Cleansing Fire

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Following the Money

July 7th, 2013, Promulgated by Diane Harris
Pope Francis checking out of Conclave Hotel

Pope Francis checking out of Conclave Hotel

Perhaps it seems funny at first — Pope Francis lecturing on what kind of car priests drive,  his living in a small hotel apartment, and paying his own bill at checkout after the Conclave, and it might even be forgiveable to wonder why. 

But it can’t be underestimated how the financial cancer which has long held sway at the Vatican can influence financial irresponsibility down through the ranks, to national conferences like the USCCB (e.g. CCHD scandal) and into local churches as well.  What is condoned will be exploited. 

So when we wonder how the retirement fund for priests and employees could be so eroded, when we wonder where the money has gone from the liquidation and closing of churches, and when we can’t find statements on funds from property transfers, there is no reason to be surprised.  What flows down from higher levels of irresponsibility will eventually engulf the lowest levels.   The hijinks at the Vatican Bank are not all that far removed from us; it all rolls downhill.  That is why it is important, once in a while, to take a peek.  Here’s a recent update.

Vatican Bank (IOR) Changes

A few days after Pope Benedict announced his resignation, Zenit reported Ernst von Freyburg as the new President of the Supervisory Board for the Institute for the Works of Religion (IOR).  A “Commission of Cardinals” for that Institute had made the appointment, stating “The Holy Father … expressed his full consent ….”  It was reported that Freyburg, a German lawyer, had “a vast experience of financial matters and the financial regulatory process.”

On May 31, 2013 Zenit ran another article entitled: “IOR President Dispels Myths on Vatican Institute:  Ernst von Freyberg [note variation in spelling of name] Speaks on Challenges in Restoring Reputation of the Institute for Religious Works,” in which “the newly appointed president of the IOR spoke on the challenges faced in dispelling myths surrounding the organization …. Mistakenly referred to by many as the “Vatican Bank”, the IOR “administers the assets of Catholic institutions who aim to further a religious and charitable apostolate at an international level.”  [He said] “Our biggest issue is our reputation.” … Concluding his interview, von Freyburg expressed his hope that at end of his term in 2015, the IOR can be viewed in a positive light ….” 

On July 2, Zenit headlines read: “Institute of Religious Works Director and Deputy Director Resign.”  … “Paolo Cipriani and Masimo Tulli, Director and Deputy Director of the [IOR] respectively,  have resigned their positions. ….  After many years of service both have decided that this decision would be in the best interest of the Institute and the Holy See,” the communique stated…. The IOR accepted the resignations and named Ernst von Freyberg as the interim General Director.  The article continued:  “A Special Commission created by Pope Francis last week to study the workings of the IOR acknowledged the decision.”

Von Freyberg apparently still serves as President of the Institute.   Now he would become interim director too.  He stated:  “Since 2010 the IOR and its management have been working hard to bring structures and processes in line with international standards for anti-money laundering.  While we are grateful for what has been achieved, it is clear today that we need new leadership to increase the pace of this transformation process.”  “The Oversight Council has begun the selection process of choosing a new General Director and Deputy Director for the IOR. Under the leadership of von Freyberg, the IOR has been working diligently in assuring compliance with anti-money laundering programs.” 

Four days later, July 6, Reuters announced:  “Prosecutors accuse the bank’s director general, Paolo Cipriani, and its deputy director Massimo Tulli, who both resigned this week, of  “authorizing illegal financial transactions…. A judge will now decide whether to proceed to a trial of Cipriani and Tulli.  The two directors left the bank on Monday after the arrest of Monsignor Nunzio Scarano, a senior cleric  who is accused of plotting to smuggle millions of euros into Italy from Switzerland.” 

As further background,  Prosecutors also dropped charges against Tedeschi, who was ousted from the bank last year and had said he was dismissed because he wanted more transparency, but the board of directors said he had neglected his duties.  In 2010, officials froze 23 million euros ($29.5 million) of the bank’s funds in Italian banks as part of the investigation. The Vatican bank said it had done nothing wrong and was transferring its own funds between its own accounts in Italy and Germany. The money was released in June 2011.”

Reuters further reports:  “The Vatican bank, known formally as the Institute for Works of Religion (IOR), has been a byword for opaque and secretive dealings for decades and its future has been in question since the appointment of Pope Francis in March.”  Pope Francis set up a special commission of inquiry to reform the bank in June, his boldest move yet to get to grips with the institution.”  

What is hard to know regarding Vatican finances, and is hard to know locally as well, is who is the hero?  who is the perpetrator?  and who is the fall guy?  But at least Pope Francis is shining a spotlight.  I hope our new Bishop does the same.

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26 Responses to “Following the Money”

  1. avatar y2kscotty says:

    “Freyberg” is the correct spelling. And it is pronounced to rhyme with Fry-bairg or Fry-bairk.
    I hope he can clean up the mess.

  2. avatar annonymouse says:

    We’ve been over this before, but these nebulous charges about the DoR’s finances seem totally unfounded to me. The DoR is, in my opinion, pretty transparent with its financial situation. Their audited financial statement is available online for all to see. The pension situation, for those who are astute in such matters, is pretty clearly about the assumptions used in the calculations and in no way indicative of malfeasance. It’s hard to find a government body or corporation that offers a defined benefit pension that doesn’t have funding problems (trillions at the state and municipal level). And the DoR appears to be taking steps to manage its underfunding.

