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Sacred Heart Wilkes-Barre Foundation Inc
770 Lantern Hill Road
Shavertown, Pennsylvania18708
(570) 696-3169
November 17, 2007
Msgr. John Sempa and Members of the Finance Committee
666 North Main Street
Wilkes-Barre, PA18705
Dear Msgr. Sempa and Members of the Finance Committee,
On behalf of the members of the Sacred Heart Wilkes-Barre Foundation, Inc., we would like the finance committee to address some issues and questions we have regarding the Parish Financial Statement for July 2006 – June 2007 and the letter as attached to the October 21, 2007 Bulletin.
First, the net loss for the fiscal year ending June 30, 2007 was ($92,079.63), per the Parish Financial Statement. However, in the letter on the reverse side of the statement, the net loss for the year is stated as ($95,454.22) (paragraph 6). Please explain why these figures do not agree, and reconcile the difference.
The letter notes that $120,000 was withdrawn from the diocesan savings account holding the proceeds from the sale of the land in Dallas in order to pay school bills last spring (paragraph 3). Please confirm that this amount of $120,000 is included in the school subsidies expense total of $315,218.46 for the fiscal year.
It has been many years since parishioners have seen a financial statement for the school. Considering that the school was closed in June 2007, we request the final school financial statement, the assessed value of the school, and when there will be a parish meeting to discuss plans for the school building and other parish issues (a meeting was requested on May 24, 2007, but none has yet been scheduled).
CC: Assistant Pastor Fr. James Alco
Most Rev. Joseph F. Martino, D.D., Hist. E.D., Bishop of Scranton
Msgr. Vincent J. Grimalia, V.G.
Msgr. Joseph C. Bambera, V.E., Canonical Consultant for Pastoral Planning
Father Michael F. Quinnan, E.V. for the Southern Pastoral Region
Father Philip A. Altavilla, E.V. for the Northern Pastoral Region
Mr. James Quinn, Diocesan Sec. for Financial Services & Chief Financial Officer
The letter states that the new Diocese school system has reduced the annual school subsidies by $50,000 (paragraph 7). This is not correct. The letter further states that the monthly school assessment is $19,345.33, or $232,143.96 for the current year. Considering that last year’s School Subsidy Expense for the fiscal year ending June 30, 2007 was $315,218.46, and the School Subsidy Assessment for the 2007-2008 fiscal year is $232,143.96, the actual reduction in school subsidies is $83,074.50.
| Actual School Subsidy Expense |
2006 - 2007 Fiscal Year |
$315,218.46 |
| School Subsidy Assessment |
2007 - 2008 Fiscal Year |
$232,143.96 |
| Actual Reduction in Assessment |
|
$83,074.50 |
It is important that the parishioners are made aware the actual reduction in the annual school subsidies is $83,074.50, and that had this year’s (FYE 2008) unadjusted school assessment of $232,144 been in place last year (FYE 2007), the net loss would have been reduced to ($9,005.13).
| NET LOSS 2006 - 2007 |
($92,079.63) |
| 2007-2008 Reduction in School Assessment |
$83,074.50 |
| HYPOTHETICAL LOSS 2006 - 2007 |
($9,005.13) |
The $50,000 reduction referenced is the cap applied by the diocese for the maximum change in school subsidy assessments to any parish during this ‘transitional’ year, based upon the 2005 – 2006 base year. However, in reviewing the school subsidy expenses for the base year 2005 – 2006 used by the diocese, there is a discrepancy in the school subsidy expense incurred by Sacred Heart – St. John Parish Community. The school subsidy expense incurred by Sacred Heart – St. John Parish in 2005 – 2006, as published in the Catholic Light is $282,144, which according to Mr. James Quinn is based upon the 2005 – 2006 financial report submitted to the Diocese. Then, in the 2005 – 2006 Parish Financial Statement issued to the parishioners with the September 10, 2006 Bulletin (copy attached), the school subsidy expense was listed as $270,580.22, a difference of $11,564.
