ADOPTED RULES An agency may take final action on a section 30 days after a proposal has been published in the Texas Register. The section becomes effective 20 days after the agency files the correct document with the Texas Register, unless a later date is specified or unless a federal statute or regulation requires implementation of the action on shorter notice. If an agency adopts the section without any changes to the proposed text, only the preamble of the notice and statement of legal authority will be published. If an agency adopts the section with changes to the proposed text, the proposal will be republished with the changes. TITLE 10. COMMUNITY DEVELOPMENT Part V. Texas Department of Commerce Chapter 187. Job Training Partnership Act Rules Subchapter D. Performance Standards 10 TAC sec.sec.187.161, 187.163, 187.164 The Texas Department of Commerce adopts amendments to sec. sec.187.161, 187. 163, and 187.164, concerning incentive grants for exceeding Job Training Partnership Act Performance Standards. Section 187.163, Incentive Grants for Exceeding DOL Performance Standards, is adopted with changes to the proposed text as published in the May 2, 1995, issue of the Texas Register (20 TexReg 3227). Section 187.161, Variations to DOL Performance Standards, and sec.187.164, Incentive Grants for Exceeding State Standards, are adopted without changes and will not be republished. The amendments are being adopted to incorporate policy modifications and clarification of procedures. Section 187.163(a)(5) has been amended to clarify that the criteria regarding exceeding performance standards refers to either the "federally required performance measures" or state established performance measures. Written comments were received from West Central Council of Governments, WorkForce Development Corporation and the Working Connection. None of the commenters opposed the adoption of the rules; however, some expressed concerns about specific parts of the rule, raised questions and made recommendations. COMMENT: A commenter suggested that sec.187.163(a)(5) be eliminated or clarified. RESPONSE: The Texas Department of Commerce agrees and has amended the rule to clarify that, "federally required performance measures" are included in the standards. COMMENT: A commenter suggested changes to the incentive policy, which was recommended by the Texas Council on Workforce and Economic Competitiveness (TCWEC), and approved by the Governor. RESPONSE: The Texas Department of Commerce will assure that TCWEC staff is provided copies of the comments and suggestions, which do not apply to the rule itself, but rather to the incentive policy, for their consideration in formulating future incentive policy. COMMENT: A commenter questioned the fiscal implications of enforcing or administering the rules at the Service Delivery Area (SDA) level. RESPONSE: The Texas Department of Commerce responds that since the SDA is not charged with either the enforcement or administration of the rules, there are none. COMMENT: A commenter expressed concern that some SDAs might be unaware of certain requirements with respect to eligibility for incentive awards for the current program year. RESPONSE: The requirements expressed in the rule are consistent with both Federal requirements and state policy which were effective at the beginning of the program year and were made available to the SDAs at that time. The amendments are adopted under the Texas Government Code, sec.481.0044(a), which authorizes the policy board to adopt rules necessary for the administration of department programs. The Texas Labor Code, sec.301.051 is affected by the adopted amendments to sec.sec.187.161, 187.163 and 187.164. No other statute or regulation will be affected. sec.187.163. Incentive Grants for Exceeding DOL Performance Standards. (a) Incentive grants will be awarded only to eligible SDAs that exceed established standards for Title IIA and IIC programs. To be eligible for consideration, an SDA must meet all of the following criteria: (1) meets at least four of the following DOL standards: (A) adult follow-up employment rate; (B) adult follow-up weekly earnings; (C) adult welfare follow-up employment rate; (D) adult welfare follow-up weekly earnings; (E) youth entered employment rate; and (F) youth employability enhancement rate; (2) meets at least one of the DOL youth standards; (3) meets the requirement that at least 65% of the SDA's Title IIA participants be hard-to-serve; (4) meets the requirement that at least 65% of the SDA's Title IIC participants be hard-to-serve; (5) exceeds at least one of the federally required or state established performance measures published by the Department in the Texas Register. (b) SDAs will receive incentive awards only for performance measures which have been exceeded. (c) Each SDA's available incentive award funds will be allocated among the established performance standards in the percentages established by the governor, at the end of a program year based on the SDA's reported performance. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 7, 1995. TRD-9508388 Brenda F. Arnett Executive Director Texas Department of Commerce Effective date: July 28, 1995 Proposal publication date: May 2, 1995 For further information, please call: (512) 936-0515 Subchapter F. Financial Management Rules 10 TAC sec.sec.187.200-187.237 The Texas Department of Commerce adopts the repeal of sec. sec.187.200- 187.237, concerning rules to implement the Job Training Partnership Act, pursuant to the Texas Government Code, sec.481.0044, which authorizes the policy board of the Texas Department of Commerce to adopt rules to administer department programs, without changes to the proposed text as published in the May 2, 1995, issue of the Texas Register (20 TexReg 3227). The repeals are being replaced with new rules published in this issue of the Texas Register. No comments were received regarding adoption of the repeals. The repeals are adopted under the Texas Government Code, sec.481.0044(a), which authorizes the policy board to adopt rules necessary for the administration of department programs; Texas Civil Statutes, Article 4413(52), sec.5A (as amended by Senate Bill 405, sec.29, Acts 1993, 73rd Legislature), which give the policy board of the Texas Department of Commerce the authority to adopt necessary rules for the implementation and management of the job training program; and pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, which mandates the rulemaking procedures for state agencies. The repeal deletes obsolete requirements and burdensome language. Texas Labor Code, sec.301.052 is affected by the repeals. No other statute or regulation will be affected. