Chapter 11: Central Services

Central services (CS) are core services provided by a centralized agency to support other state agencies in conducting their operations and missions. These are services like administrative hearings, auditing, information technology, legal, statewide financial systems, and worker’s compensation, as well as some financial, human resources, and IT services tailored for smaller agencies.

By having agencies specialize in the delivery, compliance, and programming of certain services, the services become more cost effective, efficient, and consistent for the entire state. For example, by having a single state internet network for all state agencies to use monitored by a team of cyber security professionals, we prevent the need for every state agency to setup their own internet network, which creates efficiencies and economies of scale.

The Central Services Model (CSM)

The CSM is a budgeting tool to estimate the spread of funding and costs for central services across state agencies based on CS provider methodologies.

Agencies that are central service providers
For this chapter’s purposes, nine agencies are considered CS providers. The specific central services funded through the state CSM are located at the end of this chapter. In addition to those central services, these agencies provide many other services to achieve their agency missions.

• Office of Administrative Hearings
• Office of the Attorney General
• Department of Enterprise Services
• Office of Financial Management
• Office of the Governor
• Department of Labor and Industries
• Office of the State Auditor
• Office of the Secretary of State
• Washington Technology Solutions 

Central service providers charges outside of the central service model
Agencies might not receive funding for all activities and services that CS providers offer, particularly for items where an agency determines how much to use the service. Some of the services that fall into this category are usage-based so costs can sometimes escalate quickly. A list of examples of these charges is below; however, the list is not all-inclusive. If there are questions regarding invoices, please contact the CS provider for additional information. Budgeting for these charges is the responsibility of the agency receiving the service.

Examples of frequently asked about fee-for-service offerings not funded through CS:

Does my agency receive funding for central services? If so, in which budgets?
State agencies in the legislative, judicial, and executive branches, as well as universities, community, and technical colleges, receive funding in the operating and transportation biennial, first supplemental and carry forward budgets. The capital budget is not adjusted.

Where in the budget would I find my central services amounts?
After the release of the Governor’s proposed budget and the enacted legislative budget, OFM posts a report on the OFM website of updated CS funding levels that include each individual agency and a statewide roll-up.

Within the budget, each CS provider agency has their own dedicated budget item code. New funding is found by these budget item codes. Some budget item codes include multiple central services.

When are these calculated and when do I receive funding?
The enacted legislative budgets distribute funding to agencies for changes in central services. Central service funding at the end of each budget becomes the new base for the next budget. Funding for central services is adjusted in the biennial, first supplemental budgets, and carry forward budgets but it is not adjusted in the second supplemental. At the end of the biennium, an agency could have a positive or negative variance as some CS are allocated estimates and not directly tied to actual usage and cost.

How are central service budget amounts determined?
Each CS has a methodology for how funding is estimated and distributed through the CSM. Some CS are allocated based on a statewide data point such as the number of staff in Thurston County. Other CS are allocated based on CS provider methodology based on data points such as historical usage or anticipated audits. This creates what is known in the CSM as the allocation split. This represents how OFM, and the Legislature will allocate CS funding and costs among agencies. A table of the methodologies is available at the end of this chapter.

Actual invoices, however, are based on usage and may vary from these estimates. Agencies shall pay these invoices in a timely manner and in full as they would pay any other vendor.

Why are charges spread this way?
Costs for services delivered by the CS provider must be paid in some manner and the methodology used is the CS provider’s best way to estimate a fair way to charge.

What if my agency estimates overspending our allocation split amount?
Agencies that anticipate requiring an extraordinary level of service should contact that CS provider to discuss the nature and scope of the need as soon as possible. This will allow time for consideration before budget decisions are made for both agencies to appropriately cover the costs of the expected services.

When does my agency submit a fund split for central services?
Where is the form I use? Leading up to the biennial budget submittal, OFM will send out a template that agencies must use. Currently, that document is a Microsoft Excel worksheet. It is important to submit fund splits using the template as it has macros that help compile the data to load into the CSM. Agencies must review the fund splits against how the agency paid the CSM invoices and update the spreadsheet as necessary. Please include an explanation if there are significant changes from your previous fund split or if they do not align with past expenditures. Legislative fiscal staff and OFM will review your updates and may contact you with questions. Even if your agency’s fund split has not changed, OFM still requires written confirmation of the desired fund splits during the biennial budget submittal. Please send updated fund split information to your assigned OFM budget advisor with a copy to the assigned CSM budget advisor.

For the supplemental budgets, fund splits are not updated; however, please contact your agency’s OFM budget advisor if you have identified an issue or need to update. OFM and the legislature use the information to ensure that the funding adjustments made in the budget are reflective of the percentages each agency must use for these costs.

