* Funds were previously not on overall balance sheet
* Vatican has been implementing clean up, new accounting rules
* Holy See ran 25.6 million euro deficit in 2014
By Philip Pullella
VATICAN CITY, July 16 (Reuters) - Vatican departments had more than a billion euros that were not declared on an overall balance sheet before new accounting standards kicked in last year, a financial statement showed on Thursday.
The man appointed to clean up Vatican finances said last December that departments had "tucked away" million of euros and followed "long-established patterns" in jealously managing their affairs without reporting to any central accounting office.
Thursday's statement showed that such funds totalled about 1.1 billion euros ($1.2 billion), the first time the Vatican has quantified the unreported funds discovered after Cardinal George Pell took up the newly created post of economy minister.
Pope Francis picked Pell, an outsider from the English-speaking world, to oversee the Vatican's often muddled finances after decades of control by Italians.
Pell did not suggest any wrongdoing but said the departments had long had "an almost free hand" with their finances. The Vatican said at the time that Pell was not referring to any "illegal, illicit or badly administered funds".
The financial statement for 2014, issued after a meeting of the Vatican's Council for the Economy, also showed that the Holy See, including most of its departments in Rome and embassies around the world, ran a budget deficit of 25.6 million euros, in line with the previous year.
Vatican City State, which has a separate budget, ran a surplus of 63.5 million euros, almost twice the previous year's, due to strong revenue from the Vatican Museums, which draw about six million paying visitors a year, and other cultural activities.
Since the pope's election in March, 2013, the Vatican has enacted major reforms to adhere to international financial standards and prevent money laundering and has closed many suspicious accounts at its scandal-rocked bank, the Institute for Works of Religion (IOR).
Last year, the Vatican adopted International Public Sector Accounting Standards (IPSAS) and each department's financial statements are now reviewed by am international auditing firm.
($1 = 0.9189 euros)