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Inter Agency Transfers

FI-CO-004 October 1, 2008

Inter Agency Transfers Inter Agency Transfers

FI FI-

• CO

CO-

• 004

004 October 1, 2008 October 1, 2008

LaGOV LaGOV

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Before we get started ... Logistics

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Ground Rules

• Has everybody signed in?
• Everybody participates – blueprint is not a

spectator sport

• Silence means agreement
• Focus is key – please turn off cell phones and

close laptops

• Challenge existing processes and mindsets
• Offer suggestions and ideas
• Think Enterprise
• Ask questions at any time
• One person at a time please
• Timeliness – returning from break
• Creativity, cooperation, and compromise

4

Controlling Workshops

Session ID Date Business Process Goals FI-CO-001 08/05/08 Cost Centers

• Intro to SAP Finance & Controlling
• Intro to Cost Centers
• Cost Center Numbering Schema
• As-Is Processes for Cost Centers
• To-Be Processes for Cost Centers: Master Data Maintenance & Settlement

FI-CO-002 08/19/08 Account Code Structure – Internal Orders

• Intro to Internal Orders: True Orders & Statistical Orders
• Internal Orders Numbering Schema
• As-Is Processes for Internal Orders
• To-Be Processes for Internal Orders: Master Data Maintenance
• Integration with FI-GL & FM

FI-CO-003 09/23/08 Labor Costing & Time Entry Postings (Old Name: Time Entry Postings)

• Intro to Controlling: Primary & Secondary Postings
• As-Is Discussion: Current Time-Entry and Labor Costing practices
• Discussion of Options for Labor Costing and Time Entry
• To-Be Processes for Time Entry & Labor Costing: Controlling, Project Systems,

Plant Maintenance & Grants Management perspectives FI-CO-004 10/01/08 – 10/0208 Inter Agency Transfers

• Intro to Inter Agency Transfers
• As-Is Processes for Inter Agency Transfers
• To-Be Options: Inter Agency Transfers:
• CO Allocations, FI-GL Option & AP-AR Options

FI-CO-005 10/14/08- 10/15/08 Periodic Processing/ Cost Allocations

• Periodic Processing & Cost Allocations - Overview
• Statistical Key Figures & Activities
• As-Is Processes for Cost Allocations
• To-Be Processes for Cost Allocations

FI-CO-006 10/30/08 Management Reporting

• Intro to Management Reporting
• Reporting Requirements
• Controlling Standard Reports

FI-CO-Validation 12/08/08- 12/09/08 CO Validation

• Review CO Blueprint Design & Documentation
• Validate CO Blueprint Design & Documentation

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Work Session Objective

Review current processes used in the State for Inter Agency Transfers and discuss To-Be Design Options for LaGov ERP System

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Session Topics

• Controlling Overview:
• “As-Is”: Review and capture current Agency processes and

practices in the State for Inter Agency Transfers

• “To-Be” Design Options: Inter Agency Transfers
• Summary & Decisions
• Action Items & Next Steps

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AS-IS Discussion Linn McNary

As Is - IAT

• IAT Definitions
• General Notes
• Agency Specific Examples

– DOL – DHH – DSS – DOA – OYD – DOTD

13.2.10 Interagency Transfers - Expenditure*

• Interagency transfers are the transfers of funds for expenditures from one agency to

another agency. Unless stated otherwise, the personal services related objects can be coded in ISIS HR 13.3.9 Interagency Transfers – Revenue*

• This type of Interagency Transfer represents revenue received from a state agency

for the sales of goods and services or other receipt of funds by a non ancillary or enterprise fund.

Inter Agency Transfers – Definitions & Notes

* Source: §13.2.10 & 13.3.9 OSRAP CONTROL AGENCIES POLICIES AND PROCEDURES MANUAL

IAT – General Notes

• IAT always involves the transfer of cash
• Can be intra-departmental or inter-departmental

– Also discussed intra-agency transfers (across programs or across districts)

• Numerous types of agreements – some examples are:

– Services (accounting, IT, legal, etc) – Rental payments (buildings) – Payments made from Grantee Agency to Sub-Grantee Agency

• Unclear as to whether agreement must be documented
• Accounting entries in AFS:

– J-4 - generally for variable recurring IAT’s

• Requires approval of both parties

– II – for one time or fixed rate IAT’s

• Payer approval not required

• Receipt of Funds – from Office of Finance & Support Services (OFSS)

– CDBG Grant administered by OFSS – Invoices received by DOL and entered into AFS (supplies, repairs, etc.) for payment to Vendors – OFSS pays DOL based upon invoices

