SAP Public

SAP Functions in Detail mySAP Public Sector

mySAP™ PUBLIC SECTOR IN SAP® R/3® ENTERPRISE

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CONTENTS Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . mySAP™ Public Sector in SAP® R/3® Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Budgetary and Accrual-Based Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SAP® Tax and Revenue Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SAP® Business Information Warehouse (SAP® BW) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cross-Application Topics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 10 14 14 16

SAP Funds Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . What Is a Fund? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Master Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Budget Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Budget Preparation with SAP Strategic Enterprise Management (SAP SEM). . . . . . . . . . . . . . . . . . Budget Execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Budget Control Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Availability Control (AVC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SAP Funds Management Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Expenditures and Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Period-Based Encumbrace Tracking (PBET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year-End Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19 19 19 20 22 26 31 32 37 38 40 47 48 50

Fund Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Financial Accounting Ledger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Subledgers Used in Fund Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Special Ledger for SAP Funds Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Integration Within SAP R/3 Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SAP FM Derivation Tool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51 51 53 55 60 64 65

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SAP Grants Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . SAP Grants Management Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Integration Within SAP R/3 Enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Master Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Budgeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Billing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overhead Costing: Indirect Cost Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Complementary Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Period-End Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73 73 73 75 80 84 84 85 87 87

SAP Tax and Revenue Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overview of Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Managing Taxes and Other Statutory Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revenue Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Integration with Accounting and Business Support Applications . . . . . . . . . . . . . . . . . . . . . . . . . . Performance and Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

88 88 89 92 94 95

Integration Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 SAP Asset Accounting (SAP AA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 SAP Controlling (SAP CO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Classical and Electronic Procurement (SAP MM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 SAP Sales and Distribution (SAP SD) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 SAP Plant Maintenance (SAP PM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 SAP Human Resources (SAP HR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 SAP Travel Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 SAP Position Budgeting and Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 SAP Records Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 SAP WebFlow and SAP Business Workflow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

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PREFACE This brochure is an update of the 1998 Public Sector Functions in Detail publication, and has been revised to describe the functionality of SAP® R/3® Enterprise, with the focus placed mainly on financial accounting for the public sector. The subject of integration within SAP R/3 Enterprise, as well the integration of mySAP™ Business Suite with applications external to it, remain very important and all components, whether “core” or add-on, are integrated with each other seamlessly. mySAP™ Public Sector is an industry-specific add-on to SAP R/3 Enterprise, together with mySAP™ Healthcare and mySAP™ Aerospace & Defense. SAP® Funds Management is a main component of the mySAP Public Sector solution. In particular, with respect to mySAP Public Sector functionality, there has been a consolidation of IS-PS and HR-PS functionality into one single core environment. Major development projects are based on the SAP R/3 Enterprise environment.

Many areas of mySAP Public Sector have been redesigned in SAP R/3 Enterprise. A number of functions have been considerably expanded, in particular in the area of fund accounting. After the recent Internet bubble burst, the focus of businesses as well as public agencies has gone in the direction of detailed and exact financial accounting, with e-government running a close second. Besides fund accounting, new functionality has been developed in the areas of budget preparation, grants management, and tax and revenue management. However, the subject of e-government still remains very much on the table. A brief note on branding: Whereas the functionality of SAP R/3 Enterprise refers to the new and changed functions of the R/3 System, the Internet-based “mySAP.com” has now been renamed as “mySAP Business Suite”. This name change has also taken effect in mySAP Public Sector. At the end of this brochure you will find a list of abbreviations and a glossary of terms used.

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INTRODUCTION The SAP Solution Map for Public Sector incorporates and integrates all the functionality a government agency needs to carry out proper budgeting and fund accounting: budget formulation or preparation within the framework of organizational management, budget execution and reporting within the operational management of an agency, and so on.

mySAP™ PUBLIC SECTOR IN SAP® R/3® ENTERPRISE

mySAP™ Public Sector lays the groundwork for forward-looking process and technology strategies that can be used by international public institutions, federal and state governments, local authorities, public agencies, and nonprofit organizations. mySAP Public Sector is based on the core components of the worldwide market leader in standard software, SAP® R/3® Enterprise, supplemented by industry-specific components to meet the specific requirements of public bodies and organizations. In addition, mySAP Public Sector contains complementary software components from third-party vendors, as well as SAP’s public sector expertise and worldwide service and support from SAP and its partners.

eGovernment & eGovernance

Organization Management

Citizen & Business Service Delivery Strategic & Capital Planning

e-Government Portals

Decision Support & Data Warehousing

Internal Operations Support Budget Execution Program/Project

Workforce Development

Procurement & Supplier Relationship Management

Resource Management

Government Programs I

Government Programs II

Organization & Position Management

Skills Development

Budget Formulation

Managerial Accounting

Program Evaluation Performance Results & Analysis Measurement

Grants Management

Time Management

e-Learning

Security & Authentication

e-Democracy

Cash Management & Treasury

Compensation & Benefits Administration

Knowledge Library

Case & Records Management

Payroll Accounting

Knowledge Assessment

Procurement Process Management

e-Procurement & Marketplaces

Tender Management

Contract Management

Inventory Management

Distribution

Facility & Equipment Management

Fleet Management

Reimbursable Services

Property & Asset Management

Real Estate Management

Travel Management

Tax & Revenue Management Energy Management

Figure 1: SAP Solution Map for Public Sector

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Program Formulation & Financing

Personnel Administration

Recruitment

Knowledge Development & Training

Constituent Relationship Management

Financial Accounting

Management

Human Resource Management

Creating and executing budgets are among the most important tasks of organizations operating in the public sector. For this reason, monitoring the flow of funds from the source via the budget to those receiving the services financed by revenues is a core process in the mySAP Public Sector solution.

Homeland Security

Defense & National Security

Water & Waste Management

Justice & Corrections Airport & Port Authority Services

Transportation

Public Health

Insurance

Social Services

Education

Double-Entry Accounting and Distributed Processing In addition to the fiscal approach to revenue and expenditure accounting, parallel use of a double-entry system of financial accounting is possible. This ensures that you are able to assess your organization’s position based on activities in the same manner as private sector organizations. The double-entry system of financial accounting is the cornerstone to fund accounting as practiced in the United States.

An example: You can copy and adjust the budget from the previous year by adding or deducting specific amounts. This budget then forms the basis for the following detailed planning process. Fixed amounts, such as mandatory pension expenditures, can be taken over unchanged from the previous year, with only the variable budget amounts planned in detail. See the section on budget preparation in the chapter entitled

SAP Funds Management for more information. SAP R/3 Enterprise offers a number of components for the safeguarding and proper management of resources such as personnel, assets, materials, and so on. Because the use of these resources reduces their availability for other purposes, whether the “use” is committing of budgeted resources or costs actually realized by the receipt of goods and services, it is important to have proper integration with the overall budget management and control system. Public Sector Budget Planning Approving the budget is one of the most important tasks of legislative bodies. While debates on the budget are usually conducted in full public view, the complex detailed budgetplanning processes remain mainly in the background. The annual budget-planning process begins when a government agency requires its organizations to produce detailed sub-budgets. After this initial planning, these sub-budgets are collected at the higher level using a “bottom-up” approach and are then adjusted by increasing or reducing individual estimates. Once adjusted, the individual sub-budgets are no longer consistent and must be reconciled with the lower levels before they can be presented to the authority in charge. This adjustment and reconciliation process may not be completed until the draft budget is debated at the political level, and finally approved by the legislative body.

BUDGET PREPARATION WITH SAP® STRATEGIC ENTERPRISE MANAGEMENT (SAP® SEM)

Whether for public sector organizations such as agencies on the federal, state, or local level, or for the military or universities, the ability to formulate a budget according to clear objectives and appropriate standards is crucial to obtaining funding and accomplishing the organization’s goals. The budget describes both the organization’s objectives as well as the means it will use to accomplish these objectives. As of SAP R/3 Enterprise, you can use SAP SEM to easily and interactively plan your budget. This solution supports the budget preparation and research process through its Webenabled, user-friendly interface, with which, for example, you can monitor departmental interdependencies and hierarchies. Budget Execution Applications As of SAP R/3 Enterprise, the new budget control system (BCS) is available as a second budgeting system, existing side-by-side with the existing SAP R/3 budget execution application, which has been renamed “former” or “classical” budgeting. BCS is the new strategic system for budget execution – however, it does not have any influence on the existing budget execution application. For performance reasons and in order to avoid problems caused by handling errors, SAP does not recommend using both budgeting systems in parallel.

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Both budget execution applications enable you to do the following: • Enter and update budget data. Budgeting transactions enable you to work in a detailed or overall fashion. You can document all data entries via document-specific texts in order to maintain full auditability. Automatic distribution of annual values to periods and automatic calculation functions reduce the required user input. Validation rules ensure that agencyspecific additional rules for budget maintenance are enforced. • Carry out year-end closing in a user-friendly fashion. For this, you can use the SAP® Schedule Manager to automate year-end closing tasks. • Store budget versions. Individual budget estimates are maintained in the form of budget versions, ensuring that all interim steps in the planning process – up to and including final budget approval – are documented. Once the budget has been approved, it may need to be distributed to the responsible authorities and subordinate organizations using a “top-down” approach. • Carry out active availability control, which draws on the budget to verify that all expenditures are within the limits set by the available budget. On top of this wide array of functionality included in the former budgeting system, BCS offers new features that provide you with a flexible budget execution system. Please see the chapter entitled SAP Funds Management for detailed information. SAP® FUNDS MANAGEMENT

Upon completion of budgeting activities, an organization then moves into the next, equally complex phase of available resource management: the management of funds. The business flow reflects different time horizons and situations, and processes a fund through the blocking, reservation, precommitment, and commitment stages, after which there is a payment order and the actual payment is made.

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With the exception of funds blocking, which must be lifted manually, all steps pass automatically from one step to the next within the process flow. Individual organizational requirements determine the steps to be implemented. You can use SAP® Business Workflow to integrate all of these steps, which streamlines and automates the process. Workflow can be adapted to fulfill the objectives and procedures required during the approval processes. POSITION BUDGETING AND CONTROL

A highly flexible, fully integrated HR and financial solution for the public sector, position budgeting and control is intended to help organizations monitor personnel spending within the realm of budgetary policy. Integrated with mySAP™ Human Resources and mySAP™ Financials, position budgeting and control supports proactive payroll expenditure management cost effectively and efficiently. Position budgeting and control is tailored specifically to the requirements of public sector organizations, providing guaranteed budget availability for all payroll expenditures, which helps public sector administrations realistically anticipate and control these costs. Position budgeting and control offers a detailed view of all personnel budgets – linking payroll expenditures with a department’s personnel requirements and tying them to specific employees or positions within an organization. Errors, such as budget overspending or inconsistent application of payroll funds, are detected and corrected immediately. Sophisticated workflow automation tracks the source of the problem and notifies the users responsible for its correction.

Procurement: Integrating SAP Funds Management and SAP® Materials Management Public sector organizations procure goods and services from suppliers in both the public and private sectors. To help them in this, organizations that manage available resources need a procurement system that includes requisitioning resources, processing purchase orders, and contracting with suppliers. In order to have the proper budgetary control, the system must be customized so that it fulfills the requirements of your organization as well as your country. For some organizations or countries, purchase orders can only be placed if the budget line in question has sufficient funds or commitment authorizations.

INTERN A ALLOCA L TIO N

T M A RAVEL NAG EM ENT

VE RE ES L SA

SD

ACTUALS

O

N UE RD S ER

FI

ITH W T EN ING AS

CO

PRO C MM P U URE RC M H

ITMENT MM S CO

FI

Integration with Purchase Order Processing If you implement SAP® Materials Management (SAP® MM) for procurement, the entire purchasing process is integrated with mySAP Public Sector. It begins with a purchase requisition, which is a request to the purchasing department for procurement of materials or services in the prescribed quantity at a particular time. The functions of material requirements planning also allow purchase requisitions to be created automatically from existing requirements. If a specific budget line indicates a requirement, the system conducts a simultaneous check against the budget to ensure that sufficient funds are available. The available budget for this budget line is then reduced accordingly. You can also create release strategies to determine the review and approval process for purchase requisitions. These integrated workflow processes control the transactions and release them for further processing.

FI FIFM

T W/O EMEN UR ING OC RCHAS R P PU

You can use budget control reports to determine available amounts and earmark purchase orders for later payment. In this way, you can enter not only the expenditures for the order in question, but also any costs that might arise from additional contractual obligations.

FI

LL PAYRO NG TI N ACCOU

To make purchase order processing as simple as possible, most purchase orders are created by referencing data already available in the system. This substantially reduces the work involved and the possibility of data entry errors. Once you have entered a purchase order, you can generate a budget report showing the current state of funds, including the reduction of any related purchase requisition amounts in the budget line to which the purchase order was assigned.

HR

PAYMENT REQUESTS

Figure 2: Integration of SAP R/3 Enterprise Components in SAP Funds Management

When goods are delivered or services rendered, an invoice is received that the person in charge must verify. To trigger payment of the invoice to the supplier, you create a payment request. The specifications governing payment are determined, and payment is approved after the invoice has been verified.

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As an alternative to formal payment requests, you can have payments generated automatically, based on the invoices already entered. The system automatically checks for possible duplicate invoices to prevent duplicate payments. System security also ensures that only authorized personnel may make payments, and only after proper invoice approvals have been received.

When an invoice is posted, the system also checks whether funds are available in the relevant budget line. The available funds for the budget line are adjusted if the amount of the invoice differs from the original purchase order or goods receipt. If a purchase order exists for this invoice, the purchase order item is also adjusted accordingly. You can then print a payment request online or have the final payment made against the invoice.

Additional controls can be established that require a threeway matching of the invoice with the initial purchase order and the receipt of materials or services. This ensures fully independent verification that the ordering of the materials or services was originally authorized, the organization received the materials or services ordered, and the invoice was properly entered and approved.

BUDGETARY AND ACCRUAL-BASED ACCOUNTING

Matching functions in SAP Materials Management also support goods receipts and inventory management. If processing of goods receipts is not necessary, the next step in the chain is invoice verification. INVOICE VERIFICATION

This step links invoice entry with invoice verification and the creation of a payment request or automatic payment of the invoice. Invoice verification, which is part of SAP Materials Management, is a highly integrated process. It automatically references the original purchasing information and the receipt of materials or services, as well as recording information in SAP Funds Management, mySAP Financials (accounts payable), SAP® Controlling, and SAP® Grants Management. Invoice verification checks incoming invoices to ensure that they are complete, as well as correct factually, arithmetically, and with regard to price. The reference to a purchase order or receipt of materials or goods supports the verification process.

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Budgetary accounting is the central control method used by the public sector primarily to check and control available financial resources (“fiscal accounting”). It also reflects the execution of the political will, as expressed in the budgets approved by the legislative bodies. This results in two basic principles: • Total expenditure must not exceed total available resources. • Legal commitments of funds must not exceed the approved expenditure budget. In SAP R/3 Enterprise, budgetary accounting is performed using SAP Funds Management, a component of mySAP Public Sector. Double-entry bookkeeping, based on accrual accounting, is the conventional accounting method used in the private sector (“commercial accounting”). The balance sheet illustrates, at a given point in time, where total financial resources came from (liabilities and owner’s equity) and how they were applied (assets). The income statement compares revenues realized with expenses realized and determines the profit or loss for a given period of time. In SAP R/3 Enterprise, high-level accrual-based accounting is performed using the general ledger (G/L), which is linked to various subledgers for vendors, customers, assets, and materials. Low-level accrual-based fund accounting is performed using the special ledger. In addition, accrual-based accounting is fully integrated with cost and project accounting (for

ACCOUNTS PAYABLE

ACCOUNTS RECEIVABLE

ASSETS ACCOUNTING

MATERIALS MANAGEMENT

GENERAL LEDGER, SPECIAL LEDGER

COMMERCIAL ACCOUNTING

FISCAL ACCOUNTING

VENDOR ACCOUNTS CUSTOMER ACCOUNTS

SUBLEDGER ACCOUNT MANAGEMENT

BANK ACCOUNTS CASH ACCOUNTS

FIXED ASSETS CURRENT ASSETS

BUDGET PLANNING

INCOME STATEMENT:

BUDGET EXECUTION:

• REVENUE • EXPENSE

• BUDGET ALLOCATION • COMMITMENTS MGT.

CASH ACCOUNTING

ANNUAL ACCONTING AND REPORTING

CONTROLLING

Figure 3: Dual Approach to Accounting: Financial Accounting

example, cost element, cost center, and cost object accounting). These controlling components make costs more transparent and contribute to improved business performance. Accrual-based accounting is becoming more prevalent in the public sector organizations of many countries, since it provides better cost visibility. In the United States, for example, doubleentry fund accounting is performed by most public sector organizations. This form of accounting, and the additional integration provided by the fund accounting solution in mySAP Public Sector, is described in the following section.

Fund Accounting Under this form of accounting prevalent in the United States, certain funds (and some internal agencies) have always been required to produce full accrual-based balance sheets and income statements as in the private sector. In addition, other funds (and some agencies) have always been required to produce balance sheets and income statements on a modified form of accrual-based accounting. Monitoring cash balances by individual fund and internal agency is also essential to proper tracking of available cash funds and to allocate investment earnings.

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Outgoing invoice Delivery of goods

Time scheduling and resource planning

SALES/ DISTRIBUTION

Invoice Payment

PROJECT PROCESSING

COMMERCIAL ACCOUNTING

HUMAN RESOURCE MANAGEMENT Personnel planning Payroll accounting Trip costs

Purchasing Warehouse management MATERIALS MANAGEMENT

FUNDS Budget creation MANAGEMENT Budget execution

COST ACCOUNTING Overhead costs Internal activity allocation

Figure 4: SAP Funds Management and Related Functions in SAP R/3 Enterprise

With recent accounting changes for many U.S. public sector organizations, funds that previously only required “modified accrual” financial statements are now also required to be reported on a full accrual basis in the same way as private sector companies. In many cases, the budgetary accounting view of these funds must also be reported. In addition, cost accounting and full recovery of costs on an accrual basis of accounting is becoming more important, as public sector organizations attempt to determine the true cost of services. They are required to report these costs as a justification for charging administrative costs, as well as providing comparisons with private sector companies, since they compete with these companies to continue providing certain services to their constituents. The cornerstone for fund accounting is the ability to balance every financial accounting transaction by fund and internal

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agency. This is performed automatically, with the results posted to a special financial accounting ledger, enabling full integration of fund accounting with other transactions. An internal agency or department is a breakdown of an organization’s internal responsibility structure on a fairly high level. These can be represented in SAP R/3 Enterprise as business areas. Fund accounting provides for full sets of financial statements for each fund as well as for each agency. As an example, when a vendor invoice is entered, it makes no sense from a business process perspective to manually determine each agency’s share of the invoice amount in order to post the vendor payable to the balance sheet. This would require the entry of multiple invoices, which would confuse the vendor, as well as reduce the ability of the system to properly identify duplicate invoices.

In addition to financial statements by fund and internal agency, fund accounting also requires that revenues, expenses, and fixed assets be identifiable by functional activity, which may or may not be in alignment with the internal agencies. This includes the ability to perform cost and project accounting not only by organization, but also by fund and functional area. Also, because reporting requirements are different and can change over time, lower-level funds and functional activities must be able to be flexibly grouped to meet both internal and external reporting requirements. Because an organization may be using various accounting methods for funds, it is also necessary for these accounting methods to be reconciled. The mySAP Public Sector solution includes the ability to automatically reconcile the various accounting methods. Grant Accounting Grant accounting is used to simulate, record, track, control, bill, and report on activities affecting programs determined and funded by external sponsors. Because organizations must comply with the accounting and reporting needs of sponsors, grant accounting is carried out using the sponsor’s time frames and master data definitions. However, to meet the needs of the organization’s internal and external accounting, reporting, and control requirements, a link to the organizational structures and time frames must also exist. The mySAP Public Sector solution provides a grant accounting subledger, which is the source of financial information for monitoring and control of activities supporting programs of external sponsoring organizations. Grant accounting is integrated with the other accounting methods, with simultaneous updating of the grant accounting subledger as other postings are made. New Budgetary Accounting Solutions Public sector organizations face numerous challenges that require management to reconsider the heavy emphasis on budgetary accounting and to implement fiscal accounting together with additional management tools. New ways of

thinking and acting are required to ensure that the levels and quality of services provided are maintained and improved while processes are streamlined and overall costs are reduced. The budgetary accounting systems used in the past did not support this transformation of public sector organizations. Public sector organizations are increasingly searching for a financial and cost accounting system that is useful both as an information tool and as a control instrument. The implementation of such a system provides a solid foundation upon which to base important organization decisions. The mySAP Public Sector solution provides public sector organizations with these new fundamental financial and cost accounting features, as well as the flexibility to add additional features or change approaches in the future. Multiple Accounting Approaches The architecture of mySAP Public Sector enables a doubleentry bookkeeping view as well as a budgetary accounting view of organizations. These views are run in parallel, permitting you to switch from one view to the other at any time, enabling you to take full advantage of both approaches.

COMMERCIAL ACCOUNTING

FISCAL ACCOUNTING

CASH AND REVENUE CONTROLLING

LOCAL RESOURCES/ FUNDS MANAGEMENT

• REVENUES • DIRECT COSTS • OVERHEAD COSTS

FUNCTIONAL GROUPING

COST ELEMENTS

COST CENTERS

COST OBJECTS

PROJECTS

AREAS OF RESPONSIBILITY

Figure 5: Multiple Approaches to Accounting: Controlling

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The mySAP Public Sector model is based on the integration of all relevant accounting models and methods, ensuring the following: • Fiscal requirements of conventional budgeting and budgetary accounting will continue to be supported. • Cost accounting and double-entry financial accounting, including the ability to create balance sheets and income statements by fund and/or internal agency, are also available. • Grant accounting allows for the recording of an external sponsor’s structures and information, without affecting the organization’s own internal structures and information. • Comprehensive integration between all components provides a single entry point for business transactions, with automatic reconciliation of the accounting methods used. This eliminates multiple input and reconciliation procedures. • You can transfer the planning results from one application component to another. • You can combine budgetary and accrual-based structures to meet your organization’s particular accounting requirements. SAP® TAX AND REVENUE MANAGEMENT

SAP Tax and Revenue Management with mySAP Public Sector is a solution for public tax and revenue agencies that serves all your tax administration needs while addressing the customer service requirements of taxpayers. The SAP solution contains an integrated set of applications that brings you proven best practices. Key processes include: • Registration and account maintenance enables taxpayers to register through multiple channels, such as over the Internet, on paper, or in person. Registration provides each taxpayer with a single, unique account that you can make accessible via the Internet. You can guide the taxpayer through Internet self-services – providing suggested tax-type information, for example. Centralized address management makes it easy for government agencies and taxpayers to keep their data in sync.

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• Return filing and remittance processing accepts paper, fax, telefile, and Internet-based tax filing; all methods access the same rules database. Internet-based services enable taxpayers to file and pay taxes, receive payment confirmations, and register complaints around the clock. You can monitor and process outstanding filing obligations (tax returns). The solution also works with non-SAP applications for tax calculations and reconciliation of tax returns. Correspondence and contact management supports • all correspondence with taxpayers, including tax returns and remittance documents. The solution automatically monitors incoming correspondence and creates outgoing correspondence between your agency and taxpayers. • Billing supports the management, tracking, accounting, and reporting of all information related to taxpayer payments, as well as all accounts receivable, billing, and refund activities. Both paper-based and electronic forms of billing are supported. Audit and compliance provides business intelligence that • supports careful decision making, audit triggering and planning, and knowledge management. You can spotlight common mistakes to educate taxpayers about potential errors and increase voluntary compliance. Your auditors can obtain complete and current taxpayer history and update the information online. SAP® BUSINESS INFORMATION WAREHOUSE (SAP® BW)

Public sector managers require a tool that provides them with fast and easy access to summarized information on which they can base decisions. The SAP® Business Information Warehouse (SAP® BW) meets these requirements, providing a self-contained application within the mySAP Business Suite, a suite of business solutions. It uses a modern, open data warehouse concept to provide you with the strategic information you require, such as key figures, overviews, and statistical evaluations.

As a result, SAP BW brings together all necessary data from across the applications or, if required, from external sources (for example, from business information services or from other databases and systems). The information is transferred and processed on a separate reporting server, enabling SAP BW to manage integrated and summarized information from different systems on a consistent basis.

Flexible Data Compilation SAP BW contains preconfigured information models and standardized report templates, enabling users to rapidly obtain needed information. SAP BW also includes user-friendly tools that you can use to create your own additional evaluations. Multidimensional analysis is possible and includes a drill-down function.

BUSINESS EXPLORER/REPORTING

BAPI SAP BW WAREHOUSE SERVER ADMINISTRATOR’S WORKBENCH: • SCHEDULING • MONITORING

• MASTER DATA • TRANSACTIONAL DATA • METADATA BAPI

SAP BW InfoCubes

DATA SOURCES LEGACY SYSTEMS

SAP R/3 ENTERPRISE

R/3, R/2

WEB

Figure 6: SAP Business Information Warehouse (SAP BW)

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Particularly important in this respect are the InfoCubes. Individual information requirements and update rules enable organizations to create and maintain flexible reporting structures. SAP BW uses a meta-database to gather data, with a link to the relevant master data (for example, people responsible and organizational units) and useful operations on the data (for example, calculation of averages vs. totals). Data collection for the data warehouse operations is largely automated.

CROSS-APPLICATION TOPICS

In this Functions in Detail brochure, you will find a lengthy chapter entitled “Integration Aspects.” Besides explaining the integration with all areas of SAP R/3 Enterprise – such as SAP Financial Accounting (SAP FI), SAP Controlling (SAP CO), SAP Materials Management (SAP MM), and SAP® Sales and Distribution (SAP SD) – there is information on subjects crossing all applications, such as SAP Business Workflow or SAP® Records Management.

Analysis and Reporting Multidimensional InfoCubes are used to compile required analyses and reports. A wide range of aggregations, comparisons, hit lists, exceptions, and key figure displays are among the features you can use to evaluate the data. Templates are available covering the most frequently used selections (such as plan/actual comparisons at month end), reducing the need to enter data selection criteria more than once.

Internet and Self-Service Functions The integrated Internet and intranet functions of mySAP Business Suite and SAP R/3 Enterprise enable your organization to meet the public sector requirements of tomorrow. Optical archiving and multimedia applications enhance the performance of your system, and open interfaces enable you to link SAP R/3 Enterprise with the desktop software of other suppliers.

For presentation purposes, the completed reports are transferred directly to high-performance spreadsheet or presentation programs and displayed there. You can use the editing and layout functions in these programs to further develop and change the reports, producing high-quality data output. You can also access the reports via the Internet or through your organization’s intranet.

Internet self-service functions relieve public administration employees of routine administrative tasks. Public agencies can use these functions, for example, for filing and processing passport applications, or submitting engineering blueprints and drawings for approval to local authorities. Moreover, public employees can enter and display their own vacation data and work schedules electronically.

SECURITY

e-Government Integrated Internet and intranet functionality enables public employees or the general public to become actively involved in the electronic processing of data over the Internet. Using selfservice functions, public employees can track their own data, reducing routine administrative tasks.

Strict access controls ensure data security in SAP BW, beginning with the actual authorizations for the reports; however, you can also enter restrictions on the various data levels within the report (restricting access to, for example, particular funds centers, commitment items, and funds). See the section on Budget Preparation in the following chapter for more information on SAP BW.

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Because a government agency should be free to decide its own level of integration – right up to a fully implemented e-government solution – SAP offers various approaches within a flexible framework. A carefully planned, staged implementation of the e-government capability of mySAP Public Sector can be adapted to suit the needs of all stakeholders and users.

Generally, the e-government capability of mySAP Public Sector is structured according to the way government agencies interact with the outside world. There are three main e-government scenarios: • Government-to-citizen (G2C) • Government-to-business (G2B) • Government-to-government (G2G) E-government also addresses government’s internal workings, including new roles for customer contact centers and the virtual citizen center, as well as new functions that become available at electronic workplaces, such as Web content management, knowledge management, and data warehousing. All of these are provided in mySAP Public Sector. SAP Records Management SAP Records Management for mySAP Public Sector is a standard solution for the electronic management of records, particularly important in the age of e-government. Rapid access to information is an essential factor for successful transaction processing. SAP Records Management is a tool that enables this quick access: In a record, all the information objects required for a business process can be grouped together in an overview hierarchy with any number of levels. SAP Records Management meets international requirements and provides an electronic representation of conventional paper records. It also offers functions that far exceed those available for conventional records management. In this way, you not only obtain an electronic representation of your paper records, but also get electronic and workflow functionality that allows the handling of all information objects and guarantees the correct management of records.

Managing your records electronically provides you with the following advantages: • Low storage costs for records • No physical transport of records • No time-consuming and expensive copying procedures • No switching between different media • Optimal information retrieval • Simultaneous access to a record for more than one person • Immediate document processing using electronic office communication tools WEBFLOW

SAP Records Management integrates SAP Business Workflow for efficient process control. You can incorporate a workflow definition as an element in a record. A user can start the workflow directly from the record, and the workflow log is subsequently available as part of the record. A workflow task can be, for example, to create, display, or update a record. A record itself can also be the object of a workflow and the record is then processed as part of the workflow. SAP Business Workflow In the age of Internet and e-government, it is becoming increasingly important to link tasks across systems, components, and government organizations. SAP Business Workflow has been designed to accomplish this task. Seen generically, a workflow is an automated electronic representation of a business process. There are three main reasons why organizations implement workflows: to improve the speed, consistency, and quality of a business process. • Speeding up the business process improves efficiency, saves time and money, and improves customer satisfaction. The “customer” of the workflow may be an employee of the organization, another organization, or a citizen, depending on the business process involved.

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• Improving the consistency of the business process is a matter of ensuring that the business process happens as designed every time without fail. This reduces errors and prevents users from circumventing the business process. It also saves time and money when dealing with exceptional situations, prevents things from “falling through the cracks,” avoids legal or financial penalties, avoids loss of goodwill, and improves citizen satisfaction. Improving the quality of the business process is a matter of • making it more transparent, making it clear who is responsible for each activity, using validations to improve the quality of data, and containing attachments and instructions to employees involved in the process. WHAT CAN SAP BUSINESS WORKFLOW DO?

Workflow must be easy for an organization’s employees to use. In a nutshell, workflow is taking a process and automating it by: • Pushing the tasks to the correct person when they’re ready to be acted upon • Having the system fulfill tasks where no human involvement is necessary • Walking a user through a task (“Now here’s what you have to do, and here’s the information you need to do it, and this is where you add your data”) Making the process visible to everyone (“What is going to • happen next?” “How far is the processing right now?” “Who did what?”) • Making sure that the process finishes on time (for example, escalating a process) and that everyone is kept informed • Building up statistics about the process so that, eventually, useless bureaucratic steps are removed and bottlenecks eliminated Removing the task from your task list when it’s done or no • longer necessary (someone else did it, too late, the request has been retracted, and so on)

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SAP Business Workflow and WebFlow, which refers to Internet-based workflows, are available in SAP R/3 Enterprise, mySAP™ Supplier Relationship Management (mySAP™ SRM), mySAP™ Customer Relationship Management (mySAP™ CRM), the employee self-service (ESS) capability of mySAP™ Human Resources (mySAP™ HR), SAP® Business Workplace, mySAP™ Enterprise Portal (mySAP™ EP), and so on. Fund accounting is fully integrated with SAP Business Workflow.

SAP FUNDS MANAGEMENT The SAP Funds Management (SAP FM) component of mySAP Public Sector guides you through the planning and creation of budgets, and uses active availability control to monitor the appropriation of funds. The funds management capabilities of mySAP Public Sector simplify the design of budget plans, using special planning techniques as well as budget estimates and versions. The solution supports centralized and decentralized planning and status management for budget execution.

Financial quantities are subdivided into funds so that certain activities can be performed or objectives achieved in accordance with special regulations, restrictions, or limitations stipulated from outside the organization. A government agency can also set up funds at a lower level than those required for external reporting, via the use of predefined fund groups. Funds are classified into fund types, each with distinct accounting and reporting requirements.

WHAT IS A FUND?

In order to properly manage your funds, the SAP R/3 Enterprise System contains organizational structures, master data, and detailed processes, which you need to tailor to your organization’s needs.

A fund is a separate and distinct fiscal or accounting object containing a complete self-balancing set of accounts used to distinguish cash and other financial resources, together with associated liabilities and residual equities. Within this context, the task of SAP Funds Management is to record and control all budgetary resources and to reconcile these resources to an organization’s financial resources. SAP Funds Management is used to budget all relevant revenues and expenditures for individual areas of responsibility, to control future funds movements according to the distributed budget, as well as to prevent the budget from being exceeded.

ORGANIZATIONAL STRUCTURE

The budget for public authorities is divided according to external requirements into specific resource and expenditure categories. To represent the organizational structure of such authorities, you can decentralize responsibility for resources while, at the same time, accessing a single integrated budget structure. Besides managing the budget, institutions such as universities,

CLIENT

FM AREA

CONTROLLING AREA 1

CONTROLLING AREA 2

COMPANY CODE 1

COMPANY CODE 2

COMPANY CODE 3

COMPANY CODE 4

Plant

Purchasing Organization

Personnel Area

Sales Organization

Figure 7: Organizational Units Used in SAP Funds Management 19

research institutes, associations, foundations, and other governmental and nonprofit organizations must also be able to administer funds from secondary sources. The organizational units in SAP R/3 Enterprise enable you to realistically map a multilevel structure of your governmental entity, mapping the purpose of budget use and enabling distributed funding. Besides making use of standard SAP R/3 Enterprise organizational units such as the company code and the controlling area, the main organizational unit used in SAP Funds Management is the financial management area (FM area). Company Code The use of multiple company codes should be avoided if at all possible. A company code should represent the overall public sector organization, unless there are truly multiple legal entities that have differing fiscal years, separate operations, or require the issuance of separate reports (for example, W-2s or 1099s in the United States). Organizational units located below the company code, such as a purchasing organization, are linked to SAP Funds Management via the company code, as Figure 7 illustrates. Controlling Area The controlling area (CO area) is an organizational unit within a company that is used to represent a closed system for cost accounting purposes. It can include single or multiple company codes that use different currencies. All company codes allocated to one controlling area must use the same operative chart of accounts. Financial Management Area The financial management area (FM area) is the central organizational unit used in SAP Funds Management. FM areas subdivide an organization into units in which you can conduct independent cash budget management (used in the private sector) and independent funds management (used in the public sector). The FM area and company code currencies must be the same. 20

MASTER DATA

The master data used in SAP Funds Management are: fund, funds center, functional area, commitment item, grant, and funded program. These are very often also referred to as “dimensions,” providing you with a multidimensional structure for defining and evaluating the funds managed by your organization. Fund Funds can be used to subdivide budgets and funds assignments further, including the management of funds from secondary sources (see also: SAP Grants Management ). Funds are linked to a sponsor (customer) and an application of funds (the purpose for which the fund is used). You can also store a descriptive text for each fund. If you have implemented SAP Controlling (SAP CO), the SAP FM derivation tool can be used to flexibly link funds to the related cost centers, orders, or projects in order to automatically default a relevant fund, which can then be changed if a different funding source is required. Using the SAP FM derivation tool, you can also use data structures from other modules (such as plants, G/L accounts, and so on) as appropriate for deriving the fund. Flexible groups of funds are also supported. Funds Center A funds center is a clearly defined area of responsibility in SAP Funds Management. It is allocated to a financial management area to which budget can be assigned. Funds centers are arranged in a multilevel hierarchy. In SAP R/3 Enterprise, funds centers are managed in the form of master data. You can use funds centers to structure your organization and its subordinate units. Subdivision of funds centers makes it possible to delegate responsibility for available resources. As with the fund, if SAP Controlling is used, you can use the SAP FM derivation tool to link a funds center with the related cost center, order, or project in order to automatically derive the relevant funds center.

Employees can be identified as being responsible for funds centers. In this way, you can use availability control and workflow techniques to notify an employee when budgets have been (or will be) exceeded, by sending an e-mail to their inbox.

If you have implemented SAP Controlling, you can use the SAP FM derivation tool to automatically specify the functional area based on a direct link with the related cost centers, orders, or projects. If you require a different functional area, you can change it.

You can enter both short texts and detailed long texts in the funds center master record. The system documents all changes to the funds center master record, which can be evaluated at any time. Flexible groupings of funds centers are also supported.

For more information on the derivation tool, see the corresponding section in the following chapter entitled SAP Fund Accounting .

Functional Area Up to now in SAP Funds Management, it was possible to budget and report according to commitment item (object), funds center (organization), and fund. As of SAP R/3 Enterprise, the functional area represents a new structuring element, or “dimension” for SAP Funds Management. It is integrated with all postings in SAP® Financial Accounting (SAP FI), SAP Controlling (SAP CO), and SAP Funds Management. You can group functional areas in various ways to facilitate budgeting, cost allocation, internal financial management, and external financial reporting.

Commitment Item Commitment items represent the financial grouping of expenditures and revenues within a financial management area (FM area). For public sector organizations that are driven primarily by budgetary accounting, commitment items are used to classify the contents of budgets, making them the basis for the representation of the primary budget lines. A link between commitment items and SAP Financial Accounting (SAP FI) keeps data input work to a minimum, since only the commitment item is required for postings that will affect both the budgetary and accrual-based accounting ledgers.

