Is Boston Archdiocese Violating the Law?

For months now, we have been told by readers they are rather certain the Archdiocese of Boston has been violating the law in ways that could make the archdiocese subject to any of a variety of civil charges or fines.  The excessive salaries we have been reporting on which represent a breach in fiduciary responsibility, and now the manner in which the archdiocese is handling the freezing of the lay pension plan, both raise significant enough questions that we feel this merits urgent attention by those legally expert in such matters, as well as the Presbyteral Council, Finance Council, and College of Consultors.

In yesterday’s post, Catholic School Questions, the comments revealed how the archdiocese is implying to employees that their pension fund might not be there some day so as to encourage them to take a lump sum pension fund payment now.  Beyond the troubling ethical implications, on a legal basis, doing this could leave the RCAB open to sanctions under state and federal regulations. We will take this whole matter up in a separate post, but for now you can share your thoughts on that issue via comments on that post or this one.

Excessive salaries is a whole different issue which we bring to a new level in our coverage today based on the legal consequences many readers may have not been aware of.

In 2004, the Internal Revenue Service announced a new enforcement effort to identify and halt abuses by tax-exempt organizations that pay excessive compensation and benefits to their officers and other insiders.

Could the Boston Archdiocese be subject to fines or loss of their tax-exempt status because of excessive compensation?  The $325,000 annual salary of Schools Superintendent Mary Grassa O’Neill remains one of several glaring examples that could trigger government fines or sanctions.  Read on.

“We are concerned that some charities and private foundations are abusing their tax-exempt status by paying exorbitant compensation to their officers and others,” said Mark W. Everson, then-Commissioner of the Internal Revenue Service. (The current commissioner is  Douglas Shulman)

This particular enforcement effort lasted about a year.  According to this IRS report , twenty-five (25) of the organization examinations resulted in proposed or assessed excise taxes aggregating in excess of $21 million against 40 persons or organization managers. Among the issues giving rise to these assessments was “excessive salary and incentive compensation.”

If the IRS were to get wind of the current pay practices of the Boston Archdiocese for executive cabinet members, we are honestly not sure what would happen.

This report on the IRS effort says the following:

“There is no bright-line rule defining “reasonable” compensation. The IRS has indicated that reasonable compensation is measured with reference to the amount that would ordinarily be paid for comparable services by comparable enterprises under comparable circumstances.”  Fines are 25% of the part of compensation deemed “excess” plus an excise tax of 10% to the organization manager.  The report also says, “Finally, if the IRS determines that a nonprofit organization pays “excessive” compensation to an employee, it could revoke the nonprofit’s Section 501(c)(3) tax-exempt status on the basis that the payment of excessive compensation violates the prohibition against the use of nonprofit assets to benefit private individuals.”  We are not making this up.  Click on the image to see for yourself.

The report, “Wrongdoing by Officers and Directors of Charities: A Survey of Press Reports 1995-2002″ by the Hauser Center for Non-Profit Organizations at the Kennedy School of Government (where  the most trusted advisor to Cardinal O’Malley on everything, Fr. Bryan Hehir, works and collects his six-figure salary) looked at allegations of criminal and civil wrongdoing by officers and directors of charitable organizations. Of the 152 incidents found, 104 entailed criminal activity, 54 involved breaches of fiduciary responsibility (the duties of loyalty and prudence) – self-dealing, failing to carry out the mission of the charity, and negligent management of assets – and 6 fell into both categories.  Under the caretory of “Fiduciary Duties Breached”, in 14 cases “payment of excessive compensation” was present.

This is a very serious problem.

For first-time readers, here is a quick summary.  Dr. Mary Grassa O’Neill is paid a salary of $325,000 as Secretary for Education and Superintendent of Schools for the archdiocese.  This is the highest paid person in the archdiocese, and we can find no other person in a comparable role in another archdiocese paid at this level.  We checked.  (If someone proves us wrong with documented information, we will issue a correction, but no one has to date).  There are 42,500 students in Catholic schools in Boston and the number is dropping every year.  By means of comparison, Dr. Carol Johnson, superintendent of Boston Public Schools is paid $265,000 and they have 56,000 students.  (Apologies for an error previously–an alert reader checked with the Boston Public Schools office and verified directly that Dr. Johnson is paid exactly $265K, with no bonus accepted).   Here is our previous post on this topic where we cited how Grassa O’Neill was making about $138,000 in 2003 in her last superintendent job.  Here is a comparison vs other public school superintendents in large metropolitan areas:

