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Catholic Finance Corporation Financial Advisor to Catholic Institutions Financial Best Practices for Catholic Cemeteries Annual Meeting Presentation August 14, 2014
© 2014 Catholic Finance Corporation 2 Introduction – CFC’s Mission and your Needs Operations (Budgeting) Capital Improvements Care Fund/Master Plan Review of Governance Agenda
© 2014 Catholic Finance Corporation Agenda CFC’s Mission 3 As good stewards, we will provide direction and counsel to Catholic institutions guiding them to an improved position of financial strength and security so that they may freely and faithfully fulfill their mission through their various ministries. Introduction – CFC’s Mission and your Needs Operations (Budgeting) Capital Improvements Care Fund/Master Plan Review of Governance
© 2014 Catholic Finance Corporation 4 CFC is a 501(c)(3) nonprofit corporation CFC is an independent Catholic corporation CFC was created in 2000 at the direction of the Archdiocese of St. Paul & Minneapolis Board of Directors – five lay people, three clergy Nine on staff – over 150 years experience in various areas of finance and administration CFC’s Structure
© 2014 Catholic Finance Corporation 5 Long-Range Financial Planning/Model GROW Initiative Excellence in Catholic Education (ECE) Regional Shared Resource Discussions Originating/Facilitating Loans Cooperative Purchasing Information Clearinghouse CFC’s Services
© 2014 Catholic Finance Corporation 6 Cemetery Committee Members? Parish Business Administrators? Parish Cemeterians? Pastors? Others? By a show of hands.....
© 2014 Catholic Finance Corporation 7 What did you come here hoping to learn?
© 2014 Catholic Finance Corporation Agenda 8 “A budget is simply a plan in dollar terms. The budget becomes the basic document for checking operations against plans and taking corrective action where appropriate, by either revising the plan or controlling operations to agree with the plan.” Finance and Accounting for Nonfinancial Managers, William G. Droms Introduction – CFC’s Mission and your Needs Operations (Budgeting) Capital Improvements Care Fund/Master Plan Review of Governance Budget
© 2014 Catholic Finance Corporation 9 By a show of hands, how many of you have a strategic business plan for your cemeteries for the next 3-5 years? If so, does your stewardship of resources follow? If not, how do you allocate dollars? Do you ask ‘what did we do last year?’ Questions
© 2014 Catholic Finance Corporation 10 Common Budgeting Problems Focus on one year Little or no connection between budget and mission of cemetery Disregard for current economic/demographic realities, changes in funeral practices No provisions for care fund/operating reserves No capital improvement plan (C.I.P.) Separation of operations from capital projects Unrealistic revenue and expenditure assumptions
© 2014 Catholic Finance Corporation 11 Revenue Drivers Expense Drivers Understand “Key” Drivers
© 2014 Catholic Finance Corporation 12 Lot sales/additional right of burial Fees for services (e.g. grave opening/closing, gate fees, marker fees) Interest income from savings/endowments Donations Above is about 90% of total Key Revenue Drivers
© 2014 Catholic Finance Corporation 13 Contractor fees Employee salaries and benefits Repairs and maintenance In-kind services chargebacks Expansion costs/debt payments Above is about 80% of total Key Expense Drivers
© 2014 Catholic Finance Corporation 14 It means that the income projections include only sources and amounts that are certain or reasonably certain The budget is balanced by decreasing and controlling expenses rather than making unrealistic assumptions about income Face income realities as you prepare your annual budget, rather than scrambling for a solution after the fact Be Realistic...
