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A decision made 21 December 2009 regarding: Jersey Heritage Trust - 2009 supplementary funding.

Decision Reference: MD-ESC-2009-0023
Decision Summary Title:	Jersey Heritage Trust – 2009 supplementary funding		Date of Decision Summary:	11th December 2009
Decision Summary Author:	Assistant Director - Finance		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title:	Jersey Heritage Trust – Supplementary Funding		Date of Written Report:	11th December 2009
Written Report Author:	Assistant Director - Finance		Written Report : Public or Exempt?	Public
Subject: Jersey Heritage Trust - supplementary funding to meet the short term cash flow requirements.
Decision(s): The Minister approved additional funding up to a maximum of £888,000 to be made available to the Jersey Heritage Trust on receipt of appropriate supporting documentation. This sum is sufficient to meet its short term cash flow requirements, with payments to be made monthly through to the end of 2009.
Reason(s) for Decision: A financial review is currently being carried out of the Jersey Heritage Trust by BDO Alto and, additionally, Locum Consultants are undertaking work for EDD on the potential for the Trust to generate additional income. These will provide the basis for agreement on the future operations of the Trust and funding levels required to sustain that level of activity. Until those reviews are complete, additional funding will need to be made available to ensure that the Trust is able to meet its short term cash requirements without recourse to an overdraft facility. The emergency financial assistance was recognised in the Comptroller and Auditor General’s report on the Trust as being between £800,000 and £900,000. The Treasury & Resources Minister has agreed to work with the ESC Minister to clear the existing borrowing of the Trust and to develop a longer term solution for the funding of the organisation. As an interim measure it has been agreed that unspent funds within the Department’s budget for 2009 could be used for this purpose. The Treasury Minister has confirmed that the Department will be reimbursed allowing it to deal with some of the ongoing financial pressures not recognised in the 2010 Business Plan.
Resource Implications: No resource implications other than the payments up to £888,000. It should be noted that this will ensure the short-term viability of the Trust but does not address potential long term financial consequences of any restructuring should that be required.
Action required: Instruct the Assistant Director – Finance to make appropriate payments upon receipt of appropriate supporting documentation.
Signature:		Position: Minister for Education, Sport and Culture
Date Signed:		Date of Decision:

Jersey Heritage Trust - 2009 supplementary funding

Education, Sport and Culture Department Report
Subject:	Jersey Heritage Trust – Supplementary Funding
Exempt Clause:		Date:	24 November, 2009.

Author:	Rod McLoughlin Cultural Development Officer Peter Robinson Assistant Director - Finance

Introduction

The Education, Sport and Culture Department is addressing the current financial crisis within Jersey Heritage Trust by working to devise a sustainable approach to its future activities. To this end it has engaged independent auditors (BDO Alto) to work with the Trust, and it will also benefit from the input of Locum, consultants appointed by the Economic Development Department, with regard to the potential for increased revenue on the part of the Trust.

However, there is an immediate issue of restoring financial stability to the Trust pending the long-term solution. This paper summarises the short-term funding requirements to ensure the viability of the Trust while those arrangements are put in place and requests the Minister for Education, Sport and Culture to agree payments to the Trust in 2009 amounting to approximately £888,000.

Background

2.1 The Jersey Heritage Trust received a grant of just over £2m at the beginning of the year. Part of the grant was used to pay-off borrowing from Royal Bank of Scotland. In February, to address immediate concerns first raised by the Trust last year, a supplementary grant of £200,000 was agreed; however, it was noted that the Trust would be obliged to take measures to cut back its operation by the middle of 2009 if it were to address a further projected shortfall.

2.2 To gain reassurance as to the Trust’s position in relation to these proposed emergency measures, the Minister for ESC requested that the Comptroller and Auditor General (C&AG) undertake a review ‘… in light of public concern over the financial condition of the JHT and suggestions that the Trust may be obliged to terminate several of its principal activities.’ The report was published in October 2009.

The report indicates that ‘By the end of 2009, the Trust’s overdraft is likely to amount to between £800,000 and £900,000. There is little likelihood that the Trust will be able to repay this overdraft from the results of its various activities as they are currently organised.’

