The next pope will not only have to care for the souls of his 1.1 billion-member flock worldwide, but also the church's accounts, hit by the falling dollar, sex abuse settlements and a growing diplomatic mission.
Like the chief executive of a worldwide corporation, John Paul II (search) demanded financial accountability and promised greater transparency after years of secrecy and even scandal.
But in the last years of his papacy the Holy See (search) was back in the red. In presenting the latest accounting, the chief of the Holy See's economic affairs office cited Europe's sluggish economic recovery, poor investment climate and the rising strength of the euro against the dollar.
"Our financial statement could not help but reflect all of this," said Cardinal Sergio Sebastiani (search).
The College of Cardinals running the church until a new pope is elected said in their daily report Tuesday that Sebastiani briefed them on the 2004 statement and several details of the 2005 budget, but gave no details.
"The dollar has really hurt them," said the Rev. Thomas Reese, a Vatican expert. "We're not only talking about money coming from the United States. All the rich guys in the Third World also give in dollars."
Vatican (search) officials bristle at what John Paul once called "the myth" that the Holy See is immensely wealthy.
In a rare disclosure last July, a Vatican accountant said the net patrimony, or the Vatican's real estate holdings, are assessed at a relatively modest $908 million and that such properties as St. Peter's Basilica and the Sistine Chapel are priceless, listed at a symbolic 1 euro.
The Vatican went through 23 money-losing years until 1993, but the situation improved dramatically after a revised code of church law made clear that dioceses around the world should assist the Vatican.
Still, its most recent financial statement, issued in July for fiscal year 2003, reported a deficit for the third consecutive year. It listed 2003 revenues at about 203.6 million euros and expenditures of 213.2 million euros for a deficit of 9.6 million euros, or $11.8 million at the exchange rate at that time.
Vatican financial experts blame heavy personnel costs — 2,674 people work in Holy See offices, more than half of them lay people. But the Vatican has also greatly expanded its diplomatic activity during John Paul's activist papacy and the Vatican now maintains relations with 174 states around the world — a costly enterprise.
The sex abuse crisis has also taken a heavy financial toll on the Church in the United States and Ireland. The total payout to victims of clergy sex abuse in the United States has now climbed to $840 million since 1950, with three dioceses — Spokane, Wash.; Portland, Ore.; and Tucson, Ariz. — seeking bankruptcy protection.
The Vatican doesn't bail them out, but the payouts raise questions about the financial ability of dioceses to keep up their contributions and could discourage individual faithful from giving through what is known as Peter's Pence, the financial support offered directly to the pope to use as he sees fit.
"The American bishops will always make sure they give the Vatican what the Vatican needs," said David Gibson, a former Vatican Radio newsman and writer on Catholic issues.
But he said there may be other implications.
"If the average Joe stops giving, they will depend on very conservative, big-money types," Gibson said.
Vatican officials say the United States remains the main source of donations followed by Germany, but they don't provide any breakdown on who's giving. But because of the dollar weakness, assistance from the dioceses worldwide dropped from 85.4 million euros in 2002 to 79.6 million euros in 2003, the July statement said.
In a separate statement, the Vatican said Peter's Pence reached $55.8 million in 2003, up 5.7 percent from 2002.
The financial statement on the running of the church is not a conventional balance sheet, and does not include revenues from museums, stamps and other items because those are covered by another report focusing just on the Vatican city-state.
While it provides no breakdown, Vatican accountant Paolo Trombetta said during the presentation of the most recent statement that the Vatican sought "safe if low-yield" investment opportunities, much of it in government bonds.
Experts say the Vatican has dollar-denominated stocks in its portfolio, making sure the Holy See avoids investments in companies that manufacture contraceptives or armaments.
From time to time there have been reports that the Vatican was considering selling Michelangelo's statue of the Pieta, sculptures by Bernini or other masterpieces to pay its debts or help the world's needy. It has responded that such artworks constitute "a treasure for all humanity" and cannot be sold.
John Paul ordered an annual financial disclosure in 1981 as part of his efforts to debunk the idea that the Vatican is wealthy.
He also set up a financial committee of cardinals, which presents the figures for examination of a committee of international auditors. He also shook up the officers of the Vatican Bank, which is officially known as the Institute of Religious Works.
The Vatican was stung by its dealings with Italy's Banco Ambrosiano, which collapsed in 1982 with its president, Robert Calvi, found hanging under a London bridge.
The bank had been left with $1.3 billion in debt. Most of the money had been loaned to a series of shell companies in Panama and Luxembourg that were controlled by the Vatican bank.
The Vatican refused to admit any wrongdoing but agreed to a goodwill payment of about $250 million to creditors.
Calvi, known as "God's banker" because of his Vatican ties, was originally considered a suicide victim. But Italian investigators have recently been pursuing murder charges and several suspects are under investigation.