States Assembly | R-76-2022

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STATES OF JERSEY

PROCEDURES FOR ALLOCATIONS FROM THE RESERVE

Presented to the States on 6th May 2022 by the Minister for Treasury and Resources

STATES GREFFE

2022 R.76

Policy for allocations from the Reserve

The Reserve is an important component of the Government Plan as it provides a degree of flexibility to respond to unforeseen needs for expenditure that may emerge during the year.

Article 15(3) of the Public Finances (Jersey) Law 2019 (the "Law") grants the Minister for Treasury and Resources the power to direct how an appropriation for a reserve head of expenditure may be spent. Article 30(2)(a) of the Law requires the Minister to issue a written statement to the States setting out:

"(i) the Minister's procedures for directing, under Article 15(3), how an approved appropriation for a reserve head of expenditure in a government plan may be spent, and

(ii) the expected purposes or subjects on which the Minister may direct that such appropriations be spent"

This statement is therefore issued in accordance with Article 30(2)(a), and should be read in conjunction with the information in the Government Plan. This statement applies to:

• the Reserve for Central Risk and Inflation Funding (capital programme);

• the Central Planning Reserve;

• the Reserve for Centrally Held Items; and

• the General Reserve.

as set out in the Government Plan, which collectively make up the Reserve.

For the avoidance of doubt, this statement replaces and supersedes the policy previously published as R.60/2021. It contains the following sections:-

Allocations into the Reserve
Categories of the Reserve
Allocations from the Reserve
Drawdown of approved funding
Monitoring
Unspent balances in the Reserve
Reports to the States Assembly

ALLOCATIONS INTO THE RESERVE

There are a number of different ways in which funding can be allocated to the Reserve, as set out below:

- amounts as set out in the Government Plan;

- transfers under Article 18 of the Law from a head of expenditure to enable an allocation to be made within the same financial year;

- transfers under Article 19 of the Law from a head of expenditure to allow an allocation to be made within the next financial year; and

- allocations under Article 21 of the Law where income is in excess of expectations e.g. departmental income and the department concerned has not been given permission to spend that excess income, or from capital receipts or a transfer from a Fund.

CATEGORIES OF THE RESERVE

Within the Reserve, the Government Plan identifies four heads of expenditure. These are:

• the Reserve for Central Risk and Inflation Funding;

• the Central Planning Reserve;

• the Reserve for Centrally Held Items; and

• the General Reserve.

All allocations must only be used for the purpose allocated by the Minister, with any excess funds being returned to the Reserve from which they were allocated. The Minister is able to approve a repurposing of funding she has allocated if she considers the request from the receiving department is justified.

Reserve for Central Risk and Inflation Funding

The Reserve for Central Risk and Inflation is a provision for risk and inflation in relation to the capital programme. The purpose of the reserve is to provide funding to meet inflation related to capital projects and provide central budget capacity to compensate for risks inherent in the delivery of capital projects. It is expected that risk and inflation provisions for all projects in the capital programme will be held in this reserve.

Central Planning Reserve

The Central Planning Reserve (CPR) has been established in recognition that projects may require access to funding to conduct initial exploratory work that will gather the necessary data and understanding to support the development of a robust and comprehensive business case.

The CPR is a source of one-off funding intended to support future capital projects e.g. for pre-feasibility studies.

Reserve for Centrally Held Items

This is a centrally held provision intended to fund items such as inflation. It provides budget to meet costs that are automatically driven by factors such as inflation or agreed pay awards.

The Reserve for Centrally Held Items consists of several sub-components as outlined in the table below.

