Roman Catholic Diocese of Springfield-Cape Girardeau. Independent Auditor s Report and Consolidated Financial Statements

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1 Roman Catholic Diocese of Springfield-Cape Girardeau Independent Auditor s Report and Consolidated Financial Statements June 30, 2018 and 2017

2 June 30, 2018 and 2017 Contents Independent Auditor s Report... 1 Consolidated Financial Statements Statements of Financial Position... 3 Statements of Activities... 5 Statements of Cash Flows... 7 Notes to Financial Statements... 8 Supplementary Information Contributions and Accounts Receivable Allowance for Doubtful Contributions and Discounts on Future Pledges Revenues, Gains and Other Support Diocese Funds Expenses by Object Statements of Activities Catholic Charities Custodian Fund Collections Held for Transmittal Diocese Funds... 30

3 Independent Auditor s Report Most Reverend Edward M. Rice Roman Catholic Diocese of Springfield-Cape Girardeau Springfield, Missouri We have audited the accompanying consolidated financial statements of Roman Catholic Diocese of Springfield-Cape Girardeau, which comprise the consolidated statements of financial position as of June 30, 2018 and 2017, and the related consolidated statements of activities and cash flows for the years 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 consolidated 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 consolidated 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 consolidated financial statements based on our audits. We did not audit the financial statements of Catholic Charities of Southern Missouri, Inc., a controlled affiliate, which statements reflect total assets constituting 4 percent and 3 percent, respectively, of consolidated total assets at June 30, 2018 and 2017, and total revenues constituting 46 percent and 22 percent, respectively, of consolidated total revenues for the years then ended. Those statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Catholic Charities of Southern Missouri, Inc., is based solely on the report of the other auditors. We conducted our audits 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated 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 consolidated financial statements.

4 Most Reverend Edward M. Rice Roman Catholic Diocese of Springfield-Cape Girardeau Page 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Roman Catholic Diocese of Springfield-Cape Girardeau as of June 30, 2018 and 2017, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Consolidating and Supplementary Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating information and the supplementary information listed in the table of contents is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information has not been subjected to the auditing procedures applied in the audits of the consolidated financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Springfield, Missouri November 6, 2018

5 Consolidated Statement of Financial Position With Fund and Consolidating Information June 30, 2018 Fund Information Cemetery Endowment Trust Current and Annuity Funds on Foundation Funds Funds Deposit Fund Assets Cash and cash equivalents $ 5,142,877 $ (11,642) $ 18,997 $ 1,424,303 Contributions and accounts receivable, net of allowance and discount; $1,463,711 1,138, Accrued interest receivable 277,208 8,413 13, ,258 Prepaid expenses and other assets 133, ,630 Loans receivable Parishes and other related entities 664, Other ,000 Investments 22,455, ,537 1,312,912 35,890,625 Beneficial interest in funds held in trust 6,853, Equipment 579, Land and buildings 4,142, Leasehold improvements Construction in progress Accumulated depreciation (1,789,111) Total assets $ 39,598,072 $ 790,308 $ 1,345,041 $ 37,794,816 Liabilities and Net Assets Liabilities Accounts payable and accrued expenses $ 820,793 $ - $ - $ - Accrued interest payable ,675 - Collections held for transmittal Funds held for parishes, schools and missions 107, ,825 1,327,366 37,248,476 Deposits payable Parishes and missions 18,654, Notes payable 721, Annuities payable - 108, Deferred revenue Total liabilities 20,304, ,436 1,345,041 37,248,476 Net Assets Unrestricted Undesignated 7,867, Designated vocations 1,488, Designated Capital Campaign Designated other 2,189,657 77, ,340 Total unrestricted 11,545,529 77, ,340 Temporarily restricted 894, , Permanently restricted 6,853, ,000 Total net assets 19,293, , ,340 Total liabilities and net assets $ 39,598,072 $ 790,308 $ 1,345,041 $ 37,794,816 See Notes to Consolidated Financial Statements

6 Fund Information Consolidating Information Capital Campaign Custodian Diocese Catholic Consolidating Consolidated Fund Fund Funds Charities Entries Total $ 1,112,802 $ 52,793 $ 7,740,130 $ 639,714 $ - $ 8,379,844 10,794,019-11,932, ,918-12,730,033 84,747 32, , , , ,755 34, , , , , ,000 10,860,772 4,835,400 76,148,656 1,109,240 (563,064) 76,694, ,853, ,853, , ,534-1,081, ,142,414 1,077,455-5,219, ,855-72, , , (1,789,111) (267,806) - (2,056,917) $ 22,852,340 $ 5,567,237 $ 107,947,814 $ 4,104,667 $ (563,064) $ 111,489,417 $ - $ - $ 820,793 $ 445,637 $ - $ 1,266, , , , , ,052-5,425,185 44,571,126 - (563,064) 44,008, ,654, ,654, , ,979 50, , , , ,096 50,171 5,567,237 65,087, ,733 (563,064) 65,422, ,867,105 2,864,872-10,731, ,488, ,488,767 22,802,169-22,802, ,802, ,563, ,563,812 22,802,169-34,721,853 2,864,872-37,586, ,035, ,062-1,376, ,103, ,103,703 22,802,169-42,860,790 3,205,934-46,066,724 $ 22,852,340 $ 5,567,237 $ 107,947,814 $ 4,104,667 $ (563,064) $ 111,489,417 3

