DECEMBER 19, 2019
THE CATHOLIC SPIRIT • 17
ARCHDIOCESAN CHANCERY CORPORATION ANNUAL FINANCIAL REPORT • 2019 Grateful for funds, time and expertise
Financial Officer Report
Published this year in the middle of Advent, the 2019 Annual Archdiocesan Financial Report is infused with the hope of the season. It serves as a reminder of the many ways in which Jesus continues to provide for this local Church through the extraordinary generosity of her faithful. I am deeply ARCHBISHOP thankful to all who BERNARD HEBDA have supported the Archdiocese this year. While Archdiocesan staffing and programming remain at the low level once necessitated by our bankruptcy, I am grateful that the good work of the Church nevertheless continues. This year’s report clearly reflects our awareness of the five-year commitment we made to provide $1 million annually to survivors of abuse. We take seriously our commitment to them and will continue to look for ways to set aside resources to ensure that the obligation will be met in each of the next four years. I continue to be grateful for the generous collaboration of those who share their professional expertise and assist the Archdiocese in charting a course forward. I have been assisted not only by a competent professional staff at the Archdiocese, but also by the extraordinarily well prepared laity and clerics who serve on the Archdiocesan Finance Council and Corporate Board. Working in tandem with the priests serving on the College of Consultors and Presbyteral Council, they have been valued collaborators in restoring stability to the Archdiocese. When I had arrived here as Diocesan Administrator in 2015, I asked the Archdiocesan Finance Council (required by canon law) and Corporate Board (required by Minnesota civil law) to meet jointly until we would emerge from bankruptcy, with the hope of making sure that key leaders would all be on the same page. I also asked them to stay on beyond the conclusion of their terms so that there would be continuity in decision-making, and they graciously agreed. I believe that the greater stability reflected in the 2019 Report reflects the generosity of those board members and their careful review of our financial data, as well as their invaluable input into the other decisions that fall to me as archbishop, matters that often have financial consequences. I will always be grateful to them, not only for their collaboration in navigating through particularly rough waters but also for their creativity in both institutionalizing the closest of collaborations between the Finance Council and the Corporate Board and identifying worthy successors to ensure that this good work continues. As you review this report, I hope that you share my assessment that the Archdiocese has indeed been blessed.
The fiscal year 2019 of the Archdiocese of St. Paul and Minneapolis began July 1, 2018, and ended June 30, 2019. The Archdiocese’s bankruptcy case officially closed during this fiscal year on Dec. 21, 2018. Starting that day, the more than 400 victim-survivors who filed abuse claims against the Archdiocese began receiving compensation from the bankruptcy trust established by the Archdiocese. The majority of the $210 million settlement reached in June of 2018 was distributed to claimants by the court appointed trustee as part of the bankruptcy process. The trustee determined the amount received by each claimant. In this report, you will see distributions from our cash account to the trust and a reduction in our Bankruptcy Settlement Liability for the payment of our obligations reached in the bankruptcy settlement. The first of five $1 million annual payments to the trust was made this October and will be reflected in the fiscal year 2020 report as a reduction to the Note Payable – Bankruptcy Settlement. You have heard previously from Archbishop Hebda and others regarding the new day for abuse survivors and the Church, enabled by the bankruptcy resolution. The resolution of the bankruptcy also affects the Archdiocese financially in a number of ways. First and foremost, those who were harmed over the past 70 years have been compensated and their cases settled. Second, our Special Issues Expense, which reflected the expenses associated with the bankruptcy, is behind us, which is significant. In fiscal year 2018, our Special Issues Expense totaled nearly $21 million. Third, the resolution of the bankruptcy allows for the Archdiocese and its parishes to move forward with some financial certainty. Many parishes and priests contributed generously to the settlement fund. Fourth and final, the resolution allows the Archdiocese to resume having an audit of our financials completed and published, something not possible during bankruptcy. For the past four years, the Archdiocese had asked our CPA firm to perform Agreed Upon Procedures on our financial statements. The Agreed Upon Procedures were developed by Archdiocesan staff and the Archdiocesan Finance Council in consultation with our CPA firm, and they assisted us in governance of the Archdiocese and stewardship of its resources by requiring attestation procedures on key balance sheet accounts and review of the statement of activities and internal controls. Accounting best practices dictate that our fiscal year 2019 audit consist of an audit of our balance sheet, dated June 30, 2019. Because our balance sheet as of June 30, 2018, was not audited, an audit cannot be performed on our Statement of Activities for the fiscal year ending June 30, 2019. We will return to the standard practice of annual independent audits for the fiscal year ending 2020 and will continue our practice of releasing the information promptly after completion of our financial statements and auditor’s report. While we provide administrative and pastoral support to parishes, Catholic schools, and other Catholic entities within the 12 counties that make up the Archdiocese, this annual fiscal report does not contain their financial information. That is because, under Minnesota law, they are all separate corporations with completely separate finances, and they are required to prepare and publish their own financial reports. We owe financial transparency and accountability to you, the Catholic faithful, because nearly 75% of our operating revenue comes from what you give at your parish each Sunday. Solidifying trust as we move forward is vital. Next year’s full audit will assist with that.
