Despite
long-term debt of $350 million, the Archdiocese of Philadelphia has no
plans to seek bankruptcy protection, its chief financial officer said.
The church is committed instead to bringing its annual operating
expenses into balance within a few years, CFO Tim O'Shaughnessy said in
an interview, and will sell off real estate to bring down its long-term
debt.
Earlier this month Archbishop Charles J. Chaput pulled aside the curtain
that his predecessors had kept around church finances for decades.
The
archdiocese incurred a $39 million deficit for fiscal 2012, he revealed,
and was carrying hundreds of millions of dollars in long-term debt.
In a wide range of interviews with church insiders and parishioners,
many applauded the archdiocese's newfound transparency, but one church
finance expert offered very stern words for recent cardinals' handling
of church funds that has led to the financial crisis.
"It's far worse than I expected," said Charles Zech, director of
Villanova University's Center for Church Management and Business Ethics.
"It speaks to the ineptness of [Cardinals] Rigali and Bevilacqua, not
only in the handling of [clergy] sex abuse but also church finances,"
Zech said.
Cardinal Justin Rigali, who led the five-county archdiocese from 2003 to
2012, and Cardinal Anthony Bevilacqua, who preceded him for 15 years,
"carried a lot of parishes and schools on the books that were not
supporting themselves," said Zech, a national authority on church
finances.
"Then, when they got into financial problems, they commingled funds or
took money from the pension funds and put it toward this or that" but
issued only brief financial reports that, according to Zech, "showed the
cardinals surrounded by smiling children."
Now, he said, Chaput - who arrived here from Denver just 22 months ago
to head the 1.4 million-member archdiocese - "has to close parishes that
should have been closed long ago, and the financial burden has gotten
to be immense."
Chaput was not available for comment last week. The Diocese of
Knoxville, Tenn., where Rigali lives in retirement, referred all
inquiries to the Philadelphia Archdiocese. Bevilacqua died last year.
Despite its fiscal woes, officials said the archdiocese still plans to
host Pope Francis and the Vatican's international World Meeting of
Families in 2015.
Among Catholic lay leaders who hailed Chaput's efforts was Ed Hanway,
former chairman of the Cigna Corp.
"I think it will ultimately lead to stronger support by the faithful,"
said Hanway, who now leads a foundation that manages the archdioceses
high schools.
The archdiocese had "opened its kimono," said one prominent Catholic
donor who asked not to be named. "There's no closing it now."
The breathtaking disclosures came in the form of a 37-page financial
report produced by the auditing firm of Grant Thornton for the fiscal
year ending June 2012. Chaput had it posted July 3 on the archdiocesan
website.
Among audit findings:
The priests' pension fund, which should have assets of $90 million, had
only $500,000.
The lay employees' pension fund was short $151.7 million.
The archdiocese's in-house "bank," called the Trust and Loan Fund, was
$82 million in arrears.
Its self-insurance fund was short $30.4 million.
"Most Catholics I've talked to are a little anxious," Jim Kelly, 77,
said after morning Mass at St. Timothy's parish in Tacony last week.
"But I thought it was honest what they did."
David Skeel, who teaches bankruptcy law at University of Pennsylvania
law school, agreed.
"I was struck at how candid it was," Skeel said of the audit report. "It
does look like a serious effort to get their financial house in order."
That is Chaput's goal, O'Shaughnessy said in an hour-long interview at
archdiocesan headquarters Thursday. "We've got these issues we've
articulated; we're not trying to sugar-coat them."
A former CFO of the Aramark Corp., O'Shaughnessy said he took the job
with the archdiocese in April 2012 because he believed Chaput - who had
arrived here just nine months before - was committed to pulling the
church out of its fiscal tailspin.
Filing for bankruptcy - as eight other Catholic dioceses have done in
recent years in the face of sex-abuse lawsuits - "is not a consideration
for me," O'Shaughnessy said.
His immediate priority is to bring the archdiocese's annual costs in
line with its revenue. "We need to break even," he said.
By recommending to Chaput last year that the church lay off staff and
sell properties - including the archbishop's mansion and the retired
priests' home in Ventnor - O'Shaughnessy helped whittle the operating
shortfall down to $6 million for the most recent fiscal year, which
ended June 30.
While no trifling sum, $6 million is far more "manageable," said
O'Shaughnessy, than the $39.2 million deficit incurred the previous
year.
These had included nearly $14 million in legal and professional
services related to the priest sex-abuse scandal.
He said he hoped to "reach zero" operating deficit within a few years
but thought it "imprudent" to announce a target date.
Far more daunting, he conceded, are the long-term obligations.
For most area Catholics, the most distressing of these has been the
enormous deficit in the priests' pension fund at a time when much of the
clergy is approaching retirement age.
The problem came about, he said, because the archdiocese for decades
undercharged parishes, nursing homes, schools, and other entities for
the annual pension contributions they are asked to make for each
diocesan priest in their service.
"We've already increased the charge from $6,700 to $9,300," he said,
adding that a better number would be $11,500, which he expects to start
billing next year.
"All the currently retired priests are getting their pensions on a
timely basis," he said, "and I can assure you that will continue for the
shorter term. The archdiocese has recently put $4 million into the
fund.
"I think we can solve it" long term, he said, by selling off some
archdiocesan properties, "but I'm not sure yet which assets" those might
be.
"Our intention," he said, "is to do what we have to do to meet the
obligation."
While the priests' pension fund may seem to many Catholics to be the
pressing matter, O'Shaughnessy said his first priority with property
sales was to restore the $82 million owed to the Trust and Loan Fund,
which holds parishes' funds and makes loans to other parishes.
Previous archbishops had dipped into the fund to pay bills but did not
replenish it in a timely fashion.
He said he had seen no evidence that the archdiocese had ever
fraudulently transferred funds to protect assets from possible clergy
sex-abuse lawsuits, as New York's archbishop, Cardinal Timothy Dolan,
has been accused of doing while archbishop of Milwaukee.
"We've got some very good [real estate] assets," O'Shaughnessy said, but
declined to identify them because he doesn't want prospective buyers
exploiting the situation.
"We will make very sure we get good value," he said.
Whether the archdiocese's new transparency will coax the laity into
opening its checkbooks wider remains to be seen, says Zech of Villanova.
"Most dioceses are bad" on financial disclosure, he said, "and this
archdiocese has been atypically bad.
"What they're doing now is atypically good," he added, "but they have a
long way to go."