New Zealand's Auditor-General has warned Niue over poor financial record-keeping, misused donor funds, and a budget blow-out of more than $NZ1 million.
New Zealand gives Niue millions in aid each year and is responsible for auditing its government accounts.
Auditor-General John Ryan said he was disappointed in the findings of an audit of the 2015 accounts, which are the latest available due to a backlog because of a lack of available financial reporting for the years since then.
Niue government buildings Photo: RNZ/ Sally Round
In a December letter tabled last week in Niue's parliament, Ryan said the government breached Niue's constitution by spending $NZ1.2m more than it had appropriated. There was also a shortfall of $NZ1.5m in cash held for ongoing aid projects.
"This indicates that donor cash has been used for expenditure other than the respective donor projects," he said.
"This may create future cash flow issues, insufficient funds to complete projects, trust issues with donors, and the potential for donors to recover funds from other government revenue under donor agreements."
Ryan also pointed to a raft of issues with financial accounts in the private and public sectors.
He said one of Niue's largest state-owned enterprises (SOEs), the Niue Philatelic and Numismatic Corporation (NPNC) hadn't filed income tax returns since 2012 and wasn't registered to pay consumption tax as required.
It also had not made regular government contributions since 2012.
"We are not aware of any reason why NPNC should not comply with their tax obligations."
According to Niue's company office, NPNC was struck off in 2012 and it is unclear how it is still operating.
Ryan said many companies in Niue don't complete tax returns, tax audits aren't being completed, and financial reporting to parliament no longer happens. "Not all import duty and port charges are being collected," he added.
While Ryan didn't estimate losses from duty and port fees, a 2018 letter from the Deputy Auditor General Greg Schollum said there was an unaccounted shortfall of $NZ820,000 in these charges for the same 2015 period.
In his letter tabled last week, Ryan said there had been "minimal progress" in addressing recommendations stemming from the 2018 letter, including asset management, government procurement and revenue verification of SOEs.
Niue government assets - valued at around $NZ34m excluding land - have not been revaluated since 1998, he said.
Responding to the Auditor-General's report, Niue's premier Sir Toke Talagi said completing financial statements was "of the highest importance to the government" and that all statements would be completed and available to be audited by 30 June.
The government would also be reviewing its financial reporting systems "to ensure there is a sound platform for public financial management and reporting to support Niue's continuing development and well-being," he added in a letter to the parliament's speaker.
Cabinet had also requested officials, who will work with Deloitte, to report back by 30 September with recommendations on how to address issues with financial reporting and management of SOEs.
However, Sir Toke also said the government had "obtained advice from its constitutional and legal advisers that the current legal framework for the audit of government accounts has deficiencies and the financial reporting framework requires close review."
He suggested the Auditor-General's work was not consistent with Niue's constitution and there would be "arrangements put in place" between parliament, the Auditor-General and the government until this could be addressed.
Sir Toke did not elaborate in his letter what these arrangements would be.
Previously, the premier has blamed the Auditor-General for the backlog in audited government accounts, and in October 2018 ordered a review of its work in Niue.
That same year, Niue stopped raising the New Zealand flag and singing its anthem at constitution day celebrations, a move opposition MP Terry Coe suggested was retaliation for the Auditor-General's raising of concerns.