7 Consolidated Statement of Financial Position With Fund and Consolidating Information June 30, 2017 Assets Fund Information Cemetery Endowment Trust Current and Annuity Funds on Foundation Funds Funds Deposit Fund Cash and cash equivalents $ 8,479,774 $ 1,479 $ 55,063 $ 2,248,468 Contributions and accounts receivable, net of allowance; $1,575,525 1,016, Accrued interest receivable 190,030 7,928 13, ,962 Prepaid expenses and other assets 124, ,370 Assets held for sale 1,163,427 Loans receivable Parishes and other related entities 1,020, Other ,000 Investments 17,216, ,609 1,314,065 34,704,734 Beneficial interest in funds held in trust 6,551, Equipment 562, Land and buildings 4,224, Leasehold improvements Construction in progress Accumulated depreciation (1,822,793) Total assets $ 38,727,326 $ 805,016 $ 1,382,462 $ 37,454,534 Liabilities and Net Assets Liabilities Accounts payable and accrued expenses $ 801,454 $ - $ - $ - Accrued interest payable ,007 - Collections held for transmittal Funds held for parishes, schools and missions 133, ,248 1,366,455 36,902,154 Deposits payable Parishes and missions 17,261, Notes payable 1,223, Annuities payable - 110, Deferred revenue Total liabilities 19,420, ,930 1,382,462 36,902,154 Net Assets Unrestricted Undesignated 8,023, Designated vocations 1,764, Designated Capital Campaign Designated other 2,050, , ,380 Total unrestricted 11,837, , ,380 Temporarily restricted 917, , Permanently restricted 6,551, ,000 Total net assets 19,306, , ,380 Total liabilities and net assets $ 38,727,326 $ 805,016 $ 1,382,462 $ 37,454,534 See Notes to Consolidated Financial Statements

8 Fund Information Consolidating Information Capital Campaign Custodian Diocese Catholic Consolidating Consolidated Fund Fund Funds Charities Entries Total $ 1,138,981 $ (248,257) $ 11,675,508 $ 494,811 $ - $ 12,170,319 15,768,756-16,785, ,657 (5,400) 17,302,575 51,621 28, , , , ,619 71, ,479 1,163,427 1,163, ,020, ,020, , ,000 6,581,442 4,295,376 64,908,073 1,098,163 (557,468) 65,448, ,551, ,551, , ,804-1,015, ,224,882 1,077,455-5,302, , , , , (1,822,793) (543,224) - (2,366,017) $ 23,540,800 $ 4,704,922 $ 106,615,060 $ 3,698,713 $ (562,868) $ 109,750,905 $ - $ - $ 801,454 $ 347,149 $ (5,400) $ 1,143, , , , , ,463-4,603,459 43,458,085 - (557,468) 42,900, ,261, ,261, ,223, ,223, , , , , , ,320 4,704,922 63,174, ,380 (562,868) 63,516, ,023,056 2,794,333-10,817, ,764, ,764,142 23,339,480-23,339, ,339, ,455, ,455,502 23,339,480-35,582,180 2,794,333-38,376, ,056, ,056, ,801, ,801,442 23,339,480-43,440,315 2,794,333-46,234,648 $ 23,540,800 $ 4,704,922 $ 106,615,060 $ 3,698,713 $ (562,868) $ 109,750,905 4

9 Consolidated Statement of Activities With Consolidating Information Year Ended June 30, 2018 Unrestricted - Unrestricted - Designated - Unrestricted - Unrestricted - Designated - Capital Designated - Total Undesignated Vocations Campaign Other Unrestricted Operating Revenues, Gains and Other Support Contributions $ 2,490,095 $ 331,327 $ 478,463 $ 153,652 $ 3,453,537 Diocesan assessments 111, ,489 Investment return 983, , , ,706 2,291,952 Other revenue 911,284 32, ,509 1,059,760 Net assets released from restrictions 769, ,144 Total operating revenues, gains and other support 5,265, ,142 1,304, ,867 7,685,882 Operating Expenses and Losses Pastoral 25, ,193 Religious formation 416, , ,130,828 Education 672, ,545 Ministry 1,153, ,734 1,296,862 Diocesan administration 1,628, ,704 1,500 2,141,913 Fundraising , ,808 Interest expense 198, ,206 Subsidies and contributions 245, ,940 71, ,814 Actuarial loss on annuity obligation Total operating expenses and losses 4,339, ,289 1,144, ,976 6,415,169 Change in Net Assets From Operations 926,053 (79,147) 159, ,891 1,270,713 Nonoperating Items Net unrealized losses on investments (973,305) (196,228) (697,227) (155,581) (2,022,341) Gain on trusts held in perpetuity Loss on disposal of property (108,699) (108,699) Change in Net Assets (155,951) (275,375) (537,311) 108,310 (860,327) Net Assets, Beginning of Year 8,023,056 1,764,142 23,339,480 2,455,502 35,582,180 Net Assets, End of Year $ 7,867,105 $ 1,488,767 $ 22,802,169 $ 2,563,812 $ 34,721,853 See Notes to Consolidated Financial Statements

