Annual Audit Information Released For Diocese Of Evansville
The fiscal year of the Diocese of Evansville ended on June 30, 2016. The operating results for the 12 months ended June 30, 2016, had many positive components during the course of the year. In addition, there were some factors that continued to weigh on the operating results. I would like to address some of the more significant issues that affected the operating results of the Diocese.
First, I would like to focus on the audit adjustments for the lay pension plan. This year’s audited financial statements include several adjustments that are required by the Financial Accounting Standards Board. The purpose of these adjustments is to reflect the Diocese’s obligation under the plan to all plan participants. The accounting assumptions for the pension plan differ significantly from the actual funding requirements, thus creating significant adjustments. This year, several adjustments were recorded within the lay pension plan that addressed specific situations. These included the annual funding requirement of the plan, the impact of the interest rate utilized by the plan, the performance of the investment portfolio, and the impact of updated mortality table for the calculation of future benefits. The net impact of all these adjustments was an expense of $9,810,851 and an increase of the pension liability of $10,484,986.
I would like to note that the pension liability reflected on the balance sheet is not a liability that is due within the next year. This is a potential liability that would be satisfied over 25-30 years. In addition, as interest rates change and the investment markets stabilize, there could be positive movement simply from those factors. The defined benefit pension plan was frozen to new participants as of July 1, 2013.
Second, I would like to look at the results of the Diocesan Insurance Plans. The Lay Medical Plan had an operating surplus of $1,515,050 (before considering intercompany eliminations). The Clergy Medical Plan had an operating surplus of $520,316. The Diocesan Property and Liability Plan had an operating surplus of $1,035,430. All of the Diocesan Insurance Plans are self-insured. Therefore, the primary cost of each class of insurance is the actual claims for the employees, the Priests, and the Diocese as a whole. These costs can fluctuate significantly from year to year. However, I believe we have taken many positive steps in the effort of controlling our insurance cost. These steps include various wellness programs, safety inspections of the property, increased deductibles and co-pays and mandatory health screening.
Third, I would like to concentrate on the performance of the Diocesan investment portfolio. For the year ended June 30, 2016, the overall net investment activity was a loss of $406,427. The amount represented by the value of our investments is something that changes on a daily basis. Therefore, our goal is to maximize investment returns over the long term. We are mindful that many economic factors could weigh on the portfolio in the coming years. The Diocesan Finance Council will continue to closely monitor these results on a regular basis.
I would like to comment on the amount of cash reflected on the audited financial statements of the Diocese. At the end of June 2015, our audited financial statement showed cash and cash equivalents of $6,879,100. In comparison, at the end of June 2016, the cash and cash equivalents were $8,554,405. It is significant to note that this increase is related to many of the favorable variances, especially within the insurance funds, that I have outlined above. The decision was made, after consulting with the appropriate councils, to continue to transfer a portion of this cash to the Diocesan investment portfolio. The diocesan staff will closely monitor the cash position of the Diocese with regular oversight provided by the Bishop’s advisory councils.
I would now like to discuss the major components of our audit report that are included in the exhibits that follow.
The financial data presented in this article include selected financial information from the audited financial statements conducted and prepared by BKD, LLP. The audit contains an unqualified opinion on the financial operations of the Diocese.
The complete audited financial statements are available for review on the diocesan web-site or in person during normal business hours (8:00 am – 5:00 pm CST) in the office of the Treasurer.
I would like to briefly discuss each report presented. First, is the Combined Statement of Financial Position. This report lists the assets, liabilities and net assets of the Diocese as of June 30, 2016 as well as June 30, 2015. This will allow you to observe trends from one year to the next.
The second report is the Net Investment Income for the year ended June 30, 2016 and June 30, 2015. This report shows the investment result of the Diocesan portfolio over the two year period. The interest expense consists of amounts that are paid to the parishes and institutions of the Diocese who have money on deposit with the Diocesan Deposit and Loan Fund.
The third report displays the activity from the insurance fund for the two fiscal years presented. The fourth report provides a summary of the other operating income and expenses for the years ended June 30, 2016 and 2015.
The fifth report is a summary of the Net Investment Income, the Insurance activity, and the impact of other operating income and expenses. This schedule agrees to the total change in Net Assets as outlined in the audit report.
While I have pointed out several areas of change within the diocesan financial statements, I am still aware of the need to monitor and plan for all economic possibilities in these uncertain times. The diocesan staff, under the direction of Bishop Thompson and Chief Operating Officer and Chancellor Tim McGuire, has built a solid financial plan for the future. It is our responsibility to be a conscientious and diligent steward of the resources you, the Catholic people of southwest Indiana, have so generously entrusted to our care.
