The Administrative Office of the Roman Catholic …...2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position

Report of Independent Auditors and Financial Statements for

The Administrative Office of the Roman Catholic Bishop of Orange,

a Corporation Sole

June 30, 2016 and 2015

CONTENTS PAGEREPORTOFINDEPENDENTAUDITORS 1–2FINANCIALSTATEMENTS StatementsofFinancialPosition 3 StatementofActivities–2016 4 StatementofActivities–2015 5 StatementsofCashFlows 6 NotestoFinancialStatements 7–36

1

REPORTOFINDEPENDENTAUDITORSTheMostReverendKevinW.Vann,J.C.D.,D.D.TheAdministrativeOfficeoftheRomanCatholicBishopofOrange,aCorporationSoleReportontheFinancialStatementsWehaveaudited theaccompanying financial statementsofTheAdministrativeOfficeof theRomanCatholicBishopofOrange,aCorporationSole,whichcomprisethestatementsoffinancialpositionasof June 30, 2016 and 2015, the related statements of activities and cash flows for the years thenended,andtherelatednotestothefinancialstatements.Management’sResponsibilityfortheFinancialStatementsManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordance with accounting principles generally accepted in the United States of America; thisincludesthedesign,implementation,andmaintenanceofinternalcontrolrelevanttothepreparationandfairpresentationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.Auditor’sResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits.WeconductedourauditsinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Thosestandardsrequirethatweplanandperformtheauditstoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectivenessoftheentity’s internalcontrol.Accordingly,weexpressnosuchopinion.Anauditalsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofsignificantaccountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

2

OpinionInouropinion,thefinancialstatementsreferredtoabovepresentfairly, inallmaterialrespects,thefinancialpositionofTheAdministrativeOfficeoftheRomanCatholicBishopofOrange,aCorporationSole,asofJune30,2016and2015,andthechangesinitsnetassetsanditscashflowsfortheyearsthen ended in accordance with accounting principles generally accepted in the United States ofAmerica.

SanDiego,CaliforniaDecember14,2016

Seeaccompanyingnotes. 3

THEADMINISTRATIVEOFFICEOFTHEROMANCATHOLICBISHOPOFORANGE,

ACORPORATIONSOLESTATEMENTSOFFINANCIALPOSITION

JUNE30,2016AND2015

2016 2015

CashandCashEquivalents 39,165,560$ 26,353,093$

ReceivablesPledgereceivable(Note2) 3,100,000 ‐Receivablesfromotherrelatedinstitutionsandcemeterysales,net(Note2) 15,329,748 15,514,972Loansreceivablefromparishesandschools,net(Note2) 25,104 1,151,481Loansreceivablefromrelatedinstitutions,net(Note2) 58,898,827 59,118,321Loansreceivablefortherepaymentofbonds(Note2) 20,319,593 20,871,593Beneficialinterestincharitableremaindertrusts(Note2) 105,069 109,651

InvestmentsLong‐terminvestments(Note3) 125,075,069 131,066,070Permanentlyrestrictedendowment(Note3) 2,670,497 2,670,497Investmentsheldintrustforothers(Notes3and7) 122,084,560 119,250,746

CemeteryInventory(Note5) 16,339,078 17,092,461Property,Equipment,andImprovements,net(Note6) 26,258,135 27,862,216AssetsHeldforSale(Note6) ‐ 1,976,845OtherAssets 853,464 666,491

Totalassets 430,224,704$ 423,704,437$

LiabilitiesAccountspayableandaccruedexpenses 5,178,129$ 6,330,015$Parishandotherdeposits 4,415,849 4,598,166Investmentsheldintrustforothers(Note7) 122,084,560 119,250,746Deferredamounts 23,878,196 22,209,162Notespayable(Note8) 55,477,120 55,470,645Bondspayable(Note9) 20,319,593 20,871,593Priests'pension/post‐retirementbenefitsaccrual(Note10) 33,559,000 27,950,000Otherliabilities 599,855 1,180,746

Totalliabilities 265,512,302 257,861,073

NetAssets(Note11)Unrestricted

Undesignated (7,331,227) 4,189,331Designatedforspecificpurposes 150,132,951 138,699,604

Totalunrestricted 142,801,724 142,888,935

Temporarilyrestricted 19,035,192 20,088,791Permanentlyrestricted(Note12) 2,875,486 2,865,638

Totalnetassets 164,712,402 165,843,364

Totalliabilitiesandnetassets 430,224,704$ 423,704,437$

ASSETS

LIABILITIESANDNETASSETS

June30,

4 Seeaccompanyingnotes.

THEADMINISTRATIVEOFFICEOFTHEROMANCATHOLICBISHOPOFORANGE,ACORPORATIONSOLESTATEMENTOFACTIVITIESYEARENDEDJUNE30,2016

Temporarily PermanentlyUnrestricted Restricted Restricted Total

REVENUEANDSUPPORTContributions,grants,andbequests 955,423$ 8,208,482$ 9,848$ 9,173,753$Diocesanassessments 7,827,012 ‐ ‐ 7,827,012Diocesanprograms 5,165,936 ‐ ‐ 5,165,936Cemeteryoperations 12,246,845 ‐ ‐ 12,246,845Investmentloss(Note3) (2,867,796) ‐ ‐ (2,867,796)Insuranceprograms 32,747,160 ‐ ‐ 32,747,160Netassetsreleasedfromrestrictions(Note11) 5,923,661 (5,923,661) ‐ ‐

Totalrevenueandsupport 61,998,241 2,284,821 9,848 64,292,910

EXPENSESProgramservices:

Diocesanpastoralministries 8,721,388 ‐ ‐ 8,721,388Clergysupportprograms 2,950,439 ‐ ‐ 2,950,439Investmentprograms 5,163,887 ‐ ‐ 5,163,887Cemeteryoperations 8,532,013 ‐ ‐ 8,532,013Insuranceprograms 28,334,754 ‐ ‐ 28,334,754Grants,donations,andscholarships(Note14) 9,403,714 ‐ ‐ 9,403,714

Supportservices:Diocesanadministration 13,731,832 ‐ ‐ 13,731,832

Totalexpenses 76,838,027 ‐ ‐ 76,838,027

CHANGEINNETASSETSBEFOREOTHERCHANGES (14,839,786) 2,284,821 9,848 (12,545,117)

Othercomprehensivepensionloss (5,609,000) ‐ ‐ (5,609,000)Transfersofnetassets(Note11) 3,338,420 (3,338,420) ‐ ‐GainonsaleofMarywoodPastoralCenterproperty 17,023,155 ‐ ‐ 17,023,155

CHANGEINNETASSETS (87,211) (1,053,599) 9,848 (1,130,962)

NETASSETSBeginningofyear 142,888,935 20,088,791 2,865,638 165,843,364

Endofyear 142,801,724$ 19,035,192$ 2,875,486$ 164,712,402$

Seeaccompanyingnotes. 5


ACORPORATIONSOLESTATEMENTOFACTIVITIESYEARENDEDJUNE30,2015

Temporarily Permanently

Unrestricted Restricted Restricted TotalREVENUEANDSUPPORT

Contributions,grants,andbequests 251,073$ 4,875,611$ 200$ 5,126,884$Diocesanassessments 7,839,369 ‐ ‐ 7,839,369Diocesanprograms 5,364,624 ‐ ‐ 5,364,624Cemeteryoperations 12,520,996 ‐ ‐ 12,520,996Investmentincome(Note3) 10,492,650 ‐ ‐ 10,492,650Insuranceprograms 34,456,512 ‐ ‐ 34,456,512Otherincome 183,681 ‐ ‐ 183,681Netassetsreleasedfromrestrictions(Note11) 1,944,997 (1,944,997) ‐ ‐

Totalrevenueandsupport 73,053,902 2,930,614 200 75,984,716

EXPENSESProgramservices

Diocesanpastoralministries 7,874,891 ‐ ‐ 7,874,891Clergysupportprograms 1,912,159 ‐ ‐ 1,912,159Investmentprograms 7,074,734 ‐ ‐ 7,074,734Cemeteryoperations 8,312,575 ‐ ‐ 8,312,575Insuranceprograms 25,842,937 ‐ ‐ 25,842,937Grants,donations,andscholarships(Note14) 6,893,202 ‐ ‐ 6,893,202

SupportservicesDiocesanadministration 13,417,857 ‐ ‐ 13,417,857

Totalexpenses 71,328,355 ‐ ‐ 71,328,355

CHANGEINNETASSETSBEFOREOTHERCHANGES 1,725,547 2,930,614 200 4,656,361

Othercomprehensivepensionloss (6,228,000) ‐ ‐ (6,228,000)

CHANGEINNETASSETS (4,502,453) 2,930,614 200 (1,571,639)

NETASSETSBeginningofyear 147,391,388 17,158,177 2,865,438 167,415,003

Endofyear 142,888,935$ 20,088,791$ 2,865,638$ 165,843,364$

6 Seeaccompanyingnotes.

THEADMINISTRATIVEOFFICEOFTHEROMANCATHOLICBISHOPOFORANGE,ACORPORATIONSOLESTATEMENTSOFCASHFLOWSYEARSENDEDJUNE30,2016AND2015

2016 2015CASHFLOWSFROMOPERATINGACTIVITIES

Changeinnetassets (1,130,962)$ (1,571,639)$Adjustmentstoreconcilechangeinnetassetstonetcashfromoperatingactivities:

