Pulling Plug on Audit Means Gut-check Time for Vatican Reform
By John L. Allen
April 20, 2016
When Pope Francis’ landmark project of financial reform was announced two years ago, one lynch-pin was the idea that the world would no longer just to have to take the Vatican’s word for it in terms of how much money it has and where it’s going.
Instead there would be a credible audit carried out according to generally accepted business standards in the 21st century. That step, officials said, would represent a revolution in the direction of transparency and accountability.
As it turns out, it’s now a revolution delayed.
Crux has learned that on April 12, Italian Archbishop Giovanni Angelo Becciu sent a letter to all Vatican entities informing them that an audit being performed by the global firm Pricewaterhouse Coopers (PwC) has been “suspended immediately,” and that any letters of authorization those entities have already issued to permit the transmission of financial data to PwC are to be revoked.
Prior to hiring PwC, the Vatican had relied on an external Italian auditor rather than a major global firm.
Becciu’s letter notes that Australian Cardinal George Pell, the Vatican’s Secretary for the Economy, earlier had sent out materials instructing Vatican entities to cooperate with the audit, but says those marching orders have now been suspended by “superior provision.”
Though Becciu’s name is on the letter, it’s understood that it would not have been issued without the authorization of Pope Francis. The dispute over the audit has also been discussed by the pope’s “C-9” council of cardinal advisers from around the world.
Last December, Pell signed Pricewaterhouse Coopers to a contract reportedly worth $3 million to carry out an audit, with the idea being that materials would be collected by March, the auditors’ reviews would be performed in March, April and May, and a statement would be put before the Vatican’s Council for the Economy, led by Cardinal Reinhard Marx of Munich, at its meeting in June.
As of now, that work is on hold.
Although Becciu’s letter does not lay out the logic for the decision, sources tell Crux that the issues raised by Italian Cardinal Pietro Parolin, the Vatican’s Secretary of State, concern the nature of the contract that was signed with PwC rather than the basic desirability of greater transparency.
One concern has to do with provisions of the contract allowing PwC to disseminate financial information about the Vatican internally, and, at least in theory, also with external agents with whom the firm collaborates. Since the Vatican takes its sovereignty and autonomy seriously, including its right to preserve confidential financial information, those codicils were seen as raising red flags.
In addition, the contract reportedly includes other services to be performed by PwC not directly related to the auditing process, which raised questions about “mission creep.”
There’s also some debate about whether reliance on an external auditing firm is appropriate in the first place, given that doing so is more customary for private entities rather than sovereign states. According to the statutes issued by the pope for the Council for the Economy, it has the authority to approve an external audit “when necessary,” but primary responsibility is to be lodged with the new position of “Auditor General” approved by the pontiff.
Reportedly, neither Parolin nor Marx had seen the contract with PricewaterhouseCoopers before it was signed.
For Pell’s admirers, suspending the audit amounts to a temporary victory for a Vatican old guard resistant to reform. For critics, it’s the fruit of Pell’s unwillingness to collaborate and to live within a legal framework he himself helped to craft.
“You cannot build a reform movement on illegality, and that’s what he’s doing,” one of those critics said.
Parolin reportedly approached Pope Francis with the concerns about the audit, and received his blessing to put it on ice until they could be resolved.
In the short run, the seeming loser in all this is Pell, whose authority has been publicly undercut.
The embarrassment has to be bundled with a piece in the Italian newspaper Italia Oggi on Wednesday suggesting that Pell will leave the Secretariat for the Economy when he turns 75 in June, and that the current president of the Vatican bank, French businessman Jean Baptiste De Franssu, a Pell ally, will be replaced as well.
It’s not clear how seriously to take those claims, but in any event they reflect the fact that he’s not universally supported within the Vatican.
Also on the losing end would seem to be the Council for the Economy, a 15-member panel including cardinals and lay experts created by Pope Francis. In theory it’s the body that’s supposed to be exercising vigilance over finances, not the Secretariat of State, yet the decision to suspend the audit did not come from the council.
Among the cardinals who make up the C-9, sources say, there’s general consensus that a credible audit needs to happen quickly. Pell is scheduled to meet Pope Francis shortly, and this question obviously will be a principal topic of conversation.
Pell’s office issued a brief statement Thursday indicating he hopes the audit will be restored soon.
“Cardinal Pell was a bit surprised at the Archbishop’s letter but anticipates that, after discussions and clarification of some issues, the work of PwC will resume shortly,” it said. “The work of the internal auditor which covers all areas has not been interrupted.”
People will be watching how things shake out, because aside from the inside Vatican baseball and power politics involved, the decisions that have to be made about how best to inject real accountability into the system represents a gut-check for the pope’s broader ambition of Vatican reform.