Show Me the Money: Report Gives Unprecedented Look Into Vatican Finances

The Holy See’s annual report, which indicates a smaller-than-expected deficit but an uncertain future, includes the financial status of previously undisclosed Church entities as part of a trend toward greater transparency.

Father Juan Antonio Guerrero Alves, prefect of the Secretariat for the Economy.
Father Juan Antonio Guerrero Alves, prefect of the Secretariat for the Economy. (photo: Courtesy photo / Office of Communication/Society of Jesus)

ROME — The door to the Vatican money vault appears to have been thrown open wider than ever before, revealing cause for both relief and concern.

The Holy See’s financial statement for 2021, released by the Vatican Secretariat for the Economy on Aug. 5, reflects that the Vatican is largely bouncing back from the financial downturn it suffered during the pandemic, but it is still far from being in the clear, posting a deficit in its annual budget and continuing to offload its assets to make ends meet. 

But what’s most striking about this year’s report is its scope, going well beyond that of past financial statements. In the previous fiscal year, the Holy See’s financial statement included only 60 entities operating as part of the Vatican. This year, that number has increased to 92 and for the first time includes the Vatican’s substantial pension funds and Peter’s Pence, a fund composed of donations from individuals and dioceses directed for the Pope’s activities.

These new parameters for financial reporting are a “step forward in terms of transparency and visibility of the overall economic situation of the Holy See,” Jesuit Father Juan Antonio Guerrero, prefect of the Secretariat for the Economy,  told Vatican News.

Only the finances of the Vatican Governorate, overseeing the operations of the physical 121-acre Vatican City, and the Institute for Works of Religion (also known as the Vatican Bank), which manages financial accounts for Vatican’s embassies, religious congregations and other groups closely related to the Holy See, were not included in this year’s report, as they operate under different financial frameworks.


Smaller-Than-Expected Deficit

The change resulted in a significant difference in the reporting of the Holy See’s total assets than in previous years. For the fiscal year 2020, the annual report listed 2.2 billion euros in total assets. Now, that number is posted as 3.9 billion, the first time the world has seen the Vatican attribute itself with a valuation so large. With the wider scope, however, comes an increase in the size of the Vatican’s listed liabilities: from 0.8 billion euros in 2020, to 2.3 billion in 2021. All in all, the difference between the total income and expenses for the Holy See’s 2021 budget came in at a 3-million euros loss.

Father Guerrero said that such a figure does not seem like one “to cause concern.”

“A deficit of 3 million euro in a budget of 1.1 billion is not a lot; it is practically balanced.”

A previous projection of the Holy See’s budget predicted a 33-million-euros deficit, which, due to spending cuts primarily in the Curia and what Father Guerrero called “good financial results in 2021,” including positive financial market performance and favorable exchange rates, was mitigated to a 3-million-euro deficit.

Yet that doesn’t mean the Vatican is in the clear. Despite better-than-expected returns, the Holy See is still decapitalizing itself, or selling its own assets, to compensate for its expenses, which include a huge liability in a Holy See-owned hospital in southern Italy. With just under 4 billion euros in assets, that means this current scheme can only go on for so long before it seriously starts threatening the vast property holdings.

“The Holy See reduces its patrimony every year by an average of 20-25 million euros. And in this, it is quite constant,” Father Guerrero told Vatican News.

Like many countries, the Holy See is also bogged down by its pension fund, included for the first time in its financial statement, to cover retirement costs for its aging workforce. According to the most recent figure provided in this year’s report, the fund’s net liability totaled 631.4 million euros in 2019.

Additionally, the Vatican is still recovering from a loss of revenue due to the downturn of tourism and the closure of the Vatican Museums during the COVID-19 pandemic. Prior to 2020, revenue from the Vatican Museums alone reached $100 million per year.

“We cannot say that the time for sacrifice is over,” noted Father Guerrero. “2022 will be a particularly difficult year, and so will 2023. Now, we have to face the budget for 2023, which does not allow us to be very cheerful, although the pressure from COVID has decreased.”


Trend Toward Transparency

Pope Francis established the Secretariat of the Economy in 2014 after the need to reform the Vatican’s finances emerged as a priority among the College of Cardinals in the lead-up to the previous year’s papal conclave. The secretariat was placed under the leadership of Australian Cardinal George Pell, who quickly instituted financial management policies in all Vatican offices to bring their practices in line with international standards.”

