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.3

  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.4

  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.5 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.

  If this were a European Union country the managers would probably have already brought their account books to bankruptcy court. Not to mention that these same criticisms had been voiced at the June meeting. Now it was Versaldi’s turn to lower the boom on the budgets of both the Catholic radio station and of the L’Osservatore Romano:

  We can no longer argue that no expense should be spared in spreading the word of God. We can lower costs without affecting our institutional purposes. We’ll decide what to do in a few days. For now it’s clear that the Santa Maria di Galeria station has to be closed because its upkeep is particularly expensive6 … The increase in personnel does not correspond to an improvement in production. Even the Photography Service of L’Osservatore Romano, which has the exclusive on sales of pictures of the Pope, closes the year in the red.

  This well-known situation was frowned upon in the Curia, but for years nothing had been done to change it. As Kyle had pointed out at the June meeting, in the various working groups, “Not even one cardinal had supported the current position of Vatican Radio, not even the representatives of the developing countries. The Secretary of State had tried to intervene, but to little effect. The short-wave emissions had to be blocked and with determination.” The heads of the radio station had always opposed any change. Versaldi often remarked sarcastically that the managers of the broadcaster tried to treat “the heads of the Prefecture as businessmen rather than as men of the Church.”

  With regard to personnel costs Monsignor Vallejo Balda was scathing:

  Some aspects of management clearly show serious failures, and the heads of the various Administrations, including Father Lombardi, are perfectly aware of this. The equipment at the Ponte Galeria Radio belongs in a museum. The costs of supporting the media sector make up 20 percent of the Holy See’s expenditures. The equipment analysis also included the structures in Piazza Pia and Piazza Leo XIII. The heads of the media sector don’t even know the square footage of their offices. Since APSA handles the expenses, there may not be a lot of attention to optimizing costs. These properties could be rented and become a source of income. But the most radical change has to be in personnel. About 84 journalists work at L’Osservatore Romano, but not all of them are needed. They could at least modify their contracts, but instead, everything continues passively from one year to the next. Although this year’s budget is balanced, it’s hiding some unconvincing elements, such as the constant increase in personnel costs.

  In the fall of 2013, with the help of the McKinsey consultants, the COSEA investigation uncovered the reasons for the hands-off treatment of the account books. Four risks were identified and presented to the attention of the cardinals in the Curia:

  The off-budget resources go to covering various geographic areas. At Vatican Radio the same number of editorial resources are dedicated to France and Belgium (three people for about 53 million Catholics) and to Albania (the same number of people for about 0.3 million Catholics). L’Osservatore Romano: the copies printed in Poland do not fully recover the costs of printing and shipment (a loss of about 1.5 euros per copy). Operations management is insufficient (as are outsourcing policies and production planning): 70 percent of the copies of the Italian edition are returned by the newsstands. The rotary printer of the Vatican Print Shop is only used for two hours a day. There is a duplication of the main activities by the various media departments (news production, digital activities, etc.).

  Francis insisted on a communications reform and the creation of the Vatican Media Center, prepared by COSEA advisor Francesca Chaouqui. In early January 2014, the Commission scheduled an intense series of meetings with the heads of the various editorial departments. This enabled the Holy Father to get the cardinals’ endorsement of a new department that would streamline human resources, costs, and investments in the field of communications. It would be an essential tool of the Church’s evangelical mission in the world. In June 2015, the Secretariat of Communications was established, to be headed by Father Dario Edoardo Viganò, director of the Vatican television center.7 He would be assisted by Monsignor Adrian Ruiz, head of the Vatican internet service, who gave Francis the gift of an iPad—in regulation white, of course—the day after his election to the papacy.

  The Counteroffensive of the Vatican Bureaucracy

  Starting on December 16, 2013, COSEA and the McKinsey consultants, including Filippo Sciorilli Borelli, entered the office of the Secretariat of State to begin a series of inspections and audits. The climate they found was icy. To get their hands on the data they needed, they had to overcome distrust, reluctance, and resistance. Zahra, feeling isolated, turned to Xuereb for advice. The cardinals close to Francis were not taking a stand, and tensions were mounting between COSEA and the Secretariat of State. A dangerous fracture was opening up between Bergoglio’s supporters at the very moment they needed to be most united. In a quick sequence of events, between the end of 2013 and the beginning of 2014, COSEA opened up a much broader series of investigations into twenty-five departments of the Holy See.

  On December 4, 2013, COSEA had written to Parolin asking that the documentation requested for the audit be made available. On December 16 the audit began, but on January 3 another letter was sent to Parolin in which Monsignor Vallejo Balda hinted that the acts and documents requested be forwarded no later than January 10. The next day, in a two-page letter, Parolin told him to take a hike. And he explained why: for one group of departments, “this Secretariat does not have the documents requested; beside which, it would seem more correct to forward the request directly to each of the departments mentioned.” For some of the bodies named in the COSEA letter, he recalled that “the documentation is also kept at the Prefecture.” All the Commission had to do was search through the file cabinets in its own offices. Parolin could not conceal his irritation:

  Allow me to add that I felt it was my duty to bring to the attention of the Holy Father our correspondence on this occasion, so that everything may be done in loyal adherence to the desiderata of the Holy Father.

  At the same time, the budgets that had not been approved by the Prefecture needed to be cleared. On January 3, 2014, the matter was brought directly to the attention of the Pope, who granted an audience to an increasingly distressed Cardinal Versaldi. After the meeting, Versaldi wrote an urgent letter to both Cardinal Bertello, President of the Governorate, and Calcagno, the head of APSA, with a copy to Parolin. They needed to find a way out of the mess, and the terms in which Versaldi chose to express himself were not reassuring:

  At the audience granted to me by the Pope in response to my request, the Holy Father delegated me to sit down with APSA and the Governorate before the mid-February meeting of the fifteen cardinals. The purpose of these encounters is to explain to these dicasteries the criticisms advanced by the international auditors and give the technicians involved the means to assess and absorb them. This will make it possible to unblock a situation that will otherwise create a crisis for the whole economic and administrative system of the Holy See and the Governorate. I will come to request that your dicastery quickly indicate its willingness to attend a meeting in the Prefecture designed to satisfy the Pontiff’s instructions. For my part I can assure you that my intention is to have a serene and collaborative talk for the sake of mutual understanding and a solution to the problems that objectively exist and that this Prefecture has signaled for years but that have taken too long to overcome.

  Calcagno tried to lift the tension and sent a prompt reply:

  We are always available to verify together whatever can be improved. My best wishes for your work.

  See you soon, D. Calcagno

  The two sides were locked in a dangerous struggle. On the one side the Secretariat of State felt invaded by the auditors, with their pressing demands for information; on the other, the budgets of the Holy See had been blocked for weeks. At the Apostolic Palace the atmosphere was stifling. And the news of some unexpected expenses did nothing to lift the tension. The Brazilian press reported that the Holy Father had donated 3.6 million euros to the Organizing Committee of the World Youth Day held in Rio de Janeiro on July 22–29, 2013, to help cover the enormous 28.3 million euro debt it had left. The event had been managed by the local archdiocese, whose bishop, Orani João Tempesta, was in line to be made a cardinal by Bergoglio.