Financial break for ailing Archdiocese of Phila.

The painful financial restructuring underway in the Archdiocese of Philadelphia made substantial progress in the year ended June 30, a report released Thursday showed.

The central financial office of the archdiocese lost $4.9 million in fiscal 2013, down from $17.6 million the year before, not counting unusual income and expenses in both years.

Including those unusual or one-time items, such as $11.9 million in legal and professional expenses in fiscal 2012 and $10.3 million from the sale of real estate in 2013, the improvement in results for the Office for Financial Services, was even more dramatic.

The overall bottom line swung to a $3.9 million gain in 2013 from a $39.2 million loss in 2012, the archdiocese reported.

"In terms of the operating result, we're very satisfied with how it ended up," Timothy O'Shaughnessy, chief financial officer for the archdiocese, said in an interview.

However, the archdiocese needs to stop losing money on basic operations. That won't happen immediately.

"Fiscal '14 will still not be at break-even. It will show a multimillion-dollar operating deficit, but I expect it will be better than '13," O'Shaughnessy said.

Moreover, four long-term financial obligations for pensions and other items - totaling $344 million on June 30 - remain.

Those massive gaps, which Archbishop Charles J. Chaput found waiting for him after arriving in September 2011, put the Archdiocese of Philadelphia in rare company.

It's difficult to point to another diocese that has to dig out of a deeper financial hole, said Charles Zech, a church-finance expert at Villanova University. "This is historic."

The core financial results released Thursday - among the first to be published among major dioceses nationally for fiscal 2013 - do not account for operations at high schools, nursing homes, the seminary, and other units of the archdiocese. Those audited reports will be released early next year.

Notable changes in expenses and other financial measures for the Office for Financial Services from 2012 to 2013 include:

The layoff in June 2012 of about 50 people from the archdiocesan headquarters contributed to a 32 percent drop in salaries and wages, to $10.5 million from $15.4 million. The 2012 figure included more than $1 million in severance.

Parishes remain far behind on payments to the archdiocese, but in a positive turn the archdiocese made some headway against past-due amounts. It collected $3.6 million, or 6 percent, more than it billed. That's not likely a sign of new financial health of parishes. "I think it's us being more diligent around collection and putting more attention to it," O'Shaughnessy said.

Among past losses at the archdiocese was the embezzlement of more than $900,000 by former CFO Anita Guzzardi. The archdiocese also spent $500,000 investigating the losses. Last year, it recovered half that $1.4 million loss through a $700,000 insurance payment.

While the financial picture at the archdiocese has improved, "we still have big, big issues that we're going to have to do big, difficult things to fix," O'Shaughnessy said.

Significant progress will be made on that front in the current fiscal year if the archdiocese's deal to lease its 13 cemeteries for an immediate payment of about $53 million closes as expected early next year.

An additional $36 million from that deal will be paid over years six through 35 of the lease.

The archdiocese plans to use $30 million of the initial payment to reduce the $79.8 million deficit in its trust-and-loan fund, which collects deposits from parishes and either invests the money on their behalf or uses it to make loans to other parishes.

The remainder of the initial cemeteries payment will be split between the priests' pension fund, which had a $92 million deficit on June 30, and a self-insurance reserve, which had a $30.4 million shortfall then.

A Philadelphia Orphan's Court hearing on the cemetery lease is scheduled for Wednesday at 2 p.m.

The fourth obligation is a $142 million gap in the traditional pension plan for about 8,500 lay employees of the archdiocese. The archdiocese said it would freeze benefits in that plan next year and switch to a 401(k)-style plan.

A major uncertainty for the archdiocese is the outcome of 22 pending cases alleging sexual abuse by priests. The audited report explains that those lawsuits carry tremendous risk for the archdiocese's finances, but it does not attach a number to it.