Recording Commitments and Actuals

In public sector organizations, no business activity, which leads to a future payment can be posted/approved without an available budget. Early (as soon as possible) earmarking of the budget consumption is paramount to plan accordingly. This means that when governments foresee future payments as a result of an operative commitment document, they must reserve their budget. This reservation of the budget needs to be documented through a financial budget consumption document, which is controlled by active availability checking.

This mechanism is referred to in this document as commitment updating.

In certain cases, a commitment document is not available, so the actual document is directly consuming the budget. In both cases (with and without a reference to a predecessor commitment document) this is referred to as actual updating. Commitment and actual postings together form the budget consumption.

PSM-specific commitment and actual information are recorded in the universal journal (table ACDOCA) by adding the respective PSM account assignments or master data and budgetary attributes to the universal journal entries during document posting.

In the case of commitment postings (such as purchase requisitions, purchase orders, earmarked funds), the ledger 0E is updated, whilst the ledger 0L is used for actual documents. Further ledgers are possible and described in a later chapter.

The main place where budgetary attributes are stored is in the general ledger account. In particular, expense and revenue accounts (with a few exceptions like assets and down payment accounts) contain the main attributes, which control budget consumption. During posting of a commitment or actual, the general ledger account is used to derive the budgetary attributes and store them in the respective ledger of universal journal.

To understand the key concepts of budgetary attributes, see the following chapter and also refer to the earlier master data chapter, which also describes the budget account concept.

In addition to the recording of the budgetary account assignment elements (fund, budget period, grant, cost center, WBS (optional) and functional area), the following attributes are important for recording of the commitment and actuals, checking the budget, performing availability control, and other specific processes such as down payments and year end.

Most of the attributes are stored on the general ledger account/budget account, derived during posting (in some cases based on specific processes), recorded in the universal journal (ACDOCA and ACDOCP) and subsequently used for reporting. Those attributes are as follows:

• Budget Consumption Type
• Budget Relevancy and Expense/Revenue indicator
• Budget Consumption Amount Type
• Budget Consumption Date, Budget Consumption Period, and Budget Consumption Year

These attributes are further described in this chapter and where applicable are described in additional chapters referenced.

The following example shows how a document can be used for both budgetary reporting as well as financial reporting.

The following figure illustrates that budgetary reporting and financial reporting are possible based on the same document recorded in the universal journal.

Budget consumption types (BCT) are used to interpret the financial transaction from a budgetary accounting perspective. They can be divided into commitment budget consumption types (such as purchase requisitions and purchase orders, which are both updated in the ledger 0E) and actual financial transactions (such as actual expenses or revenues, which are updated in the ledger 0L).

Only some BCTs are relevant for budgetary control purposes, whilst others are used to describe the status of a journal entry in the financial document chain or the internal or external nature of a journal entry transfer.

The process (such as purchase requisition, purchase order) determines the BCT for commitment type transactions. The BCT is retrieved from the general ledger account or from additional special processes (such as down payment, asset acquisition, transfer posting) for actual transactions.

The budget consumption type for an account is predelivered with the standard chart of account (YCOA) and cannot be changed by the user. Likewise, the budget consumption type assigned to a process is not changeable.

Budget consumption types are important for reporting. In general, (with some exceptions) only BCT’s classified as budgetary (see next table) are relevant for budgetary reporting. Additionally, see the Unit Exploring the Reporting Options (coming soon in a next update) for additional details.

The Budget-Relevant indicator is an important setting in the general ledger/budget account and is updated as part of a journal entry in the Universal Journal (ACDOCA). It can be used to control whether and how a budget is consumed for various transactions and types of postings. This budget relevance setting can be used in several different areas, but it is interpreted differently in each case:

Budget Relevance for Commitment and Actual Expenses (ACDOCA)

For commitment and actual expenditure document lines, the budget relevant indicator determines whether a document line is consuming budget. Accounts classified in the general ledger as expense document lines are included in the availability control (AVC) and produce a decrease in budget.

Budget Relevance for Actual Revenues (ACDOCA)

Accounts classified in the general ledger as Revenue are not included in the availability control and do not increase or decrease the amount consumed. The delivered default setting for these revenue type accounts is Not Budget-Relevant. The budget-relevant indicator can however also be set for revenue accounts, which allows a distinction to be made in reporting.

Setting the Budget-Relevant Indicator

The budget-relevant indicator can be set in the G/L account master data in the section Public Sector Management Data.

You can overrule the G/L account settings for specific CO processes and remove budget-relevant indicator. In this case, the respective overhead postings are excluded from the availability control and any budget consumption.

You define the budget relevance of the CO processes in the configuration activity, Define Budget Relevance of CO Processes. In addition, see the Unit Understanding the Integration with Overhead Accounting and Project Management.

The recording of a budget consumption amount type is important for documents in which the amounts can still be changed either by making direct changes or in subsequent documents and adjustments.

Budget consumption amount types are predelivered by SAP and recorded in the document. The following budget consumption amount types exist and are described in detail in the commitment section of this document and also in Unit Describing Year-End Processing.

Within a document chain, commitment documents are documents that are posted before a financial document. The generation of commitment documents is called commitment updating.

Commitment documents are created from the following:

• Earmarked funds (reservations, precommitments, commitments, forecast of revenues)
• Purchase requisitions
• Purchase orders
• Travel requests

Unlike financial documents, commitment documents can be changed and reduced by a successor document (either another commitment document or an FI document). The changes of commitments can be value increases or decreases, account assignment changes, setting a commitment to completion, or carrying a commitment forward to the next fiscal year. Different budget consumption amount types are used in order to classify the type of changes.

