2007 Accountability Report

Chief financial officer's report

As we approach the Thanksgiving and Advent seasons, the Archdiocese of Indianapolis has much to be thankful for. The 2006-07 fiscal year, which ended June 30, 2007, was our third consecutive year of break-even financial operations. We also continued to experience growing stewardship, steady investment returns, challenging employee benefit issues and facilities expenses. The people of the archdiocese continue to generously support the ministries of the Church as evidenced through the results of the Legacy for Our Mission Campaign. This report highlights several significant areas of our financial operations.

Chancery 2006-07 Operating Results

The chancery and agencies of the Archdiocese of Indianapolis completed 2006-07 with a $1,053,000 surplus versus a budgeted surplus of $596,000, a positive variance of $457,000. This represents the third consecutive year with an operating surplus for the archdiocese and a break-even 2007-08 budget seems to indicate that the archdiocese has likely achieved a more stable footing than in previous years.

I must offer two cautions about the positive operating results: first, the surplus is very small relative to the total overall budget—only about 2.7 percent of operational expenses; second, any surpluses must be used to “repay” the deficit spending of past years. In other words, we will still need to continue to hold expenses down; this is not the time to increase budgets, even for human and material resources that agencies have been doing without for a number of years.

Called to Serve: Parish Stewardship and United Catholic Appeal

Parish stewardship, through Sunday and holy day collections, continued to grow. Total parish Sunday and holy day collections for 2006-2007 throughout the archdiocese grew at a rate of 2.5 percent. This compares with a growth rate of 2.3 percent in parish Sunday and holy day collections for 2005-2006.

The 2006 United Catholic Appeal received pledges of $5.27 million, including Appeal goal amounts for the parishes participating in the Legacy for Our Mission Campaign. This compares to pledges of $5.58 million for the 2005 United Catholic Appeal, a decrease of 5.5 percent.

St. Francis Xavier Home Missions Fund

June 2007 brought the seventh year of allocations of the St. Francis Xavier Home Missions funds. The allocations committee, consisting of 11 members—pastors and parish life coordinators from each deanery—aided by two archdiocesan staff members, made recommendations to Archbishop Daniel M. Buechlein for home missions grants based on applications received from 38 parishes and agencies. Approximately $402,500 was awarded to 29 parishes.

Home missions grants are supported through the generosity of parishes that pledge some or all of the money they raise in excess of their Called to Serve/ United Catholic Appeal goal to the St. Francis Xavier Home Missions Fund and through distributions from the Catholic Community Foundation’s Archdiocesan Home Missions Endowment Fund, which was established through the Legacy of Hope from Generation to Generation capital and endowment campaign. While we’ve improved our funding to support needy parishes, parish needs still far outweigh available resources. Grant requests exceeded $1.2 million during the year. This means that approximately 30 percent of the grant dollars requested was able to be awarded.

Mother Theodore Catholic Academies

The six center-city Indianapolis grade schools that have joined to form the Mother Theodore Catholic Academies (formerly known as the Catholic Urban School Consortium) strive to provide a high quality education with a strong spiritual base, leading students of all faiths to secondary and post-secondary education. The schools are working hard to continue to raise academic excellence, maximize available resources and increase enrollment. The operating deficit for these schools for the 2006-07 fiscal year was approximately $2.6 million.

Eventually, this annual operating need is expected to be funded through annual fundraising and larger endowment distributions. In the short term, the proceeds from the Legacy for Our Mission Campaign will be used to meet this need.

The people supporting the Academies’ goals and operations are working to raise additional support, increase enrollment, and create expense savings through efficiencies. Significant facility needs are also present at several of the facilities which have and will continue to require capital expenditures. The goal of the Mother Theodore Catholic Academies continues to be to operate at a breakeven mark and will strive to accomplish this goal through additional development efforts.

Legacy for Our Mission Campaign

In the fall of 2005, Archbishop Buechlein launched the Legacy for Our Mission Campaign. As noted in Archbishop Buechlein’s letter in this accountability report, the campaign benefits both local parish needs and archdiocesan ministry needs. The $100 million goal for the parish phase of the campaign is within reach as the final group of 28 parishes embarks on their campaigns this fall. As of the writing of this report, the campaign has achieved a 42 percent participation rate with pledges received of over $90 million. The campaign has received strong leadership gifts from an identified audience totaling $16 million. The strong campaign results have been achieved because parishes and the archdiocese put together compelling cases, had strong leadership, and had quality implementation throughout the local campaigns. As pledge payments are received, they are immediately used to support the ministries within the archdiocese. Through the end of the 2007 fiscal year, the Legacy for Our Mission allocations included:

• Endowments
  • Home Missions $1,000,000
  • Making a Difference
  • (Financial Aid) $750,000
• Priest Retirement $1,000,000
• Catholic Charities capital $1,488,000
• High School capital projects $1,454,000
• Catholic Charities Programming $744,000
• Mother Theodore Catholic
  • Academies Programming $515,000
• Permanent Diaconate Formation $173,000
• St. Mary’s Child Center $150,000
• SS. Peter & Paul Cathedral capital $40,000
• Total $7,314,000

Expenses Related to Sexual Misconduct

In fiscal year 2007, approximately $114,000 was spent to provide counseling for victims of sexual misconduct perpetrated or alleged to have been perpetrated by priests or lay employees of the archdiocese. Approximately $87,000 was spent for these purposes in fiscal year 2006. Additionally, approximately $170,000 was spent for legal fees to defend the archdiocese from sexual misconduct lawsuits in 2007. $196,000 was spent for legal defense in 2006.

