston Globe about the new advertising campaign, and here is their spiffy new website.

In case you take a break during commercials to make a trip to the kitchen or bathroom and you miss the ad, here is the 30-second advertisement, seen here from Boston Catholic Insider even before it airs on TV:

According to the Globe article, 30-second advertising spots cost about $80,000 to air in the local market.  We saw one run during the game and one immediately after the game.  Brian Carty, chief marketing officer for Caritas and Steward and, coincidentally, a former exec with Jack Connors’ Hill Holliday advertising firm before Caritas,  would not disclose what the ad cost to produce.  BCI seems to recall that a key driver mentioned for selling Caritas was that they needed the infusion of capital to upgrade facilities and take care of the unfunded pension liability. We must have missed how that infusion of capital would be used to fund brand advertising campaigns.

BCI does not claim to have the marketing expertise of a Hill Holiday advertising exec or the progeny of advertising guru Jack Connors, but we must observe that the wording in the ad sounds frankly, glib:  “Believe compassion comes with a medical degree…Believe your neighborhood can save your life.”  Who writes this stuff anyway?  Is it the same people from Boathouse Group that brought us the “Quality to the people” ads a few years ago with the Socialism-style clenched fist? And what exactly is the brand-name they want viewers to remember?  Are they introducing “Steward” as the name of the new healthcare system, but people will still go visit their familiar local “Caritas” hospital? Or are they planning to re-brand the “Caritas” hospitals as “Steward”?  Who knows?  And the names of the local Caritas hospitals flash so quickly at the end that it was impossible to even read them.

By the way, in another coincidence, the Waltham, MA ad firm that Steward worked to create the ad, Boathouse Group, is run by Jack Connors’ son, John Connors III.

Also, in another remarkable coincidence, the Boston Sunday Globe Magazine has as its cover story a lengthy puff piece, I mean article about Caritas CEO, Ralph de la Torre.  It is called “The Healthcare Doctor.”  During the public debate over the acquisition price and how much Cerberus was really investing of its own cash, we asked repeatedly if the capital investments over future years were coming from Cerberus’ cash vs Caritas operating income and no one ever answered the question.  Now we have the answer:

Cerberus paid $495 million for the Caritas system, a sum that funded its pensions and retired most of its outstanding debt. It also committed to pumping another $400 million in capital improvements into the system over the next four years, although de la Torre acknowledges that those funds may come from hospital revenues in coming years, rather than from Cerberus itself.

We will let the focus of this post remain with the Steward campaign and the article about Ralph de la Torre, and will ask readers to refrain from commenting about the battle between the Steelers and Green Bay Packers.

 


Pastoral Planning Commission

February 4, 2011

From the archdiocese that lacks the leadership and fortitude to summarily shut-down a handful of “Invisible Vigils”–which continue to waste millions of dollars in scarce donor funds six years after they began and six months after their last canonical appeals were exhausted– now we have yet another committee to talk about the future parish and pastoral configuration of the archdiocese.

Before we dig into this new committee, how is that new Finance Council Compensation Committee coming along that is supposed to look  at the $1M+ in excessive six-figure salaries?  They approved it Nov. 4, but the names still are not even posted anywhere like, say, the Finance Council page of the RCAB website, so it sounds like there is stunning progress to report there.  So now we have a yet another new committee–at least this time with names publicly announced, rather than the anonymous committees the folks at 66 Brooks Drive seem to have favored in recent years, like the anonymous search committees that chose Mary Grassa O’Neill and Terry Donilon.

Here is the notice from Wednesday announcing the new committee:

Cardinal Seán P. O’Malley today announced that he has formed an Archdiocesan Pastoral Planning Commission.The work of the eighteen member commission is to present a final recommendation to the Cardinal for a pastoral plan for the Archdiocese of Boston that identifies the resources available for the foreseeable future and allocates these in a manner that will allow the mission of Christ and his Church to grow stronger in our Catholic community.

