Archdiocese of Chicago parish report

8/18/2019 Archdiocese of Chicago parish report

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Parishes—Archdioceseof ChicagoCombined Financial Statements as of and for theYears Ended June 30, 2015 and 2014, andIndependent Accountants’ Review Report


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PARISHES—ARCHDIOCESE OF CHICAGO

TABLE OF CONTENTS

Page

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT 1

COMBINED FINANCIAL STATEMENTS AS OF AND FOR THEYEARS ENDED JUNE 30, 2015 AND 2014:

Statements of Financial Position 2

Statements of Activities 3–6

Statements of Cash Flows 7

Notes to Combined Financial Statements 8–20


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INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

Most Reverend Blase J. CupichArchbishop of Chicago:

We have reviewed the accompanying combined financial statements of the Parishes—Archdiocese ofChicago (the “Parishes”), which comprise the combined statements of financial position as of June 30,2015 and 2014, and the related combined statements of activities and cash flows for the years then ended,and the related notes to the combined financial statements. A review includes primarily applyinganalytical procedures to management’s financial data and making inquiries of the Parishes’ management.A review is substantially less in scope than an audit, the objective of which is the expression of an

opinion regarding the combined financial statements as a whole. Accordingly, we do not express such anopinion.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the combined financial statementsin accordance with accounting principles generally accepted in the United States of America; this includesthe design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of combined financial statements that are free from material misstatement whether due tofraud or error.

Accountants’ Responsibility

Our responsibility is to conduct the review in accordance with Statements on Standards for Accountingand Review Services promulgated by the American Institute of Certified Public Accountants. Thosestandards require us to perform procedures to obtain limited assurance as a basis for reporting whether weare aware of any material modifications that should be made to the combined financial statements forthem to be in accordance with accounting principles generally accepted in the United States of America.We believe that the results of our procedures provide a reasonable basis for our conclusion.

Accountants’ Conclusion

Based on our reviews, we are not aware of any material modifications that should be made to theaccompanying combined financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

March 28, 2016


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COMBINED STATEMENTS OF FINANCIAL POSITION

AS OF JUNE 30, 2015 AND 2014

(Dollars in thousands)

2015 2014

ASSETS

CASH AND CASH EQUIVALENTS 121,336$ 116,426$

DEPOSITS WITH ARCHDIOCESAN PASTORAL CENTER 248,353 207,256

PLEDGES RECEIVABLE:

TTWCI 25,790 16,603 Other 14,311 13,160

Pledges receivable—net 40,101 29,763

OTHER RECEIVABLES—NET 10,222 1,053

GIFT ANNUITIES RECEIVABLE 364 389

LAND, BUILDINGS, AND EQUIPMENT: Land 162,096 162,096

Buildings and equipment 1,842,510 1,826,054 Accumulated depreciation (1,147,235) (1,104,459)

Land, buildings, and equipment—net 857,371 883,691

TOTAL 1,277,747$ 1,238,578$

LIABILITIES AND NET ASSETS

LIABILITIES: Loans from Archdiocesan Pastoral Center 154,413$ 171,912$

Interest payable on loans from Archdiocesan Pastoral Center 32,708 28,436 Accounts payable and other liabilities 114,637 75,502 Accrued postretirement liability 120,896 107,940 Asset retirement obligations 68,402 67,481

Total liabilities 491,056 451,271

NET ASSETS: Unrestricted 698,234 696,856

Temporarily restricted 88,457 90,451

Total net assets 786,691 787,307

TOTAL 1,277,747$ 1,238,578$

See independent accountants’ review report and notes to combined financial statements.


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COMBINED STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED JUNE 30, 2015


TemporarilyUnrestricted Restricted Total

REVENUES: Parish operations: Collections and bequests 214,441$ -$ 214,441$

Other revenues 106,417 106,417 Return on deposits with Archdiocesan Pastoral Center 1,401 1,401

Total parish operations 322,259 - 322,259

Educational activities: Tuition and fees 251,131 251,131

Other revenues 56,068 56,068

Total educational activities 307,199 - 307,199

Total revenues 629,458 - 629,458

EXPENSES: Parish operations: Salaries, wages, and benefits 124,623 124,623

Utilities, repairs, and insurance 84,842 84,842 Religious education (CCD) 20,241 20,241 Archdiocesan assessments 25,283 25,283 Office, printing, and postage 9,183 9,183 Depreciation 30,577 30,577

Other expenses 37,425 37,425 Interest expense 8,585 8,585


Educational activities: Salaries, wages, and benefits 266,652 266,652

Utilities, repairs, and insurance 30,942 30,942 Books and instructional materials 13,974 13,974 Depreciation 13,106 13,106 Other expenses 22,794 22,794


