The Vatican tries to clarify how the former director of its missionary fundraising office in the United States authorized the transfer of at least 17 million dollars of his resources and donations to a new charity and private investment fund that he created and still manages today, he learned The Associated Press.
The new management of the Pontifical Mission Societies in the United States (TPMS-US), which raises money for the initiatives of the Catholic Church in developing countries, has written off most of that money – the 10.2 million invested in the private fund – since “there are no terms or guarantee of recovery of the investment”, according to its most recent financial statement.
The money was transferred from TPMS-US to a New York nonprofit organization, Missio Corp., and the private investment fund MISIF LLC created by the Rev. Andrew Small when he was national director of TPMS-US.
The two financial mechanisms aim to raise cital to offer low-interest loans and investments in Church-run agricultural initiatives in Africa.
Most of the money was transferred in 2021, just before Small completed his 10-year tenure at TPMS-US. Small, a British-born priest of the Missionary Oblates of the Blessed Virgin Mary Immaculate, remains CEO of Missio Corp., which runs MISIF, while also serving on an interim basis as number two on the advisory board for protection of Minors in the Vatican.
In a series of emailed responses to the AP, Small strongly defended money transfersstating that they were fully authorized and in the best interest of the Church and TPMS-US.
He provided letters of preciation from bishops and nuns in Africa who have benefited from Missio Corp.’s low-interest loans, as well as letters from two Vatican cardinals expressing interest in its impact investing initiatives.
Diversion of money?
However, those transfers at least temporarily reduced TPMS-US funding by a quarter and peared to have diverted money that had been raised in the Pope’s name to charities and Vatican-proved projects in Africa, Asia and Latin America.
The loss is a new financial headache for the Holy See, which for decades has seen successive cases of losing investments, opaque accounting methods, lax budgets and conflicts of interest that have undermined its financial reputation.
“The Holy See is aware of the situation and is currently investigating the details of what hpened,” Vatican spokesman Matteo Bruni told the AP.
According to publicly available tax documents and financial statements, the items transferred include $7 million in “refunds,” undefined “contributions,” and “support” from TPMS-US to Missio Corp. between 2019 and 2021, as well as a $10.2 million investment in MISIF, $7.5 million of which came from a fund allocated to TPMS-US.
The transfers were proved at the TPMS-US board, making virtually impossible to recover in litigation.
But according to TPMS-US representatives, it remains unclear whether the board was fully briefed on the slides and the Vatican’s view of the initiatives, such as concerns expressed by the then-prefect of the Vatican’s missionary office, Cardinal Fernando Filoni. .
The Rev. Robert Gahl, a moral theologian who directs a church management and administration program at Catholic University of the United States, said the evangelical emphasis of TPMS-US grants is different from MISIF’s development strategy of loans that must be repaid. .
“How can donor intent be guaranteed if the objectives of the two are so different?” he asked. “The intent of the donor is upheld in both civil and canon law,” she added.
Lloyd Mayer, a professor specializing in nonprofit law at Notre Dame Law School, said he didn’t see any serious violations in the transfers, but he did see some worrisome signs.
“And to me, the legal question is, has someone violated a legal right, or is this basically a domestic policy dispute?” he said.
Small strongly defended the transfers as consistent with both the mission of TPMS-US and its fiduciary duty to increase its funding, which he said had been dwindling in the face of declining donations.
He said he searched new collection methods as a micro-donation initiative in which donors could see the direct result of their contributions. Donors, he said, were increasingly unwilling to simply donate through the usual TPMS infrastructure, where Rome decides on projects.
“A lot goes to bishops and nuncios and only a tiny fraction goes to priests and nuns,” Small said. “Many millions of dollars of US money help pay for the operating expenses of nunciatures in mission countries, which seems anomalous with the messages sent each year to the faithful on Mission Sunday,” she argued.
The priest added that he had created Missio Corp., and the website that serves as its public face, Missio Invest, because he wanted to ply the principles of impact investing to the needs of the Church in its mission territories. It was an idea that he found support in some quarters of the Vatican, which hosted three impact investing conferences in 2014, 2016 and 2018.
“The ultimate goal was to create a social impact fund that could offer low-interest loans to Church-run initiatives in Africa to create a sustainable source of income for the Church and, in principle, make them less dependent on annual foreign donations, that had proven to be increasingly precarious,” he explained.
Small said that the TPMS-US board was informed about all the details and proved all the transfers, and that he made presentations at least once a year to the missionary office of the Vatican.
Robert Warren, a retired US Treasury Internal Revenue Service (IRS) criminal investigator who now teaches accounting at Radford University in Virginia, said the relationship between TPOMS-US and Missio Corp. seemed problematic because Small ran both institutions. Those overlping relationships, he noted, require additional scrutiny from auditors and managers.
“I always tell my students: you have to determine if there is a transaction with enough distance. If they have related parties, that means by definition that they don’t have a transaction with enough distance,” he explained.
If one charity makes significant contributions to keep another afloat, “you now have an interrelated party and all of those transactions require additional scrutiny from auditors and management.”
When Small’s term ended in 2021, TPMS-US, under its new national director, Monsignor Kieran Harrington, hired a law firm to investigate. Small did not respond to questions from lawyers.
“Independent analysis concluded that the TPMS board had proved the funds transfers in a manner consistent with its powers and the TPMS regulations,” a TPMS-US statement to AP said.
Harrington later replaced the board with people of higher rank and Vatican oversight. They include the Pope’s ambassador to the United States, Archbishop Cristophe Pierre, as well as other prominent cardinals and archbishops, such as Boston Cardinal Sean O’Malley, who as head of the Vatican’s child protection board is the current head from Small.
“The new board is working to evaluate the governance structures of the TPMS and will soon recommend new church statutes and vote on the civil corporation bylaws,” the society said in a message to AP.
With Harrington at the helm, the institution asked Missio Corp. to return the $10.2 million investment in MISIF, but the request was denied, according to TPMS-US’s audited financial statement.
“The management of the organization works diligently to recover the investment, however there are no deadlines or guarantee of recovery of the investment,” the statement said.
Small criticized that loss statement as “shortsighted” and said there was no basis for it given the fund’s results. He said it was “unfortunate” that TPMS-US had so little confidence in the church’s mission’s ability to repay its loans.
“If we don’t believe our fellow missionaries, how will the banks and other cital markets?” he asked.
However, not even Small’s own auditors could verify the calculations of their fund on the value of their portfolio of investments in December 2021, and declined to express an opinion on their financial statements for that year.
Source: The Associated Press