Government of Jersey

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A decision made (26/02/2009) regarding: Transfer of Budgets - GAAP Accounting.

Reference: MD-HA-2009-0017
Decision Summary Title:	Transfer of Budgets		Date of Decision Summary:	23 February 2009
Decision Summary Author:	Liz Middleton Finance Director		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:
Written Report Title :	Budget Transfers – GAAP Accounting		Date of Written Report:	23 February 2009
Written Report Author:	Liz Middleton Finance Director		Written Report : Public or Exempt?	Public
Subject: 2009 Budget Transfers between Revenue and Capital Heads of Expenditure as a result of moving to GAAP accounting.
Decision(s): The Minister approved net budget transfers of £87,000 for 2009 from revenue budgets to capital budgets.
Reason(s) for Decision: The States of Jersey is implementing Generally Accepted Accounting Principles (GAAP) in 2009. GAAP accounting requires that only expenditure meeting the GAAP definition of capital expenditure should be treated as such. All other expenditure must be accounted for as revenue. These budget transfers are the movements in budgets between capital and revenue required to align the budgeting treatment of expenditure with the GAAP accounting treatment. This does not change the total amount of expenditure approved by the States.
Resource Implications: None
Action required: Finance Director to seek Treasury and Resources Ministerial Approval for the transfer. Once approval has been obtained Treasury and Resources Department to action budget transfers.
Signature:		Position: Minister for Home Affairs
Date Signed:		Date of Decision (If different from Date Signed):

Budget Transfers - GAAP Accounting.

Home Affairs Department Report for Minister
Subject:	Budget Transfers – GAAP Accounting
Exempt Clause:	n/a	Date:	23 February 2009

Author:	Liz Middleton – Finance Director

Introduction

The purpose of this report is to seek the Minister’s approval to transfer the sum of £87,000 from the Home Affairs Department’s revenue budget to its capital budget in order to align budgeting with Generally Accepted Accounting Principles (GAAP).

Background

The States of Jersey is implementing Generally Accepted Accounting Principles (GAAP) in 2009. GAAP accounting requires that expenditure should be accounted for as capital only if it meets the GAAP accounting definition of capital expenditure, and revenue otherwise. Previously, ‘capital’ budgets have represented whatever the States Assembly voted as capital. The States have already approved capital allocations for 2009 in the 2009 Business Plan. These budget transfers move budgets between capital and revenue so as to align the budgeting treatment of 2009 expenditure with the GAAP accounting treatment.

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

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


2009 Capital Programme Per 2009 Annual Business Plan		Transfers from /(to) revenue budget (2009 expenditure only)	Re-stated Capital Budgets after 2009 expenditure transfer only
	£	£	£
Minor Capital	200,000	90,000	290,000
Total	200,000	90,000	290,000

Pre 2009 Approved Projects
All projects	1,405,900	(3,000)	1,402,900
Total	1,405,900	(3,000)	1,402,900
Net impact on 2009 Capital Budgets	1,605,900	87,000	1,692,900

The effect of the transfer is to increase capital budgets by £87,000 and to reduce the Department’s 2009 Revenue Cash Limit by an equivalent amount, from £45,586,700 to £45,499,700 a decrease of 0.2% (as detailed on Appendix A). This does not change the total amount of expenditure approved by the States.

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

Recommendation

It is recommended that the Minister approves the net transfer of £87,000 from the Department’s revenue budget to its capital budget in order to align budgeting with accounting treatment following the move to GAAP accounting.