Professional services and administration funding policy

This page relates to the 2021-24 National Land Transport Programme.

Introduction

Waka Kotahi NZ Transport Agency's policy on the funding of professional services and administration.

Date of issue: September 2021│Investment policies will be reviewed every three years or when a new Government Policy Statement on land transport is released.

The policy sets out the professional services and administration costs that can be funded as part of an investment from the National Land Transport Fund (NLTF) and explains the requirements for procuring these services and accounting for the costs.

Policy statement

Expenditure on both in-house professional services and administration is exempt from procurement procedure requirements where we (Waka Kotahi as investor) have approved it (see below for details).

Outsourced professional services must be procured using an approved procurement procedure, as detailed in the Waka Kotahi Procurement manual.

Procurement manual

Expenditure on administration is exempt from procurement procedure requirements whether it is outsourced or undertaken in-house.

The cost of activities to be funded from the NLTF, either when applying for funding approval or when claiming funding assistance for an approved activity, should be the full cost, including any professional services or administration costs, regardless of whether the cost is an in-house cost or incurred through a contract with an external supplier.

Definitions of professional services and administration

For the purposes of funding from the NLTF:

Professional services are integral to an activity approved under section 20 of the Land Transport Management Act 2003. For NLTF funding purposes these are treated as an input, and the cost is charged directly to the activity, ie through the relevant activity class and work category. They are services provided by a person (or persons) skilled in the particular field for which they are engaged.
Administration is not integral to an activity funded from the NLTF but, nevertheless, must be provided by an organisation to support the delivery of activities, such as management of a land transport programme. The cost of administration is an overhead cost incurred in the delivery of activities.

Examples of professional services

The following are examples of services that will commonly be classified as professional services under the above definition:

preparing contracts and evaluating tenders for works and services
investigating and resolving public enquiries related to activity planning, investigation, design and delivery
assessing or evaluating proposed activities including data collection, outcome evaluation, assessment of risks and the submission of activity-specific information to us
gathering information for activity management systems
investigating activities for inclusion in regional land transport plans
gathering and managing asset and service condition information
consulting with affected parties
managing contracts
managing activity delivery
managing Total Mobility services and Total Mobility users
managing activities with community groups
obtaining building and resource consents
preparing plans and strategies for the management of activities or assets, safety, the environment, projects, customer education, etc
reporting on project feasibility, project development, contract performance, asset management systems, asset service condition, public transport services and service performance.

Examples of administration

The following are examples of costs or services that will commonly be classified as administration under the above definition of administration:

approving, administering and monitoring activity management plans, policy and standards, risk and levels of service
managing a land transport disbursement account
preparing and administering funding assistance claims, long-term council community plans, annual plans, longer-term programmes, and communications plans and strategies
administering a supplier pre-qualification system
reporting and providing data and information to us, Audit NZ or other agencies
undertaking financial processes, management accounting and reporting
developing and operating land transport business support systems
servicing democracy, including providing an interface for customers and ratepayers
meeting statutory responsibilities, including audit fees and tax advice fees
the cost of owning management systems and databases.

Approval to claim funding assistance for expenditure on administration

A standing approval is in place for all approved organisations and Waka Kotahi (for its own activities), to include fair and proportional administration costs of approved activities when claiming funding assistance for these activities, providing the conditions discussed under ‘Accounting for the cost of in-house services’ are met.

Obtaining approval to claim funding assistance for expenditure on in-house professional services

Approved organisations and Waka Kotahi (for its own activities) must have specific approval from us to include in-house professional services in the cost of approved activities when requesting or claiming funding assistance for these activities. The conditions discussed below under ‘Accounting for the cost of in-house services’ must be met.

To obtain approval and retain that approval, approved organisations and Waka Kotahi (for its own activities) must address how to procure professional services, including which services (if any) are to be obtained in-house, in their long-term programme-wide procurement strategy, which we will have previously endorsed. The Procurement manual sets out comprehensively the requirement to develop and document a strategic approach to procurement.

