Real Estate Foundation, Inc'

1
Real Estate Foundation, Inc.

• Business Model in SAP
• March 26, 2002

2
Objectives

• Provide understanding of proposed REFI model in
  SAP
• Describe SAP structures and process flow
• Demonstrate a simple business scenario
• Review reports
• Discuss open items
• Seek process owner approval of the model to begin
  next steps

3
Requirements
The Real Estate Foundation, Inc. is a charitable
foundation established in October 1997 to limit
MITs liability resulting from donations to the
Institute. It is a separate MA corporation,
exempt under the IRS code, and overseen by a
board.

• Requirements
• Produce REFI (Foundation company code) balance
  sheet, PL from SAP by property and consolidated.
  Same FY as MIT.
• Minimize impact to central office processing
  expenses will continue to post first to CUR
  (campus SAP company code). No need for HR, MM, or
  SD functions in REFI.
• Store data for donated properties, e.g., donor,
  location, sq. footage.
• Rollup with CUR for producing the Treasurers
  Report.

4
REFI Structure Model in SAP
MIT
FY V6
FM Financial Management Area
MIT
Chart HEUS FY V6
CO Controlling Area
Enterprise Structure
REFI
CUR
FI Company Code
PCA Profit Center
P420011
P420000
Treasurers Office
Real Estate Foundation
RE Real Estate Objects
Business Entity
Master Data
RE00
R4459500 R4459999
4459500 4459999
4459000 4459499
CO Internal Orders
Property (Land) or Building
IO Type REF0
IO Type 0440
5
REFI Process Flow in SAP
via frontend program
Loop as needed
Create Master Data
Receive donated property
Create REFI IO link to RE object
Record property as asset in REFI
Post expenses to CUR IO (Travel, A/P)
Incur expenses
Create CUR IO link to RE object
Create RE object
Proceeds check to REFI
Post cash voucher to REFI
Prepare cash voucher
Sell property
Prepare Excel JV template
Inter-co JV expenses to REFI IO
Inter-co JV cash to CUR
Post wire transfer to REFI cash
Proceeds wire transfer to Treasury
Upload inter-co JV to post gift to CUR
via program run monthly _at_ closing
SAP standard reports
Including gain/loss
Terminate REFI and CUR IOs
DW reports
6
Points to Note

• For each property (salable unit) at the level
  where expenses will be segregated one REFI order
  ? one REFI RE object ? one CUR order.
• The link between the order and RE object must be
  made before posting costs for those costs to be
  reflected in the RE module.
• Because expenses post initially to CUR,
  commitments and drill-down in SAP to the original
  document are available only on the CUR property
  Internal Orders.
• Utilize SAP standard trial balance, balance
  sheet, profit and loss, cash flow reports, and
  MIT custom Summary Statement and DTR.
• Reporting on real estate property master data
  will be via DW or standard RE reports. Standard
  RE reports do not combine master data with
  accounting data.

7
Scenario Overview

• Steps
• 1. Michigan land with an appraisal value
  340,000 is donated to REFI.
• 2. 7,000 expenses incurred to prepare property
  for sale paid by CUR.
• 3. Expenses transferred from CUR to REFI.
• 4. Michigan land sells for 350,000. Gain of
  10,000 is recorded by REFI.
• 5. Cash receipts transferred from REFI to CUR.
• 6. Net proceeds of 343,000 transferred to CUR
  as a gift.
• Master Data
• a. RE object R4459500 (property)
• b. REFI order 4459500, type REF0, linked to RE
  object R4459500
• c. CUR order 4459000, type 0440, linked to RE
  object R4459500

8
Linking REFI order 4459500 to RE object R4459000
The link to a RE object is made in the internal
order.
9
RE object R4459500 links to REFI order 4459500,
CUR order 4459000
The links from orders 4459000 and 4459500 to the
RE object R4459500 are visible (display only) in
the RE object Orders tab. Will be used for
mapping and reporting.
10
Step 1 REFI records value of donated property
(asset)
Asset GL 170000 is used for demonstration
purposes only. CAO provided a new asset GL
102600, Donated Real Estate.
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Step 2 REFI expenses paid by CUR
The Foundation incurs expenses of 7,000 in
preparing the property for sale. These costs
(travel, legal, taxes, etc.) are paid by CUR
through normal procedures.
4459000 is a CUR order for the Michigan property,
to which all expenses incurred in preparing the
property for sale are initially posted. Note It
should not settle.
12
Step 3 Expenses Transferred to REFI
Inter-company JV, doc type SX, transfers expenses
from CUR to REFI. Utilizes clearing GLs 950008
REFI A/P, Due to MIT and 950007 CUR A/R, Due
from Foundation.
Expenses should transfer by line item via custom
ABAP program to be executed monthly by CAO.
Travel advances will not transfer. NOTE For ease
in finding REFI SX docs, it is recommended that
CAO always create the SX JVs by first entering
the REF side of JV (cross-company doc based on
doc and co.code of the first JV line item.).
13
Step 4 Property is sold by REFI
The property sells for 350,000.
For demo only actual gain/loss will be posted to
GL 800316.
Proceeds may be received in the form of a wire
transfer or check. If by check, the Cashiers
Office will post the transaction, based on a cash
voucher slip completed by REFI. If proceeds are
via wire transfer, Treasury will post the wire
transfer to REFI as above preferably before the
wire transfer is posted to CUR uncleared wire
transfers liability GL 201124.
14
Step 5 Cash receipts transfer to CUR
The cash receipts are cleared from REFI and
posted to CUR. This step is performed by
Cashiers Office.
15
Step 6 Net proceeds transfer to CUR
The net proceeds of 343,000 (350,000 7,000)
are transferred as a gift from the REFI to CUR.
MITs gift order
Per CAO, new GL 800340, Real Estate Gift, should
be used on both sides of this entry.
16
REFI order 4459500 Summary Statement
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REFI order 4459500 DTR
18
REFI Balance Sheet/PL Statement
19
T-accounts
() Step that generated the posting.
REFI
Per Sharon DeMaranville, should use GL 800340 for
both debit and credit
CUR
20
REFI cash receipts
REFI donated property (asset)
21
REFI Due to MIT (liability)
CUR Due from Foundation (receivable)
22
CUR order 4459000 DTR
CUR gift order 1180000 DTR
23
CUR gift order 1180000 DTR
CUR cash
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Discussion Items for Process Owners

