Cost recovery update September 2018

1. Cost recovery updateSeptember 2018 Jim ScottChief Regulatory OfficerARPANSA

2. Background • Successive Australian National Audit Office (ANAO) audits at ARPANSA in 2005 and 2014 revealed ARPANSA has systematically under-recovered its regulatory costs. • In its 2014 audit report, the ANAO concluded that: • ARPANSA has subsequently developed a cost recovery plan whose ultimate objective is to fully recover ARPANSA’s regulatory costs effective from 1 July 2019. ‘Since 2008-9 ARPANSA has under-recovered its regulatory expenses by almost $4 million, and has used revenue from its scientific and advisory services functions to cross-subsidise its regulatory function.’

3. Background • In FY 2016-17, the first stage of the plan was implemented when the annual licence charges of the three largest licence holders, such as: Australia's Nuclear Science and Technology Organisation (ANSTO), the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and Defence were fixed, based on actual regulatory effort. • Regulatory effort is calculated using an activity tracking system known as the ARPANSA Cost Recovery Tracker (CRT). • ARPANSA regulatory staff have been capturing regulatory effort in the CRT database since early 2014.

4. Background • When the first stage of the plan was implemented in FY 2016-17, it was intended that the effort allocations would be reviewed on a three yearly basis, with the next review due in FY 2019-2020. • The plan also envisaged that the methodology for calculation of annual licence charges for radiation sources would be revisited since it is considered too complex and lacks transparency.

5. Latest cost recovery update 2018 • In early 2018, ARPANSA engaged Ernst and Young to undertake an independent review of its corporate overheads in the delivery of regulatory services since it was estimated that only 85% of regulatory costs are currently being recovered • The outcome of the review concluded that the corporate overhead and contributions from other branches and offices to support regulatory services has been underestimated. • The net effect of these changes is that the amount recovered by ARPANSA Regulatory Services will need to increase from $4.46 million in FY 2018 -19 to $5.31 million in FY 2019 -2020, including a 2% indexation in ARPANSA salaries in FY 2018-19.

6. Latest cost recovery update 2018 • A new source licence charging model is proposed for small source licence holders which removes the location dependence and removes the charge cap for sites, and is based solely on the number of sources held by a licence holder. • The latest calculated regulatory effort allocations in July 2018 indicated that the Australian National University (ANU) has exceeded the threshold for a small licence holder. It is proposed that from 1 July 2019 that it be classed as a large licence holder, with its annual licence charges fixed based on actual regulatory effort which is currently estimated at 3.5%.

7. Overall breakdown of costs CEO and other staff effort on reg activities Corporate overhead RSB salaries &expenses Legal office Miranda rent Travel Does not include appropriated activities e.g. security, or activities which incur fees eg applications, import/export permits

8. Total costs to licence holders – model 1 New Fixed Licence Holders with only source licences Licence Holders with Facility Licences

9. Cost Recovery Tracker • Costs for ANSTO, CSIRO, Defence and ANU are estimated based on time recorded in CRT. • Example: ANSTO activity approx. 61% of all licence holder activity. Charge adjusted so that ANSTO pays 61% of all licence holder charges. • Relative recovery is continuously improved through minor adjustments every three years. • Model options considered for small licence holders.

10. Source licence model options • Model 1 source licence holders pay per source • consistent price per source • simple calculation • easy to explain. • Model 2 source licence holders pay based on thresholds • very small licence holders over pay • acquiring additional sources above thresholds attracts large payment. • Model 3 existing calculation method in regulations • poor correlation between cost and regulatory activity • charge capping (11 plus sources at single site) • calculation is resource intensive.

11. Small licence holder charges • Charge of $663 per source • based on charge per source (model 1) • 43 small source licences • unsealed sources premises count as one source consistent with the legislation summation formulae for unsealed sources at a premises • does not apply to Australian War Memorial and Australian Federal Police, which are based on regulatory activity • also does not apply to the large licence holders ANSTO, CSIRO, Defence, ANU which are fixed based on regulatory effort.

12. Outlook for 1 July 2019 • Eight small licence holders have significant increases >$2000 • 11 small licence holders have moderate increases <$2000 • 24 small licence holders have a charge reduction • one time only adjustment • $663 charge per source (simple method).

13. Licence holders – cost recovery

14. THANK YOU CONTACT ARPANSA Email: info@arpansa.gov.au Website: www.arpansa.gov.au Telephone: +61 3 9433 2211 Freecall 1800 022 333 General Fax: +61 3 9432 1835