Catholic Charities USA Financial Statements Ending June 2012

CATHOLIC CHARITIES USA
CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 2012

TABLE OF CONTENTS
INDEPENDENT AUDITORS REPORT 1

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2

CONSOLIDATED STATEMENT OF ACTIVITIES 3

CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES 4

CONSOLIDATED STATEMENT OF CASH FLOWS 5

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6

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An independent member of Nexia International

INDEPENDENT AUDITORS REPORT

Board of Trustees
Catholic Charities USA
Alexandria, Virginia

We have audited the accompanying consolidated statement of financial position of Catholic Charities USA (CCUSA) as
of June 30, 2012, and the related consolidated statements of activities, functional expenses, and cash flows for the year then
ended. These consolidated financial statements are the responsibility of CCUSA's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of CCUSA as of June 30, 2012, and the changes in its net assets and its cash flows for the year then ended in
conformity with U.S. generally accepted accounting principles.

CliftonLarsonAllen LLP
Arlington, Virginia
September 25, 2012
CliftonLarsonAllen LLP
www.cliftonlarsonallen.com
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
JUNE 30, 2012

See accompanying Notes to the Consolidated Financial Statements.
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ASSETS
Cash and Cash Equivalents 6,115,449 $
Receivables:
U.S. Government 1,938,822
Interest and Dividends 21,307
Other 196,104
Total Receivables 2,156,233
Pledges Receivable, Net 10,531,528
Prepaid Expenses and Other Assets, Net 659,889
Investments 13,824,566
Property and Equipment, Net 31,755,287
Total Assets 65,042,952 $
LIABILITIES AND NET ASSETS
LIABILITIES
Accounts Payable and Accrued Expenses 2,390,469 $
Grants Payable 598,638
Short-Term Loan Payable 3,900,000
Deferred Revenue 118,507
Capital Lease Obligations 134,443
Deferred Rent 1,091,480
Split Interest Agreements 112,120
Accrued Loss on Lease Obligations 2,768,548
Note Payable 5,210,000
Value of Interest Rate SWAP Agreement 186,752
Total Liabilities 16,510,957

NET ASSETS
Unrestricted:
Board-Designated 9,676,936
Net Investment in Property and Equipment 26,545,287
Undesignated 5,232,053
Total Unrestricted 41,454,276
Temporarily Restricted 6,962,719
Permanently Restricted 115,000
Total Net Assets 48,531,995
Total Liabilities and Net Assets 65,042,952 $
CONSOLIDATED STATEMENT OF ACTIVITIES

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Temporarily Permanently
Unrestricted Restricted Restricted Total
REVENUE
Membership Dues 1,595,133 $ - $ - $ 1,595,133 $
Federal Grants 1,517,506 - - 1,517,506
Federal Contracts 4,699,911 - - 4,699,911
Contributions:
Disaster Response - 5,462,587 - 5,462,587
Combined Federal Campaign 595,587 - - 595,587
Other 9,996,989 984,373 - 10,981,362
Total Contributions 10,592,576 6,446,960 - 17,039,536
Investment Income:
Disaster Response 178,478 - - 178,478
Other 174,956 - - 174,956
Total Investment Income 353,434 - - 353,434
Registration and Workshop Fees 352,035 - - 352,035
Other Revenue 214,686 - - 214,686
Net Assets Released from Restrictions 3,141,696 (3,141,696) - -
Total Revenue 22,466,977 3,305,264 - 25,772,241
EXPENSES
Program Services:
Distributions to Catholic Charities
Service Agencies and Other Non Profits:
Disaster Response 3,383,482 - - 3,383,482
Programs and Services 2,334,504 - - 2,334,504
Member Agencies' Support 503,526 - - 503,526
Total Distributions 6,221,512 - - 6,221,512
Other Program Services:
Disaster Response 2,325,003 - - 2,325,003
Programs and Services 3,010,587 - - 3,010,587
Social Policy 2,789,703 - - 2,789,703
Member Agencies' Support 128,142 - - 128,142
Member Services 1,145,327 - - 1,145,327
Total Other Program Services 9,398,762 - - 9,398,762
Supporting Services:
Management and General 3,273,785 - - 3,273,785
2050 Ballenger LLC 169,626 - - 169,626
Fundraising and External Relations 1,735,978 - - 1,735,978
Total Supporting Services 5,179,389 - - 5,179,389
Total Expenses 20,799,663 - - 20,799,663
CHANGE IN NET ASSETS FROM OPERATIONS 1,667,314 3,305,264 - 4,972,578
LOSS ON VALUE OF INTEREST RATE
SWAP AGREEMENT 32,222 - - 32,222
LOSS ON LEASE OBLIGATIONS 2,768,548 - - 2,768,548
CHANGE IN NET ASSETS (1,133,456) 3,305,264 - 2,171,808
Net Assets - Beginning of Year 42,587,732 3,657,455 115,000 46,360,187
NET ASSETS - END OF YEAR 41,454,276 $ 6,962,719 $ 115,000 $ 48,531,995 $
CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES

