Internal Vatican reports warned in 2016 that a papally-created financial reform group was in danger of becoming “a charade.” Sources also say that Cardinal Angelo Becciu authorized that year a move to drain the Vatican Secretariat for the Economy’s bank account of millions of euros overnight, in a bid to undercut the department’s independence.
Confidential Vatican records show that senior members of the Vatican’s Council for the Economy were warned in 2016 that the body, set up by Pope Francis in 2014, was in danger of becoming “useful to give the appearance of ongoing reform, but with no real substance,” and that it was no longer clear “what, exactly the role of the Council for the Economy now is.”
Interdepartmental memos obtained by The Pillar also warned that the annual Peter’s Pence collection was almost entirely being spent on Vatican bureaucracy because curial officials were “failing to do their jobs,” and that the decision to cancel an external audit of curial finances in 2016 was made by officials “entirely unqualified to do so.”
Internal Vatican documents obtained by The Pillar also show that Libero Milone, the former auditor general of the Vatican, was investigating a series of financial irregularities at APSA, the Holy See’s sovereign wealth manager and paymaster department, including “a dangerously, highly centralised investment process and opaque portfolio management operation that breed irregularities and represent significant exposure to fraud.”
Milone, who is currently attempting to sue the Vatican for wrongful dismissal, has recently complained that APSA was used to hobble his department’s budget and staffing as it uncovered financial malpractice.
Here’s the latest in Vatican finance, from a series of memos and reports recently obtained by The Pillar.
The Terms
What's the Council for the Economy?
The Council for the Economy, according to the Vatican, was “established by Pope Francis on 24 February 2014, with the task of overseeing the economic management and supervising the administrative and financial structures and activities of the Dicasteries of the Roman Curia, the affiliated with the Holy See and the Vatican City State.”
“The Council for the Economy is made up of fifteen members, eight of whom are chosen from among Cardinals and Bishops, so as to reflect the universality of the Church, and seven are experts of various nationalities, with financial expertise and recognized professionalism. The Council has its own office for the coordination of activities.”
Since its creation it has been led by Cardinal Reinhard Marx of Münich.
What's the Secretariat for the Economy?
The Secretariat for the Economy, as described by Pope Francis’ 2014 motu proprio, was established at the same time as the Council for the Economy, as an office of the Roman Curia “directly responsible to the Holy Father and is competent for the economic control and vigilance” over all departments of the Roman curia, Vatican City state and Holy See in matters “that in whatsoever manner concerns such material.”
From 2014-2017, Cardinal George Pell served as prefect of the secretariat. In 2019, Pope Francis appointed Fr. Juan Antonio Guerrero Alves, SJ, to lead the department.
What's the Vatican "Auditor General?"
The Vatican's Office of the Auditor General was also created by the same 2014 motu proprio as the Council and Secretariat for the Economy, as an independent financial office responsible for reviewing the accounts, budgets, balance sheets, and ledgers of all Vatican departments.
In 2015, Libero Milone was named the first auditor general; he was forced to resign in 2017.
Milone was succeeded on an interim basis by Alessandro Cassinis Righini, who was confirmed in the role permanently in 2021.
What are "APSA" and the "IOR?"
APSA and the IOR are financial institutions of the Holy See.
For a breakdown of what they do - along with other financial departments like the Financial Information Authority - you can read The Pillar’s explainer here.
The background
Milone, who served as auditor general of the Vatican from 2015-2017, is currently attempting to sue the Secretariat of State for wrongful dismissal and damages, along with his former deputy Ferruccio Panicco, following their forced departure in 2017, at which time Milone and Panicco were accused of “spying” on senior curial officials and threatened with prosecution.
Since Milone filed suit in Vatican City earlier this month, he and his former deputy have met twice with Vatican prosecutors who, according to Milone, have reopened a criminal investigation into his tenure in a bid to prevent their lawsuit coming to court.
Milone has made a series of allegations about how the Secretariat of State, and especially the former sostituto Cardinal Angelo Becciu, moved to stymie financial reforms ordered by Pope Francis in the first years of his pontificate.
