26
Archdiocesan Chancery Corporation Annual Financial Report • 2014
The Lord is always present to help us By the Most Reverend John C. Nienstedt “Therefore, do not be anxious about tomorrow, for tomorrow will be anxious for itself. Let the day’s own trouble be sufficient for the day” (Matthew 6:34). These words of Jesus come to mind as I sit down to pen this column. Our local Church and our Chancery Corporation, in particular, have Archbishop known significant “trouble” during JOHN C. the past year. That NIENSTEDT “trouble” continues today with the disheartening financial information published in this issue of The Catholic Spirit. Unfortunately, we have taken a series of financial hits that have resulted in a serious deficit to our bottom line. Additionally, in better financial times, our staffing and other expenses grew substantially in support of our Church’s mission..As a result, we needed to cut
back on expenses. Most distressing is the evident need for reducing the size of our workforce and the loss of valued staff members. My entire staff works with great dedication and for modest salaries in order to serve Christ and His Church. Following years of hard work to promote the mission of this Archdiocese, these layoffs sadden me greatly. I ask our readers to keep these good people in their prayers. I have spent countless hours and several sleepless nights trying to analyze the current situation and find the best resolution available to us. I am grateful to the dedicated advisors I have on our staff as well as the professional and highly competent members of the Archdiocesan Finance Council who have worked closely with me. I truly regret and I apologize for the pain that this has caused others. I wish there had been a less hurtful way to resolve the situation. As you know, the work of the Church is primarily carried out in the parishes, parish schools and other Catholic institutions by priests, religious and other ministers. All of these organizations are separate legal entities
with their own budgets. Please be assured that the Archdiocesan Chancery Corporation’s financial condition does not directly affect the parishes or other Catholic institutions. Thus, it should in no way diminish the many good works which I mention in my regular column today. I am determined to see that the ministries and essential services provided by the Chancery Corporation will continue and that we will strive to minimize the impact of cutbacks on our Catholic people and the larger community. I must also admit that the road ahead offers “trouble” of its own. We have settled only two of the legal cases involving clerical sexual abuse of minors. There are 20 more trials that are scheduled. There is still another year and a half for the window created in May 2013, lifting the Statutes of Limitations. We have no idea how many more legal claims may be made against us in the time that is left. We have adopted a policy of “victims/survivors first,” which means we make decisions with fairness to them in mind. We do not want to have
all our resources spent on litigation, which could easily happen. We need to make sure that all victims/survivors are adequately compensated. I ask our readership to pray for me and my team at the Chancery Corporation, that we may have the wisdom and strength in the months ahead to resolve the serious “trouble” that faces us so that we might be a source of hope before all that confront us. We read in the Second Chapter of Sirach: “My son, when you come to serve the Lord, prepare yourself for trials. Be sincere of heart and steadfast, undisturbed in time of adversity. Cling to him, forsake him not; thus will your future be great. Accept whatever befalls you, in crushing misfortune be patient. For in fire gold is tested, and worthy men in the crucible of humiliation. Trust God and he will help you, make straight your ways and hope in him.” Indeed, there is much comfort in such advice. Let us take these words to heart, knowing that the Lord will always be present to help us. God bless you!
Financial officer report The following comments elaborate on the financial statements of the Archdiocese of Saint Paul and Minneapolis Chancery Corporation for the fiscal year ended June 30, 2014. Condensed financial statements are included in this issue of The Catholic Spirit. The audited financial statements with footnotes and independent auditors’ report are posted at archspm.org on the Administration and Finance page. By Thomas Mertens, CFO, Archdiocese of Saint Paul and Minneapolis Chancery Corporation
Introduction When I offered analysis at the time of the 2013 financial report release, I was able to say that at June 30, 2013, the financial condition of the archdiocesan Chancery Corporation was solid. Unfortunately, since that time, our financial condition has become more uncertain due to significant expenses that are not anticipated to be ongoing in the long-term and the growing potential liability surrounding litigation stemming from the lifting of the civil statute of limitations for sexual abuse of minors until May 2016 under the Minnesota Child Victims Act. In order to resolve the number of claims we are facing due to the lifting of the statute of limitations, we must have all options on the table. Our first concern is fairness: fairness for victims of clergy sexual abuse and fairness for the faithful whose stewardship has made archdiocesan ministry possible. For this reason, as we have stated previously, all options, including reorganization under the bankruptcy code, are being considered for fairly addressing the numerous sexual abuse lawsuits filed or soon to be filed against the archdiocese. As a part of determining the best way to move forward, archdiocesan leaders have consulted with various representative clergy and lay leadership groups and outside professionals to obtain their insights. At this point, no decision has been made to reorganize. Importantly, the archdiocese would not use reorganization as a tool to avoid compensating victims/ survivors. It would be a way to respond to all victims/ survivors by allowing the available funds to be equitably distributed to all who have made claims, not just those
November 20, 2014 • The Catholic Spirit
who have the earliest trial dates or settlements. The archdiocesan Chancery Corporation’s current financial condition is not the fault of victims/survivors. Readers of these financial statements should understand that the archdiocesan Chancery Corporation, a not-for-profit entity, is a separate legal entity from parishes, Catholic schools and other local Catholic entities. Action by the Chancery Corporation does not necessarily mean that the same or similar action would be taken by other local Catholic entities. (side bar at right.) The archdiocesan financial report covers the activities of the archdiocesan Chancery Corporation. Parishes and other Catholic entities, as separate corporations, independently report financial information to their stakeholders. Earlier this year, the archdiocesan Chancery Corporation released its full audited financial report (for the year ended June 30, 2013) for the first time. In order for us to be accountable to our many stakeholders among the Catholic faithful, and to act as responsible stewards of the resources entrusted to us, we are committed to releasing the full financial report each year. Archbishop John Nienstedt, the Archdiocesan Finance Council and I remain in full agreement on this point. We are releasing the report three months earlier than our past practice of February because we have improved processes, policies and controls, allowing for more timely reporting. Archdiocesan leaders have made a firm commitment to create a culture of transparency and continue to make strides in this regard. In this issue of The Catholic Spirit, you will again find the condensed financial statements and notes, and I encourage you to go online to archspm.org to see the full audited financial report. Report continued on next page
Reorganization: One option being considered At this point no decision has been made for or against reorganization. The archdiocese is considering all options including reorganization under the bankruptcy code in order to provide the most fair response to clergy sexual abuse claims against the archdiocese. If the archdiocesan Chancery Corporation files for reorganization: • The archdiocesan Chancery Corporation would expect the court’s permission to continue to function in the ordinary course while pursuing a reorganization, similar to other dioceses which have sought bankruptcy reorganization in recent years. • Parishes are separately incorporated and would not be part of a Chancery Corporation filing for reorganization. Parishes in the archdiocese have been separately incorporated under a religious corporation statute dating back to the 1800s. • Catholic schools are either ministries of a parish/ parishes or are separately incorporated and would not be part of a Chancery Corporation filing for reorganization. • Parish and Catholic school employees are employees of the parish/Catholic school where they work. • It is premature to speculate on potential impact of reorganization on 403(b), pension, medical or other employee or priest benefits were the archdiocesan Chancery Corporation to undergo reorganization. If reorganization is pursued, we would seek court approval to maintain such plans during the course of the reorganization. Such relief has been granted in other diocesan reorganizations. Regardless of whether the archdiocesan Chancery Corporation determines to seek bankruptcy reorganization, it has already taken significant expense reduction steps, outlined in the discussion contained in the adjacent articles, to balance its budget and make resources available to meet its obligations.