    The Pope is not tolerating the financial goings on at the Vatican. What does that have to do with Rochester?

  3. avatar Diane Harris says:

    For those just joining the discussion, you might want to read Dr. K’s prior post: http://cleansingfire.org/2013/03/diocesan-lay-pension-underfunded/
    and the comments following. There was no resolution then, and there is no resolution yet, because there are still far too many unanswered questions. And it is an important issue because the culture of organizations flows downhill, not uphill. Clearly Pope Francis knows the importance of starting at the top.

    Annonymouse’s words like “nebulous charges” and “seem totally unfounded” and “in my opinion” and “pretty transparent” lack the clarity and precision which financial statements should have. I think that was all pretty well answered in the prior post, and here are some of the questions that were raised then, and for which no answers seemed to be forthcoming then or now. If, indeed, Annonymouse believes the answers are in the financial statements, why isn’t he/she putting them forward?

    All the questions I raised were still unanswered when Comments were no longer added to that prior Post, but here is a refresher on the questions:

    -when a church property was sold, how much did it bring in and where did the income go? (If DoR had adequate transparency in prior financial statements we would know where the income went from selling (or renting) properties no longer used.)

    -how did restricted funds become non-restricted?

    -what was the out-of-pocket expense to the diocese of all the school and church closings, including severance and on-going insurance, heating and maintenance of unused buildings?

    – The VERY serious departure from the requirements of the PBGC (Pension Benefit Guaranty Corporation) would not have become a surprise when Bishop Clark retired if statements had been adequately transparent all along. What is now being experienced in the pension fund is a great demonstration of lack of on-going financial transparency.

    -Regardless of how poorly the pension funds may have been invested, how can the market be at or near an all time high yet have the pension fund at half of where it should be? If there were and had been financial transparency we would know the answer. Was money removed from the pension funds for other purposes so that there was no opportunity to participate in the run-up in the stock market? If so, what were removed funds used for?

    -when priests are allowed to retire earlier than planned during the pension funding, there is a double whammy on pensions: fewer years of paying in and more years to pay out. What role did that play in the debacle?

    -what happened to the Partners in Faith monies which were supposed to include some pension funding? It was at the same time as Cathedral wreckovation — could that have had an effect?

    – can you tell from reading the statements how much cash was in the schools when they were taken away by the diocese, and how much was in the schools which were given back to parish control and if the diocese kept any of the cash and, if so, where did it go?

    -Usually Audit reports give some detail on the nature of lawsuits; what do we actually know about where the money came from to pay off pedophilia lawsuits? Most insurance doesn’t start at dollar zero; there is a deductible. Did any come out of the pension plans?

    -On the sharing of risk among dioceses, is DoR paying for losses in other dioceses, like rebuilding after Katrina, and where does this show in the financial statements?

    -In the last exchage I noted: “With $47-$50 million in “Investments” perhaps DoR should have more to say about the structure of its balance sheet and the planned utilization of these investments?”

    Even though the DoR financial statements are available, that does not mean they are adequately (let alone fully) transparent. In the reply comments on Dr. K’s post, there were no answers to the questions raised. It is not surprising. How can questions be answered without transparency? And, if there were transparency, the answers to the questions would be obvious.

    In those prior postings I explained why a number of Annonymouse’s conclusions were erroneous, and how the audit process actually works. Here is just one example of the kind of response went unanswered: Annonymouse wrote that [the auditor]… “says that the statements are accurately and fully presented, I presume.” I replied: “No, actually they don’t. Their words are also very limited, saying explicitly that ‘These financial statements are the responsibility of the Diocese of Rochester’s Management.’ Auditors disclaim responsibility, and their engagement letters are usually drawn very narrowly. Words like fully and accurately are not used, but rather say “free of material misstatement” (often means +/- 10% of the total), or “reasonable assurance” or “present fairly.” They use “tests” … sampling of a very small percentage of transactions, and they many not sample one that would be a problem. This is how auditors usually work.””

    Now we are back again to “feelings” about audit reports rather than the precision and transparency which should “communicate.” It is interesting that von Freyberg’s main comment in the article in which he was quoted was the need for better internal communications and transparency. That is exactly what we are talking about, at a diocesan level and at a parish level.

  4. avatar Bill says:

    The arrogance shown by many DoR officials ignoring questions asked, their refusal to respond to email inquiries (multiple!, their limited communication etc. is certainly a sign that this type of behavior was condoned and likely encourages at the top.
    These behaviors force the question of cover up.

  5. avatar annonymouse says:

    Diane, without the time to address all of your questions, let me focus on just one – what specific “departures from the requirements of the PBGC” are you alleging? That is an allegation of violation of Federal law, which is a quite serious allegation.

    Being underfunded is not, in and of itself, any violation, so far as I am aware. Indeed, the very existence of the PBGC is in response to pension plans being underfunded. The diocese has indicated strongly that there is no expectation that the Plans will be unable to meet their obligations as they come due. With all due respect, unless you know something that I do not, this one comment impeaches the credibility of the remainder of your allegations/questions.

    While I am in no way privy to the goings on at Buffalo Road, with my modicum of financial knowledge, (if I find a few spare moments) I am reasonably confident that I can address most of your questions.

  6. avatar annonymouse says:

    Perhaps the problem lies less in the transparency of the DoR financial statements and more in the financial acumen (and possibly fanciful imagination) of the reader. With only the DoR financial statements, a rudimentary knowledge of how the Church operates, and the invaluable assistance of my CPA, I present answers to all of your questions, Diane:

    Church properties are assets of the parish corporations and not of the diocese. These do not belong in the diocese financial statement. I am confident that if you wish to find out these answers, a member of the parish finance council will be happy to assist.

