And miles to go

Diocesan Finances

I wish to devote this month's column to two areas of our diocesan finances, namely the recent financial statement for Fiscal Year 2003-04 and a response to some of the concerns raised in the speak-up sessions about an annual diocesan appeal.

Part I:  Financial Statement,

FY 2003-04

A summary of the current audit performed by James Young & Associates, Ltd., appears elsewhere in this issue, (see page 3). The bottom line is that we had a good year. Our unrestricted revenue showed a slight increase over the budgeted amount of $35,000 and our actual expenses were under budget by $126,000, mainly because certain staff positions were left unfilled.

On the revenue side, the Diocesan United Fund (DUF) provided almost half of our income. We were fortunate to receive grants that exceeded our budget projections by $36,000. But, the main source of our additional revenue and growth in net assets was temporarily restricted and permanently restricted gifts, largely bequests. Those bequests, in effect, provided a third source of revenue (in addition to DUF and investments). While these bequests amounted to good news for the Diocese last year, we cannot rely on the fact that such bequests will always be given. We never know, of course, when someone will die and leave us a bequest; in the present fiscal year, we have so far not received any bequests.

Grants are like bequests in that they, too, cannot be relied upon for income year after year. Among our major grants were those from the Committee on Home Missions for $120,000 and Catholic Extension for $65,000. We must apply for these grants every year, and we cannot be confident that we always will be successful. The grants this year supported The Prairie Catholic, Hispanic Ministry, Adult Religious Formation, Foundations, and Hispanic language study. If there are no grants, then these areas must be funded from our sources - and there are none. On the revenue side, the Diocese recognized that money is very tight, so we did not begin major new programs or make major expansions of existing programs. In fact, the only program increases in the budget reflect salary increases and the greater cost of benefits.

As you can quickly see, the diocesan budget stands on a slippery slope. True, FY 2003-04 was a good year, and for that we give thanks, first to God from whom all of our blessings come, and to the people of the Diocese who have so generously shared their resources with the diocesan church. But, the reasons for our success were bequests and grants, neither of which are reliable sources of funds. Last year, without bequests and grants, we would have been in real trouble.

Right now, the Diocese relies upon the DUF for 43% of total revenues and income from investments for 17% - more than one-half of its total budget. The fact that, last year, 30% of the budget came from bequests and grants is both positive and troubling. Because of the generosity of people who remembered the Diocese in their estate plans, and because of the generosity of the grant makers, we were able to balance our budget. Clearly, however, we need a more reliable source of funds for programming so that bequests and grants can be used for special projects or invested so that we will receive their earnings for years into the future. As you know from what I have been writing and saying, an annual appeal would give us that stable third source of revenue. It would enable us to balance the budget on a regular basis, and turn our attention to meeting the spiritual needs of our diocesan people. One day, I would like to see the diocesan budget be based on about one-third from DUF, one-third from investments and program fees, and one-third from an annual appeal.

Part II: Concerns raised about an Annual Appeal

We have had a number of conversations over the past few months about an annual appeal in the Diocese. Perhaps some of you participated in the sessions. I heard five major concerns about an annual appeal that were raised during these recent speak-up sessions concerning our annual appeal. I would like to address them briefly here. 

1.  If we didn't fill diocesan staff positions these past two years, then where did the money go? The fact of the matter is that if we had filled all positions, we would have been in a deficit position. The budget is only barely balanced, and had we not left these positions open, it would not have been even close to balanced. This is the age old practice of "Robbing Peter to pay Paul." But we really had no options since we had no money.  What monies we saved by not filling positions were applied to the next fiscal year.

2. What happened to the profits that the Diocese made on the sale of real estate? In Phase I of the Oak Bluff Properties, the sale of 30 lots did not result in major profits for the Diocese. Without any land development experience, Bishop Lucker and the Diocese contracted with an outside developer to handle all of the details in preparing the lots for sale. The contract called for the developer to receive 55% of the profits. From its share of the profits, the Diocese had to pay start-up and assessment fees, reducing its profit margin to 30%. With the help of our attorney, I ended this contract. We did, in the end, realize $328,000 from the sale of lots in Phase 1. We are using this money to pay the start-up costs for Phase II of the project.