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 7, 1995. TRD-9508387 Brenda F. Arnett Executive Director Texas Department of Commerce Effective date: July 28, 1995 Proposal publication date: May 2, 1995 For further information, please call: (512) 936-0515 10 TAC sec.sec.187.200-187.232 The Texas Department of Commerce adopts new sec.sec.187.200-187.232, concerning rules to implement the Job Training Partnership Act, pursuant to the Texas Government Code, sec.481.0044, which authorizes the policy board of the Texas Department of Commerce to adopt rules to administer department programs. Sections 187.207, Allowable and Unallowable Costs; 187.208, Definition of an Obligation; 187.210, Voluntary Deobligation; 187.225, Property Maintenance and Security; 187.226, Shared Use of JTPA Property; 187. 228 Reporting Requirements; and 187.230, Resolution of Questioned Costs, of the Financial Management Rules are adopted with changes to the proposed text as published in the May 2, 1995, issue of the Texas Register (20 TexReg 3227). Sections 187.200, Purpose and Authority; 187.201, General; 187.202, Subrecipient Bonding; 187.203, Repayment of Disallowed Costs; 187.204, Historically Underutilized Businesses (HUBs); 187.205, Insurance Requirements; 187.206, Refund Policy; 187.209, Reporting Obligations; 187.211, Contractor Code of Conduct; 187.212, JTPA Records and Files; 187.213, Methods of Procurement; 187.214, Competitive Negotiation Method; 187.215, Request for Proposal (RFP); 187.216, Statement of Work; 187.217, Noncompetitive Negotiation (Sole Source) Method; 187.218, Processing of Noncompetitive Procurements; 187.219, Cost/Price Analysis; 187.220, Contract Payments; 187. 221, Contract Budgets; 187.222, Fixed-unit Price Contracts; 187.223, Nonexpendable Personal Property Management; 187.224, Subrecipient Property Inventory; 187.227, Disposition of Excess Nonexpendable JTPA Property; 187.229, The Closeout Process; 187.231, Subrecipient Time Limitations; 187.232, Variance from Uniform Grants and Contract Management Standards, are adopted without changes and will not be republished. The rules are adopted to establish uniform accounting and financial management rules for the administration of all JTPA programs funded through the Texas Department of Commerce. Section 187.207(1)(C) has been amended by the addition of the following final sentence, "If direct assignment to final cost objectives is impractical, costs may be pooled and subsequently allocated based on some accepted measure of benefits received." Section 187.207(5) Printing and Reproduction Costs has been amended by the deletion of the phrase "without limitation." Section 187.207(6) Interest Expense is amended by clarification of the final sentence, as follows, "Interest expense is allowable on equipment leases procured through a sole source if justified by an accurate, clearly written lease versus purchase analysis, which is maintained by the Contractor and made available to monitors and other representatives of the Department." Section 187.207(11) Participant Supportive Services has be amended by the deletion of item number (11) Participant Supportive Services, and subsequent following items are renumbered. Section 187.208(a) Definition of an Obligation is amended to include the following final sentence, "The Department reserves the right to waive the 90-day limitation on obligations." Section 187.208(b) Definition of an Obligation is amended for clarification to read as follows, "If the Subrecipient is using obligations to meet the required 85% threshold in Title II at the end of the first program year, the Subrecipient shall maintain on file for review the following information on all obligations being reported for a given program year." Section 187.210 Voluntary Deobligation is amended by the deletion of the following final sentence,"All voluntary deobligations as well as involuntary deobligations shall be deobligated equally among the statutory cost categories." Section 187.225(c) is amended in order to correctly identify the reference to Disposition of Excess Nonexpendable JTPA property, the sentence is clarified to read, "On missing or lost property with a unit acquisition cost of $1,000 or more, subrecipients shall submit to the department documentation of the insurance proceeds on the loss, a copy of the police report, and the disposition information required in sec.187.227(3) of this title (relating to Disposition of Excess Nonexpendable JTPA Property)." Section 187.226 Shared Use of JTPA Property is amended in order to further clarify item (e) by including the following final sentence, "The Shared Use Schedule shall be prepared quarterly. The Schedule should be kept on file and available for review by monitors, auditors, and other Department representatives." Section 187.228(e)(7) Reporting Requirements is amended to clarify the meaning by the following, "the sum of the total expenditures less cash on hand and program income." Section 187.230 Resolution of Questioned Costs is amended for clarification to read as follows, "(a) Problem findings and questioned costs arising from an annual monitoring review of a subrecipient by the Department, or Labor Department, or the subrecipient's annual independent audit, or Office of Inspector General (OIG) audit, shall be investigated and resolved according to the procedures and audit resolution process established by Subchapter E. State Monitoring and Sanctions Policies." Written comments were received regarding the adoption of the rules. Oral comments were received from three individuals. None of the commenters were opposed to the adoption of the rules; however, some expressed concerns about