FCRSC Meeting 29 - Approved Minutes

Approved Minutes

1. Welcome and Introductions

The Chair welcomed FCRSC members & advisors, and introduced the Hon. Peter Walsh MLA, Minister for Agriculture and Food Security.

2. Apologies:

• Vince Collins (Industry)

3. The Minister for Agriculture and Food Security

The Minister advised the FCRSC that the State budget is tight, do not expect further funding. The current level of service will be the maximum level of service to be expected. There will be no subsidization from the public purse for additional services, and that he is looking to implement more cost effective services.

The Minister stated that DPI is currently under-recovering costs incurred and there is a need to resolve issues in the operation of the system that have persisted since 2007/08.

The Minister confirmed that levying the three abalone zones at 7.2% of GVP would continue, however there is not an option for abalone industry to be provided or expect services up to the limit of 7.2% of GVP. This is not guaranteed by the regulatory framework. Levies go to the consolidated fund and there is no further money available for additional services.

The changes being discussed need to begin being implemented in 2014-15 (i.e. no extension of time from 1 April 2014) as an extension of 12 months has already been provided. The Minister is agreeable to the phasing in of the new approach over three years, and the 1+1+4 implementation (i.e. 1 year trial + 1 year trial + then set for 4 years).

The Minister expects the Department and industry to find smarter ways of providing the services that are needed. The challenge is to find ways of doing things better (more cost effectively) and considering ways to better involve industry in directly delivering services with the right checks and balances.

The Minister suggests for smaller fisheries there may be some scope for reductions in compliance services but there would need to be a corresponding increase in the level of penalties for non-compliance.

The Minister confirmed that the RIS consultation will be an 'open' process and that there will be opportunity for broad consultation on a range of issues within each sector, with a view to revision of draft regulations as necessary.

4) Follow up discussion

The FCRSC noted that DPI and the abalone industry need to work together to confirm the current level of cost recoverable services provided as set out in the schedules.

The FCRSC referred to cost recovery principle number 5….'operation of the system should promote opportunities for efficiency improvements'. Industry asked what would happen if an alternative service provider could be proven to deliver a particular service at a lower cost than DPI could deliver that service? DPI acknowledged that benchmarking was an appropriate approach to assess the efficiency of service provision. Consideration could also be given to external provision of some types of services (excluding services that can only be delivered by Government) where standards and specifications could be developed, and monitoring, where necessary, was practical to ensure integrity of provision. The costs of some of these processes (development of standards and specifications, monitoring, contract management) would themselves be recoverable.

Industry considered that the schedules of services do not contain sufficient detail to allow for contestability, i.e. an alternative service provider could not accurately quote for the provision of a service without precise specification of services to be provided. DPI agreed that more detailed standards and specifications would need to be developed in these instances to allow the service to be put out for public tender. It would simply be too time consuming to create a service specification for every cost recoverable service within each of the 42 fisheries, and would be inconsistent with cost recovery principle number 2…'The cost recovery system should be administratively simple and minimise operating costs'. DPI has created the schedules, in consultation with the FCRSC, to specify the cost recoverable service to be delivered, including a definition of the service, the milestones against which performance can be measured, and the time and cost incurred by DPI to deliver that service on behalf of industry; further detail would be required for outsourcing.

Industry sought clarification from DPI that it is prepared to enter into discussion on a sector by sector basis to discuss cost recoverable services for each fishery considering the risks and statutory obligations related to a fishery. DPI advised the FCRSC that it was prepared to do this, and in fact had already been doing this via the two cost recovery workshops and on-going discussions with the industry expanded FCRSC.

The Chair raised the question…'Is the intention to use a risk-based forward budgeting approach to fisheries management with the aim to minimise the need for regulation'. DPI confirmed this was an appropriate approach.

