UNITED STATES CONFERENCE OF CATHOLIC BISHOPS DOCUMENTATION COMMITTEE ON BUDGET AND FINANCE

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1 UNITED STATES CONFERENCE OF CATHOLIC BISHOPS DOCUMENTATION COMMITTEE ON BUDGET AND FINANCE SUBJECT: ACTION ITEM #02: VOTE: Approval of the 2016 Budget Do the members accept the recommendation of the Committee on Budget and Finance for approval of the 2016 Proposed Budgets? Majority of Members Present and Voting General Assembly November 16-18, 2015 Baltimore, MD

2 ACTION COMMITTEE ON BUDGET AND FINANCE Members: Bishop Kevin J. Farrell, Chairman; Archbishop José H. Gomez; Archbishop Dennis M. Schnurr; Bishop Michael J. Bransfield; Bishop Robert J. Cunningham; Bishop John M. LeVoir; Bishop George V. Murry, SJ Consultant: Msgr. Ronny E. Jenkins Staff: Ms. Karen Acton; Ms. Joyce Jones; Ms. Rosalyn Unalivia Proposed 2016 Budgets The Committee on Budget & Finance is presenting proposed budgets for The Conference has developed the four-year budget cycle to complement the strategic planning process with the goal of presenting a longer financial outlook to the body of bishops. The consolidated budgets collectively represent Unrestricted Funds, Restricted Funds and Designated Funds. The General Fund sources and uses are labeled as Unrestricted Funds. These funds are available for the on-going work of the Conference that is supported by the annual diocesan assessment. Those funds restricted by donor intent, namely the revenue and expenses associated with Migration Refugee Services, the National Religious Retirement Office and the National Collections Office, are shown separately and are labeled as Restricted Funds. The use of these funds is restricted by either federal government regulations or Canon Law. The Communications Department is shown as Designated Funds. The revenue earned by the Communications Department is not restricted by donor intent. The revenue is to be used to support the business of the office and is therefore identified as designated. Each of the departments across the three funds contains an amount for the replacement of the Conference s PCs (personal computers). The Conference s policy is to replace PCs every three years; however, exercising good stewardship while still maintaining effectiveness, the computers have not been replaced in five years. Replacement is scheduled for

3 Operating expenses excluding salaries were budgeted with a 1% increase over the 2015 budget. The one percent increase allows a marginal cushion for the market and is slightly higher than the CPI-U for the period ended December 31, Salaries/wages reflect a 3% increase which in turn increases the fringe, administrative overhead and occupancy allocations. The three percent increase is based on survey results of average pay increases for the Washington DC area and similarly situated non-profit organizations. Unrestricted Funds The Committee on Budget & Finance proposes a 2016 Unrestricted Funds budget of $24,165,206. This proposed level of spending results in a surplus of $1,824,790 before the subsidy to cover the Designated Funds deficit and $969,809 after the subsidy. The anticipated surplus is driven largely by investment income and the Administrative Overhead Allocation. The Committee on Budget & Finance recommends maintaining the budgeted surplus. Because the investment income is based on a three year rolling average 2012, 2013 and 2014 and because those combined years reflect a rate of return that is unlikely to be sustained, the projected bottom line surplus for Unrestricted Funds as shown would be able to sustain some amount of market volatility/downturn. There is no planned draw from the long-term investment corpus; only use of investment income is budgeted for The Conference uses an Indirect Administrative Cost Recovery Calculation referred to internally as the Administrative Overhead Allocation or AOA. Allocating overhead costs is a means by which to spread administrative costs to various program offices. The AOA budgeted rate for 2016 is 43.5% down from the 2015 rate of 44.5%. The Committee and staff continue to examine plausible ways to reduce the AOA. The increase for the General Secretariat is approximately 2.5%. The decrease in the Office of the General Secretary reflects a budget allocation correction. Actual costs in 2015 for that office are being properly allocated and charged. Different from prior years, there is a Public Affairs office included under the General Secretariat. This office, formerly the Media Relations Office, was a unit in the Communications Department. This is one of the intermediate changes recommended by the expert international communications firm that was retained by the Conference to review the structure of the Communications Department. The Administrative Offices overall are up less than 1% compared to the 2015 approved budget. The most significant changes within that area are associated with General Services, showing a decrease, and Human Resources, showing a slightly larger than expected increase. The former is directly related to an additional tenant at the St. John s Staff House which makes the shared cost smaller while the HR increase is associated with salary market adjustments in that office. For Pastoral Ministries there is an overall increase of 2%. The Secretariat of Clergy, Consecrated Life & Vocations, exercising fiscal responsibility, lowered their expenses which accounts for the budget decrease between 2015 and Laity, Marriage, Family Life & Youth reflects one-time expenses for the 2016 World Youth Day in Poland. Other changes in Pastoral Ministries are within the established guidelines. 2

