Order in Executive Council authorises changes in expenditure for 2014/15

In line with Article 70 (3) (b) of the Cook Islands Constitution an Order in Executive Council was passed to authorise the modification of spending in some areas. 

Additional spending of $1.688 million has been approved in 2014/15. This has been offset by $1.6 million in savings which will be sequestered from the underwrite of the long haul flights to Los Angeles and Sydney.  An additional $3.5 million is estimated to be received in 2014/15 from fishing activities. 

A final estimated outcome for the 2014/15 Budget will be provided at the time of presenting the 2015/16 Budget, a preliminary unaudited actual outcome for 2014/15 will be provided in the June 2015 Quarterly Financial Statement.

Approved Additional Expenditure for 2014/15

Table 1 outlines the budgetary impact of the outcome additional expenditure in 2014/15 through to 2017/18. The majority of spending initiatives will not have an ongoing impact on expenditure baselines. Details of additional spending are provided at Table 1.

 

Table 1 – Additional Expenditure 2014/15 to 2017/18  

Expenditures Decisions

2014/15

2015/16

2016/17

2017/18

Production of new circulating currency

1,010

0

0

0

Social Impact Fund Spending from 2014/15

143

0

0

0

Seabed Mining Advisor Salary

25

25

0

0

Purchase of Old Cook Islands Coins

0

1,670

0

0

Purchase of New Zealand Coins

0

1,125

0

0

Transportation of old coins to New Zealand

0

50

0

0

Civil List (Ongoing Component QR)

120

25

25

25

Security Costs Associated with Schools

250

0

0

0

Banking System Report

50

0

0

0

Increase Contingency Fund

90

0

0

0

Total

1,688

2,870

25

25

Production of New Circulating Currency

In previous years the costs for the production of circulating coins were not appropriated.   Revenues from circulating currency were reported on a net basis (i.e. Gross Revenue less Gross Expenditure).

Circulating coins from New Zealand have been purchased from the RBNZ (at face value) depending on the needs of local Banks and sold (at face value) to the banks.  The costs of transport were offset by gains which were made on the minting of Cook Islands circulating currency.   In previous years this has been reported as net revenue (the net of the transaction of production and sale).

The Currency Act 86/87 stipulates that an appropriation is required for the purchase of currency.  In recognition of the requirements of the Currency Act MFEM has modified its practice and will now report on gross revenues and expenditures associated with the production of circulating currency.

The Cook Islands have contracted the Royal Australian Mint to produce approximately 4 million coins at an approximate cost of $1.010 million (AUD 0.978 million), the face value of those coins is around $4.760 million.  

Other costs will be incurred, including the purchase of old Cook Islands circulating currency and New Zealand coins (which will then be resold back to the RBNZ). 

The estimates on circulating currency are conservatively based it is unlikely that there would be more than $1.67 million worth of Cook Islands coins circulating in the economy, these figures are based on what has been historically minted. 

Table 2 and 3 outline the total expenditure and revenue which are expected over the period 2014/15 to 2017/18.

 

Table 2 – Proceeds from Circulating Currency 

Cost of Production New Coins

1.009

Purchase of Cook Islands Coins

1.670

Purchase of New Zealand Coins from Local Banks

1.375

Transportation to New Zealand

0.050

Total Cost

4.104

Sale of New Zealand Coins to the RBNZ

1.375

Sale of new Cook Islands Coins to local banks

4.760

Proceeds from Old Cook Islands Coins

0.135

Total Income

6.270

Net Seiniorage Revenue

2.166

 

Table 3 – Estimated Impact of Circulating Currency Transactions on the Budget ($m) 

 

2014/15

2015/16

2016/17

2017/18

Revenue

       

Sale of Cook Islands Currency

-

3.142

0.809

0.809

Sale of New Zealand Currency

-

1.125

0.125

0.125

Proceeds from the sale of Melted Coins

-

0.135

-

-

Total Revenue

0

4.402

0.934

0.934

Expenditure

       

Purchase of Cook Islands Coins

-

1.67

-

-

Circulating Currency Purchase

1.01

-

-

-

Transport of NZ Currency

-

0.05

-

-

Purchase of New Zealand Currency

-

1.125

0.125

0.125

Total Expenditure

1.01

2.845

0.125

0.125

Net Balance

-1.01

1.557

0.809

0.809

 Further details on the process of the introduction of new coins will be announced shortly.

Increased Funds for the Civil List

Currently $1.825 million has been spent out of the $2.374 million budgeted for the Civil List. Of the amount spent to date, $117,000 has been spent on local travel and $142,000 on overseas travel.   The Civil List has come under some additional pressure due to the requirement to pay final entitlements to some MP’s who were not re-elected and a modest increase in the remuneration package for the Queen’s Representative, the latter increase an ongoing expense.

Banking System report

Cabinet has approved the establishment of a Committee consisting of the Financial Secretary, the Financial Supervisory Commissioner and the CEO of the BCI to investigate the possibilities of the Cook Islands joining the New Zealand payments system.

Understanding whether the Cook Islands is able to join the New Zealand payments system and conducting settlement and exchange in New Zealand requires a deeper understanding of the issues required. The Committee will be using this report to ascertain whether: 

  • The BCI can obtain an Exchange Settlement Account System ("ESAS") account with the Reserve Bank of New Zealand.
  • The BCI can (or should) become a registered New Zealand bank.
  • In the case that the BCI cannot become a registered New Zealand bank what things it can do to join the payments system.

The Tender is now available and can be accessed on the Cook Islands procurement website, www.procurement.gov.ck

Increase in the Contingency Fund

The operational contingency fund was $0.1 million to cover off on unplanned and urgent requirements as they arose. Until now $75,000 of the fund has been spent, of this amount, $30,000 was provided to the Cook Islands National Council of Women for their conference and a further $15,000 as an emergency fuel purchase for the Island of Rakahanga when supplies were desperately low.

Social Impact Fund

In 2013/14 funds committed from the Social Impact Fund were not actually expended by the Ministry of Internal Affairs.  Standard cash flow processes meant that these funds were swept in at the end of the financial year and not available to spent in 2014/15.    Commitments have been entered into and remain and these expenditures which were incurred last year will now be covered off by these additional funds, this is a one off expenditure.

 Seabed Minerals Advisor

The Government of the Cook Islands is obliged to cover the component of the salary provided to an adviser in the Seabed Mining Authority which is predominantly covered by the Commonwealth Secretariat, this will be at a cost of $50,000 over two years.

Security for Schools

The Government has required that the Cook Islands Investment Corporation to maintain the responsibility for the security of school buildings and related properties from 1 July 2015. No appropriation was provided for the extra cost of physical school security for 2014/15. This extra money covers off security services for the year 2014/15.