Public release of 2020/21 SWRB funding review documents

The SWRB has released further background advice and information provided to the Board in 2021, namely the funding review provided in March 2021. These are: 

  • Funding Review Report to the Board 18 March 2021 – Proposed fees and Disciplinary Levy for 2021/22 under the Social Workers Registration Board Act 2003 

SWRB 2020-21 Funding Review Report - 18 March 2021 - redacted

  • Funding Review Report Addendum 22 March 2021 Funding Review Report Addendum 22 March 2021 Option 3: Supporting the sector adjust

SWRB Funding Review Option 3 - 22 March 2021 - redacted

We have redacted some parts of these documents under OIA. 

Summary 

Overall, this funding review has sat in line with the two previous reviews, which were recently released to you and the public as part of a proactive release.  

All three reviews have used the same financial model and guidelines for cost recovery for our regulatory activities, making sure that where possible there is little or no cross subsidisation of activities. This has been consistent with good practice across regulators, using guidance from the OAG and The Treasury.  

The Board did make the decision to consult with the sector, which did come at a cost to the Board and its reserves in this financial year. The consultation was done to properly inform and seek feedback from social workers, the sector and the public.  

We have genuinely sought and welcomed the feedback which informed the decision taken by the Board in December 2021. This is an important process and one which the SWRB will continue to undertake for major reviews and changes in the future. 

SWRB will continue to regularly monitor our funding models to make sure it is fit for purpose, so that we can best meet the regulatory activities required of us under our legislation. 

Timeline to support the documents released 

The documents reflect advice given to the Board at the time, which subsequently changed after discussions and decisions from the Board. We thought it would be helpful to explain these further. Below is a timeline and a summary of the decisions made at the time. 

18 March 2021: Funding review  

Fee and the levy recommendations made to the Board  

The advice given in the 18 March 2021 Funding Review Report provided options for the Board to consider for changing the fees and disciplinary levy to meet the ongoing funding shortfall, ensure costs are recovered from the right person or group, and to ensure funding is sufficient to properly meet its regulatory obligations under the Social Workers Registration Act (the Act). 

The advice applied the Office of the Auditor General (OAG) and Treasury guidelines and aligned with the Board’s authority and functions under the Act. The advice concluded: 

  • Most fees and the levy needed to increase to cost recover the minimum viable resources required to meet SWRB’s regulatory obligations under the Act. Due to the increase in the number of practising social workers and efficiency gains from the new digital systems, in most cases the increase is less than if the fee or levy had been inflation adjusted since 2005. 
  • The practising certificate fee should only recover the cost of issuing the certificate as a private good and the cost of the regulatory system as a club good. 
  • Private good activities should no longer be cross-subsidised by the practising certificate fee, which includes setting new fees for the activities provided directly to an individual social worker as a private good, which have not been cost-recovered in the past. An example of this is the charging of return to practise application fee if a registered social worker has not been practising for more than three years. 
  • The disciplinary levy needed to increase to meet the external costs of the significant increase in Professional Conduct Committee cases and Disciplinary Tribunal hearings, and to meet Committee and Tribunal member fee increases and external independent advice costs. 

The guidance provided to the Board at the time for changing fees and the levy followed the Act: 

  • There is no legislative requirement to consult on changes to the fees and levy. 
  • The fees and levy are set by the Board and Gazetted as a Notice, which:
    • Does not require the approval of the Minister or Cabinet 
    • Is not a regulation, so is not drafted by the Parliamentary Council Office and does not require a Cost Recovery Impact Statement for Treasury’s approval.  

The OAG guidance (the June 2008 version, as the August 2021 version came out after the funding review report was done for the Board) and Treasury guidelines recommend that government entities undertake public consultation as good practice. However, they also set out that: 

  • Under the June 2008 OAG guidelines (that applied prior to the August 2021 version): consultation does not have to occur where there is a valid reason for not consulting, for instance, where it is impractical. 
  • Treasury guidelines: refer to not consulting where there are difficulties in doing so and states, 

“When entities don’t consult there should be good and well documented reasons for not doing so”. 

SWRB had already undertaken some limited consultation in January 2021, and time was limited to do full consultation before the next practising round in July  

Registered social workers must renew their practising certificate by 1 July each year to be able to legally practise for the following 12 months. The Board could not delay the annual renewal date without putting practising registered social workers at risk of breaching the Act. 

The mandatory registration transition period end date set by Parliament under the Act was 27 February 2021. This left SWRB with two months before the 1 April 2021 Notice gazetting deadline for the annual practising certificate renewal round from 1 May 2021. However, consultation processes usually take at least 6 months to complete.  

The situation SWRB was in was deemed likely to fit within the above criteria, as the transition period end date made it impractical to properly consult before the annual renewal round. This was because the transition period under the Act ending close to the beginning of a new annual funding cycle, presented SWRB with conflicting requirements to meet. SWRB was required to: 

  • Operate a full cost-recovery model based on defensible robust fee and levy setting, AND 
  • Undertake considered and meaningful consultation, AND 
  • Have the capability to meet regulatory obligations under Act, AND 
  • Be financially viable under the Crown Entities Act 2004 and Auditor General requirements. 

Therefore, due to the transition period end date, the Board had to incorporate into their decision-making the following competing factors: 

  • Undertaking public consultation to an acceptable standard in the limited time available was not possible. Social workers could legitimately question the validity of the consultation if attempts were made to complete it in a shortened time period.  
  • If the charges were set earlier than March 2021 the late February surge in those registered and practising would not have been accounted for, so significant over or under-recovery was likely. 
  • Not having the capability required to meet its regulatory obligations under the mandatory regime would put SWRB at risk of regulatory failure. Lessons from regulatory failures such as Pike River, weathertight building issues, and Waka Kotahi’s third-party oversight practices have prompted a growing focus on a risk-based, adaptive approach to regulation and oversight, and has increased the regulatory stewardship expectations placed on regulators, including SWRB. SWRB is committed to its statutory purposes to protect the safety of the public and to enhance the professionalism of the profession. 
  • Putting the capability in place without increasing the fees and levy would put SWRB at risk of not being financially viable under the Crown Entities Act and Auditor General requirements. 

Consultation takes about 6 months to complete 

If the transition period end date had taken SWRB’s funding cycle into account to meet OAG and Treasury guidelines, it should have been held around September 2020. 

This would have provided at least 6 months (considering the summer holiday period) to complete consultation to the appropriate standard, for instance: 

  • Consultation by SWRB over November 2020. 
  • SWRB assessment of submissions and reporting to the Board by late January 2021 
  • Board consideration of the submissions report recommendations in February 2021. 
  • Board decisions in March 2021 to meet the 1 April 2021 Notice gazetting deadline. 

Had the transition period end date been in September 2020, SWRB would have known the total number registered, and likely to practise, after the final surge. This would have provided sufficient time to support robust fee and levy setting under the full cost-recovery model and for proper consultation in time for the annual June renewal round. However, the February 2021 transition period end date did not allow for this to occur. 

22 March 2021: Funding Review Report Addendum Option 3: Supporting the sector adjust 

In the March Board meeting, the Board asked for a third option to be put forward titled: Supporting the sector adjust. This put forward a phased approach to fees increases starting in 2021/22 and then 2022/23, to enable the sector to have some time to adjust to the increase in fees. This option was agreed to by the Board in March 2021. 

30 April 2021: The impact of the Teaching Council fees consultation judicial review 

On 30 April 2021, the Board received legal advice that related to recent judicial review proceedings in the High Court regarding the Teaching Council fees consultation. The advice included that the Board’s decision to change the fees and levy should be informed by the experience of the Teachers Council, which emphasised the value of consultation as part of a robust decision-making process. 

The Board considered the weighting of the balance between the preferability for consultation to inform decision-making against the risk of regulatory failure from being under-funded to meet its regulatory obligations under the mandatory regime.  

In addition, it was anticipated that the Teachers Council judicial review would provide insights into requirements for consultation. This was of particular concern as the Court had not yet issued its decision on the Teaching Council judicial review. 

Previous fees were then reinstated, except for the disciplinary levy 

The Board reconsidered its decision, reverted to the previous fees, and resolved to consult on fees and (further) levy change proposals in the second half of 2021. The sector was advised of this at the time.  

The Board did proceed with increasing the disciplinary levy. This was to partially recover the cost of the significant increase in Professional Conduct Committee cases and Disciplinary Tribunal hearings, over which it had little control and so that SWRB could remain solvent. 

SWRB met the funding shortfall caused by this decision by: 

  • Using its limited reserves, which in accordance with Crown entity standard accounting practices, Crown entities hold to cover short-term operating costs in the event of an economic or environmental shock. 
  • Delaying the capability uplift required to meet core regulatory functions under the mandatory regime. 
  • SWRB also approached the Minister of Social Development and Employment for support through a one-off payment to manage the shortfall and all the organisation to deliver on its agreed work programme. 

2021 Consultation on Fees and Levy Change Proposals 

The decision to consult with the sector and public led to the consultation, which occurred in November 2021. Consultation was held at this time for the following reasons: 

  • Holding a consultation process at the start of the financial year (July) would have caused disruption to the practising certificate round, especially in light of the implementation of the new iMIS database. 
  • Planning and drafting of the consultation documents and engagement with stakeholders would take a significant amount of time, where staff were already stretched 
  • In addition, the country went into lockdown in late August 2021, and it was decided to be inappropriate to hold consultation given the pressure on stakeholders, in the hope that this would be for a limited time. While some regions (Auckland) were still in a lockdown in November 2021, it was determined by SWRB that consultation could no longer be delayed, as good practice requires that consultation is not held in or around the Summer Holiday Break. 

The Board subsequently agreed to the consultation for November 2021.