• Best practice – an update

    In 2014 the Government introduced the Regulator performance framework (Framework), as part of its commitment to reducing cost of unnecessary or inefficient regulation. The aim 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.

    The Framework derives from obligations under the Public Governance, Performance and Accountability Act 2013. That Act includes a duty to cooperate with others to achieve common objectives, where practicable, and a duty to take account of the effect of decisions on others (refer ss.17 - 18). The ATO is an agency to which the Act applies.

    The Framework sets out measures for good regulatory performance, and examples of expected outputs. Measures and examples relevant to the ATO’s consultation arrangements are set out in Table 1.

    Table 1– Regulator performance framework

    Measure

    Outcome examples

    Regulators demonstrate an understanding of the operating environment of the industry or organisation, or the circumstances of individuals and the current and emerging issues that affect the sector.

    Regulators take actions to minimise the potential for unintended negative impacts of regulatory activities on regulated entities or affected supplier industries and supply chains.

    Regular, ongoing consultations or engagement with stakeholders on policies and procedures, including independent experts and industry associations.

    Documented responsiveness to feedback from regulated entities, including feedback from existing complaint mechanisms and surveys of regulated entities.

    Environment scanning is undertaken regularly and at a minimum, on an annual basis.

    Demonstrated engagement with relevant international organisations to learn from peer experiences and share better practices.

    Regulators consider the impact on regulated entities and engage with industry groups and representatives of the affected stakeholders before changing policies, practices or service standards.

    Demonstrated feedback is sought from stakeholders on guidance and advice provided by the regulator via a wide range of mechanisms, including stakeholder surveys.

    Demonstrated mechanisms for responding to stakeholder engagement.

    Regulators establish cooperative and collaborative relationships with stakeholders to promote trust and improve the efficiency and effectiveness of the regulatory framework.

    Regulators engage stakeholders in the development of options to reduce compliance costs.

    Documented procedures are in place to allow active and regular engagement with stakeholders.

    Feedback mechanisms are available and made known to all stakeholders.

    Number of stakeholder events held to facilitate participation in the development and/or amendment of regulatory frameworks.

    The Australian Government Guide to Regulation 2014 provides guidance on how and when to consult. It includes, as one of its core principles, that 'policy makers should consult in a genuine and timely way with affected businesses, community organisations and individuals'.

    That principle applies to any rule, whatever its form, endorsed by government, where there is an expectation of compliance.

    In July 2014 the Office of Best Practice Regulation issued a guidance note to assist departments and agencies to comply with that principle. While the guidance note was prepared in the context of the Regulatory Impact Statements process, the guidance draws on earlier COAG guidance and reflects best practice.

    The note makes the point that 'a genuine consultation process ensures that you have considered the real-world impact of your policy options. This is likely to lead to better outcomes and greater acceptance in the community, particularly among any stakeholders who may be adversely affected by the policy'.

    The note sets out the elements of effective consultation which, when combined with the COAG guidance considered in the 2013 Review, provides the following indicia of best practice relevant to this review:

    • Timely – consultation should be conducted early, when different approaches are still under consideration. Throughout the consultation process stakeholders should be given sufficient time to provide considered input.
    • Targeted – consultation should be widely based to ensure it captures the diversity of stakeholders, but sufficiently targeted to provide effective advice.
    • Not burdensome – timeframes for consultation should be realistic, to allow stakeholders enough time to provide a considered response, remembering that many involved have other business and personal commitments.
    • Transparency – agencies should explain clearly the objectives of the consultation process, the regulation policy framework within which consultations will take place and provide feedback on how they have taken consultation responses into consideration. Involving stakeholders early promotes transparent and comprehensive participation.
    • Flexibility – consultation arrangements should be designed to suit the circumstances of the particular proposal under consideration.

    Best practice indicates that, from a process perspective, a dynamic and effective consultation system that encapsulates the above principles will follow the process in Diagram 1.

    Diagram 1 – The consultation process

    The consultation process

     

    However, consultation is not an exact science. In practice it does not fit neatly into the stages illustrated above. Flexibility is required to produce the best outcomes. That said, to achieve optimal outcomes:

    • everyone engaged in the process should understand and accept the stage in the process at which they are being consulted
    • everyone engaged in the process should understand and accept that there is a clear division between advice and decisions – the latter being the responsibility of the organisation seeking stakeholder input
    • when a decision is made it should be communicated to those involved in consultation at the next stage of the process, with a short explanation of the reasons for it.

    Some organisations start their consultation processes at stage one in the diagram, others start at a later stage. In its rule-making role, CASA starts consultations at stage two. Some consult with different groups at different stages in the process. For instance, the ASIC External Advisory Panel is a consultation forum comprising 20 senior business leaders whose collective advice is drawn on by ASIC at stage one and to some extent stage two. Most Ministerial consultative bodies are other examples of consultative processes that focus on stage one. Generally, stakeholders more experienced at the working level are engaged at stages three and four. Often consultation at stage four is by inviting written stakeholder and public comment.

    Views on the utility of consultation in any given circumstances will legitimately differ. The level of interest and engagement will vary between stakeholders and over time and also depending on the subject matter under consideration. While, for some stakeholders, engaging in the consultation process is part of their paid employment, others provide their time and expertise voluntarily, without remuneration, as part of their professional or community contribution. There will rarely be unanimity on whether consultation has been timely, sufficiently transparent or productive.

    There is no perfect way to consult. The 2013 Review suggested a hierarchy of approaches for consulting effectively is set out in Table 2.

    Table 2 – Engagement assessment

    Primary purpose classification

    Suggested engagement methodologies

    High level stakeholder engagement across the Australian Taxation System; or

    High level, ongoing engagement on significant initiatives and programs across the Australian taxation system

    Standing committees of appropriately qualified key stakeholders and individual members ('peak forums')

    Sector specific engagement; or Specific programs and processes

    Industry specific focus groups
    Issue specific focus groups
    Working groups of informed/experienced experts
    Participation in professional association committees

    Engagement to provide information and seek feedback to assess the ATO's effectiveness

    Open forums–stakeholder and community
    Websites and social media–government and stakeholder
    Participation–peak professional/industry bodies' workshops and conferences

    Liaison versus advice

    The ATO refers to some of its stewardship groups as ‘liaison’ groups and others as ‘advisory’ groups. There is, of course, a difference between groups established for liaison and those expected to provide advice, although they are not mutually exclusive. Each provides input in different ways. In governance terms, the differences are described in the Table 3.

    Table 3: Differences between liaison and advisory

    Liaison groups

    Established to maintain contact and share information, with no expectation other than that, through the liaison, each participant will have a better appreciation of the views of the others.

    Size depends on the number of external stakeholders with whom liaison is required or desirable. They can be quite large.

    Agenda items tend to be set-piece presentations by each organisation present.

    All that is expected as an outcome is that there will be better understanding between those involved and dissemination of the information provided.

    Advisory groups

    Normally comprised of individuals best able to engage in robust discussion, whether chosen individually or representing particular organisations. Size generally quite small.

    Agenda covers developments impacting the organisation, important issues under consideration, programs in development.

    Outcomes expected consist of consensus advice to whether or how to proceed.

    It seems that, with the change to stewardship groups, the distinction in ATO groups is historical. Each of the stewardship groups has the opportunity, and is expected, to provide quality strategic and operational advice to the ATO, drawing on the cross-section of experience the members bring. Of course, those who serve on stewardship groups because of their official position or membership of a professional association continue to bring the experience and views of those organisations.

      Last modified: 22 Sep 2015QC 46926