Utah Code § 63J-1-410 Internal service funds -- Governance and review.
63J-1-410. Internal service funds -- Governance and review.
(1) For purposes of this section:
(a) "Agency" means a department, division, office, bureau, or other unit of state government, and includes any subdivision of an agency.
(b) "Agency cost" means all of an internal service fund agency's direct and indirect costs and expenses for providing the service for which the internal service fund agency charges a rate, fee, or other amount under this section, including:
(i) salaries, benefits, contracted labor costs, travel expenses, training expenses, equipment and material costs, depreciation expenses, utility costs, and other overhead costs; and
(ii) costs and expenses for administering the rate, fee, or other amount.
(c) "Do not replace vehicle" means a vehicle accounted for in the Division of Fleet Operations for which charges to an agency for the vehicle's use do not include amounts to cover depreciation or to accumulate assets to replace the vehicle at the end of the vehicle's useful life.
(d) "Internal service fund agency" means an agency that:
(i) provides goods or services to other agencies of state government or to other governmental units on a capital maintenance and cost reimbursement basis; and
(ii) recovers costs through interagency billings.
(e) "Rate data" means the following information related to a rate, fee, or other amount, that an internal service fund agency charges or proposes to charge another agency for services the internal service fund agency provides to the agency:
(i) the title or purpose of the rate, fee, or other amount;
(ii) the amount or proposed amount of the rate, fee, or other amount;
(iii) the estimated total annual revenue from the rate, fee, or other amount;
(iv) the account or fund into which the rate, fee, or other amount is or will be deposited;
(v) the estimated number of times the rate, fee, or other amount will be charged;
(vi) the internal service fund agency's estimated costs related to the rate, fee, or other amount;
(vii) whether the rate, fee, or other amount is intended to cover the internal service fund agency's costs related to the rate, fee, or other amount;
(viii) whether the internal service fund agency intends to subsidize the rate, fee, or other amount to cover the internal service fund agency's costs related to the rate, fee, or other amount and, if so, the internal service fund agency's justification for the subsidy;
(ix) whether the proposed amount of the rate, fee, or other amount exceeds the internal service fund agency's estimated costs related to the fee and, if so, the internal service fund agency's justification for the excess fee;
(x) for a current rate, fee, or other amount that the internal service fund agency proposes to change:
(A) the present amount of the rate, fee, or other amount;
(B) the percent difference between the present amount and the proposed amount of the rate, fee, or other amount; and
(C) the reason for the change to the rate, fee, or other amount; and
(xi) if available, a market analysis of the rate, fee, or other amount, including a comparison of the amount of the internal service fund agency's rate, fee, or other amount, and the amount other public or private sector providers charge for a comparable service.
(f) "Revolving loan fund" means the same as that term is defined in Section 63A-3-205.
(2) An internal service fund agency is not subject to this section with respect to the internal service fund agency's administration of a revolving loan fund.
(3)
(a) For a fiscal year that begins before July 1, 2027, an internal service fund agency may not bill another agency for services that the internal service fund agency provides for each internal service fund operated by the agency, unless the Legislature has:
(i) reviewed and approved each internal service fund's budget request;
(ii) reviewed and approved each internal service fund's rates, fees, and other amounts that the internal service fund bills the agencies that use internal service fund agency's services and included those rates, fees, and other amounts in an appropriation act;
(iii) approved the number of full-time equivalent positions of each internal service fund as part of the annual appropriation process;
(iv) reviewed the number of full-time equivalent contract employees of each internal service fund as part of the annual appropriation process; and
(v) appropriated to the internal service fund agency each internal service fund's estimated revenue based upon the rates and fee structure that are the basis for the estimate.