• Payments

– Examples: Office of Telecommunications Management, State Police, Risk Management – OTM initiates entries for payments in AFS – Two way approval - Each agency approves own journal line

As Is – Inter Agency Transfers

DEPARTMENT OF LABOR

As Is – DOL CDBG from DOA (OFS)

Process: DOL - CDBG IAT Sub-Process: Monthly IAT for Reimbursement

DOL Accounting DOA - OFS 3rd Party Vendor

End Invoice Paid Accounting – Create J-4 Accounting Supervisor approves – DOL J-4 Line Funds Received Start Services provided to DOL Invoice Generated Receive Invoice Enter Payable in AFS Cash Receipt OFS Approves Payment

• Receipt of Funds from DOA – Grant for Permanent Support of Housing

– Essentially a federal pass-through to DHH

• DHH allocated a portion of this grant via Cooperative Endeavor Agreement with DOA
• DHH paid from AFS via J-4 process (Inter Agency Transfer entry)
• Payments

– Example: Office of Telecommunications Management is the largest – Cash taken from DHH via J-4 process

As Is – Inter Agency Transfers

DEPARTMENT OF HEALTH & HOSPITALS

As Is – Inter Agency Transfers DEPARTMENT OF SOCIAL SERVICES

• Has normal IAT like other Agencies
• Additionally, administrative costs are allocated

from Office of the Secretary (357) to other DSS Agencies and billed monthly

– See visio

As Is – DSS Billing for Allocated Overhead

* Billing includes total allocated costs plus direct costs charged to agency 357

Process: DSS IAT Sub-Process: Billings from Cost Allocations – Example Agency 357 bills Agency 370

Agency 370 (Community Services) Agency 357 (Secretary)

End Start Monthly Allocations performed in AFS II entry approved Cash transferred to Agency 357 Admin Costs captured in Pool F102 for Agcy 370 II entry created for IAT Billing Report 2C04 generated Billing Report prepared* II Entry approved Cash Received

As Is – Inter Agency Transfers

DIVISION OF ADMINISTRATION (DOA)

• Interagency Transfers are handled in various ways:

– AFS

• J-4
• II document

– CFMS – Interagency Transfers set up as contracts

• J-4

– Initiated by the billing agency (agency receiving the revenues) – Approval required by each side (revenue and expenditure) – Usually used for periodic services or when a set rate is not known beforehand (State Mail, Forms Management, Prison Enterprises)

• II Documents

– DOA receives coding and approval from various agencies and supplies schedules to Budget Office which includes amounts in agencies annual budgets – Billing agency sends out II (billing) and receives funds automatically (monthly or annually) (Ex: ORM, OTM and UPS)

As Is – Inter Agency Transfers

DIVISION OF ADMINISTRATION (DOA)

• Various DOA Agencies Billing for Services

– OCS – Computing Services – OFC - Office Facilities Corporation (rent) – OSUP – Payroll, Garnishments, Related Benefits Payments – OFS – Accounting Services to Agencies

• Board of Regents
• Cosmetology Board

– OTM – Unemployment Compensation – Civil Service – Group Benefits

As Is – OYD Grant IAT from DOE

Process: IAT with Sub-Grant (OYD) Sub-Process: Monthly IAT for Reimbursement

Office of Youth Development Dept of Education

Report Received End Start $$ Expended from Operating Fund Accounting Run B.O. Report - Monthly Prepare Reimb. Claim & Create J-4 Approved DOE J-4 Line Supervisor – Approve J-4 Review Claim Funds Received Submit Claim to DOE

Journal Entries Example - OYD

(1) OYD spends $500 on Advertising related to Title I grant (they are sub grantee to DOE) (2) IAT for reimbursement of $ spent (3) Warrant Voucher created to transfer cash from the IAT account to Operating Cash Account Agency Object Description Dr Cr (1) 2710 403 Printing Expense $500 6000 403 Disbursement Cash (operating agency fund) $500 * (2) 6015 403 Cash - Interagency Transfers $500 1940 403 Interagency Receipt of Funds $500 * (3) 6000 403 Disbursement Cash (operating agency fund) 500* 6015 403 Cash - Interagency Transfers $500 * Note: Cash account is inferred from the AFS Organization

DOTD – Inventory IAT

Process: DOTD IAT Sub-Process: Inventory (Printer Paper) Transfer (Accounting Impact)

Agency 276 (Eng. & Operations) Agency 273 (Administration)

