Question to the Pastor: Why should I support the Bishop’s Annual Appeal if the Diocese of Raleigh is as wealthy as a recent Associated Press article I read says it is?
Msgr. Clay’s Response:
An inaccurate article was recently published by the Associated Press that created the perception that the Diocese of Raleigh is sitting on vast sums of disposable income and questioned whether Catholic parishes, schools, etc. should have participated in the Paycheck Protection Program (PPP) last year. The article implies that this diocesan money could have been used to support its parishes, schools, etc. during the pandemic. The article used inaccurate data and lacked an understanding of the financial resources of the Diocese. A lot of that money is tied up in previously designated funds and restricted gifts that legally and ethically cannot be used for any other purpose. An excellent response to the article from Dr. Russ Elmayan, chief financial officer of the diocese and a parishioner of St. Francis, that accurately portrays the true facts with total transparency is available below. I ask you to read it.
The parish was the beneficiary of a PPP loan. A statement from our director of finance and planning, Rob Neppel, endorsed by the previous and current chairs of the parish Finance Council, Tim Throndson and Steve Vebber, and me is also found below. The statement describes what we received and how it was used. You will clearly see that without the loan, the parish (i.e., church, pre-school, and TFS) would be in serious financial difficulty today because of the massive loss of income we experienced in the previous fiscal year and are continuing to experience in this one. It too shows how we have been good stewards of what we received. We did not deprive any other small business from receiving a PPP loan. In fact, nearly $130 billion remained unused in this program.
I tell you all this to assure you that the Bishop’s Annual Appeal is used appropriately and for very worthwhile causes. Supporting the many diocesan programs through this appeal is necessary because of the limitations placed around larger sums of diocesan money that are restricted. I also tell you this so you are aware of our own transparency regarding our reception and use of a PPP loan. Please be assured we treat your donations with the highest respect and integrity.
Thanks for supporting the Bishop’s Annual Appeal.
Rebuttal to the AP Story on PPP Loans and the Diocese of Raleigh
I am writing to give my thoughts regarding the February 4, 2021 Associated Press article on Payroll Protection Plan forgivable loans that were obtained by the Catholic Church in the United States and by the Diocese of Raleigh. The article as it is written does not provide appropriate context, in my opinion. Rather than rebut the article line by line, I want to address what I feel to be the threshold issues:
1. The article is correct that parish offertory for the year ended June 2020 dropped by 5% in the Diocese of Raleigh. However, in the month of March 2020, when the pandemic shutdown took place, parish offertory dropped by 45% vs. the same time in the previous year. In the month of April 2020, parish offertory dropped by 22% vs. the same time in the previous year. When the Payroll Protection Program was offered during this time when we had no idea how long the severe drop in parish offertory would continue, we felt it was an appropriate and necessary lifeline to preserve the nearly 3,000 jobs in our parishes, missions and schools to continue to provide ministry and services. Parish offertory remains approximately 10% below the prior year at this time. Since offertory is by far the largest part of the revenue stream for any parish, the PPP loans clearly saved jobs and kept people employed, which is what they were designed to do.
2. The Diocese has a financial audit every year by an independent accounting firm, and those audited financial statements are published on the Diocesan website at https://dioceseofraleigh.org/chief-financial-officer-chief-administrative-officer/audited-financial-statements. I also write a letter each year summarizing the Diocesan financial circumstances in a less technical manner. I do not know where the AP pulled some of its data, but I stand by what is posted on our website, both in my letter and in the audited financial statements prepared by the independent accounting firm of Cherry Bekaert LLP.
3. The overwhelming majority of our Diocesan assets either come with a donor restriction or a designation for their use for a specific purpose for funding a specific pastoral or charitable ministry. For the Diocese to use those restricted funds for a different purpose would be a violation of a solemn promise made to a donor and it would be both legally and ethically inappropriate.
4. I have served the Diocese of Raleigh for 30 years, and this past year has been the most financially challenging year we have had during that time. As the article accurately mentions, the Diocese provided a $3 million financial relief package to its parishes to help them weather this crisis during which time parish offertory dropped so significantly – the first time the Diocese ever provided such extensive financial relief to parishes.
5. The article is correct that the Diocese did not access a $10 million line of credit. Accessing a line of credit requires paying an interest expense on that line of credit, and the line of credit needs to be repaid. In the first few months of the pandemic shutdown, with the dramatic offertory reductions that were taking place, it was unclear at that time how a draw on the line of credit would be able to be repaid.
