Summary of Contribution Funding 2011
Summary of Funding of the Metropolitan Fire and Emergency Services Board (MFB)
The primary source of funding the Board is by way of a contribution imposed by Section 37 of the Metropolitan Fire Brigades Act 1958 (the MFB Act), on local Insurance companies commensurate with their premium income for certain classes of insurance.
In effect, a contribution is required from all insurance premiums on policies of insurance covering inter alia, the risk of fire on property situated within the metropolitan fire district of Victoria irrespective of where such insurance is transacted.
The contributions to the funding of the MFB as set out under Section 37 of the MFB Act, for the year ending 30 June 2012 (to which the current Premium Return relates) were determined by the Minister of Police and Emergency Services and approved by the Governor – in – Council is as follows:
- Estimate of expenditure for year ending 30 June 2012 as approved by the Governor-in-Council $305,563,200.00
- Proportion (1/8th) to be provided by Consolidated Fund $38,195,400.00
- Proportion (1/8th) to be provided by Municipal Councils $38,195,400.00
- Proportion (3/4ths) to be provided by Insurance Companies $229,172,400.00
In addition owners of property who effect insurance with an insurance company not making this contribution are required to also provide funds by way of contribution. This obligation is imposed under Section 44A of the MFB Act and requires an equitable contribution to be made.
Contributions received under Section 44A do not form part of the contributions determined by the Minister and are accounted for separately and have the effect of reducing the net impost on all other contributors. For the financial year ended 30 June 2011 the amount paid to the MFB by way of a contribution under Section 44A of the Act amounted to $5.43m.
The MFB advises that the current penalty interest rate for late statutory contribution payments is 10.5 per cent.
In May 2011, the Victorian Government announced the timetable for the introduction of a new fire services funding model. The transition period will commence from the 1 July 2012 and full implementation is anticipated to occur on the 1 July 2013. Accordingly, insurance contribution payments will continue until full implementation commences.
The compliance powers provided under Section 42 of the Act enables officers of the MFB to inspect any document for the purpose of verifying any return or declaration made to the MFB and determining as to whether any liability to the MFB exists.
During the 20010/11 financial year, officers of the MFB and CFA carried out inspections on a number of companies; during those inspections various irregularities which were not considered to be in accordance with the provisions of the MFB and CFA Act’s were discovered. Some common irregularities included;
• Misallocation of premiums between the Victorian fire brigade districts.
• Inappropriate premium splitting ( particularly ISR and construction policies).
• Capturing information and declaring premium in relation to “net rating”, in particular where direct interface broker systems allow intermediaries to adjust commissions.
• Handling of administration fees.
• Interpretation in the handling of returnable premium for certain classes of insurance; i.e. Mobile plant and machinery insurance, General property insurance, Static marine and personal valuables/equipment insurance.
• Declaring an incorrect amount of “fire service levy” collected/charged on the Premium Return.
• Premium returned under the wrong class of insurance.
Please refer to the instruction/explanatory notes enclosed for further clarification regarding the above noted irregularities.
The MFB and CFA will continue conducting inspections in the 2011/12 financial year, and pay particular attention to common irregularities.