Changeinallowancefordoubtfulaccounts 1,719,239 1,931,984Changeinvalueofbeneficialinterestincharitableremaindertrust 4,582 6,973Unrealizedlossoninvestments 9,181,097 4,099,950Realizedgainsonsaleofinvestments (1,031,332) (8,178,175)Depreciation 2,090,808 1,966,425Lossonwrite‐offofloansreceivable ‐ 1,000,000(Gain)lossonsalesanddisposalofproperty (16,976,052) 22,485Changeinpriests'pensionandpost‐retirementbenefitsaccrual 5,609,000 6,228,000Changeinfairvalueofswap 277,616 (271,208)

Changeinoperatingassetsandliabilities:Receivables (4,502,281) (997,542)Cemeteryinventory 753,383 664,338Otherassets (186,973) (68,337)Accountspayableandaccruedexpenses (1,145,411) 1,032,170Parishandotherdeposits (182,317) 2,421,323Equityofinvestmentsheldintrustforother 2,833,814 8,327,721Deferredamounts 1,669,034 1,839,216Otherliabilities (858,507) 821,016

Netcash(usedin)providedbyoperatingactivities (1,875,262) 19,274,700

CASHFLOWSFROMINVESTINGACTIVITIESPurchaseofproperty,equipment,andimprovements (533,830) (7,007,388)Proceedsfromsaleofproperty 19,000,000 ‐Purchaseofinvestments (20,727,950) (37,269,368)Proceedsfromsalesofinvestments 15,735,372 37,556,483Loansmadetoparishes,schoolsandotherinstitutions ‐ (1,350,000)Paymentsreceivedonloansmadetoparishes,schoolsandotherinstitutions 1,214,137 1,251,626

Netcashprovidedby(usedin)investingactivities 14,687,729 (6,818,647)

NETCHANGEINCASHANDCASHEQUIVALENTS 12,812,467 12,456,053

CASHANDCASHEQUIVALENTSBeginningofyear 26,353,093 13,897,040

Endofyear 39,165,560$ 26,353,093$

Cashpaymentsforinterest 843,073$ 918,171$

Loanpaymentsreceived 552,000$ 536,000$Paymentsmadeonbonds (552,000)$ (536,000)$

SUPPLEMENTALDISCLOSUREOFCASHFLOWINFORMATION

SUPPLEMENTALDISCLOSURESOFNON‐CASHINVESTINGANDFINANCINGACTIVITIES

YearsEndedJune30,


ACORPORATIONSOLENOTESTOFINANCIALSTATEMENTS

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Note1–SummaryofSignificantAccountingPoliciesandBasisofPresentationThe Administrative Office of the Roman Catholic Bishop of Orange was established in 1976 andencompassesanareaof782squaremilesalong42milesoftheSouthernCaliforniacoastline.TheBishopisthesolememberoftheOrganizationandmaintainsdirectoperationalcontrolovertheOrganization,which provides oversight over 63 diocesan parishes and centers, 3 high schools and 31 elementaryschools.The accompanying financial statements include only those assets, liabilities, and operations ofdepartments forwhich theAdministrativeOffice of theDiocese ofOrange (“Organization”)maintainsdirect operational control. These financial statements do not include the assets, liabilities, andoperationsoftheparishes,highschools,elementaryschools,oranyotheraffiliatedorganizationsunderthe jurisdiction of the Roman Catholic Bishop of Orange (“RCBO”), except for transactions with theOrganizationasreflectedonthebooksandrecordsoftheOrganization.The Bishop is also the sole member of a number of other organizations described below. Theseorganizationsmaintainindependentgoverningboardsorcharters.TheBishopdoesnotmaintaindirectoperationalcontrolovertheseorganizations.Christ Catholic Cathedral Corporation (“CCCC”) administers religious, charitable, and educationalactivities hosted on the Cathedral campus, and manages the operations of the Cathedral campusincludingstrategicplanning,development,andmarketing.SeeNote20.Christ Catholic Cathedral Facilities Corporation (“CCCFC”) holds title to theChrist Cathedral propertyalong with the acquisition indebtedness. It leases the entire property to CCCC under a master leaseagreement.Itspurposeistooperate,renovate,andsubleasetheproperty.Orange Catholic Foundation (“OCF”) is organized to receive gifts, grants, contributions, and bequestsfromdonorsforthepurposeofsupportingreligiouspurposesandprograms.Catholic Charities of Orange County (“CCOC”) is organized to provide professional social services toindividualsinneed,andprovideeducationandresourcestosupportparishministries.RomanCatholicBishopofOrangeRevocableTrust(“Trust”)wasformedtoholdassetsasanagentforTrustors. The Trustors are certain parishes and schools affiliated with the Organization. The TrustinvestsanddistributestheassetsinaccordancewiththeTrustAgreements.

THEADMINISTRATIVEOFFICEOFTHEROMANCATHOLICBISHOPOFORANGE,ACORPORATIONSOLENOTESTOFINANCIALSTATEMENTS

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Note1–SummaryofSignificantAccountingPoliciesandBasisofPresentation(continued)A summary of the significant accounting policies applied in the preparation of the accompanyingfinancialstatementsareasfollows:

Tax exempt status – The Organization has been designated as a tax‐exempt entity by the InternalRevenue Service except to the extent of unrelatedbusiness taxable incomeas definedunder InternalRevenueCode(“IRC”)Sections511through515andtheCaliforniaFranchiseTaxBoardunderSections501(c)(3) and 23701d, respectively. Accordingly, no tax provision has been recorded in the financialstatements.

The Organization had no unrecognized tax benefits at either June 30, 2016 or 2015, and had nouncertaintaxpositions.TheOrganizationisrequiredtoreportunrelatedbusinessincome,ifany.

Basisofaccounting–ThefinancialstatementsoftheOrganizationhavebeenpreparedontheaccrualbasisofaccounting.

Netassets–TheaccountsoftheOrganizationaremaintainedinaccordancewithprinciplesofnetassetaccounting.Thisaccountingistheprocedurebywhichresourcesforvariouspurposesareclassifiedintonet asset categories in accordance with specific activities or objectives. For financial statementpurposes,allfinancialtransactionsarereportedbythefollowingnetassetcategories:

Unrestrictednetassets–ConsistofresourcesoftheOrganizationthathavenotbeenrestrictedbyadonor.Themajorsourcesofrevenuearediocesanassessmentsandprograms,investmentactivity,insurance programs, and cemetery operations. Included in unrestricted net assets are amountswhich have been designated by the Bishop, primarily for insurance reserves and cemeteryreplacementandmaintenancecosts.

Temporarily restrictednetassets –Consistof contributionsof cashandotherassets receivedwithdonorstipulationsthatlimittheuseofdonatedassets.Donorrestrictionsarestipulatedbyeitheratime restriction or purpose restriction. Upon expiration of time restriction or completion of apurposerestriction,temporarilyrestrictednetassetsarereclassifiedtounrestrictednetassetsandreportedinthestatementsofactivitiesasnetassetsreleasedfromrestrictions.

Permanentlyrestrictednetassets–Consistofcontributionsofcashandotherassetsreceivedfromdonorstoprovideapermanentsourceofincome.Ifthedonordoesnotrestrictthealloweduseofthe income, the Organization may determine the income’s availability to the Organization’soperations.

Fair value measurements – The Organization determines the fair value of assets and liabilitiesconsistentwithafairvalueframeworkwhichprovidesforaclearerdefinitionoffairvalueforfinancialreporting,establishesahierarchyformeasuringfairvalue,andrequiresadditionaldisclosuresabouttheuseoffairvaluemeasurements.



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Note1–SummaryofSignificantAccountingPoliciesandBasisofPresentation(continued)Fairvaluemeasurementreportingprovidesaconsistentdefinitionoffairvaluewhichfocusesonanexitprice,whichisthepricethatwouldbereceivedtosellanassetorpaidtotransferaliabilityinanorderlytransactionbetweenmarketparticipantsatthemeasurementdate.Thestandardalsoprioritizes,withinthemeasurementoffairvalue,theuseofmarket‐basedinformationoverentity‐specificinformationandestablishesathree‐levelhierarchyforfairvaluemeasurementsbasedonthenatureofinputsusedinthevaluationofanassetorliabilityasofthemeasurementdate.

Thethree‐levelhierarchyforfairvaluemeasurementsisdefinedasfollows:

Level1: Quotedpricesinactivemarketsforidenticalassetsorliabilities.

Level2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets orliabilities;quotedpricesinmarketsthatarenotactive;orotherinputsthatareobservableorcanbecorroboratedbyobservablemarketdataforsubstantiallythefulltermoftheassetsorliabilities.

Level3: Unobservableinputsthataresupportedbylittleornomarketactivityandthataresignificanttothefairvalueoftheassetsorliabilities.

In certain cases, inputs used to measure fair value may fall into different levels of the fair valuehierarchy.Insuchcases,aninvestment’slevelwithinthefairvaluehierarchyisbasedonthelowestlevelof input that is significant to the fair value measurement. The Organization’s assessment of thesignificanceofaparticular input to the fairvaluemeasurement in itsentiretyrequires judgment,andconsidersfactorsspecifictotheinvestment.

Useofestimates–InpreparingfinancialstatementsinconformitywithgenerallyacceptedaccountingprinciplesintheUnitedStates,managementmakesestimatesandassumptionsthataffectthereportedamountsof assets and liabilities anddisclosuresof contingent assets and liabilities at thedateof thefinancial statements, aswell as the reported amountsof revenues andexpensesduring the reportingperiod.Actualresultscoulddifferfromthoseestimates.

Concentrationsofcreditrisk – Financial instruments,whichpotentially subject theOrganization toconcentrations of credit risk, consist principally of cash, money‐market funds, receivables, andinvestments in securities.TheOrganizationplaces its cashandmoney‐market investments inmoney‐marketfundsofmultiplefinancialinstitutionsandinvestmentmanagerstomitigatethisrisk.

