Arkansas Administrative Code
Agency 006 - Department of Finance and Administration
Division 09 - Office of Accounting
Rule 006.09.06-001 - Revisions to the Financial Management Guide

Assembly. The Governor, or Governor-elect, shall:

History. Acts 1973, No. 876, § 17; 1981, No. 741, § 2; 1985, No. 365, § 8; A.S.A. 1947, § 13- 343.

Rl-19-4-206 General Conservation Activities

In any year that changes in Constitutional Officers will occur, the Chief Fiscal Officer of the State, through the DFA-Office of Budget and Office of Accounting, will survey the condition of the various State budgets and take whatever actions he/she deems necessary in order to conserve appropriate portions of the applicable budgets to ensure adequate funding will be available for incoming officers.

R 2-19-4 -206 Governor-Elect Transition Guidelines

The administration of funds, as may be appropriated by the General Assembly and provided to an individual who has been elected to a first term as Governor for the use in preparing for his or her forthcoming administration, must comply with the provisions of ACA § 25-16-205 and this policy.

General Limitations

The expenditure of funds is limited to direct expenses of the activities relating to the new office holder preparing to take office in January following the general election. Only those expenses incurred from the date of the general election until the date of inauguration, which are directly related to assuming the office, shall be considered eligible for payment. No transition funds will be used to pay a salary to a newly elected official prior to his or her assuming the office.

Specific Guidelines

A budget for proposed use of such funds must be prepared by the Governor-Elect and presented to the Director of the Department of Finance and Administration prior to the release of transition funds. The individuals) authorized to disburse the funds will be designated in writing by the Director of the Department of Finance and Administration (DFA). Person(s) authorized to approve the following items must be designated in writing by the Director of DFA: employment and payroll documents, purchasing documents, contracts, invoices for payment, and travel reimbursement requests.

All employees of the transition team are exempt from the overtime pay requirements of the Fair Labor Standards Act (FLSA) and, therefore, are not eligible for overtime pay. The business affairs of the transitional team must comply with the policies, regulations and procedures established by the Director of the Department of Finance and Administration for the conduct of State business. All financial transactions shall be recorded on the State's Financial Management System, and all original documentation shall be kept on file in the Office of the Chief Fiscal Officer of the State.

History. Acts 1973, No. 876, § 6; A.S.A 1947, § 13-332.

History. Acts 1973, No. 876, § 6; A.S.A. 1947, § 13-332.

History. Acts 1973, No. 876, § 6; A.S.A. 1947, § 13-332.

History. Acts 1973, No. 876, § 6; A.S.A. 1947, § 13-332.

History. Acts 1993, No. 358, § 1.

History. Acts 1973, No. 876, § 27; A.S.A. 1947, § 13-353.

History. Acts 1973, No. 876, § 27

History. Acts 1973, No. 876, § 27; A.S.A. 1947, § 13-353.

History. Acts 1973, No. 876, § 27

History. Acts 1991, No. 421, §§ 1-3.

Rl-19-4-407 Electronic Warrants

Overview

Electronic warrants must be formatted to comply with Automated Clearing House (ACH) requirements. Circumstances occasionally arise that require deletions or reversals from the ACH transmittal file after it is created by the Statewide accounting system The difference between a reversal or deletion of an ACH item is determined based upon the timing of the request. If an ACH item has not been distributed to the Federal Reserve by the bank, the ACH item will be deleted. If an ACH item has been distributed to the Federal Reserve, it will be reversed if possible. ACH items are distributed to the Federal Reserve two (2) business days prior to the effective date if the bank has the item at that point. For example, if an ACH item is transmitted and the Request for Reversal/Deletion of an ACH Item form is faxed to the bank on Monday and the ACH item has an effective date of Thursday or later, the ACH item will be deleted. If an ACH item is transmitted and the Request for Reversal/Deletion of an ACH Item form is faxed to the bank on Monday and the ACH item has an effective date of Wednesday or earlier (but no earlier than five (5) business days prior), the ACH item will be reversed.

Deletions/reversals from an ACH file can only be processed by the Department of Finance and Administration - Office of Accounting (DFA-OA). In order to request a deletion/reversal of an ACH, the agency must properly complete the "Request for Reversal/Deletion of an ACH Item" form and submit the form via fax to DFA-OA. The "Request for Reversal/Deletion of an ACH item" form must be signed by two authorized agency personnel who are on file with DFA-OA as authorized personnel. Requests for deletion/reversal of an ACH item must be processed immediately following knowledge of an error.

Please Note: To comply with National Automated Clearing House Association (NACHA) Rules, the Reversal/Deletion Request must be received by the bank in time to be processed within five (5) business days of the original entry settlement date. (The cutoff time is 5:00 PM CST on the 5th business day after settlement.)

After two DFA-OA authorized personnel review and sign their approval to the "Request for Reversal/Deletion of an ACH item" form, DFA-OA will contact the bank and submit a formal request for a reversal/deletion of an ACH item. Pending bank approval, the monies will be returnedto the Vendor ACH Return Account, the Payroll ACHReturn Account or the Income Tax ACHReturn Account.

If the monies are returned to the Vendor ACH Return Account, the requesting agency will be notified by DFA-OA and issued a check from the Vendor ACH Return Account to be processed as a refund to expenditure to the fund, fund center, commitment item, wbs element and/or internal order of original issuance.

If the monies are returned to the Payroll ACH Return Account, a check will be issued to the Payroll paying fund and deposited into the Treasurer of State's office.

If the monies are returned to the Income Tax ACH Return Account, a check will be issued to DFA-Revenue-Individual Income Tax and deposited into the Treasurer of State's office as a refund to expenditure.

Changes to the file after it is sent to the bank

The purpose of this process is to delete or reverse an ACH item once the file has reached the bank. This must be done within five (5) working days of the settlement or pay date of the deposit.

The requesting agency must complete the "Request for Reversal/Deletion of an ACH item" form and submit via FAX to the DFA-OA. Two persons from the approved agency personnel list must sign the request form prior to submission to the DFA-OA.

DFA staff will approve the request for submission to the bank. Designated Office of Accounting staff will fax the official "ACH Reversal/Deletion Request" form to the bank for processing.

Deletion of an item is possible if done prior to 5 PM on the day of transmittal of the ACH file by the Auditor of State. If an item is deleted, it will not be presented for reimbursement to the Treasurer of State, and Bank of America will return no money to the State. Cancellation of the electronic "warrant" will be necessary. No further payments should be issued until the DFA - Office of Accounting confirms the reversal.

Reversal of an item is at the discretion of the receiving bank. If the reversal is honored, money will be returned to the Treasurer of State's bank settlement account and subsequently transferred to either the Vendor ACH Return Account or the Payroll ACH Return Account. At that point a check will be written to reimburse the agency for the funds or the Payroll Paying Account and deposited as a refund to expenditure, either current or prior year.

History. Acts 1993, No. 540, §§ 1-5 ; 1995, No. 232, § 8.

History. Acts 1973, No. 876, § 12; A.S.A. 1947, § 13-338.

INTERNAL ACCOUNTING CONTROL UTILIZING AASIS SECURITY ROLES

Rl-19-4-501 It is the objective of the State of Arkansas to assure proper internal accounting controls are in place, to safeguard the State's assets and to prevent fraud, errors and defalcations (theft and embezzlements). The Arkansas Administrative Statewide Information System (AASIS) utilizes various accounting roles in order to provide for an adequate segregation of duties to facilitate better business practices and enable an adequate system of internal accounting controls sufficient to accomplish the prevention of fraud, errors and defalcations. Each agency, board or commission that has online access to AASIS shall have a security liaison that is knowledgeable regarding the business and accounting practices of their respective entity, and have a working knowledge of internal accounting controls. Each security liaison will ensure that a particular individual does not have conflicting or an excessive number of security roles assigned

R 2-19-4 -501 The security liaison will assign roles to any new accounting team employee upon his/her commencement of employment. New role assignments or revisions to current role assignments will be submitted to the AASIS Security Administrator for review and entry into the AASIS system. If a conflict or an excessive number of security role assignments are discovered in the review process, the AASIS Security Administrator will forward the request to the Department of Finance and Administration, Office of Accounting, CAFR Section (DFA-OA-CAFR Section) for approval of a proposed solution or design of mitigating controls to be implemented.

Changes to current role assignments should be evaluated by the Agency Security Liaison to determine that internal control conflicts will not be created and that excessive roles are not assigned to one individual.

Upon termination or any change in status of employment, the Agency Security Liaison shall immediately remove all roles no longer applicable to an employee's job duties. There shall be a process in place at each agency to audit the change in role assignments by comparing the human resources data forms to changes in AASIS role assignments.

The Agency Security Liaison shall assess security roles annually.

R 3-19-4 -501 When circumstances dictate, temporary security role assignments may be utilized by requesting that a security role assignment be granted for a specific time period, even though the assignment would appear to be allowing an individual to have excessive security roles. In the event an agency does not have sufficient staffing to assign security roles so that all park and post capabilities are met, they may request documents be posted by the DFA-OA-Service Bureau Manager. These items must be documented and reviewed by the individual that would otherwise have been required to park or post the documents or their immediate supervisor, as a mitigating control. This documentation must be retained in the files of the agency for review until the individual transaction records involved are destroyed

R 4-19-4 -501 Cash Receipts Internal Control

Strict control needs to be maintained during the processing of cash receipts to ensure that they are properly accounted for. The term "cash" includes currency, coin, checks, moneys orders and credit card receipts. Collecting, recording, depositing and reconciling cash receipts should be separated among different individuals. No one person should be in a position to misdirect the accounting or posting of a receipt. Additionally, the internal control procedures should prevent the misappropriation of funds once in the control of the agency.

Where staffing levels do not permit separation of duties, compensating controls such as strict individual accountability and thorough management review and supervision should exist to help safeguard assets and ensure that accounting records are complete and accurate. Any system adopted should include completely separating the handling of cash or checks from the recording function whenever possible. The compensating control procedures must be submitted to the Department of Finance and Administration-Office of Accounting for written approval.

Cash Received in Person

A receipt must be issued for each payment received. The following minimum standards shall be met. Receipts are to be pre-numbered by the printer, and a printer's certificate obtained and retained for audit purposes. Such certificate shall state the date printing was done, the numerical sequence of receipts printed and the name of the printer.

The pre-numbered receipts shall contain the following information for each item receipted:

Date

Amount of receipt

Name of person or company from whom moneys was received

Purpose of payment

Fund(s) to which receipt is to be credited

Signature of employee receiving moneys

The original receipt shall be given to the party making payment. One duplicate copy of the receipt shall be maintained in numerical order in the receipt book. Additional copies of the receipts are optional with the State agency, board or commission or institution and may be used for any purpose they deem fit.

The use of mechanical receipting devices, such as cash registers, which accomplish the same purpose as pre-numbered receipts, is acceptable and is encouraged. All checks and other negotiable instruments must be endorsed immediately with a restrictive endorsement stamp.

Cash must be kept in a safe or other locked storage device until deposited

Cash Received Through the Mail

The mail must be opened in a monitored environment. All checks should be numbered, marked or endorsed as soon as possible.

A list of cash (cash log) must be prepared in duplicate. The list shall include sufficient detail to allow an audit trail of an individual receipt.

One copy of the cash log shall be kept in the area and the other should accompany the deposit. Cash must be stored in a safe or other locked storage device until deposited.

Balancing of Cash Receipts

All cash receipts must be balanced daily by mode of payment by comparing the total of the cash to the cash register totals, to the pre-numbered receipts totals and to the totals of the moneys received by mail.

All voided transactions are to be approved and initialed by the supervisor. Agencies using the Arkansas Administrative Statewide Information System must run a ZCAJO Cash Journal report on a weekly basis. Enter the cash journal number, document status of "D" and the posting date range. This will generate a list of all deleted documents from the cash journal for the period specified This list shall include the initials of the supervisor acknowledging authorization of all deleted cash receipt transactions and be available for audit purposes. Over/short amounts must be separately recorded, and investigated and resolved to the extent possible.

Preparation of Deposits

Someone not involved with collecting, recording or reconciling must prepare the deposit. Cash must be recorded on the deposit slip in the appropriate space.

An adding machine tape of checks must be included with the deposit slip if the number of checks exceeds the space available to list the checks on the deposit slip.

Good internal controls dictate daily deposits to Treasury and/or a commercial bank account. Weekly deposits are allowable if an agency receives only minimal amounts of cash and/or checks. However, in the last week of the month all deposits keyed into the State's accounting system must be delivered to the Treasurer of State or the commercial bank for deposit prior to noon on the last business day of the month.

Reconciliation of Cash Collected

Bank accounts should be reconciled by an employee independent of the collecting, depositing or recording functions on a monthly basis. Correcting journal entries must be made to the agency's books of record to correct prior month's errors in the current month.

History. Acts 1973, No. 876, § 12; 1985, No, 365, § 1; A.S.A. 1947, § 13-338.

History. Acts 1973, No. 876, § 12; 1977, No. 486, § 2; A.S.A. 1947, § 13-338.

PLEASE NOTE: Refer to 19-5-104

Rl- 19-4-504 Overview of the Financial Management System

The State of Arkansas implemented a new financial management system on July 1, 2001. The system is designed to be a database resource management tool that encompasses many types of information for management use in addition to accounting data, such as budgeting, purchasing and human resource management in an integrated fashion. The system is commonly referred to as AASIS, the acronym for "Arkansas Administrative Statewide Information System." The current operating platform is SAP software. The system replaced several of the previous automated systems used by the State since 1971. Upon conversion to

AASIS, the State has the ability to report financial results on an individual agency or statewide basis on the modified or full accrual basis of accounting in order to comply with financial reporting requirements promulgated by the Governmental Accounting Standards Board (GASB). The system is utilized on-line by most agencies and departments of Arkansas State Government. There are some small agencies that do not have the resources to utilize the system. For those small agencies, boards and commissions, the DFA-Office of Accounting created the 'Service Bureau" Section to process all transactions and produce financial reports.

Reporting agencies, (e.g. colleges and universities, certain constitutional offices, War Memorial Stadium Commission, Arkansas Highway & Transportation Department, etc.) do not use AASIS as their original books of record. They have their own separate and independent accounting systems. These systems must have the capability to present the reporting agency's trial balances and related financial statements on both the modified accrual and full accrual basis of accounting in order to facilitate preparation of the Comprehensive Annual Financial Report (CAFR) of the State of Arkansas in accordance with the requirements of GASB 34. Reporting agencies interface certain items within AASIS for budgetary control and for other financial reporting purposes. Each reporting agency, excluding the colleges and universities, shall make adjusting journal entries to agree with AASIS trial balance to their books of record, preferably on an interim basis, but not less frequently than annually as of June 30th of each fiscal year.

R 2-19-4 -504E-Commerce, Electronic Records and Signatures

ACA § 25-31-101 et seq., known as the "Arkansas Electronic Records and Signatures Act" andACA § 25-32-101 et seq., the "Uniform Electronic Transactions Act" details the definitions and guidelines relating to the authority and the use of electronic records, signatures and transactions. Acceptance and/or disbursement by State agencies of State funds via electronic means, including Internet transactions, also referred to as electronic commerce (e-commerce) must, at a minimum, be conducted in accordance with the above referenced Arkansas Code sections, the Arkansas Shared Technical Architecture Program policies which can be viewed at http://www.techarch.state.ar.us and other applicable laws, regulations and policies contained in this Guide. E-commerce includes, but is not limited to, acceptance of credit cards and debit cards, use of purchase cards, receipt and transmittal of purchase orders and invoices.