In SAP Funds Management, functional areas are used to subdivide budgets and fund assignments, in order to group related activities aimed at accomplishing a major service or having regulatory responsibility. Some governments and nonprofit organizations must also comply with the legal requirement to budget and report at the functional area level. Functional areas can be determined, for example, through the cost centers or work breakdown structure (WBS) elements, as well as through cost objects or profit centers. Besides allocating overhead costs, this level of detail can provide information on the overall purpose and objectives of an organization.

For a range of users not using budgetary accounting as the primary accounting ledger (for example, the United States and Canada), the system is configured in such a way that SAP Funds Management is serviced by the business transactions from SAP Financial Accounting and SAP Controlling (SAP CO). In such cases, the commitment items are usually derived directly from the general ledger account in SAP FI or from the cost element in SAP CO. You can define derivation rules to enable the links for deriving commitment items automatically, allowing transaction data to be updated directly in SAP Funds Management without further manual intervention.

An example of the “functional structure of a city” could be, for example: General Government, Criminal Justice, Public Safety, Transportation, Public Works, Community Development, Community Enrichment, and Water Services.

You can enter both a short text and a detailed long text for commitment item master record, as well as uploading existing Microsoft Word texts from your PC. The system documents all changes to the commitment item master record, which can be evaluated at any time. Flexible groups of commitment items are also supported.

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ASSET AND FINANCIAL ACCOUNTING

• G/L account • Asset • Business area • Functional area

FUNDS MANAGEMENT

• Commitment item • Funds center • Fund • Functional area • Grant • Funded program

LOGISTICS

• Vendor • Material • Customer • Equipment

CONTROLLING

• Cost element • Cost center • Order • Project

HUMAN RESOURCES

• HR master record • Organizational units • Positions

BASIC DATA IN R/3 ENTERPRISE

Figure 8: Integrated Basic Data in SAP R/3 Enterprise

Grant At a university or college, a grant is an award given to eligible students by foundations or other institutions based on specific criteria. From the grantor/sponsor perspective, a grant is regarded as a legal instrument used to establish a funding relationship in order to carry out a public purpose in which the sponsor does not expect to be substantially involved. SAP Grants Management has been developed to account for grants from government agencies and other bodies doing, for example, commercial or scientific research. For more information on grants, please refer to the chapter entitled SAP Grants Management . Funded Program The purpose of a funded program is to define a time frame and specific activities for funding control. This can vary from simple activities to long, complex projects. Funded programs can cross an organization’s fiscal years, funding sources, and organizational units. This enables you to get a clear picture of the program-based or project-related grouping of your organization’s resources and related expenditures, in addition to the functional area perspective. A funded program can be budgeted but cannot be assigned directly to an account. The account assignment is always derived from another account assignment object with a posting, for example, from an SAP CO order or WBS element.

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BUDGET PLANNING

Two sets of tools are available for budget planning. The classical budget planning functionality is available within SAP Funds Management, but if you are using the budget preparation system, you can access the SAP Strategic Enterprise Management (SAP SEM) component to plan your budget. This is a solution that fully supports the budget preparation and research process. It makes use of a Web-enabled, easy-to-use interface to monitor departmental interdependencies and hierarchies, perform simulations, and incorporate multiple planning dimensions. Please see the corresponding section in this chapter for further details. Using the budget preparation system, public administrations can meet the full range of strategic planning, operational budget planning, and execution requirements effectively. The budget preparation system delivers information in formats tailored to meet user-specific needs, based on popular programs like Microsoft Excel and Microsoft Outlook. For more information on budget preparation using SAP SEM, see the corresponding section in this chapter.

Budget Planning Techniques To manage a public body economically requires careful analysis of the relevant framework, factors, and prerequisites with which each organizational unit has to operate. Heightened expectations on one side and a lack of funds on the other indicate what pressures can exist. Given all the possible restrictions, only detailed budget planning keeps sight of objectives and concentrates on what is feasible. Both budget planning and budget execution can be based on various elements, or dimensions: commitment items, funds centers, funds, functional areas, funded programs, and grants. Combinations of these elements are then used in budget planning to determine the following: • What is to be planned? • Which area of responsibility is to conduct the planning? • Which funds – such as operational funds, special funds, or funds from secondary sources – are planned? • For what specific purpose are these amounts planned? • Which individual program or project do the planned amounts support? • Are the planned amounts subject to restrictions by external sponsors? Generally speaking, many people from different areas of an organization are involved in developing a budget. There are several planning techniques available for this. Among other things, the values used for planning can be taken over from the previous budget year as the first version of the new draft budget. The planning data can be adjusted to reflect such things as rate increases, price increases, and other factors. Percentage rate adjustments can be specified for each commitment item. The individual areas of an organization can then work on the first budget draft. Changes are summarized directly to higher levels in the budget structure using roll-up techniques. If a higher level reduces a budget estimate, this can lead to the estimates of the higher levels not being reconciled with those of the lower levels. For this reason, the system supports two pro-

cedures: saving an unchecked draft budget that has not yet been reconciled, and posting a draft budget once it has been reconciled at all levels. If you want to save the interim draft budget for documentation purposes, this version will be blocked for further changes. This data can then be used to create a second, working-copy version of the draft budget. Changes to the budget made during the drafting phase are documented in change documents. These documents are the line items that can later be used to trace the development of the draft budget. TOP-DOWN PLANNING

Commitment items classify the budget according to the nature of revenue or expenditure involved. By rolling up commitment items into summarization levels and creating a hierarchy, you can create a structure with as many levels as necessary. You can plan budget estimates for each of these summarization levels, as well as for the account assignment level. The total planned in one level of the hierarchy must not exceed the amount planned in the superior commitment item (top-down principle). Using this principle, neither the budget estimates nor the budget allocations are tied to the lowest level in the commitment item hierarchy. Budget planning can stop at any level, depending upon individual requirements or how much information is available. At the same time, budget allocations can also be made across the organization. BOTTOM-UP PLANNING

Funds centers are the organizational units used in SAP Funds Management. The hierarchical arrangement of funds centers represents a structure of subordinate and superior responsibility areas that are integrated into the budget planning process via this structure. Estimates are often worked out at the lower levels and then combined for superior funds centers. This bottom-up procedure means you can draw up the budget locally, before completing and revising it at a higher level in the hierarchy.

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Funds are the means of planning and managing operational funds, special funds, and funds from secondary sources. They are usually not governed by the principle of entering data on an annual basis. Instead, they are normally used to define the prerequisites for integrating longer-term resource availability and usage (for example, for investments) into budget planning and execution. Budget estimates can be planned as an overall estimate for the full duration of the fund (or estimated remaining available resources within a continuing fund), and then distributed to the individual budget years. Creating a Hierarchical Budget Structure Budget estimates are created for a particular area of responsibility. These estimates are classified using financial categories and refer to a source of funding. Accordingly, meaningful combinations of commitment items, funds centers, and funds need

to be set up for each budget year. Together, these combinations of elements make up the budget structure that will be binding for budget planning and execution during the budget year in question. The budget structure is arranged in a hierarchy. It is a streamlined structure, containing only the required elements. Depending on individual needs, the budget structure is set up to meet the requirements of local or central budget planning, allocation, and control. The following two figures illustrate the local and central budget allocation models. With local budget responsibility (see Figure 9), responsibility area “Public Services” can plan both at this organizational level, as well as at the level of the top commitment item of lower organizational levels.

Budget Allocation PUBLIC SERVICES

EXPENDITURES

HUMAN RESOURCES

ADMINISTRATION

DEPARTMENT 1

EXPENDITURES

EXPENDITURES

HUMAN RESOURCES

Figure 9: Local Budget Allocation 24

SUPPLIES

SUPPLIES

HUMAN RESOURCES

SUPPLIES

With the distribution of budget to lower organizational levels (top commitment item), the responsibility for the budget and its distribution rests with the lower-level funds centers, that is, budgeting is decentralized. This is not possible with budget planning that is organized centrally. In this case, funds center entitled “Public Services” and commitment item entitled “Human Resources” is in control of any Human Resources commitment items in subordinate funds centers (Administration, Dept. 1). Budget can be directly distributed from the higher-level “Commitment Item Human Resources” to “Commitment Item Human Resources” at lower funds center levels.

BUDGET STRUCTURE CHANGES

If so configured, commitment items and funds centers can be defined as “fiscal year-dependent.” This means that any necessary changes to these structures can easily be followed from one fiscal year to the next (for example, if the assignments of commitment items or funds centers within the hierarchies change). In addition to the hierarchical classification, commitment items and funds centers can be grouped according to different criteria. Independently of any such grouping, you can also maintain alternative reporting hierarchies of commitment items and funds centers in parallel with the standard hierarchies.

Budget Allocation PUBLIC SERVICES

EXPENDITURES

HUMAN RESOURCES

SUPPLIES

ADMINISTRATION

DEPARTMENT 1

EXPENDITURES

EXPENDITURES

HUMAN RESOURCES

SUPPLIES

HUMAN RESOURCES

SUPPLIES

Figure 10: Central Budget Allocation 25

BUDGET PREPARATION WITH SAP STRATEGIC ENTERPRISE MANAGEMENT (SAP SEM)

An accurate and complete budget requires the input and collaboration of employees throughout an organization. Compliance with the appropriate governmental standards for budgeting is as important as sharing data among numerous contributors and ensuring that this data remains consistent and accurate. SAP Strategic Enterprise Management (SAP SEM) is the dedicated tool to meet all requirements placed on an efficient and effective budget preparation. SAP SEM is used in public sector agencies as well as in the private sector.

Figure 11: Entering a Budget Layout via Web Link

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SAP SEM Solution Overview SAP Strategic Enterprise Management provides a toolset that allows organizations to perform comprehensive budget planning and formulation. SAP SEM contains multiple components. Two of them are tailored towards facilitating an end-to-end budget preparation process: • SAP® Business Planning and Simulation (SAP BPS) – Supports the preparation, consolidation, review, and approval of financial budgets using simulative methods • SAP® Corporate Performance Monitor (SAP CPM) – Contains the Balanced Scorecard and Management Cockpit, which facilitate the definition of organizational goals and objectives, as well as the creation of performance measures for monitoring performance against goals.

SAP SEM BUSINESS PLANNING & SIMULATION

CPM CORPORATE PERFORMANCE MONITOR

SAP BUSINESS INFORMATION WAREHOUSE (SAP BW)

Extract data from the source system into an SAP BW InfoCube

Retract data from SAP BW into your source system

OTHERS HUMAN RESOURCES

• CONTROLLING • PROJECT SYSTEM • ASSETS

TENSIONS EX

PUBLIC SECTOR MANAGEMENT

SAP R/3 ENTERPRISE CORE 0

SA .2 PW e b AS 6

Figure 12: SAP Strategic Enterprise Management and SAP Business Information Warehouse (SAP BW)

SAP SEM as an application is directly sourced by SAP Business Information Warehouse (SAP BW). A common approach for starting the planning process is to use historical data (master and transactional data) that was extracted from SAP R/3 or any other data source. Examples of master data that users may want to extract from SAP R/3 include: • Funds management data (budgets, actuals, and commitments) • Functional area, funded programs, funds, funds centers, and commitment items • Controlling data (cost centers, projects, and orders) • HR data (organizational units, positions, and employee numbers)

This separates the planning environment from the operational environment in which the budget is executed. SAP BW offers planning flexibility via alternative hierarchies for what-if analyses or to define characteristics that do not exist in SAP R/3 Enterprise, but that are nevertheless relevant to planning. One example would be the planning of reporting sets for a commitment item, provided your commitment items are classified according to functional, economic, and technical criteria. In addition to the fields provided in SAP SEM for budgeting (such as the fund, program, and commitment items), organizations can also create custom evaluation fields for budgeting. This enables the incorporation of data from multiple source systems. After planning is complete and the budget has been approved, the data is posted (“retracted”) to SAP R/3 Enterprise. 27

SAP Business Planning and Simulation In order to formulate the budget, organizations may have budgeting requirements such as: • Online preparation of detailed line items for budget requests • Multiyear planning • Use of summarized objects • Grouping of objects in alternative hierarchies to model large organizational and structural changes • Attachment of explanatory texts and documents to line items • Online publication of budget values • Planning all kinds of expenditures and revenues, such as personnel, capital, and others • Simulation and forecasting capabilities • Processing of global amount adjustments, for example, salary adjustments due to inflation or cost of living increase In SAP SEM, all of these budgeting requirements are taken into consideration. STRUCTURE OF THE PLANNING PROCESS

Budgeting is an iterative process with various approval levels, with planning data being created bottom up and then distributed top down. Budget versions track the development of planning data and represent the planning status at any given time. SAP SEM supports Web-based planning by making use of planning applications and a status and tracking system. These tools allow organizations to use planning scenarios that cut across locations and organizational units. Managers can use the SAP Corporate Performance Monitor, which is the central control and monitoring tool of SAP SEM, in order to determine the current status of the budget in their area of responsibility. This Web-based monitor is fully integrated with Microsoft Outlook. The manager is in continual contact with the lower-level units, setting timelines for planning phases, sending out Web-based planning layouts, checking the planning status, or making use of the notification system to approve or reject specific actions.

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An alternative to using the status and tracking system is to use SAP Business Workflow within SAP Business Planning and Simulation. This provides the infrastructure and tools to manage, automate, and analyze business processes across the entire organization. Information and process flows are accelerated, worksteps are fully linked, and a structured budget approval process is the result. TAILORED DATA EXTRACTS AND LAYOUTS

By tailoring the software to your data extraction needs, you can designate which portion of the organization’s data the user can view and change. The SAP Business Planning and Simulation component of SAP SEM contains planning level and planning package features that allow managers to restrict the data users see. This reduces the mass of data to what is really relevant to a specific user. Planning levels provide general data filtering, whereas planning packages reside below the planning level and provide a further degree of data restriction. Users have several options for accessing budget data: • Web – The Web Interface Builder allows users to create Webenabled planning applications. Users can execute this type of planning application in the Web browser, meaning that they do not have to install any additional software on client workstations. • Microsoft Excel (embedded) – Because many users are already familiar with Microsoft Excel, this interface decreases the time they need to learn the budgeting system. Since Microsoft Excel layouts update the database, budgeting data does not have to be compiled separately, as it does when users plan independently in spreadsheets. • SAP® List Viewer (SAP ALV) – This is an alternative to the embedded Microsoft® Excel layout, which is reduced to provide a list instead of offering the features that users are familiar with in spreadsheet calculation tools. BUDGETING LAYOUTS

You can design the entire layout of budgeting screens, since SAP BPS comes with a tool for creating planning layouts so you can select the fields that will be used in budgeting, and

Figure 13: Top-Down Budget Distribution with Checks

determine where the fields will appear (for example, in the header, in a lead column, in a data column, and so on). This enables you to view data in ways that are familiar to you. SAP SEM contains many layout examples and sample process structures. You can determine which user will use which kind of planning function – SAP SEM offers a huge variety of preconfigured planning functions for data handling, such as copying, revaluation, rounding off, data distribution, and so on. You can do what-if analyses or use software such as Powersim to carry out complex simulations of budgeting models that require sophisticated mathematical functions.

Linked Strategic and Operational Planning A strategy-driven organization must be able to turn its strategy into specific actions. This is a common approach in performance-based budgeting: The strategy defines the outputs and results of the organization. For example, you could define the following outputs: • Optimization of the procurement process • Improvement of the revenue collection process To measure these outputs, you define mainly nonfinancial key performance indicators, such as “percentage cost reduction in procurement” or “number of overdue tax files.” To analyze how much budget you require for meeting organizational goals, you break down strategies into sub-strategies and define individual projects, such as “Installation of e-Procurement” or “Change dunning procedures for tax files.” Finally, you calculate the required budgets.

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Figure 14: Balanced Scorecard Using Key Performance Indicators

In SAP SEM this is handled in the following way: The Balanced Scorecard (BSC) in the SAP Corporate Performance Monitor visualizes your strategies, sub-strategies, projects, and performance measures (see example in Figure 14). You set your measures/ key performance indicators as performance targets, providing a clear overview of your organization’s performance, and indicating areas with a need for improvement.

This is an iterative process and is finished once your target measures and budget capabilities are in sync. When you are in live operations, all current information from the measures, costs, and expenditures is automatically updated in the central SAP BW database and can be visualized to indicate your performance in the scorecard. REPORTING ON PLANNING DATA

In the SAP Business Planning and Simulation component, you then specify your key performance indicators or measures (for example, what is the target number of overdue tax files for the coming year) and you plan your projects (for example, you plan using cost elements referencing data from the SAP® Project System). Next, you check the effects on your expenditure budgets based on SAP Funds Management data.

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Reporting is crucial in the planning process, since the results need to be communicated, for example, for final submission or approval by a government agency. The powerful reporting capabilities of the Business Explorer Analyzer (BEx Analyzer) are flexible enough to satisfy all reporting needs. The BEx Analyzer has an embedded Microsoft Excel, and allows full Webenabled reporting from ad hoc queries, including capabilities for geographic data analysis.

DATA CONSISTENCY AND AUTHORIZATION

Monitoring and control are achieved through a series of user authorization checks and monitoring tools within the budget preparation process. The business planning and simulation capabilities of SAP SEM ensure that users have the authority to use transactions, and that the budget may or may not be changed. User authorizations are managed centrally according to SAP BW authorization procedures. BUDGET EXECUTION

Reserving and committing funds, entering payment requests, and effecting payment transfers are some of the processes that belong to the execution of budgets in SAP Funds Management. Controlling the availability of funds and defining tolerances leading to warnings or error messages are equally important. Payment and Commitment Budgets In mySAP Public Sector there are two forms (or categories) of budgets: the payment budget and the commitment budget. Using these, you can influence which business transaction commits funds in the payment budget or commitment budget and at what point in time. For example, the following combinations are possible: • Payment budget and commitment budget The payment budget forms the financial framework for all of the payment requests (invoices) in the current budget year. The commitment budget evaluates the earmarked funds that can be entered in the future, starting with the current budget year. • Payment budget and commitment authorizations Using this variant, the payment budget forms the framework for payment requests (invoices) and earmarked funds in the current budget year, while the commitment authorizations specifically determine the earmarked funds for an identified number of consecutive years.

Budget Types Generally speaking, public bodies need to differentiate budget estimates according to their use, which is done in the mySAP Public Sector solution using budget types. The following budget types are available: • Original budget The budget at the time of the first approval, that is, the budget not yet changed by correction measures (supplements, returns, transfers, and so on). • Budget carryforward If budget amounts are carried forward from the previous budget year to the next, these budget amounts are identified separately from the budget amounts for the current year. • Budget advance If the law allows parts of next year’s budget to be used in the current year, this advance appears as a separate budget type in the current year. • Budget supplements Supplements can be used to assign additional budget to SAP Funds Management account assignments where, for example, these accounts are charged with unplanned, yet necessary tasks. Supplements are effected outside of the general budget creation process. • Budget returns If there are surplus funds in a specific account assignment, these funds can be returned to the higher-level SAP Funds Management account assignments within their hierarchy. • Budget transfers Transfers help avoid funds bottlenecks by moving budget between elements of the budget structure. In the classical budgeting system, additional user-definable budget subtypes can be used to differentiate budget amounts according to an organization’s needs. Budget subtypes allow organizations to classify and report on their budgets on a detailed level. For example, contingency budgets are usually budgeted in one line item to start, and then transferred to other account assignments as needed. Organizations can also use budget subtypes to visualize the entire

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contingency budget separately from their normal operating budget to see how it has been transferred to other account assignments. Another example is a reappropriation budget, which refers to the system’s ability to separate and report on budget that was carried forward from a previous year versus the current year’s normal budget. Revenues Increasing the Budget Often, budgets are made available for expenditure only after corresponding revenue has been recognized. This is true for the already approved budget as well as for additional budget that was not part of the original approval. For such requirements, revenues increasing the budget (RIB) enable you to define rules when and how such budget increases should take place. You can choose between different phases of revenue recognition (commitment from forecast of revenue or sales order, invoice, or true cash received in bank account). The expenditure budget is then increased in the budget address stipulated in the revenues increasing the budget rules. You can also set lower and upper thresholds for the increase, requiring a base revenue before the increase starts and limiting it to a maximum amount of increase. As an alternative, Customizing settings also allow you to specify that available expenditure budgets be reduced until required revenue limits are achieved. SAP provides three different automated procedures for increasing the expenditure budget using revenues intended for a specific purpose: a document-based or totals-based distribution procedure, a call procedure, and manually creating budget increases. Cover Pools and Cover Eligibility Every administration attempts to achieve a workable compromise between the necessary level of detail for budgeting and further possible levels of detail for posting. Yet there are cases where it is not practical to shift budgets from one address to another, for example, if the distribution pattern of expenditures was not originally planned. Nor is it acceptable to inten-

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tionally change posting account assignments, just because the budget distribution does not follow an unexpected shift in expenditure patterns. As a solution for such cases, public administrations may decide to join and share budgets. Multiple individual budgets are combined, and postings to any of the participating addresses are checked for availability against the pooled budget, instead of against the individual budget. The mySAP Public Sector budget execution solutions fully support this form of budgetary control using cover pools. For each pool, participating budget addresses and the relationship of the addresses within the pool are defined (supply to and benefit from pooling, only supply, or only benefit). In the Customizing rules for cover eligibility, you determine which expenditure SAP FM account assignments are entitled to cover and which are subject to cover (that is, must cover) within unilateral (only supply or benefit) and reciprocal cover eligibility (supply to and benefit from pooling). You can also specify that an SAP FM account assignment for expenditures can use budget from revenues increasing the budget by assigning a revenues SAP FM account assignment to the expenditures SAP FM account assignment. BUDGET CONTROL SYSTEMS

As of SAP R/3 Enterprise, there are two systems for managing and controlling budgets: the tool previously available in SAP R/3 (“classical” or “former” budgeting) and the new budget control system (BCS). By switching to BCS, you will be able to precisely control the availability of your budget by: • Specifying the budget values to be checked using filter settings • Setting tolerance limits for a budgeting process • Defining availability control checking procedures for the updated and summarized budget, as well as for commitment and actual postings • Performing multilevel active availability control in order to identify possible budget underruns or overruns when funds are being committed • Using several availability control functions in parallel

New Budget Control System (BCS) The budget control system (BCS) has been developed for SAP R/3 Enterprise as part of an effort to redesign the existing SAP Funds Management features. It provides an alternative tool to the previous budget execution and availability control functions. Although the principles of budget execution have not changed, certain budgeting and budgetary control features have been greatly enhanced in BCS, as compared to the budgeting functionality prior to SAP R/3 Enterprise. A new budgeting tool was necessary in order to meet current and future requirements, and to provide customers with a greater degree of flexibility when controlling the budget. In detail, the following areas have been enhanced or redesigned in BCS. FLEXIBLE MASTER DATA SUPPORT

The need for more flexible, transparent, and detailed planning and budgetary control has led to an increasing number of dimensions in which organizations define their budget. In classical SAP Funds Management (until SAP R/3 Release 4.6C), only four dimensions are available: fund, funds center, commitment item, and functional area. BCS now offers six dimensions for detailed budget execution, supporting the existing organizational structures of SAP R/3 4.6C, and in addition, the structuring of budgets by funded program and grant. With the increased number of potential master data dimensions, the budgeting screens needed to become more flexible as well. BCS supports user selection of master data dimensions, with the budget data entry screens using only the desired dimensions. Layout settings further facilitate user interaction by offering each dimension in the following ways: • Once per document The initial value entered is used for all lines within the document.

• Multiple times per document Here, the user can enter values independently for each document line. Once the relevant master data dimensions have been chosen and the master data is set up, you use the budget structure to define the permissible combinations of master data values. BUDGET STRUCTURE

The budget structure represents all the funds centers, commitment items, functional areas, and funded programs for which the budget has been defined. A similar but independent structure is available to control the posting of commitments and actuals. The structure contains the fund, funds center, and commitment item combinations from the entire hierarchy for which you can enter budget and posting data, making your budget allocation transparent. In the structure settings for the budget, you can specify valid combinations per budget version, enabling you to easily compare alternative budgeting approaches. The budget structure posting definitions control the possible master data combinations that you can use to record commitments and actuals. The combination of the two settings provides flexible, user-definable rules for controlling the budget, which can be further enhanced using the detailed Customizing settings for active availability control. USER-DEFINED BUDGET TYPES

Each budget execution starts with an initially approved budget, called “original budget” or “President’s Budget.” However, many changes, subdivisions, and distributions of this budget are usually made before or during budget execution. Organizations are bound by legal rules as well as by their own internal guidelines specifying the manner in which budgets or changes to budgets are presented. In addition, organizations also define Customizing rules determining how these various budget types interact.

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BCS supports this approach by offering user-defined budget types. When you create budgets and define the relationships between budget types, status management and consistency checks ensure the proper use of these budget types.

CONSISTENCY CHECKS

At a lower level of detail, consistency checks support users in maintaining the budget in a correct and consistent fashion. The checks are performed either at the budget document level or at the SAP FM account assignment level.

STATUS MANAGEMENT

Many organizations tend to decentralize parts of their budget execution operations. This, together with the flexibility of master data and budget types, makes it increasingly important to closely control who can access and change a budget. Status management in the budget control system provides support for budget access in the following ways: • Budget types used together can be grouped into budget status definitions. • These status groups also determine the authorization groups necessary for accessing the related budget types. This way, you can grant different access rights to operational users and managers. • A status definition is assigned to each budget version, preventing changes from being made to the operational version, while permitting changes to be made to different planning versions.

A check at the document level can compare all the data entered in the document. For example, you can stipulate that certain budget types may only be used in conjunction with specific master data values. User-defined fund types allow you to distinguish between funds that generate revenue due to sales activities and funds that do not. You can transfer expenditure budget between organizational units only for the revenue-generating funds, and you can carry out a document-level consistency check to enforce this requirement. In principle, authorizations can also be used to define valid user interactions with budget documents. However, consistency checks provide the ideal method to implement such validations, because they can be set up according to customer-specific requirements.

An example of status management is shown in Figure 15. BUDGETING CALENDAR FOR: • FM AREA 0001 • VERSION 0 • BUDGET CATEGORY: PAYMENT BUDGET (PB) • FISCAL YEAR 2003 • FUND A 2002

2003

July

Sept STATUS 1

Oct STATUS 2

STATUS 3

July STATUS 4

Aug STATUS 5

t

Oct STATUS 6

STATUS 7

Preparation

Cons. of preparation

Operation 1

Operation 2

Internal adjustments

Year-end closing

Block budget

Original budget

Original budget

Transfer 1

Transfer 2

Transfer 3

Carryforward

Nothing allowed

Transfer 2

Transfer 3

Restricted user group

Figure 15: Status Management in Budgeting

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Mar

Figure 16: Using the Budgeting Workbench to Process Documents

A consistency check at the address level compares amounts entered in a document with amounts that have already been posted. You can use this to enforce certain financial limits on transactions.

ment type that does not have this consistency check assigned, providing them with the capability to make unlimited budget changes. DOCUMENT PRINCIPLE

Here is a business example for such a rule: An organization has a general policy that no individual budget transaction may affect more than 10% of the overall budget. An exception is made for central budget managers, who are allowed to make budget changes in excess of the 10% general limit. A consistency check at the SAP FM account assignment level, validating that budget changes are not more than 10% of the existing overall budget, can be created and assigned to certain document types for budget changes. These document types are the only ones most users are allowed to use. Central budget managers, however, are allowed to use a special docu-

The use of documents as the basis for budgeting requires improved and simplified processing and review capabilities. The budget documents in BCS are based on the same document processing features used in other modules. A budget document is identified by its document type, which controls the document numbering within the financial management area and fiscal year. BCS provides users with a budgeting workbench, which enables you to easily process budget documents. In this userdefined interface, you can create and change individual budget entry documents.

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Each document records the user name, and the date and time created. If an additional approval process is necessary, the relevant data for these approvals is also stored in the document. Documents may be placed on hold, for example, if a user is suddenly interrupted. Held documents can be retrieved at a later date, with a user searching only for his or her own documents, or for all held documents. You can also use held documents as templates for new budget documents. As long as a document is on hold, it does not have any effect on the budget or on availability checking. Documents can also be posted preliminarily to allow approvals using standard workflow features. The effect of documents in workflow on the budget and availability control is defined in Customizing. It can be taken into account or disregarded until final approval is given. Posted documents can be reversed if necessary.

BCS documents record budgeting information at both the document header and line item levels. For the document line layout, you can use the SAP List Viewer (SAP ALV). For the processing of a budget document, SAP ALV is used to enter budget data. With this tool you can easily sort, filter, and sum up line items prior to posting. MASS PROCESSING OF DOCUMENTS

Besides the budgeting workbench, which allows individual processing, mass maintenance tools exist to make copies of versions, mass adjustments, mass reversals of documents, and other activities for which similar processing is required for a large number of documents. Each mass run can be identified in the resulting documents via a document family number that links the individual documents. If you want to have a

BUDGETING WORKBENCH

FLEXIBLE LAYOUT SINGLE-ENTRY SCREEN INFORMATIVE DATA (KEY FIGURES)

HOLD

BUDGET MODIFICATION

MANAGEMENT OF FM BUDGET DOCUMENTS

DOCUMENT CREATION

DOCUMENT SELECTION

PARK

Figure 17: Overview of Budgeting Workbench

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POST

REVERSE

DISPLAY

POST

specific rule that, for example, there should be no budget documents that do not balance by fund, a document split rule can be applied that supports this requirement. AVAILABILITY CONTROL (AVC)

Monitoring of allocated available resources is an essential element of budget control. The main reason for this is that you must always be able to compare the assignments (budget usage) with the resources currently available. The information recorded in SAP FM provides for “passive” availability control in the form of a budget monitoring report. For active availability control, budget usage is controlled by having the system compare budget consumption with budget limits every time a document is posted in SAP FM.

• If necessary, you can specify that several posting combinations be checked against a single budget. The following complex requirements are supported: – Budget control might require fewer master data dimensions than are used for commitment and actual postings. You can have postings summarized to a budget account assignment by omitting unnecessary dimensions. – For more detailed budget-checking requirements, you can use the extensive derivation capabilities of SAP Funds Management. – If several budgets need to be checked at the same time, you can establish additional control levels to validate postings against different budgets, based on predefined master data combinations and the SAP FM derivation logic. DEFINING TOLERANCES

To determine budget usage, the system automatically takes into account all relevant business transactions (for example, an invoice and the earmarked funds document it references). Availability control deals with three user-defined levels: First you have to define the budgeting level (what can be budgeted), then you use the derivation tool to specify the control level. This is the level at which active availability control is enforced and specified in the budget structure. The commitment management process ensures that the budget is not used twice. Finally, the account assignment level is the level at which SAP FM postings are made which can be at or below the controlling level. BCS contains a flexible, yet easy-to-use tool for checking the availability of funds, with the following features: • You can define that the master data combination used for posting be the same combination used for budget checking. This requires just one setting to be made in Customizing, clearly defining the relationship between the objects to be checked and the objects against which checking is carried out, making the results of availability checks predictable.

Tolerances can be used for status-driven error messages in the form of an early warning or rejection. The budget usage rate, which is the tolerance level at which point these messages will be generated, can be defined in Customizing. In addition, the system can be configured to automatically notify budget managers by e-mail when a certain budget condition is reached. Active availability control includes a range of additional checks on expenditure postings: • Checks on posting feasibility in the budget structure • Consistency checks • Authorization checks • Status management checks • Validation checks on basic data In addition, you can apply filters to influence the budget types to be included when available budgets are checked. This makes it easy for you to distinguish between consumable and nonconsumable budgets.

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There are three types of objects in the AVC process: posting objects, budgeting objects, and objects for availability control. They can be structured hierarchically or all three objects can be on one level. The relationships within availability control are depicted in Figure 18:

AVAILABILITY CONTROL

AVC STANDARD LEDGER 9 H

CONTROL OBJECT 4

AVC CUSTOMER LEDGER C 1

CONTROL OBJECT 3

AVC CUSTOMER LEDGER C 2

CONTROL OBJECT 2

AVC CUSTOMER LEDGER C 3

CONTROL OBJECT 1

BUDGETING

BUDGET OBJECT POST BUDGET POSTING OBJECT

PAYROLL POSTING

POSTING POST ACTUALS/COMMITMENTS BUDGET STRUCTURE

Figure 18: Levels of Availability Control in Budget Structure

Figure 19: Budget Control System: Multilevel Checking Ledgers

MULTIPLE CHECK LEDGERS

SAP FUNDS MANAGEMENT INTEGRATION

For the most complex requirements, BCS enables you to perform multiple control checks. In this case, all the features mentioned previously can be applied more than once to define multiple check ledgers.

Payments or payment commitments can originate in many different areas of SAP R/3 Enterprise, as well as other areas including SAP® Plant Maintenance, SAP Materials Management, mySAP Financials, mySAP Human Resources, and SAP Controlling. Integrated processing between SAP Funds Management and the individual components ensures a coherent and nonredundant system.

You can apply all availability control features in parallel, in order to define multiple check ledgers. Each ledger supports a separate availability control, based on the settings made in Customizing. If an availability control error occurs for any of the ledgers, the entire posting process is stopped. Figure 19 visualizes these possibilities.

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Many of the feeder components to SAP Funds Management produce financial documents, which usually result in payments at a later time. At the time these documents are created – for example, through a legal commitment such as a purchase order – SAP Funds Management provides control options that check the resource availability before the actual payment is

made. Active availability control at this stage ensures that legal commitments are not made if budgeted resources do not exist. Examples from SAP® Travel Management and SAP Materials Management illustrate these points. Integration with SAP Travel Management In order to illustrate the integration with SAP Travel Management, here is an example. An employee wants to enter a travel request. The availability check on the travel budget for this budget line determines that the available funds are insufficient to cover this trip, so the employee is unable to complete the travel request. If the trip is necessary, the employee must either reduce the costs for the trip or request additional funding. Without the travel request and integrated availability check, there would have been no easy means for preventing the future expenditure because the costs might have already been incurred by the time they were compared with the budget. If you configure travel requests to carry out an availability check, the budget for the budget line will be assigned in the amount specified in the travel request as soon as the employee enters the request. All travel requests and trip costs for the relevant budget lines are easily identifiable in the system. At year-end, open requests can be carried forward, along with the budget, according to user-definable carryforward rules. Locking mechanisms prevent unauthorized budget carryforwards to the next budget year. For more information on SAP Travel Management, please see the chapter entitled Integration Aspects . Integration with SAP Materials Management As with SAP Travel Management, integration with SAP Materials Management can be best shown by an example. An employee from an agency requires three copies of a software product for different PCs and, accordingly, requests the software using a purchase requisition. The software normally costs $110 per unit. The total of $330 reduces the agency’s available budget.

The central purchasing agency converts the purchase requisition into a purchase order. The agency determines that several companies can supply the software. Using the evaluation criteria in the SAP Materials Management component, the purchasing agency selects a supplier willing to provide the software for $315. The difference of $15 is restored to the requesting agency’s available budget, allowing this amount to be committed/spent for other purposes. When the software is received, one of the units is damaged and it is returned to the supplier. A replacement will be obtained from a different supplier. The requesting agency’s available budget of $105 that was committed to the original supplier is then automatically reassigned to fund the replacement. The original supplier apologizes for the damaged goods and allows a special discount of $10. The normal 3% discount is also taken on the non-damaged software. The amount of $16.30 is restored to the requesting agency’s available budget, allowing this amount to be committed/spent for other purposes. Finally, the cashier’s office pays the amount of the invoice, less the discounts. You can tailor a scenario like this to suit your own requirements. For example, you can enter a purchase order without a purchase requisition, or an invoice that does not reference a purchase order if so desired. Integration with SAP Grants Management Funded programs can be used to subdivide budgets and funds assignments across the other SAP FM structures. These are initiatives used to represent a plan or system under which actions can be taken to achieve specific goals. An example would be the management of grants at universities. A grant represents an agreement with a sponsor that can cross a public sector organization’s funding sources, as well as other internal organizational, functional, and programmatic struc-

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tures. With SAP Grants Management (SAP GM) integration, grants can be used to subdivide budgets and fund assignments across the other SAP FM structures.

For more information on the SAP FM derivation tool, please refer to the section entitled Integration Within SAP R/3 Enterprise in the following chapter.

If SAP Controlling is used, either the SAP GM or SAP FM derivation tools (or both) can be used to automatically default the grant based on a direct link with the related cost centers, orders, or projects, which can then be changed if a different (or no) grant is required. The SAP GM and SAP FM derivation tools also allow other data structures to be used for deriving the grant.

EXPENDITURES AND RECEIVABLES

For more information on grants, please refer to the chapter entitled SAP Grants Management . SAP FM DERIVATION TOOL

In order to streamline data entry and make using the mySAP Public Sector solution as simple as possible, there are standard and user-defined flexible links available between the master data of the individual components. The SAP FM derivation tool is the primary method for automatically linking SAP FM master data with other components. However, in some components such as SAP® Human Resources, SAP Plant Maintenance, and SAP Sales and Distribution, you can also create manual links using the SAP FM derivation tool. The derivation tool consists of a sequence of SAP-delivered or user-definable derivation steps that, based on a user-definable sequence, subsequently determine the account assignment values to be used during updating to SAP FM (in particular to the fund, funds center, commitment item, functional area, funded program, or grant) from other account assignments in SAP FM or in other components such as the cost center, internal order, WBS element, G/L account, and so on. If desired and enabled in Customizing, a user can also directly enter the SAP FM account assignment, or derive it directly from other components.

