Guidance Note

 

The Department of Finance is supporting Ministers, departments and regulators to issue or refresh Ministerial Statements of Expectations (SOEs) for regulators, and corresponding Regulator Statements of Intent (SOIs).

Ministerial Statements of Expectations are issued by the responsible Minister to a regulator to provide greater clarity about government policies and objectives relevant to the regulator in line with its statutory objectives, and the priorities the Minister expects it to observe in conducting its operations.

This note provides guidance on the development of Ministerial Statements of Expectations and Regulator Statements of Intent. Based on some Frequently Asked Questions, additional guidance is provided below on who are ‘regulators’ for the purpose of these statements and this resource managment guide, how statements apply to regulatory functions within entities, as well as information on process and timing.

In line with a stewardship approach to regulatory reform, Ministers, Secretaries and Heads of Regulators are responsible for identifying and settling what are the regulatory functions within their portfolios. The intent of this note is to provide factors for consideration and to support consistency across portfolios. It is also a ‘first principles’ approach, with the understanding that there will be exceptions and grey areas. Finance values discussing approaches with entities in these cases, and including some of these in the guidance note for consideration by other entities.

Definition of regulator and regulatory functions

The Government expects Statements of Expectations to apply equally to standalone regulators as well as regulatory functions being undertaken within departments, consistent with this resource management guide.

Finance can assist entities to determine the applicability of these definitions to particular functions within their remit.

Ministerial Statements of Expectations

Ministerial Statements of Expectations are issued by the responsible Minister to a regulator to provide greater clarity about government policies and objectives relevant to the regulator in line with its statutory objectives, and the priorities the Minister expects it to observe in conducting its operations.

Statements of Expectations should be refreshed with every change in Minister, change in regulator leadership, change in Commonwealth policy or every two years.

Statements of Expectations should:
  • consider the economic and social environment in which the regulator operates, and the Government’s policy objectives and priorities, including the regulatory reform agenda
  • provide strategic direction (to the extent allowed by legislation) on the conduct of the regulator, its role, and how the regulator should engage with business, the community, other regulators and policy departments including the states and territories
  • reference any major projects, reforms, and key developments (for example, cost recovery, implementation of reviews) the regulator will be progressing over the next two years and the Minister’s expectations for these, including considering whether the Statement of Expectations needs to be delayed until a review is finalised
  • expect regulators to act in accordance with best practice, embedding the Government’s principles of regulator best practice, striving for continuous improvement against these principles and considering international best practice, as relevant
  • propose how the responsible Minister will engage with the regulator, including undertakings on how the Minister will help provide an enabling environment for the regulator to consistently implement best practice
  • request the regulator responds via a Regulator Statement of Intent, outlining how it will deliver on the Minister’s expectations and both the Statement of Expectation and Statement of Intent be made publicly available on the regulator’s website.
  • request that the Statement of Expectation be incorporated into PGPA Act processes (that is, Annual Report and Corporate Plan).

 

Statement of Expectations considerations for different governance models

External regulators

For standalone/external to department regulators, a publicly-available Statement of Expectations is to be issued by Ministers to the head of the regulator – this is usually the accountable authority for the entity under the PGPA Act. In these cases there is an expectation of close engagement between the Minister, the Portfolio Secretary and Head of Regulator in developing the Statement of Expectations. Examples of such regulators may include:

  • Department of Agriculture, Fisheries and Forestry: Australian Pesticides and Veterinary Medicines Authority, Australian Fisheries Management Authority
     
  • Department of Industry, Science and Resources: IP Australia, National Offshore Petroleum Safety and Environmental Management Authority
     
  • Department of Infrastructure, Transport, Regional Development, Communications and the Arts: Australian Communications and Media Authority, Civil Aviation Safety Authority, Australian Maritime Safety Authority, Australian Competition and Consumer Commission (on telecommunications consumer matters).

Regulatory functions within departments

Where a regulatory function is located within a department but has ‘external’ governance arrangements where the accountable authority is not the Secretary (and instead an external chair, board or other appointee), the Statement of Expectations can be issued from the Minister directly to the accountable authority; again with close engagement between the Minister, Secretary and the head of the regulatory function in developing the Statement of Expectations. Examples of such regulatory functions include:

  • Department of Industry, Science and Resources: Anti-Dumping Commission, National Measurement Institute, National Offshore Petroleum Titles Administrator, Australian Space Agency.

