Insolvency and Trustee Service Australia

Insolvency and Trustee Service Australia

Section 1: Agency overview and resources

1.1Strategic direction statement

The Insolvency and Trustee Service Australia’s (ITSA’s) purpose is to provide improved and equitable financial outcomes for consumers, business and the community through application of bankruptcy and personal property securities laws, regulation of personal insolvency practitioners, and trustee services.

ITSA’s responsibilities have been expanded to include administration of a national Personal Property Securities(PPS) Register from October 2011.This new role will build on ITSA’s existing core business as an information provider to major creditors, financial institutions and the public.

PPS reform is changing the law and practice for secured financing involving personal property. It will bring the different Commonwealth, state and territory laws and registers regarding personal property security interests under one national system. FromOctober 2011 there will be one national PPS Register.

Until that time, ITSAwill work with the Attorney-General’s Department to implement the PPS regime, set up the PPS Register and establish anational service centre to assist the Australian community with use of the register. Additional funding has been provided in the Budget to assist with that implementation. As a consequence of the additional responsibilities, ITSA has revised its outcome statement and program structure.

The services provided by ITSA include:

•ensuring compliance by debtors, bankrupts and their associates, practitioners and others with the requirements of the Bankruptcy Act 1966 and associated legislation by:

–operating the bankruptcy registry where debtor’s petitions are lodged, debt agreement proposals are processed and public records on insolvency are maintained

–exercising Official Receiver powers to assist trustees to obtain information and recover property, and

–investigating possible offences under the Bankruptcy Act 1966 and preparing briefs of evidence for prosecution

•regulating the administrations and activity of trustees and debt agreement administrators

•administering, as the Official Trustee, personal bankruptcies, debt agreements and personal insolvency agreements when private bankruptcy trustees or other administrators are not appointed

•acting as a special trustee for Australian Government agencies pursuant to court orders, particularly by locating, controlling and selling property under the proceeds of crime legislation, and

•administering a national PPS Register as required under the Personal Property Securities Act 2009.

ITSA’s resourcing requirements are directly affected by the levels of personal insolvency activity in the Australian community. Funding supplementation via a demand-driven funding model will ensure a continuation of current levels of service delivery irrespective of the direction and extent of change in personal insolvency activity.

To assist with service provision, ITSA also plans to continue its change program to maximise the use of technology, including online services, to deliver accessible, consistent and efficient information products that meet the expectations of insolvency professionals, debtors and creditors.

1.2Agency resource statement

Table 1.1 shows the total resources from all sources. The table summarises how resources will be applied by outcome and by administered and departmental classification.

Table 1.1: Agency resource statement—Budget estimates for 2011–12 as at Budget May 2011

Estimate of
prior year / Actual
amounts / + / Proposed / = / Total / available
available in / at Budget / estimate / appropriation
2011–12 / 2011–12 / 2011–12 / 2010–11
$’000 / $’000 / $’000 / $’000
ORDINARY ANNUAL SERVICES1
Departmental appropriation
Prior year departmental
appropriation2 / 2,503 / – / 2,503 / 3,996
Departmental appropriation3 / – / 49,003 / 49,003 / 41,778
s 30 & 31 relevant agency receipts4 / – / 32,021 / 32,021 / 2,265
Total ordinary annual services / A / 2,503 / 81,024 / 83,527 / 48,039
OTHER SERVICES5
Departmental non-operating
Equity injections6 / 1,995 / 70 / 2,065 / 3,290
Total other services / B / 1,995 / 70 / 2,065 / 3,290
Total available annual
appropriations / 4,498 / 81,094 / 85,592 / 51,329

Table 1.1: Agency resource statement—Budget estimates for 2011–12 as at Budget May 2011 (continued)

