DECEMBER 20, 2018
THE CATHOLIC SPIRIT • 1B
ARCHDIOCESAN CHANCERY CORPORATION ANNUAL FINANCIAL REPORT • 2018
Seeing beyond the numbers
W
hile it’s not unusual to hear Christ characterized in our tradition as “teacher,” “shepherd,” “physician,” “advocate,” “judge” or “lawgiver,” I’m unaware of any instance in which he’s known as the “divine accountant” or the “celestial CFO.” That’s not to say that he doesn’t provide great advice in that area. His parable of the talents suggests that he has a good sense of investment, and his oftquoted statement that “to anyone to whom much has been given, much shall be required” reveals an appreciation of the necessary connection between assets and debits. Moreover, he manifests a ARCHBISHOP passion for faithful stewardship and BERNARD HEBDA rendering accounts, and he was careful not to lose any of the sheep his Father had entrusted to him. I am delighted to present this year’s Annual Financial Report, and I hope that you will read it carefully as an accounting of what we have done over the course of the last fiscal year with the substantial resources that have been made available to us. I continue to be humbled by the generosity of the faithful of this archdiocese. I hope that you, like me, will see beyond the mere numbers when you study this report. One of the blessings of being the archbishop is that I have had etched in my brain the faces, for example, of the young people who participated in Archdiocesan Youth Day, and of the graduates of the educational programs offered by our Office of Latino Ministry, and of our newly ordained priests as they begin their priestly ministry. Those numbers in the report also remind me of all the efforts of the Office for the Protection of Children and Youth and the Office of Ministerial Standards and Safe Environment to make sure that we are following
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As is reflected in this year’s Annual Financial Report, we are blessed to be part of an archdiocese in which so many lay faithful are willing to so generously offer their time and talents to the service of the local Church, responding in fidelity to Christ’s call to servant leadership. through on our promise to foster safe environments in our parishes and schools. They recall for me as well our commitment to provide fair compensation to those who have been hurt by those who minister in the name of our Church. They bring back memories of the children encountering Jesus in our Catholic Schools and of those living on the peripheries of our communities whose lives are changed by the great work of Catholic Charities. I hope that this year’s Annual Financial Report will be an occasion for you to share my pride in the work that was accomplished by our brothers and sisters around the archdiocese in very difficult times. When it comes to financial administration, we are truly blessed to have a very competent professional staff, who have met head-on the challenges posed by our bankruptcy. They have responded well to the direction set by the Archdiocesan Finance Council (AFC) and Corporate Board, who, along with the priests serving on the College of Consultors and Presbyteral Council, have been valued collaborators in the important work of achieving stability and creating structures and procedures that will help us restore trust. Throughout the bankruptcy process, the volunteers
serving on the AFC and Corporate Board have gone above and beyond the call of duty. I am grateful to all of them, and especially to the AFC chairman, Tom Abood, for the additional commitment of time that was required to help us arrive at the consensual plan that was essential for moving us beyond bankruptcy. As is reflected in this year’s Annual Financial Report, we are blessed to be part of an archdiocese in which so many lay faithful are willing to so generously offer their time and talents to the service of the local Church, responding in fidelity to Christ’s call to servant leadership. The archdiocesan website archspm.org provides annual financial reports stretching back to 2012. Anyone comparing this year’s financials with the 2012 figures will note that we are today a much leaner operation. While the needs of God’s people have remained constant if not grown, we now have a significantly smaller archdiocesan staff to respond to them. I’m grateful to all those working at the Archdiocesan Catholic Center for finding creative ways of collaborating with our pastors and parish staffs that have enabled the Church to maintain a high level of service with significantly fewer resources. I feel privileged to work with these colleagues and know that I have benefited from their contagious Christ-centered commitment to our essential mission. While our pledge to pay $1 million each of the next five years to the Bankruptcy Trust will necessitate that we continue to be disciplined in our expenditures, I hope that this 2018 Annual Financial Report helps you to share my confidence that our local Church is nonetheless prepared to move forward. Please know of my gratitude for your generous financial support and expressions of growing trust. Through the intercession of Our Lady, Undoer of Knots, may the Lord continue to bring fruit to our labors.
