Merchants in the Temple (22 page)

Versaldi's version of the facts had more than a few dissenters. As General Accountant Stefano Fralleoni pointed out, at the Vatican it was customary to spend more and more:

The audit of APSA was long hard work. Every single balance sheet for every single department was checked. The only thing listed in the kinds of balance sheets shown to us was expenses. Although the administrations in question report to APSA, they also have assets, in addition to expenses, which should be recorded.

There is another paradox. The budgets show an increase in estimated costs, which indicates the intention to spend more. There are always huge discrepancies between the budget and the final balance. This is the result of a mentality that is hoping for the approval of many of the proposed expenses, for the sake of setting some money aside.

There have been many cuts, but we need to know more about some items. Despite everything, the final balance of the Holy See is showing losses of 25 million, and the financial earnings are modest. APSA did not include even one comment in this regard, which is hard for the Prefecture to understand. While it may be complicated to predict the behavior and fluctuations of the market, there are experts who do this as a profession.

Personnel expenses have gone up, despite our suggestion of a hiring freeze, but the most serious thing is that this increase was already recorded in the budget. This attitude smacks of an outright affront to the authorities.

I should add that there was no variation in the field of consolidation. This approach was determined more by political than technical reasons. The same is true of the need to standardize accounting principles. The Prefecture's functions are clearly identified but it has been impossible to make them operative.
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Zahra, the COSEA Chair, was at the meeting as an auditor for the Prefecture. He, too, saw no improvement and criticized the arrogance of those who refused to change:

The fact that the same situations are repeated every year indicates a constant rather than a temporary crisis. The problem is not with procedures but with the mentality and the way of doing things. Cooperation from the heads of dicasteries is often less than forthcoming. They can be very haughty, thinking they are the only ones who know how to proceed.

An Outrageous Rejection, a Scorching Climate

The day before the meeting the more inflexible advisors had done a straw poll with their colleagues, noting the growing discomfort of the various professionals and consultants from the oversight bodies. Many were demanding a break with tradition. There were long telephone calls deep into the night, discussions and agreements into the wee hours. The auditors mustered their courage. Together they had to come up with a countermeasure that would take everyone by surprise. They didn't want to just sit around and complain as they had in the past. The frustration that had built up over the years had been too demeaning. Now they wanted to see results. The hours sped by and a secret plan took shape, gathering the consensus of most of the auditors.

The day of the fateful meeting arrived. From the moment the first speaker, Fralleoni, took the floor, the prevailing line was already clear. The General Accountant lowered his gaze for a moment to check the liabilities columns and, weighing his words carefully, recalled an event from 1993, when John Paul II's closest collaborator, Secretary of State Angelo Sodano, had refused to approve the budget for Vatican Radio. It was a major precedent, a warning to everyone. There was no reason not to repeat such an approach. The speakers that came after Fralleoni took up the charge, adding criticisms of their own. When Maurizio Prato's turn came, he still seemed stunned by the data he had seen, and could barely contain his outrage:

It is disheartening to see that it's still business as usual, with no sign of change or sense of responsibility to manage accurately, efficiently and effectively the patrimony of the Holy See, and with no attempts to contain costs. As for the consolidated budget of the Holy See, in terms of presentation and commentary, it shows patches of improvement but on the whole, the analysis is discombobulated and hard to grasp.

What was most troubling were the expenses and some disappointing investments. Prato continued:

With reference to institutional activities, given the overall stability of canonical income [the amounts that dioceses throughout the world send to Rome to support the Roman Curia], the big increase [in expenses] by comparison to the historic trend until 2012 is a result of the increase in personnel costs (3 million) but mainly the big increase in general and administrative expenditures (9 million). There has been a huge decrease in financial activity by comparison to 2012 while … 2013 was relatively stable in financial market terms, even with the decrease in earnings. To record such significant losses demonstrates yet again the careless and deplorable management of assets, which is anti-economic, and of investment criteria, despite the repeated appeals from the auditors in recent years.
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Versaldi tried to interrupt him. “We have no power over that. It's up to the Superior Authority to make sure its instructions are followed. We tried to do something at past meetings, but we need more effective tools.”

The Cardinal was referring, in particular, to two conferences held in the Synod Hall during Benedict's pontificate, “in the attempt to have a global vision of the status quo at the Holy See and the Governorate as a basis for all future operations.” But it would take more than good intentions from a couple of congresses to revolutionize a Curia that had been impervious to every previous attempt at reform.

At a few minutes before eleven, the proceedings were interrupted for a coffee break. The Spanish auditor, Josep M. Cullell, still hadn't taken the floor. During the break he conferred with Messemer, Fralleoni, Zahra, Prato, Kyle, and Monsignor Vallejo Balda. On hearing his observations some said nothing, and others nodded, but they all came to an agreement: it would be up to Cullell to get the ball rolling. When the meeting resumed, he was the first to take the floor:

While it is positive that the documents highlight the problems the International Auditors have been discussing for years, I am not in favor of approving the budgets. I propose that we write an explanatory note on the specific reasons for our rejection. The note could at the very least indicate the points emphasized by Mr. Prato.

The secret maneuver, then, was to not sign off on the budgets and return them to their senders. This dramatic choice would throw a wrench in the Curia's games, but at the same time it could boomerang against Francis by slowing the dicasteries' activities. Cullell went further:

The budget documentation analyzed reflects the irregularities in the whole structure. A great deal of information remains unclear (increase in personnel, contracts with outside companies, etc.). Without transparency we cannot act. For a while it looked as if the Prefecture was moving in the direction of greater authority, but not much has changed. Without a serious budgetary law that applies to all the Vatican dicasteries, no reform is possible.