Estimate of
prior year / Actual
amounts / + / Proposed / = / Total / available
available in / at Budget / estimate / appropriation
2011–12 / 2011–12 / 2011–12 / 2010–11
$’000 / $’000 / $’000 / $’000
SPECIAL APPROPRIATIONS
Special appropriations limited
by criteria/entitlement
Bankruptcy Act 1966 / – / 500 / 500 / 674
Proceeds of Crime Act 1987 / – / 20 / 20 / 20
Proceeds of Crime Act 2002 / – / 15,654 / 15,654 / 15,654
Financial Management and Accountability Act 1997 / – / 816 / 816 / 1,378
Total special appropriations / C / – / 16,990 / 16,990 / 17,726
Total appropriations excluding
special accounts / 4,498 / 98,084 / 102,582 / 69,055
SPECIAL ACCOUNTS
Departmental
Opening balance7 / 174 / – / 174 / 174
Non-appropriation receipts to
special accounts / – / 500 / 500 / 500
Total departmental special accounts / 174 / 500 / 674 / 674
Administered
Opening balance7 / 28,850 / – / 28,850 / 29,200
Appropriation receipts8 / – / 15,000 / 15,000 / 15,650
Non-appropriation receipts to
special accounts / – / 612 / 612 / 606
Total administered special accounts / 28,850 / 15,612 / 44,462 / 45,456
Total special accounts / D / 29,024 / 16,112 / 45,136 / 46,130
Total resourcing (A+B+C+D) / 33,522 / 114,196 / 147,718 / 115,185
Less appropriations drawn from
annual or special appropriations
above and credited to special
accounts and/or CAC Act bodies
through annual appropriations / – / 15,000 / 15,000 / 15,650
Total net resourcing for agency / 33,522 / 99,196 / 132,718 / 99,535

All figures are GST exclusive.

1. Appropriation Bill (No. 1) 2011–12.

2. Estimated adjusted balance carried forward from previous year.

3. Includes an amount of $2.660m in 2011–12 ($1.851m in 2010–11) for the departmental capital budget (seeTable3.2.5 for further details). For accounting purposes this amount has been designated as ‘contributions by owners’. $0.480m funding has been returned in 2010–11 relating to the 2010–11 Budget measure Easing debt pressures on those in financial stress, due to changes in legislative provisions and timing subsequent to the 2010–11 Budget.

4. Section 30 and 31relevant agency receipts—estimate.

5. Appropriation Bill (No.2) 2011–12.

6. $1.995m has been carried forward from 2010–11.

7. Estimated opening balance for special accounts. For further information on special accounts, see Table3.1.2(a).

8. Appropriation receipts from ITSA annual and special appropriations for 2010–11 included above.

1.3Budget measures

Budget measures relating to ITSA are detailed in Budget Paper No.2 and are summarised below.

Table 1.2: Agency 2011–12 Budget measures

2010–11 / 2011–12 / 2012–13 / 2013–14 / 2014–15
Program / $’000 / $’000 / $’000 / $’000 / $’000
Revenue measures
Insolvency and Trustee Service Australia—additional funding / 1.1
Administered revenues / – / 12,040 / 15,295 / 17,870 / 21,597
Departmental revenues / – / 326 / 386 / 438 / 497
Total / – / 12,366 / 15,681 / 18,308 / 22,097
Personal Property Securities Register—additional funding / 1.2
Departmental revenues / – / 1,976 / 2,963 / 2,963 / –
Total revenue measures
Administered / – / 12,040 / 15,295 / 17,870 / 21,597
Departmental / – / 2,302 / 3,349 / 3,401 / 497
Total / – / 14,342 / 18,644 / 21,271 / 22,094
Expense measures
Confiscated Assets Account—deferral of expenditure / 1.1
Administered expenses / – / (8,000) / (8,000) / (8,000) / (8,000)
Efficiency dividend—temporary increase in the rate / 1.1
Departmental expenses / – / (160) / (478) / (631) / (803)
Insolvency and Trustee Service Australia—additional funding / 1.1
Departmental expenses / – / 13,768 / 15,811 / 18,142 / 20,727
Personal Property Securities Register—additional funding / 1.2
Departmental expenses / – / 1,441 / – / – / –
Total expense measures
Administered / – / (8,000) / (8,000) / (8,000) / (8,000)
Departmental / – / 15,049 / 15,333 / 17,511 / 19,924
Total / – / 7,049 / 7,333 / 9,511 / 11,924
Capital measures
Efficiency dividend—temporary increase in the rate / 1.1
Departmental capital / – / (13) / (27) / (34) / (40)
Total capital measures / – / (13) / (27) / (34) / (40)

Prepared on a Government Finance Statistics (fiscal) basis.

