States Departmental Budgets: Realignment to reflect savings from CSR programme

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A decision made on 18 December 2012:

Decision Reference: MD-TR-2012-0115
Decision Summary Title:	Realignment of all States departmental budgets to reflect insurance and other procurement savings as part of the CSR programme		Date of Decision Summary:	6 December 2012
Decision Summary Author:	Treasurer of the States		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Realignment of all States departmental budgets to reflect insurance and other procurement savings as part of the CSR programme		Date of Written Report:	6 December 2012
Written Report Author:	Director of Accounting Services		Written Report : Public or Exempt?	Public
Subject: The realignment of all States departmental budgets to fund savings identified for CSR purposes.
Decision(s): The Minister approved the realignment of all internal States department budgets for 2012 as part of the CSR programme having identified significant savings within the Insurance arrangements and other procurement initiatives and for these savings to be returned to the Provision for Restructuring Costs.
Reason(s) for Decision: As part of the States-wide CSR initiative in 2012, it was identified, that significant savings were achievable from a re-tender and review of the States insurance arrangements. Departmental Insurance budgets need to be realigned to reflect these savings which have been derived from the following two factors : An excellent Insurance claims history, between 2007 and 2011, with the States Insurers Improved controls and monitoring of risk management within all States departments In addition other procurement initiatives have delivered savings in 2012 which require the realignment of budgets. Article 2(6) of the Public Finances (Transitional Arrangements) (Jersey) Order 2011 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 used for the purpose of another head of expenditure.
Resource Implications: To transfer net savings of £813,650 from States-wide departmental budgets to the Provision for Restructuring Costs with increases and decreases as follows: The following revenue Heads of Expenditure to increase Chief Minister……………….……………………………………………….…………. £1,440 Treasury and Resources ………………………………………………………….... £35,170 Bailiff’s Chambers…….………………………………………………………………. £690 Law Officers’ Department……..………………………....……………………….. … £3,090 Judicial Greffe………………………………………………………………………. … £1,100 Official Analyst…………………………………………………………………………. £190 Office of the Lieutenant Governor…………….……………………………………… £110 Data Protection Commission……………………....…………………………………. £190 Probation Department….……………………………………………………………… £210 States Assembly and its services……………………………………………….…. £1,780 Total £43,970 The following revenue Heads of Expenditure to decrease Economic Development ……………...……………………………………….……... £13,220 Education, Sport and Culture…..……………………………………………...…… £259,540 Department of the Environment………..…………………………………….…… £37,100 Health and Social Services………………………………………………………..…. £86,120 Home Affairs……………………………………...……………………………..….…. £59,840 Housing…………………………………………..……………………………….….. £274,960 Social Security………………………………………………………………………… £24,330 Transport and Technical Services………………………………………………… £102,390 Viscount’s Department…..…………………………………………………………… £120 Total £857,620
Action required: Business Manager to notify the Director of Accounting Services that this decision has been approved and for the £813,650 identified above of internal States departmental budgets to be transferred to the Provision for Restructuring Costs as set out above.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

States Departmental Budgets: Realignment to reflect savings from CSR programme

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Treasury and Resources

Ministerial Decision Report

Realignment of all states DEPARTMENTAL BUDGETS TO

REFLECT INSURANCE AND OTHER PROCUREMENT SAVINGS as part of the csr programme 2012

Purpose of Report

To enable the Minister to approve the realignment of all internal States department budgets for 2012 as part of the CSR programme having identified significant savings within the Insurance arrangements and other procurement initiatives and for these savings to be returned to the Provision for Restructuring Costs.

Background – Insurance budgetary Savings to CSR

As part of the States Insurance re-tendering process undertaken in 2011, a review of all States of Jersey (SoJ) insurance claims history over the past five years (2007 – 2011), with the States Insurers Insurance Corporation of the Channel Islands (ICCI), highlighted the following annual data / trends:

Payments & Recoveries (of claims) made by ICCI

SoJ - NET PAYMENTS BY INSURANCE CLASS							% of Annual Excess Limits used
YEAR	Liability £	MedMal £	Directors & Officials £	Motor £	Property £	TOTAL £	General Classes	MedMal & Officials
2007	164,273	24,054	0	95,597	206,639	490,563	62.20%	4.81%
2008	108,868	27,000	0	161,879	374,412	672,159	86.02%	5.40%
2009	113,138	32,000	36,224	67,024	76,296	324,682	34.19%	13.64%
2010	72,018	185,000	80,094	110,144	203,156	650,412	51.38%	53.02%
2011	249,678	149,000	45,000	140,926	197,599	782,209	78.43%	38.80%
Total	707,975	417,054	161,318	575,570	1,058,102	2,920,019
Mean Average	141,595	83,411	32,264	115,114	211,620	584,004	62.44%	23.13%

SoJ - Self Insurance Exposure Utilisation Report (2007 - 2011)