Total expenses 688,227 - 688,227

(Continued)


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CHANGE IN NET ASSETS BEFORE GRANTS, OTHER OPERATING ACTIVITIES, AND POSTRETIREMENT-RELATED CHANGES (58,769)$ -$ (58,769)$

GRANTS FROM ARCHDIOCESAN PASTORAL CENTER 9,496 9,496

CHANGE IN NET ASSETS BEFORE OTHER OPERATING ACTIVITIES AND

POSTRETIREMENT-RELATED CHANGES (49,273) - (49,273)

OTHER OPERATING ACTIVITIES: Gains on land, buildings, equipment sales—net 8,822 8,822

TTWCI revenues 21,774 21,774 Annual Catholic Appeal revenues 5,132 5,132 Building fund revenues 20,811 20,811 Accretion expense of asset retirement obligations (921) (921) Net assets released from restrictions 22,805 (22,805)

CHANGE IN NET ASSETS BEFORE POSTRETIREMENT-RELATED CHANGES 8,339 (1,994) 6,345

POSTRETIREMENT-RELATED CHANGES OTHER THAN NET PERIODIC POSTRETIREMENT COST (6,961) (6,961)

CHANGE IN NET ASSETS 1,378 (1,994) (616)

NET ASSETS—Beginning of year 696,856 90,451 787,307

NET ASSETS—End of year 698,234$ 88,457$ 786,691$

See independent accountants’ review report and (Concluded) notes to combined financial statements.


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REVENUES: Parish operations: Collections and bequests 215,904$ -$ 215,904$ Other revenues 108,070 108,070 Return on deposits with Archdiocesan Pastoral Center 12,353 12,353


Educational activities: Tuition and fees 242,643 242,643 Other revenues 50,238 50,238


Total revenues 629,208 - 629,208

EXPENSES: Parish operations: Salaries, wages, and benefits 136,577 136,577 Utilities, repairs, and insurance 85,463 85,463

Religious education (CCD) 20,879 20,879

Archdiocesan assessments 23,115 23,115 Office, printing, and postage 9,294 9,294 Depreciation 30,477 30,477 Other expenses 34,094 34,094 Interest expense 8,206 8,206


Educational activities: Salaries, wages, and benefits 255,250 255,250 Utilities, repairs, and insurance 29,146 29,146

Books and instructional materials 11,960 11,960 Depreciation 13,062 13,062

Other expenses 21,555 21,555


Total expenses 679,078 - 679,078

(Continued)


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CHANGE IN NET ASSETS BEFORE GRANTS, OTHER OPERATING ACTIVITIES, AND POSTRETIREMENT-RELATED CHANGES (49,870)$ -$ (49,870)$

GRANTS FROM ARCHDIOCESAN PASTORAL CENTER 9,911 9,911

CHANGE IN NET ASSETS BEFORE OTHER OPERATING ACTIVITIES AND

POSTRETIREMENT-RELATED CHANGES (39,959) - (39,959)

OTHER OPERATING ACTIVITIES: Gains on land, buildings, equipment sales—net 1,171 1,171

TTWCI revenues 22,731 22,731 Building fund revenues 19,069 19,069 Accretion expense of asset retirement obligations (940) (940) Net assets released from restrictions 19,323 (19,323) -

CHANGE IN NET ASSETS BEFORE POSTRETIREMENT-RELATED CHANGES 2,326 (254) 2,072

POSTRETIREMENT-RELATED CHANGES OTHER THAN NET PERIODIC POSTRETIREMENT COST 4,128 4,128

CHANGE IN NET ASSETS 6,454 (254) 6,200

NET ASSETS—Beginning of year 690,402 90,705 781,107

NET ASSETS—End of year 696,856$ 90,451$ 787,307$

See independent accountants’ review report and (Concluded) notes to combined financial statements.


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COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2015 AND 2014


2015 2014

CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets (616)$ 6,200$

Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and accretion 44,603 44,479

Postretirement changes other than net periodic postretirement cost 6,961 (4,128) Gains on land, buildings, and equipment sales—net (8,822) (1,171) Realized and unrealized gains on investments (31) (11,144) Noncash grants from Archdiocesan Pastoral Center (5,344) (4,764) Contributions for acquisition and construction of parish property (29,999) (36,725)

Change in assets and liabilities: Interest payable on loans from Archdiocesan Pastoral Center 4,272 5,348

Accounts receivable (18,356) Accounts payable and other liabilities 39,135 16,611 Accrued postretirement liability 5,995 6,890

Net cash provided by operating activities 37,798 21,596

CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of land, buildings, and equipment 9,099 1,171

Purchases of land, buildings, and equipment (17,639) (18,873) Net (deposits) withdrawals from deposits with