Procurement manual

When a procurement strategy is amended in a way that has a significant material impact on the scope, scale or manner of delivery of professional services obtained in-house the change must be brought to our attention. Approval to continue to obtain professional services in-house will need to be confirmed.

Delivery of in-house professional services and administration

All approved organisations and Waka Kotahi (for its own activities) must have a formal, documented management structure for in-house professional and administrative services.

We (Waka Kotahi as investor) require all approved organisations and Waka Kotahi (for its own activities) to manage their in-house services delivery in a way that ensures both efficiency and effectiveness. We do not, and will not, specify how approved organisations and Waka Kotahi (for its own activities) should structure or organise themselves to do that, but we expect all approved organisations and Waka Kotahi (for its own activities) to be guided by the Standards NZ publication, Guide to local government service delivery options (SNZ HB 9213:2003). We expect approved organisations and Waka Kotahi (for its own activities) to undertake reviews of the cost effectiveness of their services in accordance with section 17A of the Local Government Act 2002 – Delivery of services and to incorporate the findings of these reviews into the review of their procurement strategy.

SNZ HB 9213:2003 Guide to local government service delivery options(external link)

Local Government Act 2002(external link)

In-house professional services staff and assets will typically be part of a department or semi-autonomous business unit.

In-house professional services cannot be delivered through either a council-controlled organisation (CCO) or a council-controlled trading organisation (CCTO). Neither is considered to be ‘in-house’. Where professional services are procured from either a CCO or a CCTO, these services must be treated as being outsourced and procured in accordance with one of our approved procurement procedures.

Accounting for the cost of in-house services

All approved organisations and Waka Kotahi (for its own activities) must have a documented methodology that covers how to determine costs for in-house professional services, including associated overheads and administration, and how to allocate these to work categories and, where appropriate, to individual approved activities. The method of allocating costs, including overheads, must be consistent with recognised management accounting practices.

Approved organisations and Waka Kotahi (for its own activities) must make documentation of their management accounting methods, plus accounting source documents and records, available to us on request for audit purposes.

We (Waka Kotahi as investor) expect approved organisations and Waka Kotahi (for its own activities) to account for in-house services costs in a manner that is reasonable and appropriate for a public sector entity.

The cost of in-house professional services and administration must be determined in accordance with recognised management accounting practice, taking into account generally accepted accounting practice principles when allocating costs.

Specific guidance on the determination of the cost of services (by public bodies) is available from:

the Office of the Auditor-General: Charging fees for public sector goods and services
Charging fees for public sector goods and services(external link)

the Society of Local Government Managers: The price is right – the Kiwi version.
The price is right – the Kiwi version(external link)

An in-house services operation will be expected to break even – neither over nor under recovery of actual incurred costs should occur.

In-house professional services

Professional services are integral to approved activities. They are a direct cost and this, including associated overhead, will be allocated directly to an approved activity or work category.

The cost of professional services will in many instances be time based. Approved organisations and Waka Kotahi (for its own activities) will need to have a rational, documented and consistent method for attributing time-based costs to approved activities.

Administration

Administration is an overhead cost and is not a direct cost to any approved activity. The cost of administration, including associated overheads, which make up the full cost of delivering approved activities will therefore be accumulated for a defined period and then systematically allocated to activities or work categories.

For some in-house staff a system for attributing time-based costs will be used to separate administration ‘time’ from professional services ‘time’. Where staff members also work on tasks that are not related to approved activities, for example tasks related to what approved organisations often refer to as the ‘unsubsidised programme’, then a time-based cost recording system should be used to separate out these costs.

Time-based overhead costs may sometimes be treated as a direct cost to an approved activity for the purposes of establishing the funding assistance claim cost. For example, an in-house staff member employed exclusively on a large project may devote time to both professional services and administrative tasks. Both will be a direct cost to the project. There will be no need, for the purposes of this policy, to distinguish professional services time from other time. Other staff may have a full-time administrative role on a project and thus the full cost of their time should be considered a direct cost to the project.

Other overhead costs may also be a treated as direct cost to an activity or work category. For example, an annual licence fee for specialist software, used exclusively to aid staff working on a single work category, would be a direct cost to that work category.