www.pwc.com Integrity Inquiry into the functioning of the Government of Sint Maarten Table of Contents Table of contents 1. Introduction 5 2. Executive summary 7 2.1. Background 7 2.2. Scope of the Integrity Inquiry 7 2.3. Government of Sint Maarten integrity architecture 8 2.3.1. Government of Sint Maarten key observations 9 2.3.2. Government of Sint Maarten priority recommendations 13 2.4. State-owned companies integrity architecture 21 2.4.1. State-owned companies key observations 22 2.4.2. State-owned companies priority recommendations 23 2.5. Areas for future analysis 28 3. Report structure 29 4. Scope and approach 30 4.1.Scope 30 4.2.Approach 31 4.2.1. Desk research conducted 31 4.2.2. Interviews conducted 32 4.2.3. Transaction analysis 32 4.3.Limitations 33 4.4.Summaryofcooperation 34 5. Definition of integrity for purposes of this Report 35 6. Local context 37 6.1. Sint Maarten constitutional background 37 6.2. Structure of the Government of Sint Maarten 37 6.2.1. Political and socioeconomic characteristics 38 7. Assessment of the integrity architecture of the Government of Sint Maarten 41 7.1. Global standards and leading practices 41 7.2. Leadership, commitment, and devotion of resources 44 7.2.1. Description aligned to global standards and leading practices 44 7.2.2. Observations and recommendations 45 7.3. Regulatory framework 72 7.3.1. Description aligned to global standards and leading practices 72 Table of Contents 7.3.2. Observations and recommendations 72 7.4. Investigations and enforcement 91 7.4.1. Description aligned to global standards and leading practices 91 7.4.2. Observations and recommendations 92 7.5. Procurement 119 7.5.1. Description aligned to global standards and leading practices 119 7.5.2. Observations and recommendations 119 7.6. Transparency and strategic communications 125 7.6.1. Description aligned to global standards and leading practices 125 7.6.2. Observations and recommendations 126 7.7. Personnel management 133 7.7.1. Description aligned to global standards and leading practices 133 7.7.2. Observations and recommendations 134 7.8. Systems and information sharing 148 7.8.1. Description aligned to global standards and leading practices 148 7.8.2. Observations and recommendations 149 8. Assessment of the integrity architecture of state-owned companies 161 8.1. Governance and corporate structure 161 8.1.1. Princess Juliana International Airport Operating Company N.V. 161 8.1.2. N.V. Gemeenschappelijk Electriciteitsbedrijf Bovenwindse Eilanden 161 8.1.3. Sint Maarten Harbour Holding Company N.V. 162 8.1.4. Sint Maarten Telecommunication Holding Company N.V. 162 8.2. Methodology for assessment of state-owned companies 162 8.3. Commitment and devotion of resources 163 8.3.1. Description aligned to global standards and leading practices 163 8.3.2. Observations and recommendations 164 8.4. Integrity compliance programs 169 8.4.1. Description aligned to global standards and leading practices 169 8.4.2. Observations and recommendations 170 8.5. Procurement 174 8.5.1. Description aligned to global standards and leading practices 174 8.5.2. Observations and recommendations 175 8.6. Governance and oversight 178 8.6.1. Description aligned to global standards and leading practices 178 Table of Contents 8.6.2. Observations and recommendations 179 8.7. Transparency 185 8.7.1. Description aligned to global standards and leading practices 185 8.7.2. Observations and recommendations 186 8.8. Integrity 189 8.8.1. Description 189 8.8.2. Observations and recommendations 189 9. Priority recommendations 192 9.1. Government of Sint Maarten priority recommendations 192 9.2. State-owned companies priority recommendations 193 10. Areas for future analysis 196 11. Conclusion 199 Appendix A. - Glossary of terms and acronyms 201 Appendix B. - Global standards considered 205 Appendix C. - Key relevant findings from previous assessments and reports 213 Appendix D. - Public perception of corruption in Sint Maarten based on open sources 220 Appendix E. - Code of Conduct framework gap analysis aligned to global standards 234 1. Introduction On September 30, 2013, the Council of Ministers of the Kingdom of the Netherlands (“Kingdom”) by Kingdom Decree charged the Governor of Sint Maarten with the responsibility to conduct an Integrity Inquiry (“Inquiry”) to identify shortcomings and provide recommendations into the proper functioning of the Government of Sint Maarten (“GoSM” or “Government”) as required in a democratic state governed by the rule of law. The Kingdom Decree resulted from concerns of the Council of Ministers of the Kingdom based upon media reports, public questions, perceptions about integrity and reputation, and perceptions from reported integrity breaches by politicians in Sint Maarten. The Governor of Sint Maarten (“Governor”), thereafter by Governor’s decision dated December 4, 2013, established a three-person Steering Committee supported by a professional secretariat to allow for an independent, impartial and effective process. The Steering Committee, Dr. Marten