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All transactions that trigger the consumption of available resources, lead to expenditures, or result in commitments for future payment, are recorded online within SAP R/3 Enterprise as separate documents in SAP Funds Management, using the appropriate currencies. The origin of the document is controlled by the value type. The value type is a technical classifying attribute for individual document types and budget categories, and controls the transfer of posting data from other components into SAP Funds Management, as well as serving as a selection criterion in reporting. Each budget category (customer-specific definition of budget entry documents) corresponds to one value type within budgeting. You can post the following information to SAP FM: • The type of expenditure or available resource (which commitment item/budget line is affected) • Who is responsible for the expenditure or available resource (budgeting responsibility area/funds center) • What is the applicable funding source (which fund) • What specific purpose is the expenditure or available resource designated for (functional area) • Which individual program or project does the expenditure or available resource support (funded program) • To which external sponsor-related agreement does the expenditure or available resource relate (grant) In many cases, this account assignment information is derived automatically from other SAP posting objects – for example, the employee number from the HR master record, or account information from the general ledger account or cost center.

Actual Data/Payments The obligatory documents produced in the system will, at some point, either be cleared by a subsequent document or cancelled. SAP Funds Management keeps track of the document sequence, from obligatory document to either invoice or final payment (depending on customizing). You can record payments, down payments, or partial payments automatically using the payment program. Funds Transfers Transfers between SAP FM account assignments can be affected through postings in the feeder components or through direct postings in SAP Funds Management. These include expenditure postings in SAP Financial Accounting (SAP FI), internal activity allocation in SAP Controlling, or funds transfers in SAP Funds Management. If SAP FM funds transfers are used, these postings do not impact SAP FI or SAP CO. Earmarked Funds During budgetary accounting and execution, budget is consumed as a result of different business transactions. In mySAP Public Sector, this is accomplished using earmarked funds, which differ with respect to validity period, usage, and any accompanying legal obligations. There is full integration with the budget management process. Earmarked funds represent the link in the business processes of budgeting and accounting. You can use earmarked funds to reserve budgeted funds for a particular purpose. mySAP Public Sector has functions especially designed to support all processes in this area. Integrated workflow functionality enhances the efficiency of these processes. There are a number of processes for earmarked funds in mySAP Public Sector: • Funds blocking Funds blocking can be used to prevent the budget from being used by others. You can later remove the funds block on some or all of the account assignments, thereby increasing the available budget.

• Funds reservation Funds reservation can be used to reserve portions of the budget early, even if you do not yet know specifically what the budget will be used for or the exact timing. The funds reservation is a preliminary stage for funds precommitments and funds commitments. • Funds precommitment A funds precommitment can reference a funds reservation. At the time a funds precommitment is processed, more details are known about what the budget will be used for, but no definite contractual agreement has been made yet. • Funds commitment The funds commitment represents a specific purpose for use of the budget, as well as the accompanying contractual obligation (for example, resulting in purchase orders to be made to a supplier or other legal agreements). A funds commitment may or may not refer to a funds reservation or a funds precommitment. Additional information, such as the supplier or particular contract numbers, can also be referenced in the funds commitment. Commitments A commitment refers to an anticipated expenditure, which is either contractual or scheduled, but not yet reflected in SAP Financial Accounting. Commitment management gives you an early recording and analysis of such commitments with respect to their cost and financial effects. Commitments can be entered for the following objects: • Production orders • Internal controlling orders • Maintenance work orders • Sales orders • Cost centers • Networks and network activities • Projects (work breakdown structure elements)

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PAYMENT REQUEST/ INVOICE

ACCEPTANCE REQUEST

FUNDS COMMITMENT FUNDS PRECOMMITMENT

FORECAST OF REVENUES

FUNDS TRANSFER

FUNDS TRANSFER

FUNDS BLOCK

REVENUES BUDGET

FUNDS RESERVATION

EXPENDITURES BUDGET

Figure 20: Budget Execution: Earmarked Funds and Transfers of Funds

Budgets normally contain authorizations that restrict expenditures to the current fiscal year. mySAP Public Sector provides various scenarios for setting up business transactions that are directed towards future fiscal years. These scenarios determine the method in which the different business transactions affect the two budgets provided (payment budget and commitment budget). For example, transactions that can generate commitments (such as purchase requisitions, purchase orders, and invoices) can be checked only against the commitment budget, whereas actual payments can only be checked against the payment budget.

SAP Funds Management Documents A document in SAP Funds Management has two functions: • As part of active availability control, the document forms the basis for determining how much of the budget has been assigned. When configuring the system, you can specify whether these fund assignments should draw on the payment budget or on the commitment budget. • The document forms the basis for reporting: periodic evaluations such as budget/actual comparison, line item reports, or workflow lists showing the amounts still to be approved. Each document refers back to the original document, so that you can always drill down to the original document (for example, purchase orders, payment requests, invoices, payments, and so on). In Customizing, you specify how SAP Funds Management documents are to be produced and how budgets are assigned. Customizing options for expenditure update include: • Period/fiscal year determination • Tax processing • Timing of funds assignment in SAP Funds Management

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EARMARKED FUNDS DOCUMENTS

An earmarked funds document consists of a document header and multiple line items. With some exceptions, changes are possible after these documents have been created. These changes are then validated and logged. • Document header Entering earmarked funds starts with document header information. Critical information is the document type, posting date, company code, currency and exchange rate, and document header text. After your first save, no subsequent changes are possible to the document type, company code, and currencies. However, at certain points during the document entry and approval process, you can change the rate, posting date, and document header text. Among other things, the document type controls how the document number is assigned and determines whether workflow is available for this document. • Line items An earmarked funds document contains the document header and at least one line item. The most important data in a line item is the amount requested and the relevant account assignments. You can also carry out active availability control against the relevant budget. At certain points during the document entry and approval process, the amount and SAP FM account assignments are frozen and can no longer be changed. You can also add additional line items, but you cannot delete line items that already exist in the document. The unused portion of the earmarked funds is also displayed, with access to detailed change histories as required. If your funds commitment refers to a funds precommitment, the commitment will use the account assignment from the precommitment and check that the required amount is still available in the budget. If additional funds are required, the system determines whether the additional amounts required are also available in the budget.

SAP Business Workflow Integrating workflow automates the approval process for all types of earmarked funds, including creation and changes to these documents. Workflow is started when an earmarked funds document is created using a workflow-enabled document type. The transaction must be approved before the available budget is actually used. However, to ensure that the amount will be available after approval, available budget is reserved provisionally. Additionally, an earmarked funds document cannot reference another earmarked funds document until the referenced document has been approved. Amounts reserved can be changed after approval; however, this will restart the approval process (including workflow integration). Increases to existing earmarked funds documents are treated differently than decreases. For an increase, the available budget is immediately reduced by the relevant amount to ensure that this budget cannot be used by other earmarked funds during the approval phase. Earmarked funds reductions, on the other hand, do not immediately result in an increase in the available budget until the new reduced amount has been approved. Once approved, the account assignments can only be changed if no portion of the earmarked funds document has been used. Changes to the account assignments are not valid until they have been approved. Workflow can be configured such that the assignment of transactions (for example, funds reservation for approval) to particular employees is dependent upon information contained in the document itself, such as the account assignments or the amount. For more information, see the section on SAP Business Workflow in the chapter entitled Integration Aspects .

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INCOMING INVOICES

You can enter incoming invoices in either the SAP MM Purchasing or SAP Financial Accounting components. The invoices entered are checked by the system to make sure that the contents are correct. You can add any account assignments and then approve them. This procedure is the one used in the private sector, and all transactions are fully integrated with SAP Funds Management. You can also use a payment request as another option for entering vendor invoices and credit memos. This method is primarily used by organizations that are interested only in a budgetary accounting view. PAYMENT REQUESTS

Payment requests lead to the entry of vendor invoices and any appropriate credit memos for those organizations using a purely budgetary accounting viewpoint. This method has advantages for organizations that are not concerned with financial or cost accounting because transactions are assigned directly to SAP FM account assignments without regard to SAP FI or SAP CO cost accounting objects. An SAP FM account assignment is a combination of a commitment item, funds center, fund, functional area, funded program, and grant. The system uses this account assignment to determine the general ledger account to which the posting is made in the background. If a transaction does not reference a budget, you can post it directly to a G/L account. This assignment to SAP Funds Management provides different views of the overall document: the budgetary accounting view with emphasis on the SAP Funds Management account assignments versus the financial accounting view that concentrates on cost objects and G/L accounts.

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The payment request is based on the parked document (preliminary posting) process, meaning that the document entry procedure can be interrupted at any point. It is not a precondition of document entry that, for example, the payment request must show a zero balance. However, when you determine that the document is “complete,” extensive validations are performed, the data is recorded in SAP Funds Management and the available budget is consumed. Active availability control verifies that the funds needed to make the payment are actually available. When you create or change a payment request, you can reference a funds commitment. If the payment and commitment budgets for a fiscal year differ from each other, the available budgets for these two budget types are managed separately. You can also indicate that a funds commitment is “complete” in the payment request entry transaction. As an example, this enables you to specify that a purchase order is “complete” even if not all the goods have been delivered. This releases the difference as budget available for other purposes. You can also access and display related funds commitments in order to review unused amounts or any other information. AUTOMATIC PAYMENT

The payment program automates all payment transactions carried out with customers and vendors, including the selection of the open items due (invoices or payment requests), determining the payment method and bank accounts used, and generating and managing the payment media. Also included are functions to process cross-company code payment transactions, cash discounts, offsetting of customer and vendor payments, down payments (advance payments), and credit memos. Payment Process Flow The payment process runs through the following three steps: • Determining the payment proposal list • Processing payment proposals • Posting payment documents and creating payment forms or data media

PAYMENT PROPOSAL LIST

PAYMENT PROGRAM

The system determines the payment proposal list using document information, customer and vendor master records, specific control tables, and user-definable selection criteria. If there are payment proposals to be processed, several employees can work on them simultaneously (for example, different employees can work on changing the proposed payment method, bank details, terms of payment, or payment blocks on individual items).

The due date determines if an open item is cleared. This date is calculated using the payment period and cash discount terms indicated in the document. The general rule is that payments are to be processed at the latest possible date without loss of discount; however, you can configure these rules to meet organizational requirements.

Payments are then created, based on the proposal list, and corresponding posting documents are generated. Outstanding payables and receivables are cleared and linked to the relevant payment before forms are printed or data media created. The entire payment run is monitored, providing an overview of the process at all times.

PROPOSAL RUN

BUSINESS PARTNER DATA

The payment program supports all of the common methods of processing incoming and outgoing payments, including payment by check, bank transfer, direct debit, bill of exchange, postal check, and a range of country-specific methods. You determine which of these methods are to be used. Up to 10 different methods can be assigned to a vendor or customer. Items can be grouped together for payment, or they can be paid individually.

OPEN ITEMS <– TERMS OF PAYMENT <– CASH DISCOUNT BASE AMOUNT PAYMENT PROGRAM STRATEGY

PAYMENT RUN PAYMENT PROGRAM <– CHANGE PAYMENT PROCEDURE <– CHANGE BANK <– CHANGE CASH DISCOUNT TERM PAYMENT DATA

DOCUMENT PAYMENT BLOCK

GENERATE PAYMENT MEDIA

PRINT PROGRAM

LIST

FORM

SAVED DATA

REPOSITORY OF CHECKS

Figure 21: Payment Process Flow

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PAYMENT FORMS AND DATA MEDIA

In the last step of the payment run, the program prints the required forms or creates the file for data medium exchange. The system contains the different payment forms required for each country and bank. You can use the delivered forms, change them, or create your own. The file provided for data medium exchange (DME) contains all payment information. It conforms to the standards of banks in each relevant country. The data can be downloaded or transferred directly to the bank. All the information flows into DME management, based on the data media created. This information includes the payment run ID, house bank, clearing house, amount paid, and other relevant information. You can display the documents contained in the data media or print them out, as required. Types of Receivables You can reproduce the entry of receivables (such as charges and outgoing invoices) using the SAP Sales and Distribution and SAP Financial Accounting components. This procedure is the one used in the private sector. REVENUES

In the revenue area, the emphasis is on planning (see also: Budget Preparation ) and the associated processes. Normally, you use availability control to monitor your expenditures budget. However, as of SAP R/3 Enterprise Release 2.0, you can also activate availability control to monitor your revenues budget.

If the revenue budget is managed on the basis of invoices, the budget is updated when you post the acceptance request. If document parking is used, the budget is updated when the document is parked. Recovery orders are also part of the dunning procedure that can be used to request payment for items due. FORECASTS OF REVENUE

Forecasts of revenue are revenues that are expected and included in the budget planning process. However, the method by which these revenues are received, and the timing, is not yet known. Forecasts of revenue always include an SAP FM account assignment. Recovery orders control reductions in the forecast of revenue. When you post an acceptance request, you can reference a forecast of revenue, which is then reduced by the amount of the acceptance request. If you set the “completed” indicator in the acceptance request, the system clears the entire revenue forecast, regardless of the amount entered in the acceptance request. Use of the revenue forecast functionality is optional. You can also enter acceptance requests without referencing a revenue forecast. You can enter a revenue forecast that simultaneously references a customer from whom the revenue is expected. This will not, however, update items in the customer account in SAP Financial Accounting. You can also define a revenue forecast as increasing the expenditure budget, linking the forecast values with amounts that are to be made available in the expenditure budget.

RECOVERY ORDER

For organizations focused on a budgetary accounting view, acceptance requests are used to record the receivables due from third parties. These orders represent billing documents that are based on contracts or other receivables with a legal basis (for example, taxes, royalties, deductions, and so on). They always reference a specific SAP Funds Management account assignment, the relevant general ledger account, and a customer, providing the integration with SAP Financial Accounting and the various subledgers. 46

Instead of SAP FM postings, you can also use an SAP Sales and Distribution (SAP SD) order to create a revenue forecast. Since workflow processes are fully integrated, detailed controlling and monitoring of expected revenues are supported in other areas of SAP R/3 Enterprise.

CASH RECEIPTS

PERIOD-BASED ENCUMBRANCE TRACKING (PBET)

Receipt of the cash in the bank account clears the matching open item from the customer account. You can use electronic banking, which updates bank statements automatically, for this process.

Many public sector organizations require that no changes be made to information after a fiscal period is closed for posting. This is not only true for financial accounting, but also for budgetary accounting. When you use period-based encumbrance tracking (PBET), this control capability is provided for update settings such as the posting date and whether the posting is statistical or not. These settings are stored in an update profile.

If you are managing the revenue budget on a cash basis, posting the cash receipt causes the budget to be updated. DUNNING

A dunning program is available to request payment from customers that do not meet their obligations on a timely basis. This program determines the customers and open items to be dunned, using this information to print the appropriate dunning letters. All dunning data is stored in the open items and customer accounts. Details of the dunning process, such as the number of dunning levels and the content of the dunning texts, can be defined based on organizational requirements. You can define multiple dunning procedures with different dunning areas, which can then be assigned when posting transactions. This allows separate processing of these items for each dunning area.

For each update profile, you specify the document date per value type when you allocate the period for commitment and actuals data in SAP Funds Management. The value type classi-

PERIOD-BASED ENCUMBRANCE TRACKING (PBET)

COMMITMENT 02/02

COMMITMENT 06/02

COMMITMENT 09/02

100 $ -20 $ -10 $

INTEREST CALCULATION

You can calculate interest on items that have not yet been paid but are already overdue, or on items which were paid too late. The following interest calculation possibilities are available: • The interest is to be posted; interest is only calculated on cleared items. The interest calculation starts from the due date for net payment. • The interest is to be posted; interest is calculated on both cleared and open due items. The interest calculation starts from the upper limit of the last interest run. • The interest is not to be posted. The interest calculation always starts from the due date for net payment. A correspondence function can be used to inform customers about relevant interest information.

PURCHASE ORDER CREATE 02/2002

PURCHASE ORDER REDUCTION 06/2002

PURCHASE ORDER REDUCTION 09/2002

COMMITMENT 02/02 100 $ 80 $ 70 $

YEAR-BASED ENCUMBRANCE TRACKING

Figure 22: Period-Based Encumbrance Tracking

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fies the attributes used for individual document types and budget categories. The value type is used not only to control the transfer of posting data from other components into SAP Funds Management, but also as a selection criterion in reporting.

You can carry out periodic reviews of open commitments, as well as establish detailed rules prior to the carrying forward of commitments and budget. This enables a smooth transition to the next fiscal year.

Document Changes Certain obligatory documents do not have change control with corresponding posting dates. As a result, these transactions, when changed, can post these changes into a prior period document. PBET controls changes to these documents by posting the changes to open posting periods, ensuring that final reported period balances for encumbrances do not change.

Open Commitments Transactions not fully completed by the end of a fiscal year go against the principle of annual budgeting. If the invoice for some ordered goods is delayed or the payment period ends within the new year, you may have to assign the document to the new year. Your own specific requirements and rules determine which types of documents are carried forward and how often a document may be carried forward.

Period Posting Control Posting periods are used in accounting to ensure that historical information is not changed. Because SAP Funds Management includes information from obligatory documents that are not normally controlled by the financial accounting posting periods, it is important that changes made to these types of documents do not impact previous (closed) SAP FM periods but, instead, are updated within the current (open) period. PBET enables you to control posting periods for any or all documents updating SAP FM, as well as for different SAP FM account assignments. PBET also allows prior period corrections to obligatory documents, if changed amounts must be reflected in the prior period and not just in the current period. YEAR-END CLOSING

Budgets are usually processed and controlled in relation to a particular fiscal year. This may require open documents to be reviewed and special provisions made, with emphasis on those transactions that must be addressed in subsequent years. The most important matter to consider is what to do with unused residual budgets, including whether to carry budgets forward to the next year. This may mean reassigning funds or changing your budgeting systems.

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How open commitments are carried forward is determined as part of fiscal year closing operations. The system uses your specifications to determine the open documents and display them. You can then review the documents and decide, for each individual document, whether the remaining balance is to be reduced to zero or if it should be carried forward to the new fiscal year. The last step is the actual commitment carryforward. The processes – reviewing the open commitments, determining which commitments are to be carried forward, and actually carrying the commitments forward – occur at a number of stages and do not necessarily depend on the date when the fiscal year actually ends. You can, for example, carry forward particular documents earlier or later than planned (if you forget one, for example), which helps keep your year-end closing operations correct. A simulation function supports you in these processes. Commitment Transfers to the General Ledger Certain organizations are required to reserve fund balances for open encumbrances at the end of a period. mySAP Public Sector facilitates this accounting entry by summarizing the open commitments in SAP Funds Management and automatically

BUDGET 2002

BUDGET 2003

COMMITMENTS

2002

Commitments Carried Forward

COMMITMENTS CARRIED FORWARD FROM 2002

NEW COMMITMENTS 2003

BUDGET

CARRYFORWARD

Budget Carried Forward

RESID. BUDGET FROM 2002

ESTIMATE 2003

Approved

Figure 23: Commitments and Budget Carried Forward

posting the reservation of fund balance entry to the related agencies and funds. This transfer program can be run at any time, with the SAP FI balances in the reserve account (and corresponding postings to unreserved fund balances) updated for any changes made to SAP FM commitments during the period. Residual Budgets Even the best budget plan will result in budget versus actual and commitment variances, resulting in unused budget at the end of a fiscal year. For example, projects for which you have entered concrete budgets may be delayed, while others may have been completed under budget. You will have to decide what to do with this available budget. Strictly interpreted, the principle of taking an annual budget view specifies that unused available budget cannot be made available for expenditure in the new fiscal year, resulting in a budget “lapse.” This lapse can be addressed in a number of ways, including transferring the remaining budget to the budgeted fund balance for general appropriation within the following year or, with proper approvals, carrying the budget forward to

the next year (in effect “reappropriating” the budget for the same use in the new fiscal year), especially for those SAP FM account assignments that represent specific purposes. How much of the residual budget is to be carried forward depends on various factors. When determining how to carry forward residual budget, you may need to also consider changes in areas of responsibility or financial categories. In some cases, you may need to return some or the entire residual budget to a higher-level account assignment (for example, a higher administrative authority or budgeted fund balance) so that the budget can be redistributed based on the requirements for the new fiscal year. In most cases, there are statutory rules governing how unused budgets are managed, including the manner in which unused budget may be used once it has been carried forward to the new budget year and the number of years budgeted amounts may be carried forward. The closing operations function covers all requirements for carrying forward residual budget. The system determines and displays the available budget, which is the basis for calculating the amount of unused budget to be carried forward and defines

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the SAP FM account assignment(s) that will benefit from the budget carryforward. Specific carryforward rules enable the carryforward process to be as detailed as necessary, allowing for the exclusion of individual account assignments from the carryforward or the distribution of amounts, or partial amounts, to different recipients. These reassignments, in addition to general rules, are used during the budget carryforward process. Regardless of the actual year-end, you can carry budgets forward to certain points in time. The amounts are always determined based on the latest available budget and account assignment data, and the carryforward is updated according to the existing rules. You can use a simulation function to test carryforward scenarios for the same available budget. REPORTING

The information system in mySAP Public Sector supports the evaluation of summarized records using drill-down reports and individual records using line-item reports. In addition, you can use a number of logical databases that are available to create reports of your own. Drill-down Reporting Interactive drill-down reporting offers an easy way to display results on various objects, such as commitment items, funds centers, or funds. You can use different key figures (for example, total of the payment requests in workflow). The system also supports different forms of variance analysis (for example, plan vs. actual comparisons, fiscal year comparisons, object comparisons, and so on). Drill-down reporting includes easy-to-use functions for navigating through the data, permitting efficient movement between hierarchy levels and objects, with access to relevant detailed lists. You can hide levels, as well as create reports with complex or simple detailed lists. There are also many other functions available to process lists online, including conditions,

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exceptions, sorting, hit lists, and so on. Integration with mySAP Business Suite features such as the XXL List Viewer, in addition to Microsoft Word and Excel, completes the information system’s wide range of functions and uses. Drill-down reporting functions are found on various levels, so you can use them to suit your particular information needs. In addition to the online reporting functions, the information system also includes facilities for mass printing and for storing selected reporting data for future access. Line Item Reporting Records are created with each posting relevant to SAP Funds Management. These detailed line items contain various items of information, including the SAP FM account assignments, amount posted, posting date, and who made the posting. These line items can be easily accessed at any time. During line-item reporting, you can restrict the line items that are displayed based on particular account assignments, fiscal years, and posting periods. In addition, you are able to select various settings to change the format of the report, as well as directly display the relevant documents from other components – for example, an accounting document produced by a G/L account posting. LOGICAL DATABASES

If you need additional evaluations of data, you can also use the logical databases and the ABAP programming language to create these reports. The logical databases support various selection options, data collection, and central authorization checks. Logical databases also provide user and error dialog interfaces that can be used to check user input.

FUND ACCOUNTING OVERVIEW

Fund accounting is the basis for financial accounting and reporting for most U.S. public sector entities. This form of accounting requires that government agencies be able to track all financial activities and produce financial statements by individual fund and groups of funds, including balance sheets, income statements, and cash flow statements. While SAP Funds Management has the goal of enabling government agencies to manage their funds properly, fund accounting also requires that government agencies record financial transactions – including revenues, expenses, and assets – according to the functional area they belong to. This enables these transactions to be tracked by the governmental or business purpose they support. Fund accounting is supported using one main financial accounting ledger and various subledgers, which facilitate the reporting of financial activities for various purposes. The main ledger supports cash and accrual-based accounting in compliance with Generally Accepted Accounting Principles (GAAP). For most U.S. public sector entities, these are the accounting and reporting requirements determined by the Governmental Accounting Standards Board (GASB).

The GASB accounting requirements contain common practices that have been adopted and formalized through other organizations such as the Government Finance Officers Association (GFOA) and the American Institute of Certified Public Accountants. Some government agencies are also required to follow the accounting and reporting requirements of the Financial Accounting Standards Board (FASB). Types of Funds Funds can be grouped according to external accounting and reporting requirements. Specific types of funds, in three broad categories, are recognized by GASB: governmental funds, fiduciary funds, and proprietary funds. Governmental funds are used to account for governmentaltype activities. These funds provide for the receipt, use, and position of expendable general government financial resources and related current liabilities. They are subdivided into the following categories: • General funds are used to account for all resources traditionally associated with government that are not required by law or by sound financial management to be accounted for in another fund.

R/3 ENTERPRISE ENHANCED FUND ACCOUNTING

FUNDS MANAGEMENT

• Funds • Funds centers • Commitment items • Functional areas

MAIN ACCOUNTING LEDGER Financial Accounting Special Ledger • Split processor

COST ACCOUNTING FOR FUNDS CO • Cost accounting subledger, using fund and functional area

VARIOUS

• Project System (PS) • Assets Accounting (AA) • Human Resources (HR) • Travel Management • Grants Management • Operational Accounting (FI-GL)

Figure 24: Fund Accounting Concept in SAP R/3 Enterprise

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• Special revenue funds are used to account for specific revenues (except for expendable trusts or major capital projects) that are legally restricted to expenditure for specified purposes. • Debt service funds are used to account for the accumulation of resources for, and the payment of, general long-term debt principal and interest. • Capital projects funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by proprietary funds and trust funds). Fiduciary funds are used to account for money received and held by a government in the capacity of trustee, custodian, or agent for individuals other governmental agencies and private organizations. Here again, there are several different categories: • Expendable trust funds are used to account for monies from a donor or outside entity, set aside in a trust, that can be used by the government but which are restricted to a purpose specified by the donor or outside entity. • Nonexpendable trust funds are used to account for monies from a donor or outside entity, set aside in a trust, the income from which can be used by the government. The original principal amount must be maintained and not reduced. • Pension trust funds are used to account for the accumulation, investment, and distribution of government employee pension contributions. • Agency funds are used to account for assets received by a government in its capacity as an agent for individuals, businesses, or other governments. Proprietary funds are used to account for all continuing business-type organizations, activities, and related financial resources. There are two major types of proprietary funds: • Enterprise funds are used to account for the following business-type operations: – Operations that are financed and operated in a manner similar to private businesses where the intent is to recover all costs of providing goods or services to be financed or recovered primarily through user charges. 52

– Operations that are deemed appropriate by the governing

body for which periodic determinations of revenues earned, expenses incurred, or net income is useful for capital maintenance, public policy, management control, accountability, or other purposes. • Internal service funds are used to account for the financing of goods or services provided by one department or agency to other departments or agencies of the government, or to other governmental entities, on a cost-reimbursement basis. Funds in SAP R/3 Enterprise The SAP Funds Management (SAP FM) component must be configured and active in order to implement fund accounting. Fund master data is used as the basis to integrate funds between SAP FM, SAP Financial Accounting (SAP FI), SAP Controlling (SAP CO), and SAP Project System (SAP PS), as well as to SAP HR, SAP BW, and so on. Funds are user-definable and should be created at the lowest level necessary for budgeting requirements, creating balance sheets, or tracking specific cash balances. Individual funds can then be grouped in various ways for reporting purposes. Within a fund accounting implementation, SAP FM is required to record, track, report, and control budgeted revenues, expenditures, encumbrances, fund transfers, and fund balances on a budgetary accounting basis. For more information on SAP Funds Management, see the previous chapter entitled SAP Funds Management . Functional Area Using functional areas, you can classify financial transactions according to their function or purpose. Similar activities are grouped by function based on high-level objectives for the provision of major services or carrying out regulatory responsibilities. Organizations can define functions at a lower level than those required for external reporting, for which they must also define functional areas.

Encumbrances, that is, commitments made to purchase goods or services using existing budgeted funds, are usually realized within the budget year or shortly thereafter. However, some governments have encumbrances that span multiple fiscal years, such as multiyear construction contracts. For more information on the functional area, see the section entitled Integration with Master Data. FINANCIAL ACCOUNTING LEDGER

The main financial accounting ledger, or general ledger (G/L), as it is known in SAP R/3 Enterprise, is the primary tool used to support external reporting requirements. You prepare financial statements and much of the required disclosure information for reporting to third parties using information from this ledger.

Postings to the financial accounting ledger are made using dual-entry bookkeeping, requiring balanced postings (debits = credits) by organization, agencies, or funds. Because this ledger is the source of external financial information similar to corporate accounting, all “real” financial transactions must be recorded in this ledger. Most governmental entities are required to record these transactions using one of two different accounting treatments: • Full accrual accounting, which is comparable to accrual accounting done by corporate entities • Modified accrual accounting, where long-term financial transactions are not recorded on the balance sheet of a fund but, instead, may immediately impact the financial position of the fund (long-term transactions are, instead, recorded as memo entries within the balance sheets of long-term account groups)

MAIN ACCOUNTING LEDGER

FI (Special Ledger)/Split Processor

FINANCIAL ACCOUNTING

Modified Accrual BUDGETARY SUBLEDGER BUDGETARY ACCOUNTING & CONTROL

Full Accrual

Cash

COSTING & PROJECT SUBLEDGERS

FUNDS & FUNCTIONS COST ACCOUNTING & CONTROL

Encumbrances

Funds Management

CO/PS

GRANT ACCOUNTING SUBLEDGER

GRANT ACCOUNTING CONTROL & BILLING

Grants Management

Figure 25: Fund Accounting and Ledgers in SAP R/3 Enterprise

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The correct accounting basis for your organization depends on the type of fund involved. Governmental, expendable trust, and agency funds utilize the modified accrual basis of accounting. Proprietary and pension trust funds use the full accrual basis. FULL ACCRUAL ACCOUNTING

This basis of accounting requires that all financial transactions with economic value be reported in the same manner as the reporting of corporations. In full accrual accounting, there are the following transactions: • Long-term assets are depreciated over their useful life, with the assets and accumulated depreciation reported on the balance sheet. • Long-term liabilities are included on the balance sheet, with premium or discount on long-term debt deferred and amortized over the life of the debt issuance. • Payments of long-term liabilities reduce the balances reported on the balance sheet. • Investments are adjusted to reflect market value. • Noncurrent revenues and expenses are included in the calculation of net income and carried forward into retained earnings. • Retained earnings are not reserved for encumbrances and inventory. MODIFIED ACCRUAL ACCOUNTING

This basis of accounting requires that only financial transactions that are short-term in nature be reported. In modified accrual transactions, there are the following differences as compared with full accrual transactions: • Long-term assets are shown as capital expenses when incurred, and are reported in a separate account group, with no depreciation reported. • Long-term debt issued is shown as another financial source, with premium or discount reported as current financial resources. • Long-term debt principal repayment is shown as a debt service expense when paid.

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• Long-term liabilities are reported in a separate account group, with no premium or discount reported. • Noncurrent revenues and expenses are not included in the calculation of net income and are not carried forward into the fund balance. • The fund balance is reserved for encumbrances and inventory. One example of the difference between modified accrual and full accrual accounting is the accounting and reporting for assets. When an asset is purchased, it is recorded in governmental funds as an expense. The asset is also recorded in a “General Fixed Asset” account group. Depreciation over the useful life of assets is not recorded as an expense in the financial records under modified accrual accounting. GASB 34 AND 35

In 1999, the Governmental Accounting Standards Board issued Statement Number 34, which redefined the accounting and reporting requirements for many governments. This statement required organizations to make the following changes: • Full accrual accounting for all funds, including a statement of net assets and a statement of activities • Continuation of modified accrual accounting for governmental funds • Reconciliation of full accrual statements with modified accrual statements • Expanded accounting and reporting according to revenues, expenses (including asset depreciation and proprietary funds), indirect cost allocations, and GASB Internal Service fund activities included in governmental activities, not businesstype activities GOVERNMENTAL ACCOUNTING AND REPORTING

GASB Statement Number 34 applies to state and local governments, such as villages, towns, cities, school districts, public utilities, and special districts. GASB Statement Number 35 requires public colleges and universities to also adopt Statement Number 34.

These entities must comply with the new accounting and reporting requirements based on the following schedule: Revenue

Fiscal Year Beginning

> $100 Million

After 6/15/2001

> $10 and < $100 Million

After 6/15/2002

< $10 Million

After 6/15/2003

General governmental infrastructure must now also be capitalized, depreciated, and reported under GASB 34 and 35. While adoption of these standards is encouraged when an entity implements the first GASB 34 and 35 requirements, compliance is required based on the following schedule:

Furthermore, GASB 34 and 35 now require that all funds – not just proprietary funds – report on a full accrual basis. While the new reporting standards only require accrual-based accounting at the overall entity level as compared with the individual fund level, the best approach is to perform accrual accounting at the detailed fund level and aggregate for reporting purposes. Also, since governmental funds must be reported on a modified accrual basis, reconciliation between the modified accrual and full accrual types of accounting is also required. While not required previously for funds subject to full accrual accounting, functional reporting is now a requirement for all funds under GASB 34 and 35 and has been expanded to include functional classifications of revenue. SUBLEDGERS USED IN FUND ACCOUNTING

Prospective capitalization > $100 Million

After 6/15/2001

> $10 and < $100 Million

After 6/15/2002

< $10 Million

After 6/15/2003

Retroactive capitalization > $100 Million

After 6/15/2005

> $10 and < $100 Million

After 6/15/2006

< $10 Million

After 6/15/2007

Component units of primary governments required to follow GASB 34 or 35 must implement the standards at the same time as the primary government, regardless of total revenue. This means that the general governmental infrastructure must now also be capitalized, depreciated, and reported. These regulations do not significantly alter the previous reporting for governmental funds, except to change the grouping of funds for reporting purposes. Instead of reporting by fund type, GASB 34 and 35 now require the grouping of funds by major funds versus other funds.

Subledgers are used to support additional accounting and control requirements required by U.S. public sector entities. Budgetary accounting should be provided in a separate subledger because these processes are usually performed on a basis different from the accounting required by GAAP (budgetary accounting is usually focused on the receipt, commitment, and use of short-term financial resources, similar to a modified accrual basis of accounting). You can carry out cost and project accounting for both budgetary and GAAP purposes. However, one may be done at a more detailed level than the other, or using different organizational structures that, again, may require separate subledgers. Transactions carried out in subledgers may or may not influence other subledgers or the main financial accounting ledger. Budgetary Accounting Subledger Budgetary accounting is used to record, track, control, and report on budgetary activities related to the financial resources of a governmental body. Since many organizations are focused on short-term control of financial resources, budgetary accounting is usually carried out in a manner similar to the modified

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accrual basis of accounting; however, organizations may budget on more than one accounting basis. The following are typical aspects of budgetary accounting and control: • Annual and multiyear budgets for expenditures and shortterm commitment of funds are developed for organizations, classified by type of expenditure, including fund, function, and project dimensions. • Changes made to original budgets are recorded and reported. • Expenditures and encumbrances are validated, recorded, and reported against the annual and multiyear budgets. • Annual and multiyear revenue estimates are developed by type of revenue, including fund, function, and project dimensions.

FI

SAP ACCOUNTING DOCUMENTS

• Revenues accrued or received are recorded and reported against the annual and multiyear estimates. • Financial resources available for future use (fund balances) are estimated by fund. • Actual fund balances are recorded and reported against the fund balance estimates. The budgetary subledger is the source of all internal financial information for monitoring and control against the legal budget. Postings to this ledger are ideally not made using dual-entry bookkeeping because the focus is on the receipt, commitment, and expenditure of legally budgeted funds.

COST ACCOUNTING DOCUMENTS

CO/PS

Plan/Actuals/Allocations

BUDGETARY DOCUMENTS

FM DOCUMENTS FUNDS MANAGEMENT (FI-FM)

BUDGETBASIS LEDGER

Plan/Budget/Encumbrances

BUDGETARY DOCUMENTS

PM/MM/SD

Figure 26: Integration of Budgetary Accounting

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LOGISTICS DOCUMENTS

HR DOCUMENTS

Actuals/Encumbrances

Actuals/Encumbrances

HR

For budgetary accounting purposes, encumbrances are treated in a manner similar to expenditures. However, they are usually recorded against the budget at the time you make a legal commitment of funds (contract date), not when you expect to receive the goods or services (due date). In some cases, encumbrances reduce the budgetary fund balance, and any differences in the following year are shown as a recovery of unspent funds. Not all financial transactions are budgeted – for example, many balance sheet accounts are not. Encumbrance amounts are not posted as expenses for financial accounting purposes unless the corresponding goods/services are received. U.S. public sector budgetary accounting and control are performed using the SAP Funds Management subledger. This is the same as the “budgetary ledger” within the context of fund accounting for state and local governments. You can configure this subledger to meet the unique budgetary needs of your organization and simultaneously enable the reconciliation of the budgetary ledger with the main accounting ledger. Documents created by other components (including nonfinancial commitment documents such as purchase orders, funds commitments, and so on) can, if relevant, create additional documents in SAP Funds Management. These SAP FM postings are validated against the corresponding budget and can be carried forward to a subsequent fiscal year.

Cost Accounting Subledger Cost accounting is used to simulate, record, track, control, and report on activities impacting the cost recovery of a governmental entity. Since many organizations, including federal governments, are focused on actual cost recovery, cost accounting is usually performed in a manner similar to the full accrual basis of accounting. Cost accounting and control have the following goals: • To develop annual and multiyear plans for the expenses of individual organizations, grouped by type of expense, including the fund and function dimensions. • Expenses and units of measure are recorded, allocated, and reported against the annual and multiyear plans. • Annual and multiyear revenue plans are developed by type of revenue, including the fund and function dimensions. • Revenues accrued or received are recorded, allocated, and reported against the annual and multiyear plans. • Internal and external user charges or cost bases are developed from expense and revenue plans. • Internal user charges or cost bases are recorded and used for internal cost allocations and distributions. • Internal cost movements that cross funds and functions are recorded in the financial accounting ledger. • Budgeted internal cost movements that cross organizations, funds, and functions are recorded in the budgetary accounting ledger.

