COST RECOVERY IMPLEMENTATION STATEMENT

Voluntary Product Stewardship Accreditation

2015-16

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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) implements cost recovery for voluntary product stewardship accreditation arrangements under the Product Stewardship Act 2011 (the Act). It also reports financial and non-financial performance information for voluntary product stewardship accreditation and contains financial forecasts for 2015-16 and the three forward financial years to 2018-19.

The Department will maintain the CRIS until the activity, or cost recovery for the activity, has been discontinued.

1.2 Description of the activityWhat is voluntary product stewardship

Product stewardship is an approach to managing the impacts of different products and materials. It acknowledges that those involved in producing, selling, using and disposing of products have a shared responsibility to ensure that those products or materials are managed in a way that reduces their impact, throughout their lifecycle, on the environment and on human health and safety.

Voluntary product stewardship can take many forms and may have a focus on a product’s whole lifecycle or a focus on fixing a specific problem related to part of a product's lifecycle. More and more, organisations are participating in voluntary product stewardship as part of their environmental or corporate strategies. To strengthen their voluntary product stewardship position, organisations can seek accreditation from the Australian Government.

Why voluntary product stewardship

The Act paves the way for any number of product stewardship activities and schemes to be set up, as well as for existing schemes and projects to be accredited. The many activities likely to be carried out under the Act will help reduce waste and recover valuable resources in a safe and environmentally responsible way.

The Act provides the framework to effectively manage voluntary product stewardship, with the Product Stewardship Regulation 2012 and the Product Stewardship (Voluntary Arrangements) Instrument 2012 providing administrative direction to fulfil the voluntary arrangements under the Act.

Attaining accreditation for voluntary product stewardship communicates to the public that the arrangement has been independently assessed as credible by the Australian Government. Accreditation also provides assurance to the community that voluntary product stewardship arrangements are achieving real and effective outcomes. Arrangements are able to demonstrate their accreditation via the use of the product stewardship logo.Why cost recovery

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Requiring a fee to be paid with each application for accreditation of voluntary product stewardship ensures a thorough assessment is undertaken of the application. This can include responding to questions the potential applicant may have and providing assistance in how to develop their application. Further, charging potential applicants a fee is consistent with the policy goals for accrediting voluntary product stewardship arrangement, as it:

is likely to enable a larger number of arrangements to be considered for accreditation than if funded from general tax revenue

will enable appropriate resourcing to ensure applicants are processed in an efficient manner, even if demand is higher than expected, and

will signal to applicants the costs involved in assessing an application and deter organisations from submitting poorly developed applicants.

There is the potential that charging an application fee may discourage some organisations from applying for accreditation. Organisations will need to make their own assessment as to whether the benefits of accreditation and use of the logo outweigh any costs incurred in obtaining accreditation.

Who are the key stakeholders

A range of stakeholders have an interest in the accreditation of voluntary product stewardship arrangements. However, cost recovery will only affect those stakeholders that apply for accreditation.

Likely stakeholders in the accreditation process include:

State and territory governments: The National Waste Policy has been agreed by all Australian governments. The Australian Government has responsibility for the development and implementation of the product stewardship legislation. The role of state and territory governments is to support the establishment of an effective national framework for product stewardship, including the accreditation process

Waste management authorities (including local government): Responsibility for waste management and landfills varies across the country. Those parties with the greatest interest in voluntary product stewardship, due to the primary focus on managing waste, include state government, local councils and some private companies

Industry associations and businesses: Many existing voluntary product stewardship arrangements are managed by industry associations and businesses who wish to apply for accreditation. It is anticipated that additional industries and businesses will develop new arrangements for accreditation under the Act

Environmental and other Non-Government Organisations: These organisations are likely to be interested in ensuring the proposed and accredited arrangements are credible

Community: Members of the community may be interested in opportunities to take advantage of services provided by accredited arrangements

In considering the voluntary product stewardship arrangements that are currently operating, the Department expects that future applications will predominantly be made by

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industry associations and private companies.

