[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: 7CFR277.6]

[Page 886]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 277_PAYMENTS OF CERTAIN ADMINISTRATIVE COSTS OF STATE AGENCIES
--Table of Contents
 
Sec. 277.6  Standards for financial management systems.

    (a) General. This section prescribes standards for financial 
management systems in administering program funds by the State agency 
and its sub agencies or contractors.
    (b) Responsibilities. Financial management systems for program funds 
in the State agency shall provide for:
    (1) Accurate, current, and complete disclosure of the financial 
results of program activities in accordance with Federal reporting 
requirements.
    (2) Records which identify the source and application of funds for 
FNS or State agency activities supporting the administration of the 
Program. These records shall show authorizations, obligations, 
unobligated balances, assets, liabilities, outlays and income of the 
State agency, its sub- agencies and agents.
    (3) Records which identify unallowable costs and offsets resulting 
from FNS or other determinations as specified in Sec. 277.16 and the 
disposition of these amounts. Accounting procedures must be in effect to 
prevent a State agency from claiming these costs under ongoing program 
administrative cost reports.
    (4) Effective control and accountability by the State agency for all 
program funds, property, and other assets acquired with program funds. 
State agencies shall adequately safeguard all such assets and shall 
assure that they are used solely for program authorized purposes unless 
disposition has been made in accordance with Sec. 277.13.
    (5) Controls which minimize the time between the receipt of Federal 
funds from the United States Treasury and their disbursement for program 
costs. In the Letter of Credit system, the State agency shall make 
drawdowns from the U.S. Treasury through a U.S. Treasury Regional 
Disbursing Office as nearly as possible to the time of making the 
disbursements.
    (6) Procedures to determine the reasonableness, allowability, and 
allocability of costs in accordance with the applicable provisions 
prescribed in appendix A to this part.
    (7) Support and source documents for costs.
    (8) An audit trail including identification of time periods, initial 
and summary accounts, cost determination and allocation procedures, cost 
centers or other accounting procedures to support any costs claimed for 
program administration.
    (9) Periodic audits by qualified individuals who are independent of 
those who maintain Federal program funds as prescribed in Sec. 277.17.
    (10) Methods to resolve audit findings and recommendations and to 
follow up on corrective or preventive actions.
    (c) The standards in Sec. 277.6(b) apply to subagencies or 
contractors involved with program funding.