Postings in SAP FM are not fully balanced. This means that only the items that are budgeted, included in or reconciled with the budgetary fund balance should be recorded in SAP Funds Management. Usually only the expense line items update the SAP Funds Management component.

The cost accounting subledger is the source of internal financial information necessary to the monitoring and control of all operational activities. As with budgetary accounting, postings to the cost accounting subledger are ideally not made using dual-entry bookkeeping, because the focus is on actual costs and cost recovery.

Prior to SAP R/3 Enterprise, the functional area was not recorded in SAP FM. With the changes made to facilitate functional accounting and control requirements, SAP FM now also includes the functional area field.

Commitments are treated statistically, to provide a manager with information about when costs are expected to be incurred. This means that it is not possible to carry out any further settlements, distributions, or cost allocations for a commitment.

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FI

SAP ACCOUNTING DOCUMENTS

BUDGETARY ACCOUNTING

FM

Encumbrances

COST DOCUMENTS

CO/PS DOCUMENTS Plan/Budget/Actuals/ Commitments

CONTROLLING/PROJECT SYSTEM (CO/PS)

COSTBASIS LEDGER

COST DOCUMENTS

PM/MM/SD

LOGISTICS DOCUMENTS

HR DOCUMENTS

Actuals/Commitments

Actuals/Commitments

HR

Figure 27: Cost and Project Accounting Integration

As with budgetary accounting, you usually record commitments when you expect to receive goods or services (due date), not when you make the legal commitment of funds (contract date). Again, not all financial transactions are included for cost accounting purposes, or they are recorded in another manner – fixed assets are depreciated over the useful life, not when purchased. For more information on cost accounting, see the section “SAP Controlling” in the chapter entitled SAP Tax and Revenue Management .

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Project Accounting Subledger Project accounting is used to simulate, record, track, control, and report on the activities of specific projects of a governmental entity. Due to the integration with assets and potential billing to third parties, project accounting is usually performed in a manner similar to the full accrual basis of accounting. The following are typical approaches used for project accounting and control: • Annual and multiyear plans for expenses and milestones are developed for individual projects, including the participating organization, fund, and functional area dimensions. • Expenses and results are recorded, allocated, and reported against the annual and multiyear plans.

• Annual and multiyear revenue plans are developed, including the participating organization, fund, and function dimensions. • Revenues accrued or received are recorded, allocated, and reported against the annual and multiyear plans. • Projects related to capital assets are periodically recorded as construction in progress to properly update the financial accounting ledger. As with the other two forms of accounting, the project accounting subledger is the source of internal financial information for the monitoring and control of project activities. Postings to this ledger are ideally not made using dual-entry bookkeeping, because the focus is on actual costs, cost recovery, and ultimate disposition of these costs (for example, recording of constructed assets). Again, commitments are treated statistically, and as with budgetary accounting, commitments are usually also recorded when you expect to receive goods or services (due date), not when you make a legal commitment of funds (contract date). SUMMARY

You can carry out cost and project accounting for both budgetary and GAAP purposes, but you usually do this at a more detailed level and using different organizational structures that, again, require separate subledgers (SAP Controlling and SAP Project System). Transactions performed for cost and project accounting purposes may also influence the budgetary and main accounting ledgers. Documents created by other components (including nonfinancial commitment documents such as purchase orders, funds commitments, and so on) can, if useful for cost accounting purposes, create additional documents in SAP Controlling (SAP CO) or SAP Project System (SAP PS). These SAP CO/PS

postings are reflected/validated against a separate cost accounting plan or budget in order to assist with cost or project planning or control. Postings in SAP CO/PS are also not fully balanced. This means that you should only record items that are planned/budgeted, or are to be included for cost accounting purposes. Prior to implementing additional functionality for GASB 34/35, the fund and functional area were not recorded directly in SAP CO/PS. With the changes made to facilitate the new accounting and reporting requirements, SAP CO/PS now also include the fund and functional area fields for most postings. Grant Accounting Subledger Grant accounting (from a “grantee” perspective) is carried out at a detailed level, using the organizational structures of the sponsor, requiring a separate subledger (SAP Grants Management). If applicable to a grant, documents created by other components (including nonfinancial commitment documents such as purchase orders, funds commitments, and so on) will create additional documents in SAP Grants Management. These postings are reflected/validated against a separate grant accounting budget in order to properly control spending of grant-related funds. All grant funding (amounts to be received from the sponsor as well as amounts to be funded by the organization) is recorded, controlled, and available for reporting. Amounts to be received from the sponsor are then billed from SAP Grants Management, with the related revenue recorded. Grant-related assets (cash, deposits, and fixed assets) and program income are also recorded and reportable from SAP Grants Management.

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FINANCIAL ACCOUNTING DOCUMENTS

FI

GRANT ACCOUNTING DOCUMENTS

COST ACCOUNTING DOCUMENTS

CO/PS

Plan/Actual Allocations

GM DOCUMENTS

GRANT ACCOUNTING LEDGER

GRANTS MANAGEMENT (FI-GM)

Billings/Indirect Costs/ Revenue/Accruals

GM DOCUMENTS

Budget

LOGISTICS DOCUMENTS

PM/MM/SD

GRANT ACCOUNTING DOCUMENTS

Actuals/Encumbrances

FM DOCUMENTS

FM

Encumbrances

HR

HR DOCUMENTS

Actuals/Encumbrances

Figure 28: Grant Accounting Integration

Grant-related postings can be fully balanced by grants. For more information, see the following chapter entitled SAP Grants Management . SPECIAL LEDGER FOR SAP FUNDS MANAGEMENT

The split ledger is the same as the “financial accounting ledger” within the context of fund accounting for state and local governments. In other words, the combination of SAP FI special ledger and split processor gives you the “split ledger.” This is used as the main source of accounting data in mySAP Public Sector.

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The SAP Funds Management split ledger is based on the SAP FI special ledger and populated using the split processor functionality. This enables you to carry out completely self-balancing postings by business area and fund, and to create a balance sheet structured by fund or fund groups, as well as record cash- and accrual-based transactions. The SAP Financial Accounting (SAP FI) component must be active and configured in order to implement fund accounting. Organizational and transaction data in SAP FI is used as the basis for external accounting and reporting.

PM/MM/SD

CO/PS

FI

ACCOUNTING DOCUMENTS

HR

SPLIT PROCESSOR

SPECIAL LEDGER DOCUMENT

MAIN FINANCIAL ACCOUNTING LEDGER

SPLIT LEDGER (FI-SL)

Figure 29: Using the Split Processor for the Split Ledger

For fund accounting, the special ledger provides financial information by business area, fund, functional area, and general ledger account. The general ledger is then only used to record and manage information at an overall organizational (company code) or open-item managed account level.

You may not need to produce complete financial statements for every function, since functions that require full sets of financial statements are normally handled via funds. However, you must post line items to a specific function, which is the information stored in the functional area field.

You have to configure and activate the split processor in Customizing, in order to make fund accounting entries to it. From this moment on, accounting documents coming from SAP FI are split or balanced online in the split ledger. Within this process, line items and total records are created in the split ledger, thus referencing the underlying document in SAP FI.

Split Processor Transaction splitting can be influenced by the financial document type or financial accounting transaction involved, as well as by the general ledger accounts entered. You can include validations, which check that each document contains specific general ledger accounts. You can also prevent postings for predefined general ledger accounts. A separate split ledger is assigned to the applicable company code(s), with the appropriate fields (for example, business area, fund, and grant) determined for the splitting.

In addition, fund accounting also requires that you record specific transactions – such as revenues, expenses, and assets – by functional area. This enables you to track these transactions by the governmental purpose they support.

As an example, if a vendor invoice is entered with the expense lines posted to two funds, a standard SAP accounting document will contain the following postings as shown in Figure 30.

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Split of Original Line

Figure 30: Split Processor Document: Invoice Split

To properly post this document based on fund accounting principles, a document is created in the main financial accounting ledger, which is linked to the original accounting document. Not only the invoice is split, but also the subsequent documents in the processing chain. Figure 31 illustrates the split of an incoming partial payment. Original Financial Accounting Document – Payment (Partial Payment on Invoice # 2000000000)

Figure 31: Split Processor – Partial Payment

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The underlying split ratio is determined by looking at the initial invoice. The split ledger will automatically split the documents according to this ratio (see Figure 32). For documents where no line needs to be split, the split ledger ensures that for the splitting criteria – in our case the business area (BA) and fund – only balanced postings are created. As illustrated in Figure 33, the system creates the offsetting entry automatically, using a “special” clearing account assigned in Customizing.

Allocation of Payment Based on Original Invoice Split

1500 / 2000 = 75% 500 / 2000 = 25%

Figure 32: Split Processor Document – Partial Payment Allocation

Original Financial Accounting Document

Split Processor Document

Balancing Entry

Figure 33: Sample Balancing Posting

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INTEGRATION WITHIN SAP R/3 ENTERPRISE

Because fund accounting includes many different components, integration is critical for proper configuration and use of this functionality in compliance with Generally Accepted Accounting Principles (GAAP), including the requirements of GASB Statements 34 and 35. Customizing activities in the areas of master data, SAP Funds Management (SAP FM), SAP Financial Accounting (SAP FI), SAP Controlling (SAP CO), the SAP Project System (SAP PS), and SAP Human Resources ensure this integration. Integration with Master Data Master data structures in SAP R/3 Enterprise are very important to correctly integrate functionality and master data for fund accounting purposes. The following approach to master data is the correct one to properly implement enhanced fund accounting within the mySAP Public Sector solution: • Business areas Strictly speaking, business areas are organizational units in SAP R/3 Enterprise. However, they are handled like master data, and should be used to represent agencies, lines of business, or locations for which full financial statements are required. If only one agency/line of business/location is determined, it would still make sense to use business areas to allow for the easy addition of future agencies/lines of business and prevent future data migration problems. Since business areas represent organizational structures, they are accordingly directly linked to organizational structures in other components. For example, a cost object is only permitted to have one business area when a posting is made. As a result, the misuse of this object for anything but an organizational view of information will result in the need to create and maintain multiple organizational objects that do not make sense from a responsibility perspective.

Business areas are usually available for reporting in other SAP components as well, providing a predefined grouping of information within these components. This means that you do not have to rely on the groupings of organizational structures defined by other areas. If not properly maintained, such structures might result in the possible exclusion or misclassification of information. • Funds Fund accounting is activated by requiring the use of the fund field in SAP Funds Management. Because fund accounting requires maintaining balance sheets at the fund level, splitting documents by the SAP FM fund field is now the approach that should be taken by all fund accounting customers. This allows full financial statements at the fund level, with the possibility to roll up by fund type and fund groups (in a special ledger). If splitting by fund is not needed initially, there may be serious data migration issues when fund splitting is implemented at a later date. Funds are user definable and can be created at the lowest level necessary for tracking specific funding sources. You can group funds according to various criteria, in order to fulfill various accounting and reporting requirements. Fund groups can further be used to build fund hierarchies, which summarize similar accounting treatments and objectives according to the particular requirements of the organization. The individual funds form the lowest hierarchical level. You can create any number of fund groups, and structure them, for example, according to internal or external accounting and reporting viewpoints. Using fund groups, you can carry out financial reporting evaluations for each view. They also support cost accounting processes during planning and internal allocations. Fund groups cannot be used for budgeting, however, you can use them for reporting purposes. Fund groups are not available for SAP Funds Management budgeting, only for reporting.

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• Functional areas The functional area has been designed to capture the profit and loss information (revenue and expenses) of a government organization. In order to carry out functional accounting and reporting, you have to use the functional area in SAP Funds Management. Functional areas are user definable and can be created at the lowest level necessary for tracking specific functions, general programs, and functional activities. If the functional area is not used initially, there will be serious data migration issues in the case that the functional area is implemented later. Even if you only define one function/ mission, it would still make sense to use functional areas to allow for the easy addition of future functions/missions and prevent future data migration problems. Like funds, individual functional areas can be grouped in various ways for accounting and reporting purposes. Groups can be used to build functional area hierarchies, which summarize similar activities or objectives according to the particular requirements of the organization. The individual functional areas form the lowest hierarchical level. You can create any number of functional area groups and structure them, for example, according to internal or external accounting and reporting viewpoints. Functional area groups enable you to carry out financial reporting evaluations for each reporting view. They also support cost accounting processes during planning and internal allocations.

Functional area groups can be used for SAP FI reporting and SAP CO/PS transactions enabled for fund accounting. Functional area groups are available for master data maintenance, and for SAP Funds Management budgeting and reporting; this functionality will form part of SAP R/3 Enterprise 2.0. The use of functional areas for full financial statement reporting is not supported. SAP FM DERIVATION TOOL

By defining derivation rules and strategies in Customizing, you can control how certain target characteristic values are derived automatically from predefined source characteristic values, in particular for fund master data fields. You define master data derivations for Funds Management and fund accounting using the SAP FM derivation tool. This tool enables the creation, activation, or deactivation of master data assignments to funds, funds centers, commitment items, and functional areas based on the information available in the coding block (account assignment information) such as the G/L account, the asset number, and SAP CO object. You can use these derivation assignments as defaults, but also override the contents via manual input. The derivation assignments can be date-dependent, allowing new assignments to be created but not used until a certain date.

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Figure 34: Customizing of SAP FM Derivation Tool

Only SAP FM account assignments (fund, funds center, commitment item, functional area, funded program, and grant) can be derived using this tool. However, in order to determine the SAP FM account assignment, you can use account assignments from other components, such as SAP Controlling or SAP Financial Accounting. Account Groups An account group is a hierarchical structure containing any number of accounts from one chart of accounts. In SAP R/3 Enterprise, account groups are used for reporting the financial balances of general governmental long-term assets and longterm liabilities. Memorandum-type entries are necessary to offset these balances, since these financial transactions are

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reported separately and differently within the applicable funds. Account groups are user defined and set up for a specific number range. An account group must be assigned to each G/L master record. GASB requires that depreciation be reported for fixed assets, so you need to define at least the following two account groups: • The General Fixed Assets Account Group is used to account for all general government fixed assets, with offsetting entries made to an “Investment in General Fixed Assets” account. The General Long-Term Debt Account Group is used • to account for all general government long-term liabilities, with offsetting entries made to “Amount Available” and “Amount to Be Provided” accounts.

Integration with G/L Accounts General ledger accounts can be linked directly to commitment items in the G/L master record. However, it is better to make this a direct 1:1 assignment using the SAP FM derivation tool. Here, the “move” rule eliminates the need to create manual links to G/L accounts. When binding is turned on in the derivation tool, this link cannot be changed. This is known as activating binding. In this way, the commitment item cannot be overwritten during postings. The commitment item linked to the G/L account determines whether the posting updates SAP Funds Management or not. Postings can be set to update the SAP FM budget, postings can be updated statistically for reporting and reconciliation purposes, or postings can be defined not to update SAP FM at all. Revenue and expense G/L accounts are also hard-linked to primary cost and revenue elements to reflect these postings in SAP CO and SAP PS. If allocations of revenues are required, revenue G/L accounts can be linked to nonstatistical cost elements instead of to revenue elements. Secondary cost elements are also linked 1:1 to commitment items using the SAP FM derivation tool, so that the commitment item cannot be overwritten during postings.

that changes the G/L account to a revenue account. This is done during reconciliation ledger processing for SAP FI/CO, in cases where costs are moved between fund types or for organizations that must show credit postings in SAP FI as revenue. Cost Objects (SAP CO/PS) and Funds Centers These represent the internal organizational units of responsibility, at the lowest level necessary for each component managing expenses. Cost objects (cost centers, orders, and WBS elements) should be directly linked to funds centers using activating binding in the SAP FM derivation tool. This means that the funds center cannot be overwritten during postings. This can be a direct 1:1 link: However, it is preferable to link many cost centers to one funds center if budgetary control is performed at a higher level in SAP FM. It is best to make this assignment based on intelligent numbering using the SAP FM derivation tool “move” rule to eliminate the need for manual linking. Other fields, such as the fund and functional area, can be linked as defaults to cost objects or funds centers through the SAP FM derivation tool. However, if organizational units are multiple-funded and support multiple functions, then the fund and functional area should be able to be overwritten during postings.

The commitment item linked to the secondary cost element determines whether a posting updates SAP Funds Management. Through the SAP FM derivation tool, you can create a rule that changes the commitment item linked to the secondary cost element for those cases where costs are moved between fund types (or organizations) and the credit must be shown in SAP FM as revenue.

Integration with SAP FI/CO/PS In SAP R/3 Enterprise, SAP FM active availability control, used to evaluate your SAP Controlling and SAP Project System transactions, now incorporates the fund and functional area. You can also copy funds and functional areas entered in SAP CO/PS detailed planning to SAP FM budgeting.

You need to configure SAP CO cost postings that cross company codes, business areas, funds, and functional areas in order to update accounting data through the SAP FI/CO reconciliation ledger. Using the SAP FM derivation tool, you can create a rule

Only online SAP CO/PS transactions are processed using SAP FM active availability control. Transactions run using batch processes (allocation cycles, overheads, and settlements) are not actively checked; however, they still reduce available budget.

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Posting Encumbrance Reservations to SAP Financial Accounting For open encumbrances at the end of a period, you may have to reserve fund balances in SAP Financial Accounting. In order to make this accounting entry, you summarize the open commitments in SAP Funds Management and automatically post the reservation of your fund balance journal entry to the related agencies and funds. You can run this transfer program at any time, with the SAP FI balances in the reserve account (and corresponding postings to unreserved fund balances) updated for any changes made to the SAP FM commitments during the period. Reconciliation of SAP FM with SAP FI and SAP CO You can post transactions to SAP FI and SAP CO that should not be offset with budgeted amounts in SAP FM. For this, you carry out a statistical posting (thus not consuming budget in SAP FM) of these transactions in SAP FM, to enable reconciliation and reporting in SAP FI and SAP CO. Some organizations need to reconcile the budgetary fund balance with fund balances calculated on a modified accrual basis. This means that they may also need to make certain types of postings in SAP FI for modified accrual accounting purposes that would not update SAP FM on an actual basis. You can record these postings against statistical commitment items and carry them forward to future fiscal years in SAP FM, for reconciliation and reporting purposes. As an example, compliance with GASB Statement Number 34 requires that investments be recorded at fair market value under modified accrual accounting, resulting in an unrealized gain or loss on investments. For budgetary accounting and control purposes, however, only realized gains and losses can be budgeted and recorded for investments.

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Description

G/L Account

Commitment Item

Statistical Posting Indicator

Realized Investment Income

273100

273100

(blank)

Unrealized Investment 273199 Income

273199

X

The different G/L accounts, as well as the commitment items, are mapped to individual fund balance (retained earnings) accounts to separate them as balance carryforwards from year to year. G/L Account

P&L Statement Account Type & Related Fund Balance Account

273100

RI = Fund Balance – Revenue - Budgetary Interest (modified accrual)

273199

IN = Net Assets – Full Accrual - GAAP (Interest revenue)

Commitment Item

Carryforward Item Cat. & Related Fund Balance Commitment Item

273100

RI = Fund Balance – Budgetary-Interest Income

273199

IN = Fund Balance – GAAP- Interest Revenue (statistical)

Both transactions are posted in SAP FI and SAP FM, making the unrealized gain or loss a statistical posting in SAP FM, and tracked as a timing difference from year to year in both components. You can create G/L accounts in SAP FI specifically for nonbudgetary use and link them to statistical commitment items created in SAP FM. You can create separate P&L statement account types (for the non-budgetary G/L accounts) in SAP FI, and link them to separate fund balance (retained earnings) accounts, in order to make visible the different amounts carried forward from year to year. You can also link certain budgetary G/L accounts to separate fund balance accounts, enabling an easy comparison between the budgetary and non-budgetary

balances. The separate fund balance accounts should reflect those categories of timing and permanent differences that must be reported.

Modified Accrual 483100 Debt Principal Expense 110000 Cash

In SAP FM, you can also create separate carryforward item categories, with the statistical commitment item(s) linked to separate fund balance commitment items for carryforward from year to year. Certain nonstatistical commitment items can also be linked to separate fund balance commitment items, to allow for easy comparison between the budgetary and nonbudgetary balances. As for fund balance accounts, the individual commitment items should reflect the categories of timing and permanent differences that must be reported. Using Multiple Bases of Accounting You can post and isolate transactions in SAP FI by using separate G/L accounts, fund balance (retained earnings) accounts, and contra accounts. This enables full reporting and reconciliation of different accounting bases (full accrual versus modified accrual) in SAP FI. Some funds must be accounted for on a different basis of accounting than others. In addition to fiscal accounting, full accrual accounting must be carried out, so that more than one type of fund meets the requirements of GASB Statements 34 and 35. Under modified accrual accounting, certain types of postings are different from the ones made for full accrual accounting. These postings are recorded against separate G/L accounts, included or excluded in reporting as required, and carried forward to future fiscal years for reconciliation and reporting purposes. As an example, compliance with GASB Statement Numbers 34 and 35 requires reporting on a modified accrual basis for your governmental funds and on a full accrual basis for general governmental activities. This requires that you record bond principal payments as expenditures (under modified accrual accounting) and reductions of a liability (under full accrual accounting).

$1,000,000 Debit $1,000,000 Credit

Adjustment To Full Accrual 179000 Bonds Payable

$1,000,000 Debit 483199 Debt Principal Expense Contra

$1,000,000 Credit

You can map the debt principal expense and contra accounts to individual fund balance (retained earnings) accounts to differentiate them as balances that are carried forward from year to year. G/L Account

P&L Statement Account Type & Related Fund Balance Account

483100

ED = Fund Balance-Modified Accrual (Expend-Debt Principal)

483199

PC = Net Assets-Full Accrual (GAAP-Debt Principal Contra)

Both entries are then posted in SAP FI and tracked as a permanent difference from year to year. You can carry out reporting on the various bases of accounting, by including or excluding the related G/L accounts as necessary. You can create G/L accounts in SAP FI specifically for full accrual use. These accounts may or may not be reflected in SAP CO, SAP PS, or SAP FM, depending on the cost accounting and budgetary accounting needs of the organization. If you do not want these amounts to be recorded in SAP CO or SAP PS, you can specify that cost elements not be created for these accounts. If these amounts are not recorded in SAP FM, G/L accounts can be linked to nonrelevant commitment items or, if reconciliation with SAP FM is required, posted against a statistical commitment item.

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You can create separate P&L statement account types in SAP FI and the related G/L accounts linked to the separate fund balance (retained earnings) accounts, in order to ensure the carryforward from year to year. The separate fund balance accounts can then reflect those categories of timing and permanent differences that you are required to report. To reconcile full accrual accounting to budgetary accounting, you create separate carryforward item categories in SAP FM, linking the accrual-related G/L accounts to statistical commitment items, and linking the statistical commitment item(s) to separate fund balance commitment items for carryforward from year to year. ASSET ACCOUNTING INTEGRATION

For asset master data, you can record and report asset transactions by fund, functional area, and grant. You can use subassets to record multifunded or multifunctional assets. For assets under construction, you can create subassets using an automated program, provided the projects include postings to multiple funds and functional areas. The asset master values you enter for the fund, functional area, and grant are used for all transactions (including acquisitions, transfers, retirements, and depreciation) that update SAP CO, SAP FI, SAP Grants Management, and SAP Funds Management. Asset settlements also use the fund, functional area, and grants values when postings are made in SAP CO and SAP Project System. You can customize the asset reports provided in SAP R/3 Enterprise to enable reporting based on the fund, functional area, and grant values. You can also customize messages to control changes made to the fund, functional area, and grant fields. For more information on asset accounting, see the corresponding section in the chapter entitled Integration Aspects .

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SAP CONTROLLING AND SAP PROJECT SYSTEM

The SAP Controlling (SAP CO) and SAP Project System (SAP PS) components must be active and configured before fund accounting features are available in cost or project planning and accounting. SAP CO and SAP PS master data structures can be used to derive SAP Funds Management information, including the fund, functional area, and grant values used for fund accounting. In SAP R/3 Enterprise, many SAP CO and SAP PS transactions now include the fund and functional area fields. This enables you to make more effective use of your cost and project information for fund accounting purposes. The following features have been enhanced to include direct recording of the fund, functional area, and grant: • SAP CO updating of actual data and commitments from other components • Manual actual postings of costs, revenues, line item repostings, activity allocations and repostings, as well as manual cost allocations, statistical key figures, and Customizing screen variants for manual actual postings • Manual planning postings for the Customizing settings of planner profiles, costs, activity and process input planning, and statistical key figures • Actual allocations for periodic repostings, overheads, distributions, assessments, and indirect activity allocations • Planned allocations for periodic repostings, overheads, distributions, assessments, and indirect activity allocations • Settlement of actual and plan data • Planning tools, such as copy plan, or copy actual to plan • SAP FI/CO reconciliation ledger MANUAL PLANNING INTEGRATION

In SAP R/3 Enterprise, the fund, functional area, and grant are included when detailed SAP CO and SAP PS cost and activity input planning is carried out for cost centers, internal orders, and WBS elements. Detailed cost element, activity, and statistical key figure planning are able to provide for the movement of amounts from the sender(s) to the receiver(s), using fund(s), functional area(s), and grants as specified in the line items.

MANUAL POSTING INTEGRATION

Funds, functional areas, and grants are now considered when the following SAP CO and SAP PS manual actual postings and repostings are made for cost centers, internal orders, and WBS elements: • Manual reposting of costs • Manual reposting of revenues • Reposting of line items • Activity allocation and activity allocation reposting • Manual cost allocation • Posting of statistical key figures These postings and repostings move fund amounts from the sender(s) to the receiver(s), using the fund, functional area, and grant, as specified in the line items. You can enter the fund, functional area, and grant directly in the line items. Alternatively, this can be defaulted based on assignments made with the SAP FM derivation tool.

Allocations are used to move amounts from the sender(s) to the receiver(s), using the fund, functional area, and grant (including groups), as specified in the allocation segments. For each type of allocation, you can change the way funds and functional areas are dealt with. Funds, functional areas, and grants are entered for the sender cost objects; however, fund groups can be used in order to select the proper funds, functional areas, and grants. In the allocation cycle header, you specify that the fund, functional area, and grant be derived when posting to receivers. In this case, the fund, functional area, and grant assigned to the receiver in the SAP FM derivation tool are used when posting. Otherwise, the fund, functional area, and grant entered against the receivers in the allocation cycle are used. If you do not enter a fund or functional area for the receiver, the system uses the sender’s fund, functional area, and grant. INTEGRATION OF SETTLEMENT (PLANNED AND ACTUAL)

Integration of Planned and Actual Allocation Allocation refers to the SAP CO process of assessing or distributing amounts and quantities from one sender object to one or more receiver objects, for example, from one cost center to multiple cost centers. Allocation cycles summarize the rules and Customizing settings that enable an allocation to be made. An allocation cycle consists of header data and one or more allocation segments. In SAP R/3 Enterprise, funds, functional areas, and grants are considered when planned and actual amounts are allocated using the following allocation cycles and segments: • Periodic reposting • Overhead • Distribution • Assessment • Indirect activity allocation In Customizing, you can define that internal orders and WBS elements should be enabled as senders within the above allocation cycles.

In SAP R/3 Enterprise, the fund, functional area, and grant in SAP CO/PS postings are now included when planned and actual amounts are settled from internal orders and WBS elements. Internal order and WBS element settlements provide for the movement of the original fund, functional area, or grant that were posted against the sender(s), using these same objects for the amounts settled, to the receiver(s). RECONCILIATION OF SAP CO TO SAP FI

You can update financial data for internal SAP Controlling and SAP Project System postings that cross certain organizational units. The SAP FI/CO reconciliation ledger can be activated in SAP CO, which will then summarize cross-organizational cost and revenue movements and update SAP FI. For external financial and accounting purposes, you can use cost and revenue movements across company codes, business areas, funds, functional areas, and grants.

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Integration with SAP Human Resources The SAP Human Resources (SAP HR) component must be active and configured before fund accounting features are available. The fund, functional area, and grant can be entered directly as cost distribution account assignments or derived using the assigned cost objects based on the assignments made through the SAP FM derivation tool.

TIME MANAGEMENT/CATS INTEGRATION

In SAP R/3 Enterprise, the following SAP HR functionality has been enhanced to properly integrate the fund, functional area, and grant for fund accounting purposes: • Assignments for cost distribution • Integration of training and event management • Integration of time management and Cross-Application Time Sheet (CATS)

Related SAP Business Information Warehouse (SAP BW) InfoCubes and extractors also include fund, functional area, and grant values.

COST DISTRIBUTION ASSIGNMENTS

You can include funds, functional areas, and grants for cost distributions over organizational units, positions, and persons. These account assignments are then used for related actual budgetary, financial accounting, and cost accounting postings. If detailed account assignments are not made for cost distribution purposes, SAP FM account assignments will be derived using the SAP FM derivation tool, based on the master cost center assigned to the employee. You can evaluate the cost distribution of the fund, functional area, and grant using SAP HR query. These fields are also included for Application Link Enabling (ALE) distribution purposes. TRAINING AND EVENT MANAGEMENT INTEGRATION

For training and event management, you can use the fund, functional area, and grant when carrying out SAP CO activity allocations, cost transfer postings, and cost distributions.

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Fund, functional area, and grants can be used for time entry, both in time management and the Cross-Application Time Sheet, including employee self-service (ESS) applications. These account assignments are then used for SAP HR payroll, SAP CO activity allocation, and SAP PM order confirmation, as required.

SAP TRAVEL MANAGEMENT

The SAP Travel Management component must be active and configured before fund accounting features are available. You can enter the fund, functional area, and grant directly when doing cost distribution account assignments, or you can have them derived using the cost objects assigned with the SAP FM derivation tool. You can use the fund, functional area, and grant to distribute trip costs. These account assignments are then used for related commitment and actual postings for budgetary, financial accounting, and cost accounting purposes. If detailed account assignments are not made for a trip, the account assignments from SAP HR will be used or, if necessary, SAP FM account assignments will be derived using the SAP FM derivation tool. For the extraction of SAP HR data, you can use SAP BW to evaluate the fund, functional area, and grant. These fields are also included in the interface for ALE distribution purposes, if you are using SAP HR.

SAP GRANTS MANAGEMENT SAP Grants Management (SAP GM) helps you manage sponsored programs, such as grants, contracts, and cooperative agreements, from pre-award administration to post-award management and reporting. You maintain master data for the sponsors of an organization, which in turn relates its financial structure to the financial and administrative requirements of the sponsor. This means that you don’t have to compromise your organizational structures or financial reporting to meet the administrative and financial requirements of your sponsors. SAP Grants Management also provides solutions unique to sponsored program management, such as budgeting, cost sharing and matching, billing, and indirect cost and overhead calculation, as well as closing out awards. In keeping with SAP’s fundamental principal of openness and integration, SAP Grants Management works in an integrated fashion with all areas of SAP R/3 Enterprise. SAP Grants Management also takes advantage of such SAP tools as workflow, records management, and schedule management.

EXTERNAL SPONSOR VIEW (GRANTS)

INTERNAL GRANTEE VIEW (SAP R/3 ENTERPRISE)

GRANT • FISCAL YEAR VARIANT –> X • CURRENCY –> CAD • SPONSORED PROGRAMS • SPONSORED CLASSES • EXTERNAL FUND • SPONSOR

GRANT • FISCAL YEAR VARIANT –> Y • CURRENCY –> USD • R/3 ENTERPRISE OBJECTS • SPONSORED CLASSES • EXTERNAL FUND • CUSTOMER

Operate, Manage, and Control Report and Show Results

Figure 35: SAP Grants Management External and Internal Views

SAP GRANTS MANAGEMENT PROCESSES

Some of the processes defined in SAP Grants Management are: • Planning of revenues and expenses involved in the managing of grants • Defining of internal and external budget funding sources, and checking the availability of funds on the budget item level • Carrying out control postings • Relating sponsor requirements to the financial structures of the grantee organization • Providing billing solutions • Calculating of indirect and overhead costs • Managing of grant-related documentation and transactions • Automating close-out procedures • Assigning responsibilities and authorizations • Defining workflow activities INTEGRATION WITHIN SAP R/3 ENTERPRISE

SAP Grants Management is integrated with the following components of SAP R/3 Enterprise: • SAP Human Resources (SAP HR): Planning of positions, travel, time, and expenses • SAP Materials Management (SAP MM): Purchase requisitions, purchase orders, goods receipt/goods issue, invoices • SAP Controlling (SAP CO) and SAP Project System (SAP PS): Proposal and application planning, internal cost allocations, and postings • SAP Financial Accounting (SAP FI): Accounting documents in all ledgers • SAP Funds Management (SAP FM): Organizational budgeting and availability checking, earmarked funds • SAP Asset Accounting (SAP AA): Depreciation and asset details • SAP Plant Maintenance (SAP PM): Maintenance order postings For more information on integration, please refer to the chapter entitled Integration Aspects .

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Integration with SAP CO, SAP PS, and SAP Funds Management The grant is an object in SAP Controlling, which enables you to plan revenues and record costs for both internal and external funding sources. In SAP GM, planning revenues and expenses normally occurs during the grant proposal and application phases. After funding from the sponsor is received, you can update the grant budget and then transfer it to SAP Funds Management. Transferring budget data between SAP R/3 Enterprise components eliminates the need for duplicate entries and ensures data accuracy. In addition to transferring SAP Grants Management budget data to SAP Funds Management, you can check fund availability in both SAP Grants Management and SAP Funds Management: • In SAP Grants Management, you use the grant budget to maintain spending rules and tolerances and to control postings at the sponsored program or sponsored class level. This creates fund availability checks from a sponsor’s perspective. • In SAP Funds Management, you maintain availability checking at the fund, funds center, functional area and commitment item levels. This enables you to control funds availability from both your organization’s and the sponsor’s perspective. You can use the two solutions together or independently, depending on your requirements. The flexible nature of availability checking in SAP Grants Management and SAP Funds Management provides you with the ability to address all business requirements. Integration with SAP Financial Accounting and SAP Asset Accounting Architecturally, SAP Grants Management maintains a separate view of an organization’s sponsored program activities and projects. The organization’s structures, such as projects, general ledger accounts, cost elements, commitment items, fiscal

year, and currency, are linked to the sponsor’s projects, cost and revenue categories, budget validity period, fiscal year, and currency. In this way, you can review your organization’s financial activities and transactions for sponsored programs according to a sponsor’s requirements, without affecting the integrity of your financial transactions and activities. For example, your organization and your sponsor each maintain their own fiscal years, and the two often differ. This creates administrative and reporting challenges, and organizations must often create custom reports to accommodate the fiscal year differences. In addition, SAP Grants Management maintains its own subledger using the split ledger technique, which enables you to generate an individual balance sheet per grant. The following figure depicts the flow of data from SAP R/3 Enterprise components to SAP Grants Management. The flow of transactions from other components into SAP Grants Management allows you to view the transactions from the sponsor’s perspective, based on the grant’s administrative guidelines and requirements. This enables you to relate your organization’s transactions based on such sponsor and grant criteria as the fiscal year variant and currency.

ACCOUNTING & SPLIT LEDGER FI

Account Assignment/ Coding Block

GRANT ACCOUNTING LEDGER

FM

MATERIALS MANAGEMENT MM

CONTROLLING

TRAVEL MANAGEMENT

CO

FI

Figure 36: Grantee Integration and Updating

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FUNDS MANAGEMENT

To help manage equipment purchased and built with sponsor funds, SAP Grants Management makes use of SAP Asset Accounting and SAP Plant Maintenance. Based on sponsor requirements, these components help SAP Grants Management account, track, and report on grant assets to meet sponsor guidelines. MASTER DATA

The master data used in SAP Grants Management is: sponsor, grant, fund, sponsored program, and sponsored class: • A sponsor is an institution or individual that provides funding to a grantee organization. Strictly speaking, a sponsor can be regarded as a business partner involved with a grantee organization in the sponsoring of programs through business contracts defined as grants. • A grant is the funding instrument that the sponsor provides and that documents the funding agreement between the sponsor and the grantee organization.

• A fund is an accounting object containing a complete self-balancing set of accounts, maintaining different types of funding – external and internal – from the grantee organization’s perspective. • Sponsored programs are the grantee organization’s projects, including the functions, tasks, and funding necessary to meet the objectives of an external organization. • Sponsored classes summarize the sponsor’s expense and revenue categories. The sponsored class is used to group expenses and revenues in order to meet the sponsor’s reporting requirements. To support sponsored program accounting and control, SAP Grants Management applies contractual and administrative requirements to a grant based on various combinations of each of the components. These components together correspond to “sponsored objects,” which represent allowable posting and budgeting objects, and they also create dimensions for managing, controlling, and reporting.

Figure 37: SAP Grants Management Master Data

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• Business Data Toolset (BDT), which enables you to cus-

The grant and sponsor maintain a many-to-one relationship. The grant and sponsored program, on the other hand, have a many-to-many relationship, meaning that a grant can fund many sponsored programs, and sponsored programs can be assigned to many grants.

tomize screens and data elements specific to your organization and comply with sponsored program administrative requirements. In this way, you have flexibility without compromising the ability of your organization to implement routine system maintenance and subsequent upgrades.

