DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE (ADMINISTRATIVE OFFICES)

Transcription

1 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE (ADMINISTRATIVE OFFICES) AUDITED FINANCIAL STATEMENTS JUNE 30, 2017

2 DIOCESE OF CORPUS CHRISTI A CORPORATE SOLE TABLE OF CONTENTS Independent Auditor's Report PAGE Statement of Financial Position Statement of Activities Statement of Cash Flows... 7 Notes to Financial Statements Supplemental Information Schedule of Program Services Expenses Schedule of Supporting Services Expenses... 23

3 COLLIER, JOHNSON & WOODS, P.C. CERTIFIED PUBLIC ACCOUNTANTS 555 N. Carancahua Suite 1000 Corpus Christi, Texas Fax cpa.com INDEPENDENT AUDITOR S REPORT January 4, 2018 To the Most Reverend Wm. Michael Mulvey Diocese of Corpus Christi, A Corporate Sole Administrative Offices Corpus Christi, Texas We have audited the accompanying financial statements of Diocese of Corpus Christi, a Corporate Sole, Administrative Offices (a nonprofit organization), which comprise the statement of financial position as of June 30, 2017, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosure in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the audit considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Diocese of Corpus Christi, a Corporate Sole 1

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Diocese of Corpus Christi, a Corporate Sole as of June 30, 2017, and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Report on Summarized Comparative Information We have previously audited the financial statements of the Diocese of Corpus Christi, a Corporate Sole as of and for the year ended June 30, We expressed an unmodified audit opinion on those audited financial statements in our report dated December 22, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2016 is consistent in all material respects with the audited financial statements from which it has been derived. Diocese of Corpus Christi, a Corporate Sole 2

5 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE STATEMENT OF FINANCIAL POSITION ASSETS JUNE 30, Current Assets: Cash and Equivalents 3,912,230 4,192,069 Accounts Receivable, Net of Allowance for Doubtful Accounts of $178,812 and $163,806 at June 30, 2017 and 2016, Respectively 2,286,120 1,771,523 Investments Held by Diocese of Corpus Christi Perpetual Benefit Endowment Fund, Inc. (PBEF) (Note 6) 6,586,774 6,113,933 Unrestricted and Temporarily Restricted Investments (Note 7) 5,817,965 4,602,237 Prepaid Expenses 72,354 22,907 Receivable from Foundations 351, ,639 Total Current Assets 19,027,138 17,031,308 Other Assets - Properties and Equipment, Net of Accumulated Depreciation (Note 8) 19,865,227 20,339,040 TOTAL ASSETS 38,892,365 37,370,348 LIABILITIES AND NET ASSETS Current Liabilities: Accounts Payable and Accrued Expenses 201, ,002 Incurred but Not Reported (IBNR) Medical Claims Payable 340, ,319 Funds Held for Others 934, ,007 Current Portion of Priest's Support and Post Retirement Benefits Payable (Note 13) 500, ,408 Total Current Liabilities 1,976,074 2,152,736 (Continued) Diocese of Corpus Christi, a Corporate Sole 3

6 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE STATEMENT OF FINANCIAL POSITION (Continuation) JUNE 30, Long-Term Liabilities: Unfunded Priests' Pension Plan Obligation (Note 12) 2,666,418 2,666,418 Priests' Support and Post Retirement Benefits Payable, Excluding Current Portion (Note 13) 5,620,042 6,143,661 Total Long-Term Liabilities 8,286,460 8,810,079 Total Liabilities 10,262,534 10,962,815 Net Assets: Unrestricted (Note 14) 25,509,868 23,791,334 Temporarily Restricted (Note 15) 3,119,963 2,616,199 Total Net Assets 28,629,831 26,407,533 TOTAL LIABILITIES AND NET ASSETS 38,892,365 37,370,348 See Notes to Financial Statements. Diocese of Corpus Christi, a Corporate Sole 4