specific parts of the rule, and made recommendations. COMMENT: One commenter suggested that the word "reasonable" be defined in sec.187.205(b) and (c) regarding General Liability Insurance. RESPONSE: It is the State's intention to allow the local programs to determine the amount of the deductible and associated risk based on a valid cost/benefit analysis. COMMENT: One commenter stated that the term "appropriate documentation" in sec.187.206(c) Refund Policy should be more specific. RESPONSE: The Department disagrees, since the information required, which would qualify as appropriate documentation, may vary depending on the circumstances of the refund. The specific details are described in the JTPA Financial Management Manual. COMMENT: One commenter suggested that we change the wording "comparable work in the subrecipient's area" in sec.187.207(1)(A) Compensation for Personal Services, to "comparable work in the subrecipient's agency". RESPONSE: The suggested language is too restrictive. The intent is that pay should be consistent with similar work in a particular labor market, not just within an agency. COMMENT: One commenter stated that sec.187.207(1)(C) Personal Compensation, does not provide flexibility for cost allocation based on pools with acceptable distribution basis. RESPONSE: The Department agrees and has amended this section by adding the following sentence, "If direct assignment to final cost objectives is impractical, costs may be pooled and subsequently allocated based on some accepted measure of benefits received." COMMENT: One commenter stated that in sec.187.207(4) Depreciation, the rule does not include any specific criteria regarding useful life. RESPONSE: The Department will consider providing such guidance in future revisions of the JTPA Financial Management Manual. COMMENT: One commenter had reservations regarding the phrase in sec.187. 207(5) Printing and Reproduction Costs, "without limitations" contained in the sentence, "Costs for printing and reproduction services necessary for grant administration are allowable including without limitation, forms, reports, manuals, informational literature, and reports relating to grant program accomplishments or results." The commenter felt that the phrase implied no limitation whatsoever on costs. RESPONSE: The Department agrees and therefore, the phrase has been deleted. COMMENT: One commenter stated that in sec.187.207(6) Interest Expense, interest expense should be allowable for all equipment leases procured through a competitive procurement process, including those resulting in a sole source agreement. Previously, interest expense on equipment leases procured through a sole source agreement was not allowable. RESPONSE: The Department agrees and the rule has been amended as follows, "Interest expense is allowable on equipment leases procured through a sole source if justified by an accurate, clearly written lease versus purchase analysis, which is maintained by the Contractor and made available to monitors and other representatives of the Department." COMMENT: One commenter suggested changing the wording in sec.187.207(7)(A) Expenditures for Travel and Transportation, from "local government travel policy" to "local travel policy". RESPONSE: The Department disagrees since the removal of the word government would create a broader policy than intended. COMMENT: One commenter stated that sec.187.207(8) OJT Payments, should mention "training institutions and other vendors". RESPONSE: The Department disagrees, since the lengthy detail of the policy is provided in the Federal Regulations and the JTPA Financial Management Manual. The rules were broadly written and it was intended that the JTPA Financial Management Manual would provide further detail. COMMENT: One commenter stated that sec.187.207(9) Fees or Profits, needs to specify if the 10% limitation on fees, profits or program income shall also apply to private-for-profit subcontractors. RESPONSE: The Department believes that the rule applies to all subcontractors. COMMENT: One commenter said program income should not be mentioned under sec.187.207(9). RESPONSE: The Department disagrees since profit is regarded as program income. COMMENT: Two commenters indicated that under sec.187.207, item (11) Participant Supportive Services, is no longer referenced in the Final Federal Regulations at 20 Code of Federal Regulation 627.435(i) under Cost Principles and Allowable Costs, previously referred to as the "Governor's Seventeen". RESPONSE: The Department agrees, since this item was removed from the Final Regulations as a point requiring Governor's discretion; the Participant Supportive Services is deleted from the rule at sec.187.207(11); and subsequent items are renumbered. COMMENT: One commenter suggested deleting the sentence in sec.187.207(14) Preagreement costs, which states, "Authorization to incur expenses is not a guarantee of reimbursement by the State." RESPONSE: The Department has decided to retain the sentence, because of the many requirements, which would have to be met before payment could be made. COMMENT: One commenter stated that in reference to sec.187.208 Definition of an Obligation, a definition of obligations is already present in the Federal Regulations at 20 Code of Federal Regulation 626.5. RESPONSE: The Department agrees; however the state rule does not change the federal definition, but provides greater detail. COMMENT: One oral commenter, in light of potential funding fluctuations, suggested extending the 90-day limitation for obligations, contained in sec.187. 