At times throughout theyear, thebalancesof cashandcashequivalentsand investmentsmayexceedamounts insured by the Federal Deposit Insurance Corporation (“FDIC”) or Securities InvestorsProtectionCorporation(“SIPC”) limits. Investments insecuritiesareheldbyvariouscustodialbrokersandfundmanagers.TheOrganizationhasnotexperiencedanylossesincashandinvestmentaccounts.

ConcentrationsofcreditriskexistwithrespecttoreceivablessincegenerallyallareduefromparishesandotherinstitutionslocatedwithintheRomanCatholicDioceseofOrange.


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Note1–SummaryofSignificantAccountingPoliciesandBasisofPresentation(continued)Cashandcashequivalents–TheOrganizationconsidersallhighly‐liquid investmentswithan initialmaturityofthreemonthsorlessatpurchasetobecashequivalents.Receivables fromrelated institutionsandcemeterysales –Receivables representcurrentchargesassessed for services and centrally‐administered programs rendered to parishes, schools, and otherinstitutionswithin theRomanCatholicDioceseofOrange, aswell as cemetery receivables andgrantsreceivable.Suchamountsaredueinregularpaymentsthroughouttheyearandaredeemedtobefullycollectibleunlessaparish/institutionhasanunexpectedmaterialadversechangeinitsabilitytomeetitsfinancialobligations.Inthatcase,theOrganizationwillrecordanallowanceasdescribedbelow.Loansreceivablefromparishes,schools,andrelatedinstitutions–Loanstoparishes,schools,andrelated institutions represent extended credit to these entities. Prior to June 2011,when the RomanCatholicDioceseofOrangeRevocableTrust (the “Trust”)was established, creditwas extendedbaseduponevaluationoftheborrowingentity’sfinancialconditionandotherfactors.Generally,collateralwasnotspecificallyrequired;however,theparishes,schools,andrelatedinstitutionshavepropertyorotherliquidassetswhichcouldserveascollateral.LoansareeitherdueondemandbytheOrganizationorinaccordancewithscheduledpayments.Interestaccruesonloansreceivablemonthlyinaccordancewiththeinterestratesapplicabletotheloans.TheaverageinterestrateintheyearsendedJune30,2016and2015was1.53percentand1.63percent,respectively.TheOrganizationconsidersallloanstobeinterestbearingandaccrues interestonalloutstandingbalances. Ifa loanisdeemedtohavecollectionissues,theOrganizationwillprovideforanallowanceasdescribedbelow.Ifaloanisdeemedfullyuncollectible,itiswrittenoffagainsttheallowanceintheperiodsodeemed.Loans receivable for the repaymentofbondsandbondspayable – The Organization authorizedcertain debt facilities for the benefit and use of one of its diocesan high schools such that theOrganizationpresentsthegrossamountsdue,aswellasacorrespondingreceivablefromtheschool(seeNotes2and9).Allowancefordoubtfulaccounts–TheOrganizationprovidesanallowanceforreceivablesandloansit believes itmay not collect in full. TheOrganization recognizes reserves for bad debts based on itshistorical collection experience. If circumstances change (i.e., higher than expected defaults or anunexpected material adverse change in an institution’s ability to meet its financial obligations), theOrganization’sestimatesoftherecoverabilityofamountsduemaychangeinthenearterm.AtJune30,2016and2015,thetotalallowancewas$15,499,576and$13,780,337,respectively.Investments–Investmentsarerecordedatfairvalue.Unrealizedgainsandlossesareincludedinthestatementsofactivities.Investmentincomeandgainsrestrictedbyadonorarereportedasincreasesinunrestrictednetassetsiftherestrictionsaremet(eitherbypassageoftimeorbyuse)inthereportingperiodinwhichtheincomeandgainsarerecognized.



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Note1–SummaryofSignificantAccountingPoliciesandBasisofPresentation(continued)Thefollowingdescribesthevaluationmethodologiesusedforinstrumentsmeasuredatfairvalueonarecurring basis and recognized in the accompanying statements of financial position. Therewere nochangestotheOrganization’svaluationmethodologiesfrom2015to2016.Wherequotedmarketpricesareavailableinanactivemarket,securitiesareclassifiedwithinLevel1ofthevaluationhierarchy.Level1securities includecertainmutual funds,commonstocks,andequities.Fairvalueisbasedonquotedmarketpricesforthosetradedwithsufficientfrequency.Level2securitiesincludecorporate,foreignandgovernmentbondsandmutualfundswhereaquotedmarketpriceisnotavailable.Theseinvestmentsarevaluedbasedonquotedmarketpricesofcomparableassets.Values are based on information provided by fund managers, external investment advisors, andadditional factors to determine if the carrying value of these investments should be adjusted. Indetermining valuation adjustments, emphasis is placed on market participants’ assumptions andmarket‐basedinformationoverentity‐specificinformation.Investments that represent securities that are not publicly traded are stated at estimated fair valuebaseduponthefinancialdatasuppliedbytheindividualfundsasoftheendofeachfiscalyearand/orthe net asset value (“NAV”), or its equivalent, of the fund. In establishing the estimated fair value,management may give consideration to operating results, financial condition, recent sales prices ofissuers’securities,andotherpertinentinformation,includingtheadviceofitsinvestmentmanager.The Organization recognizes that there are inherent risks associated with both non–publicly andpublicly‐tradedsecurities.Riskismanagedthroughrigorousevaluationbeforeaninvestmentismade,quarterly monitoring of valuations, and regular communication with investment managers. TheOrganizationmayalsohaveriskassociatedwithitsconcentrationofinvestmentsincertaingeographicareasandcertainindustries.DerivativeinstrumentsenteredintobytheOrganizationinvolve,tovaryingdegrees,elementsofcreditrisk, in the event a counterparty should default, and market risk, as the instruments are subject tointerest rate fluctuations. Credit risk ismanaged through the use of counterparty diversification andmonitoringofcounterpartyfinancialcondition.Endowment investments – Bequests and other contributed funds which are restricted by donorsaccordingtothedesignatedpurposestipulatedareheldinendowmentinvestmentfunds,separatefromunrestrictedandpledgedinvestments(seeNotes3and12).Amountsarerecordedatfairvalue.Investmentsheld in trust forothers – A separate asset and liability equal to the entire amount of“InvestmentsHeldinTrustforOthers”areshownintheOrganization’sstatementsoffinancialposition(seeNotes3and7).


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Note1–SummaryofSignificantAccountingPoliciesandBasisofPresentation(continued)TheRomanCatholicDioceseofOrangeRevocableTrust(“Trust”),arelatedparty,wasestablishedandcommenced financialoperations in June2011.TheTrustwascreated to serveandbenefit theRomanCatholicparishesandschoolsandtheRomanCatholiccharitablecorporationslocatedwithintheRomanCatholic Diocese of Orange. Deposit funds that are held in trust (see Note 7) are managed, but notowned,by theOrganization.Eachparishandschool thathasplaced fundswith theTrusthasenteredintoamastersubtrustagreementwiththeTrust.TheTrustservesasanagentfortheparishesandotherinstitutionsandthereforetheassetsarenotownedbytheTrust.TheTrustinvestsanddistributestheassetsinaccordancewiththeprovisionsofsubtrustagreements.DepositsheldonbehalfoftheTrustareheldas investments inequitysecurities,mutual funds,anddebtsecurities.TheOrganizationallocatestheactual income(or loss)of theOrganization’sshareof theTrust’s investmentportfolio. Investmentsecurities areexposed tovarious risks suchas interest rate,market, and credit risks. It is reasonablypossible that the estimated fair value of investment securitieswill change significantly in the future,withtheresultthatthecarryingamountoftheinvestmentsecuritiesmaychangematerially,basedonmarketconditionsandriskassociatedwithcertaininvestmentsecurities.TheinvestmentsheldintrustaremaintainedbytheOrganizationaccordingtotheirinvestmentpolicy.Cemeteryinventory–Cemeterylanddevelopmentcostsarechargedtocostofsalesasgravesaresoldonanaveragecostbasis.Landdevelopmentworkinprocessrepresentsareasbeingdevelopedandnotpresentlyavailableforuse.Property,equipment,and improvements – Property, equipment, and improvements are carried atcost, or estimated fair value at the date of donation. Depreciation is provided using the straight–linemethodovertheestimateduseful livesoftheassetsrangingfrom3to40years.Forbothoftheyearsended June 30, 2016 and 2015, the Organization capitalized assets with a cost or donated value of$1,000ormore.Equipment used for property maintenance, repairs, and minor replacements is charged to expense;additions and betterments are added to the property account at cost. When property is retired orotherwisedisposedof, thecostandrelatedaccumulateddepreciationare removed fromtheaccountsandanyresultinggainorlossisreflectedinthestatementsofactivities.Impairment of property, equipment, and improvements – The Organization evaluates long‐livedassets,includingproperty,equipment,andimprovements,forimpairmentwhenevereventsorchangesincircumstances indicate that thecarryingvalueofanassetmaynotberecoverable. If theestimatedfuturecashflows(undiscountedandwithoutinterestcharges)fromtheuseofanassetarelessthanthecarryingvalue,awrite‐downwouldberecordedtoreducetherelatedassettoitsestimatedfairvalue.Therewerenowrite‐downsduringtheyearsendedJune30,2016and2015.Assetsheld for sale – Assets held for sale are recorded at the lower of the carrying amount or fairvalue,lesscosttosell.Assetsclassifiedas“heldforsale”arenolongerdepreciated.