7 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2016 TEMPORARILY TOTAL UNRESTRICTED RESTRICTED Support and Revenue: Diocesan Assessments to Parishes 3,217, ,217,970 3,073,938 Bishop's Stewardship Appeal -- 1,424,659 1,424,659 1,214,272 Bequests from J.G. Kenedy Trust 904, , ,811 Insurance Premiums Received 5,769, ,769,589 5,910,405 Oil and Gas Royalty Income 489, , ,140 John G. and Marie Stella Kenedy Foundation: Bequests 806, , ,639 Grants -- 1,457,000 1,457, ,200 Fees for Services 995, ,386 1,140,474 Capital Campaign Distributions 354, ,034 2,559,395 Contributions: Bishop's Guild -- 90,023 90,023 82,309 Capital Campaign -- 2,269,279 2,269,279 3,630,406 Other 412, , , ,486 Income (Loss) from Investments Held at PBEF (Note 6) 664, ,400 (158,212) Endowment Earnings Transferred from PBEF 153, ,377 1,772,177 Investment Income from Other Sources (Note 7) 257, ,729 60,087 Charitable Gift Annuities ,787 Net Assets Released from Restrictions 5,117,711 (5,117,711) Total Support and Revenue and Reclassifications 19,143, ,764 19,647,332 22,861,314 Expenses: Program Services - Offices of: Diocesan Bishop and Bishops Emeriti 466, , ,001 Catholic Schools 517, , ,710 Child and Youth Protection 125, , ,403 Communication 417, , ,422 Consecrated Life 64, ,836 67,463 Divine Worship 211, , ,942 Evangelization and Catechesis 1,132, ,132,209 1,341,166 Judicial Vicar 149, , ,556 Stewardship and Development 579, , ,161 Permanent Diaconate 90, ,692 93,783 Vicar for Priests 17, ,766 22,668 Vocations 515, , ,526 Canonical and Theological Advisor 151, , ,102 Total Program Services 4,439, ,439,852 4,941,903 (Continued) Diocese of Corpus Christi, a Corporate Sole 5

8 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2017 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2016 TEMPORARILY TOTAL UNRESTRICTED RESTRICTED (Continuation) Supporting Services: Vicar General 36, ,542 49,517 Chancellor 25, ,522 81,262 Chancery Office 353, , ,026 Fiscal Officer 976, ,509 1,049,648 General Administration 212, , ,126 Human Resources 87, ,886 81,662 Diocesan Archives 101, , ,525 Capital Campaign Expense 33, ,989 44,388 Capital Campaign Distributions 2,026, ,026,799 3,565,554 Legal and Professional Fees 79, , ,936 In-House Counsel 141, , ,235 Interest Expense ,213 Bad Debt Expense 245, , ,429 Total Supporting Services 4,321, ,321,080 6,159,521 Subsidies: Subsidy to Catholic Schools 853, , ,584 Subsidy to Parishes 128, , ,306 Catholic Charities of Corpus Christi, Inc. and Mother Teresa Shelter, Inc. 262, , ,639 Diocesan Telecommunications Corporation 250, , ,356 Total Subsidies 1,494, ,494,175 1,695,885 Priests' Retirement Fund Expenses: St. John Vianney Residence for Priests 333, , ,381 Medical and Other Post-Retirement Benefits 489, , ,080 Total Priests' Retirement Fund Expenses 822, ,974 1,172,461 Insurance Fund Expenses: Insurance Claims 3,723, ,723,791 3,559,564 Insurance Premiums 1,400, ,400,914 1,347,307 Hospitalization Administration 336, , ,019 Property and Casualty Administration 165, , ,345 Total Insurance Fund Expenses 5,626, ,626,834 5,424,235 Plant Fund Expenses: Depreciation Expense 1,142, ,142,202 1,342,339 Property Management and Maintenance 207, , ,971 Property Taxes 69, ,919 73,409 Contribution of Assets to Affiliates (Note 8) 2, ,770 2,712,516 (Gain) Loss on Disposition of Fixed Assets (702,619) -- (702,619) (391,105) Total Plant Fund Expenses 720, ,119 3,928,130 Total Expenses 17,425, ,425,034 23,322,135 INCREASE (DECREASE) IN NET ASSETS 1,718, ,764 2,222,298 (460,821) Net Assets, Beginning of Year 23,791,334 2,616,199 26,407,533 26,868,354 NET ASSETS, END OF YEAR 25,509,868 3,119,963 28,629,831 26,407,533 See Notes to Financial Statements. Diocese of Corpus Christi, a Corporate Sole 6

