Spending Money

What  has $2-3 million dollars spent by the archdiocese on a piece of software for accounting, finance, and HR gotten us?  We explore that 3 paragraphs down.  But first a quick blog update.

We have been inundated with emails and input towards future blog posts since Monday and apologize for not being able to get back to everyone quickly.  Since we  cannot verify, write-up and post every story immediately, please be patient if it takes us a little while to get to the story you submitted.

No response yet to our Open Letter to the Cardinal from Monday, or to the resending of our July 23 email (found in “Bloggers Response to Boston Archdiocese”) asking for an explanation of the conflicts of interest in the hiring of Terry Donilon and Chancellor Jim McDonough.  We also have not received a response to our request that the archdiocese substantiate their unfounded claim that there are “unfounded claims” on this blog.  You may recall, the archdiocese said they reached out to “bloggers” to enter conversation with them, yet coincidentally, they haven’t responded to any of the 5 emails from this blog.

Back to the question we opened with.  Today we take a short break from cronyism, conflicts of interest, and the Caritas Christi sale to talk about how the archdiocese spends your money.  That means mostly funds the parishes give to the archdiocese for services provided by central administration and money donated directly to the archdiocese (ie from the Annual Appeal), but there are additional sources we will talk about soon as well.  The annual report helps us understand this just a little bit, so we turn to the 2009 report and look at the top vendors.

Page 73 of the 2009 annual report shows the ten highest paid vendors for the year ending June 30,2009, including Lawson Software, which was paid $1,548,072. Their website says Lawson sells software for Enterprise Resource Planning (ERP) which means the software is apparently is supposed to help streamline functions like inventory and shipping for manufacturers and financial management/accounting. (If you are reading this and are knowledgable about Lawson or this kind of software, please fill in any gaps or let us know if we have gotten something wrong).  In principle, your business is supposed to become more efficient and save a lot more money than the software costs.  In principle, at least. 

As announced by Lawson in their financial report dated July 26, 2007, the archdiocese actually bought Lawson’s S3 financial management software in Lawson’s fiscal quarter that ended June 30, 2007. The report says Lawson’s average selling price at the time for a new customer purchase was $228,000 . So the archdiocese bought the software 3 years ago (in the archdiocese’s 2007 fiscal year) for a price that was probably at least a quarter of a million dollars (perhaps more, but not disclosed) and hired an outside firm, Velocity to help implement it (which they say is almost always required for complex projects like this), then paid more money for software and services in the 2008 fiscal year, and then paid enough additional money in the 2009 fiscal year on top of that–$1.5 million–that it finally pushed the expense to the top 10 vendors. 

We only learned about the 2009 fiscal year expense of $1.5 million to Lawson in June of 2010, three years after the initial purchase. By the way, Lawson’s average selling price for repeat purchases by existing customers in Lawson’s Q2 2009 was only $83,000.  Is anyone starting to wonder about this yet?  That is not all.  Based on what is disclosed alone, we estimate the cost of the software alone to be in excess of $2 million dollars, and that is not counting the implementation services and hardware on top of that, which Lawson’s own cost of ownership study estimates to be 1.2X the cost of the software Then there are post-implementation costs of 20%/year on top of the initial cost.  Did we mention the full-time Lawson technical manager now employed by the archdiocese since March of 2009?  That means the archdiocese’s total cost could be $2-4 million. This is for accounting software that sources tell us is not even appropriate for the archdiocese. 

Does the expression “boat anchor” seem relevant to this purchase?

On top of this, the archdiocese bought software from Image Now to integrate with Lawson.  That will “enable users to create reports for all invoices, allowing financial directors throughout the organization to quickly review financial information without the hassle and costs associated with duplicating and distributing large paper files…”ImageNow will assist the Archdiocese of Boston in centralizing more than a million pieces of paper a year… The Archdiocese of Boston has plans to expand ImageNow into its human resources department.”

Is that the same HR department where the director is not Catholic and where the benefits staff has been gutted and left with no one who knows about benefits?

Did the Lawson project save money?  We do not know.  We do know that from the 2009 annual report,  Management and General Expenses increased by $6.3 million vs 2008, so if it saved money, it was not very much.   And believe it or not, the $1.5 million expense for the software project was not listed as one of the key contributors to the expense increase.  One can only wonder how much it cost in the 2008 budget if $1.5 million in cost did not add much additional cost year-to-year.

We said $2-3 million in our opening statement, but it could be up to $3-4 million dollars spent in total to make it easier to handle a million pieces a paper/year, for an archdiocese where Mass attendance is 294,000 people/week.   How many tables would that buy at the upcoming Clergy Appreciation Dinner to help close the deficit in the Clergy Retirement Fund?  Better yet, skip the dinner and just put the money toward the fund.

By total coincidence, we Googled Lawson and archdiocese of Boston and found that the account manager for Lawson Software in Boston is named, Jim McDonough.  We are not saying or suggesting there is any relationship to the Chancellor or this purchase.  We are just saying it is a coincidence.

We think there are some questions to be asked and answered:

Who approved this purchase?
What have the total costs been? What have the savings been? 
If the system has failed to deliver the expected savings, who is being held accountable for this, and in what way?
Was consideration given of purchasing a more modest system and putting even $1-2 million in “savings” from a smaller-scale, less complex system to the underfunded Clergy Retirement Fund or  employee pension fund?
What was the total Lawson-related expense for the 2010 fiscal year? What is the projected expense for this system in the 2011 fiscal year?
Is the oversight and management of this project suggestive of the sort of management we would want to continue in the future for this function?

If the archdiocese would like to give us exact amounts for amounts above where we have made assumptions, or if we have gotten anything incorrect in this post or if there is a claim considered to be “unfounded,” we would be very pleased to hear from the archdiocese and make any required corrections.

Lastly, for those commenting on our posts, we would very much appreciate you sticking just to the topic of the post and focus of the blog.   The means comments about topics such as corruption, fiscal mismanagement, conflicts of interest, cronyism or rigged hiring process, Caritas Christi, mistreatment of priests, cutting of medical or pension benefits, excessive compensation, overcharging of parishes,  lack of oversight, retaliation by the Chancellor, incompetence, ill-advised termination of long-term employees, or years of getting no response to your complaints are fine.  If it is not related to one of these, please either send us an email about it (vs commenting publicly) or feel free to post it to another blog focused on that areas.  We prefer to keep this an open forum and not have to moderate comments, but will moderate  comments that are way off-topic if needed.

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