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Federal /State Government's right to disallow costs and recover funds on the basis of a later <br />audit or other review. Unless prohibited by Federal /State law or regulation, the Federal /State <br />Government may recover any Federal /State assistance funds made available for the Project as <br />necessary to satisfy any outstanding monetary claims that the Federal /State Government may <br />have against the Contractor. <br />g. Federal /State Claims Excess Payments Disallowed Costs, including <br />Interest. <br />(1) Contractor's Responsibility to Pay. Upon notification to the Contractor <br />that specific amounts are owed to the Federal /State Government, whether for excess payments <br />of Federal /State assistance, disallowed costs, or funds recovered from third parties or <br />elsewhere, the Contractor agrees to remit to the Department promptly the amounts owed, <br />including applicable interest and any penalties and administrative charges. <br />(2) Amount of Interest. The Contractor agrees to remit to the Department <br />interest owed as determined in accordance with N.C.G.S. 147 - 86.23. Upon notification to the <br />Contractor that specific amounts are owed to the Federal Government, whether for excess <br />payments of Federal assistance, disallowed costs, or funds recovered from third parties or <br />elsewhere, the Contractor agrees to remit to the Federal Government promptly the amounts <br />owed, including applicable interest, penalties and administrative charges. <br />(3) Payment to FTA. Upon receipt of repayment from the Contractor, the <br />Department shall be responsible to remit amounts owed to FTA. <br />h. De- obligation of Funds. The Contractor agrees that the Department may de- <br />obligate unexpended Federal and State funds before Project closeout. <br />Section 5. Accounting Records. <br />a. Establishment and Maintenance of Accounting Records. The Contractor <br />shall establish and maintain separate accounts for the public transportation program, either <br />independently or within the existing accounting system. All costs charged to the program shall <br />be in accordance with most current approved Annual Budget and shall be reported to the <br />Department in accordance with UPTAS. <br />b. Documentation of Project Costs. All costs charged to the Project, including <br />any approved services performed by the Contractor or others, shall be supported by properly <br />executed payrolls, time records, invoices, contracts, or vouchers evidencing in detail the nature <br />and propriety of the charges, as referenced in 49 C.F.R. 18, the Office of Management and <br />Budget Circulars A -87, "Costs Principles for State, Local, and Indian Tribal Governments" and <br />A -102 "Grants and Cooperative Agreements with State and Local Governments." <br />C. Allowable Costs. Expenditures made by the Contractor shall be reimbursed <br />as allowable costs to the extent they meet all of the requirements set forth below. They must <br />be: <br />(1) Consistent with the Project Description, plans, specifications, and <br />Project Budget and all other provisions of this Agreement; <br />(2) Necessary in order to accomplish the Project; <br />(3) Reasonable in amount for the goods or services purchased; <br />(4) Actual net costs to the Contractor, i.e., the price paid minus <br />any refunds (e.g., refundable sales and use taxes pursuant to N.C.G.S. <br />105 - 164.14), rebates, or other items of value received by the <br />Contractor that have the effect of reducing the cost actually incurred; <br />(5) Incurred (and be for work performed) within the period of performance <br />and period covered of this Agreement unless specific authorization <br />from the Department to the contrary is received; <br />Page 9 of 36 <br />