Honesty and Accountability with Finances and Pensions

We are holding off on our final installment regarding the pro-family advocates and former ambassadors’ misrepresentation of the record of Mitt Romney to cover a different topic today.  (But we still suggest The Pilot remove the CNA propaganda and both endorsements from their website.)

Last week on the panel with Rep. Barney Frank which we complained about, Fr. Bryan Hehir was quoted as having “urged voters and the news media to insist on accountability and honesty from elected officials.”  BCI is going to ask Fr. Hehir to put his money where his mouth is–as well as the officials of the archdiocese–when it comes to financial reporting and pensions.

Financial Reporting
This is the time of year when the finishing touches are put on the annual report for the archdiocese.  Vicar General Msgr. Deeley may be leaving most of this to the Chancellor and his team, but BCI suggests he get a little more closely involved. Here are a few examples of areas to work on before the ink is dry:

  • Balanced Budget?:  Last year it was reported that the archdiocese had a “balanced budget,” which means that revenue should have equaled expenses.    BCI documented several reasons why that was not actually the case in our post last April, “Balanced Budget?”–including the fact that $1.4 million was taken from Insurance funds to pay for Central Operations programs.  No one from the archdiocese responded.
  • Moving Money: People are still wondering where funding comes from to support the $2.5 million in expense for the Office of Child Advocacy and Victim Assistance that was on the books in 2010, but mysteriously disappeared from the 2011-2012 budget, as we described in “Boston Archdiocese Budgetary Hocus Pocus” last October.
  • Debt to St. Johns Seminary: What has happened with the $40M debt obligation by the Boston Archdiocese to St. Johns Seminary, which is to repay the seminary for  proceeds from the sale of the SJS Brighton property (where the Boston Archdiocese kept the cash proceeds and used them to repay other debt)?  We reported last year how the archdiocese had defaulted on the first part of that debt by not paying back $5M owed January 1, 2011.  They were negotiating to give St. John’s a building in Brighton instead.  Will the archdiocese somehow reflect in financial reports the means by which the remainder of the obligation will be repaid?
  • Salary Disclosure:Last year the annual report said the disclosure of executive compensation was “modeled after IRS Form 990…providing greater visibility into RCAB compensation information.”  Given all of the concerns and complaints about excessive compensation, if they want to model the standard disclosure for non-profits and charities, they should actually follow the IRS Form 990. The 990 instructions clearly say they require disclosure of all salaries over $150,000, as well as the 5 highest compensated employees other than directors, officers, and key employees who received more than $100K in compensation.  The 2010 report mysteriously excluded this information, which would have no doubt highlighted Carol Gustavson, Kevin Kiley, and a few others.  This year, BCI suggests the full disclosure be included
  • Executive Salary Review:A year and a half after the Compensation Committee was approved, they are due to release a report on compensation practices along with the Boston Archdiocese annual report. BCI and others are wondering how much they have paid the expensive outside consultant to do the work that previously was done by archdiocesan staff, and more importantly, the extent to which their report and recommendations will change anything.

This is a topic that requires dedicated attention in separate posts, but we will get it started today.  Last year we posted extensively about pensions–how the archdiocese was spreading misinformation about the lay pensions, the failure of the archdiocese to uphold previous commitments to former employees regarding pension payments, the pressure on former employees to take lump-sum pension buyouts at a lowball prices without the archdiocese trying to collect funds from affiliated employers who owed money and without giving a fair valuation to the unfunded pension liability, and the hardball tactics taken with the Daughters of St. Paul. The clergy pension fund is a whole different ball of wax.

While the archdiocese is finalizing financial reports for 2011, Cardinal O’Malley, Msg. Deeley, Fr. Bryan “Social Justice” Hehir, and the Massachusetts Attorney General Martha Coakley should take a closer look at how and why the pension liability for Caritas Christi employees (when Caritas was spun off in 2010) was mysteriously valued much differently than basically the same pension plan liability for archdiocesan employees.

The short version of the story is that when Caritas Christi was “acquired” by Cerberus in 2010, the archdiocese and Caritas Christi told the Supreme Judicial Court that the value of Caritas’ unfunded pension liability was $260 million:

“During the hearing, Spina asked questions about the hospital system’s $260 million in unfunded pension liability.  It is an important issue because without the liability, the financial condition of Caritas would be much improved, and the state only permits sales of hospitals that are performing poorly.”

But according to the audited financial statements for the 3 Caritas plans covered by the transfer (found in Caritas Christi Retirement Plan and Trust and Caritas Christi 2010 audit), the amount on the books for the unfunded pension liability was $123.3M.

Why is there a difference of $136.7 million between the audited results and what was reported to the court and the public?

Why is the amount of unfunded pension liability Steward/Caritas is planning to pay their employees more than double the figure that was on the books?

What does this have to do with archdiocese having pressured former employees to take lump-sum pension buyouts  while many questions remained unanswered about the value of the unfunded pension liability?

Where is the accountability and honesty from our diocesan officials and elected officials?

The answers to these questions should come from the Boston Archdiocese, Chancellor Jim McDonough, Caritas Christi, and Attorney General Martha Coakley.

In the meantime, BCI suggests the Vicar General and Finance Council head, Jack McCarthy pay a bit more attention to the annual report and pension situation than perhaps you were paying until now.

6 Responses to Honesty and Accountability with Finances and Pensions

  1. John says:

    Your “wager” smacks of a panicked Mitt Romney move. While the proceeds may benefit a charity, gambling is sinful. Also, making it sound like the Archdiocese failing is the only way a charity will get the $100 also doesn’t feel very Christian. Perhaps you can consider an alternative approach?

    • Fair feedback.Though BCI still believes the Compensation Committee analysis is not going to result in any meaningful changes and we would be pleasantly surprised if there are changes, we have removed that passage from our post.

  2. Mark Frances says:

    As in other dioceses in America, I believe that you have to look for the existence of “slush funds” to by-pass scrutiny. Jimmy Hoffa did it best. He took money from one bank and redeposited it in another minus a “finder’s fee”.

  3. Lazarus' Table says:

    “honesty and accountability” in the same context as RCAB is oxymoronic.

  4. David Smith, Retired Chancellor says:

    If the Caritas Christi Retirement Plan was about 55 percent funded when it’s financial statements said it was 80% funded, how did those same trustees conclude that they could tell us that the RCAB plan was 83% funded when it’s statements say it was more like 79% funded?
    Perhap the Vicar General isn’t the only one who should be looking more closely at what is going on.

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