Department of Industry, Innovation, Science, Research and Tertiary Education

 

 

 

COST RECOVERY IMPACT STATEMENT

 

 

 

March 2013 to June 2014

 

 

 

Charges under Trades Recognition Australia's Programs

 

 

 

 

 

Table of Contents

1.         OVERVIEW

1.1          Purpose

1.2               Background

1.3               Australian Government cost recovery policy

1.4               Change in rates of charge

2.          POLICY REVIEW - Analysis of Activities

2.1               Description of activities

3.            DESIGN AND IMPLEMENTATION

3.1          Basis of charging - fee or levy

3.2          Legal requirements for the imposition of charges

3.3          Costs to be included in charges

3.4          Outline of charging structure

3.5          Summary of charging arrangements

4.         ONGOING MONITORING

                4.1          Monitoring mechanisms

                4.2          Stakeholder consultation

                4.3          Periodic review

5.            CERTIFICATION

6.            ACRONYMS

1. OVERVIEW

 

1.1     Purpose

The purpose of this Cost Recovery Impact Statement (CRIS) is to transparently demonstrate compliance of Trade Recognition Australia's (TRA) cost recovery activities with the Australian Government Cost Recovery Guidelines.

There are a number of TRA programs that operate on a cost recovery basis. TRA, in line with the Australian Government Cost Recovery Guidelines, periodically reviews its cost structure and fees with regard to the provision of trade skills assessment services. TRA's costs were last reviewed in 2011-12 and before that in 2006.

This CRIS has been prepared to reflect changes made to existing charging arrangements with regard to the trades skills assessment services administered by TRA and will be in effect from March 2013 to June 2014. Should changes be required during the current CRIS period, a new or amended CRIS will be prepared prior to implementing changes.

1.2     Background

TRA is a branch within the Department of Industry, Innovation, Science, Research and Tertiary Education (DIISRTE). The Minister for Immigration has specified a number of authorised assessing authorities for migration purposes. TRA is the only authorised assessing authority for trade occupations under the Migration Act (1958) and manages skills assessment services for people with trade skills who are Australian citizens, residents (both temporary and permanent) and potential migrants to Australia. A person who requires a skills assessment for migration purposes in a trade occupation is required to use TRA's services. These services include the following programs:

• Australian Recognised Trade Certificate Program (ARTC)
• Job Ready Program (JRP)
• Migration Skills Assessment Program (MSA)
• Migration Points Advice Program (MPA)
• Offshore Skills Assessment Program (OSAP)
• 457 Skills Assessment Program

The following TRA programs operate on cost recovery basis:

• The ARTC, which provides domestic trade skills recognition for Australian residents who have not completed an Australian Apprenticeship and seek recognition in an electrical or metals trade.
• The Job Ready Program, which assesses the job readiness of international student graduates from Australian trade training programs seeking permanent migration to Australia.
• The MSA, which provides skills assessment services for a cohort of overseas-trained trade skilled applicants seeking permanent migration to Australia.
• The MPA, which provides applicants with an assessment of whether the applicant's skills and experience are comparable to Australian standards for their nominated occupation.

TRA also manages two programs that are not cost recovered, namely:

*         OSAP, which is an assessment pathway for applicants applying for permanent migration to Australia, who work in a nominated occupation and hold a passport from a nominated country.

*         The 457 Skills Assessment Program, which is an assessment pathway for applicants applying for a Subclass 457 Temporary Business (Long Stay) visa who work in a nominated occupation and hold a passport from a nominated country.

Under the Offshore Skills Assessment Program and 457 Skills Assessment Program, TRA-approved Registered Training Organisations (RTOs) conduct the skills assessments for these programs on a fee for service basis, which are paid directly by the applicants to RTOs. These programs are therefore not included in this CRIS.

Since 2006, TRA has progressively introduced new robust assessment programs to cater better for demand-driven skilled migration, i.e. the JRP, MSA and MPA. The programs target skilled applicants in a number of sectors of skilled migration and utilise rigorous evidence-based assessment approaches to ensure the quality and consistency of assessment outcomes.

