Date: 27 th February 2009
REPORT FOR HOUSING MINISTER
Transfer of Budgets from Capital to Revenue Expenditure
Purpose of the report
To approve the transfer of £1,967,000 budget from Housing Department capital to Housing Department revenue, to align budgeting with Generally Accepted Accounting Principles (GAAP).
Background
The States of Jersey is implementing Generally Accepted Accounting Principles (GAAP) in 2009. GAAP accounting requires that expenditure should be accounted for as capital only if it meets the GAAP accounting definition of capital expenditure, and revenue otherwise. Previously, ‘capital’ budgets have represented whatever the States Assembly voted as capital. The States have already approved capital allocations for 2009 in the 2009 Business Plan. This budget transfer moves budgets between capital and revenue so as to align the budgeting treatment of 2009 expenditure with the GAAP accounting treatment.
This is a restatement exercise that only affects expenditure that is expected to be incurred in 2009. Revenue budgets held in capital that relate to future years will remain on department's capital budget ledgers, i.e. this transfer from revenue to capital only relates to 2009 expenditure. There will continue to be ‘capital’ budgets held against capital projects that relate to revenue spend expected in years 2010+, which will be transferred to revenue in the relevant year.
The following table identifies transfers between revenue and capital and vice versa that meet the relevant GAAP definitions.
Capital Programme 2009 | | | |
| 2009 Capital Programme Per 2009 Business Plan | Transfers (to)/from revenue budget (2009 expenditure only) | Re-stated Capital Budgets after 2009 expenditure transfer only |
| £’000 | £’000 | £’000 |
| | | |
Social Housing Works | 17,770 | (1,967) | 15,803 |
| | | |
Total | 17,770 | (1,967) | 15,803 |
| | | |
Net Expenditure - Service Analysis | | | |
| 2009 Net Revenue Expenditure before transfer | Adjust for 2009 Capital Projects Capital/Revenue Transfers | Adjust for pre-2009 Capital Projects Capital/Revenue Transfers | 2009 Net Revenue Expenditure after Transfer |
| £’000 | £’000 | £’000 | £’000 |
Estate Services | | | | |
Maintenance | 5,105 | 1,967 | | 7,072 |
Operations | 1,967 | | | 1,967 |
Cleaning | 997 | | | 997 |
| | | | |
Tenant Services | | | | |
Assisted Living | 362 | | | 362 |
Tenant Participation | 246 | | | 246 |
Lettings | 1,690 | | | 1690 |
| | | | |
Finance Services | | | | |
Rent and Fee Collection | (32,729) | | | (32,729) |
| | | | |
Net Revenue Expenditure | (22,362) | 1,967 | | (20,395) |
The effect of the transfer would be to decrease the Department’s 2009 Revenue Cash Limit from £(22,362,200) to £(20,395,200), an decrease of 8.8%, and reduce the value of capital budgets by an equivalent amount. This does not change the total amount of expenditure approved by the States.
There will continue to be a need to make transfers from Capital to Revenue on existing approved projects in each of the years in which expenditure will be incurred.
Recommendation
To approve the net transfer of £1,967,000 budget from capital to revenue within Housing Department, to align budgeting with accounting treatment.
Jason English
Senior Management Accountant
27th February 2009
Brian Welsh
Finance Director
27th February 2009