For sufficiently large, publicly-identifiable regulatory functions operating within departments, a publicly-available Statement of Expectations can be issued by a Minister to the Secretary as the function’s accountable authority. The expectations articulated by the Minister can then be communicated by the Secretary to senior leaders in the regulatory function via: communication / tasking to the function by the Secretary; as well as the Department’s usual planning and reporting processes. Examples of such regulatory functions may include:

  • Department of Climate Change, Energy, the Environment and Water: Greenhouse and Energy Minimum Standards Regulator
     
  • Department of Infrastructure, Transport, Regional Development, Communications and the Arts: Vehicle Standards Operations Branch.

Some regulatory functions within a department can be quite small, diffuse or have low visibility. Departments may consider covering these through a more generic Statement of Expectations from the Minister to the Secretary that outlines the Minister’s broad expectations for the conduct of regulatory functions undertaken within the department. It may make sense to include this as part of a Statement of Expectations to the Secretary about broader functions of the department. Again the expectations articulated by the Minister can then be communicated by the Secretary to senior leaders in the regulatory functions. A responding Statement of Intent could then be provided by the Secretary to the Minister, setting out how the department will exercise its general regulatory functions to meet the Minister’s expectations (and can be included in the department’s annual reporting). Examples of such regulatory functions may include:

  • Department of Agriculture, Fisheries and Forestry: Levies compliance, Illegal logging, Biosecurity risks, Compliance of imported food with food standards, Heritage and Reef, Exports of agriculture and Regulating wildlife trade
     
  • Department of Climate Change, Energy, the Environment and Water: Activities in Antarctic Treaty Area, Environmental Approvals, Administering water efficiency, labelling and standards, and management of hazardous waste
     
  • Department of Industry, Science and Resources: Commercial Building Program section, Australian Industry Participation
     
  • Department of Infrastructure, Transport, Regional Development, Communications and the Arts: National standards for motor vehicles, Maritime and shipping, Domestic Aviation.

Generally, the Statement of Expectations will be addressed by the Minister to a Secretary, unless the head of the regulatory function has been appointed by the Minister or Government. If the head of the regulatory function is appointed by the Secretary, then the function should be included in the Statement of Expectations from the Minister to the portfolio Secretary.

Compliance functions connected to service delivery type functions

Many entities undertake regulatory functions, even if not typically considered a ‘regulator’. Where functions – including service delivery, employment services, etc – are undertaken under legislative arrangements and compliance is expected by the Government, these are considered regulatory functions to be covered by a Ministerial Statement which sets out the Government’s priorities and expectations.

This can include where services are provided through a contractual arrangement with a private sector provider. Grants have been excluded as they are voluntarily entered into.

In these cases, the Minister, Secretary and Head of the entity should consider the applicability of a Statement of Expectations to the entity head reflecting expectations of these types of regulatory functions (noting the advice on levels of scale and governance outlined above). For example, the Minister could consider setting out a Statement of Expectations to the Secretary or entity head on the Government’s expectations around the entity’s compliance, monitoring and enforcement functions, with reference to the principles.

For example:

  • compliance in recovering debt, compliance with employment service provider contracts, compliance with child care centre requirements.
     
  • while the Department of Veterans’ Affairs isn’t considered a regulator, the former Veterans’ Affairs Minister referenced general expectations around the principles in the Minister’s Statement of Expectations to the Department of Veterans’ Affairs Secretary, given the principles supported and aligned with the Government’s expectations around delivery of services and the department’s transformation reforms. The former Minister set out a Statement of Expectations to the department Secretary on the Government’s priorities and expectations for the Department, not just its service aspects.

Cross-jurisdictional regulatory functions

A number of Australian Government regulatory functions operate under National Partnership Agreements and/or with governance, legislative performance and reporting arrangements that sit across both Commonwealth and state and territory governments. Examples of such regulatory functions include:

  • Department of Infrastructure, Transport, Regional Development, Communications and the Arts: Office of the National Rail Safety Regulator, National Heavy Vehicle Regulator.

