Budget transfer and increase to Transport and Technical Services Income Budget resulting from Storm Damage 2013/14

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A decision made 1 December 2014:

Decision Reference: MD-T-2014-0123
Decision Summary Title :	Increase of budget and subsequent transfer between Revenue and Capital Heads of Expenditure resulting from the 2013/14 storm damages		Date of Decision Summary:	25 November 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 :	Increase of budget and subsequent transfer between Revenue and Capital Heads of Expenditure resulting from the 2013/14 storm damages		Date of Written Report:	25 November 2014
Written Report Author:	Capital Accountant – TTS Finance		Written Report : Public or Exempt?	Public
Subject: Increase of budget and subsequent transfer between Revenue and Capital Heads of Expenditure resulting from the 2013/14 storm damages
Decision(s): The Minister approved the following: A) An increase of £503,526.64 to the Transport and Technical Services (TTS) income budget and an identical increase to the TTS expenditure budget. B) An internal budget transfer of £503,526.64 from the TTS revenue head of expenditure to the capital head of expenditure for Infrastructure (Q00RL10011).
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 will show an additional income budget of £503,526.64 and an additional expenditure budget of £503,526.64. This expenditure budget will subsequently be transferred to the TTS capital head of expenditure for infrastructure (Q00RL10011).
Action required: The Minister for Transport and Technical Services to request the Minister for Treasury and Resources 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 and increase to Transport and Technical Services Income Budget resulting from Storm Damage 2013/14

TRANSPORT AND TECHNICAL SERVICES DEPARTMENT

INCREASE OF BUDGET AND SUBSEQUENT TRANSFER BETWEEN REVENUE AND

CAPITAL HEADS OF EXPENDITURE RESULTING FROM THE 2013/14 STORM DAMAGES

Purpose of Report

To enable the Minister to approve the following:

A) An increase of £503,526.64 to the Transport and Technical Services (TTS) income budget and an increase of an identical amount to the TTS expenditure budget.

B) An internal budget transfer of £503,526.64 from the TTS revenue head of expenditure to the infrastructure capital head of expenditure (Q00RL10011).

Background

The winter of 2013/2014 was extremely severe and caused significant damage to the Island’s sea defences. At three sites; Le Bourg, and St Aubin’s, the scale of the damage was so severe that the entire sea defence had to be redesigned and reconstructed.

Sea defences are uninsurable, however due to the severity of the damage a contribution of £503,526.64 towards the reconstruction and enhancement of these assets was made from the Insurance Deductible Fund to TTS.

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

The payment for this work from the Insurance Deductible Fund was received by way of additional income.

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 and create a capital budget TTS are required to undertake the following:

a) Create an additional income and expenditure budget for £503,526.64 within their revenue head of expenditure. This is a net nil budget adjustment.

b) Transfer this expenditure budget from revenue to the capital head of expenditure for Infrastructure (Q00RL10011) in order to match it against the capital 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 is recommended to approve the following:

A) An increase of £503,526.64 to the Transport and Technical Services (TTS) income budget and an identical increase to the TTS expenditure budget.

B) An internal budget transfer of £503,526.64 from the TTS revenue head of expenditure to the capital head of expenditure for Infrastructure (Q00RL10011).

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 will show an additional income budget of £503,526.64 and an additional expenditure budget of £503,526.64. This expenditure budget will subsequently be transferred to the TTS capital head of expenditure for infrastructure (Q00RL10011).

Action Required

The Minister for Transport and Technical Services to request the Minister for Treasury and Resources 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