9 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE STATEMENT OF CASH FLOWS JUNE 30, Cash Flows from Operating Activities: Change in Net Assets 2,222,298 (460,821) Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities - Depreciation Expense 1,142,202 1,342,339 Gain on Disposition of Fixed Assets (702,618) (391,105) Contribution of Assets to Affiliates -- 2,712,516 Unrealized (Gain) Loss on Investments (535,149) 427,759 Change in: Accounts Receivable (537,653) 506,913 Prepaid Expenses (49,447) (20,833) Accounts Payable and Accrued Expenses (95,917) 55,620 IBNR Medical Claims Payable (25,035) 12,111 Funds Held for Others (54,384) (107,312) Post Retirement Benefits Payable (524,944) (80,845) Charitable Gift Annuities Payable -- (57,912) Net Cash Provided by Operating Activities 839,353 3,938,430 Cash Flows from Investing Activities: Purchases of Investments (3,710,045) (2,350,443) Proceeds from Sale of Investments 2,556,624 3,822,382 Purchases of Property and Equipment (973,132) (592,108) Proceeds from Disposition of Fixed Assets 1,007, ,743 Net Cash Provided (Used) by Investing Activities (1,119,192) 1,292,575 Cash Flows from Financing Activities: Proceeds from Loans -- 1,000,000 Principal Repayments on Loans -- (4,341,086) Net Cash Used by Financing Activities -- (3,341,086) Increase (Decrease) in Cash and Equivalents (279,838) 1,889,919 Cash and Equivalents, Beginning of Year 4,192,069 2,302,150 CASH AND EQUIVALENTS, END OF YEAR 3,912,230 4,192,069 SUPPLEMENTAL INFORMATION: Interest Paid -- 63,213 See Notes to Financial Statements. Diocese of Corpus Christi, a Corporate Sole 7

10 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE (ADMINISTRATIVE OFFICES) NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Note 1 ORGANIZATION The Diocese of Corpus Christi, a Corporate Sole, Administrative Offices (Diocese) provides planning and direction in the administration of pastoral, education, and support services to its parishes, Diocesan institutions, and affiliated organizations of the Diocese. Not included in the accompanying financial statements are the assets, liabilities, and financial activities of the various religious orders, lay social societies, and religious organizations which operate within the Diocese, and are not fiscally responsible to the Bishop. Additionally, parishes and schools have not been included in the accompanying financial statements. Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition Contributions are recognized as revenue when they are received or unconditionally pledged, except for capital campaigns. Unconditional promises to give due in the next year are reflected as current promises to give and are recorded at their net realizable value. Unconditional promises to give due in subsequent years are reflected as long-term promises to give and are recorded at the present value of their net realizable value. Contributions for capital campaigns are recognized when received. Pledges for contributions in future years are not recognized until received due to the length of the pledges and uncertainties for those years. Donated Services Donated services are recognized if the services received (a) create or enhance nonfinancial assets, or (b) required specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donations. No amounts have been reported in the statements for donated services since they did not meet the criteria under generally accepted accounting principles. However, religious and lay personnel have donated significant amounts of their time to the Diocese. Property and Equipment Depreciation of buildings and equipment is provided over the estimated useful lives of the respective assets on a straight-line basis. Purchases of land, buildings, and equipment of $5,000 or more are capitalized. Purchases of lesser amounts are expensed as incurred. Assessments and Fees for Services A nominal fee may be charged to related entities to defray the cost of providing administrative services. Specific assessments for insurance, support and other items provided to parishes are determined annually based on certain financial indicators provided by the parishes. Diocese of Corpus Christi, a Corporate Sole 8

11 Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continuation) Contributions Contributions are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. When a restriction expires (that is, when a stipulated time restriction ends or when the purpose of the restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. The Diocese reports gifts of land, buildings, and equipment as unrestricted support unless donor stipulations specify how the donated assets must be used. The gifts of long-lived assets with restrictions on how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent donor stipulations, the Diocese reports expiration of restrictions when the donated or acquired long-lived assets are placed in service. Cash Equivalents The Diocese considers all deposits held by financial institutions and financial service companies to be cash equivalents. Investments Investments are measured at fair value in the accompanying statements of financial position, with the net realized and unrealized gains and losses reported in the accompanying statements of activities. Allowance for Doubtful Accounts The Diocese uses the allowance method to provide for doubtful accounts. The allowance for doubtful accounts is based on management s annual estimate after considering historical collection rates and an analysis of current accounts receivable. Income Taxes The Diocese is exempt from federal income tax provisions under Section 501(c)(3) of the Internal Revenue Code. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the amounts reported in the combined financial statements and accompanying notes. Actual results could differ from those estimates. Diocese of Corpus Christi, a Corporate Sole 9