(b) For a fiscal year that begins on or after July 1, 2027, an internal service fund agency may not bill another agency for services that the internal service fund agency provides for each internal service fund operated by the agency, unless:
(i) on or before September 15 of the fiscal year immediately preceding the fiscal year in which the internal service fund agency intends to bill another agency, the internal service fund agency submits to the Governor's Office of Planning and Budget and to the Office of the Legislative Fiscal Analyst the rate data related to the rate, fee, or other amount that the internal service fund agency intends to bill; and
(ii) the Legislature has:
(A) reviewed and approved each internal service fund's budget request;
(B) reviewed and approved each internal service fund's rates, fees, and other amounts that the internal service fund bills the agencies that use internal service fund agency's services and included those rates, fees, and other amounts in an appropriation act;
(C) approved the number of full-time equivalent positions of each internal service fund as part of the annual appropriation process; and
(D) reviewed the number of full-time equivalent contract employees of each internal service fund as part of the annual appropriation process.
(c) For purposes of submitting rate data under Subsection (3)(b) an internal service fund agency may group multiple related rates, fees, or other amounts and submit rate data for the group rather than each individual rate, fee, or other amount, provided the internal service fund agency:
(i) determines that the grouping is necessary and does not reduce the quality or completeness of the rate data; and
(ii) establishes objective criteria for determining when to group multiple related rates, fees, or other amounts.
(d) If an internal service fund agency operates more than one internal service fund within the internal service fund agency, the internal service fund agency shall comply with the requirements of Subsection (3)(a) or (b), as applicable, for each internal service fund.
(e) An internal service fund agency that collects a rate, fee, or other amount in violation of this section shall rebate the collected amount to the agency that paid the rate, fee, or other amount.
(4)
(a) An internal service fund agency shall annually submit a report to the Governor's Office of Planning and Budget and the Office of the Legislative Fiscal Analyst that includes the following information for each rate, fee, or other amount charged during the preceding fiscal year:
(i) the actual amount of the internal service fund agency's agency cost;
(ii) the actual revenue collected from the rate, fee, or other amount; and
(iii) the number of times the fee agency collected the rate, fee, or other amount.
(b) For a report described in Subsection (4)(a), an internal service fund agency may group multiple related rates, fees, or other amounts and include the information described in Subsections (4)(a)(i) through (iii) for the group rather than for each individual rate, fee, or other amount, provided the internal service fund agency:
(i) determines that the grouping is necessary and does not reduce the quality or completeness of the report; and
(ii) establishes objective criteria for determining when to group multiple related rates, fees, or other amounts.
(c)
(i) Subject to Subsection (4)(c)(ii), an internal service fund agency shall submit the report described in Subsection (4)(a) on or before September 15 each year.
(ii) For any rate, fee, or other amount that is not closed out in time to report by September 15, the internal service fund agency shall submit the report as soon as practicable after the rate, fee, or other amount is closed out.
(d) For the report described in Subsection (4)(a) that is due in 2026, the deadline described in Subsection (4)(c)(i) is November 15.
(5)
(a) An internal service fund agency may charge a rate, fee, or other amount that is less than the rate, fee, or other amount established by the Legislature in an appropriations act if the internal service fund agency first reports to the Governor's Office of Planning and Budget and the Office of the Legislative Fiscal Analyst the internal service fund agency's justification for reducing the rate, fee, or other amount.
(b) Except as provided in Subsections (5)(c) and (d), an internal service fund agency may not charge a rate, fee, or other amount that exceeds the rate, fee, or other amount approved by the Legislature in an appropriations act.
(c)
(i) An internal service fund agency that begins a new service or introduces a new product between annual general sessions of the Legislature may, for that service or product:
(A) establish and charge an interim rate, fee, or other amount;
(B) acquire contract employees, if necessary; or
(C) do a combination of Subsections (5)(c)(i)(A) and (B).
(ii) The internal service fund agency shall:
(A) submit the interim rate, fee, or other amount under Subsection (5)(c)(i) to the Legislature for approval at the next annual general session; and
(B) report any change in the number of contract employees under Subsection (5)(c)(i) to the appropriate legislative appropriations subcommittee for review.
