Cleveland Catholic Diocese - Full Finance Report 2011

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FINANCE OFFICE OF THE
DIOCESE OF CLEVELAND
FINANCIAL REPORT
JUNE 30, 201I and 2010
FINANCE OFFICE OF THE DIOCESE OF CLEVELAND
CO TENTS
INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL
STATEMENTS
FI ANCIAL STATEMENTS
Statements ofFinancial Position 2-3
Statements ofActivities 4-5
Statements ofeash Flows 6
otes to Financial Statements 7-18
INDEPE DENT AUDITORS' REPORT 0 ACCOMPANYfNG
fNFORMATIO 19
ACCOMPANYfNG fNFORMATION
Detail ofUnrestricted Revenues and Subsidies by Secretariat on
Cathedral Square 20-23
Maloney>Novotny, ,
1111 SuperiorAn'nueISuite 7001 Clcv(>IHnd,Ohio 44114-25-10
p216.36:l.0100 F2Hi.:l{)J.O;'OO W1l1H]olleynovotny.col1l
Most Reverend Richard G. Lennon
Roman Catholic Bishop ofThe Diocese ofCleveland
Cleveland, Ohio
Independent Auditors' Report
We have audited the accompanying statements offinancial position ofthe Finance Office of
The Diocese of Cleveland ("Finance Office") as of June 30, 2011 and 2010, and the related
statements ofactivities and cash flows for the years then ended. These financial statements are the
responsibility ofthe Finance Office's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perfonn the audit to obtain
reasonable assurance about whether the financial statements are free ofmaterial misstatement. An
audit includes consideration ofinternal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Finance Office's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opmion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position ofthe Finance Office as ofJune 30, 2011 and 2010, and the changes
in its net assets and its cash flows for the years then ended in confonnity with accounting principles
generally accepted in the United States ofAmerica.
Cleveland, Ohio
October 24, 20II
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Cleveland Canton Elyria
FINANCE OFFICE OF THE DIOCESE OF CLEVELAND
STATEMENT OF FINANCIAL POSITION
Juno30, 201 I
Temporarily Pemlanently
Unrestricted Restricted Restricted Total
ASSETS
Cash and cash equivalents $ 4,915,685 $ 4,915,685
Accounts receivable 2,962,231 2,962,231
Parish consolidation receivables, net ofallowance
for doubtful accounts of$1,565,820 1,583,377 1,583,377
Parish and school notes receivable, net of
allowance for doubtful accounts of$1,328,000 204,541 204,541
Notes receivable 384,98I 384,981
Land held for future parish sites 285,075 285,075
Assets held as custodian 29,449,869 29,449,869
Endowment investments 2,286,633 $1 1,762,570 $47,759,109 61,808,312
TOlal assets $42,072,392 $ II,762,570 $47,759,109 $101,594,071
LIABILITIES AND NETASSETS
Liabilities:
Accounts payable $ 240,532 $ 240,532
Accrued expenses and other liabilities 152,885 152,885
Funds held for others 29,449,869 29,449,869
Total liabilities 29,843,286 29,843,286
Net assets;
Unrestricted 12,229,106 12,229,106
Temporarilyrestricted $11,762,570 11,762,570
Pennanently restricted $47,759,109 47,759,109
Total net asselS 12,229,106 11,762,570 47,759,109 71,750,785
Total liabilities and net assets $42,072,392 $ I1,762,570 $47,759,109 $101,594,071
The accompanying notes are an integral part ofthese financial statements.
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FINANCE OFFICE OF THE DIOCESE OF CLEVELAND
STATEMENT OF FINANCIAL POSITION
June 30, 2010
Temporarily Pennanently
Unrestricted Restricted Restricted Total
ASSETS
Cash and cash equivalents $ 6,051,746 $ 6,051,746
Accounts receivable 936,907 936,907
Parishconsolidation receivables, net ofallowance
for doubtful accounts of$559,813 1,616,556 1,616,556
Parish and school notes receivable, net of
allowance for doubtful accounts of$550,000 689,125 689,I25
Noles receivable 1,384,98I 1,384,981
Land held for future parish sites 285,075 285,075
Assets held as custodian 23,661,494 23,661,494
Endowment investments 2,352,868 $ I1,639,982 $43,251,700 57,244,550
Total assets $36,978,752 $11,639,982 $43,251,700 $9I,870,434
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable $ 430,223 $ 430,223
Accrued expenses and other liabilities 157,180 157,180
Funds held for olhers 23,661,494 23,661,494
Total liabilities 24,248,897 24,248,897
Net assets:
Unrestricted 12,729,855 12,729,855
Temporarily restricted $11,639,982 11,639,982
Pennancntly restricted $43,251,700 43,251,700
Total net assets 12,729,855 11,639,982 43,251,700 67,621,537
Total liabilities and net assets $36,978,752 $11,639,982 $43,251,700 $91,870,434
The accompanying notes are an integral part ofthese financial statements.