Sub-components	Purpose
Pay award inflation	Provision for the forecast costs of future inflationary pay awards including associated social security and pension requirements.
Pension and Social Security Increases	Centrally held increases to meet pension and social security increased costs.
Non-pay net inflation	From 2021 onwards funding is held in reserve for the forecast net non- pay inflation requirements across government.
Court and Case Costs smoothing reserve	Departments involved in civil and criminal judicial proceedings hold annual budgets for court and case costs. Expenditure on court and case costs is highly variable and driven by demand that is largely outside of the control of departments. The court and case costs smoothing reserve provides a source of funding to meet peaks in demand. In years where court and case costs are lower than budgeted, surpluses are allocated to the smoothing reserve in order to build capacity for the future.
Markets smoothing reserve	Income from market traders is used to run and maintain the Island's public markets. When income from the public markets exceeds expenditure, the surplus is transferred to the markets smoothing reserve to build capacity for future expenditure such as maintenance or refurbishment needs. In years where expenditure is higher than income funding can be withdrawn from this reserve.

Independent Jersey Care Inquiry	Centrally held provision for costs associated with the Independent Jersey Care Inquiry and its recommendations.
Revenue consequences of capital schemes	Centrally held reserve for the revenue consequences of capital initiatives, which will be released once projects in the capital programme have reached the point of incurring associated revenue costs. Funding is held in the reserve due to the inevitable variability involved in the timescales for capital projects, which are subject to assumptions and estimation.
Capital Smoothing Reserve	The capital smoothing reserve is intended to support improved cashflow management for projects. Allocations of funding to the reserve will typically be linked to individual projects, but where no longer required for previously identified purposes, funding can also be used to support other smoothing requirements including inter alia: opportunities to accelerate delivery of existing projects, further initiatives within the scope of an existing project head of expenditure, project cost pressures.

General Reserve

The General Reserve is intended to meet unforeseen pressures or advance funding for urgent expenditure in the public interest. Unlike allocations from the Reserve for Centrally Held Items transfers of funding from the General Reserve will require proactive decision making and will be subject to investment appraisal.

The General Reserve consists of several sub-components as outlined in the table below.

Sub-components	Purpose
Restructuring Reserve	Centrally held provision to assist in the process of restructuring and modernisation. This includes redundancy provisions, and initiatives to improve the quality and/or efficiency of public services, such as a zero-based budgeting programme.
Annually Managed Expenditure (AME) contingency	Annually Managed Expenditure is centrally held funding to provide contingency for specific types of expenditure that can be significantly affected by wider conditions and where influences on expenditure are not predictable, such as changes in wider economic conditions, or other major unexpected events. This is currently held for benefit spend and higher education costs.
Departmental Expenditure Limit (DEL) contingency	A centrally held fund for all other urgent and unforeseen, short-term funding needs that cannot be met from existing heads of expenditure.
COVID contingency	Within the General Reserve, funds have been allocated as part of Government Plan to provide further funding for Covid-19 impacts on the health or safety of any of the inhabitants of Jersey and to the stability of the economy in Jersey, in recognition that there are still significant uncertainties around the timing and quantum of need for such funding.
Brexit contingency	Funding held centrally for urgent and unforeseen, short-term funding needs relating to the consequences of Brexit that cannot be met from existing heads of expenditure.

ALLOCATIONS FROM THE RESERVES

This policy for allocations from the Reserve includes the requirement for the Treasurer of the States to make recommendations for approval of additional funding allocations to the Minister. In certain limited circumstances the Treasurer of the States may consider that he has a conflict of interest and should not be part of the process to make recommendations. In the event of those limited circumstances applying, the Treasurer of the States has delegated his role to Group Director, Strategic Finance. The Treasurer of the States has also delegated his role where the amount recommended for approval are for £500,000 or below. (Treasurer's Decision reference TR-2020-TD051)

Process for allocations out of the Reserve for Central Risk and Inflation Funding

Unless otherwise directed by the Minister for Treasury and Resources, allocations from the Reserve for Central Risk and inflation Funding will be subject to the process outlined below. The relevant form to be completed and forwarded to the Investment Appraisal Team for review.

