Team membership and resource personnel
Introduction
Description of scope
Description of process
Major concerns
Recommendations
Authorizations
Authorizations at the sub fund center level
Dollar limits
Profiles
Access to Institute wide purchasing files
Approvals
Minimizing the number of approvals
Reasons for obtaining approvals
Work flows and release strategies for approval of sensitive items
Approval of requisitions over a certain dollar level by senior
management
Entertainment, flowers, food, alcohol
Equipment and cost items requiring Office of Sponsored Program
(OSP) review
Property Office review
Consulting Agreements
Software packages
Animals
Radioactive materials
Respirators
Hazardous chemicals, nitrous oxide and syringes
Lasers
Controlled substances
Requisitioning for Institute internal providers
DAPO's
Blanket orders
Paper requisitions
Receiving, invoicing and payment
Invoices
Change orders
Requests for payment
Information gathered during interviews
List of experts consulted
Development of a tool kit
Appendix one - agendas
Appendix two - roles and profiles
Dianne Brooks
Administrative Officer
History
Bruce Brown
Administrative Officer
Division of Comparative Medicine
Mark Damian
Senior Subcontract Administrator
Purchasing - Central Subcontracting Office
Robin Elices (Co-Captain)
Administrative Officer
Earth, Atmospheric and Planetary Sciences
Jennifer Kratochwill
Fiscal Officer
Laboratory for Computer Science
Marilyn Smith (Co-Captain)
Administrative Officer
Biology
Veronica DuLong
Communication between Procurement Team and Policy Team and Project Management
Jean Dzengeleski
Communication between Procurement Team and Policy Team and Project Management
John Hynes
Communication between Procurement Team and Policy Team and Project Management
Barry Roberts
SAP Configuration for Departmental Procurement Team
The Departmental Procurement Institute Wide Implementation Team is one of six teams convened to work with the Management Reporting/Financial Operations Project to assist in the configuration of Systems, Applications and Products in Data Processing (SAP) for use in the Institute's departments, laboratories and centers (DLC's). The Team was convened effective June 17, and was charged with completing the redesign of the Institute's procurement process by adding departmental roles and responsibilities to the work completed by the central offices, and with providing information to Management Reporting Project staff in order to complete configuration of SAP for use in the DLC's for purchasing functions.
Preliminary weeks were devoted to gaining an overview of the SAP application, understanding the scope of Team responsibilities, identifying issues to be addressed, and determining a process for addressing these issues. The Team held regular meetings on Tuesday and Thursday afternoons 1:00 - 4:00 PM through September 5. Formal agendas were established and distributed prior to each meeting, and these are appended to this report for reference.
During this process, the Team met with a number of individuals in order to gain an understanding of SAP application constraints, and of the potential impact of possible recommendations under discussion. In addition, Team members conducted interviews with Administrative Officers and others across the Institute's five schools, interdisciplinary laboratories and centers, and enterprise units to determine if recommendations being considered in Team meetings would be agreeable to DLC's not participating in these discussions. Overall, administrators from twenty DLC's were interviewed. Information gathered during the interview process, along with a list of those interviewed and other individuals consulted are presented later in this report.
Recommendations included with this report, which raise issues related to setting policy at the Institute, were brought forward to the Policy Team for discussion at its August 28 meeting. Input from the Policy Team has been incorporated into the final recommendations.
The Team has struggled to design procedures that will both satisfy the needs of the community and be feasible within the context of SAP. In many instances this has required compromises that may not be considered by all to be in the best interest of the departments, laboratories and centers (DLC's); However, recommendations presented in this report are considered by Team members to be the best possible solutions for DLC's within the SAP environment.
The Team is fully aware of the short time frame targeted for completing roll out of SAP to the DLC's, but it is imperative that a fully functional system be provided to the DLC's, even if this requires a delay in implementation. It is recognized that only through utilization of SAP throughout the Institute for all financial services can the benefits of the system ultimately be realized. It is only through total integration of all systems that substantial cost savings can be achieved, making the major investment for SAP worthwhile. It is with this recognition that the Team has moved forward to evaluate how purchasing procedures can be streamlined at the Institute using SAP, with the assumption that concerns noted in this report will be addressed to the satisfaction of the DLC's.
It has been difficult to fully evaluate the functionality of SAP as the system has not been readily available to the members of the Team; However, during preliminary examinations Team members have been dismayed at the complexity of purchasing functions in SAP. While some of this may be attributed to a lack of familiarity with SAP, the fact that requisitioning is line item driven in SAP complicates the purchasing process and approvals. The number of screens required to accomplish electronic purchasing is time consuming.
