Budget Transfer for work completed under Planning Obligation Agreements

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A decision made on 4 September 2017:

Decision Reference: MD-T-2017-0077
Decision Summary Title :	The increase of budget and subsequent transfer between Revenue and Capital Heads of Expenditure for work completed under Planning Obligation Agreements		Date of Decision Summary:	23 August 2017
Decision Summary Author:	Finance Manager		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	The increase of budget and subsequent transfer between Revenue and Capital Heads of Expenditure for work completed under Planning Obligation Agreements		Date of Written Report:	23 August 2017
Written Report Author:	Finance Manager		Written Report : Public or Exempt?	Public
Subject: The increase of budget and subsequent transfer between Department for Infrastructure (DFI) Revenue and Capital Heads of Expenditure of up to £570,004.24 for work completed by the Department to fulfil the requirement of various Planning Obligation Agreements during the current MTFP 2017-19.
Decision(s): The Minister approved the following: The increase of up to £570,004.24 to the Department for Infrastructure (DfI) income and expenditure budgets during the current MTFP 2017-19. The subsequent budget transfers of up to £536,336.20 from the DfI revenue head of expenditure; £521,336.22 to the capital head of expenditure for Road Safety Improvements (Q00MF15037) £15,000 to the capital head of expenditure for Eastern Cycle Network (Q00BP10016) during 2017-19, leaving £33,668.02 remaining in revenue for bus service contributions as detailed below.
Reason(s) for Decision: 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 capital head of expenditure to a revenue head of expenditure, or vice versa, in order to comply with generally accepted accounting principles or an Order made under Article 32. Delegation 1.2 delegates authority for non-contentious transfers between heads of expenditure with no financial limit where the transfer is solely to ensure that financial transactions are accurately reflected in the States’ Accounts in accordance with GAAP or an Order made under Article 32 of the Law. 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.
Resource Implications: The DfI revenue head of expenditure will show an additional income budget of up to £570,004.24 and an additional expenditure budget of up to £570,004.24 during the current MTFP 2017-19. The majority expenditure budget will subsequently be transferred to DfI capital heads of expenditure, with £33,668.02 remaining in Revenue. The Finance Director for DfI will ensure that this total is not exceeded without additional Ministerial approval being sought. A spreadsheet will be used to maintain a running total of the amounts transferred from Revenue to Capital as a means of ensuring the total is not exceeded.
Action required: The Finance Director to request the Treasurer of the States to approve the budget creation and subsequent transfers from revenue to capital as referred to in the accompanying report.
Signature:		Position: Minister for Infrastructure
Date Signed:		Date of Decision (If different from Date Signed):

Budget Transfer for work completed under Planning Obligation Agreements

DEPARTMENT FOR INFRASTRUCTURE

INCREASE OF BUDGET AND SUBSEQUENT TRANSFER BETWEEN REVENUE

AND CAPITAL HEADS OF EXPENDITURE FOR WORK COMPLETED UNDER

PLANNING OBLIGATION AGREEMENTS

Purpose of Report

To enable the Minister to approve the following:

The increase of up to £570,004.24 to the Department for Infrastructure (DfI) income and expenditure budgets during the current MTFP 2017-19.
The subsequent budget transfers of up to £536,336.20 from the Department for Infrastructure (DfI) revenue head of expenditure; £521,336.22 to the capital head of expenditure for Road Safety Improvements (Q00MF15037) £15,000 to the capital head of expenditure for Eastern Cycle Network (Q00BP10016) during 2017-19, leaving £33,668.02 remaining in revenue for bus service contributions as detailed below.

Background

Planning Obligation Agreements signed by the Minister for the Environment (DoE) and / or the Minister for Infrastructure (DfI) frequently set out conditions entailing transport / highway improvements which require work to be carried out by DfI. The amounts for individual POA’s vary from £2,000 to £180,379. This Ministerial Decision will only enable individual transfers up to £180,379. Those over this amount will require separate Ministerial Decisions.

This Ministerial Decision allows for budget transfers up to £570,002.24 in total over the current MTFP period of 2017 to 2019. The Finance Director for DfI will ensure that this total is not exceeded without additional Ministerial approval being sought.