208 Definition of an Obligation. RESPONSE: The Department believes such an extension is not necessary at this time, but amends the rule to permit such extensions, if future circumstances require such flexibility. The Department has added the following sentence, "The Department reserves the right to waive the 90-day limitation on obligations." COMMENT: One commenter said it wasn't clear whether the list of obligations in sec.187.208 Definition of an Obligation, was to be provided to the Department regularly with a deadline, or if the subrecipients should keep this list for review only. RESPONSE: The Department agrees and amended the sec.187.208(b) as follows, "If the Subrecipient is using obligations to meet the required 85% threshold in Title II at the end of the first program year, the Subrecipient shall maintain on file for review the following information on all obligations being reported for a given program year." This sentence clarifies the point that it is not necessary to submit to the Department on a regular basis the backup documentation and worksheets used to arrive at the amount of obligations. COMMENT: Two oral commenters said that the last sentence in sec.187.210 Voluntary Deobligation was too restrictive and should be deleted. The sentence reads as follows, "All voluntary Deobligation as well as involuntary Deobligation shall be deobligated equally among the statutory cost categories. " RESPONSE: The Department agrees, since Deobligation is addressed in the JTPA Financial Management Manual and provides greater detailed guidance. Therefore, the sentence has been deleted. COMMENT: One commenter suggested addressing specific situations in sec.187. 217 Noncompetitive Negotiation (Sole Source), regarding public exigency and cooperative alliances. RESPONSE: The Department disagrees, since these situations are addressed in the Financial Management Manual, which provides greater detailed guidance. COMMENT: One commenter stated that a reference is made to subsection (b) in sec.187.220 Contract Payments; however, there is not reference to subsection (a) . RESPONSE: The Department disagrees, since in the published proposed version of the rules, no reference is made to either. COMMENT: One commenter stated that a detailed breakout of indirect costs under sec.187.221 Contract Budgets, will place an undue burden on those entities who have a large number of indirect costs. RESPONSE: The Department disagrees, since the rule does not require a detailed breakout of indirect costs. It only requires that the total amount of indirect costs be listed as a line item in the contract budget. COMMENT: One commenter noted that the reference in sec.187.225(c) Property Maintenance and Security, to Disposition of Excess Nonexpendable JTPA property was misidentified as sec.187.231(3). RESPONSE: The Department agrees and the reference has been amended in sec.187.225(c) to read, "On missing or lost property with a unit acquisition cost of $1,000 or more, subrecipients shall submit to the department documentation of the insurance proceeds on the loss, a copy of the police report, and the disposition information required in sec.187.227(3) of this title (relating to Disposition of Excess Nonexpendable JTPA Property)." COMMENT: One commenter suggested that under sec.187.226 Shared Use of JTPA Property, the Shared Use Schedule form reporting requirements be more specific. RESPONSE: The Department agrees and the following final sentence is added to item (e): "The Shared Used Schedule shall be prepared quarterly. The Schedule should be kept on file and available for review by monitors, auditors, and other Department representatives." COMMENT: One commenter suggested that in sec.187.228(e)(7) Reporting Requirements, program income should also be subtracted from total projected expenditures for purposes of calculating the amount of advance or reimbursement request. RESPONSE: The Department agrees and sec.187.228(e)(7) has been amended to read, "the sum of the total expenditures less cash on hand and program income. " COMMENTS: Two commenters mentioned the length of time required, in sec.187. 229 The Closeout Process, for submission of closeouts for contracts covering less than two years. One commenter stated that 90 days is necessary to close out contracts lasting less than two years. Another commenter stated that the 60-day requirement differs from the Financial Management Manual, which allows 90 days to closeout. RESPONSE: The Department adheres to the 60-day requirement, since only one commenter found the policy to be inconvenient. In addition, the JTPA Financial Management Manual will be corrected to be in agreement with this rule. COMMENT: One commenter indicated that under sec.187.230 Resolution of Questioned Costs, subsection (a) should not be limited to problems arising from annual monitoring reviews, but should include a reference to questioned costs resulting from the Subrecipient's annual independent audits, and DOL/OIG audits or reviews. RESPONSE: The Department agrees and has amended the following subsection (a) of sec.187.230 Resolution of Questioned Costs, by the following, "(a) Problem findings and questioned costs arising from an annual monitoring review of a subrecipient by the Department, or Labor Department, or the subrecipient's annual independent audit, or Office of Inspector General (OIG) audit, shall be investigated and resolved according to the procedures and audit resolution process established by Subchapter E. State Monitoring and Sanctions Policies." The new sections are adopted under the Texas Government Code, sec.481.0044(a) , which authorizes the policy board to adopt rules necessary for the administration of department programs; Texas Civil Statutes, Article 4413(52), sec.5A (as amended by Senate Bill 405, sec.29, Acts 1993, 73rd Legislature), which give the policy board of the Texas Department of Commerce the authority to adopt necessary rules for the implementation and management of the job training program; and pursuant to the Administrative Procedure Act, Texas Government Code, Chapter 2001, Subchapter B, which mandates the rulemaking procedures for state agencies. Texas Labor Code, sec.301.052 is affected by the new sections. No other statute or regulation will be affected. sec.187.207. Allowable and Unallowable Costs. Pursuant to Federal Regulations 29 Code of Federal Regulation 627.435(i), the following guidelines shall be used for calculating a subrecipient's allowable and unallowable costs among the listed cost items. (1) Compensation for personal services. Any costs currently paid or accrued for services rendered during a grant period including, without limitation, wages, salaries, supplementary compensation and fringe benefits are allowable if they meet these requirements: (A) the compensation