Grave concerns about pension fund – Finance Minister will comply with Audit Chamber recommendations

POSTED: 10/21/13 11:57 AM

St. Maarten – Finance Minister Maarten Hassink wrote in a letter to the General Audit Chamber’s chairman Ronald Halman on October 3 that he is ready to comply with the recommendations the chamber outlines in its financial compliance review report about the country’s 2011 financial account.

Hassink however also noted that the criticism in the report focuses too much on his ministry alone. “Your remark is correct that the administrative organization and the structure of internal control measures within the whole organization but also within the individual ministries are relevant, directly or indirectly, for the annual account’s quality,” Hassink wrote. “In the report the General Audit Chamber focuses however too much on the Finance Ministry. The information ministries provide and their financial management makes or breaks every report, whether it is an annual account or a budget. In your report about legitimacy research much more could be reported per ministry.”

Hassink wrote furthermore that the report in its current form “will not appeal to the independent ministries.” The finance minister suggests a different approach in the future. The audit chamber discussed the draft of the current report with civil servants at the finance ministry alone. “In the future we would like to see a different approach so that other ministries are also involved in this process, leading to an improved awareness of collective responsibility.”

As we already reported on Saturday, the General Audit Chamber found that the financial information in the 2011 account does not satisfy the requirements of the accounting ordinance and that operational management is not under control. Especially the internal control procedures at all ministries showed shortcomings.

The audit chamber recommends giving the highest priority to putting the country’s financial management in order. The Council of Ministers should deal with improvement plans and submit them to the parliament; it should also implement improvement plans for financial management, address the deficiencies in financial management and require from the finance Minister that he sets up a realistic improvement plan. A final recommendation is to report to parliament about the progress with the implementation of these improvement plans.

Among the many errors the audit chamber found in the 2011 account are those that classify expenditures incorrectly. An example is the costs of the royal visit in 2011. The government spent 294,000 guilders (a bit over $164,000) on it, but the number crunchers booked it as representation costs for the minister of finance.

The audit chamber was unable to audit the financial administration of the National Security Service VDSM; both the secretary general and the chairman of the audit chamber have to go through a security screening before they are allowed to perform such an audit. They requested the screening, but nothing came of it. The only hard number that is public now is the amount of money that has been advances to the VDSM: 3 million guilders. How this money has been spent remains a mystery.

Another sensitive issue is the Crime Fund; this is managed by the Justice Minister – in 2011 Roland Duncan. The Crime Fund had 2.2 million guilders (about $1.2 million) in the bank in 2011, but this money is not accounted for in the country’s 2011 financial account. “The manner in which these funds are acquired and how they are used must be reported in an annual report,” the audit chamber points out. “Reporting is said to be required by a ministerial decree as issued by the minister of justice on November 30, 2010.”

The audit chamber furthermore points out that the government missed two opportunities to contract loans to finish the new government administration building on Pond Island. The financial supervisor Cft gave a positive advice on August 16, 2011 for a 49 million guilders loan to complete the project. Of this amount, 22 million guilders was for the completion of the building and 27 million for buying out the developer RGM. “Sint Maarten failed to make use of these opportunities, both of which have elapsed. The reasons remain unclear,” the audit chamber writes in its report.

On the balance sheet, the financial account lists 32.7 million as accounts receivable; this includes a provision for doubtful accounts of 53.8 million – money the country expects never to collect. Both figures are debatable: “The balance sheet item accounts receivable is not substantiated using comprehensive specifications and contains old items for which the collectability remains unknown.”

The audit chamber recommends an investigation into the collectability of outstanding receivables and the write off the uncollectible ones.

The audit chamber also expressed its concerns about pension management. From the 2011 financial account it appears that just 45 percent of civil servants are registered with the general pension fund APS. The audit chamber found that the country did not pay all premiums it withheld from civil servants’ salaries in 2011 into the pension fund – though in 2011 this has changed. In other words, the government has used premiums civil servants paid for their pension for other purposes and it did not pay the employer’s premium into this fund in 2011.

“No substantiation related to financial provisions by St. Maarten was made in terms of pension premiums,” the audit chamber writes in its report. “It is unclear whether the provision of 46 million guilders from the former Island Territory of St. Maarten is sufficient. This means that, in the long term, insufficient transfers of pension premiums could have considerable financial consequences for St. Maarten.”

The audit chamber found that “none of the important organizations related to this subject” could provide insight into the scope of the problem. “The lack of an overview of the financial consequences causes us great concern.”

The organizations that should have been able to provide information are, apart from APS, the Ministries of General Affairs and Finance.

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