    If restricted funds were to become non-restricted (sic), that would be a violation of New York State not-for-profit corporation law. That is a rather serious allegation, and if you have specific information about that happening, you should report it to the NYS Attorney General for investigation.

    It is unlikely that the Diocese had significant out-of-pocket expenses for school closings, as no such costs are reported in the financial statement. Such costs for church closings would be borne by the parish corporations. Questions as to the ongoing parish expenses related to closed buildings should be directed to the finance council.

    The PBGC question is addressed in the previous post. It is not a violation of PBGC requirements that the diocese plans are underfunded.

    On this point, I would agree that the financial statement appears to be lacking in sufficient information to understand why the plan is so underfunded. The plan actuarial assumptions are not disclosed, particularly the assumed asset investment return and the assumed discount rate used. I agree that the faithful as well as the participating parishes have a right to know how the plans got into the position they’re in. From the news articles, it appears that the diocese is not overly concerned about the situation, and that use of a more reasonable discount rate assumption plus the allocation of other unrestricted funds should rectify the problem.

    The market is near an all-time high. It was, however, 21% lower one year ago at the time the last diocesan financial statement was published. Perhaps we should wait to see how much of the problem has been rectified by the market run-up. That said, it should go without saying that the pension funds are invested in diversified investment vehicles, not all in equity securities, and as such, will not have enjoyed the full benefit of the market run-up. With the recent rise in interest rates, it is likely that the actuary will use a higher discount rate at June 30 2013, further diminishing the underfunding problem. IF funds were removed from the pension plans, that would be a serious violation of both Federal and NYS law. If you are aware of such an occurrence, by all means report it. Given the apparent lay board fiduciary oversight of the combined plan, I seriously doubt any such “removal” has occurred (I would tell you that Diane’s questions pertaining to the pension plans betray a rather simplistic understanding of pension accounting and a lack of understanding of how actuarial assumptions can contribute to quite significant fluctuations in plan funding status).

    The financial statements indicate that the priest plan is based on the assumption that priests retire at age 70. Do many retire earlier than age 70? This is mere fishing.

    I don’t recall PIF monies having ever been designated to pensions.

    Cash in schools is not reported in the financial statements, but the transition occurred in the just-ended fiscal year. Perhaps this amount will be disclosed in the June 2013 financial statement.

    There is a lawsuit footnote in the financial statements. It is my understanding that the DoR, as well as the other NYS dioceses (unlike dioceses in other states that have declared bankruptcy) have benefited from the rather strict NYS statute of limitations, and that such lawsuit payouts have been insignificant. Any deductibles would likely be quite insignificant in relation to the overall scope of the diocese financial statements.

    “Sharing of risk among dioceses” – no idea what this is about. If the diocese participates in a risk-sharing arrangement for its insurance needs, then it would pay premiums into the plan which would indeed be used to pay for losses.

    Of the $47-$50 million in investments, it is important to note that $25 million is restricted or temporarily restricted and must be used in accordance with the donors’ wishes. You can’t accuse the DoR of invading restricted funds in one criticism and turn around and criticize them for not doing just that in another. I agree that it would be interesting to know why the Diocese holds $25million or so of unrestricted investments and what it plans to do with those monies, especially in light of the Holy Father’s encouragement that we be a “poor Church.”

    Finally, with respect to the audit process – audits provide reasonable, not absolute, assurance that the financial statements present fairly the financial position (assets, liabilities, net assets) and revenues and expenses of the organization. There are many accounting rules and conventions that they must adhere to in order that the financial statements are not misleading and present the financial information fully and clearly. Free of material misstatement does not mean +/- 10%. Materiality thresholds are significantly lower than that – more like 1%-2%. Auditors do not disclaim responsibility (that would be a disclaimer report) – auditors give positive (albeit reasonable) assurance that the financial statements fairly present the information they purport to present.

    Finally, one editorial comment. Unfounded accusations (based on an obviously incomplete understanding of accounting rules and conventions and perhaps a vivid imagination) diminish the credibility of the legitimate criticisms that this site sets forth.

  7. avatar Diane Harris says:

    As then candidate Ronald Reagan said: “There you go again!” Now we have an anonymous commenter, quoting a nameless CPA, acting like the Wizard of Oz behind the curtain. Some authority! Some credibility!

    Annonymouse, the way you write often sounds like a DoR press release. Whatever happened to FACTS? Here is a string of words just from your comments on this single post, using innuendo, opinion and speculation. Ignoring your sprinkling of sarcasm and personal attacks, and just for illustration, let’s string together your words which echo the way Buffalo Rd. answers complaints. All your modifiers and contingencies certainly weaken any credibility you might have had:

    “… nebulous charges … seem totally unfounded to me… in my opinion… pretty transparent … appears to be …so far as I am aware… there is no expectation … unless you know something that I do not… I am in no way privy to the goings on at Buffalo Road, with my modicum of financial knowledge, (if I find a few spare moments)…. I am reasonably confident…I am confident that… It is unlikely that ….appears to be lacking … the assumed asset …it appears … is not overly concerned …Perhaps we should wait to see …I seriously doubt … no idea what this is about. …I don’t recall …Perhaps this amount will be disclosed…It is my understanding …would likely be quite insignificant …”

    So, let’s deal with some facts:

    1. Stewardship, Underfunding and Violations:

    You wrote: “Being underfunded is not, in and of itself, any violation, so far as I am aware.”