An agency may establish additional policies and requirements, as long as the agency meets the minimum requirements contained in the Arkansas Code. For example, ACA § 19-11-222 provides for the State Procurement Director to have exclusive jurisdiction over the establishment and maintenance of an electronic commerce procurement solution, to include planning and administration, consistent with the established financial systems of the State. The Department of Finance and Administration-Office of State Procurement (OSP) maintains, on its web site, links to State procurement laws and regulations, including those applicable to e-commerce. http://www.arkansas.gov/dfa/purchasing/lawsandregs.html

Electronic warrants issued in payment for goods and/or services received by the State and its agencies, boards and commissions are discussed in detail in section Rl- 19-4-407 of this Guide.

Vehicle tag renewals and fishing and hunting licenses can be obtained via the Internet from the Department of Finance & Administration - Revenue Division and the Arkansas Game and Fish Commission, respectively. Links to these e-commerce transactions can be found at http://www. accessarkansas. org/

Other examples of efficient use of e-commerce:

Although this formal definition refers to internal control as a process, it should be viewed as a series of actions that permeate the entire State Government of Arkansas. Internal controls exist in the basic management processes of planning, executing and monitoring. It should not be viewed as an add-on to these basic management processes but should be viewed as an integral part of them and should be placed at strategic points in these processes to ensure that objectives are achieved

Internal control is at the core of State government fulfilling its mission and achieving its goals while providing safeguards to protect governmental resources. Management of each agency is responsible for implementing appropriate internal control activities that are appropriate to their agency's processes while keeping in mind that effective internal controls benefit rather than encumber management. Costs of implementing internal controls should not exceed the potential loss from fraud or the value of assets that the controls are established to safeguard.

It is vital that everyone understand the concept and importance of internal controls, especially since virtually every State employee has a role in how well the State of Arkansas executes the concept of internal control.

Control Environment

The control environment can be best summarized as the attitude that management has about internal controls. If management believes that internal controls are important, is committed to implementing controls and communicates this view to employees, then internal controls are more likely to function effectively. However, if management views internal control as not important or as an obstacle, then this attitude will likely be communicated to employees through management's actions. With this attitude, employees will likely view internal controls as "red tape" to be "cut-through" in order to get the job done. An effective control environment is an intangible factor that sets the foundation for all other components of internal control.

Risk Assessment

All agencies have certain risk involved in meeting their objectives and providing services to internal customers (other State agencies) and external customers (taxpayers of the State). This is based upon the premise that opportunity and risk are related; therefore, State government is exposed to risk by simply fulfilling the opportunity that it has to better serve the citizens of the State. By this definition, it can be seen that risk should not be viewed negatively but simply inherent to the decision of doing business.

Risk assessment is the process used to identify, analyze and manage the potential risks that could hinder or prevent an agency from achieving its objectives.

A risk assessment shall be performed by each agency once every two years. After completion, the assessment shall be forwarded to the DFA-Offtce of Internal Audit. (DFA-OIA) See Appendix Pl- 19-4-505.

Control Activities

Control Activities are the policies, procedures, techniques and mechanisms that enforce management's directives, such as the process of adhering to requirements for budget development and execution. They help ensure that actions are taken to address risks. Internal Control Activities should be an integral part of an entity's processes for planning, implementing, reviewing, ensuring accountability for government resources and achieving effective results.

Internal Control Activities occur at all levels and functions of the entity. They include a wide range of diverse activities such as approvals, authorizations, verifications, reconciliations, performance reviews, maintenance of security and the creation and maintenance of related records that provide evidence of execution of these activities as well as appropriate documentation. Control Activities may be applied in a computerized information system environment or through manual processes.

Click for examples of internal control activities Appendix P 2-19-4 -505

Click for internal control questionnaire Appendix P 3-19-4 -5 05

Information and Communication

For an agency to run and control its operations and achieve its desired objectives, communications relating to both operational and financial data is needed at all levels of an agency in a relevant, reliable and timely fashion.

In addition to internal communications, management should ensure that there are adequate means of communicating with and obtaining information from external parties that may have a significant impact on the agency achieving its goals.

Pertinent information should be identified, captured and distributed in a form and timeframe that permits people to perform their duties efficiently.

Additional points related to communication are made as follows:

Personnel should know their job responsibilities and how their activities relate to the work of others;

A means should exist to permit upward communication within any agency; and Employees should be confident that reprisals will not result from communicating significant information.

Monitoring

Subsequent to implementing internal controls, agencies should periodically monitor and evaluate their effectiveness to ensure that the controls are functioning properly. Potential weaknesses in internal control structure may be identified by Legislative Audit, Internal Audit or by employees of agencies. When members of management are notified of these weaknesses, they should take corrective action to resolve the identified problems in their internal control structure. Although monitoring is a separate component of internal control, it is easy to see how it relates to the component of internal control environment previously discussed.

To support monitoring activities, the DFA-OIA will maintain a database of agency audit findings and will provide agency management with routine reports of all outstanding findings. As audit findings are corrected, agency management must submit documentation of corrective action for the findings to be removed from the database.

As audit findings are brought to the attention of agency management, they will provide information to the DFA-OIA within 30 days of being notified of the finding. Agency audit findings may result from Legislative Audit reports, Internal Audit reports or examinations by the Federal Government, etc. (Findings from sub-recipient audits that receive State or federal funds from agencies are not required to be reported). The information for each finding must be presented on the Audit Finding Form. Click for the Audit Finding Form P 4-19-4 -505

Internal Control and Fraud

To preserve the trust and respect that the public has for the governing process, government agency leaders should take the necessary steps to minimize the risk of fraud, waste and abuse occurring within their agency. The establishment of a strong internal control environment where written policies and procedures are enforced, internal controls are appropriately implemented and employees are educated about fraud and its consequences is one of the best deterrents and methods of curtailing fraud.

The impact that strong internal controls has in deterring fraud and limiting exposure if fraud does occur is irrefutable; however, a strong system of internal controls is no absolute guarantee that all cases of fraud will be prevented. Why? Because the best system of internal control can't prevent collusion between two or more people who are in positions to circumvent the internal control mechanisms, or prevent managers or individuals in key leadership capacities from unduly influencing those responsible for the internal control activities. Therefore, it is important for State government employees to recognize fraud when it is occurring and report the fraudulent activities to the appropriate authority.

Occupational fraud and abuses can be defined as the use of one's occupation for personal enrichment through the deliberate misuse or misapplication of government resources or assets. Occupational fraud and abuses include misappropriation of assets in the form of cash theft, fraudulent disbursements, theft or personal use of inventory or other non-cash assets. Fraud can also take the form of bribery and corruption when kickbacks, gifts or gratuities are offered to government employees from contractors or vendors to influence decisions of government agents or employees.

Anti-Fraud Program

It is each agency's responsibility to create a culture of honesty and high ethics. Such a culture is rooted in a strong set of core values (or value system) that provides the foundation for employees as to how the agency conducts its business. It also allows an entity to develop an ethical framework that covers (1) fraudulent financial reporting, (2) misappropriation of assets, (3) corruption, as well as other issues.

Creating a culture of honesty and high ethics should include the following:

Setting the Tone at the Top

The cornerstone of an effective antifraud environment is a culture with a strong value system founded in integrity. The value system is reflected in a code of ethics. The code of ethics should reflect the core values of the entity and guide employees in making appropriate decisions during their workday. The code of ethics might include such topics as ethics, confidentiality, conflicts of interest, intellectual property, sexual harassment and fraud. Each agency shall develop a code of ethics which shall be communicated to each employee. Each employee shall sign a statement that they have received and understand the code of ethics. The Code of ethics shall be included in an employee handbook or policy manual so that it can be referred to when needed.

Click for an example of a Code of ethics Appendix P 5-19-4 -505

Creating a Positive Workplace Environment

Hiring and Promoting Appropriate Employees

Training

New employees should be trained at the time of hiring about the entity's values and its code of ethics. This training should explicitly cover expectations of all employees regarding (1) their duty to communicate certain matters, (2) a list of the types of matters, including actual or suspected fraud, to be communicated along with specific examples, and (3) information on how to communicate those matters. In addition to training at the time of hiring, employees should receive refresher training periodically thereafter.

Confirmation

Management needs to clearly articulate that all employees will be held accountable to act within the entity's code of ethics. All employees within senior management and the finance function, as well as other employees in areas that might be exposed to unethical behavior (for example, procurement, disbursement and receipting), should be required to sign a code of ethics annually.

Requiring periodic confirmation by employees of their responsibilities will not only reinforce the policy but may also deter individuals from committing fraud and other violations and might identify problems before they become significant. Such confirmation shall include statements that the individual understands the entity's expectations, has complied with the code of ethics and is not aware of any violations of the code of ethics. The confirmation shall reiterate the employee's obligation to report fraud, waste and abuse of government resources. At the time of performing annual employee performance evaluations, a signed confirmation should be obtained from the employee that they have read and understand the entity's code of ethics.

Discipline

A thorough investigation should be conducted for each alleged incident of fraud If allegations of fraud are substantiated, then appropriate and consistent actions should be taken against violators. When allegations of fraud are brought to entity management, these allegations shall be reported to the DFA-OIA. The DFA-OIA will coordinate the review of the allegations to determine if the allegations are substantiated

Expectations about the consequences of committing fraud must be clearly communicated throughout the entity. For example, a strong statement from management that dishonest actions will not be tolerated, that violators will be terminated and referred to the appropriate authorities clearly establishes consequences and can be a valuable deterrent to wrongdoing.

State employees also have the option of reporting allegations of fraud directly to the DFA-OIA. They can contact the DFA-OIA at (501) 682-0370 or complete a Fraud Reporting form and mail to the DFA-OIA.

State agency management must be familiar with the Arkansas Whistle-blower Act and their responsibility not to take adverse action against a public employee because the public employee or a person authorized to act on behalf of the employee communicates in good faith the existence of waste of public funds, property or manpower, including federal funds, property, or manpower administered or controlled by a public employee, or a violation or suspected violation of a law, rule or regulation adopted under the law of this State or a political subdivision of the State to an appropriate authority. Click for the Fraud Reporting Form P 6-19-4 -505

Click for Arkansas Whistle-blower Act

Evaluation Processes and Controls

Neither fraudulent financial reporting nor misappropriation of assets can occur without a perceived opportunity to commit and conceal the act. Organizations should be proactive in reducing fraud opportunities by (1) identifying and measuring fraud risks, (2) taking steps to mitigate identified risks and (3) implementing and monitoring appropriate preventive and detective internal controls and other deterrent measures.

Identifying and Measuring Fraud Risks

Management has primary responsibility for establishing and monitoring all aspects of the entity's fraud risk-assessment and prevention activities. Fraud risks often are considered as part of an agency-wide risk assessment program, though they may be addressed separately. The fraud risk-assessment process should consider the vulnerability of the entity to fraudulent activity (fraudulent financial reporting, misappropriation of assets and corruption) and whether any of those exposures could result in a material misstatement of the financial statements or material loss to the organization.

The nature and extent of management's risk assessment activities should be commensurate with the size of the entity and complexity of its operations. For example, the risk assessment process is likely to be less formal and less structured in smaller entities. However, management should recognize that fraud can occur in organizations of any size or type. Accordingly, management should develop a heightened "fraud awareness," an appropriate fraud risk-management program and appropriate oversight.

Managing the risk of fraud is the same in principle as managing any other business risk. When considering fraud risks in specific operations, agency management must determine which operational areas are most susceptible to fraud risk. Areas with previous losses, areas handling cash and areas distributing and administering grants are examples of areas that may be more susceptible to fraud.

The fraud risk assessment shall be performed by each agency once every two years.

Mitigating Fraud Risks

Once risk areas are identified by management, it is necessary to evaluate the adequacy of existing internal control activities and determine if further controls or changes to existing controls are required to reduce or eliminate the risk. Although there may be high risk fraud indicators in certain instances, other compensating measures may exist to mitigate the weakness in controls. It may be possible to reduce or eliminate certain fraud risks by making changes to the entity's activities and processes. For example, the risk of misappropriations of funds may be reduced by implementing a central lockbox at a bank to receive payments instead of receiving moneys at the entity's various locations. The risk of corruption may be reduced by closely monitoring the entity's procurement process, etc.

Developing an Appropriate Oversight Process

To effectively prevent or deter fraud, an entity should have an appropriate oversight function in place. Agency management is responsible for overseeing the activities carried out by employees and typically does so by implementing and monitoring processes and controls such as those previously discussed.

Management is encouraged to utilize an internal audit function in carrying out their oversight responsibility. An effective internal audit team can be extremely helpful in performing aspects of the oversight function. Internal auditors have the opportunity to evaluate fraud risks and controls and to recommend action to mitigate risks and improve controls.

Agencies that are governed by a board or commission are also encouraged to establish an audit committee to support the oversight function. One way that public officials can enhance accountability and demonstrate proper stewardship over public funds is to establish and support an adequate internal environment within their organizations. A critical element of the internal control environment is an effective audit committee that provides oversight of matters of financial reporting, auditing and internal control. An effective audit committee can provide several important aspects of control, including: ensuring the independence of the internal auditing function and ensuring appropriate action is taken on audit findings. The audit committee serves in a unique capacity as an important communication link among external and internal auditors and operating management and as a means of reducing the risk of management override of key elements of the agency's internal control structure.

History. Acts 1973, No. 876, § 12; 1979, No. 833, § 3; A.S.A. 1947, § 13-338.

Rl- 19-4-506 Reporting Capabilities of System

AASIS has the ability to produce many reports. A table which outlines the available reports is located at appendix Pl-19-4-506. The table is categorized by report type and includes the following: financial and accounts payable reports, funds management reports, accounts receivable reports, asset management reports, fiscal control reports, human resources reports and procurement reports. More information can be found on these reports at www, aasis. state, ar. us

R 2-19-4 -506 General Reporting and Year End Closing Procedures

Purpose

This portion of the Guide establishes the State reporting policies and procedures governing the accumulation of accounting data for reporting purposes and the preparation of the State of Arkansas Comprehensive Annual Financial Report (CAFR). PLEASE NOTE: A table of reports available from AASIS is in appendix Pl- 19-4-506.

Applicability & Responsibility

Each of the State of Arkansas' agencies, boards, commissions, departments and institutions is primarily responsible for the collection, maintenance, recording and transmission of financial information and other necessary disclosures to permit the Department of Finance & Administration - Office of Accounting - CAFR Section (DFA-OA-CAFR Section) to prepare financial statements and the related footnotes in accordance with Generally Accepted Accounting Principles (GAAP) and official pronouncements of the Governmental Accounting Standards Board (GASB). Each agency, board, commission, department and institution is also required to provide supplementary information and statistical summaries as requested to allow the DFA-OA-CAFR Section to compile schedules and disclosures to be presented in the CAFR The DFA-OA-CAFR Section is responsible for assisting each entity with its compliance with these reporting requirements, including:

Each agency, board, commission, department and institution is responsible for:

History. Acts 1973, No. 876, § 12; A.S.A. 1947, § 13-338; Acts 2001, No. 1453, § 8.