Given the considerable variation in governance arrangements for such entities, arrangements for issuing, implementing and reporting on a Commonwealth Ministerial Statement of Expectations should be considered on a case-by-case basis by the relevant departments and regulators, with support and advice from the Department of Finance. There will be cases where a separate Commonwealth Statement of Expectations may not be appropriate. We envisage entities would generally work with both levels of government, to align expectations of the regulator where practical.

More broadly, we see scope for jurisdictions to collectively discuss regulator performance expectations, potential overlaps and opportunities to streamline. A number of jurisdictions (for example, Victoria, Queensland) already have or are considering establishing a Statement of Expectations approach.

Ministerial Statements of Expectations and the independence of a regulator

While regulators are often operationally independent of government, this does not mean independent of expectations or guidance about how they fulfil their statutory roles.

Commonwealth regulators are typically accountable to Parliament, Senate Estimates and through Australian National Audit Office scrutiny.

The Executive Government may also set out its guidance through Ministerial Statements of Expectations on the Australian Government’s priorities for a regulator, including its performance.

Regulator Statements of Intent

A Regulator Statement of Intent responds to the expectations set out in a Ministerial Statement of Expectations. It outlines how the regulator intends to meet those expectations including how it will demonstrate progress. The Statement of Intent can be broader in scope than the expectations set out in the Statement of Expectations, and offers an avenue to highlight any emerging risks or operational issues relevant to the delivery of the regulator’s functions.

Statements of Intent should:

  • in responding to the Statement of Expectations, provide the regulator’s perspective on its purpose, strategic direction and delivery of statutory objectives
  • articulate how the regulator intends to deliver against the Minister’s expectations set out in the Statement of Expectations in practical terms. This can include describing internal initiatives or structures, changes in systems or governance, efforts to build staff capability and to foster an organisational culture that supports regulator best practice
  • outline how the regulator intends to engage with regulated entities, other regulators and other stakeholders
  • outline how the regulator intends to engage with policy departments and the Ministerat a high level, note how progress against meeting the Minister’s expectations will be measured and reported on by the regulator.

    The Statement of Intent should be developed using a consultative approach through engagement with portfolio policy teams and ministers’ offices as appropriate.

    The Statement of Expectations and Statement of Intent should inform the development of performance measures for inclusion in reporting, including Corporate Plans and Annual Reports.

    Statements of Expectations and Statements of Intent should be made available on regulator websites and on transparency.gov.au as part of a Corporate Plan and/or Annual Report.

    Finance notes this is an initial outline of what could be included in a Statement of Intent and we welcome suggestions from entities on guidance that would be helpful in developing these Statements.

     

    Other Frequently Asked Questions on drafting Statements of Expectations and Statements of Intent


    Process

    If a non-Cabinet or Assistant Minister is the effective lead within a portfolio on an area of regulation and has the primary relationship with the regulator, we would consider it appropriate for that Minister to issue the Statement of Expectations (presuming the respective senior ministerial office is supportive).

    The primary content of Statements of Intent is a response to the Statement of Expectations. It may be sensible for some entities to prepare the Statement of Expectations and Statement of Intent at the same time. For others, it may make more sense to prepare the documents sequentially.

    Format and content

    • A generic ‘template’ for Statements of Expectations has not been developed as most portfolios are tailoring the Statement of Expectations to the regulator and Minister’s preferences.
    • Most drafts shared with Finance have taken the form of a letter from the relevant Minister to the accountable authority, with the ‘expectations’ set out in the body of the letter or a dated attachment.
    • Some portfolios have adopted a common structure and approach for their Statements of Expectations, to assist the relevant Minister in looking ‘across’ and potentially demonstrate an overall posture/strategy across a portfolio’s regulators.
    • Entities may wish to consider what the department and/or regulator is looking to achieve/prosecute/raise visibility of through the Statements of Expectations.

    Content on stakeholder engagement

    • A number of the draft Statements of Expectations that Finance has reviewed would have benefited from further elaboration on stakeholder engagement, including where relevant:
    • the specific entities/jurisdictions the regulator should engage with
    • any ministerial expectations about the overall tone, posture or aims of the regulator’s engagement with stakeholders and others
    • aspects of the relationship between the regulator and the portfolio department.
    To support the regulator meet these expectations, the Statements of Expectations should also outline what the Minister intends to do to provide an enabling environment, including any specific steps by the Minister to support the regulator.

     


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