    Answer: It depends on the degree of underfunding, the accuracy and timely reporting of the underfunding, and the reasonableness of the assumptions used. It is very easy to hide a lot with a minor change in assumptions. One should ask WHY so many diocesan staff were surprised to learn their pension plans were so significantly underfunded? Can you see that underfunding of workers’ pensions yet renovating a Cathedral for millions of dollars by a bishop soon to retire might be seen as poor stewardship? You, Annonymouse, are the one who used the word “violation;” I didn’t. You used it 5x. Not every departure from customary and usual methods rises to your characterization of a “violation of Federal law.” I’m not biting on your deliberate escalation of what I didn’t say.

    2. Separation of Church and Church?

    You wrote: “Church properties are assets of the parish corporations and not of the diocese. These do not belong in the diocese financial statement.”

    Answer: While technically correct that parish corporations are separate from the diocesan corporation under civil law, it is clear that parishes are totally under the thumb of the diocese. Priests are appointed and removed, schools are closed, churches are closed, all without bonafide input and approval of parish corporations of which 3 of 5 trustees are diocesan hierarchy; the other two are rubber stamps by the pastor’s appointees, or by trustees approved by the bishop, with decisions implemented after manipulation by diocesan employees who conduct “pastoral planning” exercises and voting processes that are rigged to get the answer they wanted in advance. A diocese does, de facto, control the parish corporations, including handling cases brought against the employees, including priests, of the parish corporations. It was the diocese that unilaterally took Catholic schools away from parishes and later gave them back. How did the balance sheets of the schools change while in diocesan hands? Did the parishes get back what they turned over? How do you know? When the diocesan corporation can and consistently does impose assessments unilaterally on the parish corporation (annual assessments, e.g.) it is hard to argue that these are truly separate corporations. It looks more like a shell game.

    3. Naivete regarding how parish and finance councils work.

    You wrote twice: “A member of the parish finance council will be happy to assist.”

    Answer: Myth, pure myth. If you believe this, you must have no idea how much is window dressing at the parish level, and how councils have no power at all. Let those who have tried to find out information comment if they will. Ask people who have been thrown off councils for asking legitimate questions. Ask Trustees who have been replaced because they refuse to sign away their parish. Once parishioners understand that they can’t exercise their fiduciary obligations, they should quit having their presence contribute to the myth of parishioner oversight or meaningful involvement.

    4. Restricted becoming Non-restricted

    You wrote: “If restricted funds were to become non-restricted … that would be a violation of New York State not-for-profit corporation law. That is a rather serious allegation, and if you have specific information about that happening, you should report it to the NYS Attorney General for investigation.”

    Answer: Please read prior diocesan financials regarding DoR’s converting from restricted to non-restricted, and then feel free to send to the NYS Attorney General yourself.

    5. Diocesan School Expenses

    You wrote: “It is unlikely that the Diocese had significant out-of-pocket expenses for school closings, as no such costs are reported in the financial statement.”

    Answer: This is circular reasoning. You begin with the assumption that the reporting is correct and complete and then use it as proof that it is correct. I’d like to hear from some of those parishes sitting on dead assets, killed off by diocesan initiatives and left hanging in a parish for the bill paying? What about DeSales? Who is paying those bills? How do you know?

    6. Not recalling doesn’t make it false….or true.

    You wrote: “I don’t recall PIF monies having ever been designated to pensions.”

    Answer: You should revisit the original documents which were circulated in solicitation of Partners in Faith donations in 2003 and you will see the pension piece. When you write “I don’t recall,” you lead others to think what you recall makes it true or false. Not so. It only means you don’t remember or didn’t notice. It does a disservice to others who want the facts and want truth. On a related subject, i.e. the retirement age of priests, you should find out what the average retirement age was for priests 30 or 40 years ago, when priests now about to retire were beginning to pay into the plan with those expectations. There actually was a time when priests believed they were priests forever, who delighted in serving at the altar in their old age. We are blessed that there are still a few in the DoR. By contrast see http://www.BishopAccountability.org to see the documented 27 DoR clergy in the database of accused clergy in the US. Is DoR raising money to pay their pensions too? Do we know?

    7. Playing with Discount Rates to feel good about pension funding?

    You wrote that you agreed that “the financial statement appears to be lacking in sufficient information to understand why the plan is so underfunded” and “that the faithful as well as the participating parishes have a right to know how the plans got into the position they’re in.” But then you say that “use of a more reasonable discount rate assumption plus the allocation of other unrestricted funds should rectify the problem” You wrote: “it is likely that the actuary will use a higher discount rate at June 30 2013, further diminishing the underfunding problem.”

    Answer: Regarding putting more money into the pension fund – of course that would help, but how did it come to be underfunded in the first place so that it now needs cash? And most plans don’t become underfunded all of a sudden. I can’t imagine how you can personally come to the conclusion, Annonymouse, that the discount rate used last year was unreasonable if you don’t know what discount rate was used? And I am particularly appalled by your statement, “it is likely that the actuary will use a higher discount rate at June 30 2013, further diminishing the underfunding problem.” On what possible basis can you make that assumption? One doesn’t just tweak a number to “make it better.” There has to be a logical rationale on the choice of assumption scenarios. And you and your anonymous CPA think I’m the one who is simplistic! Just pick a nicer number and make it look better? Really?