4 Under Policy & Advocacy, office budgets are within the expense guidelines. Religious Liberty activities will be managed to the $475k budget meaning that staff will spend only to the extent there are funds to cover the expenses. This is consistent with prior practice. Justice, Peace & Human Development reflects a net 2% decrease largely due to the effect of including a $90k external grant. Previous grants, accurately recorded in the actual revenue and actual expenses, and are now also being reflected in the budget. Other changes in Policy & Advocacy are unremarkable. Migration and Refugee Services (MRS) falls under the purview of Policy & Advocacy but since their funding is primarily via federal awards and contracts they are shown separately in the Restricted Funds section. Restricted Funds The Committee on Budget & Finance proposes a 2016 Restricted Funds budget of $190,514,289. The budget reflects a net surplus of revenue over expenses of $62,068 which is entirely related to the projected surplus in the MRS Executive Office. The MRS budget shows the on-going projected amounts for federal grants and contracts. The most dramatic year-over-year change in MRS is related to Special Programs. The increase is due to a new award for direct legal representation and child advocate services for unaccompanied children. Consistent with the prior year, the National Religious Retirement Office (NRRO) plans to expend all revenue received. In addition to using all of the resources collected, NRRO requested and received permission from their Management Committee to spend down their reserves to balance the activity for 2016 and The National Collections Office budgets reflect the increases associated with the budget guidelines. The National Collections Administrative Office budget represents administrative reimbursement for Peter s Pence activity. Peter s Pence and all of the associated revenue and expenses are pass-through items and therefore do not impact the bottom line. Designated Funds The 2016 proposed budget reflects net expenses over revenue of $854,981 which will be covered by the General Fund. The Communications Department is uniquely situated in that it provides services to external customers for a fee and supports offices within the Conference for no fee. The unique structure of the department and the challenges associated with the same were the subject of an in-depth study of the area. The study performed by the expert international communications firm has been completed. Their recommendations were shared with the Administrative Committee in September It is hoped that some of the recommendations will be implemented in 2016 and that the positive financial effects will be apparent. In the interim those income-generating units in Communications have been instructed to manage their spending such that the expenses do not exceed revenue. With the knowledge of the Catholic Communications Campaign (CCC) committee chairman, a grant from CCC has been budgeted at $3.3 million. CCC funding will be used by Communications in the following 3

5 proportions: the Office of the Secretary will receive 22%; CNS 25%; the Office of Creative Services 53%. The Office of Customer & Client Relations is not expected to be a recipient of CCC grant funds in Expenses in excess of revenue for the Office of the Secretary of Communications will be covered by the General Fund. Projected Budgets 2017 through 2019 The projected budget for 2017 was developed using the same guidelines as those used for 2016 with similar results across the board, i.e., for Unrestricted Funds, Restricted Funds and Designated Funds. A surplus is expected in Unrestricted Funds. The surplus reflects a presumed increase in the annual diocesan assessment. The absence of which, coupled with a likely investment income downturn, could result in an unbalanced 2017 budget. The 2017 assessment is a separate Action Item. The planned net activity for the Restricted Funds mirrors the results of 2016 with an overall net surplus for all restricted funds in 2017 of $64,528 that is entirely associated with the MRS Executive Office. Also consistent with 2016, the Designated Funds net balance for 2017 is a deficit of $844,393. The deficit is shown as being covered by the General Fund. The 2018 and 2019 budgets provide an overall outlook that as of this writing is expected to be positive. The net surplus on the Combined Comparative Budgets shows the combined net activity of the three different funds. The prospective look provides time to make decisions and corrections, if and where needed, to the activities being planned for future years. ACTION: Do the members accept the recommendation of the Committee on Budget and Finance for approval of the 2016 Proposed Budgets? Bishop Kevin J. Farrell Treasurer November 2015 Appendices: 1. Consolidated Proposed Budget and Projected Budget Unrestricted Funds Consolidated Proposed Budget and Projected Budget Restricted Funds Consolidated Proposed Budget and Projected Budget Designated Funds Combined Comparative Budgets Unrestricted, Restricted and Designated Funds