Rl-19-4-518 General Ledger Chart of Accounts

The Financial Management System General Ledger Chart of Accounts contains the asset, liability, fund equity, revenue, expense, operating transfer, other financing sources/uses and prior period adjustment accounts necessary for operating purposes and financial statement presentation for the State of Arkansas. These accounts record the dollar value of the business transactions completed by State agencies.

The general ledger accounts are generic in nature and are established and titled for use by all State agencies. The general ledger accounts will not be set up to record specific transactions of an individual agency unless extraordinary circumstances justify the request.

The following is a general discussion concerning general ledger accounts, their characteristics and purposes. Procedures related to uses for specific transactions are located in other sections of this Guide. Types of General Ledger Accounts:

Asset Accounts

Assets are a probable future economic benefit obtained or controlled by a particular entity as a result of past transactions or events. These economic resources can be tangible or intangible.

Assets are recorded in the general ledger account number range 1000000000 to 1999999999.

Asset accounts may have budget relevant commitment items.

Run AASIS report SKI43 800003 6 to obtain the commitment item for all accounts.

Liability Accounts

Liabilities are probable future sacrifices of economic benefits, arising from present obligations of a particular entity to transfer assets or provide services to other entities in the future as a result of past transactions or events. The term does not include encumbrances.

Liabilities are recorded in the general ledger account number range 2000000000 to 2999999999.

The commitment items for all liability accounts are non-budget relevant, also referred to as statistical. One exception to the statistical posting is on the sales/use tax liability, which is non-statistical.

Fund Equity Accounts

Equity accounts are the difference between a fund's assets and liabilities. In governmental funds, it is referred to as fund balance.

Fund equity is recorded in the general ledger account number range 3000000000 through 3999999999.

The commitment items for all fund equity accounts are non-budget relevant, also referred to as statistical.

Revenue Accounts

Revenues are inflows or other enhancements of assets during a period from delivering or producing goods, rendering services or carrying out other activities that constitute an agency's operations. Revenues are recognized in the accounting period in which they become measurable and available for modified accrual and when they become measurable and earned for full accrual. Moneys receipted should be recorded as revenue upon the first receipt. Generally movements of moneys between State agencies or an agency's fund groups should not be recorded as revenue. They should be recorded as transfers. The Governmental Accounting Standards Board (GASB) requires that, if goods or services are provided between agencies and the value is approximately what it would be to receive the same goods or services from an outside source, the transaction be recorded as an expense to the paying agency and revenue to the receiving agency.

Revenues are recorded in the general ledger account number range 4000000000 through 4999999999.

The commitment items for all revenue accounts are non-budget relevant, also referred to as statistical.

Expense Accounts

Expenses are outflows, consumption of assets or incurrence of liabilities during a period from delivering or producing goods, rendering services or carrying out other activities that constitute an agency's operations. Expenses are generally recognized in the period when incurred regardless of the timing of the related disbursements with the following exception. Certain expenses are recognized when due for modified accrual such as debt service payments, claims and judgments, accrued leave and net pension obligations. Moneys that are moved between State agencies or fund groups are generally not an expense but a transfer. However, the Governmental Accounting Standards Board (GASB) requires that, if goods or services are provided between agencies and the value is approximately what it would be to receive the same goods or services from an outside source, the transaction be recorded as an expense to the paying agency and a revenue to the receiving agency.

Expenses are recorded in the general ledger account number range 5000000000 through 5999999999.

Expense accounts may have either budget relevant or non-budget relevant commitment items. Run AASIS report S_KI4_ 38000036 to obtain the commitment item for general ledger accounts.

Period ending accrual entries are made to non-budget relevant general ledger accounts that are ties to statistical commitment items. However, all warrants, checks and inter-agency transfers for expenses must be coded to budget relevant general ledger accounts with a non-statistical commitment item.

Operating Transfer Accounts

Operating transfers are used to record transfers of funds. They are legally authorized transfers from a fund receiving revenue to the fund through which the resources are to be expended. They include inter-fund transfers (transfers between two or more State agencies) and intra-fund transfers (transfers within a State agency).

Operating transfers are recorded in the general ledger account number range 6000000000 through 6999999999 along with Other Financing Sources/Uses and Prior Period Adjustments.

At the present time, all Operating Transfers have non-budget relevant commitment items.

Other Financing Sources/Uses Accounts

Other Financing Sources/Uses Accounts are used to record inflow/outflow of resources that are not revenue/expense.

Other Financing Sources/Uses are recorded in the general ledger account number range 6000000000 through 6999999999 along with operating transfers and prior period adjustments.

All Other Financing Sources/Uses accounts for use by agencies other than certain accounts set up for use by DFA Employee Benefits Division only are non-budget relevant.

Prior Period Adjustments

Prior Period Adjustments are the net effect of changes resulting from the correction of errors which occurred in prior fiscal years. No Prior Period Adjustment shall be recorded by an agency without prior authorization from Department of Finance and Administration - Office of Accounting (DFA-OA).

Prior period adjustments are recorded in the general ledger account number range 6000000000 through 6999999999 along with operating transfers and other financing sources/uses.

All Prior Period Adjustment accounts are non-budget relevant.

AASIS Reports S_ALR 87012333, S_ALR 87012326 and S_ALR 87012328 all can be used to produce lists of the Chart of Accounts. In order to receive an accurate report, Chart of Accounts and Company Code must both reflect ARK.

Contact DFA-OA for additional information concerning the Chart of Accounts.

R 2-19-4 -518 Journal Entries

Journal entries are used to change the posted value of a general ledger account balance or sub-ledger balance that is specific to a single business transaction. Generally, these include correcting the posting of a cash receipt, check or warrant to an improper account. Journal entries are also used to adjust the ending or beginning balance of an account so that the general ledger, as well as sub-ledgers is maintained in accordance with Generally Accepted Accounting Principles (GAAP), State policies, and audit requirements, such as year-end accruals for financial reporting.

Most transactions do not originate in the general ledger but rather in one of the modules (sub-ledgers) that feed the general ledger, such as the Accounts Payable and Accounts Receivable modules. In order to maintain module integrity, proper audit trails and to comply with external audit requirements, it is imperative that adjustments or corrections be made in the module from which a transaction originated whenever possible. Thus, adjustments or corrections made directly in the general ledger should be relatively few in number. In AASIS, a journal entry is prepared, checked and parked by one staff member; and it is approved and posted by another staff member. The approving staff member is responsible for ensuring that each journal entry is:

History. Acts 1973, No. 876, § 12; A.S.A. 1947, § 13-338; Acts 2001, No. 221, § 4; 2003, No. 1463, § 8; 2005, No. 237, § 2.

History. Acts 1973, No. 876, § 12; 1977, No. 813, § 1; 1979, No. 833, §§ 1, 2; 1981, No. 741, § 1; 1981, No. 924, § 1; 1983, No. 628, § 1; 1985, No. 365, §§ 2, 3, 12; A.S.A. 1947, § 13-338; Acts 1987, No. 646, § 2 ; 1997, No. 342, § 40 ; 1997, No. 1211, § 29 ; 2001, No. 163, § 1; 2001, No. 1453, § 11.

Rl-19-4-522Continuing Professional Education

Continuing Professional Education - For the efficiency and effective operations of the agency, a division at their discretion may pay for continuing professional education for their employees as long as the courses do not lead to a degree.

History. Acts 1973, No. 876, § 12; 1977, No. 813, § 1; 1979, No. 833, §§ 1, 2; 1981, No. 741, § 1; 1981, No. 924, § 1; 1983, No. 628, § 1; 1985, No. 365, §§ 2, 3, 12; A.S.A. 1947, § 13-338; Acts 2001, No. 1453, § 12.

Rl- 19-4-524 Construction and Permanent Improvements

The Arkansas Building Authority ("ABA") was established to oversee and manage capital improvements, real estate transfers and leases. ABA has established policies and guidelines governing the acquisition, construction, equipping, maintenance and operation of public buildings and other real property. The Boards of Trustees of the University of Arkansas, Arkansas State University, University of Central Arkansas, Henderson State University, Arkansas Tech University, Southern Arkansas University and other governing boards of public institutions of higher education with the approval of the Department of Higher Education, as well as the State Highway Commission, are not required to obtain approval or any other form of advice for projects from Arkansas Building Authority (ABA). All other agencies, departments and institutions should refer to ABA policies and procedures in addition to the guidelines provided herein. The ABA policies and procedures, known collectively as ABA Minimum Standards and Criteria, are located on ABA's web site, http://www.arkansasbuildingauthority.com. (ACA § 22-2-101 et seq., ACA § 6-62-302)

State agencies, departments and institutions are required to obtain legislative authorization prior to the construction and or acquisition of any lands, buildings, structures, utility systems or similar facilities to be financed in whole or in part by State Treasury Funds, Cash Funds, Federal Grants, Revenue Bonds, or Revenue Notes provided by law, agency or institutional receipts, donated funds from private sources or a combination of the above sources. (ACA § 22-2-108(2) (B), ACA § 22-2-108(7) (B), ACA § 22-9-103(b), ACA § 22-9-104)

Construction Approved by the General Assembly (During Session)

All State agencies, except the Arkansas State Highway and Transportation Department, must submit a Method of Financing (MOF), Pl- 19-4-524, to the Department of Finance and Administration-Office of Accounting-Funds Group (DFA-OA-FG) before entering into any contract or making any commitment of funds against a construction and permanent improvements appropriation. (ACA § 19-4-1403, ACA § 19-4-1407, ACA 22-2-102)

Construction Not Approved by the General Assembly (Between Sessions)

If prior legislative authorization has not been received and a State agency, department or institution, excluding the Arkansas State Highway and Transportation Department, desires to make a capital expenditure for construction and/or acquisition of lands, buildings, structures, utility systems or similar facilities between sessions of the General Assembly, the agency, department or institution must submit a request for such expenditure to the Chief Fiscal Officer of the State. The request must include a MOF Form. The request shall be reviewed for approval by the Chief Fiscal Officer of the State. Project requests $250,000 or less may be reviewed by the Governor. Project requests in excess of $250,000 require the Chief Fiscal Officer to submit the MOF to the Legislative Council for its review. Upon favorable review, the requesting agency, department or institution may proceed with the capital expenditure. (ACA § 19-4-1407, ACA § 22-9-103, ACA § 22-9-104)

MOF Processing

Upon certification of the availability of appropriations, if applicable, and funds, the DFA-OA approves the MOF. A copy of the approved MOF is returned to the originating agency. The agency making the request is responsible for providing its contracting parties with a copy of the MOF. (ACA § 19-4-1403, ACA § 19-4-1407, ACA § 19-4-1409)

If the project's estimated costs or funding sources change, a revised MOF must be submitted Revisions to approved MOF shall be submitted in the same form and manner as that of the original MOF. (ACA § 19-4-1407)

Processing of Payments

Payments to contractors may be made at the conclusion of the contracted work or may be in the form of progress payments. Progress payments are payment for a portion of work completed on public construction contracts in connection with estimates submitted by a prime contractor to the State agency, department or institution. Such estimates shall be reported by measurable units of the contract completion and compared to the actual progress of project completion. Prior to payment, the estimate must be approved by the architect, contractor or his representative.

When a contractor submits a properly prepared estimate of work completed on a construction project and such request for payment conforms to the provisions of the construction contract and laws of the State of Arkansas, the following allowable time for the processing of the estimate is permitted, excluding time required for transmittal to each party, for each of the respective parties involved:

* Architect or other design professional - Five (5) working days

* State agency or institution of higher education exempt from ABA review & approval - Five (5) working days

* Department of Finance and Administration - Five (5) working days

Each of the parties above is to make a notation on the request for payment completed to indicate the date and time of receipt as well as a notation to indicate the date and time of forwarding for further processing to aid in the investigation of delays in processing, if necessary.

In the event that a delay occurs during payment processing, the agency where the delay occurs is responsible for notifying the contractor that payment has been delayed and the related reasons. If the delay is attributable to one of the parties listed above, a penalty of 8% per annum of the amount of the request for payment shall be assessed against the parties responsible for the delay. The Chief Fiscal Officer of the State shall direct such payment rendered to the contractor. (ACA § 19-4-1411)

Retainage on Public Construction Contracts

An invoice for payment must include the total amount of the estimated completed project to date less total previous payments. The contractor is entitled to 90% of the progress payment when due. The remaining 10% is held by the State agency to assure faithful performance of the contract. After the architect and/or engineer certify the construction project is 50% complete, no additional retainage will be withheld. Because the retainage is not applicable to those materials and/or equipment required by the construction contract to be stored on the job site or in a bonded warehouse, the invoice for payment must provide enough detail to identify the portion of the payment attributable to such materials and/or equipment from the balance of the invoice total. (ACA § 22-9-604)

Upon completion of a contract, the originating agency will notify DFA-OA-Funds Group of the conclusion of the contract; no further expenditures or obligations will be incurred and all unexpended or unobligated funds will be blocked Within thirty (30) days after the contract has been substantially completed, the portion of the progress payments withheld by the State agency for retainage shall be paid to the contractor. (ACA § 22-9-601 et seq, ACA § 19-4-1410)

PLEASE NOTE: Only the provisions of this regulation related to payment and retainage are applicable to projects of public institutions of higher education where funds from private sources exceed $5 million dollars and are sufficient to finance 80% of the estimated cost of such project. (ACA § 19-4-1413)

Recording

Assets Under Construction should be recorded on each agency's books of record If the agency is using the State's accounting system, expenditures for Assets Under Construction should be recorded using Work Breakdown Structure (WBS) Elements. All WBS Elements containing construction cost should be settled to an Assets Under Construction Asset Shell when the asset is complete or at the end of each fiscal year if the asset is not complete at the end of the fiscal year. For additional information on the use of WBS Elements see Appendix P 2-19-4 -524.

History. Acts 1973, No. 876, § 12; 1977, No. 813, § 1; 1979, No. 833, §§ 1, 2; 1981, No. 741, § 1; 1981, No. 924, § 1; 1983, No. 628, § 1; 1985, No. 365, §§ 2, 3, 12; A.S.A. 1947, § 13-338; Acts 2001, No. 1453, § 13.

ACA§ 19-4-526 Repealed

History. Acts 1973, No. 876, § 9; A.S.A. 1947, § 13-335

the provisions of §§ 19-4-601, 19-4-602, and 19-4-605 - 19-4-609 shall not apply to these institutions; they shall be governed by the provisions of this section and by procedures established under authority of § 6-61-209.

History. Acts 1973, No. 876, § 11; 1977, No. 486, § 1; A.S.A. 1947, § 13-337; Acts 1995, No. 1296, § 69.

History. Acts 1973, No. 876, § 9; A.S.A. 1947, § 13-335; Acts 2001, No. 1453, § 14.

