Budget Transfer: Minor to major capital expenditure (CUTE system)

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A decision made on 13 April 2015:

Decision Reference: MD-E-2015-0033
Decision Summary Title:	DS - Transfer of budget from minor to major capital expenditure for the CUTE system		Date of Decision Summary:	13 March 2015
Decision Summary Author:	Capital Management Accountant - PoJ		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	WR - Transfer of budget from minor to major capital expenditure for the CUTE system		Date of Written Report:	13 March 2015
Written Report Author:	Capital Management Accountant - PoJ		Written Report : Public or Exempt?	Public
Subject: Approval of transfer of budget from minor to major capital head of expenditure in order that the Common User Terminal Equipment (CUTE) system upgrade can be classified as an asset.
Decision(s): The Minister: to approve the reclassification of the CUTE system upgrade from minor capital assets (V00MC10007) to CUTE major capital (V00BP09002) in order to be classified as total asset cost, in accordance with Generally Accepted Accounting Principles (GAAP) and; request approval from the Minister for Treasury and Resources to transfer the budget of £78,000 from minor capital assets to CUTE major capital head of expenditure in 2015.
Reason(s) for Decision: Under Financial Direction 3.6 the approval of the Minister for Treasury and Resources is required for variations to heads of expenditure. This has been delegated to the Treasurer of the States for non-contentious transfers of up to £1,000,000.
Resource Implications: The minor capital head of expenditure to reduce by £78,000 with the CUTE major capital head of expenditure increasing by an identical amount.
Action required: Head of Planning and Performance (PoJ) to request the approval from the Minister for Treasury and Resources for this transfer £78,000 from minor capital head of expenditure V00MC10007 to CUTE major capital head of expenditure V00BP09002.
Signature:		Position: Minister – Economic Development
Date Signed:		Date of Decision (If different from Date Signed):

Budget Transfer: Minor to major capital expenditure (CUTE system)

Economic Development

Minister’s Written Decision Report

jersey airport: Transfer of budget from minor to major capital expenditure for the Common user terminal equipment (CUTE) system

Purpose of Report

To request the transfer of budget from minor to major capital head of expenditure in order that the CUTE system upgrade can be classified as an asset.

Background

The current CUTE system has come to the end of its original service life, 5 years. A decision needs to be made about the future provision of this service that delivers a common interface for the airline Departure Control Systems (DCS) for the management of departing passengers. The intent is to extend the life of the current system by 3 years.

The CUTE system provides a common platform to manage departing passengers. Without this facility airlines would need to introduce their own systems at the check in desks and departure gates or use manual processes. If the airlines were to install their own systems there would need to be duplicate installs for each airline at common used check in desks and gates, which would reduce the flexibility of the current facilities at the Airport. Delays in processing passengers would cause delays to their departure or would require that passengers arrive for their flights much earlier than they do presently to allow extra time for processing. Flight delays would have a negative impact on the Airport’s reputation and could bring political criticism.

The Ports of Jersey (PoJ) are reviewing the operational requirements across the organisation as part of a master planning exercise, which could have an impact on the building layout. The Commercial team is also looking at the check in operation and other facilities to improve the future service delivery for passengers. Extending the life of the system for another 3 years would give time to conclude these reviews and procure a replacement system to meet the future needs of the Airport.

The current version of software will not be supported beyond the middle of 2015 and it will not be possible to get it updated to work with the airline DCS, after this time. As the airline companies update their systems in line with their future passenger handling strategies it will not be possible to alter the current CUTE system to remain compatible and compliant, the system will become obsolete.

Currently the Long Term Capital Programme (LTCP) budget for the replacement of the CUTE system is due to become available in 2017, which coincides with the life of the system if we extend it for another 3 years.

Proposal

There has been funding set aside for this project under the 2015 minor capital allocation. However, to ensure the transparency as to the total cost of the CUTE system and ensure compliance with GAAP accounting it is necessary to show this funding with the original CUTE budget which is under a separate major head of capital expenditure.

The following adjustment is necessary to the Jersey Airport 2015 minor and major heads of capital expenditure:

Budget transfer will be rounded up to £78,000

Recommendation

The Minister is recommended:

1. to approve the reclassification of the CUTE system upgrade from minor capital assets (V00MC10007) to CUTE major capital (V00BP09002) in order to be classified as total asset cost, in accordance with Generally Accepted Accounting Principles (GAAP) and;

2. request approval from the Minister for Treasury and Resources to transfer the budget of £78,000 from minor capital assets to CUTE major capital head of expenditure in 2015..

Reason for Decision

Under Financial Direction 3.6 the approval of the Minister for Treasury and Resources is required for variations to heads of expenditure. This has been delegated to the Treasurer of the States for non-contentious transfers of up to £1,000,000.

Resource Implications

The minor capital head of expenditure to reduce by £78,000 with the CUTE major capital head of expenditure increasing by an identical amount.