Granting of subsidies

December 2021

Members Court of Audit Saint Eustatius:

Drs. P. Hofstra RO CIA, chair Dr. R. Willemse, member

Audit conducted by: Drs. J. Wils.

Introduction This section contains the administrative conclusions and recommendations arising from the audit, the executive council’s reaction and the epilogue of the court of audit.

1. In the last two years the Public Entity has made progress in improving the organization of the subsidy process. More attention is being paid to making agreements concerning deliverables and accountability. There has also recently been more attention for contact with organizations. At the same time the Court of Audit sees many aspects of the organization and implementation that require improvement. The organization of the granting of subsidies has recently been put reasonably in order. Among other things, the performance agreements that have been introduced provide clarity to institutions with regard to what is expected of them. However, some important process agreements or operational instructions to ensure a transparent and independent process of assessing and monitoring the grants are still lacking. For example, the Court of Audit cannot currently identify an assessment framework with which the Public Entity makes a collective judgement on the quality of all applications. This is particularly important in order to offer any new applicants an equal opportunity. Agreements to limit conflicts of interest are also currently lacking. Furthermore, an operational instruction on the monitoring of compliance with agreements by institutions is currently lacking. Despite the improvements in the organization, in recent years many conditions have not been met by both some of the institutions and the Public Entity. This concerns the meeting of deadlines, the completeness of applications and the compliance with the accountability requirements. In addition, no active monitoring and assessment of the results of institutions has taken place. The archiving of relevant documents by the Public Entity is also unsatisfactory. Progress can be discerned in the implementation in 2021. In particular, in the past year the Public Entity has invested in better communication and involvement with institutions and more attention for compliance with reporting obligations.

2. An important point for attention with regard to accountability is that subsidized institutions may issue annual accounts without an audit report. Because of this the Executive Council and the Island Council have no insight into whether the subsidy monies are allocated to the right things and in accordance with the rules (fairness and lawfulness). In recent years not all institutions have supplied annual accounts at the end of the subsidy year. In addition, in most cases the documents that have been supplied have not been compiled by an accountant. None of the annual accounts contained an audit report by an accountant. On the basis of the subsidy regulations an audit report is required for every subsidy over $25,000, but in the performance agreement it is specified that this is only necessary at the request of the Public Entity. In practice no use is made of this provision. Because of this there is no ‘lock on the door’ with which it can be assured that subsidies are granted in the correct manner.

“Because of the manner of reporting by the PESE in annual accounts and budgets it is difficult to discover how much subsidy has been received by all institutions. This means the Island Council acquires insufficient insight into who has received or will receive what. This impairs its budgetary powers and monitoring task.”

3. Because of the manner of reporting by the PESE in annual accounts and budgets it is difficult to discover how much subsidy has been received by all institutions. This means the Island Council acquires insufficient insight into who has received or will receive what. This impairs its budgetary powers and monitoring task. The annual accounts and budgets do not give a complete picture of the annual utilization of subsidy by each institution. This is because some institutions are mentioned separately and others are not. There are also inconsistencies between the budgets and the annual accounts, for example because an institution had not received any subsidy although this was stated in the budget. Annual accounts do not give a complete picture of the subsidy actually granted to each institution.

4. Subsidies are intended to distribute money for socially relevant activities on the basis of political priorities and policy frameworks. In practice the granting of subsidies largely takes place on the basis of the past, because the tasks of the organization were then regarded as socially relevant. Subsidies are rarely used to distribute the money on the basis of the political ambitions and policy aims of the Public Entity (with the exception of the sport policy). An important cause of this is that policy aims are insufficiently present. For many years the subsidies have been granted to a more or less fixed group of institutions. The Public Entity has established that these institutions focus on socially relevant activities. There is however no further substantiation of this. There is no direct relationship with the policy aims of the Public Entity. An exception is the sport policy, in which a clear relationship has been established between policy aims and the activities of the foundation concerned.

5. As a consequence of the lack of policy aims and a focus on this in the granting of subsidy, little attention is paid to the reason why subsidy is granted in the justification for subsidy decisions by the PESE. The justification is primarily financially driven, and pays no attention to the policy aims that the application fits (or does not fit) in with. Foundations are also not sufficiently challenged to state what they need the subsidy for and what they achieve with it. The rationale in subsidy decisions for the granting or refusal is extremely brief and amounts to little more than a standard phrase concerning the social relevance of activities. In granting a lower amount than applied for or in the event of a rejection reference is only made to the limited financial resources. There is no substantive explanation of the policy aims that the subsidy must contribute to. In the application form institutions are requested to specify their aims and results in concrete terms. In many applications, however, this is hardly done.

6. Subsidy should only be given for an approved task and associated activities or projects. These concepts are however broadly interpreted by the PESE, because of which subsidy is also granted to organizations for things that strictly speaking do not fit within the subsidy framework. The absence of clear policy aims and a clear interpretation of the concept of an ‘approved task’ makes it difficult for the granting of subsidy to determine which organizations are or are not eligible for a subsidy. Various organizations now receive subsidy without there being a clear connection with the performance of an approved task and activities to be carried out in this connection. This concerns, for example, the financing of an institution’s rental expenses or a part of the running costs of a building.

7. For a number of institutions the subsidy relationship is partly based on other agreements, such as a contract for professional services or management contract. In these contracts agreements on the performance of activities are made with the foundation in question. Because of this, various instruments of civil and administrative law are used alongside each other without their mutual relationship being clear. It is not clear what the institutions concerned and the PESE should invoke in the event of disputes. Only institutions such as the St Eustatius Center for Archaeological Research (SECAR), the St Eustatius National Parks Foundation (STENAPA) and the St Eustatius Sports Facilities Foundation (SSFF) have entered into separate agreements with the Public Entity in addition to the subsidy. The mutual tasks and responsibilities are established in these. These agreements make it clear for the institutions concerned what their activities must contribute to. At the same time, it is not clear how these agreements precisely relate to the subsidy decision and the agreements in the performance agreements. If disputes arise concerning the performance of tasks, it is not clear whether the subsidy conditions (in administrative law) or agreements (in civil law) can be invoked.

Click the following link for the recommendations and the complete audit report

20211213.1+Audit+subsidieverstrekking+Sint+Eustatius+definitief_EN.pdf

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