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	Diocesan Financial Report Released By Emily Donohue Rhode Island Catholic January 23, 2009 http://thericatholic.com/stories/1851.html [read the full financial report] [Accounting & Internal Control Procedures for the Diocese of Providence.] PROVIDENCE – The diocese experienced a “fairly break-even year” during the fiscal year from July 1, 2007 to June 30, 2008, said Msgr. Raymond B. Bastia, Secretary for Planning and Financial Services and diocesan Chief Finance Officer Michael F. Sabatino in a recent interview. An independent firm of accountants and consultants, Tofias PC, completed an audit of the diocese’s annual financial report and gave a “clean opinion,” Sabatino said. The report, prepared by the Diocesan Fiscal Office under the direction of Diocesan Comptroller J. Timothy Kocab shows that, despite the current economic difficulties facing most Americans, the diocese is faring reasonably well financially. Overall, the diocese’s net assets increased by approximately $900,000 last year, Sabatino said. That number includes an estimated $4 million gain from the sale of the former Cluny Sisters’ Newport residence and approximately $5 million of endowed gifts and bequests that helped to counterbalance approximately $8.6 million of unrealized losses in the value of investments due to the declining stock market. When the Newport property was sold the proceeds were split in half, Sabatino reported. Half of the money went toward paying down a line of credit held jointly by Bank of America and Citizen’s Bank that is used to pay settlements in sexual abuse cases. The other half of the proceeds were put into the Diocesan Plant Fund, a fund established under the direction of Bishop Thomas J. Tobin that collects revenue from the sale of diocesan properties and is used for the future maintenance of other diocesan properties. Proceeds from the sale of other, smaller diocesan properties during the prior year were also added to this fund. The $5.9 million line of credit that was partially paid down with proceeds from the Newport sale rose again throughout the year due to $1.4 million spent paying settlements in six different sexual abuse cases. In the previous fiscal year the diocese spent only $115,000 paying similar settlements. “We were fortunate to pay down a significant amount, but there were additional settlements,” Sabatino said. The line of credit is down about $600,000 from last year. Sabatino also pointed out that the line of credit is held strictly for those payments: “We do not utilize that line to fund any operational needs other than to pay settlements.” Sabatino and the other members of the diocesan Investment Advisory Committee have spent considerable time ensuring that the Diocese's investments “are on the right track” he said. Still, because of the market’s rapid decline, the diocese experienced about a 35 percent decline in the value of its overall investment pool from January 1, 2008 to December 31, 2008 – about half that period is reviewed in the most recent financial report. The majority of that unrealized loss has been in the six-month period from July 1, 2008 to December 31, 2008. The Investment Advisory Committee is comprised of seven finance professionals and four diocesan staff members who usually meet quarterly to review the diocese’s investments. However, Msgr. Bastia noted that in recent months the committee has met much more frequently to keep a close eye on the diocese’s investments in these difficult economic times. Sabatino said that during the fiscal year, the diocese experienced “unrealized” losses totaling $8.6 million dollars. These losses are described as “unrealized” because although they are a loss on paper, the diocese was not immediately relying on any of the funds and has no short-term plans to sell off the investments. “The longer we hold it, the more likely it is that it will rebound,” said Msgr. Bastia. "We feel strongly that our investment portfolio is in a strong position and will turn the corner once the economy turns around," Sabatino added. Sabatino said that the diocese’s current financial strategy is to borrow necessary funds from internal sources: “We're in the financial position at this point that we have enough liquid cash reserves to fund our internal operations. ... Don’t get me wrong, we’re struggling like everyone else, but we’re not in any sort of dire situation where we’re selling off long-term securities for 50 cents on the dollar." Sabatino said there was some positive news from the annual report, especially in terms of the diocesan insurance fund. In July 2007 the diocese went from paying a third-party to handle its employees insurance to joining a pool of about 20 Catholic dioceses across the country that self-fund their insurance. The net result of that change was approximately $2 million remaining in the diocese that would have otherwise been paid out to a third party. The change does come with some risk, Sabatino noted, “but this year, it’s paying off.” Pooling with other dioceses helps to obtain lower prices on healthcare for employees of this diocese, he added. “Instead of United Health looking at our diocese as 2,000 people ... there’s actually about 18,000 people in the pool across the country.” Another new policy, this time dealing with the Catholic Foundation, has also enabled the diocese to better take advantage of its assets. The Catholic Foundation is a non-profit corporation to which individuals and organization make large donations or bequeath portions of their estate. The majority of the endowment’s dollars are received by parishes and schools, Msgr. Bastia said, and now 4.5 percent of the total endowment’s average value over three years is distributed annually. “With that new change in policy that actually was able to get more dollars out,” Msgr. Bastia said. There was an increase from $3 million to $3.7 million since last year, according to the financial report. Sabatino also credited agency directors across the diocese with keeping their budgets in line during the last year. “We feel strongly that we've at least got to maintain the level of charitable services that we've been giving because the need is so much greater now,” he said. The financial report, Sabatino noted, was for the period from July 1, 2007 through June 30, 2008. “Overall, as of June 30, 2008, we had a stable year, but obviously these past few months from July to now have been turbulent to say the least.” Bishop Tobin and the Diocesan Finance Council have developed several plans for dealing with the financial challenges based on how much of a financial loss the diocese experiences in the months to come. Currently, the diocese has implemented a hiring freeze and has reduced the interest rates on the inter-parish loan funds. “We’re on top of it, the Bishop is on top of it,” Msgr. Bastia said. “We’re poised and ready to make any changes that need to take place.” To see a full copy of the report, visit: www.dioceseofprovidence.org and follow the link at the bottom of the screen. A user-friendly report will be published in the Rhode Island Catholic in February.
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