6 United States Conference on Catholic Bishops Consolidated Proposed Budgets - Unrestricted Funds Years 2015 to 2017 Unrestricted Funds Approved 2015 Proposed 2016 Projected 2017 Sources of Funds General Fund: Diocesan assessment 10,975,915 11,305,192 11,644,348 Allocation from quasi-endowment fund 1,623,300 1,860,141 1,881,914 Allocation of AOA 5,007,178 5,499,815 5,705,983 Investment income 5,348,878 5,945,271 5,551,127 Draw from long-term investment Permissions / Royalty income 1,407,782 1,379,576 1,379,520 Total Sources of General Funds 24,363,054 25,989,995 26,162,892 Uses of Funds General Secretariat General Secretary's Office (1,800,210) (1,738,598) (1,762,381) General & Administrative Committee Meetings (1,064,895) (1,076,815) (1,104,735) Public Affairs (Former Media Relations Office) (835,498) (980,384) (999,415) General Secretariat (3,700,603) (3,795,797) (3,866,531) Administrative Offices Finance & Accounting (2,226,654) (2,244,178) (2,301,589) General Services (1,904,682) (1,868,695) (1,904,631) Human Resources (1,115,075) (1,155,287) (1,172,340) Information & Technology (1,051,315) (1,078,933) (1,083,146) Administrative Offices (6,297,726) (6,347,093) (6,461,706) Pastoral Ministries Clergy, Consecrated Life & Vocations (396,406) (390,082) (392,469) Cultural Diversity in the Church (995,646) (1,029,653) (1,037,310) Divine Worship (593,538) (590,582) (595,067) Doctrine (632,455) (633,430) (644,071) Ecumenical & Inter-religious Affairs (959,920) (977,546) (991,846) Evangelization & Catechesis (1,161,099) (1,179,648) (1,195,465) Laity, Marriage, Family Life & Youth (710,778) (755,171) (684,946) Protection of Children & Young People (870,009) (894,368) (904,720) Canonical Affairs and Church Governance (36,077) (36,437) (36,801) Pastoral Ministries (6,355,929) (6,486,916) (6,482,695) Policy & Advocacy Government Relations (812,614) (826,743) (842,320) Religious Liberty Cash Sources 340, , ,936 Religious Liberty Expenses (340,912) (474,916) (478,936) Pro-Life Activities (1,286,043) (1,341,542) (1,363,124) Justice, Peace & Human Development (1,677,733) (1,635,827) (1,646,897) Catholic Education (1,011,632) (1,025,440) (1,040,514) General Counsel (1,981,173) (2,018,860) (2,070,035) Priority Activities (5,000) - - Policy & Advocacy (6,774,194) (6,848,412) (6,962,890) Other Funding Relationships National Council of Catholic Women (20,000) (20,000) (20,000) Pastoral Provision (20,000) (20,000) (20,000) Visitor's Office - Rome (96,987) (96,987) (96,987) Allocation to Building Fund (400,000) (400,000) (400,000) Contingency Fund (150,000) (150,000) (150,000) Other Funding Relationships (686,987) (686,987) (686,987) Total Use of General funds (23,815,440) (24,165,206) (24,460,809) before Communication's Subsidy 547,613 1,824,790 1,702,082 Subsidy to cover Communication Deficit (507,641) (854,981) (844,393) after Subsidy 39, , ,689 5

7 United States Conference on Catholic Bishops Consolidated Proposed Budgets - Restricted Funds Years 2015 to 2017 Approved 2015 Proposed 2016 Projected 2017 Restricted Funds Cash Sources Uses of Cash Cash Sources Uses of Cash Cash Sources Uses of Cash Policy & Advocacy - Migration & Refugee Services MRS Executive Office 2,298,504 2,128, ,690 2,022,709 1,960,641 62,068 2,037,572 1,973,044 64,528 MRS Administration 71,229,641 71,229,641-71,579,193 71,579,193-73,014,406 73,014,406 - Migration Policy & Public Affairs 1,329,730 1,329,730-1,191,922 1,191,922-1,224,236 1,224,236 - Resettlement Services 5,891,639 5,891,639-5,921,014 5,921,014-6,082,345 6,082,345 - Special Programs 3,048,328 3,048,328-3,526,374 3,526,374-3,637,872 3,637,872 - Total Policy & Advocacy - MRS 83,797,842 83,628, ,690 84,241,212 84,179,144 62,068 85,996,431 85,931,903 64,528 National Religious Retirement Office National Religious Retirement Office 33,330,457 33,330,457-35,160,691 35,160,691-34,566,703 34,566,703 - Total National Religious Retirement Office 33,330,457 33,330,457-35,160,691 35,160,691-34,566,703 34,566,703 - National Collections National Collections Administrative Office 249, , , , , ,811 - Catholic Relief Services Collection 17,790,144 17,790,144-18,004,802 18,004,802-18,242,879 18,242,879 - Catholic Campaign for Human Development 12,864,385 12,864,385-13,532,425 13,532,425-14,001,214 14,001,214 - Committee on the Church in Latin America 7,137,943 7,137,943-7,351,584 7,351,584-7,452,602 7,452,602 - Catholic Communication Campaign 5,215,939 5,215,939-4,318,875 4,318,875-4,435,063 4,435,063 - Committee on the Home Mission 9,885,643 9,885,643-10,316,948 10,316,948-10,486,686 10,486,686 - Aid the Church in the Central and Eastern Europe 7,928,683 7,928,683-8,223,822 8,223,822-8,336,555 8,336,555 - Contribution for the Church in Africa 2,256,754 2,256,754-2,302,054 2,302,054-2,335,602 2,335,602 - Haiti Earthquake and Tornado Relief 9,207,154 9,207,154-6,940,993 6,940,993-5,949,520 5,949,520 - Total National Collections 72,536,480 72,536,480-71,174,454 71,174,454-71,424,932 71,424,932 - Grand Total - Restricted Funds 189,664, ,495, , ,576, ,514,289 62, ,988, ,923,538 64,528 6

