Taking from Peter to pay Paul

Pope Benedict XVI, John Paul II’s successor, not only needs to address theological issues — he also needs to balance the Catholic Church’s troubled finances. Sara Dixon reports.

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By  Sara Dixon Published  April 24, 2005

|~|pope 200.jpg|~|CUTBACKS: John Paul II’s reign saw the Church try to reduce costs.|~|The death of Pope John Paul II turned out to be the biggest media event the Vatican has seen in years, maybe ever. But will the recent popularity of the papacy be enough to put the church back in the black? That is just one of the many challenges the new Pontiff will face in an age of declining church membership, sexual abuse scandals and growing humanitarian crises. Vatican City is the world’s smallest state, situated on 108 acres (half a square kilometre) in the middle of Rome. It pays no income tax and there is no separation of church and state. The Pope owns the Vatican bank and therefore controls its finances. Church law dictates that he is the sole trustee of every dollar, euro, pound and 18,000 works of art; including priceless paintings, sculptures and manuscripts — none of which will ever be sold. The true wealth of the Catholic Church is known only to a select few within the Vatican, but it is said to have upwards of US$5 billion in the bank. That figure does not include the Vatican’s real estate holdings and stock portfolio, reported to be worth about US$1 billion each. Despite the staggering numbers, the Vatican has reported deficits over the past three years through 2003. According to its annual financial statement, and the exchange rate at the time, the Holy See, the Central Administration for the church, had a deficit of about US$11.8 million on income of nearly US$264 million. The separate budget for Vatican City also showed a deficit of almost US$11 million. The 2004 results are expected to be announced in July, and the Holy See predicts it will break even in 2005. The losses are blamed, in part, on the weaker US dollar. The Vatican, which operates using euros, says it lost US$42.4 million on currencies and US$15 million on financial assets in 2003. While Catholic churches donate about US$103 million a year to the Vatican, it relies heavily on contributions from the world’s 1.1 billion Catholics and receives most of its income from the Protestant United States, where Catholic Church membership is some 66 million strong (Canadian Catholics are the second largest contributor). According to financial statements, individual Catholic donations to the Pope, known as Peter’s Pence, were about US$56 million in 2003, slightly more than the year before. They are used primarily for the Pope’s charity, and the Vatican points out, the demand has been especially high recently because of “grave difficulties caused by tensions and conflicts around the world”. The Holy See’s budget is handled by the Administration of Patrimony of the Apostolic See (APSA). It doesn’t publish financial figures, but it is said to have an annual operating cost of roughly US$260 million, which includes the salaries of more than 2600 employees and pensions for about 1000 retired workers. Most of its revenue reportedly comes from several hundred apartments it rents out in Rome, (income from its real estate holdings was nearly US$30 million in 2003) the sale of museum tickets, gift shop items, coins, postage stamps, and a two-pump gasoline station that costs 30% less than the rest of Italy because it’s tax-free. Only those with special residence or work permits are allowed to use it however, in order to avoid any conflict with local competition. The Vatican also has its own newspaper and radio station, which has proven to be the biggest single expense for the city-state. In 2003, the Holy See paid US$13.5 million to cover losses at Vatican Radio for the second consecutive year. One expense the Vatican doesn’t have to worry about is the Pope’s travel, since Catholics in the host country pick up the tab. That’s a big saving, considering Pope John Paul II made 104 trips abroad during his papacy. The first Vatican financial reports weren’t published until 1970, and no details were revealed until the next decade, when the Pope ordered an annual financial disclosure as an effort to show the church had no hidden wealth. Shortly thereafter in 1982, the Vatican was besotted with scandal surrounding its dealings with Italy’s Banco Ambrosiano. The Italian bank collapsed with more than US$1.3 billion in debt, much of it from loans to companies controlled by the Vatican bank. The Holy Church made a goodwill payment of about US$250 million, but did not admit wrongdoing. Ambrosiano’s president, Roberto Calvi, was later found hanging from London’s Blackfriars Bridge. His death was recently declared murder and has not yet been solved. Church finances were mismanaged for years, according to those familiar with its history. The Holy See lost money until the early 1990s, shortly after John Paul II appointed US Cardinal Edmund Szoka as the head of Prefecture for Economic Affairs of the Holy See. He also set up a financial committee of cardinals to present the figures to a committee of international auditors. Cardinal Szoka brought in Ernst & Young to streamline the bookkeeping as he helped launch a cost reduction programme. The Holy See was profitable from 1993-2000. Szoka’s successor, Cardinal Sergio Sebastiani who took over in 1999, said last year that the recent cash crisis was provoked by “events such as the attack on the twin towers, the last series of terrorist attacks, the war in Iraq and the Israeli-Palestinian persisting conflict”. Sebastiani recently briefed the College of Cardinals running the church on the 2004 financial statement and 2005 budget, but no details were revealed. As for the Church as a whole, it is important to remember that the 2864 Catholic Diocese and nearly 413,000 parishes around the world are financially independent, and many have more money than the Vatican. However, the coffers of some have been depleted in recent years by sex abuse lawsuits, especially in the US. The archdiocese of Portland, Oregon for example, filed for bankruptcy protection in July 2004 after paying US$53 million to settle more than 100 sex abuse allegations. It was believed to be the first such action taken by a US Roman Catholic diocese. But diocese in other states soon followed suit. Because the Vatican is independent it has so far been financially untouched by the scandal, although it has been named in lawsuits filed in US courts. Even if the Vatican never has to reach into its pockets to settle scandalous cases, the question now is how much will Catholics contribute as a new papacy begins? It will be up to the Pope to take on the church’s challenges and keep the financial bottom line. ||**||

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