New Zealand Fire Service Commission: Adequacy of the Arrangements to Ensure that the Fire Service Levy is Properly and Fully Paid

July 1998, ISBN 0 477 02855 1.

Executive summary

We set out to...

Determine whether the New Zealand Fire Service Commission (the Commission) has adequate arrangements to ensure that all levy revenue is properly and fully paid to the Commission.

To do this we looked at ...

  • The statutory basis on which the levy is payable.
  • The nature, adequacy and extent of guidance given by the Commission to the insurance industry.
  • The adequacy of the Commission's audit or review arrangements and internal mechanisms to ensure that insurance companies, brokers and property owners comply with the Fire Service Act 1975 (the Act).
  • The extent to which the Commission has investigated schemes that may not comply with the Act.

Our overall finding is that ...

The Commission does not have adequate systems and procedures in place to ensure that levy revenue - particularly that relating to non-residential property owners - is properly and fully paid to the Commission. The Commission is not able to determine what percentage of the total levy is derived from non-residential property owners - however, in 1996 an independent study estimated the figure to be 41 % of the total levy received.

This has occurred ...

1.....Because of circumstances beyond the Commission's control, in that...

Section 48(6) of the Act is uncertain as to its meaning. This impacts directly on the Commission's ability to determine whether or not the levy being paid to it by non-residential property owners is complete without recourse to the courts. There has been a lack of progress in achieving an appropriate legislative solution to the uncertainty.

2.....Because of circumstances within the Commission's control, in that ...

It had a responsibility to:

  • Implement procedures to make the Act operate to best effect by:
  • Issuing guidance to the insurance industry.
  • Obtaining sufficient information from the insurance industry in order to identify properties with low indemnity values and to question those values.
  • Developing a risk profile and an appropriate audit approach in relation to levy collection.
  • Continually impress on the Government and the Department of Internal Affairs the need to amend the Act.

We recommend that ...

The Commission should:

  • Issue further guidance to the insurance industry, monitor compliance, and continue to consult the industry on a regular basis about compliance issues.
  • Obtain more information from insurance companies and brokers in order to:
  • assess the reasonableness of levy payments and to target future audits; and
  • where necessary, use its powers under section 48(6B) of the Act to determine fair and reasonable indemnity values in relation to specific properties.
  • Continue to implement - as a matter of urgency - a risk profile and audit programme aimed at identifying areas of inadequate compliance with the levy requirements.

The Department of Internal Affairs should:

  • Continue to seek the co-operation of the industry, other government departments and Ministers to achieve appropriate legislative change.
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