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Member Management
Disaster Programs and Social Agencies' Member and Ballenger 2050
Response Services Policy Support Services Total General LLC Fundraising Total Total
Distributions to Catholic Charities Service Agencies 2,501,940 $ 2,331,534 $ - $ 503,526 $ - $ 5,337,000 $ - $ - $ - $ - $ 5,337,000 $
Distributions to Other Non Profits 881,542 2,970 - - - 884,512 - - - - 884,512
Total Distributions 3,383,482 2,334,504 - 503,526 - - 6,221,512 - - - - - - 6,221,512
OTHER PROGRAM AND
SUPPORTING SERVICES
Salaries 701,507 1,108,597 512,448 60,894 212,287 2,595,733 1,214,989 3,784 562,180 1,780,953 4,376,686
Employee Benefits and Payroll Taxes 316,008 520,482 244,808 16,264 56,352 1,153,914 640,015 945 358,947 999,907 2,153,821
Travel 262,109 116,704 62,420 133 12,447 453,813 65,975 - 11,588 77,563 531,376
Professional Fees 167,519 80,565 1,446,412 - 199,405 1,893,901 195,538 18,040 22,492 236,070 2,129,971
Outside Services 192,434 78,944 63,819 8,292 - 343,489 245,600 3,970 64,393 313,963 657,452
Convening 97,892 274,340 152,396 - 605,856 1,130,484 116,814 - 972 117,786 1,248,270
Internal and External Tools - 129,642 71,339 - 7,732 208,713 200 - 1,879 2,079 210,792
Advertising and Promotions 3,370 1,075 2,670 24,600 1,274 32,989 - - 353,526 353,526 386,515
Collaboration and Public Relations 15,000 184,432 3,019 - 1,800 204,251 431 - 3,637 4,068 208,319
Personnel Expenses 1,032 9,144 6,524 - 1,581 18,281 45,873 - 3,488 49,361 67,642
Office Expenses 53,560 71,998 11,440 1,893 42,937 181,828 217,058 - 41,006 258,064 439,892
Telecommunications 33,583 46,433 13,826 - 3,656 97,498 66,174 - 11,501 77,675 175,173
Equipment and Software Purchase and Maintenance 242,069 12,576 1,926 5,565 - 262,136 131,304 - 24,805 156,109 418,245
Occupancy 78,540 143,032 69,439 5,744 - 296,755 178,908 104,119 94,416 377,443 674,198
Ballenger Occupancy Allocation to CCUSA 27,677 51,439 24,600 - - 103,716 64,440 (209,358) 41,202 (103,716) -
Depreciation & Amortization 42,574 77,957 37,694 2,285 - 160,510 150,624 188,228 54,427 393,279 553,789
Investment Expenses - - - - - - 73,147 - - 73,147 73,147
Interest Expense - - - - - - 1,109 59,898 - 61,007 61,007
Overhead Expenses Allocation 90,093 103,201 52,924 2,472 - 248,690 (329,866) - 81,176 (248,690) -
Other Expenses 36 26 11,999 - - 12,061 195,452 - 4,343 199,795 211,856
Total Other Program and
Supporting Service Expenses 2,325,003 3,010,587 2,789,703 128,142 - 1,145,327 9,398,762 3,273,785 - 169,626 - 1,735,978 5,179,389 14,578,151
Total Functional Expenses 5,708,485 $ 5,345,091 $ 2,789,703 $ 631,668 $ 1,145,327 $ 15,620,274 $ 3,273,785 $ 169,626 $ 1,735,978 $ 5,179,389 $ 20,799,663 $
Program Services Supporting Services
CONSOLIDATED STATEMENT OF CASH FLOWS

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CASH FLOWS FROM OPERATING ACTIVITIES
Change in Net Assets 2,171,808 $
Adjustments to Reconcile Change in Net Assets to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 553,790
Change in Bad Debt Allowance (362,930)
Donated Stock (610,818)
Net Unrealized Loss on Investments 246,722
Realized Gain on Sales of Investments (249,342)
Loss on Interest Rate SWAP Agreement 32,222
Changes in Assets and Liabilities:
Receivables (1,302,457)
Pledges Receivable (1,770,057)
Prepaid Expenses and Other Assets (292,512)
Accounts Payable and Accrued Expenses 1,432,561
Grants Payable (595,417)
Deferred Rent (109,232)
Non-Federal Deferred Revenue (14,509)
Accrued Loss on Lease Obligations 2,768,548
Other Liabilities (7,274)
Net Cash Provided by Operating Activities 1,891,103
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment (5,366,228)
Proceeds from Sale of Investments 6,047,920
Purchases of Investments (9,181,804)
Net Cash Used in Investing Activities (8,500,112)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on Split-Interest Agreements (12,247)
Proceeds from Note Payable 5,210,000
Payments on Capital Leases (4,796)
Net Cash Provided by Financing Activities 5,192,957
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,416,052)
Cash and Cash Equivalents - Beginning of Year 7,531,501
CASH AND CASH EQUIVALENTS - END OF YEAR 6,115,449 $

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid for Interest 230,218 $
Property and Equipment Acquired through Capital Lease 139,239 $

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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NOTE 1 ORGANIZATION
Catholic Charities USA (CCUSA) is a not-for-profit organization incorporated in 1950 to provide a forum
for discussing the application of Catholic thought in the general field of social welfare and to stimulate action,
research, and the publication of material in this field. Primary sources of funding include public contributions,
membership dues and government grants.