Sponsors are assigned funds within a grant master record, and funds are used to distinguish between external and internal financial support for a project. In addition, funds and grants also maintain a many-to-many relationship. In summary, SAP Grants Management master data relationships are adaptable, so that they can ensure many combinations and accommodate a grantee organization’s sponsored program administration requirements. Within a grant master record, the sponsor, sponsored programs, sponsored classes, and funds concern the funding provided to the grantee organization. The relationships between these master data components are flexible and support the many combinations needed to satisfy the funding correlation between the grantee organization and its sponsors. Two SAP tools are available for this: • SAP Business Partner, which contains functionality for the central creation and management of business partner master data. In this way, you can create flexibly linked, centralized, cross-component master data records, eliminating the need to create multiple master data records for external organizations and individuals who conduct business with your organization.

Grants Grant master data supports the sponsored-program business process by maintaining details specific to the pre-award process – the creation of the sponsor application – and post-award process – the administration of the award after a sponsor funds the application. Here’s an example of how the business process and life cycle of a grant work. An employee first creates a project proposal. Next, the organization reviews the proposal, approves it, and determines if external financial support is needed. The organization then creates an application and submits it to the sponsor(s). Once a sponsor approves and funds the project, the organization application becomes an award, and the organization is responsible for managing the award according to the financial and administrative requirements of the sponsor. Within the various phases of the sponsored program process, a grantee organization assigns a life-cycle status to indicate where a grant is in the business process (proposal, application,

GRANT PHASE

PROPOSAL

APPLICATION

AWARD

AWARD ADMINISTRATION

CLOSEOUT/ REPORTING

time

PROJECT PLANNING

MASTER DATA AND BUDGETING

SAP R/3 ENTERPRISE PROCESSES

Figure 38: Phases of a Grant and SAP R/3 Business Processes

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SPONSOR FUNDING

POSTINGS AND BILLINGS

FINAL ACCOUNTING AND REPORTING

award, and closeout). This status assignment triggers workflow scenarios, routing the grant and related information electronically within the organization for the necessary reviews and approvals during each of the business processes. For example, an initial project draft begins with the status proposal. If the grantee organization approves the proposal, SAP Grants Management updates the status to application. Additional stages include: • Sent application: When the organization mails the application to the sponsor • Rejected application: If the sponsor does not fund the application • Awarded application: If the sponsor funds the application • Closed award: When the grant has completed its life cycle The grant master data and budgeting activities are allowed for the proposal and application planning stages. For the sent application and rejected application stages, you can restrict or block business transactions from being carried out. Thus, during a pre-award phase of a project, you can begin processing the grant based on funding that you anticipate from a sponsor. Next, at the award level, you should convert the planning budget to the sponsor budget. This allows your organization to begin posting transactions, such as payroll, purchase requisitions, purchase orders, and invoices. Finally, the closed award status suspends new transactions, but allows continued processing of existing commitments according to sponsor administrative guidelines. Each of these statuses enables you to view the various stages of the grant during its life cycle, while controlling the transactions carried out for a specific business process. SAP Grants Management also contains functions for tracking revisions and updates for both the pre-award and post-award processes. It accomplishes this by assigning versions to the object being modified and maintains a log of these modifications for subsequent review and historical purposes.

GRANT – AWARD STATUSES GRANT

PROPOSAL

APPLICATION

AWARD

Figure 39: Grant Life-Cycle Statuses

The grant also maintains SAP Grants Management business objects, such as the fund (or funding source), sponsored program, and sponsored class. SAP Grants Management transfers default values for these business objects from the sponsor master data and updates the data as needed, based on the requirements specific to the sponsor award. The sponsored program, sponsored class, and fund control the possible posting combinations, defined in Customizing and used when planning, budgeting, and recording actual postings to the grant. In addition, SAP Grants Management classifies postings as actual or statistical, and blocks postings for processing and control using validity periods. PRE-AWARD COSTS

Pre-award costs represent the consumption of funding before official funding is received for a project. In such cases, a sponsor confirms funding of a project prior to the grantee organization receiving confirmation of the funding. Another scenario is that you anticipate a project will receive funding so the project is started, and anticipate reimbursement for outlays prior to the official start of the project. You may need to begin managing a project in advance, and taking into consideration the sponsor’s guidelines. Based on such requirements, many organizations and sponsors develop specific rules governing pre-award costs, in particular for: • Grant life-cycle status • Posting objects • Budget release and tolerances • Billing 77

You can place restrictions on a grant’s posting objects. For example, you can restrict the issue of purchase requisitions, purchase orders, funds reservations, and payments. These types of transactions are controlled using value types. In addition, you can control pre-award costs using budget releases and tolerances to limit an organization’s expenditures: • Budget releases refer to the budget amounts recorded to an object (such as a grant) that is available for consumption. • Tolerances are used to compare the budget of an object to the amount consumed or posted to that object. Finally, you can use life-cycle statuses to indicate the stage of the grant within an organization’s business processes. You can use each of these solutions independently or together to manage the pre-award cost requirements.

After completing the mapping for derivation, SAP Grants Management then records program income postings to accounts and posting objects, and, based on the mapping, records them to the SAP Grants Management sponsored program. In addition to recording program income transactions, SAP Grants Management can also plan and budget program income. Program income can be budgeted directly in SAP Grants Management, or budgeted in SAP Funds Management and transferred to an SAP Grants Management budget posting. Based on your approach and the management of program income, reporting of the transactions, and budget, SAP Grants Management can satisfy both the sponsor’s and grantee organization’s requirements. GRANT TYPES

PROGRAM INCOME

Program income is revenue that a grantee organization earns, which is attributable to a sponsor-supported project or project activity. The sponsor’s guidelines determine how your organization accounts for program income. For example, you may or may not have to use program income to offset sponsor funding. Similarly, your organization may or may not need to track or report program income. Regardless of sponsor requirements, you should monitor sources of revenue and record program income transactions according to your business requirements. You can use SAP Grants Management to monitor and track program income in a variety of ways. Using a derivation rule, you can map a sponsored class to your organization’s general ledger accounts, commitment items, and cost elements. You can also map cost elements and cost objects, such as cost centers, work breakdown structure (WBS) element, and internal orders, since some organizations treat program income not as revenue, but as an offset to expenses.

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The grant type is a key master data element that allows you to manage grants and to meet both the sponsor’s requirements and your own. It is recorded in the sponsor master record, and used in conjunction with the grant to describe and control a grant’s behavior. First, if a grant is created and assigned to a sponsor, only grant types recorded in the sponsor master record can be selected with the new grant master record. In addition, the grant type is customizable, so you can create as many grant types as needed to classify and describe your organization’s grants, such as: • Classifying grants into categories • Defining budgeting strategies for grants • Monitoring the grant using the status function • Maintaining sponsor rules for indirect costs or overhead posting • Making use of SAP Records Management templates Sponsors In SAP R/3 Enterprise, grant sponsors are maintained in the form of SAP Business Partners. A business partner refers to a natural or legal person or a group of natural or legal persons, who are not part of the organization in question, but with whom a business interest exists.

In the business partner record, you can store all information for an organization’s sponsors. Sponsor master data also provides default values for grant master data. These default values are transferred to the grant master record and can be saved or updated based on your organization’s requirements and the grant’s requirements. The sponsor default values serve as a starting point when you create a grant master record, saving time and reducing the chance of error.

SAP Grants Management also enables organizations to record sponsored programs in the sponsor master data, providing default values for the grant master data. Based on the relationship of the sponsor to a grant, SAP Grants Management can select the sponsored program defaults and import them into the grant from the sponsor master data. These default values, however, merely serve as a starting point when assigning the sponsored programs to a grant.

Examples of grant default data for a sponsor include: sponsored programs and classes, cost sharing details, indirect cost calculation details, fiscal year variants, currencies, as well as the splitting rule to be applied for budgeting and fund detail data.

Sponsored Class A sponsored class categorizes sponsor budget data according to revenues and expenses. It is also used to specify in detail which expenses are relevant for billing and for indirect cost calculation.

Sponsored Program A sponsored program refers to a sponsor’s program or project and links it to your internal projects. It is used to group costs to satisfy the sponsor’s view and reporting needs, and defines the program to be funded from the sponsor’s viewpoint. Details such as the person responsible, budget objects, funds center, functional area, and funded program are stored in the sponsored program master data. You can also include information on legislative codes to be adhered to. The funds center, functional area, and funded program represent the link between SAP Grants Management and SAP Funds Management, which enables you to relate the sponsor’s budget and posting data in SAP Grants Management to budget data in SAP Funds Management. Within SAP Grants Management, the sponsored program manages all accounting and reporting transactions. Multiple grants can fund one sponsored program, which can be linked to one or more cost objects (such as cost center, internal order, WBS element, and funds center). Alternatively, one grant can fund many sponsored programs. This many-to-many relationship enables you to maintain your own internal projects independently of the funding sources and still fulfill the sponsor’s administrative and reporting requirements.

When a sponsor funds an application, the award documents typically include a budget summarized by expense category. For example, sponsored classes are used to link G/L accounts, cost elements, and commitment items to the sponsor revenue and expense categories. A sponsor can fund a grant and provide a budget for personnel, supplies, travel, and equipment expenses, which means that the organization must manage and report the financial activities of the grant based on these budgeted expense categories. Accordingly, you create sponsored classes for each expense category and assign the sponsored classes in the grant master data. Afterwards, you assign G/L accounts and cost elements to the sponsored classes. When transactions are recorded in the G/L accounts and cost elements, the sponsored class is derived from the G/L accounts and recorded in the SAP Grants Management special ledgers. This enables you to record financial transactions according to your business requirements and reflect the transactions in the grant’s sponsored classes according to the sponsor’s requirements. The sponsored class links the sponsor requirements to

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the financial structures of your organization, providing your organization’s transactions in the sponsor view. Also, the integrity of the financial structures of your organization is maintained by deriving the sponsored class for the existing posting objects of your organization. You can also record sponsored classes, which serve as default values for the grant master data, in the sponsor master data. Based on the relationship of the sponsor to a grant, you can select the sponsored class defaults and import them into the grant from the sponsor master data. These default values, however, merely serve as a starting point when assigning the sponsored programs to a grant. BUDGETING

Budgeting plays a significant role in the administration of sponsored programs, enabling you to fulfill both the sponsor’s and the grantee organization’s management and reporting requirements. You can record revenue and expense budget data to support both the pre-award and post-award stages of sponsored program management. Using SAP Grants Management, budget data is entered and maintained from the sponsor’s perspective. For example, budget data is entered into the sponsor’s currency and the time period as required for the sponsor’s reporting requirements. You can also enter budget data for various life-cycle statuses of the grant. That means you can enter budget data for a project’s planning phase (proposal status) and then maintain and update it as needed for the remaining phases (application and award). Grant budgets are entered using the following dimensions: grant, funds, sponsored programs, sponsored classes, and time slice. The grant is the primary budgeting object, and the fund is the source of external or internal funding. In addition, the

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sponsored program identifies a sponsor’s programs or projects, and the sponsored class maintains the sponsor’s budget at an itemized revenue and expense category level, such as personnel costs, supplies and equipment, as well as revenues. SAP Grants Management budgeting is integrated with SAP Funds Management budgeting using the new budget control system (BCS) delivered as of SAP R/3 Enterprise. For more information on BCS, please refer to the corresponding section in the chapter entitled SAP Funds Management . Time Slices You can record budget data in a variety of ways during the life of a grant. For example, you can enter a budget for the total amount funded and release it all at once or periodically, perhaps monthly, quarterly, or annually. The ability to enter the entire budget and to use a release strategy provides control over when the budget is available for consumption during the life of the grant. You can also enter budget data based on the sponsor’s fiscal year and your own. Based on this requirement, time slices are created in Customizing. This enables you to create splitting rules for grants, which facilitates the budgeting process and the monitoring of grant budget data according to the sponsor’s administrative and reporting requirements. For example, a sponsor funds a grant for a two-year period (from April 1, 2002 to March 31, 2004) and requires that the grantee manage and report the funds according to the sponsor’s fiscal year. The sponsor’s fiscal year runs from January to December, but the grantee organization’s fiscal year is July to June. The time slices would be as follows: • April 1, 2002 to December 31, 2002 • January 1, 2003 to December 31, 2003 • January 1, 2004 to March 31, 2004.

SAP GRANTS MANAGEMENT (SAP GM) 4/01

3/02

3/03

GRANT VALIDITY APR 2001 – MAR 2003 1/01

12/01

12/02

GRANT VALIDITY APR 2001 – MAR 2003 1

4/01

2

3/02

3/03

SPLITTING RULES APPLIED GRANT BUDGET VALIDITY

SAP FUNDS MANAGEMENT (SAP FM) 7/01

6/02

6/03

GRANT VALIDITY APR 2001 – MAR 2003 “TIME SLICES” 1

SAP GM BUDGET VALIDITY 4/01

SAP GM BUDGET VALIDITY

1A

2

7/01

1B

3/02

6/02

2A

3/03

6/03

2B

Figure 40: SAP Grants Management Time Slices Concept

Through integration with SAP Funds Management, you can also manage the grant according to your organization’s financial structure and fiscal year. You can also revaluate transactions with different currency. When you revaluate a posting that results in an amount different from the original entry, SAP Grants Management posts a new entry, or attachment, to the original transaction, but the original entry remains as is. Attaching a new entry to the original transaction preserves the audit trail and simplifies reconciliation runs.

Released and Unreleased Budgets A budget is recorded to a grant based on the splitting rule for time slices defined for the grant in Customizing, as well as on the grant’s life-cycle status. The splitting rule also determines whether a budget is entered with a released or unreleased status. The purpose of these statuses is to maintain control of budget consumption using smaller time slices, while planning itself can be done for the entire grant. When budget is entered using the unreleased status, it is not available for consumption, and conversely when a budget is posted with a released status, the funds are available for con-

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sumption. Together the two statuses allow you to enter the awarded budget for the life of the grant, in the form of unreleased budget, and then consume only a part of it – for example, the first year’s budget – which is recorded with the released status. Cost Sharing and Indirect Costs Cost sharing or matching represents the portion of total project costs that a grantee organization must contribute to and fund internally. Some sponsors have mandatory cost sharing requirements for all or certain types of sponsored programs. Also, there are voluntary cost sharing arrangements in which an organization contributes to the project’s expenses even though there is no requirement to do so. You can use different funding sources to record a grant and sponsored program, containing the individual cost sharing requirements for each organization. For example, if a sponsor funds a grant that requires 25% cost sharing, the system records the sponsor budget using an external fund associated with the sponsor and the cost-sharing budget using an internal fund associated with the organization. Thus, SAP Grants Management records the grant budget in total, including the cost-sharing budget, whereas the use of internal and external funds allows you to distinguish between your cost sharing budget and the sponsor budget. Because cost sharing or matching requirements vary from sponsor to sponsor, a system must be flexible enough to comply with differing guidelines. Using the posting objects fund and functional area, you can easily identify cost sharing transactions. SAP Grants Management also allows you to view the impact on cost sharing and indirect costs for the duration of a grant. Since grant budgets are recorded by the grant’s dimensions (such as grant, funds, sponsored programs, sponsored classes,

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and time slices), the requirements for cost sharing and indirect costs are readily available for online review and evaluation. The grant’s values for cost sharing and indirect costs are maintained in the grant master data. As budget data is entered for a grant, the system calculates the related cost sharing and indirect cost amounts involved. Since SAP Grants Management records the grant budget data by budgeting dimensions (fund, funds center, commitment item, and so on), the cost data is updated with every posting. MATCHING FUNDS

SAP Grants Management documents a sponsor’s cost sharing requirements in the sponsor’s master record. Next, when a grant is created, the cost sharing data defaults from the sponsor master data. Based on the grant’s requirements, SAP Grants Management either leaves the grant’s cost sharing information unchanged or updates it. This provides a starting point for you to create the grant master record, and capture the sponsor’s cost sharing requirements for each grant. Most importantly, SAP Grants Management creates funding dimensions in the grant master record, recording both external sponsor and internal organization funds in the funding dimensions. The funds, in conjunction with sponsored classes and sponsored programs, create posting combinations for recording business transactions to the grant. Users employ external funds to record expenses attributable to the sponsor and internal funds to post expenses associated with your organization’s cost sharing requirements. You can also use multiple internal funds to fulfill a sponsor’s cost sharing requirements. Whereas SAP Grants Management records transactions to the grant, the fund is used to indicate whether the line item is attributable to the sponsor or to the organization (that is, cost sharing is involved).

Spending Rules Budgeting is important in administering a sponsor’s spending rules in coordination with availability checking. The grant budget and availability checking help monitor spending to ensure that a grantee spends funds according to a sponsor’s spending rules. SAP Grants Management performs availability checking to monitor the postings and works in conjunction with the grant, fund, sponsored program, and sponsored classes. In Customizing, you can decide whether to enforce spending rules flexibly or stringently. For example, a sponsor may establish tolerance rules so that the system sends a warning or error message if a transaction exceeds the sponsor’s budget. Similarly, you can establish a tolerance rule so that the system generates a warning message after 80% of the award’s budget is consumed or prohibits additional transactions if 100% of the budget is exceeded. Tolerance Rules Like spending rules, budget tolerances can be flexibly configured to meet the needs of your organization and sponsor requirements. In conjunction with tolerance rules, SAP Business Workflow sends electronic notifications to keep the management personnel informed of the transaction and the impact on the grant budget. SAP Grants Management maintains a sponsor’s availability checking and tolerance rules, whereas SAP Funds Management maintains an organization’s availability checking and tolerance rules. The separation of the tolerance rules enables you to manage the availability of funds at the sponsor and organization levels independently of each other.

Reporting Budget details and actual postings recorded to SAP Grants Management are the basis of financial reporting for the sponsor as well as for the grantee organization. SAP Grants Management ensures that each relevant component, such as SAP Human Resources, SAP Materials Management, SAP Controlling, SAP Financial Accounting, or SAP Project System, also records the actual transaction, from the perspective of the sponsor, in the SAP Grants Management subledger. In this way, the financial activities of the organization remain separate from any external sponsor requirements, and support the internal and external view of transactions related to the sponsored program activities. Budgetary Ceilings An organization with limited resources can manage its sponsored programs with budgetary ceilings, which helps monitor the amount of external funding that the organization receives and ensures that you do not accept more funding than you can adequately manage. See Figure 41 as an example of a ceiling scenario.

FUNDS MANAGEMENT OVERALL BUDGET EDUCATION $30,000

FUNDS – UNRESTRICTED FOR GRANTS EDUCATION RESEARCH

$20,000 $50,000

RESEARCH $70,000

FUNDS – RESTRICTED FOR GRANTS EDUCATION RESEARCH

$10,000 $20,000

Figure 41: SAP Grants Management Budgetary Ceilings

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Funded Programs SAP Funds Management in SAP R/3 Enterprise contains a new dimension called the funded program. Funded programs have an operational purpose with a defined time frame, and can vary from simple activities to complex projects. Funded programs can cross an organization’s fiscal years, funding sources, and organizational units. In SAP Grants Management, you can use the funded program by mapping an SAP Grants Management sponsored program to an SAP Funds Management funded program. This allows you to record budget, control postings, and monitor the performance of the sponsored programs for your organization’s internal activities in SAP Funds Management. BILLING

You obtain reimbursements for sponsored programs in many different ways: cost reimbursement (monthly invoices, quarterly invoices, or sponsor letter-of-credit accounts), scheduled payments (monthly, quarterly, or milestone payments), and advance payments (billing plans). Sponsors may require your organization to submit invoices on a cash or accrual basis, or they may even permit your organization to invoice encumbrances and expenses. In addition, special billing requirements, such as letter-of-credit scenarios, are also part of the SAP Grants Management billing functions. SAP Grants Management provides a flexible billing tool to support cost reimbursement, milestone billing, periodic billing, and manual billing. Resource-Related Billing The most common billing scenario is cost reimbursement. SAP Grants Management uses resource-related billing, including down-payment capability, to satisfy this requirement. In addition, SAP GM billing can identify billed versus unbilled expenses and generate invoices for unbilled expenses related to a

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grant. To accomplish this, a billing delta is used that compares the cumulative expenses to the expenses for which you have already submitted invoices, and then creates a new invoice reflecting the new expenses. Resource-related billing generates invoices for a specified time period, such as monthly, quarterly, or other periods, as well as for nontraditional billing periods that do not begin on the first or last day of the month. This permits many billing period combinations, enabling an organization to produce invoices based on its requirements, as well as on sponsor-defined billing rules. Resource-related billing generates invoices on a cash or accrual basis for various transaction types, such as commitments, invoices, or actual payments. You can also block transactions associated with a grant and sponsored class. SAP Grants Management supports Application Link Enabling (ALE) and Electronic Data Interchange (EDI) for sponsors that support these protocols, so organizations can communicate electronically with sponsors and share financial and administrative information regarding the sponsor’s projects. The billing solution also provides a printing and distribution function to help you prepare the sponsor invoices. OVERHEAD COSTING: INDIRECT COST CALCULATION

SAP Grants Management offers a solution specifically for sponsor overhead costing, also known as indirect cost (IDC) calculation, to address differing requirements. In addition to standard functions, you can use overhead allocation for overhead costing. This allows you to choose from three methods to allocate and manage your IDC allocations: the SAP Grants Management indirect cost calculation program, standard functions in SAP Controlling, or a combination of the two methods.

For sponsor master data, you initially maintain rules and rates for calculating indirect costs. The grant master data contains IDC rates for each sponsored class, in order to calculate the indirect cost expense based on the sponsor and grant’s guidelines. In addition, assigning IDC rates to the grant’s fund, program, and sponsored classes offers multiple calculation scenarios. You can retrieve this data later when creating the grant’s budget. For example, a grant provides funds for personnel, supplies, and equipment, which are sponsored classes or cost categories, and provides indirect cost funding at a 10% rate for personnel costs only. You can assign indirect cost rates at the grant, fund, program, and sponsored class levels, making use of conventional sponsor indirect cost calculation methods. These are indirect cost base methods, such as total direct costs or modified total direct costs. Using one of these base methods requires that you apply a single indirect cost rate to a specified group of costs. You can use the indirect cost calculation to include your organization’s IDC earned for the billing period. You can select specific grants or ranges of grants, as well as specify the calculation period and the posting date. SAP Grants Management also supports IDC fund recovery, which is the recording of revenue postings. The grant master data maintains this information and records the IDC revenue and expense G/L accounts. The tool also enables you to specify multiple funds, if required, for recording revenue. Validity periods and dollar amount or percentage ceilings can influence the distribution of revenues to your organization’s funds.

COMPLEMENTARY FUNCTIONS

In addition to unique business processes, SAP Grants Management uses complementary SAP solutions, such as SAP Business Workflow, SAP Records Management, and status management to support administrative processes for sponsored programs. SAP Business Workflow Workflow scenarios for SAP Grants Management consist of a sequence of steps that a system or user processes automatically. Several workflow scenarios exist for SAP Grants Management, including a pre-award review and approval process. In a preaward scenario, you prepare a formal application for submission to a sponsor. Before the application is submitted, the sponsor reviews the proposal. SAP Grants Management uses SAP Business Workflow to route the proposal electronically through the organization, to ensure that the appropriate reviews and approvals are carried out according to your organization’s requirements. As each area reviews the proposal and completes its task, workflow determines the routing of the proposal and the next action required. The workflow process authorizes specific users to approve, reject, forward, or update the document. Finally, workflow interprets the status of the proposal (whether the organization has approved, rejected, or updated it), and routes it accordingly until it meets the last condition and the review procedure is complete. Users do not require a comprehensive understanding of the review protocol to obtain the organization’s approval on a proposal – they simply perform a routine task within the approval procedure. For SAP Grants Management, the predefined workflow scenarios include the review, change, and approval of grant master data and grant budgets, availability checking notifications, and grant closeout processes.

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SAP Grants Management and SAP Records Management SAP Grants Management provides authorized personnel with complete online access to all documents relating to a grant. Sponsored program administration involves managing vast amounts of documentation from the proposal and application stages up to the completion of a project. Your organization may receive such documentation in many forms, including electronic documents, word-processing files, spreadsheets, and CAD drawings. Using SAP Records Management, you can store such documentation in the form of grant pre-award documents, grant master data, grant budget documents, sponsor award documents and correspondence, and general organization correspondence. All grant and sponsor information is stored in a central area, to allow easy access and flexible document searches. You can also use the records management capabilities of mySAP Public Sector to integrate external documents. SAP Grants Management also provides document templates, which contain a basic framework of the types of documentation that apply to grants. Via the grant type, a grant is linked to a template, so that when a grant type is assigned to a grant, the correct template is accessed. You can easily create and customize templates to meet your organization’s documentation requirements.

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SAP Records Management uses a hierarchy to store documents, and authorizations to restrict access to documents and integrate with workflow scenarios. You store documents by grant within a predefined hierarchy, and define security authorizations to limit access to grant information to the appropriate personnel. For example, central users in the sponsored programs office may have full access to all grant documents, whereas a project manager may be restricted to documentation for grants for which he or she has specific responsibility. In addition, you can use workflow scenarios with grant documents to assist the person responsible for approving the request, by providing online information pertaining to the grant. The system also stores the history related to the grant pre-award process, proposals, and the actual application. For more information on SAP Records Management and SAP Business Workflow, please refer to the chapter entitled Integration Aspects .

PERIOD-END CLOSING

REPORTING

The SAP Grants Management closeout features help you complete the life cycles of your sponsored programs. Part of the closeout process includes a final review of financial transactions and administrative tasks to ensure that proper action has been taken to conclude the programs and projects according to a sponsor’s requirements. To assist with these activities, you can create customized closeout rules that meet sponsor guidelines and requirements. For example, you can create rules for: • Updating master data settings to restrict or prevent additional postings • Reviewing and acting on outstanding obligations • Detailing the steps that a sponsor requires to prepare financial and technical reports • Maintaining program and grant stages of completion • Detailing all steps to satisfy organizational reporting requirements

A major challenge for organizations implementing sponsored programs is balancing externally required financial reporting with internal reporting needs and business processes. SAP Grants Management provides the financial information required to manage the program effectively from both the sponsor’s and grantee organization’s perspectives. You record financial transactions based on your organization’s internal structure, while simultaneously applying these transactions to a sponsor’s desired financial view and recording them in the SAP Grants Management subledgers.

Using the SAP Schedule Manager, worklists can be created for employees responsible for managing grant closeout activities. Worklists have a variety of uses, including helping you perform closeout procedures. Worklists allow you to apply a single task to multiple objects, which is useful for preparing a grant’s postaward reporting requirements. For example, you can generate a preliminary invoice on the termination date of a grant, which you then use to review postings in preparation for the final invoice to the sponsor.

Basic differences between a sponsor and a grantee organization can include fiscal years, budget period dates, expense and revenue categories, and currency – all of which require an organization to maintain a separate view for each reporting purpose. Supporting separate views allows you to review and monitor financial transactions according to your organizational or sponsor requirements and to make decisions accordingly. In addition to financial reporting, SAP Grants Management produces statistical and summary reports to help you manage sponsored program activities, such as funding success rates, sponsor applications submitted versus applications funded, and other metric information. SAP Grants Management delivers basic reports, but the diversity of such reporting requirements and data may require the creation of custom reports. Other tools used to satisfy reporting needs include SAP Business Information Warehouse (SAP BW), Report Writer, Report Painter, drill-down reporting, and user-defined forms.

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SAP TAX AND REVENUE MANAGEMENT Governments cover their financing requirements by defining funds from different sources. Inland revenue offices collect taxes from citizens and businesses, cities charge for their services, associations receive contributions from their members, and universities charge tuition fees. These all involve mass procedures – it is not uncommon for authorities to deal with hundreds of thousands or even millions of citizens at one time, as for example, when tax returns are due. Public agencies are increasingly looking to improve their interaction with citizens, companies, and other public administrations. More and more services are being provided over the Internet, consequently the public now expects round-the-clock access for registrations, making queries and requests, and getting and submitting information 365 days a year. SAP Tax and Revenue Management is a key component of mySAP Public Sector. It is the solution provided by SAP for managing taxes and revenues in the public sector, and is based on the following components: SAP® Collection and Disbursement, mySAP Customer Relationship Management (mySAP CRM), SAP® Biller Direct, and mySAP Enterprise Portal. SAP Tax and Revenue Management has the following features: • The system supports all core tax and revenue administration processes, including registration, return filing and payment processing, collections, audit, customer assistance, and financial management. It also provides a full range of e-government services. • All applications and data are fully integrated, providing every authorized employee with access to comprehensive taxpayer data and supporting applications. The integrated data architecture stores master data once, then makes it available to all components – saving memory, enhancing data consistency, and reducing ongoing maintenance.

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• As the back-end system, SAP Collection and Disbursement can handle high-volume data processing tasks in the background, as well as process transactions in distributed systems. The SAP Collection and Disbursement functionality is based on the mySAP Financials contract accounting solution (SAP FI-CA). • SAP Tax and Revenue Management is easily configurable. Each application component can be configured to address specific user needs. OVERVIEW OF FUNCTIONS

SAP Tax and Revenue Management covers – by itself or in conjunction with other software components – all processes involved in tax and revenue management: • Registration for services or tax returns by entering citizen master data and payment-relevant information • Calculating and posting taxes, and processing statutory payments and tax returns • Processing of payments • Collecting taxes in arrears and calculating interest, including follow-ups until transfer to collection agencies • Tax inspection (audit) • Forwarding of revenues to other government agencies • Support and information for taxpayers • Revenue accounting SAP Tax and Revenue Management starts by dividing tasks between the tax calculation and the settling systems. The calculating system determines the amount and due date of certain taxes or fees. This can take place within an SAP component, such as SAP Sales and Distribution (SAP SD) or mySAP CRM, or by using a special third-party feeder system or a homegrown system. Master and posting data is provided to these systems through the SAP Collection and Disbursement interface.

SAP Collection and Disbursement manages postings, controls payment transactions, and processes cash receipts, dunning, and correspondence. Furthermore, the transfer of postings to SAP Financial Accounting (SAP FI) or SAP Funds Management is affected in this way, and payment data is prepared for strategic reporting in SAP BW.

SAP Tax and Revenue Management is seamlessly integrated with mySAP CRM. Using mySAP CRM, a government agency can process all essential tax and revenue steps, whether they are classical (all within one system) or e-government (processing via the Internet), from the initial request up until the final payment. Taxpayers can submit their tax returns electronically using mySAP CRM.

MANAGING TAXES AND OTHER STATUTORY PAYMENTS

With SAP Tax and Revenue Management, mySAP Public Sector provides a software solution developed especially for mass processing of tax data. Extremely large amounts of data can be handled quickly and reliably due to its advanced technical design. It is also extremely flexible and can be customized to fulfill requirements placed by government agencies residing on different levels or in different countries.

The point at which a citizen accesses public tax services is mySAP Enterprise Portal. Here the tax agency provides different services (information, interaction, and so on). The second important component used to interact with citizens, mySAP CRM, is linked into mySAP Enterprise Portal.

TAX AND REVENUE MANAGEMENT

CASE MANAGEMENT

mySAP CRM

AUDIT MANAGEMENT

BILLING

COLLECTION AND DISBURSEMENT

FINANCIAL ACCOUNTING FUNDS MANAGEMENT

PAYMENTS/ COLLECTION

REVENUE ACCOUNTING

Billing Engine CALCULATION MASTER DATA

SERVICE ORDER

REGISTRATION

RETURN RECONCILIATION

SAP BUSINESS INFORMATION WAREHOUSE (SAP BW)

IPC

OTHER

BILLER DIRECT ONLINE PAYMENT

SERVICES mySAP ENTERPRISE PORTAL

Figure 42: SAP Tax and Revenue Management Framework

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The first step for the citizen is to register. For most tax payments, a citizen registration is necessary. This can happen through different channels: phone, person, letter, or Internet (multichannel access). If mySAP Enterprise Portal is used, the citizen master data is managed in mySAP CRM as the leading system and then passed on to SAP Collection and Disbursement. SAP Collection and Disbursement is a central subledger accounting tool, providing government agencies with an integrated view of all citizen data stored, and managing the master data for taxes and fees due to a government agency. You can use SAP Biller Direct if you want citizens to access this integrated view of their data on the Internet and carry out all payments online. SAP Biller Direct is an SAP software component that enables the conversion of bills to an electronic format. This unique integration makes payment-relevant processes more intelligible for government agencies and citizens, while also improving the quality of services provided. Master Data and Registration All the people or institutions that a government agency has dealings with are depicted as business partners. Whether taxpayers themselves, their tax consultants, or other authorities – all use the central SAP Business Partner functions. SAP Business Partner is used to store contact-specific details and contains an efficient address management facility. It also stores information on the relationship between business partners. The differences between individual business partners, determining who has to pay taxes, and who is only a contact person are reflected in a flexible role concept. SAP Business Partner enables seamless integration with other SAP components and solutions, such as mySAP CRM, which helps public employees optimize relationships with citizens and taxpayers by providing a large selection of front-office solutions.

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Incoming and outgoing payments are handled with one or more contract accounts or contract objects. These contain the payment-relevant master data, such as bank details or alternative payers, and enable public agencies to create various views of a business partner, based on the agency’s organizational structure (for example, partners classified by tax type paid), business rules, reporting requirements, or other criteria. Contract objects also contain all payment-relevant control parameters, valid payment methods, rules on assigning payments, interest calculation, handling petty amounts, creating invoices, and payment requests or reminders. In addition, the contract account and contract object store rules on incoming and outgoing correspondence.

TAX ACCOUNTANT

ANNA S. COMPANY X

PAUL alternative payer

BUSINESS LICENSE

SALES TAX

OFFICE 1

OFFICE 2

PERSONAL INCOME TAX

PROPERTY TAX

PRIVATE HOUSE

Figure 43: Inclusion of Business Partners and Alternative Payers

An example of SAP Tax and Revenue Management functionality can be seen in Figure 43. Anna and Paul are married. Anna runs a business with two offices, for which she pays business license fees and sales tax. She files her tax returns through her tax accountant, who is also kept in the system as a business partner (contact person). Of course, she also pays personal

income tax. Also, she and her husband own a private home. Anna is liable for the property tax. But Paul, as co-owner, is known in the system as an “alternative payer,” since he is the one who pays the property tax. ONE CITIZEN ACCOUNT – DIFFERENT CONTRACT ACCOUNTS

The number of contract accounts an administration uses for each business partner depends on the control parameters involved. The more differences there are with respect to legal or political regulations, the more contract accounts a taxpayer needs. This could be one contract account for each type of tax. You can display the data in as detailed or summarized fashion as you wish, with several individual contract accounts being displayed for one integrated citizen account. Written informa-

tion related to the citizen account, such as invoices or account statements, can be created for citizens periodically or by request. SAP Tax and Revenue Management provides a centralized view of a particular citizen and their citizen account. Employees in all departments of an organization can look at or maintain the same data. Inconsistencies in person-related data are therefore a thing of the past. In contrast with traditional, nonintegrated software, this represents a considerable savings in time and money. Of course you can also restrict access to certain confidential data using authorizations, which ensures data protection and proper access to sensitive data.

CITIZEN BUSINESS

PROPERTY TAX

BUSINESS PARTNER

LEISURE TAX

TAX AND REVENUE MANAGEMENT

Figure 44: Citizen Account on mySAP Enterprise Portal

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The citizen can see all open items on the Internet. In the backend office, there are different contract accounts with different authorizations and business rules. The layout shown here is only an example of a possible citizen account.

ment handles all payments and collections as well as related processes such as interest, dunning, or account maintenance. Online payment becomes simple for taxpayers using SAP Biller Direct in mySAP Enterprise Portal.

Online Tax Return Filing A citizen or company files a tax return online by filling in Internet forms. If further information is required for online submission, the tax agency contacts the taxpayer by e-mail, phone, or letter. These contacts are managed in mySAP CRM, with the tax return now transformed into a mySAP CRM service order.

Postings made by SAP Collection and Disbursement regularly update the G/L account. Further revenue accounting is done in SAP FI and SAP Funds Management.

An important part of the return reconciliation process is carried out when the government agency calculates the taxes due. The service order is connected to the SAP Internet Pricing and Configurator (SAP IPC), which is a part of the standard functionality of mySAP CRM. SAP IPC is a toolset of pricing functions that can be configured and enhanced for use in the tax calculation process. It is important to note in this context that SAP does not provide any content for SAP IPC nor maintain any calculation rules, but rather provides a tool that the tax agency can use to define its own tax calculation rules. Next, SAP IPC sends the calculation results back to the service order. If the government agency has an Internet tax return form, the citizen can now call up SAP IPC to check any calculation errors that may have occurred. An interactive tax form could be part of the services the tax agency provides. The service order within mySAP CRM sends the billing and posting information to the SAP® Billing Engine. This is a highperformance billing tool that sends an invoice to the taxpayer and posts the amount due in the taxpayer’s account in SAP Collection and Disbursement. SAP Tax and Revenue Manage-

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REVENUE MANAGEMENT

Revenues in the public sector need to be managed on a daily basis. Payments made to the government, dunning procedures, and deferrals are examples of such revenue processes. Payments Payments triggered by a government agency can be processed automatically using the payment program and executed by very different payment methods (for example, electronic transfers, debit memos, or checks). Incoming payments such as transfers from citizens are interpreted by the system using unique criteria and assigned using flexible clearing control. Payment receipts that cannot be assigned are forwarded to manual post-processing in the clarification worklist, with each processor accessing a personal processing list. Individual post-processing can lead to complete or partial clearing, to a repayment of an amount, or to resubmission at a later date – with or without the approval of another employee. This can be individually defined using SAP Business Workflow. In addition to the clarification worklist, you can use SAP Collection and Disbursement to manually process credits. Credits can be cleared by means of an individual decision (with or without approval) whether it is by clearing, transfer, keeping funds in the account, and so on.