Since its establishment, the Secretariat for the Economy has absorbed most of the Holy See’s balance sheets to give a more comprehensive view of total money flows in and out of the Vatican’s walls.

This trend toward transparency aims to provide the faithful with a certain type of “consumer confidence” in the Catholic Church, said Michael Severance, director of the Istituto Acton, the Rome office of a U.S.-based think tank specializing in the intersection of religion and economic principles. 

The trend comes in the wake of a recent high-profile scandal involving Vatican finances, in which the Holy See lost approximately 140 million euros in the sale of a London investment property. Concerns that the investment had initially been funded by money from Peter’s Pence, a fund made up of donations from the faithful toward the Pope’s ministry, prompted the Vatican to clarify that the losses were taken from the Secretariat of State’s reserves rather than Peter’s Pence. The Holy See acknowledged that funds from Peter’s Pence had previously been combined with other investments, but that the funds would be accounted for separately going forward.

Severance told the Register that the Church only stands to gain by being clear about its financial situation. He believes that allowing more outside finance professionals access to the Holy See’s accounting and subjecting its money to public scrutiny “will pay huge dividends in terms of its overall risk assessment of financial strategies. … If everything goes well in that way, things will move forward quite positively.”


Ethical Investment

Severance also applauded the transparency in the new investment policy, announced July 19 by the Secretariat for the Economy, which aim to bring the Holy See’s investments in line with the Church’s social doctrine. 

“The new Investment Policy,” the Vatican said in a press release accompanying the development, “aims to ensure that investments are aimed at contributing to a more just and sustainable world; protecting the real value of the Holy See’s net worth, generating a sufficient return to contribute sustainably to the financing of its activities; and are aligned with the teachings of the Catholic Church, with specific exclusions of financial investments that contradict its fundamental principles, such as the sanctity of life or the dignity of the human being or the common good.” 

The policy, effective Sept. 1, restricts investments in gambling, pornography and the arms industry, among other areas. He says this is a clear sign of Pope Francis’ belief in the power of capitalism to be used for the good.

“While Pope Francis has taken strides to condemn certain forms of capitalism, he is certainly not 100% anti-capitalist,” said Severance. “He is taking time to invest in productive enterprise, which helps cover a very large portion of Vatican operating funds, and just launched a monthly intention this August to pray for small and medium-sized entrepreneurs.”

In terms of how the Vatican will redirect its money flow in the future, Father Cristian Mendoza, a specialist on the economic dimension of the Catholic Church at the Pontifical University of the Holy Cross, praised a recent focus on consulting financial professionals to guide the Holy See’s investments. As part of the reform of the Curia, Pope Francis has established a Vatican Investment Committee, a group composed of four international investment managers that will be presided over by Cardinal Kevin Farrell. 

Father Mendoza said greater reliance upon investment professionals will help guide the Church’s money toward what he characterizes as “ESG” investments — environmental, social and governance non-financial factors that investors include in their analysis of risk and growth opportunities.

“This is a general trend. The Church is just following it,” he told the Register. “There is not a Catholic way of investing; rather, the Church can just be attentive to where it is investing, because, of course, all of the money doesn’t belong to the Pope — it belongs to the faithful.”


Reforming Church Finances

While Father Mendoza does not suspect that the Holy See’s current deficit will lead to financial problems for the Church in the near future, he says that the Holy See’s current revenue levels, propelled primarily through real estate holdings, will need to be bolstered so as to cover its expenses.

One such option is the creation of a papal development office, in which the Vatican promotes fundraising efforts on behalf of the Pope.

“Sooner or later, the Pope will need a sort of fundraising department because the Pope is not asking for money from anyone,” said Father Mendoza. 

He clarified that while the Pope receives funds annually through Peter’s Pence, that money is requested for specific projects. Father Mendoza pointed to a Vatican project launched in 2016 to build new barracks for the Swiss Guard as an example of direct fundraising on behalf of the Pope.

In light of the Vatican’s overall move toward greater clarity about its finances, Father Mendoza noted that “this transparency is expensive. It requires a lot of people to get these figures and get them right.”

“[The Church] is not an investment company that needs to have the figures every day. Its mission is religious and spiritual,” he told the Register. “It could be good to have a clearer idea of what’s happening, but without becoming an NGO. 

“I’m not sure that any other governments in the world show their figures as clearly as the Vatican.”

(Editor's note: This story has been updated since it was first published.)