The Australian Government charges the non-government sector for a range of regulatory activities by recovering some or all of the efficient costs of those activities. Regulatory activities are generally those activities where the government wishes to control or influence behaviour, manage risk and/or protect the community. They usually include an enforcement or compliance element and may not involve user discretion. Legislation is always required for these charging activities.
Where the Australian Government has made a decision to charge for a regulatory activity on a full or partial cost recovery basis, these activities are subject to the Australian Government Cost Recovery Guidelines (the CRGs). The CRGs set out the overarching framework under which government entities design, implement and review regulatory charging activities. While the six overarching charging principles apply to regulatory charging activities, they must also meet the requirements in the CRGs, including:
- policy approval from the Australian Government to charge
- statutory authority to charge
- alignment between expenses and revenue
- up-to-date, publicly available documentation and reporting.
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Stage 1 Policy approval to cost recover |
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Stage 2 Charging Model and CRIS
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Stage 3 Implementation and Ongoing management of activity
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Stage 1 – Policy approval to cost recover
The objective of Stage 1 is to gain policy approval from the Australian Government to charge for a specific government activity through a New Policy Proposal.
As part of the NPP to the Australian Government, government entities must assess the risks associated with implementing a new regulatory charging activity or making changes to an existing regulatory charging activity. This is undertaken through a Charging Risk Assessment (CRA). The CRA rating must be agreed with the Department of Finance and included in the policy proposal.
A CRA is required as part of the development of any regulatory charging policy proposal. The CRA asks a number of questions to assess the complexity, materiality and sensitivity of implementing a regulatory charge. The purpose of the CRA is to help government entities to identify and analyse regulatory charging risks. It helps to identify implementation risks and informs the risk engagement strategy adopted by the entity.
The CRA rating also determines whether CRIS needs to be agreed for release by the Finance Minister, as well as approved by the responsible Minister. A CRA rating of:
- high, means that the responsible Minister will need to seek the Finance Minister’s agreement to the release of the CRIS before charging begins
- medium or low, means that the CRIS can be approved by the responsible Minister and does not require the Finance Minister’s agreement for release before charging begins.
By identifying areas of implementation risk, the CRA informs risk engagement strategies and level of documentation. Responsible entities and Ministers determine how to engage with the identified risks (e.g. by providing more detailed information in the CRIS, engaging with stakeholders in different ways or other processes).
A CRA template is available under Templates and Tools.
Stage 2 – Charging model and CRIS
After the Australian Government has provided policy approval to a New Policy Proposal to charge for a specific regulatory activity, the objective of Stage 2 is to develop and document the charging model, prepare legislation, and consult with stakeholders. This development is documented through a Cost Recovery Implementation Statement (CRIS).
Each regulatory activity that is cost recovered, regardless of financial value, must be documented in a CRIS before new or revised charges commence.
A CRIS provides the basis for engagement with stakeholders on various charging aspects of the activity and provides key information on how charging (on a cost recovery basis) for a specific government regulatory activity is implemented. The level of information in a CRIS is proportional to the complexity, materiality and sensitivity of the activity.
Each CRIS includes:
- background information on the regulatory charging activity, including the outputs that the activity will produce to achieve government policy outcomes
- details of the Australian Government policy approval to charge for the activity
- details of the legislation authorising the charges
- an explanation of how the activity was costed
- an explanation of the design of charges
- an assessment of regulatory charging risk
- the stakeholder engagement strategy, including a summary of the most recent consultation and stakeholder views
- financial estimates for the activity (i.e. expenses and revenue)
- reporting on financial and non-financial performance of the activity
- key forward dates and events, including the next portfolio charging review.
Government entities are encouraged to use the CRIS template to assist in meeting the documentation requirements for regulatory charging activities. Government entities are encouraged to use the CRIS template available under Templates and Tools.
Stage 3 – Implementation and Ongoing Management
Following implementation of a new charging activity, accountable authorities are responsible for the ongoing management of that charging activity.
In particular for regulatory activities, it is the responsibility of the accountable authorities to ensure that the requirements and principles of the Cost Recovery Guidelines are being met, (such as publication of the CRIS prior to commencement of charging and the update of financials with estimates and actuals on an annual basis). When there are policy or operational changes to the activity (including resulting changes to the cost model), the previous CRA is required to be updated to determine the risk rating of the proposed changes to the activity.
If the newly assessed CRA rating is ‘high’ or ‘medium’, then it is likely that the change may be of a policy nature and require approval from the Australian Government. In this case, Stage 1 processes may be triggered and the CRA rating will be included in the New Policy Proposal. If the CRA rating is ‘low’, then it is likely that the change is operational in nature and the relevant approvals can be provided by accountable authorities and responsible Ministers.
For the ongoing management of all existing and potential charging activities, Departments of State will conduct periodic reviews within their portfolios at least every five years, in accordance with the published schedule of portfolio charging reviews or at other times agreed by the Finance Minister.