8. FUNDING ARRANGEMENTS

8.1 Introduction

The TIO is an industry-sponsored and funded cost recovery scheme, deriving its funding solely from Members who are charged fees for complaint resolution services provided by the TIO. The basis of funding arrangements under the TIO Scheme is provided for in the Articles of Association of the TIO Limited.

A Member is only charged complaint handling fees if the TIO receives a complaint from one of the Member's customers. The funding system therefore acts as an incentive for Members to keep TIO investigations to a minimum by developing and maintaining effective complaint handling and customer service procedures.

The funding system reflects that the vast majority of Members are small businesses. From 1 July 1999, the TIO waived all charges for the first four Level 1 complaints per quarter received for each Member.

Members receive quarterly invoices for complaint handling fees incurred in the current quarter based on the actual number of complaints logged against them (including a proportion of overheads and capital expenditure), plus an estimated amount for charges expected to be incurred in the next quarter. Each quarter a reconciliation of actual charges against estimated is completed.

Charges consist of volume-related and overhead costs.

8.2 Volume-related charges

Volume-related costs directly relate to the number and relative costs of complaints registered against the Member. Complaint fees increase with the complexity of the complaint and the time needed to investigate it.

Please click here to view the current fee structure.

In addition, a Member may be charged for any legal, technical or accounting fees incurred in investigating a complaint that can be directly attributed to the Member in relation to that complaint.

8.3 Operating costs

If a Member incurs complaint fees, it is also required to contribute a proportion of the TIO's operating costs. Members are charged on a proportional basis of the value of complaints charged to each Member as a percentage of the total value of complaints charged to all Members.

Operating costs include overhead costs such as expenses relating to accommodation, office facilities, general systems and communications costs, marketing and promotional costs; and a proportion of Enquiries and Reviews.

The proportion of complaint handling fees attributed to a Member determines the proportion of operating costs the Member must pay. For example, if a Member incurs 6% of the total complaint handling fees, it pays 6% of the operating costs.

8.4 Capital expenditure

Capital expenditure is funded by the Members proportionally to the dollar value of the complaints charged to each Member as a percentage of the total charged to all Members.

8.5 Special levies

The TIO Board may also obtain funds from Members by raising a levy to finance special projects or unforeseen circumstances. To raise a special levy, the TIO will normally make a request to the Board for funding over and above the current annual budget. Special levies are a rare occurrence as all expenditure is usually quantified in the business plan.

Special levies are charged to Members in proportion to the individual Member's share of total complaints in a quarter.

8.6 Business Plan/Budget

The Ombudsman and Financial Controller are responsible for developing and implementing a Business Plan/ Budget for the period of one July to 30 June annually.

The Business Plan comprises a summary of the strategic plan, estimates of activity levels and corresponding income levels, an income and expenditure budget and specialist areas addressing Human Resources, Information Technology, Communications activities and Member Communications.

Under the guidance of the Ombudsman and Business Manager, the Finance Manager is responsible for establishing the Budget, which is based on the activity described in the Business Plan and on forecast activity levels.

The Business Plan/Budget is approved by Council and the TIO Board prior to the start of the financial year.

8.7 'Bill the Biller' policy

The TIO adheres to a 'Bill the Biller' policy, where it will under almost all circumstances log a Complaint against the company who was actually billing the complainant at the time of the circumstances leading to the complaint. While Enquiries and Complaints are always logged against the Member concerned, only Complaints are billed directly to a Member; Enquiries are billed as part of overhead costs.

In January 1998, it was agreed by the TIO council that the TIO should have a degree of operational discretion in the application of the 'bill the biller' policy. Accordingly, the TIO will at times make an exception to this policy and pursue the supplier of a service where it has no direct relationship with the customer.

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