BRIGHTON — The Archdiocese of Boston released its 2006 financial report on April 25, outlining the significant progress made in the last fiscal year. The annual financial report covers the 12-month period ending June 30, 2006.

Chancellor James P. McDonough described the report as “encouraging.”

“We continue to take steps in the right direction. We still have many challenges in front of us,” he told The Pilot. “We see this as a year of good progress.”

The Catholic Appeal as well as individual parish collections increased in the last year. The archdiocese also cut costs in its central administration by eliminating 50 positions, consolidating programs and reorganizing the cabinet.

Additionally, the central fund of the archdiocese came closer to its goal of operating in the black by 2008. The budget shortfall was $6.2 million in 2006, down from $8.3 million in 2005. The archdiocese projects that the budget will break even excluding debt service, meaning a shortfall of $2.8 million, by the end of fiscal year 2007. The archdiocese projects it will be able to balance its budget, including debt service, by 2008.

Most of the funds in the archdiocese, however, are collected and expended at the parish level, archdiocesan director of finance Teresa McGonagle told The Pilot.

“About 7 percent of all program expenses are at the administrative level. Only about 2-4 percent, over a period of years, of the fundraising expense is at the central level,” she said. “We can continue to streamline our operations to get efficiencies, not only efficiencies over central operations but also efficiencies at the parish level as well.”

There is disparity among parishes with some doing extremely well and others facing many challenges, she said.

The total of archdiocesan-wide parish collections increased to $142 million. However, individual parishes collected anywhere from $48,000 to $1.6 million last year. Some fall far short of paying for their expenses.

McGonagle noted that most parishes’ unrestricted funds are tied up in property — land, buildings and equipment. While technically unrestricted, the assets would need to be sold in order to gain capital. Additionally, many parishes face the challenge of paying for deferred maintenance, McGonagle said.

McDonough added that more and more parishes are working on financial planning so that they can continue to provide, and potentially expand, their pastoral programs. The archdiocese has offered to help parishes with this effort, he said.

“We want to support our pastors and parishioners as they seek to develop vibrant parishes that have the resources to do the good things they want,” he said.

McDonough and McGonagle explained the archdiocese’s three key challenges, which are outlined in the report.

The first is the sale of real estate, which is the main cause of the archdiocese’s improved financial situation over the last year, McDonough said.

“The primary reason for our balance sheet improvement this year is $63 million in real estate sales as a result of primarily reconfiguration but also parish sales,” he said.

Most of the money was collected from the sale of parishes closed by the archdiocese in the parish reconfiguration process. That money was used to pay off debts of remaining parishes and shore up the parish revolving loan fund and lay employee pension fund, McGonagle said.

The sale of property from active parishes accounted for $19 million and is restricted to use within those parishes, she said.

The second challenge was repayment of the clergy funds, she added.

“We, as a leadership team, have been looking at the clergy funds and trying to figure out how best to shore those up for the future of the priests,” she said.

The archdiocese was also challenged by its commitment to parish level transparency, which has not yet been fully implemented, McGonagle said.

“We’ve made significant progress in providing those, but we’re not 100 percent there yet,” she said. “We have parishes at all different stages, just as with their financial condition.”

Facing those primary challenges will require further discussion with parishes as well as the central management team, McDonough said.

This year the archdiocese has highlighted two parishes in the financial report. One is St. Agatha Parish in Milton, a well-established parish that has been providing its financial report to parishioners for years. The other is St. Mary-St. Catherine of Siena Parish in Charlestown, which merged from two parishes last year and has submitted a six-month report.

On April 19, 2006, the archdiocese released its first financial report, fulfilling Cardinal Seán P. O’Malley’s promise of financial transparency. The 2005 financial report was an extensive document that outlined the archdiocese’s “dire” financial condition and $46 million deficit.

“This is our transition year. Financial transparency was our first foray into delivering our audited financial statements to the public. As a result, it needed a great deal of explanation,” McGonagle said.

In future years, the archdiocese plans to release annual reports similar to those released by other non-profits, she said.

The unrestricted net deficit of the archdiocese in 2006 was $13.2 million, far less than the previous year’s $46 million, she said.

But McGonagle cautioned against using those figures as proof that the archdiocese’s financial condition has drastically improved. The figures last year showed that parishes were overall in a negative financial position. This year, the archdiocese wants to focus on whether or not it is operating within its means, she said.

McGonagle cited increases in both parish collections and fundraising. Charitable giving that had fallen off in the past is returning, but there is still room for improvement, she said.

McDonough added, “At the end of the day we hope that we get more people coming to church, more people going to Catholic schools. This is what it’s all about.”

The full financial report is available in this edition of The Pilot as well as online at www.rcab.org/Finance/HomePage.html. Also available online are the audited financial statements of over 40 archdiocesan-related organizations, cabinet secretary salaries, the five highest paid positions in the archdiocese as well as the top five contractors and vendors.