Overall Management of Public Finances during the Covid-19 Pandemic (R.114/2021): Executive Response

Recommendations

Action

Target date

Responsible Officer

R1  Review  the  content  of  the Government  Financial  Reports  to consider:

• making the link between budgets in the Government Financial Reports and the amounts approved in the Government Plan clearer

• setting out a clearer analysis of the risks to income estimates and referring to information on risks and uncertainties published  by  the  IFG  or  in  the Government Plan as appropriate

• setting out the basis for expenditure estimates  (for  example,  reasonable worst  case,  prudent,  most  likely

The monthly financial reports continue to be developed in 2021 to provide the Executive Leadership Team (ELT) and Council of Ministers (CoM) with timely and relevant information to inform decision-making.

Steps have already been taken in 2021 to include:

• Comparison  to  Government  Plan  budgets, including a reconciliation of movements from the Government Plan approval to the current budget by  department/Reserves  consistent  with  that included  in  the  Statement  of  Outturn  Against Approvals in the Annual Report and Accounts.

• Reference to borrowing and draw down against the rolling credit facility in the context of cashflow requirements.

31st  December 2021  and  on- going  continuous improvement

Head  of  Group Reporting

outcome)  and  a  clearer  analysis  of uncertainties

• including cash flow forecasts and an analysis of cash flow risks; and

• providing information on key balance sheet items such as key funds

• Social Security Fund balances and forecasts.

• CIF  investment  performance  and  participant Fund investment values (e.g. Strategic Reserve, Social Security funds).

The  monthly  reports  are  part  of  the  sequence  and package of reports provided to ELT and CoM and act as a reporting bridge between the Government Plan and the Annual Report and Accounts. For consistency, they use the  central  IFG  forecasts  used  to  develop  the Government Plan as they are released during the year, supplemented with in-year data on actual receipts and other relevant metrics . The IFG reports include detail on the risks and sensitivity of the forecasts which is not duplicated in the monthly finance reports.

As reporting is developed and more components are drawn out separately (e.g. growth, rebalancing, fiscal stimulus) consideration is being given to an appropriate presentation of expenditure uncertainty. This must be balanced with the clarity required to effectively inform decision-making.

Report content will continue to be enhanced in 2021, responding to ELT and CoM feedback and recognising the points raised by the C&AG.

The reporting requirements are also being fed in to the design of the new financial system as part of the ITS project which will change the mechanisms but not the objectives of the reporting and provide opportunities for more sophisticated analysis and delivery.

There  is  a  balance  to  be  struck  between  timely  & insightful reporting useful for senior management and

Ministers and the complexity and technical detail which those in the accountancy profession may find useful. The  risk  of  overwhelming  users  with  endless  detail, which duplicates that which is reported elsewhere should be avoided.

Combining  performance  and  financial  reporting  will assist in minimising some of the duplication risk.

R2  Continue  to  develop  a  cash  flow modelling  system  and  ensure  that  it includes  cash  flow  implications  for Social Security Funds and a full audit trail.

The internal cash flow model is the subject of ongoing development and subsequent enhancements, there is a natural  link  to  the  implementation  of  the  Integrated Technology Solution and the way the States financial accounting and reporting will develop.

The  cash  flow  model  will  comprise  of  historic  data relating to income collection (shaped pre-dominantly by modelling from Revenue Jersey) and forward looking anticipated  budgetary  spend  in  line  with  approved Government Plans. This will then be assessed against actual  receipts  and  expenditure,  with  differences identified and investigated.

The model will allow assumptions to be made about future  revenue  and  expenditure  patterns  to  inform decisions about short-term borrowing and longer-term policy initiatives that might need to be considered.

30th  April  2022 (aligned  to  ITS implementation)

Director of Treasury and  Investment Management

R3  Record  a  breach  of  the  Public Finances Manual for the procurement of the revolving credit facility.

The  breach  documentation  has  been  drafted  for signature

30th September 2021

Treasurer  of  the States  and  Director Commercial Services

R4  Ensure  all  significant  updates  to financial  procedures  are  incorporated

The cross-departmental PFM Management Group will consider  its  process  for  producing  changes  to  the Manual to make it more agile and ensure it acts as a

31st October 2021 and ongoing

Director  of  Risk, Reporting & Audit

into the Public Finances Manual on a timely and consistent basis.

"single point of reference for procedures to be followed", as the C&AG rightly expects. In particular the "Reserve head  of  expenditure"  section  of  the  Manual  will  be revised to include procedures set out in the Minister's published policy.

R5 Review the preparation and approval of business cases during 2020 to identify opportunities  to  improve  the arrangements and processes.

The Investment Appraisal Team was established in late 2019  as  part  of  the  Strategic  Finance  function  to strengthen the processes surrounding business case preparation and approval.

Despite  the  acute  challenges  presented  by  the pandemic, the Team has already been able to support a demonstrable  improvement  in  the  overall  quality  of businesses cases, and steps are being taken in 2021 to drive  further  improvements  in  order  to  support  the organisation  to  deliver  business  case  standards  and processes that achieve a closer alignment with best practice. To date, revisions have been made to business case templates to provide more guidance. Structured training  through  the  Civil  Service  College  has  been provided  to  finance  staff  and  policy/operational managers  who  are  responsible  for  business  case preparation. Further training is also planned for Q4, 2021 which  will  be  delivered  by  the  Investment  Appraisal Team.

The  intention  is  to  support  a  culture  of  continuous improvement  that  involves  periodic  review  of  the effectiveness of existing processes and considers how evolving HM Treasury practice can be integrated into Jersey's approach. As part of this work, consideration will be given to the opportunities for improvement presented by the experiences of 2020.

31st  December 2021  and  on- going  continuous improvement

Head of Cost-Benefit Analysis and Investment Appraisal