Budget transfer and use of income for Driver and Vehicle Standards (DVS) Vehicle Registration System

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A decision made 12 September 2016:

Decision Reference: MD-T-2016-0081
Decision Summary Title :	Use of income, increase of budgets and subsequent transfers between Revenue and Capital Heads of Expenditure for the replacement of DVS vehicle registration system		Date of Decision Summary:	08 September 2016
Decision Summary Author:	Finance Manager		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:
Written Report Title :	Use of income, increase of budgets and subsequent transfers between Revenue and Capital Heads of Expenditure for the replacement of DVS vehicle registration system		Date of Written Report:	08 September 2016
Written Report Author:	Finance Manager		Written Report : Public or Exempt?	Public
Subject: Use of income, increase of budgets and subsequent transfer between the Department for Infrastructure (“DfI”) revenue head of expenditure and the DfI Replacement Assets capital head of expenditure (Q00MC10012) totalling £250,000 for the replacement of the DVS vehicle registration system.
Decision(s): The Minister approved the use of additional income from vehicle registration up to £250,000 for the purpose of funding the replacement of the DVS vehicle registration system the increase of up to £250,000 income and expenditure budgets in 2016 in the DfI revenue head of expenditure; and the subsequent internal budget transfer in 2016 of up to £250,000 from the DfI revenue head of expenditure to the DfI Replacement Assets capital head of expenditure (Q00MC10012).
Reason(s) for Decision: Under International Financial Reporting Standards (IFRS) expenditure that meets the definition of capital expenditure must be capitalised. This budget transfer is the movement in budget between revenue and capital required to align the budgeting treatment of proposed expenditure with the accounting treatment, in order to comply with IFRS. Under Section 5.12 of Financial Direction 3.6 Variations to Head of Expenditure, additional surplus income of not more than 10% or £100,000 of the estimated income notified to the States for that particular service area and of a non-contentious nature, may be used automatically. Where the additional surplus income is greater than these limits, and the use is of a non-contentious nature, approval has been delegated to the Treasurer of the States. In all other instances, the approval of the Minister for Treasury and Resources must be obtained. Article 18 of the Public Finances (Jersey) Law 2005 (the Law) and Finance Direction No.3.6 ‘Variations to Heads of Expenditure’ (the FD) set out the procedures for transfers between heads of expenditure. Paragraph 5.1 of the FD and Article 18(2) (c) of the Law require departments wanting to transfer funds between heads of expenditure to obtain the approval of the Minister responsible for their administration. Article 18(1) (c) of the Law requires the approval of the Minister for Treasury and Resources for any budget transfers between heads of expenditure. Paragraph 5.2 of the FD delegates non-contentious transfers between heads of expenditure up to £1,000,000 to the Treasurer of the States. Paragraph 5.3 of the FD states that, in all other instances, the approval of the Minister for Treasury and Resources must be obtained. This transfer puts in place funding for the replacement of the DVS vehicle registration system.
Resource Implications: The DfI revenue head of expenditure will show an additional income budget of up to £250,000 and an additional expenditure budget of up to £250,000, a net nil change. This expenditure budget will subsequently be transferred to the DfI Replacement Assets capital head of expenditure (Q00MC10012).
Action required: The Finance Director to request the approval of the Treasurer of the States to approve the creation of income and expenditure budgets, and the budget transfer from revenue to capital as referred to in the accompanying report.
Signature:		Position: Minister for Infrastructure
Date Signed:		Date of Decision (If different from Date Signed):

Budget transfer and use of income for Driver and Vehicle Standards (DVS) Vehicle Registration System

DEPARTMENT FOR INFRASTRUCTURE

USE OF INCOME, INCREASE OF BUDGETS AND SUBSEQUENT TRANSFERS

BETWEEN REVENUE AND CAPITAL HEADS OF EXPENDITURE FOR THE

REPLACEMENT OF DVS VEHICLE REGISTRATION SYSTEM

Purpose of Report

To enable the Minister to approve the following:

the use of additional income from vehicle registration up to £250,000 for the purpose of funding the replacement of the DVS vehicle registration system;
the increase of up to £250,000 income and expenditure budgets in 2016 in the DFI revenue head of expenditure; and
the subsequent internal budget transfer in 2016 of up to £250,000 from the DFI revenue head of expenditure to the DFI Replacement Assets capital head of expenditure (Q00MC10012).