In case you are wondering what this means they will do, in principle, they are to come back with a plan to create a much smaller number of “parishes” and pastors of those newly-defined “parishes” comprised of mostly the same number of church buildings as we have today. The Boston Globe described is as follows:

Under a draft proposal, neighboring parishes would be merged into a single parish, with worship at multiple church buildings. Each clustered parish would be run by a pastor, with help from a team of priests, as well as a consolidated lay parish council, finance council, and parish staff.

BCI’s take on this as of now is that the commission will meet…and meet…and meet, and not really get any place. Last time around in 2004, there were recommendations made by clusters, there was a central committee, there was a review by the Cardinal and his advisors like Fr. Bryan Hehir, Jack Connors and a host of others weighed in behind the scenes, and a lot of “recommendations” never made it through the quicksand and political snares.  What did we learn from that effort, and what will make this one different to avoid the snares of the past?  Not clear.

There are some good people on the committee, and some that we do not see as adding meaningful value.  One person familiar with the composition of the group  described them in an email to BCI as a “circular firing squad.”  Lest BCI be accused of personal attacks, we will make observations about the committee without mentioning specific names.

  • Why so many money people?  (And when we say “money people,” we mean big money people)
  • Why the recycled cronies of Fr. Bryan Hehir and Sr. Janet Eisner–yet again?  Are these people the only ones considered qualified or sufficiently politically-connected to serve?
  • Why the person who led the “sham search” that placed the current Chancellor?  Are we so pleased with how that choice has turned out that we want this person’s wisdom and insights once again?
  • Why the person who led one of the previous planning committees which solicited input from everyone, included input from only a few while neglecting to include some of the best ideas in the report, and basically got nowhere fast? Do we really want a plan for  “priestless Sundays” in which hostesses distribute pre-consecrated hosts to those who show up for a “communion service”?
  • Why include someone on the committee from a particular religious order when one of that same order’s members instructing a Masters of Arts in Ministry (MAM) class on immigration not long ago asked Catholic students to role-play being a foreigner in a strange land by assuming the identity of a gay or lesbian on another planet?
  • Why soak up one of the limited spots with someone from a parish that moreso resembles a part of a college campus rather than a diocesan parish?
  • Why will the committee work not be transparent and public as it progresses?  What is the means of public comment and parish input before the merger plan is communicated?
  • What about the charter, composition and operating approach of this latest committee and effort is to instill such confidence by clergy and laity that a redo of any “recommendations”  will not occur this time around?

If the Cardinal and his leadership cannot make a decision to cut the salaries of overpaid bureaucrats to save $500K-$1M+/year when the supporting information is objective and clear, and if the Cardinal and his leadership cannot make a decision to end “Invisible Vigils” costing $500K-850K/year after all appeals are done, then who in the world thinks this new pastoral planning effort–operating behind closed doors under no deadlines–will reach a set of recommendations and decisions that are acted on?

We hear from multiple sources that the Cardinal is on-the-road for a good part of the next 3-4 months, perhaps in the diocese only 14-20 days between now and the end of May.  The Vicar General may be heading back to the military in the spring.  With an absentee archbishop, who is setting the future direction of the archdiocese?  Is that responsibility now abdicated to this new committee?


Archdiocese Taketh and Spendeth

February 2, 2011

In our post from yesterday,  Easy Come, Easy Go, you got a glimpse of the budget for the 2010 fiscal year at a high level, and today we drill deeper into how the Administrative Services function (aka Chancellor’s scope of responsibility) takes and spends money.

Yesterday we shared how the 2010 budget of $34,260,000 was balanced–but only because the Chancellor tapped $1.4 million in insurance funds in order to balance it. That raised the question from one alert reader of whether it is legal and legitimate to take money intended for self-insurance and spend it on an entirely different purpose to balance the budget.  How do the trustees of the self-insurance fund make such decisions?  At what point should they insist the fund be repaid?  That is a whole ‘nother can of worms for another day.

We also shared yesterday how 30% of the budgeted expenditures in 2010 were to be spent on the Administrative Services function, or about $10.2M annually.  Here is how the Chancellor budgeted to spend that $10.2M, and how they said they were generating $6.3 million in “revenue.”

