H.B. 367

1

INTERNAL SERVICE FUND AMENDMENTS
2 1999 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: Brent H. Goodfellow
5 AN ACT RELATING TO INTERNAL SERVICE FUNDS; CREATING A LIMITED
6 EXCEPTION TO THE PROHIBITION AGAINST TRANSFERRING ASSETS TO INTERNAL
7 SERVICE FUND AGENCIES; AND MAKING TECHNICAL CORRECTIONS.
8 This act affects sections of Utah Code Annotated 1953 as follows:
9 AMENDS:
10 63-38-3.5, as last amended by Chapters 79 and 218, Laws of Utah 1996
11 Be it enacted by the Legislature of the state of Utah:
12 Section 1. Section 63-38-3.5 is amended to read:
13 63-38-3.5. Internal service funds -- Governance and review.
14 (1) For purposes of this section:
15 (a) "Agency" means a department, division, office, bureau, or other unit of state
16 government, and includes any subdivision of an agency.
17 (b) "Internal service fund agency" means an agency that provides goods or services to
18 other agencies of state government or to other governmental units on a capital maintenance and
19 cost reimbursement basis, and which recovers costs through interagency billings.
20 (c) "Revolving loan fund" means each of the revolving loan funds defined in Section
21 63A-3-205 .
22 (2) An internal service fund agency is not subject to this section with respect to its
23 administration of a revolving loan fund.
24 (3) An internal service fund agency may not bill another agency for services that it
25 provides, unless the Legislature has:
26 (a) reviewed and approved the internal service fund agency's budget request;
27 (b) reviewed and approved the internal service fund agency's rates, fees, and other amounts

28 that it charges those who use its services and included those rates, fees, and amounts in an
29 appropriation act;
30 (c) approved the number of full-time, permanent positions of the internal service fund
31 agency as part of the annual appropriation process; and
32 (d) appropriated to the internal service fund agency the internal service fund's estimated
33 revenue based upon the rates and fee structure that are the basis for the estimate.
34 (4) (a) Except as provided in Subsection (4)(b), an internal service fund agency may not
35 charge rates, fees, and other amounts that exceed the rates, fees, and amounts established by the
36 Legislature in the appropriations act.
37 (b) (i) An internal service fund agency that begins a new service or introduces a new
38 product between annual general sessions of the Legislature may establish and charge an interim
39 rate or amount for that service or product.
40 (ii) The internal service fund agency shall submit that interim rate or amount to the
41 Legislature for approval at the next annual general session.
42 (5) The internal service fund agency budget request shall separately identify the capital
43 needs and the related capital budget.
44 (6) In the fiscal year that the accounting change referred to in Subsection 51-5-6 (2) is
45 implemented by the Division of Finance, the Division of Finance shall transfer equity created by
46 that accounting change to any internal service fund agency up to the amount needed to eliminate
47 any long-term debt and deficit working capital in the fund.
48 (7) No new internal service fund agency may be established unless reviewed and approved
49 by the Legislature.
50 (8) (a) An internal service fund agency may not acquire capital assets unless legislative
51 approval for acquisition of the assets has been included in an appropriations act for the internal
52 service fund agency.
53 (b) An internal service fund agency may not acquire capital assets after the transfer
54 mandated by Subsection (4) has occurred unless the internal service fund agency has adequate
55 working capital.
56 (c) The internal service fund agency shall provide working capital from the following
57 sources in the following order:
58 (i) first, from operating revenues to the extent allowed by state rules and federal

59 regulations;
60 (ii) second, from long-term debt, subject to the restrictions of this section; and
61 (iii) last, from an appropriation.
62 (d) (i) To eliminate negative working capital, an internal service fund agency may incur
63 long-term debt from the General Fund or Special Revenue Funds to acquire capital assets.
64 (ii) The internal service fund agency shall repay all long-term debt borrowed from the
65 General Fund or Special Revenue Funds by making regular payments over the useful life of the
66 asset according to the asset's depreciation schedule.
67 (e) (i) The Division of Finance may not allow an internal service fund agency's borrowing
68 to exceed 90% of the net book value of the agency's capital assets as of the end of the fiscal year.
69 (ii) If an internal service fund agency wishes to purchase authorized assets or enter into
70 equipment leases that would increase its borrowing beyond 90% of the net book value of the
71 agency's capital assets, the agency may purchase those assets only with monies appropriated from
72 another fund, such as the General Fund or a special revenue fund.
73 (f) [Capital] (i) Except as provided in Subsection (8)(f)(ii), capital assets acquired through
74 agency appropriation may not be transferred to any internal service fund agency without legislative
75 approval.
76 (ii) Vehicles acquired by agencies, or monies appropriated to agencies for vehicle
77 purchases may be transferred to the Division of Fleet Operations and, when transferred, become
78 part of the Consolidated Fleet Internal Service Fund.
79 (9) The Division of Finance shall adopt policies and procedures related to the accounting
80 for assets, liabilities, equity, revenues, expenditures, and transfers of internal service funds
81 agencies.




Legislative Review Note
as of 2-8-99 3:49 PM

A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel