42 CFR 457.202 - Audits.
(a) Purpose. The Department's Office of Inspector General (OIG) periodically audits State operations in order to determine whether -
(1) The program is being operated in a cost-efficient manner; and
(2) Funds are being properly expended for the purposes for which they were appropriated under Federal and State law and regulations.
(1) The OIG releases audit reports simultaneously to State officials and the Department's program officials.
(2) The reports set forth OIG opinion and recommendations regarding the practices it reviewed, and the allowability of the costs it audited.
(3) Cognizant officials of the Department make final determinations on all audit findings.
(c) Action on audit exceptions -
(1) Concurrence or clearance. The State agency has the opportunity of concurring in the exceptions or submitting additional facts that support clearance of the exceptions.
(2) Appeal. Any exceptions that are not disposed of under paragraph (c)(1) of this section are included in a disallowance letter that constitutes the Department's final decision unless the State requests reconsideration by the Appeals Board. (Specific rules are set forth in § 457.212.)
(3) Adjustment. If the decision by the Board requires an adjustment of FFP, either upward or downward, a subsequent grant award promptly reflects the amount of increase or decrease.