Mission of the Church and Proper Economic Administration

Developments and crisis

Pius XII, on becoming pope, instituted various cardinalatial commissions for the control of the main areas of administration: Governorate of the State, Administration of Assets, La Speciale, Works of Religion, etc.. In addition, he established an Administrative Office of the Secretariat of State (directly under the direction of Monsignor Montini, then his “Substitute”) to directly manage Peter’s Pence and other donations, in order to be able to operate effectively and rapidly in the large distribution of economic aid that he implemented during the Second World War. For this distribution he used the operational structures and relationships of the Works of Religion, giving them – to overcome legal and diplomatic difficulties – a new legal status. Thus was born, in 1942, the Institute for Works of Religion (IOR), “with its own juridical personality and responsibility separate and distinct from that of the Offices of the Holy See” and with “the purpose of providing for the security and administration of capital for religious works.”[3]

In the post-war period and in the time of the reconstruction of Italy’s economy led by the Christian Democrats, both La Speciale and the IOR developed an active policy of relationships and investments in the fields of business, banking and real estate, with mixed results. There was no lack of difficulties (such as the new Italian tax known as “la cedolare”), to which were added the great expenses incurred by the Second Vatican Ecumenical Council and the increase in expenses for the increasingly numerous personnel of the State and the Holy See.

During the pontificate of Paul VI, with regard to the organization of the Curia, the new apostolic constitution Regimini Ecclesiae Universae (1967), published after the Council, sanctioned the central role of the Secretariat of State (which remained endowed with an Administrative Office); it brought together the Assets and La Speciale in the new “Administration of the Patrimony of the Apostolic See” (APSA); established a new department, the “Prefecture of Economic Affairs,” with the task of controlling the budgets of the various departments and bodies that are part of the Holy See, and of their economic coordination, charged also with the task of trying to formulate a consolidated balance sheet of the Holy See’s finances, integrating the results at least of the main ones among the numerous existing administrations. These are steps forward in a difficult process that naturally encountered operational difficulties and even resistance. The IOR, due to its particular statute, remained an autonomous body, separate from the new Prefecture.

At the end of Paul VI’s pontificate, Vatican finances were in serious difficulty, which lasted for an extended period, obliging the Vatican – among other things – to make extensive use of Peter’s Pence to replenish its budget. John Paul II therefore made two significant steps to try to ensure the universal Church became co-responsible in offering material support to the Roman Curia: he constituted the “Council of Cardinals to study the organizational and economic problems of the Holy See” (the so-called “Council of 15”, composed of cardinals from different continents), to which the budgets of the central organs of the Church are presented each year, and recalled the duty – formulated in canon 1271 of the Code of Canon Law – of all bishops to contribute to the material needs of the Apostolic See.[4] At the same time, to comply with the desire for transparency, all the bishops received essential information, and the summary data was also made public. The responses of individual bishops and episcopal conferences developed in a positive way.

But, in addition to the “internal” path of rationalization of the various economic administrations, as already mentioned, a network of external relations and connections with numerous personalities and institutions in the banking and business world also developed considerably. It is a world that does not fail to present its problems, not least because the Vatican appears to be a prestigious and attractive partner, less subject to controls, and at the same time there are also people vulnerable to possible pitfalls. Over the years, therefore, there were situations with very serious negative consequences not only for finances, but – perhaps even more seriously – for the good reputation of the Vatican. We can recall in particular the Sindona case (1974), later the Calvi/Banco Ambrosiano scandal (1981), and later still the Gardini-Enimont bribery scandal (1990-91). And if in some sensational cases the weak point was the IOR, one must realize that the problem is more general.

A more complex world and efforts to keep up with it

Meanwhile the world had changed. In the context of globalization and developments in world finance and international terrorism (the attack on the Twin Towers marks a decisive point in contemporary history), concern about criminal activities in the economic and financial field, about money laundering and other crimes and about the financing of terrorism grew notably and led states to develop new regulations and international conventions to combat these phenomena. The Vatican was also necessarily involved in these processes.

