Arno Visser was in the House of Representatives on Wednesday with an “uncomfortable feeling”. For the third year in a row, the President of the Court of Audit has to conclude that the government’s accounts are not in order. And at the same time, the new cabinet has big plans to spend a lot more money. ‘Then the risks pile up,’ warns the Court of Audit in the annual survey into the financial management of the national government.
Also read: Court of Auditors seriously concerned about financial management of public expenditure for the third year in a row
On this ‘Accountability Day’ Visser speaks even stricter words than last year. Then everything was not in order. This year there are even more imperfections. A ‘worryingly high percentage’ of the financial obligations that ministries entered into in 2021 are not ‘lawful’, according to the Court of Audit. This means that amounts have not been properly accounted for or that procedures, such as informing the House of Representatives in good time, have not been followed or have been insufficiently followed. “For decades, high legitimacy was an achievement and for the third year in a row that is now different,” Visser told the Chamber.
The Court of Audit is repeatedly told by the cabinet: these are difficult times. The purchase of KLM-Air France shares in 2019? Exceptional. The corona crisis? Exceptional. Due to the pandemic, the government had to spend much more money under pressure in a short period of time. In 2021 33 billion euros extra, according to the Court of Audit. Also 2022 threatens to be exceptional in financial terms: as a result of the war in Ukraine, the government incurs extra high costs for military aid, the reception of large numbers of refugees and the reinforcement of the Dutch armed forces, which has become acute as a result of the Russian aggression. And in the coming years, more major projects were planned, such as the energy transition and solving the housing shortage.
Budget right House eroded
According to the Court of Audit, all these exceptional situations also mean that the House’s ‘budget right’ is being eroded. The House of Representatives must formally be informed about new expenditure, but invoking emergency situations, the cabinet regularly skipped this step. The Court of Audit made a point of this last year. Then Prime Minister Mark Rutte (VVD) said that this could be solved with “an extra stamp”. Visser called that “a very remarkable remark” on Wednesday. Fortunately, according to him, Minister Sigrid Kaag (Finance, D66) is adopting a slightly different tone.
If extra billions for education are spent incorrectly, it will be more than an accounting problem, but ‘real children’ will soon have a language deficiency
According to the Court of Auditors, ‘exceptional’ is called ‘exceptional’ a little too often and many problems have a long history, from well before corona. Ministries have made cutbacks in the financial management departments over the past ten years. Quite a lot, says Visser. The serious shortcomings in the Ministries of Health and Defense are due to a shortage of people in the departments dealing with finance and equipment management. That may sound boring, said Visser, „but that they are crucial in exceptional times. Specific knowledge and skills are lacking at times when it matters.”
How can the government prevent new problems? “Many more people need to be added to all those different management functions,” said Visser. Rules should be simpler. “Government is indeed complex, but it has also been made complex.” And so it can also be simpler. And ministers must set a “realistic timeline” for their plans. If only because it will be difficult to find people who can carry out their plans now that the labor market is so tight.
Civilians directly affected
The crisis surrounding financial management affects citizens directly. If extra billions for education are spent incorrectly, it is more than an accounting problem, but ‘real children’ will soon have a language deficiency. Visser also gave the example of the Allowances affair on Wednesday. Although the House of Representatives and the cabinet quickly agreed on reparations for injured parents, a legal basis for this was omitted in order to speed up the process. That sounds nice, but citizens, says Visser, should be able to obtain justice if necessary – and you really need a law for that. “It may be true that a majority of the House agrees, but that is not the same as meeting the conditions of the democratic constitutional state.”
Also read this opinion piece: More money for defense: skepticism remains in place
The implementation of the scheme, and also the one for the victims of earthquake damage in Groningen, has not paid enough attention to feasibility, so that, paradoxically, precisely because of the desire to make everything go faster, delays have arisen. Visser emphasized on Wednesday the importance of more political attention for implementation, as a committee of the House of Representatives also noted earlier. The lack of this means citizens find themselves stuck ‘between policy and the counter’. Can the government implementation services cope with the new plans? Isn’t too much promised? Are citizens really helped? According to the Court of Audit, the cabinet and the House should ask themselves such questions much more often.
