North Carolina Administrative Code › Title 10A - HEALTH AND HUMAN SERVICES › Chapter 01 - DEPARTMENTAL RULES › Subchapter A - PROCEDURE › Section .1000 - AUDITING PROCEDURES › Section 01A .1002 - AUDITS OF HOSPITALS, NONPROFITS, HIGHER EDUCATION AGENCIES

Current through Register Vol. 39, No. 2, July 15, 2024
(a) Public and private hospitals, public and
				  private institutions of higher education and quasi-public and private nonprofit
				  organizations [recipient organization(s)] which receive, use, or expend State
				  or Federal funds must comply with the requirements of
				  G.S.
				  143-6.1, Office of the State Auditor's Audit
				  Advisory #2 and OMB Circular A-133 as applicable. These regulations detail
				  reporting and other requirements that recipient organizations must meet in
				  order to receive State or Federal funds. Depending on the amount of State or
				  Federal funds received, used, or expended, the recipient organization(s) may be
				  required to have either an audit made or a sworn accounting of receipts and
				  expenditures.
(b) The University of
				  North Carolina and public hospitals operated by the State of North Carolina
				  have annual audits performed by the State Auditor. The scope of such audits and
				  the contents of the audit reports are the responsibility of the State Auditor
				  and shall be accepted and relied upon by the Department unless a cognizant
				  Federal agency finds that such audits do not meet the requirements of OMB
				  Circular A-133.
(c) The above audit
				  requirements are not applicable to procurements. However, the purpose and
				  substance of an agreement rather than form shall govern whether financial
				  assistance was provided. A subrecipient is an entity that receives financial
				  assistance passed down from the prime recipient. The subrecipient's
				  responsibility is to help the recipient meet the requirements of the assistance
				  award. The test for a subrecipient relationship is whether financial assistance
				  is received from a recipient to carry out a program. A vendor is an entity that
				  receives a procurement contract for goods or services. The vendor's
				  responsibility is to meet the requirements of the procurement
				  contract.
(d) The above audit
				  requirements do not replace a request for submission of audit reports in
				  connection with requests for direct appropriation of state aid by the General
				  Assembly through the Secretary of the Department for recommendations to the
				  Governor and the Advisory Budget Commission and the General Assembly in
				  accordance with
				  G.S.
				  159-34.
(e) The above audit requirements do not
				  replace requirements for submission of a financial audit report or financial
				  information by the Department in connection with applications for funding or
				  licensure, provider certification or cost reporting, and other purposes not
				  related to provision of State and Federal financial assistance.
(f) The Secretary of the Department may grant
				  a waiver of any or all of the audit standards to a recipient organization who
				  does not receive any grants, contracts or other financial assistance financed
				  in whole or in part with Federal funds when an audit of assistance financed
				  with State funds is not otherwise required by law and is not cost
				  effective.
(g) Each recipient
				  organization shall submit one copy of the audit report and corrective action
				  plan required in Paragraph (a) of this Rule to each division of the Department
				  which provided State or Federal financial assistance during the fiscal year
				  covered by such audit within 30 days from the date the report is issued by the
				  auditor, and no later than the 13th month following the close of the recipient
				  organization's fiscal year in which assistance was received.
(h) Upon receipt of the audit report the
				  Department shall conduct a desk review of the audit report to determine if the
				  reporting standards required in OMB Circular A-133 have been met. If an audit
				  received from a recipient organization does not meet the standards required in
				  OMB Circular A-133, the Secretary of the Department shall issue a letter of
				  determination to the recipient organization rejecting the audit and listing the
				  required standards that were not met. The recipient organization shall be
				  allowed no more than 90 days from the date of receipt of the Secretary's
				  determination letter to submit a revised audit report which meets the standards
				  required in OMB Circular A-133. If the recipient organization fails to submit
				  an audit report revised in accordance with the determination letter, the
				  Secretary of the Department may suspend further financial assistance payments
				  to the recipient organization or subject the recipient organization to an audit
				  or compliance review by the Department or the State Auditor.
(i) The Department or any affected division
				  of the Department may request any additional information deemed necessary for
				  clarification of an audit finding, recommendation, questioned cost or the
				  corrective action plan. The recipient organization shall provide the
				  information to the requesting official within 30 days after the receipt of the
				  request. If additional information or clarification from the independent
				  auditor is requested, the recipient organization shall direct their auditor to
				  provide the information requested to the requesting official.
