THE HAGUE--The Committee for Financial Supervision CFT agrees with the decision of the Saba government to deduct the 2019 deficit from the general reserve. For the first time in years, the annual report of the public entity Saba showed a deficit of US $621,000 for reasons beyond its control.
In a letter to Saba Island Governor Jonathan Johnson, dated September 14, and published on the CFT website earlier this week, CFT Chairman Raymond Gradus stated that forcing Saba to compensate the 2019 deficit with surpluses in 2020 and 2021 was not realistic, also in light of the COVID-19 crisis. Therefore, CFT will not recommend a compensation measure to the Dutch government.
“CFT finds Saba’s proposal to deduct the deficit from the general reserve an acceptable solution. CFT does advise, if necessary, with the Ministry of Home Affairs and Kingdom Relations BZK, to look into possibilities to create room in future budgets so unanticipated setbacks can be intercepted.”
The 2019 annual report showed a US $0.62-million deficit, while a balanced budget was projected. The deficit is mainly caused by an addition to the pension provision for former politicians of US $0.56 million as a result of a decrease in the discount rate to calculate the provision.
Without this expenditure, which was not budgeted and was beyond the control of the public entity, Saba would have closed off 2019 with a deficit of about US $60,000. CFT considered it “undesirable” that Saba’s budget is influenced so much by the mutations of the pension provision for former politicians. “These concerns have been expressed by CFT multiple times, and also by the accountant.” The pension provision for former politicians has been indicated as presenting a medium category financial risk to the budget.
During the handling of the 2019 annual report late August this year, the Saba Island Council approved the proposal of the Executive Council to fully deduct the deficit from the general reserve, and not to compensate this in 2020 and 2021.
The 2019 annual report shows revenues of US $23.6 million that consist of special allowances amounting to US $12.7 million, the free remuneration (“vrije uitkering”) of US $9.8 million and local levies of US $1.1 million.
The total expenditures in the 2019 annual report amounted to US $24.2 million and consist of US $13.4 million expenditures for goods and services, US $8.3 million personnel expenditures and US $2.5 million of other expenditures such as interest, depreciation and other transfers.
Between 2015 and 2019, the number of projects more than doubled, and the funds that were made available by the Netherlands quadrupled, concluded CFT. More than 50 per cent of the expenditures in 2019 were financed from special allowances, a part of which was allocated for reconstruction projects after the September 2017 Hurricanes Irma and Maria.
In 2019, the Inter-Departmental Police Assessment Kingdom Relations indicated that the structural financing of a number of island tasks is under pressure, also because several investments were paid by the departments separately and on an incidental basis. It was recommended to differentiate between funding for island tasks versus tasks of the Dutch government, and between incidental and structural financing of these tasks.
The tenability of Saba’s budget and the financial position of the public entity have been qualified as high-risk. A number of large investment projects have been executed, or are in the process of being executed, but it is unclear how the maintenance will be covered in future budgets.
Also, certain personnel expenditures for functions of a structural nature are being financed from special allowances. That is why it is considered important that the trajectories that are part of the Saba Package, the island’s multi-annual development programme to create structural coverage in the budget, are continued.
CFT complimented Saba for yet again presenting an annual report with a positive audit review by the accountant. “This shows that Saba is able to keep financial management at an adequate level.”
On Thursday, the Saba Executive Council and Island Council were able to share their concerns about the financial situation, as well as other concerns, during a virtual meeting with the Permanent Committee for Kingdom Relations of the Second Chamber of the Dutch Parliament.
The Committee also had a virtual meeting with the Executive Council and Island Council of Bonaire, and with the Government Commissioner and Acting Government Commissioner of St. Eustatius.