As best as we can understand, Accounting and IT “revenue” comes from service fees to related entities.  In the 26-page 2010 budget document, this is never clearly explained, but the best way we can describe it is by inviting you to think about moving Monopoly money from one player to another player, from one pot to another pot.  It gets a little tough to follow quickly.

  • Chancellors Office: how the Chancellor’s office would generate $127,000 in revenue is a mystery to us. Did the Chancellor and Kevin Kiley run bake sales and car washes to raise money and BCI somehow missed the memos and bulletin advertisements?  Do they charge for expert financial management advice?  We are told that some of these must be service fees, but to whom and for what is unclear.  Past Chancellor, David Smith, used to service-fee out his entire operation with a markup, but pastors objected, so we are not sure exactly where this comes from today.
  • Finance and Accounting, and Information Technology (IT): The $2.2 million in “revenue” for finance/accounting and the $1.9 million in “revenue” for IT is also based on service fees. As best as we can understand, the Finance and Accounting service fees and IT service fees are cost-allocated against what archdiocesan related entities receive in finance/accounting or IT service. So, if the likes of The Pilot, the Catholic Schools Foundation, the Cemeteries Association, Catholic School Office, Pro-Life Office, Office of Professional Standards and Conduct, Catholic Foundation, Office of Cultural Diversity, HR department, etc.  were on the network and used email or some other IT services, they would get billed some pro-rated amount.   The same approach holds for the finance/accounting fees. Any department that receives paychecks or has their budgets or accounting supported by the Finance department–which is essentially everyone–gets charged fees that are deducted from their budget and then show up as “revenue” by the Finance/Accounting group.  If it is an area like Benefits or Risk Management that has some asset pool they are responsible for, those areas typically get hit with more of a fee because they are more capable of paying it.  This has also been a way to move money to and fro without hitting Office of the Chancellor funds.
  • Real Estate: this department charges fees to everyone they help, with somewhere around a 2% fee top of the transactions they work.
  • Risk Management: we believe they charge some service fee to the Mass Self-Insurance Group which insures Catholic properties throughout Massachusetts. 
  • Parishes and Accounting Fees: Parishes have often been hit the hardest with fees, putting the hands of the Chancellor and the archdiocesan spending appetite where they can still find some meat left on the bones.  Many parishes have their own accounting people but some share resources or leverage the archdiocese since they cannot all afford accounting staff.  Central Ministries still charges to check on their books (while at the same time, taking money away), and parishes are also still stuck with a collective annual bill of about $500,000/year for mandatory triennial audits, payable to the only archdiocesan-approved audit firm, Parent, McLaughlin & Nagle.  We suspect that some portion of those audit fees are probably counted as “revenue” here. (Do any readers know who this audit firm was friends with at 66 Brooks Drive in order to land this contract?)

Expenses are a whole ‘nother topic.  You have heard us rail against the six-figure salaries already, and those in the fiefdom of Chancellor McDonough are included here. FYI, included in the IT expenses is about $500,000/year on the ill-conceived Lawson Software project, covering annualized costs of software, hosting, and personnel.  As you may recall from previous posts, the estimated costs of this are about $5.5 million, and the system was a mismatch for the needs of the archdiocese, but the archdiocese is contractually committed to a five-year agreement running through 2012. To pull it out at this point would be costly, and to keep maintaining it will also be costly.

So now you have a glimpse of how the budgeting is done.  Money is moved from one bucket to another, so in the end, it looks like certain organizations consume less overhead than they really do. As for the actual expenses, those are only reported at a high-level when the annual report comes out, usually a year after the end of the fiscal year, but not at a level of detail like is found in this 2010 budget.

Will the Improved Financial Relationship Model and 18-percent tax on parishes improve any of this?  We are not sure, and are frankly doubtful it will change much at this point–except that parishes may feel more obliged to pay up.  That is, unless enough parishioners and pastors balk and say they are holding back.  

Anyway, as long as the archdiocese keeps wasting $1-2 million a year on excessive six-figure salaries and maintenance of the  “Invisible Vigils,”  does it really matter which Corporation Sole pockets the money is taken from?


