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Transition to Real-time Billing Methodology for Common Policy in FY 2021-22
As part of the IT Transformation Initiative, OIT has transitioned Common Policy services to a Real-time Billing methodology as of Fiscal Year 2021-22. Under this new methodology, OIT will set fixed service rates and bill each month based on consumption, rather than the current process of billing an estimate and performing a true up after the year is complete. The section below describes the Real-time Billing Rate Setting Methodology, but for more information on the Real-time Billing initiative, please visit the Real-time Billing section of the ReimagineIT website.
Real-Time Billing Rate Setting Methodology
Rate Development
Now that OIT has transitioned to Real-time Billing for Common Policy Services, OIT set's fixed rates each budget cycle based on expected service demand as well as estimated total costs for providing each service.
OIT's current rate setting methodology includes a multi-step process:
Departments and IT Directors forecast utilization for the upcoming fiscal year
OIT Finance reviews current service cost and develops a baseline forecast using current data, adjusting for any one-time expenditures, staff turnover, contract escalators, or other factors that are likely to impact service cost in the upcoming year.
Once Departments have submitted their utilization requests, OIT Service Owners review and quantify any necessary changes in resources required to support the service demand. This can include adding resources to support increased demand, and it can also include reducing resource estimates based on lower service demand.
Once OIT has firm cost estimates for each service line, including direct costs and indirect costs or division overhead, the following basic formula drives the initial rates and department budgets:
Rate Calculation:
Forecasted Service Cost Pool ÷ Forecasted Statewide Service Use = Service Rate
Department Budget:
Final Approved Service Rate × Department's Requested Utilization = Department's Base Budget for Each Service
Rate True Up
As an internal service provider for state agencies, OIT aims to set rates that perfectly balance revenue and expense for each service each year. Since rates are set well in advance of the fiscal year, and many factors can influence final service costs and final department utilization, OIT evaluates any variance between final service costs and revenue at the close of each fiscal year. OIT then accounts for any over/under collection in the next rate setting process. This ensures that OIT is adjusting future rates to bring fund balance in line with federal requirements
Other Information
General Overview of OIT's Reappropriated Funding
The Governor’s Office of Information Technology (OIT) delivers information and communications technology services and support across the State of Colorado’s executive branch agencies as well as to other government entities. OIT drives innovative technology solutions, provides quality service, and supports state agencies whose missions are critical to serving Coloradans.
OIT was created through C.R.S. 24-37.5-101. OIT’s operational responsibility is vast and includes the development and support of enterprise and agency-specific IT services and solutions. OIT is also responsible for information security across all three branches of state government.
OIT is funded predominantly through reappropriated funds and recovers a majority of its costs from cost allocations to departments. Departments are appropriated funding in their annual budgets and then pay OIT for services provided. The allocation methodology is called Common Policy. Departments receive an appropriation in the Long Bill for this allocation called “Payments to OIT”. OIT also recovers costs by direct billing to departments. Direct billing is done separately from Common Policy, for specific services such as telecom, or for service needs above and beyond the capacity of Common Policy appropriations.
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