Current through 2024-38, September 18, 2024
SUMMARY: To outline minimum standards for the
presentation of financial statements and the Schedule of Expenditures of
Department Agreements (SEDA), dollar thresholds for presentation of financial
statements and the SEDA, record retention standards, internal control standards
and timetables for reporting.
A.
STANDARDS FOR PRESENTATION OF FINANCIAL STATEMENTS
Responsibility for financial statements - Community agencies
will be required to submit audited entity-wide financial statements and
compliance audit to each funding Department if annual agreement expenditures
equal or exceed $500,000. Community agencies with annual agreement expenditures
of at least $100,000 but less than $500,000 will be required to submit
entity-wide financial statements and the supplemental SEDA that have been
reviewed by a qualified IPA. Agreement expenditures are the amount of agreement
funds earned on the financial claims submitted to the Department.
1.
Federal Standards
If the community agency is required to have a single audit of
financial statements in accordance with OMB Circular A-133, that audit should
be conducted and reported in accordance with those standards and should include
all Federal awards which pass through the Department. That audit will satisfy
the entity-wide financial audit requirement of these rules.
If the community agency can satisfy its federal audit
requirement through a program-specific audit as specified in OMB Circular
A-133, §__.235 and its Federal funds are the only amounts awarded within
its State agreements, that audit will satisfy the audit requirement of these
rules.
2.
Department
Standards
(a)
TIER 1- Less than
$100,000
If a community agency has less than $100,000 in total annual
agreement expenditures of agreement funding from the Department, no entity-wide
financial statements are required.
(b)
Tier 1 - Between $100,000 and
$500,000
Community agencies with total annual agreement expenditures
of $100,000, but less than $500,000, must have an entity-wide review of its
financial statements and supplemental SEDA conducted by a qualified IPA.
Tier 1 option - A community agency within Tier 1 may opt to
follow the rules for audits and reporting under Tier 2.
(c)
TIER 2 - Audited Financial
Statements
If a community agency has $500,000 or greater in total annual
agreement expenditures of agreement funding from the Department, it must at a
minimum have an entity-wide audit of its financial statements and a compliance
audit of the supplemental SEDA conducted by a qualified IPA in accordance with
Section .03 of these rules.
B.
STANDARDS FOR FINANCIAL STATEMENTS
(Tier 2 and Tier 1 with Department Expenditures of $100,000 or more)
1.
Responsibilities for financial
statements: The financial statements are the representation of the
community agency. It is the responsibility of the governing body of the
community agency to ensure the statements are completed in accordance with
these standards.
2.
Submission of financial statements: The community agency must
submit its financial statements and IPA's reports to the Department in
accordance with these rules.
3.
Presentation of financial statements: Financial statements must be
prepared annually. The basic financial statements shall consist of those
statements and disclosures required by Generally Accepted Accounting Principles
for the community agency.
(a) For Tier 2
agencies, the financial statements of a community agency must be audited on an
entity-wide basis in accordance with Generally Accepted Auditing Standards and
Government Auditing Standards.
The audited financial statements must be accompanied by the
audited SEDA.
(b) For Tier
1 agencies with annual agreement expenditures of at least $100,000 but less
than $500,000, the financial statements of a community agency must be reviewed
in accordance with Statement on Standards and Review Services (SSARS) No. 19,
Compilation and Review Services.
The reviewed financial statements must be accompanied by the
reviewed SEDA.
C.
STANDARDS FOR SCHEDULE OF
EXPENDITURES OF DEPARTMENT AGREEMENTS (SEDA)
1.
Purpose - The SEDA provides
the Department with information identifying agreement expenditures based on the
Agreement Close-out Report(s) (ACR) and interim quarterly reports submitted to
the Department during the current fiscal year. When an agency has a fiscal year
end that does not match up to the interim quarterly report period, the agency
will obtain the necessary interim financial information from its accounting
records.
(a)
MAAP Tier 1
A community agency that annually expends at least $50,000 but
less than $100,000 of agreement funds must prepare the SEDA and submit to the
Division of Audit in accordance with these rules.
A community agency that annually expends at least $100,000,
but less than $500,000 of agreement funds must prepare the SEDA. The Agency's
IPA must review the SEDA and issue a report. This SEDA and IPA report must
accompany the annual reviewed financial statements submitted to the
Department.
(b)
MAAP
Tier 2
The community agency must prepare the SEDA. The Agency's IPA
must issue an audit report on the SEDA. This SEDA and IPA report must accompany
the annual audited financial statements submitted to the Division of
Audit.
2.
Required format
(a) Each
agreement with expenditures during the current year must be identified by State
department, division or office, agreement number, agreement amount, agreement
term, service area, agreement status, and related Federal and State
expenses.
(b) The method of
settlement referenced in the Agreement Compliance Section of the agreement will
determine the basis of settlement. For example, fee-for-service would be based
on the units delivered times the applicable rate.
(c) The expenditures for each agreement are
based on claims submitted to the Department for the current fiscal year. The
SEDA must include both interim and final agreements, if applicable.
(d) The expenditures on the SEDA must
represent only the Department portion of the claimed expenses.