The lack of a signature authorization file in SAP equivalent to that utilized today, which is based on account level authorizations with the ability to set dollar limits, will be seen by many as a reduction in system capability and will require a cultural change. Faculty and others will need to support a new concept of authorizations, be committed to training personnel, and be willing to follow through with appropriate measures if there are abuses.
It is with these concerns in mind that the Team recommends serious consideration be given to maintaining the existing electronic requisitioning (EREQ) purchasing system while pursuing development of electronic web based commerce that is more user friendly, would provide appropriate controls, and would feed into SAP. A level of functionality equivalent to that which is currently available through EREQ is the minimum of what should be expected from SAP. If it is determined that web based commerce will not be pursued, EREQ must be maintained over the short term until a number of critical outstanding issues listed below can be resolved.
1) Routing: Though it appears that routing can be accomplished through the development of release strategies and work flows, it is unclear how difficult it will be to accomplish these tasks prior to roll out of SAP to the DLC's. Routing of sensitive items is absolutely necessary in order to assure compliance with policies of the Institute, sponsors and regulatory agencies. It is the Team's understanding that this capability has already been developed using material groups as a mechanism for release strategies. This must include the ability to route within a DLC prior to routing to a central office. Routing for requisitions over an identified dollar limit is considered to be critical to maintaining a reasonable level of control for a number of DLC's. The capability to accomplish discretionary routing for cases when additional review is deemed appropriate is also highly desirable. Routing within a DLC for two very different reviews, programmatic and fiscal, must be accommodated.
2) Line item issues: The dependence of SAP on line item versus requisition total is a concern. Department awarded purchase orders (DAPO's), which are quick on line purchase order numbers, must be provided at the header or requisition level rather than at the line item level. Repetitive data input for ship mode and delivery address is required for each line item rather than once for the entire requisition, and this must be eliminated. The total funds expended for a given requisition is not displayed, and this is unacceptable. Post event reconciliation at the line item rather than the requisition level will be a burden on those performing this task. Receiving items at the line item level rather than the order level will require completion of additional electronic goods receipt forms. It is unclear how line item receipt of goods will be paired with payment of invoices issued at the requisition total level.
3) Print capability: Print capability for requisitions does not exist at present. This is unacceptable to the DLC's, and must be resolved. Though purchase orders can be printed, the individual creating the requisition may not have access to the purchase order at the time the requisition is created.
4) Complexity of purchasing functions: As previously indicated, SAP purchasing functions are not user friendly. Until the system can be improved to the point where it is reasonable to train all individuals needing to purchase, the system will not satisfy the needs of the DLC's.
RECOMMENDATIONS
At present, authorizations are handled at the account level, with each individual provided authorization to spend on one or more particular accounts with or without spending limits. It is the understanding of Team members that creating and maintaining authorization files at the account level in SAP will require an exorbitant amount of effort, and for this reason a compromise solution is offered.
Authorizations at the sub fund center level: It is recommended that authorizations to allow spending in SAP be handled at the sub fund center level, with each PI assigned a sub fund center code within each DLC, rather than accomplishing authorizations at the account level as is presently done. This will allow a group of individuals to be authorized to conduct business across a group of accounts for which a PI acts as supervisor within a given DLC. Authorizations would be accomplished for research accounts/projects separately from general accounts/cost centers and funds/internal orders. Professors acting as Department Heads must have separate sub fund centers for their own laboratory accounts and DLC operating accounts.
It is recognized that not everyone within a PI's group should be authorized to conduct business on every account, and it is recommended that verbal instruction be given to individuals regarding which accounts they are authorized on. When a PI has accounts in two DLC's, separate authorizations may be accomplished for each DLC through separate sub fund centers. This method does present a problem, however, in those situations where there are co-PI's in different DLC's participating on one project. In some cases it may be necessary to establish child accounts for co-PI's in order to resolve this problem.
A hierarchy for authorizations will need to be created to allow those needing authorization at the PI or sub fund center to view related account activity, those needing DLC or profit center authorization to see a roll up of sub fund center activity, those requiring access to an entire School to see activity for a group of departments and so forth. This method of accomplishing authorizations is considered to be less effective than performing authorizations at the account level, but it does provide limits on the number of individuals having authorization for a given set of accounts. It does fall short of the current hard stop system control, and will need to be complemented with post event review by the staff monitoring accounts.
The concept of performing authorizations at the sub fund center level was brought forward to the Policy Team for discussion, and the Policy Team considered accomplishing authorizations at the sub fund center level to be significantly less effective than accomplishing authorizations at the account level. This issue was also discussed during interviews with administrators across campus. Two thirds of those interviewed responded that this method of accomplishing authorizations would provide an adequate level of control, and one third responded that this would not provide for the level of control desired.
