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What is the Administrative Office of the Archdiocese of Los Angeles?
The Administrative Office consists of the departments that provide pastoral, educational and administrative support to parishes, schools, seminaries and other institutions in the Archdiocese. The supporting departments and programs are fiscally responsible to His Eminence Cardinal Roger M. Mahony, Archbishop of Los Angeles. Cardinal Mahony maintains direct operational control of these departments and programs. The financial statements of the Administrative Office include the operations of the Catholic Cemeteries.
What sources of revenue does the Administrative Office have?
The primary resources of the Administrative Office are donations received from the Catholic faithful. These gifts are recorded in the Statement of Activity as donations and assessments. The Administrative Office also collects rents, fees and utilizes investment returns on restricted and designated assets to support operations. Cemetery sales are also a primary revenue component.
Is the Administrative Office audit report available?
The financial information presented here is summarized from the audited financial statements of the Administrative Office of the Archdiocese of Los Angeles. To obtain a complete set of the financial statements with accompanying notes, please visit the Archdiocesan website at www.la-archdiocese.org.
What does the change in net assets mean?
The net assets of an organization are determined by subtracting liabilities
from assets. In accounting for not-for-profet entities net assets are
categorized by type (for example, "restricted", "temporarily
restricted" or "property, plant and equipment"). A change
in net assets occurs when transactions during the year cause the assets
and liabilities of an organization to change. The change is generally
a result of either accounting transfers between affiliated organizations
or when there is a difference in revenues and expenses for the fiscal
year. In 2003, net assets for the Administrative Office increased $4.1
million.
Why was there an increase in net assets this past fiscal year?
Net assets increased $4.1 million during the fiscal year ended June 30, 2003. The change occurred primarily because the final capitalization and the first months of operations of the Cathedral of Our Lady of the Angels were included with the Administrative Office activity in fiscal year 2003. In fiscal year 2004 the Cathedral will be reported separately. Without the financial activity of the Cathedral, the change in net assets before transfers would have reflected a decrease of $8.3 million.
What are "restricted" and "unrestricted" funds?
These descriptions are specific accounting terms for not-for-profit organizations and are a requirement for presenting financial statements in accordance with generally accepted accounting principles. Restricted funds include gifts, pledges and other donations that are securely set aside for the purpose stated by the donor. Both civil and church law stipulate that restricted funds cannot be used other than for the purpose intended by the donor. Restricted funds fall into two categories, temporarily restricted and permanently restricted. Temporarily restricted funds are held until the donorŐs restriction has been fulfilled. Permanently restricted funds are held in perpetuity and only the earnings are available for use in accordance with the donorŐs wishes. Unrestricted funds are net assets not subject to donor-imposed restrictions and may be designated and reserved for specific purposes.
What is the impact of investment returns on the budget?
The Archdiocese budgeted approximately $7.2 million for the fiscal year ended June 30, 2002. However, market returns were significantly below the budget assumption causing a short fall in revenue that added to the operating deficit that year. The 2003 fiscal year operating budget for the Administrative Office did not include an investment return assumption.
What progress has been made to resolve the current deficit?
During 2003 the Administrative Office concluded that changes needed to be implemented in order to minimize the projected operating losses resulting from the downturn in the capital markets, a weak economy and the legal expenses associated with the clergy sex abuse crisis. Legal expenses paid to date have not impacted operations and a substantial portion of the expenses are expected to be paid by insurance at some future date. During the second quarter of 2003, the Administrative Office implemented a workforce reduction of sixty employees. Throughout 2003, there was a continued freeze on capital expenditures and new hirings as well as additional restrictions placed on spending. These policies have continued into 2004. During the second quarter of 2004 a voluntary early retirement incentive further reduced the workforce by ten employees. The voluntary retirement program is expected to result in annual savings of $0.5 million.
What is the forecast for 2004?