Key Stakeholders

The key stakeholders of TRA programs are:

*         Applicants

*         Program applicants' migration agents

*         Employers and employer groups

*         Employee representatives

*         Industry bodies

*         TRA approved Registered Training Organisations (RTOs)

*         Department of Immigration and Citizenship

*         DIISRTE

Conclusion

The provision of skills assessments to applicants presents a personal benefit to these applicants, either in the form of a positive skills assessment for migration purposes, or the issuance of a trade certificate which can be used for licensing or employment. In some cases there are alternatives to the use of TRA services where optional skills assessments or recognition of prior learning processes can be provided by RTOs.

TRA's activities and associated costs link directly to an individual's choice to apply for assessment/recognition of their trade skills through TRA programs. It is the individual, rather than the larger community, who derives primary benefit from the provided service. It is appropriate that a fee relating directly to the cost of the services provided is charged to the individual.

1.3     Australian Government Cost Recovery Policy

In December 2002, the Australian Government adopted a formal cost recovery policy to improve the consistency, transparency and accountability of its cost recovery arrangements and promote the efficient allocation of resources. The policy's underpinning principle is that entities should set charges to recover all the costs of products or services where it is efficient and effective to do so, where the beneficiaries are a narrow and identifiable group and where charging is consistent with Australian Government policy objectives. Cost recovery policy is administered by the Department of Finance and Deregulation and outlined in the Australian Government Cost Recovery Guidelines (Cost Recovery Guidelines).

The policy applies to all Financial Management and Accountability Act 1997 (FMA Act) agencies and to relevant Commonwealth Authorities and Companies Act 1997 (CAC Act) bodies that have been notified. In line with the policy, individual portfolio ministers are ultimately responsible for ensuring entities' implementation and compliance with the Cost Recovery Guidelines.

1.4     Changes in Rates of Charge

The Cost Recovery Guidelines require that charges should reflect the costs of providing the product or service. It is therefore appropriate to review and amend charges where increased delivery costs have occurred (such as labour costs, IT system improvements, provider fees, impact of CPI on office supplies etc.).

TRA has reviewed the cost incurred to deliver trade skills assessment services to applicants, and where necessary recalibrated applicant fees to reflect that cost.

The cost of managing TRA programs has increased significantly over the past six years, but the application fees that have been in place to date did not reflect these increases. Significant migration policy changes implemented from the 2009-10 financial year also affected the cost of delivering TRA programs. Key policy changes included the withdrawal of the Migration Occupation in Demand List (MODL) and changes to the Skilled Occupations List that saw the reduction of trades-related occupations from 142 to 35.

These changes were introduced as part of a package of reforms with the intent that the number of places available to independent skilled migrants in the skilled migration program would fall as the number of places available for employer-sponsored skilled migrants increased. This affected the number of applicants to TRA programs and meant that economies of scale were lost, thus increasing the cost of assessments. In addition, the restructuring, refinement and creation of new programs to ensure that rigorous assessment processes were applied incurred additional delivery costs. The full extent of the impact will not be apparent until the end of the 2012-13 financial year. This is due to the fact that costs are distorted in the early period of a program due to establishment costs, initial research and adjustments to processes and guidelines.  After two years, the program is expected to mature to a point where there is greater clarity about ongoing costs.

In addition, Machinery of Government changes announced in December 2011 have seen TRA move from the Department of Education, Employment and Workplace Relations to the Department of Industry, Innovation, Science, Research and Tertiary Education.  The changed arrangements have seen adjustments to some TRA administrative processes that increased the cost of conducting trade skills assessments.

 

Cost Structure Review

TRA has reviewed its cost structure, based on current full accrual operating costs (including indirect and corporate support costs). The review found that the average cost for the management and provision of trade skills assessment services for 2012-13 would not align with the fees applied since 2006, or the introductory fees of the more recently created programs.

 

Demand for TRA's services is mutable, contingent upon external drivers, such as migration policy changes, the high Australian dollar, and Australia's changing skills requirement. However, as individuals with trade skills who are seeking residency in Australia via the Skilled Migration Program are required to obtain skills assessments from TRA, it is unlikely that increased fees would impact significantly on the volume of demand for TRA's services. To ensure that fluctuating demand does not impact on the appropriate recovery of service delivery costs, TRA will review the cost of delivery of its services on an annual basis.