    8. Insignificant Lawsuits?

    You wrote: “It is my understanding that the DoR, as well as the other NYS dioceses … have benefited from the rather strict NYS statute of limitations, and that such lawsuit payouts have been insignificant. Any deductibles would likely be quite insignificant in relation to the overall scope of the diocese financial statements.”

    Answer: My “understanding” is that these payments have not been disclosed. From what source do you draw your “understanding?” Are you saying victims were shortchanged from just compensation because of the protection of state law? That is pretty sad. You are sounding more and more like someone on the inside at the diocese, someone especially tweaked off in the financial area. Your closing statement to your prior commentary on Dr. K’s post stated: “CFs posters lose credibility when EVERYTHING to do with Buffalo Road is criticized.” Rather, I think we lose credibility if we allow pressure from anyone to keep us from telling the truth, and of raising questions to which the answers should be legitimately transparent. If there is one general management principle which all consultants readily understand, it is that when one part of an organization goes bad, it permeates throughout. It is not surprising that when one turns over a rotten apple they also find rot on the other side.

    I can understand your desire to be in denial, but I’ve written elsewhere on CF regarding some very specific examples which I know to be true. There is no need to rehash those again here. Out of all the writing I’ve done on the subject, criticizing diocesan and parish financial systems and reporting, a summary report to the auditors, recounting issues not only on CF but in over 75 newsletters as well and in complaints to Rome, and in sworn testimony, I have never received a single letter from the diocese correcting the content or details of what I’ve written. That tells me a lot. And it takes much more effort to do all that, than to simply toss out words of disbelief.

  8. avatar annonymouse says:

    Diane –

    First, as to qualifications – I have no connection whatsoever to diocese finances. I have no dog in this race. And my CPA will remain unnamed as am I, but suffice it to say that my CPA is a recognized expert in auditing and accounting.

    The only obvious weakness he/she identified in the June 30 financial statements pertained to a lack of disclosure of the actuarial assumptions used in calculating the benefit obligations. And while it would not normally be included in generally accepted accounting principles-prepared financial statements, it would be good for the DoR to let the Faithful and her employees and the parish employees know how the situation got to where it is. But I think it’s important to you and others that (we) give you a brief lesson in pension accounting – at any point in time, the funding status of a pension plan is a gigantic estimate. The asset values are known, but the rate of investment earnings on those investments must be estimated, as it is a future event and only the Lord Himself knows what will happen in the future. Similarly, the benefit obligations – the liability for future pension payouts – only the Lord knows exactly who will retire and when and how long they will live and draw benefits and what their benefit will be based on their compensation at the time of their retirement. So, again, a gigantic estimate. Making such estimates is what actuaries go to school for. As to the estimates used by DoR – I do not know what the discount rate (the rate used to discount the estimated future payments back to the estimated liability today) they used was, but given the recent increase in interest rates, it is quite safe to assume that the actuaries will use a higher interest rate now than a year ago, meaning the projected benefit obligation will be lower. There is no rock to look under, Diane – that is common sense. That change in assumption, fully reasonable and defensible, plus the DoR’s contribution of ($10 million, I think, if memory of the D&C article serves) monies into the Plan, plus a likely double-digit percentage increase in plan assets, and the underfunding situation will be substantially, materially lower at June 30, 2013 than a year ago. This is not “tweaking a number” to make it better – this is making a good-faith estimate of a future liability that cannot be known with certainty.

    I share your desire to know how the situation got where it is, but I am much less skeptical (given investment performance over the last six years and the record low interest rates which are used to estimate the discount rate) than you that anything more than these factors is involved. Everywhere you turn, you can read horror stories of public and private defined benefit pensions being significantly underfunded for these exact same reasons.

    On your last point, the FACT that NYS dioceses have been shielded from litigation by the statute of limitations has been public information in news articles for years. Does that mean that victims are denied compensation that they are enjoying in other jurisdictions? Absolutely.

    But more to the point – WHY do you wish to know that information? What difference will it make to you? The fact that Rochester (and virtually every diocese) has had perpetrators of these crimes is well known. What would you do with the information if you had it? I guess that applies to all of your questions. How will you act/behave differently if you have all the information you demand? Certainly the Apostolic Administrator, who is charged with decision-making, must have the information necessary with which to make such decisions. But what will Diane Harris do differently? Vote for a different candidate for bishop??

    I will not address your other points for lack of time (and I do not wish to needlessly call upon my expert again) and lack of information. I am looking at this situation without bias and in a more rational manner, than you are. And I am a naturally skeptical person. I also recognize that the Church is not a democracy and it is questionable whether I have a right to know about every transaction that she enters into, and it is without question that I have no right to personally approve of every transaction she enters into.

  9. avatar DanielKane says:

    In addition to the above, part of the reason that DeSales High School closed was its extreme debt to the Diocese of over $750K in missed retirement fund payments. How this debt got so high is a tiny window into the stunning lack of fiduciary responsibility within the larger matter of DoR financials.

    For great people who have dedicated their lives – in one case a Catholic School teacher of over 39 years – her only job – to have their pensions at risk is unconscionable and sinfully unjust. Not to mention the priests and related underpaid employees who serve the people of God here.

    To witness this (and the above) while building a Cathedral that few wanted and the seemingly endless waste of funds (and the burning of benefactors) it is a miracle that the lights are in fact still on.