It will take more than good will: it will take rules that oblige all the Dicasteries to write up a proper budget and managers who know how to administer resources. We need a clear law to control the autonomy of the Dicasteries. Although we still don't know what shape this law will take, it is fundamental for it to guarantee control over expenditures and guide the economic-financial strategy of the Vatican. We have to set priorities and define coordination. We need a clear, defined procedure, as the Pope himself has indicated.

On the subject of transparency of information, there's a lot of talk about maintenance and restructuring work, but where is any of this entered into the budget? Where is that work recorded? Was there competitive bidding? At the Vatican, contracts are awarded informally, to friends and acquaintances. But one of the basic criteria should be the available funds. And during a crisis we have to cut back on maintenance because there are other more urgent priorities.

All eyes turned to Monsignor Vallejo Balda, the only prelate in the room after the Cardinal President. His support was indispensable to holding off Versaldi, and he did not disappoint:

Competitive bidding is limited to 5–10 companies that have always worked with the Vatican. No public announcements are posted. When the works are being done there is no budgetary ceiling and no item-by-item cost estimate.

Versaldi tried to quell the arguments and reintroduce his criticisms:

Opening up the competition to everyone, without distinction, would create chaos. It's better to have accredited companies that are regularly updated.

Vallejo Balda had a ready reply. He pointed to the recent works at the Vatican library, a thorn in the side of the Curia because of the huge discrepancy between the estimated and the actual costs:

It's impossible to analyze the documentation because of this style of operating. Who allocated the funds? How was the budget decided? Was an estimate drawn up? What criteria were used to choose the company? Who is responsible for management?

It was up to Zahra to bring the discussion to its lethal conclusion. For him it was not so much a question of introducing new rules. What was missing from the Vatican was the will to apply them:

The fundamental problem is that the procedures exist but they are not applied, and people are acting on the basis of practice and not rules. In addition to defining the guidelines more clearly, we need concrete tools to be able to step in and sanction departments that do not follow the guidelines. The procedures have to be updated and the various entities have to be held accountable.

The budgets had to be rewritten. Some of the auditors wanted even harsher measures. Prato was one of the most intransigent, proposing an across-the-board cut of 10 percent from the previous year's budget. He was held back by Kyle:

Considering how slowly things move at the Vatican, I think the priority should be to achieve concrete results. None of the companies for which I've worked has ever been a dictatorship: there's always teamwork but in the long run someone had to make a decision. It's not up to the employees to define the budget: it's up to the managers. Anyone who ignores the laws and deadlines has to be replaced. Allowing resources to be mismanaged is a scandal for anyone observing the Church from abroad, especially young people.

The auditors' move was audacious. Versaldi acted as if he was unperturbed. He stared at the professionals assembled in the room, the same men who a few months earlier had given Francis the ammunition he needed to go after mismanagement. For them to take such a tough stance had to mean the Pope was behind them. But then, the auditors might have been merely interpreting the
voluntas
of the Holy Father without involving him directly. So for his next statement the Cardinal performed a masterful balancing act:

I sense within this structure a physiological and pathological resistance … I wish to reiterate the need to try to change the Curia without opposing it. If the correction is then ignored, the heads of administration will have to allow themselves to receive instruction. If they do not, then we can talk about malicious resistance. I urge you to be cautious not because I am afraid of taking responsibility but because I want to find the right way to pursue the much hoped for change.
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In the end, he was overruled. With such a large deficit the time for caution and mediation was over. The meeting was adjourned. The auditors refused to sign the 2014 consolidated budgets of the Holy See and the Governorate.

The climate now turned frosty, and relations between COSEA and the Secretariat of State were tense. For two months the Secretariat had been led by a new man, Pietro Parolin, the Pope's closest collaborator. The 2014 budget had been prepared in the Apostolic Palace, the same building that housed the managers who had been appointed by Bertone, who had ruled the Secretariat with an iron fist for seven long years.

The Losses at Vatican Radio

To find a precedent for what the Prefecture's auditors had just done, you have to go back twenty years, to when Secretary of State Sodano rejected the budget of Vatican Radio.
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But this time around, the initiative was even more newsworthy: none of the budgets of the Holy See and the Governorate had been approved, which meant that most of the Vatican's finances were blocked. Still, this initiative was not necessarily enough to set a new path for Church government. The auditors knew this, as the aftermath of the historic precedent had made clear.

Vatican Radio is a glaring example of how things never change at the Holy See. The station and the whole telecommunications unit were still in the red, and every attempt to stem their losses had failed. This deficit was one of the many thorns in the side of the Curia's financial health, a situation that had long fed concerns and tensions—under both John Paul II and Benedict XVI—and today it was still provoking harsh comments from the auditors.

At the December 18 meeting, there was heavy criticism of the management of the radio station, particularly from Prato:

The Radio's propensity for spending beyond its means has remained the same, as its 26–27 million in losses attests. At the Vatican Radio
nichil sub sole novi
—there's nothing new under the sun. It would be interesting to know what leads anyone to think we can expect a sizeable lowering of the deficit in the future. The negative trend is substantially unchanged for
L'Osservatore Romano
, the print shop, the bookstore and the television center.

The number of employees and their costs have risen, and the reasons for the increase are unexplained. A hiring freeze is absolutely necessary. The consolidated deficit for 2014 is estimated at 25.1 million euros, following the estimated loss in 2013 of about 28 million euros, accelerating the progressive erosion of the patrimony.