End Start Inventory purchased from 276 Request for Inventory Received Inventory Issued to 273 Interfund Receivable Created Receipt of Inventory Interfund Payable Created Treasury Cash Credited for Inventory Purchase Monthly Intrafund Settlement Monthly Intrafund Settlement Treasury Cash Debited for Inventory Purchase End

DOTD IAT Inventory Journal Entries

Agency 276 (Engineering & Operations)

Agency Dr Cr (1) 276 Cash - Treasury 1,000 (6) 200 1000 (1) (3) 100 50 Revenue 1,000 Appropriation of $1000 200 1000 50 (2) 273 Cash - Treasury 700 Revenue 700 Appropriation of $700 (3) 276 Inventory 100 Cash - Bank 100 Purchase inventory for $100 (4) 50 50 (7) (7) 300 100 (3) (1) 1000 250 200 (6) (4) 276 Interfund 50 Inventory 50 750 Issue inventory to 273 of $50 (5) 273 Expense 50 Interfund 50 Inventory from 276 received

Agency 273 (Administration)

(6) 276 Expense 200 Cash - Bank 200 $200 in invoices paid (5) 50 700 (2) (7) 50 50 (6) 80 (6) 273 Expense 80 Cash - Bank 80 130 700 $80 in invoices paid (7) 273 Cash - Bank 80 Interfund 50 Cash - Treasury 130 Cash-Bank 300 (7) 80 80 (6) (2) 700 130 (7) Cash-Treasury 250 Interfund 50 570 Interfund Accounts settled 2,610 2,610 Cash in Bank Cash - Treasury Interfund Cash in Bank Cash - Treasury Expense Revenue Interfund Account Expense Revenue Inventory

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To-Be Design Options: Inter Agency Transfers Abdulla Meer

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SAP Glossary - 1

• Allocation – The process of assessing
• r distributing amounts and quantities

from one sender object to receiver

• bjects. CO.
• Distribution - Transaction that allocates

primary costs. The original cost element is retained in the receiver cost center. CO.

• Assessment - A method of internal cost

allocation by which the costs of a sender are allocated to receiver using an assessment cost element. CO.

• Activity type – Describe output quantity
• f a cost center and is used for

calculating operating rates. CO.

• Cost Center - Organizational unit

within a controlling area that represents a clearly delimited location where costs

• ccur. CO.
• Internal Order – An internal order is

used to monitor parts of the costs. CO.

• Primary Cost Element - A cost

element whose costs originate outside

• f CO. One to one relationship with

general ledger P/L accounts. CO.

• Secondary Cost Element – Used to

portray internal value flows, such as internal activity allocation or overhead

• calculations. CO.

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SAP Glossary - 2

• Statistical Key Figure (SKF) –

Measurable values such as number of employees or square footage. CO.

• Work Breakdown Structure (WBS) - A

hierarchical outline of an undertaking described in the project definition. The WBS is the basis for the organization and coordination of a project. It consists

• f WBS elements. The WBS elements

describe tasks or subtasks in the project to perform within a defined time period. PS.

• Tracing Factor – Non-Financial values

that establish how allocation will be carried out. CO.

• CATS – Cross Application Time

Sheet - An SAP component that enables standardized, cross- application recording of employee working times. HR.

• Plant Maintenance Work Order – A

detailed planning aid for maintenance tasks to be performed. PM.

• Chargeback – When a department

incurs cost from providing services for another department, eventually charging the cost to the appropriate

• department. CO.

Financial Accounting

FI FI

• General Ledger
• Fixed Assets
• Bank Accounting
• Accounts

Receivable

• Accounts Payable

Funds Management

FM FM

• Fund Accounting
• Budgetary Controls
• Budget Execution
• Budgetary Basis

Reporting

• Commitment

Accounting

CO CO

• Cost Center Accounting

(CCA)

• Cost Element Accounting

(G/L Accounts P&L)

• Internal Orders (IO)
• Allocations, assessments,

and distributions Controlling

Budgetary Accounting & Control Funds & Functions Grants/Funded Programs Financial Accounting (GAAP) Cost Accounting & Control

Budgetary Subledger Costing & Project Subledgers

Grant Accounting, Control & Billing

FI (SPL) FM CO / PS

Grants Subledger

GM

Core SAP Finance

Main Accounting Ledger

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Controlling (CO): Overview (contd.)

Mainly concerned with collecting “actual” costs incurred in Cost Objects, such as: Cost Centers, Internal Orders, etc – for Management Reporting.

• Master Data:

– Cost Centers: Represent State’s Organizational Units (Agency-Program- District/Section) – Internal Orders: Represent other buckets where expenses need to be collected

• For allocating to other Cost centers, or
• Just for Reporting purposes.

