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?