Diocese releases financial report

The Diocese of Manchester lost $7.8 million in assets during the last fiscal year as it paid millions in clergy sexual abuse settlements and saw parishioner donations drop 5 percent.

With the release Saturday of the diocese’s first independent fiscal audit, church leaders hope Catholics in New Hampshire will get a better understanding of how their donations are used. This disclosure comes at a time when the clergy abuse scandal has led innumerable Catholics to tighten their purse strings in fear that their contributions will mostly fund legal settlements and not church services.

The audit, in fact, reveals that while parishioners have helped in some way to pay abuse victims through insurance premiums, the bulk of their dollars still finance parish programs. The audit does not specify how much of their donations were earmarked for insurance.

Overall, expenses outpaced revenue as the largest religious institution in New Hampshire suffered a rough fiscal year ending June 30. The bottom line of the financial statement illustrates the diocese cannot suffer any further significant losses.

“The cupboard is bare, as to savings. We acknowledge that,” said the Rev. Edward Arsenault, the diocesan chancellor. “We’re more reliant on the generosity of people, but the bishop (John McCormack) is pleased with what we have done to help survivors.”

In a report accompanying the audit, McCormack wrote that the Catholic Church in New Hampshire remains “a strong and vibrant community.” He added: “We have sought to do what is right to assist those in need. The financial consequences of these choices are significant, but because it is the work of the Church to serve others, we have done so gladly.”

The audit shows that since July 2001, 207 legal settlements totaling $18.8 million have severely depleted diocesan coffers. And in the past year, parishes contributed 5 percent less than the previous year; donations in the past year were $33.2 million, a $1.8 million drop

the report said.

Diocesan leaders acknowledge parishioners have withheld contributions as an expression of dissatisfaction with the Catholic Church’s handling of clergy abuse. But the diocese also attributes the decline in parishioner revenue to changes in the economy and several parishes instead choosing to engage in capital fund drives. The audit does not list contributions by parish.

Even though the offertory diminished, the diocese does not consider a 5 percent decrease the sound of a death knell. Rather, Arsenault considers it a new starting point.

“Our churches are full, and the bottom hasn’t dropped out,” Arsenault said. “This stewardship report is to restore trust. I hope someone withholding a gift understands where the dollar goes.

“The people who are withholding are not bad people. They are just angry and upset. They ought to know they have been heard; we want to work with them. But withholding only prevents the parish from thriving.”

The audit – prepared by the Manchester firm Howe, Riley & Howe – shows that 7.8 cents for every dollar donated goes to diocesan administration, while the remainder supports parish services. From each dollar, 79.7 cents help parish operations, and 12.5 cents aid Catholic school subsidies and priests’ retirement and sick funds, the report said.

With the report, the diocese also aims to stress that legal costs associated with abuse claims since July 2001 are only 3 percent, or $393,000, of the settlements. And diocesan officials believe that the significant amount paid, $18.8 million, demonstrates they have worked promptly the past two years to settle complaints stemming from six decades of clergy abuse, Arsenault said.

“The numbers are mind-boggling for most of us,” Arsenault said. “It all pales when you measure it against the immeasurable sexual abuse of one minor, let alone 100. Having said that, part of what we’re dealing with is abuse over 60 years. That’s the aggregation. We hope no one else will be harmed in the church.”

But reconciling 60 years of abuse depleted diocesan assets.

Before July 2001, the diocese had settled 20 cases for $1.4 million, the report said. The widespread revelations of clergy sexual abuse that dominated news coverage that year, however, led to 211 claims from July 2001 to this month. Those 207 settlements amounted to a depletion of about 28 percent of the diocese’s assets.

Although net assets decreased nearly $7.8 million – from $12.7 million to $4.8 million – the past fiscal year, Arsenault does not think the diocese is in a fiscal crisis.

“This is not going to keep happening,” he said. “You wouldn’t have to be a rocket scientist to realize we can’t do it one more time. This is because of the extraordinary amount of settlements for years of abuse. But now we start from scratch. We are stable.”

According to the report, donations comprise 85 percent of parish revenue, so with $33.2 million coming in this past fiscal year – as compared with $35 million the previous year – the diocese has few resources to tap outside the offertory.

Aside from supporting parish and diocesan programs, donations also go into two funds that act like, respectively, a bank and an insurance program, Arsenault said.

The central fund holds the deposits of diocesan parishes, schools and institutions, and offers a 1.75 percent return rate, Arsenault said. It also offers loans at a 4.75 percent rate, he said. Because of this fund, none of the parishes have outstanding debt with commercial banks and owe only one another.

A pastor decides, after consulting his parish council, how much money his church will deposit into the central fund, Arsenault said.

Schools and parishes also purchase insurance from private companies through a diocesan fund established 30 years ago, Arsenault said. In essence, parishioners have helped pay for abuse settlements because their donations go into this insurance fund.

This fund has paid more than 40 percent of settlement costs for abuse cases, the report said. The remaining costs have been and will be paid through other insurance reserves and borrowed funds, the report said.

The diocese did not determine how much of each dollar donated falls into the insurance fund, Arsenault said. The percentage varies per parish, but the insurance fund falls under the category of overall parish operations, he said.

After recent settlements, diocesan officials have stressed that parish, institutional and school funds have not been used to finance any settlement. With the audit, though, the diocese acknowledges that donations, albeit through an insurance fund, have financed and will continue help paying settlements.

“The answer is, ‘Yes,’ ” Arsenault said. “It’s the work of the church. We have to help these people. The mechanism is the insurance fund. It is part of what has assisted survivors.”

This year, the diocese trimmed $500,000 from its $2.7 million annual budget by eliminating some social programs and dismissing 20 workers. But Arsenault said those moves resulted from plans to streamline operations that were made long before the abuse crisis broke.

He said the diocese intends to create new positions next year as it attempts to better serve, among other programs, the diocese’s schools and youth ministries.