# COMAR Title 26 — Department of the Environment ## Subtitle 01 — General Provisions ### Chapter 06 — Standards for Audits of Grants and Contracts with Providers and Local Agencies **Authority:** State Finance and Procurement Article, §7-404, Annotated Code of Maryland **Administrative History:** Effective date: August 12, 1985 (12:16 Md. R. 1605) **Administrative History:** Chapter recodified from COMAR 10.04.03 to COMAR 26.01.06 #### Regulation .01 Purpose. *COMAR 26.01.06.01* The purpose of this chapter is to prescribe standards, policies, and procedures for the auditing of grants and contracts of the Department of the Environment with vendors, providers of service, and local health departments. #### Regulation .02 Scope. *COMAR 26.01.06.02* A. This chapter shall apply to all contracts and grants made by the Department of the Environment with private vendors, grantees, and local health departments for which an audit is provided as described in State Finance and Procurement Article, §7-404, Annotated Code of Maryland. B. The audit shall determine whether funds were spent in accordance with the contract or grant agreement. C. The auditor shall review expenditures and revenues to determine if they are consistent with the approved budget and supported by documentation in accordance with the contract or grant agreement and generally accepted accounting principles. D. The audit shall establish amounts due to or from the State by comparison of budgeted, reported, and audited expenditures net of revenues and funded amounts. E. The audit findings shall be the basis for making a final settlement of the grant or contract. #### Regulation .03 Definitions. *COMAR 26.01.06.03* A. The following terms have the meanings indicated. B. Terms Defined. (1) “Contract” means a formal agreement between the Department of the Environment and a provider of services to conduct a program or perform specified services for a consideration. (2) “Expenditures” means disbursement of funds to pay vendors and employees for goods or services provided. (3) “Grant” means an award of financial assistance to an eligible recipient under programs that provide for this assistance based on review and approval of an application setting forth a proposed activity or program. (4) “Grantee” means that institution, public or private agency, corporation, organization, or other legally accountable entity that receives a grant and assumes legal and financial responsibility and accountability both for the awarded funds and for the performance of the grant supported activity. (5) “Revenues” mean monies generated by the program, such as client fees, payments by third parties, contributions and interest earned on deposited grant funds. (6) “Sub-grantee” means one of two or more entities whose activities, individually and collectively, are intended to fulfill the purpose of the grant program pursuant to an agreement between the sub-grantee and the grantee. #### Regulation .04 Agency Responsibility. *COMAR 26.01.06.04* A. The Secretary of the Environment shall provide for a periodic examination of the accounts and records of grantees and local health departments receiving funds under contracts and grants with the Department. In addition, periodic audits shall be conducted of the accounts and records of vendors providing purchase of care services for children, juveniles, and adults in non-governmental facilities. The purpose of the audit is to determine if the expenses incurred for which reimbursement was received were in accordance with allowable cost guidelines of the grant award and contractual agreement. B. Finance and Administration of the Department of the Environment shall be responsible for auditing the accounts and records of all grantees, local health departments, and vendors providing purchase of care services under grants and contracts with the Department, except for those grants and contracts with local governments for which audits have been conducted in accordance with the Single Audit Act of 1984. If these audits are not conducted, or are conducted but do not satisfy the information requirements of the Department, Finance and Administration shall be responsible for such further auditing as it deems necessary under the circumstances. C. The audits shall be conducted in accordance with the terms of the grant or contract, or both, and in accordance with allowable cost guidelines of the Department of the Environment and its various administrations. D. Finance and Administration of the Department of the Environment may audit a sub-grantee, notwithstanding the responsibility of the primary grantee when it is in the interest of the State to do so. The Department, when it elects to audit a sub-grantee, shall inform the primary grantee, in writing, that the primary grantee is absolved of the responsibility stated in Regulation .05C, of this chapter. E. Finance and Administration shall conduct an exit conference upon the conclusion of the audit. Before the exit conference the grantee, vendor, or local health department shall be given a draft audit report containing all findings, exceptions, and recommendations of the auditors. In addition, the draft report shall provide detailed information pertaining to amounts due to or from the State resulting from the audit. F. Finance and Administration, after consideration and evaluation of additional information and evidence presented subsequent to the promulgation of the draft audit report, shall issue a final audit report. G. The final audit report shall be distributed to the: (1) Grantee, provider, vendor, or local health department; (2) Finance and Administration of the Department of the Environment, as applicable; (3) Director of the appropriate program administration of the Department of the Environment. H. Finance and Administration in the final audit report shall: (1) Address and explain each exception identified by the auditor; (2) Make recommendations for correction of each exception cited in the report; (3) Specify amounts due and to whom; (4) Comment on any other issue warranting attention. I. The audits shall be performed at the intervals and in the manner approved and determined by the Secretary of the Environment or Director of the appropriate program administration, after consultation with the Chief of Finance and Administration. #### Regulation .05 Grantee Responsibility. *COMAR 26.01.06.05* A. The grantee, provider, and local health departments shall provide full disclosure of all accounting, financial, and other records as needed, to Finance and Administration during regular business hours of the audited organization. B. The grantee, provider, and local health department shall retain all accounts and records of the grant or contract for a period of 5 years following the close of each fiscal year for audit by the Department. C. Each primary grantee shall be responsible for auditing sub-grantees in accordance with the chapter. D. Each grantee shall maintain detailed accounting records as to receipts and expenditures of grant funds pertaining to the direct administration of the program. Each sub-grantee is accountable to the primary grantee, who is responsible directly to Finance and Administration of the Department of the Environment. E. Revenues collected as a result of sale of goods and services rendered by persons or facilities receiving grant funds shall be credited to the grant program, and be applied as a reduction of the gross expenditures of the program. These revenues shall include fee collections, third-party payments, and proceeds from sales of goods obtained or manufactured with labor and materials paid for with grant funds. Revenues shall also include interest earned on deposited grant funds and contributions, with the exception of those contributions which are undesignated. F. The grantee, provider, or local health department shall have the right to present additional information and evidence to support its position relative to the audit findings. This information and evidence may be presented at the exit conference or at any time before the issuance of the final audit report.