Following industry feedback regarding the large level of increases to levies across a number of fisheries, DPI tabled a paper that outlined the following proposals to mitigate economic impacts on industry with a particular focus on impact of smaller businesses, advising that the Minister had approved consideration of these options by FCRSC:

1. Nil cost recovery for intelligence and investigation aspects of commercial compliance;
2. Nil cost recovery for surveillance aspect of compliance;
3. Nil cost recovery for DPI component of cost recovery administration (i.e. still recover the costs incurred by the FCRSC and any additional cost recovery consultation processes);
4. Nil cost recovery for the preparation of Fishery Management Plans;
5. Adjusting the proportion of commercial and recreational catch for relevant finfish fisheries;
6. A 'small operator' concessionary level of cost recovery (i.e. levies would be capped at $500 for wild-catch licences where the average production per licence across the licence category is less than 500kg per annum); and
7. Reduced recovery for catch & effort administration (i.e. adjust recovery from 100% to 65%).

DPI advised the FCRSC that the quantum contained in each proposal was Committee in Confidence at this stage.

The Committee discussed the rationale for each proposal and the need to develop the rationale to support discussion with the Victorian Competition and Efficiency Commission. DPI sought feedback from industry members/advisors on each of the proposals.

The FCRSC considered the pros (e.g. if the service is 0% recovery, then the level of cost recovery for a number of fisheries becomes more affordable) and cons (e.g. if the service is 0% recovery, then it reduces the incentive for industry to seek that DPI deliver that service more efficiently, reduces the incentive for devolution of services, and reduces the incentive for industry to embrace new technology such as Vessel Monitoring Systems) of each proposal. The FCRSC noted the impact of the above adjustments on the estimated amount to be recovered under the prospective approach.

Given the 7.2% cap on cost recovery/royalty paid by the abalone fisheries, the abalone industry members/advisors posed the question… 'Can DPI confirm that it will continue to deliver the 'current' level of services to the abalone sector into the future? Mr Hurst, Executive Director Fisheries Victoria advised that if the Victorian Government further cut DPI's appropriation, this would have an impact on DPI's ability to deliver services to industry. Mr Hurst further explained that if DPI can link its appropriation to the delivery of cost recoverable services, DPI would have an argument to maintain its current level of service.

If DPI's appropriation is reduced, levies for the non-abalone fisheries would go down as services are reduced. The abalone sector, would continue to pay the same amount (7.2% of GVP) per annum irrespective of the level of services delivered by DPI. The FCRSC then discussed whether the abalone industry 'services' could remain the same, and any funding cuts could be made to the non-abalone fisheries. The FCRSC noted that this approach would hinder its ability to cut costs where it felt it was appropriate, and could result in an untenable situation where DPI was forced to make cuts to services in a fishery to a point that it could no longer meet its statutory obligations. DPI agreed to consider the matter out of session, and provide further advice to the FCRSC.

On 16 November 2002, National Parks (Marine National Parks and Marine Sanctuaries) Act 2002 came into effect. The Committee again noted that the (then) $3.4 million of FMS provided through the Marine Parks and Sanctuaries (MPS) initiative will continue to be exempt from cost recovery, subject to the Government continuing to provide this initiative funding.

The FCRSC provided its unconditional support for proposals 3, 4, 5, 6 and 7.

The FCRSC provided their unconditional support for proposals 1 and 2 for all fisheries except for the three abalone zones. Regulations currently specify that the combined royalty and cost recovery payable annually in the abalone fishery is limited to 7.2% of GVP (Gross Value of Product). As the abalone fisheries pay 7.2% of GVP for costs incurred plus a royalty, the abalone industry representatives wanted to continue to 'pay' for compliance costs (as opposed to pay less costs and a higher royalty) as a form of insurance that those services continue to be delivered by DPI.

The FCRSC noted that there were other options to address this situation including a proportional change to all services with a decline in DPI's budget. The provision of services would always need to consider the services necessary to address the risks and statutory obligations arising in managing a fishery at the current level of harvest.

The FCRSC agreed to keep the services that have been adjusted to nil cost recovery in each schedule other than wild-catch abalone, but that DPI should only report against the services that are cost recovered from industry.

Industry pointed out that following the concessions, there was still a significant increase on the total amount of levies to be collected from industry on 1 April 2014. The FCRSC recalled the advice from the Minister via the Chair's opening statement at FCRSC #25….' On the matter of 2012/13 levies and the issue of rolling over by the Consumer Price Index, or applying some other level of increase, the Minister does not require comments from the FCRSC. The matter will be determined in consultation with SIV. Essentially this matter is off the FCRSC table'. The FCRSC suggested SIV should seek a response on proposals for levies for 2013/14. Depending on the level of levies set for 1 April 2013, the increase for the 2014/15 licensing year (1 April 2014) may not be as big an adjustment as that being discussed by the Committee.

