About the Diocesan Annual Financial Report
Consistent with its policy of providing financial disclosure, the Diocese of Harrisburg is once again presenting the consolidated financial statements of its Central Offices and Ministries. The consolidated financial statements presented here for the fiscal years ended June 30, 2017 and 2018 were prepared in accordance with Generally Accepted Accounting Principles (GAAP) and were audited by the independent certified public accounting firm McKonly and Asbury, LLP. These consolidated financial statements do not include the financial status of diocesan parishes and schools or Catholic Charities of the Diocese of Harrisburg, PA. Inc. Each of these entities maintains its own set of fiscal records and reports individually to its own particular constituencies.
The complete consolidated financial statements for the diocese, together with the independent auditor’s report and notes to the consolidated financial statements, are available from Harrisburg Catholic Administrative Services, Inc. (HCAS) upon request.
Dear Brothers and Sisters in Christ,
As we approach the end of what has been a challenging year, I thank you for your continued financial support to your parish and the Diocese. Many of you have been raising questions about the financial status of the Diocese, especially during the past several months. Detailed on this and the following page you will find a condensed financial report for the Diocese of Harrisburg for the fiscal years ending June 30, 2018 and 2017. As the recipient of your generosity, the Diocese of Harrisburg and I as your Bishop take the responsibility of carefully managing your gifts very seriously. We are committed to the highest standards of good stewardship, accountability and transparency. While we have had financial challenges this year, through the good stewardship and management of our departments, we ended the 2018 fiscal year able to meet our financial obligations.
Moving forward, I know many of you have concerns about our pending Survivors’ Compensation Program. I want to assure you that the funding for this program will come from the Diocese’s available assets, including investments, earnings from investments and recovery from insurance. In addition, the Diocese will also borrow money and, if needed, will sell Diocesan assets to fund this program.
I give you my word that we will continue to be good stewards of your financial gifts. By opening your hearts in generous support for the Diocese of Harrisburg, you share in the ministries of prayer and worship, education and service, social concerns and works of charity that would not be possible without your financial commitment.
I am grateful for the blessings the Lord has given us and for the generosity of Central Pennsylvania’s faithful. Please pray for our Diocese, for our clergy, for our mission and for our stewardship of God’s gifts.
Be assured of my prayers for all of you.
Most Reverend Ronald W. Gainer, D.D., J.C.L.
Bishop of Harrisburg
The Roman Catholic Diocese of Harrisburg Charitable Trust and Affiliates (Diocesan Administrative Entities or “DAE”) discussion and analysis provides an overview of the DAE’s financial activities for the fiscal year ended June 30, 2018. Since this information is designed to focus on the current year’s activities, resulting changes and currently known facts, it should be read in conjunction with the message from Bishop Gainer and the consolidated financial statements.
~Increase in Total Net Assets of $1.7 million or 2.8%
~Decrease in Total Unrestricted Net Assets of $1.2 million or 6.2%
~Increase in Total Unrestricted Revenues of $1.2 million or 3.4%
~Increase in Bishop’s Annual Lenten Appeal of $72,000 or 1.0%
~Increase of Total Expenses and Losses of $982,000 or 2.9%
~Decrease in Change in Unrestricted Net Assets of $1.9 million or 286.0%
~Total Legal Costs associated with Grand Jury Investigation – $962,000
~Legal Fees Paid by the DAE for accused priests – $0
Using this Diocesan Annual Report
This annual report to the faithful consists of two parts: financial statement discussion and analysis (this section) and the basic consolidated financial statements. The basic financial statements include a series of financial statements. The Consolidated Statements of Financial Position, the Consolidated Statements of Activities, and the Consolidated Statements of Cash Flows provide information about the activities and cash flows of the DAE as a whole and present an overall consolidated view of the DAE’s finances.
Financial Statement Discussion and Analysis
At June 30, 2018, the DAE’s consolidated total net assets increased 2.8% to $62.8 million from $61.1 million. In contrast, total unrestricted net assets—the part of net assets that can be used to finance day-to-day operations and ministries without constraints established by donors or other legal requirements – Decreased by 6.2% to $18.3 million from $19.5 million.
The decrease in unrestricted net assets arose primarily because of the following factors:
Total unrestricted revenues and gains increased by $1.2 million or 3.4%. Total expenses and losses, including the total cost of all programs and services, increased by $982,000 or 2.9%, with existing programs and services remaining largely unchanged from the prior year. Cost containment and good stewardship on the part of program managers helped to offset additional legal costs incurred as part of the Grand Jury investigation. Other changes in unrestricted net assets, including net losses on investments, depreciation and amortization, changes in priests’ pension and post retirement obligations, and net gains on disposals of property resulted in a net reduction in total unrestricted assets of $1.2 million during 2018. Other changes in unrestricted net assets are subject to significant fluctuations due, in part, to changes in interest rates, investment performance and actuarial valuations on the Priests’ Pension and Post Retirement Plans.
