Govt underspends on capital projects

Monday March 19, 2018 Written by Published in Politics

The government only spent half of its capital expenditure budget in the last financial period, according to the December 2017 quarterly financial report.


Capital expenditure spending for the period June to December was below the budget estimate of $18.22 million by 46 per cent, or more than eight million dollars, with only $9.98m spent.

And additional funding totalling $15.69m carried forward from previous financial years means the government was sitting on almost $24m yet to be spent on capital projects as of December 2017.

In the latest financial report, the government said the variance was mainly due to the timing of spending and the ability to contract for services to date.

Stage two of capital project Te Mato Vai has been hindered by land matters, which further delayed progress, the report said.

“Construction is due to commence later in the second half of the financial year and anticipation of expenditure will be in line with budget estimates,” it read.

“Further comments will be included in the next quarterly report on the performance of the capital plan against budget implementation.”

Opposition deputy leader James Beer raised concerns on the substantial amount of unspent funds in capital expenditure, saying the majority of the surplus shown in the financial reports over the past five or six years has been as a result of unspent balances.

“It looks like the country is doing well with all these surpluses showing, but at the end of the day it is because we have not used the funds that are meant to be used in the capital expenditure,” Beer said.

“The danger in this is that it permits the government, through the provision in the constitution which allows them to spend 1.5 per cent of the total appropriation outside of parliament oversight, to spend much more than they normally would have.

“The higher the appropriation – even though the funds are not being used as seen in the capital expenditure over the years – the more the 1.5 per cent of the total appropriation the government gets to use outside the parliament oversight.”

Section 70 (3) (b) (i) of the Cook Islands Constitution allows for expenditure to exceed the appropriation provided that the total amount of all sums issued and paid shall not exceed 1.5 per cent of the total amount of all sums appropriated for that year.

Beer said the opposition was also concerned about the unauthorised expenditure of the government.

“The concern the opposition has had for many years is that the unauthorised expenditure statement which is required by the constitution should be tabled in Parliament,” he said.

“In the last eight years, it has never ever come to parliament, which is a clear infringement of the constitution. In the last five years, there has never ever been the up-to-date Crown accounts which are the actual expenditure items following on from an appropriation. The process by which approvals are made to the estimates is improper.”

Meanwhile, the report also said that the net operating balance of the general government sector for the last six months ending December 2017 resulted in an operating surplus of $8.29m, $8.22m higher than what was forecast during the publication of the budget estimates.

This, it said, was largely a result of savings in overall operating expenditure of $8.60m.

“Combined savings in administered payments and Payments on Behalf of Crown (POBOC) of $7.21m were the main contributing items due to timing of the payments against the budget estimates,” the report said.

“These savings are expected to be reduced towards the end of the financial year when expenditures are due.”

The fiscal balance, which is the operating balance less net capital expenditure (total capital expenditure less depreciation), for the reporting period was $3.27m.

This, the December financial report said, is $23.94m lower than what was forecast during the publication of the budget estimate – mainly as a result of delays in capital/infrastructure implementation.

“The savings in the capital/infrastructure implementation improves the fiscal position of the government against the estimated budget deficit at the beginning of the financial year,” the report said.

“It is anticipated that various large capital projects will be reprogrammed into the new financial year. This creates fiscal space for other important unforeseen projects that can be considered in the short term.

“MFEM will continue to monitor the performance of expenditures against the approved appropriation for the second half of the financial year.”

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