– Cost Elements: Represent type of ‘revenue” or “expense” (Salaries, Supplies) in CO – Activity Types: Represent “outputs” from a Cost Center (Labor Hrs, Project Mgr Hrs, etc.)

• Transactional data:

– Primary Cost Postings – Secondary cost Postings

• Reports:

– Cost Center Reports, Cost Element Reports, Internal Order Reports

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IAT Scenarios

• 1. Overhead Costs
• 2. Internal Services
• 3. Re-imbursement
• 4. Indirect – Grant Related
• 5. Indirect – Non-Grant
• 6. Cost Disbursement
• 1. Inter-Departmental
• 2. Intra-Departmental
• 3. Inter-Agency
• 4. Intra-Agency
• 5. External State

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Intro to IAT

• Inter Agency Transfers involve one Organizational entity (Cost Center)

providing goods or services to one or more Org. entities. Service provider will be referred to as the “Sender” and the one utilizing the service will be referred to as the “Receiver”.

• There are several options for handing Inter Agency Transfers in SAP. We

will review the options and discuss criteria for selecting the right option. Key Considerations

• Best Practices, Industry Experience
• Other Module Impacts, Maintenance Effort
• Organizational impacts, Change Management
• Transactional Volumes, Operational Efficiency
• Treatment: “Revenue/Expenses” or as “Cost/Negative Cost”
• Reporting Needs – Mandatory and Management

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Inter Agency Transfer Options

• 1. CO Allocations – Utilizes Controlling Module
• One-to-One Individual: Transaction-based – One Cost Center

to another

• One-to-One List: Transaction-based – One Cost Center to

many

• Activity Allocation: Transaction-based – using Activity Types
• Distribution: Periodic – Original Cost identity is maintained in

allocation

• Assessment: Periodic – Costs are grouped for allocation
• 2. FI-GL Option – Utilizes FI-General Ledger Module
• 3. AP-AR Option – Utilizes Accounts Payable (AP) and Accounts

Receivable (AR) Modules

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Option 1: CO Allocations

• Cost Center providing the service will be referred to as the “Sender” and the
• ne utilizing the service will be referred to as the “Receiver”. Expenses

accumulated in the Sender Cost Center are allocated to one or more Receiver Cost Centers.

• Utilize Controlling (CO) functionality to represent this transaction as a

negative cost (credit) for the sender and a cost (debit) for the receiver.

• Generally, senders are responsible for IAT postings in SAP.
• Receivers are responsible for monitoring periodically to ensure compliance

with the agreed upon amounts. Any receiver can ask the sender for details to support the billing.

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CO Concept: Example

Cost Centers 1 & 2 are incurring expenses

FI Posting

GL Account Description Fund Cost Center Amount 506200 Repair Expenses 1001 2765103072 +$4,000

• CCtr-1 (2765103072) and CCtr-2 (2765103074) provide services to

CCtr-3 (2745019008) and CCtr-4 (2745019012)

• Through FI Postings, CCtr-1 and CCtr-2 are charged certain expenses:
• - Repair Expenses – Object Code - 506200
• - Utility Expenses – Object Code - 515000

FI Posting

GL Account Description Fund Cost Center Amount 515000 Utility Expenses 1001 2765103074 +$3,000

35

CO Concept: Example

Simultaneous Postings in CO

CO Posting (Automatically done in the back ground)

Cost Element Description Fund Cost center Amount 506200 Repair Expenses 1001 2765103072 +$4,000 515000 Utility Expenses 1001 2765103074 +$3,000

• Postings (FI-GL) will also result in a simultaneous posting to CCtr-1 and

CCtr-2 -- in CO; Cost Center Reports will show this.

• All Account Code information is automatically carried through. Cost

Element codes are same as Object Codes (GL Account Codes) used in

• riginal transaction.

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CO Concept: Example

Let us See How Costs are moved from Senders to Receivers CO Posting – Allocate Repair Expense to Two Receiving Cost Centers

Cost Element Description Fund Cost Center Amount 906200

• Alloc. Repair Exp.

1001 2765103072

• $4,000

906200

• Alloc. Repair Exp.

1001 2745019008 +$2,500 906200

• Alloc. Repair Exp.

1001 2745019012 +$1,500

CO Posting – Allocate Utility Expense to Two Receiving Cost Centers

Cost Element Description Fund Cost Center Amount 915000

• Alloc. Utility Exp.

1001 2765103074

• $3,000

915000

• Alloc. Utility Exp.

1001 2745019008 +$2,000 915000

• Alloc. Utility Exp.