CASH JOURNAL AND CASH DESK

DEFERRAL, REMISSION, AND TEMPORARY WAIVER

The cash journal used by SAP Collection and Disbursement has functions that enable you to manually settle payment transactions. This functionality has been specifically designed to fit public sector requirements, roles, and authorizations, as well as day-end closing procedures.

In the case of financial difficulties, an agency can refrain from immediate enforced collection of the receivable and either defer, remit, or temporarily waive the receivable instead.

The cash journal reflects the cash desk structure of an organization and its individual agencies. Using the cash journal, postings at the cash desks can be logged and evaluated. This double-entry compact journal is managed in account form and records the postings for all cash transactions. The cash journal shows the cash balance at any time by adding the cash receipts and deducting the cash expenses. The cash journal also serves as a basis for entries in the general ledger and thereby represents the “Cash” G/L account. DUNNING AND COLLECTION PROCEDURES

The dunning program can incorporate various dunning procedures simultaneously. The dunning procedure to be used is determined by the contract account or the open line item. For each dunning procedure, you can specify different rules for the minimum amount of the receivable due, the number of grace days, or calculation of interest and dunning charges/dunning amount. You can exclude certain items or entire contract accounts by using the time-dependent dunning block indicator. The dunning program also determines which activities are linked to a dunning level: for example, a dunning notice, an outgoing payment block, the deactivation of an installment plan, or notification to the call center to call the taxpayer who is in arrears. Lastly, the unpaid receivable can be transferred to a collection agency.

SAP Collection and Disbursement supports remissions and limited and unlimited waivers using a clarification worklist, in which you monitor write-offs and initiate further steps if required. Individual or grouped receivables can be bundled in an installment plan when a deferral is granted. If necessary, interest and fees are also calculated, the installments agreed upon, and the appropriate letter is printed. REVENUE DISTRIBUTION

Revenues often do not remain with the authorities, but are forwarded to other public or private institutions. SAP Collection and Disbursement supports this distribution to other business partners through its mass processing functionality. This ensures fast and time-dependent allocation and transfer of the amounts received to other institutions. Taxpayer’s Obligation to Submit Declaration The SAP Collection and Disbursement component of SAP Tax and Revenue Management not only manages paymentrelevant processes, but also supports tax management for the handling of tardy declarers. The system saves the taxpayer’s commitment to submit certain tax returns, requests, or other documents in regular intervals. This commitment is first fed into the system automatically on a particular schedule (monthly, yearly, and so on), and given a due date, as for an open item. If the documents are not received within the specified time limit, the system reminds the taxpayer of his commitment by sending a dunning letter or e-mail. A comprehensive function is available for monitoring outstanding payments, as with the regular dunning procedure in FI. The business rules for dunning inbound correspondence are stored in the contract object.

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Managing Information on Taxpayers Effective financial management requires that measures be taken in accordance with an individual’s circumstances. Because of this, when dunning activities or payment deferrals are carried out, the system also takes the history of the taxpayer into account. Automatic mass processing of taxpayers must allow for these differences. Government agency employees must be able to get a fast overview of a business partner – in this case, the taxpayer. For this reason, all essential information on the relationship with the taxpayer is stored in the system: payment history, dunning history, correspondence history, adherence to deadlines for tax returns (inbound correspondence history), and contact history. A poor payment history is automatically reflected in the taxpayer’s creditworthiness. INTEGRATION WITH ACCOUNTING AND BUSINESS SUPPORT APPICATIONS

As a fully integrated solution, SAP Tax and Revenue Management represents the link between the feeder systems and the supporting applications in which analyses and reports are created, such as SAP BW, SAP FI, SAP CO, SAP Funds Management, and cash management in SAP R/3 Enterprise are all supplied with data from SAP Collection and Disbursement through a central interface, reflecting the necessary level of aggregation. This ensures reconciliation between accounting documents from SAP Collection and Disbursement and G/L accounting documents in finances. In the context of revenue management, government agencies can also implement SAP Funds Management within mySAP Public Sector in order to depict integrated budgeting processes and optimized revenue and expenditure management.

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Online Citizen Account and E-Government Solutions A government agency can set up an online citizen account using SAP Biller Direct, which is fully integrated with SAP Collection and Disbursement. Taxpayers access the account and can view all receivables and credits. They can then decide whether to pay them all or only some, and choose their preferred payment method. It is also possible to clear items in full or partially. SAP Biller Direct has a complaints management facility so that citizens can get in touch with their local government agency and refer directly to a particular line item. The taxpayer’s comments on the receivables are stored in a contact history related to the business partner and specific to the line item in question. The government agency can then evaluate and process the line item together with the citizen’s comments. The SAP Biller Direct billing engine has the following features: • Full Web access • Display of all items on the citizen account (open, paid, payment arranged) • Initiation of payments (via credit card, direct debit) • Recall of payments if required • Payment authorization (via interface, with amount) • Electronic bill presentment • Contact log integration (complaints or inquiries)

PERFORMANCE AND BENEFITS

The back-end SAP Collection and Disbursement component, which is linked into SAP Tax and Revenue Management, enables you to process large amounts of data in a short period of time. The parallel processing of batch processes ensures rapid and high-volume throughput. In a high-end performance test carried out by SAP and Hewlett-Packard in the SAP R/3 System, the following results were achieved (documents per hour): • Transfer of posting data: 14,300,000 (20 requests, 320 jobs) • Posting run: 3,600,000 (7 requests, 112 jobs) • Correspondence: 8,900,000 (6 requests, 96 jobs) The structural advantages of a client/server system – especially the high scalability – apply in full.

SAP Tax and Revenue Management offers the following benefits for public authorities and their clients: • Complete view of the constituent or citizen and his or her account • One logical master data framework with selective views, defined according to the individual needs of the respective public services agency • Shorter response time to inquiries – Citizens and companies can easily obtain quick, ad hoc information on their account status, including all open debts, filing obligations and deadlines, as well as due claims against the public authority. • Improved contact rate in the call center – Inquiries can be routed and processed more quickly. • Improved technical performance • Decrease in outstanding receivables • Faster detection of non-compliers and non-filers • Efficient use of resources in audits and investigations • Enhanced revenue accounting

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INTEGRATION ASPECTS In this chapter, you will find assorted information linking the SAP Financial Accounting (SAP FI) component of mySAP Public Sector to many other areas of SAP R/3 Enterprise. Within SAP FI, there is information on assets and internal controlling. Within SAP Logistics, you will find information on procurement and plant maintenance. There are descriptions of the functionality in SAP HR and in SAP® Position Budgeting and Control, which is new to SAP R/3 Enterprise. Lastly, there is information on SAP Records Management and SAP Business Workflow.

SAP ASSET ACCOUNTING (SAP AA)

Traditional asset accounting encompasses the entire lifetime of an asset, from the purchase order or initial acquisition (possibly managed as an asset under construction, or a leased asset) up to its retirement. The system calculates – largely automatically – the values for depreciation, interest, and insurance (and so on) of an asset. This information is grouped in reports: For example, you can define a report for depreciation forecasting or for the simulation of asset value development.

WAREHOUSE

VENDORS

MAINTENANCE WORK ORDERS

PURCHASING

INVOICE VERIFICATION

CAPITAL INVESTMENT

ASSET ACCOUNTING

• MATERIAL • COMPLEX FIXED ASSETS • FOREIGN CURRENCIES • AMOUNTS AND VALUES • SIMULATION

• DEPRECIATION • INTEREST • PROPERTY VALUE • INSURABLE VALUE • SUBSIDIES

FINANCIAL STATEMENT

COST PLANNING

SIMULATION AND CONTROLLING

BUDGET

ACTUAL COSTS OVERHEAD ALLOCATION

INVENTORY

Figure 45: Integration of SAP Funds Management with SAP Asset Accounting

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However, demands on asset accounting in the public sector are changing. In addition to the traditional emphasis on inventory accounting for assets, in the public sector there is a growing need for the continuous management of monetary asset values, as practiced mainly in the private sector, using accrual-based accounting. SAP Asset Accounting provides a comprehensive solution that meets both of these requirements. Furthermore, it is fully integrated with SAP Funds Management, SAP Financial Accounting, and other SAP R/3 Enterprise components. The assets subledger serves as a subsidiary ledger to the SAP FI general ledger, providing detailed information on transactions involving fixed assets. Public administrations are asking to be able to create financial statements and P/L statements, a requirement fulfilled by SAP R/3 Enterprise. This enables U.S. government agencies, for example, to carry out accounting according to U.S. GAAP or GASB 34 regulations. For this, you need to be able to group your fixed assets according to funds or fund groups. Using the functional area, fixed assets can be grouped according to functional aspects of an organization. If you are using SAP Grants Management, assets can also be grouped according to grants. Asset Classes Fixed assets are classified according to asset classes, which are defined according to legal and management requirements. For each asset class, you can define control parameters and default values for depreciation calculation and other master data. Here is one possible way to group your assets: • Financial assets • Assets under construction • Technical assets • Leased assets • Low-value assets

You can specify central default values for each asset, such as classification criteria, depreciation keys and useful life, data on the valuation of net assets, insurance-related data, and so on. If a physical inventory is taken of fixed assets, default information from the asset class is used. Even if an asset portfolio is extensive and complex, it can still be structured and classified in a clear and appropriate way. This facilitates asset-specific reporting and tracking. You can also define individual validation and replacement rules for asset classes. These rules form the basis of checks on the data entered during master data maintenance or posting. In the integrated system, these functions enable buyers or accounts payable processors to create new asset master records when they need them, rather than having to wait for confirmation from asset accounting. Flexible Valuation and Depreciation Different requirements for different kinds of asset valuation are reflected in the chart of depreciation, in the form of depreciation areas. For example, you can define depreciation areas for the valuations required by controlling and financial accounting. All commonly used methods for calculating depreciation values are supported. The system calculates and posts depreciation for the individual depreciation areas as required. Costaccounting depreciation, for example, can be posted directly to SAP CO and depreciation items relevant to financial accounting can be posted directly to SAP FI. Depreciation is not usually posted to SAP Funds Management. Within the context of accrual accounting, however, this may be required, and can be set up using the asset customizing functionality of SAP R/3 Enterprise.

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Asset Classification Using asset classes, you can classify your asset portfolio in a basic manner. If a more complicated vertical classification of complex or hierarchical assets is required, asset groups, asset super numbers, as well as main asset numbers and subnumbers are used. An asset group refers to a grouping of several fixed assets that belong together, typically based on their function. An asset group can have its own master record. In reports, you can display the fixed assets that belong to the asset group. While asset verification is primarily carried out for the main asset number, the super number represents the grouping of assets including both asset main numbers and subnumbers, whereas the asset subnumber is used to represent special interchangeable components or subsequent additions to the asset. You must use subnumbers if you want to record data for multifunded or multifunctional assets. You create an asset group in order to combine multiple assets for a single depreciation calculation. The main asset number is used in reporting to summarize data for any number of assets. Asset Acquisitions Regardless of the process used for procurement of assets, the integrated SAP Asset Accounting component supports various transactions, including: • Asset acquisition triggered by the creation of a purchase order in purchasing, and followed by the receipt of the goods and invoice • Asset acquisition without a purchase order, based on a vendor invoice By customizing asset transaction types, you can define the movement of asset transaction data in SAP Funds Management. If your accounting procedures group assets according to fund, functional area, or grant, you can use these as account assignment objects to manage your assets. To represent assets that are financed by several funds, you can use an asset subnumber to link to the corresponding fund for these assets.

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For all asset postings such as acquisitions, transfers, depreciation, or retirements, the fund, functional area, or grant are automatically posted to and updated in SAP Controlling, SAP Financial Accounting, and SAP Funds Management. If you are using SAP Grants Management and the grant is stored in the asset master record, all asset postings will automatically also post to the grant. For asset clearing in SAP Controlling or SAP Project System, the fund, functional area, and grant form part of the posting data. Simulation You can simulate various scenarios for asset transactions. For example, you can change the depreciation method or the useful life of an asset, and then analyze the different values that the system calculates. Once you have found the most favorable scenario, you can use it as your final version. In the following areas, you can use simulation functions to keep track of your assets: • User-defined replacement and validation rules simplify asset inventory taking and increase the reliability of posted data • Comprehensive simulations can be generated from any asset information system report • Flexible tools support the transfer of asset data from legacy systems to SAP R/3 Enterprise • Tools for mass processing of data simplify the posting of mass changes and mass retirements Reporting The asset information system contains all the reports you need for quantity- and value-based asset management, including asset lists, inventory and insurance lists, reports for cost accounting purposes, and other analyses and statistics. When you customize your asset reports, you can categorize your assets according to fund, functional area, and grant.

SAP CONTROLLING (SAP CO)

As public sector organizations face increasing budgetary pressure, they are also facing demands to deliver services and products at reduced cost. Many of these organizations are also required to compete with private sector companies for delivery of these services and products, as constituents demand more privatization in an effort to improve the services or products and lower the amounts they are required to pay for them.

HUMAN RESOURCES

PERSONNEL COSTS

ASSET ACCOUNTING

Whether private companies can deliver these services or products as efficiently as the public sector is questionable; however, public sector organizations must gather the proper information necessary to defend against these privatization attempts. Accrual-based cost accounting delivers the necessary information that, if properly used, will result in the continuation of revenues and cash flows that would have otherwise disappeared – and, with them, large portions of available budget!

COST ELEMENT ACCOUNTING

ASSESSMENT DIRECT ACTIVITY ALLOCATION IMPUTED COST CALCULATION

COST ELEMENTS COST CENTERS ACTIVITY TYPES COST CENTER ACCOUNTING COST CENTER ACCOUNTING

IMPUTED COSTS IMPUTED INTEREST

MATERIALS MANAGEMENT COSTS FROM EXTERNAL PURCHASE

OVERHEAD COST ORDERS

ACTIVITYBASED COSTING (ABC)

PROJECT SYSTEM

PRODUCTS ORDERS COST OBJECTS

PROCESSES

PROJECTS

FINANCIAL ACCOUNTING PRODUCT COSTING OTHER PRIMARY COSTS AND REVENUES

EXTERNAL SYSTEMS IMPORT VIA DATA AND/OR COMMUNICATION INTERFACES

COST ELEMENT ACCOUNTING

PROFITABILITY ANALYSIS

REVENUE ELEMENTS

PROFITABILITY SEGMENTS

Figure 46: SAP Controlling in SAP R/3 Enterprise

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In addition, efficient cost accounting and controlling features are necessary for public sector organizations to understand the actual costs of their services or products, recognize underutilized resources, identify inefficient activities, and take immediate advantage of opportunities for true cost savings. These cost savings will translate into increased available resources that will allow organizations to “do more with less” in the future. The SAP Controlling (SAP CO) component within SAP R/3 Enterprise solution enables a government organization to monitor, coordinate, and improve all business transactions within and outside of the organization. The cost and activity accounting methods provided in SAP R/3 Enterprise are comprehensive, using key figures, reporting tools, planning and budgeting functions, and other agency-specific activities. In addition, true cost and activity accounting methods are used, which are the prerequisite for accrual accounting. These methods are the first step toward establishing performance measurement and activity-based management systems. Accurate and relevant cost accounting information is invaluable to managers within public sector organizations, allowing the best possible business decisions to be made, while simultaneously estimating costs more efficiently and controlling expenses. Integration Within SAP R/3 Enterprise Regardless of whether you use budgetary accounting or financial accounting methods, the controlling and accounting applications in SAP R/3 Enterprise are integrated and reconcilable (see the chapter entitled SAP Fund Accounting for relevant integration points). Cost and activity accounting consists of a number of different applications that help you answer different types of questions for the public sector. These are cost and revenue element accounting, cost center accounting, overhead order and product cost controlling, cost object controlling, and SAP Project

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System. Furthermore, SAP R/3 Enterprise contains activitybased costing and profitability analysis. All of these accounting types are discussed in detail below. COST AND REVENUE ELEMENT ACCOUNTING

Cost and revenue element accounting collects an organization’s costs and revenues for controlling and cost accounting purposes. Most values are transferred automatically from SAP FI. Costs that do not have a corresponding expense posting in SAP FI are calculated and posted directly in cost and revenue element accounting. The reports in cost and revenue element accounting provide an overview of costs that have been incurred and revenues that have been generated by an organization. These actual values can be compared with numerous planned amounts and reconciled with the postings made in SAP FI. Cost and revenue element accounting organizes revenues and costs according to nominal income and expense codes, while other controlling components identify the relevant activities and areas of responsibility. Overview reports allow drill-down access to other components of cost and activity accounting. COST CENTER ACCOUNTING

Due to the structure of services in public institutions, it is not always possible to assign revenue and costs directly to individual products or services. As a result, cost center accounting is used to assign revenues (such as fees and charges for services) and costs (such as office supplies, rent, utilities, personnel, and so on) to the relevant cost center as they are incurred, and then perform various evaluations on the organizational units of these cost centers. The costs can then be distributed over the relevant products or activities using a number of different allocation methods. These methods range from allocations made using general allocation criteria, up to detailed activity allocations that allow costs to be assigned to the corresponding products or services with great accuracy.

Cost center accounting records monetary values and statistical quantities, allowing you to analyze the actual costs by cost center, together with the related activities. This is important for ensuring the efficiency of individual organizational units. For example, sound decision support may require the personnel costs of a cost center to also be attributed to the number of hours worked by employees. OVERHEAD ORDER AND PRODUCT COST CONTROLLING

The overhead orders and product costing components of SAP Controlling allow you to plan, calculate, and control costs for all activities and products or services of an organization. You can use them separately or together. The overhead orders component uses SAP CO orders as cost collectors. These orders allow you to plan, enter, and control costs for both one-time jobs and ongoing activities, regardless of whether these are performed for other internal cost centers or for external parties. An example of a one-time job might be the creation of a land development plan. An ongoing activity might be the issuing of passports or vehicle licenses. You can set cost budgets for individual jobs or ongoing activities, which can be automatically monitored and notifications provided when these budgets are exceeded. COST OBJECT CONTROLLING

You can also use the product cost controlling component to calculate product costs. The cost collector here is referred to as a “cost object.” A cost object differs from an overhead order in that it is more closely integrated with the logistics functions of mySAP Supply Chain Management. In cost object controlling, you can determine the costs of tangible or intangible products or activities. SAP PROJECT SYSTEM

To monitor more complex, one-time projects, you can use the SAP Project System (SAP PS) together with SAP Controlling (SAP CO). Included with SAP PS are project management

functions that allow you to control deadlines, costs, and resources of your projects. Project planning can also be integrated with the other SAP Controlling components. The elements of a project are organized into a hierarchical structure using a work breakdown structure (WBS) or WBS elements. This can be supplemented with more detailed operational activities, also referred to as “networks.” The Project System is fully integrated with the other SAP Controlling functions, since the individual elements of a WBS element and individual network operations represent cost collectors in SAP Controlling. You can assign costs and statistical quantities to projects using activity allocations or other methods. Costs can be allocated to one or several WBS elements. Capital investment projects can also be periodically capitalized and recorded in SAP Assets Accounting through project settlement functions. Noncapital costs can be transferred to other cost collectors or directly to SAP Financial Accounting. ACTIVITY-BASED COSTING

Activity-based costing represents another important controlling approach for public organizations, and is particularly recommended for organizations that perform primarily administrative tasks and internal services between departments. In activitybased costing, business transactions are analyzed in the form of cross-departmental processes and optimized with regard to time, cost, and output. This view of public sector activities focuses on the overall optimization of the business transactions, instead of viewing the activities performed within individual cost centers. In activity-based costing, you define the relevant business processes for your organization. You can plan and calculate costs and quantities, as well as develop scenarios for improving processes using special analysis functions.

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PROFITABILITY ANALYSIS

Profitability analysis is an important efficiency-optimizing step for those areas within public organizations that generate revenues for their products and services. The SAP CO component enables you to analyze revenues according to user-definable segments of an organization’s activities and supports the targeted analysis of different areas for their contribution to profitability. The analysis functions in profitability analysis provide critical support for decisions regarding price determination and outsourcing. Integration with mySAP Public Sector Cost and activity accounting components are integrated with other application components of the mySAP Public Sector solution. Integration provides for a single point of entry for all information, with automatic recording in the other components. The data relevant for cost and activity accounting is transferred from the other application components to the SAP Controlling component. Postings you make in SAP Financial Accounting (SAP FI) or in SAP Materials Management (SAP MM) are updated in real time in the relevant SAP Controlling components, allowing immediate access to this information for cost and activity accounting analyses. Master data and related assignments are also checked for validity and consistency (see the chapters entitled SAP Funds Management and Fund Accounting for additional information on mySAP Public Sector data integration). This tight integration minimizes the time necessary to post both actual and planning data. As an example, master data integration allows seamless transfer of planned costs from cost center accounting to SAP Funds Management. You can also transfer data from external systems to SAP Controlling – either in real time, asynchronously, or periodically. Figure 46 shows the components that work together with SAP Controlling, along with the possible data flows within and between these components.

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Cost Accounting Methods All prevalent cost accounting methods are supported in the mySAP Public Sector solution. The following is an overview of key methods supported: • Actual cost system, standard costing The simplest cost accounting method is the entry and allocation of costs compared to standards. In standard costing, allocated quantities (such as hours of work for an administrative task) may be valuated using planned activity prices, which will allow you to analyze variances. • Absorption costing, direct costing This cost accounting view emphasizes the difference between absorption costing and direct costing. Under this method, costs are allocated according to their relation to specific activities. All costs may then be divided into fixed and variable (activity-dependent) components. In absorption costing, all of the costs are allocated to products or activities, while direct costing allocates only the variable costs. • Contribution margin accounting In contribution margin accounting, you avoid distributing overhead costs but, instead, leave the costs assigned to the original cost collectors. • Cost assessment Cost assessment is a method of allocating all planned and actual costs without splitting them into fixed and variable components. Overhead is allocated to cost collectors and products using various allocation techniques. • Overhead costing Overhead costing is similar to the cost assessment method. Costs are not split into fixed and variable components but, instead, are allocated based on calculated rates. As an example, the personnel costs for administrative activities would be calculated based on planned hourly rates in cost center planning. The residual overhead would then be passed on to the orders, projects, and cost objects using these calculated rates. • Static standard costing In contrast to the cost assessment and overhead costing methods, static standard costing divides the cost center structure into activity types and uses activity allocations. Costs, however, are not divided into fixed and variable components.

Other cost accounting methods include marginal costing and more complex methods of activity-based costing. You can implement and use in parallel any of these methods. INTERACTIVE PLANNING IN SAP CO

SAP Controlling provides you with extensive interactive planning functions. You can create different versions to store various scenarios and planning assumptions. You can also copy and reevaluate these versions. Planning may be carried out by individual cost center, project, or product managers, or may be performed centrally by a controlling agency. Numerous automatic functions are available to accelerate the planning process. SAP CO Reporting mySAP Public Sector contains powerful information systems for creating controlling reports. Threshold values allow efficient targeting of your analyses. You can navigate interactively, access additional reports to obtain detailed information on individual values in an overview report, and display individual documents that created each line item. Standard reports fulfill the most common analysis requirements. You can adapt these easily to meet the specific requirements of your organization without any programming knowledge. When you define the reports, you can immediately see the final list format to be displayed. CLASSICAL AND ELECTRONIC PROCUREMENT (SAP MM)

The SAP Materials Management (SAP MM) procurement process refers to one of the most important logistics processes for governmental bodies. Depending on the administrative area in question, the outsourcing of activities is one of the most important tasks of the public sector. Within the context of public procurement, there are special requirements with respect to the process and monitoring of procurement that need to be fulfilled.

SAP Materials Management is a fully integrated component of mySAP Business Suite. It supports all the phases of materials management: material requirements planning (MRP), purchasing, goods receipts, inventory management, and invoice verification. Procurement Process The typical procurement cycle comprises the following phases: 1. Determination of demand The materials and services in the demand (requirements) pipeline come either from the individual departments of an organization or within the course of centralized material requirements planning. Besides manual input of requisitions by a department employee, materials management also automatically identifies materials to be procured based on inventory reorder levels. In the case of more complex purchasing projects, you can also use a bill of service. 2. Sourcing In many cases, procurement for the public sector requires that an invitation for bids be published, in order to obtain procurement sources. After a bid has been accepted, you can use the purchasing functionality of mySAP SRM to find possible sources on the basis of the agreements or contracts made. 3. Purchase order handling The purchasing system takes over the information from the purchase requisition or contract, which simplifies data entry when the order is placed. Scheduling agreements and contracts are also supported. Customizable PO release procedures enable a government agency to realistically map its approval procedures. 4. Purchase order monitoring The system checks the resubmission times specified by the government agency and then automatically prints out reminder letters. You can see the current status of all your requisitions, offers, and orders.

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5. Goods receipt and inventory management The shipment and goods receipt personnel can confirm the receipt of goods by entering the order number. If over or underdelivery tolerance values have been defined in Customizing, the purchasing personnel in an agency can limit over or under delivery. Services rendered are recorded on a services entry sheet. In this case, the data entered is monitored by an internal release process. 6. Invoice verification At the end of the logistics chain of purchasing, inventory control, and invoice verification, the incoming invoice is checked for correctness of product, price calculation, and approval procedure. When the invoice is posted, the invoice data is saved in the system. The data in the system is further updated with the posting documents in SAP MM and SAP FI. Integration with Financials Besides being integrated with the other logistics components of mySAP Business Suite, such as SAP Plant Maintenance, SAP Project System, or SAP Sales and Distribution, from which purchasing processes can be triggered, SAP Materials Management (SAP MM) is also directly linked with all SAP accounting functions. Besides SAP Controlling (SAP CO) and SAP Financial Accounting (SAP FI), the integration of SAP MM with SAP Funds Management (SAP FM) is particularly important with respect to the execution of public budgets. During the entire purchasing process, commitment and actual postings are updated in SAP Funds Management. The account assignment information can be manually input or derived automatically by the system. In active availability control, you can ensure that expenditures do not exceed the stipulated budget. Updating and availability control can be carried out for the following activities: • Purchasing: purchase requisitions, orders, scheduling agreements • Inventory management: goods receipt, goods issue, transfer postings • Invoice verification 104

Seen from the perspective of SAP Funds Management, purchasing documents represent a type of expenditure document, as the following figure shows:

MATERIALS MANAGEMENT

ACTUAL POSTING (INVOICE)

FUNDS MANAGEMENT

references

PURCHASE ORDER

FUNDS COMMITMENT

PURCHASE REQUISITION

FUNDS PRECOMMITMENT

FUNDS RESERVATION

Figure 47: Relationship Between Purchasing and Budgeting Documents

Electronic Procurement with mySAP SRM Using mySAP Supplier Relationship Management (mySAP SRM), you can carry out the entire procurement process for material and services via a user-friendly, browser-based interface. If your organization is distributed, you can use the Internet or an organizational intranet for procurement. mySAP SRM is SAP’s follow-on product to Enterprise Buyer professional edition (EBP). You can use mySAP SRM in a distributed system landscape. You can link up SAP R/3 systems, SAP® R/2® systems, or other ERP systems. Various scenarios are available for the integrated use of mySAP SRM with an SAP R/3 Enterprise or other ERP system. The actual procurement process, for example, can be carried out in SAP R/3 Enterprise, while users access the Web-based interface

BACK-END SYSTEM

mySAP SUPPLIER RELATIONSHIP MANAGEMENT (mySAP SRM)

PURCHASE

CREATE SHOPPING CART

CREATE PURCHASE REQUISITION

ACCOUNTING (FI/CO)

FUNDS MANAGEMENT

CHECK FUNDS

CREATE PURCHASE ORDER

ACCOUNTING INFORMATION

CREATE GOODS RECEIPT

CREATE GOODS RECEIPT

INVENTORY INFORMATION

CREATE INVOICE

CREATE INVOICE

ACCOUNTS PAYABLE

CHECK AND UPDATE FM

Classic Scenario

Figure 48: Procurement Using mySAP Supplier Relationship Management

of mySAP SRM. Here the user can select materials to be ordered, order services from the catalog, and use an electronic shopping cart. Figure 48 shows this “classic scenario.” SAP SALES AND DISTRIBUTION (SAP SD)

As an alternative to the SAP FM functionality for expected revenues (See the Receivables section of the chapter entitled, SAP Funds Management ), you can also use the SAP Sales and Distribution component to post revenue-related documents.

The integration between the SAP Sales and Distribution (SAP SD) and SAP Funds Management (SAP FM) components enables you to assign SAP FM account assignments to the business transactions in SAP SD, such as sales orders and sales contracts, and update a funds management document with the value type forecast of revenues. This means that you can assign revenues that were posted in SAP SD to the SAP FM account assignments (commitment item, funds center, and fund).

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SALES ORDER 4711 FUNDS CENTER A2 ITEM 10 –> FM ACCOUNT ASSIGNMENT COMMITMENT ITEM 221 ITEM 20 –> FM ACCOUNT ASSIGNMENT FUND A ITEM 30 –> FM ACCOUNT ASSIGNMENT SD BILLING DOCUMENT FM Account Assignment: • Automatic proposal • Manual entry SD DELIVERY

MM GOODS ISSUE

FI INVOICE FM Account Assignment: • Transfer from SD order

FUNDS CENTER A1

COMMITMENT ITEM 321

FM Account Assignment:

• Transfer from SD order • Automatic redetermination

FUND B

Figure 49: Integration of SAP Funds Management with SAP SD

You can also have SAP FM account assignments to procurement transactions that are triggered by a sales order, as well as goods issue postings arising in conjunction with the delivery of materials.

In the follow-on documents for the sales order, the purchase requisition, goods issue, and billing document, the SAP FM account assignment is not ready for input, since it is automatically derived from the sales order.

When you process a sales order, you assign the SAP FM account, and can enter it individually for each order item. When you enter an order item, the system will derive the SAP FM account assignment from the account assignment table in Customizing. If account assignments from SAP FM to SAP CO (profit center, WBS element) have been maintained, and an order item has been assigned to a profit center or WBS element, the SAP FM account assignment appears as the default value in the sales order and can be overwritten.

As of SAP R/3 Release 4.0A, the following processes of SAP SD are integrated with SAP Funds Management: • Sales order (credit and debit memo requests) –> Billing • Sales order –> Delivery/Goods issue –> Billing

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As of SAP R/3 Enterprise, you can update the commitment value of the SAP SD order in SAP Funds Management. The generation of purchase requisitions (third-party business transactions) in a sales order is also supported as of SAP R/3 Enterprise.

SAP PLANT MAINTENANCE (SAP PM)

In most cases, public sector organizations are responsible for the complex management of a significant number of very diverse public resources, including physical infrastructure (for example, streets, highways, bridges, railways, tunnels, parks, pipelines, cabling, and so on), buildings, facilities, vehicles, and equipment. The SAP Plant Maintenance functionality of SAP R/3 Enterprise covers all maintenance requirements of public sector organizations. Proper preventative maintenance is a key component for management of these resources, ensuring that these public resources are always in optimum condition to provide the highest quality

MASTER DATA DIRECT ORDER CREATION

PLANNING

REQUIREMENTS/ NOTIFICATIONS

ORGANIZATION PM WORK ORDERS

RESOURCES MATERIAL

INTERNAL SERVICE

EXTERNAL SERVICE

OBJECTS CONFIRMATIONS

HISTORY DOWNTIMES

DAMAGE LIST

COSTS

TASKS

and level of service to constituents and within the organization while, at the same time, meeting the increasing number of strict environmental and various other legal stipulations affecting the planning, processing, and verification of these maintenance tasks. In order to ensure that the highest quality of service is provided by the internal and external maintenance areas of your organization, the mySAP Public Sector solution provides comprehensive, integrated maintenance features. Scope of Activities SAP Plant Maintenance is a high-performance component that supports you when carrying out all maintenance tasks such as: • Detailed representation and management of assets to be maintained • Detailed planning and processing of maintenance tasks (for example, inspection, preventive maintenance, and repair) • Construction and modification of plants • Capacity scheduling and resource planning • Cost planning and determination • Recording of complete task-based, functional, and assetoriented history • Recording of financial results Integration Within SAP R/3 Enterprise The SAP Plant Maintenance application component is an integral part of the mySAP Public Sector solution, with direct links to SAP Materials Management (SAP MM), SAP Financial Accounting (SAP FI), and SAP Human Resources (SAP HR). The continuous exchange of information with other mySAP Business Suite components ensures an online, integrated working environment. In addition, integrated workflow management contributes considerably to the optimization of your organizational activities.

Figure 50: Integrated Activities in SAP Plant Maintenance

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Integration with the SAP Funds Management features of the mySAP Public Sector solution specifically supports: • Planning, budgeting, and monitoring of complex maintenance operations in connection with the various functions of the SAP Project System • Direct verification of available budget funds, if external procurement of materials or services is necessary for the execution of maintenance tasks • Cross-charging the cost centers concerned with services performed internally or with materials consumed from the warehouse • Monitoring not only the internal costs of budgeted maintenance work (internal control), but also the external expenses (budgetary control). In Customizing, you define rules for the account assignment and settlement of maintenance orders. The SAP Plant Maintenance solution provides an open environment, linking maintenance procedures to other areas of SAP R/3 Enterprise, as well as with external solutions such as computer-aided design (CAD), plant data collection (PDC), or geographical information systems (GIS). This allows you to establish a very sophisticated asset management environment, ensuring constant and consistent monitoring of your organization’s critical operational resources. SAP HUMAN RESOURCES (SAP HR)

Employee competence and productivity play a decisive role in the quality and efficiency of public administration. In view of heavy public sector spending on personnel, the management of positions and lean administrative processes has become the focal point of operative budgeting, and is shaping discussions on the necessity for further rationalization measures. The integrated SAP Human Resources (SAP HR) package for mySAP Public Sector is a highly efficient solution that combines the established standard functions of the SAP R/3 Enterprise HR application with processes developed especially for the public sector. The system is highly integrated, with interfaces to SAP Financial Accounting, SAP Funds Management, and SAP Controlling.

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ENABLEMENT

HR PUBLIC SECTOR

KNOWLEDGE MANAGEMENT, PORTALS, MOBILE COMPUTING, ETC.

HR PUBLIC SECTOR LOCALIZATION

ANALYTICS

STRATEGIC ALIGNMENT, WORKFORCE ANALYSIS, BENCHMARKING, ETC.

STRATEGIC

CORE FUNCTIONS

RECRUITMENT, TOTAL REWARD, LEARNING AND DEVELOPMENT

ADMINISTRATION, PAYROLL, TIME MANAGEMENT, LEGAL REPORTING, ETC.

R/3 ENTERPRISE – HR COLLABORATIVE BASIS

Figure 51: SAP HR Solution for Public Sector

SAP Human Resources for mySAP Public Sector offers a complete solution for all areas of the public sector – from federal and regional governments, municipal authorities and public works, through universities, nonprofit organizations and foundations, to broadcasting companies and research institutions. This will help you streamline all your strategic activities, allowing you to simulate and analyze everything from organizational structures to compensation packages, in order to make the most effective use of your organization’s talent and resources. By handling all of the basic HR processes for workforce management, the solution streamlines payroll activities, supports regulatory and labor requirements, and creates effective management strategies for the entire organization. State-of-the-art technology such as workflow management, Internet and intranet functions, integrated desktop systems, graphics tools, and optical archiving expands the possible ways

of managing the SAP HR application. Key processes in SAP HR for the public sector include the following: • High-performance payroll accounting, to calculate wages, salaries, and pensions of public officials, civil servants, public employees, and workers for many countries. The solution covers not only collective agreements of public sector employees, but also payroll and pension issues as well as supplementary benefits – such as seniority, sick pay, maternity benefits, vacation allowances, and bonuses. • Full integration with SAP Funds Management and SAP Controlling, which supports all administrative and accounting functions to manage funds, as well as fully integrated functions for planning, monitoring, and controlling resources, costs, and personnel. For more information, please see the chapters entitled SAP Funds Management and Fund Accounting . • Planning and management of personnel budgets, linking individual processes – such as planning of personnel budgets, funds approval, and management and continuous budget control – within integrated process chains. Integrated availability checks provide visibility into allocated funds and expenditures, and notify managers of the need to take action. For more information please see the section below on SAP Position Budgeting and Control . • Reporting functions enable you to compile statistics, for example, on the part-time and full-time staff employed in a particular government office, or on different employee groups. SAP Payroll Country-specific payroll accounting takes statutory and administrative regulations of a country into account. SAP Payroll is a major component of the SAP HR solution for mySAP Public Sector, and has been tailored to the needs of the public sector. The requirements per country have been updated in SAP R/3 Enterprise for various public sector organizations. International payroll accounting is fully integrated with the standard SAP Funds Management component. It provides organizations with the tools to efficiently complete day-to-day

payroll activities and supports country-specific as well as mySAP Public Sector solutions, in particular in the United States, Australia, Singapore, Germany, Great Britain, France, and Austria. The SAP HR reporting features include a wide selection of standard and statutory reports, which you can easily access and execute. They are integrated with popular desktop applications, such as Microsoft® Excel, enabling you to optimize the output as required. Country-Specific Features For many countries, the SAP HR for mySAP Public Sector component delivers country-specific functionality. The localization of SAP HR requirements for the public sector is part of the SAP R/3 Enterprise functionality. Check with your country office to get more information on country-specific solutions, or see www.sap.com. UNITED STATES

There is specific functionality in the areas of personnel management (Nature of Action processing engine, Reduction in Force processing, Priority Placement Program, or functions to support the U.S. Federal recruitment process), time management (sick leave donation or sick leave pools), benefits administration (U.S. 403B and U.S. 457 savings plans, savings plans under IRC Section 414(h)(2) and U.S. Federal bonds), payroll (nonresident alien payroll, deferred pay, multiple hourly rates, and so on), and reporting (EEO4 & 5). The functionality for Family and Medical Leave Act (FMLA) has been enhanced. GREAT BRITAIN

You will find specific functionality in the payroll area: The concurrent employment solution allows customers to correctly pay employees that have more than one contract of employment with their employer. These functions include National Insurance, income tax, statutory sick pay, statutory maternity pay, and court orders. Furthermore, there are solutions available for employees in higher education and research, such as the Higher Education Statistics Agency (HESA) data collection solution. 109

GERMANY

For Germany, HR for mySAP Public Sector contains specific functionality for administration and payroll, which conforms to German laws, including: child allowance, special payments such as Christmas and vacation bonus, deferred payments, supplementary pension fund, official housing, rehabilitation pay, pension payments, maternity leave, sick pay, and partial retirement. AUSTRIA

There is specific functionality within payroll, for example, social insurance calculation, pension increments, advanced payments, and higher duty allowance. FRANCE

Some of the key functions within the French payroll are: seniority calculation, promotions, and flexible part-time work schemes. AUSTRALIA

There are several country-specific HR functions within administration, payroll, and time management, such as: higher duty allowance, superannuation, termination workbench, and redundancy and leave processing. SINGAPORE

Here there is specific functionality in the areas of payroll, leave schemes, and administration, such as for pension and disciplinary measures. Conclusion A complete solution with fully integrated funds management and controlling, SAP HR for mySAP Public Sector allows administrations to optimize the HR processes and interactions that support employees. By enhancing workforce management performance, SAP HR for mySAP Public Sector helps organizations discover new opportunities for cost savings, generate process efficiencies, and provide employee development that keeps top talent in place.

