Friday, October 30, 2020

Vatican uses millions of dollars of donations meant for charity to cover its budget deficit

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Every year, Catholics around the world donate tens of millions of dollars to the pope. Bishops exhort the faithful to support the weak and suffering through the pope’s main charitable appeal, called Peter’s Pence.

What the church doesn’t advertise is that most of that collection, worth more than more than €50 million annually, goes toward plugging the hole in the Vatican’s own administrative budget, while as little as 10% is spent directly on charitable works, according to people familiar with the funds.

The little-publicized breakdown of how the Holy See spends Peter’s Pence, known only among senior Vatican officials, is raising concern among some Catholic Church leaders that the faithful are being misled about the use of their donations, which could further hurt the credibility of the Vatican’s financial management under Pope Francis.

The Vatican is currently embroiled in a scandal over opaque real-estate investments in London, which has triggered a power struggle within the Vatican’s bureaucracy and led to the dismissal of its chief financial regulator. Last month, the Vatican was suspended from an international network of anti-money-laundering watchdogs.

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Meanwhile, the Holy See is struggling with a growing budget deficit, with the pope warning cardinals of the “grave impact” on the body’s economic future. The Vatican’s continuing financial problems reflect a lack of progress on improving its management and finances, which Pope Francis was elected in 2013 with a mandate to overhaul, following allegations of corruption, waste and incompetence there.

Under church law, Peter’s Pence is available to the pope to use at his discretion in any way that serves his ministry, including the support of his administration. The collection’s website says that, to support the pope’s charitable works, “Peter’s Pence also contributes to the support of the Apostolic See and the activities of the Holy See,” emphasizing activities that help “populations, individuals and families in precarious conditions.”

The use of Peter’s Pence donations mostly to plug the budget deficit is particularly sensitive for Pope Francis, who began his pontificate by calling for a “poor church for the poor,” and has continually emphasized the church’s mission to care for and advocate on behalf of the most vulnerable.

The Vatican didn’t respond to a request for comment on the use of the funds.

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Peter’s Pence, a special collection from Catholics around the world every June, is billed as a fundraising effort for the needy. The Vatican’s website for the collection, www.peterspence.va, describes it as a “gesture of charity, a way of supporting the activity of the Pope and the universal Church in favoring especially the poorest and Churches in difficulty. It is also an invitation to pay attention and be near to new forms of poverty and fragility.”

A section of the website dedicated to “works realized” describes individual grants, such as €100,000 in relief aid to survivors of last month’s earthquake in Albania or €150,000 for those affected by cyclone Isai in southeastern Africa in March.

Local church leaders echo the Vatican’s line when soliciting contributions. According to the website of the U.S. Conference of Catholic Bishops: “The purpose of the Peter’s Pence Collection is to provide the Holy Father with the financial means to respond to those who are suffering as a result of war, oppression, natural disaster and disease.”

But for at least the past five years, only about 10% of the money collected—more than €50 million was raised in 2018—has gone directly to the sort of charitable causes featured in advertising for the collection, according to people familiar with the matter. Donations can also support charitable causes indirectly if the Vatican invests them and makes a profit.

Meanwhile, about two-thirds of the money has been used to help cover the budget deficit at the Holy See, these people said. The Holy See consists of the central administration of the Catholic Church and the papal diplomatic network around the world. In 2018, the budget deficit reached roughly €70 million on total spending of about €300 million, reflecting chronic inefficiencies, rising wage costs and hits to investment income.

Donations to Peter’s Pence have dropped notably in recent years, to over €50 million in 2018 from over €60 million in 2017, these people said. Concern among ordinary Catholics over the church’s clerical sex-abuse crisis, as well as about the Vatican’s financial transparency, have weighed on donations, these people said. Another decline is expected for 2019.

The Peter’s Pence fund, which is managed by the Secretariat of State, the Holy See’s executive, has been under increased scrutiny since October, when Vatican police raided the Secretariat’s offices and those of the Vatican’s financial watchdog as part of an investigation into a large investment in a building in London’s upmarket Chelsea district. Vatican officials believe at least some of the money for the controversial investment came from Peter’s Pence.

In November, Pope Francis said that he had authorized the raids because of apparent corruption, but he defended the practice of investing Peter’s Pence donations in real estate and other assets, rather than using it for charity immediately.

“When the money from Peter’s Pence arrives, what do I do? I put it in a drawer? No. This is bad administration. I try to make an investment and when I need to give, when there is a need, throughout the year, the money is taken and that capital does not devalue, it stays the same or it increases a bit,” the pope said last month.

But no more than a quarter of the annual Peter’s Pence contributions is available for investments, after the bulk is spent on the Vatican’s operating costs, according to the people familiar with the fund.

The total assets of Peter’s Pence now total about €600 million, down from about €700 million early in the current pontificate, largely on account of unsuccessful investments, said the people familiar with the funds’ use.

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