1001 2745019012 +$1,000

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CO Concept:

Cost Center Reports

CCtr-1: 2765103072

Utility expenses GL 515000 $3,000 CO Allocations CE 915000 -$3,000

• Net for Cost Center 0

C-Ctr-2: 2765103072

Repair expenses GL 506200 $4,000 CO Allocations CE 906200 -$4,000

• Net for Cost Center 0

CCtr-3: 2745019008

• Alloc. Utility Exp CE 915000 $2,000
• Alloc. Repair Exp CE 906200 $2,500
• Total allocations $4,500

CCtr-4: 2745019012

• Alloc. Utility Exp CE 915000 $1,000
• Alloc. Repair Exp CE 906200 $1,500
• Total allocations $2,500

SENDERS

(get credit)

RECEIVERS

(get debit)

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Comparison of CO Allocation Methods

Periodic Allocation Transaction-Based Posting Distribution Assessment One-to-One (individual) Activity Allocation Uses Primary Uses Secondary Primary/Secondary Uses Secondary 5 Series Acct 9 Series Acct 5 Series Acct and 9 series 9 Series Acct Period-End Period-End Real-Time Real-Time Tracing factor Tracing factor N/A No tracing factor Defined in GL Not defined in GL Defined in GL/ Not defined Not defined in GL

• Distribution – Allocation method where original cost is moved to the receiving cost center
• Assessments – Internal cost allocation method, where the costs are grouped and moved
• Primary Cost Element – Cost element whose costs originate outside of CO. 1:1 relationship with GL
• Secondary Cost Element – Cost element used only for internal management of cost. Contra posting in

secondary cost element without moving the original cost

• Activity – Internal cost allocation method where basis for calculation is the quantity of activity exchanged

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CO- Transaction Based- Allocation: One-to-One (individual)

40

To Be Process: CO- Transaction Based– Allocation- One to One (Individual)

CO- Transaction Based– Allocation- One to One- Individual

Service Provider / Sender Receiver

Service is performed Enter cost allocation Request is filled

• ut and submitted

to Service Provider Post cost allocation Are all required fields completed? Yes Return request to

• riginator

No Periodically monitor postings Are postings correct? End Yes Request additional details to support charges No Provide additional detail Are postings correct? Yes End Reverse posting No Need for Service Request is received

41

CO- Transaction Based- Allocation: One-to-One List Entry

42

To Be Process: CO- Transaction Based- Allocation- One-to-One: List Entry

CO- Transaction Based- Allocation- One to One -- List

• 1. Report of Costs

incurred from SAP

• 3. Dept / Agency

computes the charge for the month

• 2. Dept /

Agency obtains non-SAP information

• 4. Dept / Agency

enters charge details in pre- formatted Excel sheet

• 5. Consolidates all

CO postings in pre-formatted Excel sheet

• 6. Posting of CO

chargeback (Dr. Receivers

• Cr. Senders)
• 1. Report of Costs

incurred from SAP

For List entry of several one-to-one Secondary Cost postings, an Excel front-end tool could be used:

– All End-user Depts. / Agencies use Excel front-end tool for the actual posting to be charged out periodically – All supporting paper-work to be retained within the Dept. / Agency, but will be available for scrutiny and audit – As part of month-end, Depts. / Agencies send the Excel form to a Central office, for consolidated posting into SAP

Decision: Who is going to be the Central Office? One or Several?

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CO- Periodic Allocation: One-to-Many: Automated Cycle Postings

• 1. Methods:
• Distribution – Uses the same object code for allocation - Primary
• Assessment – Uses an internal account to group costs for allocation – With in CO - Secondary
• 2. Types: Distributions & Assessments
• Posted Amounts (for Sender) – e.g. Telephone payment posted in Cost Center
• Fixed Rates (for Sender) – e.g. Rate of $0.05 for each printing copy from Print Services
• Fixed Amounts (Sender & Receiver) – e.g. Actual amount paid - Telephone costs posted
• Fixed Percentages (for Sender & Receiver) – e.g. any percentage based allocation
• Variable portions (use of Statistical Key Figures) – e.g. Based on SFT of each Org., allocate total

rent costs

• 3. Basis of Postings (Tracing Factors):
• Statistical Key Figures : Master Data -- Maintains stats used as a basis for allocation
• Example: Square footage (fixed); Number of copies (variable)
• Posting of Quantities: Quantity posted by department
• Example: Number of copies (e.g. 500 for Financial Reporting)
• Posting of Dollars: Dollar value equals Quantity 500 x $5/copy

44

CO- Periodic Allocation: Distribution

Before Distribution

Sender Receiver 60% Cost Center 1 40% Cost Center 2 $20,000 $180,000

45

CO- Periodic Allocation: Distribution

After Distribution

Receivers Sender $20,000 $180,000 $20,000 $180,000 $12,000 $108,000 $8,000 $72,000

Cost Center 1 Cost Center 2

46

CO- Periodic Allocation: Assessment

Before Assessment

Sender Receiver 60% Cost Center 1 40% Cost Center 2 $20,000 $180,000 Assessment of Elec. Assessment of Tax.

