Public Finances Manual

1. by the Viscount, including through the sale of property (the Law provides the relevant details on the terms attached to any such sale); or 
2. under an asset sharing agreement, (being any agreement or arrangement made by or on behalf of Jersey with a country or territory outside Jersey for the sharing of the proceeds of unlawful conduct that, as a result of mutual assistance in proceedings (other than criminal proceedings), have been confiscated or forfeited either in Jersey or elsewhere).
   

• underspends from the previous year’s departmental allocations for Court and Case Costs
• the Criminal Offences Confiscation Fund (in accordance with article 24 of the Proceeds of Crime (Jersey) Law 1999) 
• the Reserve head of expenditure

1. Schemes of Delegation
   Accountable Officers must, when appropriate, ensure that expenditure on Court and Case Costs is addressed in departmental Schemes of Delegation relating to expenditure.
   
   
2. Expenditure controls
   Accountable Officers must ensure that there are appropriate controls and procedures in place over the Court and Case Cost expenditure process to ensure the effective and efficient use of resources.
   
   
3. Approval
   The Court and Case Costs Review Group will assess requests for Court and Case Costs Smoothing Reserve funding prior to submission to Treasury and Exchequer.  In instances where this is not possible Accountable Officers must, as soon as practicable, and prior to committing any unfunded Court and Case Costs expenditure, notify the Treasurer of the States of any anticipated expenditure including an estimate of the total cost that may not be met from within existing budgets.  In all cases the Treasurer of the States must ensure that the relevant approval process for Smoothing Reserve funding is followed.
   
   Neither the Treasurer of the States nor the Minister for Treasury and Resources will make any decision on the appropriateness of pursuing any Case.
   
   
4. Value for money
   Accountable Officers must primarily ensure that procedures are in place to achieve value for money in the procurement of legal services and advice so far as is practicable.  The best way of achieving this is through either the Procurement Best Practice Procedures Toolkit, unless an exemption has been approved (using the online Exemption process), or any other approved procedures (including those which may relate to a Legal Aid system).  Where it is not practicable to follow pre-set procedures, relevant exemptions must be approved or supporting documentation retained to support the course of action taken.
   
   The Law Officers’ Department has established procedures for appointing external Crown Advocates, and external advocates undertaking adult and children’s safeguarding cases.  There are set fixed rates for this work.  Provided those fixed rates are applied there is no need for that department to undertake any additional procurement process or complete an exemption form for a case where the costs exceed “Group 2 category” as defined in the Procurement Toolkit.
   
   
5. One-off expensive cases
   Exceptionally, an Accountable Officer may identify a one-off potentially expensive case that needs funding outside of the normal Court and Case Costs Smoothing Reserve limits. The Accountable Officer must ensure that Treasury and Exchequer are notified of any such case as soon as possible and before any expenditure is committed. In such cases other provisions within this Manual must be followed (for example for Allocations from the Reserve).
   
   
6. Reporting
   As part of the statutory reporting requirements the Minister for Treasury and Resources must report to the States at six monthly intervals regarding any transfers from the Court and Case Costs Smoothing Reserve identifying the head of expenditure to which it was applied.
   
   
7. Payment of damages
   Approval of the Treasurer of the States must be sought before any court-awarded damages are paid from Court and Case Cost budgets. Those budgets may be used to pay awards of costs by a court.
   
   
8. Reprioritisation of Court and Case Costs budgets
   Accountable Officers must not reprioritise funding allocated for Court and Case Costs without seeking the formal approval of the Minister for Treasury and Resources, and following consultation with their Head of Finance Business Partnering. This is in accordance with the Expenditure and procurement section of this Manual and specifically Requirement 19 - Sufficient budget to commit expenditure.

Financing

Financing or borrowing

Introduction and background

This section applies to all States Bodies as defined in the Public Finances Law and provides guidance on borrowing by the States of Jersey.

For the purpose of setting maximum limits, borrowing is defined as the acquisition of funds or assets from a body other than a States Body with an obligation to repay those funds. This definition also includes the permanent (or potentially permanent) acquisition of an asset with an obligation to pay for that asset over a period longer than 90 days.

Borrowing or debt financing represents a key balance sheet item of the States of Jersey. As such, a clear understanding of how this balance changes and is serviced and repaid is required to ensure that stakeholders fully comprehend the potential long-term impacts on the States and future generations. Further reference should also be made to the covenants provided and to the cost of servicing. A mismanagement of borrowing by the States of Jersey could generate substantial risk to the Island’s financial stability for years to come.

The following types of borrowing fall within the remit of the Public Finances Manual:

• loans from externalinstitutions e.g. banks
• issuance of bonds
• finance leases and similar contracts
• the assignment of debt from a third party
• sale and leaseback transactions
• guarantees or indemnities in the States of Jersey’s name (in which case the liability will be taken to be the amount borrowed for the purpose of calculating overall State of Jersey borrowing limits) – these do not include “letters of comfort” issued by the Minister for Treasury and Resources to protect certain bodies against interest rate increases
• bank overdrafts and overdraft facilities

The following are classified as financing for the purposes of calculating the financing limits which the Minister for Treasury and Resources may enter in to under the terms of the Public Finances Law Article 26(3) and (4):

• finance leases (not operating leases or property leases)
• the assignment of debt from a third party
• sale and leaseback transactions
• loans from external institutions
• the issuance of bonds
  

Accountable Officers in States Bodies with a responsibility for the oversight of Arm’s-Length Organisations should consider the potential for external providers of capital to Arm's Length Organisations to consider that the States of Jersey could implicitly guarantee that capital e.g. if an Arm's Length Organisation enters into a loan agreement with a bank, irrespective of the terms of the agreement there may be an underlying expectation that the States of Jersey will ensure that the loan is repaid in the event of a default. As such, any borrowing made by these organisations should be carefully monitored, reviewed periodically and notified to Treasury and Exchequer (Investment Management). The Accountable Officer should ensure sufficient information is received to understand, and if required, manage any risk of default. For the avoidance of doubt, while there may be a perception that such implicit guarantees extend to the finances of the Parishes, they are entirely independent of the States of Jersey and as such, the information requirements as described above cannot be applied to them.

Users of the Public Finances Manual should refer to other sections, as well that are relevant. Specifically, this includes:

• assets
• banking
• expenditure
• fraud
• income
• leases

In addition to the common risks identified in the background and introduction section of the Manual a number of significant risks relating to this section include:

• borrowing is not appropriately authorised
• approved annual and or total borrowing limits of the States of Jersey and the Minister for Treasury and Resources are exceeded
• total borrowing exceeds the maximum permissible amount
• the total borrowing limit is incorrectly calculated
• the same assets are used to secure more than one loan
• the States Body is unable to service its debt
• borrowing is carried out directly by States Bodies; only the Treasurer of the States (or the States of Jersey on the Minister’s recommendation) can borrow
• the States or Government of Jersey has inadequate methods of monitoring its borrowing arrangements and debt levels
• the States Assembly does not have a complete view of borrowings undertaken by the States or Government of Jersey
  

Principles

1. Borrowing should not be carried out without appropriate authorisation.
   
   
2. Accountable Officers should ensure that there is no activity carried out within their States Bodies that meets the definition of borrowing unless it has been approved in a Government Plan or, where appropriate, by the Minister for Treasury and Resources”.
   
   
3. Total borrowing by the States of Jersey should be monitored against approved limits set in the Public Finances Law or by the States Assembly periodically, at least on a six-monthly basis. Annually, a total of the aggregated borrowings made by the States of Jersey and all organisations which are within the scope of the Financial Statements of the States of Jersey as prescribed by the Jersey Financial Reporting Manual must be reported.

Requirements

1. Borrowing proposals
   States Bodies making borrowing proposals for consideration by the Treasurer of the States for inclusion in the Government Plan must provide a business case for such borrowing to be undertaken, including the full cost implications of the borrowing, comparisons with other methods of funding, and the funding sources for repayments and servicing of the borrowing. In addition, possible restrictive covenants should be considered as restrictions in respect of cash limits, interest cover, etc. may impact on other planned expenditure, reducing the ability of the States of Jersey to respond to new challenges.
   
   
2. Cost of borrowing
   All costs of borrowing must be met by the States Body on whose behalf the finance is obtained. The cost of borrowing must be adequately reflected in the States Body’s financial reports.
   
   
3. Treasurer of the States requirements
   When requested, Accountable Officers must submit promptly to the Treasurer of the States, information relating to borrowing, in a form which is compliant with the Jersey Financial Reporting Manual or the relevant States of Jersey accounting policies.
   
   
4. Name of borrower
   All borrowing must be in the name of the States of Jersey or the relevant Specified Organisation or Arm’s Length Organisations.
   
   
5. States Assembly approval
   All requests for borrowing other than those approved by the States Assembly in the Government Plan, regardless of limit, must be referred to the Treasurer of the States for approval before submission to the Minister for Treasury and Resources.
   
   
6. Notifying the Treasurer of the States
   States Bodies must not enter into any new finance lease arrangements, or any other type of borrowing, without first notifying the Treasurer of the States and obtaining approval to do so. For further guidance, please refer to the Leases Section of this Manual.
   
   
7. Finance or borrowing limitations
   It is the responsibility of the Treasurer of the States to ensure that limits on borrowing in the Public Finances Law or Government Plan are not exceeded without the prior approval of the States Assembly. Under the Law the Minister can finance up to £3 million in a financial year. The total outstanding amount of financing of this type at any given time must not exceed £20 million, these financial limits may be modified by the States Assembly. This is in addition to any financing approved by the States in the Government Plan. For the purposes of those limits, borrowing refers to borrowing money, i.e. the raising of finance - receiving money with an obligation to pay back the same amount plus further consideration. It includes:
   
   
   • finance leases (not operating leases or property leases)
   • the assignment of debt from a third party
   • sale and leaseback transactions
   • loans from external institutions
   • the issuance of bonds
     
     
8. Exceeding limitations
   Borrowing in excess of the Ministerial limitations set in the Public Finances Law has to be approved as part of the Government Planning process.
   
   
9. Reporting additional borrowing
   Information on additional borrowing as well as the aggregate debt position of the States of Jersey must be reported to the States Assembly on a six-monthly basis by the Minister for Treasury and Resources.
   
   
10. Requirements for specified organisations
    The circumstances under which Specified Organisations may borrow, as well as the applicable terms, must be set out in the relevant Memorandum of Understanding and associated documents. Specified Organisations should first consider borrowing directly from the States of Jersey before obtaining any external financing.
    
    
11. Contingent liabilities requirements
    • the Treasurer of the States must be notified of all of the States of Jersey’s contingent liabilities to enable a record of contingent liabilities to be maintained and to assist with the compilation of notes to the accounts.
    • the majority of contingent liabilities do not arise as an intended consequence of an action by a States Body. However, any prospective contingent liability in the form of a guarantee or indemnity must be approved by the Treasurer of the States who will advise on any budgetary implications if the contingent liability gives rise to a financial guarantee contract
    • a careful appraisal of the risks, including the legal aspects, should be carried out before accepting any contingent liabilities. In all cases, steps should be taken to restrict the total contingent liability to a minimum e.g. by carefully specifying the duration, the extent and the conditions attached to guarantees
    • a contingent liability may arise due to a complaint, a legal claim or other matter. When such a matter arises, the Accountable Officer should notify the Treasurer of the States and the Group Director, Strategic Finance, and provide periodic updates at a time specified by each
      
      
12. Crystallised contingent liabilities
    If a contingent liability crystallises then the relevant States Body must consider, in consultation with the Treasurer of the States, whether an immediate report should be made to the States Assembly or if this is better addressed during the six-monthly updates. The report should explain the circumstances in which the liability has crystallised and the amount involved.
    
    
13. States of Jersey duties in relation to Arm's Length Organisations’ (as defined in the Public Finances Manual) contingent liabilities
    The contingent liabilities are not normally under the direct control of the States of Jersey. However, any contingent liabilities which they are unable to meet from within their own resources could then fall to the States of Jersey to repay. As such, each sponsoring States Body should therefore have adequate arrangements in place to ensure that the acceptance of contingent liabilities by Arm's Length Organisations concerned is consistent with the written agreement between the Arm's Length Organisation and the States of Jersey, and that, in the event of the contingent liabilities crystallising, the States Body would have the ability to meet the costs from within their own resources. These arrangements must be reviewed and the findings reported at least annually to ensure appropriate provisions can be made.

Guarantees and indemnities

Introduction and background

This section applies to all States Bodies as defined in the Public Finances Law and provides advice on the issuance of guarantees and indemnities by the States of Jersey. Guarantees and indemnities provided by States owned entities are specifically excluded from the requirement to comply with this section. This advice also covers any guarantee or indemnity provided from a States Fund where the Fund’s terms of reference allow for these arrangements. A Guarantee does not include “letters of comfort” issued by the Minister for Treasury and Resources to housing associations to protect against interest charges. A guarantee or indemnity may arise even where neither of those specific terms have been used, for example if a contractual term creates an obligation to make payments if certain circumstances arise. The substance of the term may mean that a guarantee or indemnity is created.

• a guarantee is an agreement whereby a debt of a third party will be repaid to a lender by the States of Jersey, if the third party, who has primary responsibility to settle the debt, defaults
• an indemnity is a contractual agreement made between a third party and the States of Jersey where the States of Jersey agrees to pay for losses or damages suffered by the third party in certain situations.  An indemnity in its widest terms is recompense for a loss or liability
  

This section does not apply to standard indemnities in property leases.

It is possible for a guarantee scheme to be approved which covers smaller guarantees within an overall limit.

The Public Finances (Jersey) Law 2019 (Article 28) permits the Minister for Treasury and Resources to provide guarantees and indemnities in the name of the States up to a total value of £3 million in a financial year, provided that the grand total of all guarantees and indemnities provided in this way does not exceed £20 million. Above these amounts any further guarantees and indemnities can only be approved by the States Assembly, under Article 29 of the Public Finances (Jersey) Law 2019. The Minister may delegate his or her powers.

As the issuing of a guarantee or an indemnity may represent a balance sheet contingent liability for the States of Jersey it is important that there is a clear understanding of the potential financial implications to the States of Jersey and to any departmental head of expenditure if there is a default or need to cover the costs of an indemnity.

Proportionate due diligence must be undertaken prior to any proposed guarantee or indemnity being offered to organisations external to the States of Jersey.  There should be a formal assessment of the organisation’s financial standing and proper consideration as to whether the organisation is in a position to satisfy the terms of any agreement and if the issuance of a guarantee is the best and most cost-effective means of supporting the organisation.  As part of the due diligence process consideration must be given to the financial impact to the States and to managing any risk if there is a default which activates a guarantee or if a loss covered by an indemnity materialises.

Users of this section should refer to other sections of the Public Finances Manual that are relevant including:

• expenditure and procurement
• financing or borrowing
• lending

In addition to the common risks identified in the Background and Introduction section of the Manal a number of significant risks relating to this section include:

• unauthorised issuance of guarantees and indemnities is carried out in breach of the Public Finances (Jersey) Law 2019 or other Laws
• guarantees and indemnities authorised by the Minister for Treasury and Resources exceed limits set in the Law
• neffective due diligence procedures result in the States of Jersey being required to meet the costs of the guarantees and indemnities  
• the total value of guarantees and indemnities is incorrectly calculated
• fraud is committed through deliberate and calculated actions which ensure that terms of a guarantee or indemnity are actioned incorrectly

Principles

1. All guarantees and indemnities should be in the name of the States of Jersey.

2. Accountable Officers should not independently authorise a guarantee or indemnity. A States Body may request that Treasury and Exchequer issue a guarantee or indemnity, which is made directly from Treasury and Exchequer. All guarantees and indemnities regardless of limit must be approved by Treasury and Exchequer.