 

2. POLICY REVIEW - ANALYSIS OF ACTIVITIES

2.1     Description of activities

While all of TRA's programs can be categorised as providing a skills assessment or recognition service for trades or associated professional occupations, they each provide the service to a different cohort of applicants, service different volumes of work and undertake different activities as outlined below. The programs thus incur different running costs. These costs are reflected in the new fees, and calculated based on the operational costs associated with the programs.

Programs incur costs associated with:                 

*         the IT systems used to manage applicant details and assessment outcomes. These costs reflect the development, implementation and maintenance of business support tools (see details at 3.3);

*         a robust compliance and fraud control framework that underpins the integrity of TRA trade skills assessments;

*         applicants requesting a review of their trade skills assessment outcome; depending upon the outcome of the review the review fee can be, in some cases, refunded to the applicant; and

*         the day-to-day management of applicant information, policy development, and stakeholder liaison.

A number of TRA programs use external providers, TRA approved RTOs, to provide independent assessment or training services to applicants. RTOs do not pay a fee to be authorised as a TRA provider.

Australian Recognised Trade Certificates

Australian Recognised Trade Certificate (ARTC) assessments are conducted under the Tradespersons' Rights Regulation Act 1946. Successful applicants are granted an ARTC.

The Act provides for recognition through an ARTC granted by State based Local Committees (LCs). LCs comprise equal representation from employer and employee representatives.

While the decision to grant an ARTC rests with the LC, TRA undertakes a number of activities to facilitate the process. Key activities include:

• managing applications
• conducting a preliminary paper-based assessment and preparing a recommendation on the applicant's merits for the LC's consideration
• convening, and providing secretariat services to, the LC
• liaising with the applicant
• facilitating the conduct of trade tests
• managing providers
• issuing certificates
• facilitating the review process

The ARTC Program also incurs costs associated with the approval and management of the TRA-approved RTOs that conduct any trade tests required. Under existing fee arrangements, TRA does not fully recover the trade test fee charged by the RTOs.

The existing regulations entitle some applicants under the ARTC Program to trade skills recognition at no charge. Procedural arrangements and resources require these applications be assessed in a manner equivalent to a standard ARTC assessment delivered on a fee for service basis. This approach is inconsistent with the Australian Government's cost recovery policy as it creates equity issues and means that TRA is not fully recovering costs from those who use its services. Therefore, the ARTC Regulations have been amended so that all applicants for skills recognition under the ARTC Program be liable for a standard application charge.

Job Ready Program

The JRP was announced in 2009 and received funding in the 2009-10 Budget (see http://deewr.gov.au/portfolio-budget-statements-2009-10). The Program commenced on 1 January 2010 and operates on a cost recovery basis.

The JRP is a four step employment-based skills assessment program. The program aims to increase the confidence of Australian employers in the skills and qualifications of former international students and to ensure that these graduates are well placed as skilled workers to seek employment in their trade, whether in Australia or overseas.

The Program's four steps are:

• Step 1 Provisional Skills Assessment
• Step 2 Job Ready Employment
• Step 3 Job Ready Workplace Assessment
• Step 4 Job Ready Final Assessment

Participants must also undertake professional development in Australian workplace language and culture. This service is provided by TRA-approved RTOs. Applicants pay the RTOs on a fee-for-service basis. The Department does not currently charge RTOs a fee to gain TRA approval to deliver this service.

Each step in the Program has a discrete fee with the total fee payable for an applicant who completes the Program capped at $4,150.

At present the JRP is significantly under-recovering its costs. A key reason for the under-recovery of costs is the significantly higher than expected cost of support and enabling services. A number of factors have contributed to the higher program delivery cost. These factors include the financial processes involved in running the JRP program, the complex application process of each step in the JRP, which requires robust application processing, i.e. data entry, document management and preliminary assessment, and the need to allocate staff dedicated to assisting applicants and staff with regard to the complex TRADES II IT system. This has also been exacerbated by a lower than expected level of applications to the program.

A review of the JRP is under way. In order not to pre-empt possible review outcomes with regard to the program structure, the program fees have not been changed as part of this CRIS. Following the review and consideration of program structure, appropriate cost recovery arrangements will be implemented and reflected in a new or amended CRIS.

