PM Audit and Reconciliation

• Overview
• Reconciling Purchasing Management Audit
• Reconcile Commitments, PPV, Accruals to General Ledger

Overview

Certain activities in Purchasing Management (PM) are classed as Critical Events. These are generally events which either cause an update within Purchasing Management or cause a posting to be made to another ledger.

Audit and Reconciliation procedures ensure: that the Purchasing Management system balances internally, i.e. the subsystems within Purchasing Management are in balance. The Purchasing Management system balances externally, i.e. with the ledgers integrated with it.

Audit

The PM Audit,

• Reports upon auditable events and provides a control balance, based on outstanding quantities and values given in Orders, Requisitions and Contracts.
• Summarises all postings made to linked ledgers in readiness for reconciliation.

Reconciliation

This process reconciles between ledger balances and the postings made from Purchasing Management with the postings in the ledgers it is integrated with.

Two reconciliations are performed:

• Postings from PM to General Ledger. This covers postings for Commitments, Accruals and Purchase Prices Variances (PPV).
• Postings from Accounts Payable to PM. This covers the matching of Invoices and Credit Notes in Accounts Payable to Orders and Receipts in Purchasing Management.

Both reconciliations are triggered in the receiving ledger when the Audit Process in that ledger is activated, using the summarised information accumulated in the Purchasing Management Audit.

Each of the components of Purchasing Management system feed information into the Audit and Reconciliation process. This does not just apply to Order and Contract Management, but to Requisition Management, Goods Receiving and Invoice Matching.

Critical Events

Critical Events in Purchasing Management are listed below for Orders. Some also apply to Contracts and Requisitions as indicated.

Reports

Both Audit and Reconciliation produce reports when they are performed.

The production of reports is what the Audit and Reconciliation functions have as their primary purpose. This is because they record patterns of system usage and highlight any imbalances.

There are optional submission parameters that can suppress production of details reports for: Orders, Contracts, GRN’s, Requisitions, Flight Costs, Invoice Matching.

Audit and Reconciliation reports are listed below:

Audit Reports

• Audit Control Reports - The Audit Control report checks shows any imbalances in total quantity and total value

• Audit Detail Reports - The detail reports list all movements for the Audit Period

• Associated Summary Reports - The Summary report is produced for the Audit detail analysing it by activity, quantity and value

Purchasing Management to General Ledger Reconciliation Reports

The regular reports are triggered every time a General Ledger Audit is performed.

Historical reports can be run at the user's discretion for selected parameters.

The reports are as follows:

Reconciling Purchasing Management Audit

The Audit Control Reports detail a summary of outstanding values which are calculated from all of the documents (Contracts, Orders and Requisitions) existing at the time of the Audit. These are shown as the system control totals.

The task is to check the Control Reports every time the Audit is run and to follow up the cause of any imbalance immediately.

The Internal Audit must be reconciled to confirm that the Purchasing Management system is error free and as a preliminary to reconciling its integration with other systems, such as Accounts Payable and General Ledger.

NOTE The Audit function is self-balancing, so there is no danger that re-running Control reports during Reconciliation will produce further imbalances.

• The Purchasing Management Audit must have been run for the period being reconciled.
• You must have the following reports:

1. • Control Report - RDXO01
   • Concise Summary by Doc Ref Line - RDXX01
   • Concise Summary by Activity - RDXZ01

The basis of the reconciliation is as follows:

• Summary at Last Audit + or - Audit Activity Since = Summary in Current Audit

Any imbalances will be reported in the Control Reports.

In principle, any imbalances will be caused by an e5 process not being successfully completed.

NOTE Even if there are imbalances the Control totals will be automatically reset to the current system control totals.

1. Examine the Control reports for each function.

For those documents for which there are no imbalances no further action is required.

Knowing which document(s) show imbalances is the first step in tracing the imbalances.

2. Examine the Concise Summary reports.

These should enable you to pinpoint the imbalance by function, quantity and/or value.

3. Investigate the Imbalance.
   • Check whether it was a batch or on-line process.
   • Does re-running the Control Report help to resolve the query?
   • Has an error been logged for the process which is out of balance?