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SAP HR for mySAP Public Sector also supports the reengineering of internal processes, helping public administrations improve workflows and seamlessly link to applications such as SAP Funds Management, SAP Financial Accounting, SAP Controlling, and SAP HR recruitment. SAP TRAVEL MANAGEMENT

SAP Travel Management is an integrated end-to-end solution that supports public sector institutions and organizations in optimizing their business travel processes. Some of the services provided include: • Pre-trip approval handling with workflows to streamline approval processes • Online booking with automatic policy checks to increase policy compliance • Travel expenses management to achieve 100% control of consolidated travel expenditure • Full integration with SAP’s financial, payroll, and funds management solutions • Reporting on supplier volumes and incurred travel expenses Numerous functions accompany every phase of SAP Travel Management, from application and approval to accounting and posting of both domestic and foreign business trips. SAP Travel Management is fully integrated with SAP R/3 Enterprise, providing interfaces to SAP Funds Management, SAP Controlling, and SAP Human Resources. SAP Travel Management provides the functions, forms, statements, and valuation tables necessary for the efficient management of business trips, including an electronic approval procedure. SAP Travel Management can be used by employees in a selfservice scenario, by team assistants and expense department administrators, and by line managers with approval authorization. SAP R/3 Enterprise contains preconfigured role definitions, which include the respective authorizations and menu entries.

PRE-TRIP REQUEST & APPROVAL

TRAVEL PLANNING – ONLINE BOOKING

• Travel request including purpose, destinations,

• Real-time availability and online booking of air, hotel, car • Best fare checks • Auto-check on official travel policy throughout

estimated costs, travel & transportation services needed • Connection to SAP Business Workflow for system-automated routing of approval

entire application –> Consolidate and improve supplier negotiations to cut direct purchasing costs • Personal traveler preferences • For self-service users, team assistants and managers

TRAVEL EXPENSES MANAGEMENT

• Per-diem based and receipt-based expense reporting for domestic & international trips • Recording of travel purpose, destinations,

cost assignments, advances, deductions, credit card clearing, etc. • Auto-check of expense policy • Official versions for Public Sector in Germany, France, US, Canada • Germany only: Separation Allowance/ Relocation (TGV, LTGV) • For self-service users, travel administrators and managers

INTEGRATION mySAP HR

• Employee data stored in mini master dataset (use of HR optional) • Transfer of tax-relevant and tax-free amounts –> correct taxation in payroll • Option: payment via HR • Integration with non-SAP systems

mySAP FINANCIALS

• Integration –

> Financial accounting –> Controlling • Option: Payment via Financials • Integration with non-SAP systems possible

FUNDS MANAGEMENT of commitment items • Creation – > funds control based on commitment items, funds, funds centers…

DATA MEDIUM EXCHANGE

• Option: Payment of expenses

via data medium exchange (DME) to bank

Figure 52: SAP Travel Management in SAP R/3 Enterprise

SAP® Travel Planning Costs incurred for employee travel – such as direct purchasing costs, agency fees, and indirect processing costs – can be cut significantly by implementing a self-service scenario for online booking of travel and transportation. SAP Travel Planning is powered by online connections to major central reservation systems, providing access to thousands of airlines, hotel chains, and car rental companies. It enables an organization to electronically enforce established travel policy guidelines and negotiated fares directly at the point of sale. Employees are independent of business hours, with 24/7 system access, which means that they can skip renegotiating with an agent in case their travel plans change. Travel agents can concentrate on value-adding services instead of just fulfillment. Using this form of travel planning, organizations have a higher compliance with official policy as well as obtaining a clear overview of their travel cost structure. A consolidated management

information system facilitates decision making regarding travel service providers and changes in an organization’s travel policy. Expense Recording SAP Travel Management enables per-diem accounting of accommodation, meals, mileage, and accounting using individual receipts. You can classify the per-diem rates according to criteria such as trip purpose and vehicle class, and draw up different policy rules for expenses. You can also settle trips based on the legal regulations governing foreign and domestic business trips in your country. To facilitate system maintenance, SAP offers downloads of the latest per-diem allowances and easy import into the customer’s system. Trip settlement rules are based on trip characteristics defined in Customizing – foreign or domestic trips, for example – and the per-diem rate. Receipts can be broken down according to individually adjusted maximum rates.

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In Customizing, you can also define rules for the layout of user screens, mandatory fields, default and maximum values, as well as for the settlement process, based on trip criteria such as international or domestic trips. You can also maintain a detailed cost assignment for all types of cost objects (for example, cost center, project, and fund). The use of a corporate credit card accelerates the data entry, settlement, and reconciliation process. An employee only needs to electronically insert the corresponding receipt items from an online receipt pool, which is based on imported credit card transactions, when entering expenses into the system.

to budgetary control. You can assign accounts for travel requests and travel expense reports directly to commitment items, funds centers, and funds according to different criteria. For more information on funds, please see the chapter entitled SAP Funds Management . • Integration with SAP Controlling: You can make direct account assignments of trip costs to different cost accounting objects – cost centers, orders, or work breakdown structure (WBS) elements. Costs specified for all of an employee’s trips or for individual trips can be distributed at different levels, with different distribution possibilities for the total costs of a trip, costs per stopover, or per individual receipt.

Integration of SAP Travel Management with SAP Payroll SAP Travel Management uses the master data stored in the HR structures, but only as a minimal dataset. The use of SAP HR is not a prerequisite for the use of SAP Travel Management. The HR datasets contain information such as organizational unit assignments, personal address, cost level assignments, expense reporting authorization, and so on.

SAP POSITION BUDGETING AND CONTROL

The SAP Travel Management component processes business trips for private enterprises as well as for the public sector. The advantages of integrated data become particularly evident in SAP Travel Management: • Integration of SAP FI with SAP Payroll ensures correct posting, taxation, and payment of travel costs in SAP HR. You can post HR accounting results directly to SAP FI without reentering any data. Payments to employees can take place via different methods including SAP HR payroll runs, the payment program in SAP FI, or via data medium exchange (DME). You can repeat a period-related payroll run or carry out retroactive accounting for changes to master data and trip data at any time. • Integration with SAP Funds Management: Travel expenditures incurred in the public sector can be budgeted in detail (for more information, please see the following section, SAP Position Budgeting and Control ). The system can automatically create commitments for travel requests and expenditures in SAP Funds Management, where they are subject

The new SAP Position Budgeting and Control solution replaces the existing “SAP HR Funds and Position Management” solution and is available with the SAP R/3 Enterprise Extension EA-HR 1.10. It includes functions for: • Creating personnel commitments by means of an eventdriven background process (automatic commitment creation) • Workflow support for processing messages that occurred during commitment creation • Using the payroll simulation and the personnel cost planning functions to determine the financing requirement generated by a commitment • Posting the commitment to SAP Funds Management, SAP Grants Management, and SAP Controlling • Minimizing data entry requirements by automatically determining the budgets to be debited from existing account assignment information • Direct integration with SAP® Personnel Administration and SAP® Organizational Management

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The SAP Position Budgeting and Control (SAP PBC) component of mySAP Public Sector is specially tailored to the needs of public organizations. This solution closes the gap between the existing budget for personnel expenses in SAP Funds Management (SAP FM) and the existing organizational structures and persons in SAP Human Resources (HR).

ACCOUNTING

• COMMITMENT PROCESSOR • PERSONNEL COST SAVINGS

PERSONNEL DEPARTMENT • MANAGING FULL-TIME EQUIVALENTS • BUDGET PLAN • STAFF ASSIGNMENTS • RULES WORKFLOW

BUDGET PLANNING

Figure 53: Integration of the Accounting and Personnel Departments

The automatic commitment creation function enables you to call up a precise overview of the existing commitments in terms of personnel expenses at any time. This allows you to recognize any deficits or excess in good time and make the appropriate corrections. Integration with SAP Organizational Management SAP Position Budgeting and Control uses the existing organizational management structures of a government agency, which include organizational units, positions, and persons. You can define financing requirements for a position using the SAP HR infotype planned compensation. A vacancy indicator controls the time frame of the financing requirement.

AVAILABILITY CONTROL OBJECTS FUNDS MANAGEMENT

POSITION BUDGETING AND CONTROL

HUMAN RESOURCES

BUDGET OBJECTS

PRECOMMITMENT

COMMITMENT

ACTUAL POSTING

PERSONNEL COST PLANNING

PAYROLL SIMULATION

PAYROLL POSTING

POSITION

PERSON

PERSON

CREATE OR MAINTAIN DATA

CREATE OR MAINTAIN DATA

PAYROLL

ORG. MANAGEMENT

PERSONNEL ADMINISTRATION

Figure 54: SAP Position Budgeting and Control

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Within these structures, you can store account assignment information such as the cost center, funds, grants, and so on, which can be passed on (inherited) along the organizational structures. Here, you can also distribute funds on a percentage basis among different account assignments. The stored account assignments are used to automatically determine the budget to be debited in SAP Funds Management.

SAP PERSONNEL COST PLANNING

The system automatically recognizes changes to information relevant to financing within the organizational structure and personnel master data, and updates commitments accordingly.

Both solutions use the same data basis, which means that no additional data has to be maintained for the other application.

This process takes place automatically in the background. You do not have to make any additional entries. You can also trigger a refinancing run manually if necessary. PERSONNEL ADMINISTRATION

The information stored in the SAP HR master record forms the basis for determining the financing requirement. All the relevant information from the SAP HR master record is considered during the payroll simulation, which determines the amount and distribution of financing requirements for employees over time. Changes made to information relevant to financing are also recognized automatically by the system and result in refinancing being performed for the appropriate person. POSTING THE PAYROLL RESULTS TO ACCOUNTING

You can use the payroll simulation to determine a person’s financing requirement. All the functions available during a real payroll run are also available in payroll simulation. This means that the expected financing requirement can be forecast as accurately as possible. In the payroll run, you store the commitment documents created previously in the payroll result. When the payroll results are subsequently posted to SAP Funds Management, these commitment documents are reduced by the amounts determined in the payroll run.

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SAP Position Budgeting and Control is closely integrated with SAP® Personnel Cost Planning. This component supports decision making through the definition of actual personnel costs, cost predictions based on actual costs, and cost planning based on planned organizational changes or changes to the wage structure.

SAP Personnel Cost Planning enables you to determine the extra costs incurred for a position, for example, in terms of the financial amount and time involved. You can also use SAP Personnel Cost Planning to determine the financing requirement on the basis of the master data (without payroll simulation). Integration with SAP Funds Management To provide full support for budget execution using mySAP Public Sector, SAP Position Budgeting and Control is fully integrated with SAP Funds Management. You post commitment documents directly to SAP Funds Management using the functions this component provides, such as active availability control. In SAP Funds Management, you can post SAP HR documents to funds, funds centers, commitment items, and functional areas. The commitment documents are created using a multilevel concept: • Funds precommitment: For vacant positions, funds precommitment can be used to “precommit” the expected financing requirement by period and for the expected amount. • Funds commitment: As soon as a holder is assigned to the position, the expected financing requirement can be determined in detail by means of a payroll simulation. This extremely precise financing requirement is used to create a funds commitment that reduces the funds precommitment.

• Actual results from the payroll run: When the payroll results are posted to SAP FI, the amounts actually incurred are also posted with reference to the funds commitments created in the planning process. • Funds blocking: You can use the funds blocking function to ensure that a budget that is released but not directly available for further use remains committed. The person responsible can then decide how this budget is to be used further. This multilevel concept enables you to forecast the expected financing requirement very accurately. Depending on the degree to which a commitment is realized, you can commit the required funds at a higher or lower level. An example would be the announcement of a planned staff assignment due to a vacancy (precommitment), in contrast to the actual staff assignment itself (commitment).

This means that the automatic commitment creation function is an event-driven background process, which does not generate any extra maintenance work for the user. Changes that affect financing are recognized automatically by the system. The relevant persons and the positions they fill are determined automatically and earmarked for refinancing. A periodic run for the automatic commitment creation then adjusts the commitment in line with the changes.

HR EVENT TRIGGER

PERIODIC BACKGROUND PROCESSING

CHANGE LOG

USER-DEFINED SELECTION

FM COMMITMENT PROCESSOR

FM CO OTHERS

INTEGRATION WITH FURTHER COMPONENTS

In addition to SAP Funds Management, SAP Position Budgeting and Control can also post commitment documents to SAP Controlling and SAP Grants Management.

IF ERROR WORKFLOW

Figure 55: Process Flow for Commitment Creation

For SAP Grants Management, you can create grants as master data. The cost center, internal order, and the WBS element are also available to SAP Controlling or SAP Project System. AUTOMATIC COMMITMENT CREATION FUNCTIONS

The commitment processor, which you can use to create commitments automatically, makes position budgeting data visible in SAP FI and SAP CO immediately after each posting, in particular for the update function and availability control. The commitment processor is the central tool in SAP Position Budgeting and Control. Among other things, you can use it to calculate and check funds required for positions or persons and to create commitments using active availability control in SAP Funds Management. The update of commitments is triggered by an event, such as a change to an SAP HR infotype. System messages are processed using SAP Business Workflow.

Selected automatic commitment creation functions are: • Determination of the budget to be debited: The system automatically determines the budgets that are to be debited from the master account assignment stored in SAP Organizational Management and in the SAP HR master record or from the cost distribution. The account assignments that might be derived from existing account assignments are determined automatically here (funds center from cost center, for example). The derivation rules stored in SAP Funds Management are used for this purpose. • Processing of messages output by the system: If the system outputs messages during an automatic commitment creation run (to indicate insufficient budget in SAP Funds Management, for example), the relevant person responsible is informed by means of a workflow process.

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Four role types (categories of person responsible) exist in SAP Position Budgeting and Control: • Administrator for an automatic commitment creation run • Person responsible for financing • Person responsible for the payroll simulation • Person responsible in the accounting department The person responsible receives a detailed message log via workflow, which provides support for processing the particular message. Personnel Cost Savings Personnel costs make up a large part of the budget in most public sector organizations, which are usually required to follow strict legal guidelines on budgeting, managing, and monitoring the costs of public institutions. It is particularly important to recognize budget surpluses early on in the fiscal year and take proactive measures to deal with them by automatically identifying the funds that were not paid out in the salaries, for example. Other possibilities include the automatic transfer of contingent liabilities, the implementation of a hiring freeze for positions that become vacant, or a request for an additional budget from a higher-level authority. Instead of releasing budget surplus directly, you can commit it further with “personnel cost savings,” by making changes to financing requirements, for example. You can then decide whether only part of the budget is to be released, and part of it posted to a different account assignment. Extensive information is provided for this purpose on the date and reason for these personnel cost savings. The funds blocking function in SAP Funds Management is used to commit this budget further. SAP Position Budgeting and Control enables you to identify personnel cost savings early in the budgeting cycle, by comparing actual commitments with the budget.

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Reporting Reporting for SAP Position Budgeting and Control can be performed entirely in the SAP Business Information Warehouse (SAP BW). The new SAP PBC loads all reporting data into SAP BW and makes it available there. You can analyze the data here from both the personnel and the accounting perspectives. You can also call up SAP Funds Management reports using the report-to-report interface. You can use the reporting function to display detailed personnel requirements for specified financial amounts, including fund account assignments for positions or persons. You can also use the reporting function to display the financing history of each person and position. SAP RECORDS MANAGEMENT

Governments need records to administer their processes and deliver services to people. For the public, records provide the legal documentation of a government’s actions, and they are evidence of its work. Therefore, records management is essential to the work of governments and other public sector organizations. One very important focus of the SAP Records Management solution is to manage records in the public sector. It is a new approach to records management. Based on cutting-edge information technology, the solution enables you to manage documents and records on paper and in electronic form. The outstanding innovative feature of SAP Records Management is that you can manage any kind of SAP business objects and non-SAP business objects with it. Together with SAP Business Workflow, SAP Records Management lets you map both predefined and ad hoc process flows, such as so-called circulars, in your system.

SAP Records Management integrates all areas in public administration, ranging from simple business processes to specific technical procedures running on different application systems. In particular, this means that you can: • Provide a single point of access to all information, especially to records, for all authorized employees • Enhance the efficiency and transparency of your business processes • Integrate public and corporate services on the Internet directly into electronic records management • Manage paper and electronic records in one system • Integrate business objects, such as application documents, with their scanned images • Cut costs for storing paper records With SAP Records Management, communication with public and private institutions, as well as with individual citizens, is not restricted to the institutional boundaries of the government agency involved, since records can be viewed by or sent to other public agencies without complex transport procedures. Also, citizens and companies can send queries or requests via the e-government framework of mySAP Public Sector through the Internet. All documents created while processing requests are automatically stored in one record. Finally, all functions for processing requests and storing documents in a record are fully integrated. Record Structure Every day, government agencies perform a variety of regulated and unregulated functions to provide public services. To ensure that these functions are carried out according to legal requirements, they must be structured accordingly and individual processing activities established. In addition, certain context information is required and must be taken into account. This context information can vary in nature – from annotations and processing allocations to legal and organizational constraints or other specialized applications.

A record can be regarded as all recorded information on a case and activities required to document a task in full – from the point at which the task is started until its completion. The storage medium used to record the information is irrelevant, although electronic data storage is always preferable. BUSINESS OBJECTS

A record can contain different types of information. In addition to conventional paper documents, technical descriptions, and drawings, applications must cater to the entire range of information in multimedia formats. In SAP Records Management the various components of a record are depicted as business objects, which also include electronic documents. A business object can be regarded as a representation of a tangible or intangible object (such as a concept, business process, or triggering event) that is used in conjunction with a business application. Business objects in SAP Records Management come from a vast range of sources, including: • Office applications (word processing, e-mail, fax, calendar, and contacts) • Accounting systems (SAP Funds Management, SAP Controlling) • Human resources (time recording, HR qualifications) • Procurement (such as service descriptions) • Real estate management (such as rental contracts) • Production applications (such as bills of material) • Plant maintenance applications (maintenance instruction documents, equipment description documents) • Electronic forms and requests downloaded from the Internet • Links to Internet or intranet pages for incorporating external information sources or application forms Integrating SAP business objects in records has distinct advantages. Interfaces for communication between the application systems are standardized, as are the procedures for building component-based applications, the description of the data exchange format for Internet-based business processes, and the

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structure of electronic business documents. The prerequisites for communication between business processes are fulfilled so different agencies can collaborate in managing and processing the same set of records.

cific metadata stored in the document header. The definition of record metadata as well as of record components is user specific and is done during implementation. You can add further metadata on all levels of a record.

Records management is intrinsically linked to workflow management. For this reason, SAP Business Workflow is fully integrated with SAP Records Management.

RECORD AND REFERENCE NUMBERS

DATA AND METADATA IN A RECORD

You need to structure your records by modeling the attributes of records. These attributes are usually referred to as metadata. Examples of metadata include the storage location, the name of the record creator, the file number, and defined keywords for a record. Besides the metadata for the entire record, you can enter specific metadata for each part of a record (record components). The storage location of a record is an example of record metadata, whereas the creator of a document is an example of spe-

STRUCTURED ELECTRONIC RECORD

RECORD METADATA

RECORD COMPONENTS CASE METADATA METADATA DOCUMENT 1

METADATA DOC. APPLICATION SYSTEM

METADATA URL

REQUEST

ACCEPTANCE REQUEST

WWW.LAW

METADATA DOCUMENT 2

METADATA FOR ELECTR. PROCESS

AVAILABILITY

REQUEST WORKFLOW

Figure 56: Structure of an Electronic Record

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Two types of metadata are relevant in this context: the record number and the reference number. In general, the record and reference numbers are made up of different fields (for example, the fiscal year, organizational unit, filing plan number, and current number) and include separators between these fields. Normally public sector administrators apply specific rules, according to which the record and reference numbers are generated automatically. SAP Records Management provides different generation procedures for this in Customizing. By using these generation procedures, public agencies can define their own generation rules. Figure 56 illustrates the record structure and the variety of business objects involved. Every business object carries its own metadata. Documents that are only available in paper form are shown separately, because the content is not digitized and therefore cannot be stored in SAP Records Management. The record entries from electronic workflow management systems (for example, workflow tasks and work items), are also listed separately, because they are used to control and log business processes. In order to receive an official notification – for example, a building permit – from a government agency, a citizen usually has to pay a fee. Figure 57 shows the example of an application process, which ends when the approval or notification has been given. The government agency processes the application in the following steps: 1. First the incoming application generates a case with metadata in the government agency’s system, in this case CRM. The application is stored electronically in the record.

RECORD

RECORD

• APPLICATION

• APPLICATION • INFORMATION

Submit application

Gather information

• WWW • CRM

• WORKFLOW • INTRANET

RECORD

RECORD

• APPLICATION • INFORMATION • FEE DOCUMENT

• APPLICATION • INFORMATION • FEE DOCUMENT • APPROVAL

Post invoice

Create approval

PUBLIC SECTOR FUNDS MANAGEMENT

RECORDS MANAGEMENT

Figure 57: SAP Business Workflow and Record Structure

2. Next, the person in charge requires further information from other departments, as well as their approval for decisions made. The record is then passed on to these departments via SAP Business Workflow. Any requests and further information are also stored in the record. 3. In order for the invoice number to be sent together with the official notification, the fee schedule is entered in SAP Funds Management. The reference to the fee document is stored in the record. This ensures integration of SAP Records Management with financials. 4. The application is approved, stored in the record, and the approval is sent to the citizen. The record contains all transaction documents, text documents, and information collected in the processing of the application. MANAGING CONVENTIONAL PAPER RECORDS

In the most basic case, SAP Records Management is used to manage conventional records, which usually contain all the business processes and information required to manage the workflow of paper documents. Depending on the extent of the information involved, the record can include several volumes. User-defined metadata is assigned to these conventional records and documents. As with electronic records, this metadata can include the storage location, file number, or date of receipt of the paper document.

ELECTRONIC RECORD FOR DOCUMENTS RECORD METADATA

• WORKPLACE • REFERENCE NUMBER •... RECORD COMPONENTS METADATA OF MANUAL ACTIVITY

METADATA FOR CORR. 1

METADATA FOR CORR. 2

• CREATOR • ACTIVITY INDICATOR • ACTIVITY

• CREATOR • DOCUMENT NUMBER • REFERENCE

• CREATOR • DOCUMENT NUMBER • REFERENCE

REFERENCE

Figure 58: Electronic Record for Correspondence

The metadata is entered in an electronic record and refers to the corresponding paper-based records. The registration and classification of the correspondence in accordance with the filing plan can also be stored in the metadata. FILING PLAN

The filing plan is a systematic and practical means of structuring the entire collection of administration tasks. It forms the general framework for storing all correspondence. The strict hierarchical structure of a filing plan enables documents and records to be stored systematically across all administrative offices of a government agency. 119

The filing plan is maintained as part of SAP Records Management. You can also import a filing plan via an interface. This way, you can use standard electronic filing plans for similar administrative tasks carried out by local authorities, federal authorities, hospitals, statutory health insurance funds, and so on. Using standard filing plans has the advantage that activities managed in the same way can be stored under the same filing plan number, simplifying and rationalizing document processing. Standard filing plans also save you the effort of creating your own plan.

ELECTRONIC RECORD FOR HYBRID RECORD RECORD METADATA

• REFERENCE NUMBER •... RECORD COMPONENTS METADATA CORRESP. 1

METADATA DOC. 1

METADATA DOC. 2

• CREATOR • DOCUMENT NUMBER • REFERENCE

• CREATOR • DOCUMENT NUMBER • REFERENCE

• CREATOR • DOCUMENT NUMBER • REFERENCE

In addition, verification of manual processing can be included in the record in the form of a paper or an electronic document. You can also use SAP Records Management purely as a correspondence management system. In this case, you do not need to digitize the conventional documents.

Figure 59: Example of the Content of Hybrid Records

Electronic correspondence management provides two advantages. First, the work process is optimized because the electronic records management system searches for metadata that relates to records and documents. Second, you can do an electronic search.

Managing hybrid records provide two advantages. First, electronic documents can be processed directly from the record. Second, conventional records and documents can be included in electronic records without being digitized first, and they can be integrated electronically using metadata.

MANAGING HYBRID RECORDS

MANAGING PURELY ELECTRONIC RECORDS

Paper documents are an intrinsic part of records management, partly for historical reasons and partly because scanning of documents is too expensive or even impossible (in the case of a book, for example). Because paper stubbornly refuses to disappear, current record management systems often use hybrid records containing both paper-based and electronic documents. You can view the electronic components of these hybrid records directly in SAP Records Management without duplication.

In the best of all possible worlds, a record only contains electronic documents. From a technical perspective, an electronic record is a list of business objects, consisting of metadata and a structure containing the links to the actual documents and their content. The components of the record can be stored locally on different servers for storage or processing reasons. As soon as a clerk processes a document, it is retrieved across the network and displayed on the screen. This minimizes the volume of data transported.

In the case of hybrid records, you should digitally incorporate the manual processing verifications into the record. This provides greater clarity and makes it easier to track the processing status.

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WEB REQUEST

REPLY

The advantages of purely electronic records include the following: • All components of the record are instantly accessible. • Documents can be processed instantly with office communication tools.

• There is no media fragmentation. • All digital information is incorporated. • Paper is eliminated from the office. MANAGING RECORDS WITH ANY TYPE OF BUSINESS OBJECT

The solutions described up to now only map the functions of a conventional records management system. One of the outstanding differences between SAP Records Management and conventional records management solutions is that it provides context information for processing a record from a wide range of specialized applications and office communication systems. Specialized applications are often featured in the context of records management. In SAP Records Management, all applications are integrated using business objects. These business objects are characterized by attributes and accessed and processed using certain methods. From a programming point of view, these methods are implemented by SAP Business Application Programming Interfaces (BAPI®s). Integration with mySAP Business Suite and SAP R/3 Enterprise All the business objects defined in SAP R/3 Enterprise can be included in a record. The set of methods that can be applied to these business objects (business object methods) is defined in the record. An example of a method for the invoice document business object is one for displaying the document. mySAP Business Suite includes a wide range of powerful solutions, including mySAP Financials, mySAP Human Resources, and mySAP Customer Relationship Management, as well as a variety of industry solutions such as mySAP Public Sector. Incorporating the business objects from these mySAP Business Suite solutions ensures that the context information required for a task, such as the processing of an acceptance request – or the posting of an outgoing invoice – can be seamlessly integrated in records management without system fragmentation.

SAP Records Management can also communicate with applications from other manufacturers. In principle, documents and context information from business objects in these non-SAP systems can be incorporated and managed in records. Communication between the records management system and specialized application takes place using standard function calls or BAPIs, so that computer-aided design (CAD) or geographical information systems (GIS), for example, can be integrated. Solutions from complementary software partners can also be integrated using certified interfaces. SAP Records Management also integrates URLs for Internet Web sites that refer to external information sources, applications, and all needed Web content. INTEGRATION OF OFFICE COMMUNICATION TOOLS

In SAP Records Management, you can integrate information from office communication tools, such as e-mail, faxes, calendars, contacts, and Microsoft Word or Microsoft Excel. By doing so, you can access communication and organization tools to help you process your records.

STRUCTURED ELECTRONIC RECORD

RECORD METADATA

RECORD COMPONENTS CASE METADATA METADATA DOCUMENT 1

METADATA DOC. APPLICATION SYSTEM

METADATA URL

REQUEST

ACCEPTANCE REQUEST

WWW.LAW

METADATA DOCUMENT 2

METADATA FOR ELECTR. PROCESS

AVAILABILITY

REQUEST WORKFLOW

Figure 60: Structured Electronic Record

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SAP BUSINESS WORKFLOW AND SAP ORGANIZATIONAL MANAGEMENT

SAP Records Management is closely linked to SAP Business Workflow – SAP’s workflow management system – to help users process records. You can include a workflow in a record, enabling all processing objects and steps within a task to be entered electronically, so the time and effort required for processing can be calculated automatically. These can be changed either for the whole process or for individual work items. SAP BUSINESS WORKFLOW AND CIRCULARS

SAP Business Workflow is an extremely powerful system that handles predefined structured processes. However, in some areas of an administration, you may also have to manage unstructured processes. Here SAP Records Management offers the ad hoc definition of a process route involving all responsibilities. Within a step of a process route, you can define a circular as an activity. A circular refers to a group of elements from a record that is processed along a process route. It contains a list of record elements to be processed, together with the process route, agent assignments, and task description. For example, you can define for a signature whether a cosignature is required on a document or not, and so on. REGULATION OF REPRESENTATIVES

Another workflow capability is the regulation of representatives. Users define their representatives via the SAP Records Management desktop. This desktop, called “electronic desk” or “e-desk” is described in the following section. The next step is to activate the representative(s), and his or her representatives then will cover all of a user’s tasks. SAP Business Workflow leverages the organizational management capabilities of mySAP Business Suite, which can be used to create the entire organizational plan of an institution or derive it from the organizational and business distribution

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plan. The business distribution plan defines who is responsible for which tasks, whereas the organizational plan is a representation of the organizational units that share the tasks carried out by the institution. SAP Business Workflow determines the person responsible for carrying out a specific task. SAP Organizational Management uses a variety of different positions, jobs, work centers, and so on, each of which can be assigned tasks from SAP Business Workflow. By doing so, you define the group of possible agents for a task within a process. For more information, see the next section on SAP Business Workflow . CUSTOMIZING RULES

You can also define a set of rules that determine which of the possible agents is the actual agent responsible for the task. These rules can be defined in various ways: • Function modules: You define rules with function modules if the selection criteria for locating the agent for a specific task are extremely complex. The system then locates the agent responsible by executing the function. The manner in which the data is received varies from function to function. You can use predefined functions or create your own. The rule resolution, which takes place at runtime to determine the agent for a workflow step, forms part of an intelligent, efficient, and flexible tool. • Organizational data: If you choose the organizational model to control your business processes, the organizational data is used to define rules. The agent responsible for a particular task is determined when the rules are resolved using links between the task and SAP organizational objects. • Responsibilities: If responsibilities are used to define rules, you need precise selection criteria to determine the relevant agents. You can also use the organizational model to determine the agents responsible via jobs, positions, and so on.

RECORD MODELING

AUTHORIZATIONS

Records are structured to facilitate processing, to represent their content more clearly, and to provide the necessary contextual information. From the outset, you can also specify which record components are allowed. SAP Records Management features a variety of tools to help you model your records. In practice, records are categorized using different characteristics, for example, whether they belong to the area of SAP Human Resources, Social Security, and so on. SAP Records Management allows you to define individual record types to specify the following: • Which metadata is assigned to the record type • Which business objects are permitted in the record • The structure of a record hierarchy

It is important that users be permitted to execute only those tasks for which they have authorization. Corporate organizations are typically divided into various roles, and the employees assigned to these roles carry out certain tasks. Access to certain tasks and processes is only permitted for the relevant roles.

The record type provides users with a flexible way to structure records. For example, paper-based record types require the storage location and creator of the record (according to the requirements for managing correspondence) as metadata. In an aircraft procurement record type, bills of material for the individual assemblies are required as business objects in the record. You can extend record types on an ad hoc basis while the record is being processed. You can also create record types that contain other record types. By doing so, you can divide a record into sub-records, group records hierarchically, or arrange sub-records within a record hierarchy. You can define views of records based on the record type. Depending on the role of the user, different parts of the content of a record can be viewed. DRILL-DOWN REPORTING

The SAP authorization concept protects against unauthorized access and is implemented in SAP Records Management. All activities involving records and objects in records (for example, documents, business objects, and processes) can only be carried out with access authorizations. Among other things, access authorizations control which records can be read and changed, which can only be read, and which cannot be accessed at all. If you are using the mySAP Enterprise Portal, this data is accessed across a secure connection. USER-SPECIFIC ACCESS

Parallel access to records means that several employees can read a record at the same time without having to copy it. This is a major advantage over conventional record processing systems, because you cannot transfer paper records to a different IT system for processing. However, not every employee can view all the records or components of a record. SAP, therefore, provides a range of sophisticated options for assigning authorizations. Using authorizations, you can specify who can display a record type and its components. If a record contains a link to a business object in a mySAP Business Suite component, such as an invoice, employees can only display this invoice if they are authorized to do so.

You can carry out drill-down reporting in existing records and their objects. Search paths extend, for example, across the filing plan or metadata of all records. You can also store keywords in the metadata and define an index to allow faster access to the required records. Intelligent search engines support any number of nested search terms so you can create complex drill-down procedures. Full-text searches are also allowed. You can use the hit list to display the record directly or navigate through its objects. 123

DISTRIBUTED RECORDS PROCESSING

In some cases, other authorities may have to be included in the workflow for government-to-government collaboration. For this, you can use SAP® WebFlow. SAP WebFlow is an extension of SAP Business Workflow on the Internet and supports networked workflow management, which enables direct interagency collaboration. It also facilitates the structured transfer of records from one government agency to another. For this purpose, SAP Records Management supports a general data exchange format that contains both the content and the structure of a record. This means that records no longer have to be physically sent. In many cases, records don’t even need to be copied, accelerating business processes that may span several government agencies. A problem may arise when several persons have to process a document at the same time. In this case, a separate version of the document is created for each recipient. Once processing is complete, these different versions have to be merged to form a new version. This procedure – called versioning – can be used to ensure that processing is completely verified. For more information on SAP Business Workflow, see the corresponding section in this chapter. Business Processes with SAP Records Management Administration activities in a government agency can be divided into three steps: inbound processing, workflow management, and outbound processing. INBOUND PROCESSING

When a letter, fax, e-mail, or form is received, it is usually handled by a central mail center or by a clerk. The date of receipt is entered on the document and a reference number is assigned.

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If the correspondence is a reply to a request, the file number assigned previously is also written on the document. After this, the document is classified, scanned, and, if necessary, the barcode information is transferred to the record. The document can be assigned to a record at this point in the process or at a later stage. During inbound processing, the recipient is also determined according to the business distribution plan, and the actual business process is initiated by workflow management. WORKFLOW PROCESSING

Workflow processing is generally controlled by rules, which are user defined in Customizing. Business processes are subject to a variety of internal and external rules. External rules include laws or ordinances that directly or indirectly govern how business processes are managed. External rules can also contain specifications regarding decisions. Internal rules, on the other hand, can be used to further specify and regulate the process. An internal set of rules could be a set of internal procedures, in which the basic distribution of tasks within the organization is set out. When you define a process, you specify the individual steps according to the rules you have specified. You also define the responsibilities of individual clerks and appoint project or work groups to process a record jointly. Resources are then assigned to the process. SAP Records Management comes with predefined workflow templates for important, recurring business activities. You can adapt these workflow templates to your individual workflows. During workflow processing, you can enter memos and assignments. If an assignment was already made in inbound processing, these new documents are automatically assigned to this record.