3. All guarantees and indemnities should be appropriately authorised and undertaken in accordance with the Public Finances (Jersey) Law 2019, this Manual and any other relevant States of Jersey policies.  Guarantees and indemnities are approved in the Government Plan with the Minister for Treasury and Resources able to approve guarantees and indemnities within defined financial limits.

4. Due diligence procedures should be undertaken with regard to any proposed guarantee or indemnity to third parties, culminating in a formal assessment of the financial standing and an assessment as to whether or not the organisation requesting the guarantee or indemnity is likely to be in a position to satisfy the terms of the guarantee or indemnity.

5. States Bodies should be able to justify guarantees and indemnities and confirm that they do not give the recipient an unfair competitive advantage in a market.

6. States Bodies should ensure early discussion with Treasury and Exchequer when there is concern about the ability of a recipient of a guarantee or indemnity in meeting the terms of any agreement.

7. Accountable Officers should ensure there is no activity carried out by their States Body that meets the definition of a guarantee or indemnity unless conducted in accordance with the requirements of this section. 

8. Decisions to give guarantees and indemnities for the Treasury and Exchequer Department should be subject to consultation with a different Minister.

Requirements

1. Decision making

States Bodies must not enter into any guarantee or indemnity arrangements without the approval of the Minister for Treasury and Resources or as part of an approval within a Government Plan.

Accountable Officers must consider the full financial implications of a guarantee or indemnity and compare these with other alternative courses of action. The financial implications should be considered over the whole life of the proposed guarantee or indemnity.

2. Requesting a guarantee or indemnity

A States Body making a request for a guarantee or indemnity for inclusion in the Government Plan or for approval by the Minister for Treasury and Resources must make a written request, through the Accountable Officer, to Treasury and Exchequer. This request must include:

• details of how granting the guarantee or indemnity will contribute to the States Body's or States Strategic Priorities
• the proposed recipient of the guarantee or indemnity
• the amount of the guarantee and indemnity
• the purpose for which the guarantee and indemnity will be used
• the reasons (both financial and non-financial) for issuing a guarantee and indemnity as opposed to any other course of action, including specific measurable objectives for the success of a guarantee and indemnity
• confirmation that the States Body has given consideration to how the costs of any default of a guarantee or indemnity will be funded
• any other terms and conditions of the proposed guarantee and indemnity
• an assessment of the risk of the guarantee recipient not being able to meet the terms of the loan and that this falls within the risk appetite of the States Body
• any conditions which may apply to reclaim States support if the financial position of the recipient changed in the future

3. Risk management

The States Body requesting the guarantee or indemnity must consider the risk to the States of Jersey of the proposed course of action including the implications if the guarantee or indemnity is called in. These considerations must be documented and provided to Treasury and Exchequer.

4. Security

Once a guarantee or indemnity has been approved the Treasurer of the States must ensure that the appropriate legal agreement is drafted, agreed and signed.  

5. Monitoring of limits

The Treasurer of the States must ensure that total limits on guarantees and indemnities set in the Public Finances (Jersey) Law 2019 or Government Plan are monitored and not exceeded. 

6. Name of guarantee or indemnity

All guarantees and indemnities must be provided in the name of the States of Jersey.

7. Legal advice

The Minister for Treasury and Resources, or Treasurer of the States if delegated, must obtain legal advice prior to entering into an arrangement that creates a guarantee or indemnity.

8. Contingent or actual liability

The Treasurer of the States must be notified if there is a possibility that a guarantee or indemnity will need to be called in. If a guarantee or indemnity crystalises then the relevant States Body must consider, in consultation with the Treasurer of the States, whether an immediate report should be made to the States Assembly or if this is better addressed during the six-monthly updates published by the Minister for Treasury and Resources. The report should explain the circumstances in which the liability has crystallised, the amount involved and how this will be funded. If a guarantee or indemnity was requested by an Accountable Officer, and the guarantee or indemnity results in an actual liability to the States, the cost must be met from within the budget available to that Accountable Officer. If the cost cannot be met in this way the Accountable Officer concerned must submit a business case requesting additional funding to the Minister for Treasury and Resources.

9. Reporting 

When requested, Accountable Officers must submit promptly to the Treasurer of the States any information relating to guarantees and indemnities in a form which is compliant with the JFReM, see supporting documents. 

The Treasurer must ensure that all guarantees and indemnities issued under powers in the Law are reported to the States Assembly as part of the six-monthly updates published by the Minister for Treasury and Resources and in the States of Jersey’s annual report and accounts.

Lending

Introduction and background

This section applies to all States Bodies as defined in the Public Finances Law and, where appropriate, loans from States Funds, and provides guidance on all lending by the States of Jersey in accordance with the Public Finances Law.

For the purposes of this section, lending is defined as the transfer of money to a third party under an agreement that requires repayment of a specified amount at a specified time or times.

This section addresses the responsibilities of the Accountable Officer of a States Body in ensuring compliance with the requirements of the States of Jersey on lending and in ensuring that loans are repaid in accordance with the agreed terms.

The section does not apply to loan schemes which have been established by separate legislation (for example, Agricultural Loans). The value of these loans will, however, be taken into account when calculating overall lending limits, as defined in the Public Finances Law and by the States Assembly.

Non-lending transactions

For the purposes of this section the following transactions are not deemed to be lending:

• payment for care while awaiting curatorship
• loans of equipment
• payment for anyone supporting someone which will later reimbursed
• payment of rental deposits for Licensed employees
• payroll advances
• advances of foreign currency for travel
• spending charged to Gift Funds and settled at the year end

Lending from Gift Funds will also not be classified as lending for the purpose of this Section since the money is not part of States Funds.

Users of this section should refer to other sections of the Public Finances Manual that are relevant including:

• financing
• expenditure
• fraud

In addition to the common risks identified in the Background and Introduction section of the manual a number of significant risks relating to this section include:

• unauthorised lending is carried out in breach of the Public Finances (Jersey) Law 2019, or other Laws or relevant States or Government of Jersey policies
• lending limits on the value of the individual loans authorised by the Minister for Treasury and Resources or States Treasury and Exchequer are exceeded
• ineffective due diligence procedures result in lending which the borrower is unable to repay
• fraud is committed through deliberate and calculated loan write-offs
• lending is inadvertently subsidised, with the final charges resting on the States or Government of Jersey
• total lending exceeds the maximum permissible amount
• the total lending limit is incorrectly calculated

Principles

1. All lending should be in the name of the States of Jersey or, in the case of Arm’s-Length Organisations, the body itself.

2. With the exception of Arm's Length Organisations, Accountable Officers cannot independently authorise the issuance of a loan. A States Body may request that Treasury and Exchequer makes a loan, which is made directly from Treasury and Exchequer. All lending regardless of limit must be approved by Treasury and Exchequer.

3. In the case of Arm's Length Organisations, the sponsoring States Body should monitor any lending carried out by the Arm's Length Organisation.

4. All lending should be appropriately authorised and undertaken in accordance with the Public Finances (Jersey) Law 2019, this Manual and any other relevant States of Jersey policies.

5. Due diligence procedures should be undertaken with regard to any proposed loan to third parties, culminating in a formal assessment of the borrower's financial standing and an assessment as to whether or not the borrower is likely to be in a position to satisfy the terms of the loan.

6. States Bodies and Specified Organisations should have clear policies and procedures for credit control and must ensure that loan agreements are clear with necessary covenants in place to ensure recovery of the loan. Proper credit record checks for all potential third party borrowers should be done. This should include setting credit limits.

7. States Bodies should be able to justify loans that are on commercial terms and do not give the recipient an unfair competitive advantage in the market to organisations that compete with the Private Sector (e.g. Arm's Length Organisations).

8. States Bodies should ensure early discussion with Treasury and Exchequer when there is concern about the security of any of loans to third parties. 

9. States Bodies should consult Treasury and Exchequer regarding any proposals involving loan repayments and write offs.

10. Accountable Officers should ensure there is no activity carried out by their States Body that meets the definition of lending above unless conducted in accordance with the requirements of this section. E.g. offering extended credit terms to a specific person or organisation.

11. Total and annual lending by the States of Jersey should be monitored against the limits set out in the Law and Government Plan on a quarterly basis. 

12. All lending carried out under powers in the Law should be reported to the States Assembly as part of the Semi-Annual Updates.

Requirements

1. Decision making

Before a decision is made to consider lending in any form, Accountable Officers must consider the full financial implications (including tax implications) and compare these with other alternative courses of action. These implications should be considered over the whole life of the proposed loan.

2. Requesting funding

A States Body making a request for funds to make a loan must make a written request to Treasury and Exchequer. This request must include:

• details of how making the loan will contribute to the States Body's Strategic Priorities
• the proposed recipient of the loan
• the amount of the loan
• the purpose for which the loan will be used
• the reasons (both financial and non-financial) for making a loan as opposed to any other course of action, including specific measurable objectives for the success of a loan
• confirmation that the States Body is able to meet the cost of any interest subsidy plus the cost of repayments if the borrower defaults (if interest charged to the borrower is lower than that payable by the States Body) from within its approved expenditure
• the period over which the loan will be repaid and the method of repayment
• the proposed rate of interest to be charged
• any other terms and conditions of the proposed loan
• an assessment of the risk of non-repayment and confirmation that this falls within the risk appetite of the States Body
• details of any security or guarantee to be taken in relation to the proposed loan

3. Risk management

In particular, the States Body requesting funds to make a loan must consider the risk to the States of non-repayment of the loan and should take appropriate security from the borrower on the amount lent if it is deemed appropriate. These considerations should be documented. In the event that security is taken a process for regular valuation (at least annual) of such security should be put in place alongside details of action to be taken in the event that the value of security is lower than the outstanding loan amount. In the event of default the outstanding balance, following the liquidation of any security will be debited against the approved expenditure of the States Body requesting funds to make a loan.

4. Security

All States Bodies should, where it would be practical and economic to do so, seek to establish a security (e.g. a fixed or floating charge) covering a loan to the Private Sector.

5. Lending limitations

It is the responsibility of the States Treasurer to ensure that limits on lending in the Public Finances Law or Government Plan are not exceeded without the prior approval of the States Assembly. Under the Law the Minister can lend up to £3 million in a financial year. The total outstanding amount of lending of this type at any given time must not exceed £20 million.

6. Surplus funds

Where the borrower has genuinely accrued surplus funds and proposes an early repayment, it must be agreed with Treasury and Exchequer beforehand. Such an agreement should also specify the applicable interest and principal amount payable and any early repayment penalties. 

7. Change of status

All loan agreements should include a clause such that should the borrower’s status change from Public to Private Sector, the loan must be repaid unless agreed otherwise with the States Treasurer. The timing and amount to be repaid must be agreed with Treasury and Exchequer.

8. Finance costs

All costs of financing the loan must be met by the States Body making the loan. The States Body requesting funds to make a loan will be charged interest on the sum lent at a rate as negotiated between the States Body and Treasury and Exchequer. If the rate received by the States Body exceeds the agreed rate the additional interest should be credited to the Reserve.

9. Accounting

The loan and any interest payable and receivable must be accurately reflected in the appropriate States Body’s accounts.

10. Reporting

When requested, Accountable Officers must submit promptly to Treasury and Exchequer information which is compliant with the Jersey Financial Reporting Manual and complies with the relevant States of Jersey accounting policies for all loans for the completion of the annual accounts. When requesting the information, Treasury and Exchequer will specify the format and content to ensure compliance.

11. Outstanding loans

Treasury and Exchequer will compile information from Accountable Officers on all outstanding loans on a six monthly basis for onwards reporting to the States Assembly by the Minister for Treasury and Resources.

12. Controls

Stricter controls should be applied when lending to organisations that compete with the Private Sector or those that are operating in commercial markets such as Arm's Length Organisations for the following reasons:

• to avoid distorting competition in the markets in which these organisations operate
• to deliver value for money for Treasury and Exchequer as a whole by maximising the efficiency and minimising subsequent cost of funds

13. Guarantees

Where guarantees are required during the lending process, the States Body should follow the guidance provided on guarantees in the Financing section.

14. Underperforming loans

Accountable Officers must notify Treasury and Exchequer whenever there is an indication that a loan may be underperforming, and agree the appropriate remedial action. Underperforming loans must be reported to Treasury and Exchequer on a monthly basis in the manner prescribed.

Investments

Introduction and background

This section applies to all States Bodies as defined in the Public Finances Law and applies to all Investments made by Treasury and Exchequer or States Bodies, subject to relevant schemes of delegation.

This section applies to all investments administered by the Government of Jersey. The following is a non-exhaustive list of funds which currently hold investments:

• Strategic Reserve Fund
• Social Security (Reserve) Fund
• Long-term Care Fund
• Consolidated Fund
• Currency Notes and Coinage Fund
• Stabilisation Fund
• Health Insurance Fund
• Jersey Reclaim Fund
• Various Trust and Bequest funds

The investment strategies and governance arrangements of the Pension Funds are subject to specific legislation. Accordingly, their investment strategies are outlined in separate published documents issued by their governing bodies.

This section also provides guidance on the expected requirements for staff administering investments, specifically:

• what constitutes an investment
• who is empowered to carry out investment management
• limits around investment management activity
• governance structure for investment management
• the process for carrying out investment management (to include, selection/retirement of Investment Managers and advisers, reports to the States Assembly and Government of Jersey)

Users of this section should refer to other relevant sections of the Public Finances Manual. Specifically this includes:

• funds
• income

In addition to the common risks identified in the Background and Introduction section of the manual a number of significant risks relating to this section include:

• funds invested are mismanaged
• the return on the funds invested are insufficient to meet the States or Government of Jersey’s Strategic Priorities
• funds are not invested in accordance with the States or Government of Jersey’s risk appetite or investment strategy
• public funds are invested without the appropriate authorisation
• funds are placed in investments that are not in line with the ethical values of the States or Government of Jersey
• investments are not accurately recorded or reported

Principles

1. Investments should be made in accordance with the States of Jersey’s risk appetite and investment strategy. In appointing Investment Managers to make investments on behalf of the States of Jersey, necessary steps must be taken to strike a balance between risk and return. 

2. The Minister for Treasury and Resources is responsible for the investment of money held by the Government or a States body. The Treasurer is responsible for ensuring that investment is carried out in line with the Minister’s Investment Strategy. 

Requirements

1. Authority to invest

The States Treasurer and Minister for Treasury and Resources are responsible for carrying out investment management in line with the Minister’s investment strategies presented to the States Assembly. Only Treasury and Exchequer staff can implement the investment decisions under the approval of the States Treasurer or Minister for Treasury and Resources. No other States Bodies are authorised to carry out investment management.

2. Investment Strategy

The Minister for Treasury and Resources must develop investment strategies for the funds with investable assets in excess of £1m for which they are responsible and present any review of those strategies to the Government of Jersey as soon as practical.The investment strategies must be monitored by officers of Treasury and Exchequer : Treasury and Investment Management on a regular basis. A programme should be maintained to ensure an appropriate periodic review of strategies is undertaken to confirm they remain appropriate. This should consider the minimum frequency with which reviews are undertaken and, where factors such as macro-economic shocks or other indicators of increased risk occur, consideration should be given to more frequent reviews.Where new funds are created either in legislation or via a States proposition consideration must be given as to whether these funds will hold monies over a long period of time, i.e. in excess of 2 years. In this situation, funds must have investment strategies developed to effectively manage the monies, maximizing returns within the agreed risk appetite and cash flow requirements.