DoE currently hold the following amounts on their balance sheet for POAs:

RP/2011/0614 - £33,668.02 towards bus services contribution (Service 20 for 2018 and 2019)
P/2013/1806 – £2,000 towards Eastern Cycle Network
P/2014/0635 - £7,500 towards bus shelter provision
P/2011/14/03 - £50,000 towards footpath works on Rue Horman
P/2012/1654 - £51,157.24 towards cycle and walking improvements at La Frigate
P/2013/0337 - £7,500 towards bus shelter provision
P/2016/0137 - £6,300 towards footpath works on Beach Road
P/2016/0308 - £34,500 towards a bus shelter provision and road safety crossing and highway improvements
P/2015/1538 - £176,500 of which £16,500 is toward bus shelter provision and £160,000 is for enhancement of the public realm infrastructure within the vicinity of the “BOA/Play.com” site
P/2012/1141 - £180,378.98 for the improvement works to Charing Cross
P/2015/1313 - £15,500 of which £8,000 is toward the Eastern Cycle Network, and £7,500 bus shelter provision
P2015/1947 - £5,000 towards Eastern Cycle Network

In fulfilling these conditions on behalf of the planning applicant, DfI incur a variety of capital costs without receiving budgets to do so on the understanding that when these works are complete the budget will be transferred. Prior to the budget transfer being actioned by Finance, the operational manager within DfI must seek the approval of DoE Planning Director in order to release the funds.

Up to £521,336.22 will be transferred to Capital Head of Expenditure Road Safety Improvements (Q00MF15037) and £15,000 to the capital head of expenditure for Eastern Cycle Network (Q00BP10016), leaving £33,668.02 remaining in revenue for bus service contributions.

Once this agreement is in place, DfI finance team are notified by the Planning team. The finance team will then send details of the intended transfer to Treasury to check prior to the transfer being made. Details will include information on the costs incurred to meet the Planning Obligation Agreement and a copy of the Planning Obligation Agreement.

The payments from the planning applications will then be transferred to DfI by way of additional income. This creates a mismatch between income within DfI revenue head of expenditure and expenditure within capital heads of expenditure

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

The increase of DfI income and expenditure budgets.
The subsequent budget transfer from the DfI revenue head of expenditure to the relevant DfI capital head of expenditure.

Discussion

The States of Jersey implemented Generally Accepted Accounting Principles (GAAP) in 2009 and subsequently moved to IFRS accounting in 2012. IFRS accounting requires that expenditure should be accounted for as capital if it meets the IFRS 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 2016 in the 2016 – 2019 MTFP Plan. These budget transfers move budgets between revenue and capital so as to align the budgeting treatment of 2017-19 expenditure with the IFRS accounting treatment.

Recommendation

The Minister approves the following:

The increase of up to £570,004.24 to the Department for Infrastructure (DfI) income and expenditure budgets during the current MTFP 2017-19.
The subsequent budget transfers of up to £536,336.20 from the DfI revenue head of expenditure; £521,336.22 to the capital head of expenditure for Road Safety Improvements (Q00MF15037) £15,000 to the capital head of expenditure for Eastern Cycle Network (Q00BP10016) during 2017-19, leaving £33,668.02 remaining in revenue for bus service contributions as detailed below.

Reason for Decision

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 capital head of expenditure to a revenue head of expenditure, or vice versa, in order to comply with generally accepted accounting principles or an Order made under Article 32.

Delegation 1.2 delegates authority for non-contentious transfers between heads of expenditure with no financial limit where the transfer is solely to ensure that financial transactions are accurately reflected in the States’ Accounts in accordance with GAAP or an Order made under Article 32 of the Law.

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.

Resource Implications

The DfI revenue head of expenditure will show an additional income budget of up to £570,004.24 and an additional expenditure budget of up to £570,004.24 during the current MTFP 2017-19. The majority expenditure budget will subsequently be transferred to DfI capital heads of expenditure, with £33,668.02 remaining in Revenue.

The Finance Director for DfI will ensure that this total is not exceeded without additional Ministerial approval being sought. A spreadsheet will be used to maintain a running total of the amounts transferred from Revenue to Capital as a means of ensuring the total is not exceeded.

7. Action required:

The Finance Director to request the Treasurer of the States to approve the budget creation and subsequent transfers from revenue to capital as referred to in the accompanying report.

Written by:	Finance Manager
Approved by:	Director of Finance