13

Note1–SummaryofSignificantAccountingPoliciesandBasisofPresentation(continued)Revenuerecognition: Contributions, grants, and bequests – Contributions, grants, and bequests are considered to be

available for unrestricted use unless they are specifically restricted by the donor. Contributionsreceiveddesignatedforfutureperiodsorrestrictedbythedonorforspecificpurposesarereportedas temporarily restricted contribution revenue. The Organization recognizes all unconditionalcontributionsandpromisestogiveintheperiodnotified.Unconditionalpromisestogiveexpectedtobecollectedinfutureyearsarerecordedatthediscountedpresentvalueoftheirestimatedfuturecash flows using the risk‐free rate applicable to the years in which the promises are received.Conditionalpromisestogiveorintentionstogivearenotrecordedinthefinancialstatementsuntiltheconditionsaresubstantiallymet.PastoralServicesAppeal(“PSA”)contributionsareincludedincontributions,grants,andbequestsinthestatementsofactivities.

Cemetery operations –Revenue from cemetery operations is generated through at‐need and pre‐

need programs. At‐need and pre‐need sales are made by cemetery‐employed arrangementcounselors. Sales and cost of sales related to at‐need sales contracts and grave plots, crypts, andnichesforpre‐needsalescontractsarerecognizedatthetimeofthesale.Thesalesandcostofsalesrelated to resaleproductsandservicesaredeferredandrecognizedat fulfillment.Costof sales iscalculated by allocating total construction costs to the number of inventory units developed at acemetery.Revenuerelatedtopredevelopmentsalesisdeferreduntilconstructionbegins.

Diocesan assessments, Diocesan programs, and insurance programs – Revenue from diocesan

assessments,diocesanprograms,andinsuranceprogramsareforamountsowedtotheOrganizationby parishes and schools and include items such as diocesan assessments, medical insurance,propertyinsurance,propertytaxes,clergysupport,andparishservices.Theseamountsarerecordedwhentherelatedexpenseisincurred.

Deferredamounts–Deferredrevenueconsistsofthepre–needsaleofburialservicesandothernon–graveitemsthataredeliverableinthefutureatthetimeofburial,suchasinternmentfees,settingfees,markers,vaults,andflowers.Salesofgraves,lawncrypts,mausoleumcrypts,andcremationnichesarerecognizedascurrentrevenueatthetimeofsale,whetherpre–needorat–need.Deferredrevenuealsoincludes interest charges on long‐term installment contracts related to pre‐need sales, which arerecognizedasinstallmentpaymentsasreceived.Contributed services – The Organization receives a substantial amount of contributed services incarryingoutitsministry.Theseservicesdonotmeettherecognitioncriteriaundergenerallyacceptedaccounting principles. Accordingly, the value of these contributed services is not reflected in theaccompanyingfinancialstatements.


14

Note1–SummaryofSignificantAccountingPoliciesandBasisofPresentation(continued)Functionalallocationofexpenses–Thecostsofprovidingthevariousprogramsandotheractivitieshavebeensummarizedona functionalbasis in the statementsof activities.Accordingly, certaincostshavebeenallocatedamongtheprogramsandsupportingservicesbenefited.TheOrganizationdoesnotincuranydirectfundraisingexpenses.Subsequentevents – Subsequent events areeventsor transactions thatoccurafter the statementoffinancialpositiondate,butbefore the financial statementsare issued.TheOrganization recognizes inthe financial statements the effects of all subsequent events that provide additional evidence aboutconditionsthatexistedatthedateofthestatementoffinancialposition,includingtheestimatesinherentin the process of preparing the financial statements. The Organization’s financial statements do notrecognizesubsequenteventsthatprovideevidenceaboutconditionsthatdidnotexistatthedateofthestatementof financialposition,butaroseafter thestatementof financialpositiondateandbefore thefinancialstatementsareavailabletobeissued.TheOrganizationhasevaluatedsubsequentevents throughDecember14,2016,which is thedate thefinancial statementswere available for issuance. SeeNotes 9 and 20 for a description of subsequentevents.Reclassifications – Certain reclassifications have been made to the 2015 financial statements toconformtothe2016presentation.Thesereclassificationshadnoimpactonnetassetbalancesandwerepresentationinnatureonly.Note2–ReceivablesPledges receivable – In May 2016, the Organization received a grant of $3,100,000 from the SheaFamilyCharitiestosupporttheinstallationofairconditioninginfourDiocesanschools.Thisamountisexpectedtobecollectedwithin12monthsofthefiscalyearend.Receivablesfromrelatedinstitutionsandcemeterysales–Cemeteryreceivablesarereceivablesforpurchases of interment spaces, memorials, and services by patrons on installment accounts withrepayment terms generally up to five years. Parish billings are receivables for amounts owed to theOrganization by parishes and schools and include items such as diocesan assessments, medicalinsurance, property insurance, property taxes, clergy support, and parish services. PSA contributionsreceivableareforamountsowedtotheOrganizationbytheOrangeCatholicFoundationfortheportionsof the PSA designated for clergy formation and education and select pastoralministries. Receivablesfromother institutionsare foramountsowedtotheOrganizationrelatedtoexpenses incurredontheother’s behalf in which the Organization is owed reimbursement. With the exception of cemeteryreceivables,allreceivablesaredueandcollectiblewithin12monthsofthefiscalyearend.



15

Note2–Receivables(continued)ReceivablesfromrelatedinstitutionsandcemeterysalesconsistofthefollowingasofJune30:

2016 2015Cemeteryreceivables,netofallowanceof$77,840and

$38,177asofJune30,2016and2015,respectively 9,938,494$ 9,880,763$PastoralServicesAppeal("PSA")receivable 2,809,554 2,752,700Parishbillings,netofallowanceof$913,123and

$440,000asofJune30,2016and2015,respectively 2,207,175 2,524,539Receivablesfromotherinstitutions 374,525 356,970

Totalreceivablesfromotherrelatedinstitutionsandcemeterysales,net 15,329,748$ 15,514,972$

CemeteryreceivablesasofJune30,2016areexpectedtobecollectedasfollows:

YearsendingJune30:2017 4,511,185$2018 2,167,9342019 1,500,2702020 1,020,3702021 465,702Thereafter 350,873

Total 10,016,334

Less:allowancefordoubtfulaccounts (77,840)

Total 9,938,494$

Loansreceivable fromparishesandschools –TheOrganizationretainedcertainparishandschoolloansaftertheestablishmentoftheTrustin2011(seeNote7).AtJune30,2016,loanmaturitiesrangedfromJuly2024throughJune2044.Therearetwoloanstotalingapproximately$535,000thatarepastdue. These have been fully reserved as of June 30, 2016 and 2015. At June 30, 2016 and 2015, theOrganizationhadthefollowingamountsduefromvariousparishesandschools:

Parishandschoolloans 14,408,463$ 14,453,641$Less:allowancefordoubtfulaccounts (14,383,359) (13,302,160)

Totalloansreceivablefromparishesandschools,net 25,104$ 1,151,481$


16

Note2–Receivables(continued)LoansreceivablefromparishesandschoolsasofJune30,2016areexpectedtobecollectedasfollows:

YearsendingJune30:2017 215,450$2018 41,5292019 42,3672020 43,2222021 44,094Thereafter 14,021,801

Total 14,408,463$

Oneparish,St.CatherineofSiena,makesup90percentoftheoutstandingbalanceatJune30,2016andJune20,2015.ThisbalancehasbeenfullyreservedagainstasofJune30,2016and2015.Loans receivable from related institutions – The Organization made loans to the Christ CatholicCathedral Facilities Corporation (“CCCFC”), a related party, to finance the purchase of the ChristCathedral property by the CCCFC in 2012 and to the Orange Catholic Foundation (“OCF”), a relatedparty, to facilitate the capital campaign now under way. The Organization made loans to CatholicCharitiesofOrangeCounty,arelatedparty,tofacilitatethepurchaseoftheirowner‐occupiedproperty.TheOrganizationmadeloanstotwoparishes,bothrelatedparties,tofacilitatethepurchaseofowner‐occupied properties. The Organization made a loan to a related Diocesan entity to assist themwithsustainingtheiroperations.AtJune30,2016and2015,theOrganizationhadthefollowingamountsduefromrelatedinstitutions:

2016 2015

ChristCatholicCathedralFacilitiesCorporationloan 55,606,030$ 55,523,955$OrangeCatholicFoundationcapitalcampaigns 1,010,000 1,010,833CatholicCharitiesofOrangeCounty 596,325 673,801Otherparishesandinstitutions 1,811,726 1,909,732

59,024,081 59,118,321Less:allowancefordoubtfulaccounts (125,254) ‐

Totalloansreceivablefromrelatedinstitutions,net 58,898,827$ 59,118,321$



17

Note2–Receivables(continued)Thefollowingisascheduleoffuturepayments:

YearsendingJune30:2017 370,222$2018 229,6682019 1,491,5932020 1,194,5902021 197,679Thereafter 55,540,329

Total 59,024,081$

Loansreceivablefortherepaymentofbonds–In2009,theOrganizationenteredintoadebtfacility(seeNote9)toassistSantaMargaritaCatholicHighSchool(“SMCHS”),arelatedparty,withfundingtheconstruction of a new facility. Concurrent with the debt facility, the Organization entered into asubordinate agreement with SMCHS, thereby creating a loan receivable from SMCHS equal to theamount of the related debt. The loan receivablewas refinanced in September 2013with loan termswhich are aligned with the related debt (see Note 9). Under the agreement, SMCHS is required todirectlyrepaythefinancialinstitutionsinaccordancewiththetermsoftherelateddebtagreement.AtJune30,2016and2015,theamountduefromSMCHSwas$20,319,593and$20,871,593,respectively.Beneficial interest in charitable remainder trusts – The Organization has been named as abeneficiary in three irrevocable charitable remainder trusts. Under the terms of the split‐interestagreements,theOrganizationistoreceivealloraportionofthevalueofthetrustuponthedeathofthebeneficiaries.Theinitialcontributionswererecordedatfairvalueasabeneficialinterestreceivableandtemporarilyrestrictedorpermanentlyrestrictedcontributions.Attheendofeachfiscalyear,thetrustassetsarevaluedbasedonfairvalueandthepresentvalueoffuturebenefitsexpectedtobereceivedbythe Organization are determined using beneficiaries’ life expectancies and discount rates based oncurrentmarketconditions.PresentvaluediscountratesappliedasofJune30,2016and2015was1.8percent. The fair value of the remainder interest as of June 30, 2016 and 2015 was $105,069 and$109,651,respectively.


