The information in this section applies to recipient agencies participating in the Special Nutrition Programs who are required to obtain an audit in accordance with the Single Audit Act, as amended.

1. (1) An applicant or recipient agency whose contract has been terminated has the right to appeal the termination as specified in Chapter 79 of this title (relating to Legal Services).

2. (2) The Texas Department of Human Services (DHS) imposes fiscal sanctions on recipient agencies for failure to comply with the requirements of the Single Audit Act, as amended.

   1. (A) DHS takes fiscal sanctions against a recipient agency according to the procedures specified in subparagraphs (A)-(D) of this paragraph.

      1. (i) DHS notifies each recipient agency upon approval of the application for program participation of the date by which an acceptable audit must be received by DHS, and that failure to comply will result in contract termination and recovery of overpayments as identified through audit findings.

      2. (ii) DHS provides the recipient agency two advance notices reminding the recipient agency of the specific date that the audit is due.

         1. (I) DHS issues the first notice by regular mail six months after the end of the recipient agency's fiscal year for which the audit is due.

         2. (II) DHS issues the second notice by certified and regular mail eight months after the end of the recipient agency's fiscal year for which the audit is due. DHS notifies the recipient agency that:

            (-a-) DHS must receive the audit on or before the due date specified in the notice;

            (-b-) if DHS does not receive the audit on or before the specified due date, DHS will terminate the recipient agency's contract effective the first day of the month following the month in which the audit was due; and

            (-c-) the recipient agency has the right to appeal this decision.

      3. (iii) If DHS does not receive the audit on or before the specified due date, DHS notifies the recipient agency by certified and regular mail that their contract was terminated effective the first day of the month following the month in which the audit was due.
   2. (B) If DHS has determined there are extenuating circumstances, DHS may conduct an audit, either directly or through the engagement of a third party. All costs associated with such an audit must be paid by the recipient agency.

   3. (C) If a recipient agency submits an audit which does not meet the requirements of the Single Audit Act, as amended, then DHS notifies the recipient agency in writing that the audit is unacceptable, how it is unacceptable, and that the recipient agency has 30 calendar days from the date on the notification to submit an acceptable audit to DHS. If DHS does not receive the required audit by the specified time frame and has not granted an extension of the due date, DHS notifies the recipient agency by certified and regular mail that:

      1. (i) the recipient agency failed to provide an acceptable audit within the specified time frames;
      2. (ii) DHS must receive an acceptable audit by the due date specified in this notification;
      3. (iii) if DHS does not receive an acceptable audit by the specified due date, DHS will terminate their contract effective the first day of the month following the due date specified in this notification; and
      4. (iv) the recipient agency has the right to appeal this decision. DHS may extend the time within which a recipient agency must submit an audit if DHS determines such an extension is justified.

   4. (D) If DHS does not receive the required audit by the specified due date and has not granted an extension of the due date, DHS notifies the recipient agency by certified and regular mail that:

      1. (i) the recipient agency failed to provide an acceptable audit by the specified due date; and
      2. (ii) DHS terminated their contract effective the first day of the month following the specified due date.
   5. (E) Once a recipient agency has been terminated for failure to submit an acceptable audit, the recipient agency must provide an acceptable audit for any outstanding audit year(s) and comply with the requirements of the Single Audit Act, as amended, in order to be eligible to participate in the Special Nutrition Programs.

Source Note:The provisions of this §377.105 adopted to be effective December 1, 1995, 20 TexReg 9190; amended to be effective October 1, 1998, 23 TexReg 9785; transferred effective April 1, 2004, as published in the Texas Register July 2, 2004, 29 TexReg 6359.