Cook Islands: Ministry of Finance

Cook Islands Ministry of Finance News

All of Government Vehicle Auction

All of Government Vehicle Auction

On the 9 May 2015 the Ministry of Finance and Economic Management will be holding a whole of Government auction for a number of vehicles which are surplus to requirements. The auction will be located at the Ministry of Justice carpark and will be run by Mr John Kenning. all government vehicles for auction will be moved to the Justice building before the 4 May 2015 and an open inspection day for all vehicles to the public will be held on the 8 May 2015. All vehicles will be groomed and ready for sale as they will be sold by auction “as is basis” on the day the highest bidder. A list of vehicles will be provided on the MFEM website closer to the date which will contain a photo and specifications. There are some simple rules in regard to the Auction:

  • By bidding, you are stating that you are ready and willing to purchase that item for your bid amount, plus pay for change of ownership. If you are outbid you are under no obligation to buy. But in all other cases, you are entering a contract with the Government to buy the item, and to deliver payment immediately at the close of the auction. If you can't pay, on time, don't bid! At the drop of the hammer your bid is final and is non-retractable.
  • Change of ownership fees must be paid by the winning bidder along with the bid price at the close of the auction.
  • All vehicles must be removed from the site at the close of the auction.
  • All vehicles are sold without reserve and are sold as is where is. The Government takes no responsibility for the condition of any vehicle. You are responsible for inspecting the vehicle and determining an appropriate bid.

For further information in regards to the Cook Islands Government Auction please contact the Senior Procurement Officer at MFEM, Taina Iro at: This email address is being protected from spambots. You need JavaScript enabled to view it. .

 

Rarotonga to Host the 2015 Meeting of Forum Economic Ministers, Trade Ministers and Private Sector Dialogue Workshop

Minister Brown announced that Rarotonga would be hosting a combined meeting of the Pacific Forum Economic Ministers (FEMM) and Pacific Forum Trade Ministers Meeting (FTMM) as well as the Private Sector Dialogue workshop (PSDW)  will be held from 27 to 31 October 2015.
 
MFEM and MFAI will be working closely with the Pacific Islands Forum Secretariat on the logistics of the meeting.
 
Minister Brown was looking forward to the meeting.  “I expect to work closely with my colleagues from the Pacific on economic governance issues across the Pacific during that week.  The last joint meeting between the Finance Ministers and another Ministerial meeting was in Honiara where a number of measures to combat NCD’s were announced.  Obviously, there will to be some natural synergies between the private sector across the region and the economic and trade Ministers.”
 
More information is available from the Pacific Forum Secretariat website on http://www.forumsec.org/pages.cfm/economic-governance/.
 
 

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.

 

Global Forum Phase 2 Peer Review

A positive Phase 2 Peer Review reinforces the strength of the Cook Islands’ regulatory environment and commitment to meeting its international obligations.  The Global Forum on Transparency and Exchange of Information for Tax Purposes has just released its report on the Cook Islands titled “Peer Review Report Phase 2 Implementation of the Standard in Practice—Cook Islands”.  The report is the result of months of research and consultation by the Peer Review assessment team with stakeholders in the Cook Islands.  The process was led locally by Andrew Haigh of the Revenue Management Division of the Ministry of Finance and Economic Management, Paul Heckles of the Financial Supervisory Commission, and Jenner Davis of the Financial Services Development Authority.
 
“The positive report reflects all of the work of the Cook Islands in meeting its exchange of information obligations and modernising its laws in this area,” says Andrew Haigh.  The Cook Islands has 19 Tax Information Exchange Agreements in place and continues to develop more.  The purpose of this Phase 2 Peer Review was to assess how the Cook Islands exchanges information for tax purposes in practice, using its network of tax information exchange agreements.  Amendments to the Income Tax Act, made in 2011, set out the process by which such requests are to be handled.
 
Phase 2 involved a visit to the Cook Islands by a group of assessors from both the Global Forum Secretariat and other jurisdictions.  The assessors reviewed any legislative developments since the country’s Phase 1 Review (2012) and focused on the timeliness of  exchanges of information and effectiveness of the systems for the monitoring and enforcement of the Cook Islands’ exchange obligations.  Paul Heckles says, “This is another example of the Cook Islands being independently assessed against important international standards and being found well up to the mark.”  It is expected that the Cook Islands will be further reviewed (Phase 3) in a few years time to ensure that the standards are maintained.
 
Ten Elements comprised the Phase 2 assessment including: ownership information, accounting records, banking information, powers of the competent authority to request information, evaluations of the tax information exchange agreements as well as how effectively information is exchanged in practice.  The Cook Islands received 8 “Compliant” ratings, which are the highest ranking, and 2 “Largely compliant” ratings.
 
