State of Central Government Accounts 2012
Civil service reform, allocation of responsiblities uncertain. Uncertain whether govenment will hit targets; improvements in operational management except at BZK and V&J
Operational management in central government as a whole is satisfactory, despite the current spending cuts and reorganisations. A similar positive view cannot be drawn, however, regarding the information value of the government's accounts for 2012. The government does not explain whether it actually achieved its intended spending cuts of approximately €8 billion in 2012. An in-depth audit by the Court of Audit of five specific goals found that the government often did not state whether its policy had had the desired results. The government has also made little progress realising the intended savings of the Compact Civil Service programme. The Minister of the Interior and Kingdom Relations (BZK) and the Minister for Housing and the Central Government Sector have primary responsibility for this programme. The programme was introduced two years ago yet more than half the savings still have to be substantiated. The allocation of responsibilities at shared services for, for example, procurement, accommodation and ICT is not clear. It has not yet been determined how organisations at arm's length from central government (autonomous administrative authorities) can participate. In addition, the Ministry of Security and Justice was unable to complete its 2012 annual report on time owing to problems with a new financial system. As a result, the annual accounts had to be prepared in part manually. The Court of Audit lodged an objection that prompted the minister to draw up an improvement plan. The objection was then withdrawn but the Court will continue to monitor this serious shortcoming.
Press release
Risks increasing – Between 2008 and the end of 2012 the State's exposure to financial risks has more than doubled to €505.7 billion. This figure does not include expenditure on the nationalisation of the SNS REAAL financial services group. The Minister of Finance has since provided the House of Representatives with more information on how the risks are being controlled. The Court of Audit recommends that a stress test be made of public finances.
The Court of Audit has approved the central government accounts for 2012. In the past year, central government spent €236.4 billion, nearly €15,5 billion more than it had budgeted. In particular, the national debt and the expenditure by the Ministry of Infrastructure and the Environment were higher than budgeted. The Court of Audit's Board notes in the introduction to its report State of Central Government Accounts 2012, published on 15 May 2013: 'Particularly in times of great uncertainty at all levels of society, uncertainty for both the public administration and the private sector, and uncertainty in both national and international relations, the collection and publication of relevant, up-to-date and reliable information on the actual situation is of decisive importance. Because it can help reduce the uncertainty. Because it can help create legitimacy.'
Policy results inadequately explained
The Court of Audit's examination of the accounts included an assessment of whether the government had provided the House of Representatives with enough information for it to determine whether tax revenue had been spent on approved activities, whether the activities had delivered the promised results and whether the pre-agreed goals had been achieved. In recent years, the Court of Audit has repeatedly found that the ministers' annual reports provide the House with too little information on the results of policy. The House receives little information from the ministers when policy is implemented by municipalities or provinces, when more than one minister is responsibility for policy and when policy goals are in the distant future, particularly with regard to education. Lump sum financing prevents Minister of Education, Culture and Science (OCW) informing the House of the effectiveness of a large proportion of the education budget.
Minister inadequately informed, House receives too little information on policy results
The government has not yet lived up to its promise to report on goals, performance and costs in accordance with the 'Accountable Budgeting' system. The ministries' budgets provide less information than in the past about the ministers' ambitions and policy efforts. The Court of Audit found from five case studies that the Ministers of Security and Justice (V&J), Economic Affairs (EZ), Infrastructure and the Environment (I&M), Health Welfare and Sport (VWS) and OCW provide the House with only limited information on whether the Netherlands receives value for money. The ministers themselves receive only limited information on whether their budgets are being used effectively to seize criminal assets, to make energy generation more sustainable, to achieve the appropriate water levels for shipping, agriculture and industry, to have institutions achieve the Youth Care Plus goals, or to provide assistance to students in basic vocational education who need extra support on their courses. The responsible ministers do not provide the House with the information it needs to determine whether tax revenue has been spent effectively.
