1. © Grant Thornton LLP. All rights reserved. - 1 - © Grant Thornton. All rights reserved. The New Normal: Restructuring (Arch)diocesan Operations in light of Changing Demographics September 9, 2013 frank.kurre@us.gt.com Deacon Frank L. Kurre Managing Partner – Metro New York Cluster National Managing Partner Emeritus - Not-for-Profit Practice frank.kurre@us.gt.com frank.kurre@us.gt.com

2. © Grant Thornton. All rights reserved. - 2 - The Current State of our Church in the U.S. Declines in Northeast and Midwest in number of active Catholics. Shifting demographics to South, Southwest and West. Continued rapid growth in number of Hispanic Catholics. Fallen away Catholics attracted to evangelical groups and other Protestant denominations. Aging infrastructure of facilities with extensive deferred maintenance in many dioceses. Infrastructure built in the 1940's through 1970's in many parts of the country is no longer sustainable.

3. © Grant Thornton. All rights reserved. - 3 - The Current State of our Church in the U.S. Decline in vocations – priests and religious. The diaconate continues to expand in many (arch)dioceses – over 16,000 active deacons in the United States currently. Need to build more lay participation in the Church in many places. Lingering effects of this past decade's scandal still felt.

4. © Grant Thornton. All rights reserved. - 4 - Effective Redeployment of Resources Many (arch)dioceses have been restructuring operations in order to streamline operations and reduce costs. Reducing central costs – Chancery operations – in order to lead by example. Consolidation of parishes/sharing of parish resources. Centralization or regionalization of parish business functions. Regionalization of schools/closing of schools with low enrollment – in many dioceses high schools are thriving and many elementary schools are experiencing difficulties.

5. © Grant Thornton. All rights reserved. - 5 - Catholic Cemeteries Catholic Cemeteries – surpluses which have supported other operations may be a ticking time bomb. Several (arch)dioceses have seen a significant decline in the surpluses generated by their cemeteries. Shifting demographics – less Catholic cemetery burials and more cremations in many (arch)dioceses. Catholic Cemeteries – present value obligation of future perpetual care obligations.… Has this actuarial calculation been calculated? Has the related obligations been recorded on the financial statements and/or disclosed in the footnotes to the financial statements?

6. © Grant Thornton. All rights reserved. - 6 - Catholic Cemeteries Can we market our cemeteries more effectively? Can we sell additional services – i.e., blanket/flower program - to generate additional revenue? How much profit can we make from the building of crypts? Can we sell future revenue from cemeteries to for-profit entities (to generate substantial up-front cash and significantly reduce the perpetual ca while maintaining control of the "Catholicity" of the cemeteries and maintaining ownership over the cemetery property?

7. © Grant Thornton. All rights reserved. - 7 - Fundraising Establishment of separate Catholic foundations to raise funds. Capital Campaigns. Bishop's Annual appeals including appeals to vendors. Planned Giving – significant opportunities to expand planned giving to generate substantial revenue– i.e. Salvation Army example.

8. © Grant Thornton. All rights reserved. - 8 - Consolidation of Ministries/Operations Consolidation of ministries/operations across dioceses –i.e. Seminary system consolidated for the Archdiocese of New York and Dioceses of Brooklyn and Rockville Centre. Consolidation of ministries/operations across parishes – CCD programs, CYO programs, Parish outreach, etc.

9. © Grant Thornton. All rights reserved. - 9 - Real Estate Management Centralized management over real estate. Centralized sale of vacant and under-utilized facilities and rental of facilities. Consolidating rectory living. Conversion of convents, rectories and schools into affordable housing for the elderly. Avoid external leases with third parties - try to utilize parish and other diocesan properties for all space needs. Utilize excess parish properties to pay off loans to diocese. Refinance external debt using resources throughout the diocese.

10. © Grant Thornton. All rights reserved. - 10 - Corporate Structures Decentralization in some situations. Centralization in other circumstances. Establish corporate entities for parishes, schools and other entities that are not currently incorporated. Ensure all pension and other plans are in legal trusts. Consider keeping large investment portfolios in separate corporate entities or trusts away from operating entities. Too many corporations?

11. © Grant Thornton. All rights reserved. - 11 - Questions?