Vatican City, Dec 5, 2014 / 12:09 pm (CNA/EWTN News).- In a recent article for the Catholic Herald, Cardinal George Pell, prefect of the Secretariat for the Economy, shed light on the progress made in the reform of Vatican finances, which he is spearheading.

Cardinal Pell wrote in the Dec. 4 article that “three basic principles lay at the heart” of their work of reforming, and that these principles “are not original, and not exactly rocket science.”

First, the Vatican “should adopt contemporary international financial standards, much as the rest of the world does”. Second, “Vatican and procedures should be transparent, with financial reporting broadly similar to that of other countries, and the consolidated annual financial statement would be reviewed by one of the Big Four audit firms.” And third, “within the Vatican, there should be something akin to a separation of powers and that within the financial sector there would be multiple sources of authority.”

These principles have led to the drafting of a handbook of financial management, which rationalizes the accounting procedure of all the Vatican offices.

The training of employees to fill the new accounting procedures has already began, and it is expected that the new procedures will be in effect by January, 2015.

“It is important to point out that the Vatican is not broke,” Cardinal Pell wrote. “Apart from the pension fund … the Holy See is paying its way, while possessing substantial assets and investments.”

He added that “in fact, we have discovered that the situation is much healthier than it seemed, because some hundreds of millions of euros were tucked away in particular sectional accounts and did not appear on the balance sheet.”

While some might take this as a suggestion that Vatican entities held “black funds,” Fr. Federico Lombardi, Holy See press officer, told CNA Dec. 5 that “Cardinal Pell did not speak about illegal, illicit, or badly managed funds,” but rather about “funds that were not in the official balance sheet of the Holy See or of the Vatican City State,” of which “the Secretary for the Economy has been aware in the course of the process of study and revision of Vatican administrations.”

“It was known, and even already publicly explained by the Prefecture for the Economic Affairs, that the Holy See / Vatican City State consolidated balance sheet given to the Council of Fifteen Cardinals did not include the overall of the numerous administration linked to the Vatican, but only the main institutions of the Curia and of the State,” Fr. Lombardi added.

It is likely that Cardinal Pell was referring to three independent balance sheets which are not included in the general Vatican balance sheet: those of the State Secretariat, of the Congregation for the Evangelization of Peoples, and of the Congregation for the Eastern Churches.

Cardinal Pell explained that the questions of why Vatican finances had been in a poor state for some time is “one of the first that would come to our minds as English-speakers … but one that might be much lower on the list for people in another culture, such as the Italians,” adding that “those in the Curia were following long-established patterns.”

The normalization of Vatican finances was begun in 2010 by Benedict XVI, the cardinal noted, with the establishment of the Financial Information Authority, an agency “dedicated to preventing and eradicating money laundering.”

Pope Francis, has continued this process of reforms, Cardinal Pell noted, “which are well under way and already past the point where it would be possible to return to the 'bad old days'. Much remains to be done, but the primary structural reforms are in place.”

In several places in the article, Cardinal Pell noted the importance of lay financial experts in the reform process, highlighting its novelty and aid in transparency. In particular, a lay auditor general will be appointed next year.

Cardinal Pell also outlined the continuity of the Institute for Religious Works, saying it “will continue to be governed by an expert lay board, set up by a commission of cardinal, but will not technically be the Vatican bank as it deal with money from dioceses, religious orders and Vatican employees.”

The Administration of the Patrimony of the Apostolic See, he clarified, will be the Vatican treasury, adding that “it will continue to link up and liaise with central banks.”

Investments, Cardinal Pell explained, “will be made through the Vatican Asset Management, controlled by an expert committee, which will offer a range of ethical investment options, with varying degrees of risk and return, to be chosen by individual agencies such as Congregation. Prudence will be the first priority, rather than risky high returns, in order to avoid excessive losses in times of turbulence.”

“These reforms are designed to make all Vatican financial agencies boringly successful, so that they do not merit much press attention,” the cardinal concluded.

“Donors expect their gifts to be handled efficiently and honestly, so that the best returns are achieved to finance the works of the Church, especially those aimed at preaching the Gospel and helping the poor escape from poverty. A Church for the poor should not be poorly managed.”