3. Further considerations for investment strategiesWhen investment strategies are created for new funds, the following should be considered:

• the strategic objective that the fund is seeking to achieve
• the lifespan of the fund
• the timing of cash flows and when money is likely to be required to be distributed
• the risk appetite for the fund versus desired returns
• if the fund is suitable for carrying out its investment in the Common Investment Fund
• in the case of Trust funds, whether there are there any other parties which should be consulted in terms of their aspirations of fund returns (e.g. Trustees (such as Jurats acting as administrators), Trust Protector or separate Committees looking after the administration of the funds)
• the appropriate fund benchmark(s) and performance targets that should be utilised during the life of the fund to measure performance
• whether the fund should be prevented from investing in certain areas (e.g. Jersey) or asset classes in case of there being an economic downturn or for other specific reasons such as failing to comply with the Minister’s Responsible Investment Policywhat asset class diversification is required
• whether there are any taxation implications which should be considered

4. Investment advice

The creation of investment strategies must be led by Treasury and Investment Management in consultation with other relevant States Bodies, the States of Jersey’s Investment Advisor and the Treasury Advisory Panel (which provides independent advice to the Minister and Treasurer). The States of Jersey’s Investment Advisor may be appointed by the Minister for Treasury and Resources to provide advice on the selection, monitoring and termination of Investment Managers, as well as the investment strategies of the funds. However, the Minister for Treasury and Resources and the States Treasurer remain responsible for the safeguarding and performance of the investments. The appointment of the States of Jersey's Investment Advisor should be undertaken in accordance with standard States of Jersey procurement practices and care should be taken to ensure appropriate due diligence is conducted and that there are provisions for the termination of the contract in the event of underperformance. In particular, consideration should be given to how an Investment Manager’s contract can be terminated in the event that they are removed from the States' Investment Advisors “buy-list”.

5. Appointment of Investment Managers

All Investment Manager appointments should be carried out in line with the Government of Jersey’s procurement process with the following exceptions;  

• It is not required to an open tender to appoint new investment managers. Given the reliance placed on Investment Advisors’ operational due diligence assessment of potential managers, it is impractical to run an open tender for mandates given the high costs required to gain equivalent comfort over the internal controls of a manager unknown to the advisor. Secondly the complexity of portfolios requires the advisor to assess potential managers’ characteristics, including historic holdings, concentrations and correlation compared to existing managers in the portfolio. Obtaining, cleansing and validating data before the quantitative assessment across an open tender would be unnecessarily expensive.
• It is not required to use a standard Government of Jersey Contract. Managers have complex and bespoke contracts specific to the service they provide. These contain a number of regulatory constraints and the standard Government of Jersey contract is not an appropriate proxy.
• It is not required to include a set contract end date. Given the long term investment horizon of managers and the high cost of replacing managers a fixed term contract is not an appropriate mechanism for ensuring value for money.

Managers are instead subject to ongoing review to ensure they remain ‘best of breed’ and value for money. 

The appointment of Managers is expected to be subject to recommendation by members of the Treasury Advisory Panel and the process managed by officers of Treasury and Investment Management. It is expected the States Investment Advisor will recommend potential managers for review by the Panel.

For larger mandates, consideration should be given to appointing more than one Investment Manager.

Further due diligence must be carried out by officers of Treasury and Investment Management prior to the appointment of an Investment Manager, which comprises as follows:

• legal due diligence – The Law Officers’ Department or external lawyers and the Government of Jersey’s Investment Advisor should provide views on legal and technical details for the contract. For the Pension funds, external lawyers may be used instead of the Law Officers’ Department
• seek Investment Advisors relevant external benchmarking data for the short listed managers to supplement information gathered in the tender process in order to ascertain if there are any likely perceived risks – financial, organisational, systems, etc. Priority should be given to Investment Managers who are Buy-Listed by the Government’s Investment Advisor; consideration, however, should be given to the relationship with such Managers, should there be a downward rating. This should be addressed in the terms of reference

Prior to entering into a new contract, a Ministerial Decision or States Treasurer’s Decision must be prepared and authorised, appointing the new Investment Manager.

6. Pooling

All or any part of the money that the Minister is responsible for investing may be pooled and invested in the name “Treasurer of the States on behalf of the States of Jersey – Common Investment Fund”. However, money of a States Fund must not be invested in a manner that is inconsistent with any applicable enactment or instrument that established the Fund and money held in trust must not be invested in a manner that is inconsistent with the trust.

7. Investment monitoring

The Committee or Panel must monitor investment performance regularly. As a minimum, investments should be monitored on a quarterly basis by the Committees or Panel. Monitoring may include considering and verifying the following:  

• the investments are being managed in accordance with the appropriate regulations and terms of reference
• how the investments have performed over the last quarter compared with appropriate pre-determined benchmarks and performance targets
• how the investments have performed over the last year compared with appropriate pre-determined benchmarks and performance targets
• how the investments have performed over the last three years compared with appropriate pre-determined benchmarks and performance targets (this is only appropriate where long-term performance is relevant)
• the economic, market and political factors that should be taken in to account when considering performance (this view is usually provided by the investment advisor)
• how the individual investment managers have performed against the benchmarks set
• whether there have been any ownership, management or organisational changes or reputational issues for Investment Managers which could put the stability of investments at risk
• whether there have been any significant changes in relation to the longevity of the fund and or a change in its direction which may require a change in the long term investment strategy for the fund – and whether the benchmarks or the strategic ranges should be changed as a result
• whether the safe custody arrangements remain robust and continue to safeguard the assets of the funds at risk

8. Performance meetings

On a regular basis all investment managers must be asked to attend performance meetings to discuss the performance of the assets they manage and share their vision for the future of these funds’ investment returns. This will typically be on a three year rolling cycle unless the investment manager is downgraded by the Government’s Investment Advisor or are deemed to warrant additional attention either by the Treasury Advisory Panel or officers of Treasury and Investment Management, in which case they should be invited to attend a meeting as soon as is practical to determine how to proceed.

9. Further duties

The Committee or Panel are responsible for considering performance of the investment managers and must make a timely recommendation for the termination of a manager to the States Treasurer or Minister for Treasury and Resources when that manager continually underperforms. In addition to the monitoring of performance by the Committee or Panel, Treasury and Investment Management must

• put in place an appropriate risk matrix with associated mitigations and controls to ensure that all of the funds’ investments are being managed in accordance with mandates.
• ensure that investment managers reconcile asset balances with custodians , within the agreed tolerance range for the asset class (which is set by the States Treasurer)
• prepare regular performance reports in the prescribed form for all States of Jersey funds and circulate them to the relevant Committee or Panel and officers of the States of Jersey, including the States Treasurer
• review the underlying assets of the funds and ensure they continue to be invested in accordance with the Minister’s published investment strategies
• challenge investment managers where appropriate in relation to performance
• prepare a performance report for all States of Jersey funds and present it to the States of Jersey in a timely manner for inclusion in the six-monthly update delivered by the Minister for Treasury and Resources to the States Assembly
• notify custodians of any changes to the benchmarks and their weightings, in a timely manner before they prepare the monthly performance reports. Changes to benchmarks and weightings should be prepared in consultation with the States' Investment Advisor  

Income

Fees and charges

Introduction and background

This section applies to all States Bodies defined in the Public Finances (Jersey) Law 2019 and addresses how these Bodies can effectively introduce new charges for services that have not been previously made and make adjustments to existing charges in line with the States of Jersey’s requirements. The fees and charges covered by this section are not those relating to Tax, Impôts duties, Goods and Services Tax, Stamp Duty, Social Security contributions nor fines and penalties.

All new "user pays" (which exclude leases, rentals and sales/charges based on a commercial basis) must be approved by the States Assembly in accordance with P.63/2003 : States Approval for new "User Pays" charges.

Leases, rental, and similar charges should be levied at the market rate. A States Body should seek legal advice prior to agreeing fees of a commercially sensitive nature which will not be disclosed.

The States approved Anti-Inflationary Strategy (P.125/2000 refers) specifies that all increases in States' charges in excess of 2.5% must be approved by the Minister for Treasury and Resources, unless already approved by the States Assembly.

Fees and charges should be calculated on an accruals basis, including overheads, depreciation (for example, for start-up or improvement costs) and the cost of capital. Some costs associated with a service may be incurred by another States Body and, in these instances, it is important that there is discussion with the relevant Head of Finance Business Partnering at an early stage.

Users of this section should refer to other sections of the Public Finances Manual that are relevant. Specifically these include:

• expenditure 
• income
• Government Plan

In addition to the common risks identified in the Background and Introduction section of the Manual a number of significant risks relating to this section include: 

• charges could be made which are “ultra vires” or illegal
• inaccurate calculation of fees and charges leading to profits (which is, in some circumstances, ultra vires)
• expenditure is not reviewed
• services to specific groups of users being subsidised which may be contrary to agreed public policy
• loss of value to the States or Government of Jersey due to inappropriate levels of subsidy on fees and charges
• increased fees and charges could be detrimental to the States’ Strategic Priorities where the fees and charges influence activities or behaviours contrary to intended Strategic Priorities 
• fees and charges are subsidised on discretionary services provided in competition with the private sector

Principles

1. Plans for the significant changes to/introduction of new fees and charges should, where practicable, be included in proposals for the Government Plan.

2. The levying of fees and charges should ensure accountability for goods and services consumed (the 'user pays' principle) whilst avoiding unnecessary bureaucracy and should result in minimal cost to the States of Jersey in terms of processing and administering transactions.

3. A profit should not be made on the costs of providing a service.

Requirements

1. Approvals of new “user pays” charges

All new “user pays” charges (excluding leases, rentals and sales or charges based on a commercial basis) must be approved by the States Assembly.

2. Mechanism to approve fees and charges

3. Increase of fees/charges in excess of 2.5%

4. Increase in fees/charges of 2.5% or less

Annual increases in fees and charges which are 2.5% or less must be approved by the increasing States Body’s Minister. Where there is no Minister the Minister for Treasury and Resources must be consulted prior to any increase.

5. Basis for fees and charges

The standard approach for setting fees and charges for public services must be full cost recovery (including on-costs such as depreciation). Where full costs are not recovered an Accountable Officer must ensure that there is a formal decision setting out either an agreed plan to achieve full cost recovery within a reasonable time period or decision to charge less than full cost. 

Exceptions to the standard approach include but are not limited to the following:

• subsidised services: examples are where a subsidy is provided to a third sector organisation to enable that organisation to function properly and not be a burden on the States of Jersey, discounts to support vulnerable groups i.e. those over or under a certain age. Decisions of this nature must be documented and periodically reviewed and reconsidered
• discretionary services provided in competition with the private sector: where a commercial rate is normally charged. In determining such rates, consideration should be given to the level of competition, the market prices of competitors and the potential risks to the States of Jersey
• regulatory services where a licence fee is often set to recover associated costs such as supervision by a regulator
• legal services costs where the imposition of full costs is likely to inappropriately limit access to justice

6. Review of costs

From the Government Plan 2023 to 2026 preparation process an Accountable Officer must ensure that there is a review of the necessity and appropriateness of offering a service which is charged for. The review must document the Department’s policy on the appropriate fees or charges and whether to charge at a uniform rate for all varieties of a service or having different categories of service costing different amounts to provide. 

7. Transfer of budget to area being charged

In instances where a new fee or charge is introduced during the course of a year and this affects another States Body’s head of expenditure it may be appropriate for the charging area to transfer the relevant budget to the area to be charged for the service. Any budget transfer must follow the procedures set in the Changes to Head of Expenditure area of the Manual. Where there is any dispute about the level of funding to be transferred this must be referred to the Treasurer of the States, who will decide upon the approach to be adopted.

8. Goods and Services Tax (GST)

GST must be correctly charged on fees and charges and remitted to Treasury and Exchequer to the set deadlines. 

Income

Introduction and background

This section applies to all States Bodies as defined in the Public Finances (Jersey) Law 2019 and provides advice on the efficient and effective collection, recording and, where applicable, recovery of income realised from, inter alia, fees, charges and retail sales and from the States Trading Operations. Income from Income Tax, Goods and Services Tax, Stamp Duty, Social Security contributions and any other similar sources is not covered by this section.

The Treasury and Exchequer's Shared Services Centre provides an income collection and debt management service which should be used by Government and States of Jersey departments. Responsibility for the identification of income receivable lies with the relevant States Body and includes responsibility for ensuring compliance with any statutory authority. On an exceptional basis Departments may have their own income collection service but these must have been approved by Head of Shared Services Centre.

Details of the services provided by the Shared Services Centre are found in the Centre's Order to Cash and Debt Policies. The Shared Services Centre is responsible for the raising of invoices and collection of income, including debt recovery and accounting for internal and external transactions. They are also responsible for banking policy, that the appropriate safeguards are in place and that income is accounted for completely and accurately in a timely manner.

The Customer and Local Services Department provides customer facing cashier services including the receipt and safeguarding of cash.

Users of this section should refer to other sections of the Public Finances Manual that are relevant. Specifically, these include:

• banking
• government plan
• cash
• expenditure
• losses and write-offs
• fees and charges

In addition to the common risks identified in the Background and Introduction section of the manual a number of significant risks relating to this section include: 

• income is not collected or banked
• customers are incorrectly charged leading to reputational damage to the States and/or Government or loss of income
• income generating activities are set at the wrong price levels leading to losses to the States, unfair competition with the private sector or excessive profits
• income is misallocated, understated or overstated due to ineffective recognition, monitoring and management processes.

Principles

1. An adequate framework should be established for the effective collection, recording and recovery of income due to a States Body. 

2. Where the administration of a specific type of income is addressed in any Law, such income should be administered in line with the requirements of that Law.

3. All income due to the Government and States should be promptly collected and banked.

4. When considering legal action to recover income due, the costs of that action should be considered against the income which is likely to be collected. Where appropriate legal advice should be sought.

Requirements

1. Income collection process

Accountable Officers must ensure they are responsible for ensuring that their States Body either uses the income collection service provided by the Treasury and Exchequer's Shared Services Centre or that they maintain an income collection process within their States Body which has been approved by Head of Shared Services Centre. The service must identify and promote the most efficient ad economic methods of income collection, for example the use of bank transfers over cheque/cash payments.

2. Scheme of Delegation

Regardless of the income collection process used an Accountable Officer must ensure that roles and responsibilities relating to income are clearly set out in the Scheme of Delegation. This must include the ability to authorise write-offs of income due where all other channels of collection have been considered.

3. Documentation

An Accountable Officer must ensure that there is appropriate documentation, which may include manuals, guidelines and other relevant instructions, within their area of operation for the identification and collection of all income for which the States Body is entitled. 

4. Segregation of duties

Internal recharges

Trading operations

Introduction and background

This section applies to all States Trading Operations as defined in the Public Finances Law and provides information and guidelines relating to the financial administration of States Trading Operations. It includes details relating to:

• designation as a States Trading Operation
• establishment of a fund relating to an States Trading Operation and the use of such funds
• use of a Trading Fund
• financial returns and estimates
• borrowing by Trading Operations

A States Trading Operation is a Body which has been designated as such by the States Assembly by approving a Government Plan. Designation as an States Trading Operation means that the Body will not operate a head of expenditure in the same way as a States Body, and will not have a revenue budget allocated to it by the States Assembly in the Government Plan. The States Assembly agrees the estimated income and expenditure of each States Trading Operation for each year and its forward capital programme (including Major Projects). The States Trading Operation effectively becomes self-funding. With the agreement of the Minister for Treasury and Resources, it may retain any surplus of income over expenditure and must fund its own capital expenditure (unless the States Assembly agrees to do so) and is not subject to requirements under the Public Finances Law to seek approval to have unspent funds at the end of the year reallocated to them from the Reserve in the following year. The States Trading Operation may be required to make a contribution in any year to the general revenues of the Government of Jersey.