    I applaud people like Diane whose work is signed, who has the finance and accounting credentials to muck through the financial morass and double speak of the published data and produce a very cogent essay after days (weeks?)in the financial Augean Stables of the DoR.

    If Francis were here he would sell the organ and turn off the AC of this I have no doubt.

  10. avatar Diane Harris says:

    Thank you, Dan Kane, for a well-reasoned approach, and for adding important data regarding the DeSales situation. I don’t know where Annonymouse gets the idea that I don’t “get” actuarial accounting, as he/she has not pointed out a single error I made in my comments, but only presented a tutorial on actuarial accounting, which may be useful to others, but isn’t indicting of the points I’ve made. I’m glad to hear he/she has no connection to the DoR; but, it only shows how 30 years of witholding relevant information distorts the Faithful’s ability to realize they should have such information before making decisions on donations, for example, considering their own obligations of good stewardship. I not only think I have a right to an insight into the fiduciary behavior of those who solicit my money, before deciding to give or not; but, as a taxpayer I believe I have the right to question whether or not organizations which receive tax exempt treatment from the government are behaving in a fiscally sound manner, or creating what might become a further public burden.

  11. avatar annonymouse says:

    Daniel – with all due respect, I believe you are looking at the situation backwards. DeSales obviously did not have the money to make its payments into the pension plan as they became due, so that is why its debt to the diocese grew so large, not vice versa. That would also be a contributing factor as to why the overall plan is underfunded – DeSales did not fund its obligation when it was supposed to. I agree that the teacher should not be worrying about where her retirement payments will come from – whose fault is that, the DoR or the school? Perhaps the DoR should have been less merciful and legally demanded that the overdue payments be made sooner (which would have forced the closure earlier). Is that what you are suggesting?

    Diane – I did indeed point out a MASSIVE error in your comments. You attributed my statement about a necessary increase in the benefit obligation discount rate to financial gimickry. As such, I deemed it necessary to explain to you (and anyone else who might be reading) what it is we’re talking about here. Your one statement betrays your complete lack of understanding of pension accounting/actuarial science and serves to show a dispassionate observer that you will abandon reason in pursuit of your agenda, let facts be damned.
    It matters not whether a diocese or any other organization are behaving in a fiscally sound manner if you have a preconceived notion that they are not.
    With respect to selling the organ – the organ was funded by a restricted donation of a DoR priest. Are you recommending that such a restricted donation be used for something other than what it was restricted for? That would be a violation of state law.

    The ability to make decisions on donations is largely dependent on the ability of the recipient of the information to process that information. In its defense, the DoR cannot force the Faithful to become astute in financial and accounting matters and terminology. Hence, people with an agenda to push, who will see slithering creatures under every rock, whether or not they exist, can say whatever they wish and will be applauded by those who share the agenda. Reasonable, informed people may well come to very different conclusions.

  12. avatar DanielKane says:

    DeSales did not have the funds to meet their obligations and the DoR IN SECRET and with full knowledge of the status of the pension fund allowed this pension deficit to continue for probably years. DeSales had less than a dozen employees.

    It is undoubtedly NOT an act of mercy to divert pension funds promised to workers to fund a floundering operation. Especially when done in secret. Again, transparency – if the leadership said “We are diverting (or forgiving) a $750,000 payment to the retirement fund to continue to fund DeSales High School and her 100 or so students.” Then everything is on the table and the intelligent people of God can allot their resources as they see fit and interpret the act in accord with right reason. To withhold such information is disingenuous at best and forces all parties to operate in a knowledge vacuum. That is not a merciful act.

    And if it meant that the school closed in 2004 instead of 2012 so be it. At least such a decision would spring from a realistic understanding of the truth of the matter.

    Stated differently more coarsely, one does not spend other people’s retirement money to fund any floundering operation, no matter how noble, in secret.

    As to the organ, I am only suggesting what Francis would do based on his public acts. Public acts of the Church and her leaders are also symbolic – they teach a lesson as well. Selling the organ would send a message that needs to be sent – we (the people of the DoR)are broke and in grave, bordering on sinful debt and radical changes need to occur. In addition, it would raise hundreds of thousands of dollars. What is more sacred? The wishes of a generous and holy priest or the pensions of dozens if not hundreds of workers? I have no knowledge of the legal ramifications of such a decision – I suppose the Estate could sue or there is some tax penalty – but in the end, the symbolism remains and a radical call to frugality is understood.

    We.Are.Broke.

    The common litany I hear as an outsider entering the conversation late in the discussion is “we never knew” followed by 6 or 7 zeroes and that is simply unacceptable.

  13. avatar Diane Harris says:

    Annonymouse, please try to understand the difference among factual evidence, banter, and ad hominem attacks. I usually do not edit any of the comments on my posts, unless others are being attacked. However, you have gone so far over the line in your ad hominem attacks that to leave your words untouched would send the wrong message of expectations in both truth and charity. Hence,I have struck through what I consider unacceptable and would do so regardless of whom you were attacking. I leave it in strike-through mode so that others can see the point.

    On a different point, but not unrelated, in my opinion, is that you have not explained what it is that I said — specific words with which you are finding fault. You attacked with the words that I am in MASSIVE (yes yelling caps) error, but have still not stated the specific error. You are trying to attack what I know or don’t know, and you have no way of ascertaining that unless you can point to a sentence or two or three which is wrong. Point out the sentence, point out the words, point out the concept, and I will consider if it is wrong, unclear or correct. Give us the words you are challenging, not just “MASSIVE error.”

