Is Boston Archdiocese Moving Money from Clergy Funds?

The annual report for the Boston Archdiocese was released yesterday amidst much hoopla over the “balanced budget.”  There is good news in the report, in that parish collections rose by 4.5% and the archdiocese appears to be on stronger financial footing than in recent years.

But what is not so clear from the reports is the extent to which costs may have been shifted around and money has been moved or redirected from other entities in order to achieve the “balanced budget.”  One example: the Clergy Funds, which provides health, welfare, and retirement benefits for 683 Boston priests–285 senior  priests and 438 active priests.

A look at the 2011 annual report for the Clergy Funds shows they paid $13.5M in benefits and spent $2.3M in administrative expenses to do so.  For every $1 in benefits paid, they spend 17 cents to administer the benefits, or about $3,357 in administrative costs for each priest receiving some benefits.

Included in those $2.3M of administrative fees is $427, 642 of “Service fees” to the Boston Archdiocese for “administrative, technology, and clerical services charged to the Clergy Funds by the Roman Catholic Archbishop of Boston.”  That $427K is on top of nearly $500K in salaries and benefits, $331K for contract services, and $230K for the plan administrator. A reasonable person might question if appropriate value is derived for all of those four areas, but BCI will give credit for the plan stabilizing in recent years, and the latter 3 areas are not the focus of this post.

That said, is the Boston Archdiocese really spending $427K in administrative costs to help service the Clergy Funds?  Good question. The answer is not really.  Sources tell BCI that is the result of an overhead rate applied to the Clergy Funds.  Some of that is OK–IT help-desk support, building/facility costs, use of the photocopier, etc.  But for that $427K to have been a real number, it would mean that beyond the full-time staff and contract services on the Clergy Funds’ books, there would be the equivalent of another 5-6 full-time administrative assistants  (~$50K each) plus a full-time IT guy ($100K), along with their associated benefits. One might reasonably ask if that reflects reality.

Incidentally, the amount charged back by the archdiocese for overhead rose 20% from 2010 to 2011 (from $355K to $427K), while the benefits paid actually dropped by 10% (from $15.1M to 13.5M).  (Presumably, the increased overhead was associated with higher salaries and more people working on the plan to administer the lower amount of benefits.  Makes sense?!)

Sources tell BCI that what really happens is the Chancellor applies somewhat inflated overhead rates to the entities that have the most money (i.e. Risk Management, Clergy Funds, Self Insurance, etc.) As stated a moment ago, some of that $427K charged back to the RCAB goes to pay actual administrative costs of supporting the Clergy Funds (IT support, building/facility, etc.) while some instead goes to pay for other things. Those other things could include the excessive six-figure salaries in the Office of the Chancellor and/or elsewhere in the ranks of the Pastoral Center/central ministries executive staff.

So when people donate to the Clergy Funds (Easter and Christmas Collection, annual fundraiser dinner), most of their donations go to the funds that directly benefit priests, which is how it should be.  But about 17% of what they donate is consumed by administrative fees. And some portion of that 17% is apparently redirected to balancing the Central Ministries budget.  If so, then some people might consider that a purpose other than that intended by the donor.

Is money being charged against one area to pay for a different one?  Only a detailed accounting of the actual costs would confirm this.

This is not the only area of concern in the Annual Report.  Once again, self-insurance funds were used to help balance the budget. Many $150K+ salaries were not disclosed. The $5M debt owed to St. Johns Seminary as of 1/1/2011 has still not been repaid.

More another time.

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11 Responses to Is Boston Archdiocese Moving Money from Clergy Funds?

  1. jbq2 says:

    What you have to look for are “slush funds” which are not being reported. Here in St. Louis that is exactly what is going on. Jimmie Hoffa would move money from bank to bank and deposit less than he took from the first one. There are plenty of sleight of hand techniques which could be used. Not saying that is what is happening here.

  2. Time for a change says:

    So they socked clergy funds for a couple of extra million. That’s nothing compared to shifting $2.5 million in costs for dealing with misconduct to Catholic Charities.

