Sharing the Light

Sharing the Light 2013

Archdiocesan Finances Frequently Asked Questions

FAQ about Archdiocesan Finances

  1. What is the current financial condition of the Archdiocese of Detroit?
  2. How did the Archdiocese improve its financial situation?
  3. How did the Archdiocese handle the debt remaining on its investment in the Pope John Paul II Cultural Center in Washington, D.C.?
  4. How is the Changing Lives Together campaign affecting archdiocesan finances?
  5. How much does the Archdiocese owe to outside entities?
  6. What are the archdiocesan investment accounts and how have they performed?
  7. Where has the Archdiocese invested these funds?
  8. Who manages the Archdiocese's financial assets and operations?
  9. What measures are in place to prevent a recurrence of financial problems?

1. What is the current financial condition of the Archdiocese of Detroit?

The Archdiocese started the current fiscal year (July 1, 2012 – June 30, 2013) with a balanced budget and is performing ahead of plans. The Archdiocese experienced a $1,639,696 increase in net assets for the 2011-12 fiscal year that ended June 30, 2012. This is the equivalent of net income in for-profit organizations. The Archdiocese also had a $1,262,470 increase in net assets for the 2010-11 fiscal year. This reverses a series of annual decreases in net assets in prior years. Decreases in this regard are the equivalent of net losses in for-profit enterprises.

However, in the archdiocesan balance sheet for the year ending June 30, 2012, the total net asset deficit for the Archdiocese is $50,435,640. This is the equivalent to a retained deficit or negative retained earnings in a for-profit corporation. This cumulative net asset deficit is reduced when the Archdiocese increases its net assets, as was accomplished in each of the last two fiscal years. Based on continuing the operating trends of the last two fiscal years, the Archdiocese intends to gradually eliminate this net asset deficit.

While substantial progress has been made, especially in achieving a balanced archdiocesan operating budget, it will be a matter of years before the Loan Deposit Program is returned to full health. Archdiocesan Central Services must continue to control spending, determine the rationale and sustainability of every archdiocesan financial subsidy, and ensure it has adequate cash reserves.

These results reflect archdiocesan Central Services, related operations, and investment returns, but do not include the additional increase in net assets during these two fiscal years  from the Changing Lives Together capital stewardship initiative that emphasizes improving the health of the parishes. Also not included are positive investment returns generated by the archdiocesan Endowment Fund and the Priests’ Pension Fund, which are separately incorporated funds.

Audited annual financial reports for the Archdiocese are published on the archdiocesan website.

2. How did the Archdiocese get into such a difficult financial situation?

In recent years, the Archdiocese implemented several measures to control Central Services spending, conserve cash, and operate within a balanced budget:

  • In October 2011, the Archdiocese sold to the Knights of Columbus its financial interest in the building and land in Washington, D.C. where the Pope John Paul II Cultural Center was located. The Archdiocese received approximately $20 million from the sale, recovering some of its investment in the facility, ceasing monthly outlays of about $65,000 to preserve the value of the Cultural Center’s building and grounds, and paying off one of its two debts to outside entities.
  • Archdiocesan subsides to the Retreat Center at St. John’s in Plymouth Township were ended and Retreat Center operations suspended in November 2009, which saved the Archdiocese approximately $1 million in annual subsidies. A Troy, Michigan-based private sector firm, Hotel Investment Services, continues to successfully operate the hotel, conference center, and golf course at St. John’s, generating revenue sufficient to meet operational, maintenance, and capital expenditures at the complex.
  • Archdiocesan Central Services reversed its decrease in net assets from approximately $28 million in the 2008-09 fiscal year and $22 million in 2009-10 to achieving modest net increases of $1.3 million in 2010-11 and $1.6 million in 2011-12. These deficit reductions were primarily achieved through cost control measures including staff downsizing, expense controls, program service cutbacks, and curtailing archdiocesan subsidies. Lending practice reforms and interest rate adjustments have helped stabilize the Loan Deposit Program.

3. How did the Archdiocese handle the debt remaining on its investment in the Pope John Paul II Cultural Center in Washington, D.C.?

