Part 1: Introduction

Charging fees for public sector goods and services.

This guide is intended for all public entities1 that have statutory authority to charge a fee2 for the goods or services that they are obliged to provide. Examples are issuing a passport, or issuing a driver licence.

This guide sets out our expectations of how public entities should set fees. Our expectations are based on three principles:

  • authority;
  • efficiency; and
  • accountability.

This guide describes these principles, discusses how they should be applied, and sets out the steps and matters that we expect public entities to consider when quantifying the costs of providing goods or services and setting the associated fees.

This guide updates and replaces our 1989 publication Guidelines on Costing and Charging for Public Sector Goods and Services.

Cost-recovery focus

A fee should be set at no more than the amount necessary to recover costs, unless the entity is expressly authorised to do otherwise.

Setting a fee that recovers more than the costs of providing the goods or services could be viewed as a tax. Unless expressly authorised by statute, this would breach the constitutional principle that Parliament's explicit approval is needed to impose a tax.3 Accordingly, any authority given to a public entity to charge a fee is implicitly capped at the level of cost recovery.

For example, specific authority is required to charge a fee that would recover more than the cost of providing a good or service – to generate additional revenue, impose a penalty, limit access to or demand for a service, or meet social objectives.

On the other hand, while an entity might have legislative authority to operate full cost-recovery, sometimes fees are deliberately set to recover less than the full cost of providing the good or service. These are policy choices for the Minister or governing body of the entity to consider.

Scope of this guide

This guide does not apply to levies or contractual payments.


A levy differs from a fee for a specific good or service; it is more akin to a tax, but one that is charged to a specific group. It is usually compulsory to pay a levy. Levies charged to a certain group or industry are usually used for a particular purpose, rather than relating to specific goods or services provided to an individual. For example:

  • road user charges, which are levies put towards the upkeep of New Zealand roads, are charged on diesel vehicles and vehicles over a certain weight (other motorists contribute to road maintenance costs through an excise duty on the price of petrol); and
  • building levies, paid by an applicant for a building consent based on the estimated value of the building work to which the consent relates, are paid to the Department of Building and Housing for its building-related services.

Contractual payments

In this guide, a fee is authorised by statute, and set by a public entity to recover some or all of its costs in producing goods or services that it is required by statute to provide. In a contractual relationship the entity is simply selling a good or service.

Public entities do not need statutory authority to enter into contracts for commercial transactions. Such transactions are voluntary for both parties rather than being a matter of statutory duty.

An example of a normal commercial transaction is the Department of Internal Affairs' provision of professional translation services to businesses, central and local government, and private individuals. The Department is not obliged to provide these services. The amount charged by the Translation Service is a contractual payment agreed to by the recipient, and not a fee within the scope of this guide.

In the local government context, the Dog Control Act 1996 contains detailed provisions setting out the basis on which local authorities can charge fees for dog registration. But a local authority does not need equivalent empowering provisions when it hires out a hall or community facility for an afternoon; that is a simple matter of contract and there is no obligation on the authority to hire it out. The first is covered by this guide; the second is not.

Other interested parties

Other parties with a role in ensuring that public entities are setting fees lawfully and appropriately include the Regulations Review Committee and the Treasury. This guide has been produced in conjunction with both of them.

The Regulations Review Committee (the Committee) is the parliamentary select committee with the role of scrutinising regulations, including regulations that set fees. The Committee asked the Auditor-General to produce updated guidelines on the subject. This good practice guide updates and replaces our previous guidelines, and takes account of the Committee's past scrutiny of fees and its previous reports on the subject.

In 2002, the Treasury published its Guidelines for Setting Charges in the Public Sector (the Treasury Guidelines), which were an updated version of its 1999 guidelines. The aim of the Treasury Guidelines is to ensure that entities take proper account of efficiency, equity, fiscal, and other policy concerns as they prepare charging regimes.

This guide and the Treasury Guidelines are complementary. Both the Treasury and the Auditor-General are concerned that entities do not set excessive fees. However, the Treasury Guidelines discuss issues that the Auditor-General has no mandate to comment on, such as the policy considerations about who should be charged a fee and whether an entity should recover less than the full costs of providing a good or service. We recommend that public entities also refer to the Treasury Guidelines.

1: “Public entities” are those entities within the Auditor-General's mandate, and defined in section 5 of the Public Audit Act 2001.

2: For simplicity, we use the terms “fee” and “fees” in this guide to also cover other forms of charges for goods and services.

3: See section 22(a) of the Constitution Act 1986.

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