11 Asset Accounting c

Process Confirmation – Asset Accounting

Project XYZ Initiative

April 24th 2008

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Team Presentation Contents

• Key Count Summary

• Process Summary and Objectives

• Leading Practices and Key Features

• Process Optimization Opportunities

• As-Is and To-Be – Significant Process Changes

• Identified Gaps

• Policy and Board Rule Impacts

• Change Impacts

• Controls Framework

• As-Is and To-Be – Major System Changes

• To-Be Application Architecture Overview

• Potential Key Development Objects

• Support Required from the Steering Committee

• Implementation Challenges

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Key Count Summary

Item Count

Processes: 1

Tasks: 12

Work steps: 149

Roles: 13

Potential Key Development Objects: 6

SMA’s: 10

Review Sessions: 11

Validation Sessions: 1

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Process Summary and Objectives

SummarySAP Fixed Assets is a comprehensive integrated system that enables parallel asset valuation for CAFR and GASB 34 by creating a full audit trail from purchase to payment through the asset sub-ledger. The system improves efficiency by eliminating redundant accounting entries through automation of journal entries to dual sets of books when the goods receipt transaction is performed on the asset. The SAP Fixed Assets Best Practice process is an integrated process with other SAP functions. This process and system integration help reduce time spent on manual reconciliation, enable a faster closing and reduce manual effort through automatic bookings through integration to SAP modules. The benefits extend to increased savings through reduction in potential for errors and data redundancy. The system is able to pinpoint potential problems with data-driven analysis through master data and transaction audit trail, exception reports with drill-down capability

The asset life cycle design for Client X is grouped into following process categories: asset acquisition/addition, maintenance, disposition, periodic processing, reporting and physical inventory

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Process Summary(termed as tasks in the Industry Print Process Modeler) : Task:

Asset Acquisition or Addition DC-040-010 to 016

Asset Maintenance DC-040-020

Asset Disposition DC-040-030

Periodic Processing DC-040-040

Asset Reporting DC-040-050

Physical Inventory DC-040-060

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Summary - Asset Acquisition or Addition

The methods of acquiring or adding assets are:

• Acquisitions through SRM

• Acquisition through the General Ledger module for assets such as land

• Acquisition through reclassification for an item posted in error to an expense account

• Addition through capitalization of construction assets from the WBBI system

• Addition through capital leasing

• Additions through the SAP Fixed Assets module

• Additions through reclassification of items purchased as inventory

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Objectives - Asset Acquisition or Addition

1. Central set of records for fixed assets from purchase to payment, capitalization to disposition

2. Automate asset category determination in the Purchase Requisition through Item Category to NIGP Code mapping table

3. Automate journal entries to Modified Accrual and Full Accrual sets of books through the asset sub-ledger account determination (Full automation GASB 34 requirement)

4. Integrate asset master data and transaction postings for all financial master data

5. To identify errors through edit controls at the front end of the fixed asset process

6. To capture capital lease information

7. To create system generated fixed assets numbering

8. To track insurance information related to an asset

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Summary - Asset Acquisition or Addition

Asset Class Numbering Convention

Example:

1 3 4 0 0 1 0 Furniture, Fixture and Equipment

1 3 4 0 0 0 General Ledger Control Account for FF&E

7 digit number with first 4 digits from B/S account and last 3 digits for asset class sub-categories

Asset Numbering convention

Example:

4 0 032 986 FF&E Asset Master Record Number

1 3 4 0 0 0 General Ledger Control Account for FF&E

8 digit system generated number with first digit from 3rd number on the B/S account

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Summary

(termed as tasks in the Industry Print Process Modeler) : Task:







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Process Summary - Asset MaintenanceMaintenance is a centralized process performed by Property Accounting. The following processes are identified:

Non-Budget Relevant

1. Transfer of depreciation

2. Split asset into multiple asset master data for tagging purposes

3. Value adjustments (write-ups of cost/depreciation)

4. Location change

5. Update of personnel assignment to vehicle and other non-financial master data

6. Reversal of postings that originated from fixed assets module

Budget Relevant

1. Correction in Asset Class/Cost Center/Fund/Function/Grant

2. Reclassification from an asset to an expense item (vice versa)

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Process Summary - Asset MaintenanceObjectives

1. Add assets manually (e.g. donated assets received, reclassification)

2. Post asset values to accounts and cost centers

3. Add additional asset categories

4. Group assets for reporting purposes through a common code (example: a code that links all the contents in a building for insurance reporting)

5. Integrate or interface with Accounts Payable, General Ledger, Purchasing, Capital Budgeting using asset

6. Perform mass transfer to reflect organizational changes

7. Transfer or adjust an asset or assets and automatically interface the appropriate entries to the General Ledger

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Process Summary - Asset MaintenanceObjectives

8. Maintain a history of the transfers with From and To locations and dates (with an appropriate audit trail, effective dating, etc.)

9. Make changes to an asset record (with an appropriate audit trail, date, etc.)

10.Revalue assets for impairment and retention of original values

11.Retain the history of where the transferred asset originate from (i.e., buses, computers)

12.Maintain detailed property records for all fixed assets, including identification codes, commodity classification, acquisition data, supplier information, make, model, serial number, insurance information

13.Ability to report on asset balances by account, detailed by additions, retirements, transfers from CIP, re-classes, transfers, and other adjustments

14.Ability to enter the life of an asset (if different from default)

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Summary








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Process Summary – Asset Disposition Asset disposition is a centralized process performed by Property Accounting. The following processes are identified:

1. Sale or auction with Revenue

2. Sale or auction but asset is scrapped

3. Full or partial demolition of structure (e.g. portables, buildings and cafeteria equipment)

4. Capital lease retirement

5. Reclassification from an asset to an expense item

The disposal of property with a value of $1,000 or more, or any property included in a bid, auction, or outgoing donation, shall be approved by and recorded in the minutes of the Board

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Summary








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Process Summary – Periodic Processing Periodic processing covers month-end and year-end processes

• For assets being build during the year or at year-end, CIP(Construction In Process) and substantially completed construction assets are settled into SAP Fixed Assets module through manual journal entries

• Depreciation is run on a monthly basis as the last activity on the closing schedule for purchased assets and constructed assets. The depreciation run updates both depreciation areas

• The depreciation run will post to both sets of books

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Process Summary – Periodic ProcessingFor year-end processes, a manual journal entry is performed to debit the Construction-In-Process manual general ledger account in preparation for CAFR and AFR reporting

Year-end closing is performed and balances carried forward

Objectives1. Temporarily take assets out of service and stop depreciating them

2. Calculate and report monthly depreciation

3. Charge depreciation expenses to specific posting cost centers within the organization

4. Automatically calculate GAAP depreciation and post to the GL

5. Close the fiscal period and year

6. Calculate depreciation adjustments for assets put in service in previous periods

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Summary








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Summary - Asset Reporting

• Asset reports can be grouped into major categories as follows:

• Acquisitions Report• Proof of Origin Report (displays sources of acquisition)• Transfers• Retirement Report• Physical Inventory Report• Asset History Sheet

• Depreciation Report

• Sort keys can be easily configured for reporting

• Custom reports for Comprehensive Annual Financial Report (CAFR) & Annual Financial Report (AFR)

• Non-capital asset expense reporting through the General Ledger Module

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Summary - Asset Reporting (Cont’d)

Objectives1. Reduce lead time for preparation of Comprehensive Annual Financial Report

(CAFR) and Annual Financial Report (AFR)

2. Enable reporting by NIGP Code in the asset master record

3. Run reports as of a given date (FA lists, additions/disposals)

4. Produce a Fixed Assets roll-forward schedule denoting beginning balances, additions, deletions and ending balances for both asset cost and accumulated depreciation