© 2014 Catholic Finance Corporation 15 Planning for contingencies is one of the first signs of smart management It is a good business practice to see that a surplus is included as part of your written annual plan and then budget for it Recognize the value carryover surpluses add to fiscal stability and plan them into annual budgets Contingencies
© 2014 Catholic Finance Corporation 16 Does your cemetery have a policy to establish some minimum level of cash as an operating reserve (i.e.=>30 days) Reserves should be used to solve timing problems, not deficit problems Reserves should not be used to make up for income shortfalls if the cemetery does not have a plan to replace the income or reduce expenses in the near term future Operating Reserves
© 2014 Catholic Finance Corporation 17 Changing priorities/burial practices Strategic/long term plan Fill rate (rate at which current cemetery fills) and/or expansion plans Competition from other providers: capture rate (percent of cemetery funerals/total number of parish funerals) Financial/demographic trends specific to your area Actual results vs. budget Assess Your Current Reality
© 2014 Catholic Finance Corporation 18 Track actual historical revenues and expenses by major category Determine the percentage of change for each budget category from one actual year to next Determine the projected change for future years A Model for Long Range Forecasting
© 2014 Catholic Finance Corporation 19 Base your projections on the reality of the actual numbers: What you know, think, hope, guess The percentages convert to dollars in the budget forecast Project out at least 5-10 years - projection should extend at least a few years past the point where cemetery is full Reviewed and amended periodically - living document Long Range Forecasting
© 2014 Catholic Finance Corporation 20 Timely collection and review Focus on big picture Review budget assumptions Without accurate historical reporting, it’s difficult to project future needs The Importance of Financial Reports and Data
© 2014 Catholic Finance Corporation 21 To disregard the facts doesn’t change the facts
© 2014 Catholic Finance Corporation 22 Drain reserves (debt, CIP, and operational) to meet obligations Cut services and related staff Sale of assets at potentially inappropriate times and at unfavorable terms Inappropriate use of operating line of credit/ dependence on parish for operational support Potential Effects of Disregarding the Facts
© 2014 Catholic Finance Corporation 23 You may be a “not-for-profit” But are you also a “not-for-loss”
© 2014 Catholic Finance Corporation 24 Questions? Comments?
© 2014 Catholic Finance Corporation 25 Review the scenario Appoint a scribe to record answers Answer the questions, with scribe recording answers Share answers with the larger group when requested Table Discussion #1
© 2014 Catholic Finance Corporation Agenda 26 Outlines, typically on a multi-year basis, the expenditures and the corresponding income required to replace or acquire fixed assets or to keep them in good repair. Introduction – CFC’s Mission and your Needs Operations (Budgeting) Capital Improvements Care Fund/Master Plan Review of Governance The Capital Budget
© 2014 Catholic Finance Corporation 27.... and the corresponding income required is paid from: Accumulated surpluses Memorials and donations Funding for future development The Capital Budget
© 2014 Catholic Finance Corporation 28 Same methodology to develop and maintain Annual and multi-year components Similarities to Operating Budget
© 2014 Catholic Finance Corporation 29 Capital needs not always evident Timing for repairs/replacement not always obvious Special expertise could be required (outside help) Long-term thinking required Differences from Operating Budget
© 2014 Catholic Finance Corporation 30 Common Capital Budget Thinking Operating Budget Capital Budget
© 2014 Catholic Finance Corporation 31 Recommended Capital Budget Thinking Operating BudgetCapital Budget C.I.P. Capital Reserve Expansion Plans Repairs & Maint
© 2014 Catholic Finance Corporation 32 Discipline to set aside % of operating surplus Use of extraordinary revenue sources (bequests/donations) Use for large repairs Use for unexpected repairs/replacements Separate bank/investment account segregates funds Capital Reserve
© 2014 Catholic Finance Corporation 33 Provides a comprehensive picture of your capital needs in one document Helps you prepare well ahead of time for large projects Combined with your operating budget, gives you a better overall picture of your finances Why Prepare a CIP? Capital Improvement Plan
© 2014 Catholic Finance Corporation Agenda Care Fund/Master Plan 35 Introduction – CFC’s Mission and your Needs Operations (Budgeting) Capital Improvements Care Fund/Master Plan Review of Governance A Perpetual Care Fund is the fund that provides money to care for graves, crypts and niches that have been used, purchased, or developed/prepared for purchase. The fund also may provide for grounds care, especially at such time as there may be little or no operating income, i.e. cemetery is at capacity.
