An allocation is a generic term referring to movement of dollar amounts from one cost collector to one or more cost collectors. Johns Hopkins uses several different types of allocations, including Assessments, Distributions, Manual Allocations, Internal Order Settlement and Activity Allocations. For every allocation, there is at least one sender cost object and at least one receiver cost object. Both sender and receiver amount transferred is posted to the same Secondary Cost Element. The sender gets the credit and the receiver gets the debit when costs are allocated. When revenue is allocated, the sender gets the debit and the receiver gets the credit.
Business Areas are organizational units that represent a separate area of operations. It is generally, but not always, a separate legal entity. For Johns Hopkins, Business Area defines those organizations for which complete sets of financial statements, including balance sheets, are required or desired. For JHU units, Business Area generally refers to divisions or significant units within a division.
Business Area Ranges
|Johns Hopkins University (JHU) Divisions||100-299|
|Johns Hopkins Health System (JHHS)||400-599|
Controlling Module (CO)
SAP consists of separate integrated modules, each with its own ledger. One of the benefits of this architecture is that multiple basis of accounting (i.e. accrual vs cash) are maintained simultaneously. The CO module exists to segregate activity by cost collectors: Cost Center, Internal Order or WBS element. The CO module contains tools to move costs between cost collectors. The various SAP modules are integrated and transactions posted to other modules will appear in CO reports. The debit and credit sides of a CO allocation always post to the SAME cost element.
Allocations may post to cost collectors across the Johns Hopkins Enterprise. These transactions post to due to/ due from accounts and cash settlements between entities occur throughout the month.
A cost collector is a generic term used to describe a Cost Center, an Internal Order or a Work Breakdown Structure (WBS) element.
A cost element in CO corresponds to a revenue or expense general ledger account in the chart of accounts. There are Primary and Secondary Cost Elements.
- Primary Cost Elements – correlate one for one to general ledger expense or revenue accounts.
- Secondary Cost Elements are used for revenue and cost allocations across the Hopkins Enterprise within the Controlling Module. Secondary Cost Elements, which begin with “9” and have six digits, do not have one-to-one counterparts in the GL Chart of Accounts.
Cost element groups are used to group together revenues and expenses with similar characteristics. Examples of similar characteristics: Salaries and wages, fringe benefits, travel, student aid, interest, depreciation, etc.
A Cost Object could also be called a Cost Collector. Cost Centers, Internal Orders and WBS are all considered Cost Objects.
The Johns Hopkins Enterprise (SAP client base) is divided into two major components: Johns Hopkins University and Johns Hopkins Health System. Johns Hopkins University (JHU) divisions are set up in Business Areas within the 100-299 range and Johns Hopkins Health System (JHHS) companies are set up in Business Areas within the 400-999 range. Transactions that cross-over into different ranges represent Inter-Entity Transactions. For example, a CO allocation between Johns Hopkins Hospital (BA 480) and the School of Medicine (JHU- BA 170) is an Inter-Entity transaction.
Transactions between JHU and JHHS are considered Inter-Entity and processed as CO allocations. CO Allocations post only to revenue and expense statements. Additional offsetting balance sheet entries are posted automatically, by SAP, to record Inter-Entity Due-To/Due-From Clearing accounts balance.
Inter-Entity transactions are reviewed by and released through the Inter-Entity Transaction Group within the Accounts Receivable Shared Service Center.
Each major component of the Johns Hopkins enterprise is divided into Business Areas. Johns Hopkins University (JHU) divisions are set up in Business Areas ranging from 100-299 and Johns Hopkins Health System (JHHS) companies are set up in Business Areas ranging from 400-999.
Transactions within the same business area range are considered Intra-Entity transactions for the purposes of CO allocations. Transactions between the health system companies are also considered Intra-Entity transactions for the purposes of CO allocations.
For example, a “billing” between Bayview Medical Center (BA 400) and Johns Hopkins Health System Corporation (BA 450) is posted as an Intra-Entity CO allocation.
Approved Intra-Entity transactions may be posted by authorized users throughout the Johns Hopkins enterprise.
An internal order is a Controlling (CO) object responsible for budgetary monitoring and reporting that collects revenues and expenses separately from a cost center. All internal orders are assigned a responsible cost center. There are two main classifications of internal orders, sponsored (Sponsored Program) and non-sponsored (for costs and revenues not directly related to a Sponsored Project.) There are several types within each. The non-sponsored internal order has a one-to-one link with the funded program in the Funds Management (FM) module and the numbering is the same. Similarly, sponsored internal orders are linked one-to-one with the sponsored program in Grants Management (GM). The system automatically assigns a unique 8 digit number for the internal order. The first digit indicates the type of order: Non-sponsored (8), Sponsored (9) and IPA Agreements (1). The remaining digits are based on the next available value in the range for the type of order.
Internal Service Providers (Service Centers)
Some Service Providers have decided to use a custom transaction developed in SAP to carry out internal procurement within Johns Hopkins Entities. Customers can go online to select a product or services from a catalog. The Services Provider will be able to access the order through SAP and fill the order. Customers may purchase across legal entities. The resulting transaction will be an Inter-Entity allocation. When the Service Provider fills the order, the charge will be posted to the customer’s cost collector. The issuer fulfills orders and flags them as fulfilled, at which time a manual cost transfer (KB15N) is triggered to post the charge to the purchaser and credit to the seller. The purchaser will be able to order goods from service centers when mapped to the SRM Requisitioner role.
Journal Transfers (also called Non Payroll Cost Transfer)
The Journal Transfer (Non Payroll Cost Transfer) is a customer transaction in SAP used for the initiation and approval of Intra-Entity manual allocations and error corrections to revenues and expenses. Original allocations that were executed in error should be reversed, corrected and reprocessed. Since the resulting transaction is a KB15 (Manual Cost Allocation), only secondary cost elements may be used. The Journal Transfer does not currently allow Inter-Entity allocations that cross between JHU and JHHS. Johns Hopkins Enterprise anticipates future development of this feature. The Non Payroll Cost Transfer Approver Role triggers the posting of a KB15N.
A Receiver is an SAP concept to describe the cost collector to which amounts are transferred. In a CO allocation, there are often many Receivers of amounts coming from a single Sender. Most allocations are expense allocations; therefore the Receiver cost objects will get DEBIT (expense) postings at the time of the allocation. It is also possible to allocate revenue or funding source credits. In that case, the Receiver will get the credit posting to the Secondary Cost Element.
Secondary Cost Element
The debit and the credit on a CO allocation always posts to the same Secondary Cost Element. When CO allocations cross Business Area and/or Fund, an automatic balancing entry occurs on the balance sheet (a Due to/Due From Receivable or Payable). For GAAP financial statement purposes, Secondary Cost Element transactions are summarized and posted to a special series of General Ledger Accounts Numbers.
A Sender is an SAP concept to describe the cost collector that initiates the allocation. In a CO allocation, costs or revenues are typically posted to a cost collector, and subsequently moved to other cost collectors. Most allocations are expense allocations and therefore, the Sender’s cost object will get a CREDIT posting at the time of the allocation. It is also possible to allocate revenue. In that case, the Sender would get a debit posting at the time of the allocation.