Date: 22 nd June 2010
Transfer of CMD-ISD budgets in the approved Business Plan subject to States approval of the 2011 Business Plan
Purpose of the 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).
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.
Main Content / Subject matter
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.
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.
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.
Resource implications
None. This is a budget transfer and does not change the total amount of expenditure approved by the States.