5. Produce reports sorted by tag numbers (bar code numbers)

6. Report on fully depreciated and retired assets

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Summary - Asset Reporting

Objectives (cont’d)

7. Generate report detailing capital expenditures by fund, category or major component

8. Report capital expenditures sorted by cost

9. Have on-line access to query data, ability for self service and drill down inquiry to address ad hoc questions and provide standard reports available on-line with drill-down capabilities

10. Forecast future period depreciation expenses

11. Report the fixed assets for cost center/business areas separately

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Summary








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Summary – Physical InventoryPhysical inventory is performed on a frequent basis to account for physical assets within the District. An enhancement will be developed to download information from SAP to a flat file. This file is then uploaded to the scanner for the physical inventory. Another enhancement will be developed to upload data and perform mass changes

Objectives1. Integrate current barcode scanner hardware/software (IHS Software) and

processes to SAP

2. Enable timely updates of physical inventory records through mass change functionality for location, room number, dates and statuses

3. Enable mass retirement of assets confirmed as un-located

4. Enable addition of assets located in the field but not in the system

5. Conduct physical inventories/cycle counts

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Leading Practices and Key Features

Leading Practices and Key Features

• Asset master record utilized at the time of purchase requisition for pre-encumbrance of budget

• Asset category is automated in the purchase requisition through Item Category mapping to NIGP Code

• Purchases without Item Category will require a NIGP Code

• Posting to asset sub-ledger (asset number) where cost center, fund, grant, functional area data is embedded in the asset master record

• Automated integration with SAP module

• Modified and Full Accrual Accounting entries being made with single asset transaction

• Audit trail through drill-down report

• Audit trail on changes made to the asset master data

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As-Is and To-Be – Significant Process Changes

Master Data DefinitionCapital Assets

Master data DefinitionCapital Assets

As-Is To-Be

Asset master record created after invoice is paid

Creation of asset master record shell at the time of requisition/purchase order

Asset category defaulted based on item category/NIGP Code

Capital and expensed assets in the same account

Capitalization policy strictly adhered to through built in formulas for unit price equal to or greater than $1,000

Separate systems handling assets from construction (GASB 34) and non-construction assets (Property System)

Centralized asset master database in SAP for substantially completed assets and capital assets

Manual tracking of Portables and Capital Leases through Excel Spreadsheet

Centralized asset master database for all capital assets in SAP

Automatic entries from CIP system (WBBI) into GASB 34 for substantially completed assets

Journal entries will be prepared into SAP Fixed Asset module for all substantially completed assets

Long lead time for preparation of CAFR & AFR from separate systems

Timely preparation for CAFR & AFR

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As-Is and To-Be – Significant Process Changes

As-Is To-Be

Maintenance ProcessCapital Assets For assets being used by other cost centers, depreciation is not transferred

Maintenance ProcessCapital AssetsFunctionality to transfer depreciation to a new cost center

Decentralized maintenance of asset master date

Centralized maintenance of asset master data and transactions

Automated J/E through the asset sub-ledger for better control

Corrections of objects with financial impact such as funding may not be completely carried through from the sub-ledger to control accounts

Control of budget / non-budget relevant transactions through transaction types

CIPFixed assets record is generated (GASB 34 System from WBBI) after CSI Divisions are created and mapped to an asset categories

CIPCosts prepared in WBBI will be settled to SAP Fixed AssetsCIP balances are reported through a manual Journal Entry to a manual CIP General Ledger B/S Account in SAP

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Identified GAPS

• No identified GAPS for creation and maintenance of asset master data

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Policy Impacts

• All capital asset purchases should have an asset master record

• Each asset requisition line item should only point to 1 asset master record for depreciation & tagging purposes

• Valuation of assets at the time of Goods Receipt

• Going forward depreciation transfer to the cost center using the asset

• Integrated organization wide period-end closing to be carried out Timely goods receipt, invoice receipt, transfers, retirements prior to month-end depreciation run