The Accountable Officer of the Trading Operation, or, if an Accountable Officer has not been appointed for the Trading Operation, the Accountable Officer of the department which the Trading Operation reports to, is responsible for ensuring that this section is complied with.

Users of this section should refer to other sections of the Public Finances Manual that are relevant. Specifically, these include:

• financing 
• expenditure
• funds
• major projects

In addition to the common risks identified in the background and introduction section of the manual a number of significant risks relating to this section include: 

• the States Trading Operation may not generate sufficient income to meet its costs or capital expenditure requirements
• the operations of the States Trading Operation may have an unanticipated effect on competing private enterprises
• the planned income, expenditure and capital programmes of States Trading Operations may not be appropriately nor comprehensively prepared and authorised
• expenditure may be made from trading funds which has not been authorised
• borrowing made by States Trading Operations may not be properly authorised
• activities of States Trading Operations may not be accurately reflected in the States’ Financial Report and Accounts

Principles

1. States Trading Operations should make a financial return to general revenues unless agreed otherwise by the Minister for Treasury and Resources.

2. The financial performance of States Trading Operations should be accurately reflected in the States’ Annual Financial Statement.

3. States Trading Operations should not compete nor be perceived to compete unfairly with private enterprises engaged in the same trade.

Requirements

1. Designation as a States Trading Operation

In order to establish an area as a States Trading Operation, the Council of Ministers must include proposals in a Government Plan for debate by the States Assembly. The proposals must detail:

• the area of States operation which constitutes the States Trading Operation
• the exact nature of trading to be undertaken

The Minister responsible for the area requesting States Trading Operation designation must make a full case to the Council of Ministers as to why States Trading Operation status should be granted. Any request for such designation should include:

• an explanation as to why the operation should be classified as a States Trading Operation
• details of the benefits (financial and non-financial) to be gained from granting such an States Trading Operation status
• a business plan for the States Trading Operation setting out expected income, expenditure and including funding for major projects requirements

2. Balances on a trading fund

In circumstances where the income generated by a Trading Operation does not cover its negotiated financial return and its annual revenue expenditure, it must meet the deficit from its trading fund.

The States Treasurer may determine the interest rate to be paid on any positive balance of funds in a trading fund or charged on any negative balance. The States Treasurer must determine the times at which any interest receivable and payable will be credited or debited. 

3. Financial planning

Financial returns and estimates of the income, expenditure, surplus and financial return of a States Trading Operation as well as the amount to be transferred to the Fund and the States Trading Operation’s Major Projects expenditure plans must be subject to discussion and determination between the Minister responsible for the trading operation and the Minister for Treasury and Resources and will be based upon business plans presented by the Minister responsible for the Trading Operation and will be approved in the Government Plan.

Any income earned by a States Trading Operation in a financial year in excess of its expenditure for a particular year must be paid into the States Trading Operation’s fund.

4. Financing (Borrowing) by States Trading Operations

The States Trading Operation must approach Treasury and Exchequer with any requests for any financing (borrowing). Requests should be made in line with the section on Financing.

5. Financial Administration

Unless the Minister for Treasury and Resources requests otherwise, each States Trading Operation must prepare an Annual Financial Statement in respect of its accounts and operations. These must be delivered to the Minister for Treasury and Resources within the timeframe required for the completion of the Accounts (or any other period specified in the Treasury Instructions : Year-end Procedures). The statement must be prepared in accordance with the Jersey Financial Reporting Manual.

6. Accounting

Each States Trading Operation must maintain and regularly report, in the form prescribed by Treasury and Exchequer, a profit and loss account, a balance sheet including the balance of its Fund and a cash flow forecast.

Risk and audit

Risk management

Introduction and background

This section applies to all States Bodies as defined in the Public Finances Law and provides guidance on how to achieve effective risk management.

Risk Management is defined as, all the processes involved in identifying, assessing and judging risks, assigning ownership, taking actions to mitigate or anticipate them, and monitoring and reviewing progress, this process is set out in detail in the Risk Management Strategy 2019.

The Principal Accountable Officer is responsible for ensuring that an appropriate approach to risk management is followed throughout the States of Jersey and various departments respectively and that systems are in place to identify and manage these risks.

Accountable Officers are personally accountable for the proper oversight of risk management within their area of control, the scope of which is defined in their letters of appointment.

The term risk appears frequently throughout the Public Finances Manual. For the purposes of the Risk Management Section risk is defined as something that could happen that might have an effect on the objectives of the States of Jersey in this context a risk is therefore an uncertain future event that can be either a negative threat or a positive opportunity.

The underlying premise of risk management is that every entity exists to provide value for its stakeholders, effective risk management helps us to identify and manage the risks thereby improving the likelihood of achieving our objectives. This is the first and overriding purpose of risk management.

Internal Control is defined as, any action, originating within the organisation, taken to manage risk. Control responses may be taken to manage either the frequency or likelihood of the risk being realised or the impact if the risk is realised.

The system of internal control is designed to provide reasonable assurance regarding the effectiveness and efficiency of risk assessment, acceptance, and management. There are five key components of effective controls:

• maintenance of reliable systems
• timely preparation of reliable information
• safeguarding of assets
• optimum use of resources
• preventing and detecting fraud and error

Control activities are those actions that help ensure that responses to assessed risks, such as establishing standards of conduct in the control environment, and ensuring these are carried out properly and in a timely manner. Control activities serve as mechanisms for managing the achievement of our objectives and are very much a part of the processes by which we strive to achieve those objectives.

All employees have some responsibility for internal control as part of their accountability for the achievement of objectives. Collectively they must have necessary, knowledge, skills, information, and authority, to establish, operate and monitor the system of internal control.

Reputational Risk is failure to meet stakeholders' reasonable expectations of the organisation’s performance and behaviour. Reputational risk poses a threat or danger to the good name or standing of the organisation, as such all employees have a responsibility to help reduce the potential for reputational risk by actively promoting and following the 'Nolan Principles' described in the Glossary of the Public Finance Manual.

Principles

The Principal Accountable Officer and Accountable Officers should:

1. establish an appropriate 'Tone at the top' in respect of a shared set of attitudes where employees maintain high ethical values and act with integrity, thereby complying with laws and regulations and behaving in a principled manner

2. promote the consistent, comprehensive collaborative and proportionate approach to risk management through the Enterprise Risk Management (ERM) framework

3. ensure that States Bodies objectives are not adversely affected by significant unforeseen risks

4. ensure arrangements are in place to deal with the unexpected that might put service delivery at risk

5. promote an innovative, less risk averse culture that encourages the pursuit of opportunities as well as the management of threats

6. provide a sound basis for integrating risk management into decision making; and

7. embed risk management as a component of excellent corporate governance and management practices

Requirements

Accountable Officers must ensure that mechanisms are put in place and applied to:

1. review and note the States’ risk management strategy

2. identify and evaluate risks

3. identify any third party suppliers of goods and/or services that are in scope of risk management activities and establish appropriate monitoring and control requirements where necessary

4. assess acceptable risk

5. identify and implement suitable responses to risk

6. record and monitor risks using a suitable Risk Management Information System (RMIS) or risk register

7. document and assess the effectiveness of mitigating actions and controls

8. provide assurances that risks and their associated controls are regularly reviewed and action points carried out in a timely manner

9. escalate significant risks identified to the appropriate level of management

10. record and review near misses as part of the risk management process

11. provide training and awareness on risk management

12. ensure the effectiveness of risk policies and mandatory risk management requirements as applicable.

Insurance

Introduction and background

This section applies to all States Bodies as defined in the Public Finances (Jersey) Law 2019 and provides advice and guidance on effective insurance management.

The States and Government of Jersey face numerous risks. One way to mitigate these risks is through insurance.  The States and Government of Jersey assess these risks and insurance needs on a continuous basis with the Treasury and Exchequer’s Treasury and Investment Management team responsible for the oversight and management of the Organisation’s insurance needs.

The States’ approach to insurance is a blend of internal (“self-insurance”) and external insurance arrangements. 

Self-Insurance Arrangements

For self-insurance purposes the States operates an Insurance Fund. The Public Finances (Jersey) Law 2019 (the “Law”), Article 60: Insurance Fund continued sets out the arrangements concerning the Insurance Fund (the “Fund”). As required by the Law, the Minister for Treasury and Resources has presented R.111/2019 to the States Assembly. This Report sets out the purpose, terms and circumstances of the Fund.

The Insurance Fund facilitates the provision of mutual insurance arrangements for:

• States Bodies
• Any fund or money for which an Accountable Officer is appointed; and
• Any other bodies and persons that the Minister for Treasury and Exchequer may agree.

The Minister may also permit persons or bodies that appear to them to be connected with the States to participate in the mutual insurance arrangements on specified terms and conditions.

The Minister may:

1. prohibit an Accountable Officer for a States Body or for a specified organisation as defined in Schedule 2 of the Law from arranging any insurance otherwise than through the mutual insurance arrangements; and
2. specify the descriptions of liabilities and persons insured by, the terms of, and the administrative processes connected with, the mutual insurance arrangements.

The Insurance Fund is funded from the Consolidated Fund with amounts as decided in the Government Plan; amounts recharged to bodies or persons that participate in the mutual insurance arrangements; and amounts received from settlements in insurable claims. 

Money can only be withdrawn from the Fund:

1. for the purposes of the mutual insurance arrangements and in payment for insurable claims without any admission of liability;
   
2. if the Minister for Treasury and Resources believes that the amount in the Insurance Fund exceeds the amount required for the mutual insurance arrangements, the Minister for Treasury and Resources may approve the transfer of all or part of the excess to the Consolidated Fund (any such transfers must be reported in the six-monthly update report presented to the States Assembly on financial matters).
   
3. as approved by the States in a Government Plan.
   

Amounts paid into the Insurance Fund do not form part of the annual income of the States. Should the States and/or the Government of Jersey no longer provide mutual insurance arrangements the Fund would be wound up with any remaining monies paid into the Consolidated Fund.

In order to assist with the administration of the Fund the Minister is able to delegate functions, subject to any conditions or limitations as he or she may specify.

External Insurance arrangements

For external insurance the States contracts with insurance brokers and insurers to obtain insurance cover from the commercial insurance markets. Contact details for the current brokers and insurers can be found on the Insurance page on MyStates. The products purchased are designed to manage the risks and lower the costs unique to public entities that are associated with claims. Cover falls into two main areas: General insurance and specialist Medical Malpractice cover. These are described below: 

General Insurance  

The current States insurance programme renews annually on 1st October every year and consists of three main elements:

• Property and business interruption Insurance, covering all buildings, contents, plant and machinery.   Cover is also arranged for property related business interruption insurance, covering the increased cost of working in the event of damage to existing locations or denial of access. All property is currently insured on a reinstatement as new basis (provided regular and appropriate reinstatement valuations are undertaken).  The exception to this is the Energy from Waste plant which has standalone insurance.
• Liability insurance, covering the States’ legal liability to pay compensation as a result of personal injury to employees and third parties (including abuse) arising from States’ activities and the supply of products, loss or damage to third party property and the errors and omissions of States and Government officers.
• Motor insurance, covering damage to the motor fleet and liability to pay compensation for personal injury or property damage caused by drivers of States’ vehicles.

There are other insurances arranged for specific and specialist operations, including personal accident and travel insurance, school travel insurance, fidelity guarantee (employee dishonesty) and marine vessels and marine liabilities.

Medical Malpractice insurance - The States Medical Malpractice (MedMal) insurance is arranged separately from the general insurance programme and renews annually. The policy is arranged to protect the States from claims arising from the medical malpractice and clinical negligence of its employees. Additionally, the policy usually covers locums, bank and agency staff as they are effectively deemed to be “employees”. The policy may also cover contractors, depending on the scope of the contract. Cover is arranged at two levels, a primary layer and a secondary layer. Details of current brokers and insurers are shown on the Insurance page of the MyStates intranet site.

Excesses and Deductibles

Each insurance policy has a deductible (or excess) which is the amount paid out of pocket by the policy holder before an insurance provider will pay any expenses. The above insurances are all currently arranged with varying levels of deductibles based on a rates optimisation study undertaken by the States’ brokers. These deductibles are initially funded by departments or States bodies and then from the States’ self-insurance arrangements – the Insurance Fund. Such self-funded deductibles allow, in theory, for the most competitive premiums to be obtained from insurers as they know that high frequency, low severity claims will not fall to them to be dealt with. Insurance above the deductible level is therefore designed to protect the States against catastrophic losses. All non-medmal claims have a minimum excess of £500 per claim which is paid directly by departments suffering the loss. This encourages departments to manage their own operational risks.   

Insurance Provisions

Insurance claims usually pay according to the insurance cover in place when the incident causing the claim takes place (instead of when the claim is reported or paid). For some classes of insurance it can take several months or even years to report, investigate, pay and close claims. For large and complex claims courts may need to decide liability (or who is responsible) and this adds to the time.  Each claim will have a reserve (‘outstanding’ amount) set as an estimate of future payments.  Insurers and claims handlers adjust the outstanding amounts as the claim progresses.  The total value of a claim (the ‘Incurred’ amount) is the amount paid to date plus the ‘outstanding’ amount still to be paid.

In addition, it is expected that further claims will arise from incidents that occurred (or were “incurred”) in the past, but which have not yet been reported (known as “Incurred But Not Reported” (IBNR) claims). This is particularly the case for longer-tailed liability classes where, for example, the delay may be because the claimant had not realised their injury was sufficient to warrant a claim.

Like most public sector bodies with sizeable deductibles, the States holds provisions in the Insurance Fund to meet claims from incidents in the current and past years. 

Approval for payment from monies held within the Insurance Fund will need to be given by officers in accordance with delegations approved by the Minister for Treasury and Resources. Where claims involve legal negotiation the amount of any payment must be in line with legal advice provided by the Law Officers’ Department. It is recognised that this legal advice is confidential and is not to be circulated without the prior approval of H.M. Attorney General or their representative.

Valuation of the Insurance Fund

The Fund is valued on a regular basis, using actuarial techniques. Valuations take account of historical claims data, projected outcomes and IBNR (Incurred but not reported) claims. 

Assurance

The Risk and Audit Committee (R&AC) was established in 2019 and during 2020 took on responsibility for reviewing insurance matters. Its terms of reference include reviewing the annual insurance report; reviewing the arrangements for ensuring key risks are adequately insured and monitoring the Insurance Strategy and Improvement Plan.

Users of the Public Finances Manual should refer to other sections that are relevant. Specifically, this includes:

• Assets
• Third party assets
• Cash
• Arm’s length organisations
• Major, strategic and other projects
• Losses and write offs
  

Risks

In addition to the common risks identified in the Background and Introduction section of the Manual a number of significant risks relating to this section include:

• Failure to purchase sufficient insurance cover can lead to significant one-off revenue payments if catastrophic or major risks occur;
• Failure to undertake a regular review of significant insurable and uninsurable risks may lead to adverse financial impact or the inability to procure suitable insurance cover;
• If the States’ claims history and portfolio are not understood then the States will be unable to learn from and develop better risk management processes;
• If the States don’t undertake horizon scanning for significant risks, then opportunities to transfer risks or plan properly may be missed; and
• The most efficient options for providing insurance cover for the States and related bodies may not be chosen.
  