2.3 A letter from the Director of Education, Sport and Culture was sent to the Director of the Jersey Heritage Trust on the 6th October, attached Appendix A, outlining the conditions relating to support provided by the Department to meet its short-term cash flow requirements. Since that time:-

a payment of £165,000 was made to the Trust on the 13th October, supported by a schedule of incoming and outgoing resources and funds available;

a payment of £187,000 was made on the 23rd November again supported by appropriate supplementary information;

3. at a meeting with the Finance Director of the Trust, it was agreed that a further payment of £536,000 will be required to meet December payments and repay a number of funds which it is considered should be recognised and formally segregated in the future .

Together these payments amount to £888,000, a figure consistent with the observations of the Comptroller and Auditor General.

2.5 A response to the letter from the Director of Education, Sport and Culture was received from the director of the JHT on the 23rd November and is attached, Appendix B.

2.6 During the preparation of the report by the C&AG, ESC had already appointed auditors BDO to carry out a Financial and Business Review, in respect a terms of reference was agreed, and to work with the Trust to agree new governance arrangements regarding financial reporting to the board and devise an appropriate method of cost allocation. This will enable the Department to enter into a more specific agreement about the services which are ‘purchased’ by means of the annual revenue grant. Officers of the Department have been meeting with the auditors on a regular basis to receive feedback on progress.

2.7 The C&AG’s report observes that, in its dealings with the Jersey Heritage Trust, the States must identify both what it wishes the Trust to provide and also the means to fund those activities, including a number of elements; in addition to the revenue grant, funding for site maintenance, investment in those sites, and the means to stabilise the current critical situation with regard to the Trust’s mounting debts.

Next step

3.1 Because the Jersey Heritage Trust has no overdraft facility and no reserve funds, it is dependent upon a combination of its annual grant and its self-generated income to meet its immediate financial obligations. The additional funding provided in 2009 is, therefore, crucial to the continuing viability of the Trust.

3.2 A commitment has been given by the Minister for Treasury and Resources to work with the ESC Minister to clear the existing borrowing of the Trust and also to develop a longer term solution for the funding of the organisation. As an interim measure it has been agreed that unspent funds within the department’s overall budget for 2009 could be used for this purpose. Once the full extent of the emergency funding is known, the Treasure Minister has confirmed that the Department will be reimbursed allowing it to deal with some of the ongoing financial pressures not recognised in the 2010 Business Plan.

3.3 The Finance Director of the Heritage Trust has responded to a request from the Department for details of actions that have already been taken to reduce costs and the response is as follows:-

At the start of 2009 JH board agreed to:

Suspended its annual site maintenance programme.

All on site living history programmes reduced from 31 weeks to 20 weeks.

Cut two public events.

Extended both the Titterington and Mammoth Exhibitions at the Maritime Museum and Jersey Museum respectively.

Since JH announced it would begin a process of staff consultation in anticipation that there could be staff redundancies the following action has been taken:

Art Restoration programmes suspended.

Marilyn Exhibition extended.

All staff have been asked to accept Time off in Lieu rather than paid overtime.

A ban on off-Island training/conference.

Living History/Volunteer co-ordinator post vacant since Mid August unfilled.

Reduction in Assistant Designer post negotiated (37.5 hrs p.w. to 15 hrs p.w.).

2010 pay freeze agreed.

Finally Jon [Carter] thought it was worth adding: These actions, by reducing capacity and change, have a negative impact on sustainability as highlighted by both C&AG and Locum.

3.4 It should be noted that once agreement is reached about the extent of activities to be supported in the future, it will be necessary to address any short-term costs which result from service reduction. The Trust has indicated that the cost of restructuring will amount to £216,750 and that such costs are unavoidable even if a decision is made immediately on which services to cut. In responding to a question from the Department requesting detail of any additional costs should a decision be further delayed, the Finance Director has undertaken to revert to the department with an estimate of those costs.

4. Recommendation

It is recommended that the Minister for Education, Sport and Culture approves additional funding for the Jersey Heritage on a monthly basis to address the Trust’s obligations in 2009. That the overall level of payment will be in the region of £888,000, which is the amount initially estimated by the Trust and detailed in the report completed by the C&AG.