Recommendation: If it is not feasible to maintain the equivalent of the current signature authorization file (i.e. linking an individual with an account) either within or outside of SAP, authorizations should be handled at the sub fund center or PI level.
Dollar limits: It is the understanding of Team members that dollar limits cannot be handled through the authorization process in SAP. For this reason, it is recommended that dollar limits be given either verbally or through written policies distributed within the DLC's for units choosing to retain dollar limits. It should be noted that some DLC's strongly prefer to have the ability to restrict dollar authorization electronically. For example, the Sloan School of Management routes all requisitions with a value of $5,000 or greater to its Manager of Financial Services for approval. It is possible that this requirement can be accommodated through creation of a release strategy for units that find it necessary to restrict dollar limits for purposes of control. 70% of the administrators interviewed place dollar limits on authorized spending in their departments. Of those with dollar limits, two thirds believe this can be accommodated through verbal instruction rather than electronic controls, and one third believe that electronic controls are necessary.
Recommendation: In general, dollar limits should be given verbally or in writing rather than through the authorization process, and release strategies should be developed for areas requiring dollar limits for major purchases to be accomplished electronically.
Profiles: A set of roles or individual business tasks should be developed, which can then be combined into profiles in order to provide authorization to conduct various business tasks. Each individual will be identified with roles related to his or her job tasks, which will be combined to create a profile of the activities this individual is authorized to conduct. The individual will be associated with one or more sub fund centers, and authorized to conduct activities for that sub fund center only.
It is recommended that roles be developed for functions addressed within all implementation teams. It is suggested that these roles be combined in a variety of ways to create a set of profiles that will address all authorization issues for the DLC's. This will allow all individuals needing authorization to be paired with "canned" profiles. The feasibility of maintaining authorizations at the DLC level must then be evaluated. Maintenance of release strategies should be accomplished centrally rather than at the DLC level, as the complexity of the technical requirements for configuring this aspect of the system appears to be beyond the scope of what is reasonable to accomplish within each DLC. Once profiles are developed, they must be reviewed by the DLC's to assure that all authorization issues are addressed. Sample roles and profiles are included with appendix two.
Recommendation: Profiles should be used to facilitate authorizations as described above, and profiles should be developed that include functions under review in all implementation teams. The DLC's must have the opportunity to review profiles upon completion, and to evaluate the feasibility of maintaining authorizations at the DLC level .
It is not acceptable to the DLC's that any or all information concerning a given DLC's purchasing activities be available for access on line on an Institute wide basis. The overwhelming issues related to privacy outweigh any positive activity that may come from such access. Issues related to research confidentiality, and access to files associated with the purchase of sensitive items such as animals and consultants raise cause for serious concern. The opportunity for using available information for negative purposes including curiosity would be great, and one that the Team believes cannot be supported by the DLC's under any circumstances.
The compromise solution for accomplishing authorizations at the sub fund center level described above could also be used to restrict view access of purchasing activity at the same level. Access to purchasing activity on line must be restricted to only the sub fund center on which an individual is authorized. This issue was brought forward to the Policy Team for discussion, and this recommendation as a minimum was strongly endorsed. Administrators were asked their feelings about unrestricted viewing of their department's purchasing activities during the interview process. 70% of those interviewed consider it to be unacceptable for unauthorized individuals to view their department's purchasing activities, and one third have no problem with unrestricted view access.
Recommendation: Access to purchasing activity on line must be restricted at a minimum to only the sub fund center on which an individual is authorized.
Minimizing the number of approvals: DLC's should be encouraged to minimize hand-offs for approvals to the extent possible, with the ideal situation being to allow all individuals authorized to create a requisition for a given sub profit center or PI group also authorized to approve that requisition; However, some mechanism must be provided for centralized units to receive requisitions for approval within the fiscal offices, and for all units to obtain those approvals deemed necessary, particularly those needing both programmatic and fiscal approvals from different offices. For this reason basic routing allowing for a minimum of two hand-offs within a DLC is absolutely necessary, allowing for both budgetary and programmatic review when needed. During the interview process, only two units out of twenty were identified with more than two hand-offs for approvals. Of these, one has four hand-offs and one has six.
Recommendation: Approvals should be minimized to the extent possible; However, basic routing must be provided to facilitate approvals within centralized organizations, to allow for both programmatic and fiscal reviews, and to assure proper review for purchase of sensitive items.
Reasons for obtaining approvals: The following list, which is provided in random order, describes the reasons DLC's obtain approvals.