2. POLICY AND STATUTORY AUTHORITY TO COST RECOVER

2.1 Government policy approval to cost recover the activity

On 5 November 2009, the Environment Protection and Heritage Council agreed to the National Waste Policy: Less waste, more resources (the National Waste Policy), which was later endorsed by the Council of Australian Governments in August 2010.

A key commitment under strategy one of the National Waste Policy was to establish a national framework underpinned by legislation that supports voluntary, co-regulatory and mandatory product stewardship. The National Waste Policy identifies that the accreditation of voluntary product stewardship arrangements is to occur on a cost recovered basis through a fee-for-service.

On 8 August 2011 the Act came into effect satisfying the commitment for national legislation under the National Waste Policy. Part 2 of the Act contains provisions for the accreditation of voluntary product stewardship arrangements and Section 102 of the Act provides the legal basis for charging an application fee for accreditation.

The cost recovery model for voluntary product stewardship accreditation was developed in accordance with the Australian Government cost recovery guidelines in 2012. The model was informed by investigations into existing Australian Government cost recovery arrangements and other assessment processes, in particular the assessment of applications to accredit arrangements under the National Television and Computer Recycling Scheme.

The Australian Government confirmed policy approval for full cost recovery of the accreditation for voluntary product stewardship arrangements in November 2012.

The cost recovery arrangements for January 2013 to March 2014 were outlined in the CRIS for that period.

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2.2 Statutory authority to chargeSection 102 of the Act provides the legal basis for charging an application fee for accreditation of voluntary product stewardship arrangements. This provision determines that:

an application under the Act must be accompanied by any fee specified in the Product Stewardship Regulation 2012 (the Regulations)

the Minister may approve different forms, and the Regulations may specify different fees, for different classes of application, and

the Minister may waive the whole or a part of a fee.

The Regulations specifies the application fees for the accreditation of voluntary product stewardship arrangements under the Act. Regulations can be found at http://www.comlaw.gov.au/Details/F2012L02244/.

3. COST RECOVERY MODEL

3.1 Outputs and business processes of the activity The activity to obtain and maintain accreditation has been broadly categorised into three distinct outputs: (1) application and assessment; (2) monitoring and compliance; and (3) renewal of accreditation. An overview of each of these outputs is provided below.

Output 1 : Application and assessment

Applicants are invited to submit an application for accreditation following public notification by the Department. The call for applications is likely to occur once per year.

Applications are made by administrators of arrangements. Administrators, or the applicant, are those who are responsible for administering the accredited arrangement and ensuring that the outcomes of the arrangement are achieved. Administrators must be a body corporate. Applications, put forward by Administrators, include payment of the application fee and the following documents:

an online application formthe Financial Viability Assessment: Voluntary Product Stewardship, andall required supporting documentation.

Applications for accreditation will be assessed by the Department to determine whether the arrangement meets the eligibility and accreditation.

The assessment by the Department of an application broadly involves the following steps:

receiving the application in an IT database and processing the application feeassessing the application against the eligibility requirements and accreditation

requirements, including an assessment of the arrangement’s technical and financial viability. The Department requires that applicants provide an independent assessment report on financial viability to accompany their applications

preparation of a recommendation reportreview of the assessment by senior staff, and

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consideration of the recommendation report by the delegate of the Minister.

The Department may request further information as required to complete the assessment.

If the application meets both the eligibility and accreditation requirements, the applicant will be notified advising of their accreditation and granted use of the Australian Government’s product stewardship logo.

The Minister, or delegate, may impose conditions on accreditation of a voluntary arrangement.

Output one is fully cost recovered and the fees reflect the complexity of the application and associated effort required for its assessment.

Output 2: Monitoring and compliance

Administrators of accredited arrangements are required to report on their performance annually to demonstrate that they are meeting the conditions and requirements of accreditation. These reports are assessed by the Department. Accreditation may be cancelled where an arrangement has failed to comply with the conditions and requirements of accreditation.

Ongoing monitoring and compliance costs associated with accredited arrangements are to be met by the Department, as these costs are not cost recovered under the Act.

Output 3: Renewal of accreditation

Successful applicants are granted accreditation for a period of five years. To maintain accreditation following this period, the Administrator of an arrangement will need to re-apply for accreditation. This involves an assessment by the Department to determine if the arrangement continues to meet the eligibility and accreditation requirements, as per output 1.

If an Administrator of an arrangement wishes to seek re-accreditation, they will need to pay the application fee. Consequently, this output is fully cost recovered.

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3.2 Costs of the activityCosts associated with processing and assessing applications comprise staff costs, including remuneration (i.e. salary and superannuation) and overheads (e.g. long service leave, worker’s compensation premium, staff training and development costs, human resource support costs, organisational service costs, accommodation costs and IT costs).

Parts of the products life cycle

Direct cost

($)

Indirect cost

($)

Supplier cost

($)

Total cost

($)

1 Part of lifecycle 16,988 3,716 0 20,704

2 Parts of lifecycle 19,465 4,291 0 23,756

3 Parts of lifecycle 21,829 4,824 0 26,653

The application fees must be paid at the time of making the application to seek accreditation for voluntary product stewardship.         

The complexity of the applications depends on the number of parts of the lifecycle that a product stewardship arrangement covers. Applications that cover more than one part of a product life cycle will attract a higher cost and hence a higher application fee. For the purposes of the cost recovery model, the lifecycle has been categorised into three parts as shown in Figure One.

Figure One Product lifecycle parts

A detailed account of the costs in assessing applications covering one, two or three parts of a product’s lifecycle is provided in Tables One to Five. These costs have been calculated following Round 1 of voluntary product stewardship activity accreditation undertaken in 2013 (see Section 3.3). The costs shown have been rounded to the nearest $100 for administrative simplicity.

Table One Estimated cost for assessing an application for an arrangement covering one part of a product’s lifecycle

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Lifecycle 1

ManufactureProcess relating to the manufacture of the product

Lifecycle 2

Supply and/or UseProcess relating to the supply and/or use of a product

Lifecycle 3

End-of-lifeProcess relating to the products end-of-life treatment

Description of cost Staff time (days)Assessment

Officer(APS 6)

AssistantDirector

(EL1)Director

(EL2)

AssistantSecretary

(SES)STAFF COSTSAssisting potential applicants with questions regarding application process and their application 0.5 4 0.2Other scheme costs Review and update of Guidelines (Australian Government Accreditation of Voluntary Product Stewardship Arrangements: Application Guide, and Financial Viability Assessment Guide: Voluntary Product Stewardship) 2 0.5 0.2 0.2Assessment of each applicationInitial processing of application (receipt application, invoicing, lodge details in database) 0.5 Undertake preliminary assessment 1.3 1 Review preliminary assessment 0.3 0.6 0.3Obtain further information from applicant 0.4 0.2 0.1Undertake accreditation assessment, including preparation of report 5 8Review accreditation assessment 2 Recommendation and decision on arrangements to be accreditedPrepare recommendation report for delegate of the Minister 1.5 Review recommendation report 0.5 Consider and make decision on recommendation report 0.1 0.2 0.5Prepare briefing for the Minister 0.5 0.5 0.1Update database with decision 0.1 Upload details of accredited arrangement to the departments’ website 0.6 0.5 0.3 Total estimated days 10.0 16.8 4.7 1.2Total estimated cost of staff time and other direct costs $20,704

TOTAL ESTIMATED COST OF ASSESSING APPLICATION COVERING ONE PART OF THE PRODUCT LIFECYCLE

$20,700

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Table Two Additional estimated cost of assessing an application for an arrangement covering one additional part of product’s lifecycle

Description of cost Staff time (days)Assessment

Officer(APS6)

AssistantDirector

(EL1)Director

(EL2)

AssistantSecretary

(SES)