10 Consolidating Information - Catholic Temporarily Permanently Diocese Charities Consolidating Consolidated Restricted Restricted Funds Unrestricted Entries Total $ 786,040 $ - $ 4,239,577 $ 6,527,400 $ - $ 10,766, , ,489 29,888-2,321,840 8,606 (5,596) 2,324, ,059,760 40,636 (86,225) 1,014,171 (769,144) ,784-7,732,666 6,576,642 (91,821) 14,217, , ,193 40,080-1,170, ,170, , , ,296,862 5,886,547 7,183, ,141, ,194 (86,225) 2,331, ,808 2, , ,206 - (5,596) 192, , ,814 17,264-17, ,264 57,344-6,472,513 6,165,041 (91,821) 12,545,733 (10,560) - 1,260, ,601-1,671,754 (10,899) - (2,033,240) - - (2,033,240) - 302, , , (108,699) - - (108,699) (21,459) 302,261 (579,525) 411,601 - (167,924) 1,056,693 6,801,442 43,440,315 2,794,333-46,234,648 $ 1,035,234 $ 7,103,703 $ 42,860,790 $ 3,205,934 $ - $ 46,066,724 5

11 Consolidated Statement of Activities With Consolidating Information Year Ended June 30, 2017 Unrestricted - Unrestricted - Designated - Unrestricted - Unrestricted - Designated - Capital Designated - Total Undesignated Vocations Campaign Other Unrestricted Operating Revenues, Gains and Other Support Contributions $ 2,088,971 $ 264,164 $ 16,234,463 $ 104,834 $ 18,692,432 Diocesan assessments 115, ,167 Investment return 950, , , ,630 1,374,885 Other revenue 836,922 3, ,292 Net assets released from restrictions 846, ,567 Total operating revenues, gains and other support 4,837, ,355 16,389, ,464 21,869,343 Operating Expenses and Losses Pastoral 32, ,439 Religious formation 397, , ,056,041 Education 715, ,971 Ministry 1,083, ,083,644 Diocesan administration 1,572, ,000 1,026 1,981,644 Fundraising , ,418 Interest expense 142, ,719 Subsidies and contributions 164, , ,852 Actuarial loss on annuity obligation Total operating expenses and losses 4,109, , ,418 82,878 5,593,728 Change in Net Assets From Operations 728,762 (239,920) 15,646, ,586 16,275,615 Nonoperating Items Net unrealized gains (losses) on investments 64,070 57, ,704 92, ,158 Loss on trusts held in perpetuity Change in Net Assets 792,832 (182,012) 15,808, ,062 16,652,773 Net Assets, Beginning of Year 7,230,224 1,946,154 7,530,589 2,222,440 18,929,407 Net Assets, End of Year $ 8,023,056 $ 1,764,142 $ 23,339,480 $ 2,455,502 $ 35,582,180 See Notes to Consolidated Financial Statements

12 Consolidating Information - Catholic Temporarily Permanently Diocese Charities Consolidating Consolidated Restricted Restricted Funds Unrestricted Entries Total $ 769,144 $ - $ 19,461,576 $ 6,251,387 $ - $ 25,712, , ,167 27,948-1,402,833 7,868 (5,128) 1,405, ,292 21,847 (58,103) 804,036 (846,567) (49,475) - 21,819,868 6,281,102 (63,231) 28,037, , ,439 46,440-1,102, ,102, , ,971 2,367-1,086,011 5,201,708-6,287, ,981, ,114 (58,103) 2,099, ,418 10, , ,719 - (5,128) 137, , ,852 19,579-19, ,579 68,386-5,662,114 5,388,435 (63,231) 10,987,318 (117,861) - 16,157, ,667-17,050,421 1, , , , , ,448 (115,956) 421,448 16,958, ,667-17,850,932 1,172,649 6,379,994 26,482,050 1,901,666-28,383,716 $ 1,056,693 $ 6,801,442 $ 43,440,315 $ 2,794,333 $ - $ 46,234,648 6

13 Consolidated Statements of Cash Flows Years Ended June 30, 2018 and 2017 Operating Activities Change in net assets $ (167,924) $ 17,850,932 Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation 189, ,759 Net realized and unrealized (gain) loss on investments 1,280,905 (611,379) Gain on trusts held in perpetuity (302,261) (421,448) Loss on sale of property 108,669 1,273 Noncash contributions (6,113) (822,869) Changes in Contributions and accounts receivable 4,572,542 (10,122,225) Accrued interest receivable (104,722) (135,710) Prepaid expenses and other assets 13,088 44,516 Accounts payable and accrued expenses 124,196 (109,338) Annuities payable (153,220) 199,413 Collections held for transmittal 40,589 (51,692) Deferred revenue (104,135) (44,041) Net cash provided by operating activities 5,490,887 5,967,191 Investing Activities Purchase of property and equipment (186,333) (312,254) Proceeds from sale of property and equipment 1,077,190 7,052 Advances on loans receivable (662,586) (370,000) Payments received on loans receivable 1,018,330 2,324,475 Purchase of investments (19,274,553) (17,908,279) Proceeds from disposition of investments 5,646,914 1,837,699 Net cash used in investing activities (12,381,038) (14,421,307) Financing Activities Advances on trust funds payable 4,191,988 2,752,729 Payments on trust funds payable (2,798,603) (1,653,079) Increase in funds held for others 2,208,115 10,597,699 Payments on long-term debt (501,824) (152,871) Net cash provided by financing activities 3,099,676 11,544,478 Increase (Decrease) in Cash and Cash Equivalents (3,790,475) 3,090,362 Cash and Cash Equivalents, Beginning of Year 12,170,319 9,079,957 Cash and Cash Equivalents, End of Year $ 8,379,844 $ 12,170,319 Supplemental Cash Flows Information Interest paid $ 257,454 $ 191,088 See Notes to Consolidated Financial Statements 7

