Cera, IRD led $214 mln of unauthorised public spending in 2014, auditor finds

Tuesday 9th December 2014

The Canterbury Earthquake Recovery Authority and the Inland Revenue Department account for the bulk of $214 million of unauthorised public spending in the 12 months ended June 30, according to the Auditor-General’s review of the government's financial statements.

The audit report found there were 21 breaches in the latest financial year, where spending hadn't been authorised by an appropriation or other approval process, and would need to be validated in the next round of appropriations. Of those, there were 10 instances where the government spent about $12 million more than allowed for under an appropriation and three cases totalling $1.87 million where spending was outside the scope of existing appropriations. Another eight breaches, amounting to $200.3 million, were for spending where there was no appropriation.

The 2014 spending breaches were up from just $49 million in 2013. The overruns were tiny in relation to total government spending, amounting to just 0.26 percent of total appropriations for all Votes authorised through the 2013 budget, the report said.

Cera incurred $130.6 million without an appropriation and authorisation, which mainly reflected changes in assumptions for accounting for land, including losses on the valuation of land and demolition costs. The Auditor-General said unappropriated expenditure wasn't unusual for Vote Canterbury Earthquake Recovery "because of the inherent uncertainties about the costs of the remediation and rebuild of the earthquake affected areas."

The tax department's breach amounted to $67.7 million of public money spent under Vote Revenue. The funds were spent on Paid Parental Leave Payments even though there was no Parliamentary authority at the time, which was the result of a historical oversight.

"Inland Revenue had been making parental leave payments on the assumption it had permanent legislative authority to do so. It did not," the audit report said. "During 2013/14, it was identified that the appropriation had been incorrectly classified as a permanent legislative authority. Inland Revenue failed to seek Parliamentary authority for the payments, as it should have done."

As a result of the Vote Revenue issue, the Treasury carried out a review of appropriations under permanent legislative authority, and identified three other Vote Revenue appropriations "that might not have been operating under the required Parliamentary authority and required closer examination," the report said.

Ultimately the spending was deemed to be covered under provisions of the Public Finance Act but the issue prompted Controller and Auditor-General Lyn Provost and Secretary to the Treasury Gabriel Makhlouf to send a joint letter to all department chief executives, reminding them of their responsibilities for ensuring that spending remained within appropriations and "expressing their wish to see a continuing decline in appropriation breaches."

The Auditor-General was generally satisfied with the treatment of Solid Energy in the government accounts. The Crown signed a deed of indemnity and bond facility with the ailing state-owned coal miner after the June 30 year-end for $103 million.

It was also satisfied with the way the effects of the Canterbury earthquakes had been accounted for in the government's financial statements, which put the Crown's obligations as at June 30 at $6.4 billion, or about 4 percent of total liabilities. It noted that there continues to be uncertainty about measuring the Crown's obligation to fund a portion of the cost of damage to local authority infrastructure in Christchurch.

BusinessDesk.co.nz

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