(a) The Commissioner pursuant to sections 18-b and 14-g of the Transportation Law, and any city or county contracting for the provision of mass transportation services pursuant to section 119-r of the General Municipal Law has the power to audit and examine the accounts, books, records, documents and papers of any participating public transportation system or person, firm, or corporation. In the event the system, or person, firm, or corporation refuses to comply with the audit provisions, all future operating assistance payments will be withheld to that system or person, firm, or corporation, until the system, or person, or firm or corporation complies with the audit provisions. Furthermore, the Commissioner shall be provided, upon request with copies of audits performed by or in satisfaction of requirements for other levels of government that directly related to the provision of governmental operating aid.

(b) When either final financial reports, subject to adjustment by audit, or an audit of a prior year does result in an overpayment, the amount of the overpayment including interest per section 975.16 of this Part will be recovered either from the municipal sponsor or directly from intercity carriers under contract from the Department. Overpayment amounts can be recovered through the reduction of future STOA payments or repayment from the local government. In the event there are no further STOA payments due, the State will take whatever steps are appropriate to recover the funds.

(c) If a county or city elects to contract with a municipality, corporation, firm, or individual for the provision of mass transportation services, pursuant to section 18-b of the Transportation Law and section 119-r of the General Municipal Law, auditing expenses necessitated solely by State operating assistance program participation may be considered as part of the required matching payment; however, eligible annual auditing expenses may not exceed one percent of the amount of state operating aid received in a year or $5,000 per subsidiary, corporation or individual operator, which ever is greater.