The Diocese of Rochester again achieved “a good year, ending with a strong balance sheet” for the fiscal year ending June 30, 2016, according to Lisa Passero, diocesan chief financial officer.
The diocesan financial statements were independently audited by Bonadio & Co., LLP, a certified public accounting firm based in Pittsford. The full statements are available online at www.dor.org/index.cfm/news/financial-reports/.
Diocesan net assets decreased slightly, from $49 million in 2014-15 to $48.5 million in 2015-16. A comparable drop occurred in net investment income, which had experienced a gain of $369,000 in 2014-15 but experienced a loss of $131,000 in 2015-16 — the result of what Passero called a “flat” market.
“This year the market didn’t do as well as we wanted it to,” Passero said, noting that the diocese’s experience was consistent with national trends. However, she added that the disappointing investment results have not spurred the diocese to tinker with its strategy, saying, “We have an investment policy and we stick to it.”
She noted that market rates especially affected diocesan pension funds. According to actuarial estimates, the pension fund for lay employees of the diocese, parishes and other affiliates were 76.8 percent funded as of June 30, 2016, with net assets of $97.8 million against projected future obligations of $127.3 million. One year earlier, the fund had been 78.5 percent funded at $99.6 million in net assets vs. projected obligations of $126.8 million.
Meanwhile, the priests’ pension plan was 73.6 percent funded at the end of 2015-16 ($16.2 million in net assets vs. a projected $22 million obligation), a drop from its 79.7-percent-funded level a year prior ($18.1 million in net assets vs. a $22.7 million obligation).
In addition, the diocese made a discretionary contribution of $1.6 million in 2015-16 toward strengthening the funds, with $1.3 million going to the lay pension plan and $300,000 to the priests’ pension plan.
One challenge for closing the funding gaps involves the “discount rate” — the rate of return at which annuities can be purchased. Passero said a 1-percent increase in the discount rate would have reduced the projected benefit obligations by about $13.2 million, but that no such reduction occurred in 2015-16.
“We’re in a historically low interest-rate environment,” Passero noted.
On a positive note, she said market conditions have improved significantly since the new fiscal year began July 1. As a result, Passero noted that by mid-November 2016, the lay pension fund had become more than 80 percent funded and that the priest pension fund was “close to 80 percent” thanks to an improving market and an additional $4 million discretionary contribution to the lay pension plan in September 2016. That contribution, which will be reflected on the next year’s financial statements, was made possible by an improving market and the use of unrestricted funds — donations that can be used for any purpose at the discretion of the diocese.
Passero added that both pension funds ideally should be at least 90-percent funded, but that their present levels are no cause for major concern. On the other hand, she cautioned that the stock market offers no guarantees of continued success, so “we still need to continue to focus on monitoring and bolstering the pension funds.”
“The pension program is always a concern,” concurred Mary Ziarniak, diocesan finance director.
With continuing uncertainty in market conditions, the diocese depends heavily on the generosity of donors for financial stability, Passero emphasized.
“Even though our financial position is strong, we have the responsibility to ensure the continued mission of the church into the future,” she said. “Capital campaigns and fundraising are vital, as they always have been historically, in supporting the faith of those entrusted to our pastoral care.”
In this regard, she and Ziarniak pointed to the success of the 2015-16 Catholic Ministries Appeal, which brought in an all-time high of $6.4 million in revenue — an increase of approximately $200,000 from the 2014-15 tally.
Additional items of note in the 2015-16 financial statement include:
* Total functional expenses were $19.5 million, marking a 9.5-percent increase over 2014-15. Passero and Ziarniak attributed the jump to rising health-care costs and employee wages, the outsourcing of benefits administration and funding a new sixth grade at Siena Catholic Academy.
* Expenses for retired priests’ health and dental benefits increased by 21.7 percent to $568,000, based on a general rise in medical costs. Passero said that “we are trying to contain health-care cost increases by introducing new plans” for retired priests and all other diocesan employees as well.
* Ministerial education and formation expenses dropped by 8.9 percent to $786,000. Ziarniak attributed the reduction to lower costs associated with the diocesan seminarian program, which had fewer participants than in the previous year.
* Grant and aid revenue was bolstered by a grant of $235,000 from Fidelis Care, the health-insurance provider founded by New York state’s Catholic bishops. The grant helped to support such diocesan initiatives as migrant and multicultural ministries.
* The diocese took an expense charge of $100,000 to write off unpaid pledges to the “Our Legacy, Our Future, Our Hope” capital campaign, which concluded in 2013. The campaign raised funds that were designated for priestly formation and benefits for retired priests.
* “Sponsored program” costs rose substantially over the prior year as part of a cyclical pattern related to the biennial National Catholic Youth Conference, which in November 2015 was attended by more than 500 diocesan teens.
* Fixed assets rose by 16.6 percent to $645,000. Ziarniak explained that maintenance-related improvements were made at the Pastoral Center during the fiscal year.