MPs during Wednesday’s meeting.
PHILIPSBURG--Finance Minister Ardwell Irion said on Wednesday that he is committed to cleaning up the existing legislative backlog as it relates to government’s financial statements during this calendar year.
He made the statement to Members of Parliament (MPs) during a meeting of the Central Committee of Parliament on the approval of government’s draft 2015 financial statements.
In giving a background of the issue, Irion said the Council of Ministers had approved the draft 2015 financial statement on June 11, 2019. Approval was also given to submit the draft to the Governor, who would then send it on to Parliament.
“The Ministry fully understands its obligation to report in a timely fashion to Parliament. I can assure you that this minister is working on eliminating the existing legislative backlog completely regarding the country’s financial statements during book year 2020,” Irion assured.
In giving an insight into the backlog that exists, he said the financial statements for 2013 and 2014 have already been approved by Parliament and are to be published. The one for 2015 is now in Parliament. The drafts for 2016 are to be sent to the Council of Advice. The drafts for 2017 and 2018 are at the government accountant bureau SOAB for review. Work on the one for 2019 will be starting now and is expected to be submitted by September 1.
“With external assistance, we are now eliminating the backlog of the annual accounts. As we speak, the 2017 and 2018 annual accounts are being drafted and will be submitted to the Council of Advice shortly. The target is to be in sync with the law by September 2020 with the annual reports of 2019 then being submitted.”
He said a qualified auditor’s report SOAB and the report of the General Audit Chamber related to the 2015 financial statements mention several areas of major concern that have an impact on the country’s financial management.
“Where feasible, we have taken the comments of SOAB and the General Audit Chamber into account when drafting the Financial Statements after 2015. This also leads to visible improvement of the presentation of future financial statements. However, unless we address the structural issues related to our financial management, we ultimately will not be able to attain sound public financial management.”
Irion said key players of the Finance Ministry had discussed the approach of the country’s financial management improvements in February with specialists from the World Bank and the Caribbean Regional Technical Assistance Centre (CARTAC), one of 10 International Monetary Fund (IMF) regional technical assistance centres, and arranged their assistance.
“Our action plan is now being fine-tuned to address all the steps to enable us to reach a sound financial management level. Preparations for financing our action plan ‘Improving Financial Management’ were made in the past months, but stalled after postponement of our capital loan 2019 by the Netherlands.
“The project can only be implemented in its totality after financing is arranged. The goal is to obtain an unqualified auditor’s opinion on our financial statements as per 2021, but this target is already under pressure given the lack of financing,” Irion told MPs. “I sincerely trust Parliament will support us on the road toward full financial recovery and sustainability. The approval of these financial statements is just one step in that direction.”
Giving details of the 2015 financial statements, Irion said the actual figures for that year show a loss of NAf. 18.4 million compared to a balanced budget for 2015. This is due to NAf. 5.1 million higher income and NAf. 23.5 million higher expenses than budgeted.
Higher expenses mainly relate to an impairment of more than NAf. 14 million on the valuation of government-owned company St. Maarten Harbour Holding because of losses reported by this entity. This resulted in a lower equity of the Harbour than that included in the books of government at the end of 2015.
In addition, the cost for personnel exceeded the budget by NAf. 9 million and depreciation cost was budgeted too low for an amount of around NAf. 6 million.
On the other hand, cost for subsidies was NAf. 5 million less than budgeted.
Impairment and depreciation costs are non-cash items in the profit-and-loss statement of government and impairment cost is very hard to predict and to budget, Irion noted.
“The main issue in the actual figures as we compare them to budget is therefore in the personnel cost, where the overrun is due to a payment agreement with APS concerning a correction on the pension premiums of previous years. If these extraordinary expenses had not occurred, the actual figures would have shown a positive result compared to the budgeted result and thus a strong improvement compared to 2014,” he said.
“As it pertains to the accuracy of the Income and Expenses accounts we are confident of the accuracy of the information and so our profit and loss statements … pose no threats or challenges.”
St. Maarten continues to experience vulnerabilities/threats in the areas of material fixed active (value of assets), he added. An example is the value of the assets of the harbour or the airport. Determining the value with accuracy is challenging. While this does not affect money coming in and out of the treasury, it does affect the balance sheet.
Financial fixed active (participations) is another area. This refers to the value of the shares. “It is challenging to determine the value with high accuracy taking all the developments into consideration, particularly after a hurricane and all the uncertainty surrounding the government-owned companies.” Other areas are receivables and debts (sub ledgers); study loans; social cost, which continues to be high; and subsidies.
Irion urged MPs to approve the 2015 financial statements, noting, “While it is late and perhaps far from perfect, it is a representation of the works and finances of government as per the reported period. It represents the hurdle for us to finalise these long-overdue legislative trajectories to be able to create our path going forward.”
After fielding questions from MPs and answering some, with a promise to respond to those from one MP in writing, the meeting was closed and a public meeting is expected to be held soon so that MPs will get a chance to vote on the financial statements for 2015.
