St. Maarten Budget 2015 under pressure

POSTED: 07/11/14 11:28 PM

Cft demands compensation of 14 million in deficits

St. Maarten – Finance Minister Hassink announced on Wednesday that the draft 2015 budget will have to be balanced at around 440 million guilders. While there is still some discrepancy between that number and what the ministries demand for the next budget year, there is an even bigger discrepancy in the deficit of previous years that has to be compensated. According to the government, those combined deficits total 1 million guilders, but a calculation by financial supervisor Cft shows that the actual deficit much higher – 13.8 million ($7.7 million).

This appears from the advice from the Cft to Finance Minister Hassink about the annual account 2012. The Cft notes that the legal terms for the control of this annual account has been surpassed by 6 months. Minister Hassink informed the Cft that the annual account 2013 will be submitted by the end of August. Properly compensating the deficits is important because next year the kingdom will evaluate financial supervision for St. Maarten.

With the government accountant bureau Soab and the General Audit Chamber, that earlier reported their findings about the 2012 annual account, the Cft is of the opinion that the document does not offer a truthful picture of assets and results and that it does not meet the standards for financial lawfulness.”

The annual account report concludes that 2012 closed with a surplus of 16.7 million guilders, but this assessment did not consider mistakes due to a lack of accuracy. The Cft concludes that 2012 actually closed with a deficit of 500,000 guilders.

The Cft’s assessment contains an interesting paragraph about study financing. The financial supervisor notes that St. Maarten has been granting study loans for quite some time. By the end of 2012, the total of outstanding loans was 69 million guilders. The Island Council approved legislation to underpin study financing in 1995 and 1997 but it never became law: “It was adjourned by the governor because it violated the Islands Regulation Netherlands Antilles (Erna),” the Cft remarks. “The Erna established that St. Maarten could not contract or extend loans.”

The Executive Council decided nevertheless at the time to grant study financing for 60 percent as a loan and for 40 percent as a grant. However, when students dropped out, they had to repay the full amount. Until 2010 the outstanding study loans amounted to 61 million guilders.

“It is however the question,” the Cft notes, “whether the loans can be collected given the history, the lack of collection procedures and the possible limitation of the claims. The way the government executes study financing right now, it behaves more like a subsidy than a loan. Under unchanged policy study financing should be included in the regular account of the budget. Out of prudency, the assets have been adjusted downward for a part of the loan.”

The Cft furthermore urges the government to include the Crime Fund in the regular budget. At the end of 2012, this fund, under management of the Minister of Justice, had a balance of 2 million guilders. The Cft writes that the Crime Fund is managed outside of the budget and is therefore beyond democratic control. Adding the Crime Fund to the budget increases the countries assets by the fund’s balance.

The Cft indicates fourteen points of attention for the improvement of the country’s shaky financial management. Among them is a recommendation to obtain annual accounts from government entities in a timely manner. According to the Corporate Governance Code these accounts have to be submitted within five months after the end of a financial year.

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