Holy See Embraces Corporate Governance

Corporate style management is set to replace the current bureaucratic system of the Holy See in the near future. On the 24th of February, the Pope announced in a public statement that he is planning to make changes to its financial system by centralizing budgetary and administrative functions. As the first economic overhaul to the Vatican in over 25 years, it was decided that the Holy See will begin to operate with a system of corporate governance.

There are two distinct entities to take into account when analyzing the possible outcomes of structural policy change: The Holy See and the Vatican City State. These two bodies obtain separate revenues from different aspects of the overall economy. While the Holy See gains its revenue through investments, real estate income, and donations, The Vatican City State makes money through the sale of stamps, coins, medals, and other tourist mementos as well as fees for admission to museums and other attractions. Additionally, the revenue from the Holy See is used to help fund the Roman Curia, or Vatican bureaucracy, diplomatic missions, and media outfits, whereas the museums and post offices receive the Vatican City State’s revenue to maintain funding.

While economic data about the revenues and expenditures of the Vatican City State are easily retrievable, details in regards to the Holy See’s revenue are not as readily available to the public due to a complicated management structure. The Organization of the Economic-Administrative Structure of the Holy See (COSEA) conducted a review in July last year and found that the system needed to be simplified and consolidated to improve coordination and oversight across the Holy See and Vatican City State. It also recommended that the Holy See adopt current accounting standards, implement accepted financial management and reporting practices, enhance its internal controls, and utilize transparency and governance.

In response to these suggestions, the Pope created a new cabinet called the Secretariat of the Economy. The Secretariat will be headed by a Cardinal Prefect, George Pell of Australia, and overseen by a 15 member council composed of 8 cardinals and bishops from various parts of the world, as well as 7 lay experts with significant financial and professional experience.

Members of the Secretariat will meet on a regular basis to help to prepare an annual budget, assist in financial planning, utilize various support functions in terms of human resources and procurement, and prepare detailed financial statements of both the Holy See and Vatican State. Future leader of the Secretariat, Cardinal Pell, is a 72 year old who fiercely advocates for increased financial transparency within the Catholic Church. The Secretariat is to replace the previous council system. Both councils utilize the 15 member system; however the old version was composed solely of clerics while the newer council will implement 7 economic experts, contributing to increased financial clarity within the Holy See.

The finances of the Vatican have been made a top priority since the day Pope Francis stepped into office. Since his election on March 13, 2013, he has replaced top managers and board members at the Vatican Bank and has additionally gone so far as to suspend a German Bishop, who had funded the construction of his lavish estate with the church’s $43 million. Those living in Germany considered the event to be quite a scandal as parish funds come from a unique “church tax” in addition to donations. In order to monitor the improved financial system, an auditor general will have the ability to conduct random audits of “any agency of the Holy See at any time” he finds suitable. This will further safeguard against fiscal mismanagement by the Holy See’s own bishops and other key leaders.

Pope Francis is dedicated to the rigorous review of economic administrative structures within the Holy See. Cardinal Pell and other members of the secretariat are expected to take on their positions and begin working towards the end of March. The implementation of changes approved by the pontiff will occur over time with the help of the COSEA and according to the Vatican, will “confirm the role of the Administration of the Patrimony of the Apostolic See (ASPA) as the Central Bank of the Vatican”, as well as allow the Financial Information Authority (AIF) to continue to oversee and regulate economic activities within the Holy See and Vatican City State."