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FINANCE OFFICE OF THE DIOCESE OF CLEVELAND
STATEMENT OF ACTIVITIES
Year Ended June 30, 2011
Temporarily Pennanently
Unrestricted Restricted Restricted Total
REVENUES
Assessments $13,588,650 $13,588,650
Endowment and othercontributions $ 73,499 $ 84,781 158,280
Endowment and other investment income 1,423,059 262,760 1,685,819
Net realized and unrealized gains on investments 8,401 851,743 4,422,628 5,282,772
Rental income 357,276 357,276
Other revenues 41 I,719 411,719
Net assets released from restrictions 1,065,414 (1,065,414)
Total revenues 16,854,519 122,588 4,507,409 21,484,516
OPERATING EXPENDITURES
Subsidies by Secretariat on Cathedral Square:
Chancery 1,599,630 1,599,630
Clergy and religious 1,155,306 1,155,306
Education 2,712,457 2,712,457
Catechctical services 875,429 875,429
Finance 1,171,183 1,171,183
Legal 446,716 446,716
Parish life 1,029,924 1,029,924
Bishop's direct reporting offices 3,772,871 3,772,871
Catholic Community Foundation 778,614 778,614
Otherexpenses:
Administrative 1,088,701 1,088,701
Pastoral 612,467 612,467
Real estate taxes 31,079 31,079
Distributions 736,316 736,3I6
Total operating expenditures 16,010,693 16,010,693
Change in net assets from operations before
other changes 843,826 122,588 4,507,409 5,473,823
OTHER CHANGES
Diocesan consolidation costs (1,344,575) (1,344,575)
CHANGE IN NET ASSETS (500,749) 122,588 4,507,409 4,129,248
NET ASSETS AT BEGrNNrNG OF YEAR 12,729,855 11,639,982 43,251,700 67,621,537
NET ASSETS AT END OFYEAR $12,229,I06 $1 I,762,570 $47,759,109 $71,750,785
The accompanying notes are an integral paJ1 ofthese financial statements.
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FINANCE OFFICE OF THE DIOCESE OF CLEVELAND
STATEMENT OF ACTIVITIES
Year Ended June 30, 20I0
Temporarily Permanently
Unrestricted Restricted Restricted Total
REVENUES
Assessments $13,934,074 $13,934,074
Endowment and othercontributions $ 199,405 $ 19,976 219,381
Endowment and otherinvestment income 1,690,803 216,656 1,907,459
Net realized and unrealized gains on investments 5,659 400,721 3,369,164 3,775,544
Rental income 358,356 358,356
Otherrevenues 116,242 116,242
Net assets released from restrictions 712,492 (712,492)
Total revenues 16,817,626 104,290 3,389,140 20,311,056
OPERATING EXPENDITURES
Subsidies by Secretariat on Cathedral Square:
Chancery 1,605,801 1,605,801
Clergyand religious 1,139,584 1,139,584
Education 1,685,574 1,685,574
Catechetical services 860,321 860,321
Finance 1,144,482 1,144,482
Legal 520,698 520,698
Parish life 1,020,161 1,020,161
Bishop's direct reportingoffices 3,747,899 3,747,899
Catholic Community Foundation 670,000 670,000
Otherexpenses:
Administrative 1,428,910 1,428,910
Pastoral 620,352 620,352
Real estatetaxes 28,565 28,565
Distributions 690,I70 690,170
Total operatingexpenditures 15,162,517 15,162,517
Change in net assets from operations before
otherchanges 1,655,109 104,290 3,389,140 5,148,539
OTHER CHANGES
Diocesan consolidation costs (762,593) (762,593)
Special (distribution) contribution (2,985,386) 2,985,386
Total other changes (3,747,979) 2,985,386 (762,593)
CHANGE IN NET ASSETS (2,092,870) 3,089,676 3,389,140 4,385,946
NET ASSETS AT BEGINNING OF YEAR 14,822,725 8,550,306 39,862,560 63,235,591
NET ASSETS AT END OF YEAR $12,729,855 $11,639,982 $43,251,700 $67,621,537
The accompanying notes are an integral part ofthese financial statements.
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FINANCE OFFICE OF THE DIOCESE OF CLEVELAND
STATEMENTS OF CASH FLOWS
Years Ended June 30, 201 1and 2010
201 I 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Change in net assets $ 4,129,248 S4,385,946
Adjustments to reconcilechange in net assets to netcash
used in operating activities:
Net realized and unrealized (gains on) investments (5,282,772) (3,775,544)
Contributionsrestricted for long-term investment (84,781) (19,976)
Changes in operatingassets and liabilities:
Increase in accounts receivable (2,025,324) (248,390)
Decrease(increase) in parish consolidation receivables 33,179 (838,018)
(Decrease) increase in accounts payable (189,691) 124,377
Decrease in accrued cltpensesand other liabilities (4,295) (4,286)
Net cash used in operating activities (3,424,436) (375,891)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in investments, net 719,010 255,982
Proceeds from notes receivable 1,000,000
Proceeds from parish and school notes receivable, net 484,584 86,502
Net cash provided by investing activities 2,203,594 342,484
CASH FLOWS FROM FINANCING ACTIVITIES
Contributions restricted for Jong-tenn investment 84,781 19,976
DECREASE IN CASH AND EQUIVALENTS (1,136,061) (13,431)
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 6,051,746 6,065,177
CASH AND EQUIVALENTS AT ENDOF YEAR $ 4,915,685 $ 6,051,746
The accompanying notes arean integral part ofthese financial statements.
