In our September update for Commonwealth regulators, we discussed the release of a Draft Regulator Performance Framework to measure the performance of Commonwealth regulators. On 30 October 2014, the Commonwealth Government released the Final Regulator Performance Framework (Framework). It applies to Commonwealth regulators that administer, monitor or enforce regulation and will be effective from 1 July 2015.
The Framework is part of the Government's red tape reduction agenda to reduce unnecessary or inefficient regulation imposed on individuals, businesses and community organisations. The main premise underlying the Framework is that poorly administered regulation can impose unnecessary costs on stakeholders that reduce productivity.
It is intended that the Framework will:
- impact: encourage regulators to undertake their functions with minimum impact to achieve regulatory objectives
- outcomes: allow regulators to report objectively on the outcomes of their efforts to administer regulation fairly, effectively and efficiently
- improvement: assist regulators to identify opportunities for improvement and better target their resources for greater impact. Elements of the Framework
The Framework comprises the following main elements:
- Outcomes-based key performance indicators (KPIs): these KPIs articulate the Government's expectations of regulators, namely:
- regulators do not unnecessarily impede the efficient operation of regulated entities
- communication with regulated entities is clear, targeted and effective
- actions undertaken by regulators are proportionate to the risk being managed
- compliance and monitoring approaches are streamlined and co-ordinated
- regulators are open and transparent in their dealings with regulated entities
- regulators actively contribute to continuous improvement of regulatory frameworks.
- For each of the KPIs, the Framework identifies best practice, measures of good regulatory performance and examples of output / activity-based evidence, a number of which are summarised here.
- Measures of good regulatory performance: these measures must be used to assess achievement of the KPIs and may be complemented with relevant output specific to the regulator's circumstances.
- Annual externally validated self-assessment: these self-assessments must be undertaken by all regulators on an annual basis. Regulators have the flexibility to determine how to conduct their self-assessment, including using external assessors, peer reviews or industry bodies. If applicable, the regulator's Accountable Authority under the Public Governance, Performance and Accountability Act 2013 (PGPA) must certify the self-assessment report.
- Targeted external review every three years: targeted external reviews will only apply to a selected set of regulators every three years. Regulators will be selected on the basis of criteria such as identified or emerging industry risks, current government priorities and history of complaints about the regulator.
- Annual external reviews: the government will have the option to conduct annual external reviews for a small number of major regulators (which will still need to undertake the annual self-assessment). These regulators will be selected on the basis of factors including the value of the regulatory burden, the size of the regulated community of industry and the size of the regulator based on number of employees or annual budget and revenue.
External reviews will be conducted by review panels of government and industry representatives, including:
- comparable regulator
- representative of the relevant regulated community
- representative from the portfolio.
Regulators will be required to publish a report on the outcomes of each annual self-assessment and any external reviews of their performance.
The reports must identify the extent to which the regulator is achieving the performance indicators in the Framework and highlight areas for improvement for the regulator.
Integration of reporting arrangements under the Framework and the PGPA will allow a single report on regulator performance.
Implementation of the Framework
The Framework is not intended to increase administrative burden on regulators. Moreover, the implementation of the Framework should be cost-effective and complement, rather than, duplicate other processes (e.g. existing performance architecture and reporting frameworks).
The Framework will be supported by implementation guidance (Guidance), which will be issued by 1 January 2015 and will include (amongst other things):
- regulators covered by framework: the Guidance will include advice to assist in determining which regulators and regulatory functions are subject to the Framework
- assessment against measures of good regulatory performance: the Guidance will provide examples of input, output and /or activity-based evidence to support assessment against the mandatory measures of good regulatory performance
- case studies of better regulatory practice: the Guidance will include case studies across a range of activities demonstrating good regulatory practice
- implementation timeframes: the Guidance will set out timeframes, including for the completion of self-assessments, external reviews and publication of reports.