Conn. Agencies Regs. § 17a-306-23

Current through December 27, 2024

Section 17a-306-23 - Principles and standards for financial management and accounting

The purpose of this section is to set forth the principles and standards for the organization of an area agency on aging's accounting and accounting system.

(a)Basis of Accounting

(1) Each grantee and subgrantee shall report program outlays and program income on the modified accrual basis. Accordingly, expenditures are recorded when a liability is incurred (i.e., when an invoice has been received or the amount can be readily estimated), but revenue is not recorded until actually earned by or is available to the grantee or subgrantee. "Available" means that the revenue is both recognizable and collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period.

(2) If the grantee or subgrantee presently maintains its accounting system on the cash basis, it must develop the necessary accrual information through analysis of pertinent documentation on hand. Appropriate worksheet entries can be made to convert the books of account under the cash basis to financial statement presentation under the accrual basis.

(3) Unbilled receivables arise when revenues have been recorded but the amounts (or portions thereof) cannot yet be billed pending receipt of the final notice of grant award. Unbilled receivables can specifically occur in relation to year-end U.S. Department of Agriculture (USDA) funding where the cost has been incurred, but billing cannot occur until authority for such reimbursement has been granted. Because such sums have been incurred, collection is assured and the amount is estimable, grantees and subgrantees should treat such costs as an unbilled receivable, with a related credit to revenues in the year in which such costs were incurred.

(b)Authority to Expend Federal and State Funds

(1) By virtue of the Connecticut Department on Aging's approval of an area agency on aging area plan and its execution of a contract for the distribution of funds, area agencies on aging are thereby granted authority to obligate funds under the approved plan for eligible activities, for the period covered by their plans. This authority to obligate funds under their approved plans is only extended for allowable and allocable costs which are also reasonable and net of all applicable credits.

(2) Area agencies on aging are to refer to the Federal cost principles applicable to their organization to ascertain if there are any prior approvals required from their granting agency. There are also other prior approvals required by virtue of their award of a grant from the Department on Aging or required by specific program legislation or regulation. The following is a minimum, but not necessarily an inclusive, list of these prior approvals:

(A) Change in Scope. Changes in the scope or objectives of the grant-supported activities.

(B) Restriction on Award. Undertaking any activities that are disapproved or restricted as a condition of the award.

(C) Change of Grantee Institution/Successor in Interest/Recipient Institution Name Change. Grantees of the Connecticut Department on Aging shall notify the Connecticut Department on Aging in writing of any pending change of grantee institution, successor in interest, or institution name change. In a change of grantee or successor in interest situation, the Connecticut Department on Aging will exercise its prerogative to determine whether to continue funding the existing project(s) under the new entity.

(D) Transferring Substantive Responsibility for Management of the area plan. Transferring to a third party, by contracting or any other means, the actual performance of substantive responsibility for the management of the grant.

(E) Carry-over of Funds from One Budget Period to Another.

(F) Extensions of the Budget/Project Period With or Without Additional Funds.

(G) Capital Expenditures. Capital expenditures for land or buildings. Also, such property acquired with Connecticut Department on Aging grant support may not be conveyed, transferred, assigned, mortgaged, leased or in any other manner encumbered by the grantee, without prior written approval of the Connecticut Department on Aging.

(H) Equipment. General and special-purpose equipment exceeding $500 per unit.

(I) Salaries. Any changes which either increase or decrease salaries and/or the salary account.

(J) Preagreement Costs Incurred Prior to the Effective Date of Any Grant Award.

(K) Consultant Fees. When the consulting agreement (1) constitutes a transfer of substantive management or administrative work to a third party, (2) results in a contract for management services that requires Connecticut Department on Aging or the Federal grantor agency's prior approval, or (3) is required by program regulations or other award terms.

(L) Need for Additional Funds.