Oosting, Chairman, and members Mr. Jaime Saleh and Mr. Miguel Alexander, have extensive backgrounds and careers in law, public policy and good governance assessments across the Kingdom and former Netherlands Antilles. On December 20, 2013, the Governor issued an Invitation to Tender to engage an international accounting firm with experience and expertise in conducting forensic integrity inquiries to execute the assessment. On February 21, 2014, PricewaterhouseCoopers (US) International LLC (“PwC”) was commissioned by the Governor of Sint Maarten (“Client”) to perform an independent Inquiry into the GoSM. The scope of the Inquiry extended to the programs and activities of the public administration sector including the Government and State-owned Companies (“SoCs”). The period of the Inquiry was 24 weeks from the commencement date of February 26, 2014, as defined in the contract and related documents (“Contract Documents”). Accordingly, our services were performed and this Inquiry Report (“Report”) was developed in accordance with the Contract Documents dated February 21, 2014 and are subject to the terms and conditions included therein. Pursuant to our risk management policies, we are required to note that our services were performed in accordance with the Standards for Consulting Services established by the American Institute of Certified Public Accountants (“AICPA”). Accordingly, while we have rendered observations and recommendations in this Report, we are not providing “audit services,” nor are we providing an “opinion” pursuant to the AICPA’s Standards for Audit and Attest Services as we would, for example, if we were asked to perform an audit of the financial statements of a publicly traded company. Accordingly, we did not “verify” or “audit” any information provided to us pursuant to AICPA audit standards since this was a consulting engagement – rather we accepted the material that we were provided by the various Government Ministries and officials as authentic and accurate. We have noted in this Report when the information provided was not in accordance or responsive to our requests. Finally, we are obliged to note, pursuant to the aforementioned consulting standards, that our work is limited to the specific procedures and analysis described herein and that we did not conduct procedures that are not specified in this Report. This Report is based only on the information made available to us through August 1, 2014. Accordingly, changes in circumstances after this date could affect the findings outlined in this Report. In the course of the Inquiry, PwC gathered information through document requests and field research. The services performed were carried out on the assumption that such information is accurate and complete. PwC makes no representations with respect to the accuracy, authenticity or completeness of information provided to us and cannot assume any responsibility for incomplete, inauthentic or inaccurate information. We will, however, as indicated above, note in this Report if the information was not provided in accordance Integrity Inquiry into the Functioning of the Government of Sint Maarten 5 with our requests for such information or if there was a reluctance to produce such information. The sufficiency of the material contained in the submissions was analyzed and referenced against witness statements and other material when making observations and recommendations pursuant to AICPA consulting standards. This Report has been prepared solely for the use and benefit of, and pursuant to, a client relationship exclusively with the Governor of Sint Maarten. The Inquiry is designed to add value and improve the quality of governance on Sint Maarten and the functioning of the public administration. Furthermore, the Report refers to recommendations to be implemented throughout the Government to address issues of integrity on the ground and improve public administration. Recognizing the fact that PwC has no contractual or other responsibility to the GoSM, the Report is intended to be used by the GoSM to add value and improve the public administration of Sint Maarten, and therefore it is allowable for the GoSM to use the Report for those purposes. We disclaim any contractual or other responsibility or duty of care to others based on its use, benefit or reliance by third parties. This Inquiry is not a penal inquiry or an inquiry designed to forensically establish admissible evidence within the meaning of a penal system. The services performed do not include the provision of legal advice, and PwC makes no representations regarding questions of legal interpretation nor whether our recommendations are implementable under the law of Sint Maarten. Nothing contained herein should be taken to imply, infer, or in any other way represent legal advice or conclusions. Integrity Inquiry into the Functioning of the Government of Sint Maarten 6 2. Executive summary 2.1. Background Sint Maarten obtained its status as an autonomous country within the Kingdom of the Netherlands on October 10, 2010 (“10/10/10”).