Getting your fair share: Financing government IT operations

It still amazes me that while the powers that control the funding for IT in government want it to operate like a utility (always on, no glitches or downtime, already there when you walk into a room), they want to fund IT projects as one-time expenditures. As you and I know, IT is not a one-time expenditure, but a continuous investment in resources to keep it operating like the utility everyone expects.

So how do you go about acquiring the funds to keep yourself operating? I have observed others' methods and tried several different ways myself, and I thought I would throw them out  for your consideration and possible use. There are pros and cons associated with all of them, and I will try to mention a few for each.

The first method is what I call grab it while you can. This method employs building everything--plus the kitchen sink and a waste can or two--into your budget request for a particular item/project (including the cost to operate it for several years). This is accomplished by overbuying or buying ahead for maintenance and services (like buying blocks of hours that the vendor will carry over multiple years) or disguising operating costs as part of the cost of a piece of equipment or software.

I personally don't care for this method and like to be up front with my budgeting, but I have had my detailed budgets for projects "massaged" by CFOs and budget officers to better enable them to get funded. They knew that the time was right for a particular purchase and that the opportunity to get funding for that type of project probably wouldn't come around again any time soon.

Y2K is a good example; the impacts of major disasters like 9/11 or Katrina also influence project funding, as well as a change in administration or leadership. These budget officers also knew that there would be more flexibility in capital costs/funding that particular year than in general revenue.

Grant funding is another way of grabbing operating funds at the inception of a project. Obviously, getting grant funding for a particular project can help offset current costs (especially if the current project is already budgeted and approved) but often grants do allow for administrative overhead in their funding. This administrative overhead can be defined quite differently from grant to grant, as well as from one budget office to the next, when interpreting the grant.

However, both of these methods leave you with eventually having to go back to the well to keep the IT department running. So how do we acquire the funds to keep the wheels on? Some shops have gone to a charge-back system - where they charge users of technology (in other departments) a fee for service. I have seen this work through measured services and aggregated costs that are passed on as charges. The problem with the former is that you better be darn good at measuring - and some IT work is hard to quantify as a charge.

It also means you need to run a billing system of some kind. An example would be a per-phone or -data jack cost or an FTE cost in which all the costs of your operation are aggregated and then averaged out on a per-unit basis. The problem with this method is that users can end up paying for services they do not use and if you try and break those out, it can get pretty messy, particularly when trying to justify the per-unit charge.

One method that has been used in higher education is to charge a technology fee. This fee is either a flat, one-time fee per semester, year or credit hour. Note that this is different than an aggregated charge as described above because it is not designed to charge back all the operations of IT. The fee is an acknowledgement that it takes dollars to operate and improve IT operations, and the users are going to pick up part of the tab. The national average per credit hour is somewhere between $5 and $10 for those universities that charge a fee.

I have not seen this method employed in non-education circles yet (if you have, please let me know and give details--I'm interested), but it could have some merit in general government IT administration. I can imagine a scenario where IT departments could charge a per-user fee that is adjusted yearly with inflation to help offset the costs of continued operations. This fee could be set at an amount--say $50 per user--and would be added to the budget of the IT department. These dollars would then be added to the IT department's budget as additional funds-- not as replacement funds for general revenue funds that they would already receive.

Yes, I realize that in the long run that there is one pot of money and that these are all accounting games and none of this should matter. However, the pot has to be divided and there is never enough money for everything. How you go about making your budget requests can make a significant difference in what you get from year to year. It is an ART not a science, and logic plays very little into the final equation. Because IT is so often overlooked or considered a necessary evil, it is important to ensure that we do the best job possible come budget time. While my suggestions may or may not be what you need to do in your environment, hopefully, they will plant some seeds that will lend you some flexibility and creativity when approaching yours.