Confidential Soab Quick Scan report: Government’s support to postal services fell short

POSTED: 11/18/13 1:23 PM

St. Maarten / By Hilbert Haar – The government failed to support the Postal Services of St. Maarten (PSS) in 2010 when it needed a letter of guarantee to obtain loans for critical investments. From the start in October 2010 up to June 2012, the post office suffered operational losses to the tune of 774,634 Antillean guilders, or almost $433,000. This appears from the Quick Scan report the government accountant bureau Soab performed at the request of Minister of General Affairs Sarah Wescot-Williams. Today has a copy of the confidential report in its possession. Soab sent it to Wescot-Williams on January 2, 2013. In total, the bureau issued just seven copies.

The Quick Scan examined strategic and management control, finances and corporate governance at the Postal Services. The financial chapter shows that things went wrong from the beginning. The strategic business plan assumed that investments in fixed assets would be funded by long term loans. “The government would provide a loan of 450,000 guilders with no repayment schedule. Also a loan would be provided by the Central Bank of Curacao and Sint Maarten of 800,000 guilders,” the report states. In November 2010, the postal services asked the government for a startup capital of $250,000 for investment in “critically needed software and hardware.”

However, none of this money came the Postal Services’ way for a number of reasons. The startup capital was not forthcoming, according to the interim director (at the time Denicio Richardson –ed.) because the government indicated “that the funds were not budgeted.” Soab found a letter from the supervisory board to Richardson stating that “the government will not be forthcoming with the funds requested unless properly motivated by PSS.”

The Government of St. Maarten owns 100 percent of the shares in Postal Services Sint Maarten. Wescot-Williams, in her role as Minister of General Affairs, is the government’s shareholder representative.

All PSS received was a meager 8,000 guilders loan from the Bureau Telecommunication and Post that provided an additional 32,000 guilders in 2011.

On January 5, 2012, PSS turned to the Central Bank for an 800,000 guilders loan to complete the financing of its investment plan. PSS needed its own building as collateral to secure this loan, so it asked the government to give it the building on the Pondfill in long lease. The decree granting the long lease came only on June 21, 2012.

On January 26, 2012 the Central Bank indicated that the loan could be placed with the Girobank, but when PSS applied, the bank demanded a letter of guarantee from the government. That letter never arrived.

Then, on September 11, PSS knocked on the door of the Windward Islands Bank with a request for a non-revolving loan of 950,000 and for financing receivables through an overdraft facility of 200,000 guilders. according to PSS’ financial controller the loan was needed for investments in a point of sale system, vehicles, network systems and a telephone system.

The WIB turned down the loan request based on “the present losses of the company and its inability to carry the facilities requested.” In other words, the bank has no confidence that PSS would be able to pay off such a loan. The bank would consider granting the loan however if the government would provide “an irrevocable standing order in favor of the bank of at least equal to loan payment during the first year of the loan.” For the remainder of the loan the bank required a formal guarantee from the government that covered any shortfall in the company’s cash flow.

Interim director Richardson presented these requirements to the supervisory board. According to the Soab-report, the board never reacted to it. Thus, PSS never managed to acquire the loans it needed for its investment plan. The board reproached Richardson for “not exerting enough efforts in finding other sources of funding.”

“Assumption was made in the strategic business plan that was not realized,” the Soab-report concludes. “The decision to start the postal office was made by the government under the pressure of Sint Maarten becoming autonomous. There was no feasibility study done. The government did not take the necessary actions to provide PSS with the necessary startup funds which would be fair to provide under these disadvantages circumstances.”

The Soab-report contains detailed financial data about PSS from 2010 until June 2012. The report notes that it was near impossible for PSS to obtain historical data from its predecessor NPNA (Nieuwe Post Nederlandse Antillen). There was no budget for 2010 – form the data St. Maarten became autonomous until year’s end. The Soab-accountants found however that the expenses PSS made are in line with its business activities.

The profit and loss statement shows that PSS was in the red from the get go. In 2010 it lost 101,629 guilders, in 2011 297,721 guilders and in the first six months of 2012 375,284 guilders. The total losses over the 2010-June 2011 period are 774,634 guilders, close to $433,000.

In 2010 PSS had no income at all and its expenses consisted for 83 percent of personnel costs. In 2011 it started generating income, mostly from corporate clients (46 percent) and from the sale of stamps (40 percent). Non-postal services brought in 6 percent of the 780,352 guilders revenue in that year. That income did not save the day, because expenses were at slightly over 1 million guilders higher. Personnel expenses were 230,000 guilders higher than budgeted. For this difference, the report drily observes, “the financial controller was not able to give an explanation.”

The first half of 2012 was dramatic with income at 1.3 million guilders 46 percent below budget. Even projected revenue from the sale of stamps (178,000 guilders) and terminal dues of 400,000 guilders could not save the day.

Terminal dues are what postal services charges each other for mail received and delivered. “In terms of terminal dues PSS is on the receiving end,” the Soab-report notes, “because Sint Maarten receives more mail than it sends out.”

Revenue for Moneygram services were with just below 60,000 guilders for the first half year disappointing – given the projection of 250,000 guilders for the year.

Another reason for the disappointing, if not worrisome, performance of PSS is that it falls short in providing non-postal services. The Soab-report lists seven services the post office is not providing for a number of reasons: E-Post, speed cash, payment of utility bills (due to lack of a point of sale system), sale of packaging materials (same reason),  sale of small office services, topping up of prepaid telephone cards, Quick Pack and Postspaarbank.

Tomorrow: Strategic and management control at PSS: too many employees at the operational level.

 

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