is reasonable for the services rendered or consistent with pay for comparable work in the subrecipient's area or the labor market in which the employing subrecipient competes for similar employees; (B) the compensation follows an appointment made according to subrecipient policy, state and local laws, or other applicable requirements; (C) the compensation is determined and supported by individual time and attendance records accounting for the total activity being compensated. If an employee is chargeable to more than one cost objective, cost distribution records shall reflect an after-the-fact determination of the actual employee activity, and shall be signed by a supervisor having direct knowledge of the validity of the data. If direct assignment to final cost objectives is impractical, costs may be pooled and subsequently allocated based on some accepted measure of benefits received; and (D) employee compensation used in meeting cost sharing and matching requirements on awards shall be supported by individual time and attendance records in the same manner as salary and wage claims for reimbursement from granting agencies. (2) Costs of the Council. Reasonable costs incurred by the TCWEC, PICs and other advisory councils or committees are allowable costs. (3) Advertising. Costs for advertising are allowable to the extent that they are reasonable, necessary, and directly benefit the program. (4) Depreciation or use allowances. Compensation for the use of buildings, capital improvements, equipments and other capital assets purchased with non JTPA funds may be made through depreciation or use allowances. (A) The basis, or value for depreciation purposes, shall be the acquisition cost of the equipment. The acquisition cost of the equipment shall not include interest or any other charges that do not impact the cost of the asset. Shipping, installation, set-up fees and other costs necessary to get the asset "up and running" may be added to the basis of the asset for JTPA allowable depreciation purposes. Capital improvements are material repairs (or improvements) that have a useful life greater than one year and have not been expended or charged to JTPA. Capital improvements for assets other than buildings, shall be capitalized and depreciated separately. The depreciable life of these capital improvements shall be determined by the department. (B) In the case of buildings, basis shall be acquisition cost plus the cost of any capital improvements. Capital improvements to the building in years subsequent to the building's original purchase year shall be capitalized and depreciated separately. The depreciable life of these capital improvements shall be determined by the department. (C) It shall be the responsibility of the Subrecipient to verify the cost, depreciable basis, and year of purchase and maintain documentation of the same for monitor and/or auditor verification. (D) The department shall determine the useful lives for non-JTPA purchased property depreciation allowances. In determining the useful life for JTPA depreciation purposes, start year shall be the earlier of the year of purchase or the year in which the asset is used for JTPA. (E) The only allowable method for depreciation charged to JTPA grants and contracts is straight line without regard to anticipated salvage value. The smallest unit for depreciation shall be a month. (F) If the useful life of the asset, computed from the date of purchase, has expired the only allowable charge to JTPA shall be the use allowance. Use allowance rates for buildings, capital improvements, and all other assets shall be set by the department. (G) Both depreciation and the use allowance shall be computed based on the percentage of JTPA use of the asset. Both depreciation and use allowances shall be computed net of the cost of any land, and other assets or component thereof that are not normally depreciated or fail to benefit the JTPA program. (5) Printing and reproduction costs. Costs for printing and reproduction services necessary for grant administration are allowable including, forms, reports, manuals, informational literature, and reports relating to grant program accomplishments or results. (6) Interest expense. A cost allowance for interest expense on competitively procured equipment leases may be allowed contingent upon the accuracy and validity of the procurement process. Interest expense is allowable on equipment leases procured through a sole source if justified by an accurate, clearly written lease versus purchase analysis, which is maintained by the Contractor and made available to monitors and other representatives of the Department. (7) Expenditures for travel and transportation. Costs for transportation, lodging, subsistence, and related items incurred by employees on official business travel are allowable subject to the following. (A) The subrecipient's travel policy shall be based on existing federal, state or local government travel policy. Any deviation from the existing governmental travel policy must be approved by the department. (B) Travel expenses may be charged as actual costs incurred or on a reasonable per diem or mileage basis, or a combination of the two methods, provided the charges are consistent with those normally allowed by the subrecipient in its regular operation. (C) Direct charges are not allowed for foreign travel outside of the United States, its territories and possessions, and Canada. (8) Payments for on-the-job training (OJT). Costs for on-the-job training activities are allowable. (9) Fees or profits. Subcontractor fees and profits are allowable to the extent that they are not excessive, according to the complexity of the work performed, the risk borne by the contractor, and market conditions in the surrounding geographical area, and that they are permitted under the Federal Act, sec.164(a)(3)(D) and (I). Under no circumstances shall subcontractor fees, profits, or program income exceed 10% of the contract amount. (10) Insurance costs. Insurance costs are allowable, including insurance coverage for injuries suffered by participants who are not covered by existing workers' compensation, and personal liability insurance