Migration Skills Assessment Program and Migration Points Advice Program

The MPA program and the MSA program were introduced on 1 July 2011 and replaced the now terminated Skilled Worker Program.

The design of the MSA program takes into account the outcomes of a review of the Skilled Worker Program conducted in early 2011.  The program's underpinning principles and assumptions are consistent with contemporary international vocational training qualification arrangements, and qualifications, training and assessment policies elaborated in the Australian Qualifications Framework and Training Packages.

The MPA program provides applicants with advice about the comparability of their overseas training and qualifications to the Australian Qualification Framework (AQF) qualification relevant for their occupation in Australia. It also provides advice about applicants' employment, which must be at the required skill level for their nominated occupation in Australia. Applicants use this information when applying to DIAC for permanent migration

The Program uses extensive research and analysis, including input from international experts, in comparing information for approximately 100 countries and 150 occupations.

TRA officers assess a complex array of evidence provided by applicants to determine an assessment outcome. Key activities include:

• collecting and assessing details of vocational trade qualifications and training frameworks of over 100 countries
• verifying applicant-supplied documents
• comparing applicants' qualification documents provided with the requirements for the relevant AQF qualifications/ apprenticeships for the nominated occupation in Australia
• comparing applicants' employment history with the requirements for a skilled worker in the nominated occupation in Australia

The nexus between MSA and MPA is such that the MPA process is streamlined where an applicant has had a previous MSA assessment. The information gained during the robust MSA assessment process can be used in the MPA assessment. This productivity gain is reflected in the lower MPA fee that will be charged to those applicants with a previous MSA assessment. Applicants who do not have a previous MSA assessment will be charged a higher fee.

The MSA review fee is the same as the MSA application fee as, because when a review is received, it is effectively treated as a new application. All research and verifications necessary to making a decision are conducted again to determine whether the original decision was correct.

 

3. DESIGN AND IMPLEMENTATION

3.1     Basis of Charging - Fee or Levy

TRA's cost recovery charges are fees for services.

Fee-for-service charges, where individuals provide payment directly to TRA, can only be legally applied to services provided to an individual and where the relevant charge reasonably reflects the costs incurred in providing the service in question. Reasonable averaging of costs across instances of delivery of a given type of service is permitted when meeting this cost-matching requirement.

As the cost of the services delivered under TRA's individual programs does not vary to a major extent from participant to participant within each program, a fixed level fee for service is the most appropriate approach.

3.2      Legal Requirements for the Imposition of Charges

ARTCs are issued under the Tradespersons' Rights Regulation Act 1946. Section 51A of the Act authorises the collection of fees to pay for the provision of ARTCs. Sections 3 and 4 of the Tradespersons' Rights (Cost Recovery) Regulations 1993 detail the fee structure.

The JRP, MPA and MSA collect fees under the authority of an Instrument (IMMI 10/052) of the Minister for Immigration under Subregulation 5.40(1) of the Migration Regulations 1994. Section 504 of the Migration Act 1958 authorises the charging and recovery of fees in respect of any matter under the Act or the regulations.

3.3      Costs to be Included in Charges

TRA seeks to fully recover costs associated with administering its programs based on the following costing principles and model. The underpinning principles on which recovered costs are based are the estimation of efficient costs and transparency. Costs linked to specific activities are categorised as direct costs, other support costs and indirect costs (overheads). Capital costs have been included in calculations for those TRA programs where capital costs are incurred - generally, the capital costs relate to the TRA TRADES II IT system investment. Each cost is adjusted annually based on operations, supply costs and estimates of achievable efficiencies that might reduce costs. For example, TRA will shortly implement a new payment system that will provide productivity gains through reducing applicant enquiries, and streamlining refund processes.

A costing model, which takes account of the demand volumes and work effort hours attributed to each activity associated with the TRA programs, has been used to calculate costs. This methodology provides the total cost of each activity, which includes direct labour cost and associated support and corporate costs.

The costing model measures the staff time usually taken to perform tasks associated with each activity, which is then costed for the direct salary, including on-costs such as superannuation, leave, workers' compensation, etc. to provide a cost per activity. The support and corporate costs are also included in the hourly rate to derive the "fully loaded" cost. The total cost is then derived by multiplying the total number of regulatory activities performed by the cost of each activity.

