Report: Philly archdiocese had $39M deficit in '12

PHILADELPHIA - July 3, 2013

The current deficit stands below $5 million - excluding one-time costs and depreciation - "and we will keep working to get it to zero," archdiocese spokesman Kenneth Gavin said.

Archbishop Charles Chaput had warned of the bad news in his column last week, though he did not provide specifics. He wrote that the fiscal problems stem mostly from years of overspending, not fraud or the priest sex-abuse scandal - although the latter two certainly took a toll.

The public release of the full, audited financial reports was a first for the archdiocese, which previously had offered only informal statements. Chaput wrote that the church must be more transparent and "has a duty to make an accurate yearly accounting to her people ... whether the news is happy or not."

"That requires accurate information, no matter how complex and sobering, so the problems can be fixed," he said.

The $39 million deficit reflects the period from July 2011 - two months before Chaput arrived in Philadelphia - through June 2012. It includes one-time expenses like legal fees and an insurance increase; it also includes one-time gains, such as the sales of now-closed Northeast Catholic and Cardinal Dougherty high schools.

Legal fees alone totaled nearly $12 million, comprising an investigation of alleged clergy abuse; a probe of the church's ex-chief financial officer, who was later convicted of embezzling; and a defense fund for Monsignor William Lynn, who was convicted last summer of felony child endangerment.

Excluding these non-recurring costs, the report puts the deficit at $17.4 million, which was the figure Chaput used in June 2012 when he laid off 45 employees and ceased print publication of the Catholic Standard & Times. The newspaper is now online only.

Charles Zech, director of the Center for the Study of Church Management at Villanova University, said the report was worse than he expected. It makes clear why officials made unpopular moves to close dozens of Catholic schools and merge many parishes in recent years, he said.

"Anybody who questioned these decisions really has to recognize now that the archdiocese had no choice," Zech said.

He also noted that while legal fees from the clergy scandal might be recorded as a one-time expenditure, the scandal's cost on the other side of the ledger is incalculable.

"Revenues are down because folks stopped attending (Mass) because of the way the abuse scandal was handled," Zech said.

In his column, Chaput attributed the fiscal problems to predecessors who had "a crippling habit of trying to hang on to the past and keep unsustainable ministries, schools and parishes afloat, despite great changes in our demographic and financial realities."

He stressed that the church now uses better accounting procedures and has a new financial team, including new CFO Timothy O'Shaughnessy, who took over in April 2012. Neither Chaput nor O'Shaughnessy was available for comment Wednesday.

Results for the latest fiscal year, which ended Sunday, will be more upbeat, Chaput noted. They'll include a $14 million gain from the sales of a Philadelphia property known as the cardinal's residence and a vacation home for priests at the New Jersey shore.

He did not say when those figures would be released.

The statements released Wednesday pertain only to operations and ministries stemming from archdiocesan headquarters, not individual parishes or the Catholic school system.

The archdiocese serves 1.5 million Catholics in Philadelphia and the four surrounding counties.

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