Thursday, January 28, 2010

Archdiocesan finance officer report

The following comments elaborate on the condensed financial statements of the Archdiocese of St. Paul and Minneapolis for the fiscal year ended June 30, 2009
The year was one of more financial consistency than of recent. During 2009, net assets increased $272,000 as compared to a decrease of $3,193,000 in 2008. The improvement in results reflects three primary factors:

1. In 2009 there were no additional restructuring costs while $1.4 million was recognized in 2008. The restructuring costs related to a program of voluntary staffing reductions initiated in 2007.

2. In 2008 an expense of $3.6 million was recorded to recognize the potential for losses on amounts due from parishes and $1.4 million was expended to support the debt of a high school. During 2009, provision was made for an additional $1.2 million for potential losses and no support was required for the debt of the high school.

3. Revenue in 2009 was consistent to increased over 2008 except for a loss of $450,000 in total investment returns typical of the market. This represents a reversal of return of $1.8 million.

Revenues and gains

Total revenue for 2009 reached $35,029,000 as compared to $35,532,000 in 2008.

The revenue decrease of $500,000 reflects the reversal of investment returns that offset gains of $1.3 million from regular income streams, primarily assessments on parish income. The principal sources of support for archdiocesan activities are parish assessments and the Catholic Services Appeal, which increased by 8 percent and decreased by about 4 percent, respectively. Since both sources are reflective of the generosity of the faithful, the disparity in results seems counter-intuitive but evolves from differences in timing. Assessments for 2009 were determined by parish results of fiscal 2007 and the Appeal is more real time. Thus the decrease in Appeal revenue is likely driven by the reversals in the general economy over the last several years.

Operating expenses

Operating expenses totaled $34,800,000 in 2009 as compared to $37,400,000 in 2008.

The decrease resulted from the changes noted above in regards to allowance for doubtful accounts from parishes and other related entities and the debt support. Before considering these items, operating expenses were $33,600,000 in 2009 and $32,400,000 in 2008. Of the increase of $1.2 million, $630,000 is attributed to higher claims in the General Insurance Program. The expense structure of archdiocesan staff and programs thus increased by $570,000 from 2008 to 2009, or about 2 percent.

It is important to note that archdiocesan support and subsidy of programs such as Catholic Charities, Hispanic and Indian Ministries, prison and hospital chaplaincies, promotion of Catholic values in regards to family and life issues, encouragement and support of seminarians, aid to rural and inner city elementary schools, and secondary school tuition grants as well as support of our Venezuelan mission remain at levels consistent with previous years. These programs are funded to a large extent (approximately 76 percent in the aggregate in 2009) by the Catholic Services Appeal. Without the generous response to the Appeal that has traditionally been enjoyed, these programs could not be sustained.

Following is a chart that displays the purpose of archdiocesan program expenditures for 2009. The proportion of costs to the various programs is very similar to the preceding year.

Financial position

Net assets of the Archdiocesan Corporation were $33,402,000 at the end of fiscal 2009, or $272,000 more than the year before. Unrestricted and temporarily restricted net assets increased $426,000 while permanently restricted net assets decreased $154,000 due to decline in the market value of underlying investments.

After adjusting the change in net assets for revenue and expense items that did not result in or require cash, operations in 2009 generated $1,250,000 of additional cash, compared with a surplus of $4,390,000 in 2008. The difference between years was caused primarily by the timing of cash received within the General Insurance Program.

From the $1,250,000 of cash sourced by operating activities, augmented by a $75,000 reduction in short-term investments, net payments to parishes on loans and deposits required cash of $1,300,000 in 2009, which is likely a sign of cash stress within some parishes. After expending $638,000 on deferred structural improvements to archdiocesan property, debt was reduced by $200,000. Thus the cash position of the archdiocese declined by $807,000 since 2008.

The archdiocese has for many years extended guarantees as credit enhancements for third-party loans to parishes and schools. The exposure to this contingent liability was reduced by $9 million to $75 million at the end of 2009.

In summary

During 2009, the basic cost of operations has stabilized and the quality of the archdiocesan balance sheet continued to be improved. However, the evaluation of the accounts due from parishes continues to raise serious questions about the financial viability of segments of the parish organizations. Because parish assessments are required for support of the archbishop’s primary obligations and functions, the collection of assessments is crucial. Thus parish financial viability will be a key focus in the coming years.

John Bierbaum is chief financial officer of the Archdiocese of St. Paul and Minneapolis.
pdf Condensed statement of activities 51.86 Kb
pdf Chart - 2009 Program Expenses 44.24 Kb
pdf Chart - 2008-2009 Program Expenses 40.38 Kb
The Catholic Spirit
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