Budget transfers resulting from GAAP accounting

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A decision made 11 January 2010 regarding: Budget transfers resulting from GAAP accounting.

Decision Reference: MD-TR-2010-0003
Decision Summary Title:	Revenue/Capital Budget Transfers		Date of Decision Summary:	29th December 2009
Decision Summary Author:	Finance Director: Corporate Group		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Report on Revenue/ Capital Budget Transfers		Date of Written Report:	29th December 2009
Written Report Author:	Finance Director: Corporate Group		Written Report : Public or Exempt?	Public
Subject: 2009 Budget Transfers between Revenue and Capital Heads of Expenditure as a result of moving to GAAP accounting.
Decision(s): The Minister approved the 2009 departmental budget transfers between revenue and capital detailed in the attached report.
Reason(s) for Decision: The States of Jersey is implementing Generally Accepted Accounting Principles (GAAP) in 2009. GAAP accounting requires that only expenditure meeting the GAAP definition of capital expenditure should be treated as such. All other expenditure must be accounted for as revenue. These budget transfers are the movements in budgets between capital and revenue required to align the budgeting treatment of expenditure with the GAAP accounting treatment. This does not change the total net expenditure approved by the States. Article 15 (1) of the Public Finances (Jersey) Law 2005 requires that the Minister for Treasury and Resources approves transfers between capital and revenue heads of expenditure, following approval by the Minister in the relevant department.
Resource Implications: None
Action required: Financial Planning team to action budget transfers.
Signature:		Position: Senator P. F. C. Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Budget transfers resulting from GAAP accounting

Report Name: Report on Revenue/Capital Budget Transfers

Date: 29 th December 2009

Purpose of the report

To detail the individual Departmental transfers requiring approval from the Minister for Treasury and Resources in accordance with Article 15 (1) of the Public Finances (Jersey) Law 2005, which requires that the Minister approves transfers between revenue and capital heads of expenditure, following approval by the Minister of the department/accounting officer of the Non-ministerial States-funded body.

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 under the old basis, therefore a transfer of budgets is required. These budget transfers move budgets between revenue and capital so as to align the budgeting treatment of the actual 2009 expenditure with the GAAP accounting treatment.

These transfers only affect expenditure that has been incurred in 2009.

Transfer 1

During 2009, £354,200 of Income Tax’s revenue budget has been invested developing the Income Tax IT System (ITAX). As the software is a capital asset, the expenditure on its development, which increases its value must be capitalised.

A transfer of £354,200 revenue budget to capital is required to match this expenditure.

Transfer 2

During 2009, £88,000 of the expenditure from the GST implementation capital vote related to activities that are not classed as capital under the States of Jersey Capital Accounting manual definition. This expenditure must therefore be transferred to revenue.

A transfer of £88,000 of the capital budget to revenue is required to match the expenditure.

These transfers do not change the total amount of expenditure approved by the States.

Departmental Budget transfer requests included in report to approve:

Reference	Department	Net (Decrease)/increase in Revenue Budget (£)	Net (Decrease)Increase in Capital Budget (£)
ITAX 2009 system development	Treasury & Resources: Income Tax	(354,200)	354,200
ITAX 2009 system development: GST related.	Treasury & Resources: Income Tax	88,000	(88,000)
	Total	(266,200)	266,200

Finance Director

Corporate Group