8 United States Conference on Catholic Bishops Consolidated Proposed Budgets - Designated Funds Years 2015 to 2017 Approved 2015 Proposed 2016 Projected 2017 Designated Funds Cash Sources Uses of Cash Cash Sources Uses of Cash Cash Sources Uses of Cash Communications-COMMS Office of the Secretary of Communications 918,802 1,426,443 (507,641) 722,426 1,577,407 (854,981) 732,616 1,577,009 (844,393) Office of Media Relations CNS 4,562,082 4,562,082-4,646,772 4,646,772-4,760,045 4,760,045 - Office of Creative Services 1,731,280 1,731,280-1,746,864 1,746,864-1,789,232 1,789,232 - Office of Customer & Client Relations 3,391,981 3,391,981-3,226,726 3,226,726-3,280,238 3,280,238 - Total Communications-COMMS 10,604,145 11,111,786 (507,641) 10,342,788 11,197,769 (854,981) 10,562,131 11,406,524 (844,393) General Funds request (507,641) (854,981) (844,393) 7

9 United States Conference on Catholic Bishops Combined Comparative Budgets - Unrestricted, Restricted and Designated Years 2015 to 2019 Approved 2015 Proposed 2016 Projected 2017 Projected 2018 Projected 2019 Sources of Funds General Fund: Diocesan assessment 10,975,915 11,305,192 11,644,348 11,993,679 12,353,489 Allocation from quasi-endowment fund 1,623,300 1,860,141 1,881,914 1,867,346 1,894,699 Allocation of AOA 5,007,178 5,499,815 5,705,983 5,779,075 5,952,447 Investment income 5,348,878 5,945,271 5,551,127 4,790,084 5,204,478 Draw from long-term investment ,775 - Permissions / Royalty income 1,407,782 1,379,576 1,379,520 1,393,315 1,407,248 Total General Fund 24,363,054 25,989,995 26,162,892 25,976,274 26,812,361 Operating Fund Communications 10,604,145 10,342,788 10,562,131 10,741,370 10,924,608 Migration and Refugee Services 83,797,842 84,241,212 85,996,431 86,098,765 87,078,539 National Collections 72,536,480 71,174,454 71,424,932 72,082,226 72,746,512 National Religious Retirement Office 33,330,457 35,160,691 34,566,703 34,922,346 35,281,843 Total Operating Fund 200,268, ,919, ,550, ,844, ,031,502 Total Sources of General Funds 224,631, ,909, ,713, ,820, ,843,863 Uses of Funds Communications-COMMS (11,111,786) (11,197,769) (11,406,524) (11,601,162) (11,800,162) General Secretariat (3,700,603) (3,795,797) (3,866,531) (3,917,160) (4,009,073) Administrative Offices (6,297,726) (6,347,093) (6,461,706) (6,571,919) (6,708,468) Pastoral Ministries (6,355,929) (6,486,916) (6,482,695) (6,633,527) (6,850,352) Policy & Advocacy (90,402,346) (91,027,556) (92,894,793) (93,177,607) (94,343,539) Total National Religious Retirement Office (33,330,457) (35,160,691) (34,566,703) (34,922,346) (35,281,843) Total National Collections (72,536,480) (71,174,454) (71,424,932) (72,082,226) (72,746,512) Other Funding Relationships National Council of Catholic Women (20,000) (20,000) (20,000) (20,000) (20,000) Pastoral Provision (20,000) (20,000) (20,000) (20,000) (20,000) Visitor's Office - Rome (96,987) (96,987) (96,987) (96,987) (96,987) Allocation to Building Fund (400,000) (400,000) (400,000) (400,000) (400,000) Contingency Fund (150,000) (150,000) (150,000) (150,000) (150,000) Other Funding Relationships (686,987) (686,987) (686,987) (686,987) (686,987) Total Use of General funds (224,422,315) (225,877,263) (227,790,871) (229,592,935) (232,426,937) after Subsidy 209,663 1,031, , , ,927 8