Principles

1. Insurance arrangements should represent the most cost-effective approach for the States to treat risks that cannot be managed in other ways.
2. Accountable Officers should continually review risks for their areas of responsibility and notify the Director, Treasury and Investment Management in the event of any changes and potential impact on insurance cover.
3. The Director, Treasury and Investment Management should continually review the States’ insurance arrangements and recommend any changes needed to the Minister for Treasury and Resources and Treasurer of the States.
   

Requirements

1. Compliance with legislation
   The Director, Treasury and Investment Management must ensure that all provisions relating to insurance within the Public Finances (Jersey) Law 2019 and R.111/2019 are complied with.
   
   
2. Risk Management
   Accountable Officers and those responsible in related bodies must:
• ensure the documentation and regular review of the risk management for their areas of responsibility and related bodies in line with the Government’s Risk Strategy
• identify and evaluate risks and how these translate in terms of insurance of assets
• regularly review and document their risks and associated controls and ensure actions are carried out in a timely manner
• ensure that all risks for their area of responsibility are captured on a risk management system agreed with the Risk Team
• ensure that officers escalate significant risks identified to the appropriate level of management considering the implications in terms of insurance.
  
  
3. Returns for annual insurance renewals
   Accountable Officers and those responsible in related bodies must ensure the timely submission of returns for annual insurance renewals, highlighting any material changes.
   
   
4. Near misses and other dangerous occurrences
   Accountable Officers and those responsible in related bodies must record and review near misses, infectious diseases and dangerous occurrences as part of the risk management process and notify the Risk Team and insurers of any such events.
   
   
5. Supplier insurance
   Accountable Officers and those responsible in related bodies must ensure that any suppliers and sub-contractors they engage with have appropriate insurance as part of their contractual arrangements, health and safety policies and procedures, risk assessments, data protection policies, safeguarding policies, background checks and any other applicable measures as part of the due diligence process. The references to insurance in the template terms and conditions are not sufficient to fully satisfy this requirement.
   
   
6. Training and awareness
   Accountable Officers and those responsible in related bodies must ensure that relevant staff in their area of responsibility attend any training and awareness sessions provided on risk management and insurance.
   
   
7. Notifying Treasury and Exchequer
   Accountable Officers and those responsible in related bodies must ensure that any matters which may have a bearing on States of Jersey insurance arrangements are brought to the attention of the Risk team and Director, Treasury and Investment Management, as soon as is reasonably practicable but at least within two working days of the issue being identified.
   
   
8. Asset management
   Accountable Officers and those responsible in related bodies must ensure asset management processes capture all insurable assets.
   
   
9. Payments from the Insurance Fund
   All payments from the Insurance Fund must be authorised in accordance with the Fund’s Accountable Officer’s Scheme of Delegation before they are made, or committed to as part of settlement of a claim against the States or Government.
   

Internal audit

Introduction and background

The Internal Audit function provides an independent, objective assurance and advisory service necessary for continual improvement of the organisation’s business performance. It provides reasonable assurance that States Bodies’ financial and operational controls designed to manage the organisations’ risks and achieve the organisations’ objectives are operating in an efficient, effective and ethical manner.

On an ongoing basis, Internal Audit provides Accountable Officers with reasonable assurance that their organisation's risk management control and governance are adequate, effective and compliant with applicable legislation and other policy and procedures such as this Manual. It also functions as an important source of information and advice regarding areas of improvement and development. It helps the organisation accomplish its objectives through a systematic, disciplined approach to the evaluation and improvement of these processes. 

The States Treasurer is required under the Public Finances Law to establish a system of internal auditing in support of his requirement to ensure the proper stewardship and administration of the public finances of Jersey. The States Treasurer is also responsible for advising the Comptroller and Auditor General, as well as the Principal Accountable Officer (if appropriate), of the results of internal audits carried out under that system. 

The Treasurer must with the agreement of the Minister designate a person who is employed in the Treasury and Exchequer as Chief Internal Auditor.

In addition to the common risks identified in the background and introduction section of the manual a number of significant risks relating to this section include:

• the States or Government of Jersey is unable to meet its Strategic Priorities and outcomes due to inadequate risk management frameworks
• the States or Government of Jersey suffers financial loss
• the States or Government of Jersey suffers reputational damage 
• the States or Government of Jersey suffers missed opportunities as a result of failure to identify, report and mitigate risks

Principles

1. An Internal Audit Charter will be maintained which will be approved by the Risk and Audit Committee, and will specify the purpose of the Internal Audit function, reporting lines, scope of activities, and responsibilities. An effective Internal Audit function will be based on the following core principles:

• demonstrates integrity
• demonstrates competence and due professional care
• is objective and free from undue influence
• aligns with the strategies, objectives, and risks of the organisation
• is adequately resourced
• demonstrates quality and continuous improvement
• communicates effectively
• provides risk-based assurance
• is insightful, proactive, and future-focused
• promotes organisational improvement

Requirements

1. Internal Audit's Conduct

The conduct of work by Internal Audit should be governed by the Public Sector Internal Audit Standards, which provide a benchmark against which the quality of Internal Audit in the UK public sector is assessed. The structure, authority and responsibilities of the Internal Audit function will be specified in the Internal Audit Charter.

2. The States Treasurer's Duty to Provide Resources

The States Treasurer must provide sufficient resources to meet his obligations under the Public Finances Law and to enable the person designated as Chief Internal Auditor to perform their duties to leading international standards.

3. The Head of Internal Audit's Responsibility for Internal Audit Plans

The Head of Internal Audit is responsible for preparing an internal audit plan in accordance with Public Sector Internal Audit Standards and with the Internal Audit Charter. The plan should be prepared on a rolling three year basis and be agreed with the Risk and Audit Committee and the States Treasurer. The plan should be revised at least annually and more frequently when there are indications that the risks faced by the States of Jersey in delivering their priorities have changed materially. The Head of Internal Audit can also carry out unplanned activity at any time to address identified risks.

4. Internal Audit's Internal Control System

Part of the duties of Internal Audit is to evaluate compliance with an organisation's internal control system, including relevant Regulations, guidance and procedures. However, leading international practice in the public sector is for Internal Audit to operate under an expanded remit, also covering such issues as reports against Key Performance Indicators, comparison of results against planned outcomes, and value for money when reporting.

5. Internal Audit’s Duties and Limitations

The Internal Audit function exists in order to assist the States of Jersey to achieve its Strategic Priorities. Internal Audit team members should, therefore, be a source of advice for Accountable Officers on issues such as governance and control. However, it is important that members of Internal Audit do not take responsibility for management decisions, executive functions, or the development of systems, as this would compromise their independence and present a conflict of interest. The Head of Internal Audit will refuse requests from management to undertake work that it is not appropriate for Internal Audit to undertake.

6. The Head of Internal Audit report

The Head of Internal Audit must prepare a report on any Internal Audit carried out on a States Body. A copy of this report must be sent to the Comptroller and Auditor General as well as the Accountable Officer of the organisation audited. The Accountable Officer also has overall responsibility for ensuring the States Body has appropriate internal controls, to ensure that effective action is taken based on the recommendations of an Internal Audit report, for recognising risks associated with inaction, and for compliance with applicable policies, procedures and regulations.

Accountable Officers and management must respond to draft Internal Audit reports in a timely manner (preferably within two weeks of receipt unless agreed otherwise with the Head of Internal Audit and provide specific timescales for implementing agreed recommendations. 

Internal Audit reports are confidential, and Accountable Officers and others on the circulation list for Internal Audit reports must not forward or circulate these reports to anyone else without first obtaining the permission of the Head of Internal Audit.

A report is also provided on a quarterly basis to the Risk and Audit Committee, the States Treasurer and the Chief Executive setting out the progress made to date on the Internal Audit Plan and key control issues noted.

The Head of Internal Audit will also prepare an annual report and opinion on the States of Jersey’s governance framework and internal control environment, based on audit work carried out in the year in question. This report will be presented to the Risk and Audit Committee to inform their review of the Governance Statement in the States of Jersey’s published annual report and accounts.

7. Considerations before auditing a States Body

When seeking to provide reasonable assurance that the States Body being audited will achieve its strategic objectives, Internal Audit should focus on the following key areas:

• risk management 
• how does the States Body approach risk management? Do they appropriately consider risks to the delivery of the States Body’s priorities in a regular and timely manner? Do they maintain a risk register and is it updated regularly? Do they regularly review and update the internal control environment as issues are identified? Is the States Body’s risk framework aligned with that of the Government of Jersey as a whole?
• internal controls
• how effective and efficient are internal controls in terms of the prevention and detection of error and misstatements?
• operational effectiveness 
• is the States Body successful at achieving its priorities when measured against agreed Key Performance Indicators? How could it achieve those priorities more efficiently? How will the States Body’s priorities change in the future?
• use of resources
• are the resources of the States Body used efficiently, effectively, and economically? Are personnel proficient within their roles and comfortable with their responsibilities?
• compliance 
• does the States Body comply with all applicable policies, procedures, laws and regulations? What gaps exist and how may they be remedied?
• safeguards against losses 
• what safeguards does the States Body have in place against losses, including those arising from fraud, irregularity or corruption? How effective are these safeguards?
• data

• what level of reliability can be attributed to the data used/processed by the States Body? To what degree of quality is the data collected? How could data collection procedures be improved?

8. Co-sourcing

Co-sourcing i.e. the use of external resources in specialist areas, or just to provide more flexible resources as needs arise may be employed by the Head of Internal Audit to deliver the internal audit plan. This should be done where it represents best value for the Government of Jersey. Arm’s Length Organisations should consider whether it is appropriate to establish their own internal audit functions based on the scale and complexity of their operations. The Head of Internal Audit will not be responsible for delivering internal audit services to these bodies, except where agreed with the Risk and Audit Committee, States Treasurer and the Accountable Officer responsible for the organisation.

9. Access to persons and information

The Head of Internal Audit and staff have unfettered right of access to all persons and information within States bodies. Any requests must be complied with.

10. Independent reporting arrangements

The person designated as Chief of Internal Audit has an unfettered right to report on specific matters direct to any of the following:

• the Minister for Treasury and Resources
• the Treasurer of the States
• the Principal Accountable Officer
• the Chair of the Risk and Audit Committee
• the Comptroller and Auditor General
• the external auditor appointed by the Comptroller and Auditor General

11. Internal and External Auditor’s Relationship

The internal and External Auditors should maintain a close working-relationship. The effectiveness of an audit, along with an efficient use of audit resources, will be enhanced by co-operation between these teams. However, it should be noted that the use in Internal Audit work of entities or individuals involved in the provision of External Audit services should be allowed only in exceptional circumstances. internal and External Audit functions should be kept separate to avoid conflicts of interest, and any possible threat to objectivity or independence.

Acceptance of gifts and hospitality

Introduction and background

The Government and States of Jersey place great importance on the need to ensure that bribery and corruption has no part to play in the way that the Island is governed. This is evidenced in the Corruption (Jersey) Law 2006 which makes it a criminal offence for a public official to do or not do any act in relation to the official’s position, office or employment, for the purpose of corruptly obtaining any advantage, whether for his or her own benefit or for the benefit of any other person.

To support this Law this section provides guidance and requirements on how States Bodies should manage the receipt of gifts and hospitality and applies to all States Bodies as defined in the Public Finances (Jersey) Law 2019. It applies to gifts and hospitality either given to, or offered to, any States of Jersey employee, Crown appointments and Non-ministerial officers (“States employee(s)”). This section does not apply to any type of grouped collection of money/gift given on behalf of pupils to a teacher, or another member of a school’s staff, as an end of term/year gift. The exception to this is where a teacher or another member of the school’s staff receive or are offered a gift with a value of £40+ from one individual household, in this instance the recipient must report and declare the gift in line with the requirements of this section.

The “reasonable bystander” test should be applied i.e. whether a reasonable bystander witnessing the transaction could reasonably assume that a gift was given to influence the person in the course of their functions, or to buy goodwill in the hope of future influence.

Where the States or a States Body appoints a lay person on a voluntary basis to any Board or Panel they should consider including appropriate references to this Section of the Manual in the relevant terms of engagement.

Users of this section should also refer to other sections of the Manual that are relevant specifically this includes:

• Risk management
• Fraud
• Offering gifts and hospitality
  

In addition to the common risks identified in the Background and introduction section of this Manual a number of significant risks relating to this section include:

• that gifts or hospitality are accepted as an inducement to do or not do something
• the Government's or States of Jersey’s reputation may be compromised as a result of poor practice and weak governance arrangements
• creating a conflict of interest. For example, perceived as influencing a decision to award a contract, set policy or regulate a service
• States of Jersey employees are not protected from unwarranted criticism from not following due process, best practice guidance or adherence to principles
• Ministers and Assistant Ministers are bound by the Code of Practice for Ministers and Assistant Ministers.

Gifts or hospitality received by, or offered to, employees must be recorded on the corporate gifts and hospitality register.

Principles

1. Employees should not accept a valuable gift or money for personal reward.
2. In all cases where a gift or hospitality is offered a test of reasonableness should be applied.
3. Employees should consider, in all cases, whether the gift or hospitality offered may implicate or cause the Government or States of Jersey or themselves reputational damage if details were in the public domain. For example, this could apply to gifts or hospitality given by a supplier, potential supplier, an Arm’s Length Organisation or grant funded body.
4. Multiple gifts under the specified limit for disclosure should not be used as a means to avoid making a declaration in the Register.
5. Accountable Officers should ensure that there is a regular review of Gifts and Hospitality within their States Body with any concerns declared in the Corporate Governance Statement. They will need to request a copy of the register from the Head of Financial Governance in Treasury and Exchequer.
6. Gifts and hospitality received by Ministers and Assistant Ministers

Approval is not required for gifts or hospitality received by Ministers and Assistant Ministers, but the Gifts and Hospitality online form should be completed in line with Government and States of Jersey requirements. Ministers and Assistant Ministers are responsible for ensuring notification to the States Greffe in line with the States Assembly Code.

Requirements

Gifts and hospitality valued at £40 or more.

1. Declaration
   Any gift or hospitality received (or offered but declined) with a cumulative value of £40 or more, must be declared in line with States of Jersey requirements and relevant approval sought.
   
   
2. Completion of online Gifts and Hospitality Form
   Approval prior to accepting a gift or hospitality must be secured in line with Government or States of Jersey requirements. This approach is not always appropriate as refusal to accept a gift or hospitality may be seen as discourteous. For example, when a gift is given in recognition of, or gratitude for, a service provided by an employee(s) in the course of their duties. In these circumstances the gift or hospitality must be declared as soon as possible after receipt.
   
   
3. Approval of gifts and hospitality
   The receipt of gifts and hospitality above the limits specified in requirement 1. Declaration must be approved by the Accountable Officer of the relevant department (or their delegate, as specified in the Scheme of Delegation submitted to the Treasurer of the States for approval). Where Accountable Officers are the recipient of gifts or hospitality, approval must be obtained from the Treasurer of the States. Where the recipient is the Treasurer, approval must be obtained from the Principal Accountable Officer (and vice versa).
   
   
4. Cash gifts
   Where a cash gift is given, for example in recognition of, or gratitude for, a service provided by an employee(s) in the course of their duties this must be paid into a suitable bank account for the general use of those providing the service (details of which can be obtained from the relevant Head of Finance Business Partnering).
   