At June 30, 2018, total assets of $183.3 million increased 0.8% over last year’s total assets of $181.9 million. Included in this year’s total change is an increase in Investments of $4.5 million, the majority of which relates to changes in FOCUS, Diocesan Perpetual Care Funds and the Bishop’s Designated Fund portfolios. Also included in the change in total assets is a $1.5 million reduction in Notes and Loans Receivable, net of the allowance for doubtful loans. The main driver of the change in Notes and Loans Receivable is an increase in the allowance for doubtful loans. Net Property, Equipment and Software also decreased by $1.0 million, principally as a result of depreciation.
At June 30, 2018, total liabilities of $120.4 million decreased 0.3% over last year’s total liabilities of $120.7 million. Included in this year’s total change is a $1.2 million increase in accounts payable, accrued expenses and deferred revenue, the majority of which relates to the timing of invoices received for payment. Also included in the change in total liabilities is a $383,000 decrease in total deposits payable under the diocesan savings and loan program. The liability for Priests’ Pension and Postretirement Benefits decreased $717,000, and the estimated liability for self-insurance decreased $203,000.
Economic Factors and Next Year’s Budgets
Certain information set forth in this section contains “forward-looking information,” including “future oriented financial information” and “financial outlook” (collectively referred to herein as forward-looking statements). Except for statements of historical fact, information contained herein constitutes forward-looking statements. Forward-looking statements are provided to allow the readers of this information the opportunity to understand the DAE’s beliefs and opinions in respect of the future.
Although forward-looking statements contained in this presentation are based upon what the DAE believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The DAE undertakes no obligation to update forward-looking statements if circumstances or estimates or opinions should change, except as required by applicable laws. The reader is cautioned not to place undue reliance on forward-looking statements.
The DAE considered many factors when setting the fiscal-year budget, and the anticipated revenues necessary to fund its activities. These factors included changes to the Bishop’s Annual Lenten Appeal, anticipated investment income and gains, as well as the anticipated use of investment and other capital assets. Lastly, the DAE considered the health and property and casualty insurance markets to determine the billings necessary to ensure the viability of its centrally administered programs.
The DAE also considered staffing needs, both current and anticipated, to conduct its activities and ministries. Staffing cuts and reductions or delays in hiring new staff were made where appropriate, and other budget reductions were proposed to ensure resources were used efficiently. Legal costs associated with the Grand Jury investigation were not budgeted, nor were any settlements to survivors of abuse.
Historically, balanced budgets have been submitted to the Bishop and Diocesan Finance Council for approval. Actual results can differ materially from budget projections, in part due to some of the items cited above.
Contact the DAE’s Financial Management
This financial report is designed to provide the faithful of the Diocese of Harrisburg with a general overview of the DAE’s finances and to show the accountability and stewardship for the generous gifts it receives from its benefactors. If you have questions about this report or need additional financial information, please contact Harrisburg Catholic Administrative Services at 717-657-4804.
(Discussion and Analysis by Don Kaercher, CEO of Harrisburg Catholic Administrative Services.)
- Most Rev. Ronald W. Gainer – Bishop of Harrisburg
- Very Rev. David L. Danneker, Ph.D. – Vicar General, Diocese of Harrisburg
- Mr. Mark B. Glessner – Retired Certified Public Accountant Partner from PricewaterhouseCoopers LLC. He is also a member of the Board of Directors of Penn National Insurance and chairman of the Audit Committee
and a member of the Board of Directors of UPMC Pinnacle and chairman of the Finance Committee. Current Appointment Date: October 19, 2016.
- Ms. Lora A. Kulick, Esq. – Governor’s Office of General Counsel. Current Appointment Date: October 1, 2018
- Mr. Donald H. Nikolaus, Esq. – Consultant & Chairman at Donegal Mutual Insurance Company, former President and CEO of Donegal Mutual Insurance Company. Chairman of the Board at Le Mars Insurance Company, Sheboygan Falls Insurance Company, Michigan Insurance Company, Peninsula Indemnity Company, Southern Insurance Company of Virginia, Peninsula Insurance Company, and Conestoga Title Insurance Company. He also currently serves as an Executive Officer and Director of several Lancaster County-based water utilities. Current Appointment Date: October 1, 2018.
- Very Rev. Edward J. Quinlan – Secretary for Education / Pastor. Current Appointment Date: April 1, 2016.
- Mrs. Lisa Rohrer – A Stewardship Ministry Administrator with a BS in Accounting and years of experience in developing and implementing parish Stewardship Renewals. Current Appointment Date: October 1, 2018
- Mr. Kenneth R. Shutts – Retired President and CEO Penn National Insurance, a member of the Board of Directors of Penn National Insurance, a member of the Disciplinary Board for the Supreme Court of Pennsylvania, past-Chairman of the Pennsylvania Association of Mutual Insurance Companies, as well as a member of the Executive Advisory Committee of the Property Casualty Insurers Association of America. Current Appointment Date: May 23, 2016.
- Mr. Donald Kaercher – CFO, Diocese of Harrisburg
- Mr. Chad Seiders – Controller, Diocese of Harrisburg
Secretariat for Administrative Services
Office of Parish and School Accounting
Office of Diocesan Accounting
Office of Accounts Payable
Office of Buildings and Properties
Office of Catholic Cemeteries
Office for Stewardship & Development
Office of Human Resources
Office of Information Technology
Office of Payroll and Benefits