THE HAGUE--The 2018 draft budget of the public entity St. Eustatius has received the approval of the Committee for Financial Supervision CFT.
The budget sufficiently complies with the criteria of the financial laws, it is balanced, it contains a post for unforeseen cost and funds have been reserved to fill urgent vacant positions, CFT Chairman Raymond Gradus stated in a letter dated November 8 to the St. Eustatius Executive Council. The letter was published on the CFT website this week.
The CFT complimented the government for resuming budgetary discipline following the destruction caused by Hurricanes Irma and Maria, and making the deadline of November 15 at which time the budget should be sent to the Dutch State Secretary of Home Affairs and Kingdom Relations.
The Statia Government indicated that it was unable to comply with all legal requirements in the 2018 budget because this would have resulted in an unbalanced budget. This concerns the budgeting of maintenance cost which put a heavy burden on the island’s already strained finances. The CFT is aware of the issue of the maintenance cost and has advised the local government and the State Secretary to solve this long-standing matter.
The Executive Council complied with the requirement to provide information on its most important policy choices, the key issues and the way it intends to deal with these. The Government indicated that it wants to focus on improving the socio-economic circumstances of the Statia people.
The 2018 budget is balanced with a total in revenues and expenditures of US $16.62 million. The largest part of the revenues consists of the so-called free remittance (“vrije uitkering”) of $10.8 million, local levies of $4.9 million and the expected special purpose grants of $0.9 million.
The CFT noted that the general levying and collecting of levies requires improvement.
The local government actively consulted with the CFT in preparing the part in the 2018 budget that concerned the anticipated revenues from the sea harbour. The CFT lauded government for doing so. The government decided to be cautious in calculating the revenues from the harbour and to budget on the safe side by decreasing the amount by 30 per cent.
The expenditure side of the 2018 budget mostly consists of personnel cost ($9.1 million), followed by subsidies and contributions ($1.7 million), depreciation ($0.8 million) and unforeseen ($0.1 million).
The 2016-2017 Collective Labour Agreement (CLA) has caused the labour expenditures to increase by some three per cent, while in the 2018 budget a subsequent increase of 1.5 per cent was taken into account, also as a result of the new 2018-2019 CLA. The impact of the CLA related increase is rather heavy due to the fact that 55 per cent of the total expenditures are related to personnel.
The higher cost of personnel led the CFT to advise the Ministry of Home Affairs and Kingdom Relations BZK to base the annual adaptation of the free remittance not only on price mutations, but also on wage mutations.
The 2018 budget does not include a higher free remittance, as the Netherlands has shown great reluctance to increase its annual financial contribution to the Caribbean Netherlands public entities, despite the positive advice of experts and committees.
Statia’s free remittance would require an increase of some $1.8 million, or about 17 per cent, for the island to fully execute its legal obligations. The CFT pledged that it would bring the islands’ financial needs to the attention of the State Secretary of Home Affairs and Kingdom Relations.
St. Eustatius was barely able to anticipate the financial consequences of the damage caused by Hurricanes Irma and Maria in the 2018 budget. The Island Government sees no possibilities to free up funds for reconstruction or to cover for lower revenues. Without financial support from the Netherlands, the island might end up in financial trouble. The CFT stated that it considered this aspect to be a risk for the execution of the 2018 budget.
The CFT once more concluded that the financial management was of an insufficient level and that this had consequences for the reliability of the financial administration and even the budget itself. The CFT again urged strengthening the Financial Unit’s capacity.
