2009 Accountability Report

Chief Financial Officer’s Report

One year ago, we found ourselves in perhaps the most uncertain of times in several decades. The future of financial institutions were at stake, unemployment was skyrocketing, a new political administration was taking office, the housing market was collapsing and the federal debt was growing to record levels. Certainly, many challenges remain. Some parts of our world have returned to normalcy. This financial accountability report describes many of the challenges and successes in our archdiocesan operations.

Two major initiatives that members of the archdiocese can expect to see in 2009-2010 involve applying to the Mayor of Indianapolis to operate two public charter schools and restructuring the civil status of parishes of the archdiocese as individual corporations. Operating these two schools as public charter schools will enable us to continue ministry to children in the center city of Indianapolis—still, it will be very difficult to remove the Catholic identity from these two schools. Incorporating parishes as civil legal entities (parishes were formerly “unincorporated associations”) will serve to better match up the civil law organization of parishes with the Canon law rights and responsibilities of parishes. While we expect effects on day-to-day operations at parishes and interactions between parishes and archdiocesan agencies to be minimal, this project should help clearly describe our organization in a more understandable way—especially concerning rights, responsibilities and ownership of assets and liabilities.

Chancery Fiscal Year 2009 Operating Results

The chancery and agencies of the Archdiocese of Indianapolis completed 2008-2009 with break-even operations which was consistent with the expectations for the year as determined through the budgeting process. This represents the fifth consecutive year with break-even operations or better for the archdiocese. We started the 2009-2010 fiscal year with a break-even budget which would seem to indicate that the archdiocese has a bit more stability in its operations than in previous years. The new fiscal year budget was put together in combination with a concentrated effort to identify additional ways to make operations more cost efficient and more effective. It will take a concerted effort by everyone to hold operating expenses down and eliminate any unnecessary expenses while the credit and equity markets continue to recover and we see the growth in our endowments resume.

Parish and Archdiocesan Stewardship

For the fiscal year ended June 30, 2009, parish stewardship, through Sunday and holy day collections, declined across the archdiocese. This is the first time in many years that we’ve experienced a decrease in parish stewardship. However, the relatively small decrease during a time when many families are facing significant hardships is a strong testament to the commitment of the parish families. Total parish Sunday and holy day collections for 2008-2009 throughout the archdiocese decreased at a rate of 1.2 percent. This compares with a growth rate of 2.0 percent in parish Sunday and holy day collections for 2007-2008.

The 2008 United Catholic Appeal also experienced a decrease in recorded pledges. It received pledges of $4.1 million. This compares to pledges of $5.26 million for the 2007 United Catholic Appeal which included goal amounts for the parishes still participating in the Legacy for Our Mission campaign. For 2009, the annual parish and archdiocesan community appeal has been refocused and renamed Christ Our Hope: Compassion in Community. These appeal efforts are focused on the three-fold responsibility of the Church as expressed by Pope Benedict XVI: proclaiming the word of God; celebrating the sacraments; and exercising the ministry of charity.

Annual parish stewardship through Sunday and holy day collections and the Christ Our Hope: Compassion in Community appeal will continue to be critical to the success of the many ministries resident in our parishes and deaneries and those supported by the archdiocese. It is important that annual giving amounts are sustained during these trying economic times to the extent that our families and parishioners can support.

St. Francis Xavier Home Missions Fund

Each year, 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 (renamed Christ Our Hope: Compassion in Community for 2009) goal to the St. Francis Xavier Home Missions Fund and through distributions from the Catholic Community Foundation’s Archdiocesan Home Missions Endowment Fund. Unfortunately, in June 2009 we weren’t able to award any new home mission grants through the application process due to a combination of the decrease in funding available through endowment distributions and the reduction in pledges in the 2008 Called to Serve/United Catholic Appeal campaign. It is expected that we will be able to award home mission grants in June 2010 as the endowment fund that supports these awards has shown some positive growth in the past six months as the markets show signs of recovery and stability.

Mother Theodore Catholic Academies

The six center-city Indianapolis elementary schools that have joined to form the Mother Theodore Catholic Academies 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 annual financial operating need for these schools continues to be a challenge for the archdiocese. In December 2009, archdiocesan leadership announced their plans to operate two of these schools as public charter schools in the 2010-2011 school year pending charter approval by the Mayor’s office. If approved, the archdiocese will become the first Catholic diocese in the United States committed to overseeing a school using this educational approach. The two academy schools operated as public charter schools will be self-supporting which will allow the archdiocese to shift the fundraising dollars and appeal dollars from those two schools to the other four Mother Theodore Catholic Academies schools, stabilizing their finances.

Legacy for Our Mission Campaign

In the fall of 2005, Archbishop Buechlein launched the Legacy for Our Mission Campaign. The campaign continues to benefit both local parish needs and archdiocesan ministry needs as the pledges are collected. The $100 million goal for the parish phase of the campaign was reached and exceeded with pledges totaling $105.1 million. The strong campaign results were 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 2009 fiscal year, the Legacy for Our Mission allocations from the Chancery portion included:

• Endowments
  • Home Missions $ 1,000,000
  • Making a Difference (Financial Aid) $ 4,805,000
  • Priest Retirement $ 1,000,000
  • Cemeteries $ 1,125,000
• Catholic Charities capital $ 690,000
• High School capital projects $ 2,350,000
• Catholic Charities Programming $ 1,080,000
• Mother Theodore Catholic Academies Programming $ 5,000,000
• Permanent Diaconate Formation $ 775,000
• St. Mary’s Child Center $ 150,000
• SS. Peter & Paul Cathedral capital $ 50,000
• High School Programming $ 180,000
• Bishop Brute Seminary $ 2,110,000
• Project Exceed $ 1,105,000
• Other $ 250,000
• Total $ 21,670,000

Expenses Related to Sexual Misconduct

In fiscal year 2009, approximately $87,000 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 $102,000 was spent for these purposes in fiscal year 2008. Additionally, approximately $147,000 was spent for legal fees to defend the archdiocese from sexual misconduct lawsuits in 2009. In 2008, $156,000 was spent in legal defense costs.