Financial Officer Report Author’s note: The following comments elaborate on the financial statements of the Archdiocese of St. Paul and Minneapolis Chancery Corporation (“archdiocese”) that ended June 30, 2018. Financial statements are included in this issue of The Catholic Spirit. The Management Discussion and Analysis and Financial Statements are posted at archspm.org on the Administration and Finance page. By Thomas Mertens, CFO
Introduction The Fiscal Year 2018 of the Archdiocese of St. Paul and Minneapolis began July 1, 2017, and ended June 30, 2018. For the first time since filing for Reorganization in U.S. Bankruptcy Court in January 2015, the archdiocese has some financial certainty as we approach the New Year. The most significant financial development occurred June 28, 2018, shortly before the end of our Fiscal Year 2018, when the archdiocese and the Unsecured Creditors Committee, representing more than 400 sexual abuse claimants, filed a $210 million Joint Plan of Reorganization that provides remuneration to those harmed and allows the archdiocese to continue the mission of the Church. In the 2017 Financial Report, I noted that the second Amended Plan of Reorganization was filed in December 2016 and proposed a settlement of $156 million. Thanks to mediation involving all parties, that number reached $210 million in late spring. The $210 million Joint Plan was approved by the judge overseeing the case Sept. 25, 2018, and we were discharged from our debts Oct. 11, 2018. We are
emerging from Bankruptcy and expect the case to be closed in December of this year. As was our intention from the Plan’s filing in January 2015, the consensual Plan consisted primarily of insurance settlements with carriers that issued policies for coverage over the past 70 years. The other significant sources were insurance settlements from parishes in the archdiocese; proceeds from the sale of archdiocesan properties; unrestricted cash; the sale of our land to three Catholic high schools; and contributions from parishes, the General Insurance Program, Archdiocesan Medical Benefit Plan and priests. In addition, the archdiocese signed a non-interest bearing promissory note payable to the Bankruptcy Trust that requires an annual payment of $1 million over the next five years. All proceeds have been or will be transferred to the Bankruptcy Trust, which is overseen by a trustee selected by attorneys for the survivors. Most of the funds should be distributed to claimants before the end of this calendar year. Legal and professional expenses incurred since filing for Reorganization in 2015 totaled approximately $20 million. The archdiocese paid nearly $8 million of those expenses during the bankruptcy, and the Plan calls for the remaining amount to be paid from the Bankruptcy Trust. A significant amount of these legal and professional fees were incurred to maximize insurance proceeds from archdiocese and parish insurance policies for those harmed for events dating back as far as the 1940s. Payments from insurance carriers into the Bankruptcy Trust accounted for $175 million of the $210 million Plan. While we provide administrative and pastoral support to parishes, Catholic schools and other
Catholic entities in 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 independent corporations with completely separate finances, and they are required to prepare and publish their own financial reports. In our commitment to accountability and transparency to the Catholic faithful and the public, the archdiocese has released its full audited financial reports annually since June 30, 2013. This is important to Archbishop Bernard Hebda, the Archdiocesan Finance Council and staff because approximately 70 percent of the archdiocese’s funding comes from parish assessments, which is predominately the result of plate and envelope collections from parishioners. People who give so generously to this local Church deserve a full accounting of their resources. For the fourth year, because of the bankruptcy reorganization, the archdiocese asked our CPA firm to perform Agreed Upon Procedures on our financial statements for the fiscal year ending June 30, 2018. These procedures do not represent an audit, and, as a result, you will not see an Independent Auditor’s Report attached to our financial statements. The Agreed Upon Procedures were developed by management and the Archdiocesan Finance Council in consultation with our CPA firm, and they will assist us in governance of the archdiocese by requiring attestation procedures on key balance sheet accounts and review of the income statement and internal controls. The Agreed Upon Procedures are
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