14 Notes to Consolidated Financial Statements June 30, 2018 and 2017 Note 1: Nature of Operations and Summary of Significant Accounting Policies Nature of Operations The Diocese of Springfield-Cape Girardeau (the Diocese ) seeks to serve the needs of the local parishes throughout southern Missouri. The various ministries of the Diocese provide human and material resources that encourage spiritual, educational and charitable work in the Church and in the world. Basis of Presentation and Principles of Consolidation The accompanying financial statements include all administration and program offices and departments of the Diocese which are under the direct operational control, supervision or stewardship of the Bishop of Springfield-Cape Girardeau. The accompanying financial statements exclude the accounts of the activities within the Diocese associated with such things as parishes, schools, cemeteries, homes, hospitals, etc. These activities may or may not be performed by an entity separately incorporated under civil law; however, under canon law, stewardship requirements and guidelines, etc., each is an operating entity distinct from Diocesan administrative offices, with separate Boards of Directors or governing bodies, maintaining separate accounts and carrying on their own services and programs. The financial statements have been prepared on the accrual basis and in accordance with practices adopted by the United States Conference of Catholic Bishops. The accompanying consolidated financial statements include the accounts of the Roman Catholic Diocese of Springfield-Cape Girardeau and Catholic Charities of Southern Missouri, Inc. All significant interorganization balances and transactions have been eliminated in consolidation. Resource Accounting Policies In order to ensure observance of limitations and restrictions placed on the use of the resources available to the Diocese, the accounts are maintained internally on the accrual basis in accordance with the principles of fund accounting. Accordingly, resources are classified for accounting purposes into funds established according to their nature and purpose. For reporting purposes, the net assets of these funds have been further classified into categories based on donor stipulated restrictions. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, gains, losses and other changes in net assets during the reporting period. Actual results could differ from those estimates. 8

15 Notes to Financial Statements June 30, 2018 and 2017 Cash and Cash Equivalents The Diocese considers all liquid investments with original maturities of three months or less to be cash equivalents. At June 30, 2018 and 2017, cash equivalents consisted primarily of brokerage cash accounts. At June 30, 2018, the Diocese s cash accounts exceeded federally insured limits by approximately $5,890,000. Loans Receivable Loans receivable are stated at their outstanding principal amount, net of an allowance for uncollectible loans. At June 30, 2018 and 2017, the allowance was $0. The Diocese may provide an allowance for uncollectible loans, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Outstanding loans accrue interest based on the terms of the respective agreements. A loan receivable is considered delinquent when the parish s ability to pay is diminished. At that time, the loan is placed on nonaccrual status and interest accrual ceases and does not resume until the loan is no longer classified as delinquent. Delinquent loans are written off based on individual credit evaluation and specific circumstances. Investments and Investment Return Investments in equity securities having a readily determinable fair value and in all debt securities are carried at fair value. All other investments are carried at the lower of cost (or fair value at time of donation, if acquired by contribution) or fair value. Investment return includes dividend, interest and other investment income; realized and unrealized gains and losses on investments carried at fair value; and realized gains and losses on other investments. Investment return that is initially restricted by donor stipulation and for which the restriction will be satisfied in the same year is included in unrestricted net assets. Other investment return is reflected in the statements of activities as unrestricted, temporarily restricted or permanently restricted based upon the existence and nature of any donor or legally imposed restrictions. Assets Held for Sale Assets held for sale at June 30, 2018 and 2017, include real property, buildings and various equipment. All assets held for sale are stated at the lower of cost or estimated net realizable value. At June 30, 2018 and 2017 the balance is made up of land and buildings recorded at their estimated fair value of $0 and $1,555,898, respectively, along with various equipment valued at a total of $0 and $7,529, respectively. 9

