[PLAN: 14200745_1] Guidance Material for the Regulator Performance Framework – Overview and Observations[PLAN: 14200745_1] [Type a quote from the document or the summary of an interesting point. You can position the text box anywhere in the document. Use the Drawing Tools tab to change the formatting of the pull quote text box.][PLAN: 14200745_1] Contents 1. Introduction .............................................................................................................................1 2. Components of the Guidance................................................................................................1 2.1 Coverage ...................................................................................................................1 2.2 Key Performance Indicators ......................................................................................2 2.3 Reviewing Performance.............................................................................................4 2.4 Implementation timeline.............................................................................................6 3. Observations ...........................................................................................................................11 [PLAN: 14200745_1] 1. Introduction In spring 2014, the Government released the Regulator Performance Framework (Framework). As noted in our previous updates on the issue, including this briefing paper on the new Regulator Performance Framework, the Framework would be complemented by implementation guidance. In January 2015, the Government issued Guidance Materials (Guidance), which have been prepared in consultation with representatives from portfolio deregulation units and regulators. This Briefing Paper provides an overview of the main elements of the Guidance. It also provides some observations about the Guidance, including a comparison between the Framework and the Guidance. 2. Components of the Guidance The Guidance consists of 3 components: Coverage: The Guidance helps Commonwealth entities to determine whether or not they are subject to the Framework. Key Performance Indicators: The Guidance assists covered entities to select, design and report against the six KPIs identified in the Framework. Reviewing Performance: The Guidance provides further information about the selfassessment and external review processes. 2.1 Coverage 2.1.1 Covered activities The following regulatory activities are covered by the Framework: Licensing and/or approvals processes, including registration/accreditation that control entry to or participation in a market Monitoring and compliance activities, including imposing and collecting fees Enforcement actions for non-compliance and complaints resolution Providing advice and guidance regarding compliance with regulation Notably, providing advice and guidance will only be covered if this activity is undertaken in conjunction with one of the other regulatory activities identified above. 2.1.2 Covered entities Commonwealth entities will be covered unless one or more of the characteristics apply to the entity: Joint ownership with other governments1 Standards, code or policy setting2 1 This category includes entities established under national schemes but where constitutional powers remain with the States. 2 Entities that only perform the role of setting standards or regulatory policy are not covered by the Framework.2 [PLAN: 14200745_1] Procurement, grants and the administration of benefits and entitlements No interaction with public3 Courts or administrative tribunals Law enforcement agencies as defined by the Crimes Act 19144 2.1.3 Assessing coverage Portfolio deregulation units will need to determine whether the Framework applies to entities within the portfolio and, if so, which regulatory activities are covered. 2.2 Key Performance Indicators As noted in our previous updates on the Framework, it includes 6 KPIs, which are aimed at ensuring best practice performance and administration by covered Commonwealth entities. The Guidance includes the following information regarding application of the KPIs. 2.2.1 Scope of application Assessment against all KPIs: Regulators will be assessed against all 6 KPIs. 2.2.2 Measures of good regulatory performance Guide only: The measures of good regulatory performance are intended to guide assessment against the KPIs in the Framework and are not exhaustive. Need to tailor: The measures should be tailored for individual entities, taking account of their role, specific tasks and legislative environment. Engagement with small business: The small business engagement principles can be used to assist with the development of measures, namely: actively identify ways to eliminate unnecessary red tape in all policies, programmes and initiatives that affect small business consult and collaborate with small business early and throughout the policy making and programme design process make information targeted to small business available through the Government's primary small business communication channels strive to adopt whole-of-government small business solutions to simplify the way business interacts with Government online communicate with small business in clear, simple language and present information in an accessible format. 3 These entities are not outward facing and only regulate internal government processes. 