PHILIPSBURG--The Court of First Instance on Wednesday, ordered the Minister of Education, Culture, Youth and Sport to pay a monthly advance of NAf. 150,000 to Foundation for Secondary Education in the Windward Islands SVOBE from March. The advance is in addition to the monthly lump-sum government pays out to the subsidised schools.
SVOBE provides secondary education to 1,298 students at Milton Peters College (MPC) and Sundial School and employs 168 staff members.
The foundation had sounded the alarm in a so-called LAR administrative procedure in February. SVOBE said it was in grave financial difficulties which could have led to bankruptcy if the Ministry of Education did not provide NAf. 4.5 million in funding.
SVOBE took the Minister of Education to Court and requested a so-called temporary provision in which it sought a change in the way government is calculating the lump-sum payments.
After parties failed to reach an out-of-court settlement, the Judge made a decision on the matter.
According to SVOBE, the annual government subsidies, which are based on a lump- sum per student since the 2010/2011 school year, were structurally too low.
In the 2013/2014 school year, SVOBE received NAf. 15, 337, 356 in total, or NAf. 1,278, 113 per month.
According to SVOBE's lawyer Camiel Koster, the current remuneration to the foundation was insufficient to cover the cost of staff and exploitation, causing "large and acute financial distress."
A report from accountants and business advisers Baker Tilly was submitted to prove SVOBE has a total deficit of almost NAf. 9 million and a monthly deficit of NAf. 246,452.
SVOBE had outstanding debts of more than NAf. 2 million and an outstanding utility bill of NAf. 143.000 with GEBE, it was said.
The foundation also would be unable to pay out vacation allowances, purchase education material and pay for the hiring of new teachers, as the monies reserved for these purposes had already been used to meet current financial obligations.
The Court took into account that the Ministry of Education is obligated to make payments to schools that are sufficient to cover the cost for personnel, including wages and cost for training, as well as for maintenance of school buildings, inventories and utility bills.
It was also taken into consideration that in using abstract figures, the lump-sum system has not yet been officially defined by national decree. The system also does not provide for any final calculations based on actual costs.
Since the implementation of the lump-sum system no evaluation has taken place concerning the cost effectiveness of the remunerations. The Minister's legal representative, attorney-at-law Richard Gibson Jr., had informed the Court that Foundation Government Accounts Bureau SOAB had in the meantime been assigned to evaluate the lump-sum system.
According to the Court, the basic assumptions on which the calculations were based were incorrect. The Court also established that parties were at loggerheads concerning a wide variety of issues, among which the question whether SVOBE was also to blame for the financial difficulties due to improper financial management.
However, the Ministry of Education agreed that a cash-flow analysis had uncovered a deficit of approximately NAF. 75,000 in March, and of NAf. 100,000 in April.
This has led the Ministry to promise payment of NAf. 121,686 to bridge the liquidity gap. It also said it was prepared to pay SVOBE's debts with GEBE and to
replenish SVOBE's financial needs where vacation allowances, recruitment costs and teaching material were concerned.
Judge Katja Mans agreed with Government's lawyer Gibson that SVOBE had failed to provide any concrete evidence to sustain its claim that it immediately needed NAf. 4.5 million to keep the schools open and avert bankruptcy, but considered an "urgent situation" proven.
Considering all this, the Judge ordered the Ministry to pay NAf. 150,000 per month to SVOBE until a final decision on the lump-sum has been made.
Attorney Koster said SVOBE's financial needs would be considerably reduced if Minister Patricia Lourens-Philip fulfilled her promises.
"This, however, would not mean that all problems are over. For instance, a large amount still needs to be found for big maintenance projects," Koster said.
The lawyer also pointed at the Court's observation that the government decisions on which the subsidies were based would "with a high degree of probability" be declared null and void during the court case on the merits. The first hearing in this case is scheduled for Thursday, April 24.
"In popular terms, the Judge has sent the Minister back to the drawing board, because in its current form the lump-sum system is incorrect and cannot be upheld to calculate education subsidies," said Koster.
The lawyer said SVOBE was elated with the outcome of the injunction. "During the past four years, SVOBE has already tried to explain this to the Minister, but apart from some minor adaptations here and there, the system has never been evaluated. The Minister also never implemented any substantial changes."
This ruling is not the end of the story, Koster pointed out. "To the contrary," he said. "In any case, the Minister still has to make a decision in the so-called 'objection phase,' in which the lump-sum system will have to be (substantially) adapted. In the meantime, the Minister and SVOBE will continue communications to reach practical solutions. SVOBE has high hopes that these talks will lead to satisfactory results and that the Minister will continue to live up to promises. If that happens, than that is a good start for financial peace," Koster said.