Figure 61: Document Processing Using Photographs

SAP Business Workflow also defines the signature procedure. That means you can specify who has signatory power and in what order, and you can also specify the final signatory. The system maintains a detailed log of the entire signature procedure and of any changes made. OUTBOUND PROCESSING

The process finishes with the reply to the initial correspondence. This reply is also stored in the record assigned to the process. Every record is registered using the filing plan, which contains specifications on how the respective type of administrative data is to be stored. It merely needs to be adapted to the specific requirements of the individual administrative bodies.

mySAP Enterprise Portal One of the more notable features of SAP Records Management is that it is fully integrated with mySAP Enterprise Portal, representing the central starting point for all employee activities. mySAP Enterprise Portal is an interface that brings together all types of enterprise information, including business applications, databases, stored documents, and Internet information, and facilitates users’ role-based access to and action on business-critical information within the extended enterprise. From mySAP Enterprise Portal, employees can access all information and functionality they need to carry out their daily work, providing quick, simple, and Web-based access to both

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Figure 62: mySAP Enterprise Portal – Internet Demo and Evaluation System (IDES)

SAP and non-SAP applications. It can also incorporate links to Internet sites and services, so employees can access the information they need quickly and easily. mySAP Enterprise Portal is personalized and role-based. You can use it to process records from SAP Records Management over the Web.

Depending on the role assigned to a user, his or her records browser is subdivided into different areas. A user can also save favorites and get an overview of items for review, follow-up, or resubmission. Using a role-based view, a public employee automatically has the correct authorizations for objects in records management.

ELECTRONIC DESK (E-DESK)

The electronic desk, or e-desk, of SAP Records Management is the interface for the daily work of users in a government agency. It is browser-based and can be arranged in a flexible, user-specific fashion. The records browser in the e-desk is also structured according to user-defined criteria, containing only the documents, information, and objects of records and workflow management that a user needs to see and process.

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In the favorites list, a user can also structure his or her personal folders, for example, according to a separation of documents and records, with objects coming up for resubmission as scheduled.

Besides the user-specific folders, the e-desk also contains an inbox and an electronic bulletin board for general postings, and the ability to define agents or representatives acting on an employee’s behalf should the employee be absent or on holiday. As of SAP R/3 Enterprise, the e-desk functionality is included in the mySAP Enterprise Portal and contains additional roles for users of SAP Records Management, such as a post office employee, a registration authority, the head of department, and a processor of a record.

sends it to his electronic inbox for processing. The clerk working in SAP Records Management enters comments directly into the record, and all of the information required to process the application is made available online. To reply to the application, the clerk uses an available form, which is provided via the record type. Only the inbound and outbound documents exist in paper form, since the government agency itself uses the electronic record for processing. APPLICATION PROCESSING OVER THE INTERNET

Application Scenarios SAP Records Management can be flexibly adapted to users’ needs, facilitating a step-by-step transition from a conventional records management system to an electronic correspondence management solution, right through to full digitization of all records. SAP Records Management also supports Internet services. The following sections describe a series of application scenarios. SIMPLE CORRESPONDENCE MANAGEMENT

Suppose that a public agency has an extremely high volume of archived, paper records. Scanning all of the documents in each record would be too time-consuming so only the record management system is digitized. The electronic registry acts as a virtual table of contents for the records. When the government agency receives a new item of correspondence, only the metadata is entered in the electronic records management system: the date of receipt, storage location, and other data that simplifies processing. All employees have access to the registry, which means they can view the set of records at any time from their portals and search for records using predefined search criteria. CLASSICAL APPLICATION PROCESSING

Here’s another example. Suppose a citizen submits an application for a housing subsidy to a housing agency. In inbound processing, the document is scanned and assigned to a process that triggers a workflow. Next, a record is created automatically in the background. Via SAP Business Workflow, the system determines the clerk responsible for the housing subsidy and

A citizen submits an application for a housing subsidy to a government agency via the Internet. The system checks the data to determine whether it is complete and consistent, thus avoiding any processing delays as a result of queries. The document received by the government agency is in electronic form right from the start and does not have to be digitized. The application is then processed in two ways. First, the application is processed in parallel with SAP Records Management. All of the documents that result from processing the application, including the process itself, are automatically stored in the record. SAP Business Workflow also automatically logs the process. Second, when the application is received, it is entered in a record. The application is then processed directly in SAP Records Management. DISPLAYING RECORDS OVER THE INTERNET

Over the Internet, a citizen calls up a record documenting a process concerning him or her. He or she discovers incorrect data (for example, an incorrect address) and can report it electronically. Another example is a government agency that wants to publish tender documentation for the construction of a new roadway. This documentation is available in electronic form, which means that the government agency can make it available to the public over the Internet. Companies can view the documentation on the Internet and all citizens can view documentation on planned construction sites.

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APPLICATION INTEGRATION

Incoming invoices are recorded in SAP Financial Accounting (SAP FI). When the invoices are posted, the scanned documents and associated documents are entered directly into a record. The invoices then have to be verified. This procedure can be carried out quickly and effectively because there is no need to search for and copy the documents in question. The invoice documents are also entered in chronological order into an electronic invoice document book (or predefined record type). PERSONNEL FILES

If you are managing your HR data in the SAP Personnel Administration component, all of the HR data defined as a business object is automatically integrated into the personnel files in SAP Records Management. This means that you only need to make changes to SAP HR master data in the system once. In addition to the information from SAP Personnel Administration, you can add documents to the personnel file, which are then only available in the records management system. In Customizing, you can structure the personnel files to suit your organization’s requirements.

cases, SAP provides forms for this type of request and plans to provide appropriate forms for different situations. This technology can be used for internal business processes within a government agency. The services are supported by the e-government solution of mySAP Public Sector. SAP Records Management provides interfaces for these services. Data Security and Protection Data security and protection are essential prerequisites for deploying an electronic records management system. In essence, this means you must take the following five crucial issues into account: • Authentication: Access to a system must be restricted to authorized users, and the system must ensure that other users cannot assume their identity to gain access to the system. • Authorization: Users must be restricted to only those tasks for which they are authorized. • Integrity: Data cannot be changed unless personnel are authorized to do so. • Confidentiality: Reliability and adherence to legal obligations must be ensured. • Recording and logging: All activities and events must be recorded so that they can be accessed at a later stage.

CITIZEN SERVICES

mySAP Public Sector provides government-to-citizen (G2C), government-to-government (G2G), and government-to-business (G2B) services. For example, citizens can communicate directly with public institutions over the Internet. By doing so, they can send inquiries to the government agency in question, submit requests, or view records. Government agencies, for their part, can provide citizens with information, such as development plans and official decisions. Another type of citizen service takes the form of communication between companies and authorities. This allows government agencies to handle invitations to tender and bids via the Internet, which is a government-to-business scenario. In many

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AUTHENTICATION

User authentication in SAP Records Management is guaranteed using passwords. Various standard rules are defined for generating and using passwords, but if necessary, you can extend these rules. In addition, the solution supports Secure Network Communications (SNCs) because it enables cryptographic procedures and uses smart cards for user authentication. You can also use SNC to set up a single sign-on environment. In a single sign-on environment, users only have to authenticate themselves once, even if they are working with more than one system. Single sign-on environments require an external security product that provides authentication, data integrity, and data confidentiality services.

Depending on the selected security product, smart cards can be used for authentication. These cards store the user’s authentication information and are protected by a personal identification number (PIN). Because the user owns the card and knows the PIN, it is extremely unlikely that the information will be copied or put into the wrong hands. With smart card authentication, no password information needs to be transferred across the network. The network connections between distributed components of SAP systems can be protected with SNC. INTEGRITY AND CONFIDENTIALITY

Support for electronic authentication mechanisms and protection of electronic business processes is increasingly important for a variety of applications. This applies in particular to transactions handled across public data communication networks.

SSF also protects SAP data and documents stored on data carriers. SAP Records Management protects data transferred across unsecured communication channels like the Internet by packing the data and documents into secure formats before they are stored on a data carrier or transferred via unsecured communication channels. Protecting data and documents with SSF fulfills the following basic security requirements: • Data integrity (protection against falsification) • Confidentiality of data (protection against unauthorized reading) • Sender authentication (protection against impersonation) • Verification (proof of order placement) LOGGING

To ensure that data has not been modified, that the creator of the data can be uniquely identified, and that the data cannot be accessed by unauthorized parties, SAP uses two basic mechanisms: digital signatures and digital envelopes, which support the asymmetric digital signature method. These mechanisms are provided via the digital Secure Store and Forward (SSF) interface to external security products. SSF uses digital signatures and digital envelopes to secure digital data and documents. A digital envelope is a security mechanism that protects a message from being viewed by anyone other than the intended recipient and is created using hybrid encryption. Digital signatures verify the identity of a signatory, as well as the integrity of a signed data package. A digital signature cannot be falsified, so it protects the integrity of the data involved. Any changes to the data after the signature has been provided render the digital signature invalid for the modified data. The SSF interface operates using public and private digital keys, ensuring that only the intended recipient can read the data content. Digital signatures are based on public key technology.

SAP Records Management logs all access to records, including read access, so you can track who viewed which records and when they viewed them. Records intended for citizens can also be physically stored on a separate server. The extent to which you implement logging is determined in Customizing. Version management is available for records and other editable documents, in order to provide a complete history of records and documents. Using this versioning function, the current status of records can be stored and restored if necessary. Individual activities within a business process defined with SAP Business Workflow can be monitored using the associated workflow log. SECURITY FOR INTERNET APPLICATIONS

Internet data is usually transferred in plain text so this data must be encrypted to ensure confidentiality. For this purpose, SAP uses Hypertext Transfer Protocol with Secure Sockets Layer (HTTPS) as an encryption method to provide a secure connection. HTTPS is an extension of HTTP.

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Technology and Architecture SAP Records Management is based on SAP® Web Application Server and features a three-tier, client/server architecture. The architecture consists of three layers: the presentation layer, application layer, and the database layer. All of the benefits and services of SAP Web Application Server are highly scalable. You can also run SAP Records Management on a separate system.

OBJECT ORIENTATION AND FRAMEWORK

SAP Records Management was developed with the object-oriented Advanced Business Application Programming (ABAP) language. It is based on the records management framework, which manages access to the component and physical server/ instance data of record types and other object classes, as well as access to the individual records and their objects.

INTEGRATING EXTERNAL SYSTEMS

You can easily integrate external systems into SAP Records Management. Integration within SAP R/3 Enterprise is effected using cross-system workflows from SAP WebFlow (an extension of SAP Business Workflow for the Internet). All objects not stored in the online transaction-processing (OLTP) database can be integrated into records. In other words, the solution provides a link to external systems from both a business process and an object perspective. You also have significant flexibility in how you structure the system environment. WEB TECHNOLOGY

SAP Records Management uses state-of-the-art Internet languages and protocols. Record types are modeled with eXtensible Markup Language (XML) and generated as an XML schema. Each record is saved as an XML document, which can be converted to a HyperText Markup Language (HTML) document using a style sheet from eXtensible Stylesheet Language (XSL), and then displayed with a conventional browser. XML and HTML are languages that are used to transfer data over the Internet. SAP Records Management uses the more flexible XML language to model and store records. XML has several advantages over HTML. It is more extensive than HTML, and it supports user-defined data formats. A data exchange format based on XML for storing records provides a generic interface for transferring records. XMLcompliant browsers can then display records directly. Within SAP R/3 Enterprise, the common HyperText Transfer Protocol (HTTP) is used for communication with the Internet.

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SAP WEBFLOW AND SAP BUSINESS WORKFLOW

SAP Business Workflow is a component of SAP Web Application Server and is designed to work with all areas of SAP R/3 Enterprise. Principal features of SAP Business Workflow include: • Workflow definition: A workflow can be defined and the task it contains assigned to clerks. • Workflow templates: Workflow templates shipped by SAP that can be used by customers to create their own workflow definitions and tailor them to their specific requirements. • Ad hoc functions: A task can be directly forwarded or delegated to a different employee on an ad hoc basis. • Workflow log: Every step within a workflow is logged so it can be evaluated. • Workflow Builder: You can modify and adapt the workflows that SAP provides, and you can also define new workflows. • Workflow tools: These tools support standard scenarios. • SAP WebFlow: The workflow can run on the Internet or your organization’s intranet. SAP Business Workflow is embedded in the heart of SAP R/3 Enterprise, and provides the scalability and stability that you need to ensure that your business processes run smoothly and consistently. SAP solutions such as mySAP CRM and mySAP SCM are built on this platform to incorporate workflow features directly in their application.

WORKFLOW FOR APPROVAL EARMARKED FUNDS APPROVED

EARMARKED FUNDS CREATED

USER

NOT PROCESSED

RELEASED

INBOX

INBOX

USER

RELEASE OF EARMARKED FUNDS

INQUIRY STATUS

CREATE EARMARKED FUNDS

USER

INBOX

Figure 63: Using SAP Business Workflow to Process Activities for Funds Commitments

SAP Business Workflow automates your business processes in a flexible and transparent way. It integrates tasks across departments, applications, and system boundaries. You can use a graphical interface to define workflows and map individual tasks to users. This “push technology” informs and helps users through the processes they are working on. Steps that do not require user intervention are carried out automatically, along with business logic and escalation procedures. The process creates a precise audit trail and can provide powerful analysis reporting to allow you to optimize your processes. The term “WebFlow” refers to the e-business functionality of SAP Business Workflow. SAP Business Workflow is the solution for all your workflow requirements. It is active “behind the scenes” in many Internet processes of mySAP Business Suite, ensuring the delivery of the right information to the right person at the right time.

Although Web-based workflow functionality has been available since SAP R/3 Release 3.1, the enhanced functionality has led to the creation of the new product name SAP WebFlow, which basically designates the Web-based workflow functionality for SAP R/3 Enterprise. Optical Archiving SAP Business Workflow is used in conjunction with an optical archiving system, which is linked to SAP R/3 Enterprise applications using the ArchiveLink interface. This enables you to reduce the amount of paper in your office, and create flexible links between business objects such as earmarked funds, purchase orders, or invoices with archived documents. Some examples are letters, faxes, drawings, applications, or calculations. In this way, you can quickly access any archived documents you need.

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An example of how SAP Business Workflow works in conjunction with optical archiving: • A business sends its financial returns, which are paper-based, to a government agency. • These documents are then scanned in by the government agency, for example, the Internal Revenue Service. • The scanned-in image is sent to the person responsible via SAP Business Workflow, and the original image is barcoded and linked to an SAP business object (“optically archived”). • After this point, processors will only work with the image and not with the paper original. This improves efficiency, reduces processing costs, and shortens processing times. Using the ArchiveLink interface, there is full integration between the optical archiving system and SAP Business Workflow. For more information on electronic filing and archiving, see the previous section on SAP Records Management . SAP Business Workflow Applications SAP Business Workflow makes a substantial contribution to improving administrative efficiency. It is a high-performance tool with functions going beyond those offered by conventional workflow and document management systems. SAP Business Workflow ensures a smooth flow of information and short transaction lead times, including the following: • Extensive automation and acceleration of routine activities is possible across application boundaries, functional areas, organizational units, and time zones. • The SAP® Business Workplace, which forms part of your SAP R/3 Enterprise solution, enables efficient communication between those involved in a process. You can select all the required tasks for processing online – nothing is omitted or remains unprocessed. Time-consuming dunning or queries are no longer necessary.

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• Workflow processes predefined specifically for an organization clearly describe your business transactions in a graphical map. These graphical maps can be created using the SAP® Workflow Builder tool. You can carry out organizational evaluations, and make business processes and responsibilities more transparent. Each employee has an activity profile derived from where he or she is positioned in the structure. • Complete integration with the operative applications means there is no need for duplicate input. The system supplies every step in a process with the required data and documents, and produces results that determine what steps are performed next. • Constant process improvement using an integrated information and diagnostic system which analyzes all the components of the workflow system and compiles information on the actual process execution, such as: how often a process is run, runtimes, those involved, any queries arising, and so on. Integration with SAP Organizational Management SAP Business Workflow is not on the level of existing process structures in the business application components. Instead, it should be regarded as an integration level “above” the standard business applications. After implementing SAP Business Workflow, you continue to use the existing transactions, function modules, and reports as before, but with substantially more electronic processes than previously. The integration of SAP Organizational Management within SAP Business Workflow means that you can easily link tasks with employee positions. Since positions are held by the employees defined to carry out specific tasks, you can assign tasks and activities to the right personnel. This also means that you do not have to change the workflow when organizational changes (restaffing of positions, retirement, and so on) take place.

Figure 64: SAP Workflow Builder for Funds Reservation Process

SAP Business Workflow controls and automates complex transactions based on established models of business processing. Communication networks link the desktops of the personnel involved and transport information and documents quickly and efficiently in all directions. Checking and approval processes, regulations, and legal requirements are taken into account, as is scheduling covering the whole process from start to finish.

Every authorized employee has access to the information he or she needs at any time. All messages and documents intended for that employee are sent to the SAP Business Workplace, which can be fully integrated with groupware products such as Lotus Notes or the Microsoft Exchange inbox. The employee is told what tasks have been assigned to him/her and is provided with the information needed to carry them out. An integrated workflow log ensures that you can view the state of transaction processing at any time; the information is logged, ensuring complete and clear information on all running or completed transactions.

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ABBREVIATIONS Solutions: mySAP CRM mySAP SCM mySAP SRM

mySAP Customer Relationship Management mySAP Supply Chain Management mySAP Supplier Relationship Management

Components of SAP R/3 Enterprise: AA Assets Accounting CO Controlling FI Financial Accounting FM Funds Management GM Grants Management HR Human Resources MM Materials Management PM Plant Maintenance PS Project System SD Sales and Distribution

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Further SAP abbreviations: ALE Application Link Enabling ALV SAP List Viewer AVC availability control BCS budget control system BDT Business Data Toolset BPS Business Planning and Simulation CAD computer-aided design CATS Cross-Application Time Sheet CPM Corporate Performance Monitor DME data medium exchange EDI Electronic Data Interchange ESS Employee Self-Services GAAP Generally Accepted Accounting Principles GASB Governmental Accounting Standards Board HTTP hypertext transfer protocol PBET period-based encumbrance tracking PDC plant data collection RIB revenues increasing the budget SAP BW SAP Business Information Warehouse SAP SEM SAP Strategic Enterprise Management SAP Web AS SAP Web Application Server SNC Secure Network Communications WBS work breakdown structure XML eXtensible Markup Language XSL eXtensible Stylesheet Language

GLOSSARY A

ABAP List Viewer See SAP List Viewer . accrual An expense made before the closing key date that represents an expenditure for any period after this date. accrual accounting Method used to distribute expenditures, revenue, gains, and losses to the correct period, based on the origin of these amounts. In this way, irregularly occurring costs can be evenly spread over the periods involved and distributed by cause to the appropriate periods. See full accrual accounting and modified accrual accounting . account assignment See FM account assignment . active availability control In SAP Funds Management (SAP FM), a check on budget usage which identifies possible budget underruns or overruns when funds are being committed. Using tolerance levels predefined in Customizing, the system compares against budget limits at the time a document is posted in SAP FM. Active availability control is carried out for both the former budgeting system and the BCS. B

BAPI See Business Application Programming Interface . Balanced Scorecard Functionality in the SAP Corporate Performance Monitor of SAP Strategic Enterprise Management (SAP SEM) to help organizations visualize their business strategies, projects and performance measures . You set your performance

measures and key performance indicators as performance targets, in this way providing a clear overview of your organization’s performance and indicating areas with a need for improvement. budget For a specific fiscal year, a plan of expenditures or outlays, containing detailed information on the funds to be provided to specific public organizations within a particular time frame. In SAP R/3 Enterprise, the budget is defined by using a budget structure , which contains funds centers and commitment items. A balanced budget occurs when total receipts equal total outlays for a fiscal year. budget address An element of the budget structure to which budget can be committed. It consists of a combination of, for example, fund, funds center, and commitment item. Budget is allocated to this combination. See dimension . budget category There are two categories for budgets, the payment budget and the commitment budget . Both can be either released or not released. As defined in Customizing, the system controls which business transaction commits funds in the payment or commitment budget and at what point in time. budget control system (BCS) As of SAP R/3 Enterprise, a solution for budgeting and budget execution, as well as for the active monitoring of available funds in SAP Funds Management. The budget control system includes functions for budget planning, entering, updating and carrying forward budget, as well as availability control. budget object See budget address .

Terms in italics refer to other terms in this glossary. 135

budgeting process When budgeting with BCS, the budgeting process defines the basic type of action carried out. Processes are predefined by SAP. The budget type , defined by the customer, is used to detail the budgeting process information, enabling customers to define their own budget types for each SAP budgeting process. In the BCS, budget can only be entered for a combination of process and budget type. budget profile An object that combines the control parameters for budgeting and availability control. Only used in the former budgeting system, not in the budget control system (BCS) of SAP R/3 Enterprise. budget return A type of budgeting process used in the budget control system that effects a reduction in the budget amount, for example, as when funds are returned because they were not used. budget structure The budget structure represents all the funds centers, commitment items, functional areas, and funded programs for which budget may be entered. A similar but independent structure is available to control the posting of commitments and actual values. See budget address . budget subtype Used only in the former budgeting system. Budget subtypes can be used to differentiate and classify budget amounts according to an organization’s needs, and report on their budgets on a detailed level. In the new budget control system (BCS), similar functionality can be used with the budget type .

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budget type Used in the budget control system (BCS). A user-defined subdivision of the SAP-defined budgeting processes, which helps to recognize the origin of the budget. Examples are the original budget entry, supplements, returns, transfers, and releases. See budgeting process . budgeting workbench In the budget control system (BCS), the budgeting workbench is the transaction for individual budget maintenance. It provides a user-defined interface and enables the checking of budget consistency, as well as providing a detailed audit trail through the use of budget documents. Business Application Programming Interface (BAPI) Standard programming interface that facilitates external access to business processes and data in the SAP R/3 Enterprise system. BAPIs are defined in the Business Object Repository (BOR) as methods applied to SAP business objects or SAP interface types. BAPIs offer an object-oriented view of business components. They are implemented and stored as RFC-enabled function modules in the ABAP Workbench. business area In SAP R/3 Enterprise, an organizational unit of financial accounting that represents a separate area of operations or responsibilities within an organization and to which value changes recorded in SAP Financial Accounting can be allocated. You can create financial statements for business areas, and you can use these statements for various internal reporting purposes. Business Information Warehouse See SAP Business Information Warehouse.

commitment carryforward The transfer of commitment amounts into the following year. The term “carry over” refers to the possibility of also transferring amounts into a past year.

C

carryforward See Commitment carryforward . chart of accounts A classification scheme consisting of a group of general ledger (G/L) accounts. A chart of accounts provides a framework for the recording of values to ensure an orderly rendering of accounting data. One chart of accounts must be assigned to each company code. For each G/L account, the chart of accounts contains the account number, the account name, and technical information. circular In SAP Records Management, a group of elements from a record that are processed along a process route (ad hoc workflow). A circular consists of the list of elements from a record that are to be processed, together with the process route, agent assignments, and task description. commitment A liability incurred by an organization due to outstanding orders (delivery commitment from confirmed orders), open purchase orders (acceptance commitment from binding orders), and bill of exchange liabilities (total bill of exchange commitments at a bank). Commitments are managed using commitment items . Funds commitments may or may not refer to a funds reservation or a funds precommitment. Additional information, such as the supplier or particular contract numbers, can also be referenced in the funds commitment. commitment budget A standardized framework within a particular area of responsibility that can be used to enter and control commitments leading to expenditures or costs in the current year or in subsequent years. See budget category and payment budget .

commitment item Commitment items represent the grouping of expenditures and revenues within a financial management (FM) area. You can enter budget for a commitment item. cost sharing In SAP Grants Management, a portion of total expenses that parties other than the sponsor contribute to a sponsored project or program. See matching grant . D

derivation tool See FM derivation tool . dimension In SAP Funds Management, the term “dimension” designates FM account assignment elements. The possible dimensions used in SAP Funds Management are fund, funds center, functional area, commitment item, grant, and funded program. The combination of such dimensions enables you to define both budget and posting addresses. document (SAP Financial Accounting) A data record containing a financial posting, which provides proof of a business transaction. A distinction is made between original documents and data processing (DP) documents. Original documents include incoming invoices and bank statements, whereas DP documents include accounting documents, sample documents and recurring entry documents.

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DP documents have a header and line items: the header is an object that contains information valid for the entire document, such as the document date and document number. A line item contains information on a line of the document such as the amount, account number, and whether the item is a debit or credit.

encumbrance A high-level commitment made to purchase goods or services using existing budgeted funds. Commitments are usually realized within the budget year or shortly thereafter. However, some governments have encumbrances that span more than one fiscal year, such as multiyear construction contracts.

e-government E-government refers to a government agency’s use of information technologies (such as Wide Area Networks, the Internet, and mobile computing) to exchange information and services with citizens, businesses, and other arms of government.

For budgetary accounting purposes, encumbrances are usually treated in a manner similar to expenditures. In some cases, they reduce the budgetary fund balance, with any differences in the following year shown as recovery of unspent funds.

E

F

earmarked funds In SAP Funds Management, funds classified according to validity period, usage, and any accompanying legal obligations. Earmarked funds lead to business transactions that process budget that has already been distributed for revenues or expenditures to be expected. The distinguishing characteristics of earmarked funds are that they commit budget, they are used in accordance with a specified purpose, and contractual obligations associated with them must be adhered to. The individual business transactions are: • Funds reservation • Funds precommitment • Funds commitment • Funds blocking • Estimated revenue e-government A key functional area of mySAP Public Sector that allows citizens to use Internet portals to gain role-based, personalized access to public information, services and functions. As well as collaborative procurement opportunities for public agencies, mySAP Public Sector also supports online services and payments through Web-based interfaces.

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financial management area (FM area) The central organizational unit used in SAP Funds Management. FM areas subdivide an organization into units in which you can conduct independent cash budget management (used in the private sector) and independent funds management (used in the public sector). The FM area and company code currencies must be the same. FM account assignment Assignment of budgeting or posting data to a combination of fund, funds center, functional area, commitment item, grant or funded program. There are revenue account assignments and expenditure account assignments. See posting address and dimension . FM derivation tool A set of functions used to derive account assignments in SAP Funds Management from objects of other components. You define the individual derivation steps in Customizing. Using derivation rules and strategies, you can control how certain target values are automatically derived from source values.

former budgeting system The SAP Funds Management budgeting system, which is available simultaneously with the budget control system (BCS). SAP does not recommend using the two budgeting systems in parallel. Migration tools are available to switch from the former budgeting system, also called “classical” budgeting, to BCS.

fund A separate and distinct fiscal/accounting object containing a complete self-balancing set of accounts, used to distinguish cash and other financial resources, together with associated liabilities and residual equities. Funds are classified according to fund types , which have distinctive accounting and reporting requirements.

full accrual accounting A type of accrual accounting requiring that all financial transactions with economic value be reported, as is the case for businesses or corporations. This means that long-term assets must be depreciated over their useful life, with the assets and accumulated depreciation reported on the balance sheet. Long-term liabilities must also be included on the balance sheet, with premium or discount on long-term debt deferred and amortized over the life of the debt issuance. See modified accrual accounting .

fund accounting Modified accrual or full accrual accounting carried out by the private sector and increasingly used by the public sector.

functional area In SAP Funds Management, functional areas are used to subdivide budgets and fund assignments, in order to group related activities having the same purpose or regulatory responsibility. The functional area provides structured information on the function or objective of an organization. The “functional structure of a city” could be, for example: General Government, Criminal Justice, Public Safety, Transportation, Public Works, Community Development, Community Enrichment, Water Services. The functional area is used for budgeting, financial management, external reporting, and cost controlling purposes. Organizations can establish functional areas at a lower level than those required for external reporting. functional area group A functional area group is a user-definable set of functional areas used to meet internal and external accounting and reporting requirements. Functional areas can be grouped in various ways to facilitate budgeting, cost allocation, internal financial management, and external financial reporting.

fund group User-defined set of funds used to meet internal and external accounting and reporting requirements. Funds can be grouped in various ways to facilitate budgeting, cost allocation, internal financial management, and external financial reporting. Fund groups can be used to build fund hierarchies, which summarize similar accounting types and objectives as defined by the specific requirements of the organization. fund type A subdivision of funds according to the applicable external accounting and reporting requirements defined for them. You define fund types in Customizing. funded program A program within SAP Funds Management with an operational purpose and a defined time frame. Funded programs can vary from simple activities to complex projects, and can cross an organization’s fiscal years, funding sources, and organizational units. Funded programs enable you to record budget, control postings, and monitor the performance of internal projects.

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funds blocking A function for preventing the budget from being used by others or by further processes. You can later remove the blocks on some or all of the account assignments, thereby increasing the available budget. Technically, a funds blocking document is similar to a funds reservation document. See earmarked funds . funds center A clearly defined area of responsibility in SAP Funds Management. It is an organizational unit within a financial management area (FM area) to which budget can be assigned. Funds centers are arranged in a multilevel hierarchy. funds commitment See commitment . funds management (FM) See SAP Funds Management. funds precommitment A process step in the chain of commitment documents which lies between reservation and commitment. A precommitment represents an initial but not binding commitment of funds, and can reference a funds reservation. At the time a funds precommitment is processed, more details are known about what the budget will be used for, but no definite contractual agreement has been made yet. The next step is a funds commitment . funds reservation The entry of expected costs in SAP Funds Management. Manual funds reservation is also called “manual commitment.” You may not yet know which transaction (such as a purchase order or material reservation) will actually cause the costs you expect. However, you can use manual funds reservation to reserve some of the budget for expected costs. See earmarked funds .

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general ledger (G/L) A ledger designed to present the values used in creating financial statements. It contains the G/L accounts managing financial values at the company-code level. G/L account A structure that records value movements in a company code and represents the G/L account items in a chart of accounts. A G/L account contains transaction figures that record changes to the account during a posting period. These figures are totals that are used for G/L reporting. grant Legal instrument that allows a sponsor to transfer money to a grantee when no substantial involvement is expected between the sponsor and grantee when the planned grant activity is carried out. A grant usually contains terms and conditions for the control, use, reporting, and reimbursement of sponsor funding. grant type User-defined classification of grants, which controls the behavior of a grant in the system. It determines which functions are available, which number ranges are used for grants, and so on. A grant type must be entered in the master data of each grant created. grantee Organization or other entity that receives sponsor funding and assumes legal, financial, and management responsibility and accountability for the awarded funds and for the performance of the grant-supported activity. Also called “contractor.”

mySAP Enterprise Portal User interface unifying all types of enterprise information, including business applications, databases, stored documents, and Internet information, which facilitates users’ role-based access to and action on business-critical information within the extended enterprise.

I

indirect costs In SAP Grants Management, the costs related to expenses incurred in performing or supporting program activities, but not directly attributable to a specific project. infotype A data structure within mySAP Human Resources. Infotypes are grouped according to subject matter and mirror a logical set of data records. Infotypes are identified by their four-digit keys, for example, the addresses infotype (0006). To facilitate reporting on past employee data, infotypes can be saved for specific periods. K

mySAP Public Sector A set of tools designed to help governments and public organizations increase efficiency, improve economic viability, enhance process transparency, and improve communication with the public. SAP delivers all public sector capabilities in an open, Internet-based solution. O

key performance indicator (KPI) See performance measure .

original budget The budget at the time of the first approval, that is, budget not yet changed by correction measures such as supplements, returns, and transfers. Also called “President’s budget” in some organizations.

M

manual commitment See funds reservation .

overall budget In the former budgeting system , a structured representation of the revenue and expenditure proposed for a fund, with the option to break overall values down into fiscal year values. While SAP Funds Management itself focuses on the planning and execution of overall budgets, position budgeting and control focuses on budgeted costs for persons and positions.

matching grant ( see cost sharing) A grant that requires a specified portion of the sponsored program costs be obtained from other sources, such as the grantee. modified accrual accounting Accrual accounting in which only financial transactions that are short-term in nature must be reported. Long-term financial transactions are not recorded on the balance sheet of a fund, but however may immediately impact the profit and loss statement of the fund. Instead, long-term transactions are tracked statistically.

P

payment budget A standardized framework for the forecasted expenditures and revenues or for the costs, revenues, and investments that can be expected within a fiscal year and area of responsibility. See budget category .

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payment program A program for making the payments specified in payment requests. The payment program generates documents, which are used by programs for generating payment media to create payment forms and lists, and result in postings to payment processing accounts in SAP Financial Accounting. payment request A document for generating payment media. Payment requests can be generated automatically when payments that are due are posted. They are subsequently settled individually or collectively using the payment program. performance measure A measurement or metric used for evaluating a company’s business strategy, performance, or technology. Performance measures express abstract company objectives in financial or physical units for comparative purposes. SAP Strategic Enterprise Management (SAP SEM) uses performance measures for monitoring an organization’s performance. They are recorded in the Balanced Scorecard . period-based encumbrance tracking (PBET) In SAP Funds Management, a function that tracks encumbrances per period, with a change record issued for each change made in a period. You can control posting periods for any or all documents updating SAP FM, as well as for different FM account assignments. PBET also allows priorperiod corrections to obligatory documents, whereby the changed amounts may be reflected in prior periods and not just in the current period. posting address The posting address is an element of the budget structure. It is the combination of, for example, fund, funds center, and commitment item to which postings can be made. See dimension and FM account assignment . posting object See posting address .

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return See budget return . residual budget The unused budget calculated as part of the closing operations at the time of the fiscal year change. It equals the current budget minus the assigned budget, and the budget still to be carried forward from the commitment carryforward . S

SAP Business Information Warehouse (SAP BW) SAP’s data warehouse and reporting interface. SAP BW gets data from various source systems, such as SAP systems, manual flat files, or a database system into which data is loaded from a database supported by SAP, and systems in which data and metadata are transferred using BAPIs . SAP Business Workflow SAP application component that consists of technologies and tools for automated control and editing of cross-application processes. SAP Business Workflow primarily involves coordinating the persons and worksteps involved, as well as the data to be processed. The chronological and logical sequence of the steps, linked to the evaluation of conditions, is monitored by the workflow manager and can be controlled flexibly with event-related response mechanisms. SAP List Viewer (ALV) SAP’s standard grid reporting tool. Used, for example, in BCS budgeting where you can easily sort, filter, and sum up line items during budgeting or reporting. The SAP ALV grid control includes additional application-specific functions, while making it possible to hide functions not relevant to the application.

SAP Funds Management (SAP FM) An application in SAP R/3 Enterprise whose task is to budget all relevant revenues and expenditures for individual areas of responsibility. SAP Funds Management controls funds movements according to the distributed budget, and prevents the budget from being exceeded. The values defined and approved for the individual areas of responsibility when planning the budget are binding. You can adapt the distributed budgets to changing conditions using gradual releases, supplements, returns and transfers. SAP Schedule Manager An SAP tool that uses extensive automation to enable or simplify the definition, scheduling, execution, and control of periodically recurring tasks, such as period-end closing in SAP Funds Management. For SAP Grants Management, worklists can be created for employees responsible for managing grant closeout activities. Worklists allow you to apply a single task to multiple objects, which is useful for preparing a grant’s post-award reporting requirements. SAP Strategic Enterprise Management (SAP SEM) A key functional area of mySAP Financials that enables companies to execute strategies rapidly and successfully while managing business performance throughout the entire organization. SAP SEM supports integrated strategic planning, performance monitoring, business consolidation, and effective stakeholder communication, thus enabling value-based management. Used in the budget preparation phase. See Balanced Scorecard and performance measure . special ledger See Special Purpose Ledger .

Special Purpose Ledger An application used for customer-defined ledgers, which contain information for reporting purposes. The customerdefined ledger can be used as the general ledger or as a subledger and may contain the account assignments desired. The account assignments can be either SAP dimensions from various applications or customer-defined dimensions, such as a business region. split processor Tool that enables you to automatically generate self-balancing documents for account assignments other than the company code. The split processor is mainly used for fund accounting purposes, utilizing the fund dimension from SAP Funds Management. The split processor is included within the special ledger, but not visible within SAP Funds Management. sponsor Also called grantor. An organization or individual funding a project or program with external financial assistance or contracts. Financial and administrative information on the sponsor must be maintained, such as name, contact information, fiscal year, currency, billing instructions, and carryforward rules for available funds. sponsored class In SAP Grants Management, sponsored classes represent expense and revenue categories of an external organization. Can be used to summarize an organization’s expenses based on a sponsor’s cost categories. sponsored funds Financial assistance or contracts provided to others to further the programs of the sponsoring entity.

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sponsored program Defines the program to be funded from the sponsor’s viewpoint. A sponsored program contains all functions, tasks, and funding necessary to meet the objectives of an organization sponsoring a grantee organization. It is used to collect costs reflecting the grantor’s sponsored projects.

W

WebFlow A key functional area of mySAP Technology that provides a workflow solution using the Internet as the communication infrastructure and Web-based applications as information delivery vehicles. You can configure the time- and event-driven business workflows and graphically display the workflow in your business processes. WebFlow enables XML documents to be sent to other systems via a workflow, or to be started when an XML document is received.

Strategic Enterprise Management (SEM) See SAP Strategic Enterprise Management . supplement A budgeting process in which the original budget is increased by additional funds. A supplement can be created for either a payment budget or a commitment budget. See budgeting process and original budget . Also known as supplementary budget . U

update profile A summary of parameters that control the update of commitment data and actual data in SAP Funds Management. The update profile is maintained in IMG Customizing. Via the update profile, for example, you can define whether a purchase requisition consumes budget or not (statistical postings). V

value type The value type is used not only to control the transfer of posting data from other components to SAP Funds Management, but also as a selection criterion in reporting. It contains a classification of the attributes used for individual document types and budget categories.

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workflow See SAP Business Workflow . Y

year-end closing The annual fiscal-year processing of financial information in order to create a balance sheet and/or profit and loss statements, both of which must be created in accordance with the legal requirements of each country. Standard accounting principles require that all assets, debts, accruals, and deferrals, and all revenues and expenses be contained in the balance sheet and P/L statement.

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