16 Notes to Financial Statements June 30, 2018 and 2017 Property and Equipment Equipment, land and buildings are stated at cost or, if acquired by gift, the estimated fair value at the date of the gift. Equipment and buildings are depreciated over the estimated useful life of each asset. Annual depreciation is primarily computed using the straight-line method. The estimated useful lives for each major depreciable classification of property and equipment are as follows: Buildings Land improvements Furniture, fixtures and equipment Vehicles 40 years 20 years 10 years 5 years Funds Held for Parishes, Schools and Missions and Deposits Payable Funds held for parishes, schools and missions and deposits payable (also known as trust funds on deposit) represent funds held and invested by the Diocese for the benefit of others. The trust funds on deposit earn a fixed rate of return that is determined semiannually and adjusted on January 1 and July 1 and is comparable to current CD rates. The fixed rate of return is either paid to the depositors or reinvested and added to the liability. Trust funds on deposit are payable on demand while cemetery, endowment and foundation fund liabilities are invested in perpetuity. Annuities Payable Annuity obligations are valued at the actuarial present value of the expected payments based upon the life expectancy of the annuitants and grantors. The Diocese received $34,988 and $0 in contributions from these instruments for 2018 and 2017, respectively. Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are those whose use by the Diocese has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by the Diocese in perpetuity. Contributions Gifts of cash and other assets received without donor stipulations are reported as unrestricted revenue and net assets. Gifts received with a donor stipulation that limits their use are reported as temporarily or permanently restricted revenue and net assets. When a donor stipulated time restriction ends or purpose 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. Gifts having donor stipulations which are satisfied in the period the gift is received are reported as unrestricted revenue and net assets. 10

17 Notes to Financial Statements June 30, 2018 and 2017 Gifts of land, buildings, equipment and other long-lived assets are reported as unrestricted revenue and net assets unless explicit donor stipulations specify how such assets must be used, in which case the gifts are reported as temporarily or permanently restricted revenue and net assets. Absent explicit donor stipulations for the time long-lived assets must be held, expirations of restrictions resulting in reclassification of temporarily restricted net assets as unrestricted net assets are reported when the long-lived assets are placed in service. Unconditional gifts expected to be collected within one year are reported at their net realizable value. Unconditional gifts expected to be collected in future years are reported at the present value of estimated future cash flows. The resulting discount is amortized using the level-yield method and is reported as contribution revenue. The Diocese recognizes transfers of nonfinancial assets received with a corresponding liability in circumstances where the Organization does not have variance power and is not financially interrelated with the specified beneficiary. Income Tax Status The Diocese is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code (IRC). However, the Diocese is subject to federal income tax on any unrelated business taxable income as defined in the IRC. The Diocese files tax returns in the U.S. federal jurisdiction. With a few exceptions, the Diocese is no longer subject to U.S. federal examinations by tax authorities for years before Allocation of Catholic Center Overhead The Diocese is located in The Catholic Center and allocates to various departments their portion of the overhead costs of operating The Catholic Center. The allocations amounted to $77,000 in both 2018 and 2017 and are included in the departments rent expenses and as a reduction of the Diocese s administration expenses. Functional Allocation of Expenses The costs of supporting the various programs and other activities have been summarized on a functional basis in the statements of activities. Certain costs have been allocated among the program and support services categories based on various methods. Reclassifications Certain reclassifications have been made to the 2017 financial statements to conform to the 2018 financial statement presentation. These reclassifications had no effect on the change in net assets. 11

18 Notes to Financial Statements June 30, 2018 and 2017 Note 2: Contributions Receivable Contributions receivable consist of the following unconditional promises to give: DDF due in less than one year $ 786,040 $ 769,144 Capital Campaign Due in one to five years 12,181,730 17,268,281 Less discount on capital campaign pledges 355, ,525 Less allowance for doubtful pledges 1,108, ,000 $ 11,504,059 $ 16,461,900 Diocesan Development Fund (DDF) pledges are solicited annually on the first Sunday in May and are collected over the following year. For the years ended June 30, 2018 and 2017, total Diocesan Development Fund pledges amounted to $2,186,636 and $2,059,154, respectively. The pledges not collected at the end of the pledge year are written off against the allowance for doubtful pledges. The Capital Campaign Fund began in 2015 and concluded in spring of There is a five-year collection process where donors have five years to pay on their pledge but funds are used toward current projects aligned with the mission of this campaign. For the years ended June 30, 2018 and 2017, total Capital Campaign Fund net pledges amounted to $10,794,019 and $15,768,756, respectively. The pledges not collected at the end of the five-year payment period, will be written off against the allowance for doubtful pledges. The discount rate used was 3.84 percent and 2.98 percent for 2018 and 2017, respectively. Note 3: Loans Receivable Loans receivable from parishes and other related entities are payable in monthly installments with interest adjusted at January 1 and July 1. Interest rates were 4.50 percent and 3.75 percent at June 30, 2018 and 2017, respectively. Interest income earned was $43,195 and $85,424 as of June 30, 2018 and 2017, respectively. Installments due within 12 months total approximately $43,218 and $591,811 at June 30, 2018 and 2017, respectively. As of June 30, 2018, no loans are considered delinquent and, therefore, no loans are on nonaccrual status. 12

