Budget Transfer: Central Contingencies to Department for Infrastructure (2016 Voluntary Release Scheme Costs)

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A decision made 12 July 2016:

Decision reference: MD-T-2016-0064
Decision Summary Title:	Transfer of funding between Central Contingencies and the Department for Infrastructure to recognise the savings and costs associated with the Voluntary Release Scheme in 2016.		Date of Decision Summary:	08 July 2016
Decision Summary Author:	Finance Manager		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 Central Contingencies and the Department for Infrastructure to recognise the savings and costs associated with the Voluntary Release Scheme in 2016.		Date of Written Report:	08 July 2016
Written Report Author:	Finance Manager		Written Report : Public or Exempt?	Public
Subject: Transfer of funding between Central Contingencies and the Department for Infrastructure to recognise the 2016 savings and costs associated with the Voluntary Release Scheme.
Decision(s): The Minister approved a non-recurring budget transfer of £246,277.00 in 2016 from the DFI revenue head of expenditure, as outlined in the attached report, to Central Contingency – Budget Measures to recognise the 2016 savings associated with the Voluntary Release Scheme, and £986,290.00 non-recurring budget transfer to departments from Central Contingency – Redundancy Provision for VR Applications approved and signed up to 30 June 2016.
Reason(s) for Decision: Article 18(1A) of the Public Finances (Jersey) Law 2005 (the Law) states that the Minister for Treasury and Resources is authorised to approve the transfer from heads of expenditure to contingency expenditure in a financial year. Article 18(2)(c) of the Law requires departments wanting to transfer funds from heads of expenditure to contingency expenditure to obtain the approval of the Minister responsible for their administration. 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 or the insurance fund of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year. This Decision reduces DFI’s budgets to reflect the savings associated with the Voluntary Release Scheme and transfers the savings to Central Contingency, and also funds the next tranche of VR Applications to 30 June 2016.
Resource Implications: DFI revenue head of expenditure to decrease by a total of £246,277.00 in 2016 and the Central Contingency – Budget Measures to increase by an identical amount. DFI revenue head of expenditure to increase by a total of £986,290.00 and Central Contingency – Redundancy Provision to decrease by the same amount. This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019.
Action required: The Finance Director to notify the Head of Decision Support that the Decision has been approved.
Signature:		Position: Minister for Infrastructure
Date Signed:		Date of Decision:

Budget Transfer: Central Contingencies to Department for Infrastructure (2016 Voluntary Release Scheme Costs)

DEPARTMENT FOR INFRASTRUCTURE

TRANSFER OF FUNDING BETWEEN CENTRAL CONTINGENCIES AND THE

DEPARTMENT FOR INFRASTRUCTURE TO RECOGNISE THE SAVINGS AND

COSTS ASSOCIATED WITH THE VOLUNTARY RELEASE SCHEME IN 2016

Purpose of Report

To enable the Minister to approve the non-recurring budget transfer of £246,277.00 in 2016 from the Department for Infrastructure (DFI) revenue head of expenditure to Central Contingencies – Budget Measures, and £986,290.00 from Central Contingencies – Redundancy to the DFI revenue head of expenditure. This is to recognise the savings and costs associated with the Voluntary Release Scheme so far and identify the full year effect of these savings as included in the MTFP Addition for 2017 – 2019.

Background

The Voluntary Release (VR) Scheme provides a mechanism for employees who wish to volunteer to leave the organisation through redundancy or early retirement to receive a redundancy payment or immediate pension. The scheme was made available to all employees in 2015 and closed at the end of July. It was then re-opened on 19 January 2016. As at 31 May 2016 a total of 502 applications for VR had been received (329 in 2015 and 173 to date in 2016) and a total of 155 had been approved. Of these, a total of 64 applications have been approved from DFI, 39 of which have been approved in 2016, and these employees have signed up to leave the organisation in 2016. The scheme remains open for the foreseeable future in order to support organisational change initiatives.

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 over £17 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 a total allocation of £986,290.00 has been approved for 2016, although there are some agreements where the employee has not signed yet.

The transfer figure of £986,290.75 is the funding agreed for the period 01 January to 30 June 2016. The final amount transferred to DFI will only be confirmed once VR exit agreements have been signed by leaving individuals.

As a result of the 2015 VR packages there are savings made in 2016 which were not identified early enough to be included in the MTFP 2016 - 2019. This totals £246,277.00 which will be removed from DFI’s revenue head of expenditure in 2016. The full year effect is included in the MTFP Addition 2017-2019. FTEs have been reallocated and reduced accordingly when approval was granted for the Transfer of Functions P.46/2015 and MD-TR-2016-0017.

Other savings for DFI contribute to the overall savings already identified in the 2016-19 MTFP.

Recommendation

The Minister is recommended to approve a non-recurring budget transfer of £246,277.00 in 2016 from DFI’s revenue head of expenditure to Central Contingency – Budget Measures, to recognise the savings associated with the Voluntary Release Scheme from 2015.

The Minister is recommended to approve a non-recurring budget transfer of £986,290.00 from Central Contingency – Redundancy Provision to DFI’s revenue head of expenditure.

Reason for Decision

Article 18(1A) of the Public Finances (Jersey) Law 2005 (the Law) states that the Minister for Treasury and Resources is authorised to approve the transfer from heads of expenditure to contingency expenditure in a financial year.

Article 18(2)(c) of the Law requires departments wanting to transfer funds from heads of expenditure to contingency expenditure to obtain the approval of the Minister responsible for their administration.

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.

This Decision reduces departmental budgets to reflect the savings associated with the Voluntary Release Scheme and transfers the savings to Central Contingency, and also funds the next tranche of VR Applications to 30 June 2016.

Resource Implications

DFI’s revenue head of expenditure to decrease by a total of £246,277.00 in 2016 and the Central Contingency – Budget Measures to increase by an identical amount. DFI’s revenue head of expenditure to increase by a total of £986,290.00 and Central Contingency – Redundancy Provision to decrease by the same amount. This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019.

Action required:

The Finance Director to notify the Head of Decision Support that the Decision has been approved.

Written by:	Finance Manager
Approved by:	Director of Finance