Section 2: Outcomes and planned performance

2.1Outcomes and performance information

Government outcomes are the intended results, impacts or consequences of actions by the government on the Australian community. Commonwealth programs are the primary vehicle by which government agencies achieve the intended results of their outcome statements. Agencies are required to identify the programs that contribute to government outcomes over the budget and forward years.

ITSA’s outcome is described below together with its related programs, specifying the performance indicators and targets used to assess and monitor the performance of ITSAin achieving government outcomes.

Changes in agency outcomes and programs

Commencing in the 2011–12 Budget, ITSA has revised its outcome statement and program structure. The revision reflects ITSA’s additional responsibility for a national PPS Register to become operational in 2011–12. Two programs under this outcome allow ITSA to managepersonal insolvency and personal property securities separately.

Figure 2: ITSA outcome and program structure changes

2010–11 Budget year / 2011–12 Budget year
Outcome 1: A personal insolvency system that minimises the impact of financial failure on the community, produces equitable outcomes for debtors and creditors and enjoys public confidence, through application of bankruptcy laws, regulation and trustee services / Outcome 1: Improved and equitable financial outcomes for consumers, business and the community through application of bankruptcy and personal property securities laws, regulation of personal insolvency practitioners, and trustee services
Program 1.1: Insolvency and Trustee Service Australia / Program 1.1: Personal Insolvency and Trustee Services
Program 1.2: Operation of a National Register of Security Interests in Personal Property
Outcome 1: Improved and equitable financial outcomes for consumers, business and the community through application of bankruptcy and personal property securities laws, regulation of personal insolvency practitioners, and trustee services
Outcome 1 strategy

The strategy for Outcome 1 is outlined in ITSA’s strategic directionstatement for
2010–11 in section 1.1.

To allow ITSA to manage its continuing personal insolvency and trustee services responsibilities and its new PPS responsibilities, two separate programs have been established under Outcome 1.

ITSA also operates under cost-recovery arrangements. Fees and charges raised for personal insolvency and trustee services are returned to the Consolidated Revenue Fund. ITSA expects to collect $37.745m for those services in 2011–12. Fees and charges raised for PPS services directly fund the operation of the PPS program, and are expected to total $26.145m in 2011–12 and $34.861m in a full year.

Since the 2010–11 Budget, ITSA has conducted and completed two reviews of ITSA’s fees and charges:

•June 2010—a scheduled biennial review, and

•December 2010—as a result of the Australian Government’s decision to impose a fee for lodging a debt agreement proposal with the Official Receiver.

A third review is currently underway, firstly (and in accordance with a
2010–11 Budget measure), to propose an increase to the realisations charge on funds realised in an administration, to take effect from 1 July 2011; and secondly,to introduce a fee from 1 July 2011 for publication of a notice advertising a creditors’ meeting on ITSA’s website, where a trustee chooses that advertising medium. The next biennial review of ITSA’s charging arrangements is scheduled to occur in 2012.

The Attorney-General’s Department is currently completing a cost-recovery review to appropriately set the fees and charges for the PPS program when it commences operation in October 2011.

Each cost-recovery review results in a cost-recovery impact statement. These statements are available on ITSA’s website, PPS impact statement is available on the PPS website,

Outcome 1 expense statement

Table 2.1 provides an overview of the total expenses for Outcome 1, by program.

