Internal Service Funds

JLARC has statutory oversight authority for internal service funds (§ 2.2-803B, § 2.2-1101, and § 2.2-2013). Internal service funds are used to account for the cost of support services that are centrally provided to Virginia state agencies. Centrally provided services include information technology, property management, and financial and human resource services. Internal service funds are intended to:

  • ensure central services are managed in a businesslike manner;
  • promote efficient use of services by making agencies pay the full costs associated with providing the services; and
  • allocate the costs of central services across all fund types, so that federal and other non-general fund programs provide their fair share of support.

JLARC staff review internal services funds at the request of the chairman of JLARC, the Senate Finance Committee, or House Appropriations Committee. These as-needed reviews may include the fund’s financial status, its balances and cash reserves, and the rates charged to customer agencies. JLARC staff previously produced an annual high-level memo on the financial status of internal service funds. In July 2019, JLARC approved a policy change that removes the requirement that JLARC staff annually review and report on all internal service funds and instead directs JLARC staff to review and report on designated internal service funds on an as-needed basis.

JLARC staff provide ongoing oversight of the VITA and Cardinal internal service funds as required by separate oversight directives in the Appropriation Act.

Policy

Internal service funds are used to account for support services provided by a centralized administrative unit. This accounting method allows for the identification and reporting of services used by the individual state agencies and is intended to improve management of the funds.

The Joint Legislative Audit and Review Commission (JLARC) has statutory oversight authority for internal service funds (§ 2.2-803B, § 2.2-1101, and § 2.2-2013). Accordingly, at the request of the chairman of JLARC, the House Appropriations Committee, or the Senate Finance Committee, JLARC staff shall conduct a review of a designated internal service fund. Review topics may include the financial status of the fund, including whether the fund has appropriate balances and cash reserves, and the rates charged to customer agencies through the fund.

At the request of JLARC staff, an internal service fund manager shall supply annual end-of-the-year financial statements, a schedule of rates to be charged for services in the current and next fiscal year, and estimates of fund revenues and expenditures for the current and next fiscal year. Submissions shall include a description of the assumptions used to determine rates and estimates, including changes to services provided, customers served, or pricing policies and formulas.

At the conclusion of a requested review, JLARC staff shall provide a memo to the members of JLARC documenting their results and findings.

Adopted: September 12, 1983

Amended: July 15, 2019