Fisheries Cost Recovery Standing Committee Meeting #20

10.30am Tuesday 6 April 2010

Venue: Treacy House, 126 The Avenue, Parkville.

Chairman's Summary

Attendees:

Ian Cartwright – Independent Chair
Geoff Ellis (Industry member)
Vince Collins (Industry member)
Hugh Meggitt (Industry member)
Ross McGowan (SIV) – Permanent Observer
Terry Truscott (DPI member)
Robert Krix - Executive Support
Chris Padovani – Administrative Support

Invitees:

Anthony Hurst, Executive Director Fisheries Victoria
Travis Dowling, A/Director Fisheries Management, Fisheries Victoria (apology)
Bill Fisher, Principal Economist, Economics and Policy Research Branch, DPI
Kirsty Henry, Principal Economist, Economics and Policy Research Branch, DPI

The meeting was the first Fisheries Cost Recovery Standing Committee (FCRSC) in 2010. Key issues discussed included:

Changes to the membership of the FCRSC.
Review of Fisheries Activity Costing System (FACS) and move to forward-budgeting for provision of Fisheries Management Services (FMS).
Six monthly FACS report.
Marine Parks programme services.
Certain costs associated with the abalone sector.

Changes to the membership of the FCRSC

Mr Gerry Geen (industry adviser) and Mr Bill Allan (eel fisher) have resigned from the FCRSC due to other commitments. The Committee acknowledged their valuable contributions and suggested that a letter could be sent from the Minister's office thanking them for their service to the Committee and fisheries cost recovery. A letter will be provided to SIV seeking the nomination of persons to replace both previous members.

It is proposed that Mr Travis Dowling, Director Fisheries Management, will be nominated for appointment to the FCRSC as the second DPI member.

Review of Fisheries Activity Costing System (FACS) and move to forward-budgeting for provision of Fisheries Management Services (FMS)

The Committee previously endorsed a DPI/FV proposal to conduct a Cost Recovery Review aimed at improving the cost-effectiveness and efficiency of the current fee, levy and royalty-setting approach for cost recovery from industry. The Committee requested that particular emphasis be given to replacing the current retrospective system of cost recovery (i.e. paying for undefined services after they have been delivered) with a prospective process (i.e. agreeing on the cost and nature of planned FMS delivered before they are delivered, and charged accordingly. The project also includes a review of the Fisheries Activity Costing System.

DPI's Economics and Policy Research Branch (E&PRB) were engaged to undertake the review with direction from, and in collaboration with, Fisheries Victoria, and with the general oversight of the FCRSC. This work is now well progressed and is anticipated that it will conclude by 30 June 2010.

Two E&PRB staff provided a PowerPoint presentation to the FCRSC, seeking feedback on the initial findings and progress of the review. They noted that:

the scope of the project is a strategic review - not a focus on implementation and software options for the Fisheries Activity Costing System (FACS);
the review does not include any royalty/resource rent calculations, but has a strong focus on simplifying fisheries cost recovery for it to be cost effective; and
E&PRB have undertaken a thorough examination of other jurisdictions and their methods of cost recovery, and have conducted a number of interviews with a cross section of Fisheries Victoria team members.

In considering the preliminary findings, the Committee provided a range of comments for consideration by E&PRB, including:

cost recovery principles which have been established over time should be considered and retained when finalising the review. i.e. strive to keep existing benefits and agreements, but include appropriate improvements identified by the review;
the review should provide a better definition of goods and services to be provided to each fishery - once total goods and services have been defined, DPI will then be able to allocate the appropriate cost to be met by industry, in the same manner that a RIS has a defined activity, which is then distributed in relation to industry, recreational and public good benefit;
accountability for FMS provided should be improved and contestability expanded;
Seafood Industry Victoria embraced cost recovery and assisted the Minister for Agriculture to implement cost recovery partly to have some control, but also to ensure accountability for FMS provided, as cost recovery and the work of the FCRSC is about more than the accounting functions of FACS;
the benefits of a suggestion by the E&PRB reviewers to discontinue the use of FACS and to create an up-front service agreement with industry in order to track budget expenditures using DPI's 'project costing model' could be adopted for this purpose; and
in considering options available to industry to cover costs arising from an emergency situation (e.g. AVG (abalone virus)), the favoured option was to have further discussion between industry and government on an ad hoc basis, with consideration given to industry's capacity to pay for services provided during a crisis/emergency response; industry did not support the proposition of a 'sinking fund' to collect funds in order to hedge against future crises.

