The Roman Catholic Diocese of Phoenix Fall 2008 Finance Forum Update on Restructuring Process

2 Update 7/1/ sets of Articles of Incorporation were filed at the Arizona Corporation Commission. 90 parishes 6 missions/quasi-parishes 5 high schools Newman Center (Tempe) Mt. Claret Retreat Center Cemeteries and Mortuaries Diocese itself will remain a corporate sole. Each Corporation has received certificate of good standing from the Corporation Commission.

3 Update 9/18 – 9/20/08 Organizational Meetings held - Phoenix –76 Boards of Directors attended –Photos taken of 1 st Board of Directors –Bylaws and corporate resolutions were adopted Bylaws – contain multiple references to canon law and bishop’s authority, as well as roles of officers and directors Corporate Resolutions – standard resolutions (authority to open bank account, authority to pay certain expenses, adoption of bylaws, etc., as well as resolutions specifically agreeing to follow and abide by Diocesan policies and procedures) –Services agreement with Diocese of Phoenix was signed Services Agreement – maintains the ongoing relationship between parish and Diocese (services provided by Diocese) –Corporate Record Book given to Corporate Secretary

4 Update 9/26 – 9/27/08 Organizational Meetings held in Northern Arizona 4 Corporate Boards met in Flagstaff 11 Corporate Boards met in Seligman Same process – adopted bylaws, corporate resolutions, services agreements 10/31/08 Make-up Organizational Meetings to be held in Phoenix (Pastoral Center) 12 Corporate Boards will be attending

5 Update Oct./Nov./Dec Transfer of Title of Real Property from Diocese to Parish Corporations Four stages –#1 - Properties of Parishes who owe nothing to Diocese (unencumbered) –#2 - Properties of Parishes who owe money to Diocese (Growth & Development Fund) Property will be transferred subject to a lien Parish will sign note and deed of trust in favor of the Diocese –#3 - Properties of Parishes that have complex issues Some may require lot splits – i.e., ½ of property is parish’s – other ½ is Diocese’s (e.g., reserved for future high school) Others involve issues of ownership and/or property lines –#4 - Properties of Parishes that have outside debt

6 Update Oct./Nov./Dec Other Transfers of Title from Diocese to Corporations Vehicles via Assignment Leasehold Interest via Transfer Contract Rights and Obligations via Assignment Assets that Require No Action –Anything already held in Parish’s name –Personal Property and Sacred Items –Cash and Securities

7 Governance Parish Board of Directors has been formed The Board is comprised of 3 parish leaders (Pastor, Chair of Parish Finance Council, Chair of Parish Pastoral Council) and 2 Diocesan leaders (Bishop and the Moderator of the Curia) Pastor will be responsible for all parish operations With direction from Parish Board on certain matters In consultation with Parish Finance Council and Pastoral Council (consultation is mandated by Canon law) Pastor will be responsible for parochial school operations With direction from Parish Board on certain matters In consultation with Parish Finance Council and Pastoral Council along with the Parochial School Board

8 Role of the Corporate Board Corporate Boards meet once annually –Have option to meet quarterly (but not required) Special meetings may be required –If Board action is needed and can’t wait until next regularly scheduled meeting –Board acts through adoption of corporate resolutions

9 Corporate Resolutions Corporate Resolutions are the vehicle through which a Corporate Board acts –Examples of issues typically addressed in Corporate Resolutions: Decision to retain the services of General Contractor or Architect (depending on the size of the project) Decision to obtain a loan secured by parish property Decision to purchase, sale or lease real property Decision to enter into capital campaign and/or hire capital campaign consultant Decision to commence or enter into litigation

10 Role of the Corporate Board Corporate Restructuring Manual & Guidelines has been developed by Diocese to assist Directors of parish corporations in conducting Board meetings, taking action on behalf of their respective corporations, and documenting those meetings and actions taken by the Corporation. Corporate Restructuring Manual & Guidelines has been developed by Diocese to assist Directors of parish corporations in conducting Board meetings, taking action on behalf of their respective corporations, and documenting those meetings and actions taken by the Corporation. Manual is being reviewed internally and by outside counsel – in “draft stage” –Feedback from this group is appreciated (REVIEW OF MANUAL)