(d) An internal service fund agency may, in a fiscal year, charge rates, fees, and other amounts that exceed the rates, fees, or amounts approved by the Legislature in an appropriations act, if:
(i) during the immediately preceding annual general session, the Legislature appropriates money to each state agency to pay for an increase in the state agency's employee's compensation;
(ii) within 90 days after the day on which the Legislature adjourns the general session sine die, the internal service fund agency submits a proposed increased rate schedule to the rate committee established in Section 63A-1-114 that adjusts the rates, fees, and amounts approved by the Legislature to reflect the percentage increase that the Legislature appropriated for state agency employee compensation under Subsection (5)(d)(i);
(iii) the rate committee approves the proposed increased rate schedule described in Subsection (5)(d)(ii) during the meeting described in Subsection 63A-1-114(4); and
(iv) the internal service fund agency uses all the revenue from the rate schedule increase under this Subsection (5)(d) to increase the internal service fund agency's employee's compensation in an amount equivalent to the state agency employee compensation increase described in Subsection (5)(d)(i).
(6) The internal service fund agency budget request shall separately identify the capital needs and the related capital budget.
(7) In the fiscal year that the accounting change referred to in Subsection 51-5-6(2) is implemented by the Division of Finance, the Division of Finance shall transfer equity created by that accounting change to any internal service fund agency up to the amount needed to eliminate any long-term debt and deficit working capital in the fund.
(8) No new internal service fund agency may be established unless reviewed and approved by the Legislature.
(9)
(a) Except as provided in Subsection (9)(f), an internal service fund agency may not acquire capital assets unless legislative approval for acquisition of the assets has been included in an appropriations act for the internal service fund agency.
(b) An internal service fund agency may not acquire capital assets after the transfer mandated by Subsection (7) has occurred unless the internal service fund agency has adequate working capital.
(c) The internal service fund agency shall provide working capital from the following sources in the following order:
(i) first, from operating revenues to the extent allowed by state rules and federal regulations;
(ii) second, from long-term debt, subject to the restrictions of this section; and
(iii) last, from an appropriation.
(d)
(i) To eliminate negative working capital, an internal service fund agency may incur long-term debt from the General Fund or Special Revenue Funds to acquire capital assets.
(ii) The internal service fund agency shall repay all long-term debt borrowed from the General Fund or Special Revenue Funds by making regular payments over the useful life of the asset according to the asset's depreciation schedule.
(e)
(i) The Division of Finance may not allow an internal service fund agency's borrowing to exceed 90% of the net book value of the agency's capital assets as of the end of the fiscal year.
(ii) If an internal service fund agency wishes to purchase authorized assets or enter into equipment leases that would increase its borrowing beyond 90% of the net book value of the agency's capital assets, the agency may purchase those assets only with money appropriated from another fund, such as the General Fund or a special revenue fund.
(f)
(i) Except as provided in Subsection (9)(f)(ii), capital assets acquired through agency appropriation may not be transferred to any internal service fund agency without legislative approval.
(ii) Vehicles acquired by agencies from appropriated funds or money appropriated to agencies to be used for vehicle purchases may be transferred to the Division of Fleet Operations and, when transferred, become part of the Fleet Operations Internal Service Fund.
(iii) Vehicles acquired with funding from sources other than state appropriations or acquired through the federal surplus property donation program may be transferred to the Division of Fleet Operations and, when transferred, become part of the Fleet Operations Internal Service Fund.
(iv) Unless otherwise approved by the Legislature, vehicles acquired under Subsection (9)(f)(iii) shall be accounted for as "do not replace" vehicles.
(10) The Division of Finance shall adopt policies and procedures related to the accounting for assets, liabilities, equity, revenues, expenditures, and transfers of internal service funds agencies.
(11) Beginning July 1, 2027, this part does not apply to charges that are:
(a) for legal services provided by the Office of the Attorney General; and
(b) governed by Title 63J, Chapter 1, Part 10, Funding for Attorney General Services.
Amended by Chapter 364, 2026 General Session