Rl-19-4-608 Agency Annual Operations Plan

Agencies must submit an Annual Operations Plan in May of each fiscal year to the Department of Finance and Administration-Office of Budget (DFA-OB). (ACA § 19-4-607) An Annual Operations Plan contains an agency's proposed expenditures and anticipated resources for the ensuing fiscal year. The Annual Operations Plan is prepared using the State's budgeting system and upon review by the Department of Finance and Administration Offices of Budget and Accounting, the approved plan will be transferred into the Arkansas Administrative Statewide Information System (AASIS). Forms and instructions are available on the DFA-OB web site at http://www. state, ar. us/dfa/budget/budget index, html.

The S_ALR_87013611 Cost Centers Actual Plan Variance report in AASIS can be used to monitor and compare actual vs planned expenditures. http://aasis. state, ar. us/Reports/reports fifm. htm

If at any time during the fiscal year changes to the Annual Operations Plan result in an increase or decrease in the appropriation and/or funding allocated for expenditure, corresponding adjustments to the Annual Operations Plan must be made in the detail plan in AASIS. (ACA § 19-4-608) These changes may be made by accessing transaction KP06 - Activity Input Planning. Although budget is not checked at this level, proper plan maintenance is required for accurate evaluation of agency expenditure variances. Training courseware is available at the following web site: http://aasis.state,ar.us/Training/Courses/default.htm.

PLEASE NOTE: Agencies that do not have access to AASIS should contact their Budget Analyst in the DFA-OB for assistance.

History. Acts 1973, No. 876, § 13; 1985, No. 365, § 6; A.S.A. 1947, § 13-339.

History. Acts 1973, No. 876, § 13; 1985, No. 365, § 6; A.S.A. 1947, § 13-339.

History. Acts 1973, No. 876, § 13; A.S.A. 1947, § 13-339.

The DFA contacts will work with the closing and/or receiving agency on all transactions/actions to be accomplished. A "check list" of action, indicating date accomplished will be maintained and submitted by each DFA Office assigned to the DFA-OA upon completion of assignment.

The DFA-OA will prepare a final report for the Chief Fiscal Officer of the State and obtain signatures of administrative heads of agency being closed/receiving agency for all legal documents to ensure the interests of the State are protected. See Pl- 19-4-711 for a sample checklist.

R 2-19-4 -711 NEW AGENCY

State agencies newly created by Acts of the State Legislature and signed by the Governor of Arkansas will be created on the books and records of the State of Arkansas, Treasurer of State and Auditor of State by the Department of Finance and Administration-Office of Accounting (DFA-OA).

The Department of Finance and Administration-Office of Accounting-Funds Group (DFA-OA-FG) will review the appropriation which created the agency, determine their sources of funding and grants their authority for spending levels.

The DFA-OA -Funds Group staff will assign the following items within AASIS to conduct and record the agency's financial transactions: business area number, funds center, funds and cost centers.

The DFA-OA-FG staff will also notify the DFA-Office of Budget, DFA-OA-CAFR Section and the AASIS Support Center of the agency's creation.

The DFA-OA will also notify the Treasurer of State and the Auditor of State's office that a new State agency has been created. Details of their fund and appropriation structures will be provided as necessary to each entity.

The DFA-Office of Budget will assign a Budget Analyst to work with the agency in the design and implementation of an operating budget for the current and future fiscal years.

The DFA-OA-CAFR Section will assign a liaison to the newly created agency.

The AASIS Support Center will assign professional security roles to each AASIS user upon request of the Security Liaison. Each user will also be assigned an ESS security role for employee self service functions.

At the direction of the Chief Fiscal Officer of the State the new agency is set up as an online agency commonly referred to as a user agency, a service bureau agency or a reporting agency based upon the agency's resources.

Human resource issues/actions can be found at http://www.state.ar.us/dfa/opm/index.html. The following sample "check lists" for accounting and non-human resource issues are available online:

History. Acts 1975, No. 5, §§ 1, 2; A.S.A. 1947, §§ 13-356, 13-357.

History. Acts 1975, No. 5, § 4; A.S.A. 1947, § 13-359; 2001, No. 1453, § 17.

History. Acts 1975, No. 5, § 7; 1975, No. 265, § 1; 1977, No. 713, § 14; A.S.A. 1947, §§ 13-356.1, 13-362; Acts 1997, No. 540, §39 ; 1997, No. 1000, § 17 ; 1997, No. 1179, § 3 ; Init. Meas. 2000, No. 1,§ 19.

ACA§ 19-4-804 Repealed

Rl-19-4-805Management of Cash Funds

Agency Bank Reconciliations

Arkansas Code 19-6-103 states that "All taxes, licenses, fees, permits, or other income collected by any board, agency, or commission by virtue of the authority of the State of Arkansas which are designated by law to be deposited in a depository other than the State Treasury are classified as "Cash Funds " and are declared to be revenues of the State to be used as required and to be expended only for such purposes and in such manner as determined by law." Arkansas Code 19-4-801(2) defines Cash Funds "as all moneys, negotiable instruments, certificates of indebtedness, stocks and bonds held by or owned by any State Agency which are not on deposit with or in the trust of the State Treasurer."

Cash expenditures must have legislative authorization (appropriation) and are subject to Accounting, Procurement, State Printing and Arkansas Building Authority regulations unless exempt under Arkansas Code 19-4-803, as amended.

All agencies, other than institutions of higher learning, shall request and abide by the recommendations of the State Board of Finance as to the best investment decisions of any idle cash balances. The institutions of higher learning shall have the right to determine the depositories and the nature of investments of any of their Cash Funds which are not currently needed for operating purposes.

All cash activity must be recorded in AASIS using the proper transactions. This includes interest earned on investments. Various sections of the Financial Management Guide contain instructions for most types of transactions that occur in a Cash Fund and should be reviewed for the correct accounting procedure for those transactions.

The AASIS balance at month end must be reconciled to either the check register or the bank statement depending upon whether the agency is a user agency (an agency with direct access to AASIS) or Department of Finance and Administration- Office of Accounting-Service Bureau (DFA-OA-SB) agency (an agency who uses DFA-OA-SB to record transactions in AASIS-they do not have direct access). The following procedures must be followed when reconciling the AASIS balance at month end:

User Agencies

There are two different business processes that determine the method to be used for month-end reconciliations performed by user agencies: those with commercial bank accounts that are held and managed at the agency location and those with local accounts held and managed at local offices at multiple locations.

User Agency (Accounts Held at Agency Location)

If an agency has a commercial bank account(s) that is held at the agency location, transactions must be entered in AASIS on a "real time" basis. This means that transactions should be recorded on a daily basis. At any time, a trial balance pulled from AASIS should equal the balance held at the commercial bank account plus or minus any reconciling items (i.e. outstanding checks, deposits in transit, interest, etc.).

These accounts must be reconciled to the commercial bank account statement on a monthly basis using the "Cash in Bank Reconciliation" Form, Pl- 19-4-805. Instructions for the use of this form are provided with the form.

PLEASE NOTE: A journal entry to correct any reconciling item, caused solely by a difference in when the transaction is recorded in two different periods by the perspective parties, must be made in the month following the event that caused the reconciling item to be created.

After the reconciliation is completed, the agency must submit a copy of the first page of the bank statement and the "Cash in Bank Reconciliation" Form to DFA-OA-Fund Reconciliation. These shall be received by DFA-OA-Fund Reconciliation by the 15' of each month.

User Agency (Accounts Held at Local Offices at Multiple Locations)

If an agency has commercial bank accounts held at local offices at multiple locations, with approval from the DFA-OA-Fund Reconciliation, the agency can make an entry at month end for the total of transactions that occurred during that month. These entries must be made in the month that the transactions) occurred.

These accounts must be reconciled to the commercial bank account statement on a monthly basis using the "Cash in Bank Reconciliation" Form. Instructions for the use of this form are provided with the form.

PLEASE NOTE: A journal entry to correct any reconciling item, caused solely by a difference in when the transaction is recorded in two different periods by the perspective parties, must be made in the month following the event that caused the reconciling item to be created.

After the reconciliation is completed, the agency must submit a copy of the first page of the bank statement and the "Cash in Bank Reconciliation" Form to DFA-OA-Fund Reconciliation. These shall be received by DFA-OA-Fund Reconciliation by the 15th day after the cutoff date of the statement period.

DFA-OA-SB Agencies

If an agency uses DFA-OA-SB to record transactions in AASIS, the agency must send in transactions on a "real time" basis to be entered This includes both incoming and outgoing cash transactions for both appropriated and non-appropriated accounts.

The agency must reconcile its check register to the commercial bank account statement at month end and submit a copy of the reconciliation and the commercial bank account statement to DFA-OA-SB by the 15' of the following month. DFA-OA-SB will reconcile the agency's account balance with AASIS utilizing the reconciliation.

PLEASE NOTE: A journal entry to correct any reconciling item, caused solely by a difference in when the transaction is recorded in two different periods by the perspective parties, must be made in the month following the event that caused the reconciling item to be created. ALSO NOTE: This section shall not apply to institutions of higher education which maintain full accounting records separate and apart from AASIS. Receipts and disbursements of such agencies shall be submitted in summarized form for general review and reference.

R 2-19-4 -805Agency Investments)

If an agency has investments, interest earned or any other transactions occurring must be recorded in AASIS on a monthly basis. When a monthly statement is received, the statement must be submitted to DFA-OA-Fund Reconciliation by the 15' of each month. If the investment statements are received quarterly, semi-annually or annually, those statements must also be submitted by the 15' of the following month.

The agency must reconcile the investment statement balance to AASIS balance to verify that all transactions have been recorded If the agency determines that there are reconciling items, a "Cash in Bank Reconciliation " Form must be completed and submitted with copies of the investment statements to DFA-OA-Fund Reconciliation.

PLEASE NOTE: This section shall not apply to institutions of higher education which maintain full accounting records separate and apart from AASIS.

History. Acts 1975, No. 5, § 10; A.S.A. 1947, § 13-365; Acts 2003, No. 656, § 1.

Rl- 19-4-806 Imprest Fund Accounts

Authority

"Imprest" fund accounts may be established and maintained by State government agencies,boards, commissions and institutions. Authority to establish such accounts is authorized in ACA 19-4-806, ACA 19-4-1802 and 19-4-904(d). Record keeping and documentation requirements of such accounts are prescribed by ACA 19-4-1108 and ACA 19-4-815. The authority to establish imprest accounts is vested in the Chief Fiscal Officer of the State. All requests to establish, increase or decrease the authorization of such accounts must be submitted on an "Imprest Fund Request" Form, Pl- 19-4-806.

Imprest fund accounts authorized for agencies, boards, commissions and institutions include:

If an agency has an internal audit function, each imprest fund account must be audited no less than each biennium If the agency does not have an internal audit function, then each imprest fund account must be reviewed by management personnel on an annual basis. The review must include, at a minimum, tying the reconciliation balance to the amount reflected on the AASIS trial balance or the agency's original books of record and verifying that reconciling items are cleared within a two month period.

History. Acts 1991, No. 21, § 1 ; 2001, No. 1453, § 21.

History. Acts 1991, No. 21, § 1 ; 1997, No. 541, § 1 ; 2001, No. 1453, § 22.

History. Acts 1973, No. 876, § 16; A.S.A. 1947, § 13-342; Acts 2001, No. 1453, § 24.

ACA 19-4-902 places the authority and responsibility of authorizing and approving travel expenses with the board or commission in charge or to the administrative head of the agency, department or institution.

Rl-19-4-902 Responsibility and Accountability for Travel Authorizations and Disbursement

It shall be the responsibility of the administrative head of each agency, board, commission or institution to keep on file in the place of business of the agency, subject to audit, originals of all supporting documents and required receipts for expenses incurred in connection with the travel authorizations and disbursements for persons traveling on behalf of the governmental entity. The documents on file may be in the form prescribed under the provisions of ACA 19-4-815(b) if approved by the Division of Legislative Audit.

In large governmental units, it may not be feasible for the administrative head of the agency, department, or institution to act as travel administrator. In this case, he or she may designate other responsible officials to act as his or her agent(s) and to be referred to as travel administrator. The approval of these designated agents will be considered to reflect the approval of the board, commission or head of the agency, department or institution. The

designation of agents as travel administrators shall be made in writing and kept on file in the agency/institution.

History. Acts 1973, No. 876, § 16; 1974 (Ex. Sess.), No. 16, § 1; 1977, No. 462, § 1; 1979, No. 890, § 1; 1985, No. 365, § 7; A.S.A. 1947, § 13-342; Acts 1987, No. 81, § 1 ; 1991, No. 1222, §§ 1,2 ; 1997, No. 795, § 1.

Rl- 19-4-903 Standard Reimbursements for State Employees and Officials

Officials and employees may be paid travel expenses when required to travel away from their "official station" on State business. "Official station" is the geographic location or "address" where the employee normally reports for duty and/or spends the majority of his/her productive time and must be designated as such in writing by the employer. An employee's "residence" shall be the city or town in which the individual has an abode or dwelling place. An employee

whose resident city is a location other than his/her "official station" shall not be allowed mileage to travel between them except as provided for under Special Authorizations.

All employee travel reimbursement claims must be completed for payment to the individual traveler. One employee may not include on his travel payment request the expenses of another employee.

No expenses for meals or lodging will be allowed within the city or town of the employee's " official station" unless 'special authorizations," under ACA 19-4-903, are authorized by the agency head or travel administrator.

State employees loaned from one State agency to another may be reimbursed for travel expenses by the agency benefiting from the travel.

Limits for Meals and Lodging

Please note that travel reimbursement is NOT a per diem and is to be claimed for A CTUAL EXPENSES FOR MEALS AND LODGING NOT TO EXCEED THE MAXIMUM ALLOWABLE RA TES AS LISTED IN THE FEDERAL TRA VEL DIRECTORY, http://www.gsa.gov/Portal/gsa/ep/contentView.do?programId=9704&channelId=-15943&ooid=16365&contentId=17943&vageTvveId=8203&contentTvve=GSA BASIC&vrogr amPage=%2Fep%2Fprogram%2FgsaBasic.isp&P=MTT, PLUS APPLICABLE SALES TAX. (Sales tax rate must be stated on Travel Reimbursement (TR-1) forms or equivalent in instances where the sales tax causes the maximum per diem rate(s) to be exceeded) PLEASE NOTE: Special allowances in certain cities that exceed the daily "normal" or 'State-wide" limits may be claimed in other locales of the County where the listed City is located In other words, the special rates for reimbursement apply "County-wide."

Meals

Reimbursement for meals is allowed only in connection with overnight travel whether in State or out of State unless 'special authorizations," under ACA 19-4-903, are authorized by the agency head or travel administrator. The maximum full day meal allowance will be the Federal-per-diem rate depending on the destination location. For partial days, meals charged must be in proportion to the time in travel status and may not exceed the maximum for applicable meal(s) stated in the Federal Travel Directory for the location(s). Although receipts for meals are not required by this rule, the administrative heads of agencies, departments and institutions may require them. See the Federal-per-Diem site @ http://www.gsa.gov/Portal/gsa/ep/contentView. do?contentId=17943&contentTvpe=GSA BASIC.

PLEASE NOTE: The "IE" allowances as stated in the Federal Travel Directory are for incidentals. Those are not part of the daily allowance for travelers in the State of Arkansas.