Year 2007	Class	Excess Limits	Claims Awarded	Est. Claims Accrued	Total Exposure	% Exposure
	Aggregate	750,000	377,352	0	377,352	50%
	Med Mal Aggregate	500,000	14,054	10,000	24,054	5%
2008	Aggregate	750,000	650,483	70,065	720,548	96%
2008	Med Mal Aggregate	500,000	14,643	20,380	35,023	7%
2009	Aggregate	750,000	175,763	47,000	222,763	30%
2009	Med Mal Aggregate	500,000	36,224	4,000	40,224	8%
2010	Aggregate	750,000	298,512	85,100	383,612	51%
2010	Med Mal Aggregate	500,000	36,072	276,770	312,842	63%
2011	Aggregate	750,000	316,696	433,304	750,000	100%
2011	Med Mal Aggregate	500,000	33,898	452,950	486,848	97%
Mean Average	Aggregate	750,000	363,761	127,094	490,855	65.45%
Mean Average	Med Mal Aggregate	500,000	26,978	154,820	179,798	35.96%

SoJ - Self Insurance Exposure Utilisation Report (ytd August 2012)

Year

2012

Class

Excess Limits

Claims Awarded

Est. Claims Accrued

Total Exposure

% Exposure

Aggregate

1,400,000

44,859

697,340

742,199

53%

Official Indemnity Agg.

250,000

50,000

20%

The above data tables reflect two main historic factors, namely that:

The average annual net payments, to ICCI, from the central Insurance Fund were well below annual aggregate deductible levels set by the Insurers – indicating that the SoJ claims history (no. of incidences / quantums) is low.
The average annual self Insurance exposure of the SoJ to claims, within the central Insurance Fund, is also low – indicating that the levels of claims arising against the central Insurance Fund are well managed.

The Treasury based its’ decision to release insurance savings to CSR in 2012 based on this detailed analysis, coupled with a more proactive approach to improving risk management policies and procedures throughout the States.

This proactive approach is evidenced by the increased involvement of the Insurance Risk Forum and Insurance Group (IRFIG), which is chaired by the Head of Treasury and Investment Management, whose scope includes the following directives:

To advance States-wide risk management awareness strategies designed to best manage SoJ claims culture.
To promote by results the SoJ’s proactive position on such matters to our Insurers.

It is also worth stating here that following the completion of the States Insurance portfolio tendering process, ICCI were successfully re-appointed as the SoJ primary Insurers. This re-appointment was part of a three year (2012 – 2014) Rate Stabilisation Agreement (RSA), which included a further two year (2015 – 2016) option available to SoJ, depending on performance.

As part of this new agreement, SoJ agreed to increase certain aspects of the States insurance policy coverage in keeping with best advice and also agreed to increase the SoJ annual self insurance exposure limits from £1.25m to £1.9m, as shown in the ‘Excess Limits’ columns above.

In turn for agreeing to increase the States annual risk exposure, the SoJ secured a very favourable group boundary premium in 2012, against a backdrop of an ever hardening cycle within the Insurance markets worldwide. The stability and surety created by securing this favourable new premium (2011: £1.7m – 2012: £1.6m) and RSA with ICCI further supports the Minister’s decision to release savings identified to the CSR programme in 2012.

Computation of Departmental Insurance Budgets to be released to CSR in 2012

	SUMMARY CSR INSURANCE SAVINGS – 2012
Internal States Departments	Opening Insurance Recharge	Closing Insurance Recharge	Inter-Departmental Recharge Adjustment	Insurance Budget Annual Increase/(Decrease)
Ministerial Departments
Chief Minister	6,998	11,798		4,800
Economic Development	12,556	4,276		(8,280)
Education, Sport and Culture	314,760	80,700		(234,060)
Department of the Environment	37,892	10,022		(27,870)
Health and Social Services	203,840	143,430		(60,410)
Home Affairs	104,933	53,613		(51,320)
Housing	373,136	70,126	(29,400)	(273,610)
Social Security	30,827	8,007		(22,820)
Transport and Technical Services	195,544	105,014		(90,530)
Treasury and Resources	47,393	119,743	29,400	42,950
Non Ministerial States Funded Bodies
Bailiff’s Chambers	9	699		690
Law Officers’ Department	89	4,659		4,570
Judicial Greffe	242	2,212		1,970
Viscount’s Department	1,196	1,636		440
Official Analyst	251	441		190
Office of the Lieutenant Governor	573	683		110
Data Protection Commission	21	211		190
Probation Department	1,327	1,537		210
Receiver General	10	10		0
States Assembly and its services	1,640	3,420		1,780

Totals	1,333,237	622,237	0	(711,000)

These insurance savings are reflected in the Medium term Financial Plan in 2013 as part of the procurement savings target. This saving needs to be reflected in 2012 budgets and returned to the CSR Restructuring Reserve in 2012.