12 Note 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continuation) Prior Year Comparative Information The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the audited combined financial statements of the Diocese of Corpus Christi, a Corporate Sole for the year ended June 30, 2016, from which the summarized information was derived. Subsequent Events Subsequent events have been evaluated through January 4, This corresponds to the date the financial statements were available for issuance. Note 3 CASH AND CASH EQUIVALENTS As of June 30, 2017 and 2016, the Diocese maintained deposits in excess of federally insured limits or other collateralized means amounting to approximately $3,487,085 and $3,763,594, respectively. The Diocese also maintained deposits with brokerage firms insured against loss due to theft or misappropriation by the Security Investor Protection Corporation. The Diocese further manages risk by maintaining all deposits at reputable financial institutions and financial services companies. The Diocese maintains cash balances with a related corporation, the Diocese of Corpus Christi Deposit and Loan Fund, Inc. (Fund) amounting to $175,145 and $178,475 as of June 30, 2017 and 2016, respectively. This balance is not covered by deposit insurance or otherwise collateralized. Consequently, these deposits are at risk if the Fund failed to perform its fiduciary duties. The Fund was audited for the fiscal years ended June 30, 2017 and 2016 and received unmodified opinions on its financial statements. Restricted cash totaled $619,851 and $681,021 as of June 30, 2017 and 2016, respectively. Note 4 ACCOUNTS RECEIVABLE Accounts receivable includes assessments receivable from parishes and short-term pledges. When management considers amounts to be uncollectible, the amounts are charged against reserves. Increases in reserves for uncollectible assessments are charged to operating expenses. Note 5 CAPITAL CAMPAIGN PLEDGES In early 2012, the Diocese began a combined campaign for the benefit of diocesan and parish projects to develop pledges for funding of long-term projects that included a priest s residence and retirement, campus ministry, parish support and Catholic education and outreach. As of June 30, 2017, the campaign was not complete and total unpaid pledges at that time amounted to approximately $15.6 million. Since the campaign was not complete, the pledges are non-binding, and the pledges will be paid over an extended period, revenues will be recognized only upon collection. Diocese of Corpus Christi, a Corporate Sole 10

13 Note 6 - INVESTMENTS HELD BY THE DIOCESE OF CORPUS CHRISTI PERPETUAL BENEFIT ENDOWMENT FUND, INC. AND FAIR VALUE MEASUREMENTS The Diocese deposits funds in the Diocese of Corpus Christi Perpetual Benefit Endowment Fund, Inc. (PBEF). The funds are managed in accordance with the investment policies established by the Board of Directors of the PBEF. The PBEF was audited for the fiscal years ending June 30, 2017 and 2016 and received unmodified opinions on its financial statements. FASB ASC 820, Fair Value Measurements and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1 Level 1, inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the plan has the ability to access. Level 2 Level 2 inputs to the valuation methodology include: quoted prices for similar assets in active markets; quoted prices for identical or similar assets in inactive markets; inputs other than quoted prices that are observable for the asset; inputs that are derived principally from, or corroborated by observable market data by correlation or other means. If the asset has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Level 3 inputs to the valuation methodology are inputs that are unobservable and significant to the fair value measurement. Valuation Methodology The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value of equities and mutual funds is based on quoted net asset values of the shares held by the Fund at the end of the year. Under the fair value hierarchy utilized to measure fair value, equities, U.S. Treasury Bonds and mutual funds were based on quoted prices in active markets for identical assets (Level 1). The corporate bonds, municipal bonds and U.S government agencies valuation is based on inputs other than quoted prices included within Level 1 that are observable either directly or indirectly. The valuation may be based on quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset (Level 2). Diocese of Corpus Christi, a Corporate Sole 11