How the CSM Works

The CSM is a budgeting tool to spread costs for CS. It uses the Allocation Split from the CS provider and the Fund Split from the agency to spread funding for CS.

Example 1: $100 was appropriated to WaTech for an IT training program to serve statewide IT staff. In this case, the methodology of the allocation split is the percentage of statewide IT staff. The Department of Social and Health Services (DSHS) has 18% of the statewide IT staff, therefore they would receive $18 ($100 * 18%). The funding source(s) of that $18 comes from the fund split form submitted by DSHS during the biennial budget submittal. If the fund split submitted was split 50% General Fund-State and 50% General Fund-Federal, DSHS would receive appropriations for $9 GF-S and $9 GF-F for this item.

How can I see my base funding and amount by fiscal year? The CSM carries forward biennial amounts by state agency, but not detailed by fiscal year, so this data point is not available. The assumption is that FY splits are even due to each biennium’s carry-forward level adjustments. However, during the allotment process, customer agencies are encouraged to make their best guess based on what they know about how their agency uses or consumes a service.

How can my agency receive funding for a new central service? Sometimes agencies want to join a service that receives funding through the CSM, such as the small agency IT service that Washington Technology Solutions offers. In these instances, please reach out to the CS provider and your OFM budget advisor about becoming a new customer.

My agency’s consumption of a service didn’t change but we received additional funding. Like all state agencies, CS providers receive funding for things above their existing base budget such as global compensation items. Additionally, there are other services that must be paid for that benefit state agencies and the public. These costs are distributed to state agencies using a prescribed methodology.

Example 2: Statewide human resource staff receive a targeted class wage increase that will cause OFM and DES statewide human resource efforts to cost $100 more. In this case, the methodology of the allocation split is the percentage of total statewide staff. The Department of Corrections has 12% of the total statewide staff, therefore they would receive $12 ($100 * 12%).

The funding source of the $12 would come from the fund split form submitted during the biennial budget submittal. If the fund split submitted was 100% GFS, DOC would receive appropriation for $12 GFS for this item.

DES administers the state’s enterprise risk management (ERM) and self-insurance liability programs. For more information about these programs, please contact DES Risk Management.

How self-insurance premiums are calculated
Actuaries prepare estimates for self-insurance premiums that will be shared when available. Agencies do not need to submit decision packages (DPs) for routine self-insurance premium adjustments as any cost adjustment will be handled through the central service model and distributed appropriately to agency budgets as necessary.

What if your agency anticipates an extraordinary risk management (ERM) cost?
Request funding for ERM-related costs in a separate policy level DP (e.g., unexpected costs related to implementing ERM programs or unexpected costs related to specific risks and their associated treatment plans).

If your agency anticipates extraordinary ERM costs, are there other requirements in addition to drafting and submitting a DP?
Yes, agencies must submit an ERM update with their budget submittal after first submitting it to DES’ Office of Risk Management (ORM). The update should be a one-page submittal describing three major risks that could affect the agency’s ability to achieve its strategic objectives/goals on time and any existing or proposed initiatives to address these risks. When submitting a request concerning enterprise risk management, please do not include confidential information related to specific claims or lawsuits. Agencies must seek advice from agency legal staff if there are questions about confidentiality issues. Email a copy of the update to ORM prior to submitting your agency’s budget request.

ORM can provide a loss history profile of agency losses, including pending claims. For additional risk management information and resources, visit the ORM website. ORM staff members are available to assist you with interpreting loss trends and developing risk management goals at 360-407-9199.

The Department of Labor and Industries administers the statewide Worker’s Compensation program. Actuaries prepare estimates used to determine premiums and funding for agencies to pay worker’s compensation premiums through the central service model. Premium adjustments will be processed through the central service model and distributed to agencies accordingly. For more information about these rates, please visit their frequently asked questions website or reach out directly to the agency.

Agency financial records show payments made for services. In addition, some agencies have invoices publicly available at the following websites:

• Washington Technology Solutions: des.wa.gov/watechar/
• Department of Enterprise Services: des.wa.gov/ar/
• Office of Financial Management: des.wa.gov/ofmar/

CS providers must maintain properly documented methodologies for each service they provide, including how the methodology billing was determined. Total revenues must match estimated billing costs. Agencies that administer central services must provide OFM with a worksheet detailing proposed charges by agency, and a detailed explanation of significant changes that have occurred since the last adjustment to the model.

For accounts where the central service model is the only funding source, total revenues must match estimated billing costs. OFM will provide a formatted spreadsheet and instructions to CS providers for their use in preparing this list.

If the question is regarding invoicing or a specific service, reach out to the agency contact provided on the invoice of the service. If the question is about the broader funding of the CSM, reach out to your agency’s OFM budget advisor and the CSM OFM budget advisor.