Assessment of application (dealing with one part of product lifecycle)Undertake accreditation assessment 2.0 2.2 Review accreditation assessment 0.6 0.3 Total estimated days 2.0 2.8 0.3 0.0TOTAL ESTIMATED ADDITIONAL COST OF ASSESSING APPLICATION COVERING ONE ADDITIONAL PART OF PRODUCT LIFECYCLE

$3,052

Table Three Total estimated cost of assessing an application for an arrangement covering two parts of product’s lifecycle

Description of cost Estimated CostTotal cost of one part $20,704Total cost for additional part $3,052Total estimated cost of staff time and other costs $23,756

TOTAL ESTIMATED COST OF ASSESSING APPLICATION COVERING TWO PARTS OF THE PRODUCTS LIFECYCLE $23,800

Table Four Additional estimated cost of assessing an application for an arrangement covering two additional parts of product’s lifecycle

Description of cost Staff time (days)Assessment

Officer(APS6)

AssistantDirector

(EL1)Director

(EL2)

AssistantSecretary

(SES)

Assessment of application (dealing with one part of product lifecycle)Undertake accreditation assessment 3.0 5.0

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Review accreditation assessment 1.2 0.6 Total estimated days 3.0 6.2 0.6 0.0TOTAL ESTIMATED ADDITIONAL COST OF ASSESSING APPLICATION COVERING TWO ADDITIONAL PARTS OF PRODUCT LIFECYCLE

$5,949

Table Five Total estimated cost of assessing an application for an arrangement covering three parts of product’s lifecycle

Description of cost Estimated CostTotal cost of one part $20,704Total cost for additional part $5,949Total estimated cost of staff time and other direct costs $26,653

TOTAL ESTIMATED COST OF ASSESSING APPLICATION COVERING THREE PARTS OF THE PRODUCTS LIFECYCLE $26,700

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3.3 Design of cost recovery charges Outline of existing charging structure

The Act specifies that applicants are required to pay the full cost of assessing their application for accreditation in one upfront fee payment. The application fee has been calculated on the total costs associated with processing and assessing an application and, as such, represents a fee-for-service.

A fee was considered to be the most appropriate form of cost recovery for the assessment of applications for accreditation. This is because there is a service provided to an identifiable recipient.

The existing application fee, and fee structure, are specified in the Regulations and illustrated in Table Six.

Table Six Existing charging structure for voluntary accreditation as outlined in the Regulations

Number of parts of the product lifecycle’s covered by the arrangement

Application fee payable 2013-14 (excluding GST)

1 part of the products lifecycle $20,6002 parts of the products lifecycle $23,6003 parts of the products lifecycle $26,600

Review of existing cost recovery model

The January 2013-March 2014 CRIS identified that a review would be undertaken after the completion of the first round of applications and prior to the second round of applications. The review of the cost recovery model would enable a more accurate estimation of the time and resources necessary to undertake an assessment and the likely number of applications that could be expected into the future.

Following the completion of Round 1 of the applications for accreditation of voluntary product stewardship activities, a review was undertaken. The review, which occurred in late 2014, looked at the time taken to undertake the entire process of assessing an application process, which was calculated by assessment officers, and compared this to the estimated time and cost that was identified in the 2013-2014 CRIS. It also looked at the assessment and recommendation process, comparing what was undertaken compared to what was estimated in the 2013-2014 CRIS.

The review subsequently determined that the fee identified in the CRIS from 2013-14 for assessing one, two and three parts of the products lifecycle were marginally lower than the actual costs in undertaking the assessment process from Round 1. See Table Seven.

Table Seven Current and revised charging structure for voluntary accreditation

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Number of parts of the product lifecycle’s covered by the arrangement

Application fee payable 2013-14 (excluding GST)

Costs determined following Round 1 (excluding GST)

1 part of the products lifecycle

$20,600 $20,700

2 parts of the products lifecycle

$23,600 $23,800

3 parts of the products lifecycle

$26,600 $26,700

The actual costs of assessing applications and recommending accreditation was slightly higher than what was estimated in the January 2013-March 2014 CRIS. This can be put down to a number of factors including greater than estimated time involved in assisting applicants with questions regarding their application and greater than estimated time involved in undertaking the assessment of each application. However these costs are off-set with a reduction in costs identified, specifically not requiring the use of a consultant, as identified in the 2013-2014 CRIS and the reduction in ongoing costs associated with updating application guidance material.