Table 2.1: Budgeted expenses for Outcome 1

Outcome 1: Improved and equitable financial outcomes for consumers, business and the community through application of bankruptcy and personal property securities laws, regulation of personal insolvency practitioners, and trustee services / 2010–11
Estimated / 2011–12
actual / Estimated
expenses / expenses
$’000 / $’000
Program 1.1: Personal Insolvency and Trustee Services
Departmental expenses
Departmental appropriation1 / 42,192 / 46,361
Expenses not requiring appropriation in the budget year2 / 6,961 / 5,201
Total for Program 1.1 / 49,153 / 51,562
Program 1.2: Operation of a National Register of Security Interests in Personal Property
Departmental expenses
Departmental appropriation1 / – / 18,612
Expenses not requiring appropriation in the budget year2 / – / 5,253
Total for Program 1.2 / – / 23,865
Outcome 1 totals by appropriation type
Departmental expenses
Departmental appropriation1 / 42,192 / 64,973
Expenses not requiring appropriation in the budget year2 / 6,961 / 10,454
Total expenses for Outcome 1 / 49,153 / 75,427
2010–11 / 2011–12
Average staffing level (number) / 301 / 370

Note: Departmental appropriation splits and totals are indicative estimates and may change in the course of the budget year as government priorities change.

1. Departmental appropriation combines ‘Ordinary annual services (Appropriation Bill No. 1)’ and ‘Revenue from independent sources (s30 and 31)’.

2. Expenses not requiring appropriation in the budget year are made up of depreciation and amortisation, write-down and impairment of assets, and audit fees.

Contributions to Outcome 1
Program 1.1: Personal Insolvency and Trustee Services
Program 1.1 objective
ITSA will:
•ensure compliance by debtors, bankrupts and their associates, and practitioners and others with the requirements of the Bankruptcy Act 1966 and associated legislation through an information and registry function
•regulate the administrations and activity of trustees (including the Official Trustee) and debt agreement administrators
•administer, as the Official Trustee, personal bankruptcies, debt agreements and personal insolvency agreements when private bankruptcy trustees or other administrators are not appointed, and
•act as a special trustee for Australian Government agencies, pursuant to court orders, particularly by locating, controlling and selling property under the proceeds of crime legislation.
Program 1.1 expenses
ITSA’s expenditure reflects appropriation funding for the delivery of personal insolvency and trustee services for 2011–12.
Additional appropriation funding has been provided in recognition of long-term changes in externally driven workload under the Bankruptcy Act 1966.It also factors in a demand-driven funding model through a resource agreement to be agreed with Department of Finance and Deregulation. This would annually redetermine appropriation supplementation from 2012–13 based on forecast insolvency activity levels, providing greater operational and funding certainty.
Note that under the proposed resource agreement the financial impacts in the forward years will be influenced by emerging trends in numbers of personal insolvencies.The financial impacts provided below use a projection of a continuation of the average change in levels of personal insolvency activity over the last five financial years.Emerging trends may differ from that average, resulting in a change to the quantum of funding provided.
2010–11 / 2012–13 / 2013–14 / 2014–15
Revised / 2011–12 / Forward / Forward / Forward
budget / Budget / year 1 / year 2 / year 3
$’000 / $’000 / $’000 / $’000 / $’000
Annual departmental expenses
Ordinary annual services (Appropriation
Bill No. 1) / 39,927 / 44,902 / 46,915 / 49,580 / 52,494
Revenues from independent sources
(sections 30 & 31) / 2,265 / 1,459 / 1,528 / 1,589 / 1,648
Expenses not requiring appropriation in
the budget year1 / 6,961 / 5,201 / 3,373 / 3,604 / 3,360
Total program expenses / 49,153 / 51,562 / 51,816 / 54,773 / 57,502

1. Expenses not requiring appropriation in the budget year are made up of depreciation and amortisation, write-down and impairment of assets, and audit fees.

