Family Nursing and Home Care debt

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A decision made (17.03.08) to approve the report and proposition on the Family Nursing and Home Care debt.

Decision Reference: MD-TR-2008-0042
Decision Summary Title:	Report and proposition re Family Nursing and Home Care Debt		Date of Decision Summary:	12 March 2008
Decision Summary Author:	Kevin Hemmings – Head of Decision Support		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Family Nursing and Home Care Debt - Report and proposition		Date of Written Report:	12 March 2008
Written Report Author:	Kevin Hemmings - Head of Decision Support		Written Report : Public or Exempt?	Public
Subject: Report and proposition re Family Nursing and Home Care debt.
Decision(s): The Minister approved the report and proposition re Family Nursing and Home Care debt and requested that it be lodged on 13th March 2008 with a request for debate on 29th April 2008.
Reason(s) for Decision: To enable the report and proposition re Family Nursing and Home Care debt to be lodged au Greffe.
Resource Implications: There are no manpower implications for the States or department as a result of this decision. The financial implications are as set out in the report and proposition.
Action required: Head of Decision Support to forward the report and proposition to the States Greffe and request that it be lodged on 13th March 2008 with a request for debate on 29th April 2008.
Signature:		Position: Senator T A Le Sueur, Treasury and Resources Minister
Date Signed: 17th March 2008		Date of Decision: 17th March 2008

Family Nursing and Home Care debt

REPORT

Background

In agreeing P190/2005 on 27 September 2005 the States confirmed responsibility for the Pre-1987 Debt past service liability which arose when restructuring the PECRS arrangements with effect from 1 January 1988. It involves repayment of the Debt by 31 December 2083 via monthly payments indexed on each 1 January in line with the average increase to States employees’ pay. This liability also applies to admitted bodies including Family Nursing and Homecare (FNHC). FNHC repayments as an admitted body to PECRS for its share of the Debt are £7,463 per month in 2008 and are currently funded through a grant from the Health and Social Services Department.

FNHC do not hold significant reserves. They have been advised by their auditors that they are required to include the debt within their balance sheet. This presents problems to them in respect of fund raising, for example the Lloyds TSB foundation will not provide financial grants to charities with negative reserves. If FNHC choose to ignore their auditors’ advice their accounts would be qualified, again adversely affecting FNHC’s ability to raise funds.

79% of FNHC’s 2006 income was provided by the States’ grant from Health and Social Services. FNHC have indicated that it is not the repayment of the debt that presents a problem as this is funded through their grant but rather the debt that has to be recorded in their balance sheet.

FNHC have requested the support of the States to help resolve this issue in order to maintain their financial stability.

Proposal

Following meetings between the Treasurer, FNHC and Health and Social Services the following proposal has been prepared.

 The liability relating to FNHC’s share of the Pre-87 PECRS debt be transferred from FNHC to the States of Jersey

 The States of Jersey take responsibility for repayment of the debt (£7,463 per month in 2008 and subject to annual indexation thereafter)

 The H&SS grant to FNHC be reduced by £89,556 (12 x £7,463) in 2008 and subject to annual indexation thereafter.

 An amount of £89,556 be transferred from H&SS cash limit to Chief Ministers Dept Cash Limit in 2008 and subject to annual indexation thereafter



The most appropriate accounting treatment for this would be to establish the liability in the States of Jersey accounts in exactly the same way as the existing States of Jersey liability.

This analysis considers the impact on the books of both the States of Jersey and FNHC in regard to the implementation of the proposal, detailed above.

1. Accounting

Under this proposal the liability for the FNHC element of the PECRS Pre-87 debt will be reflected in the States’ accounts rather than Family Nursing and Homecare’s. Accounting for the payment to PECRS will be recorded directly in the States’ accounts rather than being given as a grant to FNHC who under the current scenario then make the payment to PECRS.

2. Budget and Cash Limits

This option would require agreement that approximately £90k of grant currently given by H&SS ceased and the corresponding budget be transferred from H&SS to CMD to be added to the current budget for the payment in respect of States employees.

3. The States of Jersey Liabilities

The value of liabilities of the States of Jersey balance sheet would increase by the capitalised value of the future debt repayments previously attributable to FNHC. As at 31 December 2007 the current capitalised value was approximately £3m. This would reflect an increase in States liability to PECRS.

4. The States of Jersey Income and Expenditure

The charge to the States Income and Expenditure Account would be a one off charge of the value of the debt. There would be no impact on cash flow as the initial charge would be created as a liability and the £90k per annum would be paid directly to PECRS rather than through a grant to FNHC and then to PECRS.

5. FNHC

This option would address the concerns of FNHC regarding their solvency by removing the liability from their accounts. Their income and expenditure would be reduced resulting in no impact on their overall income and expenditure position.

Financial and manpower implications

There are no additional manpower implications arising from this proposal. The financial implications are as set out in this report. There will be a one-off cost shown in the States Income and Expenditure Account as the debt is taken on. The net financial effect on the States over the course of the debt’s life is nil.