| School Subsidy Expense |
2005 - 2006 FYE per Catholic Light |
$282,144.00 |
| School Subsidy Expense |
2005 - 2006 FYE per Parish Financial Statement |
270,580.22 |
| |
|
$11,563.78 |
Please explain why these amounts differ. This is significant, as this could reduce the school subsidy assessment for the current 2007 – 2008 fiscal year by $11,564, resulting in a projected net income of $2,558.65, based on the 2006 – 2007 parish financial statement, as adjusted.
| NET LOSS 2006 - 2007 |
($92,079.63) |
| 2007-2008 Reduction in School Assessment |
83,074.50 |
| Discrepancy in 2005-2006 School Subsidy |
11,563.78 |
| PROJECTED INCOME 2007 - 2008 |
$2,558.65 |
The application of the $50,000 cap leads to the inequity in the assessments that has already been brought to your attention (refer to letter from Foti’s dated July 30, 2007):
| PARISH |
2005-2006 INCOME BASE |
2007-2008 ASSESSMENT |
PERCENTAGE OF INCOME BASE |
| Sacred Heart-St. John (Wilkes-Barre) |
$517,323 |
$232,144 |
44.87% |
| Gate of Heaven (Dallas) |
$517,400 |
$177,070 |
34.22% |
| St. Peter's Cathedral (Scranton) |
$517,721 |
$87,382 |
16.88% |
| Assessment Without Cap |
$517,000 |
$129,250 |
25.00% |
| St. Luke's (Stroudsburg) |
$934,430 |
$152,226 |
16.29% |
As can be seen, three parishes (Sacred Heart-St. John, Gate of Heaven in Dallas, and St. Peter’s Cathedral) have virtually identical income in the 2005 – 2006 base year of about $517,000. Under the diocesan ‘fair and equitable’ assessments, Sacred Heart-St. John is assessed at $232,144 (44.9% of its operating income), Gate of Heaven is assessed at only $177,070 (34.2% of its operating income), and St. Peter’s Cathedral is assessed at only $87,382 (16.9% of its operating income). Furthermore, the parish with the fourth (4th) highest income in the diocese, St. Luke in Stroudsburg, (operating income of $934,430, or 80.6% more than that of Sacred Heart/St. John) pays only $152,226, or 16.3% of its operating income.
For the 2007 – 2008 school year, the majority of parishes in the diocese have been assessed at 25% of their income in the 2005 – 2006 base year. The variance between our $232,144 parish assessment for school subsidy (45%) and a flat 25% assessment rate is $102,813. This is the highest variance of any parish in the diocese.
| |
2005-2006 INCOME BASE |
ASSESSMENT RATE |
SCHOOL SUBSIDY ASSESSMENT |
| Sacred Heart-St. John per Diocese |
$517,323 |
44.87% |
$232,144 |
| Typical Parish without $50,000 Cap |
$517,323 |
25% |
$129,331 |
| |
|
|
$102,813 |
This $102,813 overcharge represents nearly $0.20 out of every $1.00 raised by the parish through collections and every other source of income. One could easily make the case that this additional assessment amounts to the use of the Sacred Heart – St. John Parish assets (i.e.: savings account) in order to subsidize other parishes. This is contrary to cannon law which prevents disposing of the savings or property of one parish in order to pay the debts owed by another parish, school, or institution. Considering that our parish expenses have outpaced income, why does the parish pay this excessive and unfair assessment? Why doesn’t the parish simply pay an assessment at the standard 25% assessment rate, which would be only $129,331 annually or $10,777.58 monthly? Our parish is certainly in no financial position to pay more than any other parish in the diocese. Our parish can certainly put this additional $102,813 to better use than to subsidize other parishes.