The Investment Appraisal Team will provide the Treasurer of the States with Review by sufficient information to allow him/her to reach a recommendation on the use of

the funding. The Treasurer of the States will decide to either: -

Treasurer of • recommend that the Minister for Treasury and Resources approves an

the States allocation of funding; or

• refer the request back to the Investment Appraisal Team

Minister for Under the Law, the Minister for Treasury and Resources has the authority to approve

allocations from the Reserve.

Treasury

and The Minister for Treasury and Resources will either:

Resources •• adeppclriovnee thea "pu requbliesc" t 1 and refer it back to the Investment Appraisal Team.

Ministerial Decision to agree an allocation; or

Approval

In reaching a decision, the Minister will consider the recommendation of the Treasurer of the States. The Minister can reject the recommendation of the Treasurer of the States but must document his/her reasons for doing so.

Process for allocations out of the Central Planning Reserve and the Reserve for Centrally Held Items

Unless otherwise directed by the Minister for Treasury and Resources, allocations from the Central Planning Reserve and the Reserve for Centrally Held Items will be subject to the process outlined below.

The Investment Appraisal Team will provide the Treasurer of the States with Review by sufficient information to allow him/her to reach a recommendation on the use of

the funding. This will typically involve a completed Business Justification Case, but in some circumstances, such as allocations for pay awards or funding assigned to a

Treasurer of specific project in the Capital Smoothing Reserve, supporting information will

the States usually involve a simpler summary of financial requirements.

The Treasurer of the States will decide to either: -

• provide a recommendation to the Minister for Treasury and Resources as to whether the application for funding should be approved; or

• refer the request back to the Investment Appraisal Team

Minister for Under the Law, the Minister for Treasury and Resources has the authority to approve

allocations from the Reserve.

Treasury

and The Minister for Treasury and Resources will either:

• approve a "public" 1 Ministerial Decision to agree an allocation; or

Resources

Approval decline the request and refer it back to the Investment Appraisal Team.

Process for allocations out of the General Reserve

Allocations from the General Reserve require a request for funding to be made to Treasury and Exchequer by the Accountable Officer of a Department or Senior Responsible Owner. All requests should be accompanied by documented confirmation that the lead Minister (or Accountable Officer where only Non-Ministerial Departments are involved) is supportive as well as evidence that any other Ministers or Accountable Officers impacted have been consulted and have given their assent to the proposal.

Requests for funding will be submitted to the Investment Appraisal Team within the Treasury and Exchequer, which will ensure that all requests are subject to a consistent and robust investment appraisal process. The appraisal process will be focused on ensuring there is sufficient information and supporting evidence captured in a request for funding to enable the Minister for Treasury and Resources to take an informed decision.

Funding requests will generally be set out in a business case that will provide:

• the nature of the expenditure and the reason it has arisen;

• the rationale for investment (the Strategic Case);

• the options that have been considered, and an assessment of benefits (the Economic Case);

• a description of any procurement processes required and other commercial matters (the Commercial Case);

• a financial analysis including details of key assumptions and an explanation as to why the expenditure cannot be met from existing budgets (the Financial Case); and

• details of the monitoring arrangements that will be put in place to ensure the project achieves its objectives, a description of the critical risks, and milestones (the Management Case)

3.3.1 Allocation process from the General Reserve

Unless otherwise directed by the Minister for Treasury and Resources, allocations from the General Reserve will be made subject to the following process and there will be a de minimis of £100,000.

The Investment Appraisal Team (IAT) will consider all requests for funding. It will provide challenge and review the merits of the request including the rationale for

Review by the investment, value for money, key financial assumptions, affordability and

deliverability.

Investment

Appraisal Team Following its review, the IAT will decide to either:

• recommend that the Treasurer of the States advises the Minister to approve the application for funding; or

• refer the request back to the department.

