Budget Transfer: Revenue to Capital Head of Expenditure

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A decision made on 30 October 2013:

Decision Reference: MD-HA-2013-0062
Decision Summary Title:	Transfer from Revenue to Capital Head of Expenditure		Date of Decision Summary:	28 October 2013
Decision Summary Author:	Finance Director, Home Affairs		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	n/a
Written Report Title :	Transfer from Revenue to Capital Head of Expenditure		Date of Written Report:	25 October 2013
Written Report Author:	Finance Director, Home Affairs		Written Report : Public or Exempt?	Public
Subject: Internal budget transfer from the Home Affairs revenue head of expenditure to the Home Affairs minor capital head of expenditure amounting to £130,000 to allow for the purchase of equipment for the new Prison Stores building in accordance with GAAP accounting.
Decision(s): The Minister approved a non recurring budget transfer of £130,000 for 2013 as set out in the accompanying report.
Reason(s) for Decision: The States of Jersey implemented 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. This budget transfer is the movement in budgets between revenue and capital required to align the budgeting treatment of expenditure with the GAAP accounting treatment. This does not change the total amount of expenditure approved by the States.
Resource Implications: The Home Affairs revenue head of expenditure to decrease by £130,000 and the Home Affairs minor capital head of expenditure to increase by an identical amount. This decision does not change the total amount of expenditure approved by the States.
Action required: Finance Director to seek the approval of the Minister for Treasury and Resources in accordance with Financial Direction 3.6. (Treasurer’s Delegation).
Signature:		Position: Minister for Home Affairs
Date Signed:		Date of Decision (If different from Date Signed):

Budget Transfer: Revenue to Capital Head of Expenditure

Transfer from Revenue to Capital Head of Expenditure

Home Affairs Department Report for Minister
Subject:	Transfer from Revenue to Capital Head of Expenditure
Exempt Clause:	n/a	Date:	25 October 2013

Author:	Finance Director

Introduction

The purpose of this report is to seek the Minister’s approval for an internal budget transfer amounting to £130,000 from the Home Affairs revenue head of expenditure to the Home Affairs minor capital head of expenditure to fund the purchase of equipment for the new Prison stores building.

Background

The Minister will recall that the Department carried forward unspent funds of £130,000 from 2012 for the provision of equipment for the new stores building at the Prison. The capital project is due for completion in early 2014 so the process of procuring the necessary equipment will commence shortly.

The States of Jersey implemented 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.

In accordance with the States of Jersey Capital Accounting Manual:

 FRS 15 defines tangible fixed assets as ‘assets that have physical substance and are held for use in the production or supply of goods or services, for rental to others, or for administrative purpose on a continuing basis in the reporting entity’s activities’.

 A tangible fixed asset will generally have a life in excess of one year.

 The States of Jersey has adopted a £10,000 capitalisation threshold for individual assets except for land.

It is therefore necessary to make an internal budget transfer in order that the expenditure is properly classified as capital expenditure.

Finance Direction No.3.6 ‘Variations to Heads of Expenditure’ sets out the procedures for the transfers between revenue and capital heads of expenditure. Authority to approve non-contentious budget transfers under £1,000,000 has been delegated to the Treasurer of the States.

Reason for Decision

This budget transfer is the movement in budgets between revenue and capital required to align the budgeting treatment of expenditure with the GAAP accounting treatment. This does not change the total amount of expenditure approved by the States.

Recommendation

It is recommended that the Minister approves the internal budget transfer of £130,000 from the Home Affairs revenue head of expenditure to the Home Affairs minor capital head of expenditure in order to align budgeting with accounting treatment following the move to GAAP accounting.