Section 144-30-02 - ACCOUNTING AND FINANCIAL MANAGEMENT STANDARDS FOR COMMUNITY AGENCIESSUMMARY: To outline minimum standards for the presentation of financial statements and the Schedule of Expenditures of Department Agreements (SEDA), dollar thresholds for presentation of financial statements and the SEDA, record retention standards, internal control standards and timetables for reporting.
A.STANDARDS FOR PRESENTATION OF FINANCIAL STATEMENTSResponsibility for financial statements - Community agencies will be required to submit audited entity-wide financial statements and compliance audit to each funding Department if annual agreement expenditures equal or exceed $500,000. Community agencies with annual agreement expenditures of at least $100,000 but less than $500,000 will be required to submit entity-wide financial statements and the supplemental SEDA that have been reviewed by a qualified IPA. Agreement expenditures are the amount of agreement funds earned on the financial claims submitted to the Department.
1.Federal StandardsIf the community agency is required to have a single audit of financial statements in accordance with OMB Circular A-133, that audit should be conducted and reported in accordance with those standards and should include all Federal awards which pass through the Department. That audit will satisfy the entity-wide financial audit requirement of these rules.
If the community agency can satisfy its federal audit requirement through a program-specific audit as specified in OMB Circular A-133, §__.235 and its Federal funds are the only amounts awarded within its State agreements, that audit will satisfy the audit requirement of these rules.
2.Department Standards(a)TIER 1- Less than $100,000If a community agency has less than $100,000 in total annual agreement expenditures of agreement funding from the Department, no entity-wide financial statements are required.
(b)Tier 1 - Between $100,000 and $500,000Community agencies with total annual agreement expenditures of $100,000, but less than $500,000, must have an entity-wide review of its financial statements and supplemental SEDA conducted by a qualified IPA.
Tier 1 option - A community agency within Tier 1 may opt to follow the rules for audits and reporting under Tier 2.
(c)TIER 2 - Audited Financial StatementsIf a community agency has $500,000 or greater in total annual agreement expenditures of agreement funding from the Department, it must at a minimum have an entity-wide audit of its financial statements and a compliance audit of the supplemental SEDA conducted by a qualified IPA in accordance with Section .03 of these rules.
B.STANDARDS FOR FINANCIAL STATEMENTS (Tier 2 and Tier 1 with Department Expenditures of $100,000 or more)1.Responsibilities for financial statements: The financial statements are the representation of the community agency. It is the responsibility of the governing body of the community agency to ensure the statements are completed in accordance with these standards.2.Submission of financial statements: The community agency must submit its financial statements and IPA's reports to the Department in accordance with these rules.3.Presentation of financial statements: Financial statements must be prepared annually. The basic financial statements shall consist of those statements and disclosures required by Generally Accepted Accounting Principles for the community agency. (a) For Tier 2 agencies, the financial statements of a community agency must be audited on an entity-wide basis in accordance with Generally Accepted Auditing Standards and Government Auditing Standards. The audited financial statements must be accompanied by the audited SEDA.
(b) For Tier 1 agencies with annual agreement expenditures of at least $100,000 but less than $500,000, the financial statements of a community agency must be reviewed in accordance with Statement on Standards and Review Services (SSARS) No. 19, Compilation and Review Services. The reviewed financial statements must be accompanied by the reviewed SEDA.
C.STANDARDS FOR SCHEDULE OF EXPENDITURES OF DEPARTMENT AGREEMENTS (SEDA)1.Purpose - The SEDA provides the Department with information identifying agreement expenditures based on the Agreement Close-out Report(s) (ACR) and interim quarterly reports submitted to the Department during the current fiscal year. When an agency has a fiscal year end that does not match up to the interim quarterly report period, the agency will obtain the necessary interim financial information from its accounting records. (a)MAAP Tier 1A community agency that annually expends at least $50,000 but less than $100,000 of agreement funds must prepare the SEDA and submit to the Division of Audit in accordance with these rules.
A community agency that annually expends at least $100,000, but less than $500,000 of agreement funds must prepare the SEDA. The Agency's IPA must review the SEDA and issue a report. This SEDA and IPA report must accompany the annual reviewed financial statements submitted to the Department.
(b)MAAP Tier 2The community agency must prepare the SEDA. The Agency's IPA must issue an audit report on the SEDA. This SEDA and IPA report must accompany the annual audited financial statements submitted to the Division of Audit.
