Better financial results, but uncertainties remain | THE DAILY HERALD

THE HAGUE/PHILIPSBURG–The St. Maarten government has booked better financial results in the first quarter of 2018 than anticipated, but there are still some risks and uncertainties that could have an adverse effect on government’s already strained finances. Also, no progress was made in the area of financial management.

The Committee for Financial Supervision CFT was moderately positive in its response to the first quarterly report the St. Maarten government submitted on May 24, 2018. In a letter to St. Maarten Finance Minister Mike Ferrier dated June 7, which was released over the weekend, the CFT confirmed that the St. Maarten government had a NAf. 13 million deficit in the first quarter of 2018.

In total, the government revenues amounted to NAf. 104.2 million in the first three months of this year, while expenditures were NAf. 117.2 million. The NAf. 13 million deficit is much lower than the NAf. 32.4 million originally projected, mainly due to higher tax revenues and lower personnel expenditures.

Government collected more wage and profit tax in the first three months than had been anticipated. NAf. 35.7 million in wage taxes was collected and NAf. 10.5 million in profit tax. However, the turnover tax yielded NAf. 1.3 million less than projected and amounted to NAf. 29.6 million in the first quarter.

In addition, a higher contribution to government’s coffers came from the fees collected from commercial bank licences, as well as fees from casinos and lotteries: NAf. 1.8 million more than was calculated in the 2018 budget.

Total liquid assets increased by NAf. 34.5 million to NAf. 136 million in the first quarter, mostly because government received a monetary loan of NAf. 50 million financed by the Dutch government in liquidity support for 2017. The NAf. 50 million loan has not caused St. Maarten to exceed the interest charges norm.

About NAf. 48.6 million of the liquid assets is earmarked to eliminate payment arrears, mostly to the General Pension Fund APS and the Social and Health Insurances SZV, and also for the capital account, which leaves NAf. 87.4 million freely available.
So far, the good news.

St. Maarten has payment arrears to the tune of NAf. 87.3 million per the end of March 2018, and those payment arrears have not decreased in the first quarter, despite the fact that for the repayment to the APS and SZV, NAf. 40 million was incorporated in the calculation of the Dutch liquidity support. “The CFT advises to make these promised payments without further delay.”

The first quarterly report showed that the actual payment of pension premiums to the APS was lower than the percentage that should be paid according to the law. “This will cause new payment arrears, which is unacceptable and which will deteriorate the financial policy of the APS. The CFT urges not to allow St. Maarten to create new payment arrears.”

The CFT was positive about the inclusion of a risk paragraph in the first quarterly report that indicated the possible financial risks for the 2018 budget. “The CFT values this manner of transparency.” A sizable risk is the final settlement of the Government Health Insurance Regulation OZR for the years 2012-2017 and the multi-annual shortages of the Health Insurance and Accident Insurance Fund ZV/OV and the Government Pensioners Health Insurance Fund FZOG.

Considering the role that the SZV plays in these risks, the CFT advised the government to consult with the SZV to attain more clarity about the risks the shortages at the OZR, ZV/OV and FZOG create, and about possible mitigating measures. The final settlement of the OZR is expected to result in NAf. 20 million of additional cost.

The CFT is not satisfied about the lack of progress in improving St. Maarten’s financial management. No progress has been achieved in the first quarter of 2018 where it regards the execution of projects to improve the country’s financial management.
The CFT wants to know where the execution of these projects stands, as well as the planning for releasing the 2016 and 2017 annual accounts. “St. Maarten needs to book progress on these subjects and solve the lasting IT problems.” Also, St. Maarten needs to hire technical assistance to strengthen the financial administration. So far, this has not happened, despite the various urgent calls by the CFT.

The IT problems and the insufficient level of financial management add to the multiple uncertainties regarding St. Maarten’s financial administration. Therefore, the CFT sees a number of risks to the correctness and completeness of the overview of revenues and expenditures that was included in the first quarterly report.

According to the CFT, the figures from that report were also not completely reliable because of St. Maarten’s financial and economic situation after Hurricane Irma, which has brought about much uncertainty. “This makes it quite a challenge to draft a realistic budget. It can therefore be assumed that there will be significant differences between the realised and the budgeted figures.”

The CFT noted that it had received the first quarterly report with a slight delay of 10 days after the May 14 deadline, and observed that despite the IT issues and the aftermath of Hurricane Irma, the St. Maarten government was making improvements where it concerned submitting the obligatory reports.

Source: The Daily Herald