    Way to balance a budget!!

    • Chris Whittle says:

      They shouldn’t be spending 17% for adminstration. That’s too much! They shouldn’t be spending more than 5% on administration. This money is supposed to go towards the priests, who make $0, and not towards people that don’t have a clue what Catholicism is.

  3. Justyn Tyme says:

    This can be easily explained. Where did the $$$$ go from the Clergy Fund from 1984-2002. It was emptied in 2002. Guess by whom!!!

      • BobofNewtn says:

        HI – Good post BCI but regarding your statement “…The $5M debt owed to St. Johns Seminary as of 1/1/2011 has still not been repaid”, do we know that the debt is due or past due for that matter?

      • BobofNewtn says:

        Hi – I am able to answer my previous question – January 1, 2011 is the due date. So, the RCAB is in default.

      • Correct. BCI wrote that the RCAB was in default of this debt last year and it has still not been paid. The RCAB does not have the cash. St Johns Seminary and the RCAB have been negotiating for more than a year to let the RCAB repay this first debt installment by tranferring a Brigton property to the seminary. One candidate is the building that houses the MAM (Masters of Arts in Ministry). It is not clear if the value of that property is commensurate with the $5M debt owed, plus interest accrued in the past year. It is also not clear how the RCAB intends to repay the remaining $35M debt due to SJS in 2017.

  4. Dieter says:

    There may be a simpler answer. Sorry if it doesn’t further the argument that all things Braintree are foul smelling. When Boston Catholic Development Services(BCDS) were created The Clergy funds had a dedicated resource for fundraising. With the creation of BCDS, the reporting structure of all fundraising professionals, including that one shifted to BCDS. That fundraising person was laid off. In the process, Clergy funds now pays Service fees (that is, fees for services rendered) to BCDS for all fundraising activities they perform for the Clergy funds, such as running the Priest Dinner, and the 3 collections, as well as any other marketing/promotional work they perform, like producing websites and letter campaigns, and other collateral material.

    • Boston Catholic Insider says:

      Dieter,
      Thank you for your comment. BCI is aware that BCDS has taken on fundraising responsibility for Clergy Funds and there is some chargeback of associated expenses, so we appreciate you pointing that out. Even with that, the total expense relative to the benefits paid still appears to out of line with other private benefit plans of this nature.

      BCI is not claiming any expertise in high finance, but here is an example:

      Let us take off the depreciation expense for Regina Cleri of $340K, so the net expenses are $1.923M to administer $13.5M in benefits. Therefore, net expenses are 14% of benefits. By comparison, the Board of Pension of the Presbyterian Church (U.S.A)–albeit, a larger fund–spends 9% of benefits to administer their plan.

      BCI also looked at the Boston Clergy Funds expenses as a percentage of total assets and compared vs other private retirement/benefits funds. The Boston Clergy Funds ratio is high compared to other private pension/benefits funds.

      BCI could not find annual reports of this nature for other Catholic dioceses. If you have data that shows Boston is in-line with other similar organizations, please let us know and we will be glad to post it and issue a correction. But based on what we could find, the Boston expense ratios are high enough that BCI believes it is still appropriate to question whether the Clergy Funds are making the best use of all donor contributions.

  5. Anni says:

    Wow! This was posted about an hour ago on Boston.com

    http://www.boston.com/Boston/metrodesk/2012/01/chancellor-boston-archdiocese-step-down-interim-top-financial-officer-named/YRAFs7QRxhHFxOsBaWLU3M/index.html?p1=News_links

    “James P. McDonough, chancellor of the archdiocese of Boston, will leave his position as the top financial officer on March 2, the archdiocese announced today. McDonough held the post for nearly six years.

    In a statement, Cardinal Sean P. O’Malley credited McDonough with re-establishing a “sound financial foundation” for the Archdiocese and focusing on the financial health of the archdiocese’s 291 parishes. “

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