While the review identified that the costs of the activity are marginally higher than the fees charged for Round 1, this difference is considered immaterial. Therefore it is not considered necessary to increase the fees as identified in the Regulations.

As the Department develops more experience in the process of voluntary product stewardship accreditation, costs will be regularly monitored and assessments will be made in the future on whether fee changes are required.

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4. RISK ASSESSMENT

The overall risk associated with the cost recovery of this activity is low. Potential risks, and how they will be managed are illustrated in Table Eight.

Table Eight Potential risks and mitigation with cost recovery

Risk Mitigation

More applications are received than anticipated for round 2 to round 4.

The Department maintains good working relationship with its stakeholders and industry representatives so has an understanding of the potential applications that would be received each year.

However if more applications are received, the workload of the assessment team would need to increase to effectively assess and administer the applications. The Department would manage this by ensuring tasks are evenly distributed amongst the team and key processes are focused on in the first instance. The assessment team would adhere to set procedures and timeframes.

Assessment processes taking longer than expected to complete

The time taken to assess an application has been determined and averaged out in the review process. It is expected that some applications will be undertaken in a shorter timeframe than others and over the course of the year, this would be averaged out.

Industry considering voluntary requirements too onerous or costly

The review of the CRIS has determined that the cost is in fact reflective of the time taken to assess, process and accredit voluntary product stewardship applications.

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5. STAKEHOLDER ENGAGEMENT

During 2012, extensive consultation was undertaken to inform the development of the cost recovery arrangements including a formal public consultation round in February and a targeted public consultation round in June. The consultation round sought feedback on the model for accrediting voluntary arrangements and submissions put forward generally supported the proposed design of the scheme, with some suggestions for modification or refinements. Nearly all submissions provided comments on the appropriateness of the proposed fees. Key outcomes of these consultations are in the CRIS January 2013-March 2014 at http://www.environment.gov.au/about-us/accountability-reporting/cost-recovery.

Given there are no proposed changes to the activity or fees, this revised CRIS have not been released for public consultation.

6. FINANCIAL ESTIMATES

Table Nine Estimated projected costs to 2018-19

  Budget year

Forward estimates

  2015-16 2016-17 2017-18 2018-19Expenses = X $85,858 $85,147 $85,884 $86,712Revenue – number of applications

1 part of lifecycle 3 3 3 3 2 parts of lifecycle 1 1 1 1 3 parts of lifecycle Total revenue = Y $85,400 $85,400 $85,400 $85,400Balance = Y - X -$458 $253 -$484 -$1,312

Cumulative balance * -$458 -$205 -$689 -$2,001Explain variance Not applicable

Explain impact on balance management strategy Not applicable

*The cumulative balance presented is for the reported financial years only. Any deficit will be absorbed by the department.

The Department has good working relationships with its key stakeholders and is well versed around the issues of product stewardship so is able to estimate the level of interest by industry on potential applications put forward. The Department is aware of a number of potential applications that will be put forward when the next voluntary round is opened. However it is important to note that while the Department is able to determine an approximate number of applications that may be received each year, the number of applications included in this CRIS are an estimate only and no way confirm what will be received.

A cumulative balance, or shortfall, has been identified between the fee for cost recovery of accreditation and the actual cost to the Department. It is proposed that the Department will absorb this through its departmental

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budget. It was agreed that as this shortfall is regarded as being immaterial, it would be more cost effective to absorb this cost rather than having to amend regulations which currently dictate the actual fee structure.