When it wanted to enter the Euro area and therefore signed a new Convention with the European Union (December 18, 2009), it was obliged to adhere to a series of commitments that required a real transformation of the system of supervision and control. This involved new laws for the Vatican City State, the establishment of a new supervisory body, AIF (Financial Intelligence Authority), the assignment to the Vatican City State Tribunal of jurisdiction to investigate and prosecute any crimes committed against the new laws by the staff and in the activities of the bodies of the Holy See, the acceptance of the inspections of the International Moneyval Committee for the periodic evaluation of the implementation and effectiveness of measures to prevent and combat money laundering and terrorist financing and allied matters. In this context, the fundamental decisions were taken by Benedict XVI with the Apostolic letter issued motu proprio on December 30, 2010, for the prevention and countering of illegal activities in the area of monetary and financial dealings. Translating them into practice, however, is very challenging even for pre-existing institutions that were not established for these tasks (for example, the Tribunal and the Gendarmerie).

The pontificate of Pope Francis is in continuity with previous developments, but has also given new directions, aiming to achieve an overall reform of the Roman Curia, which involves within it a reform of the departments and bodies in the economic field. The road is bumpy and sometimes the intention to regulate, to renew or make a clean sweep leads to drastic or painful decisions, but – according to the method of gradualness used by Pope Francis – we can achieve the results required today.

The “Council of 15 Cardinals” was replaced by a new “Council for the Economy,” with tasks of supervision and guidance of all economic activities. It is constituted by a Cardinal President, seven high ranking ecclesiastical members and seven other members, (note: not consultants, but actual members) lay people, experts in the field. In the recent renewal of this Council, six of these members are women.   

A new Secretariat for the Economy was established (note: “Secretariat” and not “Office,” to affirm its high level of responsibility), which absorbs the tasks that were exercised by the Prefecture of Economic Affairs, the control of the budgets of the various institutions and the preparation of the consolidated financial statements, but also with greater powers of intervention for the realization of an overall “economic policy” under the guidance of the Council for the Economy.

A new Office of the Auditor General, based on a Common Law model, was also established, with functions of the control and auditing of the financial statements.

The novelty of these last two changes means that the definition of their competences has been going through a period of tension and fine-tuning, also with respect to the competences of APSA and those of the Secretariat of State. To this was added the particular situation of the accusations of a completely different nature and the trial in Australia of Cardinal George Pell, who had to suspend his activity as head of the Secretariat of Economy. A certain stalemate affecting these reforms arose before they could be relaunched in a more constructive climate.

On a different tack, Pope Francis intervened in the IOR in order to complete the operation already started under the previous pontificate of a complete audit of the existing accounts and to launch a new statute, which limits more strictly the Institute’s activity to the purposes of service of ecclesiastical institutions and persons of the Holy See and Vatican City State[5] and ensures full compliance with internal and international regulations,[6] with particular attention to the prevention and fight against money laundering and terrorist financing. This important commitment was achieved with the new Statute of the IOR of August 8, 2019.

Also, the whole set of Vatican rules and institutions to guard against illegal and criminal activities has been updated and strengthened. In particular, in 2019 AIF was given a new president and an increase in staff, and now a further update of the Statute has been announced.[7] As the pope himself has pointed out, the system built up in recent years is proving to be effective: the recent investigations concerning the controversial investments in London and related events, despite the reports in the press, began not from complaints coming from outside but from reports coming from within the Vatican (specifically from the IOR and the Auditor General), and are still ongoing, conducted under the guidance of the Promoter of Justice (the “Public Prosecutor”) of the Vatican City State Tribunal.[8]

