Budget transfer: Driver and Vehicle Standards Test Centre Equipment

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A decision made 15 December 2014:

Decision Reference: MD-T-2014-0128

Decision Summary Title :

Increase of budget and subsequent transfer between Revenue and Capital Heads of Expenditure for the replacement of DVS Vehicle Test Centre Equipment.

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 :

Increase of budget and subsequent transfer between Revenue and Capital Heads of Expenditure for the replacement of DVS Vehicle Test Centre Equipment.

Date of Written Report:

08 December 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 for the replacement of DVS Vehicle Test Centre Equipment.

Decision(s): The Minister approved the following:

A) An increase of £85,000 to the Transport and Technical Services (TTS) income budget and an identical increase to the TTS expenditure budget.

B) An internal budget transfer of £85,000 from the TTS revenue head of expenditure to the capital head of expenditure for Infrastructure (Q00MC10012).

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 £85,000 and an additional expenditure budget of £85,000. This expenditure budget will subsequently be transferred to the TTS capital head of expenditure for infrastructure (Q00MC10012).

Action required: The Minister for Transport & Technical Services to request the Treasurer of the States to approve the creation of the income and expenditure budgets, and the budget transfer 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: Driver and Vehicle Standards Test Centre Equipment

TRANSPORT AND TECHNICAL SERVICES DEPARTMENT

INCREASE OF BUDGET AND SUBSEQUENT TRANSFER BETWEEN REVENUE

AND CAPITAL HEADS OF EXPENDITURE FOR THE REPLACEMENT OF

VEHICLE TEST CENTRE EQUIPMENT

Purpose of Report

To enable the Minister to approve the following:

A) An increase of £85,000 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 £85,000 from the TTS revenue head of expenditure to the replacement asset head of expenditure (Q00MC10012).

Background

The Driver & Vehicle Standards department (“DVS”) provides an extensive and comprehensive range of services to all members of the Public, Educational Bodies, The Motor Industry, Enforcement Agencies, the Judiciary and States Departments.

The primary purpose of the department is to ensure that safety and technical provisions, and associated documentation for drivers and vehicles in Jersey, are improved to, and maintained at, internationally recognised standards.

DVS have approximately 3,700 vehicles passing through the vehicle test station each year. We have legal obligations to test all Public Service Vehicles (“PSV”), all controlled Taxi-Cab meters, all vehicles that are issued with vehicle exemption licences, all vehicles issued with international circulation permits, all pre-registered vehicles that require registration in Jersey, and the testing of suspected defective vehicles on behalf of the States Police.

The vehicle test equipment is vital to the day to day running of DVS. Without this equipment our legal obligations to test PSV vehicles could not be fulfilled and PSV licences would not be issued. P30 exemption licences would not be issued, international circulation permits would not be issued, and vehicles could not be registered in the Island. All of these areas would have a detrimental effect on the day to day running of the Island as there are many industries that would be affected and many members of the public would be inconvenienced or potentially put at risk.

Parts of the vehicle test equipment are antiquated, ranging from 15 to 25 years old. More recently, two gear boxes that drive the rollers in the brake testing equipment failed and had to be rebuilt by local engineers as replacements were no longer available. This proved to be expensive and non-productive as the test station could not be operated whilst these repairs were being carried out. More importantly, it prevented the department from fulfilling its statutory obligations. The longer DVS postpones reinvestment in internationally approved equipment, the greater the risk is run of Jersey not being compliant with European Standards relating to motor vehicles. This would also have ongoing consequences for vehicles travelling from Jersey to trade in parts of Europe and the UK.

Though identified on the TTS replacement asset programme as needing replacement in 2015, no funding was available to be allocated from the existing Replacement Assets Head of Expenditure, with the expectation that DVS would find additional funding as necessary. It is estimated that, due to civil and electrical works necessary in addition to the equipment purchase itself, the total funding necessary could be as high as £250,000.

On 29 November 2014 the unusual license plates auction generated windfall income, and it is requested that £85,000 of this windfall income be approved to be used by DVS to part fund the replacement costs.

In order to create a budget to part fund the replacement costs, it will be necessary to create an income and expenditure budget.

Under States of Jersey accounting policies this replacement of a States of Jersey asset must be treated correctly as capital expenditure.

This creates a mismatch between income within the revenue head of expenditure and expenditure within the capital head of expenditure for replacement assets (Q00MC10012).

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 £85,000 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 replacement assets (Q00MC10012) in order to match it against the capital expenditure already incurred.

Recommendation

The Minister is recommended to approve:

A) An increase of £85,000 to the Transport and Technical Services (TTS) income budget and an identical increase to the TTS expenditure budget.

B) Approve an internal budget transfer of £85,000 from the TTS revenue head of expenditure to the capital head of expenditure for replacement assets (Q00MC10012).

Reason for Decision

Under Section 5.12 of Financial Direction 3.6 Variations to Head of Expenditure, additional surplus income of not more than 10% or £100,000 of the estimated income notified to the States for that particular service area and of a non-contentious nature may be used automatically.

Under Section 5.2 of Financial Direction 3.6 and the Public Finances (Jersey) Law 2005, the approval of non-contentious transfers between heads of expenditure up to £1,000,000 is delegated to the Treasurer of the States

Resource Implications

The TTS revenue head of expenditure will show an additional income budget of £85,000 and an additional expenditure budget of £85,000. This expenditure budget will subsequently be transferred to the TTS capital head of expenditure for replacement assets (Q00MC10012).

6. Action Required

The Minister for Transport and Technical Services to request the Treasurer of the States to approve the creation of the income and expenditure budgets, and the budget transfer from revenue to capital as referred to in the accompanying report.

Written by:	Capital Accountant
Approved by:	Director of Finance