Public sector shared services groups are increasingly tasked with managing expenditures, reducing costs, standardizing infrastructure and leading digital transformations to drive policies and standards across their organizations.

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Public Sector Chargeback
SaaS for Shared Services
Frequently Asked Questions
What is IT chargeback and
how do I know if it is compliant?
Public sector shared services groups are increasingly tasked with managing expenditures, reducing costs,
standardizing infrastructure and leading digital transformations to drive policies and standards across their
organizations. For many, however, processes have become more and more fragmented, with increasing
cloud usage, multi-cloud environments, legacy systems that are no longer supported, key resource and
staffing gaps and the inability to add data, products, rates or new members to systems without development
resources.
State agencies are generally held to a higher standard for shared services chargeback compliance. However,
the public sector’s large-scale movement to Software-as-a-Service (SaaS) has complicated IT shared
services chargeback processes.
IT chargeback is a method of charging internal consumers (e.g., departments, functional units) for the
IT services used. SaaS chargeback solutions consolidate usage data from multiple sources and
calculate shared service billings or cost allocations based on actual usage rather than per capita or
other non-consumption based methods.
To comply with GAAP principles, “chargeback” requires double entry, accrual-based accounting of
financial transactions. This means an invoice to internal consumers must be generated from a
financial platform built around these principles.
When evaluating ITSM/ITFM and other chargeback solutions, a good way to know if a solution
complies with GAAP is to determine if it can produce a general ledger report with a credit and debit
(double entry) for each transaction.
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Another indicator is whether the solution is “accrual based.” This simply means that revenue (charges
to internal users) or expenses (internal invoices) are recorded when a transaction occurs versus
when a payment is received. The method follows the matching principle, which says that revenues
and expenses should be recognized in the same period.
How has the last two years
influenced the modernization effort?
Covid forced employees to work from home or telecommute. This required IT organizations to
enable users with more centralized cloud-based access and solutions. Many central IT organizations
attempted to address the allocation of these expenses to internal agencies and departments. Most
agree the shift to the cloud and related expenses will continue to grow.
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What are the major changes in technology
that have occurred?
The large-scale movement to Software-as-a-Service (SaaS) has changed both the development and
delivery of shared services chargeback software.
Additionally, SaaS can be more secure by leveraging cloud security solutions and architecture
delivered by cloud providers.
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Development – SaaS solutions are inherently rich in scalability, user capability, cloud security,
and system architecture.
Delivery – SaaS chargeback solutions can be delivered remotely and integrated quickly and
inexpensively.
What benefits does it add; and what does it
replace or supplement?
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A dedicated chargeback solution typically has a powerful mediation engine that can consume
charging data from many internal and external sources, then mediate or normalize these charges for
the allocation of internal users.
This replaces most, if not all, manual data entry to record charges from any third-party or
internal-solution provider. Additionally, this enables the reconciliation of actual charges against
expected charges based on contracted pricing.

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This reconciliation process becomes increasingly difficult as IT solution delivery is shifting to
individual end-user consumption or usage. A dedicated chargeback solution will
Collect and consolidate billing data for public sector Central Services Information
Technology Service Management (ITSM) systems and third-party, cloud-based SaaS
solutions.
Calculate centralized services chargebacks based on metered-, usage-, and
consumption-based billing models.
Have easy usage data reconciliations for accurate chargebacks and actual versus planned
analysis for greater contract pricing accuracy.
Automate shared IT service allocations by generating and issuing an internal invoice to
public sector departments and agencies.
Export a GAAP compliant chargeback summary into a flat file for State Financial
Accounting systems (SFMA).
What challenges can IT chargeback solve for me?
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Unify fragmented data from legacy and multi-cloud systems.
Modernize antiquated legacy systems by automating chargeback administration processes.
Manage multiple billing models – base, consumption, labor, backup, colocation, mainframe, midrange,
storage, enterprise email, mail hub, network, and software renewal. IT services pass-through
dollar-for-dollar.
Include vendor management capability to store and manage chargeback contracts.
Automate IT chargebacks to agency budgets in real time to ensure adherence to established budget
processes.
Automate to reduce or eliminate staffing gaps related to chargeback administration.
Restrict unauthorized use or access to IT solutions by end-users.
Reduce inefficient expense of resources that result from not being centralized.
Manage non-compliance with OMB Circular 87 and other cost compliance principles as they relate
to GAAP.

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What solutions are available to help us with
calculating and applying chargebacks?
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It depends on the complexity level of the chargeback method. Often, the method is influenced by how a
vendor invoices or charges for their services.
We have been able to define 7 different methods. Starting from the simplest, the first 3 can be managed
with a combination of spreadsheets and accounting platforms. The last 4 require a more sophisticated
financial platform, like BluLogix BluIQ Chargeback, capable of reading, mediating (normalizing), and rating
usage data to calculate, allocate, and generate a charge for an invoice.
From this point forward, you really need automation to manage the chargeback process.
“High-level Allocation”
is dividing up the cost
equally – among agencies, in
this case.
“Low-level Allocation”
would be dividing costs
among agencies based on
some metric, like the number
of users.
“Direct Cost”
is a charge based on dedicated
ownership. For example, if an
agency procured a specific
solution just for its exclusive use.
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“Measured Resource Usage”
would be charges based on the
actual use of a specific IT resource,
like bandwidth or storage.
“Tiered Flat Rate”
are charges based on an allocated
use, whether used or not.
“Negotiated Flat Rate” is a charge
based on projected use, often with
overage.
“Service Based Pricing”
is measured against a pool of pre-paid
use with either a top-up or overage
rate applied once consumed.
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What are my use cases for implementing it?
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Centralized management and delivery of IT solutions and services – often moving from on-site
software to cloud, hybrid, or SaaS solutions. Typical services include:
Desktop, Endpoints
Infrastructure, WAN/LAN Circuits
Network Storage
Unified Communications
Applications
Security
Cloud Services
What do I need to consider before procuring?
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Ensure the SaaS chargeback solution is SOC 2 compliant.
Calculate projected return on investment (ROI).
Experience with public sector chargebacks.
OMB Circular 87 (GAAP) compliance.
Cost justification and/or recovery of chargeback solution costs.
Reduction in manual processes.
Reduction in time for the internal user’s (agency) reconciliation and approval.
Reconciliation of charges from third-party providers.

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What hardware/software would I need
to procure?
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No hardware or software procurement required. Modern chargeback solutions are delivered as
cloud-based SaaS.
Are there any limitations or restrictions I need
to be aware of?
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A dedicated chargeback solution needs to interface with public sector ITSM or ITFM software via
API or flat file. This includes IT asset management, professional services automation, and cost
management solutions.
How does the cost structure usually work?
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The cost structure is typically based on usage or charged on an annual basis payable monthly.
What else do I need to know?
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It is important to define the requirements for chargebacks around a chargeback framework that
considers automating the chargeback process around a service or solution catalog. The ability to be
the source of truth or integrate with another source of truth for this service catalog is a critical point
of management and control.
Tim Cook
Tim is the Recurring Revenue Evangelist for NASTD Partner Parsolvo’s BluIQ solution platform. Tim works
with some of the most innovative state agencies and organizations in the world as they look to transform
the way they engage their customers, manage the business, and create amazing experiences. Tim is a true
subject matter expert regarding digital disruption, efficiency, and effectiveness. He has held previous
executive positions with Votela, Force 3, and Cisco Systems.