Cost Recovery Implementation Statement - Australian Government (Page 3 of 7) in pdf

COST RECOVERY MODEL

3.1

Outputs and business processes of the regulatory charging activity

Guide:

Describe the outputs (operational targets or milestones) of the activity and how they will be used

to measure progress in achieving government policy outcomes. Outputs should be specific and

measurable (e.g. the number and type of permits granted within a specific period). Identify key

business processes used to produce outputs of the regulatory charging activity (see paras 77-78 of

the CRGs).

 What are the outputs of the regulatory charging activity?

 What key business processes are used to deliver the outputs?

3.2

Costs of the regulatory charging activity

Guide:

Explain how the regulatory charging activity is costed, including assumptions about cost drivers.

They may relate to the expected volume of outputs or cost of resources. Where cost estimates are

sensitive to changes in assumptions, entities can use a range rather than a single estimate. The

cost breakdown should be proportional to the complexity, materiality and sensitivity of the activity

(see paras 79-87 of the CRGs).

 What are the main cost drivers for the activity?

 What assumptions have been made about cost drivers for the activity?

 How sensitive are cost estimates to changes in assumptions about cost drivers?

 What resources are included in the direct costs of the activity?

 What resources are included in the indirect costs of the activity?

 How are direct costs allocated to the outputs and business processes of the activity?

 How are indirect costs apportioned to the outputs and business processes of the activity?

 Which categories of capital costs does the activity have (e.g. operation and maintenance,

depreciation, capital investment)?

 Are any of the resources shared by the regulatory charging activity and another activity that is

funded via other mechanisms (e.g. Budget funded)? If so, how are the costs apportioned?

 Are any parts of the activity delivered by parties other than the responsible entity (e.g. an

outsourced service provider)? If so, how are their costs determined and verified?

 Which cost management strategies, such as asset management, are employed?

Below is a possible presentation of cost breakdown estimates for the current budget year. It

should be modified to suit the activity (e.g. if the regulatory charging activity shares any resources

with activities funded through other mechanisms or parts of the regulatory charging activity are

delivered by third parties, more columns can be added as necessary).

 What are the cost breakdown estimates for the current budget year?

Direct costs

Indirect costs

Capital costs

Output 1

Business process 1.1

Business process 1.2

Output 2

Business process 2.1

TOTAL

Ensure that capital costs are not double counted as part of direct or indirect costs.

Page 3 of 7

Cost Recovery Implementation Statement - Australian Government Page 3

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