• Posting periods to be closed after month-end closing

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Change Impacts Category

• Process changes:

• Creation of purchase requisitions with asset master record shell automation

• Transactions will be performed in the Fixed Assets module rather than through the General Ledger. J/Es for gain/loss are automated through system configuration

• New process of asset acquisition through Readsoft invoice scan by reclassifying the expense item to a capital asset

• Capital leasing process now spans across various functions (Purchasing, General Ledger and Fixed Assets)

• New process for month-end closing

• Manual reporting of CIP Balances due to separate external CIP system

• Accountability changes:

• Goods receipt will be performed against the PO line item in SAP

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Change Impacts Benefits of Change

• Integrated approach between fixed asset sub-ledger, general ledger, cost center, funds and grants

• A complete sub-ledger system that is in balance with General Ledger control account balances

• Account automation through the asset sub-ledger to enable parallel asset valuation for CAFR and GASB 34 at the time of purchase

• Comprehensive audit trail throughout the life cycle of the asset starting from PR/PO to capitalization, depreciation, maintenance and disposal

• Central asset sub-ledger system

• Automatic Adjustments of asset value if discrepancies between the PO and invoice amount exist

• Enable timely internal/external reporting (CAFR/AFR) with shorter lead time

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Change Impacts

Risks Associated with Change

• Requisitioner will need to be trained to split quantity by line item

• The sequence of events for GR/IR, transfers, disposals have to be adhered to in order to close the month for depreciation run

• Settlement of substantially completed construction assets from an external system to SAP fixed assets

• Change of mind set that requires all asset related transactions to be posted through the asset sub-ledger for asset acquisitions, maintenance and retirement

• Month-end closing cut-off dates need to be conveyed to individuals performing Goods Receipt

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Change Impacts

Implementation Requirements• Training is needed for the Requisition creation process, the capital leasing process, asset

addition through the fixed assets module as a result of recoveries, lost & found, donations received, month-end closing activity cut-off deadlines, capitalization of completed or substantially completed construction costs, land purchases, creation of asset master record shell for reclassification of from expense and maintenance of Category Item (SRM) to NIGP Code/Asset Category

• End-Users training is mandatory

Impacted Audience

• Worksite Employees: Requisition creation process, asset acquisitions through Readsoft Invoice scan

• Property Accountants: Asset creation process in requisitions, other asset addition processes, capital leasing process, month-end closing, asset valuation

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Change Impacts

Impacted Audience (Cont’d)

• Procurement Department: Category Item mapping

• Facilities Management: Land purchase

• Account Payable Specialist: Land purchases and Capital leases

• Capital Construction Budget Control (CCBC) Specialist: Capitalization of completed/substantially completed construction asset

Level of Impact• High

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Controls Framework

Key controls include:

1. Segregation of Duties between Maintaining Fixed Asset Master Data and the Procurement Functions

2. Restricted & centralized access to perform asset transfers, retirement, reverse asset documents, and perform asset valuation adjustments

3. System functionality automatically adjusts account balance, budget availability and depreciation postings upon reclassification of an asset to an expense

4. Depreciation keys (depreciation method) and useful life are configured based on Client X policy and attached to asset class

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As-Is and To-Be – Significant System Changes

As-Is To-Be

Maintenance ProcessCapital Assets Two separate fixed assets systems for capitalized assets

GASB 34 Property System

Maintenance ProcessCapital AssetsSingle, standardized asset master data database SAP Fixed Asset Module

CIPCIP balances is prepared & automatically settled from WBBI to GASB 34 for substantially completed construction item

CIPManual process between WBBI and SAP Fixed Assets for substantial completed construction item

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Key Potential Development Objects

Name Description Implementation Requirements

Interface: SL_OUT_0006

SAP Outbound to flat file for physical inventory

Interface: SL_INB_0006

Flat file Inbound to SAP with updated information

•This is a work-around solution as the current bar code scanner from the district is not SAP compatible. This program downloads data to a flat file for physical inventory

