[Code of Federal Regulations]
[Title 7 Volume 4]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR246.20]

[Page 356-357]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 246--SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN--Table of Contents
 
                    Subpart F--Monitoring and Review
 
Sec. 246.20  Audits.

    (a) Federal audit responsibilities. (1) OIG reserves the right to 
perform audits of State and local agencies and other organizations 
involved in the Program as determined by OIG to be necessary. In 
performing such audits, OIG will rely to the extent feasible on audit 
work performed by other Federal and non-Federal auditors.
    (2) The State agency may take exception to particular audit findings 
and recommendations. The State agency shall submit a response or 
statement to FNS as to the action taken or a proposed corrective action 
plan regarding the findings. A proposed corrective action plan developed 
and submitted by the State agency shall include specific timeframes for 
its implementation and for completion of correction of deficiencies and 
their causes.
    (3) FNS will determine whether Program deficiencies have been 
adequately corrected. If additional corrective action is necessary, FNS 
shall schedule a follow-up review, allowing a reasonable time for such 
corrective action to be taken.
    (b) State audit responsibilities. (1) State agencies shall comply 
with the provisions of 7 CFR part 3016 regarding independent 
organization-wide audits of financial operations. In conformance with 7 
CFR part 3016, State agencies shall arrange for independent audits of 
financial operations, including compliance with appropriate provisions 
of Federal laws and regulations, and shall ensure that audits are made 
on an organization-wide basis rather than on a program basis. When 
organization-wide audits are done the State agency shall cause 
procedures to be established which ensure that FNS programs are included 
in the universe of Federal awards from which a sample is drawn.

[[Page 357]]

    (2) Such organization-wide audits shall be used to determine 
whether--
    (i) Financial operations are conducted properly;
    (ii) Financial statements are presented fairly;
    (iii) State and local agencies are complying with the laws, 
regulations and administrative requirements that affect the expenditure 
of Federal funds;
    (iv) State and local agencies have established internal procedures 
to meet the financial management objectives of federally assisted 
programs; and
    (v) State and local agencies are providing accurate and reliable 
information to the Federal government. If such agencies fail to arrange 
for the required audits at the appropriate frequency or fail to ensure 
that an acceptable audit is performed at the appropriate frequency, the 
respective cognizant audit agencies may arrange for the performance of 
the required audits. If the cognizant audit agencies arrange for the 
required audits because of these circumstances, the State agencies shall 
reimburse the respective cognizant audit agencies for the pro rata cost 
of their organization-wide audits.
    (3) Each State agency shall make all State or local agency sponsored 
audit reports of Program operations under its jurisdiction available for 
the Department's review upon request. The cost of these audits shall be 
considered a part of nutrition services and administration costs and may 
be funded from the State or local agency nutrition services and 
administration funds, as appropriate. For purposes of determining the 
Program's pro rata share of indirect costs associated with organization-
wide audits, the cost of food shall not be considered in the total 
dollar amount of the Program.