The Public Accounts Committee (PAC) has advised the Cook Islands Investment Corporation (CIIC) to disclose all anticipated income during the budget process and to Parliament.

The Committee made this recommendation after reviewing two investigation reports submitted to Parliament by the Public Expenditure Review Committee and Audit (PERCA).

The investigations were carried out by the Cook Islands Audit Office and the Public Expenditure Review Committee after a complaint about CIIC’s overspending of its budgeted appropriation and discretionary expenses.

The PERCA report was tabled on May 15, 2024. A PAC hearing was held on August 27, and the witnesses summoned were Tangata Fletcher Melvin, chair of the CIIC Board of Directors, and Allan Jensen, the CIIC chief executive.

It revealed that CIIC overspent their budgeted appropriation from Parliament by $2,765,175 over five years from 2018 to 2022.

CIIC was able to spend more than it was appropriated through inaccurate budget figures submitted to Parliament for anticipated revenue expected to be collected and its ability to draw on cash reserves generated from excess rental income, other income and dividends retained.

During that period, CIIC collected $3,169,338 more revenue than what it was budgeted for, the report said.

A legal opinion deemed the overspending by CIIC lawful but concluded that it “does not mean the overspending by CIIC and those in management and governance positions are released from the responsibility for incorrect and unrealistic revenue reporting and then overspending”.

According to the Public Accounts Committee, the use of excess revenue from rental income from the Cook Islands Government Property Corporation for CIIC falls outside the scope of the Appropriation Act, as per the legal opinion from the Crown Law.

“These funds are appropriated via CIIC Act (not an Appropriation Act) and its expenditure is decided by the CIIC Board under the CIIC Act. The Act does not specifically cover other income from subsidiaries other than Cook Islands Government Property Corporation.”

According to the PAC, CIIC chairperson Melvin said that CIIC considered the various recommendations in the report and has taken action on them. These actions are being implemented and will be reflected in the 2023-2024 annual report and its financial statement.

The Public Accounts Committee recommended that budget figures provided to the CIIC Board of Directors should agree to the figures provided to Parliament. This includes rental income and other incomes and anticipated dividends retained to ensure an accurate net Crown appropriation is provided to CIIC each year.

The PAC further recommended that discussion be held between CIIC, Ministry of Finance and Economic Management and the Crown in regards to revenue received from subsidiaries other than the Cook Islands Government Property Corporation to provide further clarity on whether CIIC has the sole authority to use excess other revenue or if it required the approval of the financial secretary.

The report on discretionary expenditure was related to two overseas trips taken by the chief executive and the former chairman.

It was revealed that $15,798 was used for a trip to Australia from June 10-15 in 2022, and another of $41,796 to the United States from September 23 October 7, 2022.

The report stated that the two trips were assessed against CIIC’s travel policy, Cook Islands Government: Official Duty Travel Policy and Remuneration Tribunal. It further stated that both trips were funded by administered payments and the costs were included in CIIC’s annual financial statements.

The PAC recommended to CIIC that all travel by CIIC be economy class travel consistent with the government’s official duty travel policy.

The PAC further recommended that CIIC submit a report on all travel expenses for the 2022-2023 and 2023-2024 financial year, identifying the class of travel and sources of funding.

CIIC is to also submit its revised travel policy.