18

Note3–InvestmentsInvestmentsarerecordedat fairvalue. Investmentsasof June30,2016and2015aresummarizedasfollows:

2016 2015

Long‐terminvestments 125,075,069$ 131,066,070$Investmentsheldintrust(seeNote7) 122,084,560 119,250,746Endowmentinvestments(seeNote12) 2,670,497 2,670,497

Totalinvestments 249,830,126$ 252,987,313$

Note4–FairValueMeasurementsThefollowingschedulesummarizesinvestmentincome(loss)recognizedinthestatementsofactivitiesfortheyearsendedJune30,2016and2015:

Netrealizedgains 1,031,332$ 8,178,175$Netunrealizedlosses (9,181,097) (4,099,950)Interestanddividends 4,521,307 5,367,782Other,net 760,662 1,046,643

Total (2,867,796)$ 10,492,650$



19

Note4–FairValueMeasurements(continued)ThefollowingtablesummarizesfinancialassetsandliabilitiesmeasuredatfairvalueonarecurringbasisasofJune30,2016:

NetAssetValueLevel1 Level2 Level3 orEquivalent Total

Fairvalueassets:Investments:

Cashandcashequivalents 6,662,749$ ‐$ ‐$ ‐$ 6,662,749$Fixed‐incomeobligations:

Corporate ‐ 16,553,681 ‐ ‐ 16,553,681Foreign ‐ 4,703,341 ‐ ‐ 4,703,341U.S.government ‐ 14,392,088 ‐ ‐ 14,392,088

Commonstocksandequities:Domestic 75,405,510 ‐ ‐ ‐ 75,405,510International 17,712,383 ‐ ‐ ‐ 17,712,383

Mutualfunds:Domestic 35,672,529 ‐ ‐ ‐ 35,672,529International 37,965,688 ‐ ‐ ‐ 37,965,688

Alternativeinvestments:Commonstocksandequities:

International ‐ ‐ ‐ 10,680,680 10,680,680CommingledTrust ‐ ‐ ‐ 6,211,139 6,211,139Hedgefunds:

Fundoffunds ‐ ‐ ‐ 10,653,831 10,653,831Credit/Event‐driven ‐ ‐ ‐ 3,328,686 3,328,686

Privateequity:Secondaries ‐ ‐ ‐ 492,652 492,652Buyouts ‐ ‐ ‐ 7,254,027 7,254,027Mezzanine ‐ ‐ ‐ 406,600 406,600Distressed ‐ ‐ ‐ 231,911 231,911Fundoffunds ‐ ‐ ‐ 1,502,631 1,502,631

Totalfairvalueinvestments 173,418,859 35,649,110 ‐ 40,762,157 249,830,126

Beneficialinterestincharitableremaindertrusts ‐ ‐ 105,069 ‐ 105,069

Totalfairvalueassets 173,418,859$ 35,649,110$ 105,069$ 40,762,157$ 249,935,195$

FairvalueliabilitiesSwapliability(Note8) ‐$ 463,160$ ‐$ ‐$ 463,160$

Totalfairvalueliabilities ‐$ 463,160$ ‐$ ‐$ 463,160$


20

Note4–FairValueMeasurements(continued)Thefollowingtablesummarizesfinancialassetsmeasuredat fairvalueonarecurringbasisasof June30,2015:

NetAssetValueLevel1 Level2 Level3 orEquivalent Total

Fairvalueassets:Investments:

Cashandcashequivalents 8,382,745$ ‐$ ‐$ ‐$ 8,382,745$Fixed‐incomeobligations:

Corporate ‐ 19,117,268 ‐ ‐ 19,117,268Foreign ‐ 5,659,304 ‐ ‐ 5,659,304U.S.government ‐ 10,469,949 ‐ ‐ 10,469,949

Commonstocksandequities:Domestic 84,256,313 ‐ ‐ ‐ 84,256,313International 16,528,604 ‐ ‐ ‐ 16,528,604

Mutualfunds:Domestic 27,827,396 ‐ ‐ ‐ 27,827,396International 35,988,833 ‐ ‐ ‐ 35,988,833


International ‐ ‐ ‐ 12,851,121 12,851,121CommingledTrust ‐ ‐ ‐ 6,270,044 6,270,044Hedgefunds:

Fundoffunds ‐ ‐ ‐ 11,847,462 11,847,462Credit/Event‐driven ‐ ‐ ‐ 3,337,804 3,337,804

Privateequity:Secondaries ‐ ‐ ‐ 800,787 800,787Buyouts ‐ ‐ ‐ 7,255,761 7,255,761Mezzanine ‐ ‐ ‐ 637,224 637,224Distressed ‐ ‐ ‐ 298,436 298,436Fundoffunds ‐ ‐ ‐ 1,458,262 1,458,262

Totalfairvalueinvestments 172,983,891 35,246,521 ‐ 44,756,901 252,987,313

Beneficialinterestincharitableremaindertrusts ‐ ‐ 109,651 ‐ 109,651

Totalfairvalueassets 172,983,891$ 35,246,521$ 109,651$ 44,756,901$ 253,096,964$

FairvalueliabilitiesSwapliability(Note8) ‐$ 185,544$ ‐$ ‐$ 185,544$

Totalfairvalueliabilities ‐$ 185,544$ ‐$ ‐$ 185,544$



21

Note4–FairValueMeasurements(continued)Valuation policy – The Controller, as authorized by the Organization’s Investment Committee,determinesthefairvaluemeasurementpoliciesandproceduresinconsultationwiththeOrganization’sinvestment advisor, Canterbury Consulting. These policies and procedures are reassessed at leastannually to determine if the current valuation techniques are still appropriate. At that time, theunobservableinputsusedinthefairvaluemeasurementsareevaluatedandadjustedasnecessarybasedoncurrentmarketconditionsandotherthird‐partyinformation.WhiletheOrganizationbelieves itsvaluationmethodsareappropriateandconsistentwiththoseusedbyothermarketparticipants, theuseofdifferentmethodologiesorassumptionstodeterminethe fairvalueofcertain financial instrumentscouldresult inadifferentestimateof fairvalueat thereportingdate.Thoseestimatedvaluesmaydiffersignificantlyfromthevaluesthatwouldhavebeenusedhadareadily availablemarket for such investments existed, or had such investments been liquidated, andthesedifferencescouldbematerialtothefinancialstatements.ThefollowingtablerepresentstheliquidityandredemptionrestrictionsforthealternativeinvestmentsvaluedatNAVoritsequivalentasofJune30,2016:

Redemption Redemption Other Investment UnfundedFairValue Frequency NoticePeriod Restrictions Strategy Capital


International 10,680,680$ Monthly 10days None [1] ‐$Commingledtrust 6,211,139 Quarterly 60days None [4] ‐Hedgefunds: [2]

Fundoffunds 10,653,831 Quarterly 90days None [2a] ‐

Credit/Event‐driven 3,328,686 Quarterly65days(180daysforfullredemption)

25%perquarterw/65days;5%feeforfullredemption

[2b] ‐

Privateequity: [3]

Secondaries 492,652 10yrlockup N/APossiblethree1yrextensions [3a] 436,000

Buyouts 7,254,027 6to10yrlockup N/A

Possibleextensionupto3

yrs [3b] 2,159,914

Mezzanine 406,600 10yrlockup N/APossible5yrextension [3c] 404,250

Distressed 231,911 10yrlockup N/A None [3d] 100,000

Fundoffunds 1,502,631 10yrlockup N/A None [3e] 532,000

40,762,157$ 3,632,164$


22

Note4–FairValueMeasurements(continued)[1] Theinternationalequityshowninthealternativeinvestmentssectionisclassifiedassuchbecause

ofthevehicleitisinvestedin,nottheunderlyingholdings.Theholdingsinthesefundsarecommonstockandequity securities,but thepartnerships theyare invested indonotofferdaily liquidity.Becausealternativeinvestmentsrepresentapproximately16percentofthetotalportfolioandaretargeted to produce significant return over time, the impact to our liquidity is acceptable tomanagement.

[2] Hedgefundsareanassetclassthatlookstoprovidedownsideprotectionforaportfolioastheytry

to achieve superior risk adjusted returns. Hedge funds are generally established as a limitedpartnershipwheretheinvestorsarebuyingashareofthepartnership.Hedgefundscangenerallyuseleverageandhavetheabilitytoholdbothlongandshortpositions.Hedgefundsareincludedintheportfoliowiththegoalofstabilizingreturnsinthesecuritiesandfixedincomeinvestments.

[2a] Fundoffundsisasubsetofthehedgefundcategory.Afundoffundsisahedgefundthatinvestsin

other hedge funds. This allows for further diversification as the investor now has an indirectinvestmentinanumberofindividualhedgefunds.Thefeesforfundoffundsaregenerallylessthanstandalone hedge funds, but investors are paying a second layer of management fees, which isreflected in the net return for the fund of funds. The objective of the funds is to achieve capitalappreciation through investments in portfolios of domestic and international equities aswell asdistressedandarbitragesecurities.

