A study of public foundations

A public foundation is a foundation that the government establishes, co-establishes or has established. At the end of 2008, there were 275 public foundations in the Netherlands. 78 of them were legal entities with statutory tasks and/or autonomous administrative authorities. By law, the minister is responsible for the entire operation and performance of this group. For the other 194 foundations, there are no unambiguous rules in place regarding the scope and content of ministerial responsibility and thus not on the provision of information to the House of Representatives.

Provision of information to the House of Representatives
The House of Representatives could be better informed of the establishment of public foundations. The Government Accounts Act lays down that the establishment of a public foundation must be put to the States General. It must also be assessed against the points included in the Foundation Framework. In practice, however, proposals to establish a foundation are rarely considered in detail. We think that the House of Representatives should be better informed. Unlike the current situation, all public foundations should comply with the procedure in the Government Accounts Act. The House of Representatives receives no information whatsoever on the dissolution of foundations. It is therefore unaware of developments concerning public foundations. We think the ministries should keep up-to-date records of public foundations and provide the information to the House. A single digital government site that is regularly updated would suffice.

Supervision of public foundations
Many of the ministries concerned think their supervision need extend no further than the use of subsidies or the implementation of their tasks. In view of the minister's involvement in the establishment of a public foundation, however, we think that stance is too limited. In our opinion, a minister cannot suffice with monitoring public funds. By definition, the establishment of a public foundation implies that there is a specific public interest. Given that public interest, we would stress that the ministers must be sure that the operation of the foundation as a whole does not endanger the task for which it was established. Over time, foundations often operate at more distance from the ministry. If a foundation then carries out commercial activities, there is a risk of unauthorised state aid and distortion of competition.

Guidelines
Foundations are often established for a very specific reason. For this reason and also because the relationship between the foundation and the ministry can change, differentiation is required. The form of the relationship between a minister and a foundation must be tailored. In our report we offer a number of guidelines to complement the Foundation Framework. All foundations, for example, would benefit from an advance business analysis of their viability and from the preparation of a business plan. The preparation of model articles (and alternatives) would also be beneficial. We found that the articles were not always properly regulated in the internal and external governance of public foundations or were not entirely consistent with each other.

The Minister of Finance responded to our report on 16 March 2011 on behalf of himself and the other ministers concerned. The minister saw no reason to amend the Foundation Framework in the areas in which we provided guidelines. He also saw no reason to make the assessment system in the Foundation Framework more transparent. The minister will consult the other ministries regarding the publication of a list of the foundations they have established or had established and with which they have a management and/or funding relationship.