19 Notes to Financial Statements June 30, 2018 and 2017 The loans receivable primarily represent loans made by the Diocese to parishes and are generally secured by mortgages on the properties. Loans receivable consist of: Real estate parishes $ 664,479 $ 1,020,223 Other 250, ,000 Total loans 914,479 1,270,223 Less allowance for losses on loans - - $ 914,479 $ 1,270,223 There was no activity in the allowance for loan losses for the years ended June 30, 2018 and Note 4: Investments and Investment Return At June 30, 2018 and 2017, the Diocese held the following investments: 2018 Endowment Cemetery Capital Current and Annuity Trust Funds Foundation Campaign Custodian Catholic Funds Funds on Deposit Fund Fund Fund Charities Total Corporate stocks $ 1,076 $ - $ - $ 1,420,545 $ - $ - $ - $ 1,421,621 Certificates of deposit , , ,289 Corporate bonds 19,690, ,865 1,054,188 15,043,179 5,757,870 2,628,416-44,704,286 Mutual funds 2,308, , ,791 18,017,206 5,097,690 2,205,339-28,149,023 Government issue and similar bonds 2, , ,702 5,212 1, ,951 Real estate 452, , ,662 $ 22,455,410 $ 793,537 $ 1,312,912 $ 35,890,625 $ 10,860,772 $ 4,835,400 $ 546,176 $ 76,694,832 13

20 Notes to Financial Statements June 30, 2018 and Endowment Cemetery Capital Current and Annuity Trust Funds Foundation Campaign Custodian Catholic Funds Funds on Deposit Fund Fund Fund Charities Total Corporate stocks $ 783 $ 26,479 $ - $ 1,063,201 $ - $ 7,486 $ - $ 1,097,949 Certificates of deposit , , ,552 Corporate bonds 14,655, ,184 1,166,588 16,462,066 3,682,278 2,524,925-39,017,967 Mutual funds 2,104, , ,575 16,849,358 2,894,245 1,610,033-23,832,058 Government issue and similar bonds 3,345 13,110 2, ,252 4, , ,460 Real estate 452, ,782 $ 17,216,847 $ 795,609 $ 1,314,065 $ 34,704,734 $ 6,581,442 $ 4,295,376 $ 540,695 $ 65,448,768 Investments of $250,000 at June 30, 2018 and 2017, are held for long-term investments in perpetuity and $105,476 and $106,795 are held to support split-interest annuity agreements at June 30, 2018 and 2017, respectively. Investment return of Diocese funds during 2018 and 2017 consisted of the following: 2018 Unrestricted - Unrestricted - Designated - Unrestricted - Designated - Capital Designated - Total Temporarily Permanently Catholic Unrestricted Vocations Campaign Other Unrestricted Restricted Restricted Charities Investment income $ 983,597 $ 144,186 $ 317,630 $ 94,204 $ 1,539,617 $ 29,888 $ - $ 8,606 Net realized gain (loss) (104) 126, , , , Total operating investment return 983, , , ,706 2,291,952 29,888-8,606 Net unrealized loss - nonoperating (973,305) (196,228) (697,227) (155,581) (2,022,341) (10,899) - - Total investment return $ 10,188 $ 74,620 $ 128,678 $ 56,125 $ 269,611 $ 18,989 $ - $ 8,606 14

21 Notes to Financial Statements June 30, 2018 and Unrestricted - Unrestricted - Designated - Unrestricted - Designated - Capital Designated - Total Temporarily Permanently Catholic Unrestricted Vocations Campaign Other Unrestricted Restricted Restricted Charities Investment income $ 793,177 $ 133,856 $ 129,874 $ 85,662 $ 1,142,569 $ 27,948 $ - $ 7,868 Net realized gain 157,115 16,965 25,268 32, , Total operating investment return 950, , , ,630 1,374,885 27,948-7,868 Net unrealized gain - nonoperating 64,070 57, ,704 92, ,158 1, Total investment return $ 1,014,362 $ 208,729 $ 317,846 $ 211,106 $ 1,752,043 $ 29,853 $ - $ 7,868 Note 5: Beneficial Interest in Trusts Held by Others The Diocese is the beneficiary of various trusts held by third parties. Under the terms of these trusts, the Diocese has the irrevocable right to receive a percentage of the income earned on the trust assets in perpetuity. The Diocese has recorded its interest in these trusts, based on the fair value of assets held in trust, which approximates the present value of income to be received from trust assets. During the years ended June 30, 2018 and 2017, distributions of $312,746 and $309,626, respectively, were received from these trusts. Gains on assets held in trust in perpetuity of $302,261 and $421,447 were recognized in 2018 and 2017, respectively. Note 6: Deposits Payable Deposits from parishes, missions, Catholic Charities of Southern Missouri and Priests Mutual Benefit Society represent funds received and held in trust. These funds are payable on demand and bear interest at variable rates. Interest expense for the years ended June 30, 2018 and 2017, on deposits payable totaled $183,154 and $119,096, respectively. 15

22 Notes to Financial Statements June 30, 2018 and 2017 Note 7: Long-Term Debt Note payable, bank (A) $ - $ 452,032 Note payable, Sisters of St. Joseph (B) 721, ,771 $ 721,979 $ 1,223,803 (A) Paid off in full on September 5, 2017; was due June 2021; with monthly payments of $9,627, including variable interest at LIBOR plus 1.75 percent (3.84 percent at June 30, 2018 and 2.98 percent at June 30, 2017); secured by certain property. (B) Due January 2033; with monthly payments of $4,149, bearing no interest, secured by certain property. Annual maturities at June 30, 2018, are: 2019 $ 49, , , , ,792 Thereafter 473,019 $ 721,979 Note 8: Temporarily Restricted Net Assets Temporarily restricted net assets at June 30, 2018 and 2017, are available for the following purposes or periods: Unrestricted DDF pledges for periods after year end $ 786,040 $ 769,144 Gift annuity agreements 141, ,333 Other 108, ,216 Catholic Charities 341,062 - $ 1,376,296 $ 1,056,693 16

