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Guidelines for Setting Charges in the Public Sector -April 2017

Cost Recovery Impact Statement templates

Each cost recovery regime should be based on sound analysis, underpinned by transparent information and a good understanding of the impact of the cost recovery regime. In summary, a public entity that generates revenue via cost recovery should be able to demonstrate:

  • a documented approach to its charging system that makes clear the legal authority for charging, the scope of and rationale for charges, and any other sources of revenue
  • a clear understanding of the objectives sought and the trade-offs that have been made
  • a sound cost-allocation process, with clear assumptions
  • for each charge-setting process, a clear audit trail showing the assessment of costs incurred (where applicable), expected to be incurred and forecast demand, and the way in which the charges have been determined
  • that the entity has a performance framework against which their cost recovery activities are measured
  • lines of accountability for the activity being cost recovered and the related charges, and
  • a plan for implementation, monitoring and review.

Two Cost Recovery Impact Statement (CRIS) templates, based on the Regulatory Impact Analysis (RIA) requirements have been designed to assist with cost recovery proposals.

The templates are designed specifically to help elicit the information required to meet the RIA requirements and to ensure that decision makers are fully informed when setting up a cost recovery regime and setting cost recovery levels. Any questions about the RIA requirements for a cost recovery proposal should be directed to the relevant Treasury vote team.

The templates should be used alongside this guidance. The templates reference the relevant sections of this guidance.

Figure 1: Cost recovery stages and templates
Figure 1 - Cost recovery stages and templates.

Stage 1 - Policy approval to cost recover

The objective of this stage is to gain policy approval to cost recover a specific government activity. This stage normally involves seeking approval to draft primary legislation to give authority to cost recover. If agreement is being sought on specific cost recovery levels then the stage 2 CRIS should be used.

A stage 1 CRIS containing the policy rationale for cost recovery and a high level cost recovery model should be prepared and attached to the RIS on the underlying policy proposal.

Stage 2A - Approval of the design of new cost recovery charge levels

The objective of this stage is to gain approval on the design and level of the proposed user charge. This stage normally involves seeking approval to draft regulations that contain the detail behind the user charges.

A stage 2 CRIS can be prepared and substitute the normal RIS. The stage 2 CRIS should contain at minimum:

  • the policy rationale to cost recover (section 3 of these guidelines)
  • a detailed cost recovery model (section 4)
  • impact analysis of the proposed user charges (section 3.3, 3.4 and 5)
  • results from consultation with stakeholders on the proposed cost recovery charges (section 2.5)
  • implementation plan (section 6), and
  • how the user charges will be monitored, evaluated and reviewed (section 6).

Stage 2B - Review of existing cost recovery arrangements

The objective of this stage is to gain approval to any changes that need to be made to current cost recovery arrangements based on the results of a cost recovery review. See section 6.6 for guidance on reviews of existing cost recovery arrangements.

A stage 2 CRIS can be prepared and substitute the normal RIS. A stage 2 CRIS for a review could be an updated version of a previous stage 2 CRIS. The stage 2 CRIS is intended to be a living document.

The fully completed stage 2 CRIS can substitute the normal RIS. A conversation about whether it is appropriate to replace the RIS should be had with the relevant Treasury vote team.

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