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Penrhyn blew budget by $67k

Thursday June 29, 2017 Written by Published in Outer Islands
FinSec Garth Henderson acted after hearing of the overspend on Penrhyn. 17062369 FinSec Garth Henderson acted after hearing of the overspend on Penrhyn. 17062369

Progressive overspending of the Penrhyn Island Administration personnel budget became so serious that the Ministry of Finance withheld bulk funding for four months to the island last year.

 

This was an effort by the Ministry of Finance and Economic Management to highlight its concerns over the mismanagement of the northern islands’ personnel budget.

The unprecedented action effectively left Penrhyn without money for operating expenses for which bulk funding is intended. A Public Expenditure and Review Committee investigation into the matter disclosed that four months without operating funds amounted to $20,890, which fell well short of the overspent personnel total of $67,403. The overspending was referred to PERC by Financial Secretary Garth Henderson in May 2016 as exceeding set budgets is a breach of section 39 of the MFEM Act. The PERC report was completed in August 2016. It was tabled in parliament last week, making the document available to the public. Overspending was identified by MFEM Treasury staff as far back as January 2016. The PERC report stated that despite concerns being raised by MFEM over “progressive overspending” the trend was not halted to any degree. Penrhyn Island Administration executive officer at the time Vaine Wichman had asked the Financial Secretary for a waiver of the overspent $67,403 in April 2016.

There is no ability for waivers to be imposed on instances of budget overspend. A similar appeal by Wichman for the Penrhyn budget to be changed mid-year was also not possible PERC stating this revealed “non-understanding of the budget process”.

The Penrhyn Island personnel budget for the 2015/16 financial year was $351,717. Actual spending amounted to $419,120.

“When questioned as to what actions were taken after the budget allocation became known in June 2015 to fit within the figure of $351,717, Mrs Wichman could not identify any actions taken such as lay-off of staff, reduction of wages, or change to part-time duties.”

PERC went on to state that a number of staff had taken leave without pay which amounted to a saving of almost $15,000 – “without this the overspending would have been much higher.”

The PERC report revealed that the executive officer had delegated much of Penrhyn Island Administration accounting to a Rarotonga resident. Both the executive officer and financial officer had admitted they were aware how much had been budgeted for personnel and operations when the national budget was finalised in June 2015. It is this allocated budget that should have been administered, but wasn’t.

“It becomes clear that the overspent personnel budget is a cost the Crown must incur as funder of the outer islands administrations. Repayment or reduction from the following year’s budget is not realistic,” stated PERC.

PERC also received a written complaint from a member of the public regarding the executive officer’s extended absences from Penrhyn. This matter was also addressed by PERC.

PERC commented that under the Island Government Act, the executive officer is required to work in close consultation with the mayor. PERC considered it wouldn’t be possible to meet this requirement if an executive officer is not resident on the island the person is contracted to serve.

PERC had sighted correspondence dated November 30, 2015 to the executive officer asking her to return to work as she had been residing in Rarotonga. The report disclosed that Wichman, who was appointed in October 2014 had spent most of her contracted employment in Rarotonga, or New Zealand.

“Enquiries with the Office of the Prime Minister by PERC revealed that no other outer island administration has its EO based in Rarotonga.” The executive officer’s employment contract had Penrhyn as the expected location of duties. Some advantages of being located on Rarotonga were described to PERC, including being able to monitor or “push along” orders for Penrhyn. PERC considered these to be minor as two MFEM officers are responsible for assisting the outer islands and the executive officer being located on Rarotonga “…could not be sustained.”

PERC recommended Penrhyn executive officers in future be required to be stationed on the island fulltime to better achieve the requirements of the Island Administration Act which is to work in close consultation with the mayor and island council.

PERC further stated the overspent 2015/16 Penrhyn Islands Administration personnel budget blowout be taken seriously by the mayor and island council. It recommended at the time an immediate review of the 2016/17 budget be made with the aim of ensuring repeat overspending does not occur.

PERC stated that the failure of the executive officer to stay within budget should be taken into account in her next performance review.