Internal Service Funds

JLARC is responsible for ongoing oversight of 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 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 produce an annual review of the internal service fund, which examines the funds’ status, fund appropriations proposed by the governor, and proposed changes in the rates charged for services. JLARC staff perform special studies of internal service funds, as needed.

 

Current Internal Service Funds

JLARC monitors internal service funds managed by three agencies:

Virginia Information Technologies Agency (VITA)

VITA provides information technology services to state agencies, such as data center, personal computing, internet, and telecommunications services. Services are financed through VITA’s Information Technology and Management internal service fund.

Department of General Services (DGS)

DGS provides property management and other services to state agencies. Services include real estate management, building maintenance, food and supply provisioning, fleet management, construction consulting, laboratory analytical testing, state surplus property disposal, federal surplus property disposal, and graphic design and printing services. Services are financed through nine separate DGS internal service funds.

Department of Accounts (DOA)

DOA provides financial services to state agencies. Services include payroll processing, enterprise accounting, and enterprise budgeting application services. Services are financed through two separate DOA internal service funds.

Policy

Internal service funds are to be used to account for support services provided by a centralized administrative unit. This method of accounting permits identification and reporting of services used by the individual state agencies, and is intended to result in improved management.

The Joint Legislative Audit and Review Commission (JLARC) has statutory oversight responsibility for internal service funds (§ 2.2-803B, § 2.2-1101, and § 2.2-2013). Accordingly, the Commission desires to establish a policy that ensures there is adequate legislative oversight of internal service funds. In keeping with this objective, the Commission adopts this policy statement.

Each internal service fund manager shall keep the Commission informed of the financial condition of the funds that they manage. For each fund, the manager shall supply JLARC staff with annual end-of-the-year financial statements in a format specified by the staff and additional information as shall be required. JLARC staff shall report to the Commission on the condition of the funds on an annual basis.

By September 1, each internal service fund manager shall submit to JLARC staff (1) a schedule of rates to be charged for services in the next fiscal year and (2) 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, to customers served, or to pricing policies and formulas. JLARC staff shall review these materials and report findings to the Commission on an annual basis.

The Department of Planning and Budget shall notify JLARC staff of changes that are made to proposed rates or revenue and spending estimates during and after the budget development process. JLARC staff shall report findings from these oversight activities to the Commission as needed.

All state agencies shall report the creation of any new internal service funds, or the creation of new rates under an existing internal service fund, to JLARC staff. JLARC staff shall review new rates as they are established and report findings to the Commission as needed.

Each internal service fund manager shall establish charges to customers that are intended to be sufficient to recover the actual cost of providing service but not at a level to accrue a surplus. In the event a surplus is accumulated, disposition of the surplus shall be determined by the Commission as provided by law.

Adopted: September 12, 1983

Amended: July 14, 2014