4 One example is the Australian Federal Police.3 [PLAN: 14200745_1] 2.2.3 Evidence of performance Guide only: The examples of output or activity-based evidence in the Framework are not exhaustive and should be used as a guide only. Use of evidence: Data may be used as evidence for assessing multiple KPIs. However a range of evidence from different sources should be used to ensure adequate performance assessment against each KPI. Proportionality: Where a KPI is considered relatively less relevant, the evidence and assessment should be proportionate to the degree of relevance. Coverage of regulatory activities: The evidence of performance should relate to all covered regulatory activities. Stakeholder evidence: Evidence should include opportunities for a full range of stakeholders to contribute, including through business surveys, interviews, focus groups and feedback mechanisms. Minimise burden on small business: Collection of evidence should not impose an unnecessary burden, particularly on small business. Approval of metrics: Suitability of evidence should be tested with relevant department(s) and Ministerial Advisory Councils or through stakeholder consultation mechanisms. In all cases, the relevant Minister must agree to the proposed evidence metrics, which must be made publicly available. 2.2.4 Improvement Use of performance results: Entities will be required to demonstrate that they have considered how regulatory settings, frameworks or approaches could be improved based on the performance results. 2.2.5 Reporting Alignment with reporting under the Public Governance, Performance and Accountability Act 2013 (PGPA): Where appropriate, entities may choose to align reporting under the Framework with reporting requirements under the performance framework established pursuant to the PGPA. In relation to the interface between the PGPA and the Framework, please see our briefing paper, The Interface between the PGPA and the new Regulator Performance Framework. 2.2.6 Existing performance framework Use of existing performance frameworks: To avoid duplication, entities can use their existing evidence base and reporting mechanisms to assess and report on their performance, subject to agreement by the responsible Minister. In these cases, performance reports must demonstrate the regulator's performance against the Framework's KPIs. 2.2.7 Use of performance results Limited comparison of performance across entities: The KPIs will enable Commonwealth entities to benchmark their own performance. Only a high-level comparison of performance of entities within a portfolio or with similar roles and functions may occur.4 [PLAN: 14200745_1] 2.3 Reviewing Performance 2.3.1 Self-assessment Requirements: The only specific requirements regarding self-assessment are that they be conducted annually, externally validated through an approved stakeholder consultation mechanism and made publicly available. Consistency within portfolios: Deregulation units and covered entities should consider whether consistency across entities in the same portfolio or operating in the same market is desirable or appropriate for comparative purposes. Body to undertake external validation: All covered entities must have their selfassessment externally validated. Normally, this will be done by the Ministerial Advisory Council. However, an alternative stakeholder consultation mechanism (e.g. an existing stakeholder committee or reference group) may be approved by the responsible Minister if this is considered to be more appropriate. Purpose of external validation: External validation does not involve an audit of the entity's self-assessment. Rather, it provides an opportunity for external stakeholders to provide feedback on whether the self-assessment results are consistent with the stakeholders' views of the entity's performance. Cases where external review conducted: If a covered entity is subject to an external review, annual self-assessment will still be required. However, in these cases, external validation of the self-assessment will not be required. 2.3.2 External reviews Purpose of external reviews: The purpose of external reviews is to confirm the validity of and provide external accountability for regulator self-assessments. Targets of external reviews: A selection of entities will be subject to external review over a 3 year cycle. The entities selected for targeted external review can be adjusted by the responsible Minister at any time. Programme of targeted external reviews: Deregulation units will develop a programme of targeted external reviews of selected entities within their respective portfolios, which must be agreed between the responsible Minister and the Prime Minister by 31 December 2015 for the first year of the programme. Considerations for selecting entities for the programme of external review are: industry risk current government priorities nomination by Ministerial Advisory Councils or the responsible Minister history of complaints about how the regulator operates regulator was recently subject to an external review outside the Framework that sufficiently assessed performance measures in the Framework regulator's previous performance against the Framework and/or other performance requirements5 [PLAN: 14200745_1] Annual external review: The government will have an option to commission external reviews of a small number of major regulators on an annual basis. Smaller regulators that consistently under-perform or where there are genuine concerns about performance could also be the subject of an annual external review. Criteria for annual external review: Considerations to select entities for annual external review include: cost of regulatory burden size of the regulated community and industry value to the economy annual budget/revenue results of self-assessments of external reviews Timing of review decisions: Annual review decisions will generally be made by March each year to inform planning for the next assessment period. 