The Vatican

What's New in Vatican Finance. A guide to understanding the changes

The publication of the balance sheets of the Holy See and of the Administration of the Patrimony of the Apostolic See, known by its acronym APSA, show the state of the Vatican's finances, one of the major areas reformed in recent years.

Andrea Gagliarducci-August 25, 2022-Reading time: 6 minutes

Recruits of the Vatican Swiss Guard parade in front of the Institute for the Works of Religion ©CNS photo/Tony Gentile, Reuters

How is the Vatican money? Mainly in the real estate sector and in conservative investments, with not excessive but safe yields.

What is the Vatican's money used for? First of all to carry out the mission of the Church, and therefore, for institutional purposes, to keep the Roman Curia, the "ministries" of the Pope that carry out the mission, functioning.

The answers to these questions can be found by reading the balance sheet of the Holy See and the balance sheet of the Administration of the Patrimony of the Apostolic See, known by its acronym APSA.

The balance sheets were published at the beginning of August, unfortunately only accompanied by an institutional interview with the top management, but without a press conference or additional explanations. To understand them, it is necessary to read them carefully.

It must be kept in mind that the balance sheets are snapshots of a financial situation that is still in the process of change. As we write, Pope Francis has established with a "rescriptum" that all investments and movable property transactions of the Holy See and related institutions must pass through the Institute for the Works of Religion and that all funds must be transferred to the so-called "Vatican bank" by September 30. However, this does not change anything in the budgets we are analyzing.

The two budgets

These are two very different budgets. The budget of the Holy See includes all the entities related to it. Until last year, some 60 entities were considered. Now the perimeter of entities has been expanded to 92, and also includes the administration of, for example, the Bambino Gesù Pediatric Hospital, linked to the Secretariat of State. The budget also includes the Vatican Health Care Fund and the Vatican Pension Fund, two entities that have generally been considered to have an autonomous budget and whose management has experienced moments of crisis.

The APSA budget, instead, is the budget of the entity that acts as the Vatican's "central bank" and the entity that is the central investor. With the transfer of funds from the Secretariat of State to the management of APSA, decided by Pope Francis last year, all investments, revenues and financial decisions become managed by APSA.

Needless to say, the approaches of the two budgets are very different. The Holy See's budget is 11 pages long, is written entirely in English and attempts to put together, in a very technical way, the numbers. However, in the end it is difficult to find the figures broken down for all the entities. There is no exact list of which entities were previously included in the counts and which were not, and the fact that all the accounts are now put together makes it impossible to know how each entity operated. The budget wants to show the new approach, but the comparison with the old one is difficult to make.

The APSA balance sheet, instead, has 91 pages and a more descriptive and historical approach, which goes beyond the data and tries to explain the ways of acting. It is a balance sheet that aims to clarify the philosophy and raison d'être of what has become a sort of central bank, but which began as a special administration to manage the money of the "Conciliazione", the agreement signed with the Italian State in 1929. In fact, Italy settled the dispute with the Holy See that had arisen with the invasion of the Papal State in 1870, granting the Pope the small territory of the Vatican City State and compensation for the land and the State that had been expropriated from him.

The main objective of the Vatican's finances

The primary purpose of the Vatican's finances, as mentioned, is to support the Pope's mission, i.e., the Pope's "ministries," the Roman Curia. It is not surprising, therefore, that since 2011 APSA has been obliged to send at least 20 million a year to the Curia, plus an amount to be calculated from other benefits, of which 30% goes to the Curia and 70% to APSA itself. This year, it is more than 30 million.

Curiously, the consolidated accounts of the Curia do not include the contribution of the APSA, but they do include 15 million euros allocated to the Holy See by the governorship, 22.1 million euros paid by the IOR 1 million and St. Peter's obolus. It is a contribution that cannot cover all the expenses of the Holy See.

The Dicastery for Communication is the one that spends the most, 40 million euros, while the nunciatures account for 35 million and the Evangelization of Peoples for 20 million. The Dicastery for the Oriental Churches costs 13 million a year, the Vatican Library 9 million a year and Charity 8 million.

It is worth noting that among the items with the highest expenditure is the Pontifical Lateran University, which accounts for 6 million a year. This is more than the Dicastery for Integral Development (4 million) or the Vatican Archives (4 million), while the amount spent on the Vatican Tribunal, amounted to 3 million, although it will probably see its expenses increase due to the ongoing trial. In fact, the same trial could have an impact on the 27.1 million of consulting services, which will surely increase if the costs of the different legal consultancies related to the same trial are taken into account.

In the words of the presidents

The statements accompanying the budgets are very optimistic. Father Antonio Guerrero Alves, prefect of the Secretariat for the Economy, pointed out that the Holy See has gone from total assets of 2.2 billion in 2020 to 3.9 billion in 2021, a figure that could be misleading if it were not remembered that previously some 60 entities were on the balance sheet, now 92, including the Bambino Gesù Hospital and, precisely, Vatican entities such as the Health Care Fund and the Pension Fund. And it is obvious that, as the number of entities increases, so do the assets: in 2020 it was 1.4 billion, today it is 1.6 billion.

On the other hand, Bishop Nunzio Galantino, president of APSA, pointed out that there was a surplus of 8.1 million euros, despite the difficulties created by the pandemic.

The fruits of real estate investment

The APSA is not only the "central bank", but also has the task of managing and investing assets. Historically, since the creation of the "Special", APSA has been committed to conservative investments and has mainly developed an investment policy in the real estate sector.

There are 4,086 properties with a surface area of 1.5 million square meters, of which 30% are destined for the free market. The remaining 70% are for institutional needs, and are therefore rented at favorable prices or at zero rent to employees and entities of the Holy See.

Overseas properties are managed by historic companies, established as far back as the 1930s, which from time to time make headlines as if they were novelties. They are not.

"Grolux, which manages real estate in the UK, is, among others, owned in 49% by the Vatican Pension Fund. It is now renovating a building for £16 million, which will be re-let at a potential rent of £1.2 billion. A similar operation to that of the Secretariat of State building on "Sloane Avenue" in London, after all.

In Switzerland, there were 10 companies, all now channeled into the historic "Profima", which made purchases of social housing. In France, everything is managed by "Sopridex".

In addition, APSA launched the "Maxilotti 1" and "Maxilotti 2" projects to renovate 140 homes that had become vacant and in poor condition. It should be noted that only 30% of APSA's housing units are put on the market, while 70% are for institutional purposes, granted at zero rent or subsidized.

In movable assets, APSA has maintained high liquidity and invested conservatively, with only 25% of the package allocated to shares. The investee companies are mainly located in France (€8.6 million), the United Kingdom (€5.2 million) and Switzerland (€1.1 million).

Towards full transparency

The publication of the two balance sheets is a step towards full financial transparency of the Holy See. APSA, in particular, has published its financial statements for the second time, while the Holy See has recently begun to present a consolidated financial statement prepared according to these criteria.

Missing, however, are the financial statements of the Governatorato, that is, of the Vatican City State Administration, which have not been published since 2015. The goal was to have a consolidated one that would pool the financial statements of the Governatorato and of the Holy See, but this has not yet happened. And the Governatorate is the administration most likely to make a good profit, because it also manages the Vatican museum center, and counts on the ticket revenues from the great mass of visitors who buy the Vatican Museums every year.

The authorAndrea Gagliarducci

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