Cost Management Policy

Version: 1.00Issue Date: 10/27/2015

This Cost Management Policy ensures that IT costs are tracked and that staff members are aware that their use of IT resources has impact on costs.

1.0 Overview

This Cost Management Policy will help ensure that costs of information technology are controlled based upon the business requirement and costs are tracked and identified.

2.0 Purpose

This Cost Management Policy requires that an information technology budget be created and costs are identified and tracked.

3.0 Scope

This Cost Management Policy applies to everyone using information technology resources but applies specifically to those who create and maintain the IT budget. This policy is effective as of the issue date and does not expire unless superceded by another policy.

4.0 Cost Allocation

  • The costs of information technology capabilities must be identified and tracked.
  • A process must be created to enable the organization to identify and assess information technology costs.
  • A process to measure and allocate costs of information technology to the business must be created and the method must be communicated to and understood by the business. The process must ensure the cost figures are accurate and should be bases on use of resources where possible.
  • Business staff must be trained to be sure they understand how information technology costs are transferred to the business and what those costs are including labor and services.
  • Business staff who use information technology resources should understand how their use of those resources costs the business and they should be able to modify their use of the resources which would impact the costs.
  • Staff that track and maintain financial records of information technology costs and billing must be identified and assigned the task. These staff must possess the skills required for the tasks.

5.0 Information Technology Budget

  • A process for creating an information technology budget must be created. The budget must consider recovery of costs from the business units that use the services or equipment.
  • The budgeting process must provide for a review of technological priorities and the Technology Planning Policy.

6.0 Cost Tracking

  • Costs of information technology must be tracked using a reliable and auditable process. The process must provide a method of authorization, identification and tracking of all information technology costs whether internal or external labor, internal services, external services or equipment.
  • When it is feasible, cost identification should be automated.
  • Automated cost tracking processes should be regularly audited.
  • Costs should be reviewed frequently and compared to budgeting estimates.
  • Costs of services should be compared to industry standard costs and benchmarks.
  • IT cost structures (How billed, what business function is using the services, what the costs are) should be formally reviewed annually and the review results must be reported to management.
  • The method used to charge the business function for the information technology cost must be negociated between the business function management and the information technology management. Users should have an opportunity to contribute to the cost discussion.
  • The method used to charge the business function for the information technology cost must be approved by both the business owners and information technology management.
  • The method used to charge the business function for the information technology cost must be detailed enough to find opportunities to reduce cost or to find places where additional and unexpected costs are being charged.
  • The method used to charge the business function for the information technology cost should make it easy to determine the benefit for the expense and be aligned with the information technology service level agreement.
  • A process must be created which allows for the algorithms used to charge the business function for information technology costs to be evaluated for its effectiveness, accuracy, and appropriateness.

7.0 Enforcement

Since following the Cost Management Policy is important for the welfare of the organization, employees that purposely violate this policy may be subject to disciplinary action up to and including denial of access, legal penalties, and/or dismissal. Any employee aware of any violation of this policy is required to report it to their supervisor or other authorized representative.

8.0 Other Policies

  • IT Budget Policy
  • Technology Planning Policy

9.0 Additional Requirements

  • A process to measure and allocate costs of information technology to the business must be created.
  • Training in IT costs allocation for business users.
  • A process for creating an information technology budget must be created.

Approval

Approved by:__________________________ Signature:_____________________ Date:_______________