14 Note 6 - INVESTMENTS HELD BY THE DIOCESE OF CORPUS CHRISTI PERPETUAL BENEFIT ENDOWMENT FUND, INC. AND FAIR VALUE MEASUREMENTS (Continuation) The fair value recorded in these financial statements is based on the proportionate share of the fair market value of the investment portfolio of the PBEF, amounting to approximately 25% and 18% as of June 30, 2017 and 2016, respectively. The methods used to measure fair value may produce an amount that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the PBEF believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table summarizes financial assets measured at fair value on a recurring basis as of June 30, 2017, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. FAIR VALUE MEASUREMENTS USING: QUOTED PRICES IN ACTIVE SIGNIFICANT MARKET FOR OTHER IDENTICAL OBSERVABLE TOTAL ASSETS INPUTS June 30, 2017 FAIR VALUE (LEVEL 1) (LEVEL 2) Investments: Corporate Bonds 223, ,373 Equities - Domestic 2,751,149 2,751, Equities - Foreign 435, , Mutual Funds: Real Estate 171, , Multi-Sector Bond 63,721 63, Commodities 110, , Multi-Asset 2,421,440 2,421, U.S. Treasury 53,546 53,546 State and Municipal Bonds 181, ,933 U.S. Government Agencies 173, ,705 TOTAL 6,586,774 6,007, ,011 Diocese of Corpus Christi, a Corporate Sole 12

15 Note 6 - INVESTMENTS HELD BY THE DIOCESE OF CORPUS CHRISTI PERPETUAL BENEFIT ENDOWMENT FUND, INC. AND FAIR VALUE MEASUREMENTS (Continuation) The following table summarizes financial assets measured at fair value on a recurring basis as of June 30, 2016, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value. FAIR VALUE MEASUREMENTS USING: QUOTED PRICES IN ACTIVE SIGNIFICANT MARKET FOR OTHER IDENTICAL OBSERVABLE TOTAL ASSETS INPUTS June 30, 2016 FAIR VALUE (LEVEL 1) (LEVEL 2) Investments: Corporate Bonds 263, ,546 Equities - Domestic 2,275,431 2,275, Equities - Foreign 378, , Mutual Funds: Real Estate 213, , Multi-Sector Bond 83,489 83, Commodities 60,536 60, Multi-Asset 2,484,847 2,484, State and Municipal Bonds 194, ,818 U.S. Government Agencies 159, ,424 TOTAL 6,113,933 5,496, ,788 Income from these investments consists of the following: YEAR ENDED JUNE 30, Dividends and Interest 188, ,074 Realized and Unrealized Gains (Losses), Net of Investment Costs 475,503 (449,286) TOTAL PBEF INVESTMENT INCOME 664,400 (158,212) Note 7 UNRESTRICTED AND TEMPORARILY RESTRICTED INVESTMENTS In addition to investments of the Diocese held by the PBEF (see Note 6), investments are also held in accounts through brokerage and investment advisors and through pooled investments accounts with other Catholic organizations. Investments in publicly traded securities are presented at fair value based on quoted market prices. Catholic Umbrella Pool has been presented at cost since market value could not be reasonably estimated. Diocese of Corpus Christi, a Corporate Sole 13

16 Note 7 UNRESTRICTED AND TEMPORARILY RESTRICTED INVESTMENTS - (Continuation) The fair value of unrestricted and temporarily restricted investments as of June 30, 2017 and 2016 are summarized below: FAIR VALUE MEASUREMENTS USING: QUOTED PRICES IN ACTIVE MARKET FOR SIGNIFICANT IDENTICAL UNOBSERVABLE TOTAL ASSETS INPUTS June 30, 2017 FAIR VALUE (LEVEL 1) (LEVEL 3) Investments: Mutual Funds: Multi-Asset 4,625,466 4,625, Municipal Short-Term 812, , Catholic Umbrella Pool 379, ,722 June 30, 2016 TOTAL 5,817,965 5,438, ,722 Investments: Mutual Funds: Multi-Asset 3,717,737 3,717, Municipal Short-Term 521, , Catholic Umbrella Pool 363, ,033 TOTAL 4,602,237 4,239, ,033 Income from these investments consists of the following: YEAR ENDED JUNE 30, Dividends and Interest 33,526 20,610 Realized and Unrealized Gains, Net of Investment Costs 224,203 39,477 TOTAL INVESTMENT INCOME - UNRESTRICTED AND TEMPORARILY RESTRICTED INVESTMENTS 257,729 60,087 Diocese of Corpus Christi, a Corporate Sole 14

17 Note 8 PROPERTY AND EQUIPMENT Property and equipment consisted of the following: JUNE 30, Land 4,263,682 4,562,682 Land Improvements 1,043,479 1,662,870 Buildings 27,299,251 30,841,048 Equipment 655, ,190 Furniture and Fixtures 445, ,629 Automobiles 110, ,802 Total Property and Equipment 33,817,240 38,713,221 Less Accumulated Depreciation 13,952,013 18,374,181 NET PROPERTY AND EQUIPMENT 19,865,227 20,339,040 Prior to July 1, 2015, included in property and equipment were assets leased in-kind to affiliated corporations. Additions to depreciable assets made by each of the affiliated corporations were recorded as assets on the books of the Diocese and as in-kind contributions for the use of facilities and equipment on the books of the affiliated corporations. Effective July 1, 2015, the Dioceses changed its property and equipment policy so that property acquired by the affiliated corporations would no longer be transferred to the Diocese. Additionally, property and equipment acquired prior to July 1, 2015 was transferred with a net book value of $2,712,516 to the affiliated corporations. Depreciable assets contributed to these affiliates and the accumulated depreciation related to these assets as of July 1, 2015, consisted of the following: June 30, 2015: ACCUMULATED NET COST DEPRECIATION BOOK VALUE Diocesan Telecommunications Corporation 1,133, , ,430 Villa Maria of Corpus Christi, Inc. 2,929,301 2,716, ,939 Catholic Charities of Corpus Christi, Inc. 1,830, , ,548 Mother Teresa Shelter, Inc. 2,181, ,388 1,498,599 TOTAL 8,076,165 5,363,649 2,712,516 Depreciation expense amounted to $1,142,202 and $1,342,339 for the years ended June 30, 2017 and 2016, respectively. Diocese of Corpus Christi, a Corporate Sole 15

18 Note 9 - EMPLOYEE BENEFIT PLAN Employees of the diocese and related entities who have completed two years of service are eligible to participate in the defined contribution plan (Plan) of the Diocese, covering all full-time lay personnel. Bi-weekly contributions to the Plan are required based on a percentage of gross salary ranging from 3 percent to 10 percent, depending on years of service. Employees are fully vested in contributions and may make voluntary tax-deferred contributions up to limits specified by federal income tax regulations. All contributions into the Plan are credited to individual accounts maintained by the Plan s trustee for each participating employee. The total contributions attributable to the Diocese for the year ended June 30, 2017 and 2016 were $124,438 and $120,208, respectively. Note 10 INSURANCE FUNDS The Diocese is self-insured for medical benefits, unemployment compensation, automotive losses and property and liability losses as described below. Effective July 1, 2016, the Diocese is fully insured for individual workers compensation insurance. Various religious organizations, parishes, and schools participate with the Diocese in the insurance plans. Premiums paid to the Diocese by these organizations are included in insurance revenue. The Diocese is a member of the Catholic Employees Benefit Group Trust (the Trust) to provide medical benefits for employees and dependents. The Trust purchases an excess loss policy from an independent insurance company to provide medical benefits on all claims exceeding $200,000 per employee and dependents per year. As a member of the Trust, the Diocese participates in a self-insured pool to fund medical benefits on claims up to $225,000 per covered employee. Effective July 1, 2016, the claims benefit per covered employee was increased to $250,000. The individual excess loss policy of the Trust provides for maximum annual coverage of $1,200,000 per individual without an aggregate limitation. An independent administrator processes all claims. Claims amounted to $3,533,128 and $3,305,895 for the years ended June 30, 2017 and 2016, respectively. The Diocese is self-insured with respect to unemployment compensation. Claim and benefits paid were not significant for the years ended June 30, 2017 and 2016, respectively. As of July 1, 2016 the Diocese is fully insured for individual workers compensation. Prior to July 1, 2016 the Diocese was self-insured for individual losses exceeding $50,000 and aggregate losses exceeding $150,000 per policy year. Total workers compensation claims incurred and paid prior to June 30, 2016 amounted to $125,415. Claims incurred prior to June 30, 2016, but paid in the year ending June 30, 2017, amounted to $17,456. The Diocese is self-insured for individual automotive losses of $100,000 or less and has purchased excess loss policies covering individual losses exceeding $100,000 and aggregate losses exceeding $200,000 per policy year. No claims were paid for the years ended June 30, 2017 or The Diocese is self-insured for individual property and liability losses of $25,000 or less and has purchased excess loss policies covering individual losses exceeding $25,000 and aggregate losses exceeding $225,000 per policy year. Property damage resulting from a named, tropical storm is subject to a 3 percent deductible with a $50,000,000 per-occurrence and annual aggregate. Claims paid amounted to $93,696 and $78,346 for the years ended June 30, 2017 and 2016, respectively. Diocese of Corpus Christi, a Corporate Sole 16