47

CO- Periodic Allocation: Assessment

After Assessment

Sender Receivers $20,000 $180,000 Assessment of Elec. $20,000 Assessment of Tax. $180,000 $12,000 $108,000 $8,000 $72,000 Cost Center 1 Cost Center 2

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CO- Allocations: Tracing Factors

Tracing factor: Establishes how the allocation will be carried out

– May represent fixed portion or percentage (square/cubic footage, etc.) – Variable portions or percentage (# of tel. calls, hours worked, etc.)

49

CO- Allocations: Statistical Key Figures (SKF)

• Measurable values – posted as Quantity postings

– Fixed value (Example: Square Feet)

• No change from current period to subsequent period

– Variable value (Total) – (Example: Number of Copies)

• Value changes in every period
• Entered individually for each period
• SKF is a master data used as a variable tracing factor for cost allocations.
• A master record is created to establish the unit of measure used (kilowatt

hours, items, hours, etc.)

• At month-end when cost allocations are run, actual dollars are posted, based
• n statistical numbers previously posted against cost centers with SKF

Periods 1 2 3 12

Square Feet 20 20 20 20 Copies 1300 1355 1275 1325

…

50

To Be Process: CO- Periodic Allocation- Cycle Assessment

CO Allocation: Cycle Assessment Postings

• 2. Interim Reports for

Actual Costs posted and Quantity posting

• 1. Dept. / Agency

posts Quantity information using

• Stat. Key fig.
• 3. Dept. / Agency inputs

Percentage and other cycle info into Assessment Cycles

• 5. Execute monthly

Assessment Cycles for Chargeback

• 4. Verify Report for

Actual Costs posted and Quantity posting

• 7. Verify report for

chargeback postings

• 6. Chargeback

Debited to Rec. Cost Centers Credited to Sender

For One-to-Many type Secondary cost postings, the Assessment Cycles will be used as follows:

• Prior to monthly cycle execution, Quantity postings of Statistical Key Figures must be completed by End-User Agency
• Initial cycle structures would be set up before Go-Live, after which cycles only need to be maintained; the maintenance

choices are to be decided -- Central Agency / dept. responsible for Financial Reporting?

• Month-end Cycle execution is always centralized – this responsibility is to be discussed and finalized.

51

To Be Process: CO- Transaction Based- Activity Allocation

• Method of internal cost allocation by which activities or allocation

bases from sender cost centers can be moved to cost receivers.

• The activities or allocation bases represent the output of a cost

center (such as labor hours or machine hours). These outputs are represented in SAP as “Activity Types”.

• Activity Types are valuated with prices specified in the system –

Standard Rate.

• In Internal Activity Allocation, the activity produced by the cost

center is multiplied by the activity price. The result is the cost to be

• allocated. The sender cost center is credited with this amount and

the receiver object is debited.

52

To Be Process: CO- Transaction Based- Activity Allocation (contd.)

• Unique secondary cost elements are used
• Activity allocation cost elements (type 43)
• No tracing factors. The basis for calculation is the quantity of activity

exchanged

• Steps to perform an activity allocation:

1) Activity type master data creation – Represent the activities produced and offered by the cost centers – Are often used to represent internal labor – Typically expressed in units of time or quantity 2) Activity type / sender cost center planning – Plan activity availability, capacity, and price in sending cost centers 3) Activity allocation – Real time – Automatic computation of cost

53

CO Allocations: Features

• Manual allocations: are subject to availability control. Budgets in

Funds Management.

• Automated (program) -- Assessments and Distribution: are not

natively subject to availability control – problems similar to Payroll postings.

• Secondary cost elements can be budgeted or not.
• SAP Workflow functionality not available; therefore, automated

approvals are not possible. However, other options for approvals, such as: form-based, can be used.

• Split Processor functionality provides full inter agency and inter fund

accounting; thus allowing cash transfers (if needed) between agencies (discussed in later slides). Preferred for IATs that involve internal cost movements.

