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	Diocese Addresses Fiscal Realities By Margaret M. Russell Catholic Free Press October 16, 2009 http://www.catholicfreepress.org/_Pages/_This%20Week/1016diocese.html WORCESTER (MA) — Bishop McManus called it an exercise in transparency. The finances of the Diocese of Worcester were laid out to more than 350 people involved in various aspects of the diocese and its parishes over the past two weeks. Msgr. Thomas J. Sullivan, director of the office of fiscal affairs, met Oct. 5 with committees that oversee finances, investments, building and pastoral planning. The presentation, unveiling the financial picture as of Aug. 31, 2009, was the first of its kind. It was repeated Tuesday for pastors, priests, and those lay people on parish finance boards. The figures presented are both "enlightening and sobering," Bishop McManus said Tuesday. But he said he is optimistic that once the people of the diocese have this information, they will respond generously. "I would not say the situation is catastrophic but it is certainly critical and problematic," Bishop McManus said. It is a situation that has been in the making for more than 10 years, and it will take some time to correct, according to Msgr. Sullivan. At the end of the meetings he explained a diocesan-wide, parish-based increased offertory campaign that will be undertaken. He and the bishop cited a number of factors the have affected the financial health of the diocese including economic downturns, a drop in investment returns, increasing indebtedness and fewer people in the pews contributing to the Church. "The Church exists to evangelize," to announce to people the good news of Jesus Christ for the salvation of souls, the bishop said. The new evangelization, he said, is to remind people of what they once heard and bring them back home. "There is a view out there that we have plenty of money.... this is not true," Msgr. Sulivan said. Before he began outlining the actual figures, he made it clear that the meetings were for educational purposes, not to lay blame on any person, parish, school or agency. It was also made clear that the priest sexual abuse crisis did not have a direct effect on diocesan finances as it has in other dioceses. Since 2002, Msgr. Sullivan said, 32 cases were settled: insurance paid $464,000; the diocese paid $81,560; and individuals paid $122,500. The bishop conceded that the crisis probably has contributed to some parishioners giving less. PARISH SUPPORT The diocese comprises 117 parishes and 4 missions. The parishes support the central administration of the diocese through what is called the cathedraticum. In the Worcester Diocese, 7.5 percent of a parish's ordinary annual income is given to the central administration, Msgr. Sullivan said. About $2 million is generated from the cathedraticum annually, it was reported. The diocese also has its own "bank" called the Diocesan Expansion Fund. Since 1977, parishes, cemeteries and diocesan agencies have been required to place their savings in the DEF. Also, when they need a loan they are required to take their loans from the DEF. The current rate of return on savings is 3.75 percent, according to the finance office. The current interest rate for loans is 7 percent. "The idea was to use the money to build up the Church, and that has been happening," Msgr. Sullivan explained. As of the close of the fiscal year, the monies on deposit in the DEF totaled $56, 893, 822. BORROWING Up until 1998 the diocese was able to fund all of its expenses, Msgr. Sullivan said. However, in the past 10 years the central administration has had to borrow from the DEF to meet its own obligations and those of some parishes. Interest on what has been borrowed now reaches more than $1 million annually, he reported. "It is not a good thing when 50 percent of what you receive in the cathedraticum is paid out in interest expense. .... This has severely impacted our ability to enhance our pastoral ministries, add needed staff, or save any money," he said. With the economic downturn some parishes are not generating as much offertory, so, less comes in to the diocese. If the diocese doesn't take action, "interest payments could conceivably require greater than 50 percent of the cathedraticum," Msgr. Sullivan said. ASSETS Diocesan assets, not including real estate, total more than $35 million, it was reported. Real estate holdings were not included in the presentation but it was pointed out that churches and parish halls belong to the people in a parish and if they are sold the proceeds "follow the people." Once any parish debt obligations are met, the remainder of the money is given to the parish designated to receive the people from the closed parish. The diocese has its money in a master investment account. That account is managed by outside professionals and overseen by the diocesan investments committee. At the end of the fiscal year there was $35,405,989 in the account, Msgr. Sullivan reported. Much of the money is invested for specific "reserved" purposes, he explained. The largest amount is the Forward-In-Faith endowment investment. The capital campaign from 1999 is now valued at $15,875,388. Some $42,436,616 was collected. About $14 million was paid out to parishes; $4.5 million was used in lieu of the annual Bishops' Fund that year and $500,00 the next year; and $2.5 million given to Catholic Charities. Other investments in the master account and their approximate amounts include: funds for retired priests, $8 million; diocesan management fund (income for central administration), $7 million; bishop's discretionary account, $800,000; investments of two parish endowments, $1 million; worker's compensation funds, $700,000; employment transition funds, $600,000; seminarian burses, $600,000; Catholic schools, $400,000; and annuities funding, $300,000. DEBT Even though DEF deposits total nearly $57 million, more than 65 percent of the monies exist in loan obligations, Msgr. Sullivan reported. A total of $37,129,022 is owed to the DEF. Since 1998 the diocese has had repeated years of deficit budgets causing the central administration to take loans to pay its obligations, he said. Currently central administration owes the DEF $18,667,530. Several factors make up this amount, according Msgr. Sullivan. A combination of 65 parishes, three parish schools and nine agencies owe $5,348,004 in unpaid bills to the diocese; St. John's Cemetery system has a debt of $1,972,665; the priest retirement fund owes $1,709,597; four Central Catholic schools owe $1,075,170; The Catholic Free Press owes $978,075; and the compound interest on the debt is $8,687,664. Parishes owing the largest amounts to the diocese were not named. Other obligations to the DEF include 37 individual parish and school loans taken directly that total $15,658,748. Also, the Plant Fund, money borrowed in the 1960s to build St. Peter-Marian and Holy Name high schools, remains at $2,802,744 but the diocese has been paying this down over the years, it was explained. CHALLENGES Msgr. Sullivan outlined specific challenges the diocese is facing with regards to assisting seminarians, school children and retired priests. Vocations expenses currently run at $754,835 annually but only about $33,000 in interest income from unrestricted funds can be used to offset this amount. Partners in Charity makes up the rest. Catholic schools tuition assistance is not covering the demonstrated need despite the fact that $1,146,245 in financial aid was given to students this year, Msgr. Sullivan said. Sources for assistance include Partners in Charity, Adopt-A-Student (a separate entity that raises its own funds), and interest from the Catholic schools' Forward in Faith endowment. Together they reach about 30 percent of the need of applicants. "In other words," said Msgr. Sullivan, "the need for financial assistance is more than three times greater than what we can afford." Care for the diocese's 60 retired priests will total nearly $3 million this fiscal year, he said. Some $2,713,855 is needed for salaries, health care, housing and nursing home expenses. The account will be underfunded by about $1.3 million despite sizeable input from Partners in Charity and the Forward in Faith endowment. Part of the funding for retired priests comes from a parish assessment each year that has not increased in decades. Fewer active priests are paying into the system due to declining numbers and more priests are retired. And, over the next 10 years an additional 34 priests will reach retirement age, Msgr. Sullivan said. The increased offertory campaign which will begin in "pilot parishes" in early 2010, is just the first step toward turning around the financial picture. Increasing income to parishes also would benefit the diocese. An increase in parish revenue of 20 percent, "which is very realistic," Msgr. Sullivan said, would mean the cathedraticum would grow by $450,000 a year. The finance office will also work with individual parishes to find ways to reduce their debt, Msgr. Sullivan said. Some will need to develop sound, realistic business plans that will enable them to pay bills and keep up their ministries.
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