(M) Closely Related Work. When salaries and/or other activities are being supported by two or more grant sources, area agencies on aging may request authority to charge the cost to the Title III grant for which the costs are originally approved, or to another Department on Aging project, provided all of the following conditions are met:

(i) The projects are programmatically related;

(ii) The projects are under the direction of the same project director;

(iii) There is no change in the scope of the individual grants involved;

(iv) The relating of costs will not be detrimental to the conduct of work approved under each individual award;

(v) The relatedness will not be used to circumvent terms and conditions of an individual award; and

(vi) Each funded project has the same completion date.

(N) Indemnification Against Third Parties.

(O) Transfer of Funds Between Construction and Nonconstruction.

(P) Travel Outside of the Continental United States.

(Q) Insurance. Contributions to a reserve fund for a self-insurance program and the cost of insurance on any U.S. Government-owned equipment requires prior approval.

(c)Cost Center Accountability

All costs for the operation of the area agency on aging approved in its annual plan shall be considered administrative and must adhere to the current federal limit.

In general, the following list of costs which are considered necessary for the overall administration of the agency shall be included in this category:

(1) The personnel expenses of administrative secretarial staff, the agency director, and fiscal and planning staff to the extent they are involved in activities of a general nature related to the overall operation of the area agency on aging. Such activities include personnel management or supervision by administrative staff that is not traceable to any specific service.

(2) Staff time devoted to planning activities, which are of a general nature and not assignable or allocable to a service such as: preparing testimony, addressing public hearings, conducting public hearings, overall agency program performance reviews and analysis of program effectiveness, and revision of agency objectives and plans as necessary.

(3) Staff time assigned to coordination activities (which may include joint planning with other agencies), assisting in the development of other agency programs to better serve the elderly; involvement in jointly funded activities and information sharing.

(4) Staff time spent in researching and acquiring other resources to be used for the development and expansion of services provided through the area plan.

(5) Providing travel expenses, meal allowances, etc., necessary to support Advisory Council activities.

(6) Staff travel expenses for personnel activities charged to the area agency on aging administration cost center.

(7) General agency personnel management and record keeping related to employee benefits, as well as developing and implementing agency personnel policies and such activities as staff orientation and training of a general nature.

(8) Financial management of the entire agency operation such as maintaining necessary journals, ledgers and accounts, making requisite bank deposits and withdrawals, invoicing and payment processing, payroll administration and preparing periodic financial reports that encompass the overall agency financial status.

(9) Activities involved in providing advocacy for older adults.

(10) Costs of office furniture, supplies, and equipment designated specifically for the administrative staff.

(11) Payments for the agency's annual audit.

(12) The costs of general liability insurance, fidelity bonds, etc.

(d)Chart of Accounts

Provided that area agencies on aging are able to comply with the nine standards for financial management systems in Attachment F of OMB Circular A-110, and the financial management standards contained in Title 45 Code of Federal Regulations Subpart 74.61, area agencies on aging shall adopt their own account structure based on their own external and internal reporting requirements.

(e)Elements of an Acceptable Financial Management System

(1) Title 45 Code of Federal Regulations Subpart 74.61 (b) requires that grantees or subgrantees have records that identify adequately the source and application of funds for grant or subgrant-supported activities. At a minimum, these records shall contain information pertaining to grant or subgrant awards, authorizations, obligations, unobligated balances, assets, outlays, income, and if the recipient is a government, liability.

(2) Special grant conditions may be more restrictive than those prescribed in Title 45 Code of Federal Regulations Part 74 imposed by the Connecticut Department on Aging on its subrecipients as needed when the Connecticut Department on Aging has determined its grantee:

(A) Is financially unstable.

(B) Has a history of poor performance, or

(C) Has a management system which does not meet the standards of Part 74.

(3) For the purpose of determining the adequacy of a subrecipient's financial management system, the Connecticut Department on Aging shall consider the following records maintained on a current basis to be minimum:

(A) General Journal,

(B) General Ledger,

(C) Separate or combined Cash Receipts and Disbursements Journal or Voucher Register,

(D) Payroll Register (if the agency has more than 10 employees),

(E) Fixed Assets Register for all owned and leased property and equipment,

(F) In-Kind Journal/Worksheets,

(G) Project Cost Control Subsidiary Ledger/Worksheets, and

(H) Bank statements reconciled within 15 working days of receipt.

