Pope Francis' Financial Reforms Rattle Vatican's Old Guard

By Sylvia Poggioli

Published March 14, 2015 at 7:35 AM EDT

Pope Francis arrives for a special audience with the members of the UCIIM Catholic union of Italian secondary school teachers, in the Pope Paul VI hall, at the Vatican on Saturday.

When the College of Cardinals elected the new head of the Roman Catholic Church two years ago, Pope Francis was given the mandate to put the Vatican's dysfunctional administration in order.

As the papacy's enters its third year, some of the biggest reforms have been achieved in the Vatican's finances, long tainted by scandal.

Three days after his election, Pope Francis made clear his vision of what the Catholic Church should be when he exclaimed, "Oh, how I would love a poor church ... for the poor."

But the pope did not mean he wanted a church with empty coffers. The Vatican's finances had long been plagued by suspicion of corruption. In order to clean house, Pope Francis created a new department, the Secretariat for the Economy, and chose as its prefect an outsider to the opaque and secretive world of the Vatican bureaucracy.

Australian Cardinal George Pell arrives for a meeting at the Vatican. Last year, Pope Francis named Pell as prefect of the newly formed Secretariat for the Economy to oversee the Vatican's finances.

A New Order

Shortly after taking over his new job, Australian Cardinal George Pell spoke to the media.

"We are working so that international financial standards will be followed in all the dicasteries [departments] and sections of the Holy See," Pell said.

For an organization that in the past had been accused of money laundering, Cardinal Pell set the bar very high. "We are aiming at a substantial transparency," he said. "Our ambition is to become something of a model of financial management, rather than a cause for occasional scandal."

In less than a year, sweeping reforms have gone into effect.

The Vatican Bank closed down thousands of suspicious bank accounts, and cooperation agreements have been signed with Germany, Italy and the U.S. for full transparency and exchange of information to combat tax evasion and money laundering.

Starting this year, there will be one centralized budget and consolidated balance sheet showing earnings and expenses for each department.

No More Shell Games

In overseeing many of these changes, Pell's gruff and no-nonsense manner irritated many of the Old Guard, who feared the outsider was amassing too much power.

"When it comes to money and to properties, [the] Vatican becomes always a place of snakes," says longtime Vatican analyst Marco Politi. He also says Pell "rocked the boat."

"And in this job, Pell has been in the last months very energetic, sometimes maybe too swift ... not observing the soft diplomacy," he says.

Pope Francis knew there would be resistance to Pell, says Gerard O'Connell, Vatican correspondent for America magazine, a Jesuit publication. "Because you are touching interests; you are touching a whole network ... of money moving here and there that has been put in place over decades".

At the pope's instructions, Pell insisted that all funds that different Vatican departments pocketed from outside sources must now be listed in the balance sheet. O'Connell says that means no more shell games.

"They can't keep money in the closet and use it for other purposes," he says. "Because people were giving money, but also trying to influence the policy directions and even nominations."

Issues Remain

Last month, in a move reminiscent of the "Vatileaks" scandal that helped end the papacy of Benedict XVI, an Italian weekly — under the headline "The Luxuries of the Moralizer" — published Pell's receipts for business-class airfare and expensive vestments.

The Vatican strongly defended the cardinal, calling the leaks "undignified, petty and illegal."

A few days later, Pope Francis announced his approval of the legal framework of three new financial oversight bodies. That gives Pell wide powers, including monitoring of other Vatican departments.

But the pope did not give him control over the Vatican's multimillion-euro real estate portfolio. Vatican analyst Politi says this fits in with the introduction at the Vatican of the concept of checks and balances.

"If you are a controller you cannot be a manager, so management must be separated from vigilance," he says.

Politi points out that Cardinal Pell is a conservative who does not share all the pope's views on how to run the Catholic Church. He says that shows that in Pope Francis' renewal of the church, "everybody has to take part."