Program 1.1 components
1.1.1: An efficient information and registry service
•The registry service assists debtors in making informed decisions on options to deal with unmanageable debts. Where debtors decide to seek relief through formal insolvency options under the Bankruptcy Act 1966, there is an efficient registry service that processes insolvency applications and maintains the National Personal Insolvency Index.
1.1.2: An effective regulatory framework for insolvency practitioners
•The regulatory responsibilities of the Inspector-General in Bankruptcy aim to ensure high national standards of personal insolvency practice and procedure. Both groups of private practitioners (bankruptcy trustees and debt agreement administrators) and ITSA’s trustee function (the Official Trustee) are regulated.
1.1.3: Administration of insolvent estates where private insolvency practitioners are not appointed
•Australia’s personal insolvency system operates on the basis that a trustee or administrator is appointed in every bankruptcy or arrangement under the Bankruptcy Act 1966. When a registered trustee or administrator is not appointed, the Official Trustee handles the matter, with ITSA appropriately resourcing the Official Trustee’s work.
1.1.4: Investigation of Bankruptcy Act offences
•ITSA is responsible for investigating alleged offences under the Bankruptcy Act 1966and specified sections of the Criminal Code Act 1995. Enforcement strategies include encouraging individuals to comply with the Bankruptcy Act 1966and, when necessary, forwarding briefs of evidence to the Commonwealth Director of Public Prosecutions.
1.1.5: Administration of proceeds of crime property
•ITSA, acting as the Official Trustee, administers property that is the subject of orders made under the Proceeds of Crime Act 1987, the Proceeds of Crime Act2002, the Customs Act 1901 and the Crimes Act 1914. ITSA acts as custodian of restrained property and disposes of both forfeited property and property available to satisfy pecuniary penalty orders.
Note: ITSA has reviewed the titles used for all components since the 2010–11 Budget.While the nature of the activities carried out under each component has not changed, there have been some changes in terminology in the titles.

Program 1.1 components (continued)