Action item:

1. Based on further specific questions on services to be provided, DPI will schedule a follow up cost recovery workshop with the abalone fisheries with branch representatives to review 'current' cost recoverable services provided.
2. Abalone industry representatives to provide questions to DPI at least two weeks prior to the scheduled abalone cost recovery workshop.
3. DPI to consider how any further reductions in its appropriation would affect cost recoverable services, with a particular focus on the impact of services to the abalone industry.
4. SIV to seek clarification from the Minister for Agriculture and Food Security on the proposed levies for the 2013/14 licensing year.

5) Distribution of hard copy documents to members/advisors

DPI provided hard copies of meeting papers (approved Minutes, Chair summaries, Action Item papers, etc.) to members & advisors.

6) Confirmation of previous Minutes

BACKGROUND: Draft Minutes of FCRSC meeting #28 of 22 November 2012 were circulated to members on 7 December 2012.

RECOMMENDATION: That the FCRSC confirms the Minutes of FCRSC meeting #28 of 22 November 2012.

OUTCOME: The Committee confirmed the Minutes of FCRSC meeting #28.

7. Progress on Action Items from meeting #28

Progress on Action Items from meeting #26

Progress on Action Items from meeting #27

Progress on Action Items from meeting #26

7) Items for discussion/noting

7(b) Progress on Action Items from non-abalone cost recovery workshop

Background:

At FCRSC meeting #27, the Committee asked DPI to organise and conduct two workshops, one for the abalone sector, and the other for the remaining wild-catch fisheries prior to FCRSC meeting #28.

The non-abalone cost recovery workshop was held Tuesday 20 November 2012.

DPI to provide an update on the progress of Action Items arising from the workshop.

Recommendation:

For discussion.

Outcome:

1. The FCRSC noted that seven of the nine action items assigned to DPI have been completed.
2. The FCRSC noted that due to resources being diverted to implement the recommendations of the recent compliance audit, complete the freshwater fisheries and forestry regulations audit, DPI will not be asking VAGO to bring forward the marine fishery audit from 2014/15. The FCRSC further noted that any individual is able to write to VAGO to make this request.
3. The FCRSC noted that DPI had done some preliminary work into how prior reporting may reduce some compliance costs across fisheries, particularly surveillance costs, and that a more detailed discussion paper would be provided in due course.
4. The FCRSC noted the discussion paper provided by DPI on the relationship between research and management controls contained some good information. The Committee further noted DPI's intention to better explain this relationship to the FCRSC, including a table that specifies how the outcomes of research would/will be used to adjustment management controls within the fishery.

Action item:

1. Industry to review the papers provided by DPI that address various non-abalone workshop action items (relationship between research & management controls, inspections data, rec vs commercial estimates) and to provide any comment prior to the next FCRSC meeting.
2. DPI to source and table historical research costs for Rock Lobster dating back to 2006/07 – remaining action from non-abalone cost recovery workshop.
3. DPI to table a more detailed break-down of research activities for the Rock Lobster & Giant Crab fisheries – remaining from non-abalone cost recovery workshop.

7(c) Progress on Action Items from abalone cost recovery workshop

Background:

At FCRSC meeting #27, the Committee asked DPI to organise and conduct two workshops, one for the abalone sector, and the other for the remaining wild-catch fisheries prior to FCRSC meeting #28.

The abalone cost recovery workshop was held Monday 12 November 2012.

DPI to provide an update on the progress of Action Items arising from the workshop.

Recommendation:

For discussion

Outcome:

1. The FCRSC noted that nine of the 14 action items assigned to DPI have been completed, with a further action item no longer required.
2. The FCRSC noted that the remaining four action items would be completed by DPI in due course. 