   

   Gifts and hospitality valued at less than £40

   
   For the avoidance of doubt there is no requirement to record incidental and low value hospitality received such as a working lunch as part of a meeting, unless there is a risk that acceptance could be perceived as having potential reputational damage. As a general guide, no more than one working lunch from the same organisation (such as a supplier or grant recipient) should be accepted in any financial year - any more must be declared.
   
   
5. Declaration
   Where the recipient of gifts or hospitality considers that they may implicate or cause the Government or States of Jersey or themselves reputational damage if details were in the public domain, then these must be declared even if valued at less than £40. This also applies where the offer was declined. For example, this may include gifts or hospitality given by a supplier, potential supplier, an Arm’s Length Organisation or grant funded body.
   
   Where there is considered to be little or no risk of reputational damage receipts valued at less than £40 need not be declared.
   
   
6. Approval of gifts and hospitality
   The receipt of gifts and hospitality below the limits where the recipient considers they may implicate or cause the Government or States of Jersey or themselves reputational damage if details were in the public domain must be approved by the Accountable Officer of the relevant department. Where Accountable Officers are the recipient of gifts or hospitality, approval must be obtained from the Treasurer of the States or the relevant Head of Finance Business Partnering. Where the recipient is the Treasurer of the States, approval must be obtained from the Principal Accountable Officer (and vice versa).
   
   
7. Cash gifts
   Where a cash gift is given, for example in recognition of, or gratitude for, a service provided by an employee(s) in the course of their duties, this must be paid into a suitable bank account for the general use of those providing the service (details of which can be obtained from the relevant Head of Finance Business Partnering).

Gifts and hospitality offered

Introduction and background

The Government and States of Jersey place great importance on the need to ensure that bribery and corruption has no part to play in the way that the Island is governed. The Corruption (Jersey) Law 2006 makes it a criminal offence for a public official to do or not do any act in relation to the official’s position, office or employment, for the purpose of corruptly obtaining any advantage, whether for his or her own benefit or for the benefit of any other person.

This is evidenced in the States and Government of Jersey Anti-Fraud and Corruption Policy; the States of Jersey Anti-Fraud and Corruption Strategy; and the Anti-Money Laundering (AML) Policy.

To support this Law, the policies and the strategy, this section provides guidance and requirements on how States Bodies should manage offering gifts and hospitality. It applies to all States Bodies as defined in the Public Finances (Jersey) Law 2019. It applies to gifts and hospitality offered by any States of Jersey employees, Crown appointments and Non-Ministerial officers (“States employees”).

Occasionally gifts, hospitality or entertainment are a normal part of the courtesies of public life.

Offering gifts and hospitality is permitted but it must be only for the right reason and clearly as an act of appreciation or for a business purpose (for example: to show respect, establish or build relationships or represent the organisation). It must not create any obligation or expectation on the recipient.

Offering gifts, hospitality and entertainment is vulnerable to being seen as inducement, and/or as an improper and wasteful use of public money. It is important that this expenditure is transparent, proportionate and reasonable, and will withstand scrutiny (e.g. Internal Audit, States Questions and Freedom of Information questions).

The “reasonable bystander” test should be applied i.e. whether a reasonable bystander witnessing the transaction could reasonably assume that a gift was given to influence the person in the course of their functions, or to buy goodwill in the hope of future influence.

Users of this section should also refer to other sections of the Manual that are relevant specifically this includes:

• Risk management
• Accountable Officers in Government Departments
• Accountable Officers in Specified Organisations
• Accountable Officers in Non Ministerial States Bodies
• Acceptance of gifts and hospitality
• Special payments

In addition to the common risks identified in the Background and Introduction section of the manual a number of significant risks relating to this section include:

• the value or nature of a gift or hospitality is inappropriate or excessive to the occasion or the reason for giving it
• the gift or hospitality is given in explicit or implicit expectation of favour in return
• the gift or hospitality is given in substitution for legitimate payment or remuneration
• the gift or hospitality expense is not approved
• the Government's or States of Jersey’s reputation may be compromised as a result of poor practice and weak governance arrangements
• using a purchase card to pay for gifts or hospitality can result in inappropriate business-related expenditure, poorly documented or justified expenditure or paying for personal items or benefits

Principles

1. The decision to offer gifts or hospitality should be based on objective criteria, rather than on any sort of bias, preference, or improper reason.

2. Employees should follow specific policies and procedures, such as the Business Travel Policy and Purchase card procedures (within Supporting documents) which give guidance for decision-making and streamline internal processes.

3. Managers should set the standard for what is and is not acceptable to offer as a gift or hospitality. They should promote open and effective communication, professionalism, and transparency at all times.

Requirements

1. Approval – over £40
   Gift or hospitality expenditure with an individual or cumulative value of £40 or more, must be approved in advance in line with the relevant Accountable Officer’s scheme of delegation. The person approving the expenditure must be satisfied that it is for a justifiable business purpose and that is consistent with the SoJ objectives. This must be recorded in the online gifts and hospitality register.
   
   It is not acceptable for gift or hospitality transactions to be structured in such a way as to attempt to avoid the financial limit.
   
   
2. Approval – any value
   The following items of gifts or hospitality are contentious and represent heightened risk. As such approval must always be sought from the Accountable Officer (or their delegate if documented in the Scheme of Delegation) (through the online gifts and hospitality register) regardless of value:
   
   
   • cash (or any payment that is effectively equivalent to giving cash, for example paying for something on behalf of someone, including a member of staff)
   • gift cards
   • donations to charity
   • event tickets
   • sightseeing excursions
   • alcohol
   • overnight stays
   • where the recipient is a family member of the giver
     
     
3. Expenditure
   Gift and hospitality expenditure decisions must:
   
   
   1. be made transparently
   2. be made with proper authority
   3. have a justifiable business purpose
   4. preserve impartiality
   5. be made with integrity
   6. be moderate and conservative
   
   These principles must be applied together. None should be applied alone, and no principle should be treated as more important than any other.
   
   
4. Supporting documents
   Supporting documents (invoices and receipts) must be retained (and available upon request) for all expenses incurred and must include the date, amount, description, and purpose.
   
   
5. Donations
   A donation is a gift in a form of payment (money, goods or services) made voluntarily and without expecting reciprocation.
   
   Donations must not create any obligation on individuals or organisations, other than to apply the donation to the purposes of the recipient. They must be lawful in all respects, non-political, disclosed and appropriately documented.
   
   
6. Entertainment and hospitality expenditure
   Offering entertainment and hospitality must only be incurred if it is deemed to be in the public interest and it is:
   
   
   • cost-effective and appropriate for the occasion
   • supported by appropriate documentation that includes receipts, names of parties entertained, and the reasons for the entertainment and hospitality

   
   Alcohol is not permitted when claiming subsistence unless approval has been received from the budget holder or accountable officer (or delegate). Approval should be sought at pre-authorisation stage wherever possible.
   

   
   
7. Loyalty reward scheme benefits
   Gift and hospitality expenditure must not result in receiving any personal benefits or loyalty scheme rewards.
   

Other

Fraud

Introduction and background

This section applies to all States Bodies as defined in the Public Finances Law, and provides assistance in the prevention, detection, and reporting of fraud.

The term ‘Fraud’ is generally used to refer to dishonest behaviour such as deception, forgery, false representation, concealment of material facts etc. which result in the misuse of funds. These include but are not limited to misappropriation or embezzlement of funds, financial reporting fraud and cyber fraud, which remains an evolving aspect of fraud.

Users of this section should refer to other sections of the Public Finances Manual that are relevant including:

• Accountable Officers
• expenditure
• income
• risk management

In addition to the common risks identified in the background and introduction section of the manual a number of significant risks relating to this section include:

• the States or Government of Jersey suffers a financial loss as a result of fraud
• the States or Government of Jersey or a States Body suffers reputational damage as a result of fraud

Principles

1. Accountable Officers are responsible for managing the risks which their respective States Bodies face, including fraud risk. They are responsible for establishing and maintaining sound systems of internal control to manage such risks.

2. The most effective way to manage the risk of fraud is the presence of an effective and proactive anti-fraud culture. In general terms, this involves:

• assessment
• an analysis of the overall vulnerability of the organisation to fraud, and the areas which are most at risk. This will also involve continuous horizon scanning and monitoring of global trends in order to keep up-to-date with emerging threats 
• identification
• recognising the area's most vulnerable to fraud risk
• evaluation
• determining the level of risk of fraud, including probability of occurrence and likely impact (both monetary and reputational)
• response
• taking strategic action to mitigate risks associated with fraud, including establishing appropriate anti-fraud controls
• appraisal
• critically assessing the effectiveness of the fraud risk strategy. This includes periodic testing to determine if controls can be circumvented
• reporting 
• mandatory reporting of any incidents of fraud which do occur and taking appropriate legal advice or disciplinary actions in line with Human Resources or other relevant policies. An important element of reporting is the establishment of tip-off or whistle-blower mechanisms to complement other internal controls

3. Accountable Officers should also ensure that an anti-fraud culture is being promoted within States Bodies.

Requirements

1. Fraud policy

Every States Body to which the Public Finances Manual applies should demonstrate their commitment to combatting fraud by developing a fraud policy which details their approach to fraud risk. As a minimum these measures must follow the corporate fraud strategy.

2. Staff instruction

All staff should be instructed and regularly reminded of the role they play in the prevention and detection and reporting of fraud but overall responsibility for the systems, procedures and approach to fraud rests with Accountable Officers. Managing the risk of fraud should be viewed as part of the wider risk management framework of the States of Jersey as well as the States Body and should be in line with the requirements of the Risk Management section of the Public Finances Manual.

All employees should be positively encouraged to raise any concerns they have about fraud associated with any Government/States departmental activities. They must be able to do this in the knowledge that such concerns will be treated in confidence and properly investigated. Any concerns can be raised with:

• Line managers
• Chief Officer/Accountable Officer
• Internal Audit

3. Risk assessment

Each States Body should identify and assess its vulnerability to fraud and document this within its risk register. As part of the fraud risk assessment process, there should be a framework for ongoing scanning of the global environment for emerging trends and technologies which drive or control fraud as well as other emerging controls.

4. Risk mitigation

Each States Body should evaluate the potential impact and likelihood of fraud risks which it has identified. This should be periodically reviewed and should form the basis of its risk mitigation strategy.

5. Response to fraud

States Bodies should customise their response to fraud to reflect the nature of the activities and the risks they face. This will typically involve some or all of the following:

• developing a Fraud Policy Statement, a Fraud Risk Strategy and a Fraud Response Plan
• developing and promoting an anti-fraud culture, through a clear statement of commitment to ethical behaviour, and the promotion of fraud awareness and, where appropriate, taking legal action
• thorough recruitment screening, relevant regular training and maintaining high staff morale to minimize the motivation to commit fraud
• allocating responsibilities for the overall and specific management of fraud risk so that these processes are integrated into management
• segregation of duties and ongoing monitoring of interpersonal relationships within or across States Bodies, in order to manage the likelihood of collusion to circumvent controls
• establishing cost-effective internal systems of control to prevent and detect fraud
• developing the skills and expertise to manage fraud risk effectively and to respond to fraud effectively when it arises
• establishing and monitoring specific controls and data analytics competencies for the management of cyber risk and sharing insights with other States Bodies, as appropriate
• establishing well publicised avenues for staff and members of the public to report suspicions of fraud
• responding quickly and effectively to fraud when it arises, in particular ensuring any control weaknesses are addressed in order to prevent any recurrence 
• establishing systems for investigations into allegations of fraud
• using Internal Audit to advise on fraud risk and drawing on their experience to strengthen controls
• taking appropriate action (criminal, disciplinary) against fraudsters and seeking to recover losses. Such a decision should be based on both the qualitative and quantitative matters of the fraud rather than solely the amount stolen
• continuously evaluating the effectiveness of anti-fraud measures in reducing fraud
• working with stakeholders to tackle fraud through intelligence sharing, joint investigations, etc.

6. Recording

Each Body must maintain records of frauds discovered, actions taken and any losses incurred. Such records should be provided to the Director of Risk and Audit on a monthly basis or when a significant control breach or material loss is incurred. The Director of Risk and Audit and the Head of Internal Audit will report all suspected fraud to the Treasurer and Comptroller and Auditor General as well as the Chief Executive Officer in relation to fraud with Government departments. They will also provide regular updates on reported fraud and subsequent action taken to the Risk and Audit Committee.

Losses and write offs

Introduction and background

This section applies to all States Bodies as defined in the Public Finances Law. This section provides guidance to States Bodies on what is expected when they incur losses or write off the value of assets. This section also applies to Funds for which a States Body is responsible. Specified Organisations may also want to follow this section.

As the States Assembly does not agree or approve advance provision for potential future losses when voting money or passing specific legislation, such transactions when they arise are subject to greater scrutiny and control than other payments.

A loss is any event that temporarily or permanently causes a decline in value or deprives the States of revenues, services, tangible or intangible assets or resources, including human resources. Below are some examples of circumstances that may result in losses:

• overpayments to staff due to miscalculation, misinterpretation etc. of allowances and superannuation benefits
• overpayments of social security benefits, grants, subsidies etc.
• fraud and theft, arson or any other deliberate act
• claims waived or abandoned
• fruitless payments which cannot be avoided because the recipient is entitled to it even though nothing of use to the States Body will be received in return e.g. payment for travel tickets or hotel accommodation wrongly booked; or for goods wrongly ordered or accepted
• losses due to errors in procurement processes
• bookkeeping losses such as unexplained payments e.g. unvouched or incompletely vouched payments
• inadequate charges e.g. for the use of public property
• losses are incurred due to damage to, or inadequate maintenance of physical property, e.g. stock
• a loan default
• revaluation of assets

Users of this section should refer to other sections of the Public Finances Manual that are relevant. Specifically this includes:

• government plan and budgeting
• expenditure
• fees and charges
• fraud
• income
• lending
• investment

In addition to the common risks identified in the background and introduction section of the manual a number of significant risks relating to this section include: 

• losses are recognised and written-off when there could be other alternatives to avoid the write-off
• assets are deliberately written-off in order to facilitate theft or fraud
• there is a loss of revenue that could have been received or collected
• the resources of the States Body are not used efficiently and effectively to meet the States or Government of Jersey’s Strategic Priorities
• increased budget projections due to an increase in the trend of losses or write-offs lead to a possible increase in fees and charges
• services to specific groups of users could, in effect, be reduced due to increased losses
• there is an incorrect accounting treatment of losses due to a lack of understanding of the different type of losses

Principles

1. Losses and write offs should be reduced to the lowest level possible or entirely mitigated.

2. States Bodies should have clear methods of investigating, mitigating, and reducing losses and write offs.

3. All losses and write offs should be carefully appraised and approved before being processed.

4. States Bodies should only consider accepting losses and write offs after careful appraisal of the facts (including whether all reasonable action has been taken to effect recovery), and should be satisfied that there is no feasible alternative.

Requirements

1. Assessment of controls

Accountable Officers must ensure that they have arrangements for detecting weaknesses or failures in the control system around losses and write offs and identifying appropriate corrective actions. The ability to authorise losses or write offs must be documented in the relevant Scheme of Delegation.