for PIC members. Costs are not allowable for insurance policies offering protection against debts established by the federal or state government. (11) Acquisitions of capital assets. Costs for acquisitions of capital assets are allowable. (12) Building space costs. Costs for building space, including rent, repairs and alterations are allowable to the extent they are properly procured, reasonable, and necessary for the administration of the program. (13) Pre-agreement costs. Pre-agreement costs are allowable if prior approval by the department is obtained. The department may allow such expenses when the situation requires that costs be incurred before the award of a contract. The substate area (SSA) or sub-state grantees (SSG) must request such authorization in writing before incurring any costs. Preagreement costs are only allowable to the extent that they would have been allowable if incurred after the date of the award. Authorization to incur expenses is not a guarantee of reimbursement by the state. The state may disallow such costs because of Department of Labor limitations, violation of a statute or regulation by the SSA or SSG, or for other cause considered sufficient by the department. (14) Fund raising activities. Costs of fund raising activities are not allowable. (15) Professional services. Costs of professional services are allowable to the extent they are ordinary and necessary, and the selection and award of such contracts was based on the demonstrated competence and qualifications for the professional services to be performed. Such contracts may be procured through to the use of a Request for Information (RFI) or a Request for Quotations (RFQ). (16) Taxes. Taxes are allowable costs to the extent they are incurred in the operation of the JTPA program, and are attributable to JTPA operations, assets, or resources. sec.187.208. Definition of an Obligation. (a) An SDA obligation is a debt established by legal contract, letter of agreement, subgrant award, or purchase order which has been executed prior to the end of a program year, and which will be performed within the program year or 90 days after the program year ends. Any obligation periods extending beyond 90 days after the program year ends shall be prorated using the straight line method or other acceptable proration method which accurately matches benefits received with dollars included as obligations. Deviations from the straight line method must be supported by worksheets and a documented rationale. The Department reserves the right to waive the 90-day limitation on obligations. (b) If the Subrecipient is using obligations to meet the required 85% threshold in Title II at the end of the first program year, the Subrecipient shall maintain on file for review the following information on all obligations being reported for a given program year: (1) the number of the contract, purchase order or document; (2) the contract amount; (3) the contractor's name; (4) the amount of the contract included as an obligation; (5) the contract or agreement period; and (6) the basis used for calculating the amounts included as obligations. (c) The following agreements or encumbrances are deemed not to be obligations: (1) procurements in any stage prior to the execution of the contract; (2) the amount of a lease agreement extending beyond 90 days after the program year end, even though the agreement may have been signed within the last month of a program year; (3) remaining balances within the SDA internal budget; (4) letters of intent; and (5) funds set aside (earmarked) in the budget as estimates for future commitments. (d) Any reported obligations and worksheets generated by a proration of an obligation shall be subject to review by the department. Deliberate unreasonable misstatement of obligations to meet expenditure requirements or cost category compliance shall subject the subrecipient to possible sanctions. sec.187.210. Voluntary Deobligation. SDAs/SSGs which determine they cannot meet the 85% obligation level may request to voluntarily deobligate funds. An SDA/SSG request for voluntary deobligation must be received by the department within a reasonable time frame for the funds to be reobligated and utilized elsewhere. For Title IIA, IIC, and Title III formula funds, the deadline is the end of the third quarter of the applicable JTPA program year. The request for voluntary deobligation must be approved by the department. A waiver of the voluntary deobligation deadline may be granted by the Department. sec.187.225. Property Maintenance and Security. (a) Nonexpendable personal property purchased in whole or in part with JTPA funds, or transferred from the Comprehensive Employment and Training Act (CETA) , shall be tagged to indicate the item was acquired with JTPA funds. (b) Subrecipients shall maintain documentation on any JTPA property destroyed, including a property description, the date and cause of the destruction. Information on destroyed property with a unit acquisition cost of $1,000 or more shall be submitted to the department. (c) Subrecipients shall contact the appropriate police department to report any missing or stolen JTPA property and must maintain a copy of the policy report in the subrecipient's property records. On missing or lost property with a unit acquisition cost of $1,000 or more, subrecipients shall submit to the department documentation of the insurance proceeds on the loss, a copy of the police report, and the disposition information required in sec.187.227(3) of this title (relating to Disposition of Excess Nonexpendable JTPA Property). sec.187.226. Shared Use of JTPA Property. (a) JTPA funded activities, accountable property, equipment, or personnel may be made available for non-JTPA use provided such use will not interfere with the JTPA purpose for which such items were funded or acquired. Records shall be maintained showing the actual JTPA and non-JTPA shared use on a monthly basis. (b) Subrecipients must document the shared use of JTPA activities, property or personnel by entering into a shared use agreement with the non-JTPA entity. Such agreements shall be subject to review by the department, and must: (1) describe the basis, or benefits received, for the prorated share; (2) describe the non-JTPA use and the percentage of such usage; (3) describe the method used to verify the usage percentages, which must be determined at minimum on a quarterly basis; (4) describe the basis for determining that any user fees are reasonable. (5) assure that any shared use will not interfere with the JTPA use of such property, activity or personnel and that priority will be given to JTPA participants; (6) assure that an amended shared use plan will be retained on file to document any change in the shared usage; and (7) provide a list of JTPA property and a description of both the JTPA and non-JTPA activities. (c) Subrecipients must be reimbursed for reasonable cost by the non-JTPA entities whenever JTPA property, activities or personnel are used for non-JTPA funded programs or activities. Such reimbursement, or user fee, may be in cash or in kind. The user fee must be in proportion to the contribution by JTPA to a specific project. If the usage of the property, activities or personnel by JTPA participants falls below 50%, the department shall determine the type of user fees and method of payment. (d) Matching contributions from non-JTPA entities for shared use may be in- kind contributions, such as buildings, utilities, staff time, equipment, property or other tangible items, or may be matching funds in cash. Such contributions by a non-JTPA entity may be accepted in exchange for access to JTPA activities, property or personnel. Shared use agreements may provide for shared classroom training activities, facilities, or other appropriate activities. Such contributions, whether in-kind or as matching funds, must be properly valued, must be used to further JTPA objectives, and must be fully documented and recorded. (e) Subrecipients submitting a Shared Use Schedule form shall be deemed to have complied with the reporting requirements of this section. The Shared Use Schedule shall be prepared quarterly. The Schedule should be kept on file and available for review by monitors, auditors, and other Department representatives. sec.187.228. Reporting Requirements. (a) Subrecipients must submit to the department, no later than the 20th calendar day of each month, monthly reports for each contract with the department to provide financial information for budgeting and program management oversight, including the following information. (1) The contractor's name, address and telephone number, the name of the contractor's representative who approves fiscal information, and the name of the person preparing the report. (2) The assigned contract number, the contract time period by month and year, and the most current contract amount, which should agree with the total budgeted amounts. (3) The specific month being reported and whether the information is a monthly expenditure report, final expenditure report or a budget report. (4) The appropriate title or program funding source for the contract. (5) A listing by cost category, as defined in Federal Regulation 20 Code of Federal Regulation 627.440, of the following items: (A) program expenditures for the current month and a cumulative total (cash and accrual); (B) the budgeted amounts according to the contractor's JTPA plan, which should agree with the current contract amount; (C) the current balance, calculated by subtracting the cumulative expenses from the budget amounts; (D) any recorded expenses which have not been paid (reported as monthly accruals); (E) a listing of the obligations; (F) program income, earned and expended, for the current month and a cumulative total; and (G) program costs paid from non-federal sources for the month and cumulatively. (b) Subrecipients submitting such reports on the JTPA Financial Report forms shall be deemed to have complied with the reporting requirements of this paragraph. Monthly reports are required although the contract and expense information may remain unchanged. (c) Subrecipients may obtain cash required to cover immediate needs resulting from expenditures under a contract by submitting to the department a request for advance or reimbursement including the following information. (1) The contractor's name, address and telephone number, the name of the contractor's representative who approves fiscal information, and the name of the person preparing the report. (2) The assigned contract number, the contract time period by month and year, and the sequential request number. (3) The time period during which the expenditures generating the need for cash were incurred, or will be incurred. (4) The following information on the status of funds: (A) the authorized contract amount as of the latest Letter of Notification; (B) cumulative cash received as of the last request; (C) cash previously requested but not received; (D) the total cash received and requested; (E) cumulative expenses to date; (F) projected expenses for this request; (G) the total of cumulative and projected expenses; (H) the amount of funds presently requested; and (I) the funds remaining in the contract. (d) Subrecipients that submit a Request for Advance or Reimbursement form shall be deemed to have complied with the requirements of subsection (c) of this section. (e) In addition to the requirements of subsection (c) of this section, subrecipients requesting advance funds must submit the following information: (1) the total payroll costs; (2) the total rent and utilities costs; (3) the total subcontractor payments; (4) the total projected costs for support services, needs based/related payments, postage, and workers' compensation costs; (5) the total projected variable expenses, such as office supplies, printing costs, repairs and maintenance, and capital expenditures; (6) the total cash on hand; and (7) the sum of the total expenditures less cash on hand and program income. Subrecipients that submit a Cash Request Support Form shall be deemed to have complied with the requirements of this paragraph. (f) Subrecipients shall submit to the department a state purchase voucher and a signed statement indicating the contract number and the names and signatures of each individual authorized to