FINANCIAL REPORT AND ACCOUNTS 2011 - States Assembly

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THE ANNUAL REPORTTREASURER’S INTRODUCTIONIt is also important that we clarify a common area of confusion, the differences between pension accountingvaluations carried out annually for the accounts (under FRS 17) and pension actuarial valuations carried outevery three years.The two exercises are designed to cater for different purposes and therefore result in very different outcomes.The FRS 17 accounting standard is a UK accounting standard issued by the Accounting Standards Board.FRS 17 (Retirement Benefits) requires entities to recognise a pension liability (or asset) on their balance sheetbased on an estimated market valuation of the pension scheme.The FRS 17 valuation is not an appropriate measure of the long-term sustainability of the Pension Fund for thefollowing reasons:• It uses a discount rate which does not reflect the best estimate of the expected returns from theScheme’s portfolio and long term strategic asset allocation. The FRS 17 valuation currently takes aprudent view in this regard and results in the disclosure of a larger deficit under FRS 17 than identified inthe Valuation of the Actuary, all else remaining equal.• It disregards the commitment of States of Jersey to pay the Pre 87 Debt contributions over a periodoriginally certified to end in 2084. This results in a larger deficit under FRS 17 than identified in theValuation of the Actuary, all else remaining equal.• It does not consider the ability of the employer to amend contribution rates in the long term, to meet thefuture accruing benefits. The Valuation undertaken by the Actuary makes allowance for this potentialfuture amendment in the assessment of the sustainability of the Scheme.In contrast, the valuation undertaken triennially by the Actuary is the correct framework for undertaking anassessment of the sustainability of the Scheme because it reviews the financial condition of the Scheme andreports on the adequacy of the contributions to continue to support the benefits of the Scheme.For further clarification and explanation on Pension matters please see section 2.7.4 and Note 32.The remainder of the Annual Report in sections 2.2 to 2.11 gives an overview of the results for 2011 and howthe States are structured to deliver services to the public.6
THE ANNUAL REPORTFINANCIAL PERFORMANCE 2011AT A GLANCE – FINANCIAL RESULTS2.2 Financial Performance 20112.2.1 At a Glance – Financial ResultsTable 1£m £mFinalBudget / ApprovedActualBusiness Budget/ ActualYear Ended 31 December 20112010Plan Updated 20112011 Forecast2011546 States Net General Revenue Income 565 568 587Departmental Net Revenue Expenditure – BP Basis(564) – Business Plan (616) (616) (577)(6) – Carry forwards (16) (16)(29) – Additional Amounts (8) (6)(599) Departmental Net Revenue Expenditure – BP Basis (616) (640) (599)(53) Operating Deficit for the Year (51) (72) (12)(17) Trading Operations Net Revenue Expenditure (3) (4) 1(70) Deficit adjusted for Trading Operations (54) (76) (11)GAAP Adjustments(37) – Depreciation (37) (37) (34)(130) – Impairments (8)– – Asset Disposals 2(167) GAAP Adjustments (37) (37) (40)22 Other Income/(Expenditure) and Adjustments 17(215) Gross Accounting deficit for the Year (91) (113) (34)(14) Consolidation Adjustments (1)(229) Net Accounting deficit for the Year (35)A more detailed analysis of performance is given in section 2.5, which also explains what makes up each item.2.2.2 Summary of PerformanceThe States of Jersey finds itself in a favourable position at the end of 2011 compared with the projectedposition in the Annual Business Plan, which projected an operating deficit of £51 million comparedto actual deficit of £12 million.States Net General Revenue Income was £22 million better than originally budgeted, at £587 million• More revenues than expected from Salary and Wage Earners (£16 million) due to an increase indeclared income, a larger than expected impact of the freezing of exemption limits and lower interestrelief due to low interest rates.• Tax from investment holders and self employed persons also exceeded budget by £3 million, andCompany Tax by £10 million (most of which was identified in the 2012 Budget).7
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States of Jersey TreasuryCyril Le M
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