2. Consultation

Accountable Officers must ensure that they adopt a pragmatic approach to losses and write offs and document that approach. However, irrespective of the amount of losses, States Bodies should consult Treasury and Exchequer if the loss or write off:

• involves important questions of principle
• raises doubts about the effectiveness of existing systems
• contains lessons which might be of wider interest
• is novel or contentious
• might create a precedent for other States Bodies in similar circumstances
• arises because of obscure or ambiguous instructions issued centrally

3. Maintaining records

Accountable Officers must ensure that they maintain a record of losses at all times. The record should show:

• the nature and gross amount (or estimate where an accurate value is unavailable)
• cause of each loss
• the action taken, total recoveries and date of write-off where appropriate
• the annual accounts in which each loss is to be noted

4. Recovery

Accountable Officers must maintain a record of claims to ensure that recovery is not overlooked where efforts are still being made to secure recovery of cash losses formally written off and charged to the accounts and noted.

5. Potential losses

Accountable Officers must identify the different types of losses that may arise in the operations of the Body and ways to address the losses.

6. Loss management

When managing losses, considerations by States Bodies should include but not be limited to the following:

• for any loss incident, where there is evidence of threatening behaviour or other equivalent emergency situation, notifying the police immediately
• ensuring there are internal procedures for investigating, detecting, mitigating and monitoring of losses and write offs. The procedures must include what procedures should be undertaken after a loss incident in terms of review of the efficiency and effectiveness of the existing system
• methods to be used for any loss incident in order to recover losses in a cost-effective manner
• for all cases where a States Body has reason to believe that the conduct of an employee or contractor in the workplace is criminal in nature, promptly notifying the appropriate police authority and cooperate in any resulting investigation and subsequent prosecution
• when dealing with a loss incident alleging illegal activity by a Body’s employee or contractor, the Body must not make any threat or promise to the employee or contractor or their representatives as to whether the alleged illegal activity will or will not be referred for criminal investigation or prosecution
• whether it may be appropriate to make an insurance claim in respect of the loss

7. Notifying Treasury and Exchequer and quarterly reporting

Accountable Officers must provide a quarterly return to Treasury and Exchequer detailing all losses incurred in the period. Losses should be valued in accordance with the Jersey Financial Reporting Manual. Where losses or write offs exceed £30,000 they should be notified to Treasury and Exchequer, where practical, before the payment is made or loss recorded.

Jersey Overseas Aid

Introduction and background

This section applies to the Jersey Overseas Aid Commission, known publicly as ‘Jersey Overseas Aid’, which is designated as a Specified Organisation in the Public Finances Law. 

Jersey began its official overseas aid programme in 1968. Its current incarnation was established and is governed by the Jersey Overseas Aid Commission (Jersey) Law (2005). The organisation is governed by a Commission, which consists of three States members and three non-States members, all of whom are appointed by the States. They are legally responsible for managing the monies voted annually by the Government of Jersey for overseas aid. They are assisted in doing so by a team of directly-employed professional staff, led by an Executive Director.

Jersey Overseas Aid provides funding in the following ways:

• grants for development projects implemented through UK-registered charities and other recognised specialist aid agencies
• humanitarian aid and disaster relief through internationally-recognised relief agencies
• community work projects, where teams of Jersey volunteers undertake specific development projects overseas
• supporting Jersey charities in their work overseas, often on a matched-funding basis
• providing sponsorship and bursaries to Jersey citizens conducting charitable work overseas

The chair of the Jersey Overseas Aid Commission is also, by definition, the Minister for International Development, and vice versa. The Minister for International Development, in conjunction with the Commission, is responsible for policy on:

1. promoting economic and social development in developing countries; and
2. humanitarian aid overseas

The Jersey Overseas Aid Commission is not linked to any Department or States Body for funding purposes. It is a separate Head of Expenditure in the Government Plan.

The Jersey Overseas Aid Commission remains an independent body governed by its own (2005) law, and is a separate legal entity from the Government of Jersey.

The Jersey Overseas Aid Commission complies with the Public Finances Manual, but due to the unique nature and overseas-focus of its work it has developed some policies and procedures of its own which may differ from those in the Public Finances Manual. This section lays out where Jersey Overseas Aid complies with and differs from the Public Finances Manual.

Principles

1. Jersey Overseas Aid recognises that it has a dual responsibility: to the world’s poorest and neediest people, and to Jersey’s taxpayers. Discharging this dual responsibility requires the same, fairly straightforward approach: a well-governed, professionally-staffed donor organisation making the most effective use of its budget, concentrating on areas where Jersey can add the most value, and focusing on long-term outcomes rather than short-term activities.

2. The Mission of Jersey Overseas Aid is ‘To translate the generosity, skills and compassion of the people of Jersey into effective assistance for the world’s neediest people’. 

3. Jersey Overseas Aid’s high-level objectives are laid out in its 5 year strategy plan and are the following:

• to promote sustainable economic and human development in some of the poorest countries on earth
• to provide timely humanitarian assistance to victims of natural and manmade disasters
• to facilitate the efforts of individuals and organisations in Jersey to provide assistance to the world’s poor
• to enhance Jersey’s international personality as a responsible global citizen and force for good in the world

4. Jersey Overseas Aid complies with international standards, set out by the Organisation of Economic Co-operation and Development Assistance Committee, in what constitutes Official Development Assistance. Jersey Overseas Aid aims to improve aid and development effectiveness and is guided by the principles of aid effectiveness, as set out in the 2005 Paris Declaration, the 2008 Accra Agenda for Action, the 2011 Busan Outcome Document and the 2014 Mexico Communique. The key principles for effective aid, defined in the Busan outcome, are:

• country ownership
• transparency and accountability
• focus on results
• inclusive development partnerships

Requirements

1. Accountable Officer

The Principal Accountable Officer may appoint an Accountable Officer for Jersey Overseas Aid who will ensure accountability to the Principal Accountable Officer for the use of resources. The Accountable Officer must be a full-time employee of the Jersey Overseas Aid Commission. In normal instances, the Accountable Officer will be the most senior full-time official of the Jersey Overseas Aid Commission. The appointment, responsibilities and other guidelines are covered in the Accountable Officers section.

2. Oversight

A specific Memorandum of Understanding is being developed between Jersey Overseas Aid and the Office of the Chief Executive, which will set out the administrative support which the Government of Jersey will provide to Jersey Overseas Aid. The Accountable Officer must ensure compliance with the forthcoming Memorandum of Understanding.

3. Compliance in full with Public Finances Manual

Jersey Overseas Aid complies in full with the following applicable sections of the Public Finances Manual:

• assets
• leases
• cash
• banking
• foreign currency
• special payments
• financing
• lending
• income
• projects
• fraud
• losses and write offs

4. Majority Compliance with Public Finances Manual

Jersey Overseas Aid complies with the following sections of the Public Finances Manual with certain stated exceptions:

• consulting Treasury and Exchequer. Full compliance, except in Section 2 of Explicit Approval, Compliance only with the provision ‘Expenditure proposals affecting the Government of Jersey’s approved expenditure totals’ and none of the other examples given.
• Expenditure and Procurement. The provisions only apply to Jersey Overseas Aid where the expenditure and procurement are conducted within Jersey. 
• Major Projects. The provisions only apply to Jersey Overseas Aid where the major projects are conducted within Jersey.
• Delegations and Changes to Head of Expenditures. Full compliance apart from being exempt from requirement 6 under and overspends of revenue budgets. Any underspend at the end of the financial year should not be transferred to the Reserve but may be retained by Jersey Overseas Aid for allocation in the following year. This will need to be effected by a decision of the Minister for Treasury and Resources.
• Annual financial Statements. Compliance except with the provision of requirement 2 of Semi-Annual Updates. Financial reports can be provided but not focusing on ‘progress against objectives’. 
• Fees and Charges. Full compliance to the extent that this section is relevant, but this section does not affect Jersey Overseas Aid’s ability to recover costs from volunteers deployed on projects abroad

5. Exemptions from Compliance with Public Finances Manual

Jersey Overseas Aid is exempt from compliance with the following sections of the Public Finances Manual:

• Grants and Sponsorships. Awarding grants is the main task of the Jersey Overseas Aid Commission, and the organisation follows its own policies and procedures in this respect. 
• Investment. Jersey Overseas Aid reserves the right to make impact-oriented investments in developing countries in accordance with Organisation of Economic Co-operation and Development guidelines and only to the extent that they remain eligible to be considered Official Development Assistance. 

Jersey Overseas Aid has developed and complies with its own travel policy, developed due to the nature of its work in difficult environments abroad.

Jersey Overseas Aid has its own insurance (travel, public and employers’ liability, Directors and Officers, Special Risks).

States Employment Board

Introduction and background

The States Employment Board is established in the Employment of States of Jersey Employees (Jersey) Law 2005. It is a political body chaired by the Chief Minister, or their nominee (who must be another Minister), and comprises two Ministers or Assistant Ministers (appointed in writing by the Chief Minister) and two other members of the States Assembly (who are neither a Minister nor an Assistant Minister and who are appointed by the States Assembly). The Board may also appoint one or 2 advisors who have the right to attend and speak at meetings. The States Employment Board may delegate (in writing) to any of its members, or to the Chief Executive Officer, any of its powers or functions.

The States Employment Board is the employer of States of Jersey employees but has a more limited role in relation to certain specified senior appointments including within the Non-Ministerial Departments, Crown Officers and police officers.

The States Employment Board is responsible for giving directions regarding consultation or negotiation with States’ employees, or with representatives of States’ employees, concerning pay awards and the term and conditions of employment of those employees. This is particularly important in financial terms as a large proportion of overall States expenditure is incurred on staff costs.

Other legislative and States approved functions of the States Employment Board include:

• ensuring that the public service conducts itself with economy, efficiency, probity and effectiveness
• accountability for the health, safety and well-being of States’ employees
• issuing Codes of Practice (strategic policy documents) with which Accountable Officers (including those for Ministerial and Non-Ministerial Departments) have a duty to comply (Accountable Officers are required to produce a Policy statement setting out how they and their delegates comply with the directions set in the relevant Code)
• approving the engagement of senior employees, interims and contractors under the requirements of P59/2011
• oversight of the Jersey Appointments Commission including recommending appointments to the Commission
• preparing an Annual Report to the States Assembly.
  

All States Employment Board meetings are supported by the Group Director of People and Corporate Services who ensures that:

• meetings are formally recorded (by the States Greffe) and that minutes are agreed at a subsequent meeting
• decisions are notified to the relevant Minister and Accountable Officer – decisions which have financial implications must also be reported to the Minister for Treasury and Resources and Treasurer of the States
  

P.59/2011 – Salaries over £100, 000 – Process for Review and Scrutiny imposes a duty on the States Employment Board to control and monitor all pay proposals where the salary is likely to be over £100,000 per annum. There are established arrangements for reporting on such proposals to the States Employment Board, using a standard proforma containing key information. The States Employment Board is supported in this process by the Group Director of People and Corporate Services. Approval is required from the States Employment Board for the salary band/daily rate, and also where an alternate arrangement is required to engage the most suitable candidate.

In addition to the common risks identified in the Background and Introduction section of this Manual a number of significant risks relating to this section include:

• Accountable Officers are not fully aware of the legal, and States approved, responsibilities and accountabilities required of them by the States Employment Board
• the States Employment Board does not receive the support required to meet its statutory and States approved obligations
  
• expenditure approved by the States Employment Board may exceed the amount set aside by the States Assembly.
  

Principles

1. Effective oversight of people management is a critical component of the operation of the Government and States of Jersey. The role of the States Employment Board is to set the standards and give direction on its functions to officers rather than to conduct the work itself.

2. The States Employment Board should receive sufficient support to fulfil its obligations and it should ensure that it follows the requirements of the Public Finances (Jersey) Law 2019 and the Public Finances Manual when meeting those obligations.

Requirements

1. Consultation by the Group Director of People and Corporate Services (or their authorised delegate(s))

The Group Director of People and Corporate Services (or their authorised delegate(s)) must consult with the Minister for Treasury and Resources and the Treasurer of the States before any proposals are put to the States Employment Board which would result, or would be likely to result, in the amounts allocated, and approved, in a Government Plan to be exceeded.

The Group Director of People and Corporate Services, or their authorised delegate(s), must also consult with the Treasurer of the States and the relevant Accountable Officer (with responsibility for the budget out of which any costs would be met) prior to the States Employment Board offering an employment contract with non-standard clauses that could expose the States of Jersey to future liabilities.

The Group Director of People and Corporate Services must ensure that the Treasurer of the States (or a nominated representative from Treasury and Exchequer) is invited to all States Employment Board meetings with attendance required where either:

• any proposals are to be put to the States Employment Board which would result, or would be likely to result, in the amounts allocated, and approved, in a Government Plan to be exceeded; or
• the States Employment Board are considering offering an employment contract with non-standard clauses that could expose the States of Jersey to future liabilities.
  

2. Funding

Where a decision made by SEB has financial implications the Accountable Officer, of the department(s) affected, will be required in the first instance to meet additional costs within existing heads of expenditure. Where this is not possible a business case for supplementary funding from the Reserve head of expenditure must be made by the affected department to the Minister for Treasury and Resources (see section on Reserve head of expenditure).

The Accountable Officer must, in advance of any recommendation or decision of the States Employment Board, seek advice on any business case for funding from the Reserve from the Treasury and Exchequer.

3. Posts where remuneration is estimated to exceed £100,000

In order to meet the requirements of the Governance Statement Questionnaire (specifically Principle 1 – Accountability, Decision Making and Scrutiny) an Accountable Officer must ensure that all documentation relating to the filling, establishment or extension of any post(s) within their department where remuneration is expected to exceed £100,000 is properly completed and submitted to the States Employment Board in line with any deadlines set, in advance of finalising any decision.

4. Codes of Practice

In order to meet the requirements of the Governance Statement Questionnaire (see Principle 5. People management frameworks) Accountable Officers must complete an annual statement of compliance against the Code (applicable to the Codes issued from 2020 onwards) along with any breaches or exemptions applied to the Codes.

Specific States Owned Entities

Introduction and background

This section applies only to the following list of States Owned Entities (SOEs) (and their subsidiaries, if any) in which the States has an interest whether wholly or partly as Shareholder or as Guarantor:

Companies wholly owned by the States 

• Andium Homes Limited (“Andium”)
• Jersey Post International Limited (“JP”)
• JT Group Limited (“JT”)
• The States of Jersey Development Company Limited (“SoJDC”)
• Ports of Jersey Limited (“PoJ”)

Companies partly (majority) owned by the States

• The Jersey New Waterworks Company Limited (“JNWW”)  
• Jersey Electricity Plc (“JE”)
  

These entities are referred to in Article 53 of the Public Finances (Jersey) Law, 2019 (the “Law”).  Under this Article the Minister for Treasury and Resources is responsible for managing the States’ shares in a company, wherever incorporated, on behalf of the States, and may exercise the rights and is responsible for any liabilities attached to the shares.  These companies are referred to as the States Owned Entities (SOEs).

In addition, there are powers set up under the individual Laws and Regulations governing each of the SOEs in this section.

The overriding consideration in any SOE arrangement is the achievement of the States’ Strategic Priorities in the most effective, efficient and economic manner, ensuring the imposition of robust controls over governance, including probity and regularity.

The Shareholder Relationship team within Treasury and Exchequer are responsible for maintaining the relationship between the States of Jersey and the above listed companies.

The States Owned Entities covered by this section can be split into two classes:

• Strategic Investments; and
• States-controlled subsidiary entities.
  

