(1) Standards of scope, quality, and administration promulgated under section 2495 shall be implemented through an agreement between the department and the local governing entity. An agreement under this subsection shall specify at least the minimum activities agreed upon as necessary for substantial compliance with rules and shall be based upon findings in the annual program statement of the local health department.

  (2) A local health department shall be reimbursed on the basis of approved program performance reports as required by this section and section 2481 and 2483 and on the basis of prescribed fiscal reports reflecting actual, reasonable, and allowable costs incurred pursuant to rules promulgated under section 2495. An operating advance may be provided which shall be replenished as the costs are reported. Adjustments shall be made as necessary to compensate for payments previously made.