The Archdiocese applied about $20 million received from the sale of its interest in the Cultural Center to retire $19 million remaining on a term loan owed to Allied Irish Bank that supported archdiocesan operations and the Cultural Center. That left about $34 million in archdiocesan investments in the former Cultural Center, an amount previously included in a $78 million allowance for doubtful accounts in the archdiocesan Loan Deposit Program (2010-11 fiscal year). The allowance for doubtful accounts in the fiscal year ended June 30, 2012 was reduced by a commensurate amount to reflect the loss of unrecoverable funds invested in the Cultural Center.

4. How is the Changing Lives Together campaign affecting archdiocesan finances?

The primary intent of the Changing Lives Together capital stewardship initiative is to strengthen parishes. Parishes strong in sacramental and ministerial life as well as financial health are the basis of a spiritually and fiscally strong Archdiocese of Detroit. A minimum of 70 percent of funds raised through the campaign in each parish stays with the parish to achieve specific parish-determined priorities. Some parishes are reducing their debt to the archdiocesan Loan Deposit Program through the campaign. Others are adding to their Loan Deposit Program savings, both of which are having a beneficial effect on parish finances.

The other 30 percent of campaign gifts are designated for specific archdiocesan-wide priorities established by Archbishop Vigneron including increasing funds available for tuition assistance at Catholic schools, providing more financial support for priestly formation and lay leadership development, and allocating up to $4 million to create an endowment to support Church ministries in the city of Detroit beyond the wherewithal of any one parish in the city to maintain. Campaign expenses are also being met through this 30 percent share of campaign proceeds.

The campaign is well underway, with more than $79 million pledged toward a $135 million goal. More than $32 million of campaign pledges have been fulfilled through December 31, 2012.

5. How much does the Archdiocese owe to outside entities?

In 2011 the Archdiocese had two major debts to outside entities. Using proceeds from the sale of the Pope John Paul II Cultural Center, the Archdiocese eliminated one of these debts in 2012, retiring a $19 million bank loan.

In December 2011, the Archdiocese refinanced a municipal bond issue for the Pontiac Vision 2000 Schools project that initially totaled $22.1 million and had been paid down to approximately $10.4 million. By restructuring and reissuing these bonds, the Archdiocese eliminated its reliance upon a letter of credit from the bank, replaced a variable interest rate with a fixed rate, and reissued the bonds with a similar term (the time period for paying bondholders).

In refinancing the bond, the Archdiocese took on $3.4 million of bond principal and rolled reissuing fees of $500,000 into the new bond. Pontiac-area parishes and schools benefitting from the bond issue have paid approximately $9.8 million on the original bond issue and will continue to pay down the balance, which is now approximately $11.6 million. Of that balance, $1.2 million, provided by the Archdiocese, is being held in a reserve savings account by the bond trustee. The Archdiocese has paid $1.7 million to fulfill the Pontiac bonds since the original bond issue more than ten years ago.

6. What are the archdiocesan investment accounts and how have they performed?

The Archdiocese has three separate funds invested in the financial markets to generate revenue commensurate with the goals and objectives of each fund. Proceeds from these investments are for the specific purposes established for each fund. Investment earnings for each fund are segregated and not mixed between the funds.

The Stewards for Tomorrow campaign in the 1990s raised more than $84 million and established the Archdiocese of Detroit Endowment Foundation. From 1995 through June 30, 2012, the archdiocesan Endowment fund has distributed over $59.7 million for tuition grants to K-12 Catholic school students, support to Sacred Heart Major Seminary, financial aid for catechetical instructors, supplementary support for retired priests, and support for other Catholic organizations. Catholics in southeast Michigan continue to benefit from the Endowment, which distributes funds annually under the supervision of a board appointed by Archbishop Vigneron.

