Telcos already crying poor over the miserly sum the government had promised in compensation for expensive new mandatory data retention systems are now finding the government is going to eat up millions of dollars of that funding through administrative costs.

Telecommunications companies have estimated that the cost to set up systems to store customer data  for two years, as required under the scheme for access by government agencies without a warrant, will cost $319 million minimum. The government made a peace offering to the industry in May by announcing it would contribute $131.3 million to pay for these new systems.

“This is a substantial contribution that will reduce the cost burden on Australian telecommunication businesses while substantially improving the availability of data to assist law enforcement and security agencies in investigations,” Attorney-General George Brandis said when announcing the funding as part of the federal budget in May.

While this “substantial contribution” was less than half the estimated cost suggested by industry, telcos have come to the table anyway and have been working with the department to develop implementation plans to begin setting up the systems over the next 18 months. But sources close to the negotiations between the government and the industry have told Crikey that the AGD is planning to keep close to $3 million of the $131.3 million in funding for “administrative costs”.

A spokesperson for the department confirmed there would be administrative costs, but would not say exactly how much.

“The government has made a substantial contribution of $131.3 million to support the capital costs of implementing data retention. This includes an allocation to administer the scheme, consistent with other programs of this nature,” the spokesperson said.

“The government is working closely with the telecommunications industry on implementation.”

Brandis’ office did not respond to a request for comment.

The Attorney-General’s Department confirmed in a response to a budget estimates question on notice last month it was going back to the drawing board to work out the actual cost for the scheme.

“The regulatory impact of the data retention scheme is being re-costed to measure the impact of the scheme as passed by Parliament, and to include the deregulatory [sic] impact of the government’s $131.3 million data retention industry capital assistance budget measure,” the department stated.

The funding that has been provided to the industry will help the telcos develop “efficient and innovative solutions”, the department says.

This excludes the actual annual operating costs for keeping the data on behalf of the government. Brandis stated earlier this year that a PricewaterhouseCoopers analysis had determined it would cost between $1.83 and $6.12 per customer per year to keep the data. The government has yet to make any offer to the telcos for the operating costs of keeping this data on behalf of the government.

It is the latest round of the department getting the telecommunications industry offside. Many telcos are already concerned they may be in breach of the new data retention law because they did not submit their implementation plans to the department on time in August. The department has suggested these deadlines were not set in stone, however telcos that are not in compliance with the legislation by October 13 — after the allocated 60-day time period that the department has to suggest changes to the plans — telcos could face fines for breach of the legislation.