Budget Transfer: Rue du Maupertuis Sewer

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A decision made on 8 December 2014:

Decision Reference: MD-T-2014-0122
Decision Summary Title :	Acceptance of additional funding, budget creation and subsequent transfer from revenue to capital for the reconstruction of Rue du Maupertuis sewer.		Date of Decision Summary:	24 November 2014
Decision Summary Author:	Capital Accountant – TTS Finance		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Acceptance of additional funding, budget creation and subsequent transfer from revenue to capital for the reconstruction of Rue du Maupertuis sewer.		Date of Written Report:	24 November 2014
Written Report Author:	Capital Accountant – TTS Finance		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Acceptance of funds, increase of budget and subsequent transfer between Revenue and Capital Heads of Expenditure for a Planning Obligation Agreement.
Decision(s): The Minister approved the following: a) An acceptance of £390,000 from the Insurance Deductible Fund (IDF) under MD-TR-2014-0006. b) An increase in the Transport and Technical Services (TTS) income and revenue expenditure budgets by £390,000 respectively. c) An internal budget transfer of £301,357.19 from the TTS revenue head of expenditure to the TTS Infrastructure Capital head of expenditure (Q00RL10011 - Infrastructure) for the reconstruction of Rue du Maupertuis sewer.
Reason(s) for Decision: Under financial direction 3.6 Variations to Head of Expenditure approval of the use of additional surplus income of more than 10% or £100,000 of the estimated income notified to the States for that particular service area and of a non-contentious nature must be sought from the Treasurer. Under Generally Accepted Accounting Principles (GAAP) expenditure that meets the definition of capital expenditure must be capitalised. This budget transfer is the movement in budget between revenue and capital required to align the budgeting treatment of expenditure with the accounting treatment, in order to comply with GAAP. Article 18(1)(a) of the Public Finances (Jersey) Law 2005 states that all or any part of the amount appropriated by a head of expenditure may, with the approval of the Minister for Treasury and Resources, be transferred from a revenue head of expenditure to a capital head of expenditure, or vice versa, in order to comply with accounting standards issued for the purposes of Article 32(2). Delegation 1.2 delegates authority for non-contentious transfers between revenue and capital heads of expenditure (and vice versa) with no financial limit where the transfer is solely to ensure that financial transactions are accurately reflected in the States’ Accounts in accordance with accounting standards issued under Article 32(2) of the Law.
Resource Implications: The TTS revenue head of expenditure will show an additional income budget of £390,000 and an additional expenditure budget of £390,000. £301,357.19 of this expenditure budget will subsequently be transferred to the TTS capital head of expenditure for infrastructure (Q00RL10011).
Action required: The Finance Director to request the Minister for the Treasury and Resources Department to approve the budget increase and transfers from revenue to capital as referred to in the accompanying report.
Signature:		Position: Minister for Transport & Technical Services
Date Signed:		Date of Decision (If different from Date Signed):

Budget Transfer: Rue du Maupertuis Sewer

TRANSPORT AND TECHNICAL SERVICES DEPARTMENT

ACCEPTANCE OF ADDITIONAL FUNDING, BUDGET CREATION AND SUBSEQUENT

TRANSFER FROM REVENUE TO CAPITAL FOR THE RECONSTRUCTION OF RUE DU

MAUPERTUIS SEWER

Purpose of Report

To enable the Minister to approve the following:

a) Acceptance of £390,000 from the Insurance Deductible Fund (IDF) under MD-TR-2014-0006.

b) Increase the Transport and Technical Services (TTS) income and revenue expenditure budgets by £390,000 respectively.

c) An internal budget transfer of £301,357.19 from the TTS revenue head of expenditure to the TTS Infrastructure Capital head of expenditure (Q00RL10011 - Infrastructure) for the reconstruction of Rue Du Maupertuis sewer.

Background

£390,000 of funding was approved for release from the Insurance Deductible Fund in 2014 under MD-TR-2014-0006 to cover repair works at Rue Du Maupertuis, although under Treasurer’s Decision TR-2014-DD062 only £88,642.81 was released to TTS. Therefore, the remaining £301,357.19 needs to be released to TTS. This funding can only be received by way of additional income, for which TTS have no income budget.

This work can be split into two sections:

a) Payment of £88,642.81 to the Parish of St Clement for repair works undertaken on their assets.

b) Full reconstruction of the States of Jersey sewers in the area. The costs were originally expected to be revenue expenditure but subsequently the works progressed to full reconstruction and as a result are capital in nature. The cost of this work covered by the IDF was £301,537.19 which will be treated as capital under States of Jersey Accounting Principles.

This creates a mismatch between income within the revenue head of expenditure and expenditure within the capital head of expenditure for infrastructure (Q00RL10011).

In order to correct this mismatch and create a capital budget TTS are required to undertake the following:

a) Create an additional income and expenditure budget for £390,000 within their revenue head of expenditure. This is a net nil budget adjustment.

b) Transfer £301,357.19 expenditure budget from revenue to the capital head of expenditure for Infrastructure (Q00RL10011) in order to match it against the capital expenditure already incurred.

Recommendation

The Minister is recommended to approve the following:

a) Accept a payment of £390,000 from the Insurance Deductible Fund (IDF) under MD-TR-2014-0062.

b) An increase in the Transport and Technical Services (TTS) income and revenue expenditure budgets by £390,000 respectively.

Reason for Decision

Under financial direction 3.6 Variations to Head of Expenditure approval of the use of additional surplus income of more than 10% or £100,000 of the estimated income notified to the States for that particular service area and of a non-contentious nature must be sought from the Treasurer.

Under Generally Accepted Accounting Principles (GAAP) expenditure that meets the definition of capital expenditure must be capitalised. This budget transfer is the movement in budget between capital and revenue required to align the budgeting treatment of expenditure with the accounting treatment, in order to comply with GAAP.

Article 18(1)(a) of the Public Finances (Jersey) Law 2005 states that all or any part of the amount appropriated by a head of expenditure may, with the approval of the Minister for Treasury and Resources, be transferred from a revenue head of expenditure to a capital head of expenditure, or vice versa, in order to comply with accounting standards issued for the purposes of Article 32(2). Delegation 1.2 delegates authority for non-contentious transfers between revenue and capital heads of expenditure (and vice versa) with no financial limit where the transfer is solely to ensure that financial transactions are accurately reflected in the States’ Accounts in accordance with accounting standards issued under Article 32(2) of the Law.

Resource Implications

The TTS revenue head of expenditure will show an additional income budget of £390,000 and an additional expenditure budget of £390,000. £301,357.19 of this expenditure budget will subsequently be transferred to the TTS capital head of expenditure for infrastructure (Q00RL10011).

Action required

The Finance Director to request the Minister for the Treasury and Resources Department to approve the budget increase and transfers from revenue to capital as referred to in the accompanying report.

Written by:	Capital Accountant
Approved by:	Director of Finance