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CHAPTER 1-180

AUDIT RESOLUTION AND COST DISALLOWANCES

1-180-00 What does this chapter do?

1-180-10 What audits and reviews are covered by this chapter?

1-180-20 What is our primary emphasis in resolving an audit?

1-180-30 What process do we use to develop an audit resolution?

1-180-40 How do we process our audit decision?

1-180-50 How can you appeal our audit decision?

Exhibit 1 Audit Decision Form

Exhibit 2 Sample Decision Transmittal to Recipient

1-180-00 What does this chapter do?

This chapter provides an overview of our policies and procedures for resolving audit findings 

related to assistance agreements awarded by us, the Office of Surface Mining Reclamation and 

Enforcement (OSMRE). It also describes how we may evaluate audit cost disallowances based 

on projecting audit findings to time periods not specifically examined by the auditors. 

1-180-10 What audits and reviews are covered by this chapter?

A. The Uniform Administrative Requirements, Cost Principles and Audit Requirements for 

Federal Awards, at 2 CFR Part 200, Subpart F, requires recipients that expend $750,000 

or more in a year in Federal awards to conduct a single audit of the organization’s 

financial statements and Federal awards. Audit issues for our assistance agreements 

normally come from the single audit process through the cognizant Federal agency, the 

lead Federal agency working with your organization. We will use the procedures in this 

chapter to resolve single audit issues. 

B. These procedures also apply to issues raised by other audits, such as the Government 

Accountability Office or the Department of the Interior Inspector General’s Office. They 

also apply to other financial or management reviews of the assistance agreements with 

findings or recommendations that we must resolve. 

1-180-20 What is our primary emphasis in resolving an audit?

A. When auditors report deficiencies in an organization with which we have a continuing 

relationship, our primary emphasis is to ensure that the deficiencies are adequately 

corrected. We must ensure that the deficiencies will not occur again under this 

agreement or any future assistance agreements.

B. If we disallow costs, we will limit the disallowance to costs incurred during (a) the 

organization's three fiscal years immediately preceding the starting date of the audit, and 

(b) subsequent periods up to the date the deficiencies are corrected. 
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For example, if an audit of a grant for the period July 1, 2009, through June, 30, 2010, 

found deficiencies in a recipient’s management system and questioned cost amounts 

based on extending the findings to earlier or later grants, we would limit the disallowed 

costs as follows.

Date audit started: December 12, 2010

Organization’s three previous fiscal years: July 1, 2007, through June 30, 2010

Date deficiencies corrected: July 1, 2011

Limitation on cost disallowances: July 1, 2007, through June 30, 2011

1-180-30 What process do we use to develop an audit resolution?

A. We must resolve all audits in a timely and proper manner. Our awarding office will 

resolve audits within 60 calendar days of our receipt. The 60-day period allows 30 days 

for you, the recipient, to respond to the audit findings. In the remaining 30 days, we will 

review your response, develop an appropriate resolution of the issue, approve the 

resolution, and inform you and our agency officials.

B. We receive the audit report and distribute it to the awarding office for review and 

resolution.

1. Normally, the Department of the Interior Office of Inspector General (DOI-OIG) 

receives an audit report from your cognizant Federal agency or from the auditors. 

DOI forwards the audit to OSM’s Office of Planning, Analysis and Budget 

(OPAB).

2. OPAB reviews the report and forwards it to the appropriate Regional Director 

(RD) for review. If we have any issues to resolve, OPAB enters the report into 

OSM’s audit tracking system.

3. The RD forwards the audit report to the grants specialist who works with that 

recipient. The grants specialist must review the report. If we have no issues to 

resolve, the awarding office need not take any further action on the audit.

C. We request your response to the audit findings.

1. Our grant specialist will prepare a written request to you asking you to respond to 

the audit findings. The request must include a summary of the findings to be 

resolved, and a copy of the relevant portion of the audit report. We will inform 

you that your response is due back to us 30 days after you receive the request. 

Our request should be signed or approved by the official authorized to approve 

your assistance award. Our grant specialist must confirm the date you receive the 

letter through the use of certified mail, a documented telephone conversation, or 
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other means. Our grant specialist will keep in contact with you throughout the 30-

day response period and provide technical assistance as needed.

2. You may request an extension to the 30-day response deadline. Your request 

must be fully justified, with an explanation of the unusual circumstances which 

prevent your timely response. Your request must also include a schedule for the 

final response. 

3. Our awarding office may choose to approve or disapprove your request. If our 

approval will delay resolution of the audit beyond the 60-day period, our grant 

specialist must notify OPAB of the reason for the extension and the new audit 

resolution due date.

