Negative CFT advice on St. Maarten 2018 budget

THE HAGUE–The draft 2018 budget of Country St. Maarten does not comply with the norms of the Kingdom Law on Financial Supervision, and therefore cannot count on a positive advice from the Committee for Financial Supervision CFT.

The draft 2018 budget showed a deficit of NAf. 254.7 million, which is not allowed under the Financial Supervision Law without specific approval of the Kingdom Council of Ministers.
The draft 2018 budget stated that the deficit was caused by a NAf. 217.7 million shortfall in revenues and by NAf. 61 million in additional expenditures, mostly related to Hurricane Irma. The draft budget presented NAf. 266.8 million in revenues and NAf. 521.7 million in expenditures.

CFT Chairman Raymond Gradus pointed out in a letter dated February 9, 2018, which was released by CFT on Friday, that CFT did not have sufficient financial statements of 2016 and 2017 to “adequately assess the level of reality” of the figures provided in the 2018 draft budget.


“CFT cannot assess whether all expected revenues and expenditures are budgeted in accordance with the Financial Supervision Law due to the consequences of Hurricanes Irma and Maria, the continuous IT problems and the subsequent lack of insight into the expenditures since late 2016, lack of a 2016 annual account and the weak state of the financial management,” it was stated in the letter.

“CFT is of the opinion that the draft budget does not comply with the current norms. One should take into account that the financial and economic situation in St. Maarten has brought many insecurities after the hurricanes.”

CFT found that insufficient information was provided on the shortfall in tax revenues as well as the “considerable increase” of expenditures. In this sense too, the draft budget did not comply with the norms stated in the Financial Supervision Law.
The draft budget did not specify which measures the St. Maarten Government plans to take in 2018 to limit the deficit as much as possible. The draft budget furthermore did not include a multi-annual planning, as is required by law.

CFT was critical of the fact that the draft budget did not provide in solving the payment arrears and the compensating of deficits from previous years. This means that St. Maarten is not complying with an earlier instruction of the Kingdom Council of Ministers. The measure to increase the pensionable age to 65 has not been introduced as yet.
CFT acknowledged that it is a challenging task for St. Maarten to prepare a realistic draft budget, considering the situation after Hurricane Irma. As such, CFT views the draft 2018 budget more as a “point of departure,” rather than a “realistic prognosis.” CFT advised that the St. Maarten Government provide information on the execution of the budget on a monthly basis.

Gradus explained that deviation from the Financial Supervision Law is only possible with the explicit approval of the Kingdom Council of Ministers. Only then can the budget comply with the Financial Supervision Law.
CFT referred to a letter that Dutch State Secretary of Home Affairs and Kingdom Relations Raymond Knops sent to St. Maarten Finance Minister Mike Ferrier on January 26, 2018.
In this letter, St. Maarten is informed that decision-taking on the 2018 budget can only be considered if the government complies with a number of conditions. These conditions included having an approved 2018 budget, including an overview of the liquidity position and the liquidity need, as well as a positive CFT advice.

CFT stated that it did not consider it realistic that the 2018 budget could comply with the norms of the Financial Supervision Law, and without a decision of the Kingdom Council of Ministers to allow deviation from the norms, CFT can only conclude that the budget is in violation of said law.

CFT advised the Governments of St. Maarten and the Netherlands to arrive at an agreement regarding the decision-taking in the Kingdom Council of Ministers regarding the 2018 budget, and to allow a deviation from the law.
The hurricanes have resulted in a further deterioration of St. Maarten’s financial administration. CFT noted that prior to the hurricanes, the financial administration and financial management were already functioning inadequately.
Despite the earlier warnings by the government accountant bureau SOAB, St. Maarten’s General Audit Chamber and CFT, the government has not been able to carry out the necessary improvements.

“Due to the further deterioration of the situation, CFT is advising to request technical assistance and a strengthening of capacity in order to structurally improve the financial administration and financial management. In CFT’s opinion, this cannot wait any longer,” it was stated in the letter.

“CFT is aware of the extraordinary circumstances and the associated budgetary challenges facing St. Maarten. On the other hand, it is of great importance to have the economy quickly recover and St. Maarten get on a track of tenable government finances. For this reason it is important that St. Maarten, together with CFT and the Dutch Government, look at the possibilities and solutions that can be offered in the current situation,” Gradus concluded.

Source: The Daily Herald