Improvements in central government's operational management, even in times of spending cuts
The Court of Audit's audit of the accounts found that operational management had improved at several ministries following many years of serious problems, especially at the Ministries of VWS (grant management), Defence (materiel and financial management) and the Tax and Customs Administration (ICT projects). The Court of Audit found no shortcomings at the Ministries of Foreign Affairs (BuZA) and Social Affairs and Employment (SZW) in 2012. The standard of operational management has remained largely unaffected by the far-reaching reorganisations in central government. This has also been the case at the merged Ministries of I&M and EZ.
Objection lodged against serious shortcomings at V&J
The Court of Audit lodged an objection with the Minister of V&J regarding the ministry's financial management. Owing to problems with the financial system, the ministry did not have a complete insight into the outstanding commitments and thus the budget margin. The Ministry of Finance should have exercised stricter supervision of financial management at V&J. The Ministry of Finance had problems with information security and at the agency responsible for State loans. The Ministry of BZK was unable to exercise its coordination effectively. Definite plans are not yet in place to achieve a substantial proportion of the proposed spending cuts in the civil service – estimated by the current government at between € 647 and € 792 million. Proposed spending cuts of €426 million must still be substantiated and the ambition level is coming under pressure. The Court of Audit is not optimistic about the achievement of additional spending cuts in the civil service. A strategy is necessary for the future of the civil service that involves autonomous administrative authorities in the Compact Civil Service programme. This is a responsibility of the Minister for Housing and the Central Government Sector.
Shortcomings in municipal controls – The control system in place for the municipalities' use of special purpose grants awarded by central government again failed to function adequately in 2012, although some improvements were seen. There were improvements in the audit but the municipalities and provinces themselves have not yet taken appropriate action. The Minister of BZK, moreover, still does not adequately encourage other ministries to play a more active role in a uniform recovery policy. In May 2012, the Court of Audit concluded that there was no assurance on the regularity of the use of 10% of the special purpose grants awarded by central government to municipalities and provinces. The special purpose grants were worth €12.3 billion in 2012 and were spent in part on contingency planning, the reintegration of benefit recipients, combating educational disadvantages and stimulating house building. The Minister of SZW had not done enough in 2012 to assure the regularity of the municipalities' €1.1 billion expenditure on the participation budget.
Supervision of organisations' operational management important, lessons learned from Amarantis
The quality of operational management at organisations that perform a variety of tasks at arm's length from central government is uncertain to the House of Representatives. These organisations receive approximately €85 billion from the State budget every year. They also receive approximately €48 billion in income from charges and fees. In response to recent 'accidents' such as those at the Amarantis education group, measures have been taken to improve financial management, accountability and supervision at public and semi-public institutions. The House cannot adequately check the use of these public funds because ministers provide only limited information on them.
Response of the ministers and the Court of Audit's afterword
The Minister of Finance responded with pleasure to our finding that the number of regularity errors and uncertainties in central government had remained within the permitted margin. Operational management was improving; more than 95% of the processes were satisfactory but there had been a deterioration in some areas at the ministries. Regarding the financial management problems at the Ministry of V&J, the minister wrote that he had no legal power to issue instructions. He would examine ways to strengthen his supervision of financial management at other ministries. In the minister's opinion, the government is on course to achieve the intended spending cuts and there is therefore no need to introduce a new way of informing the House of Representatives about the state of the spending cuts.
The Minister of BZK wrote that the control system in place for special purpose grants awarded by central government to municipalities had again functioned inadequately in 2012 but the auditors had since successfully completed the necessary improvement measures. There is now sufficient assurance on the regularity of the use of these billion-euro government grants.
The Minister for Housing and the Central Government Sector wrote that the intended spending cuts in the civil service 'will just happen'. That the Court of Audit has doubts about the feasibility of the proposed spending cuts is, according to the minister, too one-sided.
The Court of Audit thinks the statement that additional savings 'will just happen' harbours the risk of wishful thinking. The Court notes with pleasure in its afterword that the Minister of Finance is considering ways to strengthen its supervision of budget accounts. The Court will closely follow the investigation announced by the Minister of BZK into ways to improve the accounts kept for special purpose grants. It will pay particular attention to the improvements necessary at the Ministry of SZW.