6. It is unclear as to where the AP pulled its data. The AP references $170 million of “funds disclosed”. Actually, the audited financial statements on the Diocesan website show $193 million in assets. However, against those assets are $111 million in liabilities, leaving $82 million in net assets. Of those $82 million in net assets, $52 million come with a donor restriction as to their use, and $26 million are designated for specific ministry purposes, leaving a bit over $4 million in assets that are undesignated and unrestricted. This amounts to two months of operating expenses, which is below most generally accepted standards regarding the amount of reserves an organization should have to conduct day to day operations.
7. The Diocese has made efforts to be transparent about all of its finances, including our use of the PPP funds, as demonstrated in this article that was published a few months ago on our website.
That link is here:
If you have any further questions, please do not hesitate to reach out to me.
Dr. Russell C. Elmayan
Chief Financial Officer and Chief Administrative Officer
The Catholic Diocese of Raleigh
St. Francis response to the AP article about the Catholic Church receiving PPP funds
Many of you may have read the recent Associated Press article about the Catholic Church applying for and receiving Payroll Protection Program (PPP) loan funds. After taking the time to fully digest the article I felt the conclusion reached did not fairly and completely consider several key factors and, as a result, I felt compelled to take a moment to explain why we at St. Francis applied for and received PPP loan funding.
During the weekend of March 15, 2020, the COVID-19 shutdown was imposed on our Parish. Over the next 4 weekends we experienced a 49.6% decrease in our offertory collections. Your generous contribution of funds to our offertory collection is the primary funding source for nearly all of our ministries at St. Francis. In terms of dollars, those four weeks yielded a $74,394 drop in collections compared to the same weeks in 2019. Not knowing what the total downside impact would be from this rapidly worsening pandemic, we prepared for a projected potential loss of $223,000 for the fiscal year ending in June, and $670,000 for the calendar year.
In addition to the projected loss in the offertory collection, we experienced a sudden loss of tuition income at the Pre-School, loss of TFS’s Before & After Care (Bridges) income, and we had to make refunds of fees for spring and summer camps which were cancelled due to the COVID shutdown and future uncertainty. That loss of income and refunds totaled anther $257,000.
At a minimum we projected a loss of income estimated at $480,000 over the remaining three months of the fiscal year. If you recall from our annual report, the Parish is a $12.7M operation, of which approximately $6.6M covers personnel. That equates to about $550,000 per month to cover payroll. Since 52% of our total expenses are tied to personnel, we started to consider the possibility for significant layoffs.
As a result, we applied for the PPP and received a loan of $1,151,800 which covered our payroll-related costs for two months. We did not request additional assistance available through the PPP to help cover other eligible expenses such as utilities, mortgage payments, or service contracts. Our application was strictly limited to the 2 months of payroll-related expenses. As a result, we avoided having to make significant layoffs in the downturn, consistent with the desires of Bishop Zarama, Monsignor Clay, and Fr. Steve Patti.
The Associated Press article also discussed assets and reserves. Unfortunately, they did not articulate the limitations around restrictions, endowments and other encumbrances related to these funds. Again, referencing our annual report, we ended the June 30, 2020 fiscal year with a Savings/Investments/Endowments balance of $7,174,821. Here is a brief breakdown of those funds:
Endowments $4,353,787 Restricted
Other Restricted Savings $982,828 Restricted
General Savings $1,828,206 Unrestricted
Since the start of our current fiscal year, offertory collections have recently recovered to about 94% of pre-pandemic levels. However, we continue to draw against our unrestricted reserves to make up the difference. Due to the continued uncertainty, the church and schools continue to experience a loss of revenue due to the elimination of on campus programs, activities, the TFS Bridges program, and lower school enrollments earlier in the year. As a result, each has had to depend upon their limited savings to close the budget gaps. Our current reserves are projected to be able to cover about 1 1/2 months of operation. If our PPP loan is not forgiven, our resulting reserves would be able to only cover about 1/2 a month’s expenses. This would leave us with an extremely limited ability to respond to unplanned financial events. Our reserves are minimal when viewed in that context.
If you have any further questions about our PPP loan and/or forgiveness application, please feel free to contact me at email@example.com or call me at (919) 534-4846. As always, thank you for your support of the Parish.
Director of Finance and Planning