2.3.3 Assessment reports Means of publication: The Framework does not prescribe how or where to report the results of self-assessment and external reviews. Timing of publication: Assessment reports should be made publicly available as soon as possible following the end of the relevant assessment period and, preferably, no later than each December. Publication in case of national security issues or operational sensitivities: If there is a risk to achievement of regulatory objectives or national security, the responsible Minister could agree to how and where reports should be published. In addition, no or limited consultation on these reports may be authorised in certain circumstances. Certification: Assessment reports must be certified by the entity's Accountable Authority under the PGPA (or equivalent) and provided to the responsible Minister. 6 [PLAN: 14200745_1] 2.4 Implementation timeline The Guidance includes an implementation timeline, which is set out below:1 [PLAN: 14200745_1] 3. Observations In this section of the Briefing Paper, we outline some observations regarding the Guidance based on a comparison with the Framework document. ISSUES FRAMEWORK GUIDANCE OBSERVATIONS Objectives The Framework document indicates that the objective of the Framework is to "encourage regulators to undertake their functions with the minimum impact necessary to achieve regulatory objectives and to effect positive ongoing and lasting cultural change within regulators".5 The Guidance states that the Framework "has been established to assess regulators' performance when interacting with business, the community and individuals whilst carrying out their functions. The objective of this Framework is to improve the way regulators operate, reduce the costs incurred by business, individuals and the community from the administration of regulation, and to increase the public accountability and transparency of regulators".6 There is no inconsistency between the statement of objectives in the Framework and the Guidance. However, the Guidance confirms that the Framework is intended to not only minimise administrative burden on regulated entities, but is also intended to enhance accountability and transparency. 5 Regulator Performance Framework, p. 4. 6 Guidance, Key Performance Indicators, p. 3.2 [PLAN: 14200745_1] ISSUES FRAMEWORK GUIDANCE OBSERVATIONS Coverage of entities In the Framework, the only categories of regulatory entity that are expressly stated not to be covered by the Framework are:7 Regulatory bodies jointly owned with other governments Bodies responsible for setting standards or regulatory policy The Guidance clarifies that a broader range of entities will not be covered by the Framework, namely:8 Joint ownership with other governments Standards, code or policy setting Procurement, grants and the administration of benefits and entitlements No interaction with public Courts or administrative tribunals Law enforcement agencies as defined by the Crimes Act 1914 The most notable addition to the list of entities that will not be covered by the Framework is entities that are responsible for administration of benefits and entitlements. Entities that are primarily responsible for these functions are not "regulators" in the conventional sense. Nevertheless, they do have significant interaction with the public. Therefore, their exclusion from the Framework is an interesting development given the objective of the Framework to minimise administrative burden. The exclusion may be explained by the fact that the interaction of these entities with the public is mostly confined to individuals seeking benefits or entitlements. The impact of the administration of benefits and entitlements would in some cases be more limited for businesses and the broader community. To date, entities administering benefits and entitlements have been subject to deregulation activities and presumably those entities will continue to be subject to the broader deregulation agenda. 7 Regulator Performance Framework, p. 7. 8 Guidance, Coverage, p. 2.3 [PLAN: 14200745_1] ISSUES FRAMEWORK GUIDANCE OBSERVATIONS Coverage of regulatory activities In the Framework, procurement and grants are expressly stated not to be covered by the Framework.9 The Guidance does not list regulatory activities that are not covered by the Framework. Rather, regulatory activities that are covered are listed, namely: 10 Licensing and/or approvals processes, including registration/accreditation that control entry to or participation in a market Monitoring and compliance activities, including imposing and collecting fees Enforcement actions for noncompliance and complaints resolution Providing advice and guidance regarding compliance with regulation There is a broad range of activities that covered entities might undertake pursuant to their respective regulatory frameworks. It makes more practical sense to list regulatory activities that will be covered under the Framework rather than listing those that will be excluded. The regulatory activities that are to be covered by the Framework are those typically undertaken by "regulators" in the conventional sense. 