The Treasurer of the States will consider all requests for funding recommended by the Investment Appraisal Team and decide to either:

• provide a recommendation to the Minister for Treasury and Resources as to whether the application for funding should be approved; or

• refer the request back to the Investment Appraisal Team.

Review by the

Treasurer of the In reaching a decision, the Treasurer of the States will seek the comments of the

States or PTheAOTanread smureray sof eethek theS tatvieewss wiof ll othconersi deSenr a ior ranOffgeic ersof ffacromtorso, utswhiidce h themaTyr eincasluryude. Principal whether the expenditure:

Accounting • is necessary and the operational need could not be met in some other

way;

Officer • would imply or commit a permanent and recurring need for expenditure,

as these would need to be included in next Government Plan;

• could be met from underspends in the requesting department or elsewhere within government.

Where a request for funding is made by Treasury and Exchequer, the Treasurer of the States will declare a conflict of interest and this stage in the process will be undertaken by the PAO.

Under the Law, the Minister for Treasury and Resources has authority to approve allocations from the Reserve.

The Minister for Treasury and Resources will either:

• approve a "public" 1 Ministerial Decision for successful requests; or

Minister for • refer unsuccessful requests back to the Investment Appraisal Team with the reasons that the bid was not approved and an agreed course of action.

Treasury and

Resources Prior to making a funding allocation, the Minister will circulate the draft Ministerial

Decision to the Council of Ministers for information before it is signed.

In reaching a decision, the Minister will consider the recommendation of the Treasurer of the States and the comments from the appraisal process. The Minister can reject the recommendation of the Treasurer of the States but must document his/her reasons for doing so.

DRAWDOWN OF APPROVED FUNDING

If a transfer from the Reserve is approved by the Minister for Treasury and Resources, funds approved will be transferred to the relevant head of expenditure upon request by the Accountable Officer, or Senior Responsible Officer, according to an agreed drawdown schedule. Once funding has been transferred it becomes the responsibility of the Accountable Officer with responsibility for the relevant head of expenditure.

During the approval process, the Minister may have requested certain funding conditions are included in the Ministerial Decision. The allocations to the relevant head of expenditure will only occur once these funding conditions have been met.

Where funding has been drawn down and is unspent at the end of the financial year, it will return to the Reserve. Where unspent balances are required for the same purpose in the following year, the Minister may approve a Ministerial Decision in the subsequent year to reissue the funding without a need to repeat the funding application and assessment process.

MONITORING

Periodically, the Accountable Officer, or Senior Responsible Officer, in receipt of funding from the General Reserve, will be required to confirm to the Treasury and Exchequer information related to inter alia:

- the amount of the allocated funding spent to the date of the request for information;

- the forecast total expenditure from the reserve funding allocated;

- the way funding has been spent and that this is consistent with the purposes approved; and

- performance management.

Monitoring of initiatives funded from the General Reserve is the responsibility of the Accountable Officer and will be supported by the government-wide performance management arrangements developed and delivered collaboratively by the Chief Operating Office, Department for Strategic Policy, Planning and Performance, and the Treasury and Exchequer.

UNSPENT BALANCES IN THE RESERVE

By its nature amounts allocated to the Reserve may remain unspent and can be returned to the Consolidated Fund at the end of a financial year, depending on the financial position. The Minister for Treasury and Resources may approve a Ministerial Decision to allocate unspent balances in the Reserve to be made available in the Reserve in the following financial year.

REPORTS TO THE STATES ASSEMBLY

All decisions made by the Minister for Treasury and Resources relating to the Reserve will ordinarily be public and the States will receive updates of all expenditure allocations as part of the six-monthly Budget Management Reports presented by the Minister.

All requests for funding provided to the Minister, whether successful or otherwise will be reported to the Corporate Services Scrutiny Panel on a monthly basis.

END NOTES

1 In some cases, it may be necessary to restrict circulation of Ministerial Decisions, for example when individuals are affected and potentially identifiable.

Procedures for allocations from the Reserve