Insurance Plans and Parish Services

The archdiocese operates several insurance plans, employee benefit plans and other services on behalf of parishes, schools and employees. Two of the most significant plans are the lay employee health insurance plan and the property insurance plan. Both have seen significant changes in recent years.

Starting Jan. 1, 2007, the previous lay employee health insurance plan was fully replaced with a high deductible health plan complete with Health Savings Accounts (HSA). For the first six months of this calendar year, the plan has experienced a $1,531,000 surplus. I caution that this surplus is only a six month surplus, and that claim experience will increase as employees exceed deductible amounts resulting in additional claim expenses being paid with plan dollars. Small changes in enrollment or claim activity can quickly eliminate this surplus and swing the plan to a loss. Additionally, since this is the first year of our new lay employee health insurance plan, it could take several years for us to accumulate credible data with which to budget and project costs for the plan. In the meantime, we will continue to use an endowment fund established in September of 2007 to help maintain the affordability of our lay employee benefits. Increasing health care costs continue to challenge parish, school and agency budgets. At the same time, they create financial challenges for individual employees.

The property insurance plan experienced a surplus in excess of $195,000 despite two large losses due to fires at our parishes. This fiscal year marks the fourth consecutive year that the plan has been designed to run at a significant surplus. These results have supported the establishment of a property insurance reserve fund in the Catholic Community Foundation that is now approximately $4 million. This reserve fund will help to protect parishes, schools and agencies against catastrophic losses and will help to mitigate annual insurance cost increases. The reserve fund has allowed us to increase our self-insurance level for the upcoming 2007-08 fiscal year from $750,000 to $1,000,000 which will result in smaller premium increases paid by our parishes, schools, and agencies.

Catholic Community Foundation, Inc.

The Catholic Community Foundation’s total assets topped $163 million at June 30, 2007, an increase of 20.7 percent from the previous year. Investment returns achieved a remarkable rate of 18.1 percent versus our policy benchmark of 17.9 percent. Foundation investments have returned a very respectable 9.9 percent (annualized) since the inception of the current investment structure in January 1995. Parishes, schools and agencies of the archdiocese added 16 new endowments during the year, bringing the total number of endowments held in the foundation to 339. The endowments distributed more than $6.4 million this past year to support parish, school and agency ministries, demonstrating the ability of endowments to provide long-term funding for ministries.

2006-07 Operating Budget

We enter the 2007-08 fiscal year with a breakeven operating budget on approximately $40 million of total operating expenses. We anticipate the most significant challenges to include:

• Health care and employee benefit costs that are ­increasing much faster than Sunday collections
• Construction and facilities costs (such as property insurance and heating costs) that continue to increase
• School operating costs (including health care expenses) that are increasing faster than our ability to increase tuition
• Stable but not increasing school enrollment across the archdiocese
• Growing parish stewardship to meet operating needs and eliminating parish operating deficits.

On the other hand, we have several positive opportunities:

• A trend of positive growth in Sunday and Holy Day collections
• The strong results for the Legacy for Our Mission Campaign
• Strong support for the Called to Serve/United Catholic Appeal
• The formation of the Mother Theodore Catholic Academies to address financial operations of Indianapolis center-city Catholic schools
• Four consecutive years of strong investment returns and growing endowments which help to mitigate rising operating costs
• The introduction of an alternative health care plan to better control escalating costs
• A funded property self-insurance reserve endowment to protect against future potential large losses and mitigate future cost increases.

While the budgeted surplus is certainly small relative to the total operating budget, it is our belief that we are seeing the beginning of a stable operating trend that will help us recoup deficit operational spending from previous years.

Accountability

Accountability is an important part of our stewardship responsibilities. Each year, the archdiocese subjects itself to the scrutiny of an independent audit. The firm of Deloitte & Touche LLP performed the audit for the last fiscal year. The audited financial statements are available for inspection through the Office of Accounting Services or at www.archindy.org/finance/archdiocese.html.

Archbishop Buechlein has established and regularly confers with the Archdiocesan Finance Council. The council, whose existence is required by canon law, focuses on financial policies, procedures and activities of the Church in central and southern Indiana. Current members of the Archdiocesan Finance Council are:

• Most Rev. Daniel M. Buechlein
  • O.S.B., Archbishop, Chairman
• Rev. Msgr. Joseph F. Schaedel
  • Vicar General, Vice Chairman
• Jacqueline Byers, President
• Philip B. McKiernan Vice-President
• Mary Horn Secretary
• Members
  • Clark Byrum
  • Daniel L. DeBard
  • Dale Gettelfinger
  • Kenneth J. Hedlund
  • David R. Milroy
  • Timothy Robinson
  • Jerry Williams
  • Jeffrey D. Stumpf Chief Financial Officer, Staff

This past fiscal year marked continuing financial advancement for the parishes, schools and agencies of the Archdiocese of Indianapolis as we worked to build a sound financial footing. Stewardship grew, investment returns were strong, and expenses generally fell in line with budget expectations. Now, we look with hope toward the conclusion of the Legacy for Our Mission Campaign. We continue to place great emphasis on improving the financial stability of those parishes experiencing deficit operations. May God lead us toward continued success in our ministries.

Respectfully submitted,

Jeffrey D. Stumpf, M.B.A., C.P.A., CFA

Chief Financial Officer