Easy Come, Easy Go

February 1, 2011

While we await word of how and when the Archdiocese of Boston is going to address six years of mismanagement of the “Invisible Vigils at closed parishes and reduce excessive 6-figure salaries that together are costing donors and parishes somewhere in the range of $1 to $2M a year unnecessarily, we thought we would share some other details of how the archdiocese spends money and manages the budget.  (If you have not read the comments on our last post, do take a moment to check those out).

We have spent a fair amount of time trying to understand the archdiocesan budgeting process.  Even with our own deep knowledge of how things work at 66 Brooks Drive, network of helpful contacts, and consultations with people expert in finance, we just cannot understand how Chancellor McDonough comes up with some of these numbers.

Today we start with the 2010 budget because that has been out there in public for a while and has the greatest level of detail explaining how things work, sort of. It came out as part of the Improved Financial Relationship Model, whereby the patchwork of fees imposed on parishes to fund Central Ministries is supposed to be revised and replaced by a flat “tax” of 18% on parishes instead of all kinds of fees.  You will find the 26-page 2010 Central Ministries Budget  here.

Here are a few highlights, just to get you thinking.

  • To give credit where credit is due, it is a very comprehensive document–much moreso than we have seen other dioceses publish.
  • There are two main sources of “revenue” as described the budget:  1) “Non-Program” Sources of $18.3M, such as the Annual Catholic Appeal, other donations and collections, interest and dividends, restricted funds, a one-time transfer from insurance funds and 2) Central Ministries fees of $15.9M. The latter is where the accounting gymnastics are most difficult to understand.
  • The 2010 budget of $34,260,000 was balanced–but only because the Chancellor tapped $1.4 million in insurance funds in order to balance it. One can do that for only so long until one depletes assets to draw down that were intended for other purposes. We understand the insurance fund reserves may have approached that depletion point.
  • The new Office of Professional Responsibility headed by Mark Dunderdale, another South Shore resident, was funded with $1 million.
  • There is no apparent provision in the budget for allocating funds each year to pay off the $41 million owed to St. Johns Seminary for their property sold to Boston College, including $4.8M due in January of 2011.  The absence of any budgetary allocation for that repayment suggests that the only way to raise that money would be for the archdiocese to sell off other assets.
  • “Administrative Services” somehow generates revenue and fees of $6.3 million to offset the $10.2M they spend.
  • “Administrative Services” and “General/Outside Counsel” accounted for 1/3 of all Central Ministries expenditures.

Here you can see the overall Central Ministries budget with expected “Non-Program” sources of revenue at the top. In the bottom half, you see the Central Ministries expected “revenues” from various fees in the first column, expense in the second column, and “net” cost in the third column. (Click on the image to enlarge, or you can see p.6 of the full document here.)

archdiocese of boston central ministries budget 2010

Though it is easy to see how an entity like Pilot Publishing Group raises revenue through subscriptions and advertising, it is not so straightforward to see how a group like “Administrative Services” raises revenue of $6.3 million.  We will share our best understanding of how they do this through a variety of service fees to parishes and related entities in a separate post, as well as more details of the other areas.

Lastly for today, we take the 2010 budget document one step further and give you our own exclusive 3-D pie-chart showing the percentage of expenses allocated to each area. (click chart to enlarge)

All we did was enter the amounts from the above table and then generate a pie-chart.  It shows for the 2010 fiscal year that 33% of the $34.2M budget was spent on the combination of the Chancellor’s ‘s fiefdom (“Administrative Services” in green at the bottom left) and General Counsel/Legal expenses (purple slice to the left of Administrative Services), plus another 3% on Professional Responsibility and Oversight.  At the same time only 12% was spent on advancing the mission of the church in Faith Formation and Evangelization (dark red at top right).  With the Catholics Come Home initiative, we hear that evangelization has gotten some more funding in the 2011 budget, but this is how the proverbial cookie crumbled in 2010.

Anything look wrong or out-of-balance in this picture to you?


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