An economy for mission

On the reorganization and coordination of economic departments front, progress resumed with the appointment of the new Prefect of the Secretariat for the Economy, Fr. Juan Antonio Guerrero. In two interviews with Vatican Media,[9] he set out the line followed in agreement with the Council for the Economy, working in collaboration with APSA, the Secretariat of State, the Congregation for the Evangelization of Peoples and the Governorate of State. Fr. Guerrero first of all made it clear that “We are not a business. We are not a company. Our goal is not to make profit. Every department, every entity, performs a service. And every service has costs. Our commitment must be that of maximum restraint and maximum clarity. Ours must be a mission budget. That is, one that involves a balance sheet that relates the numbers to the mission of the Holy See. This, which may appear to be just a premise, is actually the substance of the matter.”

It must be understood that the diplomacy of dialogue and peace, the communication of what the pope does and says, support for poor and troubled Churches, and so on, are activities that have costs and do not generate revenue. Therefore, they must be supported with offerings and with the good administration of the assets available. Now, precisely in order to contain and rationalize expenses and ensure the most correct management of resources without sacrificing the ends of the mission, the aim is to centralize financial investments, improve personnel management, and improve procurement management.

With regard to this last point, on May 19 this year the new “Rules on the transparency, control and competition for public contracts of the Holy See and Vatican City State” were published. In addition to rationalizing, it aims to banish the risks of patronage and favoritism in the field of procurement, with their negative economic and moral consequences.

With regard to the centralization of investments, the misadventures of the Administrative Office of the Secretariat of State finally led to a clear decision by the pope to transfer, without further delay, from the latter to APSA the management and administration of all the financial funds and real estate assets at its disposal (without changing the purpose, which must be respected). In addition, the Secretariat for the Economy will assume the functions of control and supervision in administrative and financial matters over all entities of the Roman Curia or related to it, including the Secretariat of State and the entities it previously oversaw. For “confidential” economic matters subject to secrecy, the Secretariat of State will now depend on a Commission that was appointed for this purpose by the pope on October 5, 2020.

This outlines an important aspect of the overall reform of the Curia, which is not only economic. The function of the Secretariat of State – which, as the pope states, remains “without a shadow of a doubt the department that most closely and directly supports the action of the Holy Father in his mission, representing an essential point of reference in the life of the Curia and the dicasteries that are part of it”[10] – is freed from the weight and risks of being a center of economic power autonomous from the overall system of control and supervision of the Curia, to the benefit – we think – of its essential functions of service to the Holy Father and at the heart of his “diplomacy” throughout the world.

Some reflections

On November 30, 1933, after a meeting with Pius XI about economic aid applications from Russia, the then young Monsignor Domenico Tardini noted: “But was it prudent to invest the Holy See’s money in certain securities, foreign currencies, etc.? And is it prudent today to buy real estate in various countries? Hasn’t one entered a little too much into the field of speculation? And weren’t there other ways, more tranquil, safer, more stable? […] This is the problem: very serious and very difficult. Certainly, if it has made mistakes, the Holy See will suffer for a long time from the mistakes made. And with the Holy See many activities of Catholics throughout the world will be affected. […] Here, in my judgment, is the thought that is currently worrying the Holy Father, the source of the anguish afflicting him.”[11]

As Fr. Guerrero rightly points out, after all, the much talked about “Vatican money” is not very much. These are administrations with very small budgets compared to those of large institutions in the educational, commercial and banking world (the Holy See’s expenses are around 320 million euros a year), smaller than those of “an average American university” or some large dioceses. This does not detract from the fact that they should be administered wisely and correctly, both because of their origin, which, directly or indirectly, in the present or in the past, is generally the generosity of the faithful, and because of their unique purpose, which is the service of the Church’s mission, that is, the spreading of the Gospel, charity and the good of the human family.

However, from time immemorial, money, which should always serve for good, is often the focus of greed and temptation. It would be naive to think that it will not continue in the future to cause crimes, frauds, misdemeanors and the like. In order to combat these, above all, virtue, honesty, freedom, poverty in spirit, and prudence are certainly necessary, but competence and experience are also needed, as are rules and procedures that allow for strict control, that reduce the risks of illicit acts, guarantee appropriate behavior, correct errors and prosecute crimes.