Archdiocesan Pastoral Center (41,066) (6,552)

Net cash used in investing activities (49,606) (24,254)

CASH FLOWS FROM FINANCING ACTIVITIES: Pledges receivable—net (1,151) (8,263)

Contributions for acquisition and construction of parish property 29,999 36,725 Gift annuities receivable 25 (38) Loan borrowings from Archdiocesan Pastoral Center 3,219 4,890 Loan repayments to Archdiocesan Pastoral Center (15,374) (8,809)

Net cash provided by financing activities 16,718 24,505

NET CHANGE IN CASH AND CASH EQUIVALENTS 4,910 21,847

CASH AND CASH EQUIVALENTS—Beginning of year 116,426 94,579

CASH AND CASH EQUIVALENTS—End of year 121,336$ 116,426$

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION—Cash paid during the year for interest 4,313$ 2,858$

See independent accountants’ review report and notes to combined financial statements.


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NOTES TO COMBINED FINANCIAL STATEMENTSAS OF AND FOR THE YEARS ENDED JUNE 30, 2015 AND 2014(See independent accountants’ review report)(Dollars in thousands)

1. NATURE OF OPERATIONS

Parishes—Archdiocese of Chicago (the “Parishes”) include the parishes, schools, and various shrinesand oratories of the Archdiocese in Cook and Lake counties of Illinois. These sites minister to thespiritual, social, and educational needs of the faithful. They provide catechesis for people at all agelevels—from young children to the elderly—as part of the educational ministry of the church. TheParishes’ fiscal operations include sacramental services, religious education training, formal preschoolthrough 12th grade educational instruction, fund-raising, and investment of reserve funds. Operatingsupport is derived primarily from parishioners’ contributions, tuition and fees, and fund-raisingactivities.

These combined financial statements only reflect the operations of Parishes and do not reflect theoperations of the other agencies and organizations that also are a part of The Catholic Bishop ofChicago, a corporation sole.

2. SIGNIFICANT ACCOUNTING POLICIES

Presentation —Certain 2014 balances have been reclassified to conform to the 2015 presentation.

Use of Estimates —The preparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets

and liabilities at the date of the financial statements, and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates.

Subsequent Events —Parishes evaluated subsequent events through March 28, 2016, the date thecombined financial statements were available for issuance.

Cash Equivalents —Cash equivalents are defined as all highly liquid debt instruments with originalmaturities of three months or less and are stated at cost, which approximates fair value.

Land, Buildings, and Equipment —Land, buildings, and equipment are carried at cost. Wherehistorical cost is unavailable, Parishes’ buildings are carried at reported insurable value as of July 1,1980, with subsequent major additions recorded at cost. Land associated with these properties is carriedat the estimated fair value at July 1, 1980, with subsequent additions recorded at cost.

Depreciation is computed using the straight-line method based upon the following lives:

Land and building improvements 20 yearsBuildings (new construction) 50–75 yearsEquipment, furniture, fixtures, and contents 25 years


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Repairs and maintenance that do not extend the life of the applicable assets are charged to expense asincurred.

Asset Retirement Obligations —Management records all known asset retirement obligations for whichthe fair value can be reasonably estimated. A liability is initially recorded at fair value if the fair value ofthe obligation to retire an asset can be reasonably estimated. Parishes has recorded a liability for asset

retirement obligations related to asbestos remediation of $68,402 and $67,481 as of June 30, 2015 and2014, respectively.

Asset Impairment —Management reviews the carrying amount of long-lived assets by comparing thefuture cash flows expected from the asset to the carrying value of the asset when certain conditions existor events occur. In management’s opinion, no impairment exists as of June 30, 2015 or 2014.

Classification of Net Assets —In accordance with Financial Accounting Standards Board (FASB)Accounting Standards Codification (ASC) Topic 958, Not-for-Profit Entities, resources are classifiedinto three classifications of net assets according to donor-imposed restrictions:

Unrestricted —Net assets that are expendable for any purpose in performing the primary objectives of

the organization.

Temporarily Restricted —Net assets whose use is limited by donor-imposed restrictions that either expirewith the passage of time or can be removed by fulfillment of the stipulated purpose for which thedonation was restricted. When a restriction expires, temporarily restricted net assets are reclassified tounrestricted net assets and reported in the combined statements of activities as net assets released fromrestrictions. Temporarily restricted net assets as of June 30, 2015 and 2014, represent building fund pledges used to assist in the financing of capital projects for parishes.

Permanently Restricted —Net assets donated with stipulations that they be invested to provide a permanent source of income; such restrictions can neither expire with the passage of time nor beremoved by fulfillment of a stipulated purpose. There are no permanently restricted net assets as of

June 30, 2015 or 2014.

