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Budgeting and Accounting for Services Policy

ISO/IEC 20000 Toolkit Version 6 ©CertiKit 2016

Budgeting and Accounting for Services Policy

Implementation Guidance (The header page and this section must be removed from final version of the document)

Purpose of this document The Budgeting and Accounting for Services Policy defines the approach that will be taken by the service provider in this area, including the management of budgets and the allocation of costs to services.

Areas of the standard addressed The following areas of the ISO/IEC 20000:2011 standard are addressed by this document: 6. Service delivery processes 6.4 Budgeting and accounting for services

General Guidance In terms of the setting and monitoring of budgets this is likely to be an organisationwide process which is already documented and this should be available at audit time. The main purpose of this document is to describe how costs will be apportioned to services; this can be a difficult task and the important thing is to state the assumptions made so that the method of calculation is clear. If the cost apportionment will be used to request funds from customers then they will want to be able to see for themselves that the basis of allocation is fair.

Review Frequency We would recommend that this document is reviewed annually in line with the organisational budget cycle.

Toolkit Version Number ISO/IEC 20000 Toolkit Version 6 ©CertiKit 2016.

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Contents 1

INTRODUCTION ....................................................................................................................................... 7 1.1 1.2 1.3 1.4 1.5

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COST APPORTIONMENT AND ALLOCATION POLICY ................................................................. 8 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

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PURPOSE ................................................................................................................................................... 7 SCOPE ....................................................................................................................................................... 7 GOVERNANCE AND REVIEW ...................................................................................................................... 7 POLICY COMPLIANCE ................................................................................................................................ 7 RELATED DOCUMENTS.............................................................................................................................. 7

GENERAL .................................................................................................................................................. 8 ASSETS ...................................................................................................................................................... 8 SHARED RESOURCES ................................................................................................................................. 8 OVERHEADS .............................................................................................................................................. 9 CAPITAL AND OPERATING EXPENSES ........................................................................................................ 9 EXTERNALLY SUPPLIED SERVICES ............................................................................................................ 9 PERSONNEL ............................................................................................................................................... 9 FACILITIES ................................................................................................................................................ 9

SERVICE COSTING MODELS ............................................................................................................. 10

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1 Introduction 1.1

Purpose

This policy defines how the costs of IT services will be apportioned and allocated within [Service Provider].

1.2

Scope

The scope of budgeting and accounting covers all business units that procure services from [Service Provider]. Essentially, this is every business unit within [Organization Name].

Procurement relating specifically to [Service Provider] is detailed within Financial Regulations. It details that any business team of [Organization Name] wishing to procure any IT related goods or services must do so through [Service Provider]. This ensures that best practice, compliancy and consistency is achieved through the procurement route and its outcomes. A copy of the [Organization Name] Financial Guidelines may be found on the appropriate network drive or can be obtained from the Service Manager.

1.3

Governance and Review

This policy has been defined by the Chief Information Officer with input from stakeholders and approved by the IT Steering Group.

It will be reviewed on an annual basis and any amendments will be ratified by the IT Steering Group prior to publication.

1.4

Policy Compliance

Whilst success against some aspects of this policy will depend upon the resources, systems and processes put in place by management, compliance with this policy is largely mandatory for all employees of [Organization Name]. Where appropriate and at management discretion, instances of non-compliance may be subject to formal disciplinary action in accordance with organizational HR procedures.

1.5

Related Documents

The following documents are relevant to this policy and should be read in conjunction with it:  

Budgeting and Accounting for Services Process Financial Regulations

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2 Cost Apportionment and Allocation Policy 2.1

General

IT costs within [Organization Name] will be apportioned on a recharge basis according to the number of devices each Business Unit has. This recharge forms part of the budget for each business unit at the start of the financial year.

No additional charges are levied during the year, but some items are expected to be paid out of the business unit’s budget, such as printer ink cartridges and paper.

Where possible, direct costs will be allocated to specific services in order to assess the overall cost of providing that service and whether it is viable or cost-effective for the organisation. This calculation will also include an element of indirect cost which is spread across all services, for example where shared resources are used to provide the service.   

2.2

Direct costs are those which can be attributed to a single service (e.g. the costs of the payroll system will generally only be applicable to the payroll or finance service), Indirect costs are those which cannot be directly attributed (e.g. the hardware costs of the server hosting a number of virtual machines) and thus have to be apportioned to the relevant services Unabsorbed overheads are those indirect costs which cannot be apportioned to a subset of services and so must be apportioned across all services (e.g. the entire cost of the server room).

Assets

IT assets (including software licenses) will be recorded in the Configuration Management Database (CMDB) along with their purchase value. IT hardware assets are depreciated over a four year period by the Finance Department, who will be informed when they are disposed of according to the organisation’s Configuration Management Process.

2.3

Shared Resources

Resources that are shared across services (such as IT service desk) will be apportioned according to an estimate of their relative use in the preceding financial year. The method of calculating relative use will vary according to the nature of the resource. For example for the service desk this may be according to the number of incidents and service requests logged.

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2.4

Overheads

IT overhead costs such as office space will be spread across services in line with the number of users of each service. Where possible, account will be taken of the degree of use e.g. the difference between an occasional and a power user.

2.5

Capital and Operating Expenses

Capital and operating expenses will be allocated to the approved project to implement a new or changed service that requires them in line with the project’s business case. These funds must be obtained in accordance with the organisation’s financial regulations which dictate that a capital expenditure request must be submitted for approval by the board.

2.6

Externally Supplied Services

The cost of services provided in full or in part by external suppliers will be allocated directly to the service provided where possible, for example in the case of a software maintenance agreement. Where this is not possible, similar criteria as for shared internal resources will be applied.

2.7

Personnel

Personnel costs will be allocated across services according to an estimate of the number of full time employees dedicated to the provision of that service. This may be calculated as a proportion of an FTE (Full Time Equivalent) where required. Overall costs of employment, including any relevant employment taxes will be used rather than simply the salary associated with the role.

2.8

Facilities

Use of other facilities which do not come under the heading of overheads will be allocated according to an estimate of their relative use in the preceding financial year.

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3 Service Costing Models The calculation of the overall cost of each service is carried out using a service costing model. This sets out the specific method of apportionment of shared resources and the allocation of direct costs for each service and results in a headline cost for that service.

The assumptions made in each case are stated and the model provides a straightforward way of amending the impact of these assumptions if they are found to be inappropriate.

The service costing model aims to give a true picture of the relative cost of the service across its lifetime and where possible will take into account the costs of implementation as well as on-going maintenance. Any costs which have been paid up-front will also be accounted for e.g. if a three year maintenance contract has been purchased.

Based on the conclusions from the costing model the Service Manager will review whether the service is viable and if the best method of service provision is being used e.g. in-house vs. outsourced.

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