The consolidated financial statements include the assets, liabilities, net assets and activities of CCUSA and 2050
Ballenger, LLC (the LLC). All significant intra-entity transactions and balances have been eliminated in
consolidation. The LLC is a limited liability corporation as defined under the Internal Revenue Code and is
operated exclusively for purposes of leasing office space at 2050 Ballenger Avenue in Alexandria, Virginia, to
CCUSA, as its new headquarters, and leasing any excess space to other tenants. The LLC, which was incorporated
in Virginia in March 2011, is wholly owned by CCUSA and is therefore consolidated as required under U.S.
GAAP.

Program services are provided in the following principal areas:
Disaster Response
CCUSA provides leadership, coordination, and technical assistance to Catholic Charities and other
diocesan organizations as part of its role as the lead Catholic agency in times of natural disaster. CCUSA
support is provided to not only assist organizations and communities respond to disasters, but also to
help them prepare and plan for disasters. Additionally, CCUSA has a contract with the federal
government to provide disaster case management services for individuals and families recovering from
natural disasters.
Programs and Services
Local Catholic Charities agencies provide a wide range of human services to millions of people in need
each year. CCUSA provides training, technical assistance and networking opportunities for its
membership on a range of issues of critical importance including aging, housing, emergency services,
parish social ministry, child care, healthcare and Catholic Identity. In addition, CCUSA provides
opportunities for leadership development and consultations to ensure that members remain at the
forefront of emerging needs and quality services.
CCUSA applies for federal grants to support specific programs on behalf of its membership. These funds
are then transferred to member agencies interested in implementing these programs through a sub-
granting process.
Social Policy
CCUSA provides a national voice for the needs and concerns of its membership and the people they
serve. Working with its membership, CCUSA develops and advocates for just public policies that
empower people and alleviate the conditions that perpetuate poverty. CCUSA also works with its
membership around issues of racial equality and diversity.
Member Agencies Support
CCUSA provides grants to member agencies to support general operations of local Catholic Charities.
Member Services
CCUSA supports its membership by providing a range of services that promote networking, ongoing
education, and improve their ability to respond to the needs of the poor and vulnerable in their
communities. These services include: an annual gathering, web-based training and information, a
quarterly newsletter and other printed resources.

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NOTE 2 CHANGE IN FISCAL YEAR-END
In 2011, CCUSA changed to a fiscal year ending June 30th. CCUSA receives a majority of its contributions in
December; thus the change in year-end to June has moved a majority of contribution revenue from the end of
the year to the middle of the year, resulting in better planning and more efficient year-end closings. A June
30th year-end is also more consistent with CCUSAs member agencies year-ends. In addition, the year-end
change has alleviated conflicts between the annual internal budget and planning process and the annual
meeting hosted by CCUSA for its member agencies. The consolidated financial statements for the year ended
June 30, 2012, represent the first 12-month reporting period after the fiscal year-end change.

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of CCUSA are presented on the accrual basis of accounting. Consequently, revenue
is recognized when earned and expenses when obligations are incurred.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect certain
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

Cash and Cash Equivalents
For financial statement purposes, CCUSA considers money market and overnight sweep accounts to be cash
equivalents. However, at times part of the investment portfolio may be held in cash equivalents.

Investments
Investments are recorded at fair value. CCUSA invests in various securities, including U.S. Government
securities, corporate debt securities, and equities. Investment securities, in general, are exposed to various
risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain
investment securities, it is reasonably possible that changes in the values of investment securities will occur in
the near term and that such changes could materially affect the amounts reported in future statement of
activities.

Fair Value of Financial Instruments
CCUSA accounts for a portion of its financial instruments at fair value or considers fair value in their
measurement. CCUSA accounts for certain financial assets and liabilities at fair value under various
accounting literature that establishes a fair value hierarchy.

Uniform Prudent Management of Institutional Funds Act
During 2008, Virginia enacted the Uniform Prudent Management of Institutional Funds Act (UPMIFA). Also
during 2008, guidance was provided on the classification of endowment fund net assets for states that have
enacted versions of UPMIFA. Under UPMIFA, all unappropriated endowment fund assets are considered
restricted.


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NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Pledges Receivable
Pledges receivable are recorded at fair value at the date the promise is received. Pledges that are expected to
be collected within one year are recorded at their net realizable value. Pledges that are expected to be collected
in future years are recorded at the present value of the amount expected to be collected. The discounts on
those amounts are computed using an imputed interest rate applicable to the year in which the pledge is
expected to be received.

Accounts Receivable
Accounts receivable are recorded at their net realizable value. The majority of the receivables are from
government grants and contracts, membership dues, and the Medical Trust. Accounts that are past due are
individually analyzed for collectibility. When all collection efforts have been exhausted, the account is written
off against an allowance for bad debts. At June 30, 2012 all outstanding accounts receivable were deemed
collectible and no allowance for bad debts was reported.

