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‘Double-ups’ create budget problems

Monday June 16, 2014 Published in Letters to the Editor
Democratic Party finance spokesperson James Beer. 14033119 Democratic Party finance spokesperson James Beer. 14033119

Dear Editor, I congratulate the Democratic Party Finance Spokesman James Beer for identifying a problem in the appropriation process for the 2013/14 financial year.

This is a problem that others, but more particularly those responsible for it like Mark Brown the Minister of Finance, have overlooked and, in doing so, should attract the closest scrutiny and investigation as it appears to me that he may have committed a significant breach of trust, probably broken the law and deceived Parliament.

The Appropriation Act 2013 comprises three sections, five schedules and a summary. The schedules are, as Mr Beer has indicated, 1(a), 1(b), 2, 3 and 4. Pursuant to section 3 (2) the sums appropriated are the aggregate of these Schedules. These Schedules total $210,298,620. That is the sum Parliament was asked to appropriate and that is the sum it actually appropriated and identified in the Bill's Explanatory Note yet the Act purports to be appropriating a much lesser sum, namely, $196,534,398 a difference of $13,764,222.

On its face it would appear that Government was attempting to appropriate $210m+ when its revenue expectation was significantly less thus incurring a huge deficit.  

Minister Mark Brown signed off on the Appropriation Bill declaring that he was satisfied that it reflected the underpinning of a fiscally responsible budget; that he concurred in the Financial Secretary's Statement of Responsibility and that he accepted overall responsibility “for the integrity of the Budget Appropriation Statements 2013/14 and compliance with the Ministry of Finance and Economic Management Act 1995/96”.

This is a most serious situation. The Minister knowingly or unknowingly has misled Parliament. In doing so he would appear to be in breach of both the MFEM Act and the PERCA Act.

He has also spawned a host of associated problems.

The Outer Islands appropriations of $11,632,325 have been appropriated twice. Once in Schedule 1(a) and again in Schedule 1(b).

Similarly $13,583,800 for Welfare payments of the $13,763,800 appropriated for Benefits and Other Unrequited Expenses has been appropriated twice. Once in Schedule 1(a) and again in Schedule 2.

These two duplications totalling $25,216,125 have therefore been voted by Parliament to services which do not require, or were not intended to have, these additional sums and consequently were unavailable, without an Appropriation Amendment Act, for general Ministry requirements or Other Expenses thus guaranteeing major blowouts somewhere if the proposed expenditure for the year proceeded unchecked. As Mr Beer has written, had the Government not been so desperate to dissolve Parliament this mess could have been corrected.  Now it will remain for the incoming Government to try and clean it up but how would it do that when the Appropriation Act lapses at the end of this month is anyone’s guess.

I wonder whether the Minister or MFEM are aware that the aggregate of the appropriations contained in Schedules 1(a), namely $116,191,778, Schedule 3 namely $5,710.000 and Schedule 4 namely $74,632,620 themselves alone actually came to the purported appropriated sum of $196,534,398 and that to all intents and purposes Schedule 1(b) and Schedule 2 would appear to be redundant. They are not, of course, because they form part of the Act and the sums authorised by them have been lawfully enacted taking the total appropriations well beyond the sum intended and into deficit territory. 

MFEM will likely argue that the Summary makes the intention clear. There are two problems with that. The Summary is attempting to encapsulate the appropriations in the foregoing Schedules. It does not do that. Further there is no Schedule 1 and being just a summary it should accurately reflect that which has gone before. It does not do that either. Furthermore, to give the Summary any other interpretation would presuppose the abrogation of section 3(2) of the Act.

Heads of Departments are required by S.39 of the MFEM Act to restrict authorisation of expenditure to the allocation specified in their Vote.  They might correctly argue that they are therefore lawfully empowered to authorise expenditure up to the limit so allocated and that it was MFEM’s job to ensure that the supporting sums were made available which would be difficult when $25m+ is tied up where it was not needed and could not legally be touched.  In this connection MFEM might need reminding also that Article 70 of the Constitution says “All expenditure from the Cook Islands Government Account or any other public fund or account shall be in accordance with an Appropriation Act unless otherwise authorised or permitted by any other enactment.”

As any opportunity for correction by amendment to the Appropriation Act 2013 was lost with the vacuously justified hasty dissolution of Parliament the only real remedy available to MFEM is to rein in expenditure but with the end of the financial year looming any such effort would have limited effect.

Legally all expenditure should stop until the position has been assessed. MFEM should go into immediate damage control and search for legislative authority on how to extricate itself from a mess of its own creation.

Someone should take the fall for this disaster if my analysis is correct and that person is the Minister of Finance as it is he who has ultimate responsibility.

In the first instance the entire matter should be handed over to PERCA for enquiry and the Statements of Responsibility reviewed against the integrity and consistency provisions of the MFEM Act and whether they were misleading or made without adequate investigation.

PERCA’s attention should also be directed to the requirements of S.14 of its Act as to ensuring adequate public accountability for statements of responsibility as well as the offences provisions in  S.36, more particularly S.36(d) and the associated penalties in S.37 because a conviction would disqualify the Minister of Finance from re-election and in respect of which, because of the seriousness of the matter and the manifold consequences, the voting public is entitled to expect that some action be taken before the general election.

-- John M Scott