Chancellor provides additional information on financial statement

The following Q&A was prepared by the Office of the Chancellor to respond to potential questions related to the 2004 financial statement of the archdiocese printed on pages 16-19 in this week’s edition.

Q: The statements you gave us are for FY 2004 only. Why don’t you make comparative statements available?

A: We provide substantial additional detail with our trailing fiscal year statements as published in The Pilot. Full comparatives and footnotes are available on our Web site.

Q: Last fall, Archbishop Seán P. O’Malley said that the Central Fund was losing $10 million per year. These statements show an operating loss of $19.3 million. How do you explain his statement?

A: The archbishop was referring to the amount by which our recurring expenses exceed our recurring revenue. The $19.3 million “operating loss” includes $12.9 Million in non- recurring settlement expenses. When you subtract the non-recurring expense, add back the increased appeal that these statements show because of timing differences and adjust for inflation you come out at a $10 million dollar level, which is just what the archbishop reported.

Q: What about the appeal. Last year, the statements showed $7.6 million. This year, they show $12.2 million. How do you explain that?

A: Our financial statements follow generally accepted accounting principals. Non-profit institutions recognize revenue when they receive it or when they have a firm pledge. Due to the Promise for Tomorrow campaign, part of the FY 2003 appeal was conducted during FY 2004.

Q: What are the real appeal numbers?

A: The Catholic population is coming back to the appeal and doing so in large numbers. The number of donors has increased from 40,843 in 2002 to 44,097 in 2003 to 53,999 in 2004. Donations for those same appeal years were, $8,788,860, $10,435,348 and $10,881,793 (to date) respectively.

Q: Your statements show $99,260,500 going to settlement related expenses during the two-year period. In the past, you have said that no appeal money has been used for settlements. Is that still true?

A: Yes. Those same statements show gains on real estate exceeded the amounts paid for settlement items.

Q: Are you saying that the settlements have had no impact on the Church?

A: No. I’m only saying that the Archbishop has kept his word and deserves your confidence. I will say that the Archbishop would never have sold most of the Brighton campus to Boston College were it not for the need to compensate victims. Nonetheless, it would be foolish to say that those tasked with developing a long-range strategic plan would not have had more options to consider if we still owned the property we sold.

Q: We have heard a lot about strategic planning. When will it be done?

A: A full plan will take several months to complete. Portions of the planning projects are underway. Some have not yet begun. We are grateful to the Finance Committee for taking the lead and brought in so many talented volunteers to help with it.

Q: Will it be months before anything is done?

A: No. You will start to see the impact in the FY 2006 budget process. Ongoing losses will be reduced. It’s too soon to tell exactly how much, but the reduction will be significant.

Q: You mentioned pension liability in your cover letter. What is the status of the lay and clergy pension plans?

A: FY 2004 was a good year for investment performance. A total return of 13.6 percent was attained. This narrowed the funding gap in both plans. Archbishop O’Malley’s estimate of a total incremental funding need of $25 million in the lay plan is solid and is being closed in on because of the changes in future benefits made and communicated last year. His estimate of $55 million, after pending design changes, in the clergy plan is also conservative based on last year’s market performance. Fully funding these plans will be a high priority of the ongoing strategic planning effort.

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