Senate Rural and Regional Affairs and Transport Legislation Committee, , 37:18 to 41:53
Examination of internal reviews from 2024 regarding charging model risks and the potential for cross-subsidization between different fee structures.
Topics: Biosecurity, Government spending, Integrity
Speakers: Hon Matthew Canavan, Matthew Geysen, Miss Victoria Anderson
>> I mean I take the point you're trying to make. The problem is you're a monopoly and people don't have any other alternative and every other business that's regulated in this way. Uh you know through through infrastructure charging principles like they have to do this. So do building blocks have to go through this but I don't understand why you think you should be exempt from similar scrutiny. Uh yes it'll add a cost but uh the problem is without that uh additional work being done. We can't have assurance. We effectively have to take you on trust and you are in a conflicted position. I've made this point many times you have a conflict. You would like to obviously charge more money and the department the government would like to be able to cross subsidize the fees charged to uh importers to producers uh to offset the costs of the broader the broader government and there's not and I'm still hearing that you don't believe you should face the same scrutiny as any other natural monopoly in this country that would face uh policy pricing principles.
>> Well, I I think we do face a fair bit of scrutiny. Senator the ANO has just looked at us. As I said, we have industry asking questions with the opportunity to ask questions very regularly through the consultative bodies that we have in place. So, um I I don't think we we we um we certainly don't disagree that we have a job to do to demonstrate to industry that we are uh delivering these costs at minimum efficient costs. Uh but I do think there are a range of different ways we could go about this and that's what we're looking into. It's not it's not a done deal. We we've not answered that question yet. We're going through the process right now.
>> So DAP quotes that you conducted three reviews in of your charging model in 2024. It says the reviews identified risks relates to the accuracy of DAP's cost estimates and prices. Are those reviews publicly available?
>> Uh no Senator,
>> could we get copies of those please on notice? Could we get copies of three reviews referred to by the order? I mean, if if the problem here is those reviews apparently identified risks, yet nothing seems to have been done or at least not done uh to assuage the conclusions here of the auditor general. Why weren't those three reviews acted upon sufficiently to avoid such a damning report from the auditor general?
>> So, so Senator, I think they were acted upon. um we were not able to um uh include some of those actions in the auditor's report because they put a time boundary around when they were looking at and and the things we've done for example most of last year and into this year uh were not uh necessarily reflected in that ANA report and that's fine that's how they're done but it's certainly not true to say that actions weren't done in response to to earlier concerns raised and as we as we went through the audit process in response to things that we knew the auditors were looking at and that that we needed to
improve. So the the report also found that the department had failed to advise both the secretary and the minister that some of its prices uh were not reflected or not directly informed I should say by its charging model. Uh uh when did the secretary and the minister uh realize that uh uh some of the prices set weren't directly informed by the
>> I think I'll defer to others. That was prior to my
>> I I think that was uh prior to my time, Senator. But what I what I'd observe is um in making that recommendation, we understand that so that the auditor general said that it was 34% of prices that were not aligned. Um that represents about 3% of our bio security cost recovered revenue. Uh and the corrections made at that time were to ensure that there was no overcharging. was actually um we didn't that the adjustments made to the prices at that time uh were to ensure that the correct charge was passed on to industry.
>> Can you take on notice when the minister and secretary were informed that that had occurred? >> Uh the next sentence in the auditor general's report says DAP's ability to effectively manage the risk of cross subsidization is limited. I mean that's been one of my major complaints here. Uh what are you doing to ensure there's no risk of cross subsidization?
So Senator, I think that stems from uh the ANO's recommendation around how we use our effort based cost drivers. So we articulate uh and we go through a process where we look at the effort to inform the allocation of costs uh and we're currently going through the process of implementing a new activity based costing uh piece of software at the current point to replace our legacy one um which will go to increasing our ability to ensure the accuracy of effort uh allocated to cost recovered arrangements.
>> Chair I'll have to pass on the call.