BRAINTREE -- The annual financial report released on July 10 for fiscal year 2007 shows an increase in parish donations and donations to the annual Catholic Appeal, a fully funded pension fund for more than 6,500 retired lay employees, and realistic plans to balance the budget by 2010. This is a drastic change from five years ago -- when Cardinal Seán P. O’Malley was sent to lead the Archdiocese of Boston in 2003, he described the financial situation of the archdiocese as dire. Still in the midst of the clergy sexual abuse crisis, finances quickly took a turn for the worse in order to settle with victims and begin to heal as an archdiocese. At that time, financial health seemed a distant illusion, but now there is promising news.

“We are committed to improving the services provided to our parishes, schools and agencies and to responsible planning,” said Cardinal O’Malley upon release of the figures. “As we continue the archdiocese’s journey of healing and rebuilding, we offer a message of hope to all. To those who are actively engaged in parish life and Christian service, please know how much we value and appreciate your presence. For those who have been absent from the life of the Church, allow me to personally share that you are welcomed and needed.”

Father Richard Erikson, vicar general and moderator of the Curia of the Archdiocese of Boston, said that the increase in parish giving is a positive sign of the climate in the archdiocese even though many parishes have been closed. He is optimistic that hope and confidence is being restored and he described the archdiocese as being on the road to fiscal health.

“The past two years’ reports were very somber, with Cardinal O’Malley saying that the archdiocese was on financial free-fall,” said Father Erikson. “Under his leadership we are turning the corner and making difficult financial decisions that are making our foundation stronger, which helps us better serve out our mission.”

“The report is a reflection of the leadership that we have been receiving from Cardinal O’Malley and his calling us to accountability and transparency is an indication of our commitment to build trust and this is the fruits of our labor,” he continued.

Several difficult, but necessary, steps taken by the Archdiocese of Boston over the years have positively contributed to its financial standing. Through the sale of land including the chancery, the closure or merger of 61 parishes and a number of schools, and a 10 percent reduction in staff, the archdiocese has increased its total assets by $42 million and decreased its liabilities by $24 million from 2006 to 2007. Also encouraging is a $1.8 million increase in donations to the Catholic Appeal in 2007.

“We have been working toward recentralization and some tough decisions had to be made such as staff reductions, but what we ask of parishes and schools in terms of fiscal account and responsibility is our commitment as well,” said Father Erikson. “We must lead by example.”

In July of last year, the archdiocese sold the remainder of its 18.7-acre Brighton campus to Boston College for $65 million and recently relocated to its new Braintree building, which was given to the archdiocese by the late Thomas Flatley. Also boosting the financial situation was a review by McKinsey & Company, a management consulting firm, and an internal oversight committee that was made up of pastors, employees, specialists and volunteers, to create and rollout a plan to improve the workings of the curia. In addition, shortly after fiscal year 2007 closed, the archdiocese paid off a $26 million mortgage from the Knights of Columbus.

“We were paying $2.5 million a year in interest on that mortgage so that is $2.5 million that we now have for services and ministry,” said Father Erikson. “Fiscal health and responsibility relates directly to increased ministry.”

The clergy sexual abuse scandal continues to affect the finances of the archdiocese, having paid out well more than $100 million in settlement claims during the years 2003, 2005 and 2006. The number of cases settled is steadily reducing and thus the amount of the settlements continues to decrease each year. During 2007, the archdiocese settled with 34 victims of sexual misconduct with payments totaling $2.1 million.

Another area needing financial attention is the clergy retirement fund, which archdiocesan director of finance Glen Materra said is underfunded by $110 million. The clergy retirement fund, which provides long-term care for elderly, disabled and other priests in need, is paid for by special collections taken in parishes at Easter and Christmas. Because these collections do not cover all the costs of caring for an increasing number of elderly priests, the archdiocese plans to develop an aggressive plan to supplement the fund. Greater oversight of benefits spending to increase efficiency in operating the fund is also planned.

“From our perspectives priests are giving their lives to the Church and we have a canonical and moral obligation to provide a medical and retirement fund,” said archdiocesan spokesman Terrence Donilon. “We have an aging clergy and we are faced with some very real problems at a time when pension plans at businesses and elsewhere are going downhill. We are saying that we cannot and we are not going to let that happen.”

The Archdiocese of Boston also plans to balance its budget by 2010, two years later than they had initially hoped. Materra expects an operating loss of $4 million next year, $2 million the following year, and a balanced budget by 2010. Cardinal O’Malley had also expressed the goal of making parishes transparent by posting their financial statements online by November 2006, however, the undertaking proved more difficult than anticipated. Materra said that all parishes in the archdiocese should be 100 percent compliant in a few years.

“When I became vicar general two years ago, I said that people would judge us by our actions and the fact that we have kept our commitment to transparency, and done it in a breathtaking way in terms of scope and how we have taken an archdiocese in economic freefall and brought it back to fiscal health, shows that we have good intentions,” said Father Erikson. “The decisions we are making will be visible in terms of better services and ministries to parishes, schools, cemeteries, and ministries like the Pastoral Center, which give glory and honor to Christ. We want to be value added to 1.8 million Catholics and 144 cities and towns in the archdiocese.”