Incidentals are specifically defined and provided for and must be listed separately and explained on the Travel Reimbursement Request Form (TR-1).

Partial days' meal allowances

For partial days in travel status where no lodging cost is incurred, the traveler is allowed to claim up to 75% of the daily allowance for meals. This occurs only when the traveler spent the night and had meals on the day of departure or return. The daily travel allowance at the destination location shall be used in the calculation of the limit for partial days. In accordance with the State travel regulations, actual expenses only are allowed, and the charges must be in proportion to the time in travel status not to exceed that allowed by the Federal Travel Regulations. Lodging

Reimbursement for lodging is limited to the single room rate. If a room is occupied by more than one person, the single room rate must be noted on the receipt. The maximum daily allowance will be limited to the Federal-per-Diem rate depending on the location for both in State and out of State travel. Lodging costs exceeding the rates listed in the Federal Travel Directory may not be paid without a letter of authorization by the administrative head of the agency and must include a justification as to why it was in the best interest of the State to exceed the standard reimbursement rate. Such letter of authorization must be filed in the agency files with the travel payment document for the trip for each occurrence of such overage. Except for institutions of higher education exempt under ACA 19-4-903(a) (2), a report of these special authorizations in a format prescribed by the Department of Finance and Administration may be required See the Federal-per-Diem site @ http://www.gsa.gov/Portal/gsa/ep/contentView. do?contentId=l 7943&contentTvpe=GSA BASIC

Transportation

Travel may be achieved by plane, train, bus, taxi, private vehicle/aircraft, rented or State-owned automobile whichever method serves the requirements of the State most economically and advantageously.

Reimbursement for out-of-state travel will be the lesser of coach class airfare or the established rate of private car mileage based on map mileage when driven.

The minimum miles traveled per day while in travel status in reaching or returning from a destination to be eligible to collect a night's lodging must be 400 miles. The requirement to travel a minimum of 400 miles daily has no effect on in-state travel nor does it affect travel outside the state where the destination is less than 400 miles from the employee's "official station". The requirement applies to trips where the destination is 400 miles or more from the "official station". It addresses the period of time the employee(s) spends "en-route" or in "travel status " reaching the destination. Travelers by commercial air shall utilize coach accommodations, except in those instances where first class accommodations would be more economical for the State. Instances where first class fare is utilized will require detailed justification and must be approved by the travel administrator.

Reimbursement for Use of Privately Owned Vehicle

Private vehicle mileage shall be reimbursed and computed, using map mileage, between the travel site destination and the employee's official station or residence, if leaving directly from the residence, whichever is less. Mileage reimbursement for official use of a private motor vehicle may be claimed, listed separately on the TR-1, within the vicinity of any locale.

When privately owned motor vehicles are used for travel on official business, the owner may claim reimbursement at the rate per mile established by the Chief Fiscal Officer of the State in effect during the time the travel occurred. See P 2-19-4 -903. The shortest major highway route (electronic map mileage) will determine the maximum mileage allowed. The source for map mileage used by the agency personnel shall be designated by the administrative head of the agency and shall be used exclusively on all mileage claims.

The State will reimburse for official miles driven only. The State assumes no responsibility for any maintenance, insurance, operational costs, accidents or fines incurred by the owner of the vehicle while on official business for the State.

When a privately owned aircraft is used for travel on State business, the rate of reimbursement will be the rate as established by the Chief Fiscal Officer of the State, under the provisions of ACA 19-4-903, during the time the travel occurred. See P 2-19-4 -903a.

Use of Travel Agencies

Travel agencies may be used to obtain transportation, lodging and related travel expenses.

Miscellaneous Expenses

Miscellaneous expenses, whether or not directly connected with travel (such as postage, small emergency supplies, etc.), may be allowed with adequate justification when necessary to the performance of official duties. Receipts are required

Items Not Reimbursable

Except for those provisions enumerated in ACA 19-4-904, expenses for personal entertainment, tips, flowers, valet service, laundry, alcoholic beverages, cleaning, movies or other similar services are not reimbursable. Communication expenses shall be allowed only when necessary for the transaction of official business and properly receipted

Expenses for rental of space, decorations, entertainment or other arrangements in connection with banquets held solely for the benefit of employees are not reimbursable.

Petty cash funds cannot be used to make travel advances or reimbursements. If the agency has a petty cash fund, incidental expenses incurred by the traveler such as postage and procurement of minor supplies essential to the performance of State business may be reimbursed from petty cash funds upon presentation of proper receipts. If the agency has no petty cash funds, such items may be reimbursed using the TR-1 form with proper and sufficient documentation.

Exempt Persons and Agencies

There exists certain provisions in State law for the payment of some travel related expenditures for State supported colleges and universities and some other specific institutions that are responsible for the care and/or group activities of students, inmates and wards of the State. The administrative head of agencies and institutions to which these provisions apply is to be cognizant of and shall properly adhere to such provision of special legislation.

R 2-19-4 -903 More Restrictive Policies

Under authority of ACA 19-4-903, the administrative heads of the various departments, boards, commissions and institutions of the State of Arkansas may promulgate and enforce regulations governing travel that are more restrictive than those promulgated by the Chief Fiscal Officer of the State.

R 3-19-4 -903 Taxable Use of State Vehicle

Personal use of a State vehicle is considered a taxable benefit. Refer to IRS Publication 15b for conditions and methods. The responsible administrative head shall ensure that the Payroll Unit of each agency, department and institution performs proper reporting for taxable use of State-owned vehicles.

State employees and officials who drive State-owned motor vehicles for personal use, whether limited to commuting from and to their residence, are subject to receiving an amount on their wage statement W2 form for the value of the uses of the vehicle. Various conditions and factors determine the method and amount of such value. Internal Revenue Service (IRS) Publication 15b http://www.irs.gov/pub/irs-pdf/pl5b.pdf5sets out the valuation rules. When computing the value of the personal use of a State vehicle to determine the benefit amount to be reported on the annual Statement of Wages, any reimbursements made under the provisions ofACA 19-4-903(b) (2) (A) may be subtracted from the total taxable benefit for vehicle usage.

See IRS Publication 15-B "Employer's Tax Guide to Fringe Benefits" for information related to the taxable use of State-owned vehicles by State employees. http://www.irs.gov/pub/irs-pdf/pl5b.pdf

R 4-19-4 -903 Reimbursable Use of State Vehicle

Reimbursement for the Use of State-Owned or Leased Motor Vehicles for Transportation To and/or From an Employee's Residence ACA 19-4-903(b) (2) (A) states that "any employee of the State of Arkansas, who utilizes, but whose job does not require the employee to utilize, a State-owned motor vehicle for transportation to or from his permanent residence from or to his official station on a daily basis shall reimburse the fund from which the operating expenses of the motor vehicle are paid at the rate of $0.15 cents per mile for each mile or portion thereof in excess often (10) miles each way" provided that all State-owned or leased vehicles shall be for official business use only.

The administrative head of each State agency, board, commission, department and institution shall be responsible for determining which of their employees utilize a State-owned or leased vehicle for transportation to and/or from their permanent residence to their official place of duty that exceed the distance often (10) miles each way by the shortest route. A permanent record of such employees shall be established in each agency containing the following:

The cost of meals, lodging, and mileage of State employees who are designated by a supervisor or agency director to attend official or special board meetings or other functions recognized as being in the performance of their official duties may be paid either as reimbursement to the employee or on direct billing, in the case of meals and lodging, subject to approval of the superior.

PLEASE NOTE: Go to

htty.//170.94.58.9/NXT/gatewav. dll?f=templates&fn=default. htm&vid=blr:code to view

complete code section and list of agencies and number of vehicles authorized.

History. Acts 1983, No. 490, §§ 1, 2; 1985, No. 649, § 44; 1985, No. 888, §§ 22, 23; A.S.A.

1947, §§ 13-342.1, 13-342.3; Acts 1987, No. 921, § 19 ; 1989, No. 790, § 1; 1989 (1st Ex. Sess.), No. 252, § 9 ; 1993, No. 447, § 9 ; 1997, No. 540, § 40 ; 1997, No. 948, § 3 ; 1999, No. 646, § 56 ; 1999, No. 1164, § 156 ; 1999, No. 1398, § 28 ; 2001, No. 739, §§ 2, 3; 2001 No. 1669, § 29; No. 1800, § 2.

Claims must be filed quarterly if the amount of the claim is $750.00 or more. If the amount of the claim is less than $750.00, the amount may be carried forward and filed in a succeeding quarter when the cumulative amount of excise taxes to be claimed exceeds $750.00. If you cannot file a claim for at least $750.00 after the fourth calendar quarter, the form must be filed as an "annual" claim after the end of the year. All claims must be filed no later than three (3) years following the close of the taxable year in which taxes were paid

The claim information must be submitted to the Office of State Procurement to file as only one Form 8849 per tax identification number may be filed. Once Form 8849 is filed with the IRS, they will refund the amount of excise taxes paid to the agency. The receipt is to be treated as a "refund to expenditure" because the Federal government as the taxing authority is both the ultimate receiver of the tax and ultimate refunding agent. The receipt, when properly recorded, will restore the appropriation in the amount of such receipt.

DIESEL

The refund provision for sales ofundyed dieselfuel to a State or local government for the State or local government's exclusive use can be found under Treas. Regs. §48.6427-9. A registered ultimate vendor must obtain a properly executed exemption certificate from the State or local government. See Pl- 19-4-1006, "Sample Exemption Certificate."

Note that, unlike gasoline refunds, there is no provision for a State or local government to receive refund or credit of dieselfuel tax paid to its supplier. The only way to avoid tax is through a tax excluded purchase from a registered ultimate vendor.

As an alternative to the purchase ofundyed dieselfuel, the State may purchase tax-free dyed diesel fuel for its exclusive use. Submission of an exemption certificate to the State's supplier is not required for the purchase of dyed dieselfuel. An executed certificate may be requested from DFA-OA. This certificate will suffice for all State agencies utilizing the State's primary TIN. Those offices and institutions not using the State's TIN may complete the blank Certification Statement shown as addendum Pl- 19-4-100 6.

Rl-19-4-100 7State Travel Card Use

Procedures for Authority to Use Credit Cards

Approval for use of all credit cards rests with the Chief Fiscal Officer of the State. The State of Arkansas' "Arkansas Procurement Card," "Arkansas-Sponsored Business Travel Card" (SBTC), and oil company cards in force on December 31, 2002, are approved No other retail credit cards issued in the name of State agencies and institutions may be used after the adoption of these travel regulations and must be cancelled as soon as practical and billings are paid. Directors of State agencies, boards, and commissions and presidents and chancellors of institutions of higher education may request from the Chief Fiscal Officer of the State, in writing, authority to establish an agency commercial account. Requests shall state:

* Purpose, intended use of card

* Number and type of cards

* Detail method of controls

* Justification

The Office of Accounting and the Office of State Procurement shall review requests to establish agency credit cards and provide the Chief Fiscal Officer of the State their recommendation.

The Chief Fiscal Officer of the State shall not be liable for any unauthorized expenditure through the use of credit cards.

The administrative head of the board, commission, agency, department, or institution shall be responsible for ensuring that only authorized charges are paid as the result of the use of any authorized credit card and the collection for any unauthorized expenditures that may occur. The administrative head of the board, commission, agency, department or institution may appoint a travel administrator to administer travel functions within their activities. However, the responsibility for taking corrective action for any abuses discovered rests with the administrative head of the board, commission, agency, department or institution. Individuals on State business shall use the Arkansas Business Travel Card-Individual Account (BTA) or provide themselves with sufficient funds or personal credit cards for necessary travel expenses. Nothing in this regulation removes the responsibility of the administrative head of an agency from being required to report to the Chief Fiscal Officer of the State and the Division of Legislative Audit incidences of fraud and/or theft as required by law.

PLEASE NOTE: For more specific information on the Travel Card Program refer to the State Procurement web site @ http://www.accessarkansas.org/dfa/purchasing/index. html. An exception to provision(s) established in this rule shall only be granted by the Chief Fiscal Officer of the State based on written request and justification from the administrative head of an agency or institution. All requests for exceptions should be addressed to the State Procurement Director, who will make a recommendation to the Chief Fiscal Officer of the State regarding such request(s).

History. Acts 1973, No. 876, § 15; A.S.A. 1947, § 13-341; Acts 1997, No. 541, § 2 ; 2001, No. 1453, § 33.

Rl-19-4-1108 Public Records

The law defines public records as writings, recorded sounds, films, tapes, electronic or computer-based information or data compilations in any medium required by law to be kept or otherwise kept and which constitute a record of the performance or lack of performance of official functions which are or should be carried out by a public official or employee, a governmental agency or any other agency wholly or partially supported by public funds or expending public funds.

All public records shall be open to inspection and copying by any citizen of the State of Arkansas during the regular business hours of the custodian of the records, except as otherwise specifically provided by law.

Refer to Arkansas Code AC A 25-19-105 for exceptions, charges for providing copies of records and required response time to requests for copies andACA 25-19-109 for special requests for electronic information.

R 2-19-4 -1108 Records Retention

All records that are public property are required to be maintained by the agencies that generate the documents. The type of business record in question and the business process it supports determines the length of retention. Generally, all records should be maintained a minimum of three fiscal years. All records and supporting documentation must be maintained until they have been audited and may not be destroyed until permission has been granted by the Division of Legislative Audit. Other records such as records for grants are maintained according to State or Federal laws.

Public records can only be destroyed after permission is granted by the Division of Legislative Audit.

Storage of records in electronic form is permissible in some cases. Refer to Arkansas Law ACA 19-4-815, 19-4-1108, 25-32-112, 13-4-203, 25-32-117, 25-32-118.

Effective January 1, 2006, the Executive Chief Information Officer shall promulgate rules and guidelines governing the retention and management of public records and issue periodic updates as necessary. Each State agency shall comply with these rules and guidelines by the earlier of July 1, 2007, or when the line item appropriation is established to comply with this requirement.

Contact for Information: Division of Legislative Audit, Arkansas History Commission, the Executive Chief Information Officer or your Assistant Attorney General.

History. Acts 1973, No. 876, § 14; A.S.A. 1947, § 13-340.

History. Acts 1973, No. 876, § 14; A.S.A. 1947, § 13-340; Acts 1993, No. 1073, § 17.

History. Acts 1973, No. 876, § 14; A.S.A. 1947, § 13-340.

History. Acts 1973, No. 876, § 14; A.S.A. 1947, § 13-340; Acts 2001, No. 1453, § 37.

ACA§ 19-4-1208 Repealed

History. Acts 1983, No. 781, § 3; A.S.A. 1947, § 13-376.

History. Acts 1983, No. 781, § 2; A.S.A. 1947, § 13-375; Acts 2001, No. 1453, § 40.

History. Acts 1973, No. 876, § 22; A.S.A. 1947, § 13-348.

History. Acts 1973, No. 876, § 22; 1975, No. 985, § 1; A.S.A. 1947, § 13-348.

History. Acts 1973, No. 876, § 22; A.S.A. 1947, § 13-348; Acts 2001, No. 1453, § 41.

History. Acts 1973, No. 876, § 22; A.S.A. 1947, § 13-348.