But even this comparison is flawed because, unlike public schools, where the superintendent is directly responsible for management of policy, curriculum, busing, district-wide budgets, hiring and firing teachers and principals, negotiations with labor unions, and a host of other issues, Grassa O’Neill is not directly accountable for results.  She and her office may support pastors, school leaders and faculty on an as-needed basis with areas like planning, curriculum development, recruitment and hiring, development and fundraising, but they do not actually manage, direct or drive these areas. Since most Catholic schools are parish-based, the key decisions are all made locally, so the role of Catholic Schools Superintendent is mostly consultative and advisory.  As one reader wrote to us about the Boston Catholic Schools Office (CSO):

They aren’t running anything, they are just running to the bank.  It is far from the job description of a superintendent in New York City, Brookline, or Los Angeles, where the superintendent has the ultimate responsibility and authority over the schools.  CSO has none.  So why the big paydays?

It is bizarre.  A million bucks for a command staff that commands nothing, and puts out no financial reporting, no long range plan, no results, nothing.

One of our researchers wrote to other large dioceses about salaries and recently heard back from the head of HR for one of them.  Our researcher shared the Boston salaries and asked if the other diocese could give some sense for how they compared.  Here is what our researcher wrote and received back:

To HR Director,

I am a Boston-based writer conducting some research into whether salaries paid to lay leaders and executives in the Boston archdiocese are consistent with those paid in other dioceses.  I’m wondering if you might be able to share a general range of compensation paid in ___ for key positions, such as the following. The amount in parenthesis is what has been reported publicly that these positions pay in Boston:

Superintendent of Schools (publicly disclosed salary is $325K/year in Boston)
Assoc. Superintendents of Schools (publicly disclosed salary is $188K/year in Boston)
Chancellor and head of finance: (publicly disclosed salary is $250K in Boston)
General Counsel: $300K/year in Boston
HR Director: $150K/year in Boston

Are the salaries of some of these roles a matter of public record in the ___ archdiocese?  If not, I’d appreciate if you are able to give some sense for the ranges. We are looking for a basis to compare vs other large archdioceses.

Thanks in advance for any perspectives you can share.

The response:

These are not consistent in ___.  The first 2 are way over ___
Chancellor is a priest on priest stipend
General Counsel varies but $300K is high
And I wish HR got $150K…..but, not in my lifetime.

As best as this writer can determine, based on IRS guidelines and based on the Kennedy School of Government Hauser Center for Non-Profits’ report on wrongdoing by Officers and Directors of Charities, the leadership of the Boston Archdiocese is today breaching their fiduciary responsibility by paying excessive salaries to a number of senior lay executive employees–in the Catholic Schools Office, in HR/benefits, in legal, in finance, and probably in fund-raising, communications and other areas.   Are laws being violated?  We do not know–we will have to leave that determination up to others.

The archdiocesan Presbyteral Council is meeting with Cardinal O’Malley next week.  We are asking all readers to talk to their pastor this weekend at Sunday Mass about the problems you have seen documented on this blog and ask him to request that these concerns be discussed at the Presbyteral Council meeting. You can focus on just the excessive compensation and legal risks if you wish, but better still, ask him to request that the following concerns be discussed:

  • Leadership/Governance: especially the need for engaged, active leadership and governance by the Archbishop of Boston
  • Integrity: on the part of cabinet members and the archbishop in words and actions
  • Fiscal Management: breach of fiduciary responsibility with excessive six-figure salaries being a good starting point, and
  • Team: will there be likely changes with the Vicar General (returning to the military) and the Chancellor?  How will those be dealt with?

Click on “Leave a comment” at the end of this message, and you’ll get an email link/graphic that will let you easily email a copy of this post to any friend or colleague.  If you have your pastor’s email address or that of a member of the Archdiocesan Presbyteral Council, we suggest you start there.  At the same time you are asking your pastor to request that these issues be discussed by the Presbyteral Council, let your pastor know you are praying for him and supporting him 100% in raising these issues. If you do not know your pastor’s email, talk to him in-person over the weekend.  Regardless, you can also send a copy of this post to: newstip@globe.com.