Property and Equipment
Acquisitions of property and equipment are recorded at cost and depreciated using the straight-line
depreciation method. Depreciation is provided over the estimated useful lives of the assets, which range from
3 - 40 years. Building improvements are depreciated on a straight-line basis over the lesser of the remaining
life of the building or estimated useful life of the improvement. Leasehold improvements are amortized on a
straight-line basis over the remaining term of the lease agreement. CCUSA capitalizes all property and
equipment purchased with a cost of $5,000 or more.

Net Assets
To ensure the observance of limitations and restrictions placed on the use of resources available to CCUSA,
its net assets and revenue have been classified into net asset groups based on the existence or absence of
donor-imposed restrictions. The classes of net assets are as follows:

Unrestricted: Represents both resources of CCUSA available to support general operations and amounts
invested in property and equipment, net of the mortgage liability. The CCUSA Board of Trustees has
internally designated a portion of its unrestricted net assets (see Note 13).
Temporarily Restricted: Represents resources that result from contributions limited in use by donor-imposed
stipulations. Such restrictions either expire by the passage of time or can be fulfilled and removed by actions
of CCUSA pursuant to those stipulations.
Permanently Restricted: Represents two bequests that established Endowment Funds. The Caritas
Endowment Fund is to be held in perpetuity by CCUSA. Investment income earned is used to support
program activities for Caritas Internationalis and is recorded as temporarily restricted activity. The Tracy
Endowment Fund is to be held in perpetuity by CCUSA. Investment income earned is used to support
scholarships granted by CCUSA and is recorded as temporarily restricted activity.
Membership Dues Revenue
Membership dues are treated as an exchange transaction due to membership benefits offered. Revenue is
recognized in the year to which the membership applies.


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NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Grants and Contracts from U.S. Government
Grant and contract funds are reported as revenue when earned. Revenue is earned when eligible expenditures,
as defined in each grant or contract, are incurred. Funds received but not yet earned are reported as deferred
revenue. Expenditures under government grants and contracts are subject to review by the granting authority.
To the extent, if any, that such a review reduces expenditures allowable under these grants and contracts,
CCUSA will record such disallowance at the time the final assessment is made.

Bequests
Bequest revenue is recorded in the period an irrevocable right to the assets occurs. At such time, the
contribution revenue and receivable are recorded at net realizable value.

Functional Allocation of Expenses
The costs of providing programs and other activities have been summarized on a functional basis in the
statement of activities. Accordingly, indirect expenses have been allocated among the programs and
supporting services benefited that includes an allocation of personnel and overhead expenses based upon the
estimated amount of time worked by employees and space utilized in each functional area.

Income Taxes
CCUSA is exempt from the payment of federal income taxes on activities exempt under Section 501(c)(3) of
the Internal Revenue Code and is classified as an organization that is not a private foundation under Section
509(a) of the Code. The LLC is a limited liability corporation as defined by the Internal Revenue Service.

CCUSA is not aware of any activities that would jeopardize its tax-exempt status and is not aware of any
activities that are subject to tax on unrelated business income, excise, or other taxes. As of June 30, 2012,
there are no identified uncertain tax positions. As a church related entity, CCUSA does not file a 990 with the
IRS.

Subsequent Events
In preparing these financial statements, CCUSA has evaluated events and transactions for potential
recognition or disclosure through September 25, 2012, the date the financial statements were available to be
issued.

NOTE 4 FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value Hierarchy
CCUSA has categorized its financial instruments, based on the priority of the inputs to the valuation
technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted
prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable
inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the
hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement
of the instrument.
Financial assets and liabilities recorded on the statement of financial position are categorized based on the
inputs to the valuation techniques as follows:


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NOTE 4 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Fair Value Hierarchy (Continued)
Level 1
Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets
or liabilities in an active market that CCUSA has the ability to access (examples include active
exchange-traded equity securities, listed derivatives, and most U.S. Government and agency securities
including government guaranteed CMO actively traded in the secondary market).

Level 2
Financial assets and liabilities whose values are based on quoted prices in markets that are not active or
model inputs that are observable either directly or indirectly for substantially the full term of the asset
or liability. Level 2 inputs include the following:

Quoted prices for similar assets or liabilities in active markets (for example, restricted stock);
Quoted prices for identical or similar assets or liabilities in non-active markets (examples include
corporate and municipal bonds, which trade infrequently);
Pricing models whose inputs are observable for substantially the full term of the asset or liability
(examples include most over-the-counter derivatives, including interest rate and currency swaps);
and
Pricing models whose inputs are derived principally from or corroborated by observable market
data through correlation or other means for substantially the full term of the asset or liability
(examples include certain residential and commercial mortgage related assets, including loans,
securities, and derivatives).

Level 3
Financial assets and liabilities whose values are based on prices or valuation techniques that require
inputs that are both unobservable and significant to the overall fair value measurement. These inputs
reflect managements assumptions about how a market participant determines the price of the asset or
liability (examples include certain private equity investments and split interest agreements).


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NOTE 4 FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Fair Value Hierarchy (Continued)
The following tables present CCUSAs fair value hierarchy for those assets and liabilities measured at fair
value on a recurring basis as of June 30, 2012.