Strategic Investments

The shares the States hold in:

• Jersey Electricity Plc
• Jersey Post International Limited
• JT Group Limited
• JNWW
  

are classed as “Strategic Investments” and are companies in which the States have a controlling interest.   These companies are not consolidated into the States accounts because, even though the States have either a 100% shareholding or a majority shareholding, in an adaption of IFRS 10, the Jersey Financial Reporting Manual only requires entities to be consolidated where the States have direct control evidenced by the Government, Council of Ministers or a Minister exercising in year control over operating practices, income, expenditure, assets and liabilities of the entity.

As Strategic Investments the holdings in these companies are classified in the States annual report and accounts as “Available-for-Sale” instruments.

States-controlled subsidiary entities

In addition to the Strategic Investments the Minister is responsible for the following wholly owned subsidiary companies (and any subsidiary, if any): -

• Andium - Jersey’s largest provider of affordable housing, managing more than 4,500 properties and providing homes for more than 10,000 Islanders and is the States wholly owned social housing provider.
• Ports of Jersey - the wholly owned operator of the Island's Airport and Harbours, providing the strategic gateway infrastructure and associated services.
• SoJDC – the wholly owned company responsible for the development and regeneration of States owned property and land no longer required for the delivery of public services.

The above subsidiaries are distinguished from the Strategic Investments by way of the level of control exerted by the States of Jersey.  Sufficient control is exerted over the entities above to meet the criteria for consolidation into the States of Jersey group accounts.

States of Jersey Investments Limited (“SOJIL”)

SOJIL is wholly owned by the States and is a nominee company formed to hold the issued shares in Jersey Post 

International Limited, JT Group Limited and Ports of Jersey Limited.

The following legislative provisions and agreements govern the operation of the SOEs:

Users of this section should also refer to the following sections of the Manual:

• Accountable Officers in specified organisations
• Annual financial statements.

These companies will face many of the same risks to which the States is exposed but these are managed directly by the individual Boards and Executive Management teams. Details on how these risks are managed can be found in each company’s own annual report.

The following list identifies some of the risks to the States which this section is intended to address and reduce in terms of likelihood and impact. There will invariably be more risks than can be practically listed below:

Principles

1. All SOEs should contribute towards the strategic aims, priorities, and desired outcomes of the States.
2. Service delivery should be aligned to the priorities of the States.
3. The merits of establishing a relationship with a SOE should be well defined and based on robust assumptions. 
4. A risk based approach to assurance, governance and the oversight of operational and financial performance should be exercised.
5. There should be a consistent approach to the utilisation of SOEs across the States and a continuous challenge required on both SOEs’ performance and the utilisation of SOEs as representing the most optimal mode of service delivery against viable alternative options.

Requirements

1. SOE obligation to make staff aware
   The most senior officer of each SOE must ensure that their staff are aware of the requirements of this section of the Public Finances Manual as it affects their organisation.
   
   
2. Responsibility of Treasury and Exchequer’s Shareholder Relationship Team
   The Head of Shareholder Relations maintain sufficient records to evidence that the SOEs are meeting their obligations under the Law and MoUs.
   
   
3. Requirements of the Companies (Jersey) Law 1991, as amended (the “Companies Law”)
   In addition to the legislative provisions and agreements that govern the operation of the SOEs set out in the Introduction and background, each SOE is a Jersey registered company and is therefore governed by the Companies Law. Each SOE must comply with the following requirements:
   • have a registered office in the Island in accordance with Article 67
   • the directors of an SOE must observe the duties listed in Article 74 in fulfilling their responsibilities
   • must maintain a register of directors and secretaries in accordance with Article 83
   • must maintain a register of members in accordance with Article 84
   • must produce an annual set of accounts in accordance with Article 105
   • should hold an AGM of the shareholder(s) of the company at which the annual report and accounts are to be tabled for adoption in accordance with Article 87 as well as the SOE’s Articles of Association and MoU
   • must produce and retain minutes of all general meetings, meetings of its members, directors, and committees of directors in accordance with Article 98.
     
     
4. Requirement for Memoranda of Understanding (“MoU”)

   The MoU complements the legislation and Articles of Association for each wholly owned SOE. It represents the internal guidebook to the shareholder relationship. There must be an MoU between the body and the States, as represented by the Minister for Treasury and Resources, for each wholly owned SOE.  These MoUs must be published to the States Assembly, and must cover the following areas:

   • the business objectives of the SOE
   • the objectives of the States’ ownership of the SOE
   • Key Performance Indicators (“KPIs”)
   • obligations to inform, consult and/or approve
   • director appointment and remuneration provisions
   • risk management
   • the requirements for a Strategic Business Plan
   • reporting requirements.
     
     
5. Periodic updates
   On a quarterly basis, to a timescale agreed with the Minister all wholly owned SOEs must provide financial information in the form required by the Minister for Treasury and Resources focusing on progress against objectives. All majority owned SOEs must provide financial information on a semi-annual basis in the form required by the Minister for Treasury and Resources.
   
   
6. Meetings
   The MoUs set out a calendar of meetings, besides the AGM, that must take place between the SOEs, the Minister for Treasury and Resources and Treasury officials, as well as define the items to be discussed, papers and reports to be tabled at each meeting. The dates of the quarterly meetings for the following year should be agreed with the company secretaries of the SOE by the last quarter of each year.
   
   
7. Meeting notes
   The Treasury and Exchequer’s Shareholder Relationship Team must ensure that official notes of all meetings with the SOEs are taken and these are circulated to attendees as soon as is practicable after the meeting to ensure the notes are an accurate record of discussions held during those meetings.
   
   
8. Strategic Business Plan (“SBP”)
   Each SOE is required by the MoU to produce a SBP, and keep it under review, setting out the SOE’s objectives and aims for the ensuing period covered by the SBP. The MoUs set out detailed requirements as regards what should be contained within the SBP as a bare minimum. The SOE must seek the approval of the SBP by the Minister for Treasury and Resources. Treasury officials may seek external assurance reviews of the SBP as deemed appropriate and necessary. At each quarterly meeting, the SOE must present an update on their performance against the Key Performance Indicators in the SBP.
   
   
9. Reporting
   Under the terms of the MoUs, the SOEs must provide such reporting on an annual and ad hoc basis for the purpose of preparing the financial statements of the States and to assist with the financial planning of the States. This information must be provided in line with the States of Jersey’s accounting timescales.
   
   
10. Provision of information
    SOEs must give the Minister for Treasury and Resources shareholder access to information to assist the Minister to properly and effectively respond, within the necessary timescale, to requests for information for Ministerial questions. SOEs must provide any other information required for the Shareholder to fulfil its responsibilities on behalf of the States.
    
    
11. Risk Management
    In accordance with each MoU, the Treasury’s Head of Risk must be invited to attend two of the quarterly shareholder meetings per annum with the SOEs. In addition, Treasury officials must bring any risk issues with respect to the SOEs that need to be considered and escalated to the attention of the Head of Risk.
    
    
12. SOJIL
    SOJIL holds the shares in Jersey Post, JT and Ports of Jersey as nominee for States of Jersey. Accordingly, dividends received from these entities are automatically paid to States of Jersey.
    
    Annual financial statements are prepared for SOJIL which note the dividends that were paid to the States of Jersey during the course of the year in respect of the shares held as nominee.
    
    The Directors’ resolution that is prepared to approve the annual financial statements also ratifies all actions of the directors during the course of the year, which include the signing of proxy forms for the Annual General Meetings of Jersey Post, JT and Ports of Jersey.
    
    
13. Retention of financial documents
    The Shareholder Relationship Team must ensure that documents in respect of the SOEs are retained in accordance with the periods set out in Retention of Financial Documents (see Supporting documents) in an appropriate format.

Supporting documents

Business Travel Policy

Procurement Best Practice and Procedures: User Guide and Toolkit

Retention of Financial Documents

Purchase card procedures

List of Accountable Officers

Governance questionnaire

Jersey Financial Reporting Manual

Purpose of States Funds

Frameworks for major, strategic

Special payments

Sponsoring Senior Responsibilities Officer

Supplying Senior Responsible Officer

Governance checklist and grant application for Arm's Length Organisations under £1m

Governance checklist and grant application for Arm's Length Organisations over £1m

Glossary

A

Accountable Officer

An official who has overall responsibility for a States Body or other organisation for which such an official may be appointed in accordance with the Public Finances Law​.

Aggregated Foreign Currency Cash Flow​

The net combined inflows and outflows in foreign currency over a given time period.

​Arm’s Length Organisation

An organisation which either has statutory fee levying powers or fulfils a role or function the Government of Jersey would otherwise perform (this definition does not extend to organisations which receive funding from the Government of Jersey of less than £75,000 per year).

​Asset

A tangible or intangible resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow.

B

​Benefit payments

Benefit payments are part of a social welfare framework established by Government Policy. They typically include a payment of money to people who have been identified as in need of support. These could include those who are ill, financially insecure, and elderly or those who have children, etc.​

C

​C&AG

The Comptroller and Auditor General of Jersey, whose duties are specified in the Comptroller and Auditor General (Jersey) Law 2014 and other legislation where the C&AG is required to appoint an auditor.

​Capital Rolling Vote

​A head of expenditure agreed in the Government Plan for general maintenance projects not specifically identified within the Major Projects Envelope.

​CEO

Chief Executive Officer.

​Chief Minister

​The head of the Government of Jersey and leader of the Council of Ministers.​Chief Officer of the States PoliceHas the command, direction and control of the States Police Force and of each of its police officers.

​CIF

​Common Investment Fund. The pool of assets available for the Government of Jersey to invest in accordance with the investment strategy published by the Minister for Treasury and Resources.

​Clawback

The act of retrieving money paid out by the Government of Jersey to a third party.

​CoM

See Council of Ministers​.

​Commercial Services team

​The Government of Jersey team with responsibility for the procurement of goods and services.

​Common Strategic Policy

​A document agreed and lodged by the Council of Ministers as required by the States of Jersey Law 2005.

​Complaints Panel

​The panel of independent volunteers which are available to form the States of Jersey Complaints Board when it is required to hear a complaint about a decision or administration process by any minister or department of the States.

​Consolidated Fund

​The account into which tax revenues and other relevant receipts are directed and from which payments for the majority of government expenditure are paid.

​Contingent liability

A possible obligation depending on whether some uncertain future event occurs, or a present obligation for which payment is not probable or the amount cannot be measured reliably.

​Council of Ministers

The Government of Jersey group consisting of the Chief Minister and at least seven other ministers, with duties described in the States of Jersey Law 2005.

D

​Department

A division of the Government of Jersey or a Non Ministerial Department as specified in the Public Finances (Jersey) Law 2019.

​Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life. It is used to account for declines in value. Organisations and businesses depreciate long-term assets for accounting purposes.

​Discretionary Financial Benefit

A transfer of value (monetary or otherwise) to a person or body to achieve results sought by States of Jersey policy. A discretionary financial benefit typically has the following characteristics:

• a transfer to a recipient which may be in return for compliance with certain terms and conditions;
• a transfer which may not directly give approximately equal value in return to the States (that is, there is a non-exchange transaction or subsidy so there may not be exact pound for pound value); or
• a recipient may have been selected on merit against a set of scheme-specific criteria

​Discretionary grant

​A one-off or regular Discretionary Financial Benefit which meets the definition of a grant but does not form part of an existing grant scheme.

​Donation

A transfer of value given, typically for charitable purposes and/or to benefit a cause. They impose no obligations on the recipient and offer little or no rights or benefits to the provider.

E

​EU

European Union.

Executive Leadership Team (ELT)

The ELT is an executive leadership team of the Government of Jersey’s public service. It's chaired by the Chief Executive and its membership includes:

• the Treasurer of the States and Assistant Chief Executive
• the Assistant Chief Executive and Chief Officer of People, Policy and Digital
• the Chief Officers of the following Departments:
• Customer and Local Services
• Children, Young People. Education and Skills
• Economy
• External Relations
• Infrastructure & Environment
• Health and Community Services
• Justice and Home Affairs
• Strategic Director, Assurance and Risk
• the Director of Communications
• the Chief People Officer

The following are not ELT members but have a standing invite:

• the Greffier of the States of Jersey
• a senior Representative of the Law Officers' department
  

F

​Feasibility

One of the four essential standards Accountable Officers must meet. Feasibility requires that the Accountable Officer should be satisfied that any proposed activity is likely to be successful in securing its intended result at a reasonable cost.

​Feasibility assessment

​A study to determine the viability of an idea, such as ensuring a project is legally and technically feasible as well as economically justifiable. Formal feasibility assessments are typically conducted when a Major Project is being considered.

​Finance charges

Interest and other costs, such as arrangement fees, that an entity incurs in connection with the borrowing of funds​.

​Fiscal Policy Panel

The organisation which reports on the state of the economy in Jersey and on the States’ finances in accordance with Articles 43-46 of the Public Finances (Jersey) Law 2019.

​Fixed assets

​Tangible, intangible and financial assets of a long-term nature. Typically these are assets that an entity owns and uses in its operations to generate income, not expected to be consumed or converted into cash within one year.

​FPP

See Fiscal Policy Panel.

G

​Government’s Investment Advisor

A third party organisation appointed by the Government of Jersey to provide advice and recommendations for the investments of the CIF.

​Government Plan

​The Government Plan sets out in detail how public money will be used to deliver the day-to-day services provided by government and non Ministerial departments and the Strategic Priorities set out in the Common Strategic Policy. It is composed of a detailed first year plan with outline priorities and an indicative spending envelope for the three subsequent years and is updated annually.

​Grant

A type of Discretionary Financial Benefit which does not confer the rights and benefits of a Sponsorship, but requires the recipient to comply with specific terms and conditions as to its use​.

​Grant scheme

​A system by which grants may be awarded if the proposed recipient meets certain specified criteria.

​GST

Goods and Services Tax as defined in the Goods and Services Tax (Jersey) Law 2007.

H

​Head of Expenditure

​An amount of money the States Assembly agrees may be used to deliver a service or strategic priority set out in the Common Strategic Policy.

​Hire purchase contracts ​

A form of lease that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration after which ownership of the asset transfers to the lessee.

I

​IFRS

International Financial Reporting Standards.

​Impairment

An accounting treatment by which a loss is recognised when the carrying amount of an intangible Asset or cash-generating unit exceeds its recoverable amount​.

​Income tax

Tax levied directly on personal or corporate income.

​Intangible asset

An identifiable non-monetary Asset without physical substance, such as goodwill, trademarks, and copyrights​.

​Internal Audit Charter

​The document which specifies the purpose of the Internal Audit function of the States of Jersey, along with reporting lines, scope of activities, and responsibilities.

​Investment

The placement of money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit.

​IT

Information Technology.

J

Jersey Appointments Commission

The independent body that oversees the recruitment of Government of Jersey employees and appointees to States supported or related bodies.

Jersey Financial Compliance Framework (JFCF)

The JFCF is an overarching framework developed to help the States of Jersey to establish and maintain effective financial management and to support the achievement of Jersey’s strategic aims, objectives and ultimately deliver expected outcomes.

Jersey Financial Reporting Manual

The technical accounting guide to the preparation of financial statements for the States of Jersey. It is complemented by guidance issued by the States Treasurer such as the Capital Accounting Manual. The Manual is based on the UK Treasury Financial Reporting Manual, adapted for States of Jersey specific situations.

​Jersey Property Holdings (JPH)

Now part of the Infrastructure, Housing and Environment Department. JPH is responsible for the real estate owned by the States of Jersey.

K

​Key Performance Indicator (KPI)

A quantifiable measure used to evaluate progress towards a population-level outcome.

​Key Stage Reviews (KSR)