Cooperation St. Maarten with supervisor is lacking: Cft toys with instruction from Kingdom Council of Ministers

POSTED: 01/20/13 7:57 PM

St. Maarten – The board for financial Supervision Cft subtly points out in its advice about the 2013 draft budget that it has options to advise the Kingdom Council of Ministers to give St Maarten an instruction to put its budget in order.
The advice, dated December 24, has been published in the Cft-website this week. The financial supervisor is especially concerned about the way St. Maarten deals with the deficits from the 2010, 2011 and 2012 budgets. These deficits alone total 33.4 million guilders. The Cft wants St. Maarten to compensate these deficits in its budgets for the next three years at a pace of 11 million guilders per year. St. Maarten has to follow an instruction from the Kingdom Council of Ministers to cover these deficits by 2015.

The supervisor keeps an open mind about the possibility that the Netherlands will change its mind and pay some of the debts from before 2006. “If the Netherlands is prepared to pay these debts after all, they can be used to cover these deficits.”
The draft budget the government presented to the Cft in October did not take into account payment arrears, the compensation of the deficits and the disappointing tax revenue, the financial supervisor writes in its advice.
Another sore point is the quality of St. Maarten’s financial management. In its advice about the 2012 budget, the Cft urged the country to set up an improvement plan for financial management. “This plan still has to be made definite and the Cft wonders whether there is a sufficient reservation in the budget to execute this plan.”

The Cft’s preliminary conclusion – based on the financial management of the 2010 annual account, the execution in 2011 and the 2012 budget – is that the improvement of the financial management has mainly been at a standstill and that St. Maarten has encountered delays in the realization of its objectives for 2015.
Increasing tax revenue by 58 million guilders in 2013 is an enormous challenge, the Cft notes, “St. Maarten is facing an extensive process of legislation with very tight deadlines.” The supervisor supports the plan to increase revenue through taxes on casinos, alcohol and tobacco, but it considers the projected additional revenue to be too ambitious.

The Cft also notes in its advice that the first amendment to the 2012 budget still has not been approved by the parliament and that this puts the legality of certain expenditures into question.
The Cft furthermore advises St. Maarten to establish prior supervision by the finance minister over expenditures. Euphemistically the supervisor writes that the past has shown that the current control system has not been able to prevent the deficits.
The supervisor is also not too happy with the level of cooperation it gets from St. Maarten to perform its tasks. “In spite of the fact that St. Maarten is obliged to provide all information the Cft needs to perform its task, the requested multi-annual budget of the SZV has been received only after repeated reminders. An explanation about the Justice Park was never received. This way St. Maarten is ignoring the information duty that is based on the Kingdom law financial supervision. It makes a complete review by the Cft based on the correct documents impossible.”

A letter from the Cft about the execution of the 2012 budget was never answered either.
Other points of criticism have to do with plans to increase the retirement age. “The Council of Minister has decided to increase the retirement age from 60 to 62 but the legislation-process has not been completed and there has been no debate with the parliament, while in the meantime it has been considered to increase the allowances.”

The Cft advises the government to report on a monthly basis about the state of affairs, also to the parliament. “This report has to focus on executing the budget in terms of revenue and liabilities and on the liquidity-position. If necessary the Cft will inform the Kingdom Council of Ministers about the state of affairs.”
Because there is no established 2013 budget per January 1 – a situation the Cft foresaw in December – the 2012 budget has to be the basis for the government’s actions. Taking the expected deficit for 2012 into account, the Cft assumes revenue to be 417 million guilders. This means that in the first months of this year – as long as the budget has not been approved – the government has 1/12 of this amount to spend per month – around 35 million guilders.

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