(j) If the Department has reason to believe
				  that due professional care was not used in conducting the audit required under
				  OMB Circular A-133, or if the recipient organization or their auditor is
				  unwilling or unable to provide clarification or additional information
				  requested by an official of the Department, the Controller of the Department
				  may make or arrange for any review of the auditor's work papers deemed
				  necessary for timely resolution of the audit findings, recommendations, or
				  questioned cost.
(k) The Secretary
				  of the Department shall provide the recipient organization with a written
				  determination which accepts or rejects the corrective action plan for each
				  audit finding, recommendation or questioned cost that pertains to or otherwise
				  affects a program of the Department. If the corrective action plan is rejected
				  the reasons for the rejection and an acceptable corrective action shall be
				  specified in the determination letter. If the corrective action plan indicates
				  that the proposed corrective action for nonmonetary findings has not been
				  implemented, the determination on all nonmonetary findings shall specify the
				  time by which the local government or public authority shall implement the
				  corrective action if different from the time proposed in the corrective action
				  plan. The determination on all questioned cost or other charges to the
				  Department shall state whether the cost or other charge is allowable or
				  unallowable for reimbursement to the recipient organization under applicable
				  laws, rules and other provisions of assistance agreements. If a cost or other
				  charge to the Department is determined to be unallowable for reimbursement, the
				  determination letter shall require full monetary repayment to the Department
				  within 60 days of the date of the determination letter. The amount of any cost
				  or other charge determined to be unallowable shall constitute a debt due the
				  State of North Carolina until repayment in full is received by the
				  Department.
(l) A determination by
				  the Secretary of the Department required under Paragraph (k) or Paragraph (h)
				  of this Rule shall become final unless a petition for contested case is filed
				  in accordance with
				  G.S.
				  150B-23.
(m) Upon a petition for contested case filed
				  in accordance with
				  G.S.
				  150B-23, monetary repayment or implementation
				  of a corrective action required under Paragraph (k) of this Rule shall be
				  suspended only for individual determinations or parts of a determination
				  specifically disputed in the appeal. Interest may be charged under the
				  conditions specified under Paragraph (n) of this Rule on the amount of any cost
				  or other charge determined to be unallowable under Paragraph (k) of this
				  Rule.
(n) Except where otherwise
				  provided by statutes or regulations, Federal agencies are required to charge
				  interest on overdue amounts in accordance with the Federal Claims Collection
				  Standards (4 CFR Ch. II). The date from which interest is computed is not
				  extended by litigation or the filing of any form of appeal. If a Federal agency
				  charges the Department interest on the Federal share of an overdue amount from
				  a recipient organization, the Department shall charge the interest to the
				  recipient organization.
(o) If a
				  recipient organization fails to make repayment of an amount due to the
				  Department or obtain Department approval of a deferred payment plan by the "due
				  date" specified in Paragraph (k) of this Rule the Department shall offset the
				  amount of the disallowance or any portion thereof remaining unpaid and any
				  interest due from subsequent reimbursements or other amounts due the recipient
				  organization until the amount due is fully recovered.
(p) A recipient organization may propose a
				  plan for repayment of amounts determined to be unallowable on an installment
				  basis. The recipient organization must certify that it is unable to make
				  repayment by the "due date" specified in Paragraph (k) of this Rule and that
				  commercial financing can not be obtained. Repayment of the Federal share of
				  amounts determined to be unallowable shall not be allowed on an installment
				  basis unless the Federal grantor agency approves of the installment plan or
				  otherwise allows the Department the same installment repayment terms. Interest
				  may be charged as specified under Paragraph (n) of this Rule while awaiting
				  Federal approval of an installment plan or on installment payments.
(q) If a recipient organization fails to
				  submit the corrective action plan required under Paragraph (a) of this Rule or
				  additional information requested under Paragraph (i) of this Rule or fails to
				  implement corrective action within the time frame established by the Secretary
				  under Paragraph (k) of this Rule, the Secretary of the Department or the
				  Director of the requesting Division may suspend payment to the recipient
				  organization of all or any portion of the administrative and indirect cost
				  funding administered by the Department until such time as the required audit,
				  corrective action plan or additional information is submitted as requested.
				  Alternatively, the Secretary of the Department may issue a unilateral
				  determination on the audit findings, recommendations, and questioned cost
				  requiring any corrective action and repayment of questioned cost deemed
				  necessary for compliance with the laws and rules governing assistance programs
				  affected.
Authority
					 G.S.
					 143B-10(j);
					 143B-139.1;
Eff.
					 January 1, 1990;
Amended Eff. August 1, 2000;
Pursuant
					 to G.S.
					 150B-21.3A, rule is necessary without
					 substantive public interest Eff. April 23,
					 2017.