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A decision made 13 July 2010 regarding: Budget transfer - GAAP accounting.

Decision Reference: MD-TR-2010-0105
Decision Summary Title:	Capital to Revenue budget transfer - 2011		Date of Decision Summary:	12th July 2010
Decision Summary Author:	Finance Director, Corporate Group		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Transfer of CMD-ISD budgets in the approved Business Plan subject to States approval of the 2011 Business Plan.		Date of Written Report:	5th July 2010
Written Report Author:	Finance Manager		Written Report : Public or Exempt?	Public
Subject: Transfers between capital and revenue heads of expenditure as a result of moving to GAAP accounting for the 2011 CMD-ISD budget.
Decision(s): The Minister approved, subject to States approval of the 2011 Business Plan, the 2011 budget transfers between capital and revenue, representing a recurring net budget transfer of £500,000 as detailed in the attached report.
Reason(s) for Decision: The States of Jersey has implemented Generally Accepted Accounting Principles (GAAP) in 2009. GAAP accounting requires that only expenditure meeting its definition of capital should be treated as such and that all other expenditure must be accounted for as revenue. This budget transfer is the movement in 2011 between capital and revenue and is required to align the budgeting treatment with GAAP. This does not change the total amount of expenditure approved by the States.
Resource Implications: None.
Action required: Finance Manager- Corporate Group to inform the Head of Financial Planning the budget transfer has been approved.
Signature:		Position: Deputy E. J. Noel, Assistant Minister for Treasury and Resources
Date Signed:		Date of Decision:

Budget transfer - GAAP accounting

Treasury and Resources

Ministerial Decision Report

Transfer of CMD-ISD budgets in the approved Business Plan subject to States approval of the 2011 Business Plan

1. Purpose of Report

To request approval for the recurring transfer of £500,000 budget from CMD-ISD IS/IT capital vote to the CMD-ISD revenue with effect from 2011. This will align the budgets within Generally Accepted Accounting Principles (GAAP).

2. Background

The States of Jersey implemented GAAP in 2009. As a result only costs meeting the GAAP definition of capital expenditure should be treated as such. All other expenditure must be accounted for as revenue. In previous years the annual CMD-ISD capital budget voted by the States Assembly funded projects and annual equipment replacement/refresh, which are defined under GAAP as revenue expenditure.

3. Proposed Transfer

Following a fundamental review of all CMD-ISD budgets, ministerial decision MD-C-2009-0022 approved a recurring budget transfer of £4,299,376 between its capital vote and revenue votes with effect from 2009.

The 2011 Business Plan now includes a capital vote of £500,000 onwards to fund the replacement and refreshment of PCs, network hardware and servers. Over the last few years the refreshment of such assets has lapsed, which has created in a major risk in terms of potential business interruption and performance. Critical business systems should operate on servers and infrastructure supported by the vendor and on compatible PCs. Furthermore if the States tried to run new applications on old PCs end users would experience major performance issues. Without this funding the IS service can not be maintained.

CMD-ISD has planned expenditure programmes to renew and maintain annual spend on infrastructure, PCs, network and server components. Under GAAP this should be classified as revenue expenditure. The effect of this transfer would be to make all CMD-ISD capital and revenue budgets fully GAAP compliant.

4. Recommendation

To approve the recurring transfer of £500,000 budget from the CMD-ISD IS/IT capital vote to the CMD-ISD revenue budget with effect from 2011 therefore aligning budgets with the required GAAP accounting treatment.

5. Reason for Decision

The States of Jersey implemented GAAP in 2009 and as a result only costs/budgets which meet the GAAP definition of capital expenditure should be treated as such. All other expenditure must be accounted for as revenue. This budget transfer is the movement in 2011 between capital and revenue budgets as required under. It does not change the total amount of expenditure approved by the States.

The CMD-ISD capital vote is reported under a separate head of expenditure to its revenue budget and Financial Direction 3.6 requires transfers between capital and revenue heads of expenditure to be approved by the relevant minister. Furthermore the direction also requires transfers exceeding £100,000 to be approved by the Treasury & Resources minister.

6. Resource Implications

None. This budget transfer does not change the total amount of expenditure approved by the States.