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6.5  Memorandum accounts

Memorandum accounts record the accumulated balance of surpluses and deficits incurred in the provision of certain outputs on a full cost recovery basis. The purpose of memorandum accounts is to:

  • increase transparency to charging practices
  • provide a credible commitment that charging entities will not inadvertently benefit from over-recovery
  • focus the attention of entities on possible over- or under-recovery, and
  • establish an even-handed regime in terms of their treatment of short-term surpluses and deficits, by applying a long-term perspective.

Departments must use memorandum accounts to record the accumulated balance of surpluses and deficits incurred in the provision of third party, fully cost-recovered outputs.

Memorandum accounts should be used wherever:

  • third parties are to be charged for services provided on a full cost-recovery basis
  • refunding surpluses or levying short-falls through a contractual arrangement is costly or impractical, and
  • the benefits of preparing a memorandum account clearly outweigh the compliance costs involved.

The expectation is that the balance of each memorandum account will trend towards zero over a reasonable period of time, with interim deficits being met either by cash from the agency's balance sheet or by seeking approval for a capital injection from the Crown.

What constitutes 'reasonable' will differ from case to case and is dependent on the specifics of the circumstances. Factors relevant are things like the useful life of capital investments, likely changes in input costs, cyclical changes in volumes, and how constant (for example, airlines) or changing (for example, passport applicants) the set of payers is.

More information on memorandum accounts can be found in Treasury Circular 2011/10, the Treasury Instructions 2016, the OAG guidance (section 3.57).

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