How will the final subsidy for NOW 1.0 be determined?

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Date:
10 Sep 2020

By:
Aimëe Peterse, Joost Verlaan

How will the final subsidy for NOW 1.0 be determined?

On 8 September 2020, the Minister of Social Affairs and Employment announced in a letter to the House of Representatives that the Employee Insurance Agency (“UWV”) intends to enable employers  to submit a request to have their NOW 1.0 subsidy definitively determined (the final settlement) as of 7 October 2020.

Because of the wide variety of employers who have applied for the NOW 1.0 subsidy, these differences will be taken into account in the final settlement. The Minister of Social Affairs and Employment and the Dutch Association of Accountants (“NBA”) have developed a special audit protocol for this purpose. During the audit, a large company that has received a high amount of subsidy will receive an extensive audit. A small company that has received a small amount of subsidy will be audited less extensively.

Below you will find an overview in which the audit protocol is clarified. You will find an explanation at the bottom of this overview.

Tabel vaststelling NOW 1 ENG.JPG

Subsidy: advance payment of maximum € 20,000 or € 25,000 subsidy request

Employers who have received an advance payment of up to € 20,000 or who have applied for a subsidy of up to € 25,000 are likely not expected to submit an accountant’s statement when making their determination. These organisations are subject to a risk-based investigation by the UWV.

Subsidy: application between € 25,000 and € 125,000 or advance payment between € 20,000 and € 100,000

Employers who fall within this category need a third-party statement. This third-party statement may be issued by an auditor, administrative office, tax consultant or an accountant. The Minister of Social Affairs and Employment will determine exactly what this statement will contain in the coming weeks. However, it has already been announced that this third-party statement will require a number of (limited) activities from the independent expert.

Subsidy: advance payment between € 100,000 and € 375,000

Employers who have received an advance payment within this category can be divided into two groups:

1.            Company without audit obligation:

  • The company that does not have an audit obligation for the annual financial statements suffices with an assignment related to assurance (the statement of composition). When applying for the final NOW 1.0 subsidy, this company must attach an auditor's report. For this statement:
    • The company provides financial data;
    • The auditor compiles the financial statement, without providing assurance on the data in the application;
    • The auditor performs additional work to address the specific risks of the NOW identified by the Ministry of Social Affairs and Employment.

2.            Company with audit obligation:

  • An assurance report with limited assurance is requested from the company subject to audit for the annual financial statements, with a more intensive risk analysis and work based on this analysis by an auditor. Here, too, the auditor must perform additional work to specify the specific risks of the NOW identified by the Ministry of Social Affairs and Employment.

Subsidy: advance payment of at least € 375,000

Within this category, employers are also divided into two groups:

1.            Company without audit obligation:

  • An assurance report with limited assurance is requested from the company subject to audit, with a more intensive risk analysis and work based on this analysis by an auditor. Here too, the auditor must perform additional work to specify the specific risks of the NOW identified by the Ministry of Social Affairs and Employment.

2.            Company with audit obligation:

  • In view of the size of the enterprise and the amount of the subsidy, extra care is expected from organisations with an obligation to carry out audits. Therefore, an assurance report with a reasonable degree of assurance is expected from them. This examination concerns the same level of assurance as a regular annual audit, focusing on an audit of the NOW grant.

Application for individual operating company

Lastly, there is a separate monitoring obligation for individual operating companies that have submitted an application on the basis of article 6a of the NOW 1.0 scheme. Article 6a of the NOW scheme states that an individual operating company, which forms part of a group of companies, can apply for a subsidy provided that this operating company has its own corporate body and has a drop in turnover of more than 20%. This possibility is subject to additional conditions (see our article on loss of turnover within a group). In view of the additional risks related with these additional conditions, an assurance report with a reasonable degree of certainty is always required from these organisations.

What if an organisation does not submit an approved auditor's report?

1.            What if an organisation submits a restricted opinion, i.e. that the organisation has made an undue error or uncertainty in its revenue recognition? In that case, the auditor is asked to include uncertainties and errors in the statement and to make a pro forma calculation of the consequences of the turnover decrease on the basis of the audit protocol. The UWV will then correct the errors and uncertainties in the application.

2.            What if an organisation submits a report rejected by the auditor? In that case, the subsidy will be set at zero and the advance paid will be reclaimed in full.

3.            What if an organisation submits a statement of abstention given by the auditor? In that case, the Ministry of Social Affairs and Employment cannot form an opinion on whether or not the data in the application is correct and that there is therefore insufficient certainty as to the legitimacy of the awarded subsidy. The subsidy will therefore be set at zero. Please note: this zero determination will be made if an auditor abstains from issuing an opinion in the case of an assurance report with a reasonable degree of certainty as well as in the case of an assurance report with a limited degree of certainty (see categories II and III in the overview).

Based on the above, one exception is made for organisations that require a statement with reasonable assurance, but where due to the size of the business or COVID-19 related circumstances the administrative organisation and internal control are (temporarily) inadequate, despite the size of the organisation. Should this situation arise, the auditor may indicate that his inability to express an opinion is solely due to these inherent limitations. In that case, the Ministry of Social Affairs and Employment and the UWV can be confident that there are no other matters that would have led to a non-approval opinion. Reclaiming the subsidy advance in its entirety is therefore disproportionate. The subsidy will be determined, but at a lower amount: a 10% reduction will be applied to the subsidy.