The archdiocese’s fiscal year 2019 Financial Statements along with the Independent Auditor’s Report will be posted at archspm.org at the Finance and Accounting page prior to Dec. 31.
By Thomas Mertens, CFO
Introduction
Financial condition For the year ended June 30, 2019, we generated a surplus from operations before Special Issues Expense of nearly $900,000. It is similar to the surplus from operations in FY 2018 before Special Issue Expense, which totaled nearly $1 million. Generating a surplus from operations is critical to our operation, as it will provide cash to meet our $1 million annual obligation for the remaining four years related to the bankruptcy settlement. As we have done in the past, we will continue to closely monitor and analyze our expenses. In fiscal year 2019, we generated an overall surplus of almost $1.7 million because of an operating surplus of $900,000 and a favorable non-cash adjustment to our Bankruptcy Settlement Liability of approximately $800,000. The adjustment was related to the assignment to the Bankruptcy Trust of a potential refund from the workers’ compensation investment account of excess funds not required by the Minnesota Department of Commerce for self-funded plans. The refund to the Bankruptcy Trust did not materialize. In fiscal year 2018, we had a loss from operations of $20 million due to Special Issues Expense of nearly $21 million, which represented the Archdiocesan payment of its obligations agreed to in the Plan of Reorganization that became effective in October 2018.
Revenue Total Operating Revenue in fiscal year 2019 was $20.2 million, down slightly from fiscal year 2018 of $20.6 million. The decrease was primarily due to the down market’s impact on Investment Income, a decrease in Contributions, and a decrease in Other Income as a result of lower imputed rental income required by accounting standards due to the land sale to the Catholic high schools in September of 2018 as part of the bankruptcy settlement. Parish Assessments, our primary source of revenue, increased slightly from 2018, up $40,000, while Fees and Program Revenues increased more than $300,000. Parish Assessments are generated from the 186 parishes within the Archdiocese and are calculated and billed on a two-year lag, which means the parish financial results for the years ending June 30, 2017, and 2016 formed the basis for the Parish Assessment revenue for the years ended June 30, 2019, and 2018, respectively. Under the Plan of Reorganization, the Archdiocese agreed not to change the assessment methodology or rates to the parishes for a two-year period.
Operating expense Our Operating Expense Before Special Issues Expense in 2019 totaled $19.3 million, as compared to $19.6 million in 2018, a decrease of 1.6 %. The decrease is due to an intentional and continued focus aimed at generating a surplus to meet our annual $1 million dollar obligation to the bankruptcy trust over the next four years. The Archdiocese closely monitors expenses through monthly financial meetings with each Archdiocesan department director.
Non-operating activity: Gain on sale of assets The Archdiocese sold three parcels of land in October of 2018 as agreed to under the Plan of Reorganization for an aggregate price of $4 million. The proceeds from the sale of the land went directly into the Bankruptcy Trust. Each parcel of land was part of the campus of each of three Catholic high schools; BenildeSt. Margaret, DeLaSalle, and Totino-Grace. The land was purchased by the Archdiocese decades prior and a gain on the sale of $3.4 million was recognized in the year ending June 30, 2019.