Revenue Recognition —Unconditional promises to give cash and other assets to Parishes are reported atfair value at the date the promise is received. Conditional promises to give and indications of intentionsto give are reported at fair value at the date the contribution is received. Cash received through parishcollections or fundraisers is recognized when received. Tuition and fees for educational activities arerecognized during the related academic year.

Tax Status —The agencies that comprise Parishes are tax-exempt organizations under Section 501(a) asorganizations described in Section 501(c)(3) of the Internal Revenue Code.

Accounting Standards Update (ASU) Adopted —In April 2013, the FASB issued ASU No. 2013-06,Services Received from Personnel of an Affiliate, to specify the guidance that not-for-profit entitiesapply for recognizing and measuring services received from personnel of an affiliate. The amendmentsin this update require a recipient not-for-profit entity to recognize all services received from personnel ofan affiliate that directly benefit the recipient not-for-profit entity. Those services should be measured atthe cost recognized by the affiliate for the personnel providing those services. However, if measuring aservice received from personnel of an affiliate at cost will significantly overstate or understate the valueof the service received, the recipient not-for-profit entity may elect to recognize that service received at


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either (1) the cost recognized by the affiliate for the personnel providing that service or (2) the fair valueof that service. The new guidance is effective for reporting periods beginning after June 15, 2014. Theadoption of this ASU did not have a material effect on the combined financial statements.

ASUs Issued Not Yet Adopted —In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU No. 2014-08

changes the requirements for reporting discontinued operations. A disposal of a component of an entityor a group of components of an entity is required to be reported in discontinued operations if thedisposal represents a strategic shift that has (or will have) a major effect on an entity’s operations andfinancial results when the component of an entity or group of components meets the criteria to beclassified as held for sale, is disposed of by sale, or is disposed of other than by sale (for example, byabandonment or in a distribution to owners in a spin-off). ASU No. 2014-08 also requires an entity to present, for each comparative period, the assets and liabilities of a disposal group that includes adiscontinued operation separately in the asset and liability sections, respectively, of the statement offinancial position. ASU No. 2014-08 is effective for the Parishes beginning on July 1, 2015. ASU No 2014-08 is not expected to have an impact on the combined financial statements as no disposals arecontemplated.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 creates Topic 606, Revenue from Contracts with Customers, and supersedes the revenuerecognition requirements in Topic 605, Revenue Recognition. ASU No. 2014-09 requires an entity torecognize revenue to depict the transfer of promised goods or services to customers in an amount thatreflects the consideration to which the entity expects to be entitled in exchange for those goods orservices. The guidance also specifies the accounting for some costs to obtain or fulfill a contract with acustomer and indicates an entity should disclose sufficient information to enable users of financialstatements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arisingfrom contracts with customers. ASU No. 2015-14 deferred the effective date of ASU No. 2014-09. ASU No. 2014-09 is now effective for the Parishes beginning on July 1, 2018. The Parishes have not yetdetermined the impact on its combined financial statements.

3. DEPOSITS WITH ARCHDIOCESAN PASTORAL CENTER

The Archdiocesan Finance Council and its investment committee oversee a pooled investment fund forvarious entities in the Archdiocese, including Parishes. The deposits made by Parishes are invested inthe pooled investment fund. The pooled investment fund invests with a number of investment managersin various equity and fixed-income products. A portion of the investments is in nonmarketableinvestments through limited partnerships. Parishes owns investments through participation in theArchdiocese pooled investment fund. Deposits other than savings accounts are stated at fair value.


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Deposits at June 30, 2015 and 2014, consisted of the following:

2015 2014

Savings account 147,924$ 105,173$

Investments: Invested cash 8,598 9,375

Common stock and equity mutual funds 5,533 6,654

Fixed income mutual funds 26,781 12,194

Alternative investments: Marketable alternative equity 35,269 42,421

Fixed income 12,002 14,516 Marketable energy and commodities 1,350 1,637 Private equity 10,896 15,286

Total alternative investments 59,517 73,860

Total investments 100,429 102,083

Total 248,353$ 207,256$

Returns on deposits with Archdiocesan Pastoral Center for the years ended June 30, 2015 and 2014, areas follows:

2015 2014

Interest income on savings accounts and investments 1,370$ 1,209$

Realized/unrealized gain on investments—net 31 11,144

Total 1,401$ 12,353$

Investments, in general, are exposed to various risks, such as interest rate, credit, and overall marketvolatility. Due to the level of risk associated with certain investments, it is reasonably possible thatchanges in the values of investments will occur in the near term and that such changes could materiallyaffect the amounts reported in the combined statements of financial position and in the combinedstatements of activities.