11 Make sure that corporate procedure is strictly followed by each parish corporation –Hold at least One Board Meeting per year Between 9/1 and 11/30 –Document All Meetings and Keep Corporate Records in secure location Original Articles, Bylaws, Service Agreements, Minutes are to be kept in the Corporate Record Book Kept at Parish – not at home of Secretary –Consider investing in a fire-proof cabinet or safe Copies of corporate records will be kept in a “shadow file” at Diocese – but Parish must send copies of minutes and other documents to Diocese within 30 days of any meeting How can you help?

12 How can you help? - Keep other Vital Records nearby but separate Finance Council/Pastoral Council minutes Sacramental records Real Estate deeds/transaction records Major contracts/leases BudgetsInventories Employee records – Make sure that records are kept confidential (restrict access)

13 How can you help? Make sure that all contracts and leases and documents are consistently in the name of the Corporation and signed on behalf of the Corporation –Clearly state actions on behalf of the corporation –Signature Block: XYZ Roman Catholic Parish Phoenix By: _____________________ (signature) Rev. Joe Smith, President Make sure the Corporation and Diocese is listed in insurance provisions of groups/individuals who lease facilities –Use Facility Use Agreement/Indemnity Agreement prepared by DPC Legal Office –Insurance requirements may vary

14 How can you help? Make sure that all bank accounts are in name of the Corporation –Each parish will need to: Advise bank(s) of new corporate status Depending on the bank, provide corporate resolution and/or execute new documents for existing accounts (including signature cards) Some banks are requiring copies of Articles of Incorporation – can obtain from corporate record book or online at Corporation Commission Corporate resolutions will be required if opening a new account – resolutions from initial organizational meeting will suffice

15 How Will Civil Incorporation Affect Our Daily Operations? No change in name of parish or school No change in the employment status of paid parish staff No change in function of parish councils and committees No change in our duty to abide by Church teachings No change in manner in which assessments are calculated No change in obligation to abide by Diocesan policies –No change in spending authority –No change in restrictions on outside loans No change in need to have major contracts reviewed and approved by Diocese –Although PASTOR will be signing contracts now, not Bishop –After review by Diocese and “initialing” of General Counsel No change in parish’s obligation to participate in Growth & Development program

16 How Will Civil Incorporation Effect Daily Operations? Tax Exempt Status –Parishes will continue to be recognized as a 501(c)3 nonprofit, tax- exempt entity by virtue of the IRS Group Ruling and their listing in the Official Catholic Directory (Kenedy Directory) Parish can individually apply for separate 501(c)(3) designation, but we do not recommend it (lengthy process, requires additional reporting) Employer Identification Numbers (EIN) –NEW *** The IRS is requiring that all parish corporations obtain a new EIN due to their change in corporate identity *** Do not panic – still under study by Diocese Do not apply for new EINs on your own yet – the Diocese will send out instructions shortly –Parishes will likely have to apply for new EINs by 11/1/08 Securing new EIN earlier than 1/1/09 would be very expensive (doubles the payroll reporting, tax filings, etc.) –If parishes or quasi-parishes share an EIN with another entity – must be corrected –Each parish and quasi-parish corporation must have its own, distinct EIN

17 Housekeeping Items Expenses related to Civil Incorporation –Each parish will pay $50 annually pursuant to Services Agreement with the Diocese –Service Fee will be “invoiced” to parishes on Nov. 1 –Parishes must pay within 30 days of receipt of invoice –If parishes desire title insurance on real property transferred by Diocese, there is a cost associated with that insurance Title report will be provided by Diocese at no cost to parish

Insurance Program Kathy Tuley Catholic Mutual 18

19 The Roman Catholic Diocese of Phoenix Spring 2008 Finance Forum Thank you for your time, for your leadership, and for your devotion to the Church.