Finance Minister Ardwell Irion.
PHILIPSBURG--Finance Minister Ardwell Irion is pushing to lower the cost that is forked out on rent as part of efforts to lower costs in government and wants to see proper procedures followed when renting.
He said there have been cases where government rents or purchases property without an appraisal report, which he said is necessary. Irion provided the information in response to a question during last Wednesday’s live Council of Ministers press briefing when asked whether government will be able to reduce rental costs by 20 per cent as proposed and address discrepancies that were identified in the General Audit Chamber report entitled: “Audit on the possibilities of reducing rental costs for Government.”
Irion made clear that he was the one who requested the Audit Chamber to conduct the audit on government and all government owned entities and their rentals “In regard to reducing rent - that’s also the big idea when it comes to finance. It doesn’t necessarily fall under us, but we are pushing that because we want to reduce cost – so that is how we started this process, looking at – before you rent, you need to have an appraisal report or an idea of what the per square meter rental value in this district will cost so we have a good comparison and also look at the opportunities of taking departments out of where they are at now into maybe cheaper locations, bigger locations and so forth. So, we are looking at this whole aspect holistically,” Irion explained.
In its report, the Audit Chamber explores the feasibility of reducing government's rental costs by 20% over five years, as stated in the country packages. The 2020 budget is the baseline for the reduction. The Chamber questions whether the 2020 budget is a feasible benchmark noting that the 2020 financial statements are unreliable, making it challenging to determine the figures to calculate the 20% reduction effectively. In addition, the report highlights how the increases in annual rental costs in the 2020-2022 budgets further complicate the calculation.
To achieve a 20% reduction, relocation (to government property) or termination of leases is likely. The Audit Chamber advises government to consider (or investigate) the costs associated with relocating government organizations and review the expenses related to remodelling spaces used by various departments based on their individual needs and office requirements. Irion said he had received questions about a year and a half or two years ago regarding rent and other entities renting and as a minister he wanted factual advice and not just form an opinion about the issue. “That’s why we went in and requested the Audit Chamber to do this audit. So, with that basis, now we can look and see how we can tackle these things.”
He continued: “There were things, let’s say, for example, within government that I also had my concerns on in regard to rent and so forth which we also started to address… Government would, for example, rent a building without an appraisal report or purchase a building, sometimes, without an appraisal report, but let’s say more into rent.” Irion said he spoke to Prime Minister Silveria Jacobs about these concerns.
Government, he contended, cannot just look at a building and decide to rent the one that is the lower cost. “We have to look at the ‘per square meter’ what we are renting. So, these policies were not in place and... from the outside it looks as if all these things are happening and government isn’t doing anything about it and yes, when we come in and make these changes, it makes some individuals or even entities uncomfortable because they were used to just collecting a certain amount of money without a just reason.”
Irion said having the audit gives him another tool to “put pressure” on getting the proper policies in place and ensuring that renting properties are done in the correct manner by both government and government owned entities. “I am happy to hear at least one or two entities that have, since this audit started, looked into their rent… and their policies and made sure that their policies are properly being implemented when it comes to their real estate.”
In its report the Audit Chamber said it believes there was a need for an impact study before setting a 20% reduction goal for rental costs in the Country Packages. Furthermore, terminating leases might result in long-term office building vacancies. The aim is to reduce costs; however, the potential negative economic impact should not be underestimated and requires research, the Chamber said. The report includes the findings of a short survey issued to landlords of the government to determine the level of willingness surrounding rent reduction. Almost two-thirds (64%) of respondents indicated a willingness to (possibly) renegotiate existing leases.
https://www.thedailyherald.sx/islands/irion-pushing-to-lower-rental-costs-as-part-of-cost-reduction