The Administrative Office now projects the operating deficit for the fiscal year ending June 30, 2004 at approximately $1.8 million. The Administrative Office continues to consider further reductions in administrative costs. Similar to many other organizations, the Archdiocese is experiencing a severe increase in fixed expenses such as insurance premiums, healthcare costs and workers compensation premiums. Because of the negative return on investments the Archdiocese used accumulated reserves. The investment returns began to improve only during the last quarter of fiscal year 2003. Like all other not-for-profit organizations, the Archdiocese uses investment returns to help support programs and ministries. Should the current upturn in the capital markets continue, the Administrative Office will replenish depleted investment reserves before investment income is applied to current operations or any new program expenditures are considered.
What was the financial impact of the clergy sexual abuse crisis in
fiscal year 2003?
The Archdiocese incurred expenses of approximately $5.4 million in legal fees in fiscal year 2003. The Administrative Office is currently receiving reimbursement from its insurers for a portion of the costs. The Administrative Office expects it will incur substantial future charges related to the defense of such matters, but cannot reasonably estimate the future reimbursement of the potential costs that it may incur. Under Generally Accepted Accounting Principles, no accrual for these costs has been made in the financial statements for the year ended June 30, 2003.
How did the Cathedral of Our Lady of the Angels impact church finances?
The Cathedral was dedicated on September 2, 2002. As with all major construction projects within the Archdiocese, the assets and liabilities are reflected within the financial statements of the Administrative Office until the project is complete. Property, plant and equipment in fiscal year 2003 included the capitalized costs relating to the construction of the Cathedral complex. As of June 30, 2003, the net assets of the Cathedral reflected on the Statements of Financial Position amounted to $192.4 million. The other Cathedral complex balances included within the financial statements are as follows:
--Investments include $47.2 million for the Cathedral which were accumulated
through collection of pledges and the unused portion of the note payable.
-- Pledges receivable include $28.5 million of donor restricted assets
to be used for the Cathedral complex.
-- Notes payable total $75.0 million.
In 2003, the Cathedral did not require advances from the Administrative Office.
What were the "Together in Mission" results, and how were
the funds used?
Together in Mission donations increased from the prior year. Our Catholic
faithful continue to open their hearts to those in need through their
generous donations to the "Together in Mission" appeal. The
funds donated during the annual Together in Mission campaign totaled $13.9
million in fiscal year 2003 and $13.4 million in fiscal year 2002. The
donations are used exclusively to provide subsidies to parishes and schools
in the most economically disadvantaged areas of the Archdiocese and to
administer the program. This appeal differs from other diocesan annual
appeals in that all the funds are used exclusively to subsidize needy
parishes and schools. As part of our responsibility as fiscal stewards,
an independent audit has been scheduled for the "Together in Mission"
appeal beginning with the 2004 fiscal year.
Are parish finances included in the Administrative Office financial
statements?
No. Parishes are independent operating and accounting entities. Each parish is required to have a Finance Council and maintains its own accounting records. Summary highlights of combined parish finances are included in the summary on page A-4.
Additionally, there are other independent operating and accounting entities that are not included in the Administrative Office reports such as Schools, Seminaries, Catholic Charities, The Tidings / Vida Nueva, and the Education Foundation.
The parishes of the Archdiocese of Los Angeles are organized into five pastoral regions. For the past fifteen years, the practice in the Archdiocese has been to present the financial results substantiated by the audited financial report to the Pastors and the Parish Finance Council members in each of the five pastoral regions of the Archdiocese. Individual invitations to these meetings are extended by letter from Cardinal Roger Mahony to each Pastor and to each Parish Finance Council member. The financial presentations for the year ended June 30, 2003 are taking place January 2004 and February 2004.
Are donations from parishioners up or down?
Contributions and donations for all the parishes in the Archdiocese increased by $184,122 from $159,417,265 for fiscal year 2002 to $159,601,387 for fiscal year 2003. |