Last week I began reviewing the Annual Report of the Diocese of Metuchen, NJ (the “Diocese”). In that entry, I concentrated on the seemingly devastating loss in its investment portfolio. Just as a reminder I want to emphasize the phrase “seemingly devastating” since there is not enough information in the Annual Report to make that determination. I also want to reiterate that I am in no way being critical of the management of the Diocese except for how it didn’t address the unrealized losses in the mailing. I am “picking” on the Diocese to make some points. If anything, its marketing arm is tone deaf to how some of its materials might be received by potential donors.
This week I want to focus on some of the other concerrs I have with the Annual Report:
- The Annual Report was issued almost a year after the period end. I received it in May 2023, eleven months after the period being reported on ended. By itself, this gives you some pause. By comparison, public companies issue their financial statements within 90 days of year end. Obviously, a Catholic diocese isn’t a public company and doesn’t have the resources or the legal requirement to issue such a report that quickly. However, taking so long to issue a financial report is often taken as a sign of weak financial management. This is particularly important when you are sharing bad news such as the unrealized investment losses the Diocese incurred.
- There is no indication of an outside accountant’s review or audit of the financial data. The financial statements seem to be in good form so there is obviously a capable financial team in place. Nevertheless, there are some very complex accounting issues involved. For instance, the Diocese self-insures and has an Incurred But Not Reported (IBNR) liability of $22.5 million. Similarly, the clergy retirement and post retirement obligations amounted to $24.5 million. I don’t know about other potential donors, but I would feel much better if an outside reviewer could provide me with some comfort about these balances. How would a donor know the correct actuarial assumptions were included in the computation of the liabilities and the accounting principles are correct?
- Donating should be made easy. The Annual Report doesn’t say where to send donations and what they will be used for. Perhaps a QR code or a Paypal address would be helpful. Why make potential donors search for where to send their hard-earned money?
With all of that being said, I truly applaud the Diocese for hitting the “Abuse” issue head on. It did a great job of outlining its programs to control and eliminate such a terrible plague. The importance of this can’t be underestimated as the now disgraced former Cardinal Theodore McCarrick was once the Bishop of the Diocese. Finally, I wish the Diocese well in its activities for the upcoming year. It has been a tremendous force for good in Central New Jersey. With the help of its donors and parishioners, it will be for many years to come.
The lesson to be learned for any NFP organization is to stop and ask what the perception of its stakeholders is. Management needs to scrutinize its communication strategy to see if the proper message is being conveyed. Alternatively, can the message be misconstrued by the public? Sometimes management is too close to the issue to see how this information is being received.