Verification of available funds
Verification that the individual preparing a requisition is authorized to do so
Verification of correct account number
Appropriateness of purchase to account utilized
Verification of correct object code
Compliance with Institute policy
Compliance with funding agency restrictions
Compliance with federal or state licenses or regulatory agency guidelines
Quality assurance reasons
Monitoring department, laboratory or PI activity
Information purposes
Verification of adequate funds in the account used for a given purchase is considered to be one of the most important reasons for approving requisitions, and automatic verification of adequate funding when requisitioning is crucial to minimizing the number of approvals to the greatest extent possible. Funds availability checking must be at the total requisition level, and include indirect cost calculations in addition to direct costs for it to be beneficial. The DLC's must have the ability to set this function as either a hard stop or a warning with override capability.
Recommendation: The ability to accomplish funds availability checking at the total requisition level within SAP, including both indirect and direct costs, must be given the highest priority for development.
As stated above, the number of approvals should be minimized to the extent reasonable; However, release strategies and work flows should be developed in order to maintain adequate control for sensitive and restricted items. This is necessary in order to assure compliance with Institute, sponsor and regulatory agency policies. Release strategies in SAP are defined as hard stops within the system that force the review of a requisition by one or more parties in parallel or sequentially prior to the assignment of a purchase order (PO). A work flow is defined as a notification of an event via an email message to an interested party for information purposes without a hard stop in the system that would prevent the assignment of a PO number. Routing would be accomplished through the creation of release strategies, but it should be noted that the complexity of creating different release strategies within different DLC's for the purpose of routing may be a cause for concern. A set of universal release strategies for sensitive items should be created to assure compliance with government regulations. Using a combination of work flows and release strategies within SAP, it is recommended that hand-offs for multi leveled approvals be minimized to the extent possible.
It should be noted that if post event monitoring is done in place of controls currently handled by the system, additional tasks must be absorbed by those monitoring accounts. While some aspects of reconciliation may be eliminated, new tasks related to review may be added. Supervisors should accomplish post event review in order to assure that abuse does not occur, and this can be facilitated through implementation of appropriate work flows or through review of electronic detailed transaction reports (DTR's). The ease with which correction of errors can be accomplished on line is uncertain, and written policies must be established to assure that any necessary corrections are completed within thirty days from the transaction date in order to comply with audit guidelines.
An easily accessible on line report should be developed that would provide the information needed to a supervisor for the purpose of post event monitoring. Such a report should include the date a requisition is created, the name of the individual creating the requisition, the name of the individual approving the requisition, PO number, object code or cost element and material group, vendor, amount of order, and fund center. There must be clear documentation and training for requisitioners if material groups are to be used to route sensitive items, including clear policies regarding inappropriate use of material groups. Faculty must support this, and be willing to emphasize the need for compliance with Institute policies to their personnel.
Recommendations: The number of approvals should be minimized to the extent reasonable; However, release strategies should be developed in order to maintain adequate control for sensitive and restricted items. Correction of errors should be accomplished within thirty days of the transaction date. An easily accessible on line report and written policies, procedures and audit guidelines should be developed to facilitate post event review.
Approval of requisitions over a certain dollar level by senior management: At present the Vice President for Information Services reviews all requisitions for computer hardware over the dollar level of $25,000, software over the dollar level of $5,000, peripherals such as printers over the dollar level of $10,000, and orders pertaining to networking and consulting related to computing. Effective immediately, Prof. Bruce has agreed to discontinue review of these orders with the exception of those related to computing networking and consulting agreements, as he believes there is no value added in the previously noted circumstances. It is estimated that this will eliminate approximately 80% of those requisitions now being forwarded to Prof. Bruce for approval.
At present, the Senior Vice President reviews all purchase orders throughout campus over $50,000, and purchase orders from Lincoln Laboratory over $200,000. Mr. Dickson has agreed to discontinue review of orders on campus to the level of $500,000, with review of Lincoln Laboratory orders maintained at the current level. It is recommended that authorization limits for Central Purchasing staff be reviewed. Currently, the Director and Associate Director of Purchasing have spending limits of $50,000, which will need to be increased to the $500,000 level. Other personnel typically have $10,000 limits, which could also be increased to expedite the approval process as appropriate.
Recommendation: The number of requisitions forwarded to the Vice President for Information Systems and the Senior Vice President should be minimized, with only orders related to networking and computer consulting reviewed by Prof. Bruce., and orders on campus of $500,000 or higher being approved by Mr. Dickson. Authorization limits for Central Purchasing staff should be reviewed and increased as appropriate.
Entertainment, flowers, food, alcohol: It is recommended that a clear policy be established regarding expenditures for entertainment, flowers, food and alcohol at the Institute. It is further recommended that accountability for compliance with Institute policy related to the purchase of these items reside within the DLC's, with the originating unit maintaining backup paperwork for audit purposes and verification of use of unallowable object codes or GL accounts where necessary. The Team believes that special review and up front control of purchase requisitions currently accomplished within Dean's offices and Accounts Payable has little added value.