8 Responses to Is Boston Archdiocese Violating the Law?

  1. Chris says:

    Thank you for your monumental efforts to inform the Catholic community in Boston. I hope this information spreads far and wide and sparks outrage and action. I will do my part by emailing this around to all the concerned parents I know (along with some former Catholic school teachers, who are going to be shocked when they see what the superintendent makes).

  2. Mary says:

    There is no question Mary Grassa O’Neill’s salary is more than excessive. She is also currently receiving a pension in excess of 100,000 plus benefits and pays no state tax on that amount. Aren’t there any retired Catholic administrators who would be more than happy to do the minimal administrative duties required for the good of the Church?

  3. Objective Observer says:

    According to the reply from the large diocese cited above, Boston is way over in every category. This means that the salaries are excessive, and therefore, subject to scrutiny under the law.

    But why go to so much trouble? If Jim McDonough, Carol Gustavson and Mary Grass O’Neill are the only people who are qualified to do those jobs, we’re stuck. Are they? Is there no one else who could do as good or better job as chancellor, as benefit trust president, or as school superintendent?

    They add up to about $1 million dollars in total compensation. That’s bout $800,000 in salary, then add in health, dental, life and disability, oh yeah, and pension contributions, to come to just about $1,000,000.00 for three people. I can’t believe I just typed that about our Archdiocese.

    So shoo them out the door with all the usual accolades, find three people at about $150,000 each to do their jobs. Now you are at $450,000 for salary and about another $150,000 for benefits (new hires can’t start in the pension plan). Put the other $400,000 you’re not spending on those three positions into the pension trust to raise the total available every year, and sing all the way to the bank.

    While you’re at it, place a $150,000 cap on the top ten salaries (think about those lawyers, layers of finance poobahs, etc.).

    That’s about three times the median income in the Archdiocese — the people who are putting in the money. As the head of our parish’s finance council said recently, “When they are paid more like we’re paid, people will start giving again.”

    Now that’s the kind of language the pastors on the presbyteral council can understand.

  4. Catholic Tax Accountant says:

    BCI and Objective Observer are correct that the Archdiocese of Boston could well be subject to scrutiny or penalties under the law.

    Though I’d hope the Archdiocese would do something about this voluntarily, if you suspect or know of an individual or company that is not complying with the tax laws, you can report this activity by completing IRS Form 3949-A. Instructions can be found on this IRS page:

    http://www.irs.gov/individuals/article/0,,id=106778,00.html

    You can get the form online but need to print it and mail to:

    Internal Revenue Service
    Fresno, CA 93888

    If you do not want to use Form 3949-A, you can also send a letter to the address above. Although you are not required to identify yourself, it is helpful to do so. Your identity can be kept confidential.

  5. […] Is Boston Archdiocese Violating the Law? […]

  6. A. J. Constantino says:

    Good Monday Morning!

    I am a bit concerned re Mary’s reply: “ Aren’t there any retired Catholic administrators, who would be more than happy to do the minimal administrative duties…..”

    First, let me voice my strong opposition to the $325.0K annual salary for the Superintendent of Schools. As I have written, in the past, there is no question her experience and education does qualify her for the position.

    I do feel, however, the Archdiocese of Boston does need a strong Superintendent of Schools! Are not the youth, in our schools, the future of the Church?

    The RCAB first needs a Superintendent of Schools committed to evangelization and the teachings of the Church.

    There are temporal matters to attend to: technology, curriculum that allows students from Catholic schools to be competitive, an infrastructure that supports Principals and teachers with the resources needed to plan for the future.

    I also politic for a project, I feel is key to success of our schools; forming strong Development Offices that will assist schools in developing more sophisticated fundraising initiatives and alumni programs.

    We need a committed Catholic educator not a minimalist!

  7. Jerry O'Sullivan says:

    Questions. How about the hundreds of thousand dollars to up grade rectories at a time retired priests have having pensions cut. Specifically the Cathedral Rectory.

  8. […] savings alone for these 5 people/roles would be $550,000.  We have raised concerns in “Is Boston Archdiocese Violating the Law?” and many other posts.  Apparently neither the Cardinal nor the Finance Council, who are […]

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