Administration costs

Introduction

This section defines Administration costs and provides examples, advice and links to useful resources for the approval, delivery and accounting for these costs.

Definitions

The following definitions relate to land transport activities that the Transport Agency funds. They may not be relevant in any other context.

Administration is not integral to a project or activity that has been funded by the Transport Agency but, nevertheless, must be provided by an Approved Organisation and the Transport Agency (for National Programmes and State Highways activities) to support the delivery of activities. The cost of administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. is an overhead cost incurred in the delivery of activities.

Expenditure on administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. is exempt from procurement procedure A procurement procedure approved under section 25 of the LTMA. requirements regardless of whether it is outsourced or undertaken in-house.

The cost of all activities advised to the Transport Agency(Planning & Investment), either when applying for funding approval or when claiming funding assistance for an approved activity, must be the full cost of the activity, including any administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. costs, regardless of whether the cost is an in-house cost or incurred through a contract with an external supplier.

Examples of Administration costs

The following are examples of cost or services that will commonly be classified as administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. 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 plans (LTPs), annual plans, longer-term programmes, and communications plans and strategies
• administering a supplier pre-qualification system
• reporting and providing data and information to the Transport Agency, Audit NZ, etc.
• undertaking financial processes, management accounting and reporting
• developing and operating land transport business support systems
• servicing democracy, including providing customer/ratepayer interface 
• meeting statutory responsibilities, including audit fees and tax advice fees
• the cost of owning management systems and databases.

Obtaining approval to claim funding assistance for expenditure on administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities.

A standing approval is in place for all Approved Organisations and the Transport Agency(National Programmes and State Highways) to include the cost of administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. in the cost of approved activities when claiming funding assistance for those activities, providing the conditions discussed under accounting for the cost (below) are met.

Delivery of administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities.

All Approved Organisations and the Transport Agency(National Programmes and State Highways) must have a formal, documented management structure for in-house services operations. Typically a single management structure will apply to both in-house professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. and administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. .

The Transport Agency requires all Approved Organisations and the Transport Agency(National Programmes and State Highways) to manage their in-house service delivery in a way that ensures both efficiency and effectiveness. The Transport Agency(Planning and Investment) does not, and will not, specify how these organisations should structure or organise themselves to do that, but it expects them to be guided by the Standards NZ publication, Guide to Local Government Service Delivery Options (SNZ HB 9213:2003).

Accounting for the cost of administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities.

All Approved Organisations and the Transport Agency(National Programmes and State Highways) must have a documented methodology covering how costs for overheads and administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. are to be determined and allocated to work categories. The method of allocating overheads must be consistent with recognised management accounting practices.

Approved Organisations and the Transport Agency(National Programmes and State Highways) must make documentation of their management accounting methods, plus accounting source documents and records, available to the Transport Agency(Planning & Investment) on request for audit purposes.

The Transport Agency(Planning & Investment) expects Approved Organisations and the Transport Agency(National Programmes and State Highways) to account for administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. in a manner that is reasonable and appropriate for a public sector entity. 

Administration as defined here is an overhead cost and not a direct cost to any approved activity. The cost of administration The components of activities that are reasonably provided in administering the delivery of land transport-related activities. , including the cost of associated overheads, that 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 The components of activities that are reasonably provided in administering the delivery of land transport-related activities. ‘time’ from professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. ‘time’. Where staff members also work on tasks that are not related to approved activities, for example tasks related to what 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 project may devote time to both professional services Technical inputs to an activity undertaken by persons skilled in fields relevant to that activity. and time to administrative tasks. Both will be a direct cost to the project and there will be no need, for the Transport Agency’s purposes, to distinguish professional services time from time spent on administrative tasks. Other staff may have a full-time administrative role on a project and the full cost of their time should similarly 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 A type of activity – not confined to a particular activity class, e.g. new roads (work category 323) appears in:

* activity class 12 – local road improvements
* activity class 13 – state highways improvements . 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 that should be charged to that work category.