19 Note 11 COMMITMENTS AND CONTINGENCIES The Diocese is involved in various legal proceedings and litigation. The outcome of these matters is not presently known, but in the opinion of management and legal counsel, the ultimate liability of these proceedings and litigation will not materially affect the Diocese s financial position. Note 12 PRIESTS PENSION PAYABLE The Diocese sponsors a defined benefit pension plan for its priests who meet certain age and service requirements. The Plan requires benefits to be paid to eligible priests at retirement based on years of participation. The funding policy of the Diocese is to contribute the annual pension costs as determined by the Plan s actuary. The last actuarial estimate was made as of July 1, 2015, and as of June 30, 2015, a liability in the amount of $2,666,418 was recorded for the unfunded plan benefits and included in long-term liabilities on the statement of financial position. A current portion has not been reflected on the statements of financial position at June 30, 2017 and 2016 because it is anticipated the current portion will be paid from plan assets. The following table shows the Accumulated Benefits at June 30, 2015, the last actuarial measurement date, less the current fair value of plan assets. Disclosures concerning the Plan are as follows: JUNE 30, Accumulated Plan Benefits 6,585,825 6,585,825 Less: Fair Value of Plan Assets 5,363,091 4,060,490 Unfunded Plan Benefits 1,222,734 2,525,335 Employer Contributions 1,248, ,813 Expense 52,280 37,045 Benefits Paid 431, ,460 Assumptions used by the actuary in the accounting for the Plan as of the last actuary report dated June 30, 2015 is as follows: Assumed Discount Rate 7% Expected Long-Term Rate of Return on Assets 7% Diocese of Corpus Christi, a Corporate Sole 17

20 Note 13 PRIESTS SUPPORT AND POST RETIREMENT BENEFITS PAYABLE The Diocese is obligated under Canon Law to provide for the care of its disabled and retired priests. Such care includes medical and housing needs and other related costs. The estimated liability as of June 30, 2017 and 2016 totaled $6,120,125 and $6,645,069, respectively. Of this amount, $500,083 and $501,408 are reported as current liabilities as of June 30, 2017 and 2016, respectively. The estimate projects retirement obligations based on the age of each priest, an inflation rate of 3 percent, and a present value discount rate of 6 percent. Note 14 DESIGNATED NET ASSETS The Diocese held designated, unrestricted net assets for the following purposes: Property and Casualty Insurance 4,268,607 4,412,956 Diocesan/Cathedral Restoration 1,251,104 1,137,651 Diocesan Unemployment Compensation Trust 506, ,980 Medical Insurance 2,020,290 1,613,241 Infirm/Retired Priests 604, ,020 Parking Lot Maintenance 486, ,750 Chancery Project 2,321,754 1,436,740 TOTAL 11,460,052 10,158,338 Note 15 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets were available for the following purposes: JUNE 30, Capital Campaign 2,367,973 2,155,493 Bishop's Stewardship Appeal Programs 290, ,577 Other Diocesan Projects 436, ,901 Kenedy Memorial Foundation Projects -- 51,200 Bishop's Guild Supported Projects 25,091 13,028 TOTAL 3,119,963 2,616,199 Diocese of Corpus Christi, a Corporate Sole 18