Non-operating activity: General Insurance Program The General Insurance Program of the
Archdiocese of St. Paul and Minneapolis provides comprehensive, uniform insurance coverage to all of the parishes, Catholic schools, and certain other Catholic entities within the Archdiocese, as well as the Chancery Corporation. The coverage provided by the General Insurance Program includes commercial property, casualty, general liability, and workers’ compensation. The General Insurance Program is maintained for the benefit of the participants who have contributed funds in exchange for obtaining insurance coverage. The General Insurance Program had a surplus from operations of $1.6 million in 2019, as compared to $2.8 million in 2018, due to higher claims in the most recent fiscal year. These higher claims were the result of the extremely cold weather this past winter, higher than normal precipitation, and hail damage in the spring. In 2018, the General Insurance Program contributed $6 million to the Plan of Reorganization. The expense of this contribution is included in Special Issues Expense.
Non-operating activity: Priest Benefits The Archdiocese coordinates a self-insured health and dental benefit fund for active priests and seminarians within the Archdiocese. The Archdiocese invoices parishes, Catholic schools and other Catholic entities based on clergy assignments and pays benefit providers directly for any claims. Priest Benefits generated a loss of nearly $100,000 in 2019 and income of $487,000 in 2018. The loss in the current year was the result of higher claims per participant as compared to the prior year. The results of the Priest Benefits program fluctuates annually based on the claims and over time has historically been a break-even program.
Financial position Net Assets of the Archdiocese were approximately $17.1 million as of June 30, 2019 as compared to $10.5 million on June 30, 2018. The increase was due to the $1.7 million surplus from operations during the fiscal year, the non-cash gain on the sale of land of $3.4 million and the combined net income from the General Insurance Program and Priest Benefits of $1.7 million. The total cash balance as of June 30, 2018 was nearly $28 million and decreased to $6.6 million on June 30, 2019, due to the cash used to fund the Bankruptcy Trust. Our current cash balance consists of $4.4 million of Unrestricted Cash, $1 million of Board Designated Cash and Donor Restricted Cash of $1.2 million. The Board Designated Cash represents funds set aside for the payment of the first of five annual payments of $1 million to repay the $5 million Note Payable – Bankruptcy Settlement. Accounts Receivable – Net of Allowances decreased from $4.8 million in 2018 to $3.5 million as a result of continued efforts to collect past due assessments from parishes and offsetting Parish Demand Deposits of $495,000 (amounts owed to parishes) with Accounts Receivable. The decrease in Land, Property & Equipment is the result of the sale of the three parcels of land during the year.
Looking forward The majority of our financial obligations related to the bankruptcy are now in our rearview mirror. We all know and understand that our work is never complete as it relates to the protection of children, and we continue to do all that we can to keep all people safe in this Archdiocese, regardless of the financial cost. We are fully aware of our future financial obligations to fund the Bankruptcy Trust over the next four years, and we are committed to making the difficult decisions required to provide the resources to meet those obligations. Thank you for your on-going support as we work together towards our mission of making Jesus Christ known and loved in our local Church.
FINANCIAL REPORT
18 • THE CATHOLIC SPIRIT
THE ARCHDIOCESE OF SAINT PAUL AND MINNEAPOLIS Chancery Corporation • Statement of Activities Years Ended June 30, 2019 and 2018 (Unaudited) OPERATING REVENUE Contributions Parish Assessments Fees and Program Revenues Investment Income, Net Other Income Operating Revenue OPERATING EXPENSE Program Services: Catholic Education Central Services Clergy Services Communications Community Services Evangelization and Catechesis Marriage, Family and Life Parish Services and Outreach Latino Ministries Total Program Services Support Services: General and Administrative Stewardship and Development Total Support Services
THE ARCHDIOCESE OF SAINT PAUL AND MINNEAPOLIS Chancery Corporation • Statement of Financial Position As of June 30, 2019 and 2018 2019 (Audited) • 2018 (Unaudited)
2019 $2,528,413 14,599,007 2,710,682 107,900 241,000 20,187,002
2018 $2,727,981 14,561,156 2,365,234 291,356 641,001 20,586,728
933,375 4,876,621 5,007,836 1,881,250 83,261 317,139 958,789 1,835,614 495,503 16,389,388
1,313,560 5,109,558 4,739,194 1,875,894 75,050 267,180 856,950 1,517,428 475,989 16,230,803
2,648,180 255,386 2,903,566
2,905,425 468,100 3,373,525
Total Operating Expense before Special Issues Expense 19,292,954 Change in Net Assets from Operations before Special Issues Expense 894,048 Special Issues Expense (801,123) Change in Net Assets from Operations 1,695,171