[2b]Credit/event‐drivenhedgefundsaresimilartolong/shortequityhedgefundsexcepttheyarenot

focusedsolelyonequitysecurities,butratherhavetheability to invest increditandother fixed‐incomesecurities.Thefocusofevent‐drivenstrategiesistofind“specialsituations”inthemarketand purchase securities to attempt to take advantage of those situations (distressed companies,takeovers,mergers,etc.).

[3] Privateequityfundsarebuyingcompaniesthatarenotpubliclytradedonastockexchange.Private

equityfundsareusuallyalong‐terminvestmentandthestrategiesaregenerallyilliquid.[3a] Secondary private equity funds look to buy and sell pre‐existing investor commitments to other

privateequityandalternativeinvestmentfunds.Thenegotiationsareprivatelynegotiatedasthereisnotanactivemarketforsecondaryinterestinprivateequityfunds.ThefundtheOrganizationisinvestedininvestsdirectlyorindirectlywithotherentitiesinprivatelynegotiatedinvestmentsinthesecondarymarket.

[3b]Theprivateequitybuyoutfundslooktopurchaseprivateoperatingcompanies.Thesefundsinvest

directly or indirectly in private companies doing business domestically and globally. Theseinvestmentsdonotimplyminorityormajorityownershipintheacquiredcompany.



23

Note4–FairValueMeasurements(continued)[3c] Mezzaninestrategyfundslooktopurchasemezzaninedebt.Mezzaninedebtiswhenahybriddebt

issue is subordinated to another debt issue from the same issuer. Mezzanine debt usually hasembedded equity instruments attached. A manager implementing a mezzanine strategy willtypicallybeassociatedwithbuyoutsoracquisitions.

[3d]Distressedprivate equity funds look to takepositions (both equity anddebt) in companieswith

distressed balance sheets. These can range from a complete takeover to a cash infusion to gainequityownershipuntilthecompanyisatamorestablestate.

[3e] Fundoffundsisasubsetoftheportfolio’sinvestmentinhedgefundsandincludedasameansof

stabilizing return.These funds invest indistressedcompanies, real estateandreal‐estate relateddebt,intheUSandglobally.

[4] Comingledtrustfundslooktoaddun‐correlatedreturnswiththeotherfixedincomefundsaswell

asadditionalyield.Thesefundsareinvestedprimarilyinhighyielddebtandprivateloans.Note5–CemeteryInventoryAt June 30, 2016 and 2015, inventory consists of cemetery property available for sale, underdevelopment,andlandforfuturedevelopment:

2016 2015

Internment 15,354,370$ 16,413,191$Work‐in‐process 305,438 ‐Undevelopedland 679,270 679,270

Totalcemeteryinventory 16,339,078$ 17,092,461$

Atthetimefinishedcemeteryinventory(i.e.,graves,lawncrypts,mausoleumcrypts,cremationniches)issold,cemeteryinventoryisrelieved.Nocostofsalesorinventoryreductionisrecordeduponthesaleof pre–developed inventory.When pre–developed inventory is completed and the total developmentcost is knownandallocatedover the available inventory, the appropriate cost of sales and inventorytransactionsarerecognized.


24

Note6–Property,Equipment,andImprovementsAsummaryofproperty,equipment,andimprovementsatJune30,2016and2015isasfollows:

2016 2015

Land,buildings,andimprovements 33,491,534$ 33,495,109$Furniture,fixtures,andequipment 5,041,168 4,773,987Constructioninprogress 76,121 150,981

Totalproperty,equipment,andimprovements 38,608,823 38,420,077Less:accumulateddepreciationandamortization (12,350,688) (10,557,861)

Totalproperty,equipment,andimprovements,net 26,258,135$ 27,862,216$

As a resultof theOrganization’sdecision in theyearended June30,2014 tomove its administrativefacilitytotheChristCatholicCathedralPastoralCenter,theRomanCatholicBishopofOrangelisteditsprior facility,knownas theMarywoodPastoralCenter, for saleand thepropertywas inescrowasofJune30,2015.Thebuildingandimprovementswerereflectedinthestatementsoffinancialpositionas“assets held for sale” at a net book value of $1,976,845 as of June 30, 2015. In February 2016, theOrganizationsoldtheMarywoodPastoralCenterfor$19,000,000andrecordedagainof$17,023,155onthesale.

Note7–InvestmentsHeldinTrustforOthers

TheTrustwasestablishedduring2011tofacilitatetheoperationandadministrationofthedepositandloanactivitiesonbehalfoftheparishesandschools.IncludedintheOrganization'sinvestmentpoolaremoniesfromtheTrustheldbytheOrganizationforthepurposeofprovidinginvestmentmanagementandtechnicalassistance.AliabilityisrecordedattheestimatedfairvalueofassetsdepositedwiththeOrganizationby theTrust. Investment fundsheld in trust forothers at June30,2016and2015were$122,084,560and$119,250,746,respectively.

Note8–NotesPayable

TheOrganizationhastwonotespayablewithU.S.Bank,intheamountsof$20,400,000and$35,000,000.The$20,400,000noteaccruesinterestatanannualrateequalto0.55percentplusone‐monthLIBOR.InDecember 2015, the note was amended to extend the maturity date from December 31, 2015 toDecember31,2016.The$35,000,000noteaccruesinterestatanannualrateequalto0.75percentplusone‐monthLIBORandmaturesMay31,2018.Bothnotesare interest‐onlywitha lumpsumpaymentdueupon theirmaturitydates.Theoutstandingbalanceswere$20,400,000and$35,000,000 forbothyearsendedJune30,2016and2015.Interestexpenseonthedebttotaled$580,135and$485,222asofJune30,2016and2015,respectively.Thedebtissecuredbyaportionoftheinvestmentportfolio.TheOrganizationmustcomplywithvariousfinancialandnonfinancialcovenants.AccruedinterestasofJune30,2016and2015was$77,120and$70,645,respectively,andisincludedinthenotespayablebalance.



25

Note8–NotesPayable(continued)Asastrategy formaintainingacceptable levelsofexposureto theriskofchanges in futurecash flowsdue to interest rate fluctuations, theOrganization entered into interest‐rate swapagreements for theloans noted above. The intention of the swap agreements is to effectively change the Organization’svariableinterestratetoafixedrate.TheswapagreementswereenteredintoeffectiveFebruary1,2012foranotionalamountequaltotheoutstandingprincipalamountsoftheloans.Theswapagreementforthe $20,400,000 note ended on January 26, 2015. The swap agreement for the $35,000,000 note isscheduledtoendonMay31,2018.AsofJune30,2016and2015,thefairvalueoftheinterest‐rateswapagreement was a liability of $463,160 and $185,544, respectively, and has been reflected in otherliabilities inthestatementsof financialpositionasof June30,2016and2015,respectively.Fairvaluewasdeterminedusingavariablerateof1.24percent.Interestexpenseontheswapagreementstotaled$327,626and$432,949asofJune30,2016and2015,respectively.

Note9–BondsPayable

On February 1, 2009, the Organization, on behalf of SMCHS entered into a loan agreement with theCaliforniaMunicipalFinanceAuthorityandaletterofcreditreimbursementagreementwithU.S.Bank,actingas the creditbank for the funding.Under the loanagreement, theCaliforniaMunicipalFinanceAuthority issued its tax exempt Refunding Revenue Bonds Series 2010, in the aggregate principalamountof$19,190,000,theproceedsofwhichwereusedbySMCHSforthepurposeofconstructionoftheschoolbuildings.SMCHSisobligatedtopayallsumsnecessaryforthepaymentofthedebtserviceonthebonds.InSeptember2013,thebondswererefinancedtoincreasetheaggregateprincipalamountto$21,800,000andtoextendthematuritydatetoMay1,2039.Theinterestrateisfixedat3.63percent.Interest ispayable semi‐annuallyoneachMay1andNovember1.Asof June30,2016and2015, theoutstanding balance was $20,192,000 and $20,744,000, respectively. Accrued interest as of June 30,2016and2015was$127,593andisincludedinthebondspayablebalance.Bondspayablearesecuredby real property and certain assets owned by SMCHS. The note agreement contains various financialcovenants.Managementisnotawareofanynon‐compliancewithsuchcovenantsasofJune30,2016.

OnAugust1,2016,theSMCHSbondagreementwasamendedtoremovetheOrganizationfromanylegalobligationsonthebonds.Atthetimethebondswereissued,thefinancialpositionofSMCHSrequiredthe Organization to share liability obligations on the financing. The financial position of SMCHS hassignificantlyimprovedanditwasdeterminedthattheOrganizationisnolongerneededtobeanobligoronthesebonds.

Note10–Priests’PensionandPost‐RetirementBenefits

The Organization sponsors a defined‐benefit pension plan for all priests who are incardinated orordained in the Diocese. Although this defined‐benefit pension plan is exempt from the fundingrequirementsofERISA,ithasbeenthepolicyoftheOrganizationtomakecontributionsannuallybasedon actuarial principles. The Organization also sponsors a post‐retirement medical plan for retiredpriests.Thepost‐retirementmedicalplanpaysmedicalcostsnotcoveredbyPartsAandBofMedicare.Thepost‐retirementmedicalplanalsoreimbursesapriest’scontributionforPartBexpenses.Thepost‐retirementplanhasnotrustfundassets.


