2011 Annual Report Analysis by Former Chancellor

Last Thursday, the Boston Archdiocese released the annual report for the 2011 fiscal year. Cardinal O’Malley stated that “The Archdiocese of Boston has greatly benefited by the financial management of recent years that has achieved and sustained a balanced budget.” Chancellor Jim McDonough said, “We have made great progress in moving the Archdiocese from a position of financial freefall just a few short years ago to one of stability, fully committed to supporting our parishes, schools and ministries.”  That reflects one perspective, and BCI thought our readers might be interested in another perspective.

BCI received an email a few days ago from former Chancellor, David W. Smith, with his analysis of the 2011 Annual Report.  BCI thought the analysis from someone familiar with archdiocesan finances was interesting, so we are sharing it with you:

Last week I was asked by the Boston Globe to comment on the Archdiocese of Boston’s release of financial information.  I tried to provide “instant analysis” but it is just not possible to review hundreds of pages of information on a same day basis.

On the assumption that your readers may want some more analysis of these complex statements, here is a little more analysis.

The Chancellor’s letter indicates that Central Funds had a balanced budget of $33.9 Million and that there was a 13% improvement in expenses since FY 2006 when I retired.  Below is a summary of the two years operating performance of the unrestricted Central Funds extracted from the audited financial statements on the Archdiocesan web site:

                                                          AMOUNTS IN MILLIONS OF DOLLARS


FYE 6/30/2006   

FYE 6/30/2011

         Change (%)
Total Operating Revenue




Management & Overhead




Pastoral Programs












Total Operating Expenses




Operating Results




Given that unrestricted operating revenue was $35.6 million, unrestricted operating expenses were $39.8 million and there was an operating loss of $4.2 million, I can’t figure out how the budget was balanced at $33.9 million.  I guess some revenue and expenses just don’t count?  Neither can I find a 13% reduction in operating expenses, since they were actually up $.5 million from 2006.

What I find disturbing was that Management and Overhead was up $8 million or 71% and Pastoral Programs were down $6.1 million or 27%.  Apparently, pastoral programs, which in my day were more than twice administrative costs, are now outpaced by administrative spending.    

And that’s just what we see on the books.

The Chancellor says that central fund headcount is down 50 folks.  That may be correct, but we know that some staff has been shifted from central funds to other legal entities.  We know, for example that Clergy Funds now has employees at total salaries of $428,000 and an administrator line item cost at $231,000.  When I retired, RCAB’s service fee of $400,000 took care of all three clergy funds.  They now pay $436,000 in service fees plus the salaries and a plan administrator for a total of nearly $1.1 million.

The financials for the RCAB lay pension fund don’t break out salaries, so we don’t know how much payroll costs have been transferred to that fund, but the RCAB service fees have gone up anyway.  The Caritas Christi pension fund statements were not released.

It was good to see that insurance funds are being used to provide educational workshops for parishes.  It was a little disappointing to see that equity in that fund has dropped from $15.3 million at 6/30/2006 to $700,000 today.  It makes you wonder where the $2.6 million in sexual abuse victim counseling costs are coming from this year and why those costs have been transferred out of the RCAB budget process altogether.

David W. Smith
Former Chancellor, Archdiocese of Boston

BCI is not in a position to explain, defend, or elaborate on the above analysis–we are publishing it for the edification of our readers, the archdiocese, and those who are may be trying to gain their own understanding of the financial condition of the archdiocese.  If you have questions or comments on this analysis, feel free to post them, and we will ask Mr. Smith to respond.

With the news that Chancellor Jim McDonough is leaving his role, this gives Cardinal O’Malley, the Vicar General and archdiocese a chance to take a fresh look the financial condition of the diocese. We hope and pray that the Cardinal, Vicar General, and those around them will be guided by the Holy Spirit in deciding how precious resources will be used to most effectively continue the saving ministry of Jesus Christ, give Glory and Honor to God, and serve Christ and His Church.

18 Responses to 2011 Annual Report Analysis by Former Chancellor

  1. Thomas says:

    Thank you, BCI, however I think we need some independent analysis if there is anyone you can find. While I appreciate the former chancellor may have some inside knowledge on operations, and am concerned that he remains far from objective in his public dealings with the current, soon to be out-going chancellor. Additionally as I review the FY06 vs FY11 statements as he did, I notice that there are diFferent categories of programs counted in each and his comparison does not note that or reference the specific changes. I am not implying he is being deceitful, just that he is offering something other than an apples-to-apples comparison which is unintentionally misleading. If you spend the right time searching you learn that where and how 66 Brooks accounts for money has changed and while some will want to assume the worst (and perhaps they are justified) you can find the trail of where things have moved and why. I do not want anyone to think I am defending the current chancellor — I am not. I just want to operate from a base of facts and the above does not tell the whole story.

