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(3) The Contractor understands and agrees that payment to the Contractor for any Project cost does not constitute the Federal/State Government's final decision about whether that cost is allowable and eligible for payment and does not constitute a waiver of any violation by the Contractor of the terms of this Agreement. The Contractor acknowledges that the Federal /State Government will not make a final determination about the allowability and eligibility of any cost until an audit of the Project has been completed. If the Federal/State Government determines that the Contractor is not entitled to receive any portion of the Federal/State assistance the Contractor has requested or provided, the Department will notify the Contractor in writing, stating its reasons. The Contractor agrees that Project closeout will not alter the Contractor's responsibility to return any funds due the Federal /State Government as a result of later refunds, corrections, or other transactions; nor will Project closeout alter the Federal /State Government's right to disallow costs and recover funds on the basis of a later audit or other review. Unless prohibited by Federal /State law or regulation, the Federal / State Government may recover any Federal /State assistance funds made available for the Project as necessary to satisfy any outstanding monetary claims that the FederaUState Government may have against the Contractor. d. Federal /State Claims Excess Payments, Disallowed Costs including Interest. (1) Contractor's Responsibility to Pay Upon notification to the Contractor that specific amounts are owed to the Federal /State Government, whether for excess payments of Federal /State assistance, disallowed costs, or funds recovered from third parties or elsewhere, the Contractor agrees to remit to the Department promptly the amounts owed, including applicable interest and any penalties and administrative charges. (2) Amount of interest The Contractor agrees to remit to the Department interest owed as determined in accordance with N.C.G.S. 147 - 86.23. Upon notification to the contractor that specific amounts are owed to the Federal Government, whether for excess payments of Federal assistance, disallowed costs, or funds recovered from third parties or elsewhere, the Contractor agrees to remit to the Federal Government promptly the amounts owed, including applicable interest, penalties and administrative charges. (3) Payment to FTA Upon receipt of repayment from the Contractor, the Department shall be responsible to remit amounts owed to FTA. e. De- obligation of Funds The Contractor agrees that the Department may de- obligate unexpended Federal and State funds before Project closeout. Section 9. Accounting & Accounting Records a. Cost Accounting System. The Contractor will be responsible for having an adequate cost accounting system, and the ongoing burden of proof of adequacy for such system shall be upon the Contractor. The Department will determine whether or not the Contractor has an adequate cost accounting system. Such determination shall be documented initially prior to payment of any invoices pursuant to the Agreement, and from time to time as deemed necessary by the Department. In the event of a negative finding during such determining proceedings, the Department may suspend, revoke, or place conditions upon its determination, and /or may recommend or require remedial actions as appropriate. b. Establishment and Maintenance of Accounting Records. The Contractor shall establish and maintain separate accounts for the public transportation program, either independently or within the existing accounting system. All costs charged to the program shall be in accordance with most current approved Annual Budget and shall be reported to the Department in accordance with UPTAS. C. Documentation of Project Costs All costs charged to the Project, including any approved services performed by the Contractor or others, shall be supported by properly executed payrolls, time records, invoices, contracts, or vouchers evidencing in detail the nature Updated 3/01/11 Page 10 of 41 F -8 Attachment number 2 Page 144