History. Acts 1973, No. 876, § 22; 1975, No. 985, § 1; A.S.A. 1947, § 13-348.

History. Acts 1973, No. 876, § 22; 1977, No. 641, § 1; A.S.A. 1947, § 13-348.

History. Acts 1997, No. 961, § 1.

History. Acts 1973, No. 876, § 26; A.S.A. 1947, § 13-352; Acts 2001, No. 1453, § 42.

History. Acts 1973, No. 876, § 26; A.S.A. 1947, § 13-352.

Rl- 19-4-1503 Property Management Responsibility

It is the responsibility of the executive head of every State agency, board or commission regardless of whether they participate in AASIS to maintain a record of all property of the agency belonging to the State of Arkansas.

All new acquisitions shall be promptly added to the detail of capital assets and all items transferred, lost, stolen, destroyed or sold must be promptly removed from the detail of capital assets. General information and guidance on capital assets is located in the Capital Asset Guidelines, Pl- 19-4-1503 (Capital Assets Guidelines).

Also included in the appendix are asset category definitions, capitalization/tracking thresholds, depreciation methodologies and examples of expenditures for each class of assets. All user agencies and service bureau agencies shall record their capital assets on AASIS based on established tracking and capitalization thresholds located in the Capital Asset Guidelines. Detailed instructions on adding or removing capital assets are located under Asset Management on the AASIS web site at http://www.aasis.state.ar.us/Training/CourseWare/CWareAM. htm. Reporting agencies shall record their capital assets on their books of record based on established tracking and capitalization thresholds located in the Capital Asset Guidelines.

Capital Assets Defined

Capital assets include: land, land improvements, buildings, building improvements, construction in progress, equipment, infrastructure, easements, works of art, historical treasures and any other tangible or intangible assets used in operations with an initial useful life in excess of one year.

PLEASE NOTE: Capital assets may include leased assets. For guidance on the potential capitalization of leased assets, see Rl- 19-11-238 for guidelines on leases of tangible personal property (equipment) and Rl- 22-2-114 for guidelines on leases of office space, buildings, structures, parking lots and grounds.

Capital assets purchased should be recorded and reported at their historical costs, which include the vendor's invoice, sales tax, initial installation cost, modification cost, attachments, accessories or apparatus necessary to make the asset usable and render it in service. Historical costs also include ancillary charges such as freight and transportation charges, site preparation costs and professional fees. Capital assets donated should be recorded at fair market value at the time of donation.

PLEASE NOTE: The book value of assets shall never be increased to reflect appraised value, insurance value, etc.

Low Value Items

Although capital assets costing less than the capitalization/tracking threshold as detailed in the Capital Asset Guidelines Appendix are not considered capital assets for financial statement reporting purposes, the executive head of each State institution, department, board, commission or other State agency is not in any way relieved of the duty to account for all State property under his/her control regardless of the dollar value. Items costing in excess of $500 particularly susceptible to pilferage such as tools, computers, electronic equipment, etc., shall continue to be maintained on capital asset records as Low Value in order to prevent losses and to maintain proper accountability.

Items costing less than $500 individually that are part of or used with a group or set such as kitchen utensils, groups of chairs, hospital linens should be capitalized in groups or sets at total cost as Low Value Collective items. A listing of the contents of the aforementioned sets or groups should be maintained by the agency for internal control and audit purposes.

Donated Items

A donation is defined as a voluntary non-exchange transaction entered into willingly by two or more parties. Both parties may be governments, or one party may be a non-governmental entity, including an individual. Equipment donated to State agencies shall become property of the State and shall be accounted for and disposed of according to the procedures set forth for property of the State.

Donors may set restrictions on the use and disposition of property donated. In such instances the donor's guidelines shall be followed. Adequate records must be maintained to demonstrate the guidelines were followed.

All donated equipment shall be valued and placed on the agency's capital asset records at the fair market value of the donated property at the time the donation is received. Donated items determined to have no value for its manufactured purpose shall be treated as consumable material, (i.e. donated items used for parts or training aids).

PLEASE NOTE: A voluntary contribution of resources between State agencies is not a donation. Such transaction should be accounted for as a transfer.

Federal Surplus Property Donees

The Federal Surplus Property (FSP) is administered by the Arkansas Department of Workforce Education. Generally, property received from FSP must be put into use within twelve months from the date acquired and used for eighteen months from the date the property is put into service. After the eighteen months, ownership of the property passes on to the entity. The property must be entered on the entity's inventory and primarily used in Arkansas. At the time the asset is received, if the asset meets the capitalization requirements of the State, the fair market value of the asset should be debited and deferred revenue should be credited in the fund financial statements of an enterprise fund and in the government-wide financial statements for a governmental fund. At the end of the eighteen month period, the revenue should be recognized. Consumable items would be recorded like other consumable donations.

Please note: Items that are to be held in trust for the federal government (ownership will never be transferred to the State) are not handled in the above manner. They should be handled as described in the following subsection, "Loaned Assets".

Confiscated Assets

Although not voluntary, confiscated assets awarded to an agency by judicial decision are accounted for in the same manner as donations.

Loaned Assets

Loaned assets are assets that are possessed but not owned by an agency. The agency may have fiduciary or administrative responsibility for such assets, but the agency only has temporary control of the asset and does not hold the asset's title or other ownership responsibility. These assets include, but are not limited to, art collections owned by families, estates or others, as well as equipment on loan from the federal government. Such assets shall not be included in the agency's capital asset records.

Other adequate supplemental records must be maintained by the agency on assets loaned (not donated) to the agency. The records must include an acquisition date, an adequate description of the property, location, if feasible, serial number, if applicable, the entity that owns the asset. Such information may be required to be reported to the Department of Finance and Administration-Office of Accounting-Comprehensive Annual Financial Report (CAFR) Section-(DFA-OA-CAFR Section) in the Year-End Disclosure Package.

The assets shall be subject to all other property procedures of the agency including, but not limited to, inventory and lost/stolen procedures.

State Owned Motor Vehicles

Motor vehicles shall be recorded and maintained in the capital asset records of the State Financial Management System. Refer to Rl- 19-4-903 and the Department of Finance and Administration-Office of Information Services web site http://www.state,ar.us/dfa/info_svcs/index.html for additional information on motor vehicles.

Capital Asset Additions

All additions are to be promptly added to the agency's detail of assets in the State Financial Management System. In the event that assets, which should have been added, are not included on AASIS prior to the end of the fiscal year, the agency shall remit a complete "Create Asset Master Record" Form located at http://www.arkansas.sov/dfa/aasis/aasis_forms,html to the DFA-OA-CAFR Section for each capital asset to be added to AASIS. The DFA-OA-CAFR Section will complete the necessary transactions to add the asset to the agency's capital asset records.

Depreciation

Generally Accepted Accounting Principles require capital assets to be reported and depreciated over their estimated useful life in the government-wide financial statements. Capital assets that are inexhaustible are not depreciated

The purpose of depreciation is to spread the cost of the asset over the asset's economic life. The straight-line depreciation method will be used to calculate depreciation. Depreciation data will be calculated and stored by AASIS for each eligible asset of user agencies and service bureau agencies. Reporting agencies shall have a GASB 34 compliant fixed asset system to record fixed assets and calculate depreciation data. Accumulated depreciation shall be summarized and posted to the accounting general ledger of the State Financial Management System.

Each State agency, board or commission shall utilize the estimated useful lives outlined in the useful life appendix P 2-19-4 -1503. Additionally, each agency shall annually evaluate the estimated useful lives assigned to their assets to ensure depreciation is spreading the cost of the asset over the asset's economic life. If the current estimated useful life varies more than one year from the estimated useful life assigned to the asset, the agency shall request approval from DFA-OA to change the estimated useful life. Upon approval the estimated useful life of the asset will be changed, and the related accumulated depreciation and depreciation expense will be adjusted on a prospective basis.

Equipment Transfers - Inter-Agency

The transfer of equipment accountability from one agency to another agency shall be approved by the DFA Director prior to the transfer. (ACA 19-4-1503)

If the transfer involves the transfer of funds, the agency wishing to transfer the asset shall submit a request to sell the asset to the Department of Finance and Administration-Office of State Procurement-Marketing and Redistribution (DFA-OSP-M & R), and the agency wishing to receive the asset shall submit a letter of acceptance to DFA-OSP-M & R. Upon receipt of sale approval (by the selling agency) and invoice (by the receiving agency), the agency receiving the asset may transfer the asset value to their capital asset records.

If the transfer does not include the transfer of funds, a transfer request including an acknowledgement from the receiving agency, board, commission or institution shall be submitted to the Department of Finance and Administration-Office of Accounting-Reconciliation Section as the DFA Director's designee for approval. Upon receipt of an approved transfer request, the agency receiving the asset may transfer the asset value to their capital asset records and, if a reporting agency, the agency transferring the asset may remove the asset from their capital asset records.

Removal of Equipment

Upon determination by the owning agency that property is no longer usable in its original State or no longer needed, Department of Finance and Administration-Office of State Procurement-Marketing and Redistribution Section (DFA-OSP-M & R) should be contacted for proper disposition (disposal, cannibalization or sale). See additional instructions in Rl- 19-11-243 Marketing and Redistribution.

Assets may be impaired but continue to be in service. Any capital asset that has a permanent reduction in service utility should be adjusted accordingly. If an impairment (physical damage, technological developments that reduce the use of an asset, changes in environmental factors that reduce production or abandonment of a project) occurs, the agency should certify in writing to DFA-OA-CAFR Section the date the impairment occurred, the percentage or dollar amount of the impairment and what caused the asset to be impaired. The DFA-OA-CAFR Section will assist the agency in making the journal entries necessary to properly account for the impairment.

Lost/Stolen Personal Property

When an agency is unable to locate personal property contained on its capital asset records, the following possibilities must be considered:

When property on record cannot be located, the executive head of the agency should immediately appoint an individual with supervisory or managerial responsibility to investigate the case and present the facts. A memorandum from the executive head of the agency should be written to the appointed individual notifying the individual of his/her investigative duties. The appointed individual should proceed in the following manner:

History. Acts 1973, No. 876, § 23; 1975, No. 881, § 1; 1981, No. 251, § 1; 1983, No. 164, § 1; A.S.A. 1947, § 13-349; Acts 1987, No. 18, § 1 ; 1987, No. 646, § 3 ; 1989, No. 506, § 1; 1995, No. 1122, § 1 ; 1997, No. 747, § 1 ; 2001, No. 166, § 1; 2003, No. 1795, § 1.

Rl-19-4-1602State Insurance Contribution Payments

Payments by agencies and institutions participating in benefits offered by DFA-Employee Benefits Division (DFA-EBD) shall be made payable to the DFA-EBD vendor set up for voluntary products for State insurance contribution payments (currently vendor number 9990386 in AASIS). Invoices entered into AASIS with a payment method of "A " will be directly deposited into the State Employee Benefits Trust Fund Account by Automatic Clearing House transaction. Invoices with a payment method of "W" will produce a warrant, which should be delivered by hand or mailed to DFA-EBD. The payment will be processed and manually deposited in the State Employee Benefits Trust Fund Account. Payments not received by DFA-EBD by the due date will be subject to penalties and benefit termination.

Supportive Papers for State Contribution Payments

No supportive documents are normally required to be submitted with the State contribution payments; however, agencies that are paying a different amount for added extra help positions than the amount billed should submit a copy of the billing along with the changes/corrections to DFA-EBD. Any permanent budgeted position changes/corrections should be reported to the DFA-Office of Budget for future billings. It remains the agencies' responsibility to retain all appropriate supporting documentation in their files for audit purposes.

Agencies participating in the DFA-Employee Benefits Division health and life insurance plans are required to enroll and maintain records for eligible employees. Employee benefit master

data shall be maintained as required by Employee Benefits Division for the purposes of eligibility and employer matching contributions.

R 2-19-4 -1602Retirement Contributions

Agencies participating in the Arkansas Public Employees Retirement System (APERS) are required to monitor regular and extra help hours for all positions to comply with employer retirement matching contribution requirements and balance Arkansas Public Employee Retirement monthly reports. Agencies are required to submit employee contributions and employer matching payments within 10 calendar days after each payroll processing date. Agencies shall receive pre-printed remittance forms from APERS and will be provided additional forms as requested Generic remittance forms may be found at http://www.apers.ors/pdf/form_remittance.pdf for emergency use. Complete the agency name, payroll cycle and agency number when using these generic forms. Reporting instructions are available at http://www.apers.org/emploverassistancep1.html.

R 3-19-4 -1602Deferred Compensation Plans

Authority

Arkansas Annotated Code 21-5-504 states:

Purpose

The purpose of the Arkansas Diamond Deferred Compensation Plan ("Plan"), formerly the State of Arkansas Deferred Compensation Plan, is to provide employees and independent contractors of the State of Arkansas and its political subdivisions with a convenient way to save on a regular long-term voluntary basis to provide supplemental income for their retirement. The Plan is intended to satisfy the requirements for an "eligible deferred compensation plan" under Section 457 of the Internal Revenue Code of 1986, as amended, established and maintained by and for the State of Arkansas, its political subdivisions and any agency or instrumentality of the State of Arkansas or its political subdivisions. All amounts of compensation deferred under the Plan and all income attributable thereto shall be held for the exclusive benefit of participants and their beneficiaries and alternate payees.

In order to make deferral contributions to the Plan, an employee or independent contractor must enter into a deferral agreement, which shall become effective as soon as administratively feasible after the deferral agreement is entered into by the employee or independent contractor.

The operation and administration of the Plan shall be the responsibility of the Executive Director, Employee Benefits Division, Department of Finance and Administration of the State of Arkansas, or the person or persons designated by the Executive Director to act on his or her behalf.

The Executive Director shall, in his or her sole and complete discretion, determine both the financial organizations, which provide investment funds to the Plan, and each individual investment fund offered as an investment option under the Plan. Investment funds may include annuity contracts, fixed or variable life insurance contracts, mutual funds, pooled investment funds or such other investment vehicles that comply with Arkansas and federal laws and which permit the deferral of compensation for income tax purposes when held in a custodial account for the Plan.

TERM DEFINITIONS

Employee - Any employee who is employed by an Employer and is characterized as a common law employee under Arkansas law.

Employer - The State and any Participating Employer.

Independent Contractor - An individual who performs services for an Employer as an independent contractor.

Participant - An individual who is or who has previously deferred compensation under the Plan pursuant to a deferral agreement, and who has not received a distribution of all of his or her accounts under the Plan.

Participating Employer - Any political subdivision of the State and any agency or instrumentality of the State or apolitical subdivision of the State, the governing body of which has adopted the Plan by appropriate resolution or other legal action with the consent of the Executive Director, and in any case where a resolution or other legal action of such governing body is required by law to be approved by any other body or officer, with the written approval of such other body or officer.

Plan Administrator - Citistreet (Third Party Administrator)

Plan Sponsor - Employee Benefits Division

Regulations

Regulations have been established as broad guidelines for State employees' eligibility to participate in the Arkansas Diamond Deferred Compensation Plan. The Employee Benefits Division (EBD) of the Department of Finance and Administration (DFA) has sponsorship oversight of this plan. As such, EBD may enter into a contract or contracts with Plan Administrators to conduct the daily work of The Plan and also hire a consultant as an advisor in these matters.

