Business Process Re-Engineering Finance Transformation “SAP 101” Fundamentals of finance system structure, master data, and functionality

OBJECTIVE AND AGENDA Objective for the session Establish a baseline understanding of some core components of the future state SAP Finance system This baseline will be the foundation for future trainings and exercises Agenda SAP ledgers Main master data elements Other critical data elements and fields New or modified functionalities

“SAP 101” SAP Ledgers

FOUR LEDGERS Purdue’s SAP implementation uses four ledgers Financial Accounting (FI) Funds Management (FM) Controlling (CO) Grants Management (GM) It’s important to understand the use for all ledgers in financial management Each is intended to answer different questions

FOUR LEDGERS Financial Accounting (FI) Reporting based on GAAP Provides Balance Sheets and Income Statements Funds Management (FM) Reporting based on budgetary management Calculates available balance Provides Income Statements Controlling (CO) Designed to assist with planning on individual accounts In S/4, CO ledger table has been merged with the FI ledger table Grants Management (GM) Facilitates both budgetary management and financial accounting by grant

Chart of Accounts Balance Sheet Accounts Income Statement Accounts FI FM CO General Ledger Acct Commitment Item Cost Element Balance Sheet Accounts 1xxxxx – Assets 2xxxxx – Liabilities 3xxxxx – Fund Balance In FM, transactions on these accounts are classified as “statistical” Income Statement Accounts 4xxxxx – Revenue 5xxxxx – Expense

MAJOR FI/FM Differences FI (GAAP Financial) Capital Assets post as Assets & Depreciate over useful life Bond principal is recorded as reduction of liability Inventory is recorded on balance sheet and expensed when used FM (Funds Mgmt) Capital Assets expense completely in the period the asset is procured Bond principal payment recorded as expense in the period it is made Inventory is recorded as an expense when it is procured Bond Principal and Inventory postings are changes to the existing posting rules. GR/IR and Accounts Receivable Write Offs will be consistent across both modules in the future, and are not today.

Master Data – Main Elements “SAP 101” Master Data – Main Elements

“ACCOUNTS” “Accounts” are comprised of three main components Company Code and Business Area are derived today In the future state, fund will also be derived in most instances Organization Company Code Business Area Fund Cost Object Cost Center Internal Order/ WBS Element

FundS Represent a particular funding source and restriction Used to maintain accountability to the source Subdivide balance sheet reporting Can split all balance sheet G/L’s by fund In future state, funds mostly consolidated by fund type Internal Orders and WBSE’s will replace the use of multiple funds within a fund type Balances/transactions for A/R, A/P, etc. will be reportable by IO/WBSE

FundS Three general funds Most units will only use 21010000 21020000 and 21030000 will remain available for areas required to divide their general fund by function Other unrestricted funds consolidated into general fund Residuals (conference, grant, royalty, etc.) Study Abroad Digital Education & Conferences Income-producing activities to be distinguished by funded program type (explained later)

FundS One Internal Services fund All recharge center accounting will be consolidated to one fund Individual recharge centers will be designated by cost centers Activities within recharge centers that require separate tracking will use internal orders

FundS One Gift fund, one Scholarship fund All gift and scholarship accounting will be consolidated to one fund for each type Tracking of individual gifts & scholarships will shift from funds to internal orders

FundS Other restricted funds Agency (1) Auxiliary (1) Debt (23) Endowment (2) Federal Appropriations (10) Grants (1) Plant (1) Restricted – Other (1) State Line Items (TBD) Student Aid (3) Student Loans (6) Work Study (4)

Company Codes Separates Distinct Legal Entities Current State: One company code (PUR) Future State: Multiple company does PUR PII NewU PUR: Purdue University PII: Purdue International PICO: Purdue Colombia PIAF: Purdue Afghanistan TBD: NewU PICO PIAF 7/1/2018: PII, PICO and PIAF will be implemented “NewU” implementation TBD

Business Area Within company codes, Business Areas divide the organization Today, Business Area represents campus West Lafayette, Fort Wayne, Northwest Future State, represents Organizations led by direct reports to the President, Provost, Treasurer, or EVPRP And equivalent positions at PNW / PFW And organizations which require a separate GAAP financial statement E.g. WBAA, North Central Nursing Clinic

Business Area Business Areas will be grouped into segments Two levels of segments will be used First grouping: based on executive reporting Segments for Provost, CFO, EVPRP and President Second grouping: based on campus Segments for West Lafayette, Fort Wayne, Northwest May want to mention that this allows full financial reporting at the campus level. This is a hot topic at the Fort Wayne campus especially.