(4) Grantees of the Connecticut Department on Aging may substitute the equivalent kind of records for those specified in C. above provided the substitute records meet the function for which those records have been required.

(f)Separate Fund for Equipment, Fixtures and Property

(1) Fixed assets should be recorded in a self-balancing group of accounts separate and distinct from the regular General Ledger accounts.

(2) To be classified as a fixed asset, a specific piece of property must possess three attributes:

(1) tangible nature,

(2) a useful life of two years or more, and

(3) a value of $500 or more.

(3) All fixed assets acquired, either by purchase from the Connecticut Department on Aging or local funding or donated to the area agency on aging, should be immediately recorded in the Fixed Assets Account Group. Purchased fixed assets are valued at cost. Donated fixed assets are recorded at their estimated fair value at the time received by the agency.

(4) Balance in the separate Fixed Assets Account Group is provided by the various asset accounts with their debit balances, offset by equity accounts with credit balances that show by their respective titles the sources from which the assets were acquired.

An example of the Fixed Assets Account Group is as follows:

Asset Accounts
	Land
	Buildings
	Equipment
Equity Accounts
	Investment in Fixed Assets-Federal
	Investment in Fixed Assets-State
	Investment in Fixed Assets-Local

(g)Area Agency on Aging Budgeting System

Area agencies on aging shall establish and maintain a budgeting system that compares the actual and budgeted amounts for each grant or subgrant. Periodically, but no less frequently than quarterly, the system shall be updated with actual cost experience versus originally estimated costs. This system shall also be able to forecast costs to the completion of the grant period.

(h)Accounting Standards

Grantees and subgrantees of the Connecticut Department on Aging shall observe the standards contained in this part.

(1) Capitalization of Equipment

All tangible personal property with a useful life of more than two years and a unit acquisition cost of $500 or more shall be capitalized and depreciated over its useful life using the straight-line method of depreciation. All capitalized assets shall be maintained in the special fixed assets account group and are not to be included as an operating expense.

(2) Title to Acquired Equipment or Property

Title to all equipment with a unit acquisition cost of $1,000 or more and property acquired as a direct cost with funds granted by the Connecticut Department on Aging shall vest with the Grantee. Provided, however, that such property shall not be transferred or otherwise disposed of without the prior approval of the Connecticut Department on Aging. Upon termination of such a grant, the grantee may arrange to retain such equipment or property by paying a fair and reasonable price therefor, or retain custody of such equipment or property, with the approval of the Department on Aging if service will be continued with other funding to older Americans. In all other circumstances such property as remains shall be transferred to the Department on Aging unless said department waives its interest therein, in writing.

(3) Accounting for Paid Absences

To be in conformance with generally accepted accounting principles, in general, and specifically Financial Accounting Standards Board Statement No. 43, the Connecticut Department on Aging requires the accrual method of recognition of entitlement for vacation, holidays and illness in the year earned, not the year when the entitlement was granted or in the year when it is actually taken. This entitlement, if authorized through approved agency personnel policies, shall not exceed a maximum accrual of 30 vacation days and 30 nonvested sick days. This unfunded contingent liability shall be reported in a note to the financial statements of the independent auditor's report. Grantee's or subgrantee's accrued liability should take into consideration probationary employee's entitlement to benefits and any material projected forfeiture of vacation time.

(A) Upon termination of a Fair Labor Standards Act-exempt employee, the Connecticut Department on Aging will not recognize or authorize payment for any accumulated but untaken compensatory time. This applies to both actual payment for earned, but unused compensatory time and to time taken off in lieu of paying for accumulated compensatory time.

(4) Self Insurance

(A) Authorization for self insurance is limited to the deductible amount of insurance policy coverage. Such deductible should be limited to an amount which would not cause undue hardship in the current administrative budget.

(B) There are three possible methods of computing self insurance costs.

