PHILIPSBURG:--- Last week Wednesday, April 17, 2019, the Ministry of Education, Culture, Youth and Sport was in court, once again, with the Stichting Voortgezet Onderwijs Bovenwindse Eilanden (SVOBE). Ever since the new subsidy system for schools was implemented, SVOBE has contested it, stating that they are not receiving sufficient finances to cover the personnel and operational costs of their schools.
The new system, which is called the lump sum system, was implemented in 2010 when Sint Maarten obtained country status. Prior to 2010 schools were subsidized based on the “Vergoeding en Verantwooordingsstelsel”, known as the V&V System. Via the V&V System, schools were subsidized based on each item in their budget; and each budget item had to be accounted for at the end of the year. The lump sum system, on the other hand, offers School Boards more flexibility as it pertains to the subsidy that they are granted. The lump sum system also offers School Boards less bureaucracy. It should be noted that the rationale behind the lump sum system is to reduce the amount of bureaucracy that was involved in financing secondary education, with the V&V system, prior to 10-10-10. As a result of the reduced bureaucracy and the flexibility that School Boards, and in this case SVOBE has acquired, with regard to the funds placed at its disposal, it is imperative that SVOBE provide proper accountability for the funds it receives.
The formula to calculate the lump sum subsidy is based on the number of students in the school who are registered as of December of the previous school year. For example, for the calendar year 2018, you will see that in the Government’s budget, an amount of NAf. 17,093,101 was allocated to SVOBE. This was based on the number of students registered with SVOBE at that time.
Now, in order for the Ministry to assess whether SVOBE has been spending the tax payer’s guilders in a correct and prudent manner, SVOBE is required to provide the Ministry with a proper audit of its financial statements. Unfortunately, since 10-10-10 SVOBE has not been able to provide the Ministry with a proper audit of its financial statements over the past years, going back to 2010.
In February of 2014, SVOBE initiated a court case against the Government for loss of income due to the implementation of the lump sum system. The judge instructed both parties, SVOBE and Government, to seek an amical solution. Based on SVOBE’s claims that the lump sum cause it’s schools to have a financial shortfall, the government advanced payment of NAf. 2,276,153 for the period 2010 – 2014, pending the receipt of Foundation’s audited financial statements. However, when the parties could not reach a further amicable solution, the judge rendered an interim decision in April 2014. The verdict stated that Government should pay an additional NAf. 150.000 per month to SVOBE until a decision is
taken by government. A Complaint Committee, consisting of members of the Department of Education as well as members of the SVOBE, was installed to discuss and resolve the points of contention. As a result of the Complaint Committee, the Ministry in 2015 amended the lump sum system extensively on the basis of an analysis of the lump sum system by SOAB. The complaints that had been made by SVOBE in the past were also taken into account during that exercise. In other words, the Government made certain adjustments in favor of SVOBE and took a decision as the judge had instructed. Yet, SVOBE also contested this decision.
Meanwhile, the Government made monthly payments of NAf. 150.000 to SVOBE. In total 46 payments of NAf. 150.000, which came up to a grand total of NAf. 6,900,000. Together with the NAF. 2,276,153 the government had paid a total of NAf. 9,176,153 without having received the requested audited financial statements. According to the Ministry, with the payment of the amount of NAF. 9,176,153 the Government had over-compensated SVOBE. Hence, given the precarious financial situation that Government found itself in after hurricanes Irma and Maria, the Ministry informed SVOBE in November
2017 that the NAf. 150.000 would be discontinued as their cost over the school years 2011-2014 had
been adequately compensated. In January 2018 the payment was stopped.
It is important to mention that without a proper audit it is not possible for the Ministry to objectively assess if SVOBE is indeed experiencing a significant financial deficit as it has been claiming for these past years. The Ministry is of the opinion that as a result of the amendments made to the lump sum system in 2015, that SVOBE is, in fact, enjoying a financial surplus. Hence, the urgent need for an audit, which SVOBE has failed to facilitate since 2010.
Since 2015 the Ministry has informed SVOBE that a final settlement could only be established in line with the Minister’s decision of March 2015, based on audited financial reports. The Ministry also agreed to pay for a certified accounting firm to conduct the audit. The accounting firm attempted to audit the financial statement over 2010 – 2014. In March 2018, the accounting firm submitted its report indicating that there was insufficient audit evidence and that no supporting documents could be provided for the subsidy received from government over those years.
SVOBE has requested that the payment of the additional monthly amount of NAf. 150.000 be reinstated. Government is willing to review SVOBE’s claims of a monthly financial shortfall due to the discontinuation of the NAF. 150.000. However, to date, Government has yet to receive SVOBE’s audited financials for the years 2015-2017 in order to be able to substantiate SVOBE’s claim that the subsidy that they have been receiving has not been sufficient to cover their costs.
Actually, from the perspective of the Ministry, the recent discussions with SVOBE regarding the lump sum were progressing in a constructive manner. It therefore came as quite a surprise to be informed by the court that SVOBE had filed administrative injunction proceedings against the Minister of Education. Even though SVOBE has not objectively substantiated its claim that it continues to suffer a structural deficit, the Ministry was prepared to provide SVOBE an amount Naf. 50.000,- monthly in addition to the significant amounts SVOBE already receives from the Ministry. SVOBE received this offer in writing from the Ministry.
For reasons unknown to the Ministry, SVOBE has failed to respond to this offer of Naf. 50.000,- additionally per month. SVOBE has instead without any previous announcement or warning, filed via court petition dated April 12th, 2019 administrative injunction proceedings. The hearing in these proceedings took place on Wednesday, April 17th, 2019 before the court. SVOBE claimed before the court that it currently suffers a liquidity deficit to such an extent that a real chance exists that its bankruptcy would be sought. SVOBE also stated verbally during the hearing that it will have to close its doors within the coming months due to an acute liquidity shortage.
In addition to its failure to present an audit report, SVOBE has not provided bank statements, nor a cash flow statement to the Ministry or the to court to support its allegation that it is underfunded and that it would not be able to meet its financial obligations within the coming months to such an extent that it would have to cease operating. These aspects were emphasized on behalf of the Ministry during the court hearing last week Wednesday.
The court subsequently upon the request of the Ministry decided to suspend the hearing in the administrative injunction proceedings so that SVOBE can present the proper documentation as requested by the Ministry in the form of banks statements and a cash flow statement in order for the Ministry to be able to properly assess whether or not SVOBE finds itself in such a precarious financial situation that it would have to cease its operations within the coming months. Only after it has been determined on the basis of proper documentation that SVOBE is currently in an acute liquidity crisis will a decision be made by the Ministry (or the court) if additional monthly liquidity support to SVOBE is necessary.