At an unprecedented summit convened in Rome at the behest of Pope Francis earlier this month, a Vatican official warned the treasurers of 500 Catholic orders from around the world that their financial wealth, sometimes used for secular, commercial purposes such as running hotels and restaurants, was contrary to the teachings of the Catholic Church and imperils their religious mission.
Archbishop José Rodríguez Carballo, secretary of the Vatican’s Congregation for Institutes of Consecrated Life and Societies of Apostolic Life, told the meeting’s attendees, “Those who do not renounce wealth cannot be disciples" of Jesus, “the poor man who lives in solidarity with the poor.” According to the National Catholic Reporter, “a constant theme during the event” was “criticism of the capitalist system, which several speakers called a ‘structure of sin.’”
This new move by Francis, just one part of what many Catholics hope are wide-ranging financial reforms within the church, is driven by the pope’s concern that by engaging in modern economic activity, religious institutions “run the risk of losing their true identity.”
Reconciling the divide between the church’s vast wealth and its mission to serve the poor has become a priority for a pope who regularly issues spiritual broadsides against the inequities of the global economy.
But addressing the financial incompetence and corruption within the Vatican, as well as in decentralized Catholic dioceses around the world, requires far deeper changes than the pope can accomplish with either his new tone or personnel adjustments within the Vatican bureaucracy.
“One of the major problems of church finances,” said Thomas Reese, a Jesuit priest and author of “Inside the Vatican: The Politics and Organization of the Catholic Church,” “is the total incompetence of clergy in financial matters.”
Dogged by corruption and scandal, and a lack of transparency and accountability, the Vatican’s financial institutions have long drawn scrutiny from reform-minded Catholics as well as law enforcement and banking regulators. The church’s questionable financial dealings are the subject of “Holy Money,” a documentary airing Sunday on Al Jazeera America.
The secretive Vatican Bank, or Institute for the Works of Religion, isn’t a bank in the traditional sense, as it lends no money. It holds deposits for 19,000 customers, mostly Catholic institutions and clergy, yet does not adhere to banking industry standards for transparency or money laundering prevention.
The bank is outside the Vatican’s control, but the pope appoints the members of a committee of cardinals, which oversees its activities. In January, Francis fired four of the five cardinals because “they were doing a bad job,” said Reese. “They were either corrupt or incompetent.”
The IOR, long suspected of being a depository for money laundering and offshore accounts used to evade taxes, including for clergy and organized-crime figures, also lies outside the purview of European banking regulators.
A board of superintendence, appointed by the committee of cardinals and currently led by Ernst Von Freyberg, an appointee of Pope Benedict XVI, also plays a role overseeing the bank. The committee of cardinals is the intermediary between the lay board and the pope.
Under Von Freyberg, the bank in 2013 released the first public financial statement in its history, reporting $117.4 million in net profits. Von Freyberg also hired the Promontory Financial Group to review accounts and establish greater transparency and anti-money-laundering standards within the institution.
In June 2013, Monsignor Nunzio Scarano, a Vatican official, was removed from his post after being charged by Italian authorities in a plot to use the Vatican Bank to hide cash from Switzerland for an Italian shipping magnate. Scarano, also known as “Monsignor 500 Euros” because of his habit of flashing large sums of cash, now faces a second round of criminal charges over a different alleged scheme to use the bank to launder money.
Scarano remains under house arrest in Salerno.
Both Von Freyburg and Francis have hinted publicly that they would consider shutting down the Vatican Bank entirely.
The pope has also undertaken reform of the Roman Curia, the bureaucracy within the Vatican, long rife with corruption and self-dealing. He recently announced the creation of a new Secretariat of the Economy, which will oversee the Vatican’s own finances.
To lead the secretariat, Francis appointed Cardinal George Pell of Australia, hailed by some as a much-needed reformer of the Vatican’s corrupt internal finances. But Jason Berry, author of “Render Unto Rome: The Secret Life of Money in the Catholic Church,” reported that others derided Pell as an “obstructionist,” citing his failings in ending the Australian church’s sex abuse scandal or in holding perpetrators to account.
The secretariat will have the authority to audit any Vatican entity — although it’s not clear whether the bank falls within its bailiwick — and will be charged with establishing procedures for hiring staff and contracting for services, to prevent, for example, employees giving lucrative contracts to their friends or relatives, said Reese.
At the parish level, financial improprieties lie outside the Vatican’s authority. In the United States, where each diocese controls its own finances without oversight from Rome, parishes pull in $8 billion annually from the collection plate, according to Charles Zech, a professor of economics and director of the Center for Church Management and Business Ethics at Villanova University.
But few parishioners know what is done with the money, said Zech, adding, “It’s like a black hole.”
“It’s a huge issue,” he added. “The Catholic Church in general has poor ratings on transparency and accountability.”
In Catholic parishes, he said, unlike in Protestant churches, congregants have no say in the budget or in how contributions are spent. The reporting by parishes back to the congregation is “very poor.”
Embezzlement, too, has been rampant, owing to a “lack of routine financial controls common in the business world,” said Zech. He said 85 percent of dioceses in the United States have experienced embezzlement at the parish level, where it is “not unusual” to have the same person counting the collection money, making deposits, writing all the checks and reconciling the parish checkbook.
In the most egregious cases, two Florida priests embezzled nearly $9 million, and New York and Philadelphia have each experienced embezzlements of $1 million.
Archbishop John J. Myers of Newark, N.J., has come under fire after recent news reports revealed that parishioners were being asked to finance a half-million-dollar, 3,000-square-foot addition to his 4,500-square-foot home, replete with a hot tub, an elevator and other luxuries.
The church is “embarrassed” by these incidents, said Zech. But while on matters of faith and morals the church is “very hierarchical,” on “temporal matters,” he said, it is very decentralized.
“Each bishop is the pope of his diocese” on financial matters, he said. Beyond Francis’s exhortations on greed and money, there is little authority the Vatican can exercise at the local level on these matters.
What’s more, said Reese, there is little room for oversight by lay experts with expertise in finance and accounting.
“This is still a papal court,” he said, “and only princes can tell princes what to do.”
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