23 Notes to Financial Statements June 30, 2018 and 2017 Note 9: Permanently Restricted Net Assets Permanently restricted net assets at June 30, 2018 and 2017, are restricted to investment in perpetuity, the income from which is expendable to support: Vocations activities $ 670,699 $ 634,484 Any activities of the Diocese 6,433,004 6,166,958 $ 7,103,703 $ 6,801,442 Note 10: Multiemployer Pension Plan The Diocese has a noncontributory retirement plan covering all full-time lay personnel. The expense for the plan was $75,918 and $95,020 for the years ended June 30, 2018 and 2017, respectively. The retirement plan is part of a multiemployer plan, administered by the Christian Brothers Retirement Allowance Committee. The unfunded portion, if any, of vested employee benefits is not determinable at the Diocese level. The Diocese makes annual plan contributions equal to the retirement expense accrued. The risks of participating in a multiemployer plan is different from single-employer plans in the following aspects: 1. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. 2. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. 3. If the Organization chooses to stop participating in the multiemployer plan, the Organization may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability. Note 11: Disclosures About Fair Value of Assets and Liabilities Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities. 17

24 Notes to Financial Statements June 30, 2018 and 2017 Level 2 Level 3 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; 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 assets or liabilities. Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities. Recurring Measurements The following tables present the fair value measurements of assets recognized in the accompanying statements of financial position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2018 and 2017: 2018 Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Fair Assets Inputs Inputs Value (Level 1) (Level 2) (Level 3) Cash equivalents $ 554,289 $ 554,289 $ - $ - Corporate stocks 1,421,621 1,421, Corporate bonds 44,704,286-44,704,286 - Mutual funds Equity funds 19,346,221 19,346, U.S. fixed income funds 4,886,913 4,886, Non-U.S. fixed income funds 141, , Other 3,774,188 3,774, Government issue and similar bonds 930, ,951 - Assets held in trust by others 6,853,703-6,853,703-18

25 Notes to Financial Statements June 30, 2018 and Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Fair Assets Inputs Inputs Value (Level 1) (Level 2) (Level 3) Cash equivalents $ 576,552 $ 576,552 $ - $ - Corporate stocks 1,097,949 1,097, Corporate bonds 39,017,967-39,017,967 - Mutual funds Equity funds 16,979,076 16,979, U.S. fixed income funds 4,067,570 4,067, Other 2,785,412 2,785, Government issue and similar bonds 471, ,460 - Assets held in trust by others 6,551,442-6,551,442 - Following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying statements of financial position, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the year ended June 30, Investments Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted market prices are not available, then fair values are estimated by using quoted prices of securities with similar characteristics or independent asset pricing services and pricing models, the inputs of which are market-based or independently sourced market parameters, including, but not limited to, yield curves, interest rates, volatilities, prepayments, defaults, cumulative loss projections and cash flows. Such securities are classified in Level 2 of the valuation hierarchy. In certain cases where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. There are no Level 3 investments. Beneficial Interest in Funds Held in Trust Fair value is estimated at the present value of the future distributions expected to be received over the term of the agreement. Due to the nature of the valuation inputs, the interest is classified within Level 2 of the hierarchy. 19

26 Notes to Financial Statements June 30, 2018 and 2017 Note 12: Significant Estimates and Concentrations Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Those matters include the following: Investments in Marketable Securities The Diocese invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the amounts reported in the accompanying statements of financial position. This risk is controlled through a diversified portfolio and regular monitoring procedures. Revenues From Pledge Drive The Diocese holds the Diocesan Development Fund drive annually to raise funds for the Diocesan programs and activities. Contributions from this pledge drive were approximately 74 percent and 13 percent of total contribution revenue during 2018 and 2017, respectively. The Diocese is in the process of the Capital Campaign Fund drive to raise funds for three specific Diocesan endowments. Contributions from this pledge drive were approximately 0 percent and 84 percent of total contribution revenue during 2018 and 2017, respectively. Related Party Receivables At June 30, 2018, the Diocese has one outstanding loan receivable from a parish that comprised approximately 89 percent of total loans receivable. General Litigation The Diocese is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management that the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, results of operations and cash flows of the Diocese. Note 13: Subsequent Events Subsequent events have been evaluated through November 6, 2018, which is the date the financial statements were available to be issued. 20

27 Supplementary Information

28 Contributions and Accounts Receivable June 30, 2018 and 2017 DDF contributions receivable $ 786,040 $ 769,144 Capital campaign contributions receivable 12,181,730 17,268,281 12,967,770 18,037,425 Accounts receivable Insurance premiums 239, ,342 Subscriptions receivable 5,447 7,271 Miscellaneous receivable 182,745 87,405 Catholic Charities receivables 797, ,657 1,225, ,675 14,193,744 18,878,100 Less allowance for doubtful contributions 1,108, ,000 Less discount on future pledges 355, ,525 $ 12,730,033 $ 17,302,575 Allowance for Doubtful Contributions and Discount on Future Pledges Years Ended June 30, 2018 and 2017 Balance, beginning of year $ 1,575,525 $ 700,196 Provision for doubtful accounts 544, ,177 Accounts charged off during the year (328,695) (48,177) Discount on future pledges (327,814) 467,329 Balance, end of year $ 1,463,711 $ 1,575,525 21