This issue was brought forward to the Policy Team for discussion. Members of the Policy Team stated that if review needs to be accomplished at the Dean's Office level, review should be at the requisitioning stage rather than on a post event basis. The Policy Team also stated that if clear policies are put in place at the Institute for purchases in these categories, it may be appropriate to eliminate this additional approval.
Recommendation: A clear policy should be established regarding expenditures for entertainment, flowers, food and alcohol. The approval process for purchasing these items should be streamlined, with accountability for compliance with Institute policy residing within the DLC's.
Equipment and cost items requiring Office of Sponsored Program (OSP) review: Only requisitions for cost items requiring OSP approval should be routed to an OSP representative for review. This should be facilitated by a DLC routing the requisition to OSP when necessary, and the OSP representative routing the requisition to Purchasing. Purchasing should be provided with access to the Sponsored Program Management System (SPMS) in order to verify compliance with sponsor requirements when requisitions are received directly from a DLC without OSP routing.
This issue was brought forward to the Policy Team for discussion. The Director of OSP, who is a member of the Policy Team, strongly endorsed installing SPMS in Purchasing, and efforts are already underway to train Purchasing staff to use the system.
Recommendation: The Purchasing Office should be provided access to the SPMS, and be trained to verify compliance with sponsor requirements pertaining to purchases, consulting with OSP representatives as necessary.
Property Office review: At present, the Institute's Property Office follows procedures that assure compliance with government external reporting requirements associated with indirect cost recovery and government property ownership. These procedures include pre acquisition screening for equipment and systems costing $10,000 or more to verify unavailability of like or similar instrumentation on campus, post event review to verify correct object code use, and review of equipment being traded in for credit on new equipment purchases. These procedures are necessary, and it is recommended that these procedures be facilitated through the development of reports to make the task of verifying correct object codes less time consuming. An electronic process to replace the current procedure of hand carrying requisitions to the Property Office should be established. Equipment systems with a cost in excess of $10,000 will not be identified within SAP for Property Office review if each line item is below this threshold. To solve this problem, it is recommended that a separate material group code be assigned to equipment systems with a purchase price of $10,000 or higher.
Recommendations: Current procedures for review of property should remain in place. An electronic process should be developed to replace the current procedure of hand carrying requisitions to Property for review. A separate material group code should be assigned to equipment systems with a purchase price of $10,000 or higher.
Consulting Agreements: The Team evaluated issues related to consulting agreements, and determined that the complexity of IRS and pension plan regulations requires that current practices within Accounts Payable for addressing issues related to companies and independent contractors acting as consultants be retained. This requires that all requisitions for consulting agreements be routed to Accounts Payable for handling prior to being routed to Purchasing. This will require that a separate material group code be assigned to consulting agreements. The Team considered recommending that this responsibility be transferred to Purchasing; However, this is not feasible due to the fact that Purchasing does not have access to payroll information required for this review.
Recommendations: Current procedures for handling consulting agreements within Accounts Payable should be retained. A separate material group code should be assigned to consulting agreements.
Software packages: Separate material groups should be associated with "off the shelf" software licenses versus other unique software licenses. Purchase requisitions for "off the shelf" licenses can be handled directly by Purchasing with no further review required. A list of licenses within this category can be maintained in Purchasing for verification as necessary. Purchase requisitions for other software licenses should be routed by the DLC's directly to the Intellectual Property Counsel for handling.
Recommendation: Separate material groups should be associated with "off the shelf" software licenses versus other unique software licenses, allowing only those requiring intellectual property review to be routed appropriately.
Animals: All orders for animals and animal care must be routed to the Division of Comparative Medicine (DCM) including orders on subcontracts. It is recommended that current procedures and forms used for purchasing animals and animal care remain in use. It is also recommended that the feasibility of using the Controlling (CO) requisitioning system, SAP's internal order system, or alternate mechanism for ordering animals electronically through the DCM be evaluated for future implementation.
Recommendation: Current procedures for purchasing animals should be retained over the near term, and the feasibility of implementing an electronic requisitioning system for ordering animals through the DCM in the future should be evaluated.
Radioactive materials: Requisitions must be routed to the Radiation Protection Office (RPO) prior to Purchasing in order to assure compliance with regulatory agency policies. A separate material group code should be assigned so that a release strategy can be developed for this purpose.
Recommendation: A separate material group code should be assigned for radioactive materials so that a release strategy can be developed to route requisitions to the RPO.
