Fisheries Cost Recovery

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Fisheries Cost Recovery

The Victorian Fisheries Authority (VFA) delivers fisheries administration, management, compliance and research services for the ongoing sustainable operation of Victoria's commercial fisheries (comprising wild-catch, aquaculture and fish receiver licences and individual quota holders), in accordance with the Fisheries Act 1995 and the Fisheries (Fees, Royalties and Levies) Regulations 2008. Levies for cost-recoverable services are recovered in line with the Victorian Government's response to the National Competition Policy 2001 review of the Fisheries Act and its more recent Cost Recovery Guidelines

History

In April 2004, a dedicated Fisheries Activity Costing System (FACS) was put in place to track specific activities carried out by Victorian Fisheries Authority staff, and retrospective cost recovery was introduced.

The Fisheries Cost Recovery Standing Committee (FCRSC) was established by the Minister responsible for fisheries to provide advice on the implementation and ongoing operation of the cost recovery program.

The FCRSC comprises:

  • an independent Chairperson;
  • four members nominated by Seafood Industry Victoria (SIV) who have expertise in the commercial wild-catch sector;
  • one member nominated by SIV who have expertise in the aquaculture sector;
  • two members from the VFA nominated by the Secretary; and
  • the Executive Director of SIV as a permanent observer.

In 2008, the FCRSC expressed concern about the accuracy and reliability of FACS data. Consequently, the 2008/09 licensing year levies, based on FACS data for the 2006/07 financial year (the first year of full recovery) were rolled over (with an inflation adjustment) for the 2009/10, 2010/11, 2011/12 and 2012/13 licensing years.  Because of the continuing roll-over and some reduction in levies since 2008/09, there was, in most fisheries, an increased discrepancy between recoverable costs and those actually recovered.  In view of the need for significant adjustments to levy values, the FCRSC recommended moving to a simpler, more transparent, forward-budgeting cost recovery system.

A new, simpler approach

In 2005, the FCRSC first identified the need to move to forward budgeting in order to better link budget with service delivery.  The committee recommended moving to a simpler, more transparent, forward-budgeting cost recovery system.  In 2007, the department and SIV agreed to work together to develop a suitable framework for forward-budgeting and monitoring.  After extensive consultation with the FCRSC, DEDJTR published a comprehensive review of the cost recovery process, which also recommended a forward budgeting approach to encourage both industry and the department to focus on improving the effectiveness and efficiency of services provided.

In 2012, following the completion of the review, the Minister asked the department to implement, in consultation with the FCRSC, a new, simpler, more transparent, forward-budgeting approach to cost recovery for the licensing year beginning 1 April 2014.

The Minister agreed to the new approach being phased in over three years to mitigate the level of adjustment for industry, while moving towards an appropriate level of cost recovery. The Minister also agreed to a range of concessions which reduce the extent of levies imposed.

The FCRSC oversaw the implementation process, providing advice on:

  • a timeline outlining each of the steps required to meet the Minister's request;
  • a set of cost recovery principles;
  • the services that VFA provides to industry (both recoverable and non-recoverable);
  • the levels of recoverability for each cost recoverable service, i.e. the proportion to be attributed to the commercial sector;
  • the costs incurred to deliver that service (both staff and operating);
  • a preferred consultation approach; and
  • milestones that industry can measure the department's performance against.

All of these measures support transparency and ensure accountability for services provided.

The nature and extent of services to be provided by VFA under the new approach to cost recovery has been examined and adjusted where appropriate.  However, because of the deficiencies in the FACS based approach and the rolling over of levies, a substantial increase in recovery of costs is required.

New Cost Recovery Principles

The following cost recovery principles, developed by the FCRSC in September 2012, underpin the new approach to recovering costs from the commercial fishing industry.

  1. Cost recovery systems should be designed to promote:
    1. Economic efficiency; i.e. improve the allocation of resources in an economy by providing price signals for service provision that incorporate all of the relevant costs; and
    2. Equity; i.e. those that benefit from a government service, or contribute to the need for a service, should pay for the associated costs.  Where a number of groups benefit from a service, costs should be apportioned.
  2. The cost recovery system should be administratively simple and minimise operating costs.
  3. Operation of the system, including planning for the provision and delivery of services, should involve well designed, cost effective, consultation with those paying for the costs of services.
  4. There should be transparency about the nature, extent, delivery and cost, of services for which there is cost recovery.
  5. Operation of the system should promote opportunities for efficiency improvements.
  6. Cross-subsidisation between fishers and fisheries should be minimised.
  7. Fee for service should be used where possible to directly recover the costs of transactions/services.
  8. Between-year volatility should be minimised in order to smooth costs to better enable businesses to plan.
  9. Where resources are diverted to non-recoverable services (e.g. emergency services) or are materially under-delivered, a corresponding adjustment to future levies or future services should be made.
  10. The implementation of the system should include monitoring and periodic review.
  11. The design, nature and extent of services should take into account the risks posed to the fishery and the value of production generated by the fishery.