© 2014 Catholic Finance Corporation 36 Who has a Master Plan?
© 2014 Catholic Finance Corporation 37 What is included?
© 2014 Catholic Finance Corporation 38 New buildings, plots, columbaria Different equipment Major renovations to existing buildings/expansion Major grounds maintenance (e.g. roadways, fences, drainage, irrigation) What Items are Typically Included in a Master Plan?
© 2014 Catholic Finance Corporation 39 How did you develop it?
© 2014 Catholic Finance Corporation 40 How has it changed over time?
© 2014 Catholic Finance Corporation 42 Good financial planning Forward thinking Creates a manageable process Guides future decision making and makers Prevents surprises Benefits of Preparing a CIP/Master Plan
© 2014 Catholic Finance Corporation 43 A care fund may be different from your savings account
© 2014 Catholic Finance Corporation 44 Care Fund plans should be based on the following: Assumed fill rate of cemetery based on mix of types/frequency of sales A reasonable annual rate of return on Care Fund investments A set or variable percentage of each lot/niche sale dedicated or allotted directly to Care Fund Care Fund Elements
© 2014 Catholic Finance Corporation 45 Assure that Care Fund is adequate for long-term maintenance of cemetery beyond the projected date of reaching capacity. Pay attention to risk/return issues, seeking professional advice where appropriate Review sales frequency/types and cemetery expenses annual to determine match to history/budget/projections Adjust both revenue (prices/rates) and operating expenses as needed to insure continued care Care Fund Issues
© 2014 Catholic Finance Corporation 46 How do you fund the Care Fund? How do you use it?
© 2014 Catholic Finance Corporation 47 Review the scenario Appoint a scribe to record answers Answer the questions, with scribe recording answers Share answers with the larger group when requested Table Discussion #2
© 2014 Catholic Finance Corporation 48 Other Questions? Comments?
© 2014 Catholic Finance Corporation Agenda 49 Relationships between Parish cemeteries and sponsoring parishes Introduction – CFC’s Mission and your Needs Operations (Budgeting) Capital Improvements Care Fund/Master Plan Review of Governance Governance
© 2014 Catholic Finance Corporation 50 “Parish cemeteries are to be administered with the same diligence as the balance of the parish, mission or station to which a pastor/ parochial administrator is assigned.” From Handbook for Parish Cemeteries, Vol. I-7, referencing 1983 Canon Law Book IV: Part III Title I Canon 1243 Policy
© 2014 Catholic Finance Corporation 51 “Because Canon Law clearly establishes lines of responsibility to the pastor, the pastor is ultimately responsible for the local administration of the parish cemetery. Because pastors must handle many administrative matters, the necessity to delegate is recognized. Pastors may delegate the administration of parish cemeteries to either parish business administrators or parish sextons/managers.” Procedures
© 2014 Catholic Finance Corporation 52 “The operation of a parish cemetery in today’s environment is a very complex matter. An Advisory Board, able to assist the pastor/ parish administrator in the establishment of procedures for the operation of the parish cemetery, is earnestly recommended.” From Handbook for Parish Cemeteries, Vol. I-9, referencing 1983 Canon Law Book IV: Part III Title I Canon 1276 Procedures (continued)
© 2014 Catholic Finance Corporation 53 The Pastor is canonically responsible for the parish cemetery operations The Pastor may delegate to and seek the advice of others, including administrators, employees and boards on the operation of the parish cemetery. All work together to provide a valuable ministry to church and community In Summary
© 2014 Catholic Finance Corporation 54 How can Catholic Cemeteries and Catholic Finance Corporation continue to help you?
© 2014 Catholic Finance Corporation Questions & Answers We’re here to help! Call us at (651) 389-1070 firstname.lastname@example.org email@example.com www.catholicfinance.org Presenters: Judy Logan firstname.lastname@example.org@catholicfinance.org Phil Boelter email@example.com@catholicfinance.org Mike Laughery firstname.lastname@example.org@catholicfinance.org Renee Sherman email@example.com@catholicfinance.org 55
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