By Philip Pullella
VATICAN CITY, Feb 24 (Reuters) - Pope Francis has taken his boldest step yet to overhaul the Vatican's scandal-plagued finances, creating a new department with broad powers to oversee all of its economic and administrative affairs, the Vatican said on Monday.
The Secretariat for the Economy will answer directly to the pope and will be headed by Australian Cardinal George Pell, currently the archbishop of Sydney.
The pope will also name an auditor with oversight powers, according to a papal document known as a Motu Proprio, Latin for "by his own initiative", formalising the changes.
The Secretariat will be guided in policy making by a new 15-member Council for the Economy, which will be made up of eight cardinals and bishops and seven lay financial experts from the around the world.
The inclusion of the lay members was seen as a move by the pope to bring more outside expertise into the often closed world of Vatican finances to avoid repeats of scandals that have hit the Holy See for decades.
In the Motu Proprio, the pope says that the Church must see its possessions and financial assets in the "light of its mission to evangelise, with particular concern for the most needy".
According to the changes, an existing economic department known as the Administration of the Patrimony of the Holy See (APSA), which manages financial holdings and real estate, will formally assume the role of the Vatican's central bank.
The role and structure of the separate Vatican bank, formally known as the Institute for Works of Religion (IOR), will not change for the time being, a spokesman said.
Both the IOR and APSA have been at the centre of scandals. Italian magistrates are investigating the IOR on allegations of money laundering. The Vatican dismisses the charges.
Monsignor Nunzio Scarano, who worked as a senior accountant at APSA for 22 years and who had close ties to the IOR, is currently on trial for plotting to smuggle millions of dollars into Italy from Switzerland to help rich friends avoid taxes.
Scarano has also been indicted on separate charges of laundering millions of euros through the IOR. He says the money in his accounts at the IOR were from donations.
According the new structure, the Vatican Financial Information Authority (AIF), which was set up in 2011 to monitor the Vatican's adherence to international banking standards, will keep its current role.
The pope made his decision after an advisory panel of eight cardinals, including Pell, suggested the changes to the pontiff at meetings last week.
(Reporting by Philip Pullella; Editing by Andrew Heavens)