The Philadelphia Archdiocese's $11.6 Million Mystery

The church is far from candid about its supposed price tag for responding to its sex-abuse charges

Philadelphia Weekly/September 5, 2012

With the trial against ex-priest Father Charles Engelhardt and former schoolteacher Bernard Shero beginning yesterday, the Philadelphia Archdiocese is making headlines yet again. The archdiocese has been in the news constantly lately, between the landmark conviction of Msgr. William J. Lynn; the battle over statute of limitations on child-sex abuse; the closing of many Catholic schools; and all the brouhaha surrounding the incipient sale of a few lavish real-estate holdings-including Villa St. Joseph, a 19-room, 9,800-square-foot house on the Jersey shore featuring two elevators and assessed at $6.2 million.

And in article after article, the figure $11.6 million pops up.

The $11.6 million-you may have seen it in the news as $11 million, $10.6 million or $10 million-is, reporters inform us, the price the church has paid so far responding to "the current clergy sex-abuse scandal" or, to use ever-so-slightly clearer language, "the latest grand jury investigation into clergy sex-abuse and the criminal prosecution of Msgr. William J. Lynn."

The figure is never attributed. It just hangs there, as if it is confirmed fact. Trouble is, it's not. So where's it from?

This past June, amid international headlines about the case against Lynn, the Archdiocese published a document titled the "Financial Report of the Archdiocese of Philadelphia."

The introduction to the report was written by Archbishop Charles Chaput: "The cost of responding to the grand jury report, the investigations related to priests on administrative leave, the subsequent criminal and civil legal proceedings and the investigation into the embezzlement has been heavy." Chaput states that "roughly $1.6 million" of these "extraordinary costs" occurred fiscal 2011, with the remaining $10 million or so accruing in the time period ending March 31, 2012.

"The embezzlement" refers to the recent conviction of former Archdiocese CFO Anita Guzzardi, sentenced last week to two to seven years for stealing $906,000. So how much did it cost the Archdiocese to investigate Guzzardi? The report doesn't say. So why are reporters rolling that unspecified cost into this catchall price tag related to the sex-abuse scandal-and not pointing out that the figure came from the church itself?

Financial figures coming from the Archdiocese, a notoriously secretive organization, should be not published without skepticism, nevermind lacking attribution. We're talking about an organization that had a room full of secret documents-called "Secret Archives," right out of a Scooby-Doo episode-that contained information detailing priests sex-abuse histories; memos outlining clandestine lobbying efforts to ensure that Pennsylvania's statute of limitation on child sex abuse would not be extended; and a memo strategizing how to keep all of it out of the hands of attorneys for civil lawsuits, should the day come.

Well, that day has come. After the criminal trials end, at least nine civil lawsuits are next.

Which brings us to a much bigger problem than the mystery sum: The report itself, the supposedly "candid" snapshot of the church's financials, is-in the words of an accounting expert who has spent the last eight years reviewing financial reports from the almost 200 dioceses and archdioceses in the U.S.-"virtually worthless" for anyone who wants to really know what's going on.

Jack Ruhl is a professor of accounting at Western Michigan University who started researching the financial reporting habits of the Roman Catholic Church in the United States in 2004 after learning, 20 years into marriage, that his wife was sexually assaulted by a priest while growing up.

Ruhl says his family doesn't not want financial compensation from their church; all they want is transparency. They haven't found it in general, and certainly not in Philadelphia.

"I've been trying... to get financial statements [from the Philadelphia Archdiocese] and I can't get anything," Ruhl told PW on a recent call. "They just will not provide audited financial statements."

Ruhl graciously and eagerly reviewed the June report. "There's no auditor's report, and that's the gold standard for financial reporting," he says. "[The lack of an auditor] is not a surprise because an auditor is prohibited from putting his name on a piece of work like this... it's incomplete."

Ruhl noted that the report doesn't include any money from parishes and lacks a statement of cash flow and financial notes.

"There is so much that is not included that you don't know. Is $11 million a big piece of the whole puzzle or a tiny piece of the whole puzzle?" asks Ruhl. "It's just very frustrating to try to make sense out this."

"In my opinion, [unaudited reports] are misleading attempts to show that everything is transparent."

Ralph Cipriano, a local journalist who has been reporting on the Philadelphia Archdiocese since the 1990s, says, "It's a shell game, what they do. They always have a purpose for what they do and they never tell the truth. They certainly don't level with people about what's going on financially. I wouldn't put much stock in [the report.]"

Donna Farrell, spokeswoman for the Philadelphia Archdiocese, says that "audits were conducted for the entities for which disclosure was made," and confirms the lack of cash-flow statements and accompanying notes. "We believe [the report does] provide a transparent view of the financial condition and changes in net assets for the entities included in our disclosure." Farrell notes that the 257 parishes all have separate budgets and reporting methods.

The fact of the matter is that despite several local attempts, no one has yet been able to access the true wealth of the Philadelphia Archdiocese, let alone the Roman Catholic Church at large. Not even The Economist, which published a story about attempting to do just that last month, has been able to uncover the true wealth of the Roman Catholic Church's finances.

Due to "the overall lack of openness," The Economist's investigators were left to extrapolate estimates from records discovered during formal bankruptcy proceedings, pretty much the only window into the Church's financial affairs in the U.S.

It's an interesting read with a stark three-word conclusion about the church's money: An unholy mess.

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