29 Revenues, Gains and Other Support Diocese Funds Year Ended June 30, 2018 Unrestricted - Unrestricted - Designated - Unrestricted - Unrestricted - Designated - Capital Designated - Temporarily Permanently Undesignated Vocations Campaign Other Restricted Restricted Total Contributions Catholic Home Missions Appeal $ 82,100 $ - $ - $ - $ - $ - $ 82,100 Dorsey B. Heer Trust 284, ,462 DDF annual appeal 1,877, ,040-2,663,634 Collections for vocations - 240, ,628 Capital Campaign , ,463 Other 245,939 90, , ,290 2,490, , , , ,040-4,239,577 Diocesan Assessments 111, ,489 Investment Return Investment income 983, , ,630 94,204 29,888-1,569,505 Net realized gains (losses) on investments reported at fair value and on other investments (104) 126, , , , , , , ,706 29,888-2,321,840 Other Revenue Insurance commissions 53, ,911 Miscellaneous 132,751 32, , ,227 Priests Institute 18, ,000 Priests Retreat 6, ,000 Insurance premiums CUP II 93, ,896 Rent 50, ,701 Auxiliary Offices Communications, Media & Publications 248, ,835 Evangelization and Catechesis 10, ,872 Social Ministry 7, ,269 Superintendent of Schools 45, ,532 Hispanic Ministry 5, ,850 Chaplain Ministry 5, ,930 Family Life Office 5, ,000 Marriage Tribunal 20, ,435 Diocesan Youth 206, , ,284 32, , ,059,760 $ 4,496,361 $ 635,142 $ 1,304,368 $ 480,867 $ 815,928 $ - $ 7,732,666 22

30 Revenues, Gains and Other Support Diocese Funds Year Ended June 30, 2017 Unrestricted - Unrestricted - Designated - Unrestricted - Designated - Capital Designated - Temporarily Permanently Unrestricted Vocations Campaign Other Restricted Restricted Total Contributions Catholic Home Missions Appeal $ 90,000 $ - $ - $ - $ - $ - $ 90,000 Dorsey B. Heer Trust 283, ,219 DDF annual appeal 1,696, ,144-2,465,414 Collections for vocations - 192, ,307 Capital Campaign ,234, ,234,463 Other 19,482 71, , ,173 2,088, ,164 16,234, , ,144-19,461,576 Diocesan Assessments 115, ,167 Investment Return Investment income 793, , ,874 85,662 27,948-1,170,517 Net realized gains on investments reported at fair value and on other investments 157,115 16,965 25,268 32, , , , , ,630 27,948-1,402,833 Other Revenue Insurance commissions 54, ,908 Miscellaneous 111,347 3, ,717 Priests Institute 18, ,800 Priests Retreat 7, ,255 Insurance premiums CUP II 94, ,042 Rent 55, ,341 Auxiliary Offices Communications, Media & Publications 260, ,370 Evangelization and Catechesis 23, ,870 Social Ministry 9, ,562 Superintendent of Schools 44, ,225 Hispanic Ministry 13, ,400 Chaplain Ministry 12, ,130 Family Life Office 4, ,870 Marriage Tribunal 24, ,190 Diocesan Youth 102, , ,922 3, ,292 $ 3,991,352 $ 418,355 $ 16,389,605 $ 223,464 $ 797,092 $ - $ 21,819,868 23

31 Expenses by Object Years Ended June 30, 2018 and 2017 Pastoral DCCW $ 21,294 $ 21,388 Diocesan Leadership Groups 3,899 11,051 $ 25,193 $ 32,439 Religious Formation Undesignated Priests Institute $ 40,558 $ 41,043 Priests Retreat 26,851 20,466 Clergy other 349, ,257 $ 416,539 $ 397,766 Religious Formation Designated Seminary $ 487,306 $ 405,466 Continuing education of priests 48,399 16,369 Vocation 178, ,440 $ 714,289 $ 658,275 Religious Formation Temporarily Restricted McAuliffe stipend distributions $ 40,080 $ 46,440 $ 40,080 $ 46,440 24

32 Expenses by Object Years Ended June 30, 2018 and 2017 Education Communications, Media and Publications $ 339,090 $ 332,834 Evangelization and Catechesis 135, ,550 Superintendent of Schools 198, ,587 $ 672,545 $ 715,971 Ministry Undesignated Catholic Campus Ministry Springfield $ 178,300 $ 175,802 Cape Girardeau 101,600 99,595 Joplin 10,000 3,300 Hispanic Ministry 112, ,313 Chaplain Ministry 67,766 69,854 Family Life Office 84,111 50,294 Diocesan Youth 323, ,902 Office of Worship 27,706 29,514 Social Ministry 71, ,704 Trinity Hills ,645 Marriage Tribunal 175, ,721 $ 1,153,128 $ 1,083,644 Ministry Designated Other Special projects $ 143,734 $ - $ 143,734 $ - 25