Respirators: Requisitions must be routed to the Environmental Medical Service (EMS) prior to Purchasing in order to assure compliance with OSHA regulations. A separate material group code should be assigned so that a release strategy can be developed for this purpose.
Recommendation: A separate material group code should be assigned for respirators so that a release strategy can be developed to route requisitions to the EMS.
Hazardous chemicals, nitrous oxide and syringes: A list of individuals authorized to purchase hazardous chemicals, nitrous oxide and syringes should be maintained in Purchasing, for use in verifying appropriate authorization upon receipt of such an order in Purchasing. Other than routing for basic authorization required within some DLC's, no further approval is needed for these items.
Recommendation: A list of individuals authorized to purchase hazardous chemicals, nitrous oxide and syringes should be maintained in Purchasing for use in verifying appropriate authorization upon receipt of such an order in Purchasing.
Lasers: No prior approval is required to purchase lasers; However, the Radiation Protection Office (RPO) must be aware of purchases for monitoring of these devices as necessary. A work flow should be established to allow an email message to be sent to the RPO for post event monitoring. This will require that a separate material group code be assigned to lasers.
Recommendation: A separate material group code should be assigned to lasers so that a work flow can be established in order to notify RPO of purchases via email for post event monitoring.
Controlled substances: The burden is on the Principal Investigator (PI) to present proof of Drug Enforcement Agency (DEA) license and/ or complete appropriate Federal Drug Administration (FDA) forms as required depending on the substances being purchased. Requisitions can be sent directly to the Purchasing Office electronically, with backup forwarded through the mail as needed. It is suggested that particular purchasing representatives be identified to handle purchases of controlled substances in order to maintain proper control of these items. This can be facilitated with a separate material group code assigned to controlled substances.
Recommendations: No special approvals are required for the purchase of controlled substances; However , it is recommended that particular individuals be identified in Purchasing to handle these purchases to assure compliance with regulatory agency policies related to obtaining DEA licenses and completing FDA forms. A separate material group code should be assigned to controlled substances to facilitate routing to the proper purchasing agent.
All MIT internal providers, such as Physical Plant and Food Services, must be strongly encouraged to utilize the SAP system for Controlling (CO) requisitioning and billing. As previously stated, it is only through utilization of SAP throughout the Institute for all financial services that the benefits of the system will ultimately be realized. If the Institute continues to maintain a number of peripheral and shadow systems throughout the DLC's, minimal if any cost savings will ever be realized, and continued efforts to build bridges between the various systems will be necessary.
Using SAP for internal requisitioning will allow the DLC's to continue to forward requisitions electronically rather than using paper for this purpose, and will provide for encumbrances associated with outstanding orders within SAP. Utilization of the system for billing of DLC's for services rendered will provide for automatic liquidation of encumbered requisitions when payment is posted. If accomplishing billing outside of SAP, internal providers must be told to reference the requisition number assigned by SAP when the requisition is initiated. If this does not occur, there will be no mechanism for the DLC's to match requisitions with the payments for reconciliation and audit purposes.
The Procurement Team has had inadequate opportunity to fully evaluate the CO requisitioning system within SAP with regard to how utilization of the system will impact operating procedures within the organizations of Institute internal providers. It is recognized that procedures within each internal provider organization will need to be evaluated and perhaps altered to facilitate use of the system. In some cases it may be possible to create interfaces between existing billing systems and SAP to allow units to continue to use existing systems while satisfying the needs of the DLC's for accurate and up to date financial information. At a minimum, the DLC's must have a comparable level of service to what is currently provided through EREQ for requisitioning to internal providers. Hence, some form of electronic requisitioning for internal providers must be implemented.
This issue was brought forward to the Policy Team for review, and the Team strongly supported this recommendation.
Recommendations: The Institute must strongly encourage units providing internal services to utilize the CO requisitioning system for ordering and billing of services. Evaluation of operating procedures within each internal provider unit must begin now to determine how use of the CO requisitioning system can be accommodated.
It is imperative that DLC's have the ability to get DAPO's or fast purchase order numbers on line when creating requisitions within SAP. It is also critical that this occur at the header or requisition level rather than the line item level. SAP currently provides alternative methods to obtain fast purchase order numbers, which on the surface appear to be inadequate and more time consuming than the current DAPO system.
