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Cost Recovery Proposals under the Animal Products Act 1999

9 Charging Mechanisms

This section outlines the policy for determining the basis for charging, including mechanisms and methods for calculating fees and charges.

9.1 Charging regime should not be overly complex

Total costs to be recovered by regulation are around $9 million. Providing a cost recovery system where small units of service are individually calculated for each client would be costly to set up and administer in comparison with the estimated costs to be recovered. In some cases the costs of obtaining the necessary information and keeping track of various components may outweigh the direct cost of providing the service.

9.2 Basis of charging for services

It is proposed that for functions and services that can be divided into homogeneous units and where there is little variation in the cost of providing the unit of service, they will be charged at an average cost (direct and indirect) per unit of output. Fixed fees and annual charges are proposed. This will assist in minimising transaction costs and providing certainty over fees and charges.

Where there is a large variation in the cost of individual outputs, for example, in the time taken to perform the service, average costing through fixed fees is not an appropriate charging option. In these circumstances it is proposed that hourly rates be used. Where hourly rates are used, disbursements covering items such as (but not exclusively) travel, accommodation, and communication will be charged at cost.

For certain industry goods a charge based on size or throughput ie, levies or differential charges are considered.

9.3 Proposed charging mechanisms

The proposed basis for charging for services provided under the Animal Products Act:

• attaches fees and charges to specific units of service provided

• uses mainly fixed fees and annual charges, as these are simpler to apply and therefore have a lower administrative cost

• sets fixed fees and charges based on the average full and reasonable costs of providing the services

• sets annual charges on the basis of the costs of performing these functions allocated amongst the persons that will be paying the charge

• sets time-based charges on the basis of fixed and variable costs (eg, salaries and operating costs)

• sets other charges (disbursements) on the basis of actual and reasonable costs incurred in providing the service, and

• provide for levies to recover costs where a differential charging system is desirable.