Following an unprecedented financial report from the Archdiocese of Philadelphia’s Office for Financial Services in early July, 15 archdiocesan entities for the first time made their financial statements public Friday, Aug. 2.
The statements, audited by the accounting firm Grant Thornton for archdiocesan corporations operating in health care, social services and education, present a picture of their finances as of June 30, 2012, the end of that fiscal year.
(See all the financial statements here.)
A total of 274 pages of financial statements and accompanying notes show a similar level of detail as the Office for Financial Services’ financial statement presented July 3.
The largest grouping of the reports is for agencies of Catholic Human Services, the archdiocesan umbrella organization comprising Catholic Health Care Services, Nutritional Development Services and Catholic Social Services.
The latter is a separately incorporated entity and itself an umbrella organization for numerous social service ministries, many of which are also separately incorporated.
They include St. Gabriel’s System, St. Edmond’s Home for Crippled Children, St. Francis-St. Joseph Homes, St. Vincent’s Orphans Asylum of Tacony, Don Guanella Village and Divine Providence Village.
(See more statements including the Office of Catholic Education, archdiocesan high schools, schools of special education, St. Charles Borromeo Seminary, Catholic Cemeteries Office and St. John Vianney Center.)
As nonprofit corporations, all have produced annual audited financial reports for their boards of directors. This year is the first that the reports have been made public, following Archbishop Charles Chaput’s pledge in June to make information public, even when the news is grim.
The figures from Catholic Human Services are a mix of good and not so good.
Catholic Social Services posted a positive change in net assets – revenues exceeding expenses – of $2.2 million for the fiscal year ending June 30, 2012.
Two of CSS’ largest sources of total operating revenue of $20.8 million were governmental programs ($10.4 million) and fees for services ($3.9 million). Such revenues alone would not suffice to meet $25 million in expenses in 2012.
Key to the ability of CSS to continue its ministry of providing a broad range of social services to homeless people, developmentally challenged people, at-risk youth, families, seniors and all residents of Southeastern Pennsylvania, regardless of creed, are contributions of the Catholic faithful in the archdiocese.
Additional revenue from the Catholic Charities Appeal ($3.7 million), donations and bequests ($3.7 million) and other revenue totaled $7.1 million.
Some separate corporations organized under CSS saw operating gains while others experienced losses in 2012.
St. Edmond’s Home for Crippled Children is fairly typical, in that it showed a relatively small operating loss of $39,374. The Rosemont facility serves about 40 children with developmental and physical disabilities who receive physical, speech, recreational and music therapies. Its expenses were $8.6 million over operating revenues of $7.5 million.
For St. Edmond’s and every corporation of Catholic Human Services, community donations including the Catholic Charities Appeal plus income from bequests and interest gained from investments helped narrow operating losses.
It is normal for CSS corporations to dip into investment funds ii\n this way, according to Michael Czeckner, chief financial officer for Catholic Human Services. “We’re drawing off cash, so we didn’t have to draw down the principal (of the investments).”
The modest growth in investment value funds the ongoing operations in this way, he said, adding the investment portfolio “is there to use, not to let it build.”
The financial reports of Catholic Human Services and the Office of Catholic Education shed more light on the complex arrangement revealed in the Office for Financial Services financial statement, which concerns the retirement of external debt.
The debt consisted of two bonds, one for $47 million from 2008 and another for $50 million from 2001. The archdiocese brought the remaining value of the debt in-house by taking a loan for $77 million from participating entities.
The lenders and the amounts loaned from each included St. Francis-St. Joseph Homes ($6.8 million), Divine Providence Village ($2.4 million), Don Guanella Village ($3.3 million), St. Edmond’s Home ($7.2 million), Catholic Social Services ($2.8 million), Office for Financial Services and Office of Catholic Cemeteries (about $3 million each) and Catholic Health Care Services ($48.7 million).
One component of the $50 million bond, $28 million of which was used to build Bishop Shanahan High School in Downingtown, included a renovation project at St. Gabriel’s begun early last decade. St. Gabriel’s retired its external debt as part of the archdiocesan strategy in the transaction.
The entities participating in the transaction helped contribute to the retirement of the large outstanding debt, but as the figures show, Catholic Health Care Services assumed the lion’s share of the burden.
CHCS acts a parent corporation that runs seven long-term care nursing homes and other health care functions in the archdiocese. Its financial statement offered a window into just how large the system is, to the point that it has become one of the largest faith-based senior care providers in Pennsylvania and in the United States.
The cost of caring for 1,433 seniors on a given day in the system (according to the 2012 annual report of CHCS), some of whom reside in special dementia units of the system’s homes, is steep.
Operating expenses totaled $139.9 million in 2012 against $132 in operating revenue. As with other corporations, investment income helped narrow the losses. But CHCS still ended the 2012 fiscal year with a $5.1 million deficiency.
Unrestricted investment reserves of more than $19 million, in addition to other assets such as the physical plant (valued at $78 million) and receivables such as the aforementioned loan to pay off external debt (almost $48 million), exist to offset the deficiency.
Nutritional Development Services, a separate corporation under the Catholic Human Services organizational umbrella, provides food services to community organizations in Southeastern Pennsylvania primarily utilizing contracts with the federal Department of Agriculture.
The NDS financial statement showed an operating loss of almost $620,000. Expenses of $18.3 million – of which $11.5 million went toward food procurement – exceeded $17.7 million in revenues. The largest revenue source was federal and state government programs totaling almost $15 million.
As in the case of other corporations, sufficient unrestricted assets exist to cover the operating shortfall.
Archdiocesan officials confirmed audited financial statements for additional archdiocesan corporations would be made public in coming weeks, including especially the Catholic Charities Appeal and Heritage of Faith-Vision of Hope.
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Why did it take Grant Thornton over a year to publish its audit of the June 30,2012 Financial Statements ?