[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR226.8]

[Page 181-182]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 226--CHILD AND ADULT CARE FOOD PROGRAM--Table of Contents
 
                   Subpart C--State Agency Provisions
 
Sec. 226.8  Audits.

    (a) Unless otherwise exempt, audits at the State and institution 
levels shall be conducted in accordance with the Office of Management 
and Budget's Circulars A-128 and A-110 and the Department's Uniform 
Federal Assistance Regulations (7 CFR part 3015). Title XIX and title XX 
proprietary institutions not subject to organization-wide audits shall 
be audited by the State agency at least once every two years.
    (b) The funds provided to the State agency under Sec. 226.4(h) may 
be made available to institutions to fund a portion of organization-wide 
audits, provided that the organization-wide audit includes tests of the 
CACFP in accordance with section 10.558 of the Compliance Supplement to 
OMB Circular A-128. The funds provided to an institution for an 
organization-wide audit shall not exceed the portion of the audit's cost 
equal to the CACFP's portion of the total Federal grant.
    (c) Funds provided under Sec. 226.4(h) may be used by the State 
agency to conduct program-specific audits of institutions not subject to 
organization-wide audits, or for which the State agency considers 
program specific audits to be needed. The State agency may use any funds 
remaining after all

[[Page 182]]

required program-specific audits have been performed to conduct 
administrative reviews of institutions.
    (d) Funds provided under Sec. 226.4(h) may only be obligated during 
the fiscal year for which those funds are allocated. If funds provided 
under Sec. 226.4(h) are not sufficient to meet the requirements of this 
section, the State agency may then use available State administrative 
expense funds to conduct audits, provided that the State agency is 
arranging for the audits and has not passed the responsibility down to 
the institution.
    (e) In conducting management evaluations or audits for any fiscal 
year, FNS or OIG may disregard any overpayment which does not exceed 
$100. In conducting State agency sponsored audits in State administered 
programs, the State agency may disregard any overpayment which does not 
exceed the amount established by State law, regulations or procedures as 
a minimum for which claims will be made for State losses generally. No 
overpayment shall be disregarded, however, where there are unpaid claims 
of the same fiscal year from which the overpayment can be deducted, or 
where there is evidence of violation of criminal law or civil fraud 
statutes.
    (f) While OIG shall rely to the fullest extent feasible upon State 
sponsored audits, OIG may, whenever it considers necessary:
    (1) Make audits on a statewide basis;
    (2) Perform on-site test audits;
    (3) Review audit reports and related working papers of audits 
performed by or for State agencies.
    (g) State agencies are not required to provide a hearing to an 
institution for State actions taken on the basis of a Federal audit 
determination. If a State agency does not provide a hearing in such 
situations, FNS will provide a hearing, upon request, in accordance with 
procedures set forth in Sec. 226.6(j) of this part.

[47 FR 36527, Aug. 20, 1982, as amended at 50 FR 8580, Mar. 4, 1985; 51 
FR 4295, Feb. 4, 1986; 52 FR 5526, Feb. 25, 1987; 53 FR 52590, Dec. 28, 
1988; Amdt. 22, 55 FR 1378, Jan. 14, 1990]