Budget transfer: Storm Damage 2013/14

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A decision made 15 December 2014:

Decision Reference: MD-T-2014-0129
Decision Summary Title :	Transfer between Revenue and Capital Heads of Expenditure resulting from the 2013/14 storm damages		Date of Decision Summary:	08 December 2014
Decision Summary Author:	Capital Accountant – TTS Finance		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Transfer between Revenue and Capital Heads of Expenditure resulting from the 2013/14 storm damages		Date of Written Report:	08 December 2014
Written Report Author:	Capital Accountant – TTS Finance		Written Report : Public or Exempt?	Public
Subject: Transfer between Revenue and Capital Heads of Expenditure resulting from the 2013/14 storm damages
Decision(s): The Minister approved an internal budget transfer of £215,890 from the TTS capital head of expenditure for Infrastructure (Q00RL10011) to the revenue head of expenditure.
Reason(s) for Decision: Under Generally Accepted Accounting Principles (GAAP) expenditure that meets the definition of capital expenditure must be capitalised. This budget transfer is the movement in budget between capital and revenue required to align the budgeting treatment of expenditure with the accounting treatment, in order to comply with GAAP. Section 5.1 of Financial Direction 3.6 Variation to Heads of Expenditure states that Departments wanting to transfer funds between heads of expenditure must obtain the approval of their minister or of their accounting officer where a scheme of delegation exists prior to obtaining approval from the Treasury Minister or Treasurer. Article 18(1)(a) of the Public Finances (Jersey) Law 2005 states that all or any part of the amount appropriated by a head of expenditure may, with the approval of the Minister for Treasury and Resources, be transferred from a revenue head of expenditure to a capital head of expenditure, or vice versa, in order to comply with accounting standards issued for the purposes of Article 32(2). Delegation 1.2 delegates authority for non-contentious transfers between revenue and capital heads of expenditure (and vice versa) with no financial limit where the transfer is solely to ensure that financial transactions are accurately reflected in the States’ Accounts in accordance with accounting standards issued under Article 32(2) of the Law.
Resource Implications: The TTS revenue head of expenditure to increase by £215,890 and the TTS capital head of expenditure for infrastructure (Q00RL10011) to decrease by an identical amount.
Action required: The Minister for Transport and Technical Services to request the Minister for the Treasury and Resources Department to approve the budget transfers from revenue to capital as referred to in the accompanying report.
Signature:		Position: Minister for Transport and Technical Services
Date Signed:		Date of Decision (If different from Date Signed):

Budget transfer: Storm Damage 2013/14

TRANSPORT AND TECHNICAL SERVICES DEPARTMENT

TRANSFER BETWEEN REVENUE AND CAPITAL HEADS OF

EXPENDITURE RESULTING FROM THE 2013/14 STORM DAMAGES

Purpose of Report

To enable the Minister to approve an internal budget transfer of £215,890 from the TTS infrastructure capital head of expenditure (Q00RL10011) to the revenue head of expenditure.

Background

The winter of 2013/2014 was extremely severe and caused significant damage across the Island’s sea defences. Sea defences are uninsurable, and as such the Department has to bear the costs of repairing these.

The Department holds a maintenance budget for repairing sea defences, however, due to the extent of the damage this budget was inadequate.

The repairs required were essential to the Department and the only funding route available was to delay the rolling capital enhancement of the Island’s sea defences.

Under States of Jersey accounting policies this work was undertaken on a States of Jersey asset and has therefore been treated correctly as revenue expenditure.

This creates a mismatch between income within the revenue head of expenditure and expenditure within the capital head of expenditure for infrastructure (Q00RL10011).

In order to correct this mismatch TTS are required to undertake a transfer of expenditure budget from the capital head of expenditure for Infrastructure (Q00RL10011) to revenue in order to match it against the revenue expenditure already incurred.

Discussion

The States of Jersey implemented Generally Accepted Accounting Principles (GAAP) in 2009 and subsequently moved to IFRS accounting in 2012. IFRS accounting requires that expenditure should be accounted for as capital if it meets the IFRS accounting definition of capital expenditure, and revenue otherwise.

Previously, ‘capital’ budgets have represented whatever the States Assembly voted as capital. The States have already approved capital allocations for 2013 in the 2013 – 2015 MTFP Plan. These budget transfers move budgets between revenue and capital so as to align the budgeting treatment of 2013 expenditure with the IFRS accounting treatment.

Recommendation

The Minister approves an internal budget transfer of £215,890 from the TTS capital head of expenditure for Infrastructure (Q00RL10011) to the revenue head of expenditure.

Reason for Decision

Section 5.1 of Financial Direction 3.6 Variation to Heads of Expenditure states that Departments wanting to transfer funds between heads of expenditure must obtain the approval of their minister or of their accounting officer where a scheme of delegation exists prior to obtaining approval from the Treasury Minister or Treasurer.

Under Financial Direction 3.6 and the Public Finances (Jersey) Law 2005, the approval of the Minister for Treasury and Resources is required for any variations to heads of expenditure. Authority to approve non-contentious budget transfers under £1,000,000 has been delegated to the Treasurer of the States.

Resource Implications

The TTS revenue head of expenditure to increase by £215,890 and the TTS capital head of expenditure for infrastructure (Q00RL10011) to decrease by an identical amount.

Action required

The Minister for Transport and Technical Services to request the Minister for the Treasury and Resources Department to approve the budget transfers from revenue to capital as referred to in the accompanying report.

Written by:	Capital Accountant
Approved by:	Director of Finance