7A. FINANCIAL PERFORMANCE

Table Ten Financial results from the first round of voluntary accreditation 2013-14

2012-13 2013-14 2014-151

Expenses = X $0 $61,800 $0

Revenue – number of applications

1 part of lifecycle 0 3 0

2 parts of the lifecycle 0 0 0

3 parts of the lifecycle 0 0 0

Total revenue = Y $0 $61,800 $0

Balance = Y – X $0 $0 $0

Cumulative balance $0 $0 $0

Explain variance No variance

Explain impact on balance management strategy

Not applicable

7B. NON-FINANCIAL PERFORMANCE

Accreditation provides assurance to the community that voluntary product stewardship arrangements are achieving real and effective outcomes on the environment by focussing on the whole or part of the products lifecycle.

Upon completion of the first round of applications in 2013, the Australian Government successfully accredited two arrangements for accreditation of voluntary product stewardship: MobileMuster and FluoroCycle. Details on these arrangements are on the Department’s website at www.environment.gov.au.

Prior to being granted accreditation, arrangements need to identify the proposed outcomes of its scheme and provide specific, measurable and clearly defined outcomes over five years including appropriate milestones and interim targets. Arrangements are to provide an update to the Department on how they meet these criteria through an annual report. For example:

Outcomes are to refer to the specific and measurable objectives or targets that will be achieved, i.e. reduce the impact the products have on the environment or reduce the impact that substances contained in the products have on the environment

Activities are to be specific, measureable and clearly defined and should include key performance indicators, milestones, formulae for calculating targets and measures, timelines and roles and responsibilities of all parties involved.

1 Expenses not incurred for the 2014-15 FY as a voluntary accreditation round was not undertaken.

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Demonstrated information needs to show that the arrangement will result in an overall benefit to the environment

The Department’s Annual Report describes the outcomes of the voluntary product stewardship arrangements, specifically accreditation of specific arrangements.

8. KEY FORWARD DATES AND EVENTS

Round 2 for Voluntary Product Stewardship Accreditation will be opened by the Department most likely at the beginning of the 2015-16 financial year.

The information in this CRIS will be reviewed on a regular basis of no more than five year intervals to ensure that underlying assumptions and estimates of expenses and revenues are current.

9. CRIS APPROVAL AND CHANGE REGISTER

Date of CRIS change CRIS change Approver Basis for change

18/01/2012 Certification of the CRIS

Acting Secretary, Department of Sustainability, Environment, Water, Population and Communities

New cost recovered activity

30/06/2015 Update of financial estimates

Assistant Secretary, Waste Policy Branch, Department of the Environment

Review of average staffing levels effort and update of cost estimates

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10. GLOSSARY

Administrator The entity responsible for administering an accredited arrangement and ensuring that the outcomes of the arrangement are achieved. This may be a product stewardship organisation established for that purpose. Also known as the applicant.

Arrangement A set of activities or measures designed to achieve the outcomes for which accreditation has been sought. The details of each arrangement will need to be submitted to the department for accreditation and each arrangement will need to nominate an Administrator.

Cost recovery Involves the Australian Government charging the non-government sector some or all of the efficient costs of a specific government activity.2

CRIS Cost Recovery Implementation Statement

Lifecycle Covers the time from when a product is manufactured through to the time of the product’s end-of-life treatment.

Product Stewardship An approach to managing the impacts of different products and materials. It acknowledges that those involved in producing, selling, using and disposing of products have a shared responsibility to ensure that those products or materials are managed in a way that reduces their impact, throughout their lifecycle, on the environment and on human health and safety.

The Act Refers to the Product Stewardship Act 2011.

The Department Refers to the Australian Government Department of the Environment

The Regulations Refers to the Product Stewardship Regulation 2012

Voluntary product stewardship

Voluntary product stewardship involves parties coming forward voluntarily to seek accreditation by the Australian Government of a product stewardship arrangement on a fee-for-service basis. Under the Act, participation across an entire industry in a voluntary product stewardship arrangement is not required.

2 Australian Government Cost Recovery Guidelines (2014)

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