Action item:

1. Industry to review the papers provided by DPI that address various abalone workshop action items (data entry, database management and structured fishing explanations, data on inspection activities, rec vs commercial take estimates) and to provide any comment prior to the next FCRSC meeting.
2. DPI to analyse the scope of potential government role in the provision of any urchin research/culling – remaining from abalone cost recovery workshop.
3. DPI to adjust schedule of services to align with Abalone Management Plan, once that Plan is finalised – remaining from abalone cost recovery workshop.
4. DPI to investigate whether more up to date catch and effort data is available to be used in stock assessments, as well as available to industry more frequently – remaining from abalone cost recovery workshop.

7(d) Deliverables/Milestones described for each fishery

Background:

DPI has provided the amended schedules in which the cost recoverable  services (Function, Description, Deliverables / Milestones, FTE's and Costs) are described for each fishery. 

The schedules have been amended following industry feedback at the two recent cost recovery workshops. 

Recommendation:

For discussion.

Outcome:

1. The FCRSC noted the schedules had been amended following industry feedback previously provided. In a number of instances, the level of service, and by extension, the cost of delivering those services had decreased, whilst the level of services in some other fisheries had been increased.
2. The FCRSC discussed the introduction of a time recording system. One industry advisor was of the strong opinion that a time recording system is required to 'prove' to industry that the effort indicated by DPI in the schedules for each fishery is accurate. The Chair noted the residual concerns from the past performance of the fisheries cost recovery process and the impact this places on trust between DPI and industry. Noting the considerable expense involved, Mr Hurst agreed to consider implementing a time recording system for a 12 month period to re-assure industry about the level of cost recoverable services that are provided. Industry then suggested…If DPI is going to implement a time recording system, it should be permanent, not just for one year. The majority of the FCRSC expressed real reservations about the cost of implementing a time recording system that would be linked to DPI's Project Costing Model, finance and budget systems, estimated to be $350,000 which would then be recovered from industry, and the usefulness of a time recording system to address any accountability concerns. Overall, the option of a time recording system was considered as inappropriate at this stage.
3. In noting the need for transparency about the delivery of cost recovered services, the FCRSC also acknowledged the need for practicality and simplicity. The Committee recognised that it would be the deliverables and milestones that would be important within any year, rather than the hours or dollars which would be costly to track. The Committee reiterated the conclusion reached at meeting #26 that reporting at the fishery level would support transparency and accountability. The Chair advised the Committee that once the prospective cost recovery system was implemented, it would be a key role of the FCRSC to review these fishery-level reports.
4. The FCRSC again noted that the schedules do not address resource sharing arrangements in fisheries. They set out the best estimate of recreational versus commercial catch for use when attributing costs on the basis of take for some management and science services.
5. The FCRSC also noted that the schedules may need to be further amended following a) the abalone sector's desire to review the agreed current level of services in view of the Minister's advice, and b) the proposals that DPI tabled which FCRSC support.

ACTION ITEM:

1. DPI to amend the schedules following further consultation with the abalone sector and to reflect the proposals for adjusting recovery supported by the FCRSC.

7(e) Transition to prospective system/implementation

Background:

At FCRSC meeting #25, the Committee developed a timetable outlining the key steps to be completed to implement the new prospective cost recovery system by 1 April 2014.

The timetable indicates that FCRSC consider the transition/adjustment/implementation of the prospective system at FCRSC meeting #29.

Recommendation:

For discussion.

Outcome:

1. The FCRSC noted the Minister's advice that cost recovery will be phased in over a three year period. This will ease the initial impact on licence holders and provide opportunities for further consideration of necessary services and technology that could continue to improve efficiency.
2. The FCRSC noted that the phase in would be from 1 April 2014 (i.e. the first trial year of the new prospective cost recovery system).
3. DPI tabled a paper suggesting three annual phases of 33% of the required increase each year until the approach is fully implemented in 2016/17 (i.e.33%, 66%, 100%).
4. The FCRSC agreed that this approach provided an incentive for industry to work more closely with DPI to improve efficiencies, thereby reducing costs/levies. Industry advised that some commercial operators may choose to gear up and increase their catch and effort to offset any increase in levies.
5. An alternative approach suggested by industry was to back-end the phase in amounts, i.e. 20% of the required increase in year one, 30% in year two and 50% in year three.
6. The FCRSC noted that this approach enabled the eel fishery greater recovery time from the recent drought. It would also enable greater time for the Australian dollar to go down, thereby increasing the profitability of Victoria's fisheries that export fish and their ability to absorb the increased levies. The majority of industry members/advisors supported the back-ended phase-in approach.
7. The FCRSC agreed that the invoice issued by DPI would display total costs incurred, then the concession applied and the amount owed by the commercial operator. 