Background

The Driver & Vehicle Standards Department (“DVS”) provides an extensive and comprehensive range of services to all members of the Public, Educational Bodies, The Motor Industry, Enforcement Agencies, the Judiciary and States Departments.

The primary purpose of the Department is to ensure that safety and technical provisions, and associated documentation for drivers and vehicles in Jersey, are improved to, and maintained at, internationally recognised standards.

As part of the Department’s statutory requirements and as set out in the Motor Vehicle Registration (Jersey) Law 1993, The Inspector of Motor Traffic is required to compile and maintain a register of motor vehicles. Registration of all motor vehicles is compulsory and is essential to the Department’s function of regulating drivers and their vehicles.

The existing Vehicle Registration System (VRS) was installed in 2001 and has performed well for longer than its original estimated useful life, however it is becoming increasingly costly to maintain resulting in a false economy. As part of the Department’s commitment to online services, the new system will be scoped to include as many of these services as possible. Using LEAN principles this is an excellent opportunity to streamline many services and procedures ensuring we are able to offer the best customer experience as possible whilst working as efficiently as possible. In addition, there is a need to accommodate Vehicle Operator Licencing within the VRS, a function that is not catered for within the current system.

Though identified on the DfI replacement asset programme as needing replacement in 2016, no funding was available to be allocated from the existing Replacement Assets capital allocation, with the expectation that DVS would find additional funding as necessary to fund the replacement. This is expected to be in the region of £250,000.

During 2016, the unusual licence plate sales, sold both via auction and over the counter, have generated additional income at least £250,000 in excess of budget, which is being requested to fund the Vehicle Registration System replacement project.

As a result of the above, and to match the intended use of the funding with the accounting treatment, it will be necessary to create income and expenditure budgets of up to £250,000 in the DfI revenue head of expenditure, before transferring up to £250,000 expenditure budget in 2016 from the DfI revenue head of expenditure to the DfI Replacement Assets capital head of expenditure (Q00MC10012).

Recommendation

That the Minister approves:

the use of additional income from vehicle registration up to £250,000 for the purpose of funding the replacement of the DVS vehicle registration system;
the increase of up to £250,000 income and expenditure budgets in 2016 in the DfI revenue head of expenditure; and
the subsequent internal budget transfer in 2016 of up to £250,000 from the DfI revenue head of expenditure to the DfI Replacement Assets capital head of expenditure (Q00MC100

Reason for Decision

Under International Financial Reporting Standards (IFRS) expenditure that meets the definition of capital expenditure must be capitalised. This budget transfer is the movement in budget between revenue and capital required to align the budgeting treatment of expenditure with the accounting treatment, in order to comply with IFRS.

Under Section 5.12 of Financial Direction 3.6 Variations to Head of Expenditure, additional surplus income of not more than 10% or £100,000 of the estimated income notified to the States for that particular service area and of a non-contentious nature, may be used automatically. Where the additional surplus income is greater than these limits, and the use is of a non-contentious nature, approval has been delegated to the Treasurer of the States. In all other instances, the approval of the Minister for Treasury and Resources must be obtained.

Article 18 of the Public Finances (Jersey) Law 2005 (the Law) and Finance Direction No.3.6 ‘Variations to Heads of Expenditure’ (the FD) set out the procedures for transfers between heads of expenditure. Paragraph 5.1 of the FD and Article 18(2) (c) of the Law require departments wanting to transfer funds between heads of expenditure to obtain the approval of the Minister responsible for their administration. Article 18(1) (c) of the Law requires the approval of the Minister for Treasury and Resources for any budget transfers between heads of expenditure. Paragraph 5.2 of the FD delegates non-contentious transfers between heads of expenditure up to £1,000,000 to the Treasurer of the States. Paragraph 5.3 of the FD states that, in all other instances, the approval of the Minister for Treasury and Resources must be obtained.

This transfer puts in place funding for the replacement of the DVS vehicle registration system.

Resource Implications

The DfI revenue head of expenditure will show an additional income budget of £250,000 and an additional expenditure budget of £250,000, a net nil change. This expenditure budget will subsequently be transferred to the DfI Replacement Assets capital head of expenditure (Q00MC10012), reducing the DfI revenue head of expenditure by £250,000.

6. Action required

The Finance Director to request the approval of the Treasurer of the States to approve the creation of income and expenditure budgets, and the budget transfer from revenue to capital as referred to in the accompanying report.

Written by:	Finance Manager
Approved by:	Director of Finance