Archdiocese of Philadelphia issued the following on Nov. 24
Archdiocese of Philadelphia Publishes Audited Financial Statements for Fiscal Years Ended June 30, 2020 and June 30, 2019
ARCHDIOCESE OF PHILADELPHIA PUBLISHES AUDITED FINANCIAL
STATEMENTS FOR FISCAL YEARS ENDED JUNE 30, 2020 AND JUNE 30, 2019
Reports illustrate a modest surplus in the core operating result for the past fiscal year and an
improvement of over $190 million against underfunded balance sheet obligations over the past
eight years
Contextual Background
For the fiscal year ended June 30, 2012, the Archdiocese of Philadelphia disclosed a core operating
deficit of $17.6 million as well as underfunded balance sheet obligations totaling $354.4 million.
Since that time, results have improved significantly as reflected in the graph and the table presented
below. The core operating result for the fiscal year ended June 30, 2020 was a surplus of $0.1
million. This surplus is slightly better than our expectation of a break-even result.
In addition, as of the fiscal year ended June 30, 2020, the Archdiocese has reduced its underfunded
balance sheet obligations to $164.4 million over the course of eight years.
Under/(over)funded Balance at
(in millions) June 30, 2012 June 30, 2020
Deposit and Loan Program $ 82.0 $ 27.0
Risk Insurance 30.4 56.1
Lay Employees’ Retirement Plan 152.0 91.2
Priests’ retirement plans 90.0 (9.9)
$ 354.4 $ 164.4
A Priests’ retirement plans’ assets ($114.8M) exceeded liabilities ($104.9M) by $9.9M at
June 30, 2020
Analysis of Fiscal Year Ended June 30, 2020
The analysis below presents the “Change in Net Assets Before Other Items” for the year ended
June 30, 2020. This amount (i.e. the $31.1 million surplus shaded below) can be found in the
Statement of Activities and Changes in Net Assets under the caption “Change in Net Assets
Before Other Items” in the “Without Donor Restrictions” column (the actual amount is
($31,127,962) which has been rounded to $31.1 million in the presentation below). We believe
that the analysis presented below provides a meaningful disclosure of results after adjusting for
the impact of items that are non- recurring in nature.
(in millions) FY 2020
Change in Net Assets Before Other Items $ 31.1
Non-Recurring Items
Risk Insurance and
Welfare Benefits Trust experience (22.4)
Investment Gains (includes investment income) --
Deposit and Loan Program experience 0.2
Net Gain on the Sale of Real Estate and Terminated
Affiliation (12.5)
Legal and professional fees 1.7
Recurring Surplus including Depreciation Expense (1.9)
Depreciation expense 2.0
Recurring Surplus excluding Depreciation Expense $ 0.1
A The experience of the Risk Insurance and Welfare Benefits Trusts and the Deposit and Loan Program
Trust should be considered separately and treated as non-recurring. The assets in these trusts are not
available for general operating needs.
B In June 2020, the Archdiocese entered into an agreement terminating the affiliation of Saint John
$190.0 million improvement
in 8 years.
B
Vianney Center (“SJVC”) with the Archdiocese and converted SJVC into a nonprofit corporation
governed by a self- perpetuating board. The Archdiocese received consideration for entering into this
agreement in the amount of $12,000,000, all of which was recognized as a gain on the terminated
affiliation. Also includedin the net gain is approximately $500,000 from land located in Delaware
County.
C Primarily includes legal and professional fees incurred related to the following, as of June 30, 2020:
Sproul Road ($155,000), the Cathedral Block ($61,000), and the Federal Grand Jury investigation
($1,530,000).
The “Recurring Surplus excluding Depreciation Expense” caption above represents what we refer
to as our “core” (excludes items of a non-recurring nature and depreciation) operating result. We
do however recognize the uncertainty around the pandemic’s impact on our “core” operating
results and are closely monitoring the COVID-19 impact on OFS. Although the full impact of
COVID-19 cannot yet be determined, we anticipate a decline in the assessment income OFS
receives from parishes and a decrease in interest and investment income.
Discussion of Other Significant Matters
In connection with our recent financial disclosures we have provided specific commentary
regarding certain balance sheet obligations. As of June 30, 2020 the following balance sheet
obligations remain underfunded:
- Deposit and Loan Program Trust
- Insurance Fund/Risk Insurance Trust
- Lay Employees’ Retirement Plan
Please find an update as of June 30, 2020 for each of these obligations below.
Deposit and Loan Programi
Included in the financial statements for the Office for Financial Services are all assets and
liabilities of the Archdiocese of Philadelphia Deposit and Loan Program Trust Fund (“Deposit
and Loan Program Trust” or “D&L”). The Deposit and Loan Program Trust is a separate legal
entity that provided a deposit and loan program for the benefit of parishes to assure continuation
of the ecclesial goals of the Archdiocese and the parishes. Parish funds on deposit in the D&L
receive a competitive interest rate. Historically these funds have been loaned to other parishes for
construction and other projects. As noted at the asterisk (
*
) below effective on February 17, 2017,
the trustees of the D&L instituted a moratorium on accepting deposits, opening new accounts and
making new loans.
