Pastoral Center trims expenses in 2008-09 - Catholic Courier

Pastoral Center trims expenses in 2008-09

Thanks to a $10.6-million reduction in expenses, the diocesan Pastoral Center reported a solid 2008-09 fiscal year for its operations in light of substantial — but anticipated — investment losses.

"Overall we had a very good year, considering the (stock) market," said Lisa Passero, diocesan chief financial officer.

The full financial report — which appears online at http://www.dor.org/administration/documents/DioceseofRochesterPastoralCenterOperationsandAssociatedFundsFSJ09.pdf— was prepared by Bonadio and Co. LLP, an independent accounting firm in Pittsford that audited the diocesan books and records.

For the year ending June 30, 2009, the value of diocesan investments fell by $7.5 million amid this country’s worst economic crisis since the Great Depression. This decrease was significantly greater than the loss of $2.1 million the diocese experienced in 2008. Overall revenue for the diocese fell from $23.7 million in 2008 to $16.7 million in 2009.

However, the diocese also saw a significant reduction of total expenses — from $31 million in 2008 to $20.4 million in 2009. Overall losses (revenue minus expenses) were $3.7 million this past fiscal year, compared to a $7.3 million deficit in 2008.

A key area of cost reduction involved insurance programs, for which expenses fell from $4.7 million in 2008 to $1.9 million in 2009. Passero attributed this reduction to a diocesan-wide risk-management initiative begun two years ago. The program included establishment of a risk-management committee, implementation of enhanced employee training and the hiring of risk-management staff. Passaro said these moves have yielded a substantial reduction in claims against the diocesan self-insurance pool, which covers workers’ compensation, property, liability, automobile, crime and short-term disability claims.

She added that changing the method for allocating insurance premiums among entities (parishes, schools and affiliated agencies) that participate in the diocesan self-insurance fund also has proven effective. The previous formula for the self-insurance fund allocated premiums among participants equally, but premiums are now based on market rates and the experience ratings of each participating entity. As a result, Passero said participants are now more motivated to address risk management.

She pointed out that saved insurance costs become unrestricted net assets for the diocese.

"These are banked savings that will continue in the future," she said, adding that the savings are especially impressive because the Diocese of Rochester "isn’t a huge operation" compared to a number of other companies with self-insurance pools.

Passero acknowledged that the Pastoral Center also did some staff cutbacks — "a handful in various departments" — to reduce expenses. Most of these occurred through attrition. However, she said this step was tied in with the diocesan mind-set of being proactive rather than reactive in creating as healthy a financial picture as possible.

"It wasn’t easy; people lost jobs. (But) we have always tried to be out ahead of the curve," Passero said. "We’re in the mode of cost right-sizing, when and where appropriate." Consequently, she said that "we were in a better position to weather the storm" brought on by the poor economy.

Whereas the diocese has been able to take decisive action in some areas, its investments picture has been more of a wait-and-see situation. Passero expressed cautious optimism that the Pastoral Center’s 2009-10 fiscal year will be stronger, based on an improving stock market in recent months.

"The market’s come back quite a bit. But who knows what will happen?" she said.

Passero also emphasized that the $7.5-million decrease in investment value in 2009 is not an immediate loss of liquid cash, since many diocesan investments are endowments from which only 5 percent of earnings are actually applied to operating budgets each year.

"It’s not like we lost $7 million and can’t spend $7 million. That’s not how we manage investment funds," Passero said.

In other areas of the financial report, Passero attributed many fluctuations between 2008 and 2009 to timing issues. For instance, expenses related to the Partners in Faith capital campaign fell from $5.3 million in 2008 to $1.1 million in 2009. She explained that the 2008 figure was high because that year the diocese included a substantial write-off of uncollectible pledges. But since collection and distribution of funds from the five-year PIF campaign largely ended in 2008, expenses related to the campaign naturally dropped for 2009, she said.

Another timing situation involved support for parishes, for which expenses fell from $4.1 million in 2008 to $2.3 million in 2009. Passero said this was mainly due to an anticipated decrease in expenses for the new Sacred Heart Cathedral organ, which was dedicated in September 2008 and fully funded by donor-restricted gifts..

The financial report reflects Pastoral Center operations and associated funds. However, Passero stressed that the report does not reflect the financial health of diocesan parishes or Catholic schools, which are reported in their individual financial statements. Since parishes and schools are separately incorporated, the financial implications of numerous school and parish closings in 2008 also are not reflected in this financial report.

The Catholic Ministries Appeal, which generates virtually half of the Pastoral Center’s annual budget, produced revenue of approximately $5.6 million in both 2008 and 2009. The 2008-09 appeal actually fell $480,000 short of its goal, netting $4.9 million in donor pledges. But Passero pointed out that parishes are required to make up any shortfall relative to their quotas, thus holding the overall revenue figure relatively consistent from one year to the next.

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