Action item:

1. The Chair to seek the Minister's view of alternative phase in options. 

8) Other Business

8(a) Miscellaneous matters related to the introduction of a prospective cost recovery system

Outcome:

1. The FCRSC noted that the Guidelines for the operation of cost recovery document would need to be amended to reflect the second trial year approved by the Minister, and the reduction of any costs/levies as a result of new technology being adopted by industry.
2. The Committee amended some of the words/grammar used in the Guidelines.
3. The Committee noted that the Guidelines would evolve as deliberations continued on the operation of the new regime.
4. The FCRSC again noted cost recovery principle number 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.
5. At FCRSC #28, the Committee noted that under Section 151 and 151A of the Fisheries Act 1995, levies may be charged on licences, quota units or pots (in the case of rock lobster). DPI advised that, in principle, allocation of costs in a fishery should reflect who it is that creates the need for services and who benefits from them. The FCRSC discussed the attribution of costs within the Rock Lobster (EZ) & Giant Crab fisheries. Industry suggested that costs should be apportioned 70% to the licence holder and 30% to quota units. The FCRSC noted that this approach would likely result in the reduction of latent licenses in the fisheries, which would be a positive outcome for these fisheries, and that industry may want to revisit the attribution of costs in the future, if/when the latent licenses are removed(e.g. when a certain number of licence holders are left). 
6. The FCRSC noted that the costs for the remaining licence/quota holders in the fisheries may increase (i.e. costs of managing the fishery spread amongst fewer licences), and cited the example that occurred in the Commonwealth fishery. Whilst there will be a minimum level of management and research costs incurred to sustainably manage the fishery, compliance costs could be reduced as a result of less licence holders (i.e. do not increase the number of inspections on the remaining licence holders, conduct the same number of inspections, and reallocate time that would have been spent inspecting licence holders who are no longer in the fishery to other fisheries or non-cost recoverable services). Management costs could theoretically be reduced as there would be less operational management costs incurred as there would be fewer queries from licence holders to respond to. 
7. The FCRSC further noted that a reduction in the number of licences means a reduction in the total grants levy collected on behalf of SIV. SIV advised the FCRSC of their intent to address this in 2013 during the development of a new four year funding agreement.
8. In regard to the three abalone fisheries, industry strongly supported maintaining the status quo, i.e. a small proportion of management costs attributed to the licence holder (currently 191 fee units for each zone), with the remaining costs attributed to quota.
9. The FCRSC agreed that the best way to reduce costs is to reduce the risk posed by commercial operators to the fishery.
10. DPI reminded the FCRSC that all cost recovery revenue goes to the consolidated fund (Treasury).
11. The FCRSC noted that DPI had not received any feedback from industry on the GVP data provided at FCRSC #28. Industry agreed to review the GVP data and provide feedback to DPI (existing action item from FCRSC #28).
12. The FCRSC noted that two abalone processors voluntarily provide DPI with beach price data, which is then used to calculate abalone GVP. Industry supported DPI approaching at least two more abalone processors to get a better geographic spread of data.

Action item:

1. DPI to amend the Guidelines as requested and provide an updated version to the Committee members for review.
2. Industry to present proposals for the attribution of costs in the Rock Lobster (WZ) fishery.
3. DPI to confirm that any licences returned/forfeited/not renewed by industry will become null and void, and will not be re-issued.
4. DPI to write to at least two additional abalone processors requesting abalone beach price data be provided.
5. Industry to review the papers provided by DPI that address various FCRSC action items (statutory consultation principles, general/research permit response times, Abalone TACC process, treatment of levies when a fishery is closed, options to prevent closure of a fishery) and to provide any comment prior to the next FCRSC meeting.

7) Next meeting:

Friday 8 February 2013.

Meeting closed at: 4:00pm

Action items