FINANCIAL REPORT AND ACCOUNTS 2011 - States Assembly

THE ANNUAL REPORTTREASURER’S INTRODUCTION2 The Annual Report2.1 Treasurer’s IntroductionDepartments have been managing their budgets tightly during 2011, continuing with their initiatives to delivercurrent and future savings as part of the Comprehensive Spending Review (CSR) work. This focus continuesto help departments to work more efficiently, manage the timing of their expenditure and ensure thatresources are directed to the highest priority areas.Departments are being given greater flexibility by the Minister for Treasury and Resources so as toencourage longer term thinking in the management of their overall expenditure. This approach fits in with thecentral initiative of finding sustainable ways of delivering CSR savings. It is also an important feature of theMedium Term Financial Planning process, and it encourages departments to manage their expenditure overa three year period.There is increasing recognition that the States has to manage both revenue and capital expenditure for thelong term. The capital investment decisions will look to the future so that the States continues to invest in theright capital and infrastructure projects. Not only does this help departments deliver services, it helps boostthe economy and safeguards the Island for generations to come.The introduction of the Common Investment Fund (CIF), which had its first full year of operation in 2011, hasachieved a real improvement in the returns of States’ investments. In 2011 the value of the Strategic Reserveincreased by £7 million in contrast to falling global markets. The balanced Investment Strategy means thatthe short term volatility in risk seeking assets was offset by the other asset classes that form part of ourdiversified investment strategy. Both cash and bonds made steady gains over the year offsetting the shortterm impact of falls in the value of equity investments. It is encouraging that stock markets have ralliedstrongly so far in the first quarter of 2012 but there is a long way to go before we can be assured of positiveresults in 2012.2011 has been a very productive year for the States Capital Programme. The new Energy from Wasteplant was completed and handed over from the contractor and the Town Park was completed. Contractorsworking for Transport and Technical Services (TTS) started on the Town Park site at the beginning of the yearand worked quickly to transform the former car park into a new, contemporary park that meets the needs ofthe community. It is very well used and much valued by people in the locality.The States process of ‘allocating’ full budgets to capital schemes in year one means that at any point intime a significant amount of the Consolidated Fund balance can be committed as capital funding, but notyet spent. With the drive to stimulate the local economy through increased construction activity, the Stateshas been reviewing this position to ensure it progresses such work as quickly as possible. This has beensuccessful and can be demonstrated by the drop in unspent capital allocations at the end of the year. Inaddition, the States has achieved very competitive tender prices and has achieved more for less money.The format of these Accounts has not substantially altered from last year’s, but the States recognisesthat Accounting Standards are not static, and has followed the UK Government in adopting the FinancialInstrument Standards. These changes are explained more fully in Section 6.1 of this report.5