Budget transfer from Central Contingencies to Health and Social Services Department: Voluntary Release and Redundancy Scheme

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A decision made 19 December 2016:

Decision reference: MD-HSS-2016-0074
Decision Summary Title:	Transfer of funding between the Health & Social Services revenue head of expenditure and Central Contingencies to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2016.		Date of Decision Summary:	7th December 2016
Decision Summary Author:	Head of Financial Management, Health & Social Services		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Transfer of funding between various departmental budgets and Central Contingencies to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2016.		Date of Written Report:	25th November 2016
Written Report Author:	Financial Performance Reporting Manager		Written Report : Public or Exempt?	Public
Subject: Transfer of funding between Central Contingencies and the Health & Social Services (H&SS) Department’s revenue head of expenditure to recognise the costs associated with the 2016 Voluntary Release and Redundancy Scheme.
Decision(s): The Minister approved a non-recurring budget transfer of £72,274.50 in 2016 to the Health & Social Services revenue head of expenditure from Central Contingency – Redundancy Provision for VR Applications approved and signed up to 19th November 2016.
Reason(s) for Decision: Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure to heads of expenditure of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year. On 16th and 17th April 2015, the Council of Ministers agreed to the request to approve non-recurring funding in 2015 totalling £5,100,000 from the Central Contingency – Redundancy Provision to various departments for the funding of the Voluntary Release Scheme. MD-TR-2015-0141 approved funding of £4,666,119 to fund the Voluntary Release Scheme in 2015 in line with the allocation of funding approved by the States Assembly in P.72/2015 Medium Term Financial Plan 2016 – 2019 (as amended). MD-TR-2016-0058 and MD-TR-2016-0082 approved funding of £1,735,344 to fund applications approved and signed up to 30th June 2016. This Decision funds the next tranche of VR Applications to 23rd November 2016 and will leave a balance of £13.86 million in Contingency for future applications. This tranche includes an allocation of £72,274.50 to the Health & Social Services Department’s revenue head of expenditure. There will be a final MD in early January 2017 to capture any further applications signed before 31st December 2016.
Resource Implications: Health & Social Services Department’s revenue head of expenditure to increase by £72,274.50 and Central Contingency – Redundancy Provision to decrease by the same amount.
Action required: The Head of Financial Management (H&SS) to notify the Head of Decision Support (Treasury) that the Decision has been approved.
Signature:		Position: Minister for Health & Social Services
Date Signed:		Date of Decision:

Budget transfer from Central Contingencies to Health and Social Services Department: Voluntary Release and Redundancy Scheme

Treasury and Resources Department

Ministerial Decision Report

Transfer of funding between various departmental budgets and Central Contingencies to recognise the costs associated with the Voluntary Release Scheme in 2016.

Purpose of Report

To enable the Minister to approve the non-recurring budget transfer of £1,737,200.19 from Central Contingencies – Redundancy to various departmental budgets. This is to recognise the costs associated with the Voluntary Release Scheme so far.

Background

A voluntary release (VR) programme was run in 2015 closing at the end of July and re-opened in January 2016. As at the 19th November 2016 a total of 536 applications for VR had been received (329 in 2015 and 207 to date in 2016) and a total of 181 have been approved. The scheme remains open for the foreseeable future in order to support organisational change initiatives. In addition, a total of 46 employees have been made compulsory redundant to date in 2016.

The Council of Ministers approved the allocation of £2,000,000 from Central Contingencies to create a Redundancy Provision in 2015 to fund the first tranche of the scheme. The States Assembly approved a further £20,000,000 to be added to the Redundancy Provision across 2015 and 2016 to be funded by transfers from the Strategic Reserve Fund with £4,000,000 to be transferred in 2015 and £16,000,000 in 2016. Following the completion of the 2015 VR scheme the remaining money was drawn down for funding of new applications in 2016. In total this left £17.3 million available for VR funding from January 2016.

International Financial Reporting Standards (IFRS) interpreted for the States of Jersey in the Jersey Financial Reporting Manual (JFReM) require termination benefits to be recognised as an expense at the point at which the entity can no longer withdraw the offer of those benefits. Accordingly, the full cost of all VRs must be recognised at the point a binding contract has been signed with the employee.

To date in 2016 a further transfer of £91,390 was made to departments for 2015 VR agreements and a transfer of a £1.64 million was made for VR’s agreed in 2016 up to the 30th June 2016.

CR and VR’s agreed to be centrally funded by the redundancy decision panel for the period July to November 2016 amounts to a commitment of an additional £1.86 million. This now leaves a balance of approximately £13.7 million remaining to fund redundancy for the remainder of the MTFP period to December 2019.

The transfer figure of £1.74 million is the total funding agreed for the period 1st July to the 19th November 2016. The final amount transferred to departments will only be confirmed once VR exit agreements have been signed by leaving individuals.

The release of these employees combined over the two-year period provides an estimated saving of approximately £7.48 million and 164.1 FTE at a one off cost of £8.56 million of which a cost of approximately £8.27 million to the central contingency fund.

Note: The 2016 figures are based on the Central decision panel decisions up to the 19th November 2016 and is not a record of employees who have left. These figures may fluctuate as employees are able to withdraw their interest up until the point they have signed an exit agreement.

Recommendation

The Minister is recommended to approve a non-recurring budget transfer of up to £1.74 million from Central Contingency – Redundancy Provision to Departments.

Reason for Decision

Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure to heads of expenditure of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year.

On 16th and 17th April 2015, the Council of Ministers agreed to the request to approve non-recurring funding in 2015 totalling £5,100,000 from the Central Contingency – Redundancy Provision to various departments for the funding of the Voluntary Release Scheme.

MD-TR-2015-0141 approved funding of £4,666,119 to fund the Voluntary Release Scheme in 2015 in line with the allocation of funding approved by the States Assembly in P.72/2015 Medium Term Financial Plan 2016 – 2019 (as amended).

The transfer figure for funds from the central contingency fund to Departments for the period from July 2016 up to the end of November 2016 will be a maximum of £1.86 million. The final amount transferred to departments will only be confirmed once VR exit agreements have been signed by leaving individuals.

A further redundancy decision panel is due in December 2016. Following decisions made if exit agreements are signed before close of 2016 a further transfer will be required under financial directions to cover all financial commitments made. If this should occur COM will be notified in January 2017 of additional transfer requirements.

Resource Implications

Various departments’ revenue heads of expenditure to increase by up to £1.74 million and the Central Contingency – Redundancy Provision to decrease by the same amount.

Report author : Financial Performance Reporting Manager	Document date: 25th November 2016.
Quality Assurance / Review : Head of Decision Support	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2016-0058 - VR Savings 2016
MD sponsor : Director of Financial Planning and Performance