Level 1 Level 2 Level 3 Total
Assets
Government Obligations 1,817,252 $ - $ - $ 1,817,252 $
Government Guaranteed CMO-Backed Securities 801,306 - - 801,306
Corporate Bonds 510,761 - - 510,761
U.S. Equities 3,363,639 - - 3,363,639
International Equities 1,174,591 - - 1,174,591
Mutual Funds - Real Estate 465,216 - - 465,216
Mutual Funds - Fixed Income 4,758,269 - - 4,758,269
Total Assets 12,891,034 $ - $ - $ 12,891,034 $
Liabilities
Value of Interest Rate SWAP Agreement - $ 186,752 $ - $ 186,752 $
Split-Interest Liability - - 112,120 112,120
Total Liabilities - $ 186,752 $ 112,120 $ 298,872 $

The fair value of the interest rate swap agreement is based on the estimated present value of the difference
between the fixed and variable interest cash flows. Present values are estimated utilizing discounted cash
flows techniques at discount rates based on interest rate assumptions corroborated by quoted rates on similar
agreements.

The following table provides a summary of changes in fair value of CCUSAs Level 3 financial instruments
for the year ended June 30, 2012:

Split-Interest
Liability
Beginning Balance as of July 1, 2011 131,641 $
Unrealized and Realized Net Loss (7,274)
Distributions (12,247)
Balance as of June 30, 2012 112,120 $

The Reginato trust and charitable gift annuity split-interest liabilities were calculated based upon the Internal
Revenue Service life expectancy tables and the adjusted federal midterm rate at the time the charitable annuity
and the charitable remainder trust were established.


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NOTE 5 CONCENTRATION OF CREDIT RISK

Financial instruments, which subject the CCUSA to concentrations of credit risk, consist of demand deposits,
overnight repurchase agreements, money market, and mutual funds that are held by financial institutions. In
the normal course of business operations, the CCUSA may have funds on deposit in various financial
institutions in excess of Federal and other insurance limits.

NOTE 6 INVESTMENTS
Investments are recorded at fair market value and are comprised of the following at June 30, 2012:

Cost Market
U.S. Government Obligations 1,780,651 $ 1,817,252 $
Government Guaranteed CMO-backed Securities 858,939 801,306
Corporate Bonds 436,008 510,761
U.S. Equities 3,090,984 3,363,639
International Equities 1,080,446 1,174,591
Mutual Funds - Real Estate 467,504 465,216
Mutual Funds - Fixed Income 4,539,228 4,758,269
12,253,760 12,891,034
Money market funds 933,532 933,532
Total investments 13,187,292 $ 13,824,566 $

Investment income consists of the following for the year ended June 30, 2012:

Interest and dividends 350,814 $
Unrealized loss on investments (246,722)
Realized gains on sale of investments 249,342
Total investment income 353,434 $

NOTE 7 PLEDGES RECEIVABLE
Pledges receivable at June 30, 2012, represent unconditional amounts pledged under various fundraising
campaigns. Pledges expected to be collected in more than one year are reflected at net realizable value. The
net realizable value is estimated by calculating the present value of estimated cash flows.


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NOTE 7 PLEDGES RECEIVABLE (CONTINUED)
Pledges receivable for the fiscal years ending June 30 are as follows:

2013 11,437,484 $
2014 60,000
2015 60,000
2016 60,000
Total Pledges Receivable 11,617,484
Less: Allowance for Doubtful Pledges (1,085,956)
Net Pledges Receivable 10,531,528 $

In 2010, CCUSA received the William R. Fry bequest, valued at approximately $22 million at the time of the
award. Approximately $15,861,000 of the bequest was received during fiscal year 2010. As of June 30, 2012,
the outstanding balance expected to be received from the William R. Fry Estate to CCUSA in accordance
with the bequests provisions, amounts to approximately $9.6 million, after an increase of approximately $3.5
million based on current years valuation of the remaining balance from updated Estate information. The
distribution is expected to be collected in September of 2012.

NOTE 8 PROPERTY AND EQUIPMENT
At June 30, 2012, property and equipment consisted of the following:

Canal Center:
Leasehold Improvements - Canal Center 1,833,338 $
Less: Accumulated Depreciation
and Amortization (838,162)
Net Canal Center Leasehold Improvements 995,176
2050 Ballenger LLC:
Land 2,560,000
Building and Building Improvements 26,687,865
Net 2050 Ballenger LLC Property 29,074,709
Equipment and Software 663,695
Furniture and Fixtures 1,450,842
Capital Leases 139,239
Net Equipment, Software and Furniture and Fixtures 1,685,402
Net Property and Equipment 31,755,287 $


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NOTE 8 PROPERTY AND EQUIPMENT (CONTINUED)
In April 2011, CCUSA purchased a new, never occupied 72,670 square foot office building in Alexandria,
Virginia, for $24,696,000. While most of the payment involved cash, a $3,900,000 bridge loan was also
initiated. CCUSA financed most of the costs of improvements to the office building (see Note 16). CCUSA
moved to the new office space in April 2012, occupying a portion of the building, and expects to lease the
remaining portion. Currently, CCUSA has executed a Letter of Intent to sublease the office space at Canal
Center (See Note 15).