Direct costs, of which staff costs are the most significant component, are based on historical financial information and statutory requirements in relation to staff (such as the Department of Industry, Innovation, Science, Research and Tertiary Education Enterprise Agreement), analyses of workload fluctuations, staff numbers required to manage the TRA programs efficiently and surveys of future operational requirements.

Overheads include rent, utilities, corporate services employee costs, ICT infrastructure services and office supplies. These overheads are allocated on the basis of the full time staff equivalents (FTEs) involved in each activity as the most equitable and reasonable basis for allocation, taking account of the fact that employee numbers are the most significant cost determinant for overheads in all activities.

Other support costs include costs associated with application data entry, undertaking necessary checks, branch and regulatory management.

This cost recovery analysis is based on fully distributing overhead costs. Accordingly, all overhead costs are incorporated into individual activity costs.

3.4      Outline of Charging Structure

Fee charges are structured on a unit fee basis with a fee schedule covering applications, trade tests, the issue of replacement ARTC certificates and applicant requests for a review of decision. The fee setting process takes account of Australian and international comparative rates.

TRA minimises costs wherever possible by centralising the application registration process. That is, all applications are registered by a single team. This team also manages TRA's record management requirements (e.g. file creation) and applicants' enquiries. This approach streamlines registration processes and leverages the economies of scale of a high volume workload. It removes duplication of roles, minimises delays and ensures applicants receive a consistent and high quality service.

The calculation of fees takes account of a broad range of variables. For example - the ARTC replacement certificate application fee of $170 takes account of a number of discrete activities and costs. This includes the different APS levels and salary costs of staff conducting the various discrete activities within the process; the time taken to complete an activity; the overheads attached to the process such as the cost incurred to print a new ARTC certificate; staff benefits that accrue, such as leave entitlements and superannuation; and the application's complexity.

An officer at the APS3 level registers the application requesting an ARTC replacement certificate. The registration process takes about 30 minutes. Applicant details from the application are data entered into TRADESII, the cheque or money order attached to the application is forwarded to the Finance Officer (APS 5) to be processed, and the payment is banked. As TRA processes its banking on a batch basis, (that is multiple payments are processed simultaneously), the total time taken (up to two hours), and cost incurred, to process the batch is proportionately split between each application.

The application is allocated to the ARTC program area where an APS 5 officer checks that the applicant had previously been granted an ARTC certificate. This varies from between 5 minutes, where the applicant has been granted an ARTC within the past 5 years, to 30 minutes where the applicant had been granted an ARTC certificate 20 years previously. A replacement certificate is issued to the applicant where entitled. This process takes up to 10 minutes. The replacement certificate is placed in a presentation folder and mailed to the applicant. Where the applicant is not entitled to a replacement certificate, a letter is sent to the applicant advising this decision.

An EL1 officer checks each outcome to ensure that the decision is correct; the certificate correctly shows the applicant's name; the details are recorded correctly in TRADES II; and that the certificate is being mailed to the correct address. This process can take up to 10 minutes.

TRA fees are published on the TRA website.

 

3.5      Summary of Charging Arrangements

The below summaries outline the fee changes to be implemented under this CRIS.

 

The fee changes came into effect from March 2013.

 

2012-2013

 

	Activity	Method of Recovery	Volume of Activity	Price Previous to CRIS	Cost Recovery Price[1]	Total Cost for Activity	Total Recovery for Activity
1.1	ARTC application	Fee For Service	2,448	$300	$930	$1,125,639	$1,119,960
1.2	Reissue/ replacement certificates	Fee For Service	49	$130	$170	$6,843	$6,861
1.3	Trade Test Applications	Fee For Service	115	$270	$1,000	$53,369	$52,038
2.1	Migration Skills Assessment (MSA)	Fee For Service	2,365	$300	$1,000	$1,123,300	$1,123,375
2.2	MSA Review of Outcome	Fee For Service	284	$300	$900	$125,544	$127,800
3.1	Migration Points Advice Program (MPA) Based on Migration Skills Assessment	Fee For Service	400	$300	$600	$155,254	$150,000
3.2	Migration Points Advice Program (MPA) Based on Skilled Worker Program skills assessment	Fee For Service	172	$300	$1,100	$88,407	$86,000
3.3	MPA Review of Outcome	Fee For Service	6	$300	$300	$1,839	$1,800
						$2,680,195	$2,667,8342

