Because profound issues of governance and institutional politics pervade large entities, of all types and in all locations, it’s worth noting the recent flurry of activity at the top of the Catholic Church.
To start, the news wires lit up with the May 12 announcement by Pope Francis of a commission to study the possibility of women as deacons. With this start from scratch -- while the debate on women’s participation in corporate boardrooms, legislative bodies and university faculties has long moved to questions of real progress -- optimism must be tempered. The opening of formal dialog suggests that while full clerical participation will not be available for women any time soon, a long forward step has been taken.
As for more mundane matters of Vatican governance and finance, the news was less up-beat.
That is -- since the year 313 AD, when Constantine bestowed his imperial favor and benevolence on the early Christians, the Church has managed to render successfully unto Caesar, uninhibited by the assistance of outside auditors.
So after seventeen centuries, it would have involved both a real cultural shift and considerable internal dislocation in December 2015, when the Vatican announced its engagement of PwC to perform history’s first independent audit of the Holy See.
Political reality soon intruded, however, with the unsurprising news in April 2016, that PwC’s audit was being “suspended.”
Only the most naïve and credulous would take as gospel the official Vatican version, that “issues have emerged regarding the meaning and scope of certain clauses of the contract and their methods of implementation,” or the suspiciously explicit spin that sought to disavow any “considerations linked to the integrity or quality of the work initiated by PwC, let alone the intention of one or more entities of the Holy See to block the reforms in process.”
Background first. As known to experienced auditors, “first-time-through” can make the Herculean project to hose out the stables of King Augeas look like a once-over with a handi-wipe. The international standards on auditing require in part (IAS 510(6)), in the start-up work on a client’s opening balances, that:
“The auditor shall obtain sufficient appropriate audit evidence about whether the opening balances contain misstatements that materially affect the current period’s financial statement by:
(a) Determining whether the prior period’s closing balances have been correctly brought forward to the current period or, when appropriate, have been restated;
(b) Determining whether the opening balances reflect the application of appropriate accounting policies….”
That work would be especially daunting with no predecessor auditor on which to rely. In the Vatican’s case – where never done before – there would have been no telling what financial skeletons lay deep and restive in those ancient catacombs, only waiting to be discovered and released. Small wonder that those with incentives to avoid the process would resort to postponement, denial and evasion.
Consider the reticence and anxiety, on the part of the Vatican’s functionaries charged with the keys to its treasury, and now called upon to yield up their sacred confidences to a team of invasive outsiders.
In fact a full-blown turf battle has been revealed, since PwC’s “suspension,” between the reform-oriented Cardinal George Pell of the Vatican Secretariat for the Economy, who managed the mandate given to PwC, and the old-school leader of the Secretariat of State, Archbishop Angelo Becciu, who unilaterally and without notice to Pell informed the Vatican entities charged to cooperate in providing information that Pell’s authority was revoked.
(Developments will leak out, from day-to-day and highly managed, on these internal structural struggles; for now, see the Guardian, the Catholic News Agency, and the National Catholic Register.)
Briefly put, when he blessed PwC’s presence, Pope Francis mis-read his subordinate administrators’ readiness to cooperate -– that is, that the auditors’ archeological excavations in the Vatican’s books and records at least threatened to open ancient tombs and sarcophagi where had rested ledgers and records permeated with rot and decay.
Further at the level of actual job performance, a client so insecure and defensive as to pull the plug, at the earliest stages of the engagement, would pretty well meet an auditor’s definition of “an engagement from hell.”
To an outsider, the Vatican’s unseemly internal scrum at the foot of St. Peter's throne might not reach the scale of the Great Schism between Rome and Avignon in the Middle Ages -- perhaps more resembling the scene in Woody Allen’s 1971 “Bananas,” where rival teams of cross-bearing monks degenerate into a melee over a parking place.
In such a fragile environment, hostile factions within the client that could scupper the job at the outset would have ominous implications for PwC’s ability to report in any event. It is difficult enough to assess the veracity of client representations with the skepticism required by professional standards. More so, to raise questions of credibility when the client holds over an inquisitive auditor the potential invocation of celestial fury or the unleashing of eternal hellfire and damnation.
It would suggest no dishonor to PwC if the warfare inside the Vatican obliges them to cap their pens and close their bags and make a diplomatic retreat -- so long as their withdrawal can be sold to the waiting faithful as a professional matter, and not under the threat of excommunication or anathema.
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