The Diocesan Finance Council met on October 27, 2011, at Wadhams Hall in Ogdensburg, with Bishop Terry R. LaValley presiding.

During the course of the meeting the following agenda items were reviewed and discussed: Audited Financial Statements  -June 30, 2011
Mr. Edward Mucenski, CPA, partner in Pinto, Mucenski, Hooper, Van House & Co., Certified Public Accountants, P.C., presented the audited financial statements as of June 30, 2011 for the Central Administrative Offices of the Roman Catholic Diocese of Ogdensburg. Mr. Mucenski noted the following during the course of his presentation:
•The auditors issued an unqualified opinion, which means the financial statements present fairly the financial position of the diocesan central offices as of June 30, 2011.

• Net assets of the diocese increased by $3.8 million, primarily due to strong investment performance during the 2010-11 fiscal year. Net realized and unrealized gains on investments amounted to $3,765,653.

• Loans receivable in the Deposit & Loan Fund from parishes and affiliates, net of reserves for uncollectible accounts, decreased from $3,617,692 to $3,186,609. Deposits in the Fund (except those owned by the diocese) totaled $14,359,173, a decrease of $393,506 as compared to the prior year.

• Assets restricted for support of the Lay Employees’ Retirement Plan increased by almost $4 million.

• There were no significant weaknesses in internal control noted by the auditors in their Required Communications to the diocese.

Mr. Mucenski stated his appreciation to the Diocesan Finance Office for its efforts in preparation of the audit work papers, and members of the council stated their appreciation to Michael Tooley, Diocesan Fiscal Officer, and his staff for the clean opinion expressed by the auditors.

Budget-to-Actual Reports for the year ended June 30, 2011
In addition to the information shared in discussion of the audited financial statements Mr. Tooley shared the following with the Diocesan Finance Council:

• Total expense for Special Care of Priests in 2010-11 was $283,749; $54,000 was budgeted. Nine members of the clergy received support services during the year.

• Expenses for salaries and fringe benefits for central office administration of Catholic Schools was $52,000 lower than anticipated, as an open administrative position remained vacant. The Department of Education has reconfigured its administration structure within Catholic Schools, Christian Formation and Formation for Ministry to provide better efficiencies and a cost savings to the diocese.

• $44,332 was transferred from the Protected Self-Insurance Program for support of the Safe Environment program.

• North Country Catholic’s expenses exceeded revenue by $23,060, with net assets designated for its support in the amount of $18,149 applied toward the loss. Advertising revenue was $15,700 below budget. The diocesan newspaper believes it will close this deficit in 2011-12 in part due to net revenue expected from the pilgrimage to Italy to be led by Bishop LaValley in spring 2012, and in part due to an increase in readership of the newspaper in electronic format.

• The 2010 Bishop’s Fund Appeal received $1,207,934, exceeding the goal of $1.2 million. Agency grants of $1,137,804 were issued during the year.

•The Bishop’s Good Samaritan Fund issued $78,852 in grants in 2010-11, of which almost $20,000 were special grants for food assistance.

• The Office of Vocations saw its expenses increase from $26,875 in 2009-10 to $73,855 in 2010-11 as the diocese made a significant investment by hiring a full-time director (Rev. Bryan Stitt). There are currently five men in their first year of seminary as a result of Fr. Stitt’s efforts.

• $177,507 was issued in education grants to Catholic schools in the diocese in 2010-11.

• $115,000 in new annuities was issued in the diocese’s Charitable Gift Annuity program in 2010-11. The diocese is now registered to issue annuities to residents in Florida.

• Net assets supporting Education of Seminarians increased by $156,760 to $886,786, due to unrealized net gains on investments.

2011 Bishop’s Fund Appeal
Information from the October 21 report issued by Valerie Mathews, Director of the Bishop’s Fund Appeal, on the 2011 appeal noted the following:
•To date $941,810 has been contributed or pledged; the goal is $1.25 million.

•The 2011 appeal is approximately $23,269 higher than the amount contributed and pledged through the same time period in the 2010 appeal.

•There are 7,850 donors to date, compared to 7,999 donors one year ago at this time.

Investments
Investment performance for the 2010-11 fiscal year was reviewed. As of June 30, 2011 the market value of investments was $90,978,800, an increase of $11.7 million as compared to June 30, 2010.

Mr. Tooley noted that the performance of the primary investment manager of diocesan portfolios, Manning & Napier Advisors, Inc., exceeded benchmarks during the year, earning a rate of return of 20.9%.

Other highlights:
• The investment in Commonfund Realty Investors is valued at $17,983 as of the latest valuation date, June 30, 2010. The program, which focused on direct purchase of real estate in selected areas of the country, suffered significant losses when the market value of real estate in certain areas of the country plummeted beginning in 2008. It is now winding down its affairs. To date the diocese has received distributions of $656,479 from CRI. The diocese’s original investment was $4.15 million.

• The diocese’s investment in Dimensional Fund Advisors emerging markets had a rate of return of 22.7% in 2010-11, bringing its market value to $2,412,930. The diocese invested $2.5 million in the program in 2007.