21 Note 15 TEMPORARILY RESTRICTED NET ASSETS - (Continuation) Net assets were released from donor restrictions by incurring expenses satisfying the following restrictions as follows: JUNE 30, Capital Campaign 2,056,800 5,221,186 Catholic Sharing Appeal Supported Programs 1,404,381 1,535,517 Kenedy Memorial Foundation Projects 1,508, ,000 Bishop's Guild Supported Projects 77,960 80,281 Charitable Gift Annuities -- 99,856 Other Diocesan Projects 70, ,570 TO TA L 5,117,711 7,764,410 Note 16 RELATED PARTY TRANSACTIONS AND SUPPORT The Diocesan Telecommunications Corporation, Villa Maria of Corpus Christi, Inc. (Villa Maria), Catholic Charities of Corpus Christi, Inc. and Mother Teresa Shelter, Inc are related parties to the Diocese. Except for Villa Maria, these entities are dependent on continued support from the Diocese for their operations. The Diocese provided $512,995 and $569,995 in operating subsidies to the entities during the year ended June 30, 2017 and 2016, respectively, for current year operations. The Diocese also provides accounting support to the Diocesan Telecommunications Corporation, Catholic Charities of Corpus Christi, Inc. and Mother Teresa Shelter, Inc. and others. The Diocese charged $96,550 and $89,734 for accounting support during the years ended June 30, 2017 and 2016, respectively. Diocese of Corpus Christi, a Corporate Sole 19

22 SUPPLEMENTAL SCHEDULES

23 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE SCHEDULE 1 SCHEDULE OF PROGRAM SERVICES EXPENSE YEAR ENDED JUNE 30, Office of Diocesan Bishop and Bishops Emeriti: Bishop Mulvey 355, ,264 Bishop Emeritus - Gracida 50,623 67,331 Bishop Emeritus - Carmody 59,674 45,406 Total Office of Diocesan Bishop and Bishops Emeriti 466, ,001 Office of Catholic Schools 517, ,710 Office of Child and Youth Protection 125, ,403 Office of Communication: South Texas Catholic 293, ,441 Information Technology 84,720 94,150 Web Development 39,569 40,831 Total Office of Communication 417, ,422 Office of Consecrated Life 64,836 67,463 Office of Divine Worship 211, ,942 Office of Evangelization and Catechesis: Department of Evangelization and Catechesis 194, ,472 Youth Ministry 294, ,980 Life, Justice and Human Dignity 100, ,752 St. Thomas Aquinas, A&M Kingsville 265, ,439 Family Life 109, ,128 Young Adult and Campus Ministry 40,172 50,673 Cardinal Newman Student Center 102,992 96,722 Beeville Student Center 25, Total Office of Evangelization and Catechesis 1,132,209 1,341,166 Office of Judicial Vicar 149, ,556 Office of Stewardship and Development 579, ,161 (Continued) Diocese of Corpus Christi, A Corporate Sole 21

24 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE SCHEDULE 1 SCHEDULE OF PROGRAM SERVICES EXPENSE (Continuation) YEAR ENDED JUNE 30, Office of Permanent Diaconate: Deacons' Formation 57,971 57,833 Permanent Diaconate 32,721 35,950 Total Office of Permanent Diaconate 90,692 93,783 Office of Vicar for Priests 17,766 22,668 Office of Vocations: Vocations Office 508, ,591 House of Discernment 7,233 8,935 Total Office of Vocations 515, ,526 Office of Canonical and Theological Advisor 151, ,102 TOTAL PROGRAM SERVICES 4,439,852 4,941,903 Diocese of Corpus Christi, A Corporate Sole 22

25 SCHEDULE 2 DIOCESE OF CORPUS CHRISTI, A CORPORATE SOLE SCHEDULE OF SUPPORTING SERVICES EXPENSES YEAR ENDED JUNE 30, Vicar General 36,542 49,517 Chancellor 25,522 81,262 Chancery Office 353, ,026 Fiscal Officer: Finance/Accounting 463, ,980 Parish and School Accounting Office 182, ,565 Cemeteries 105, ,537 Construction Management 156, ,066 Parish Management Information Office 59,323 60,675 Diocesan Parking Lot 9,223 24,825 Total Fiscal Officer 976,509 1,049,648 General Administration 212, ,126 Office of Human Resources 87,886 81,662 Diocesan Archives: 101, ,525 Capital Campaign Expense/Distributions 2,060,788 3,609,942 Legal and Professional Fees 79, ,936 In-House Counsel 141, ,235 Interest Expense -- 63,213 Bad Debt Expense 245, ,429 TOTAL SUPPORTING SERVICES 4,321,080 6,159,521 Diocese of Corpus Christi, A Corporate Sole 23