Procurement Savings

A number of other procurement projects were delivered, evidenced and savings of £102,650 achieved in 2012. A base budget reduction for these projects has been included in 2013 within the Medium Term Financial Plan. The cost savings from these projects in 2012 need to be reflected in budgets and the saving returned to the CSR Restructuring Reserve in 2012. The projects delivered and savings evidenced in 2012 include;-

Electric Meter Tariff Review – savings resulting from changing tariffs on meters to the most favourable following investigation of usage patterns.
Mobile Phones – savings resulting from re-tendering of mobile phone contract.
Advertising – savings resulting from re-tendering and changes to arrangements for advertising.
Stationery – savings resulting from tendering exercise for stationery resources.

SUMMARY CSR OTHER PROCUREMENT SAVINGS – 2012
Internal States Departments	Electric Meter Tariff Review	Mobile Phones	Advertising	Stationery	Other Procurement savings Budget Increase / (Decrease)
Ministerial Departments
Chief Minister	0	(590)	(2,210)	(560)	(3,360)
Economic Development	(100)	(990)	(2,940)	(910)	(4,940)
Education, Sport and Culture	(14,460)	(4,710)	(6,230)	(80)	(25,480)
Department of the Environment	0	(2,990)	(5,410)	(830)	(9,230)
Health and Social Services	(7,250)	(13,770)	(2,010)	(2,680)	(25,710)
Home Affairs	(3,820)	(470)	(580)	(3,650)	(8,520)
Housing	0	(460)	(460)	(430)	(1,350)
Social Security	(190)	0	(1,320)	0	(1,510)
Transport and Technical Services	0	(10,560)	(490)	(810)	(11,860)
Treasury and Resources	(3,710)	(1,500)	(1,220)	(1,350)	(7,780)
Non Ministerial States Funded Bodies
Law Officers’ Department	0	(600)	(350)	(530)	(1,480)
Judicial Greffe	0	(360)	(190)	(320)	(870)
Viscount’s Department	0	(240)	(110)	(210)	(560)

Totals	(29,530)	(37,240)	(23,520)	(12,360)	(102,650)

Overall Savings

The overall savings from the insurance re-tender and review together with other procurement projects in 2012 have delivered savings of £813,650 which need to be removed from Departmental budgets.

SUMMARY OF TRANSFERS (TO) / FROM PROVISION FOR RESTRUCTURING COSTS
Internal States Departments	Insurance Budget Increase / (Decrease)	Other Procurement savings Budget Increase / (Decrease)	Budget Transfers (to) / from Provision for Restructuring Costs
Ministerial Departments
Chief Minister	4,740	(3,360)	1,440
Economic Development	(8,280)	(4,940)	(13,220)
Education, Sport and Culture	(234,060)	(25,480)	(259,540)
Department of the Environment	(27,870)	(9,230)	(37,100)
Health and Social Services	(60,410)	(25,710)	(86,120)
Home Affairs	(51,320)	(8,520)	(59,840)
Housing	(273,610)	(1,350)	(274,960)
Social Security	(22,820)	(1,510)	(24,330)
Transport and Technical Services	(90,530)	(11,860)	(102,390)
Treasury and Resources	42,950	(7,780)	35,170
Non Ministerial States Funded Bodies
Bailiff’s Chambers	690	0	690
Law Officers’ Department	4,570	(1,480)	3,090
Judicial Greffe	1,970	(870)	1,100
Viscount’s Department	440	(560)	(120)
Official Analyst	190	0	190
Office of the Lieutenant Governor	110	0	110
Data Protection Commission	190	0	190
Probation Department	210	0	210
States Assembly and its services	1,780	0	1,780

Totals	(711,000)	(102,650)	(813,650)

Recommendation

The Minister is recommended to approve the transfer of £813,650 of departmental budgets for year 2012 as savings contributing to the Comprehensive Spending Review Programme

Reason for Decision

As part of the States-wide CSR initiative in 2012, it was identified, that significant savings were achievable from a re-tender and review of the States insurance arrangements. Departmental insurance budgets need to be realigned to reflect these savings which have been derived from the following two factors:

An excellent insurance claims history, between 2007 and 2011, with the States Insurers.
Improved controls and monitoring of risk management within all States departments.

In addition other procurement initiatives have delivered savings in 2012 which require the realignment of budgets.

Article 2(6) of the Public Finances (Transitional Arrangements) (Jersey) Order 2011 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 used for the purposes of another head of expenditure.

Resource Implications

Internal States departmental budgets to be reduced by £813,650 as set out above.

Report author : Assistant Accountant Treasury and Investment Management	Document date : 09/10/2012
Quality Assurance / Review : Director of Accounting Services	File name and path: L:\Treasury\Sections\Treasury Operations\Treasury Management Folder\Insurance\2012\CSR Programme\CSR Ministerial Decisions & Reports\Final Draft Versions
MD sponsor : Minister for Treasury and Resources