NOTE 9 DISASTER RESPONSE AND GRANTS PAYABLE
Grants are based on applications submitted and reviewed by the Disaster Response Advisory Committee as
part of the approval process, which requires concurrence by the President of CCUSA. Grants are made for
needs related to a variety of disasters, including hurricanes, floods, terrorist attacks, and other events.

It is CCUSAs policy to be reimbursed for actual costs incurred for Disaster Response oversight and
administration. Amounts charged for the administration of the Disaster Response program are determined by
formula based on amounts received and disbursed. An assessment is applied against each Disaster Response
program and is recovered over the period the funds are held, part when contributions are processed, and the
remainder when grants are disbursed. For most disasters, the total assessment is 10%.

NOTE 10 SHORT-TERM LOAN PAYABLE
CCUSA entered into a loan agreement for $3,900,000 on April 19, 2011, as a bridge loan to finance the
purchase of the office building located at 2050 Ballenger Avenue in Alexandria, Virginia (see Note 8).
Monthly interest-only payments are required at a variable interest rate based on the one-month LIBOR rate,
0.25% at June 30, 2012. The loan matured on April 19, 2012, and has been extended to September 19, 2012,
when the principal balance and any accrued interest are due. The loan is secured by the proceeds of a bequest
of approximately $9.6 million (See Note 7).
NOTE 11 SPLIT INTEREST AGREEMENTS
CCUSA receives contributions pursuant to several charitable gift annuity contracts with donors. The
actuarially determined liability resulting from the annuity gifts was recorded at the date of the gift. The excess
of the annuity gifts over the annuity liabilities is recognized as unrestricted support and has been set aside as a
portion of the Board-designated net assets. The liability amount is adjusted annually based on the latest
actuarial information available. The charitable gift annuity obligations approximated $59,000 at June 30, 2012.

CCUSA also received a contribution of a charitable remainder unitrust in 1998. Under this charitable
remainder unitrust, a donor made a contribution to CCUSA that will remain in trust until a stipulated event, at
which time the remaining trust balance will convey to CCUSA. The unitrust was valued at market value at the
time of the gift. In consideration of the gift, the donors will receive an annuity from the trust based on the
lesser of the trust principal at the beginning of the year at a stated interest rate or the actual earnings of the
trust. The liability amount is adjusted annually based on the latest actuarial information available. The assets
of the unitrust are included in temporarily restricted net assets on the Statement of Activities. The charitable
remainder unitrust obligation approximated $53,000 at June 30, 2012.


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NOTE 12 TEMPORARILY RESTRICTED NET ASSETS
Changes in temporarily restricted net assets during the year ended June 30, 2012 are detailed as follows:

Balance Funds Balance
July 1, Funds Released from June 30,
2011 Received Restriction 2012
Cafferty Fellow 91,310 $ - $ 89,352 $ 1,958 $
Children of Children 43,669 - - 43,669
Disaster Response 2,592,316 5,462,588 1,758,834 6,296,070
Food Service Program 758,285 - 758,285 -
Domestic Trafficking 24,532 83,722 2,429 105,825
Family Strengthening 33,058 200,000 179,209 53,849
National Religious Partnership 3,842 - 5 3,837
Other 18,876 - - 18,876
Reginato Trust 81,067 - 14,633 66,434
Adoption - 50,150 17,692 32,458
Notre Dame Social Policy Partnership - 350,500 270,307 80,193
Social Policy Advocacy - 50,000 50,000 -
Partners in Excellence - 250,000 950 249,050
U.S. Catholic Conference Children's
Environmental Health 10,500 - - 10,500
Total 3,657,455 $ 6,446,960 $ 3,141,696 $ 6,962,719 $

NOTE 13 UNRESTRICTED NET ASSETS

Unrestricted Net Assets
Unrestricted net assets are available to finance the general operations of Catholic Charities USA. The only
limits on the use of unrestricted net assets are the purposes specified in the CCUSAs articles of incorporation
and those limitations resulting from the nature of the CCUSA and the environment in which it operates.

Board-Designated Net Assets
Board-designated net assets are based on voluntary resolutions by the Board of Trustees to designate a
portion of net assets for specific purposes and do not result in restricted net assets. Since designations are
voluntary and may be reversed by the Board of Trustees at any time, designated net assets are classified as
unrestricted net assets. During 2004, the Board of Trustees approved a policy to designate for operations
unrestricted net assets by transferring a portion of the Facilities and General Reserve Funds to the Designated
for Operations Fund. The reserve will serve to address the CCUSAs financial needs when economic
downturns impact Catholic Charities USA and to address cash flow needs that result from differences in the
timing between Catholic Charities USA expenses and the receipt of revenues. The designated purpose of the
Operations Fund is to address cash flow needs of Catholic Charities USA; therefore, the Board believes such
funds are not subject to the Uniform Prudent Management of Institutional Funds Acts (UPMIFA). The
appropriations from the fund are authorized by the Board of Trustees resolutions. The investment objectives
of this fund are primarily liquidity and secondarily return and capital preservation.