When the arbitrary $50,000 cap in the maximum change in assessment is removed, our parish will be in excellent financial standing in the future.
| NET LOSS IN 2006 - 2007 |
($92,079.63) |
| Present Reduction in 2007 - 2008 School Assessment |
$83,074.50 |
| Elimination of Overcharge Due to $50,000 Cap |
$102,813.00 |
| INCOME WITH FAIR ASSESSMENT |
$93,807.87 |
This clearly represents a drastic change from the dire warning that parishioners received on October 21, 2007 that the parish would deplete its cash reserves by early summer 2008. Even with the current assessment including the overcharge, our parish will be very close to break-even. The fiduciary responsibility of stewards of the parish is to justly protect the financial interests of the parishioners and to provide more accurate and frequent financial projections and statements.
The letter states that the parish, in addition to the diocesan school assessment, was responsible for paying teacher salaries and benefits until the end of August. Please confirm that this will be part of this year’s (FYE 2008) expense, and was not included in last year’s (FYE 2007) school subsidy expense of $315,218.46. In a letter from Mr. Quinn dated August 20, 2007, it was noted that there were other schools that did not have funds to pay future benefits, and were relying on future income to pay current and past bills. However, for those other schools, the diocese amortized these costs over twenty years, and included the $1,000,000 annual debt service as part of the $15,000,000 school budget for 2007 – 2008 to be subsidized by all parishes in the diocese. Considering these other schools were able to pass their obligations onto all parishes in the diocese, why is it necessary for Sacred Heart – St. John Parish to finance its obligation independently?
Not only are these obligations unfair burdens to our parish, but as noted they overlap with the payment of the new school subsidy assessment. For the first two months of the year, we are forced to pay under the old “parish pays for their own school” system, and yet we have to pay the new “all parishes share the cost” system.
June-07 July-07 August-07 September-07
Old Parish Pays for Their
Own School System ===============================
Through (08-31-07)
New Diocesan Share the
Cost System =====================================
Effective (07-01-07)
NOTE: Our parish current school assessment includes a 20% overcharge. Also, the diocesan school assessment is based on a budget that includes debt service on a loan to cover other schools' capital improvements, current and past bills, future benefits, etc.
We also would appreciate additional clarification and breakdown of some of the expense categories listed in the parish financial statement.
- Please itemize the Plant Operation/ Maintenance Expense of $53,275.10 by heating expense, electrical expense, water expense, sewer expense, and maintenance expense categories.
- Please advise what constitutes Non-Operating Income and Non-Operating Expense.
- It is our understanding that the diocese administers the payment of salaries, pensions, payroll taxes, health insurance, and benefits of the clergy, and that this cost is included in the other Diocesan Assessment. Please advise how many employees from our parish are on the Diocesan payroll. Please advise how the Diocesan Assessment is computed for each parish, and if all parishes are assessed by a common formula.
- Considering the Administration Expense of $148,596.70 includes $83,649.12 in Diocesan Assessments ($6,970.76 monthly assessment times 12 months), please provide a breakdown of the remaining $64,947.58 Administration Expense (phone bills, postage, misc. office expense, cleaning, etc.).
- Please verify that the expense for Diocesan property insurance and property taxes on our parish buildings is not included in the Diocesan Assessment of $6,970.76 per month. Also, please provide a breakdown of the $28,714.41 Fixed Expense to indicate the cost each of property insurance and taxes.
Finally, we request that you resume the practice of publishing at year end the names and number of baptisms, weddings, and deaths (please break down deaths between parishioners and non-parishioners). (See copy of January 6, 2003 Bulletin).
In order to facilitate matters, we request a meeting with the Finance Committee to review these issues and concerns, so that we can work together to resolve them. On behalf of the Sacred Heart Wilkes-Barre Foundation, Inc., we thank you for your service to our parish, and we appreciate your prompt response.
Sincerely,
Officers and Members of the Board of Directors of Sacred Heart Wilkes-Barre Foundation, Inc.
_______________________________ _______________________________
Noreen W. Foti – President Anthony S. Foti
_______________________________ _______________________________
Mary Ann Petrenchak – Vice President Martha Iskra
_______________________________ _______________________________
David Tarantini - Treasurer Mary Jean Tarantini
_______________________________
Michael Horvath - Secretary |