    Just because you’ve written a tutorial on discount rates does not mean that you know something I don’t. I wonder if you have ever sat in a corporate board room and reviewed the range of actuarial assumptions, heard the challenges by various peer board members, and had to reach a decision on what should be used. Have you? Because text book knowledge is not sufficient when you are on the front line.

    By the way, I did not use the word gimmickry, you did. Slight changes in the discount rate can cause large variations, even moving a balance from unfunded to funded. I stand by that conclusion.

  14. avatar annonymouse says:

    Daniel – I see your point. I agree that a prudent businessperson would have forced DeSales to cough up the funds or shut down, much sooner than happened. Bishops are not always prudent businesspersons, as they are, first and foremost, shepherds of their flock. If Bishop Clark allowed DeSales more time to figure out a way to fund their liability, that’s his fault that the plan is $750K in the hole. Hopefully for the retirees, the sale of any assets will substantially cover that deficit.

    I find it interesting that there has been criticism on this site, if memory serves, over the closure of DeSales. Blame pointed at Buffalo Road, if memory serves. The last thing I wish to be known as is a Buffalo Road apologist, but damned if you do, damned if you don’t, or at least it looks like that.

    But I agree with your overall point – if the DoR allowed DeSales to stay open and run up a $750K unfunded pension obligation over a number of years, that was irresponsible in a strictly business sense.

  15. avatar annonymouse says:

    Diane, I apologize if I’ve gone over the line and posted in an unChristian manner. That’s unbecoming.

    I simply think you’re fishing for fish that aren’t in this pond.

    Your MASSIVE error is as follows, just so that I am clear:
    1. “Playing with Discount Rates to feel good about pension funding?” Your words – “playing with discount rates” implies gimickry (my words) and implies dishonesty. As you know by now, every year the pension obligation must be estimated using assumptions, including the discount rate. Interest rates are higher now than they were a year ago. It’s not rocket science, nor do I need to know the current discount rate assumption, to assume that a higher discount rate will be used for the June 30, 2013 financial statements. You concluded that section with “One doesn’t just tweak a number to ‘make it better.’ There has to be a logical rationale on the choice of assumption scenarios. And you and your anonymous CPA think I’m the one who is simplistic! Just pick a nicer number and make it look better? Really?” You are automatically assuming the worst, when an impending increase in the discount rate assumption is a fairly obvious conclusion.

    Diane, I’m afraid that, based on these posts and on the sum of your other posts that you are not able to look at this in the least bit objectively. That’s not an ad hominem. That’s obvious.

    I’m out. Feel free to have the last word.

  16. avatar annonymouse says:

    Daniel –

    For convenience, I’ve searched for and found the thread about the closure of DeSales:
    http://cleansingfire.org/2012/07/desales-high-school-to-close/#comments

    In your defense, you did not object. It’s interesting to see who did, though. It’s also interesting to see that “the usual suspects” were blamed. My one post on that thread will, undoubtedly, further paint me as a Buffalo Road apologist.

    God bless.

  17. avatar Eliza10 says:

    Anonymouse writes: “We’ve been over this before, but these nebulous charges about the DoR’s finances seem totally unfounded to me. The DoR is, in my opinion, pretty transparent with its financial situation.”

    Wow, seriously? Pretty transparent?? You are naive or you are in deep with the Diocese.

    Yes, the DoR releases plenty of carefully selected and polished information, but it doesn’t take a financial wizard to smell a rat in the DoR. And look around and see something is not right at all. It will take know-how to root it out, though, but there are plenty who have that, and the new Bishop will need to lead them in cleaning up our stinking mess, following in the footsteps of Our Holy Father, Pope Francis.

    If it takes time to find a Bishop that can do that AND shepherd a misled flock, then let us continue to wait, please.

  18. avatar DanielKane says:

    The DHS closure in this blog was largely noted as the 54th closure of a Catholic School under Bishop Clark. The DHS Board of Trustees had thought that they had a $200K deficit and hand raised over $110K. But when the 2nd shoe fell when the “Corporate Board” a second board over the board of trustees fell when the – here is that word again – secret $750K debt was revealed.

    This posting on DHS; a posting I did not comment on, is not critical of Buffalo Road nor does it place the blame on His Excellency. It is mostly re-hashing of the 54th school closure and related declined in Catholicity.

    http://cleansingfire.org/2012/07/desales-high-school-to-close/

    Now, we do not moderate comments here unless they are outrageous. So the comments belong to the commentators, not Cleansing Fire.

    It may surprise you that it is my position that it is NOT “Buffalo Road’s” fault that DHS closed. Quite clearly the Catholic community of the Finger Lakes did not send their children there. At the same time, my point stands – a secret governing board which was a shock to every alumni I knew and the people of Geneva at large coupled to a secret $750K debt is emblematic of a lack of transparency.

    The responsibility for the closure of DHS is not Bishop Clark’s. The Catholic community abandoned it.

    To clarify the asset picture, DHS reverts back to the parish of St. Francis deSales (Now Our Lady of Peace). So the DoR pension fund is simply out the monies. DHS if sold (there are plans to rent it) the proceeds go to Our Lady of Peace in Geneva.

    To your point – A shepherd cares for the WHOLE FLOCK and that would include retirees who dedicated their lives and set aside greater opportunities to serve the people of God with the hope of a humble pension.