(i) Compute "projected average loss" based on the cost or comparable cost of purchased insurance based on competitive quotes,

(ii) Compute a "projected average loss" based on data reflecting the grantee's or subgrantee's experience and anticipated conditions in accordance with actuarial principles, or

(iii) Compute a self-insurance charge based on the actual amount of losses during an accounting period.

Methods (i) and (ii) are preferred for computing "projected average loss."

(5) Consistency of Costing Practices

A grantee or subgrantee's practices used in estimating costs in preparing its grant applications should be consistent with its accounting practices used in accumulating and reporting costs.

(6) Allocation of Indirect Costs

A grantee or subgrantee of the Connecticut Department on Aging shall have a written statement of accounting policies and practices for allocating costs to various programs, which shall be consistently applied. Costs should be allocated to cost objectives in reasonable proportion to the beneficial or casual relationships of the pooled costs to cost objectives.

(7) Unallowable Costs

Costs expressly unallowable or mutually agreed to be unallowable, including costs mutually agreed to be unallowable directly associated costs, shall be identified in separate accounts and excluded from a billing, claim or grant applicable to a grant, or contract with the Connecticut Department on Aging.

(8) Treatment of Any Deferred Compensation

The cost of deferred compensation shall be assigned to the cost accounting period in which the grantee or subgrantee incurs an obligation to compensate the employee. In the event no obligation is incurred prior to payment, the cost of deferred compensation shall be the amount paid and shall be assigned to the cost accounting period in which the payment is paid. The measurement of the amount of the cost of deferred compensation should be the present value of the future benefits to be paid by the grantee or subgrantee.

(9) Leases

(A) Grantees and subgrantees of the Connecticut Department on Aging shall observe rules regarding an operating lease vs. a capital lease, contained in Financial Accounting Standards Board Statement (FASB) No. 13. If, according to FASB 13, it is determined that a capital lease exists, a share of such lease payment will be capitalized and amortized over the life of the lease or the useful life of the asset, whichever is longer.

(B) In the case of long-term leases, the portion of any lease payments that represents the finance costs under an alternate acquisition shall be treated as an unallowable cost.

(C) The maximum amount of cost recovery on a lease with an affiliated division or subsidiary shall be the amount allowed had the grantee retained title. Thus, the cost of depreciation by the straight-line method, taxes, insurance and maintenance, excluding interest, are allowable.

(10) Credits

To the extent that credits accruing or received by the grantee or subgrantee of the Connecticut Department on Aging relate to allowable costs, they should be credited to the Connecticut Department on Aging as a cash refund. Credits will apply to the year in which the underlying cost occurred rather than in the year of credit receipt. In the case of credits of an immaterial amount, credits may be offset against the current year's costs.

(i)Control of Inter-Fund Cost Transfers

For all transfers of cost or program income from one program or fund to another, made on other than a contemporaneous basis, the area agency on aging will:

(1) Have available in its accounting records an appropriate written justification statement for any cost or program income transfer.

(2) Reflect the adjustment in its General Journal. All corrections are to be made by cross-out and new entry, with no erasures or whiteouts.

(j)Use of Title III-C Funds Until USDA Reimbursement

Title III-C of the Older Americans Act funds shall be used first in reimbursement for the cost of nutrition services. Nutrition funding from USDA should be used to reimburse Title III-C at the allotted annual rate. Even though funding from USDA has been late to reimburse elderly nutrition providers for the cost of these meals, it is the expectation of the Connecticut Department on Aging that elderly nutrition providers should provide the meals and use Title III-C funds until USDA reimbursement is obtained. Until a notice of grant award for USDA's share of the meal cost has been obtained, elderly nutrition providers shall treat those costs as unbilled receivables. Refer to Policy Statement 17a-306-23 (a) (3) for the purpose and nature of unbilled receivables.

(k)Sound Internal Control Structure

(1) Title 45 Code of Federal Regulations Subpart 74.61 (c) requires grantees and subgrantees to maintain effective control and accountability for all grant or sub-grantee cash, real and personal property covered by Subpart O of Part 74, and all other assets.

(2) Typically, grantees and subgrantees would normally observe the following, general internal control measures:

(A) No one person has complete authority over an entire financial transaction.

