Budget Transfer: Home Affairs to Jersey Fire and Rescue Service: Database Development

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A decision made 7 January 2014:

Decision Reference: MD-HA-2014-0002
Decision Summary Title:	Transfer from Revenue to Capital Head of Expenditure to comply with GAAP		Date of Decision Summary:	30 December 2013
Decision Summary Author:	Finance Director, Home Affairs		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title :	Transfer from Revenue to Capital Head of Expenditure to comply with GAAP		Date of Written Report:	30 December 2013
Written Report Author:	Finance Director, Home Affairs		Written Report : Public or Exempt?	Public
Subject: Jersey Fire and Rescue Service: database - non-recurring budget transfer from Home Affairs (HA) revenue head of expenditure to HA minor capital head of expenditure.
Decision(s): The Minister approved a non-recurring budget transfer from Home Affairs (HA) revenue head of expenditure to HA minor capital head of expenditure for £31,910, to fund the development of a database for the Jersey Fire and Rescue Service in accordance with GAAP accounting.
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. 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 HA revenue head of expenditure to decrease by £31,910 and the HA minor capital head of expenditure to increase by an identical amount in 2013. This decision does not change the total amount of expenditure approved by the States in the Medium Term Financial Plan 2013 to 2015.
Action required: Finance Director to seek the approval of the Minister for Treasury and Resources in accordance with Financial Direction 3.6. (Treasurer’s Delegation).
Signature:		Position: Minister for Home Affairs
Date Signed:		Date of Decision (If different from Date Signed):

Budget Transfer: Home Affairs to Jersey Fire and Rescue Service: Database Development

Transfer from Revenue to Capital Head of Expenditure

Home Affairs Department Report for Minister
Subject:	Transfer from Revenue to Capital Head of Expenditure to comply with GAAP
Exempt Clause:	n/a	Date:	30 December 2013

Author:	Finance Director

Introduction

The purpose of this report is to seek the Minister’s approval for a non-recurring budget transfer of £31,910 from the Home Affairs (HA) revenue head of expenditure to the HA minor capital head of expenditure to fund the development of a database for the Jersey Fire and Rescue Service in accordance with Generally Accepted Accounting Principles (GAAP) accounting..

Background

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

In accordance with the States of Jersey Capital Accounting Manual:

 Assets are defined in paragraph 49(a) of the International Accounting Standards Board’s Framework for the preparation and presentation of financial statements as ‘...a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity’. ‘Future economic benefits’ means that the asset will contribute in some way to the provision of services or other outputs by States of Jersey entities. ‘Control’ in this context means the ability to obtain those benefits in fulfilment of aims and objectives of the entity and to restrict the access of others.

 For non-cash generating data assets, e.g. the content of a database, the term 'future economic benefit' is interpreted as 'future service potential' - that is, a direct contribution to the delivery of services to the public.

 The States of Jersey has adopted a £10,000 capitalisation threshold for individual assets except for land.

It is therefore necessary to make an internal budget transfer in order that the expenditure is properly classified as capital expenditure.

Finance Direction No.3.6 ‘Variations to Heads of Expenditure’ sets out the procedures for the transfers between revenue and capital heads of expenditure. Authority to approve non-contentious budget transfers under £1,000,000 has been delegated to the Treasurer of the States.

Reason 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.

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.

Recommendation

It is recommended that the Minister approves a non-recurring budget transfer from Home Affairs (HA) revenue head of expenditure to HA minor capital head of expenditure for £31,910, to fund the development of a database for the Jersey Fire and Rescue Service in accordance with GAAP accounting.