ARRANGEMENT BETWEEN NEW ZEALAND AND TOKELAU ON ECONOMIC SUPPORT TO TOKELAU 2004/05 – 2007/08

September 2003

ENTRY INTO FORCE: 2004 

Introduction

1  In accordance with the special relationship of partnership between New Zealand and Tokelau, outlined in the Joint Statement of the Principles of Partnership between New Zealand and Tokelau (Principles of Partnership), signed in November 2003, New Zealand acknowledges its obligations to provide support to Tokelau. Hence, the Government of New Zealand (The New Zealand Agency for International Development (NZAID) and the Office of the Administrator of Tokelau) and the Council for the Ongoing Government of Tokelau (Tokelau), have reached the following understanding in relation to the provision of New Zealand's economic support to Tokelau. 

2  Both partners wish to promote a strategic programme in support of the budgetary and developmental needs of Tokelau, in accordance with the terms of this Arrangement.

Guiding Principles 

3  The relationship between New Zealand and Tokelau under this Arrangement will be guided by the Principles of Partnership (attached). New Zealand and Tokelau undertake to continue a relationship of mutual accountability, transparency, openness and trust. 

Term

4  Regardless of the date or dates of signing, this Arrangement will be deemed to have taken effect on 1 July 2004, and will continue in effect, unless brought to an end by mutual agreement, until 30 June 2007. 

Provision of Economic Support 

5  New Zealand will provide ongoing economic support to Tokelau in the form of budget support and development project funding. 

6  The agreed allocation of economic support for each financial year is as follows -

Financial Year	NZ $	
2004/05	$9.5 million	
2005/06	$9.36 million	
2006/07	$9.73 million	

7  The economic support provided under this Arrangement is separate from any contribution that New Zealand might make to the Tokelau Trust Fund during the period of this Arrangement. 

8  Economic support is inclusive of expenditure managed through NZAID as mutually agreed by both parties. 

9  Economic support payments will be made in the following proportions at the following times in each financial year - 

Date	Percentage of annual Allocation (%)	
31 July	50%	
31 December	25%	
31 March	25%	

Financial Management 

10  The agreed level of economic support provided, is based on the 2003 Review on Support for Self Government, which estimated Tokelau's annual budget needs at that time as $7.1 million per annum. This Review also outlined a recommended level of additional assistance for development projects of $2.24 million per annum. 

11  Tokelau will not draw on the savings schemes from individual Tokelau citizens, except for the purpose for which they were established. The accounts of village stores will be kept separate from Tokelau's budget. Tokelau will also include a depreciation reserve fund within its budget. 

12  Tokelau will not in any given year budget for a deficit, and will make every effort during the financial cycle to balance expenditure with total revenue flows. 

13  Should Tokelau's annual revenue in any given year be less than $1.5 million - excluding New Zealand economic support - discussions will be held between Tokelau and New Zealand on how to manage the shortfall. 

14  Should Tokelau's annual revenue in any given year exceed $2 million, Tokelau will consider the transfer of such sums that are in excess of this amount, into the Tokelau Trust Fund. 

Reporting and Monitoring 

15  The assistance provided by New Zealand is subject to satisfactory and timely reporting from Tokelau to New Zealand. New Zealand will follow Tokelau's own financial and reporting systems where appropriate; the following reporting schedule aims to inform Tokelau's planning and financial monitoring.

Report	Detail	
Sectoral	Six monthly narrative reporting on each of the key sectors: health, education, power, shipping and telecommunications	
Financial reports and projections	Six monthly and annual financial reports
Six monthly updates on progress and developments in the implementation of the budget and financial flows, together with timely projections of revenue expectations, including revenue trends and impacts on anticipated annual revenue
Annual audit reports and audit management letters from Audit New Zealand	

-Six monthly reports are due on 31 August (for the period 1 January to 30 June) and 31 January (for the period 1 July to 31 December). 

-Reporting will include both recurrent budget and development project expenditure, and the Director of Finance will provide a narrative on any significant expenditure and revenue variances. New Zealand should be advised promptly should Tokelau's expected revenue deviate significantly above or below projected figures. 

-New Zealand will undertake up to two general financial reviews per annum, to advise on any financial management issues and to assist Tokelau and the Finance Director to ensure a positive cash flow situation. 

16  Tokelau's Financial Director in Apia, NZAID Tokelau Programme Manager and the Administrator of Tokelau, will be the first contact points on all issues relating to economic support. 

17  The partners agree to participate in the following engagement and reviews – 

(i)  meet annually to review budget outcomes and forecasts within the framework of agreed New Zealand support. Meetings will take place in October each year, in order to fit in with Tokelau and New Zealand budget cycles;

(ii)  work jointly on budget planning and analysis; 

(iii)  work jointly on the review and analysis of at least one sector annually (sector performance reviews). In 2004/05, Tokelau and New Zealand will jointly assess shipping needs in terms of the current level of services and how best to meet short and long-term requirements, and;

(iv)  jointly review this Arrangement in 2006/07, at least six months prior to the next budget setting process. 

Appropriation of Funds 

18  The provision by New Zealand of economic support is conditional upon New Zealand Parliamentary approval of appropriations. 

Status of Tokelau 

19  If Tokelau formally becomes self-governing within the three-year term of this Arrangement, New Zealand will continue to provide economic support on the basis of this Arrangement.