COST RECOVERY IMPLEMENTATION STATEMENT. Application to vary a fuel standard

Transcription

1 Australian Government COST RECOVERY IMPLEMENTATION STATEMENT Application to vary a fuel standard Cost recovery involves government entities charging individuals or non-government organisations some or all of the efficient costs of a specific government activity. This may include goods, services or regulation, or a combination ofthem. The Australian Government Cost Recovery Guidelines (the CRGS)l set out the overarching framework under which government entities design, implement and review cost recovered activities. 1 The ergs are available on the Department of Finance website ( Page 1 of8

2 1. INTRODUCTION 1.1 Purpose of the CRIS This Cost Recovery Implementation Statement (CRIS) provides information on how the Department of the Environment (the Department) will implement cost recovery charges for 'Applications to vary fuel standards'. The CRIS also reports financial and non-financial performance information for this activity and contains financial forecasts for and three forward years. The Department of the Environment will maintain the CRIS until the activity or cost recovery for the activity has been discontinued. 1.2 Description of the activity The activity being cost recovered is the approval process to vary a fuel standard in respect of a specified supply of fuel in accordance with the Fuel Quality Standards Act 2000 (the Act). The Act places an obligation on the fuel industry, including fuel suppliers, to supply fuel that meets strict environmental requirements in accordance with fuel quality standards. Fuel quality standards have been made for petrol, ethanol, automotive diesel, biodiesel and autogas. The Act provides the legislative basis for national fuel quality and fuel quality information standards for Australia. The Act is in place to: 1. regulate the quality of fuel supplied in Australia in order to: Reduce the level of pollutants and emissions arising from the use of fuel that may cause environmental and health problems; and Facilitate the adoption of better engine technology and emission control technology; and Allow the more effective operation of engines; and 2. ensure that, where appropriate, information about fuel is provided when the fuel is supplied. The standards regulate the supply of fuel to consumers and reduce harmful vehicle emissions. Modern vehicles require fuels that meet higher quality standards. The Act and the Fuel Quality Standards Regulations 2001 (the Regulations) provide a framework for establishing and enforcing national fuel quality standards. Fuel suppliers who supply fuel that is the subject of a fuel standard must comply with the Act. The testing offuels under the Act is undertaken across all areas of the national fuel supply chain. Samples may be taken from importers, refineries, distributors and service station forecourts. The monitoring, compliance and enforcement program established under the Act is not cost recovered. Section 13 of the Act allows the Minister to grant to any person an approval in writing that varies a fuel standard or fuel information standard, with respect to a specified supply of fuel, for a specified time and purpose. The processing of approvals under section 13 ('section 13 approvals') is considered suitable for cost recovery, in accordance with the Page 2 of8

3 Cost Recovery Guidelines as the following criteria are met: Approval to vary a fuel standard under section 13 of the Act results in benefits for a specific non-government recipient as a result of a government activity that cannot be provided by a non-government provider, with associated costs. It is the Australian Government's overarching policy to recover these costs; The cost recovery fee is imposed on the recipient of the government activity; Charging a cost recovery fee reduces demand for section 13 approvals, thus facilitating the achievement of the policy objectives of the Act; It is efficient to implement cost recovery fees as the department can determine costs of its services, attribute these costs to particular applicants and recover them. Section 13 approvals are intended to cater for situations where there is a specific requirement to supply fuel that varies from a standard for a limited time. For example, where there is an emergency and there will be a shortfall in the supply of a fuel or where a motor sports organisation seeks to supply petrol-containing octane enhancers such as lead or methyl tertiary-butyl ether (MTBE) to teams participating in an organised motor racing event. Further examples where a section 13 application might be approved might be where there is an inability to source appropriate feedstock or to allow a novel fuel e.g. diesel / biodiesel blends to be sold before a fuel standard is developed. 2. POLICY AND STATUTORY AUTHORITY TO COST RECOVER 2.1 Government policy approval to cost recover the activity The policy authority for full cost recovery of processing applications to vary fuel standards was re-confirmed by Government in the Budget ( 2.2 Statutory authority to charge Subsection 14(2} of the Act provides the legislative basis for application fees, and requires the payment of a fee to accompany an application to vary a fuel standard under section 13 of the Act ( The assessment of applications, including the application fee, is dealt with under Part 2 of the Fuel Quality Standards Regulations The Fuel Quality Standards Amendment (Fees) Regulation 2016 came into force on 5 May 2016 and amended the application fee. From 1 July 2016, the fee for an application for an approval is prescribed at Regulation 5 to be $ Page 3 of8

4 3. COST RECOVERY MODEL 3.1 Outputs and business processes of the activity The outputs from this cost recovered activity are the processed applications for approval to vary a fuel standard. The key business processes required to process applications to vary a fuel standard are: Receive application and liaise with applicant to ensure application is complete. Assess the application and seek external technical or legal advice as required. Seek the advice of the Fuel Standard Consultative Committee (FSCC). Brief the Minister and/or delegate to seek a decision on the application. Prepare any legal instruments and notices. Notify the applicant of the decision and any conditions of approval. Publish the decision in the Commonwealth Gazette and record the approval. Update internal record keeping files and databases. An approval applies only to the applicant and any Regulated Persons (onsellers) specified in the application. 3.2 Costs of the activity The main cost drivers for the processing of section 13 applications include the hours taken by departmental officers to assess the application and prepare briefing material, the level of technical advice required and the processes involved in making a recommendation to the Minister or delegate. Cost Nature Description and Assumptions Employee expenses Direct Includes the salaries, superannuation, leave entitlements and allowances for a proportion of one SES officer, one EL2 officer, one ELl officer and one APS6 officer. The EL2 officer will process each section 13 application for, on average, 0.4 days, the ELl officer will process each section 13 application for, on average, 8.3 days, and the APS6 officer will process each application for, on average, 0.1 days. The SES officer will process each section 13 application for days. Technical advice Direct Cost of obtaining necessary technical advice from external technical consultants where required. Consultation Direct A proportion of the costs of consulting the FSCC for their advice. The value is based on an estimate of the time taken to consider section 13 applications. Legal advice Direct Costs of obtaining necessary legal advice. Employee Indirect Includes pro-rata apportionment of expenses associated with overheads workers' compensation, staff training and development, human resources support, desktop information and communication technology support, organisational service costs and property operating expenses. Page 4 of8