Board-designated Disaster Response funds are unrestricted net assets to fund the disaster operations office at
CCUSA and emergency disaster grants made by CCUSA to Catholic charities around the country.


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NOTE 13 UNRESTRICTED NET ASSETS (CONTINUED)

Board-Designated Net Assets (Continued)
At June 30, 2012, CCUSA unrestricted net assets were as follows:

June 30, 2012
Board-Designated:
Disaster Response 1,976,936 $
Operations Fund 7,700,000
Total Board-Designated 9,676,936
Net Investment in Property and Equipment 26,545,287
Unrestricted and Not Board-Designated 5,232,053
Total Unrestricted Net Assets 41,454,276 $

The activity in the Board Designated Disaster Response Net Assets for the year ended June 30, 2012 was as
follows:

Beginning balance as of July 1, 2011 1,976,936 $
Temporary Restricted Releases and Other Revenue 851,215
Expenses (851,215)
Ending balance as of June 30, 2012 1,976,936 $

The net change in the Board Designated Disaster Response Net Assets was $0, due to temporary restricted
releases covering all disaster operations office expenses and emergency grants, for the year ended June 30,
2012.

NOTE 14 PENSION PLAN
CCUSA sponsors a defined contribution 401(k) profit sharing plan covering all employees who have reached
the age of twenty-one and have completed one year of continuous employment. Under the terms of the plan,
CCUSA contributes 10% of the employees compensation (3% safe harbor and 7% profit share) within
statutory limits to the plan. Pension expense was approximately $388,000 for the year ended June 30, 2012.


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NOTE 15 LEASES
Leases 66 Canal Center
In October 2007, CCUSA executed a non-cancelable operating lease for its headquarters (20,866 square feet)
in Alexandria, Virginia, for ten years, six months effective through March 31, 2018. In April 2012, CCUSA
moved its headquarters to the office building purchased by CCUSA in April 2011 (see Note 8). Currently, the
office space at 66 Canal Center is unoccupied. In August 2012, CCUSA executed a letter of intent to sublease
the entire office space at 66 Canal Center. The sublease agreement is expected to come into effect on
September 1, 2013 and terminate on March 31, 2018. The sublease rent will be lower than CCUSA's lease
payments. Accordingly, CCUSA recorded an accrued loss on lease obligations of $2,768,458 as of June 30,
2012. CCUSA used a discount rate of 4.75% approximating its incremental borrowing rate at June 30, 2012.
All 66 Canal Center net leasehold improvements and related liability write-offs have been included in the
accrued loss on lease obligations.

Future minimum lease payments, expected sublease receipts, and sublease related costs are as follows:

Former Headquarters Expected Headquarters Sublease Related
Year Ending June 30, Lease Payments Sublease Receipts Costs Net
2013 854,567 $ - $ 245,704 $ 1,100,271 $
2014 877,989 (214,191) - 663,798
2015 902,037 (504,333) - 397,704
2016 926,868 (588,988) - 337,880
2017 952,376 (606,657) - 345,719
Thereafter 732,242 (466,334) - 265,908
Total Rental Payments, Receipts, and Related Costs 5,246,079 (2,380,503) 245,704 3,111,280
Less: PV Discount on Lease Payments and
Sublease Receipts 766,007 (423,275) - 342,732
Accrued Loss on Lease Obligations 4,480,072 $ (1,957,228) $ 245,704 $ 2,768,548 $

CCUSA recorded rent expense on a straight-line basis over the term of the lease. A deferred rent obligation in
the amount of $520,313 has been recorded at June 30, 2012, that represents the difference between rent
expense and cash payments. CCUSA was provided a leasehold improvement allowance in the amount of
approximately $1,043,000 as an incentive to enter into this lease. The leasehold improvement allowance is
amortized over the term of the lease and has an unamortized balance of $571,167 as of June 30, 2012.

The lease has an option to renew for 5 additional years. Additionally, in lieu of a security deposit, CCUSA
executed a letter of credit tied to this lease in the amount of $250,932. With each passing year, the minimum
balance requirement reduces until the sixth anniversary in which minimum requirement is set at $62,598 for
the duration of the lease. Related rent expense was $752,848 for the year ended June 30, 2012.

NOTE 16 COMMITMENTS AND CONTINGENCIES
Hotel Commitments
CCUSA entered into several agreements with hotels concerning room accommodations for its meetings and
seminars through calendar year 2013. These agreements indicate CCUSA is liable for liquidated damages in
the event of cancellation. At June 30, 2012, CCUSAs commitments for possible liquidated damages totaled
$293,000. Approximately $15,000 of the commitments has been paid as of September 25, 2012.


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NOTE 16 COMMITMENTS AND CONTINGENCIES (CONTINUED)
Federal Grants and Contracts
Under the terms of the CCUSAs reimbursable government grants and contracts, CCUSA is entitled to the
reimbursement of direct and indirect costs incurred. These expenses are subject to audit by the cognizant
government agency.

