Budget Transfer: Central Contingencies to various departments (2016 Voluntary Release Scheme Costs)

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A decision made 13 July 2016:

Decision reference: MD-TR-2016-0058
Decision Summary Title:	Transfer of funding between various departmental budgets and Central Contingencies to recognise the savings and costs associated with the Voluntary Release Scheme in 2016.		Date of Decision Summary:	12th July 2016
Decision Summary Author:	Head of Financial Performance		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Transfer of funding between various departmental budgets and Central Contingencies to recognise the savings and costs associated with the Voluntary Release Scheme in 2016.		Date of Written Report:	12th July 2016
Written Report Author:	Head of Financial Performance		Written Report : Public or Exempt?	Public
Subject: Transfer of funding between various departmental budgets and Central Contingencies to recognise the 2016 savings associated with the Voluntary Release Scheme.
Decision(s): The Minister approved a non-recurring budget transfer of £864,227.00 in 2016 from various departments’ revenue heads of expenditure, as outlined in the attached report, to Central Contingency – Budget Measures to recognise the 2016 savings associated with the Voluntary Release Scheme and £1,646,599.30 non-recurring budget transfer to departments from Central Contingency – Redundancy Provision for VR Applications approved and signed up to 30th June 2016.
Reason(s) for Decision: Article 18(1A) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from heads of expenditure to contingency expenditure in a financial year. On 16th and 17th April 2015, the Council of Ministers agreed to the request to approve non-recurring funding in 2015 totalling £5,100,000 from the Central Contingency – Redundancy Provision to various departments for the funding of the Voluntary Release Scheme. MD-TR-2015-0141 approved funding of £4,666,119 to fund the Voluntary Release Scheme in 2015 in line with the allocation of funding approved by the States Assembly in P.72/2015 Medium Term Financial Plan 2016 – 2019 (as amended). This Decision reduces departmental budgets to reflect the savings associated with the Voluntary Release Scheme and transfers the savings to Central Contingency, and also funds the next tranche of VR Applications to 30th June 2016.
Resource Implications: Various departments’ revenue heads of expenditure, as outlined in the attached report, to decrease by a total of £864,227.00 in 2016 and the Central Contingency – Budget Measures to increase by an identical amount. Various departments’ revenue heads of expenditure to increase by a total of £1,646,599.30 and Central Contingency – Redundancy Provision to decrease by the same amount. This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019.
Action required: The Head of Decision Support to notify the Finance Directors of all relevant departments that the Decision has been approved.
Signature:		Position: Senator A J H Maclean Minister for Treasury and Resources
Date Signed:		Date of Decision:

Budget Transfer: Central Contingencies to various departments (2016 Voluntary Release Scheme Costs)

Treasury and Resources Department

Ministerial Decision Report

Transfer of funding between various departmental budgets and Central Contingencies to recognise the costs and savings associated with the Voluntary Release Scheme in 2016.

Purpose of Report

To enable the Minister to approve the non-recurring budget transfer of £864,227.00 in 2016 from various departmental budgets to Central Contingencies – Budget Measures, and £1,646,599.30 from Central Contingencies – Redundancy to various departmental budgets, as outlined in Appendix 1. This is to recognise the savings and costs associated with the Voluntary Release Scheme so far and identify the full year effect of these savings are included in the MTFP Addition for 2017 – 2019.

Background

The Voluntary Release (VR) Scheme provides a mechanism for employees who wish to volunteer to leave the organisation through redundancy or early retirement to receive a redundancy payment or immediate pension. The scheme was made available to all employees in 2015 and closed at the end of July. As at the 31st May 2016 a total of 502 applications for VR had been received (329 in 2015 and 173 to date in 2016) and a total of 155 had been approved. The scheme remains open for the foreseeable future in order to support organisational change initiatives.

The Council of Ministers approved the allocation of £2,000,000 from Central Contingencies to create a Redundancy Provision in 2015 to fund the first tranche of the scheme. The States Assembly approved a further £20,000,000 to be added to the Redundancy Provision across 2015 and 2016 to be funded by transfers from the Strategic Reserve Fund with £4,000,000 to be transferred in 2015 and £16,000,000 in 2016. Following the completion of the 2015 VR scheme the remaining money was drawn down for funding of new applications in 2016. In total this left over £17 million available for VR funding from January 2016.

