BRIDGEPORT—In the continued practice of full transparency, the Diocese of Bridgeport has released its Consolidated Financial Statements for the Fiscal Year Ended June 30, 2017.
The consolidated audited report is posted online on the diocesan website. The development and implementation of the diocesan turn-around strategy over the past three years has resulted in positive results consisting of a surplus in operations. A stronger financial position is presented with an increase in assets, controlled liabilities and positive net assets for the first time in many years.
“Transparency is key as we continue to work toward long-term financial sustainability for the diocese and continue to be good stewards of resources entrusted to us,” said Michael Hanlon, CPA, chief financial officer of the diocese.
“Our priorities continue to be the presentation of clear, timely and comprehensive financial reports, particularly as the diocese moves forward with synod initiatives, mission-related programs and investment in the future,” Hanlon said.
The diocesan fiscal policy continues to focus on a strategy of returning the diocese to financial stability, viability, long-term growth and sustainability, he added.
Many initiates from the synod have been implemented and funded, including the Catholic Leadership Institute and ongoing pastoral and strategic planning for parishes.
Hanlon said he was very pleased to learn that the Diocese of Bridgeport ranked near the top of a much-reported Voice of the Faithful (VOTF) nationwide study of diocesan financial transparency practices and policies.
The VOTF study reviewed the financial transparency and accountability of 145 dioceses and 32 archdioceses by analyzing transparency practices and policies. On a scale of 0-60, the Diocese of Bridgeport received a score of 55 for its efforts toward financial transparency.
“The VOTF analysis affirms the fact that we continue to follow transparency and industry best practices mandated by Bishop Frank J. Caggiano upon his arrival in 2013. Under Bishop Caggiano’s leadership, we remain committed to full financial transparency and best practices,” he said.
The newly-released consolidated financial statements report operational revenues, support and other changes totaling $44.6 million, and total expenses from operations before depreciation of $42.6 million, resulting in income from operations before depreciation of $2 million for the 12-month period ended June 30, 2017.
Hanlon said the consolidated financial statement includes activities related to diocesan operations, employee benefits and insurance programs, cemetery operations and other activities.
Diocesan operations report total revenue and support and other changes of $23.2 million, resulting in a $10,000 surplus from operations. The audit reports positive operational results, however slight, for the first time in many years.
Additional revenues and other changes from non-operating activities and depreciation, and other pension-related expenses, resulted in an increase of net assets totaling $5.5 million for the year.
A large portion of this increase is related to priest pension and postretirement medical expense projections totaling $4.2 million, related to an increase in interest rates used in actuarial assumptions as well as strong investment returns.
Employee benefits and insurance programs continue to be the largest expense recorded within the diocesan financial statements totaling $17.2 million, or 38.8% of $44.3 million in total expenses including depreciation. Religious and lay personnel salaries totaled $9.8 million or 22.1% of total expenses. And grants and contributions totaled $6.7 million or 15.1% of total expenses.
Grants and contributions to support mission related, educational and youth programs include the Bishops Scholarship Fund within Foundations in Education, Catholic Charities, the Cardinal Shehan Center, the McGivney Center, St. Catherine’s Center for Special Needs and other diocesan-related programs.
The consolidated diocesan statement of financial position reports total assets of $87.1 million, liabilities of $44.1 million and total net assets of $43 million.
Hanlon explained that the positive change in net assets from prior year deficits was a result of examining the accounting treatment for the large, underfunded lay pension obligation, which has been reported within the diocesan consolidated financial statements since 2004.
He said a sub-committee of the Diocesan Finance Council was formed early during 2017 to explore alternatives and develop recommendations to resolve the underfunding of the lay pension liability. In exploring the lay pension plan document, the treatment and recording of the obligation within the diocesan consolidated financial statements was questioned under accounting rules governing U.S. generally accepted accounting principles.
The diocesan auditors concluded, following a review of accounting rules and a legal opinion, that the lay pension obligation should not be reported as a liability within the diocesan consolidated financial statements but rather reported within its footnotes according to the accounting rules for a multi-employer pension plan. This change resulted in the removal of approximately $107 million in lay pension obligations from the diocesan consolidated financial statement. The finance council sub-committee continues to explore solutions for the underfunded lay pension obligations and recommendations will be finalized at the Finance Council meeting later this month.
“As we continue on our path of stability, viability and sustainability we continue to search for alternative sources of revenue, examine all operational expenses, and to eliminate our outstanding debt,” Hanlon said.
As of June 30, 2017, the Knights of Columbus obligation was $ 8.3 million (down from the original $15 million note.) Since the issuance of the consolidated financial statements, this debt has been reduced to $6 million, utilizing proceeds from the sale of the Augustana Homes in October 2017.
Hanlon said a strategy will be finalized in the near future to identify asset sales or other funds that will be used to eliminate the remaining debt balance which will save approximately $270,000 annually in interest expense from the diocesan operational budget.
A recent reorganization of Catholic Cemeteries operations and the engagement of Catholic Management Services to manage cemetery operations has led to a plan for major improvements, efficiencies and strategic vision for enhanced resources to support the 15 diocesan cemeteries in Fairfield County.
Hanlon said the continued work of the school Education Commission, which is partnering with schools in developing plans for reorganization and/or operational viability, is reducing the medical premium and insurance burden absorbed by the diocese, while synod-initiated pastoral and strategic planning is ongoing within our parishes.
The $3.5 million Queen of Clergy expansion project has been completed, along with the first phase of the remodeling of St. John Fisher’s Seminary. Both residences are in Stamford.
The establishment and growth of various diocesan-sponsored foundations now includes Foundations in Faith (formerly named The Faith in the Future Fund, Inc.), Foundations in Education, and the near-future establishment of Foundations in Charities, all of which will provide much needed support for diocesan mission-related activities.
Programs included within the diocesan financial statements include the St. John Fisher Seminary; the Catherine Dennis Keefe Queen of Clergy Retirement Home for Diocesan Priests; the Newman Center at Western Connecticut State University; Teresian Towers and Carmel Ridge Estates, life use and rental properties for elderly residents; and pastoral care services for residents in nursing homes formerly owned by the diocese.
Hanlon said the diocese will continue to address ongoing challenges including medical and benefit costs, caring for a growing number of retired priests, the continued development and implementation of viability plans for schools and parishes, synod-related initiatives and programs and finding solutions for long term pension liabilities.
(The complete audited reports are available online. To learn more, visit the diocesan website: www.bridgeportdiocese.com/financialreports.)