In May 2012, the Archdiocese executed a promissory note to the D&L. In May 2013, the
promissory note was amended to increase the amount of the note to $82 million, which
represented the excess of deposits over assets as of June 30, 2012. The promissory note is
collateralized by specific pledged real estate assets which are documented in the note. As pledged
properties are sold or monetized, net proceeds from these collateral transactions will be deposited
into the D&L, in accordance with the provisions of the promissory note. In the event a transaction
generates in excess of $20 million in net proceeds, the Archdiocese has discretion regarding
alternative uses for the excess so long as remaining pledged assets are at least equal to the then
outstanding principal amount owed.
As of June 30, 2020, the underfunded obligation (i.e. the excess of deposits over assets) in the
D&L was as follows:
(in millions)
D&L Deposits $ 41.0
D&L Assets (excludes promissory note) 14.0
Excess of Deposits Over Assets $ 27.0
As of June 30, 2020, the balance outstanding on the promissory note was $32.1 million, which is
greater than the underfunded obligation noted above. During September 2020, the Archdiocese
closed on the sale of a parcel of land in Delaware County. The land was specifically pledged
property and therefore $8.0 million of the net proceeds were deposited into the D&L in
accordance with the promissory note. We estimate that the value associated with the remaining
pledged properties will be sufficient to resolve the remaining underfunded obligation in the
Deposit and Loan Program Trust.
Insurance Fund/Risk Insurance Trustii
Effective July 1, 2014, the Archdiocese of Philadelphia Risk Insurance Trust (“Risk Insurance
Trust”) replaced the Insurance Fund. On that date the assets and liabilities of the Insurance Fund
were assigned to and assumed by the Risk Insurance Trust. The Risk Insurance Trust administers
the risk management program of the Archdiocese. As part of the risk management program, levels
of self-insurance risk are retained. As of June 30, 2020, insurance related liabilities exceeded
dedicated insurance assets, as follows:
(in millions)
Insurance Related Liabilities $ 71.5
Insurance Related Assets (excl. prepaid expenses) 15.4
Excess of liabilities over assets $ 56.1
Lay Employees’ Retirement Plan
The Lay Employees’ Retirement Plan (LERP) is considered a multiemployer plan for financial
reporting purposes. As such, the assets and actuarially determined liabilities for this plan are not
included in the OFS financial statements. The Archdiocese froze this defined benefit pension plan
effective June 30, 2014.
While not a direct liability of OFS the amount by which the plan liability exceeds plan assets is a
liability of the Archdiocese. The preliminary estimate of the actuarially determined liability for this
plan as of June 30, 2020 was $564.5 million.
When the estimated liability is compared to plan assets available for benefits as of June 30, 2020
(approximately $473.3 million), the plan’s shortfall is approximately $91.2 million. The funded status
of the LERP as of June 30, 2020 has decreased to 83.8%, versus 87.8% as of June 30, 2019. The
funded status decreased from the prior year primarily due to the lowerthan expected investmentreturns
on plan assets during the fiscal year which can be attributed to the volatility in the global financial
markets as a result of the COVID- 19 outbreak.
Looking Forward
The core operating result has been stabilized significantly since FY 2012’s deficit of $17.6 million.
Since that time we have taken steps to ensure a break-even result and did achieve a surplus in FY
2020, 2019 and 2018 as a result of these steps.
As noted earlier, we estimate that the value associated with properties pledged for the Deposit
and Loan Program promissory note is sufficient to resolve the remaining underfunded obligation
once those properties are sold.
Going forward our remaining balance sheet issue will be the underfunded LERP and Risk
Insurance Trust. The underfunded amount required in the Risk Insurance Trust, a result of the
Independent Reconciliation and Reparations Program (IRRP) is in excess of the available
liquidity, meaning borrowing, sales of assets and contributions from related ecclesiastical entities
will be necessary to fund this program.
We have taken the following significant steps to address the Lay Employees’ Retirement Plan:
- froze the plan effective June 30, 2014;
- completed approximately $107 million of lump sum distributions in calendar year 2015
to eligible participants at a rate equivalent to 85.1% of the present value of their normal
retirement benefit;
- made a contribution of $7.5 million during the year ended June 30, 2016 and a
contribution of $30 million during the year ended June 30, 2017;
- instituted an ongoing lump sum distribution program effective October 1, 2017. During
the year ended June 30, 2018 lump sum distributions totaling $5.6 million were made
to 306 eligible participants, at their election, at a rate equivalent to 82.1% of the present
value of their normal retirement benefit. During the year ended June 30, 2019, lump
sum distributions totaling $3.2 million were made to 121 eligible participants, at their
election, at a rate equivalent to 86.6% of the present value of their normal retirement
benefit. During the year ended June 30, 2020 lump sum distributions totaling $2.8
million were made to 93 eligible participants, at their election, at a rate equivalent to
87.8% of the present value of their normal retirement benefit, and distributions totaling
$0.2 million were made to 2 eligible participants, at their election, at a rate equivalent
to 74.0% of the present value of their normal retirement benefit.
- increased the funding rate to 5.9%, from 4%, of “pension eligible payroll” effective July
1, 2016. Based on the most recently completed actuarial valuation for the plan (as of
July 1, 2020), if we maintain a funding rate of 5.9%, and all other actuarial assumptions
are achieved, the plan should be fully funded in just under 12 years.
Additional Financial Statements for the Fiscal Year Ended June 30, 2020
The audited financial statements for OFS do not include financial results for the Office of Catholic
Education, Catholic Social Services, Saint Charles Borromeo Seminary, or the Catholic Charities
Appeal as all are separate entities.
Additionally, none of the reports released by the Archdiocese include financial statements for
individual parishes. All parishes are independent and autonomous entities.
Original source can be found here
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