    In this discussion, the root is this – I see the pension monies as an opportunity for a good shepherd to show good stewardship; caring for the funds not their own as in the parable of the good steward. You seem to see the pension monies as something the shepherd has discretionary authority over. To that I say no.

    It was NEVER the DoR’s money to spend on DHS. It was the pensioner’s money. At 50% underfunded logically we will see 50% less in disbursements. Save the “good shepherd/poor businessman” is little comfort for the elderly who can no longer work and have counted on this pension in the winter of their lives.

    I have never criticized Bishop Clark personally or “Buffalo Road”. I merely report the truth as I understand it and let people draw their own conclusions. If I say 54 schools closed under his watch, I do not imply or state incompetence or disrespect. I simply count the number of schools. If as a businessman and a shepherd of funds myself I say that a 2nd secret board over the board of trustees and a secret debt of $750K is a lack of transparency (and an odd form of governance) it is merely the opinion (a signed opinion, I might add) of an itinerant Catholic physicist who also sits presently on the boards of 4 non-profits and one for profit with assets approaching $100 million.

    Others may conclude that this is normal practice and standard Catholic governance. Fine, make a donation to continue the course and fund the pension. Likewise, one can see that letting a $750K debt “ride” is good shepherding – and I do believe that the workings of the holy Spirit are mysterious and that angle may be right.

    I see it as gambling with other people’s retirement in secret.

    This is an important discussion that the people of God need to have.

  19. avatar annonymouse says:

    Daniel – very well stated. In hindsight it appears that the Bishop ought to have forced the issue much sooner. Of course, he would have faced the wrath of those who will criticize his every move much sooner.

    There are a number of posts on that thread from last July which are critical specifically of Bishop Clark for not keeping Desales open. We the faithful cannot rationally criticize the difficult decisions to close schools and churches (or in this case to allow them to close) due to a lack of resources and simultaneously criticize the same decision-makers for not being fiscally prudent when they decline to take such actions. You have not done that, but others have and continue to do so. The common denominator is that +Clark can do no right.

    I am not here to defend +Clark, only fairness and a dispassionate analysis.

  20. avatar Eliza10 says:

    Wow, I read the discussion linked in the third comment here. What shocks me – and tells me much, is your statement there, “Annonymouse”:

    “….If anything, I would say that Catholics’ niggardly giving habits prevent parishes from having the kind of staffs and paying the kind of wages and benefits that would allow the parishes to effectively carry out their missions of catechesis, worship and sacraments, charitable service and evangelization.”

    I think your view of DoR Catholics stinks.

    I have a different view. I think when you starve Catholics for decades of the richness of true Catholic teaching you will get naturally get starving contributions. When DoR Catholics are evangelized in truth, and when they see that the leadership of the DoR reflects that truth, contributions will soar.

    I have great hope that God will grant us a bishop who will lead us in the New Evangelization. The harvest fields here are ripe, the “niggardly” everyday people that you refer to are in fact ready to hear the true good news.

  21. avatar Richard Thomas says:

    There’s one important point concerning the closing of DSH that someone pointed out months ago.

    Most of the local Catholic schools in the Finger Lakes region closed. Who sends students to Catholic High Schools? Catholic grammer schools. So, by closing most of the local grammer schools, they dried up the sources of students. Closing was only a matter of time.

  22. avatar annonymouse says:

    Eliza – it’s no secret – Catholics everywhere, not just the DoR, give a very small percentage of their income to the Church, particularly as compared to evangelicals/fundamentalist sects. “Tithe” is a word we Catholics neither hear or understand. And I’m not pointing fingers at anyone without also pointing at the annonymouse person in the mirror.

    I hope you are correct that a new bishop will inspire soaring contributions. Although given most parishes’ and most priests’ reluctance to preach the “sermon on the amount” I’m not sure how that will come to be.

  23. avatar peekaboo says:

    Where did the money go? Can you say PAYOFFS To Survivors of clergy sex abuse and rape?

  24. avatar Scott W. says:

    Where did the money go? Can you say PAYOFFS To Survivors of clergy sex abuse and rape?

    That doesn’t explain the lion’s share of the financial corruption if it explains any of it. In fact, I’m not aware of any substantial cases where survivors were paid off with some secret diocesan slush-fund or what not (but I could be wrong).

  25. avatar Eliza10 says:

    “…Catholics everywhere, not just the DoR, give a very small percentage of their income to the Church, particularly as compared to evangelicals/fundamentalist sects. “Tithe” is a word we Catholics neither hear or understand.”

    And its a good thing that “tithe” hasn’t been pushed on DoR Catholics because the money would have been wasted. It must be because they weren’t allowed to impose that on the people.

    Yes, the DOR is not the only diocese in this country with the problem of systematically withholding Catholic teaching, its just one of the notorious ones. The Dioceses that are faithful to the Magisterium must certainly also be bigger giving dioceses. I refer to those dioceses that have no priest shortage, due to teaching the true faith. Like what we did not get in the DoR these past 30 years.

  26. avatar Diane Harris says:

    From Catholic NEWS US today (supplement to the above post):

    Cipriani and Tulli are alleged to have refused to provide details of the origin of the money to Credito Artigiano and the reason for the transfer, prompting Credito Artigiano to alert the Bank of Italy, which oversees Italy-based banks, of a failure to follow guidelines….

    Full story at: http://www.cathnewsusa.com/2013/07/ex-vatican-bank-officials-broke-anti-money-laundering-laws-prosecutors-say/


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