26

Note10–Priests’PensionandPost‐RetirementBenefits(continued)Theannualmeasurementdate is June30 for thepensionbenefitsandotherpost‐retirementbenefits.ThefollowingtablesprovidefurtherinformationabouttheOrganization’spensionandpost‐retirementbenefitplans:

PensionBenefits

ProjectedbenefitobligationatJune30,2014 20,816,000$

GainduetoJuly1re‐measurement (489,000)Increase(decrease)dueto:

Servicecost 673,000Interestcost 856,000Actualbenefitpayments (579,000)Administrativeexpenses (49,000)

Lossduringtheyearduetochangeinassumptions 1,532,000

ProjectedbenefitobligationatJune30,2015 22,760,000

GainduetoJuly1re‐measurement (515,000)Increase(decrease)dueto:

Servicecost 742,000Interestcost 963,000Actualbenefitpayments (640,000)Administrativeexpenses (61,000)

Lossduringtheyearduetochangeinassumptions 2,212,000Additionalliabilityduetoplanamendment 2,829,000

ProjectedbenefitobligationatJune30,2016 28,290,000$

The funded status of the pension and post‐retirement plans and the net amount recognized in theOrganization’sstatementsoffinancialpositionatJune30wereasfollows:

2016 2015 2016 2015

Projectedbenefitobligation 28,290,000$ 22,760,000$ 15,970,000$ 14,715,000$Planassetsatfairvalue (11,012,000) (9,893,000) ‐ ‐

Under‐fundedstatus 17,278,000$ 12,867,000$ 15,970,000$ 14,715,000$

PensionBenefits Post‐RetirementBenefits



27

Note10–Priests’PensionandPost‐RetirementBenefits(continued)Amountsrecognizedinthestatementsoffinancialpositionconsistof:

2016 2015

Totalunder‐fundedstatus 33,248,000$ 27,582,000$Supplementalliability 311,000 368,000

Totalpriests'pension/post‐retirementbenefitsaccrual 33,559,000$ 27,950,000$

The accumulated benefit obligation for the defined‐benefit pension plan was $19,500,000 and$16,083,000atJune30,2016and2015,respectively.The pension and post‐retirement plans’ pension expense, pension benefits paid, and employercontributionsfortheyearsendedJune30,2016and2015areasfollows:

2016 2015 2016 2015

Netpensionexpense 1,075,000$ 877,000$ ‐$ ‐$

Pension/post‐retirementbenefitspaid 640,000$ 579,000$ 316,000$ 356,000$

Employercontributions 1,958,000$ 376,000$ 316,000$ 356,000$

Netpost‐retirementexpense ‐$ ‐$ 1,453,000$ 1,310,000$


OtherchangesinplanassetsandbenefitobligationsrecognizedinunrestrictednetassetsatJune30areasfollows:

2016 2015 2016 +

Netloss 2,572,000$ 1,431,000$ 379,000$ 3,633,000$Newpriorservicecost

duringtheyear 2,829,000 ‐ ‐ ‐Amortizationofgain (107,000) (29,000) (261,000) (239,000)

Total 5,294,000$ 1,402,000$ 118,000$ 3,394,000$



28

Note10–Priests’PensionandPost‐RetirementBenefits(continued)Amounts recognizedasunrestrictednetassets in the statementsofactivitiesasof June30,2016and2015areasfollows:

Post‐Pension RetirementBenefits Benefits

AmountrecognizedasofJune30,2015 4,444,000$ 6,154,000$Totalrecognizedduringtheyear 5,294,000 118,000

AmountrecognizedasofJune30,2016 9,738,000$ 6,272,000$

Weighted‐average assumptions used in the accounting for the Organization’s pension and post‐retirementbenefitplanswere:

2016 2015 2016 2015

Weighted‐averageassumptionsusedtodeterminebenefitobligationsatJune30:

Discountrate 3.6% 4.4% 3.8% 4.4%Assumedfutureannual

benefitincreases 2.5% 2.5% ‐ ‐

Healthcarecosttrend ‐ ‐ 5.0% 5.0%Otherpost‐employment

benefitstrendrate ‐ ‐ 3.5% 3.5%Weighted‐averageassumptionsusedtodeterminenetperiodicbenefitcostfortheyearsendedJune30:

Discountrate 4.4% 4.3% 4.4% 4.3%Expectedlong‐termrate

ofreturnonassets 7.0% 7.0% ‐ ‐Assumedfutureannual

benefitincreases 2.5% 2.5% ‐ ‐Healthcarecosttrend ‐ ‐ 5.0% 5.0%Otherpost‐employment

benefitstrendrate ‐ ‐ 3.5% 3.5%


Expected long‐termasset returnassumption – TheOrganization employs amethodical process todeterminetheestimatesofexpectedlong–termrateofreturnonassets.Theseestimatesareprimarilydrivenbyactualhistoricalasset–classreturnsandadvicefromexternalactuarialconsultingfirmswhileincorporatingspecificasset–classriskfactors.



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Note10–Priests’PensionandPost‐RetirementBenefits(continued)Planassetinvestmentstrategyandallocation–TheassetallocationforthepensionplanasofJune30,2016,andthetargetallocation,byassetcategoryare:

Diocesan‐Approved Policy

AssetAllocation BenchmarkRange AssetAllocation 2016 2015

Class:Equities 45to75% 65% 62% 63%FixedIncome 25to55% 35% 38% 37%Cash 0to95% 0% 0% 0%

PercentageofPlanAssets

Actual

Investmentpolicy – The investment policy of the Organization for all assets held for investment isdesignedtomeettheOrganization’sprimarygoalofcapitalpreservationcombinedwiththeobjectiveofachievingreasonable incomeandcapitalgrowth,whileshowingapreferencetowardthosecompanieswhichhavemanifestedaparticularconsiderationforthesocialgood.Investment hierarchy – The plan assets are measured at fair value on a recurring basis and areclassifiedasLevel1pursuanttothevaluationhierarchy.TheplanassetswereclassifiedasfollowsasofJune30:

2016 2015PlanAssets:

Investments:Domesticcommonstock 1,075,000$ 1,079,000$Mutualfunds:

Equities:Domestic 3,666,000 3,103,000International 2,073,000 2,058,000

Fixedincome:Domestic 4,198,000 3,653,000

Total 11,012,000$ 9,893,000$


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Note10–Priests’PensionandPost‐RetirementBenefits(continued)TheOrganizationexpectstocontribute$600,000toitspensionplanand$0toitsotherpost‐retirementbenefitplanduringtheyearendedJune30,2017.

Estimated futurebenefitpayments –The followingbenefitpaymentswhich reflect expected futureservice,asappropriate,areexpectedtobepaid:

Pension Post‐RetirementBenefits Benefits

YearsendingJune30:2017 759,000$ 323,000$2018 803,000 344,0002019 864,000 366,0002020 992,000 423,0002021 1,013,000 439,0002022‐2026 6,220,000 2,851,000

Total 10,651,000$ 4,746,000$

Note11–NetAssets

AsofJune30,2016and2015,netassetswereclassifiedasfollows:

2016 2015

Unrestricted,undesignatednetassets (7,331,227)$ 4,189,331$

Plant 39,869,136 45,669,138Cemeterycare 36,244,478 35,654,057Cathedralrenovation 20,000,000 ‐Debtreductionreserves 18,388,559 ‐Insurancereserves 18,377,133 42,960,544Earthquakeretrofit 6,273,413 8,805,000Investmentreturnsreserve 5,368,647 ‐Other 5,072,019 4,353,114Catholiceducation 259,312 985,257Bishopdiscretionaryfunds 131,098 123,338Seminarians 100,085 100,085Priestretirementandrelief 49,071 49,071

Totalunrestricted,designatednetassets 150,132,951 138,699,604

Totalunrestrictednetassets 142,801,724$ 142,888,935$



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Note11–NetAssets(continued)Temporarilyrestrictednetassetswereavailableforthefollowingpurposes:

2016 2015

Catholiceducationgrantsandassistance 13,340,895$ 13,323,495$Constructionprojects 2,785,253 ‐Pastoralservicesappeal 1,458,166 5,343,362Other 774,075 718,168Parishesinneed 424,447 359,907Endowmentappreciationandincome,notappropriated 252,356 343,859

Total 19,035,192$ 20,088,791$

During the year ended June 30, 2016, $3,888,420 in funds temporarily restricted to support the PSAweretransferredtounrestrictednetassets.ThesefundsrepresentamountsthatwerecontributedandspentpriortoJuly1,2015butwerenotincludedinreleasesfortheyearendedJune30,2015.Temporarilyrestrictednetassetswerereleasedforthefollowingpurposes:

Pastoralservicesappeal 3,528,764$ 75,840$Catholiceducationgrantsandassistance 1,493,000 1,478,000Constructionprojects 314,747 ‐Other 246,815 249,123Endowmentappreciationandincome,appropriated 185,000 40,000Parishesinneed 155,335 102,034

Total 5,923,661$ 1,944,997$

Permanentlyrestrictednetassetswererestrictedto investment inperpetuity, the incomefromwhichwasexpendabletosupport:

BishopMcFarlandTrust 2,670,497$ 2,670,497$Seminarianendowment 204,989 195,141

Total 2,875,486$ 2,865,638$

TheBishopMcFarlandTrust isrestricted for futurescholarships forstudentspursuingCatholic, faith‐based work. The seminarian endowment was established to support the educational costs ofseminarianswithintheRomanCatholicDioceseofOrange.