9 Regulator Performance Framework, p. 7. 10 Guidance, Coverage, p. 1.4 [PLAN: 14200745_1] ISSUES FRAMEWORK GUIDANCE OBSERVATIONS Self-assessments The Framework states that "selfassessments and how they are conducted will be reviewed by the relevant MACs or other relevant stakeholder consultation mechanism agreed with the responsible Minister." 11 The Guidance clarifies that the MAC is the default body for external validation. The alternative stakeholder consultation mechanism may be approved by the responsible Minister if this is considered to be more appropriate than the MAC. 12 Whereas the Framework document appeared to anticipate external validation of self-assessments by either the MAC or alternative stakeholder consultation mechanism, the Guidance makes it clear that the MAC is the default body to undertake external validation. The alternative stakeholder consultation should only be employed if this is considered to be more appropriate in the circumstances. 11 Regulator Performance Framework, p. 8. 12 Guidance, Reviewing Performance, p. 1.5 [PLAN: 14200745_1] ISSUES FRAMEWORK GUIDANCE OBSERVATIONS Targeted external review In the Framework, the following criteria are identified for selecting entities for targeted external review:13 Identified or emerging industry risks Current government priorities Nomination by MACs or the responsible Minister History of complaints about the regulator Extent to which the performance of a regulator has been recently assessed externally, e.g. through an ANAO audit or a parliamentary inquiry. In the Guidance, the following criteria are identified for selecting entities for targeted external review:14 Industry risk Current government priorities Nomination by MACs or the responsible Minister History of complaints about how the regulator operates Regulator was recently subject to an external review outside the Framework that sufficiently assessed performance measures in the Framework Regulator's previous performance against the Framework and/or other performance requirements The criteria identified for selecting entities for targeted external review in the Framework and Guidance are very similar. However, the Guidance identifies an additional criterion for selecting entities for targeted external review, namely "regulator's previous performance against the Framework and/or other performance requirements". 13 Regulator Performance Framework, p. 9. 14 Guidance, Reviewing Performance, p. 3.6 [PLAN: 14200745_1] ISSUES FRAMEWORK GUIDANCE OBSERVATIONS Annual external review In the Framework, the following criteria are identified for selecting entities for annual external review:15 Value of regulatory burden Economic value Size of regulated community or industry size Identified or emerging industry risks and/or current Government priorities Results of self-assessments and external reviews under the Framework Size of regulator based on total employees or annual budget revenue In the Guidance, the following criteria are identified for selecting entities for annual external review:16 Cost of regulatory burden Size of the regulated community and industry Value to the economy Annual budget/revenue Results of self-assessments of external reviews While the criteria identified for selecting entities for annual external review in the Framework and Guidance are very similar, they have been articulated slightly differently in a number of cases (e.g. Economic value versus Value to the economy). Notably, reference to "identified or emerging industry risks and/or current Government priorities" has been removed from the Guidance. Nevertheless, the list of selection criteria in the Guidance is not exhaustive. Therefore, it is possible that this criterion could be taken into consideration in practice. Alignment between the Framework and the PGPA The Framework document emphasises the need to ensure cohesion between the Framework and the PGPA. Specifically, it is anticipated that the performance architecture for the Framework and the PGPA will be integrated. 17 The Guidance states that "Where appropriate, regulators may choose to align reporting against the Framework with the requirements of the PGPA Performance Framework".18 The Guidance does not appear to be as strident about ensuring alignment between the Framework and the PGPA performance framework. This may be linked, in part, to the fact that the PGPA performance architecture has not yet been established. 15 Regulator Performance Framework, p. 10. 16 Guidance, Reviewing Performance, p. 3. 17 Regulator Performance Framework, p. 13. 18 Guidance, Key Performance Indicators, p. 3.1 [PLAN: 14200745_1] If you require any further information regarding the Framework or the Guidance, please do not hesitate to contact us. In addition, please get in touch if you require assistance with implementation of the Framework. Bronwyn Weir | Partner 61 3 9258 3604 email@example.com Dariel DeSousa | Consultant 61 3 9258 3552 firstname.lastname@example.org © Maddocks 2015 The material contained in this paper is of the nature of general comment only. No reader should rely on it without seeking legal advice.