    Perhaps instead of trying to get 66 Brooks attention we should compile a list of questions and send them to the audit firm. Professionally they cannot overlook any accusation of fraud waste and abuse claims. Is that a possibility? I know it is a lot of work, but we would get what we need.

    Keep fighting the good fight — but do it with facts.

    • Thomas,

      Thank you for your message. You raise important and valid points.

      BCI did ask an independent finance expert–a university finance professor–to review the 2010 annual report, and he found issues similar to those BCI identified and reported on last year. (Eg the budget was “balanced” in part by drawing down assets, not by income equalling expenses).

      The information in the 2011 report would benefit from independent review, but that said, the numbers are the numbers and some things fairly clearly jump out as questions. (Eg evidence again this year of drawing down of assets to pay expenses to “balance” the budget).

      As for the comparison between 2006 and 2011, if the manner in which expenses are categorized has changed from 2006 to 2011 as you mentioned, then the best way to get a truly objective assessment of that would indeed be an independent auditor.

  2. JustSaying says:

    Can we dispense with using David Smith material now. I have as mush use for his view of the world as I do for Jimmy McDonough’s. David is casting stones and yet no one ever mentions it was during his watch that the real money shift in Clergy Funds took place in 2002. Perhaps someone from the inside can share a copy of that private audit that was performed by an outside firm and shared with few people? It was done in 2006 I believe. Regardless, I am not willing to give him credibility like this and hope BCI reconsiders their investment in his “analysis.”

    • Thank you for your comments. BCI just posted a link to the 2009 study of the Clergy Funds by the outside firm. That report explained why the Clergy Funds were bleeding and showed there was not a “money shift.”

      As far as a private audit performed by an outside firm and shared with just a few people, BCI does not know of this. Around the time of the initial release of the 2005 financial statements, we are aware that a team of CPA’s/auditors reviewed all of the funds and statements and did not have any complaints or raise any red flags. If some other document exists, we would appreciate if someone can send it to us.

      As far as what we publish at BCI and from whom the material comes, BCI would like to give a proper response to your feedback but due to other pressing responsibilities right now, will need to do that another time.

  3. Dave Smith says:

    Thomas is right there have been many changes in the operations of the Archdiocese since I retired. That does not change the fact that GAAP requires seperate reporting of program expenses and administrative ones. The labels on the program expenses have changed but the spending levels on programs are,in aggregate, correctly reported in my summary. The labels on management and general have not changed and those expenses are way up. Thomas is also correct that we don’t have sufficient facts because the Archdiocese no longer releases the uncoonsolidated Central Fund statements so we are working with much less data than we did when Central Fund statements were released as they were every year from my arrival in Brighton until my retirement. (see 2005 annual report and the detail provided in the Central Fund Statement.) An outside review would be useful if the unconsolidated information was made available.

    JustSaying could not be more wrong about a money shift in Clergy Funds in 2002. There was a regonition of unfunded post retirement medical costs booked around that time (previous audits neglected to report it) but no funds were ever shifted between legal entities.

    For the record, I have no issue with the outgoing Chancellor, except for his part in the lay pension plan mess. Anyone who would dovote six years of his life to the Church deserves credit for his efforts. While his approach and mine are were different, I don’t question his motives and, I doubt the he questions mine. I acknowlegde that I did feel a need to correct his assertion that Central Fund expenses were down since I retired when, in fact, they were up.

  4. CuriosityKilledMoreThanACat says:

    I heard rumor of this audit several years ago. Do you have a copy JustSaying? Does BCI have a way to get a copy? I and a few of my Brothers would appreciate seeing what it has to say so we are not viewing the 2002 cash issue through anyone’s verbal gyrations.

    God Bless

  5. Fr. D says:

    I have to admit something which just occurred to me, reading both the report and the commentary.

    I do not believe the Catholic Church can survive, at least not in its present form, in an age of transparency and instantaneous communication.

    The whole institution survives, in a bizarre juxtaposition with what we are to believe, in the darkness of secrecy.