2.Required format(a) Each agreement with expenditures during the current year must be identified by State department, division or office, agreement number, agreement amount, agreement term, service area, agreement status, and related Federal and State expenses.(b) The method of settlement referenced in the Agreement Compliance Section of the agreement will determine the basis of settlement. For example, fee-for-service would be based on the units delivered times the applicable rate.(c) The expenditures for each agreement are based on claims submitted to the Department for the current fiscal year. The SEDA must include both interim and final agreements, if applicable.(d) The expenditures on the SEDA must represent only the Department portion of the claimed expenses.(e) If financial claims submitted to the Department cross two or more fiscal years, the community agency should review the make-up of the claims to determine what portion of the claimed expenses belongs to the current year. For cost sharing agreements that are in interim status, the community agency must determine the Department expenditures based on the agreement pro forma adjustments and the actual Department cost sharing percentage.(f) The SEDA must contain notes that, at a minimum, identify agreements tested and the percentage of agreements tested.3.SEDA supporting documentation - Financial records and/or worksheets must be available to support financial claims submitted to the Department. The financial claims that are the basis for the SEDA must be maintained to support SEDA amounts. All financial records and financial claims that support SEDA amounts must be supplied upon request to the Division of Audit.D.STANDARDS FOR RETENTION OF FINANCIAL AND ADMINISTRATIVE RECORDS1. Financial records for agreements and supporting documentation under these rules must be retained for a period of three (3) years from the date of submission of the final expenditure report with the following exceptions: (a) If any litigation, claim, audit, examination or appeal is started before the expiration of the 3-year period, the records shall be retained until all litigation, claims or audit findings involving the records have been resolved and final action taken.(b) Records for real property and equipment acquired with Federal funds shall be retained for 3 years after final disposition.E.INTERNAL CONTROL STANDARDSCommunity agencies shall establish and maintain internal controls to achieve the organization's goals and objectives. Internal controls shall be designed to provide reasonable assurance about the achievement of the community agency's objectives with regard to the reliability of financial reporting, effectiveness and efficiency of operations, and compliance with applicable rules and regulations. Internal control standards shall consist of the following five interrelated components.
1.Control environment: The control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure. Control environment factors include the integrity, ethical values, management's operating style, delegation of authority systems, as well as the processes for managing and developing people in the organization.2.Risk Assessment: Risk assessment is the community agency's identification and analysis of relevant risks to achievement of its objectives, forming a basis for determining how the risks should be managed. A precondition for risk assessment is establishment of objectives, and thus risk assessment is the identification and analysis of relevant risks to achievement of assigned objectives. Risk assessment is a prerequisite for determining how the risks should be managed.3.Control activities: Control activities are the policies and procedures that help ensure management directives are carried out. They help ensure that necessary actions are taken to address risks to achievement of the community agency's objectives. Control activities occur throughout the organization, at all levels and in all functions. They include a range of activities as diverse as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties.4.Information and communication: Information and communication systems support the identification, capture, and exchange of information in a form and time frame that enable people to carry out their responsibilities. Information and communication systems play a key role in internal control systems as they produce reports, including operational, financial and compliance-related information that make it possible to run and control the community agency.5.Monitoring: Monitoring is a process that assesses the quality of internal control performance over time. This is accomplished through ongoing monitoring activities or separate evaluations. Internal control deficiencies detected through these monitoring activities should be reported upstream, and corrective actions should be taken to ensure continuous improvement of the system.F.REPORTING TIMETABLESCommunity agencies will submit reports and the SEDA as follows:
1. Tier 1 agencies with total annual agreement expenditures of at least $50,000, but less than $100,000, must submit the SEDA no later than four (4) months after their fiscal year end. The SEDA must be signed and dated by an appropriate manager or administrator certifying to its accuracy.2. Tier 1 agencies with total annual agreement expenditures of at least $100,000, but less than $500,000, must submit the reviewed entity-wide financial statements and the reviewed supplemental SEDA no later than six months after the fiscal year end of the community agency.3. Tier 2 agencies must submit the audited entity-wide financial statements and the audited SEDA no later than nine months after the fiscal year end of the community agency.4. Tier 1 and Tier 2 agencies that fall under the audit requirements of OMB Circular A-133 must submit the entity-wide financial statements, the SEFA and the Federal OMB Circular A-133 reporting package no later than nine (9) months after the fiscal year end of the community agency.5. Cost allocation plans due to the Maine Department of Transportation are due no later than four (4) months after the fiscal year end of the Tier 1 community agency, and nine (9) months after the fiscal year end of the Tier 2 community agency.6. Electronic submission is recommended and should be sent to dhhs.audit@maine.gov for submission to the Maine Department of Health and Human Services. Electronic submissions to the Maine Department of Transportation should be sent to OfficeofAudit.MaineDOT@maine.gov. State personnel who require a copy of the MAAP report for a community agency should contact the Division of Audit for the Maine DHHS or the Office of Audit for the Maine DOT.7. The Department may grant an extension of report submission for good cause.G. SANCTIONS1. Failure to follow the reporting timetables in accordance with this part, may result in Department sanctions such as: (a) Withholding a percentage of Department awards until the audit is completed satisfactorily.(b) Withholding or disallowing indirect costs;(c) Suspending Department agreements until the audit is conducted; or(d) Terminating the Department award.10- 144 C.M.R. ch. 30, § 02