The Vatican, both as a small state and as the Holy See (i.e. the center and government of the Church in the world), is facing the difficult challenge of operating in the economic and financial field in the context of the increasingly complex – and let’s say even more insidious – reality of the modern globalized world. This requires not only the renewal of general organization and skills, but also – as we have seen – the development of complex systems of control. Even if at times these may seem excessive for the relatively small Vatican budget, we must continue our efforts so that it can give, to the greatest extent possible, a witness of sobriety and wisdom, transparency and honesty in the use of economic and financial resources for its great spiritual mission.

DOI: La Civiltà Cattolica, En. Ed. Vol. 5, no. 1 art. 9, 1020: 10.32009/22072446.0121.9

[1].    We refer to the acceptance of the retirement of Cardinal Giovanni Angelo Becciu as Prefect of the Congregation of Saints and his renunciation of the rights and privileges connected with the cardinalate (September 24, 2020), which can be read in the context of the investigations into the administration and investments made in recent years by the Administrative Office of the Secretariat of State; and the decision to transfer to APSA the management and administration of the funds it has managed to this date(Letter of August 25, 2020, reiterated and published by the Press Office on November 5, 2020).

[2].    The total amount established in the Financial Convention was 1 billion 750 million lire, part in cash and part in bearer bonds. See B. Lai, Finanze vaticane. Da Pio XI a Benedetto XVI, Soveria Mannelli (Cz), Rubbettino, 2012, 14 f.

[3].    Annuario Pontificio 1948, 921.

[4].    “Bishops, by reason of the bond of unity and charity, according to the availability of their diocese, should help to procure the means which the Apostolic See, according to the conditions of the times, needs in order to be able to provide its service to the universal Church in an appropriate manner” (can. 1271 of the CIC).

[5].    Its mission “consists in serving the Catholic Church in all its articulations (Holy See – Related Bodies – Religious Orders – Catholic Institutions – Clergy – Accredited Diplomatic Corps – Employees of the Holy See) by guarding and administering the assets entrusted to them and providing them with dedicated payment services worldwide.”

[6].    The “fiscal peace” with Italy was sanctioned with the signing of a Convention on fiscal matters in 2015. We recall that relations with Italy regarding the IOR had moments of particular tension as of 2010, following a seizure ordered by the Italian authorities of 23 million euros of the IOR. However, it seems fair to us to point out that all three then IOR managers – Gotti Tedeschi, Cipriani and Tulli – who were on trial in Italy for the operations that had given rise to the seizure, were – after years! – fully acquitted.

[7].    Cf. Carlo Marroni’s interview ofthe President of AIF, Carmelo Barbagallo: “Scoperchiata la pentola. Ora la fase 2 della trasparenza finanziaria”, in Il Sole 24 Ore, July 3, 2020.

[8].    A punctual and articulate answer to the many current questions on the London investment issueis given in the interview to Avvenire, November 1, 2020, by Archbishop Nunzio Galantino, President of APSA. One must realize that the investigations in this field are extremely complex today and the “small” Vatican institutions, such as the Office of the Promoter of Justice of the Tribunal and the Gendarmerie, must make extensive use of international collaboration. AIF must also stay in contact and cooperate with similar institutions in other countries.

[9].    Cf. A. Tornielli, “Guerrero: quello della Santa Sede è un bilancio di missione”, in Vatican News, May 13, 2020; Id., “Guerrero: Ecco il bilancio della Curia, a servizio del Papa e della missione”, ibid., October 1, 2020.

[10].   Francis, Letter of August 25, published on November 5, 2020 by the Press Office.

[11].   C. F. Casula, Domenico Tardini (1888-1961), Rome, Studium, 1988, 292.