The cost of maintainning the Dutch waterway network
Is the Dutch government setting aside enough money to manage and maintain the country’s network of main waterways? In response to a €1.8 billion budget deficit in 2011, the Minister of Infrastructure and the Environment took action that she claimed would solve the problems during the period up to the end of 2020. We performed an audit with the dual aim not only of ascertaining whether the Minister was right about this, but also of analysing the budgetary risks for 2020-2028. We also examined whether the Dutch parliament had been fully informed about these problems.
Conclusions
In 2011, the Minister of Infrastructure and the Environment calculated the amount of money that would be needed to pay for the management and maintenance of the country’s network of main waterways up to the end of 2020, including the regular renovation and replacement of engineering works such as locks and bridges (these activities being referred to collectively as ‘sustainment’). We found that the Minister’s calculations were correct in the light of the information available at the time. Four years later, however, the situation today is that additional funds are needed to pay for the sustainment of the network of main waterways. There is a deficit of approximately €0.4 billion for the period up to the end of 2020.
The lack of funds to pay for the sustainment of the main waterways is a recurring problem, with deficits also having been recorded in both 2003 and 2008. On both occasions, the government had to find large sums of money (€1.6 billion in total) to cover the cost of overdue maintenance. We believe that further financial risks are likely to arise after 2020. The funds set aside for the sustainment of the main waterways are once again likely to prove insufficient.
The main reason for the constant recurrence of these budget deficits lies in the lack of clear information available to the Minister of Infrastructure and the Environment about the extent and quality of the country’s network of main waterways. This information problem is caused in turn by the data-processing system used by the Directorate-General for Public Works and Water Management, which is not up to standard (although the Directorate-General is working on it at the moment). The data available on the network of main waterways is not up-to-date, reliable and comprehensive. This makes it difficult to accurately forecast how much money will be required and when.
Parliament, too, needs to have clear information on the funds required to sustain the network of main waterways so that it can decide whether the available budget is enough. For this reason, we believe that the Minister of Infrastructure and the Environment should inform parliament about future developments that will affect the extent and quality of the waterway network. We are referring, for example, to information on bridges and locks that need replacing and the cost involved, in relation to the available budget.
Recommendations
Find extra budget funds to pay for the cost of sustaining the network of main waterways
The Minister of Infrastructure and the Environment should find budget funds to defray the additional expenditure of €0.4 billion that will need to be incurred up to the end of 2020 in order to sustain the network of main waterways. She should also take action to mitigate the risks affecting the adequacy of the sustainment budget after 2020.
Improve the data-processing system used by the Directorate-General for Public Works and Water Management
We also urge the Minister of Infrastructure and the Environment to further improve the data-processing system used by the Directorate-General for Public Works and Water Management. After all, if the Ministry is to plan for and budget sustainment work, it needs to have access to up-to-date, reliable and comprehensive data on the extent and quality of the network of main waterways. This data is absolutely essential in order to make an accurate forecast of the level of funding required for maintenance work.
Instruct the Directorate-General for Public Works and Water Management to adopt a system of accrual accounting
We also believe that a permanent solution to the budgetary problems can be found only if the Directorate-General for Public Works and Water Management switches to a different accounting system. In the current set-up, the network of main waterways and all the various engineering works pertaining to it are not listed as assets on the Ministry’s balance sheet. This means that the waterways and the related works are not depreciated and that no account is therefore taken of the ‘hidden cost’ of their gradual ageing. Were the Ministry to adopt a system of accrual accounting, it would be clear from the balance sheet that the waterways and works were gradually declining in value. Such a system would also make clearer how much money is needed to pay for maintenance, replacement and renovation work. Parliament could use this information to make well-informed decisions on the use of the Infrastructure Fund. A system of accrual-based budgeting and accounting would also encourage the Directorate-General to work more methodically, as both the waterways and works would need to be recorded in the accounts. For this reason, we would recommend that the Directorate-General make a full switch to a system of accrual-based budgeting and accounting.
Improve reporting to parliament
We urge the Minister of Infrastructure and the Environment to inform parliament in the near future about changes in the funding requirements for maintaining the network of main waterways during the period up to the end of 2020, in relation to the available budget. We also urge the Minister to take action in the near future to give parliament a clearer picture of the funding requirements and the available budget after 2020, in relation to both the network of main waterways and the two other networks managed by the Directorate-General for Public Works and Water Management, i.e. the trunk road network (on which we published an audit report in 2014) and the main water system.
Response of the Minister
Response of the Minister of Infrastructure and the Environment
The Minister of Infrastructure and the Environment said that she did not wish to fully hedge against all future financial risks. Her policy was to transfer funds to the sustainment budget only once the risks had sufficiently crystallised. She rejected any suggestion that there were any major maintenance backlogs.
The Minister said that she had taken a number of steps to meet the budget requirements up to the end of 2028. She also made clear that it would be some time before the Directorate-General for Public Works and Water Management had improved its data system and that this was a constant focus of attention for the Ministry. Nonetheless, the Minister did not cite any specific action she was planning to take in this respect.
The Minister did not wish to take a decision on the matter of a full switch to a system of accrual accounting until the publication of the findings of a survey to be held at the end of 2015.
Regarding the matter of reporting to parliament, the Minister said that a ‘sustainment supplement’ had been appended to the budget for the Infrastructure Fund since 2012 and that this supplement had been extended and refined in recent years. She did not comment on our recommendation to take action in the near future to give parliament a clearer picture of changes in the funding requirements both in the period up to the end of 2020 and thereafter, in relation to the available budget.