Archdiocese of Phila. in serious financial shape - and so are its parishes

MICHAEL BRYANT / Staff
MICHAEL BRYANT / Staff
Posted: October 01, 2012

The fortunes of the Archdiocese of Philadelphia and its more than 250 parishes are deeply and torturously entwined.

The archdiocese, the central organizing force for 1.46 million Catholics in Southeastern Pennsylvania, depends on money from member parishes to pay for churchwide activities and to shift money to weaker parishes.

But that formula is broken: Too many parishes have seen attendance fall and offerings shrivel, rendering them unable to support themselves. Ten have been shuttered in the last year, including Ascension of Our Lord in Kensington, which is closing Sunday.

There is no easy way out.

"More than two-thirds of the parishes have operating deficits," Archbishop Charles J. Chaput said in a June speech. "About 100 are in some form of financial distress."

For years, the archdiocese's central administrative office, the Office of Financial Services, tapped generations of accumulated wealth to pay bills for parishes that could not afford them. That money is gone, Chaput has said.

One result of that spending - and a dramatic sign of the cash shortages - is a $62 million deficit in a savings-and-loan arrangement between parishes and the archdiocese.

Much remains unknown about how dire the money woes are - and if any additional sources of wealth remain - because the information the archdiocese releases to parishioners and the public is not comprehensive.

Chaput and his new chief financial officer, Timothy G. O'Shaughnessy, who started in April, declined to be interviewed on such matters because the new financial team has not fully come to grips with what went on before they arrived, spokeswoman Donna Farrell said.

O'Shaughnessy answered some detailed questions by e-mail through Farrell.

"We can't change the past," said O'Shaughnessy, formerly a financial executive at Aramark Corp. and St. Joseph's Preparatory School. "The problems can be fixed, and we're doing that."

A financial report published in June that covers the fiscal year ended June 30, 2011 - before Chaput arrived - was far more detailed than those of his predecessors, but still lacked key information.

"It probably seems to them that they are being more transparent," said Nancy Gunza, a partner in the Plymouth Meeting office of the accounting firm CliftonLarsonAllen, who looked at the June financial report. "But without a fully consolidated set of financial statements, the picture's not complete."

Because there is too little public information - churches have virtually no public-reporting requirements - Gunza and other accountants said they could not draw any conclusions about the archdiocese's finances.

The Philadelphia Archdiocese turned down an Inquirer request for a full set of audited statements. But Chaput has acknowledged that the financial problems are serious.

Those problems are compounded by huge expenses to defend against child-sexual-abuse charges.

Any turnaround will depend on the parishes. And for too many parishes, revenue is on the decline.

For example, at Presentation Blessed Virgin Mary parish, whose congregation comes from Cheltenham and the city's Lawndale section, yearly collections have plummeted to $430,000 in fiscal 2012 from $730,000 in fiscal 2000 - a 56 percent drop, adjusted for inflation - the pastor, the Rev. Bill Harrison, said in a Sept. 13 letter to parishioners urging them to increase giving.

Presentation B.V.M. and other parishes are expected to pay assessments, or taxes, to the archdiocese equal to 10 percent of their Sunday offerings. Parishes also pay for insurance and pensions through the archdiocese.

The archdiocese operates a "trust-and-loan fund," where parishes are required to keep 50 percent of their cash reserves, where they earn an interest rate of 1.25 percent. The fund makes loans charging 4.5 percent interest to parishes for new gymnasiums or other buildings. Even for parishes that have unpaid assessments and insurance bills, an account with the archdiocese can be a rainy-day fund.

In a recent bulletin, Ss. Cosmas and Damian parish in Conshohocken listed $266,729 of its own debt to the archdiocese, plus $249,000 in shared debt related to grade-school consolidations. The bulletin said the parish had money in the trust-and-loan fund.

"We have a trust fund that I want to keep for emergencies, such as the boiler or the air-conditioning needing replacement," the Rev. Gasper Genuardi wrote to his congregation. But he did not say how big the trust fund was.

Three calls to the rectory were not returned.

As of June 30, 2011, the financial report shows, the archdiocese's trust-and-loan fund had $191.1 million in deposits.

Like a bank, the Office of Financial Services uses the parish deposits either to make loans to parishes and other related entities or to make investments so it can pay interest to the depositors.

But in its June statement, the Office of Financial Services listed just $71.7 million in loans and interest receivable and $57.6 million in investments designated for the trust-and-loan fund.

That $129.3 million total left a $61.8 million gap between the deposits it could have to pay back and the assets directly designated for that purpose.

The archdiocese attributed an unspecified amount of that deficit to investment losses.

But the balance of the funds "would have been used for the pressing, legitimate purposes of the church," Farrell said in an e-mail that cited financial woes of parishes and schools, as well as "years of deficit spending at the archdiocesan level."

The use of trust funds for deficit spending started in the fiscal year ended June 30, 2004, and ended after Chaput took over. "We are no longer using these deposits for purposes other than 'trust-and-loan,' " Farrell said.

To assure pastors that parish savings are safe, the archdiocese this year pledged real estate to cover the deficit in the trust-and-loan fund. The cardinal's mansion on City Avenue and Villa St. Joseph in Ventnor, which sold for a combined $14.1 million, were not included in the pledge. "Some assets currently for sale and some not currently for sale" were, Farrell said.

Making trust-and-loan money off-limits for deficit spending likely intensified pressure on parishes, some of which have been groaning under debt.

St. Martha parish in the Far Northeast, with 2,200 registered households and nearly 7,000 people on June 30, 2011, owed $637,500 on an archdiocesan loan for a parish center that opened in 2004. Between 2009 and 2011, St. Martha paid no principal on the loan, and the amount of unpaid interest climbed to $202,929 from $160,985.

St. Martha, which was founded in 1966, was also far behind in its assessments, insurance bills, and pension payments. Those debts were $2.1 million on June 30, 2011.

The Rev. Alexander Masluk, pastor at St. Martha, said in an interview this month that parish debt "is not growing at the same rate it was. We're on a five-year plan that we put in a year ago to stop the bleeding."

Overall, parishes owed the archdiocese more than $60 million as of March 31, not including loans, according to Chaput's letter accompanying the June financial report.

Parishioners at the Church of St. Monica in Berwyn have dug deep to turn things around, said Charles L. Ladner, chair of the parish finance committee.

"We were in financial distress. We took it to the parishioners. They responded" with higher pledges, said Ladner, a retired senior vice president of finance at UGI Corp.

The parish also got some help from the archdiocese, which agreed to restructure a loan from five years to seven years. Including past-due principal, the new loan totaled $390,900 on June 30, Ladner said. "They didn't reduce the amount we owed them," he said. "We're in a wonderful position to pay it back now."

The new loan came with a formal agreement, which the parish did not have before.

"We're very pleased with it," said Ladner. "I think it's best for the archdiocese to do things on a businesslike basis like that."


Contact Harold Brubaker

at 215-854-4651 or hbrubaker@phillynews.com.

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