    Even beyond clerical abuse, there appears o be very little which can stand the light of day….very little. The institution can be spotted for its lies in second after something is uttered and the people at large are not stupid and illiterate any longer.

    I don’t know what the answer is, even if there is an answer, but it appears obvious to me that the RCAB’s report is purely for public consumption and bears little likeness to reality.

    But is the RCAB so delusional as to think that since they print it, it must be real? If so, they are truly living in a parallel universe where write makes right. It scares me…..

  6. PleaseStopTheMadness says:

    I am all Chancellor’ed out at this point. Gentlemen, and I use that term loosley at this point, take your ball and go home. Retire quietly and enjoy like. Seek out the word of the Lord in all you do — but in the name of all that is holy — do it privately and quietly. Find peace already and move on. I will pray for you both.

  7. Mack says:

    The steep increase in management and overhead, and the corresponding decrease in funding for pastoral programs is a sad commentary on the RCAB’s priorities….

    • Anni says:

      Amen, Mack! Many, many years ago, when I was a grad student at Michigan, I remember the pastor of the Newman Center exclaiming “What am I doing here worrying about stopped up toilets and leaking roofs? I am supposed to be doing the work of the Lord!”

    • Jack O'Malley says:

      Though I confess myself to have an aversion to leaking roofs and stopped up toilets, particularly if they occur in the selfsame room of the Newman Centre (nihil peius quam desuper mingi cacando desub durante, qua de vulgari eloquentia me excuso), I think that the many Catholic missionaries who established churches, schools and hospitals in Third World hell holes had more remissible complaints. Such a peevish pastor does not elicit the sympathy due the martyrs of whatever degree of humidity.

      That said, I agree with Mack and Anni that the concentration of lucre in the Braintree Sanhedrin and its allocation to the elite of the Scribes to the detriment of the corporal not to mention the spiritual works of mercy, is a heinous delict. Let Connors and his cronies be cast out. Or let the widows’ mite be withheld. And the mite of all of us others who enable by our contributions the reign of malversation that endures at 666 Brooks Road.

      Cardinalis O’Malley, audistine? Nonne acturus es? Si coleos haberes, ageres? Expelle igitur nummularios. Purga speluncam latronum. Visne anglice hoc legi? Fac quid necesse sit.

  8. qclou says:

    since Sr. Regis has long gone to her reward, and her classes in Latin at Matignon are far in my past, I regret I can not interpret your erudite language comments.
    Could you please stay in our current vernacular !!

    • qclou,

      Jack is his own man–BCI is not sure if he will accommodate your request. But, in this case, it might be better if he does not translate, since some of what he wrote is profane. Here is the best attempt by BCI to translate.

      “Cardinal O’Malley, did you hear? Are you not going to act? If you had any [slang word], would you? Drive out the money. Purge a den of thieves. You want to read this in English? Do what is necessary.”

    • Jack O'Malley says:


      I didn’t go to Matignon so I tried Google translate to translate the Latin 😉

      Cardinal O’Malley, Did you hear? You are not going to do? If you have had any spunk, would you? Drive out the money. Purge a den of thieves. Well, I read this in English? Do what is necessary.

      Actually, that isn’t too bad for a machine translation; in fact it is downright amusing in one phrase. I’ll leave that as an exercise for the reader, as they say. Here is what it really means:

      Cardinal O’Malley, did you hear? You are going to act, aren’t you? If you had the coglioni, would you act? Drive out the money changers. Clean out the den of thieves. Do you want this to be read in English? Do what is necessary.

      BCI’s translation was pretty good too.

  9. John says:

    Let us all pray for the repose of the souls of the good sisters who taught us Latin and French, German, Chemistry and Physics, etc. so many years ago at Matignon.Teachers like Sister Mary Regis and Sister Thomas More come to mind. They were brilliant in their subjects and taught us by example to love and be joyful and respectful of our Catholic Faith ..and let us not forget our spiritual advisor, Father Flynn. Thany you for all that you did for us. You made us proud to be Catholic.

    • qclou says:

      how about Sister Adelbert ? and Sister Francis Grace in the music room ? and then there was the elderly Sister Juliana ? That was the time, sister Regis taught all the boys in our homeroom what a REAL teacher/mentor is all about !! Sister Regis heaped scorn on our heads for some stupid school boy foolish behavior without raising her voice, or naming any names, but made us all resolved to be better human beings in a few well chosen phrases. She remains the most effective teacher in my personal pantheon of great teachers including all of the many world famous I had at Harvard !

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