Instrument fixing charges to be paid to APRA - No. 1 of 2005

Administered by Department of the Treasury

Legislation au F2005L01128 Not in force Legislative Instrument

Legislation content

 

Explanatory statement

accompanying

Instrument fixing charges to be paid to APRA

No 1 of 2005

Australian Prudential Regulation Authority Act 1998

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PROVISION OF STATISTICAL INFORMATION TO RBA AND ABS IN 2004-05

 

 

Instrument to which this explanatory statement relates

 

1.   This explanatory statement relates to the instrument fixing charges which is made under paragraph 51(1)(a) of the Australian Prudential Regulation Authority Act 1998 (the APRA Act) and which is dated 9 May 2004 (the instrument).

 

APRA’s authority to fix charges

 

2.   The APRA Act is administered by the Australian Prudential Regulation Authority (APRA).  APRA is the prudential regulator of the superannuation, general insurance, life insurance and banking industries.

 

3.   Subsection 51(1) of the APRA Act provides that APRA may, by written instrument, fix charges to be paid to it by persons in respect of:

(a) services and facilities which APRA provides to such persons; and

(b) applications or requests made to APRA under laws of the Commonwealth.

(These paragraphs reflect the contents of paragraphs 51(1)(a) and (b).)

 

4.   Subsection 51(2) of the APRA Act provides that a charge fixed under subsection 51(1) must be reasonably related to the costs and expenses incurred or to be incurred in relation to the matters to which the charge relates and must not be such as to amount to taxation.

 

 

 

 

 

 

Purpose of the instrument

 

5.   The instrument, made by a delegate of APRA, imposes charges for the provision of statistical information about financial sector entities to the Reserve Bank of Australia (the RBA) and the Australian Bureau of Statistics (the ABS) during the 2004-05 financial year.

 

Background

 

6.   The 2004-05 financial year is the third year in which APRA has been providing statistical information to the RBA and ABS: it also provided them with such information in 2002-03 and 2003-04, and imposed charges for providing it, under paragraph 51(1)(a) of the APRA Act.

 

7.   Under the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act), APRA collects financial and other statistical information (statistical information) from superannuation entities, general insurers, life insurers, authorised deposit-taking institutions and registered finance corporation (collectively financial sector entities).

 

8.   The statistical information that financial sector entities are required to lodge with APRA is prescribed by reporting standards that are made by APRA pursuant to the Collection of Data Act.  The reporting standards detail the information required and are accompanied by forms into which the information has to be inserted.

 

9.   In 2000 and 2001 APRA had a computer system designed and constructed to collect, store, and report the statistical information from financial sector entities.  It is called @APRA.  The @APRA system enables financial sector entities to lodge statistical information with APRA electronically, and it includes software which can be used to analyse and compile reports from the statistical information collected.

 

10.   Subsection 3(1) of the Collection of Data Act provides that the purpose for which statistical information is collected under that Act is to assist APRA in the prudential regulation of financial sector entities and to assist the RBA in the formulation of monetary policy.  Also, as is implicitly acknowledged by subsection 56(5A) of the APRA Act, some of the statistical information will be relevant to the ABS’s function under the Census and Statistics Act 1905 of maintaining and disseminating statistics relating to the financial industry and the wider economy.

 

11.   Thus, as envisaged by the legislation, APRA shares the statistical information it collects with both the RBA and the ABS.  They each need specific kinds of information.

 

12.   The RBA and the ABS need specific kinds of statistical information from financial sector entities which APRA does not need and which it therefore would not otherwise collect for itself.  To enable such information to be obtained by the RBA and the ABS, APRA draws up reporting standards and accompanying forms which require financial sector entities to provide the information, collects it from them, and then supplies it to whichever of the two agencies has requested it, either in the form of standard statistics or customised reports.

 

13.   This arrangement, under which APRA in effect collects statistical information from the whole financial sector and disseminates to the RBA and the ABS such of that information as each of them needs, is more efficient and cost-effective for all concerned than if the three agencies each individually collected their own information.  Financial sector entities save time and money by only having to provide one set of statistical information to one agency (APRA).  The RBA and the ABS also save considerable resources by not having to collect the statistical information themselves.

 

14.   The statistical information that APRA is providing to the RBA and the ABS during the 2004-05 financial year, is described in Schedule 2 of the instrument.

 

15.   The statistical information is provided to the two agencies at their request, and they have agreed to pay the charges for it that are fixed by the instrument.