D. You respond to the audit findings in writing. 

1. Your audit response must state whether you concur or disagree with each finding 

or recommendation. If you concur, you should specify how and when you will 

implement corrections and system changes. If you concur that questioned costs 

should be disallowed, you must specify when you will pay back the funds for the 

disallowed costs. 

2. If you disagree with a finding or recommendation or questioned cost, you should 

justify your position and offer any alternative information or supporting 

documentation. You should send the response to our grants specialist.

E. If you do not respond within the 30-day deadline, our grants specialist may proceed on 

the basis of the available information to recommend resolution actions and prepare the 

decision letter to be signed by our authorized official.

F. We review your response.

1. In evaluating your response, the standard we apply is whether the costs are 

allowable, documented, reasonable, and justified. Factors such as the good faith 

of the organization, successful accomplishment of program objectives, or your 

ignorance of requirements should not be used as a basis for allowing costs which 

are unallowable. Our awarding office is not authorized to waive collection of 

unallowable costs. 

2. The auditor’s findings may have been based on estimates or statistical sampling of 

a few documents, with the findings projected to the total population. If you 

present an alternative sampling methodology or analysis, we may choose to 

accept it. 
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3. If the auditor questioned costs because you failed to request advance agency 

approval, but we would have approved the action if you had requested it, the 

official who would have approved the request may allow the questioned costs. 

4. If the information you submit is inadequate or inconclusive, our grant specialist 

may recommend disallowance of the entire questioned amount. Alternatively, our 

grant specialist may work with you to obtain more information. 

G. We may have meetings and discussions with you before we make audit decisions.

1. If your response is inadequate, our grant specialist may contact you and request 

additional information or a revised response. Alternatively, the grant specialist or 

other staff may perform an on-site review of your records to acquire the needed 

information. However, the requirement for timely resolution of audits still 

applies. If these actions will result in a delay of audit resolution beyond the 60-

day period, our grant specialist must notify OPAB of the reason for the delay and 

the new audit resolution due date.

2. Our officials may need to meet with your officials to develop acceptable actions 

and schedules to resolve audit concerns or to design changes needed in procedures 

and systems. Written meeting notes must be kept. The decision letter resolving 

the audit must include agreements developed in these meetings.

3. We have found that it is best to get your concurrence with all aspects of a 

proposed resolution before we make our decision. When possible, we will discuss 

any plan to require changes in your processes, or systems with you before we 

include it in our audit decision.

4. If we decide to disallow costs, our awarding office will discuss with you how you 

will pay them. If appropriate, we will meet with you either before or after 

issuance of the decision letter to negotiate an extended payment plan for 

disallowed costs. 

1-180-40 How do we process our audit decision?

A. After full consideration of your responses and other pertinent information obtained, our

grant specialist will recommend whether or not to allow any questioned costs, and what 

corrective actions we will require to resolve administrative findings. The official 

authorized to approve your assistance agreements must approve the resolution. 

B. We will document our audit decision and prepare a transmittal to send it to you.
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1. Our awarding office will use the Audit Decision Form (Exhibit 1) to document all 

decisions made to resolve the audit. Both our grant specialist and the official 

authorized to approve our assistance awards must approve the form. For each 

finding, the form will accomplish the following: 

a. Summarize the initial audit report finding.

b. Summarize your response.

c. Summarize any discussion or any other pertinent factors.

d. State the final decision.

e. Identify any corrective actions to be taken by you and include the schedule 

to implement them.

f. Identify any follow-up reviews or actions we will be doing.

g. Identify total disallowed costs and include a plan for collecting them.

2. We will use a transmittal document to send the Audit Decision Form to you. 

Exhibit 2 is an outline of a sample letter. The transmittal is prepared by our grant 

specialist and approved by the official authorized to approve your assistance 

awards. Our transmittal will accomplish the following:

a. Identify the audit number.

b. Refer to the attached Audit Decision Form.

c. Specify payment procedure, address, and due date for any amounts owed. 

The due date should be 30 days after your receipt of the decision.

d. Identify any revised cost reports you must submit.

e. Summarize the appeal procedures you may use.

f. State that the resolution is final unless questioned by DOI OIG.

g. Identify an OSMRE contact for further assistance.

C. We will distribute the Audit Decision Form and approved cover letter as follows.

1. Send the approved Audit Decision Form and transmittal to you. Our grant 

specialist will confirm the date you receive them.