2010–11 / 2012–13 / 2013–14 / 2014–15
Revised / 2011–12 / Forward / Forward / Forward
budget / Budget / year 1 / year 2 / year 3
$’000 / $’000 / $’000 / $’000 / $’000
Component 1.1.1
Annual departmental expenses
Ordinary annual services (Appropriation
Bill No. 1) / 14,374 / 16,165 / 16,889 / 17,849 / 18,898
Revenues from independent sources
(sections 30 & 31) / 815 / 525 / 550 / 572 / 593
Total component expenses / 15,189 / 16,690 / 17,439 / 18,421 / 19,491
Component 1.1.2
Annual departmental expenses
Ordinary annual services (Appropriation
Bill No. 1) / 4,392 / 4,939 / 5,161 / 5,454 / 5,774
Revenues from independent sources
(sections 30 & 31) / 249 / 160 / 168 / 175 / 181
Total component expenses / 4,641 / 5,100 / 5,329 / 5,629 / 5,956
Component 1.1.3
Annual departmental expenses
Ordinary annual services (Appropriation
Bill No. 1) / 16,370 / 18,410 / 19,235 / 20,328 / 21,523
Revenues from independent sources
(sections 30 & 31) / 929 / 598 / 626 / 651 / 676
Total component expenses / 17,299 / 19,008 / 19,862 / 20,979 / 22,198
Component 1.1.4
Annual departmental expenses
Ordinary annual services (Appropriation
Bill No. 1) / 3,593 / 4,041 / 4,222 / 4,462 / 4,724
Revenues from independent sources
(sections 30 & 31) / 204 / 131 / 138 / 143 / 148
Total component expenses / 3,797 / 4,172 / 4,360 / 4,605 / 4,873
Component 1.1.5
Annual departmental expenses
Ordinary annual services (Appropriation
Bill No. 1) / 1,198 / 1,347 / 1,407 / 1,487 / 1,575
Revenues from independent sources
(sections 30 & 31) / 68 / 44 / 46 / 48 / 49
Total component expenses / 1,266 / 1,391 / 1,453 / 1,535 / 1,624
Expenses not requiring appropriation in
the budget year / 6,961 / 5,201 / 3,373 / 3,604 / 3,360
Total program expenses / 49,153 / 51,562 / 51,816 / 54,773 / 57,502
Program 1.1 deliverables
1.1.1: An efficient information and registry service
•Timely and relevant information given to clients about options to deal with unmanageable debt and insolvency processes.
•Assessment of applications for personal insolvency administrations and the issuance of notices for commencement of insolvency proceedings.
•Maintenance of a register of personal insolvency administrations (National Personal Insolvency Index) which supports the community to make informed commercial decisions.
1.1.2: An effective regulatory framework for insolvency practitioners
•Planned inspection program covering all personal insolvency practitioners finds generally high standards of practice and no systemic issues.
•Review of decisions by, and complaints against, insolvency practitioners.
•Registration and de-registration of insolvency practitioners to maintain high standards in practice.
1.1.3: Administration of insolvent estates where private insolvency practitioners are not appointed
•Timely reports to bankrupts and creditors.
•Recovery of property (including income contributions) and payment of dividends to creditors.
1.1.4: Investigation of Bankruptcy Act offences
•Investigation of offences under the Bankruptcy Act.
1.1.5: Administration of proceeds of crime property
•Control and administration of property pursuant to court orders and timeliness standards.
•Maintenance of the Confiscated Assets Account (CAA) and timely reports to stakeholders.
Program 1.1 key performance indicators
1.1.1: An efficient information and registry service
•Website information is current and accurate. Periodic educational publications, seminars and training occurs for stakeholders.
•80% of new personal insolvency applications and bankruptcy notice applications are assessed and registered within one business day of receiving a complete application, and 95% assessed and registered within five business days of receipt of a complete application.
•The National Personal Insolvency Index is current and accurate, supporting commercial decision making.
1.1.2: An effective regulatory framework for insolvency practitioners
•Achievement of target inspection program.
•Complaints are handled and statutory reviews completed within 60 days.
•Only suitably qualified people are registered as a trustee or debt agreement administrator.
1.1.3: Administration of insolvent estates where private insolvency practitioners are not appointed
•75% of reports to creditors are issued within six weeks of bankruptcy and 100% within three months.
•Realisations are achieved and dividends paid in a timely manner.
1.1.4: Investigation of Bankruptcy Act offences
•Alleged misconduct is addressed in a timely manner, risk-based strategies are employed to address breaches of the Bankruptcy Act and material offences are referred for prosecution action.
1.1.5: Administration of proceeds of crime property
•Action is taken to identify and locate property within one business day of receipt of court orders and achieve control within two weeks. Property is disposed within six months of receipt of final orders.
•Initial report to stakeholders is issued within three weeks of receipt of court orders, and monthly reports are provided on the Confiscated Assets Account.
Note: ITSA has reviewed its key performance indicators across all components since the 2010–11 Budget.While some previous key performance indicators remain, changes have been made to reflect evolving organisational priorities.
Program 1.2: Operation of a National Register of Security Interests in Personal Property
Program 1.2 objective
From October 2011 ITSA will:
•administer a national PPS Register as required under the Personal Property Securities Act 2009, and
•provide information about the PPS Register and facilitate both the registration of securities and searching of the PPS Register via the web and a national service centre.
Prior to that time, ITSAwill assist the Attorney-General’s Department to implement the PPS regime, set up the PPS Register and establish a national service centre to assist the Australian community with use of the PPS Register.
As the Attorney-General’s Department retains primary responsibility for implementation of the regime and the PPS Register, that Department’s Program 1.1 also includes information on its implementation activities.
Program 1.2 expenses
ITSA’s expenditure reflects appropriation funding for implementation of the PPS Register and national service centre in the period before the PPS Register commences operation. Appropriation funding is also provided to cover some of the costs associated with the first few months of operation, pending receipt of fees and charges for services provided.
ITSA will retain the fees and charges raised from registrations and searches once the PPS Register commences operation. Those fees and charges include an allowance for the future replacement of PPS assets, and include an allowance for the repayment of funding provided in the 2010–11 and 2011–12 budgets for the completion of the establishment of the PPS Register. That funding was provided on the basis that it will be repaid over the first three years of operation of the PPS Register.
2010–11 / 2012–13 / 2013–14 / 2014–15
Revised / 2011–12 / Forward / Forward / Forward
budget / Budget / year 1 / year 2 / year 3
$’000 / $’000 / $’000 / $’000 / $’000
Annual departmental expenses
Ordinary annual services (Appropriation
Bill No. 1) / – / 1,441 / – / – / –
Revenues from independent sources
(sections 30 & 31) / – / 17,171 / 18,124 / 18,700 / 19,255
Expenses not requiring appropriation in
the budget year1 / – / 5,253 / 6,893 / 6,893 / 6,893
Total program expenses / – / 23,865 / 25,017 / 25,593 / 26,148

1. Expenses not requiring appropriation in the budget year are made up of depreciation and amortisation expense.