54

IAT Option 2: FI-General Ledger

• Postings are handled in FI-General Ledger (GL) module.
• Expenses incurred by an Agency (Billing Agency) are posted as:
• DR Exp Acct Paying Agency Cost Center Code

CR Rev Acct Receiving Agency Cost Center Code

• SAP Split Processor creates postings to Due-To/Due-from

accounts.

• Due-To/Due-From accounts can be settled via Journal entries.
• SAP Workflow functionality is available for system-based (auto)

approval process.

55

Split Processor

• Split Processor ensures that documents that contain multiple

funding sources are balanced at Agency (Business Area) and Fund level.

• As an accounting document is posted in FI-GL, a New GL

document is created simultaneously, processed through the Split Processor rules and posted to the fund accounting ledger.

• Split Processor adds additional lines to balance the FI document

by Agency and Fund codes – based on Balancing Method or Split Method.

• This allows for proper Inter Agency and Inter Fund accounting

and Cash Transfers – for both CO-based and GL-based IAT

• ptions.

56

Split Processor: Splitting

Splitting Method

FI Accounting Document

Split Processor Splitting Rules

FI New GL Document FI Payment Document

Split Processor Splitting Rules

FI New GL Document Payment Clearing

When a document that is split has a subsequent clearing that updates cash accounts (e.g., a check is issued against multi-funded vendor invoices), then the splitting done on the original document is also used for the cash payment upon clearing of the invoice with the payment.

• - Document is

split into multiple lines based on the funding split in

• ther lines in the

document.

57

Split Processor: Balancing

Splitting Method FI Accounting Document

DR Expense BA1 Fund1 $10,000 CR Expense BA1 Fund2 $10,000

Split Processor Balancing Rules

DR Expense BA1 Fund1 $10,000 CR Expense BA1 Fund2 $10,000 DR Clearing BA1 Fund2 $10,000 CR Clearing BA1 Fund1 $10,000

FI New GL Document

• If no splitting is configured for a document type, the document is then

balanced using an inter-agency/inter-fund clearing account.

• Agency (business area) and fund are updated during the balancing method in
• rder to track the inter-agency and inter-fund transactions. This allows full

reporting of due to/due from transactions to provide for cash balances to be cleared daily.

• - If a Document is

posted “out of balance” for fund, Split Processor will balance it using the GL Account defined in configuration for fund clearing.

58

Cash Transfer

Splitting Method

If necessary, the inter-agency/inter-fund clearing postings can be offset by posting entries to other GL accounts (bank accounts or actual due to/due from accounts).

FI Accounting Document

Split Processor Balancing Rules

FI New GL Document

59

Cash Transfer: Complete Example

Splitting Method

Treasury AG-T / Fund-T Owned by Agencies Owned by Funds Bank Acct $6,000 DR AG-1 $3,000 Fund-1 $4,000 Clearing $6,000 CR AG-2 $3,000 Fund-2 $2,000 Balance - 0 - $6,000 $6,000

DR Bank Acct $6,000 CR Rev Ag-1 Fund-1 $1,000 CR Rev Ag-1 Fund-2 $2,000 CR Rev Ag-2 Fund-1 $3,000 DR Bank Acct Ag-T Fund-T $6,000 CR Rev Ag-1 Fund-1 $1,000 CR Rev Ag-1 Fund-2 $2,000 CR Rev Ag-2 Fund-1 $3,000 DR Clearing Acct Ag-1 Fund-1 $1,000 Ag-T Fund-T DR Clearing Acct Ag-1 Fund-2 $2,000 Ag-T Fund-T DR Clearing Acct Ag-2 Fund-1 $3,000 Ag-T Fund-T CR Clearing Acct Ag-T Fund-T $1,000 Ag-1 Fund-1 CR Clearing Acct Ag-T Fund-T $2,000 Ag-1 Fund-2 CR Clearing Acct Ag-T Fund-T $3,000 Ag-2 Fund-1 Split processor configured to assign constant Treasury business Area and Fund Agency Business Area and Fund automatically recorded

• n each Inter Agency and

Inter Fund clearing line

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IAT Option 3: Using AP & AR

• Accounts Payable (AP) and Accounts Receivable (AR) modules

in Finance are used for recording and processing Invoices and Payments related to Vendors and Customers.

• Organization entities providing goods & services are set up as

“Vendors” in AP.

• Organization entities receiving goods & services are set up as

“Customers” in AR.

• Vendor agencies who provide goods and services create an

Invoice and send it to Customers. SAP Invoice document created.

• Customers make the Payment to clear the Invoice. SAP Payment

document created.