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FINANCE OFFICE OF THE DIOCESE OF CLEVELAND
NOTES TO FINANCIALSTATEMENTS
Note 1. Organization and Operations
The Finance Office ofThe Diocese ofCleveland ("Finance Office") is organized under the
stewardship ofthe Bishop ofThe Diocese of Cleveland (the "Bishop") and is responsible
for the collection of assessments and Diocesan revenue, the payment of Diocesan
obligations, the purchase and sale ofland held for future parish sites, and all financial, real
estate, and investment transactions that have been delegated to the Finance Office by the
Bishop.
The major efforts of the Finance Office, which are reflected in the financial statements,
relate to the funding requirements in the fields of education and religious development,
community and human development, work for the universal church, support for high
schools, grade schools, and inner city parishes, subsidies to religious and social programs,
financing for parishes, as well as Diocesan administration and auxiliary services. In
addition to these activities, the Finance Office makes loans to various parishes and other
religious organizations.
These financial statements exclude certain actIvIties of the Diocese such as parishes,
schools, cemeteries, seminaries, charities, Catholic Community Foundation, etc. Each of
these activities is an operating entity distinct from the Finance Office. These entities carry
out and record their own services and programs.
Note 2. Summary ofSignificant Accounting Policies
Accrual Basis:
The accompanying financial statements have been prepared on the accrual basis of
accounting and, accordingly, reflect all significant receivables, payables, and other
liabilities.
Basis ofPresentation:
The Finance Office financial statements are presented in accordance with accounting
principles generally accepted in the United States of America ("GAAP"). The Finance
Office is required to report infonnation regarding its financial position and activities
according to three classes of net assets; unrestricted, temporarily restricted, and
permanently restricted.
A description ofthese categories follows:
Unrestricted Net Assets - Includes the net assets that are free of donor-imposed
restrictions and are neitherpermanentlyrestricted nor temporarilyrestricted.
Temporarily Restricted Net Assets - Includes the net assets from contributions or other
inflows where the use is limited by donor-imposed restrictions that either expire by the
passage oftime or can be fulfilled and removed by the actions ofthe Finance Office.
Permanently Restricted Net Assets - Includes the net assets from contributions or other
inflows where the use is limited by donor-imposed restrictions that neither expire by the
passage oftime nor can be fulfilled or removed by actions ofthe Finance Office.
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FINANCE OFFICE OF THE DIOCESE OF CLEVELAND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note 2. Summary ofSignificant Accounting Policies (Continued)
Contributions:
Contributions received are recorded as unrestricted, temporarily restricted, or pennanently
restricted support, depending on the existence and/ornature ofanydonor restrictions.
Support that is restricted by the donor is reported as an increase in unrestricted net assets if
the restriction expires in the reporting period in which the support is recognized. All other
donor~restrictedsupport is reported as an increase in temporarily or pennanently restricted
net assets, depending on the nature ofthe restriction.
When a restriction expires (that is, when a stipulated time restnctlOn ends or purpose
restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted
net assets and reported in the Statements of Activities as Net Assets Released From
Restrictions.
Revenues:
The principal source of operating revenue for the Finance Office is parish assessments.
The amount levied against each parish is detcnnined by applying a specific fonnula to
parish revenues as defined by the Diocese. Assessments from parishes and other related
entities are recorded as revenues when received. All other revenues are recorded on an
accrual basis.
Cash and Equivalents:
The Finance Office considers all highly liquid investments, with initial maturities ofthree
months or less, to be cash equivalents. These investments are carried at market value.
Investments:
GAAP requires that investments in equity securities with readily detenninab1e fair values
and all investments in debt securities be reported at fair value with realized and unrealized
gains and losses included in a Statement of Activities. Investment income has been
recognized in the Statements ofActivities in accordance with the tenns ofany endowment
restrictions.
Investments in U.S. Government obligations, corporate bonds, and mortgage backed
securities, traded on a national securities exchange, are valued at the last reported sales
price on the last business day ofthe fiscal year; investments traded on a national securities
exchange for which no sale was reported on that date and investments traded on the over
the-counter market are valued at the last reported bid prices; and investments not having an
established market are valued at fair value based upon the advice of the investment
advisor.
Accounts Receivable:
Accounts receivable represent advances to churches, schools, and charitable and
benevolent institutions associated with, or controlled by, the Diocese, as well as monies
advanced to the Catholic Community Foundation.
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