Like financial documents, commitments do reserve budget using active availability checking. They are updated in the universal ledger ACDOCA using ledger 0E.

At the end of the year open commitments (not completely reduced) can be carried forward. (see Unit 6, Lesson 2, Describing Commitment Adjustments).

Commitment documents are usually followed by other commitment documents or actual documents. From a business perspective, a successor is usually more contractual than its predecessor. A document chain describes linked documents, for example:

Purchase Requisition – Purchase Order – Goods Receipt – Invoice Receipt – Payment

The linkage of the documents is usually created on a line item (not document header) level. It is important to understand that the relationship of commitment document and successor document is N:N. However, each commitment document line item can be reduced by multiple successor documents lines, but each successor document line refers to exactly one predecessor line item.

The account assignments can be different between commitment document and its successor. The account assignments are usually copied into the successor document, but they can then, depending on field status configuration, be changed.

The successor document does not need to consume the complete amount of its predecessor document. In this case, part of the predecessor document will remain open. However, if the successor document knows that this is a partial reduction, but there will be no more further successor documents, then the completion indicator can be used in order to reduce the complete open amount.

In general, each update of the budget consumption shall be posted with today’s posting date (or the posting date of the last newly created document) or with the due date (date of expected payment) as the budget consumption date.

Examples of this are the following:

• For the creation of a commitment document, the posting date or due date of commitment document will be the budget consumption date.
• For an invoice document (or any other actual document) reducing a commitment document, the posting date or due date of the actual document shall be the budget consumption date.
• For a change of commitment documents, the current CPU date (or due date) is the budget consumption date.

In exceptional cases, it is possible to influence this date for all commitment documents, for an individual user or for an individual time range. The app to influence this is called Manage Users with Flexible Update Date (see the following figures).

In general, it is not possible for a document line to use a budget consumption date which is younger than existing persisted budget consumption dates (no backdating of updates).

• For certain types of commitments, specific behavior is described in Unit 5, Understanding Integrated Components.
• Currently SAP S/4HANA Cloud does not provide the ability to forecast revenue, for example, from sales orders.

It is possible to update on due rather than posting dates based on configuration. For example, it might be that a funds commitment with a posting date in this year and a due date next year, shall immediately consume only next years budget. In your role as a configuration expert (business role SAP_BR_BPC_EXPERT), you can activate the due date updating for budget consumption in the configuration activity "Define Update Date for Budget Consumption" for selected commitment documents. In case the due date updating is active the following applies:

• If due date is empty in the document, the posting date acts as budget consumption date
• for commitment changes before the budget consumption/due date, the existing budget consumption date is used for the updates
• -for changes after the budget consumption date, the logic applies for posting dates applies (CPU date or update date act as budget consumption date)

Actual documents are in many cases financial documents referencing commitment documents but can also be recorded without reference.

Important for public sector organizations are the recording of expenses (with or without reference to a predecessor document) or revenue. The subsequent collections or payments are less important from a budgetary reporting standpoint and most of the budget consumption reports are based on line types with BCT classified as budgetary (see earlier table with budget consumption types).

The payment and collection of invoices are only of relevance for budgetary reporting if they contain additional expense/revenue adjustment lines for cash discounts or a foreign currency exchange gain/loss. These adjustments are referred to as online post-processing, which is a function of FI document splitting.

The following example demonstrates the basic concept of actual updating.

Other typical actual documents which can occur and which are relevant for budgetary reporting and budget consumption are listed below.

Note that only the budget consumption types 'Expense/Revenue' (99) and 'Down Payment' (61) are used for budgetary reporting/budget consumption. The entries are highlighted in bold.

• Goods receipts with reference to a purchase order:

  Debit 'Expense' (BCT 99 Expense/Revenue) Credit 'GR/IR' (BCT 54 Payables)

• Invoice receipts (accounts payable) with reference to an earmarked fund or purchase order:

  Debit 'Expense' (BCT 99 Expense/Revenue) Credit 'AP Vendor/Liability' (BCT 54 Payables)

• Accounts receivable invoices without a reference:

  Debit 'Customer/Receivable' (BCT 55 Receivable) Credit 'Revenue' (BCT 99 Expense/Revenue)

• Accounts receivable invoices with reference to a sales order:

  Debit 'Customer/Receivable' (BCT 55 Receivable) Credit'Revenue' (BCT 99 Expense/Revenue)

• Down payments (AP) without a reference:

  Debit 'Vendor/Special GL (BCT 61 Down Payment) Credit 'Bank/Cash' (BCT 57 Payment)

• Down payments (AR) without a reference:

  Debit 'Bank/Cash' (BCT 57 Payment) Credit 'Customer/'Special GL' (BCT 61 Down Payment)

• Down payments (AP) with reference to a purchase order or earmarked fund:

  Debit 'Vendor/Special GL (BCT 61 Down Payment) Credit 'Bank/Cash' (BCT 57 Payment)

• Integrated documents with expenses/revenues from fixed assets, payroll, contract and lease management, treasury and risk management, travel, plant maintenance, overhead accounting and project management. See chapter see Unit 5: "Integrated Components" for integrated component to learn some more specifics about these documents.

The concept of updating the universal journal for both financial reporting and budgetary reporting (with additional PSM attributes described) allows for a simpler reporting and reconciliation.