In December 2002 the Australian Government adopted a formal
cost recovery policy to improve the consistency, transparency and
accountability of Commonwealth cost recovery arrangements and promote the
efficient allocation of resources.
For the purposes of this policy, ‘cost recovery’ broadly
encompasses fees and charges related to the provision of government goods and
services (including regulation) to the private and other non-government sectors
of the economy.
1. Agencies should set charges to recover all the costs
of products or services where it is efficient to do so, with partial cost
recovery to apply only where new arrangements are phased in, where there are
government endorsed community service obligations, or for explicit government
policy purposes.
2. Cost recovery should not be applied where it is not
cost effective, where it is inconsistent with government policy objectives or
where it would unduly stifle competition or industry innovation.
3. Any charges should reflect the costs of providing
the product or service and should generally be imposed on a fee-for-service
basis or, where efficient, as a levy.
4. Agencies should ensure that all cost recovery
arrangements have clear legal authority for the imposition of charges.
5. Costs that are not directly related or integral to
the provision of products or services (e.g. some policy and parliamentary
servicing functions) should not be recovered. Agencies that undertake
regulatory activities should generally include administration costs when
determining appropriate charges.
6. Where possible, cost recovery should be undertaken
on an activity (or activity group) basis rather than across the agency as a
whole. Cost recovery targets on an agency-wide basis are to be discontinued.
7. Products and services funded through the budget process
form an agency’s ‘basic information product set’ and should not be cost
recovered. Commercial, additional and incremental products and services that
are not funded through the budget process fall outside of an agency’s ‘basic
product set’ and may be appropriate to cost recover.
8. Portfolio Ministers should determine the most
appropriate consultative mechanisms for their agencies’ cost recovery
arrangements, where relevant.
9. Cost recovery arrangements will be considered
significant (‘significant cost recovery arrangements’) depending on both the
amount of revenue and the impact on stakeholders. A ‘significant cost recovery
arrangement’ is one where:
a. an agency’s total cost recovery receipts equal $5
million or more per annum - in this case every cost recovery arrangement within
the agency is considered, prima facie, to be significant, regardless of
individual activity totals; or
b. an agency’s cost recovery receipts are below $5
million per annum, but stakeholders are likely to be materially affected by the
cost recovery initiative; or
c. Ministers have determined the activity to be
significant on a case-by-case basis.
10. Agencies with significant cost recovery arrangements
should ensure that they undertake appropriate stakeholder consultation,
including with relevant departments.
11. All agencies with significant cost recovery
arrangements will need to prepare Cost Recovery Impact Statements (CRIS). A
CRIS will not be required where a Regulation Impact Statement (RIS) that also
addresses cost recovery arrangements against these guidelines has been
prepared.
a. The chief executive, secretary or board must certify
that the CRIS complies with the policy and provide a copy to the Department of
Finance and Administration.
b. Agencies must include a summary of the CRIS in their
portfolio budget submissions and statements.
12. Agencies are to review all significant cost recovery
arrangements periodically, but no less frequently than every five years.
13. Agencies will need to separately identify all cost
recovery revenues in notes to financial statements – to be published in
portfolio budget statements and annual reports consistent with the Finance
Minister’s Orders.
14. Portfolio Ministers are responsible for ensuring that
the cost recovery arrangements of agencies within their portfolios comply with
the policy and will report on implementation and compliance in portfolio budget
submissions.