One method utilizes the SAP assign and process functionality, which requires that vendors first be established in the SAP vendor master as qualified to receive automatic purchase orders. Secondly, a material master or information record must be attached to that vendor for classification of commodities. When a requisition is created to a qualified vendor for commodities that are identified in the material master or information record, and a user has the proper authorizations, the user would follow this menu path in SAP: (Requisition>Follow On Functions>>Create PO>Automat. Via Preq.). Then, if all other mandatory SAP fields for a PO are filled, a purchase order will be generated. Please note that dollar amount of the PO is not a criteria. The second alternative involves granting authority for users to create purchase orders; However, it is unclear whether this option is only an on/off function, or if some elaborate authorization tables can be built so that purchase orders can be limited by dollar amount at the header level.
Recommendation: The ability to obtain a DAPO at the header level within SAP is imperative, and how this will occur must be clarified.
The Team supports the concept of developing Institute wide contracts for use by DLC's in lieu of unit specific blanket orders as are now created. This would involve negotiation teams with participation from both Purchasing and interested DLC's to negotiate best pricing, which all units can potentially take advantage of as needed. This concept should be adopted and pursued while maintaining flexibility to create DLC specific blanket orders as needed for unique purchases through scheduling agreements.
Recommendation: The Institute should pursue Institute wide contracts for use by DLC's in lieu of unit specific blanket orders as are now created, while maintaining flexibility to create DLC specific blanket orders as needed for unique purchases.
Paper requisitions should be discouraged but allowed, so that individuals not trained to create requisitions in SAP will be able to generate requisitions. It is anticipated that paper requisitions will be needed for purchasing urgently needed supplies at the VWR stock room as well. A terminal could be placed at the stock room so that those with authorization to approve requisitions will be able to place orders on line; However; it is anticipated that graduate students and others not authorized to approve requisitions will need to pick up orders at the stock room, requiring the use of paper requisitions. It is recommended that the paper requisition be redesigned to be compatible with SAP requirements.
Recommendation: While paper requisitions should be discouraged, they must be allowed, particularly for purchases in the stockroom, and should be redesigned to be compatible with SAP terminology.
Invoices: Payment of invoices should be linked to receipt of goods through completion of the electronic goods receipt screen in SAP regardless of dollar amount. Electronic receipt of goods should be accepted in lieu of maintenance of packing slips for audit purposes, and the current practice of retaining packing slips should be eliminated.
This issue was brought forward to the Policy Team for discussion. The Institute Auditor is a member of the Policy Team, and agreed to pursue acceptability of this recommendation from an audit perspective. If it is determined that packing slips must be retained, the goods receipt form must be simplified to include only information needed to generate payment of invoices.
Recommendation: The procedure of retaining packing slips as proof of receipt of goods for audit purposes should be abolished.
Change orders: The process of requiring change orders for payment of invoices exceeding the requisition amount beyond the tolerance levels should be eliminated. DLC approval for payment of these invoices should be required, but without completion of a change order.
Recommendation: The process of requiring change orders for payment of invoices exceeding the requisition amount beyond the tolerance levels should be eliminated.
Requests for payment: It is recommended that receipts associated with electronic parked invoices, which replace request for payment forms for reimbursements and other items, be retained within Accounts Payable rather than within the DLC's. This will require that a procedure be established for forwarding and filing receipts, which may result in the need to print electronic parked invoice forms. Though the Team believes that accountability for correct and truthful processing should reside with the individual generating the electronic parked invoice, it is also believed that the ability to process reimbursements to individuals without review of receipts outside of the unit requesting that reimbursement provides an opportunity for abuse that is not acceptable.
Recommendation: It is recommended that receipts associated with electronic parked invoices, which replace request for payment forms for reimbursements and other items, be retained within Accounts Payable rather than within the DLC's.
Team members conducted interviews with Administrative Officers and others across the five schools, interdisciplinary laboratories and centers, and enterprise units in order to determine if recommendations under discussion in Team meetings would be agreeable to DLC's not participating in these discussions. Overall, representatives from twenty DLC's across campus were interviewed. Where possible, Team members accomplished interviews within their own schools or areas.
: Since the Team had no participation from the School of Architecture, the advice of Diane McLaughlin was sought in order to identify appropriate individuals to interview within the School of Architecture. Interviews were accomplished by Robin Elices of the Department of Earth, Atmospheric and Planetary Sciences.
Robert Bloomberg
Administrative Officer
Media Laboratory
Rebecca Chamberlain
Administrative Officer
Architecture
Rolf Engler
Administrative Officer
Urban Studies and Planning
: Interviews were conducted by Jennifer Kratochwill of the Laboratory of Computer Science.
Betty Bolivar
Assistant to the Director
Industrial Performance Center
Mary Gibson
Manager
Center for Transportation Studies
Brian Tavares
Fiscal Officer
Departments of Chemical Engineering and Materials Science and Engineering
: Interviews were conducted by Dianne Brooks of the Department of History.