Investment Account

Balance
June 30, 2009

Balance
June 30, 2010

Balance
June 30, 2011

Balance
June 30, 2012

Balance
Dec. 31, 2012

Endowment Fund

$64.3 million

$69.4 million

$82.4 million

$81.3 million

$84.7 million

Parish Accounts

$17.2 million

$19.6 million

$23.8 million

$25.8 million

$27.5 million

To provide for their retirement years, priests in the Detroit archdiocese participate in the Priests’ Pension Plan, a defined benefit program. Managed by a board comprised of priests elected by their brother priests, as well as lay and clergy appointed by Archbishop Vigneron, this separately maintained program receives its funding from annual parish assessments and currently provides benefits to approximately 140 retired diocesan priests. Plan benefits include a monthly cash payment of $1,500 as well as medical and dental insurance, Medicare Part B costs, auto insurance, and reimbursement for educational expenses.

Investment Account

Balance
June 30, 2009

Balance
June 30, 2010

Balance
June 30, 2011

Balance
June 30, 2012

Balance
Dec. 31, 2012

Priests’ Pension Fund

$36.2 million

$40.2 million

$46.9 million

$45.3 million

$48.5 million

The General Fund represents longer term assets invested for archdiocesan Central Services. The General Fund compliments the cash reserves held for operating purposes in commercial bank accounts primarily on behalf of parishes and schools.

Investment Account

Balance
June 30, 2009

Balance
June 30, 2010

Balance
June 30, 2011

Balance
June 30, 2012

Balance
Dec. 31, 2012

General Fund

$20.3 million

$21.5 million

$27.7 million

$30.4 million

$34.5 million

7. Where has the Archdiocese invested these funds?

Archdiocesan investments are in diverse portfolios of domestic equity, international equity, fixed income, and alternative investments including mutual funds tied to market indexes such as the Dow Jones Industrial Average and Nasdaq Composite Index. A private-sector firm, CapTrust, advises the archdiocesan Finance Council on these investments.

8. Who manages the Archdiocese’s financial assets and operations?

Archbishop Vigneron is ultimately responsible for the overall stewardship of archdiocesan property and financial assets. The daily financial management of archdiocesan operations and investments are the responsibility of Central Services staff, specifically the Department of Finance and Administration, which reports to the Moderator of the Curia. In the private sector, the Moderator of the Curia has responsibilities similar to a chief operating officer and reports to the Archbishop.

The archdiocesan Finance Council, a nine-member committee comprised of clergy and lay people with operational, financial, banking, auditing, investing, and other backgrounds, provides oversight and advice to Archbishop Vigneron on all financial matters. The archdiocesan College of Consultors, which is the priest council of advisors to the Archbishop, also provides input on administrative and financial issues.

Plante & Moran, PLLC annually audits the financial statements of certain archdiocesan funds including its Central Services operations, designated funds, properties, the Loan Deposit Program and archdiocesan collections. The Archdiocese has consistently received unqualified (also known as “clean”) audit opinions from Plante & Moran. The annual reports are published on the archdiocesan website.

9. What measures are in place to prevent a recurrence of financial problems?

Based on the recommendations of the two task forces appointed in 2009 by Archbishop Vigneron, significant improvements have been made in monitoring and controlling archdiocesan finances and operations. Archbishop Vigneron has implemented formal policies and procedures regarding the management of archdiocesan operating funds, endowments, and other accounts.

These reforms, which include consultative consent on some financial issues, exceed standards required by statute under canon law as well as those set by the United States Conference of Catholic Bishops in areas of diocesan financial responsibilities. Reforms in the Archdiocese of Detroit include:

  • An improved reporting system at the archdiocesan and parish levels, providing more timely and insightful financial reporting
  • An enhanced archdiocesan Finance and Administration staff with significant emphasis on transparency and accuracy. Changes included stronger emphasis on internal controls  such as  separating the controller and treasurer functions to provide defined checks and balances

The governance of financial management has been strengthened by reorganizing archdiocesan financial operations and the archdiocesan Finance Council. The level of Finance Council engagement in archdiocesan fiscal matters has increased significantly. The Finance Council is working in close collaboration with the Archbishop, the Moderator of the Curia, and the College of Consultors to provide greater oversight and guidance to the Archbishop regarding the financial affairs of the Archdiocese.

Archbishop Vigneron continues to implement other recommendations of the 2009 task forces including austerity measures and other efforts to achieve annualized balanced budgets on an ongoing basis.