News Focus

What the Vatican’s audit U-turn means

Cardinal George Pell (CNS)

The story of Vatican finance reform could only ever be told properly by a skilful thriller-writer. It is both too full of clashes between big personalities and too complicated by bureaucratic procedures.

If such a thriller is ever written, it may use the events of the last two months as a good moment for a chapter break. In April, the audit to be carried out by Pricewaterhouse Coopers (PwC) was suspended, at the behest of Vatican Secretary of State Cardinal Pietro Parolin. Cardinal George Pell, who is in charge of Vatican finance reform, said he was “surprised”.

Now, the audit has resumed, but in a different form: PwC will have an “assisting role”, “in collaboration” with the Auditor-General, Libero Milone.

A statement says this “permits all of the entities of the Holy See to participate more actively in the reforms”. In other words, it has nothing to do with any reluctance from Vatican departments to get their financial houses in order.

But one interpretation (which might appeal more to the thriller-writer, though it should not be discounted for that reason alone) is that the reforms are aimed at restraining Cardinal Pell.

The Australian cardinal is the protagonist of Rome’s financial cleanup. He was appointed in 2014 as prefect of the Secretariat for the Economy. In an article written that year, the cardinal explained how Pope Francis’s reforms would take place. It makes interesting reading in light of recent events.

Cardinal Pell said that Vatican financial reporting would be brought up to the standards observed by other countries, “and the consolidated annual financial statements would be reviewed by one of the Big Four audit firms”. That would be PwC – whose role is now unclear.

Another key principle, the cardinal wrote, was “something akin to a separation of powers”. The Secretariat for the Economy, led by the cardinal, would have “authority over all economic and administrative activities”. It would report directly to the Pope, not to the Secretariat of State.

Yet it is the Secretariat of State which announced the suspension of the audit. And – though the decision-taking process is mysterious – the Secretariat of State seems to have had a major role in renegotiating PwC’s position.

So in two major aspects – the powers given to PwC and the independence given to Cardinal Pell’s Secretariat – the recent changes seem to have blunted the reforms.

When the PwC audit was suspended in April, Cardinal Pell raised an eyebrow: it was striking, he observed, that PwC’s audit ran into objections only “when auditors began asking for central financial information and we’re finding it difficult to get answers”. That suggests that the Secretariat of State was reluctant to cede power to the newly established Secretariat for the Economy.

Cardinal Pell is a famously combative figure. He was brought in to be combative, and there may well be no other way to reform Vatican finances. But that may also mean this moment of resistance was inevitable.

The thriller-writer’s preferred narrative – a pushback from the old guard against reforms – may be too simple. For one thing, as Fr Federico Lombardi, the Vatican spokesman, observed, giving ultimate responsibility to an auditor-general is the norm for sovereign states.

Some Vatican departments fear transparency, not necessarily for dishonourable reasons, but because their work is genuinely delicate (the same goes for national governments).

The financial reforms had already achieved a significant amount. Cardinal Pell’s discovery of “missing millions” of euros, and the reform of financial structures, were serious achievements. If PwC are given a major role, and happily sign off on the accounts of the different Vatican departments, the Vatican will be
an exemplary case of financial turnaround. But maybe the reforms will eventually hit a wall.

In the meantime, Cardinal Pell is scheduled to continue in his job for three more years. He is driven by a sense that the Church’s witness is impaired by financial mismanagement, and he has the Pope’s support.

Back in 2014, Cardinal Pell said the reforms were “designed to make all Vatican financial agencies boringly successful”. His role is to minimise excitement. Let’s hope that novel never needs to be written.