19,604,328 982,400 20,991,488 (20,009,088)
NON-OPERATING ACTIVITY Gain on Sale of Assets General Insurance Program Revenues General Insurance Program Expenses Priest Benefits Revenues Priest Benefits Expenses Change in Net Assets from Non-Operating Activities
3,395,470 10,101,680 (8,506,485) 3,056,286 (3,156,011) 4,890,940
9,479,187 (6,720,347) 3,101,557 (2,614,366) 3,246,031
CHANGES IN NET ASSETS
$ 6,586,111
$(16,763,057)
Supporting the Church’s mission The Archdiocese of St. Paul and Minneapolis serves Catholics and the greater 12-county Twin Cities community. The following narrative briefly explains the function of each department and the funding level for FY 2019. Total department expenses below include allocations of depreciation, occupancy, and archbishop expenses. u Catholic Education — $933,375 The Office for the Mission of Catholic Education (OMCE) provides vision, support, and direction to those who teach in the name of the Church within the Archdiocese so they can achieve their mission to proclaim Christ and form authentic disciples of Jesus Christ. The Office primarily serves Catholic schools and parish catechetical programs. By establishing a shared vision for quality and excellence in Catholic education under the leadership of the Archbishop, the OMCE is focused on assisting parishes and Catholic schools partner with parents in forming a new generation of Catholic students. u Central Services — $4,876,621 The Department of Central Services provides support and services to the Archdiocesan staff and the parishes. The department includes the offices of the chancellors for civil and canonical affairs, information technology services, the metropolitan tribunal, human resources and benefits, records and archives, the office of financial standards and parish accounting. Also covered in this category are assessments to the Minnesota Catholic Conference and the United States Conference of Catholic Bishops. uClergy Services — $5,007,836 The role of this office is to provide support and formation for priests and deacons in all aspects of ministry and pastoral care. Services provided by this office include the following: Seminary Formation: There are currently 51 men in formation for the priesthood for service of our Archdiocese. While the number changes throughout the discernment process, our Archdiocese has one of the largest enrollments of seminarians of any diocese in the country. The Archdiocese funds the medical and dental coverage of the seminarians at The St. Paul Seminary, as well as tuition, room and board of those attending the North American College in Rome. Center for Clergy Formation: Institute of Ongoing Formation for Clergy and the Institute of Diaconate Formation comprise the Center for Clergy Formation. Each entity of the center provides an integrated approach to priestly and diaconate formation, including gatherings and support for newly ordained priests and deacons,
DECEMBER 19, 2019
ASSETS Cash - Without Donor Restriction and Board Designated Cash - Restricted for Bankruptcy Cash - With Donor Restriction Contributions Receivable, Net of Allowances Accounts Receivables, Net of Allowances Loans Receivable Investments with Donor Restrictions Beneficial Interest in Perpetual Trusts General Insurance Program Assets Prepaid Expenses and Other Assets Land, Property and Equipment, Net Total Assets
2019 $ 5,422,915 - 1,196,721 212,263 3,481,624 675,066 1,123,737 1,490,207 12,881,854 185,006 3,371,001 $30,040,394
2018 $2,698,445 23,475,000 1,880,642 535,156 4,784,148 697,604 1,143,414 1,519,426 10,773,364 315,003 4,244,390 $ 52,066,592
LIABILITIES AND NET ASSETS Liabilities Accounts Payable and Accrued Liabilities, Pre-Petition - Accounts Payable and Accrued Liabilities, Post-Petition 1,810,479 Bankruptcy Settlement Liability - General Insurance Program Claims Payable and Other Liabilities 5,349,348 Amounts Held for Others Under Agency Transactions 182,129 Parish Demand Deposits - Deferred Revenue 199,011 Other Liabilities 212,733 Lease Payable 50,171 Deferred Rent 165,762 Note Payable - Bankruptcy Settlement 5,000,000 Total Liabilities 12,969,633
$242,332 1,577,658 28,694,031 4,836,053 175,232 495,028 144,176 175,000 65,469 176,963 5,000,000 41,581,942
NET ASSETS Without Donor Restrictions - Undesignated Without Donor Restrictions - Designated With Donor Restrictions Restricted by Time or Purpose Restricted in Perpetuity
Total Net Assets Total Liabilities and Net Assets
