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The Vatican released a summary of its 2014 financial statements on Thursday, reporting more than €1 billion in previously off-the-books assets and showing improved returns on investments over 2013.

Cardinal George Pell, who as prefect of the Secretariat for the Economy serves as the pope’s finance chief, said that the statements give the most accurate picture to date of the financial situation in the Vatican’s two main entities: the Holy See, which is the central administration of the world-wide Roman Catholic Church; and the government of Vatican City State, the 108-acre sovereign territory where the pope resides.

The cardinal said that the statements provide a realistic basis for pursuing the continuing financial reforms that Pope Francis has made a major goal of his pontificate.

As part of what the Vatican called a “journey of transition to new policies,” the 2014 statements are supposed to offer a more complete picture of assets and liabilities, verified by external auditors. The Vatican adopted international accounting standards in 2014, and those standards will be used to prepare the statements for 2015.

The Holy See reported a deficit of €25.6 million ($27.9 million), compared with €24.5 million for 2013. However, the Vatican noted, “had the same accounting treatment applied in 2014 been applied in 2013, the 2013 deficit would have been reported as €37.209 million. The improvement in 2014 was largely due to favorable movements in investments held by the Holy See.”

Nevertheless, Cardinal Pell described those returns as less than optimal. “We probably need to do a bit more to protect ourselves against the outside economic world,” he said. “We need a sophisticated investment strategy.”

Asset management is one of the major unresolved issues of the financial reform, with proposals for giving a major role to outside managers currently on hold amid resistance from Vatican offices that have long enjoyed autonomy in investing.

At its meeting this week, the 15-member Council for the Economy, which oversees the Secretariat for the Economy, tasked Cardinal Pell’s office with studying “investment and income practices to see whether we’ve got the right benchmarks and the right settings for the future,” said Danny Casey, the cardinal’s chief of staff.

Personnel policy is another unresolved area of reform, with the Secretariat for the Economy—established by Pope Francis in 2014—vying with the much older Secretariat of State for authority over hiring.

The Holy See’s biggest expense in 2014 was €126.6 million for the salaries of its 2,880 employees—an expense that won’t be reduced by layoffs.

“The Holy Father has said he doesn’t want any staff member dismissed, and they won’t be dismissed,” Cardinal Pell said.

A Council-appointed working group is studying how to use Vatican staff more effectively, Mr. Casey said. A recent consolidation of the Vatican’s media outlets, including several hundred employees of Vatican Radio, is supposed to reorganize staff in ways more appropriate to the digital age.

Vatican City State, which runs the popular Vatican Museums, reported a surplus of €63.5 million, up from €33 million in 2013. Some 1,930 people were employed by Vatican City State in 2014.

Source: http://on.wsj.com/1HCr0Lv