Portfolio Charging Reviews

The PCR should look at all activity in scope of the Charging Framework and consider the potential to change current charging levels and start or stop charging, to better achieve the Government’s policy objectives. It is an opportunity to:

• identify all activities in scope of the Charging Framework across the Portfolio and which ones are currently charged for
• compare and analyse different charges for consistency with the existing policy authority to charge
• evaluate the performance of charges with the existing policy authority to charge
• identify potential for new and existing charges
• identify opportunities to amend or discontinue specific charging activities
• identify how changes in actual cost are accounted for in the current final charges
• identify where indexation is used and could be used to simplify cost and price management, without distorting policy outcomes
• for regulatory activity, assess the effectiveness of stakeholder engagement strategies and opportunities for improvement.

The PCR is reported to the Portfolio Minister and may include recommendations for the Minister’s consideration.

The Department of State should plan its PCR, including allowing enough time to coordinate across all portfolio entities and for the responsible Minister and the Minister for Finance to consider the report before the relevant Budget. This plan should also allow time for the Government to consider the review outcomes and/or any of the Minister’s decisions on the recommendations in the budget process, as necessary.

The length of the timeframe in the plan for the PCR will depend on:

• engagement and processes for agreeing a Terms of Reference for the PCR
• the number of entities in the portfolio
• the number and complexity of the entities’ existing charging arrangements
• the quality of the records of the authorities, processes and costs of the activities that are charged for
• internal processes involved in the preparation, approval, and submission of the review report to the responsible Minister and the Finance Minister.

Information sources for the Portfolio Charging Review

Most of the information for the PCR should be readily available through entities’ regular monitoring and evaluation of the performance of charging and activities that are charged for.

Where the information to allow a complete and robust PCR, or to allow a complete and robust assessment for a particular activity, is not available, this becomes a recommendation for action to be presented to the responsible Minister.

Information sources may include:

In addition, portfolio entities may use information from a variety of sources to inform the PCR of issues and opportunities. These sources could include internal and external enquiries, audits and other reviews of operations or specific activities. This information may relate to either or both regulatory and non-regulatory activities, but should be recent (that is, produced in the preceding 2 or 3 years).

Stakeholder feedback is a valuable source of information about issues and opportunities with charging arrangements. Stakeholder consultation for the PCR is not required, however, portfolio entities may decide to consult, particularly if stakeholder feedback has not occurred recently. In such circumstances, consultation should occur in time to provide the necessary information to the department.

For each Department of State, the Terms of Reference for the PCR is agreed between the responsible Minister and the Minister for Finance to assist in appropriate focus and timely delivery. 

Before the PCR starts, to minimise duplication of effort, allow for specific issues of concern, ensure appropriate timing, and accommodate other reviews agreed to by Government, a Terms of Reference for the PCR must be agreed between the Portfolio Minister and the Minister for Finance.

Activities in scope of the PCR are all activities that are not excluded by the Charging Framework. This means that only explicitly identified activity in the Charging Framework, the activity of raising of a general tax and any activities agreed in the Terms of Reference for a PCR. How a charge is raised for an activity is not a reason to exclude the activity from the PCR. 

Department of State should consult Finance on the most appropriate current approach for the Terms of Reference and on the process for Minister’s to agree the Terms of reference.

The Department of State should collect information from each portfolio entity to inform the PCR. 

At the request of the Accountable Authority of the Department of State, the Accountable Authority of each portfolio entity should provide the following information as part of the review:

• A list of all the entity’s activities in scope of the Charging Framework, including a description of the policy objectives for the activity, the legal authority for the activity, a description of who is charged and what they are charged for
• For each activity that is charged for:
  • the types of charges used for the activity
  • the policy approval to charge
  • the legal source of the authority to charge
  • the rationale for charging for each activity
  • the amount of revenue raised each year, total costs, and the rates of charges
  • an analysis of any policy, legal, operational issues and risks identified for charging
  • a summary of ongoing stakeholder feedback related to charging
  • an evaluation of the effectiveness of stakeholder engagement on charging
  • an assessment of whether the level of the charges or the decision to charge should be amended, and on what basis, to better achieve the Government’s policy objectives.
• For each activity that is not charged for:
  • the rationale for not charging for the activity
  • the cost each year for the activity
  • an analysis of any policy, legal, operational issues and risks identified against charging
  • a summary of any ongoing stakeholder feedback
  • an assessment of whether charging is now appropriate and on what basis, to better achieve the Government’s policy objectives.
• For each regulatory activity that is charged for, the following additional information should be included in PCR:
  • the Government policy approval to charge or not for the regulatory activity – absence of a clear decision is a finding that should be addressed in the recommendations for action to the Portfolio Minister
  • the Government policy approval for the level of the charges
  • a statement of how the entity knows the costs are the minimum efficient costs
  • data on expenses and revenue for the activity over the past 5 years (or another period for which data is available if the activity has been in place for less than 5 years) that show alignment or otherwise to the Government decision on the price level
  • a website link to the CRIS for the activity
  • an evaluation of performance of the charging with respect to the activity objectives

The portfolio entities should assess the potential to charge for existing and/or new activities, including pricing to recover part or all the costs of the activity. This may include charging for activities that have previously been provided for free or for activities that have not previously been provided.

Stage 1 of the Charging Lifecycle contains a policy design and rationale process for charging that may assist in determining whether an existing activity has the potential to be charged for.

Entities should assess whether a charging arrangement that is classified as general taxation remains most appropriate for the policy objectives of the Government. Entities should also assess whether indexation of pricing has caused the level of any charging to vary from the Government’s policy authority for that charge.

The Department of State is responsible for preparing the PCR report.

The portfolio entity must submit the PCR report to the responsible Minister for approval and must provide a copy to the Finance Minister.

The PCR report should be submitted to the responsible Minister in time for policy proposals to implement recommendations, if any, to be brought forward for Government consideration in the relevant Budget context.

Where a PCR identifies adjusted or additional charging that requires Government agreement, the responsible Minister may bring forward new policy proposals as part of relevant Portfolio Budget Submissions for Cabinet consideration during the Budget process, without the Portfolio Minister being required to seek further authority to do so. 

The entity should consult with Finance during the preparation of the PCR. 

Early engagement, particularly during the planning and conduct of the review, will assist in finalising the review. There may also be a further need for the department to liaise with portfolio entities to clarify provided information, assure its accuracy and quality, or seek additional information. 

Finance has developed PCR Information Sheet and Templates, available under Tools and templates in the right hand menu, to assist entities complete a PCR and the report, and the Portfolio Charging Reviews schedule.