programs to assist new pastors in their role and ongoing formation opportunities for priests and deacons throughout the Archdiocese. Continuing Education: This includes continuing education opportunities, a sabbatical program, international enculturation, and a biennial presbyteral assembly. Ministerial Standards and Safe Environment: The mission of the Office of Ministerial Standards and Safe Environment is to work with our community to prevent the sexual abuse of minors and vulnerable adults through a number of initiatives including implementing abuse prevention programs, immediately reporting allegations of abuse to law enforcement and/or child/adult protection officials and cooperating fully with their investigations, and helping those affected by abuse in their healing journey. Priest Support: This includes support for priests who are not in ministry due to personal health issues or a disciplinary leave of absence and those who have been permanently removed from ministry. Chaplaincies: There are several priests and deacons in full or part time ministry at hospitals and correctional facilities throughout the Archdiocese who are supported by the Archdiocese. There are many other priests and deacons throughout the Archdiocese who provide pastoral care at healthcare, correctional facilities or schools, either as a ministry of their parish or through their outreach work. They offer the sacraments and spiritual support during some of the most difficult times in peoples’ lives. Last year, thousands of people throughout our community were served by chaplains. Specialized Ministries: This includes the Office of Vocations, support for international clergy, and retired clergy, which includes the operation of the Leo C. Byrne Residence for retired priests. uCommunications — $1,881,250 The Office of Communications helps convey the teachings of the Church and fosters communications between the Archdiocese and the faithful, parish and school leaders and staff, and others in our community. It does this through The Catholic Spirit, multiple websites, social media, e-newsletters, printing services, and other communications. The office also conducts media consultation and training for clergy, parishes and other representatives of the Archdiocese, and works with secular TV and radio stations, as well as print and online publications. u Community Services — $83,261 The Archdiocese helps men, women and children most in need within our local community, including the poor, hungry, and homeless. u Evangelization and Catechesis — $317,139 The Office of Evangelization seeks to bring each person into a deeper relationship with Jesus Christ, equip them as a missionary disciple and help them more fully participate in the mission of the Church, to “Go and announce the Gospel of the Lord.” The office is
12,269,424 1,000,000
6,291,163 -
2,073,980 1,727,357
2,436,912 1,756,575
17,070,761 $30,040,394
10,484,650 $52,066,592
dedicated to assisting and serving the evangelization efforts of the parish, with a particular focus on young adults while also reaching those who do not yet know the love of Jesus. It also provides ministries for men, women, grandparents and young adults. uLatino Ministries — $495,503 The Office of Latino Ministry serves the Spanish speaking faithful and leadership at 24 parishes across the Archdiocese through outreach and diverse programs. Areas of emphasis include evangelization and formation, with programs and events like International Women’s Day, biblical, catechetical and pastoral leadership institutes. The office focuses much of its outreach on families and youth by providing and supporting prolife activities, marriage retreats and local and national youth conferences. Special days of celebration of the faith and family, and the annual Mass of Solidarity are also overseen by the staff to provide opportunities of encounter for people of all ethnicities/nationalities. uMarriage, Family and Life — $958,789 This Office of Marriage, Family and Life assists the laity and parishes through programs supporting marriage preparation, family education programming, respect life, pro-life groups, biomedical ethics, and outreach for people with disabilities. The office also sponsors the annual Archdiocesan Youth Day that brings together hundreds of local high school aged teens to praise God, grow in the faith and find fellowship. In addition, this office helps coordinate local representatives attending World Youth Day, the National Catholic Youth Conference, the March for Life and other youth events. uParish Services and Outreach — $1,835,614 The Office of Parish Services provides consultation, planning, and leadership development opportunities to parishes throughout the Archdiocese. The Archdiocese supports outreach ministry to various groups and members of the Archdiocesan community, including Indian ministry, the Venezuelan mission, the Archdiocesan Council of Catholic Women, and other groups and coalitions. uGeneral and Administrative (Support Services) — $2,648,180 The offices of the retired archbishops, auxiliary bishop, vicar general, accounting, finance, and general administration are included in the General and Administrative category. Over half of this category of expense supports salaries and benefits of staff. Also included are expenses incurred for legal fees and bad debt expense. uStewardship and Development (Support Services) — $255,386 This office works with parishes and Catholic schools to help grow a culture of stewardship in local communities and to support parish and school development efforts. The office also engages in outreach to benefactors who wish to support specific ministries or programs of the Chancery Corporation.