4. CAPITAL CAMPAIGN (TTWCI)

The To Teach Who Christ Is (TTWCI) capital fund-raising campaign is an effort to raise $350,000 infunds to support parishes, Catholic education, and Faith Formation initiatives over a five-year period.The campaign is being managed in two distinct areas: a major gift portion with a fundraising goal of$100,000 and a parish phase seeking $250,000. Within the parish phase, 60% of the goal amount($150,000) will be retained at parishes for parish-specific needs and 40% ($100,000) will be allocated toArchdiocese of Chicago-level needs. Overall, the campaign is expected to provide $150,000 for parishes, $150,000 for a scholarship endowment, $30,000 for urgent capital repairs, $12,000 for


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religious education programs, and $8,000 for academic excellence in Catholic schools. An independenttrust, Catholic Education Scholarship Trust (CEST), has been established to oversee and manage thescholarship endowment.

As of June 30, 2015 and 2014, Parishes have remaining uncollected unconditional TTWCI pledgestotaling $25,790 and $16,603, respectively. Pledges are mostly expected to be collected within one year.

5. OTHER PLEDGES RECEIVABLE

The Annual Catholic Appeal (the “Appeal”) supports the work of the schools, programs, agencies, andministries of the Archdiocese that serve the educational, physical, and spiritual needs of its people.Through Catholic Relief Services, the Appeal also serves those overseas devastated by natural disasters,illness, wars, and famine. Parish goals for the Appeal are set at 6% of their offertory income. Donationsreceived by a parish in excess of its goal are returned to the parish as a rebate.

As of June 30, 2015, Parishes has remaining uncollected unconditional Appeal rebates totaling $4,160.The rebates are expected to be collected within one year.

In addition, from time to time, individual parishes solicit funds from parishioners to assist in thefinancing of parish capital projects. Management makes significant assumptions regarding theoutstanding pledges and ultimate collectibility of these receivables. Actual results could differ fromthose estimates. As of June 30, 2015 and 2014, Parishes has remaining uncollected unconditional pledges totaling $10,150 and $13,160, respectively. Pledges are expected to be collected within oneyear.

The valuation of pledges receivable at June 30, 2015, are as follows:

BuildingAppeal Fund Total

Gross rebates / pledges receivable 4,160$ 11,033$ 15,194$

Less allowance for uncollectible pledges (883) (883)

Pledges receivable—net 4,160$ 10,150$ 14,311$

The valuation of pledges receivable at June 30, 2014, are as follows:

BuildingFund Total

Gross rebates / pledges receivable 14,304$ 14,304$Less allowance for uncollectible pledges (1,144) (1,144)

Pledges receivable—net 13,160$ 13,160$


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6. FAIR VALUE MEASUREMENTS

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in anorderly transaction between market participants at the measurement date. The following fair valuehierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the mosttransparent or reliable:

Level 1 —Quoted prices for identical instruments in active markets.

Level 2 —Quoted prices for similar instruments in active markets, quoted prices for identical or similarinstruments in markets that are not active, and model-derived valuations in which all significant inputsare observable in active markets.

Level 3 —Valuations derived from valuation techniques in which one or more significant inputs are notobservable.

Parishes attempts to establish fair value as an exit price in an orderly transaction consistent with normalsettlement market conventions. Parishes is responsible for the valuation process and seek to obtain

quoted market prices for all securities. When quoted market prices in active markets are not available,Parishes uses independent pricing services to establish fair value.

Assets Measured at Fair Value —Assets, inclusive of those investments through participation in theArchdiocese pooled investment fund, measured at fair value on a recurring basis as of June 30, 2015 and2014, are as follows:

2015 Level 1 Level 2 Level 3 Total

Invested cash 8,598$ -$ -$ 8,598$



Alternative investments: Marketable alternative equity 14,196 21,073 35,269

Fixed income 8,386 3,616 12,002 Marketable energy and commodities 598 752 1,350 Private equity 10,896 10,896

Total alternative investments - 23,180 36,337 59,517

Total 40,912$ 23,180$ 36,337$ 100,429$


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2014 Level 1 Level 2 Level 3 Total

Invested cash 9,375$ -$ -$ 9,375$



Alternative investments: Marketable alternative equity 20,483 21,938 42,421

Fixed income 8,626 5,890 14,516 Marketable energy and commodities 925 712 1,638 Private equity 15,286 15,286

Total alternative investments - 30,034 43,826 73,860

Total 28,223$ 30,034$ 43,826$ 102,083$

The Parishes’ investment balance includes $100,429 and $102,083 of investments through participationin the Archdiocese pooled investment fund as of June 30, 2015 and 2014, respectively. These balancesinclude $36,337 and $43,826 of Level 3 investments as of June 30, 2015 and 2014, respectively. Thetable below presents a reconciliation for total Archdiocese pooled investment fund assets measured atfair value on a recurring basis using significant unobservable inputs (Level 3), and presents changes inunrealized gain or losses recorded in changes in net assets for the years ended June 30, 2015 and 2014,for Level 3 assets:

2015 2014

Balance as of July 1 465,939$ 419,529$Purchases 43,900 49,822 Sales (61,682) (67,124)

Realized and change in unrealized gains—net 17,402 63,712

Balance as of June 30 465,559$ 465,939$

The amount of total net gains for the year attributable to the change in unrealized gains or losses relating to assets still held at June 30 14,093$ 20,585$

Investments that Parishes is able to fully redeem at the net asset value (NAV) in the “near term” have been classified as Level 2 investments. Investments that cannot be fully redeemed at the NAV in the“near term” have been classified as Level 3. Parishes has determined that investments that are not able to be redeemed at the NAV in the “near term” are investments that generally have one or more of the

following characteristics: gated redemptions, all or a portion of the investment is side-pocketed, or havelock-up periods greater than 90 days. Certain investments may be split between Level 2 and Level 3 ifdifferent share classes have different redemption or liquidity characteristics. As of June 30, 2015 and2014, Parishes did not have any investments split between Level 2 and Level 3 in the fair valuehierarchy.


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A summary of the nature and risk of Parishes’ alternative investments by major category as of June 30,2015 and 2014, is as follows:

Fair Unfunded Redemption Redemption Side Pocket Lockups/

2015 Value Commitments Frequency Notice Period Investments(e) Gates

Marketable alternative

equity(a)

35,269$ $ 1 day–36 months 1–120 days 77$ 1/3 annually rolling

Fixed income(b)

12,002 1–12 months 10–65 days 1/3 annually rolling

Marketable energy and 1,350

commodities(c)

1–12 months 22–90 days 1/3 annually rolling

Private equity(d) 10,896 2,807 N/A N/A N/A

Total 59,517$ 2,807$ 77$

Fair Unfunded Redemption Redemption Side Pocket Lockups/

2014 Value Commitments Frequency Notice Period Investments(e) Gates

Marketable alternative

equity(a)

42,421$ -$ 1 day–36 months 1–120 days 160$ 1/3 annually rolling

Fixed income (b) 14,516 1–12 months 10–65 days 1/3 annually rolling

Marketable energy and

commodities(c)

1,637 1–12 months 22–90 days 1/3 annually rolling

Private equity(d) 15,286 4,121 N/A N/A N/A

Total 73,860$ 4,121$ 160$

(a) Marketable alternative equity investments are comprised of investments in fund of funds and hedge funds which invest primarily inmarketable equity securities and equity-related underlying securities.

(b) Fixed income alternative investments are comprised of hedge fund investments, which invest primarily in fixed income securities and fixedincome-related underlying securities.

(c) Marketable energy and commodities are comprised of limited partnerships and hedge funds, which invest in marketable securities of the

energy and commodity sectors.

(d) Private equity includes investments in limited partnerships and private equity funds primarily invested in the oil and gas, natural gas, andreal estate sectors. These investments are not redeemable periodically at the discretion of the investor. Instead, the nature of theinvestments in this category is that distributions are received through the general partner’s liquidation of the underlying assets of the fund.It is estimated that the underlying assets of the fund would be liquidated in 7 to 15 years.

(e) Parishes may participate in side-pocket investments, either at Parishes’ discretion or that of the investment adviser who manages theinvestment fund in which Parishes invest. A side-pocket investment is generally less liquid than others in an investment fund and will besubject to different terms and conditions, including more significant restrictions on redemptions.

The following section describes the valuation methodologies used to measure different assets at fairvalue, including an indication of the level in the fair value hierarchy in which the asset is generallyclassified. Parishes uses prices and inputs that are current as of the measurement date, obtained through

a third-party custodian from independent pricing services or the underlying investment managers.

Invested cash includes money market mutual funds and are generally categorized in Level 1 of the fairvalue hierarchy.

Common stock is valued based on quoted prices from an exchange. To the extent these securities areactively traded, valuation adjustments are not applied and they are generally categorized in Level 1 ofthe fair value hierarchy.


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Equity mutual funds and fixed income mutual funds are valued based on the NAV as computed once perday based on the quoted market prices of the securities in the fund’s portfolio, and are generallycategorized in Level 1 of the fair value hierarchy.

Marketable alternative equity investments are comprised of investments in fund of funds and hedgefunds. Marketable alternative equity investments that cannot be fully redeemed at the NAV in the “near

term” are investments that cannot be redeemed at its NAV within 90 days after combined statement offinancial position date. The marketable alternative equity investments that can be redeemed within the“near term” are categorized in Level 2 of the fair value hierarchy. The marketable alternative equityinvestments that cannot be redeemed within the “near term” are categorized in Level 3 of the fair valuehierarchy. These investments are valued using estimates developed by external investment managers andare accepted or adjusted through a valuation review performed by management.