 

 

2013/2014

	Activity	Method of Recovery	Volume of Activity	Price Previous to CRIS	Cost Recovery Price	Total Cost for Activity	Total Recovery for Activity
1.1	ARTC application	Fee For Service	2,613	$300	$930	$2,370,741	$2,430,090
1.2	Reissue/ replacement certificates	Fee For Service	53	$130	$170	$8,892	$9,010
1.3	Trade Test Applications	Fee For Service	123	$270	$1,000	$122,514	$123,000
2.1	Migration Skills Assessment (MSA)	Fee For Service	2,530	$300	$1,000	$2,450,399	$2,530,000
2.2	MSA Review of Outcome	Fee For Service	304	$300	$900	$264,408	$273,600
3.1	Migration Points Advice Program (MPA) Based on Migration Skills Assessment	Fee For Service	485	$300	$600	$286,173	$291,000
3.2	Migration Points Advice Program (MPA) Based on Skilled Worker Program skills assessment	Fee For Service	208	$300	$1,100	$219,990	$228,800
3.3	MPA Review of Outcome	Fee For Service	7	$300	$300	$2,006	$2,100
						$5,725,123	$5,887,600

                                                                                                                                                                                   

 

 

4. ONGOING MONITORING

 

4.1      Monitoring Mechanisms

TRA regularly monitors its cost recovery position to consider how costs and revenues align. Strong stakeholder engagement ensures an ongoing consultation process occurs, with regard to TRA's activities and fees charged.

TRA also undertakes periodic reviews of its overall approach to cost recovery. The associated revenues are reported in accordance with the Minister for Finance's Orders for financial reporting.

 

4.2     Stakeholder Consultation

TRA's costs have a very minimal direct impact on industry or small business and as such minimal specific consultation has occurred with regard to the changed fee arrangements detailed in this CRIS. The draft CRIS document was made available to the public for comment in December 2012 on the DIISRTE website. No feedback was received. The final document will also be available on DIISRTE website. TRA's strong stakeholder relationships mean that stakeholders can provide feedback at their convenience with regard to service delivery and the continuous improvement and evolution of its Programs' structures and costs.

 

The respective Regulations/Disallowable Instrument will show the amended fee structure. In addition, the revised fee structure will be published on the TRA website. TRA stakeholders can provide feedback to the TRA via the customer satisfaction form that is available on the TRA website.

 

4.3     Periodic Review

The cost structure of TRA, delivery mechanisms and the resources required for service delivery will be monitored on a regular basis, with TRA conducting a formal review of its cost recovery approach every four to five years, as required by the Australian Government Cost Recovery Guidelines, with the next major review of all cost recovery arrangements due by 2016-17.

 

Changes in the range or nature of activities and services over time will be reflected by amending this CRIS or preparing a new CRIS. For example, should the outcomes of the TRA JRP Review expected to be released by mid-2013 lead to changed fees, the CRIS will be updated appropriately.

 

 

5. CERTIFICATION

 

I certify that this CRIS complies with the Australian Government Cost Recovery Guidelines.

 

 

 

Donald Eric Russell

... ... ... ... ... ... ... ... ... ... ..

Secretary

Department of Industry, Innovation, Science, Research and Tertiary Education

 

Date: ... ... 19/03/2013            ... .

 

 

6. ACRONYMS

 

ARTC - Australian Recognised Trade Certificate Program

 

CRIS - Cost Recovery Impact Statement

 

DIAC - Department of Immigration ad Citizenship

 

DIISRTE - Department of Industry, Innovation, Science, Research and Tertiary Education

 

FTE - Full-time staff equivalent

 

IT - Information Technology

 

JRP - Job Ready Program

 

JRE - Job Ready Employment

 

JRFA - Job Ready Final Assessment

 

JRWA - Job Ready Workplace Assessment

 

LTC - Local Trades Committee

 

MPA - Migration Points Advice Program

 

MSA - Migration Skills Assessment

 

PSA - Provisional Skills Assessment

 

RTO - Registered Training Organisation

 

TRA - Trades Recognition Australia

 

TRALO - Trades Recognition Australia Liaison Officer