(e) If financial claims submitted to the
Department cross two or more fiscal years, the community agency should review
the make-up of the claims to determine what portion of the claimed expenses
belongs to the current year. For cost sharing agreements that are in interim
status, the community agency must determine the Department expenditures based
on the agreement pro forma adjustments and the actual Department cost sharing
percentage.
(f) The SEDA must
contain notes that, at a minimum, identify agreements tested and the percentage
of agreements tested.
3.
SEDA supporting documentation - Financial records and/or
worksheets must be available to support financial claims submitted to the
Department. The financial claims that are the basis for the SEDA must be
maintained to support SEDA amounts. All financial records and financial claims
that support SEDA amounts must be supplied upon request to the Division of
Audit.
D.
STANDARDS FOR RETENTION OF FINANCIAL AND ADMINISTRATIVE RECORDS
1. Financial records for agreements and
supporting documentation under these rules must be retained for a period of
three (3) years from the date of submission of the final expenditure report
with the following exceptions:
(a) If any
litigation, claim, audit, examination or appeal is started before the
expiration of the 3-year period, the records shall be retained until all
litigation, claims or audit findings involving the records have been resolved
and final action taken.
(b) Records
for real property and equipment acquired with Federal funds shall be retained
for 3 years after final disposition.
E.
INTERNAL CONTROL STANDARDS
Community agencies shall establish and maintain internal
controls to achieve the organization's goals and objectives. Internal controls
shall be designed to provide reasonable assurance about the achievement of the
community agency's objectives with regard to the reliability of financial
reporting, effectiveness and efficiency of operations, and compliance with
applicable rules and regulations. Internal control standards shall consist of
the following five interrelated components.
1.
Control
environment: The control environment sets the tone of an
organization, influencing the control consciousness of its people. It is the
foundation for all other components of internal control, providing discipline
and structure. Control environment factors include the integrity, ethical
values, management's operating style, delegation of authority systems, as well
as the processes for managing and developing people in the
organization.
2.
Risk
Assessment: Risk assessment is the community agency's
identification and analysis of relevant risks to achievement of its objectives,
forming a basis for determining how the risks should be managed. A precondition
for risk assessment is establishment of objectives, and thus risk assessment is
the identification and analysis of relevant risks to achievement of assigned
objectives. Risk assessment is a prerequisite for determining how the risks
should be managed.
3.
Control activities: Control activities are the
policies and procedures that help ensure management directives are carried out.
They help ensure that necessary actions are taken to address risks to
achievement of the community agency's objectives. Control activities occur
throughout the organization, at all levels and in all functions. They include a
range of activities as diverse as approvals, authorizations, verifications,
reconciliations, reviews of operating performance, security of assets and
segregation of duties.
4.
Information and communication: Information and
communication systems support the identification, capture, and exchange of
information in a form and time frame that enable people to carry out their
responsibilities. Information and communication systems play a key role in
internal control systems as they produce reports, including operational,
financial and compliance-related information that make it possible to run and
control the community agency.
5.
Monitoring: Monitoring is a process that assesses
the quality of internal control performance over time. This is accomplished
through ongoing monitoring activities or separate evaluations. Internal control
deficiencies detected through these monitoring activities should be reported
upstream, and corrective actions should be taken to ensure continuous
improvement of the system.
F.
REPORTING TIMETABLES
Community agencies will submit reports and the SEDA as
follows:
1. Tier 1 agencies with total
annual agreement expenditures of at least $50,000, but less than $100,000, must
submit the SEDA no later than four (4) months after their fiscal year end. The
SEDA must be signed and dated by an appropriate manager or administrator
certifying to its accuracy.
2. Tier
1 agencies with total annual agreement expenditures of at least $100,000, but
less than $500,000, must submit the reviewed entity-wide financial statements
and the reviewed supplemental SEDA no later than six months after the fiscal
year end of the community agency.
3. Tier 2 agencies must submit the audited
entity-wide financial statements and the audited SEDA no later than nine months
after the fiscal year end of the community agency.
4. Tier 1 and Tier 2 agencies that fall under
the audit requirements of OMB Circular A-133 must submit the entity-wide
financial statements, the SEFA and the Federal OMB Circular A-133 reporting
package no later than nine (9) months after the fiscal year end of the
community agency.
5. Cost
allocation plans due to the Maine Department of Transportation are due no later
than four (4) months after the fiscal year end of the Tier 1 community agency,
and nine (9) months after the fiscal year end of the Tier 2 community
agency.
6. Electronic submission is
recommended and should be sent to dhhs.audit@maine.gov for submission to the
Maine Department of Health and Human Services. Electronic submissions to the
Maine Department of Transportation should be sent to
OfficeofAudit.MaineDOT@maine.gov. State personnel who require a copy of the
MAAP report for a community agency should contact the Division of Audit for the
Maine DHHS or the Office of Audit for the Maine DOT.
7. The Department may grant an extension of
report submission for good cause.
G.
SANCTIONS
1. Failure to follow the reporting timetables
in accordance with this part, may result in Department sanctions such as:
(a) Withholding a percentage of Department
awards until the audit is completed satisfactorily.
(b) Withholding or disallowing indirect
costs;
(c) Suspending Department
agreements until the audit is conducted; or
(d) Terminating the Department
award.