(B) Maintain a policy manual covering

(i) approval authority for financial transactions

(ii) guidelines for controlling expenditures, such as purchasing requirements and travel authorizations.

(C) Record all cash receipts or participant contributions immediately.

(D) Use special safeguards for cash collections, including: two-person count of receipts; receipts are kept in a locked box, safe or other secure location until deposited; deposit slips compared with receipts; employees handling cash be bonded.

(E) Deposit all cash receipts or participant contributions intact daily.

(F) Make all payments by serially numbered checks.

(G) All checks issued by an area agency on aging shall be signed by two authorized officials, each of whom is independent of control of the other person.

(H) Use an imprest petty cash fund entrusted to a single custodian for all payments other than by check to be reimbursed no less frequently than monthly.

(I) Reconcile bank accounts monthly and retain copies of the reconciliations in the files.

(J) Use serially numbered revenue invoices, purchase orders and receiving reports.

(K) Issue checks to vendors only in payment of approved invoices that have been matched with purchase orders and receiving reports.

(L) Balance subsidiary ledgers for grant accounts with actual accounts no less frequently than monthly.

(M) Prepare trial balances monthly for submission of invoices and in sufficient detail to disclose significant variations in any category of revenue or expenses.

(3) Because of their relatively small size and the limit imposed by the administrative cost cap, area agencies on aging shall also adopt the following internal controls:

(A) All checks, irrespective of their dollar amount, will bear two signatures, one of which can be the Director's. No mechanical signatures will be accepted. Any cosigners must be organizationally independent of the Director.

(B) The Director of the area agency on aging will oversee and control all cash collections by regularly reviewing all cash counts used in intact deposits.

(C) The Director of the area agency on aging will closely examine and sign all financial reports furnished to the Connecticut Department on Aging.

(D) The Director of the area agency on aging will closely examine and initial all general journal entries.

(E) Someone other than the person who prepares the check or signs and cosigns the checks will reconcile the agency's bank statements, either on an ongoing basis or on a rotating basis. The bank statement will be delivered to this person unopened. In completing the reconciliation of the bank statement, the name of the payee and the endorsement on all checks will be compared with that in the check register or cash disbursements journal. The reconciliation will be completed within 15 days of receipt. The Director of the area agency on aging will review and initial each bank statement reconciliation. The reconciled bank statement will be maintained on file for a period of three years or until audited, but in any case a minimum of three (3) years.

(F) The area agency on aging will prepare a trial balance that balances within 15 days of month end. For the last month of the fiscal year, the trial balance will be completed within 45 days of year end.

(G) All checks made payable to the Director of the area agency on aging will be cosigned by a person above the level of the Director.

(H) Under no circumstances will the Director of the area agency on aging maintain any of, or make any entries in, the books of original entry.

(l)Liquidation of Obligation:

(1) Grantees and subgrantees of the Connecticut Department on Aging shall liquidate all obligations incurred under the Older Americans Act within 90 days of the end of the grant period. The Connecticut Department on Aging will consider written requests for waivers from this rule in the case of accrual accounting for compensated personal absences, for the annual audit fee or for contracts involving construction or renovation.

(2) For state-appropriated funds, the liquidation period for obligations shall be 30 days after the grant period.

(m)Area Agency on Aging Fiscal Manual

Area agencies on aging will prepare a complete, accurate and current set of written fiscal policies to be maintained in the form of an officially adopted manual. This manual will cover the area agency's own fiscal policies and those applicable to their subgrantees. This manual should be modeled after the Connecticut Department on Aging's Manual of Fiscal Policies and be completed within one year of adoption of this rule. As a minimum, this area agency on aging fiscal manual should provide for a description of each of the following accounting applications and the internal controls in place to safeguard the agency's assets for billings, receivables, cash receipts, purchasing, accounts payable, cash disbursements, payroll, inventory control, property and equipment, and general ledger. Each of the agency's fiscal activities for revenue/receipts disbursements and financial reporting should also be described.

Conn. Agencies Regs. § 17a-306-23

Effective November 8, 1991