Ministerial Determination for the Formation and Operation of Business Units Competing for Minor and Ancillary Works and Reporting Requirements 1996
Under section 32 (b) and 32 (c) (i) and (ii) of the Transit New Zealand Act 1989 (as amended by the Transit New Zealand Amendment Act 1995) the Minister of Transport, in consultation with the Board of Transfund New Zealand, makes the following determination. D e t e r m i n a t i o n l. Title and commencement This determination may be cited as the Ministerial Determination for the Formation and Operation of Business Units Competing for Minor and Ancillary Works and Reporting Requirements 1996 and commences on the date that it is signed by the Minister of Transport. 2. Interpretation (1) In this determination, unless the context otherwise requires, ``the Act'' means the Transit New Zealand Act 1989. (2) Unless the context otherwise requires, terms used in this determination and defined in the Act have the same meaning as in the Act. 3. Business unit requirements The requirements for the formation and operation of a business unit of a local authority competing for minor and ancillary works subject to competitive pricing procedures to which payments may be made under section 27 of the Act are as follows: Formation The business unit must be formed by resolution of the council of the local authority (the ``parent local authority''). Operation The business unit must: (a) Business Plan: adopt and operate in accordance with a written annual business plan which (at a minimum) must contain the following in respect of the business unit: Its purpose or mission; The goods and services to be provided by it; Its performance targets; Its management structure; The content and frequency of its reporting requirements to the parent local authority; Its operating budget; Its accounting procedures; (b) Autonomy: be a separately identified unit within the overall activities of the local authority and to this end: (i) Allocation and costing of goods and services employed: the cost of all goods and services allocated to, purchased by or employed in the business unit from its parent local authority or external suppliers must be fully charged to the business unit, and must be evidenced in a written agreement quantifying the goods and services and the price; (ii) Independence of infrastructural asset managers: no member of the staff of the parent local authority involved in infrastructural asset management may work for, or be involved, in the business unit or its activities; provided that this shall not affect the overall supervisory responsibilities of the Chief Executive Officer of the parent local authority. (iii) Accounting for business unit activities: the accounting records for the business unit must enable the surplus/deficit generated by the activities of the business unit to be measured and reported in accordance with generally accepted accounting practice to the parent local authority; (iv) The fair value of capital employed to be established: the fair value of the parent local authority's investment (notional debt/equity) in the business unit must have been determined and supported by independent valuation and must be updated annually. (v) Expected rate of return on local authority investment: the council of the parent local authority must determine annually by resolution the rate of return it expects from its investment (notional debt/equity) in the business unit; (vi) Form of agreement for goods and services provided: where the business unit supplies the parent local authority with goods or services for which payment is to be made under section 27 of the Act all the terms of conditions of such supply must be recorded in writing. Those terms and conditions must, insofar as is practicable, be: (aa) the same as the parent local authority's standard documentation for contracts with external suppliers of similar goods or services; (bb) conform to the request for tender. 4. Reporting requirements The notes to the audited financial statements of a local authority prepared under section 223e of the Local Government Act 1974, must include, in relation to payments made under sections 27 and 28 of the Act, from the local authority's land transport disbursement account, the following amounts: (a) total payments; (b) operating costs (including all overhead costs and depreciation) of the business unit to which those payments are to be made; (c) net surplus/deficit; (d) the basis for reallocations of a net surplus or the funding of a net deficit. Dated this 1st day of July 1996. M. D. WILLIAMSON, Ministry of Transport.