Dexteyra Consulting Group Inc.

Lend, bend, spend, extend, and pretend accounting challenges for SAP public sector customers

 

Thomas Lyon* and Mandeep S. Oberoi**


April 5, 2013

 

Overview

 

Late 90s and early 2000s had witnessed a growing trend among public sector enterprises across North America, Europe, and the Caribbean to implement SAP to manage their business processes. For most part, SAP remained the system of records for accounting, financial management, budgeting, procurement, and human resources management. And to a relatively lesser extent; for tracking of project initiatives. Fast-forward fifteen years to 2013, financial coding blocks in most of these systems have become so much complex because master data such as cost centers and fund centers have been created sporadically to represent needs of each department or project that was ever undertaken within the organization.  The practice has rendered these SAP systems with a complex plethora of data homonyms and synonyms.

Now as governments across the western hemisphere are increasing their footprint on SAP, it is an “extend accounting” challenge for public sector consultants as they inherit a complex financial coding structure from the existing SAP instances. It is very complicated to harmonize newer functionalities such as online tax forms, register tax payers in PS-CD, process tax returns, collections, cash management, and revenue accounting, while integrating with modules such as dispute and case management in CRM. It is important now to look into the existing SAP financial coding block and reduce pertinent complexity before adding up newer functionalities into the system. The process would be slow and complex, but it will provide value in long run.

 

Lack of planning and governance led to chaos

 

Without proper governance and Best Practices oversights over the years, many of these organizations continued to upgrade to newer versions of SAP software and continued to add functionalities to cater to smaller groups within the organization. Some did not consider a detailed enterprise wide purview of impacts of the newer business processes. The thrust was primarily towards accounting, so most of the data and reports that should have been derived from diversified SAP modules were factually extracted through the financial coding block. For example, instead of reports that should have been derived from procurement and material group records, additional general ledger (G/L) accounts were created for each blue and green chair that was purchased for each project. Which should have been ideally tracked in financial coding block as furniture, while as a blue and a green chair in the material master records (MMRs); budgeted at a higher level fund center, and referred to the project work breakdown structure (WBS) element or as an internal order for statistical reporting purposes. Instead, most organizations are left with a plethora of repeated G/L accounts that they have to now deal with.  

 

Public sector organizations are, in some extreme cases, left with much more cost centers and fund centers as compared to the number of employees, leave alone the managers they have. Budgets are created at each manager level and in some cases, the managers own multiple cost centers. So Projects end up hitting multiple cost centers within or across multiple subdivisions. Sometimes the payments are made through the budget belonging to somebody else’s cost center. Then, the public sector accountants keep very busy posting 100s of journal voucher (JVs) to allocate those costs that do not provide accurate reporting. So the directors finally end-up doing their forecast in excel sheets, while Transferring, Supplementing, and Returning their PSM-BCS budgets in SAP – true to Lend, Bend, Spend, and Pretend Accounting “Bad-Practices”. It’s not “real” accounting as it should have been, but it does keep the accountants very busy. It is very important for public sector enterprises to have a proper governance model before adding up master data sporadically to their existing financial coding block. If not, they will have to eventually spend hundreds of thousands of tax payers’ dollars across prolonged periods and invest lots of efforts to clean up their systems. As it was well said in yesteryears, “A stitch in time can save nine.” 

 

When matching multiple grants to many funds is a challenge

 

It has always been a challenge for SAP public sector consultants to configure SAP Grants and Funds Management functionalities down to the level of details at which the grantors want to see on how their grants are being spent by respective funds. For example, if a hospital receives grants from multiple sources, say the federal and provincial governments, donor agencies such as Bill and Melinda Gates Foundation, and individual donors to fund AIDS and Cancer research, how would you track the costs incurred on a patient that has both Cancer and AIDS? It becomes truly complex and granular in case of large public sector organizations where multiple grants are used to fund many different projects in various subdivisions and service sectors such as maintenance, development, security, policing, equipment, and training. A grant for equipment or training could be used to fund security that caters to multiple business establishments of the organization that may not be involved in similar functions. Cross-instance funds and grants management postings become a real challenge along with interfaces in cases of very large establishments where multiple SAP instances are installed separately to manage ECC and Contract Accounting (FICA and PS-CD) processes. 

 

Conclusion

 

Using SAP based systems has benefitted many public sector organizations over the years. Using the system with “caution” and a “governance” mechanism in line with Best Practices will make it easier to maintain and to add newer functionalities.

 

 

*Thomas Lyon works as Director with MaStra Tech Inc. and as an Advisor with Dexteyra Consulting Group Inc. Thom has over 23 years of SAP and financial services advisory experience in his capacity as a SME and director within multiple organizations in Ottawa region including SAP Practice of PriceWaterhouseCoopers (PwC), Treasury Board, Canadian Blood Services, Justice Canada, Natural Resources Canada, Agriculture and Agri-Food Canada, among others. Thom holds a Certified Management Accountant (CMA) designation and Masters Certificate in Project Management from Carleton & Schulich Universities. He was the Founding Chairman of Ottawa ASUG Chapter in 2002-03. Thom is a member of Financial Management Institute (FMI), Canadian National Capital Chapter and a member of Society of Management Accountants of Ontario (SMAO).

 

 

**Mandeep S. Oberoi works as Director & Principal Consultant with Dexteyra Consulting Group Inc. He has also worked with large consulting firms such as Hewlett-Packard Canada’s Business Consulting Group and Capgemini USA LLC, among others. Some of his key past clients include Canada Revenue Agency (CRA), Bank of Canada, MolsonCoors Brewing Company UK, Winnipeg Regional Health Authority, Ministry of Works - Government of Trinidad & Tobago, and Bacardi Rum, among others. He specializes in designing SAP Best Practices based banking, finance, public sector management, and supply chain solutions. Mr. Oberoi has worked on projects across North America, Caribbean, Europe, and Asia Pacific. He was awarded a Medallion by the Indian National Academy of Engineering (INAE) in 2001.


Please contact info@dexteyra.com to reproduce this article or to add your comments.

 

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