5 The Budget is based on the following costing structure per application: Business process Direct costs Indirect costs Total 1. Assessing applications, investigation and $2,338 $520 $2,858 drafting recommendations 2. Liaison, consultation and responding to $1,618 $363 $1,981 queries 3. Drafting briefing materials for the Minister $608 $133 $741 / delegate 4. Drafting legal documents $54 $12 $66 5. Review brief and legal instruments $68 $12 $81 6. SES review of brief and legal instruments $77 $9 $85 7. Notify approval holder $108 $24 $132 Total $4,870 $1,074 $5,944 Total number of anticipated applications 9 Total cost to the Department $53, Design of cost recovery charges The appropriate design of a cost recovery charge depends on the characteristics of the activity. There are two broad types of cost recovery charges: 1. Fees - these are direct charges for the provision of a service. According to the Cost Recovery Guidelines, a cost recovery fee is the preferred option where the activity and its costs can be linked to a specific individual or organisation (e.g an application for a licence). 2. Levies - these are a form of tax imposed on a specific industry or class of persons, in contrast to general taxation that applies more broadlv." A cost recovery levy can be used for costs that cannot be directly linked to specific applicants (e.g for a compliance audit). As the costs associated with applications to vary a fuel standard can be linked to specific individuals or organisations, it is appropriate for the Department to charge a fee to recover the efficient costs of the activity. 4. RISK ASSESSMENT The assessed overall risk associated with cost recovery of processing section 13 approvals is considered low because: The complexity and materiality of the cost recovery activity is low. Only one type of cost recovery charge is used. 2 Department of Finance, Australian Government Cost Recovery Guidelines, Resource Management Guide No. 304, July Third edition, p.2; Productivity Commission, 2001, Cost Recovery by Government Agencies, Inquiry Report No. 1S, p. XXXIII. Page 5 of8

6 The Act review contained an examination of the section 13 approvals cost recovery processes, and it was determined that the total cost to the Department of processing applications differed from the then current fee structure. The Department will continually evaluate the efficiency of the fee structure through ongoing engagement and consultation with businesses. The Department will manage risks in accordance with the Department's internal Risk Management Framework, and to mitigate risks, the Department will advise all companies prior to the introduction of the changes. The Department will be reviewing the Legislative Instruments under the Act, and this will involve a consultation period for stakeholders to provide their comments. 5. STAKEHOLDER ENGAGEMENT Stakeholders were asked to provide comments on the section 13 approval fees during the review of the Act. There will be a consultation period for stakeholders to comment on cost recovery arrangements during the review of the Legislative Instruments this year. 6. FINANCIAL ESTIMATES $ $ $ $ Expenses = X 53,498 47,827 48,102 54,530 Revenue = Y 53,498 47,554 47,554 53,498 Balance = Y-X 0 (273) (548) (1,032) Cumulative balance 0 (273) (821) (1,853) Explain material" variance Explain balance management strategy N/A The costs of this activity will be reviewed regularly to ensure continued alignment of revenue and expenses. a As defined by AASB1031 and Division 12 - Materiality and Disclosure of the Finance Minister's Orders. Note: Revenue varies as approvals have differing durations (1, 2 or 3 years). These estimates assume applicants will reapply when their approval expires, which may not occur. Page 60f8

7 7 A. FINANCIAL PERFORMANCE $ $ $ $ Expenses = X 92,189 77,984 41,908 13,493 Revenue = Y 23, ,450* 18,025 10,300 Balance = Y-X (69,014) 92,466 (23,883) (3,193)) Cumulative balance (69,014) 23,452 (431) (3,624) *This figure includes a tier 4 payment of $130,000 for an approval to supply more than 100 mega litres. 7B. NON-FINANCIAL PERFORMANCE The Act places an obligation on the fuel industry, including fuel suppliers, to supply fuel that meets strict environmental requirements in accordance with fuel quality standards. Fuel quality standards have been made for petrol, ethanol, ethanol E85, automotive diesel, biodiesel and autogas. The Department will monitor the number of approvals given under section 13 of the Act and compliance with legal requirements, such as the Fuel Quality Standards. This will be done on an ongoing basis. The Department endeavours to process and respolve applications to vary a fuel standard under section 13 of the Act in an efficient and timely manner. The Applicants Guide to the Section 13 Approval Process states that standard applications may be completed within 12 weeks and more complex applications may take up to 18 months to resolve, depending on whether further information is required from the applicant and if further research is required. The following table sets out performance against these timeframes during : Performance measure results Number of standard applications processed 6 Number of complex applications processed 0 Number of standard applications processed within 12 weeks of receipt 6* Number of complex applications processed within 18 months of receipt N/A *Note: all applications received during were processed within 12 weeks of receipt. 8. KEY FORWARD DATES AND EVENTS The next scheduled update of forward (financial) estimates is May 2017, to coincide with the Budget. The next scheduled update for actual (financial) outcomes is October 2016 following release of the Department's audited financial statements. Page 7 of8

8 9. CRIS APPROVAL AND CHANGE REGISTER Date Description Approved by July 2016 Major amendment Certified by the Department of the Environment to reflect new fee structure Page 8 of8