EBD shall require that the Plan Administrator obtain official permission from each employee participating in the "Plan" to authorize salary reduction and contributions into the "Plan" and that the Plan Administrator be responsible for compliance with the Plan Document (on file at EBD) and State and Federal regulations.

Regarding the Employee's Opportunities to Participate in Plans:

All State employees (including physicians who receive State Medicaid funds) are to have equal opportunity to participate in any deferred compensation plan and any options or benefits related to such plan as has been approved Any employee hired after the "Plan" is effective is to be informed of the "Plan" at the onset of their employment.

EBD is responsible for seeing that a proper, unbiased, educational program is made available to eligible employees to inform them of the pertinent information relating to the "Plan" or plans in which they may participate. This educational program may take the form of an instructional seminar for all eligible employees, a direct mailing to all eligible employees or both. The seminar approach is recommended where practicable because it affords the employee the opportunity to ask questions and have direct contact with persons knowledgeable on the subject.

Regarding Control of Funds:

EBD acts as the Plan Sponsor to the Third Party vendor (Plan Administrator) that manages the funds allocable to any deferred compensation plan or plans in which State employees participate.

When a salary reduction agreement exists, the employee's Federal and State Income Tax withholding will be computed on the net salary after the amount of the salary reduction is applied. The salary reduction will be deducted each payroll from the employee's pay and paid to the third party vendor by the DFA-Office of Personnel Management-Payroll Systems.

Records of such deductions are maintained on AASIS in the employee's payroll result table. AASIS also maintains a record of the third party payment to the vendor.

Payment of contributions for investment in the "Plan" investment options on behalf of participating employees will be made promptly, preferably by secure electronic fund transfer (EFT).

Complete records of salary payments, salary reduction amounts and investment elections will be maintained. Federal and State taxable wages are reported annually in boxes one (1) and sixteen (16) of Internal Revenue Service W-2 forms. The amount of salary reduction for a deferred compensation "Plan" is reported in box twelve (12).

The Plan Administrator is responsible for making prompt payment of any benefits to which the employee or former employee is entitled under the terms of the contract. The Plan Administrator shall maintain complete and accurate records of such payments.

Any benefits forfeited by any State, county, city, town or other political subdivision employee under a deferred compensation agreement shall become the property of the unit of government for which the employee worked and shall be considered general revenues. (The likelihood of this is small, as the "Plan" requires participants to name a beneficiary to receive the account balance in the event of the participant's death. If no beneficiary is on file, plan assets will become part of the deceased's estate.)

R 4-19-4 -1602 Workers' Compensation Premium Tax

The Workers' Compensation Premium Tax was established to provide funding for the Workers' Compensation Commission. Such tax is required to be paid by all insurance carriers, self insurers and public employers not obtaining Workers' Compensation Insurance from an insurance carrier. On or before March 1st of each year the Workers' Compensation Commission shall certify the rate of taxation, not to exceed 3%, for the preceding year to the Insurance Commissioner. The Insurance Commissioner shall notify the Insurance Department-Public Employee Claims Division of the rate of the tax. (ACA § 11-9-306 (a-d), ACA § 11-9-306(e) (3)) Also refer to ACA§ 11-9-303 for limit on tax.

The tax calculation is based upon the following formula:

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The salaries within the formula are all taxable wages and salaries for the employees of the public entity including any non-cash taxable wage such as clothing and housing allowances. The NCCI Average Compensation rate is determined from the published rate in effect on January 1 of the year the tax is based (i.e., calendar year 2003 salaries and January 1, 2003) NCCI Average Compensation rate will be the basis for the 2003 taxes collected (ACA § 11-9-305(a)(2)(B))

After the "Computation of the Worker's Compensation Premium Tax" Form, at http://www.awcc.state.ar.us/premium_tax/schedule_wc.pdf, is received from the Insurance Department-Public Employees Claims Division, the agency or institution shall prepare a warrant(s), check(s) or fund transfer as specified by the Insurance Department-Public Employees' Claims Division for remittance. Payments must be made in accordance with salary appropriations received

The tax filing must be completed on the form received from the Insurance Department-Public Employees Claims Division according to the instructions provided The form, including certifying signature with all warrants and/or checks, shall be submitted to the Insurance Department-Public Employee Claims Division, 1200 West Third Street, Suite 201, Little Rock, AR 72201-1904. The tax payment is due to the Insurance Department-Public Employees Claims Division annually on or before April 1st. Any questions regarding payment shall be addressed to the Insurance Department-Public Employee Claims Division. (ACA § 11-9-306(f)

PLEASE NOTE: Workers Compensation Premium Tax is based on the gross payroll and is considered an employment cost as a "Matching" payment. It is paid from Commitment Item 03 using AASIS GL account number 5010010000.

An agency or institution's failure to pay the tax may result in decertification of the public employer from participation in the State Workers' Compensation Program which would require that agency or institution obtain workers' compensation coverage for its employees from the private insurance market for one full year. (ACA §ll-9-305(b))

The Insurance Department-Public Employees Claims Division allocates the tax and remits the payments to the Workers' Compensation Commission on or before April 1st of each year. (ACA § 11-9-306(e) (3))

Year-End Reportins

Because the Workers' Compensation Premium Tax is paid on a calendar year basis and the State has a fiscal year, which differs from a calendar year, an estimate of the amount of premium tax to be paid for the period from January through June shall be recorded while completing fiscal year-end adjusting entries. The estimated tax due is calculated by the Workers' Compensation Commission-Administrative Services. The amount of each agency's estimate shall be communicated to the respective agency by the Workers' Compensation Commission-Administrative Services on or before July 20th.

As with all year-end accrual entries, the accrual entry should be entered with a FBS1 Enter Accrual/Deferral Document Transaction with a reversal date the first day of the following fiscal year (07/01/20XX). Although the previous year's accrual entry to record the estimated premium tax should have been reversed in the current year, the account should be reviewed to determine this occurred. If the previous year's entry has not been reversed, the previous year entry should be reversed in the current period. The current year estimate should be recorded in non-budget relevant accounts in period 13 in funds that correspond to salary appropriations (See additional information and instructions in R 2-19-4 -506). The amounts recorded for each fund shall also be detailed on the Intergovernmental Transactions (Igt's) - Receivables/Payables Form in the Year-End Disclosure Package. The journal entry should use the following accounts:

DR 5010001100 NBR- Personal Service - Payroll

CR 2110004100 Inter-agency Due to Other Agency

To record accrued workers compensation premium tax accrual.

History. Acts 1969, No. 199, § 8; A.S.A. 1947, § 12-3208; Acts 2001, No. 1453, § 43.

History. Acts 1979, No. 578, § 1; A.S.A. 1947, § 13-349.2; Acts 1989, No. 688, § 1; 1997, No. 758, § 1 ; 2001, No. 1453, § 45.

History. Acts 1973, No. 876, § 23; 1976 (Ex. Sess.), No. 1, § 1; 1977, No. 118, § 1; 1985, No. 820, § 1; A.S.A. 1947, § 13-349.

History. Acts 1973, No. 876, § 23; 1975, No. 980, § 2; A.S.A. 1947, § 13-349; Acts 2001, No. 1453, § 46; 2005, No. 1188, § 1.

History. Acts 1973, No. 876, § 23; 1977, No. 813, § 4; A.S.A. 1947, § 13-349.

Refer to Rl- 19-10-101 for information regarding Judicial Awards.

History. Acts 1995, No. 176, § 1.

Refer to Rl- 19-10-101 for additional information regarding Judicial Awards.

History. Acts 1973, No. 876, § 24; A.S.A. 1947, § 13-350.

PLEASE NOTE: Refer to ACA§ 19-4-806 for policies regarding Petty Cash and Imprest Funds.

History. Acts 1973, No. 876, § 24; A.S.A. 1947, § 13-350.

Rl- 19-4-1807 Cash Management Improvement Act

Purpose of the Cash Management Improvement Act

The purpose of the Cash Management Improvement Act is to ensure efficiency, effectiveness and equity in the exchange of funds between the States and the federal government for federal assistance programs. The Cash Management Improvement Act of 1990 (CMIA) was enacted by Public Law 101-453, as amended by the Cash Management Improvement Act of 1992 (Public Law 102-589), codified in the United State Code (USC) at 31 U.S.C 6501 and 31U.S.C 6503. The implementing regulations are found in the Code of Federal Regulations (CFR) at 31 CFR Part 205. The general provisions of the Act are as follows:

The responsibilities of DFA-OA are to:

History. Acts 1973, No. 876, § 21; A.S.A. 1947, § 13-347; Acts 1989, No. 37, § 2.

State forms necessary to fulfill the requirements of 19-4-1901 through 19-4-1904 can be found within the following five (5) links:

http://www.whitehouse.gov/omb/grants/sf424.pdf

http://www.state.ar.us/dfa/igs/clearinghouse/ch-1_supplementary_grant_information_form.doc

http://www.state.ar.us/dfa/igs/clearinghouse/ch-2_nstructions_clearinghouse_supplement_form.doc

http://www.state.ar.us/dfa/igs/clearinghouse/ch-2_state_clearinghouse_app_supplement_form.doc

http://www.state.ar.us/dfa/igs/clearinghouse/grant_award_notification.doc

Rl- 19-4-1904 Federal Grants and Aid

General Policies and Procedures

From time to time State agencies may request or receive federal funds in the form of grants or other aid. By nature, federal grants are subject to a full range of varying, yet specific, post award administrative requirements. To reasonably assure compliance with State and federal law as well as accurately report financial information, State agencies should maintain effective internal control over the financial administration of federal programs consistent with the following requirements:

U.S. Office of Management and Budget (OMB) Circulars A-87 Cost Principles for State, Local, and Indian Tribal Governments A-102 Grants and Cooperative Agreements With State and Local Governments, A-133 Audits of States, Local Governments, and Non-Profit Organizations, the recommendations and requirements contained in the A-133 Compliance Supplement (current edition), the Cash Management Improvement Act of 1990, the regulations promulgated pursuant thereto at 31 CFR Part 205, and other relevant grants management provisions applicable to the federal program in question, as announced in the Catalog of Federal Domestic Assistance and in The Federal Register.

These essential documents can be found within the following five (5) links:

http://www.whitehouse.gov/omb/grants/grants_circulars.html

http://www.fms.treas.gov/cmia/statute.html

http://www.fms.treas.gov/fedreg/31cfr205final.pdf

http://12.46.245.173/cfda/cfda.html

http://www.gpoaccess.gov/fr/index.html

Grant or Aid Preapplication

All preliminary, preapplication or informal proposals which may result in the commitment of personnel, space, facilities, equipment or State funds shall be submitted to the Department of Finance and Administration-Intergovernmental Services (DFA-IGS) with an Evaluation Report at the time it is submitted to the federal granting agency. DFA-IGS shall coordinate the review of any proposed program to prevent overlap, inefficiency or violation of legislative intent. (ACA § 19-4-1902, ACA § 19-4-1903)

State institutions of higher education should submit preliminary proposals to DFA-IGS at <http://www.state.ar.us/dfa/igs/igs_clearinghouse.html>as informational only. (ACA § 19-7-604(b)(3))

Grant or Aid Application

All formal proposals or other applications for federal funds in the form of grants, aids and reimbursements, except research grants or requests originating from a State institution of higher education, are to be submitted to DFA-IGS and the Governor's Office prior to submission to the granting source. The submission should include a summary of the application with the indirect cost rate of the applicant agency and a projection of the amount to be received as indirect cost reimbursement, if applicable. DFA-IGS is to file a summary of this submission with the Bureau of Legislative Research of the Legislative Council quarterly for review. (ACA § 19-4-1901, ACA § 19-7-604)

MFG Requirements for New or Additional Federal Funds

When new federal programs or new Comprehensive Employment and Training Act programs become available which require the benefiting State agency to employ additional personnel or require the benefiting State agency to obtain additional appropriations so that the program meets the requirements of or performs the objectives of the program, the head of the affected agency may request additional appropriations from the Governor and the Chief Fiscal Officer of the State. The agency's request must be on a "Miscellaneous Federal Grant" Form (MFG) and include supporting documentation, if applicable. The completed MFG and supporting documentation should be submitted to the agency's Budget Analyst at the Department of Finance and Administration-Office of Budget. After consulting the Legislative Council or the Joint Budget Committee, the Governor may approve or modify the requests. (ACA § 19-7-502)

MFG documents can be found within the following two (2) links:

http://www.state.ar.us/dfa/budget/documents/mfg_form_pagel_0206_001.xls

http://www.state.ar.us/dfa/budget/documents/mfg_form_page2_0206_OOO.xls

Quarterly Reporting Requirements

Information on all grants, aids, reimbursements and reimbursement plans, including research grants and those originating from a State institution of higher education, is to be reported to DFA-IGS quarterly. These reports shall be filed with respect to new federal programs or expansions of existing federal programs which were not in existence or which were not implemented by State participation at the time of the adjournment of the regular session of the General Assembly and entered into prior to the convening of the next regular session of the General Assembly. The DFA Director is to report to the Legislative Council on federal funds quarterly. The report is to summarize and itemize all programs which involve the expenditure of federal funds and is to include the following:

* a brief purpose of the agreement,

* the amount of federal funds to be expended,

* the amount of State matching funds, if required,

* the name of the administering agency or department, as well as any additional information that would assist the Legislative Council in determining the nature and purpose of the agreement.

Findings and recommendations by the Legislative Council from review of the quarterly reports are to be reported to each subsequent regular session. (ACA § 19-4-1904; ACA § 19-7-101, ACA § 19-4-1907, ACA § 19-4-1908)

Funds Receipt

The DFA-IGS is to be notified when a State agency receives notification or obtains any federal funds, grants, aids or reimbursements, including unsolicited federal funds. Such notification shall include reporting federal funds received for indirect cost reimbursements resulting from overhead cost of the entity or overhead cost allocated to the entity through the Consolidated Statewide Cost Allocation Plan. A summary of the notifications will be provided by DFA-IGS to the Bureau of Legislative Research of the Legislative Council for review quarterly. (ACA § 19-7-604, ACA § 19-4-1904)

All such funds are to be deposited as all other State Treasury funds. Any federal funds received on behalf of public school districts shall be forwarded to the county treasurer or district treasurer as the district chooses. Federal funds received by the agencies set out in ACA § 19-5-205(b) shall be deposited in to the State Central Services Fund. (ACA § 19-3-501, ACA § 19-3-518, ACA § 19-4-408, ACA § 19-5-205)

CMIA and other Interest Earned on Federal Funds

Interest earned on federal funds received under the State and Local Fiscal Assistance Act of 1972 is to be transferred from the Securities Reserve Fund at the direction of the Chief Fiscal Officer of the State based upon the related portion of the average daily balance of the federal funds on a quarterly basis. (ACA § 19-3-521)

PLEASE NOTE: Refer to Rl- 19-4-1807.

