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King County Information Technology’s (KCIT) rate model lacks transparency. Its unnecessary complexity hinders accuracy, consistency, and oversight. While the model follows several best practices, customers report confusion over IT charges and may not have enough information to make optimal decisions about IT services. In reviewing the model, we found inconsistencies, questionable assumptions, and errors, which have led to higher rates across the County. In addition, KCIT’s workstation inventory process complicates accurate allocation of costs. In total, the problems with the model’s structure prevent adequate review by oversight entities and could have a substantial budgetary impact. We make recommendations for KCIT to refine the structure of its model in order to improve accuracy, consistency, and accountability.

Summary

KCIT is one of the largest internal service funds in King County and spends over $100 million per year. KCIT designed its rate model to generate revenue equal to the cost of providing IT services to county customers. It should fairly allocate costs among customers and provide sufficient clarity so that customers can make cost-effective decisions about IT service levels. In addition, the rate model should be transparent enough to allow accountability to oversight entities such as the County Executive and County Council so they can understand the drivers of rate increases.

In 2011, King County consolidated IT services from individual departments into KCIT. Through an internal service fund, KCIT charges other county agencies for the cost of its services. Since its reorganization, KCIT has changed the methodology it uses to charge customers for service several times, which has resulted in confusion about the fairness and accuracy of its charges as well as concerns about the visibility of budget increases.

The King County Department of Information Technology (KCIT) charges county agencies over $200 million per biennium for the information technology (IT) services it provides countywide. The rate model KCIT uses to bill agencies for IT services contains inconsistencies, errors, and questionable assumptions affecting over $20 million in customer charges. Some of these issues raise rates, and some lower them. These issues stem from a lack of transparency caused by the model’s complexity and structure.

The rate model contains nearly 200 separate spreadsheets with inconsistent structures and assumptions. The size and complexity of the model hinders oversight by obscuring visibility into the model’s assumptions that affect millions of dollars of rates.

KCIT follows several best practices in how it structured its rate model, such as calculating rates in great detail in an effort to provide customers choices in the type and volume of IT services they purchase. However, customers report that they have little insight into their IT charges, which hampers cost-informed decision making about IT purchases.

In addition, KCIT’s process of counting user accounts and workstation inventory needs improvement. Because KCIT distributes its operating costs across the total number of users and devices, inaccurate inventory counts can result in rates that are either too high or too low. Inaccurate counts have also contributed to several million dollars in “true-up” charges, which may not be justified by additional costs.

We recommend that KCIT work with the Office of Performance, Strategy and Budget to simplify its rate model, take steps to ensure that customers understand how their rates are determined, and continue to improve the accuracy of its inventory process.

Reports related to this audit

Follow up work is in progress. A report will be available as soon as it is complete.

Currently, there are no related reports to this project.

Audit team

Larry Brubaker, Grant Dailey, Laina Poon, and Ben Thompson conducted this audit. If you have any questions or would like more information, please call the King County Auditor's Office at 206-477-1033 or contact us by email KCAO@kingcounty.gov.