Shortcomings
Since 2019, the Court of Audit has identified structural shortcomings in property management by the Ministry of Defense. The available budget for maintenance is disproportionate to the number of barracks, offices and ammunition depots. As a result, the quality of the buildings deteriorates rapidly.
The Court is also critical of what are called “grey stocks”, the cartridges kept out of sight of the administration in barracks. The soldiers keep these after exercises in case there is a lack of ammunition during the next exercise. “This poses a security risk,” says the Court of Audit, partly because ammunition can be stolen undetected. Handing in ammunition is also complicated: in the past, soldiers could anonymously throw unused cartridges into a container. Now they have to fill out forms for returning ammunition. That hardly happens. They prefer to leave unused ammunition on the training ground or hide it from view by ‘kicking the cartridges into the ground’.
Wishing too much
In an ideal world there is one budget moment per year, but in the past year ministers submitted a large number of supplementary budgets: 63 in total. Public health took the cake, with fourteen supplementary budgets. According to the Court of Audit, this resulted in Parliament being presented with a different budget every 3 to 4 weeks. “That has made the budget process (…) cluttered.” That has to change from now on. Minister Sigrid Kaag (D66, Finance) wants to return to an “orderly budget process”, she said on Wednesday. With ‘one decision-making moment’ in which all interests are weighed up against each other. But, she said, that is quite difficult. Sometimes the ‘political and social pressure’ is so great that waiting is not possible. Such as in March, when the cabinet came up with a billion-dollar plan before the regular budget consultations in the spring to support purchasing power.
Dragging files
The Court of Auditors argues that lingering issues appear to be ‘losing pace’ again. Paradoxically, that is “the result of the urge to act quickly.” Under pressure, the cabinet decided to compensate benefit victims more generously at the end of 2020. The payments of 30,000 euros to victims briefly accelerated, “subsequently significant delays arose” because the organization that carries out the recovery operation is not designed for the timely assessment of tens of thousands of applications. According to the Court of Audit, insufficient attention has been paid to feasibility. Something similar happened in Groningen: new policy was introduced to speed up recovery operations, despite the Court of Audit’s warnings that policy changes cause delays. Last year the Court of Auditors called it disproportionate that 56 euro cents of every euro of compensation is spent on implementation costs. In 2021 it will be even worse: 74 euro cents.
Serious cases
If problems at a department are major or persistent, the Court of Audit may judge that there is a ‘serious deficiency’. Last year, Public Health and Defense were given that predicate. This year again. Many shortcomings at VWS can be traced back to the corona crisis. However, the Court of Audit emphasizes, financial management was not in order before the corona crisis. The problems have become more acute due to corona. The Court of Audit does see improvements: the Minister of Health, Welfare and Sport now has a good overview of the problems. Investments were made in new employees for the financial management, although this ‘has not yet led to the desired results’. Economic Affairs also almost got a big slap on the fingers, because it was unable to demonstrate that a corona support scheme for entrepreneurs (the TVL subsidy) had been paid out in accordance with the rules. In the end, it worked.
Irregularities
Ministers are formally obliged to collect, spend and account for all money in accordance with the rules. This is difficult in practice, which is why a ‘tolerance limit’ of 1 percent is used. This means that no more than EUR 3 to 4 billion may be spent ‘incorrectly’ in the total budget. That limit was ‘significantly exceeded’ in 2021, the Court of Audit concluded. With regard to the money actually spent, there is still a small excess: the legality or reliability of 1.01 percent of the expenditure (3.3 billion euros) has not been established. The liabilities (‘future expenditure’) amount to 15.5 billion euros, or 4.83 percent. In 2019 that was still 1.08 percent. This concerns errors, for example because parliament was not informed in advance or the rules for purchasing were not complied with. Or for uncertainties; then the legality of an expenditure cannot be established.