Funds Disbursement

Disbursement made on specific funds receiving federal funding require the State Auditor to process warrants and the Treasurer of State to redeem the warrants presented for payment in accordance with the Federal Cash Management Improvement Act of 1990, Pub. L. 101-453, Oct. 24,1990,104 Stat. 1058, after the Chief Fiscal Officer of the State notifies them that the State agency director has certified that the Federal fund transfer request has been completed and accepted by the federal funding source and that the federal funds will be transferred for the benefit of the State fund to pay the warrants. (ACA § 19-4-1107)

In the event of actions that would adversely affect funds received or related estimates, each agency head administering federal funds is required to immediately notify the State's Chief Fiscal Officer. (ACA § 19-4-1306)

Recommendations of Governor

ACA § 19-7-504 states that the Governor will submit recommendations to the General Assembly at the beginning of each regular session of the Arkansas General Assembly for any federal programs during the following fiscal biennium Such recommendation is to include a recommended appropriation of federal and State funds necessary for each program. In the event the General Assembly fails to appropriate the funds for any program, the State will no longer participate in such program effective June 30* following adjournment of the regular session.

Accounting

The Federal Grants & Reimbursements, general ledger account 4050004000, is the only account used to record federal grant revenue received directly from the federal grantor or sub grantor that is not another State of Arkansas agency. Grants and Aid from Other State Agencies, general ledger account 6060001000, is used to record grants received from other State agencies. The State agency disbursing grant funds to another agency should use Grants and Aid to Other State Agencies, general ledger account 6061001000. Each agency will be required to provide the Department of Finance and Administration-Office of Accounting-CAFR Section a list of all federal funds with CFDA numbers, the general ledger account the revenue was recorded to and the related amount. For additional information on recording and tracking Federal Grants and Aid see Pl- 19-5-101 and Project Accounting at http://www.aasis.state.ar.us/Training/CourseWare/CWarePRJACT.htmTutorials on the AASIS web site.

PLEASE NOTE: Also refer to ACA § 19-4-2201 et seq. to review requirements for discretionary grants. Also refer to ACA § 19-7-101 et seq. for more information on Federal Funds.

History. Acts 1973, No. 876, § 21; A.S.A. 1947, § 13-347.

History. Acts 1973, No. 876, § 18; A.S.A. 1947, § 13-344

Rl-19-4-2004 Responsibility for Reporting and Recovery of Losses Discovered Prior to Audit

The bonded disbursing officer for each State agency, board, commission or institution is responsible for, and held accountable for, reporting any losses of State funds to the Chief Fiscal Officer (CFO) of the State of Arkansas and to the Division of Legislative Audit (DLA). Losses include apparent unauthorized disbursements of State funds or the apparent theft or misappropriation of State funds or property.

No State agency, board, commission or institution has the authority to negotiate with any officer or employee for settlement of any losses of State funds without the approval of the CFO of the State.

The CFO of the State and the Director or Chief Officer of the respective agency, in coordination with the advice of the Attorney General (AG), has the duty to determine and initiate the appropriate action that is necessary to collect any amount found to be due the agency.

The recovery of losses under surety bonds must be coordinated with the CFO of the State and the DLA.

Recovery of Moneys Lost through Improper Redemption of Warrants/Checks

If a vendor or individual (the payee) receives a replacement warrant/check and cashes both the replacement and original, the agency shall attempt to obtain repayment from the payee. Evidence of the collection attempt(s) shall be documented in writing. If attempts to collect fail, the agency shall report the incident to the CFO of the State, the DLA and the AG's office.

If an individual, who is not the payee, cashes a warrant/check, the agency shall report the incident to the CFO of the State, the DLA, and the AG's office and to their local law enforcement office.

Recovery of Lost Assets (Not Warrants/Checks)

If theft of assets occurs, the agency shall report the incident to the CFO of the State, DLA, and the AG's office and to their local law enforcement office.

R 2-19-4 -2004Recoveries of Losses Discovered by an Audit

Notice and Proof of Losses - Investigations - Restitution

The DLA, with the approval of the Legislative Joint Auditing Committee, will give notice and proof of loss to the Governmental Bonding Board on fidelity bonds. This is done when the audit report reflects apparent unauthorized disbursements or unaccounted-for funds or property for which the public official, officer or employee may be liable. (ACA 21-2-708) The DLA may request the appropriate prosecuting attorney or the AG to assist the State or the appropriate political subdivision in obtaining restitution when the audit report reflects apparent unauthorized disbursements or unaccounted-for funds or property for which the public official, officer or employee may be liable.

The Self-Insured Fidelity Bond Program and the participating governmental entity are considered victims. Restitution may be awarded to the participating governmental entity for the entire amount of its non-reimbursed losses and to the Self-Insured Fidelity Bond Program for the entire amount of its payment to the participating governmental entity in the event that any criminal prosecution against the official or employee causing the loss where such official or employee enters a plea of guilty or nolo contendere or where such official or employee is found guilty following a trial.

Disposition of Bond Proceeds

When the Board receives proof of loss from the DLA, the Governmental Bonding Board will determine whether the loss is covered under the Fidelity Bond Program (ACA 21-2-709)

When determined that the loss is covered under the Fidelity Bond Program, the Insurance Commissioner will authorize fidelity bond loss payments from the fund to the participating governmental entity on a timely basis.

All disbursing documents for bond claim payments must include as supporting documents:

Agencies shall diligently and actively pursue the collection of receivables. Diligently and actively pursuing the collection of these accounts may include but is not limited to:

History. Acts 1991, No. 768, § 2.

History. Acts 1991, No. 768, § 3.

The ACA 19-5-101 etseq. (ACA 19-5-106(a)) provides for transfers to be made under certain circumstances. Transfers may be made for one of the following reasons:

In both instances the completion of the form must be the first step in the process ("Create Treasury Fund Request" Form) to set up a new fund for receipting and expensing. The original form is submitted to the agency's DFA-Office of Budget Analyst (OB) for review. The Manager of the DFA-OA-Funds Group may initiate the establishment of new legal funds or the Chief Fiscal Officer or Director of the agency requesting a new sub-fund may initiate the process. The Budget Analyst approves the form by placing his/her initials on the fund request form and submitting it to the DFA-OA-Funds Group Manager. The information provided on the form is reviewed Items that are incomplete are researched and corrected by the Funds Group Manager or DFA-OA-Funds Group staff.

The Funds Group Manager assigns an alpha numeric code to the fund as necessary to comply with the general naming convention used for all funds held by State agencies. After DFA-OA-Funds Group enters the new fund information into AASIS, the information contained on the request form is entered into a template and e-mailed to the Treasurer of State for entry into their system. The beginning date for usage is the date following entry into the AASIS system. The end date is always the biennium end date. The information contained on the funds request form is entered into the "Funds Control Log."

A copy of the e-mail is sent to the Auditor of State, Attorney General's Office, DFA Comprehensive Annual Financial Report Section Manager (CAFR) who verifies the fund type assigned and DFA-OA Funds/Appropriations Manager. A copy is filed in the DFA-OA-Funds Group files. The original printed e-mail letter is signed and faxed to the Auditor of State.

When the Treasurer of State has completed entry into their system, a return e-mail is made to the Funds Group Manager, and the DFA-OA-Funds Group "funds" log is updated to reflect the date of the "establishment" or "fund created" date. When the DFA-CAFR Section Manager responds with the correct fund type, the Funds Group Manager updates the fund type as necessary in AASIS, logs and files the response in the 'saved e-mail" inbox.

The original fund request form is returned to DFA-OB after it is signed and dated for filing.

Establishing New General Ledger Codes

Additions to the existing general ledger chart of accounts are a result of either new legislation from the General Assembly (request will be by DFA-OA) or a request from an agency, DFA-OA, DFA-Budget Office or the AASIS Support Center staff. The form to request a new general ledger code is completed and signed by the originating party and transmitted by printed or electronic copy to the DFA-OA-Reconciliation Manager. The appropriate name, legal authority and AASIS coding structure for the new general ledger code is added onto the request form by the DFA-OA-Reconciliation Manager if the request is for an expenditure or balance sheet code. If the request is for a revenue code, the appropriate name, legal authority and AASIS coding structure is added to the request form by the Funds Group Manager. After establishing the code in AASIS, the DFA-OA-Reconciliation Manager notifies the Funds Group Manager by delivery of an initialed copy of the request form. The Funds Group Manager enters the information onto an e-mail letter template that is sent to the Treasurer of State. The Treasurer of State e-mails a verification notice to the Funds Group Manager that the general ledger account code has been added to the Treasurer of State's system.

Deposits to Treasury Detail

The reporting agencies, user agencies or Department of Finance and Administration-Office of Accounting-Service Bureau (in the case of agencies that have their accounting process performed by DFA) enter their receipts of income into cash journals for posting, which in turn creates the deposit slip for the agency to submit to the Treasurer of State with the corresponding checks, cash or warrants for non-Electronic Fund transfer deposits. Entries to record receipts of income or federal fund transfers that are received through the Electronic Fund transfer (EFT) process also create cash journals and the corresponding deposit slips; however, additional identifying information about the draw, such as the transfer document number from the Federal Reserve System, must be on the face of the deposit slip. The deposit slips are to be made on the day of the federal fund transfer request and presented to the Treasurer of State. These deposit slips are then matched to the incoming federal fund transfers and recorded into the Treasurer of State's records.

The agency submits the original deposit slip and three copies to the Treasurer of State. The Treasurer's staff records the Treasury receipt number on the third copy of the deposit slip which is given to the agency for filing in their records. The remaining copies are maintained in the Treasurer of State's records.

The Treasurer of State's posting of deposits and transfers ends at 2:00 p.m. each weekday, except for the last workday of the month which ends at 12 noon. Deposits delivered to the Treasurer's Office after those times will be posted the following business day. Processing of the receipts and disbursements into the proper funds follows. When all processing and daily reconciliation is complete, the Treasurer of State files the original deposit receipt, provides one copy to the Auditor of State and the final copy to the DFA- OA-FG. The DFA- OA-FGfiles the receipt copies in "daily batches."

The DFA-OA-FUNDS GROUP files are used to provide an agency a copy of misplaced receipts. If the DFA-OA-Funds Group Manager issues a revenue receipt correction, the Treasury receipt number will be obtained from these files and entered on the receipt correction sent to the Treasurer of State.

Revenue Receipt Corrections

Revenue receipt corrections are initiated by agency personnel to correct an incorrect characterization of the revenue or transfer of moneys receipted by the agency. This is accomplished by completing the "Revenue Receipt Correction" Form and recording it in both AASIS and the Treasurer of State's records. The electronic template is provided on the DFA web site

http://www.state.ar.us/dfa/accounting/documents/request_form_and_instructions_for_revenue-receipt

The revenue receipt corrections requested by an agency are sent by e-mail to DFA-OA-Funds Group and accompanied by the electronic template with all pertinent information. The detailed instructions appear on the Excel template.

The Funds Group Manager reviews the information provided, and any missing information is requested from the agency person initiating the request. When completed, the deposit record is researched thoroughly to ensure the correcting entry will be accurate. DFA-OA- FG staff will post the correction into AASIS.

Revenue receipt corrections that involve either general or special revenue or those in which cash is taken from one fund and deposited into another fund require correction in the Treasurer of State's records. This is accomplished by the DFA-OA-Funds Group Manager forwarding a copy of the revenue receipt correction to the Treasurer of State's office to be posted.

The Treasurer of State and the Auditor of State choose to process certain documents manually rather than accept interfaces with updated records to process within their systems. The actual documents are printed out and the Funds Group Manager enters those document numbers in a document log. These documents, the list and the log are faxed to the Auditor of State and Treasurer of State for manual entry.

After the Auditor of State and Treasurer of State have entered them into their systems, they fax the log with the entry date on it to the Funds Group Manager. The document log is updated in the DFA- OA-FG computer files maintained by the Funds Group staff The printed lists, logs and fax coversheets are filed in the Funds Group.

PLEASE NOTE: Revenue Receipt Correction forms for transactions are located at http://www.state.ar.us/dfa/accounting/documents/request_form_and_instructions_for_revenue-receipt-correction.xls. PLEASE NOTE: The Treasurer of State investment policy may be viewed as appendix PI- 19-5-104.

PLEASE NOTE: Other forms applicable to the management of funds in the State Treasury are located on the DFA-OA web site at http://www.state.ar.us/dfa/accounting/index.html.

Returned Checks

Refer to R 3-19-4 -2004 "Returned Checks" for discussion of returned checks.

ACA § 19-5-704 Administration

"This subchapter shall be administered by the Chief Fiscal Officer of the State. Upon certification to the Chief Fiscal Officer of the State by the Arkansas Employment Security Department of unemployment compensation benefits paid during a benefit period and charged to a State agency, the Chief Fiscal Officer of the State shall direct that reimbursement be made to the Arkansas Employment Security Department from the Unemployment Compensation Revolving Fund for such amounts as are properly certified. The Chief Fiscal Officer of the State shall have the authority to make such rules and regulations as are necessary to enforce the provisions of this subchapter."

ACA § 19-5-705 Benefits Claims Investigation

"The Arkansas Employment Security Department shall investigate all claims for benefits filed by State employees whether or not the employing State agency lodges a protest to the payment of such benefits. Such investigation shall result in a determination of the eligibility of the employee for benefits payments."

ACA § 19-5-707 Contributions Generally

"Each State agency shall make contributions to the Unemployment Compensation Revolving Fund, using the experience rate determined in accordance with ACA § 11-10-704, from personal services matching costs funds within fourteen (14) calendar days following the end of each calendar quarter. The experience rate for each even-numbered fiscal year will be used to fix the rate for the next even-numbered fiscal year. Each odd-numbered fiscal year's experience rate will be used to fix the next odd-numbered fiscal year rate. If during any fiscal year the Chief Fiscal Officer of the State determines that the contributions rate for any agency will result in a significant surplus or deficit for that fiscal year, he shall have the authority to adjust the agency contribution rate to reduce such surplus or recover any such deficit, subject to the provision of ACA § 19-5-708."

ACA § 19-5-708Maximum Contributions

"In no event shall any experience rate result in a State agency making contributions of more than three percent (3%) of its gross payroll expenditures. In the event that an agency builds a deficit which would require a contribution rate greater than three percent (3%), then that agency shall continue to make contributions at the rate of three (3%), even though eligible for an experience rate reduction, until any deficit owed the fund is repaid. Only then shall the actual experience rate be used to compute such agency contributions."

Contributions Policy

Notification of the next fiscal year's contribution rate for each State agency shall be distributed by March 1 of each year. These rate assignments shall be forwarded to the DFA-Office of Budget as well.

A newly established agency shall be assigned a contribution rate equal to the experience rate of State government agencies as a whole (the total claims divided by the total salaries). Contribution rates for second and subsequent years' shall be established through experience rating. The rate calculation method is outlined herein.

To each agency's current balance:

* Add each agency's pro-rata share of accrued interest,

* Add the projected interest through the next fiscal year,

* Add the contributions yet due from current year rates,

* Subtract projected claims through the next fiscal year,

* Subtract the desired fund level (75% of the last 2-year average of claims).

These steps will have established the amount of contributions due for the next fiscal year. Each agency's contribution rate is determined by dividing the contributions due amount by the projected salaries for the fiscal year.

Maximum Contributions

Unemployment contribution rates may not exceed 3% of agency's total gross salaries.

Rate Calculation Procedure