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Note12–EndowmentFundsInterpretation of relevant law – The Organization has interpreted the California Uniform PrudentManagementof InstitutionalFundsAct (“CUPMIFA”)as requiring thepreservationof the fairvalueofthe original gift as of the date of the donor restricted endowment funds absent explicit donorstipulationstothecontrary.Asaresultofthisinterpretation,theOrganizationclassifiesaspermanentlyrestrictednetassets: (a) theoriginalvalueof thegiftsdonated to thepermanentendowment; (b) theoriginal value of the subsequent gifts to the permanent endowment; and (c) accumulations to thepermanentendowmentmadeinaccordancewiththedirectionoftheapplicabledonorgiftinstrumentatthe time the accumulation is added to the fund. The remaining portion of the donor‐restrictedendowment fundthat isnotclassified inpermanentlyrestrictednetassets isclassifiedas temporarilyrestricted net assets until those amounts are appropriated for expenditure by the Organization in amannerconsistentwiththestandardprudenceprescribedbyCUPMIFA.InaccordancewithCUPMIFA,the Organization considers the following factors in making a determination to appropriate oraccumulatedonor‐restrictedendowmentfunds:a. Thedurationandpreservationofthefundb. ThepurposesoftheOrganizationandthedonor‐restrictedendowmentfundc. Generaleconomicconditionsd. Thepossibleeffectofinflationanddeflatione. Theexpectedtotalreturnfromincomeandtheappreciationofinvestmentsf. OtherresourcesoftheOrganizationg. TheinvestmentpoliciesoftheOrganizationSpending policy and how the investment objectives relate to the spending policy – Theendowmentfundhasaspendingpolicyofappropriatingnetincomeearnedontheinvestmentofthesefundsfordistributionaccordingtotheinstructionsofthedonoratthetimethegiftismade.Theoriginalvalueofthegiftsdonatedtothepermanentendowmentistobeclassifiedaspermanentlyrestrictedandanyearningsareclassifiedastemporarilyrestricteduntilappropriatedforexpenditure.Specific to a bequest contribution, an annual spending percentage was established initially at fivepercentbasedontheaveragevalueoftheendowmentassetsfortheyear.Investmentpolicy–Theendowmentfundsareinvestedasinstructedbydonorsorwiththeinvestmentpolicies of the Organization and are designed to meet the Organization’s primary goal of capitalpreservation combined with the objective of achieving reasonable income and capital growth whileshowingapreferencetowardthosecompanieswhichhavemanifestedaparticularconsiderationforthesocialgood.



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Note12–EndowmentFunds(continued)Theclassificationoftheendowmentassetswereasfollows:

TotalTemporarily Permanently Endowment

Unrestricted Restricted Restricted NetAssets

Endowmentnetassets,July1,2014 ‐$ 368,991$ 2,865,438$ 3,234,429$

Contribution ‐ ‐ 200 200Investmentincome ‐ 14,868 ‐ 14,868Amountsappropriatedforexpenditure ‐ (40,000) ‐ (40,000)

Endowmentnetassets,June30,2015 ‐ 343,859 2,865,638 3,209,497

Contribution ‐ ‐ 9,848 9,848Investmentincome ‐ 93,497 ‐ 93,497Amountsappropriatedforexpenditure ‐ (185,000) ‐ (185,000)

Endowmentnetassets,June30,2016 ‐$ 252,356$ 2,875,486$ 3,127,842$

Note13–Related‐PartyTransactionsInadditiontorelated‐partytransactionsmentionedthroughout,thefollowingrelatedparty‐transactionsexist:PastoralServicesAppeal(“PSA”)–ThePSA isadministeredby theOCF,a relatedparty.TheOCF isgiven the responsibility to conduct andadminister thePSA includingprovision for the fundingof theOCFoperationsandforachangeintheapplicationoffundsraisedunderthePSA.AllamountscollectedunderthisprogramarerestrictedtobeusedexclusivelyfortheprogramsandservicesoutlinedinthePSAcampaignmaterials.TheBishopofOrangeisamemberoftheOCFBoard,buthedoesnotcontroltheOCFBoard,OCFactivities,orOCFgrantsandprogramallocationsthatarefundedbythePSA.TheOCF and the Organization share a common purpose to serve the Roman Catholic Church in OrangeCounty.DuringtheyearsendedJune30,2016and2015,theOCFcollected$2,809,554and$2,760,048,respectively, on behalf of the Organization under this program. These amounts are included incontributions,grants,andbequestsintheaccompanyingstatementsofactivities.The OCF may from time to time enter into fundraising campaigns that do not directly benefit theOrganization. In those cases, the Organization will only report revenue from the OCF upon the OCFmakingadirectgranttotheOrganization.


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Note13–Related‐PartyTransactions(continued)Managementserviceagreements–TheOrganizationhasanagreementwiththeCCCCforthepurposeofmanaging theCathedralMemorialGardens and for providing leased employees. Thenature of thisagreement for the Cathedral Memorial Gardens is to provide management and sales support forinterment services at the Memorial Gardens cemetery located on the Christ Cathedral campus. TheOrganizationalsohasanagreementwiththeOrangeCatholicFoundationforthepurposeofprovidingleased employees. The OCF compensates the Organization for these services through their monthlyremittanceforrentandoverhead.

Note14–Grants,Donations,andScholarshipExpenses

TheOrganizationmakesgrants,donations,andscholarshipstotheparishesandschoolsoftheRomanCatholicBishopofOrangeandtovariousotherorganizations.Asummaryofthesegrantsanddonationsareasfollows:

2016 2015

Assistancegrantstoparishesandschools 3,359,290$ 2,457,843$GrantstoCCCC 2,500,000 3,000,000Earthquakeretrofitgrants 2,531,587 ‐Highschoolscholarships 750,000 900,000Othergrants,donations,andscholarships 107,502 325,404Parishesandschoolsinneed 155,335 107,206Parishandschooldebtforgiveness ‐ 102,749

Total 9,403,714$ 6,893,202$

Note15–SelfInsuranceFunds

TheOrganization and various institutions of the Roman Catholic Bishop of Orange are partially self–insuredwithrespecttotheirgeneralliabilitycoveragethroughtheirparticipationwithotherdiocesesinseveralwesternstatesinariskretentiongroup,whichisincorporatedinVermont.TheOrganizationisalso insured up to shared limits with respect to its earthquake insurance coverage through itsparticipation with other dioceses in the California Interdiocesan Earthquake Insurance poolingagreement.ReservesforthelossesattheparishesandschoolsaremaintainedattheOrganizationwithinthe investment pool for all centralized risk management programs. The Organization believes thatamounts designatedby theBishop as insurance reserveswithinunrestricted net assets are adequateandtherearesufficientassetsavailabletocoverthenon‐designatednetassets.Therewas$18,377,133and$42,960,544designatedatJune30,2016and2015,respectively.AsofJune30,2016and2015,theOrganization isnotawareofanyspecific claims inexcessof thecombinedself‐insuranceand insuredlimits.



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Note16–LitigationandLegalExpensesThe Organization is involved in various lawsuits relating to claims of alleged sexualmisconduct andothermatters.Of theremainingmisconductcases, themajorityarepast thestatuteof limitationsandlowercourtshaveupheldtheOrganization’sposition.While thecivilmattersarebeingappealed,managementbelieves itwillprevail.TheOrganizationhasestablished protocols consistent with the norms of the U.S. Conference of Catholic Bishops, whichprovidesafeguardsandpoliciessurroundinganyfutureallegations.Note17–EmployeeBenefitPlanThe Organization has a defined‐contribution plan (the “Plan”) under Section 403(b) of the InternalRevenue Code, covering all employees of the Organization who are at least 18 years of age. TheOrganizationdoesnotmatchparticipant’scontributions.Participantsareatalltimesfullyvestedintheircontributions.TheOrganizationretainstheright,byactionoftheBishopofOrange,toamend,modify,orterminatethePlan.Note18–LayEmployees’PensionPlanTheOrganizationhasanon‐contributorymoneypurchasepensionplan(definedcontribution)foralllayemployees (includingparishes, schools, andcemeteries)whohavecompletedoneyearof serviceandareatleast18yearsofage.Annualcontributionstotheplanwere5.0percentofthecompensationofalleligiblelayemployeesin2016and2015.Benefitsvestbasedonperiodsofserviceandaremeasuredin12‐month increments starting with date of hire. Vesting begins after two (2) periods of service arecompleted and benefits are fully vested after six periods of service. Total contributions for theOrganization’s employees for the years ended June30, 2016 and2015were $605,999 and $548,001,respectively.Note19–LeaseCommitmentsInSeptember2013,theOrganizationrelocateditsofficestothecampusofChristCatholicCathedral(the“Campus”).TheOrganizationenteredintoa10‐yearleasewiththeChristCatholicCathedralCorporation(“CCCC”),arelatedparty, foradministrativeofficeswithin thePastoralCenter locatedon theCampus.Underthetermsofthelease,thebaserentforthefirstyearissetat$75,476permonth.TheleasetermisfortenyearsexpiringSeptember30,2023withtwofive‐yearoptionrenewals.Onanannualbasis,thebaserentwillincreasebasedontheyearoveryearbuildingoperatingcostincreases.


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Note19–LeaseCommitments(continued)TheOrganizationalsoleasesofficespacelocatedinOrange,CaliforniaunderanoperatingleaseexpiringOctober31,2017withonethree‐yearoptiontorenew.Monthlyleasepaymentsare$2,206.TotalleasepaymentsundertheoperatingleasesduringtheyearsendedJune30,2016and2015were$1,080,592and$1,061,330,respectively.TheapproximateannualminimumleasepaymentsundertheoperatingleasesasofJune30,2016are:YearsendingJune30:

2017 932,184$2018 914,5362019 905,7122020 905,7122021 905,712Thereafter 2,037,852

Total 6,601,708$

Note20–SubsequentEventsOn July 1, 2016, the CCCC board transitioned the administration of the Cathedral campus and themanagement of the operations of the campus to the RCBO. The CCCC will continue to manage thefundraisingforandrenovationofChristCathedral.

Documents

The Administrative Office of the Roman Catholic …...2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position