• The diocese’s investment in The Investment Fund for Foundations Multi-Asset Fund had a rate of return of 20% in 2010-11. Its market value as of June 30, 2011 is $12,281,083; the diocese’s original investment was $10,220,618.

• The diocese’s Investment Advisory Committee committed $2 million to a real estate investment, The Investment Fund for Foundations Real Opportunities Fund. The committee believes this modest investment will help diversify the investment portfolios.

Investment performance for the first quarter of the 2011-12 fiscal year was shared with council members. In that quarter portfolios lost approximately 9% of their total market value, as market volatility rules in the world of financial investments.

Deposit & Loan Fund
Net assets of the diocese’s Deposit & Loan Fund increased by $1.3 million in 2010-11, bringing the Fund’s net assets to $3,642,044 as of June 30, 2011.

This is the highest net asset value in the fund’s history. The diocese reduced the interest rate on loans during 2010-11 from 5% to 4%.  

Diocesan Trust Fund
Mr. Tooley stated to the Diocesan Finance Council he expected some investments in the Diocesan Trust Fund to have their respective market values below cost when the Fund is valued at September 30.

Such being the case, it is likely the diocese will continue to limit distributions to investors to investment income only in 2011-12, an anticipated rate of return of 2%.

This past June, upon recommendation of the Diocesan Finance Council, bishop LaValley approved an increase in the quarterly dividend from $100,000 to $125,000 a quarter for the first three quarters of the fiscal year in 2011-12.

The fourth quarter dividend will be dependent upon investment income received during the year.

Endowed Care Cemeteries Fund
Investments in the Endowed Care Cemeteries Fund will continue to see a return of approximately 5% of their respective market values in 2010-11. No change is planned in regards to the timing or the amounts of distributions from the Fund.

Lay Employees’ Retirement Plan
Mr. Tooley informed the council the diocese had recently received the July 1, 2011 actuarial valuation for the Lay Employees’ Retirement Plan. This valuation, and other financial information pertinent to the Plan, was reviewed by the Lay Employees’ Retirement Committee at its annual meeting on October 28.

The actuarial valuation shows the Plan to be underfunded by almost $3.6 million as of July 1, and while this is significant it is an improvement when compared to the previous year. As of June 30, 2011, the Plan is 87% funded, versus 77% funded one year earlier.

The percentage calculated is the market value of investments divided by the present value of future obligations of the Plan to active employees and current retirees.

The actuaries note that payments to current retirees are not threatened; the current market value of investments is 175% of the future estimated payments to current retirees.

Retirement Plan for Priests
The July 1, 2011 actuarial valuation of the Retirement Plan for Priests shows the Plan to be fully funded. Strong investment performance in 2010-11, plus donations and bequests received in addition to normal contributions to the Plan, will keep the required contribution in 2011-12 close to that of 2010-11 ($386,941 is required to maintain full funding in 2011-12).

The new funding formula for the Plan in 2011-12 is expected to generate $470,000, more than enough to cover the year’s required contribution. However, the Plan’s actuarial projection over the next three years projects future required contributions will range between $400,000 and $600,000, depending upon future investment performance and possible ad hoc pension increases to retirees in the future.

Diocesan Protected Self-Insurance Program
The Protected Self-Insurance Program continues to be financially sound. The program has designated net assets in the amount of $2,583,667, as well as reserves for future claims in the amount of $904,820, as of June 30, 2011.

Mr. Tooley informed the council that when New York State  adopted its 2011-12 budget it passed legislation to discontinue group self-insured programs for Workers’ Compensation insurance beginning January 1, 2012.
Several dioceses in NYS, including the Diocese of Ogdensburg, currently operate as a group self-insured program.

After consideration of alternatives, the diocese elected to apply to NYS to continue self-insurance for Workers’ Compensation in a different, permissible format which basically would allow the diocese’s program to continue as it has for many years.

The Diocese of Ogdensburg awaits the decision of the Workers’ Compensation Board in regards to its application.

Health Insurance
Since the Diocesan Finance Council’s meeting the diocese has been informed that health insurance premiums will increase 12.7% effective January 1, 2012.

Mr. Tooley also informed council members the federal Department of Health and Human Services released guidelines under the Affordable Care Act which will require additional preventative services for women. Among the required services is “all FDA approved contraceptives” and “sterilization procedures and counseling”.
Effective August 1, 2012, these services are to be included in all individual and group health insurance plans, including self-insure plans, without patient cost sharing.

An initial ruling provides an exemption for religious employers, but the narrow definition of a religious employer could see St. Joseph’s Home and Catholic Charities become subject to these required services. Catholic organizations have imitated lobbying efforts to contest this administrative decision of the federal government.

The Foundation of the Roman Catholic Diocese of Ogdensburg
Mr. Tooley informed the Diocesan Finance Council that the diocese’s Foundation saw its net assets increase from $3,134,830 to $4,373,582 in 2010-11. New contributions of $549,840 were received during the year. The Foundation now has 39 endowments.

Subsequent to the meeting, the Foundation’s Board of Directors held its annual meeting, at which time it approved dividends of $60,000 in 2011-12. The Foundation distributed $36,000 to investors in 2010-11.
The annual report of the Foundation appeared in the Nov. 16 issue of the North Country Catholic.