The former auditor general has specifically alleged that Becciu acted to cancel an agreed external audit of all curial financial institutions in 2016 by the firm PricewaterhouseCoopers, moved to block the independent operation of the auditor’s office, and pushed to see Milone sacked in 2017.
Milone has also said that he has extensive documentation showing financial misconduct and corruption at the highest levels of the curia which he will present in court to show he was dismissed because of “panic” caused by his work to reform Vatican finances, but has declined to make such documentation available to press.
Cardinal Becciu has denied all of Milone’s allegations, and said publicly that the decision to cancel the audit was made by Cardinal Pietro Parolin, the Secretary of State, and the decision to oust Milone came from Pope Francis personally.
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The audit
Among the points of controversy between Becciu, Milone, and other Vatican officials is the cancellation of a 2016 Vatican-wide financial audit, to have been conducted by global consulting firm PricewaterhouseCoopers. The audit was arranged by the Vatican’s Council for the Economy, but canceled in an announcement sent to all curial departments by Cardinal Angelo Becciu.
Memos and reports recently obtained by The Pillar show that members of the Council for the Economy were concerned the audit’s cancellation put the pope’s financial reforms “at risk.”
An April 2016 report warned that “the suspension [of the PwC audit] follows a series of decisions which place on hold the implementation of new controls and procedures.”
“The risks to the Holy See from abandoning the key elements of the economic reforms is likely to be very significant indeed.”
Cardinal Becciu maintains that he did not cancel the audit, he only notified Vatican offices it had been canceled.
But a separate memo, dated in May 2016 and circulated among the Council for the Economy’s audit committee members, complained that the audit was canceled by Becciu’s office, even while the audit committee of the Council for the Economy was supposed to be in charge of the process.
“It appears that objections [to PwC’s work] were raised by the Secretariat of State,” the May memo says. “Notwithstanding the clearly defined role of the Council, we were never advised of the exact nature of the objections and/or concerns, nor were we asked to resolve them, or even participate in the resolution.”
“Not only does this conflict with the Statutes [of the Council for the Economy], but also, if there is any accuracy to the reports of the ‘objections’, issues are being raised and resolved by people in the Secretariat of State who, based on the issues identified, are entirely unqualified to do so,” the memo said.
The memo warned that - with its mission curtailed - the Council for the Economy was “not only on the verge of becoming irrelevant but in danger of becoming a charade — useful to give the appearance of ongoing reform, but with no real substance.”
Milone has said that Becciu canceled the PwC audit when the firm sent letters to banks and investment houses, asking for lists of Vatican accounts, deposits, signatories and similar details.
“When they saw this list [of requests], I think they panicked, because they realized these guys would discover a lot of things they didn’t want to tell them — that’s why PwC was sacked,” Milone told reporters earlier this month.
Milone has also told press that Cardinal Becciu, after canceling the external audit, asked Milone’s office to perform the same function internally, which he agreed to do while warning he would apply the same methods and standards as PwC. His attempt to do so, he claims, eventually led to his forced departure.
Becciu has stated that the decision to cancel the PwC audit and appoint Milone to carry out the same work was taken by the Secretary of State, Cardinal Pietro Parolin, and that he was simply tasked with delivering the decision.
Milone has rejected this narrative, saying the decision was Becciu’s personally: “Parolin decided nothing,” Milone said to media earlier this month. “Parolin was called in after Becciu had spoken to me about doing the work.”
No clear role
Regardless of who approved the cancellation of the external audit and asked Milone’s office to assume the task, an internal assessment of the Secretariat for the Economy, presented in a September 2016 report to the Council for the Economy, was damning.
Referencing the replacement of PwC with Milone’s office, the report, obtained by The Pillar, noted that “these steps were taken without the involvement or consent of the Council’s audit committee.”
“At this time, because of the weaknesses in controls and procedures we have been highlighting, we cannot produce reliable accounting reports to assess current performance,” the report concluded.
“Further, we still do not have the necessary visibility over cash movements to provide assurance that all cash movements are valid,” the report stated, noting that it was no longer clear “exactly what the role of the Council for the Economy now is, nor how members see the Council’s role.”