International Financial Reporting Standards (IFRS) interpreted for the States of Jersey in the Jersey Financial Reporting Manual (JFReM) require termination benefits to be recognised as an expense at the point at which the entity can no longer withdraw the offer of those benefits. Accordingly, the full cost of all VRs must be recognised at the point a binding contract has been signed with the employee.

To date a total allocation of £1.78million has been approved for 2016, although there are some agreements where the employee has not signed yet. An additional transfer of £91,390.50 is also required to be transferred for funding of VR’s agreed as part of the 2015 scheme where funds have not previously been transferred due to VR agreements not being signed at the date of the last transfer.

The transfer figure of £1.65 million is the total funding agreed for the period 1st January to the 30th June 2016. The final amount transferred to departments will only be confirmed once VR exit agreements have been signed by leaving individuals. This will leave £15.8 million remaining for funding redundancy.

Table 1 - Number of agreed departures by department and year of departure

	Scheme			FTE Savings

Department	2015	2016	Total	2015	2016	Total
Chief Minister’s Department	13	1	14	6.7	0.8	7.5
Community and Constitutional Affairs	1	4	5	0.7	4.0	4.7
Department for Economic Development, Tourism, Sport and Culture	4	1	5	2.9	1.0	3.9
Department for Environment	6		6	5.9		5.9
Department for Infrastructure	27	41	68	24	34.6	58.6
Education Department	16	3	19	8.4	1.6	10.0
Health and Social Services	23	3	26	15.5	2.9	18.4
Non-Ministerial	1	1	2	0.5	0.7	1.2
Social Security	9	2	11	5	0.5	5.5
Treasury and Resources	5	1	6	6.9		6.9
Total	105	57	162	76.5	46.2	122.7

Financial Savings				£4.213m	£1.319m	£5.532m

Total Cost of VR				£5.017m	£1.791m	£6.808m

Cost to Central Redundancy Provision				£4.786m	£1.78m	£6.566m

Note: The 2016 figures are based on Panel decisions up to the 31st May 2016 and is not a record of employees who have left under VR. These figures may fluctuate as employees are able to withdraw their interest up until the point they have signed an exit agreement.

As a result of the 2015 VR packages there are savings made in 2016 which were not identified early enough to be included in the MTFP 2016 - 2019. Appendix 1 shows part year budgets which will be removed from department’s revenue heads of expenditure in 2016. The full year effect will be included in the MTFP Addition 2017-2019. FTEs have been reallocated and reduced accordingly when approval was granted for the Transfer of Functions P.46/2015 and MD-TR-2016-0017.

Recommendation

The Minister is recommended to approve a non-recurring budget transfer of £864,227.00 in 2016 from various department’s revenue heads of expenditure to Central Contingency – Budget Measures, as outlined in Appendix 1 (C), to recognise the savings associated with the Voluntary Release Scheme from 2015.

The Minister is recommended to approve a non-recurring budget transfer of up to £1.65 million from Central Contingency – Redundancy Provision to Departments, as outlined in Appendix 1 (E and F).

Reason for Decision

Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure to heads of expenditure of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year.

On 16th and 17th April 2015, the Council of Ministers agreed to the request to approve non-recurring funding in 2015 totalling £5,100,000 from the Central Contingency – Redundancy Provision to various departments for the funding of the Voluntary Release Scheme.

MD-TR-2015-0141 approved funding of £4,666,119 to fund the Voluntary Release Scheme in 2015 in line with the allocation of funding approved by the States Assembly in P.72/2015 Medium Term Financial Plan 2016 – 2019 (as amended).

This Decision reduces departmental budgets to reflect the savings associated with the Voluntary Release Scheme and transfers the savings to Central Contingency, and also funds the next tranche of VR Applications to 30th June 2016.

This request is to remove budgets from departmental revenue heads of expenditure where savings have been made as a result of funding received from the Voluntary Release Scheme in 2015 in line with the allocation of funding approved by the States Assembly in P.72/2015 Medium Term Financial Plan 2016 – 2019 (as amended).

Resource Implications

Various departments’ revenue heads of expenditure, as outlined in Appendix 1, to increase by up to £1.65 million and the Central Contingency – Redundancy Provision to decrease by the same amount.

Various departments’ revenue heads of expenditure, as outlined above, to decrease by a total of £864,227.00 in 2016 and the Central Contingency – Budget Measures funding to increase by an identical amount. This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019.

Report author : Financial Performance Reporting Manager	Document date: 12th July 2016.
Quality Assurance / Review : Head of Decision Support	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2016-0058 - VR Savings 2016
MD sponsor : Director of Financial Planning and Performance