Presently, we are developing 37 lots out of a potential 75 lots in Phase II. The Property Committee that I formed has given wonderful assistance to the Diocese in this project. So far we have sold and closed on 11 lots for a total of $375,000. Two years ago, I asked that these monies be separated in some way from the General Budget so that they would be available for one or more special projects, or for those emergencies that can occur. These funds, in effect, are our savings account. These funds do show up as revenue on the final audit, which may lead us to think that the Diocese has a stronger annual revenue stream than, in fact, we have.

3. Are there not funds available from the Seminary Aid Fund to support our seminarians? One of the reasons I am thinking about an annual appeal is to support the costs of educating our future priests, today's seminarians. The Seminary Aid Fund is a temporarily restricted fund that receives most of its annual revenue from interest earned by the Priests' Burse Fund, a permanently restricted fund. When I arrived in the Diocese, the Seminary Aid Fund was supporting not only the expenses of seminarians, but the salaries and expenses of the Diocesan Vocations Office. I thought that this was neither right, nor financially responsible. In these past three years, we have been weaning the office from this financial source, but because there are so few other funds available, we have not been able to do so completely.

4.  How well does the Diocese handle its finances? Here, I believe, the Diocese of New Ulm has been a good steward of the monies received from the faithful of this local church. Every year, an outside audit firm scrutinizes our expenses and revenue streams. Every month, the members of the Finance Council get a full balance sheet of year to date figures. Those reports also are made available to the Priests' Council at its monthly meeting. At the end of the fiscal year, the Finance Council, the Priest's Council and the Diocesan Pastoral Council each receive a full report on the audit by a representative of the outside agency. The books of the Diocese are open to review not only by the auditor but by all of the priests and laypeople who serve on these committees. I believe in good stewardship of the gifts given to the Diocese, and a major part of good stewardship is transparency - so that people can see what is happening to their money.

5.  Is the house purchased for the bishop excessive? When I arrived in the Diocese, I was shown my office and then, less than ten steps away, my living space. I knew enough at that moment to ask Fathers Berger and Garvey if there were some other possibility for my housing. I spend long hours at my desk conducting the business of the Diocese, but I cannot compose homilies or talks there. I needed another "space" in which to think and reflect.

I first looked at the availability of empty rectories or convents in the area. We visited St. George, for example, but that was being used for storage by the San Lucas Mission, and was in bad repair. There were no other empty spaces to consider. The second idea was to move into the bishop's residence in the Diocesan Center, but that was occupied already by three members of the diocesan staff, and I didn't think it fair to ask them to leave. Part of that space was also being used for meetings and a lunch room, so it also lacked privacy.

A previously sold bluff lot became available in the Oak Bluffs Project, which seemed to be a ready answer to the dilemma. It was close, it was our land and it was reasonable. I ordered the same modular model home as my neighbors to the north and south. It is a comfortable home, but not ostentatious. We were able to get a 30 year mortgage with a 6 1/4% interest rate. The house belongs to the Diocese and can be sold at any time, likely at a substantial profit. Last year my base salary was $17,640 and living expenses were $6,000. I very much appreciate having a decent home, away from my office, as a place to which I can go to think, reflect, study and prepare myself to be your teacher and shepherd. This makes it possible for me to be a better bishop.

These are some of the questions most frequently asked about an annual appeal. I continue to think about this project, and work on developing a plan for presentation to the priests and people of the Diocese. I think it is important to note that many diocesan appeals are called "The Bishop's Annual Appeal." In those cases, and especially in the Diocese of New Ulm, the bishop is not the only one, nor even the primary one, who benefits. There are so many more things the Diocese could accomplish if we only had the income: Lay Ministry Formation, a Diaconate program, Youth Ministry programs, Hispanic Outreach, Scholarships for Catholic Schools and Religious Education, Adult Continuing Education. Those are just some of the needs an annual appeal could address. That's why as the diocesan shepherd I am continuing to explore the costs and benefits of an annual appeal for our Diocese.

The business of the Diocese is the business of all of us; all of the people of God in the Diocese of New Ulm have a stake in the future of the local church. I am happy that so many people participated in the speak-up sessions, and I hope that, as other opportunities to express your thoughts arise, you will take advantage of them. I am pleased to be able to make this report to you, and I am grateful to you for reading it.

God bless you!

May, 2005

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