With respect to the two elements receiving the largely compliant rating, Jenner Davis says that these are easily fixable.  “One element was rated lower due to the relatively low number of exchange of information requests received by the Cook Islands and this should increase over time, and with further requests, a compliant rating should be issued.  The other element only requires some minor amendments to our international legislation. For example, the Foundations Act requires some penalty provisions to be inserted for non-compliance.”
 
Andrew Haigh, who represented the Cook Islands at the recent Global Forum Peer Review Group meeting in Paris where the Report was ratified, said, "The process has been a lot of work for a jurisdiction as small as the Cook Islands but it is great to receive another positive report reinforcing the strength of our regulatory regime".  Minister of Finance, the Honourable Mark Brown, was pleased to note that the Global Forum's webpage stated in the Report's Key Findings that "the Cook Islands has answered all requests for information from treaty partners in full and timely manner and peers are very satisfied with the Cook Islands as an exchange of information partner."
 
The Executive Summary of the Report can be found at www.mfem.gov.ck/exchange-of-information or for the full Report visit http://www.oecd.org/tax/global-forum-on-transparency-and-exchange-of-information-for-tax-purposes-peer-reviews-cook-islands-2015-9789264231450-en.htm. 
 
 
[End]
 

Quarterly Financial Statement for December 2014

The Quarterly Financial Statement for December 2014 is now available on the MFEM website.  For the December Quarter the net operating balance of the General Government Sector as at 31 December 2014 was a surplus of $8.5 million, made up of: 

  • Operating revenue of $65.9 million; and
  • Operating expenditure of $57.4 million. 

The overall fiscal balance which excludes theeffectsof depreciation which are contained in operating expenditure, but includes capital expenditure was a surplus of $6 million. 

Total revenue collections for the quarter ending December 2014/15 were slightly higher than the Budget estimate and were mainly attributable to higher than estimated tax and fishingrevenues. 

Total operating expenses for the quarter ending December 2014/15 were lower than the Budget estimate and were mainly attributable to lower levels of spending by Agencies, the underwrite of the long haul Sydney (cost to December $1.42 million) and Los Angeles (Cost to December $3.05 million) routes and the TOA Apex Guarantee.  Welfare payments were also below budget by 9 per cent, however, timing issues with the increase in the rate of the pension for those aged 70 and over of $15 a month will see this expenditure come back towards the budget estimate. 

Whilst pleased with the positive state of the accounts Minister for Finance, the Honourable Mark Brown pointed out that there were some considerable expenditures to go through.  

“It is positive to see these surpluses coming through, however I am confident that we will be in surplus for the 2014/15 year but not at these sorts of amounts that we have seen for December.  We have expenditure associated with a number of infrastructure activities coming through, such as Project City and also the increase we gave to pensioners will also bring that number down.” 

Minister Brown noted in particular that the performance of the underwrite to date was positive. “The underwrite is improving, with the oil prices beginning to factor into the equation, and we are hopeful that trend will continue on, additionally spending on the Toa guarantee were lower as well.” 

Gross borrowings of the Crown were $94.179 million, net borrowings of the General Government Sector (excluding loan reserves and borrowings by SOEs) were $51.358 million.  The net cash reserve which is essentially unencumbered increased by $0.26 million since last quarter to a total of $16.218 million. 

As at 31 December 2014 the Crown held $52.4 million in cash which was held in various term deposits, against this amount were $36.2 million of commitments, leaving a balance of $16.2 million. 

 

Table 1 Overall Budget Balance 

2013/14

Actual

('000)

2014/15

Budget

('000)

2014/15

Actual

('000)

             Variance

 

('000)                %

59,530

Operating Revenue

65,078

65,934

856

1

54,762

Operating Expenditure

62,460

57,409

(5,051)

(8)

4,768

Net Operating Balance

2,618

8,525

(5,907)

(226)

547

Add CrownDepreciation

1,460

1,460

-

-

862

Add Ministry Depreciation

1,298

1,054

(244)

(19)

436

Add Pa Enua Depreciation

497

439

(58)

(12)

2,375

Less Capital Expenditure - CI Govt Funded

10,917

5,479

(5,438)

(50)

4,238

Fiscal Balance

(5,044)

5,999

(11,043)

219

 

 Table 2 Total Gross Borrowings

 

(‘000)

   Total Gross Borrowings

94,403

      Loan Reserve

16,866

   Net Borrowing by the Crown

77,537

      Avatiu Port Development

24,122

      Airport Authority

2,057

  Total Net Borrowings by the Crown

51,358

 

 [End ]

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