 

Description of the charges and how they have been calculated

 

Description of the charges:

 

16.   A fee of $275,000 is imposed on the RBA and a fee of $412,500 is imposed on the ABS for the statistical information provided to each of them from the @APRA system during the 2004-05 financial year.  The fees include GST of 10%.

 

How the charges have been calculated:

 

17.   The charges are based on the need to recover APRA’s costs of providing the statistical information.

 

18.   Those costs have been worked out as follows:

- A proportion of the capital cost (expressed as depreciation) of the @APRA system has been allocated to the 2004-05 financial year.  The capital cost of the system was approximately $6.7 million (which includes additional functionalities of approximately $200,000 during 2003-04), and it has been estimated to depreciate at one-fifth of the capital cost (that is, $1.3 million) per year.  However due to enhancement to the @APRA system in 2003-04 which resulted in certain parts of the original software functionalities being made obsolescent, APRA had to depreciate those original functionalities at an accelerated rate and the impact of this is an additional depreciation of $230,000 for 2004-05.  (Being a system of computer hardware and software, a rapid rate of obsolescence can be expected.)  Hence, depreciation of $1.53 million has been allocated to 2004-05.

- The costs of maintenance and operation of the @APRA system during 2004-05 is based on the budgeted cost for the year.  A comparison with the first nine months indicates that actuals are tracking very close to this budget.  These costs represent the costs of staff time expended in performing ongoing maintenance (including enhancement) of the system and in operating the system (which includes collecting, managing and distributing the statistical information collected by the system).  APRA has established separate “cost centres” (V320 and Z220) to manage and track these costs.  In all, 36 APRA staff members are engaged in performing these activities on either a full-time or part-time basis.  The total cost of these two cost centres for the year is estimated to be $3.6 million.

- A proportion of the above-mentioned costs has been allocated to the RBA and the ABS, based on their usage of the @APRA system during 2004-05.  During that financial year, the system serviced three agencies with statistical information: APRA, the RBA and the ABS.

- These costs are classified into four categories, namely shared support work (which supports the services provided to all three of the RBA, the ABS and APRA), RBA specific support work, ABS specific support work and APRA specific support work.  The number of forms generated for each of these three agencies is determined and they are divided into forms requiring full services and forms requiring marginal services.  Then the cost of shared support work ($2.5 million) is distributed evenly between the forms generated.  From this the cost of each form is determined ($35.36 per form).  Based on the costs per form, the actual allocation for the forms generated for each agency is calculated.  Whilst full service forms are charged at $35.36 per form, marginal service forms are not charged at all.  To these, the costs relating to specific support work done for the agency concerned are added.  This yields a provisional total to be charged each agency.  The provisional total is then discounted to take into account the saving of effort resulting from those instances where the same statistics are collected for all three agencies – that is, the shared support work.  The reason for this is that the forms relating to the shared support work are collected and processed for all the three agencies (RBA, ABS and APRA) and it would be wrong to charge each of them the full cost of the shared support work, based on the above charge rate per form.  That would be tantamount to charging three times for the one activity.  This discount seeks to apportion the cost of the shared support work between the three agencies in an equitable way.

- On the above basis it is determined that the total cost of services to RBA amounts to $400,659.

- However, it has been agreed between APRA and the RBA that the amount to be charged to the RBA in respect of the 2004-05 financial year will be capped at $250,000 (plus GST).

- Similarly, the total costs of services to the ABS has been determined to be $531,183.  This includes an amount of $75,000 for additional information on superannuation provided to the ABS in respect of the second, third and fourth quarters of 2004-05.  The cost of this additional service has been estimated to be $100,000 for a full year, hence three quarters of that amount (that is, $75,000) has been charged in respect of 2004-05, since the service was only provided in respect of three of the four quarters.

- It has been agreed between APRA and the ABS that the amount to be charged to the ABS in respect of the 2004-05 financial year will be capped at $375,000 (plus GST).

- After addition of 10% GST, the amount payable by the RBA comes to $275,000, and the amount payable by the ABS comes to $412,500.

 

Charges must be reasonably related to the costs and expenses incurred

 

19.   As indicated above, the charges set by the instrument are calculated on a cost recovery basis for the services for which the charges are imposed.  The charges incorporate depreciation of the @APRA system and staff costs of maintaining and operating the system, and are allocated to the RBA and the ABS based on their proportionate usage of the system.

 

Charges must not amount to taxation

 

20.   As the charges are reasonably related to the costs incurred by APRA in providing the services concerned, they do not amount to taxation.

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