The Ferrari of Collection and Disbursement Solutions

March 3, 2003 by SAP News

The collection and disbursement functions of public administration are wide-ranging. They include not only the payment of taxes and disbursement of welfare payments, but also the payment of traffic fines or of court costs for judicial matters. The large variety of payment methods (credit card, bank transfers, and installments), along with extensions and dunning, complicate the posting processes. And the high volume involved means that the majority of business processes must be handled by bulk processing.

Advantages of PSCD

Advantages of PSCD

For some time, the SAP industry solution for the public sector has essentially used a standard function of the SAP Financials component in SAP R/3 to process collections and disbursements. In content, the functions of the private economy and public administration are comparable. However, each accounting system does display significant differences. In contrast to SAP Financial Accounting – Accounts Receivable (SAP FI-AR), the industry-standard component in SAP R/3 for accounts receivable, PSCD offers advantages in dealing with very large quantities of data – quantities that public administrations face every day. The advantages include faster processing speed and functions to process business transactions efficiently. Good performance is a central characteristic of the uniform accounting and uniform liquidity management of a government agency, which, of course, demands the integration of all payment transactions in one system. Only this type of system can implement a customer- and citizen-oriented collection and disbursement department and handle the real-time processing of public receipts and expenses.
Accordingly, up to now, Hamburg has administered the different departmental systems for collections and disbursement functions separately. Departmental systems support the specific tasks of public administration (such as the calculation of welfare payments or the creation of an official demand for the payment of a fine. When departmental systems relate to an incoming payment to or an outgoing payment from the administration department, they must be linked to the administration department via an interface.

The Challenge of Bulk Data Processing in Hamburg

For integrated resource control, Hamburg is currently implementing (until the autumn of 2003) SAP R/3 with SAP Financials (SAP Financial Accounting and SAP Financial Accounting – Asset Accounting), cost and activity accounting (SAP Controlling, SAP CATS, and SAP Project System), and IS-PS at 3,200 workstations. The project will exhaustively map the fiscal system (budgeting, planning, and management of the budget and accounting for collections and disbursements) along with additional business components (product information and partial cost and activity accounting) in 22 offices and agencies. The project will also completely replace previous collection and disbursement procedures.
The quantity of debit positions for incoming payments in the municipality of Hamburg is considerable; about 6 million postings are performed each year, 5.2 million from departmental systems and 0.8 million postings from the administration of funds. There are also 8 million debit positions for payments (6.8 million postings for departmental systems and1.2 million postings for the administration of funds). Because SAP R/3 creates several update documents in corresponding components to guarantee the integration of fiscal postings, the system load can double or even triple.

The Industry Solution Reaches Its Limits

Experience from projects in other public entities and communities has shown that the performance of SAP R/3 can be critical when processing more than three million debit positions annually in dialog processes. This finding plays no role for the rollout of the fiscal reference solution in offices and agencies because the number of documents from the administration of funds (without consideration of departmental systems) lies at about two million incoming and outgoing payments – below the critical limit. For the intended integration of departmental systems, however, particularly three major systems (OPAL for misdemeanors, PROSA for welfare, and PAISY for HR payments) with SAP R/3, Hamburg followed SAP’s recommendation to perform a pilot project.
The OPAL misdemeanor system was selected for the pilot to enable mapping of all business processes and transaction in the system and to gain experience. Just the volume of debit positions in the OPAL system at peak times can reach about 50,000 documents each day. In total, OPAL accrues about 4.7 million debit positions annually.

Careful Examination of Accounts Receivable Accounting

The examination therefore focused on an alternative to SAP FI-AR. Public administration typically must efficiently process high numbers of fiscal postings.
The resulting performance problems occur primarily with resource-critical processes on the incoming payments side:

  • Processing electronic bank statements
  • Allocating payments to open items
  • Updating payments into the budget (the conversion of double-entry postings into fiscal postings)

The quantity of postings to personal accounts can also have a negative influence on performance because every line item of a personal account in SAP FI-AR must be transferred into general ledger accounting and, therefore, into budget management. In SAP FI-AR, customer and vendor business relationships require two personal accounts. Accordingly, a customer (a citizen) is carried as a customer for misdemeanors and as a vendor for services rendered.

The New Solution: PSCD

With PSCD, SAP developed a solution for the public sector that uses components which had already proven themselves in the area of insurance, telecommunications, and utilities (telephone and mobile radio communications and electricity, water, and gas suppliers). These industries have similar requirements for batch document processing. The goal of the pilot project with Hamburg was to test the PSCD components in practice and to undertake the final, fine adjustments between the business processes mapped in the software and the real processes of a public collections and disbursements office. The design of the posting processes in PSCD solved the weaknesses of traditional personal and bank accounting in terms of batch processing. For example, updates to payment transactions in budget management do not occur by line item, but at an aggregated level corresponding to the structure and account-assignment elements of the budget (such as a title or the authority to make appropriations) and cost accounting.

Document Flow

Document Flow

PSCD also works with business partners, a technical element of master data, which are used to map natural or juridical persons and groups of persons (joint heirs, for example, or associations of property owners) in SAP R/3. Beneath the level of business partners, one or more contract accounts are created. Contract accounts represent the business relationship, such as property or commercial taxes. A contract object (property A and property B for property taxes or fees for waste removal; company A and company B for commercial taxes) is represented beneath the contract account. Compared to SAP FI-AR, the advantages of PSCD lie in its ability to manage all the business transactions of a citizen or company with central master data. This approach excludes redundancies.

Differentiated Access

The centralization of master data also involves differentiated assignment of access rights. For example, the housing assistance section of the welfare department requires information on housing assistance payments. However, any misdemeanors committed by a citizen do not fall within the purview of this section, so its personnel are not allowed to see such data. Data protection requires special security for payments based upon a citizen’s claims for social assistance from the government. The multilevel structure of master data in PSCD takes this requirement into account: authorizations are granted at the level of the contract account.
In addition to Hamburg, SAP has also involved additional municipalities and governmental entities in the development partnership and the objectives of the project. This approach ensures that other municipalities and governmental entities can also use the developments. The requirements of all the pilot projects are sent back to the SAP development department where they are converted into programs and become part of the PSCD standard release. The collections and disbursements solution will thus become available for additional implementation in other localities. As part of the Special Expertise Program of SAP, BearingPoint functions as a cooperation partner for SAP Public Sector.

Andrea Stock

Andrea Stock

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