Business Area Future State Example Segment Segment Business Area

Cost Center Future State Represents units FI FM CO Cost Center Fund Center Future State Represents units To which multiple positions are assigned 1:1 with future state HR Departments (i.e. “org units”) That have accountability to an annual budget plan That can allocate revenues or make independent decisions about use for specific purposes and programs Will not be used for tracking programs, projects, etc. that don’t function as organizational units

Cost Center Future State Three-level hierarchy FI FM CO Cost Center Fund Center Future State Three-level hierarchy Level 1: “Department” Level 2: “Sub-Department” Level 3: “Program” Cost Centers can be reassigned to different departments and business areas without changing numbers Addresses many problems caused by reorgs Will not maintain “smart-numbering” after implementation No longer will be able to tell campus and major unit/college from looking at the cost center

Cost Center Structure Future State Example Emphasize that level 3 and level 4 are going to exist as organizational units Cost centers will be used forever Relations with other cost objects

Internal Orders Used for detailed tracking within Cost Centers FI FM CO Internal Order Funded Program Used for detailed tracking within Cost Centers Individual programs E.g. Study Abroad, Digital Education programs Individual gift/scholarship accounts Can be assigned to the “Sub-Department” and “Program” level Cost Centers Most transactions not associated with faculty or construction accounts will post to internal orders in the future state

Internal Orders Internal Order Types FI FM CO Internal Order Funded Program Internal Order Types Allow grouping for more detailed reporting Internal Order Sub-Type/Funded Program Type Categorizes accounts by detailed restrictions/ designations Undergrad Scholarships, Graduate Scholarships, etc. Will determine IO numbering SIO’s will still not be available for use in conjunction with “RIO’s”

WBS Element (WBSE) Similar to an Internal Order FI FM CO WBS Element Funded Program Similar to an Internal Order Allows for linkages to “projects” Construction projects (C.X0.00000) Faculty* members (F.XXXXXXXX.XX.XXX) Each faculty member will have a project Will be categorized by Funded Program Type Also categorized by “node” *Staff who receive allocations for their personal research/instruction/ engagement activities may also have projects

WBS Element (WBSE) Simplified Faculty Allocations Structure (next slide is bigger – if you want to get closer) Faculty can see all accounts in one place Allows departments to identify and segregate resources allocated to faculty for their individual activities

Master Data – Other Elements & Fields “SAP 101” Master Data – Other Elements & Fields

Grant & Sponsored Program FI FM CO GM WBS Element Funded Program Sponsored Program Future State Grant number field extended to 8 digits Grant types expanded to replace sponsor divisions previously identified by unique fund numbers (e.g. NSF, NIH, Industrial) Internal Orders replaced with WBS Elements Formatted as F.xxxxxxxx.02.xxx The “.02.” identifies sponsored accounts The same WBSE number will be used in the Sponsored Program field

Functional Area Defined by NACUBO codes Categorizes expenditures by function Instruction, research, student support, etc. Used for financial statement and IPEDS reporting Will be assigned to individual IO’s/WBSE’s in future state Currently assigned based on fund and funds center combination

Functional Area Instruction & Departmental Research (1000 – 1100) Organized Research (1200 – 1400) Extension & Public Service (1500) Academic Support (1600) Student Services (1700) General Administration & Inst. Support (2000 – 3000) Scholarships & Fellowships (4xxx) Auxiliaries (5xxx) Plant (1800)

PUBLIC / nonpublic Flag that tracks whether an account contains public funding Public funding includes Tuition & Fees State & Federal Appropriations Any funds that could be considered to have come from a public source Will be tracked on individual IO’s/WBSE’s in the future state Currently tracked on individual funds

AVAILABLE / UNAVAILABLE Flag that tracks whether an account is available or unavailable for use to repay debts (bonds) Unavailable sources include State Funds Tuition & Fees Other Legally Pledged Funds Will be tracked on individual IO’s/WBSE’s in the future state Currently tracked on individual funds

“SAP 101” New Functionality

Revenue-Increasing-Budgets (RIB) Creates an expenditure budget for every account New revenue postings increase the budget Expense postings decrease the budget Example Transactions Revenue posted: $500 Expense posted: ($300) Revenue posted: $250 FY ends New FY carryforward New FY revenue posted: $100 Budget Balance $500 $200 $450 $550

Revenue-Increasing-Budgets (RIB) Enables consistent management of all accounts “Central revenue” and “unit revenue” accounts will all have RIB Budget carryforward on all accounts LTD reporting can be replaced by YTD reporting Balance calculation will be consistent across systems (BI, SAP, etc.) Does not impact annual budget entries/amounts

Alternate Budget Address / CO Plan Directs postings to one account to change the budget of another account Facilitates tracking “within” IO’s/WBSE’s CO Plan Allows expenditure plans to be entered into SAP to which actuals are compared Enables calculation of a balance based on the CO Plan amount entered rather than the account’s RIB amount

Alternate Budget ADDRESS / CO PLAN Using Alternate Budget Address and CO Plan together enables reporting without manual tracking and transfers Example Making allocations to faculty from a gift IO Revenue Expenses Expenditure Budget Unexpended Plan Department Gift IO 100,000 (81,232) 18,768 143,768   Plan Smith Project WBSE - (23,499) N/A 76,501 Jones Project WBSE 75,000 (45,376) 29,624 Daniels Project WBSE 50,000 (12,357) 37,643 225,000 The Gift IO has been assigned as an alternate budget address to these WBSE’s A plan amount has been entered for the WBSE’s equal to the amount allocated by the Dept Head

NEXT STEPS October 2017 Mapping of existing accounts into the new structure