Note Payable
In July 2011, CCUSA entered into a Bond Purchase and Loan Agreement with the Industrial Development
Authority of the City of Alexandria (the Authority) and Capital One Public Funding, LLC (Capital One).
According to the agreement's provisions, the Authority issued a 27-year variable rate tax-exempt revenue
bond in the amount of $5,210,000 to finance CCUSAs acquisition of a building located at 2050 Ballenger
Avenue in the City of Alexandria consisting of office space to be used as the CCUSAs headquarters, with any
excess space being leased to other tenants. The Authority sold the Bond to Capital One, and the proceeds
were loaned to CCUSA, through the execution of a Promissory Note dated with the same date as the Bond
issuance to evidence CCUSA's obligation to make monthly payments sufficient to pay the Bond. The Note,
secured by the acquired real estate, was assigned by the Authority to Capital One who became the obligation's
holder. The bonds have a maturity date of July 14, 2038. Interest is payable monthly at a LIBOR-based
variable interest rate.

Estimated future principal payments of the note are as follows:

Year Ending June 30, Amount
2013 - $
2014 148,196
2015 152,233
2016 156,014
2017 216,071
Thereafter 4,537,486
Total 5,210,000 $

The CCUSA also entered into an interest rate swap transaction with Capital One, evidenced by a master
agreement dated and effective July 14, 2011. The notional amount of the agreement is $5,210,000. The
agreement effectively changes the CCUSAs interest exposure on the $5,210,000 loan from LIBOR-based
variable to fixed rates. The swap agreement terminates July 14, 2016, and provides for a fixed interest rate of
2.65 percent. The interest rate swap agreement's fair value at June 30, 2012, approximated $187,000 in favor
of Capital One.

NOTE 17 ENDOWMENT

CCUSA has a donor-restricted endowment fund established for the purposes of providing income to support
specific donor-restricted activities. As required by GAAP, net assets of the endowment fund are classified
and reported based on the existence or absence of donor-imposed restrictions. The board of directors of the
CCUSA has interpreted Virginias Uniform Prudent Management of Institutional Funds Act (UPMIFA) as
requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted
endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, CCUSA
classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent
endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to

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NOTE 17 ENDOWMENT (CONTINUED)

the permanent endowment made in accordance with the direction of the applicable donor gift instrument at
the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment
fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets
until those amounts are appropriated for expenditure by the CCUSA in a manner consistent with the standard
of prudence prescribed by UPMIFA. The CCUSA considered all amounts earned on the endowment fund to
be appropriated for current use.

NOTE 18 CAPITAL LEASE OBLIGATIONS

CCUSA entered into two five-year lease agreements for office equipment during fiscal year 2012. The value of
the equipment, $139,239, has been capitalized and recorded as furniture and fixtures within the consolidated
statement of financial position and is being depreciated on a straight-line basis. Imputed interest rate of
approximately 4% is being amortized over the lease term. Future minimum lease payments are as follows for
the years ending June 30:

2013 30,812 $
2014 30,812
2015 30,812
2016 30,812
2017 24,896
Total Minimum Lease Payments 148,144
Less: Amount Representing Interest (13,701)
Present Value of Minimum Lease Payments 134,443 $

NOTE 19 RELATED PARTY TRANSACTIONS

On July 28, 2011, CCUSA (Sponsor) entered into an agreement with Catholic Charities USA Employee
Welfare Benefit Trust (the Trust) acting through its Board of Trustees. The sponsor established the Trust
with the intention that the Trust would offer a series of welfare benefit plans, which provide health, dental,
vision, and other health benefits on behalf of eligible employees of the Sponsor and its member organizations,
and other affiliates of the Catholic Church in a manner that is consistent with the teachings of the Catholic
Church.

The Trusts Board of Trustees is chaired by CCUSAs CEO, and consists of members who are also members
of the CCUSA Board of Trustees, as well as independent members. The CEO and two of the Trust Board
members lead organizations that subscribe to the Trust benefit services.

CCUSA invested $45,807 in formation costs prior to establishing the Trusts corporate structure. On January
5, 2012, CCUSA extended a $275,000 cash advance to the Trust, which was repaid on March 8, 2012. There
are no outstanding advances as of June 2012.


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NOTE 19 RELATED PARTY TRANSACTIONS (CONTINUED)

CCUSA provides certain services at no cost to the sole Trust employee. CCUSA services are provided on a
cost reimbursement basis and include payroll services, accounting, accounts payable, cell phone, shipping and
postage. CCUSA has incurred out-of-pocket expenses of $180,124 of which $94,976 have been reimbursed by
the Trust. A receivable in the amount of $85,148 is outstanding as of June 30, 2012.

CCUSA has contracted with the Trust for healthcare services for staff and paid a total of $391,473 through
June 30, 2012.

NOTE 20 SUBSEQUENT EVENT

In September 2012, CCUSA collected the balance of the approximately $9.6 million bequest pledge receivable
outstanding at June 30, 2012 (see Note 7). Also in September 2012, CCUSA used these proceeds to pay off
the entire balance of $3.9 million outstanding on the short-term loan payable at June 30, 2012 (see Note 10).

Catholic Charities USA Financial Statements Ending June 2012

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CATHOLIC CHARITIES USA

CONSOLIDATED FINANCIAL STATEMENTS

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