• Invoice and Payment documents are related in SAP (via

Reference Document #’s)

Billing

BA bills PA for services Billing Agency (BA) Paying Agency (PA)

Billing document 1

DR Customer PA $1,000 CR Revenue Fund3035 $ 500 CR Revenue Fund3197 $ 500 Reference #AR22221 (Agency Invoice #)

IAT invoice 2

DR Expense Fund3466 $ 600 DR Expense Fund1001 $ 400 CR Vendor BA $1,000 Reference #AR22221 (Agency Invoice #)

PA posts expenses Documents 1 and 2 are ‘linked’ by Reference number (Billing Agency Invoice #) FI-AP FI-AR

Payment

BA receives payment and clears A/R Billing Agency (BA) Paying Agency (PA)

Receipt 4

DR IAT ’Cash’ Clearing $ 1,000 CR Customer PA $ 1,000 Reference # 2018700 (Agency Voucher #)

Payment 3

DR Vendor BA $ 1,000 CR IAT ‘Cash’ Clearing $ 1,000 Reference #2018700 (Agency Voucher #)

PA makes payment Documents 3 and 4 are ‘linked’ through Reference number (Paying Agency voucher #) FI-AR FI-AP

Reconciliation

Billing Agency (BA)

Billing document

DR BA $1,000 CR Cash $1,000 Reference #2018700 (Agency Voucher #)

IAT invoice

Paying Agency (PA)

Payment Receipt

DR Cash $1,000 CR Customer PA $1,000 Reference #2018700 (Agency Voucher #)

1 2 4 3

DR Customer PA $1,000 CR Revenue Fund3035 $ 500 CR Revenue Fund3197 $ 500 Reference #AR22221 (Agency Invoice #) DR Expense Fund3466 $ 600 DR Expense Fund1001 $ 400 CR Vendor BA $1,000 Reference #AR22221 (Agency Invoice #)

Documents 1 linked to 2 through Reference number; similarly 3 is linked to 4 Documents 2 linked to 3 by SAP clearing document number. Likewise for documents 1 & 4

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Decision Tree Drivers

– Receiver of Service: External vs. Internal (AR or Not) – Payment Discretionary or No Means to Obtain Paying Agency Code? (AP-AR or FI/CO) – Treatment: “Revenue/Expenses” or as “Cost/Negative Cost” (FI or CO) – Approvals: Automated (System) vs. Off-line (FI or CO) – One-to-One vs. One-to-Many (CO) – Cost Identity after Allocation: Need to Maintain (Distribution) or Need Not (Assessment) – Activity-based or Not (CO)

IAT: To-Be Summary

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Process Improvement Opportunities

• Good summary reporting capabilities for IATs become available;

immediate visibility of allocated agency charges across the State.

• Transaction-level detail on IATs is available via drill down

capabilities -- similar to other SAP postings.

• Manual or automatic allocation to one or multiple receivers based on

predefined parameters.

• System capability for automatic calculation and allocation of cost.

– e.g. pick up all costs from an account and automatically allocate at month-end to all valid receivers of the internal charges.

• Reversing the IAT postings for corrections gets easier.

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• Prepare and send out meeting minutes to invitees;

ensure all to-do’s are appropriately documented.

• Follow up on action items identified during the workshop;

let us review them now.

• Schedule off-line meeting (s) to obtain more details

surrounding current IAT Scenarios:

– Process Flow : Details, Forms – Postings: Account Codes, Allocation Criteria – List of Items: Senders & Receivers

• Plan validation workshop.
• Validate Design Document.

Action Items & Next Steps

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Thank You for Your Participation!

LaGov Cost Accounting Contacts

Linn McNary – Linn.McNary@La.Gov – 225-219-6730 Patrick Johnson – Patrick.Johnson@La.Gov – 225-219-6717 Abdulla Meer – Abdulla.Meer@La.Gov – 225-219-6711

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Background Slides

Creating a Purchase Order Example

Enter one of these: Cost Center/WBS Element/Work Order/Grant/Asset Company Code Business Area Vendor Material Number Functional Area CO Area Fund Funds Center GL Account Commitment Item Cost Element FM Area Funded Program

Legend

Entered Derived

Integration

Sponsored Program Sponsored Class Note: this is an example of common presentation and may be varied based on specific State of Louisiana requirements

Creating a Purchase Order Example

Vendor

What will I need to enter?

Cost Center Material Number To charge to my organization . . . Enter these Vendor WBS Element Material Number To charge to a project . . . Enter these Vendor Work Order Material Number To charge to a work order . . . Enter these Vendor WBS Element Material Number To charge to a grant . . . Enter these Grant

Note: these are examples of common presentation and may be varied based

• n specific State of Louisiana requirements