DPI will distribute the draft review report to the Committee when finalised and a meeting of the FCRSC will be scheduled for about two weeks after the report's receipt.

Six monthly Fisheries Activity Costing System comparative data report

Comparative FACS data for the provision of Fisheries Management and Compliance Services for the first six months of 2008/09 and 2009/10 was provided to the Committee for review. The Committee noted that the FACS data provided for Management & Administration and Compliance services had a completion rate of about 80% of Fisheries Victoria staff. The on-going issue on non-completion of FACS by Fisheries Victoria staff is a major concern which is now being addressed. It was noted that the proposed forward budgeting approach would rectify many of these problems. DPI will provide an accurate, up to date nine-month comparative FACS data report for review at the next FCRSC meeting, which will include information on the apparent anomalies in the provision of Management & Administration and Compliance services of plus or minus 5%.

Marine Parks & Sanctuaries compensation initiative program

In 2003, the Marine Parks & Sanctuaries compensation Initiative program:

Allocated $300,000 over two years to assist in the identification of underutilised areas for abalone harvesting potential; and
Provided strategic assistance via a substantial increase in funding of $14.1 million over 4 years and $3.4 million on-going to boost fisheries enforcement - representing a 75% increase in recurrent funding.

The Committee re-affirmed its belief that the $3.4 million of FMS (enforcement) formerly provided through the above initiative program should continue to be exempt from cost recovery. It was noted that the form of enforcement funded under this initiative is not limited to visible, uniformed officers in the field and that some expenditure will be on other, less visible activities, such as intelligence gathering and analysis. This fact may have contributed to the perception by some in industry that Fisheries Victoria is receiving funding for additional enforcement, but not delivering these services in accordance to these funds. DPI will clarify with the Executive Director Fisheries Victoria that the $3.4 million worth of enforcement services formerly provided as part of the Marine Parks & Sanctuaries compensation initiative program will continue to be delivered on a non-attributable basis.

Central zone green lip abalone unit renewal costs

At a previous FCRSC meeting, VADA identified what it considered to be an anomaly, whereby licence holders were charged an additional $695 in excess of 7.21% of the green lip GVP

DPI advised that the 2010/11 green lip abalone quota unit renewal fee will include an adjustment for the 2009/10 over charge (as above) and that this will be made for the upcoming commercial licence renewal process commencing in March 2010.

FV confirmed that the Fisheries (Fees, Royalties and Levies) Regulations define the abalone royalty as the difference between 7.2% of abalone GVP and the sum of Fisheries Management Services Levy plus the FRDC Levy. Industry did not support any change towards a fixed royalty component.

Certain costs associated with the abalone sector

At the previous meeting, the Chair, on behalf of new Committee members, made a request to Fisheries Victoria regarding the provision of cost recovery data for the abalone sector from previous years. The Executive Director Fisheries Victoria (EDFV) advised via a letter dated 26 March 2010 to the Committee, that it would not be appropriate or efficient to divert staff resources to prepare detailed reports on data that has been the subject of FCRSC meetings in setting the Fisheries Fees, Royalties and Levies in previous years. While noting the advice from the EDFV, incoming Committee member Mr Ellis requested some specific information from Fisheries Victoria be provided concerning the delivery of compliance services. It was agreed that the Chairman would take up the matter with the EDFV, and that members of the Committee would be informed of the outcome in due course.