FROM WARNING TO ACTION: When an Entity’s Financial Problem Becomes Government’s Problem - PART 1

From Warning To Action: Strengthening Sint Maarten’s Public Institutions Before Problems Become Crises

A Three-Part Series on Financial Health, Good Governance and Responsible Self-Government

The latest warning from the Committee for Financial Supervision (Cft) in its report published on August 31, 2026, deserves more than acknowledgement.

It requires action.

According to the Cft, Sint Maarten faces substantial risks to its public finances from several government-owned companies. But the warning goes further. The Cft has also drawn particular attention to the financial situation surrounding the social-security funds administered by SZV.

This means that the discussion cannot be limited to government-owned companies alone It must also include other institutions whose financial difficulties can eventually affect the national budget and the taxpayer.

This should concern Government and Parliament. It should concern Management and Supervisory Boards. It should concern those responsible for publicly funded institutions. And it should concern every citizen whose pension, healthcare, electricity, water, telecommunications, housing or other essential service depends upon these institutions.

The central question is simple:

Are we identifying and addressing financial and governance problems early enough, or are we waiting until they become crises?

When the Problem Reaches Government’s Doorstep

Government-owned companies are separate legal entities. Subsidized foundations have their own legal structures. SZV and the social-security funds operate under yet another statutory framework.

They should therefore not all be governed in exactly the same way.

But they have something important in common.

Serious financial problems within these institutions can eventually become serious financial problems for the Country.

Consider TelEm. Its financial challenges demonstrate why Government, as shareholder, needs to know when an important government-owned company is heading towards financial difficulty before intervention may have to be considered.

Consider also the Sint Maarten Housing Development Foundation (SMHDF). It is not a government-owned company and Government does not exercise ordinary shareholder rights over it. Nevertheless, where an organization performs an important public function and relies significantly on public resources or creates material financial exposure for Government, appropriate financial oversight and accountability are necessary.

And then there is SZV.

The Cft’s May 2026 warning is particularly serious. It reported that the healthcare funds administered by SZV are losing approximately XCG 35 million annually, while accumulated deficits have reached approximately XCG 500 million. According to the Cft, those deficits have until now been absorbed using reserves from other funds, mainly the AOV pension fund. The Cft warned that these reserves could be depleted within a few years, placing the affordability of both healthcare and pensions under serious pressure. (CFT)

This is not merely an accounting issue.

It concerns healthcare today, pensions tomorrow and the national budget ultimately.

Three Different Institutions, One Public-Finance Reality

It is important not to confuse the legal structures.

Government is a shareholder in government-owned companies.

It may be a subsidizer, funder or contractual partner in relation to foundations and other publicly supported entities.

And in relation to SZV and the social-security funds, Government has statutory, policy and public-finance responsibilities that differ again.

Good governance requires respecting these differences.

But good financial governance also requires recognizing a common principle:

Where the Country carries substantial financial risk, Government must know the risk, monitor the risk and act within its legal authority before that risk becomes a crisis.

Healthy Institutions Must Come First

In my recently published Tribune article, “Healthy Government-Owned Companies First: The Foundation for Sustainable Dividends,” I argued that Government should first determine whether a company is financially healthy before considering how much dividend it can pay.

That principle remains.

But the Cft warning demonstrates that we should broaden the discussion.

For government-owned companies, the question is:

Is the company financially sustainable?

For substantially subsidized entities, the question is:

Are public funds producing the intended results, and is the organization financially sustainable?

For SZV and the social-security funds, the question becomes even more fundamental:

Are the healthcare and pension systems financially sustainable for the people who depend on them?

Different questions. Different legal relationships.

But one common responsibility:

Do not wait for the money to run out before acting.

SZV Shows Why Early Action Matters

The situation involving the healthcare funds is perhaps the clearest illustration of why an early-warning approach is necessary.

The Cft has stated that healthcare expenditure structurally exceeds income and that the deficits are being covered through reserves, particularly AOV reserves. It has called for measures to restore sustainability, including implementation of general health insurance and measures affecting both income and healthcare costs. (CFT)

Whatever policy choices Government ultimately makes, one point should be beyond dispute:

Using reserves to cover structural annual deficits cannot continue indefinitely.

A reserve buys time.

It does not solve a structural problem.

And once the reserve is exhausted, the choices become much more difficult.

The Warning Is an Opportunity

The Cft warning should therefore not be viewed simply as outside criticism.

It gives Sint Maarten an opportunity to strengthen how it identifies, governs and manages risks across important public institutions.

The objective is not more political interference.

It is better governance, earlier intervention and clearer accountability.

Government should not manage TelEm.

It should not take over the daily management of SMHDF.

It should not micromanage SZV.

But Government cannot ignore financial risks that may ultimately arrive at its own doorstep.

By Franklyn Richards LL.M., Former Lieutenant Governor of Sint Maarten

‍