In recent years he has led a major diocesan review of the diocese called Fit for Mission? to prepare the diocese for the future with fewer priests and practising Catholics and attempting to encourage all Catholics to be more missionary-focussed.
Catholic schools
In November 2007, he brought out his teaching document on Catholic education, Fit for Mission? – Schools. Hailed in the Catholic press as 'groundbreaking' and 'courageous', it was also praised by the Holy See. The Congregation for Clergy 'hopes it will become an example for other Dioceses in the country in their implementation of the General Directory for Catechesis and the Catechism of the Catholic Church', and the Congregation for Catholic Education wrote, it will undoubtedly be a reliable resource for renewing the vitality of Catholic Education in today's society. O'Donoghue was an opponent of attempts to secularise the culture of Catholic schools in the Diocese of Lancaster. For instance, he gave instructions to the schools to halt promotion of contraceptives, remove anti-Catholic books from their libraries and prevent the presentation of ideas contrary to the Catholic Church's official teaching. Some secularist critics, such as Barry Sheerman, a Labour MP and Steve Sinnott of the National Union of Teachers attacked him for his advocation of a Catholic education in Catholic schools.
Catholic Caring Services
In October 2008 he came into direct conflict with trustees of the local Catholic-founded adoption agency, Catholic Caring Services, which was attempting to enact homosexual adoption contrary to Church teachings, following the UK government's Sexual Orientation Regulations. In a letter to the agency he threatened them with eviction from church property, warned that he would sue the CCS for money left in wills by Catholics to the agency if they did not change their stance within one week, threatened to inform the Charities Commission that the organisation was no longer Catholic, and would break its link with the Lancaster diocese:
I find it unthinkable, indeed heart-breaking, that Catholic Caring Services, so linked to the Catholic Church since its inception, would abandon its position and capitulate to recent same-sex adoption legislation.
Retirement
O'Donoghue retired on 1 May 2009, with a special Mass at St Peter's Cathedral, Lancaster, and assumed the title Bishop Emeritus of Lancaster. He left the Diocese of Lancaster on 29 May 2009 and retired as an assistant priest to the parish of Bantry on the west coast of County Cork, Ireland.