To assist with Audit and Reconciliation an enquiry iand QED report are provided to give an ability to display the current status of Orders, Contracts and Requisitions. There is also a link to the document list to show all the documents that make up the high level figure.

Reconcile  Commitments, PPV, Accruals to General Ledger

The General Ledger Audit produces reports which display mismatches between Purchasing Management and postings to the General Ledger.

If they reconcile, i.e. show no mismatches, no action is required. If not, the Reconciliation steps which comprise this task should be taken.

The Reconciliation is performed:

1.  To ensure that all postings made to General Ledger are received in General Ledger and trace any mismatches.
2. To track any entries made in General Ledger that do not correspond to postings from Purchasing Management.

The task forms part of checking Audit and Reconciliation details, which is done for each business cycle within Purchasing Management.

Reconciliation details are produced automatically by the system whenever a General Ledger Audit is run its frequency being system defined.

Checking the Reconciliation can be done periodically at the User's discretion.

The user can request Historic Audit Reports defining the period and data required.

• The General Ledger Audit must have been run for the periods being reconciled.
• You must have the following Reconciliation reports triggered by the Audit:
  • Commitment General Mismatch Report - RDIF02
  • Commitment Sourced Mismatch Report - RD1F01
  • Accrual General Mismatch Report - RD1P01
  • Accrual Sourced Mismatch Report - RD1P02
  • PM/GL Non-sourced Mismatches - RD1P03

  NOTE Purchase Price Variance mismatches are contained in the Accruals reports.

The same reconciliation principles apply to Commitments, Accruals and Purchase Price Variances. These are referred to collectively as PM GL Postings in this task description.

This task is performed to reconcile imbalances between Purchasing Management and General Ledger. If the PM Audit Reports show no imbalances, then no further reconciliation is required.

The following procedures are designed to help achieve reconciliation by highlighting the potential causes of imbalances and providing means to resolve them.

NOTE Ignore all value mismatches of '+/- 0.01' as these are rounding discrepancies.

A fundamental division is between sourced and un-sourced mismatches. These are treated separately.

Sourced Mismatches

These will be detailed in the Sourced Mismatches reports RD1DF02 and RD1JO2. They show the two types of sourced mismatch, which are: Records which exist on the PM file but not on the GL file.

Records which exist on the GL file but not on the PM file, but were expected on the PM file.

The following possibilities of imbalances should be checked until the imbalances are all accounted for.

1. Imbalances due to Incomplete Processing. - This is likely to be a cause of imbalance for PM GL postings in PM, but not in GL.
   • Check if any mismatches are compensating for imbalances recorded on the previous reconciliation. If so running an historic reconciliation to cover the periods should clear the imbalance down.
   • Imbalances may have been caused by current incomplete processing. Check this by running a historic reconciliation for the period covered by the Audit reconciliation being checked.

If this does not resolve the imbalance and incomplete processing appears to be the cause, Step (a) for the next Audit may resolve the imbalance.

Alternatively if the Commitment is still outstanding try reversing the Commitment by cancelling the document entry. Then run a historic reconciliation for the audit period. If this resolves the imbalance re-enter the Commitment document and again run the historic reconciliation to verify that there is no imbalance.

1. • If there are records that exist on the GL file but not in PM, though were expected in PM, it is possible that a Commitment reversed from General Ledger has not yet reached Purchasing Management. As in 'Step (b)' one way of checking this is to run a historic reconciliation for the period covered by the Audit reconciliation being checked.

2. Imbalances caused by Operator or System error. - If the imbalances remain even after a further General Ledger Audit and accompanying PM-GL Reconciliation Report has been produced then the source of the imbalance may be due to a user-created, or system, error.

Full details should be logged and passed to the System Administrator.

Unsourced Mismatches

These will be detailed in the PM/GL Non-sourced Mismatches Report RD1J03.

This report details those records that exist on the GL file but not on the PM file and which were not expected to appear on the PM file.

• Imbalances by direct postings into General Ledger. - This is by far the most likely cause of error. Journal entries posted directly into the General Ledger should be checked as follows:

1. • Have they been posted to the correct General Ledger account?
   • If so, does this posting require action in the Purchasing Management Ledgers?

See also

Purchasing Management Home Page