2. Send the Audit Decision Form and transmittal to OPAB. They will send it to 

DOI-OIG for final approval of the resolution.

3. If we must collect any disallowed costs, we will send the transmittal to our 

Division of Financial Management (DFM) for further action

4. File the approved Audit Decision Form and transmittal in our awarding office. It 

should be filed in the audit resolution file as well as in the official file for each 

assistance agreement affected.
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D If we disallow any costs, we will develop a written agreement with you confirming the 

payment plan that is included with the Audit Decision Form. Authorized officials of your 

organization and our awarding office must sign or approve the payment agreement. We 

must send a copy of the approved payment plan to DFM for collection. DFM will initiate 

collection proceedings according to the payment plan. 

E. If the audit decision calls for a follow-up review to confirm that corrective actions have 

been implemented, our grant specialist should schedule and perform the review as soon 

as feasible for the review topic. The grant specialist must notify the official authorized to 

sign our assistance awards and OPAB of the results of the follow-up review.

F. Upon repayment of all identified disallowed costs and implementation of all required 

corrective actions, our awarding office must notify you and OPAB that the audit 

resolution is complete. OPAB must close out the audit in our audit tracking system.

1-180-50 How can you appeal our audit decision?

A. If you do not concur with the awarding office’s decision on an audit finding, whether 

fiscal, or administrative, you may appeal the decision to the RD of the appropriate region. 

1. You must send a formal appeal letter within 30 days after you receive the 

awarding office decision. Your appeal must include the reasons for contesting the 

audit decision and all information necessary for review of the appeal.

2. Our RD should assign a coordinator for the audit appeal process. The coordinator 

should not have been involved in the initial decisions being appealed.

3. The coordinator must provide you with written confirmation that we have 

received your appeal letter within three days of receipt. 

4. If you are appealing disallowed costs, the coordinator must notify DFM that you 

have filed an appeal. DFM will suspend collection procedures during the appeal, 

but late charges will continue to accrue.

5. The coordinator should obtain comments on the appeal from our grant specialist, 

our authorized official who signed the initial audit decision, and from all other 

interested parties. The coordinator will provide to the RD all information needed 

to decide the appeal.

6. The RD will make an initial decision on the appeal within 30 days of receiving 

your appeal. We will not send this initial decision to you. OPAB must concur 

with the decision before it becomes final. We should complete this coordination 

and review process within 30 days. Our final decision is due to you within 60 

days of receiving your appeal. 
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7. If we cannot issue the final decision within 60 days of receiving your appeal, the 

appeal coordinator will notify you and OPAB of the reason for the delay, and the 

revised decision date.

B. If you do not agree with the appeal decision, you may appeal the decision to the Director 

of OSMRE for final resolution.
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Exhibit 1

Audit Decision Form

1. Audit Control Number: 

2. Recipient: 

3. Audit findings resolved: (For each audit finding resolved, show the finding number, the 

agreement number(s), the original finding, the amount of costs questioned, the recipient’s 

response, the resolution decision, and the amount of costs disallowed. Use space “A” 

below for the first finding resolved, and add another letter for each additional finding. 

Expand this section or use additional pages as needed.)

A.

4. Total amount of costs disallowed: $ 

Collection plan: (Fully describe all elements of plan, including schedule for payment(s).)

5. Approvals

Grants Specialist:

 

 Signature Date 

Authorized Approving Official: 

 

 Signature Date 
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Exhibit 2

Sample Decision Transmittal to Recipient

Dear:

The purpose of this letter is to inform you of our resolution of the Single Audit of the State of 

_______, for the period ending _______, dated ________.

Enclosed is the Audit Decision Form detailing the resolution of each audit finding relating to the 

OSMRE assistance agreements.

The disallowed costs resulting from this audit total $_____. Please send a check in this amount 

payable to the Office of Surface Mining Reclamation and Enforcement to the following address 

by no later than [date] . If payment is not received by OSMRE prior to this date, interest 

charges will begin. 

[grants specialist or payment address]

Please prepare revised [final] cost reports for agreements [numbers] , and send them to the 

following address by no later than [date] .

[report address]

If you wish to appeal any of these decisions, an appeal letter must be sent to the following 

address by [due date] .

Director, Regional Office

[address]

You may consider this resolution to be final unless notified otherwise by this office. If the 

Department of the Interior, Office of Inspector General questions any of these decisions, we may 

reopen the audit resolution

If you have any questions or we may be of any assistance, contact [grant specialist] at 

_________.

Thank you for your assistance with this audit resolution.

Sincerely,

[Official authorized to approve agreements]