•After the physical inventory is performed, data is reloaded back to SAP. When reloading, location is updated into SAP

•Possible translation table for location codes•Format for download and upload is predetermined by existing scanner software

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Key Potential Development Objects

Name Description Implementation Requirements

Enhancement: SL_ENH_0002

Fixed Assets User Enhanced Fields & Search help activation

•This is a very simple enhancement to activate user fields in the asset master record screen for storing crucial key data from legacy asset systems so that SAP Fixed Assets becomes the main source of data for searches by old PO numbers, old asset numbers, old project reference numbers •User fields can also be utilized to store warranty and other statuses.

•After activating the user fields, the search help field needs to be activated also

Enhancement: SL_ENH_0003

Populate NIGP Code from PO to Asset Master Database

This program is a substitution rule that is non-standard. It grabs the NIGP code in the PR/PO and auto-populates them into the asset master record

•Evaluation Group in the asset configuration must be maintained whenever the NIGP table is updated

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Roles within Fixed Assets

Role Role Description

Accounts Payable Fiscal Assistant

Set up/Maintain/Cancel recurring payment for capital lease

All Administration Staff (restricted by cost center)

Display Standard and Custom Reports in Fixed Assets & General Ledger, Run Asset Explorer and Display Asset Master Record

Capital Construction Budget Control (CCBC) Specialist

Prepare WBBI balances and other information, map item to asset category, upload to Batch Program, monitor upload, reconcile differences, display settlement report

ERP Support Create New Sort Key and create substitution rule for mass changes

Property Accountant •Create/Change/Display/Delete/Block Asset Master Data and perform all asset transactions; Additions, Transfers, Retire (with revenue and scrap)

•Supervisory/Super user role for Capital Lease asset setup, GL JE Postings related to Fixed Assets Additions and Corrections/Reclassifications, Bar Code Scanner data load, mass change process

•Liaise with Purchasing Process owner for NIGP Code mapping to Asset Category

•Execute Year-End Closing

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Roles within Fixed Assets

Role Role Description

Worksite Employee Creates Purchase Requisition which creates shopping cart for Asset Purchases

Procurement Specialist Creates Purchase Order pertaining to Capital Leasing Agreement

Store & Distribution / Transportation / Maintenance Specialist

Manually Tag Assets

Property Auditor Perform Physical Inventory

ITS Project Managers Create Purchase Requisition for Education Rate Programs ( E-Rate) Items

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To-Be Application Architecture

ECC- Procurement- Accounts Payable

SRM- Vendor Management

ECC- Project Systems- Funds Management

SAP

BIData

Warehouse

Customized Reports

WBBI (Asset Capitalization

system)

ECCFixed Assets

Capitalized Assets (Manual settlement)

FlatFile

Asset Bar-code Scanner

Asset data

Asset Data

Fixed Assets

1

2

1

2

1 (Yellow): Construction Items

2 (Blue): Non-Construction Assets

Project Systems (WBS for tracking purpose only)

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Support Required from Steering Committee

• Assist in gaining District-wide acceptance for the use of asset sub-ledger from asset life cycle

• Asset master record to be created at the time of purchase requisition with built-in system business rules to default asset category by Item Category/NIGP/Asset Category mapping

• Valuation of assets at Goods Receipt and capitalization date to default from Goods Receipt Date

• Organization-wide month-end closing process

• End-Users training is mandatory

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Implementation Challenges

• Change impact allowing various departments within the District in terms of the process for creation of fixed assets through Purchasing Process

• Ensure that relevant personnel retained knowledge gain through training to post to asset sub-ledger from the time of requisition to asset retirement

11 Asset Accounting c

Documents

asset acquisitionaddition

asset maintenance dc

asset disposition dc

asset reporting dc

integrated process

parallel asset valuation

addition dc

following process categories