Fixed income alternative investments are comprised of hedge fund investments, which invest in primarily fixed income securities and fixed income-related underlying assets. Fixed income alternativeinvestments that cannot be fully redeemed at the NAV in the “near term” are investments that cannot beredeemed at its NAV within 90 days after combined statement of financial position date. The fixedincome alternative investments that can be redeemed within the “near term” are categorized in Level 2

of the fair value hierarchy. The fixed income alternative investments that cannot be redeemed within the“near term” are categorized in Level 3 of the fair value hierarchy. These investments are valued usingestimates developed by external investment managers and are accepted or adjusted through a valuationreview performed by management.

Marketable energy and commodities are investments in marketable alternative equity fund of funds andhedge funds with a concentration in the energy and commodities sectors. Marketable energy andcommodities that cannot be fully redeemed at the NAV in the “near term” are investments that cannot beredeemed at its NAV within 90 days after combined statement of financial position date. The marketableenergy and commodities investments that can be redeemed within the “near term” are categorized inLevel 2 of the fair value hierarchy. The marketable energy and commodities investments that cannot beredeemed within the “near term” are categorized in Level 3 of the fair value hierarchy. These

investments are valued using estimates developed by external investment managers and are accepted oradjusted through a valuation review performed by management.

Private equity investments include investments in limited partnerships and private equity funds investedin oil and gas, natural gas, and real estate. These investments are valued using estimates developed byexternal investment managers and are accepted or adjusted through a valuation review performed bymanagement. Private equity investments are generally categorized in Level 3 of the fair value hierarchy.


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7. LOANS FROM ARCHDIOCESAN PASTORAL CENTER

The Archdiocesan Pastoral Center has a parish loan program, which lends at rates generally believed to be below the prevailing commercial interest rate. At June 30, 2015 and 2014, there were loans fromArchdiocesan Pastoral Center aggregating $154,413 and $171,912, respectively. Interest rates on suchloans were 0% to 8.55% for both 2015 and 2014. Total principal payments are due as follows:

Years EndingJune 30

2016 110,073$2017 10,747 2018 7,623 2019 4,922 2020 4,632 Thereafter 16,416

Total loans from Archdiocesan Pastoral Center 154,413$

8. COMMITMENTS

At June 30, 2015 and 2014, contractual commitments on construction in process amounted to $18,086and $19,576, respectively. The Archdiocese has entered into contracts with third parties to purchasesubstantially all of its electricity needs until December 2015.

9. RETIREMENT BENEFITS

Employee Benefits —The Archdiocese of Chicago has noncontributory pension plans coveringsubstantially all priests and eligible lay employees of the Archdiocesan Pastoral Center (the “PastoralCenter”), Parishes, and participating agencies. The name of the lay employees’ plan is the RetirementPlan for Full-Time Lay Employees of the Catholic Bishop of Chicago, A Corporation Sole (the “Lay

Employees’ Plan”) and the name of the priests’ plan is the Retirement Plan for Priests’ Retirement andMutual Aid Association (the “Priests’ Plan”). The Lay Employees’ Plan provides retirement benefits(over and above normal social security benefits) based on length of service and annual salary. ThePriests’ Plan provides level benefits at normal retirement (age 70) and also covers disability prior toretirement. Priests are also able to participate in a defined contribution plan with a match funded fromthe Priests’ Retirement & Mutual Aid Association (PRMAA) assessment. During 2007, the LayEmployees’ Plan was amended, effective July 1, 2007, to freeze benefit accruals and participation as ofthat date.

Parishes are assessed for fringe benefits by the Pastoral Center based on the parish payroll. Theassessment for these costs was $19,013 and $18,615 for 2015 and 2014, respectively, and is included insalaries, wages, and benefits on the statements of activities.

Parishes are also assessed for health and medical benefits related to priests by the Pastoral Center. Theassessment for these costs was $7,479 and $7,354 for 2015 and 2014, respectively, and is reflected in parish operations—salaries, wages, and benefits in the combined statements of activities.

Since the pension plans cover many agencies, benefit and asset information applicable to Parishes is notavailable. The Pastoral Center has recorded the total pension liability in its combined statements offinancial position. Parishes is responsible for its related costs. This liability may be transferred toParishes in the future.


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Postretirement Benefits —Certain insurance (medical, life, and auto) and other aid are provided toretired priests. Retired priests do not contribute to the cost of these benefit plans, and the plans arecurrently not funded. These benefits are administered and partially funded through the PRMAA.

