Government of Jersey

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A decision made (24/03/2009) regarding: 2009 Budget Transfers between Capital and Revenue Heads of Expenditure as a result of moving to GAAP accounting.

Decision Reference: MD-E-2009-0053
Decision Summary Title:	Capital/Revenue Budget Transfer – Jersey Airport DS Jersey Airport RAB Capital Revenue 110309		Date of Decision Summary:	11 March 2009
Decision Summary Author:	Donna Mitchell Finance and Commercial Services 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 budgets WR RAB Capital Budget Transfers 110309		Date of Written Report:	11 March 2009
Written Report Author:	Donna Mitchell Finance and Commercial Services Manager		Written Report : Public or Exempt?	Public
Subject: 2009 Budget Transfers between Capital and Revenue Heads of Expenditure as a result of moving to GAAP accounting
Decision(s): The Minister approved 2009 budget transfers between capital and revenue, representing a net budget transfer of £100,750 from capital to revenue, as detailed in the attached report.
Reason(s) for Decision: The States of Jersey is implementing 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. These budget transfers are the movements in budgets between capital and revenue 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: None.
Action required: Departmental Finance Director to seek Treasury and Resources Ministerial Approval for the transfer. Once approval obtained, Departmental Finance Director to action budget transfers.
Signature:		Position: Senator P.F. Routier, Assistant Minister for Economic Development
Date Signed:		Date of Decision:

Budget Transfers - GAAP Accounting.

Report Name:Transfer of Budgets

Support for Ministerial Decision MD-E-2009-0053

Date: 11 March 2009

Purpose of the report

To approve the transfer of £100,750 budget from Jersey Airport capital to Jersey Airport revenue, to align budgeting with Generally Accepted Accounting Principles (GAAP).

Background

The States of Jersey is implementing 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. Previously, ‘capital’ budgets have represented whatever the States Assembly voted as capital. The States have already approved capital allocations for 2009 in the 2009 Business Plan. These budget transfers move budgets between capital and revenue so as to align the budgeting treatment of 2009 expenditure with the GAAP accounting treatment.

This is a restatement exercise that only affects expenditure that is expected to be incurred in 2009. Revenue budgets held in capital that relate to future years will remain on department's capital budget ledgers, i.e. this transfer from revenue to capital only relates to 2009 expenditure. There will continue to be ‘capital’ budgets held against capital projects that relate to revenue spend expected in years 2010+, which will be transferred to revenue in the relevant year.

The following table identifies transfers between revenue and capital and vice versa that meet the relevant GAAP definitions.

Capital Programme 2009
	2009 Capital Programme Per 2009 Business Plan	Transfers (to)/from revenue budget (2009 expenditure only)	Re-stated Capital Budgets after 2009 expenditure transfer only
	£	£	£
Regulatory compliance & Safeguarding	500,000	(27,000)	473,000
ATC Centre Equipment phase 2	2,250,000	(25,000)	2,225,000
Total	2,750,000	(52,000)	2,698,000

Pre 2009 Approved Projects
	Net budget at 31 December 2008	Transfers (to)/from revenue budget (2009 expenditure only)	Re-stated Capital Budgets after 2009 expenditure transfer only
	£	£	£
ATC Centre Equipment phase 1	1,250,000	(48,750)	1,201,250
Total	1,250,000	(48,750)	1,201,250
Grand total		(100,750)

Revenue Income and Expenditure - Service Analysis
	2009 Net Revenue Expenditure before transfer	Adjust for 2009 Capital Projects Capital/Revenue Transfers	Adjust for pre-2009 Capital Projects Capital/Revenue Transfers	2009 Net Revenue Expenditure after Transfer
	£	£	£	£
Income
Aeronautical Services	8,739,000		58,600	8,797,600
Passenger and Security Charges	8,242,000			8,242,000
Concessions and Rentals	3,641,000			3,641,000
Sales and Services	1,622,000			1,622,000
Communications Services	1,160,000			1,160,000
Total Income	23,404,000		58,600	23,462,600

Expenditure
Aeronautical Services	10,368,000	52,000	107,350	10,527,350
Passenger and Security Services	6,081,000			6,081,000
Commercial Services	672,000			672,000
Communications Services	1,082,000			1,082,000
Total Expenditure	18,203,000	52,000	107,350	18,362,350

Gross Surplus	5,201,000	(52,000)	(48,750)	5,100,250

The effect of the transfer would be to decrease the Airport’s 2009 Gross surplus from £5,201,000 to £5,100,250 a decrease of 2%, and reduce the value of capital budgets by an equivalent amount. This does not change the total amount of expenditure approved by the States.

There will continue to be a need to make transfers from Capital to Revenue on existing approved projects in each of the years in which expenditure will be incurred.

Recommendations

To approve the net transfer of £100,750 budget from capital to revenue within Jersey Airport, to align budgeting with accounting treatment.

L:\Treasury\Sections\Corporate Finance\GAAP Conversion Issues\Documents\Model Report supporting MD on budget transfers 110209.doc