• Business entity number range Recommend one
  entity for the Foundation, RE00.
• RE objects (property, buildings) recommended
  number range R4459500-R4459999 - identical to
  the REF order number preceded by an R.
• When expenses are JVd from CUR to REFI, do you
  prefer to view line item level or total by GL
  account in the REFI order? (Detail will always
  exist in the CUR order.)
• Inter-company JVs and use of Excel template
• Use of Data Warehouse for combination real estate
  and financial reporting.

25
Next Steps

• If process owners sign off on business model
  today
• Friday, April 12 FSS will complete
  configuration, development, and unit testing by
  this date.
• April 2002 FSS, process owners, and CAO will
  create test scripts and end-user documentation
  and participate in integration testing.
• April 17-24 Integration test.
• May 2002 Process owners will develop report
  specifications, with FSS assistance. Includes
  analyze SAP reports and/or determining fields to
  send to DW.

26
Development Impact

• Modify front-end to create new internal orders
  for REFI and CUR (new order types).
• Modify Data Warehouse extracts to include real
  estate master data fields.
• Write program to post monthly SX JVs to transfer
  expenses from CUR orders to REFI orders, using
  link between IOs to RE object as mapping.
• Configure standard SAP RE reports. If do not meet
  needs, create custom ABAP to combine RE master
  data with financial data.

27
REFI Chart of Accounts
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REFI Process Flow w/ Accrual
Audit requirement REFI must request a document
in lieu of invoice before posting an accrual.
Step 2.1
Step 6
Inter-co JV expenses to REFI IO
Sell property
Doc to accrue expense
Upload inter-co JV to post gift to CUR
Post accrual to REFI IO
Step 7
Debit expense GL, REFI order Credit REFI
Liability GL 200060
via program run monthly _at_ closing or ad-hoc as
needed
Reverse accrual
Step 9
Step 8
If accrual ltgt actual
Post actual expense to CUR IO
Receive actual invoice
Inter-co JV actual expense to REFI IO
Prepare Excel JV template
If accrual actual
Step 10
Terminate REFI and CUR IOs
Upload inter-co JV to adj. gift to CUR
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T-accounts w/ Accrual
() Step that generated the posting.
REFI
CUR
Accrual of 1,000 and actual of 1,050 are
recorded.
30
REFI Process Flow w/ Rental Income
Rental income reduces expenses, thereby
increasing gift value on transfer to MIT.
Record property in REFI
Incur expenses
Loop as needed
Post expenses to CUR IO (Travel, A/P)
Receive rental check
Prepare cash voucher
Loop as needed
Step 2.1
Step 5.1
Inter-co JV expenses to REFI IO
Post cash voucher to REFI
Inter-co JV cash to CUR
via program run monthly _at_ closing
Debit Cash GL 101221 Credit Rental income GL
800309, REFI order
Addition to process
Sell property
31
T-accounts w/ Rental Income
() Step that generated the posting.
REFI
CUR
Rental income of 20,000 (via check) is received
in REFI.
32
REFI Process Flow w/ Capitalized Costs
via program run monthly _at_ closing or ad-hoc as
needed
Loop as needed
Step 3.1
Step 3.2
Step 2.1
Inter-co JV expenses to REFI IO
Post expenses to CUR IO (Travel, A/P)
Incur expenses
JV to transfer capital expense to asset GL
Credit expense GL, REFI order Debit Asset GL
102600
Step 4
Proceeds check to REFI
Post cash voucher to REFI
Prepare cash voucher
Sell property
Post wire transfer to REFI cash
Proceeds wire transfer to Treasury
Include capitalized costs in gain/loss
calculation, asset clearing
33
T-accounts w/ Capitalized Costs
() Step that generated the posting.
REFI
CUR
6,000 capitalizable costs incurred.
34
CAO Approvals / Decisions

• 3/14/2002
• New CUR IO type 0440, number range
  4459000-4459499. Will not settle (zero balance at
  EOM due to SX JV transfers).
• New REFI IO type REF0, number range
  4459500-4459999. Will not settle.
• All REFI orders will be assigned BLANK costing
  sheet (not subject to EB, FA, fund fee).
• Profit center in REFI will be P420011. Per CAO,
  continue to use Treasurers Office profit center
  P420000 in CUR.
• Per CAO, capitalizable costs will be journal
  vouchered from REFI IO to Donated Real Estate GL
  102600, and must be cleared at time of property
  sale.

35
CAO Approvals / Decisions, contd

• 3/19/2002
• Rental income will reduce expenses and therefore
  increase gift. Dr GL 101220, Cr REFI order GL
  800309.
• CUR Treasury will pay for non-property specific
  REFI tax filing fees.
• For SX JVs, process owners will create the entry
  in an Excel template, then e-mail to Mary
  Nicholson in CAO for review and upload. CAO only
  is authorized to post SX JVs.
• CAO will provide a Trial Balance section code
  assignment in table ZZSECT for CUR and REFI
  property IOs (one code may be used for both).