Summary information for the priests’ postretirement benefit plan at June 30, 2015 and 2014, is asfollows:

2015 2014

Change in benefit obligation: Benefit obligation—beginning of year 107,940$ 105,178$

Service cost 3,229 3,174 Interest cost 4,881 5,267 Actuarial loss (gain) 8,249 (2,270) Benefits paid (3,484) (3,519) Retiree drug subsidy reimbursement 81 110

Benefit obligation—end of year 120,896$ 107,940$

Change in plan assets: Fair value of plan assets—beginning of year -$ -$

Employer contributions 3,484 3,519 Benefits paid (3,484) (3,519)

Fair value of plan assets—end of year -$ -$

Funded status—end of year (120,896)$ (107,940)$

Net accrued benefit cost (120,896)$ (107,940)$

Amounts recognized in the combined statements of financial

position—accrued postretirement cost (120,896)$ (107,940)$

The components of net periodic benefit cost for the years ended June 30, 2015 and 2014, are as follows:

2015 2014

Components of net periodic benefit cost: Service cost 3,229$ 3,174$

Interest cost 4,881 5,267 Recognized net actuarial loss 1,288 1,858

Total net periodic benefit cost 9,398$ 10,299$


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The postretirement plan items not yet recognized as a component of periodic postretirement cost, butincluded as a separate benefit to net assets during 2015 and 2014, are as follows:

2015 2014

Actuarial (gain) loss arising during the period 8,249$ (2,270)$

Reclassification adjustment for recognition of actuarial gain (1,288) (1,858)

Total recognized as a separate (benefit) charge to net assets 6,961$ (4,128)$

The postretirement plan accumulated net actuarial loss not yet recognized as a component of periodic postretirement cost but accumulated in unrestricted net assets as of June 30, 2015 and 2014, is $39,437and $32,476, respectively. An estimated $1,630 of net actuarial loss will be included as a component of periodic postretirement cost in 2016.

Actuarial assumptions for the plan as of June 30, 2015 and 2014, are as follows:

2015 2014

Weighted-average assumptions used to determine benefit obligations as of June 30: Discount rate 4.70 % 4.60 % Expected return on plan assets N/A N/A Rate of compensation increase N/A N/A

Weighted-average assumptions used to determine benefit costfor the years ended June 30:

Discount rate 4.60 % 5.10 % Expected return on plan assets N/A N/A Rate of compensation increase N/A N/A

For measurement purposes, 7% net health care trend rate was used for fiscal year 2015 and 8% was usedfor 2014. Trend rates were assumed to decrease gradually to 4.5% in fiscal year 2025 and remain at thislevel beyond.

The benefit payments, which reflect expected future services, as appropriate, expected to be paid as ofJune 30, 2015, are as follows:

June 30 Amount

2016 3,657$2017 3,9022018 4,2012019 4,549

2020 4,9052021–2025 30,365


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10. TRANSACTIONS WITH RELATED PARTIES

Archdiocesan Assessments —Each parish is assessed annually from the Pastoral Center for the supportof Pastoral Center activities. This assessment is computed as 10% of operating revenue from two years prior. For example, the 2015 assessment was 10% of 2013 operating revenue. Archdiocesan assessmentswere $25,283 and $23,115 in 2015 and 2014, respectively.

PRMAA Assessments —Each parish is assessed annually from the Pastoral Center to reimburse thePRMAA for health and medical benefits for current and retired priests. This assessment is computed as3.5% of prior-year ordinary income. PRMAA assessments were $7,479 and $7,354 in 2015 and 2014,respectively, and were recorded in parish salaries, wages, and benefits.

Insurance Program —Parishes participates in a self-insurance program coordinated by the Archdiocese.In 2015, Parishes incurred expenses of $65,257 to the Archdiocese for insurance which are reflected inutilities, repairs, and insurance as well as in salaries, wages and benefits in the statements of activities. Inthe event that Parishes withdraw from participation in the program, amounts may be payable to theArchdiocese for residual liabilities relating to historical claims experience or for claims incurred but notyet reported.

Grants —Certain parishes receive financial assistance from the Pastoral Center.

Deposits with and Loans from Archdiocesan Pastoral Center —Generally, deposits bear interest atrates that are contingent upon the amount and availability of the deposit. During both 2015 and 2014, theinterest rates paid on deposits ranged from 0.7% to 1.7%. Parishes may invest in pooled investmentaccounts that are in various investments and whose returns are dependent upon market conditions. Theestimated fair values of investments that do not have readily determinable fair values, and of otherinvestments, are based on estimates provided by external investment managers and are examinedthrough a valuation review process performed by management. A range of possible values exists forthese investments and; therefore, the estimated values may differ from the values that would have beenused had a ready market for these securities existed.

Loans bear interest at rates believed to be below the prevailing commercial interest rates.

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