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 January 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 past two years, we’ve been operating this high deductible plan with very favorable claim results and thus have generated a surplus in this health insurance plan. A surplus in a plan of this nature is very important because a small change in enrollment or claim activity can dramatically change the dynamics of the plan and thus reduce an existing surplus. Using the accumulated surplus in the plan, we established an endowment fund in September 2007 that is designed 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. Our goal is to minimize large increases in healthcare premiums charged to parishes, schools, and agencies and attempt to keep premium increases below national averages. As the initial funding levels we established for this endowment have been met by the accumulated surplus, we have also identified two ways to pass this plan savings along directly to the employees of the archdiocese and also to the parishes, schools and agencies that they serve. In January 2010, all participating employees will receive a one-time additional contribution to their Health Savings Account ($500 for single coverage and $1,000 for family coverage). Also in January 2010, all parishes, schools, and agencies will experience a “premium holiday” and will not pay any premiums for employee health insurance. This will reduce their annual health insurance costs by about 8 percent.

The property insurance plan experienced a surplus of $227,000 for the 2008-2009 fiscal year. This fiscal year marks the sixth consecutive year that the plan has run at a surplus. These results have funded a property insurance reserve fund in the Catholic Community Foundation that is now approximately $5.2 million. This reserve fund helps 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 maintain our self-insurance level at $1 million for the 2009-2010 fiscal year which translates into maintaining lower premiums paid by our parishes, schools, and agencies for property insurance.

Catholic Community Foundation, Inc.

The Catholic Community Foundation’s total assets were $126.7 million at June 30, 2009, a decrease of 16.5 percent from the previous fiscal year. The decrease in asset values were driven by the overall investment returns which were a negative 20 percent for the 2009 fiscal year which included the very poor investment results suffered in the last calendar quarter of 2008. Despite the poor overall investment returns for the 12-month period, there have been positive results more recently and the calendar year to date investment returns through September 2009 were a positive 22.9 percent. Foundation investments have returned a very respectable 6.2 percent (annualized) since the inception of the current investment structure in January 1995 despite facing one of the worst 10-year periods in the history of the U.S. equity markets. Parishes, schools and agencies of the archdiocese added 12 new endowments during the year, bringing the total number of endowments held in the foundation to 368. The endowments distributed over $6.5 million this past year, compared to $6.8 million the previous year, to support parish, school and agency ministries, demonstrating the ability of endowments to provide long-term funding for ministries.

Operating Budget for 2009-2010

We enter the 2009-2010 fiscal year with a break-even operating budget on approximately $38 million of total operating expenses. We anticipate the most significant challenges to include:

• A very difficult national economy that is showing signs of recovery but still has plenty of negative indicators that lead us to believe that the recovery will take time. The large reductions in endowment balances experienced as a result of the economic environment will continue to affect the funding of our ministries until the endowment balances can recover their losses
• Health care and employee benefit costs that are increasing much faster than Sunday collections. The decisions being made on health care reform will be closely monitored as they are finalized
• Construction and facilities costs (such as heating costs) that continue to increase
• School operating costs 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:

• Despite a one-year decrease, a trend of positive growth in Sunday and holy day collections
• The re-definition and re-focus of the annual appeal – Christ Our Hope: Compassion in Community which will bring the focus of the annual parish and archdiocesan appeal into the local communities of the Church
• The application to operate two of the Mother Theodore Catholic Academies as public charter schools to address financial operations of Indianapolis center-city Catholic schools and continue the important ministry of providing quality education to those living in the center-city neighborhoods of Indianapolis
• A history of strong investment returns and restoration of the growth in our endowments which help to mitigate rising operating costs
• The maturation of an alternative health care plan to better control escalating costs and a funded health care reserve endowment to protect against future large premium increases
• A funded property self-insurance reserve endowment to protect against future potential large losses and mitigate future cost increases.

As mentioned previously, our break-even operating budget for 2009-2010 will be very difficult to achieve within the boundaries of our struggling economy. However, our recent operational performance leads us to believe that once the economy is bolstered and back on track, we will be capable of continuing the stable operating trend of the past five years which will help us to 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
• Mary Horn
  President
  St. Charles Borromeo, Bloomington
• Kenneth J. Hedlund
  Vice-President
  St. Matthew, Indianapolis
• Daniel J. DeBard
  Secretary
  St. Patrick, Terre Haute
• Members
  • Clark Byrum; St. Luke, Indianapolis
  • Dale Gettelfinger Holy Family, New Albany
  • Philip B. McKiernan Immaculate Heart of Mary, Indianapolis
  • Scott Nickerson St. Pius X, Indianapolis
  • Timothy Robinson St. Joan of Arc, Indianapolis
  • Jerry Williams St. Simon, Indianapolis
  • 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. Expenses generally fell in line with or below budget expectations, we’ve started to see a recovery in the investment markets and every day we see the use of the Legacy for Our Mission campaign proceeds at work in our deaneries, agencies and schools as they work hard on their missions. 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