Diocese of Buffalo bankruptcy "imminent" according to financial report

Jan 30, 2020

The Roman Catholic Diocese of Buffalo has revealed a $5 million deficit for its fiscal year 2018-2019 and, according to its own financial report, bankruptcy is "imminent."

(Updated January 31, 2020)

The Diocese details its finances for a year ending August 31, 2019 in the results of an audit of its Central Administrative Offices, published in the February edition of WNY Catholic.

Credit WBFO file photo

The second paragraph of a section addressing the financial impact of the clergy abuse scandal reads: "The abuse scandal has had consequences on the financial condition of the diocese beyond the cost of settling claims. Diocesan parish offertory has declined since August 2018, resulting in budget shortfalls for the 2019 fiscal period. Diocesan administration and the Finance Council are addressing these income trends, have reduced spending where possible and further reductions in ministries and services will be necessary."

The report also states that a Chapter 11 bankruptcy filing, which apostolic administrator Bishop Edward Scharfenberger admitted was likely, is imminent.

"In response to the magnitude of the number of claims, lawsuits, and alleged damages, the CAO has determined that a filing of a voluntary petition for reorganization under Chapter 11 of the Federal Bankruptcy Code is imminent," the report reads. "The CAO believes that this filing best allows the CAO to manage the claims adjudication process in an orderly manner, as well as to ensure the equitable treatment of all claimants. The CAO believes that this process will result in the eventual settlement of the claims and ultimately in the CAO’s ability to conduct ongoing business operations consistent with its recent historical practices. The ability of the CAO to remain as a going concern and meet its obligations as they become due is dependent on the outcome of the anticipated bankruptcy proceeding and the settlement of abuse claims and lawsuits filed, and those that may be filed during the one-year window commencing on August 14, 2019. These factors create substantial doubt about the CAO’s ability to continue as a going concern for the year following the date the financial statements are available to be issued. The financial statements do not include any adjustments that might be necessary if the CAO is unable to continue as a going concern."

According to its financial report, the Diocese paid a total $17.7 million in settlements through its Independent Reconciliation Compensation Program. That program has now ceased, but nearly 200 lawsuits are pending , filed by plaintiffs taking advantage of the Child Victims Act, which opened a window of opportunity for many to pursue civil damages in cases previously closed due to a statue of limitations.

But how imminent is "imminent?" On Friday, Diocese of Buffalo spokesperson Greg Tucker issued the following written statement: "The Diocese published its financial overview, which it does annually, and it includes comments from the auditor. There is nothing new here. Bishop Scharfenberger, the Apostolic Administrator of the Diocese, has already indicated that the Diocese is considering a Chapter 11 reorganization and, in all likelihood, will go down that route. We will communicate thoroughly about this at the appropriate time. The primary reasons for doing so would include the fair and just restitution for victim survivors, versus a litigation approach that would favor those first in line (with initial costly settlements depleting the Diocese’s resources). It would also enable the diocese to continue uninterrupted the vital work of ministry and outreach that is carried out across Western New York each and every day.

"As we have continued to explain, there are quite a number of complex issues that Bishop Scharfenberger and the leadership of the diocese are working through. A decision is likely a few weeks away. There are no plans as you describe that I am able to detail at this stage."

The financial report does not include assets, liabilities, or activities of individual parishes, schools, cemeteries or diocesan-run social services agencies.