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August 07, 2015

Letting in the light? Vatican adopts IPSAS

Vatican light

 Posted by Tim Irwin[1]

Throughout Europe, fiscal secrecy gave way to openness as absolute monarchy gave way to constitutional government, mainly during the nineteenth century. Kings, if they weren’t simply deposed, were constrained by legislatures and judiciaries, and budgets and accounts became public documents. Absolute monarchy has of course disappeared from Europe. Or, rather, it has almost disappeared. In a small corner of the continent, the Vatican holds out against the trend, describing itself as “an absolute monarchy” (albeit an elective one) in which the Pope “holds full legislative, executive and judicial powers.” Not surprisingly, the Vatican publishes less information on its finances than other European governments.

 Yet even absolute monarchs depend on the consent, or the acquiescence, of at least some of the governed. Moreover, unlike other governments, the Vatican does not have the power to raise taxes using coercion, only to collect donations. It may also be influenced by what Paul Collier in War, Guns, and Votes (p. 186) calls a neighborhood norm of accountability. In any case, the Vatican has been opening up, its most recent step being the announcement of a plan to prepare accounts that follow International Public Sector Accounting Standards.

 In fact, the Vatican’s transition to greater openness goes back a few decades. In the 1970s, its finances seem to have been entirely secret, but, in 1981, Pope John Paul II began a tradition of annual financial announcements. That change was spurred by financial scandals of the early 1980s. After more recent scandals, the Vatican’s bank published its financial statements for the first time, in 2012. These statements follow International Financial Reporting Statements and are audited by one of the big four.

 Despite all this, the financial statements of the Holy See and the Vatican—the two are separate entities, one corresponding to the church, the other to the territory—seem still to be confidential. Over the years, commentators have noted that some annual announcements are more informative than others, the Vatican choosing each year which numbers to disclose. As an Italian newspaper remarked of the most recent announcement, it offers some general ideas and some high-level numbers, but it does not “descend into the details”—whose proverbial resident is of course well known.

[1] Senior Economist, PFM1 Division, Fiscal Affairs Department, IMF 

 Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.


Thanks for the blog Tim. I assume they are going for accrual? It will be interesting to see how they deal with the tricky issues of valuation of assets, how they define define "control" for determining the scope of the accounting entity and associated issue of consolidation.

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