Peter’s Pence
One 2016 memo circulated to Cardinals Reinhart Marx, head of the Council for the Economy, Cardinal George Pell, then prefect of the Secretariat for the Economy, and Cardinal Pietro Parolin, the Secretary of State, warned that financial mismanagement at the Vatican meant that curial offices were spending the vast majority of money donated to the Peter’s Pence collection, which many Catholics expected would go to charity.
“The unfortunate corollary to all these failures is that the funds received from the annual Peter’s Pence Collections around the world are now almost entirely consumed by ordinary Vatican expenditures, not because there is no other way to keep the Holy See running, but because several people entrusted with the management of the assets and activities of the Holy See are failing to do their jobs.”
“This is even more distressing when we realize that the overwhelming majority of the members of the Curia are, or at least have been, working very hard to implement the reforms.”
Bank balance: Zero
Senior sources close to the Council for the Economy told The Pillar this week that the pope’s financial reforms faced a 2016 defunding effort from the Secretariat of State, followed by close scrutiny of its operational expenses. That scrutiny, they said, compromised their independence.
In 2016, the Secretariat for the Economy maintained a separate account at the IOR, a Vatican deposit bank, to fund its operations. That account, the sources say, was drained of its 4 million euro balance overnight, leading the secretariat to file a suspicious transaction report with the Financial Information Authority, the Vatican’s anti-money laundering watchdog.
“That complaint was not well received” by AIF officials, one source told The Pillar, but having been filed it had to be followed up. The result, they said, was “the draining of the account was authorized by [then] Archbishop Becciu and the Secretariat of State, and the final report recognized that.”
While there was agreement among officials at the AIF and Secretariat for the Economy that this is what had happened, officials said, there was disagreement about whether Becciu and the Secretariat of State had the authority to order the transfer of the funds.
“There was confusion about why AIF concluded this was acceptable,” one source close to the Secretariat for the Economy told The Pillar, “but that was before we realized [AIF president] René Brülhart had an ongoing arrangement with the Secretariat of State.”
The Pillar requested comment from Cardinal Becciu on the alleged draining of the IOR account belonging to the Secretariat for the Economy and conclusions of the AIF report, but did not receive a response by time of press.
After their funds were drained, several sources close to the Council for the Economy and the Secretariat for the Economy told The Pillar, the Secretariat for the Economy’s operational expenses were scrutinized and routinely queried by the Secretariat of State.
“It was the same for the secretariat [of the economy] and the auditor general,” the official said, “once you lose control of your own budget, you’ve lost control of your whole ability to function independently. [The Secretariat of State] had eyes on everything everyone was doing, who was looking at what and who they were talking to, and that was an impossible situation.”
Former auditor Milone has raised a similar point about the operations of his Vatican auditing office.
Speaking to the media last week, Milone said that his office was functionally subject to APSA, the Holy See’s sovereign asset manager and paymaster department which Milone’s office was charged with auditing.
“In fact, we did not have administrative independence,” Milone said during a press conference November 17 this year. “It was APSA that paid our passive invoices and therefore we were in the situation that the subsidiary [APSA] had access to the activities carried out by the controller [the Office of the Auditor General] and therefore we could not thus operate in complete independence.”
Milone also flagged to press that his department was subject to tight budgetary and personnel restrictions, originating from Cardinal Becciu in the Secretariat of State, with all staff being kept on six month temporary contracts subject to approval before renewal.
In a September 2016 report obtained by The Pillar, Milone warned the Secretariat for the Economy about operations at APSA, the agency financially overseeing his office.
Milone’s report noted concerns expressed by the Secretariat for the Economy about “a dangerously and highly centralised investment process and opaque portfolio management operation that breed irregularities and represent significant exposure to fraud” at APSA, as well as a “complete absence of control over day-to-day activities on the part of APSA leadership, from the president on down” and that analysis of these issues was “in progress.”
Milone has previously stated that as his investigations into APSA and other curial departments progressed throughout 2016, he lost access to Pope Francis and in less than a year, he was out of his role.
