[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR226.8]

[Page 206-207]
 
                          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 must be conducted in accordance with Office of Management and 
Budget circular A-133 and the Department's implementing regulations at 
part 3052 of

[[Page 207]]

this title. State agencies must establish audit policy for title XIX and 
title XX proprietary institutions. However, the audit policy established 
by the State agency must not conflict with the authority of the State 
agency or the Department to perform, or cause to be performed, audits, 
reviews, agreed-upon procedures engagements, or other monitoring 
activities.
    (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 made in accordance with part 3052 of this title. The funds 
provided to an institution for an organization-wide audit must be 
determined in accordance with Sec. 3052.230(a) of this title.
    (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 required program-specific audits have been performed 
to conduct administrative reviews or agreed-upon procedures engagements 
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(k).

[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; 67 FR 43490, June 27, 2002; 
69 FR 53543, Sept. 1, 2004]