Nancy Lowe
Administrative Officer
Foreign Languages and Literature
Alison Salisbury
Administrative Officer
Political Science
Judith Stein
Administrative Officer
Science, Technology and Society and Anthropology
Since the Team had no participation from the Sloan School of Management, the advice of Donna Behmer was sought in order to identify the appropriate individual to interview. The interview was conducted by Team Co-Captains Robin Elices and Marilyn Smith.
Ellen Baum
Manager, Financial Services
Sloan School of Management
: Interviews were conducted by Marilyn Smith of the Department of Biology.
Joan Boughan
Fiscal Officer and
Teresa Santiago
Administrative Assistant
Center for Space Research
Patrick Dreher
Associate Director and
Arthur Scully
Sponsored Research Administrative Staff
Laboratory for Nuclear Science
Cheryl Eccles
Financial Administrator
Chemistry
: Interviews were conducted by Bruce Brown of the Division of Comparative Medicine.
Joseph Connolly
Administrative Officer and
William Smith
Fiscal Officer
Research Laboratory of Electronics
Ronald Hasseltine
Fiscal Officer and
Karen Fosher
Accounting Coordinator
Center for Materials Science and Engineering
John O'Brien
Administrative Officer
Energy Laboratory
Katherine Ware
Senior Fiscal Officer
Plasma Fusion Center
: Interviews were conducted by Mark Damian of Purchasing.
Deidre Dow-Chase
Administrative Officer
Center for Advanced Educational Studies
Michael Leonard
Associate Director for Operations
MIT Press
Elizabeth Ogar
Director, Finance and Administration
Resource Development
Interviews on average took approximately forty five minutes, and views on a variety of issues under discussion were covered. Following are responses to major questions posed, with results from twenty units quantified.
DLC Organization
Is purchasing in your department centralized or decentralized?
7 Centralized
13 Decentralized
Access to Institute Wide PO's
What are your feelings about unrestricted viewing of your department's purchasing activities?
6 Acceptable
14 Unacceptable
Dollar Limits
Do you place dollar limits on individuals authorized to purchase on your accounts?
14 Dollar limits
6 No dollar limits
Would you be satisfied to place limits on dollars verbally rather than through electronic controls?
(asked of those units with dollar limits only)
9 Verbal limits okay
5 Electronic controls necessary
Approvals
How many levels of approvals (hand-offs) are there for purchase requisitions within your DLC?
18 Two or less hand-offs
2 More than two hand-offs (4 in one unit and 6 in another)
Authorizations at the Sub Profit Center Level
The Team is considering that authorizations be handled at the PI level where a group of individuals would be authorized to handle various activities across a group of accounts for which a faculty member acts as account supervisor, rather than at the individual account level as is now done. What is your reaction to this idea?
13 Adequate level of control
7 Inadequate level of control
Kip Warren - June 26, 1996
SAP architecture
Barry Roberts - July 2, 1996
Demonstration of requisitioning in SAP
Lillian Rich - July 9, 1996
Preliminary discussion of release strategies for sensitive purchases
George Petrowsky - July 11, 1996
Authorizations in SAP
Reengineering Steering Committee - July 23, 1996
Guidance on Team approach to addressing issues under discussion
Shaym Jajodia - July 30, 1996
Demonstration of internal CO requisitioning in SAP
Charles Shaw - August 1, 1996
Discussion of auditing principles
Thomas Duff - August 1, 1996
Discussion of sponsor constraints
Lillian Rich - August 8, 1996
Follow up discussion of work flows and release strategies
Shaym Jajodia - August 20, 1996
Discussion of SAP architecture related to creating authorizations
The following are suggested items that could be developed and included in a tool kit for use in orientation during roll out of SAP to the DLC's.
1) Examples of models for centralized and decentralized units including centralized units with routing versus without routing;
2) Forms to capture information needed for authorizations and release strategies;
3) Roles and profiles to assist administrative staff in identifying which staff will require authorizations;
4) Condensed list of cost centers for use in CO requisitioning for internal providers;
5) Guidelines for post event monitoring;
6) List of reports available on line with directions on how to access each report; and
7) List of who to call for help.
Text not available
A set of roles or individual business tasks should be developed, which can then be combined into profiles in order to provide authorization to conduct various business tasks. Each individual will be identified with roles related to his or her job tasks, which will be combined to create a profile of the activities this individual is authorized to conduct. The individual will be associated with a sub fund center, and authorized to conduct activities for that sub fund center only. It is recommended that roles be developed for functions addressed within all implementation teams. It is suggested that these roles be combined in a variety of ways to create a set of profiles that will address all authorization issues for release two. This will allow all individuals needing authorization to be paired with "canned" profiles. Sample roles and profiles follow.