401 KAR 42:335. Financial audits.

      RELATES TO: KRS 61.878(1)(c), 224.60-130(1)(d), (j), (k), 224.60-140(2)(a), (e)

      STATUTORY AUTHORITY: KRS 224.60-130(1)(k)

      NECESSITY, FUNCTION, AND CONFORMITY: KRS 224.60-130(1)(k) requires the establishment of the policy, guidelines, and procedures to perform a financial audit of an owner or operator receiving reimbursement for corrective action services from the cabinet, or of an entity who contracts or subcontracts for corrective action services at a facility whose owner or operator is eligible for reimbursement. This administrative regulation establishes procedures for audits and the penalties for noncompliance.

      Section 1. An entity shall be subject to financial audit if it is an entity described in KRS 224.60-130(1)(k).

      Section 2. Financial Audit Policy and Procedure. (1) The cabinet shall audit an entity if:

      (a) A document it is required to submit to the cabinet appears to be fraudulent; or

      (b) There is evidence or other reason to believe that the entity has violated a federal or state law or regulation related to its actions.

      (2) A record shall be subject to financial audit if it is described in KRS 224.60-130(1)(k).

      (3)(a) The cabinet shall notify the subject of the audit, in writing, of the date that the audit is scheduled to begin. The notice shall be sent at least ten (10) working days before the scheduled start of the audit.

      (b) A decision to reschedule the audit shall rest solely with the cabinet, and it shall not be rescheduled more than thirty (30) days after the date of the original audit.

      (4)(a) If the owner or operator fails to maintain records as required by KRS 224.60-130(1)(k), the cabinet shall recover money reimbursed to the owner or operator for the cost of corrective action at the facility to which the missing documents relate.

      (b) If an eligible contractor or subcontractor fails to maintain records as required by KRS 224.60-130(1)(k), the cabinet shall recover any monies paid to the entity pursuant to a contract or agreement to perform a corrective action service at that facility. If the entity is certified under 401 KAR 42:316, that certification shall be revoked or suspended in accordance with 401 KAR 42:316, Section 4.

      Section 3. Improper Use of Reimbursements. (1) If the audit by the cabinet finds an improper, irregular, or illegal use of money received directly or indirectly from the cabinet, or that the money was obtained by fraud or misrepresentation, the cabinet shall report the results of the audit to the proper authorities for civil and criminal investigation.

      (2) If the subject of the audit is certified pursuant to 401 KAR 42:314 or 401 KAR 42:316, and the audit conducted by the cabinet finds improper, irregular, or illegal use of money received directly or indirectly from the cabinet, or that the money was obtained by fraud or misrepresentation, the cabinet shall immediately revoke the certification in accordance with 401 KAR 42:314, Section 8, or 401 KAR 42:316, Section 4.

      (3)(a) Failure by an owner or operator to allow an audit shall render the petroleum storage tank owner or operator ineligible for reimbursement. Reimbursements to the owner or operator shall be subject to recovery by the cabinet.

      (b) Failure by a person certified pursuant to 401 KAR 42:316, or a supplier, provider, contract employee, or subcontractor of that person, to allow an audit shall result in the revocation of that certification. Reimbursements to that person, pursuant to a contract for a corrective action service, shall be subject to recovery by the cabinet. (25 Ky.R. 1274; Am. 2870; eff. 6-9-1999; Recodified from 415 KAR 1:135; 32 Ky.R. 2143; 33 Ky.R. 759; eff. 9-13-2006.)