sign a request for advance or reimbursement. Subrecipients submitting an Authorized Signature Designation form shall be deemed to have complied with the requirements of this paragraph. sec.187.230. Resolution of Questioned Costs. (a) Problem findings and questioned costs arising from an annual monitoring review of a subrecipient by the Department, or Labor Department, or the subrecipient's annual independent audit, or Office of Inspector General (OIG) audit, shall be investigated and resolved according to the procedures and audit resolution process established by Subchapter E of this chapter (relating to State Monitoring and Sanctions Policies). (b) Subrecipients proposing to use stand-in costs as a substitute for otherwise unallowable costs shall include the proposal in the information provided to the department during the informal resolution period and, if accepted by the department, shall be subject to final DOL review and approval. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 7, 1995. TRD-9508386 Brenda F. Arnett Executive Director Texas Department of Commerce Effective date: July 28, 1995 Proposal publication date: May 2, 1995 For further information, please call: (512) 936-0515 TITLE 16. ECONOMIC REGULATION Part III. Texas Alcoholic Beverage Commission Chapter 36. Gun Regulation 16 TAC sec.36.1 The Texas Alcoholic Beverage Commission adopts a new rule, 16 TAC sec.36.1, Possession and Sale of Firearms on Licensed Premises. The rule is adopted with changes to the proposed text as published in the March 24, 1995, issue of the Texas Register (20 TexReg 2189). The rule is adopted to define when, and under what circumstances, firearms can be possessed and sold on premises where alcoholic beverages are served or sold. The rule allows retail merchandise stores to sell firearms and alcoholic beverages without the additional financial hardship of separate locations. The rule also allows local government entities and fraternal and charitable organizations to lease their facilities for gun shows while continuing to maintain an alcoholic beverage license or permit on those premises. The following changes were made to the text as proposed. sec.36.1(a)(1), (3); sec.36.1(b)(1), (2), (4), (5) were omitted as unnecessary regulation. The adopted rule contains new provisions in sec.36.1(a)(1) and the last clause of sec.36.1(c)(2). The new text was adopted to provide greater safety to members of the public. 36.1(a)(3), as written in the proposal, could be interpreted to forbid sale and consumption of alcoholic beverages on portions of a municipality's premises during functions not related to gun shows. Further comment noted that inclusion of the word "and" between sec.36.1(c)(1) and (2) of the text as proposed would impose restrictions greater than that allowed by the relevant statute. Finally, one comment indicated that allowing municipalities, fraternal and charitable organizations to hold gun shows on licensed premises without making similar provisions for private entities was unfair. The Texas Hotel and Motel Association was opposed to adoption of the rule. This rule is adopted under the authority of sec.5.31 of the Texas Alcoholic Beverage Code. sec.36.1. Possession and Sale of Firearms on Licensed Premises. (a) Gun Shows. A permittee/licensee may use or allow a portion of the grounds, buildings, vehicles and appurtenances of the licensed premises for the use of gun shows if the permittee/licensee: (1) suspends all sales, complimentary offers and consumption of all alcoholic beverages during the gun show including time required for preparation or set-up and dismantling of the gun show; and (2) operates its licensed premises at a facility regularly used for special functions, directly or indirectly, under a lease, concession or similar agreement from a governmental entity or legally formed and duly recognized civic, religious, charitable, fraternal or veterans organization. (b) Off-Premise Retailers and Gun Sales. The holder of a retail dealer's off- premise license, a wine and beer retail dealer's off-premise permit, a wine only package store or package store permit may allow the sale or offer for sale firearms at the licensed location if: (1) alcoholic beverages are not being displayed or sold in any area where firearms are readily accessible or can be viewed; and (2) the firearms are secure from the general public and are only accessible by employees of the person or entity offering the firearms for sale. (c) On-Premise Possession of Firearms. The holder of a permit or license allowing on-premise consumption of alcoholic beverages may possess firearms on the licensed premise if the firearms are: (1) possessed by the permittee/licensee as defined in the Texas Alcoholic Beverage Code, sec.1.04(11) and 16; or (2) possessed for ceremonial and/or display purposes, if such firearm is disabled from use as a firearm. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 11, 1995. TRD-9508498 Doyne Bailey Administrator Texas Alcoholic Beverage Commission Effective date: August 1, 1995 Proposal publication date: March 24, 1995 For further information, please call: (512) 206-3204 TITLE 22. EXAMINING BOARDS Part IX. Texas State Board of Medical Examiners Chapter 163. Licensure 22 TAC sec.163.16 The Texas State Board of Medical Examiners adopts new sec.163.16, without changes to the proposed text as published in the May 30, 1995, issue of the Texas Register (20 TexReg 3951). The section as adopted will allow the executive director, at his discretion, to issue a temporary license to primary care physicians practicing in rural counties or medically underserved areas in Texas. This provision will hopefully aid in placing qualified physicians in underserved areas in a more expeditious manner. The section as adopted will function by expediting the issuance of a temporary license to physicians practicing in rural counties or medically underserved areas in Texas. No comments were received regarding adoption of the new section. The new section is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this act. Article 4495b, sec.3.03, is affected by this new section. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 12, 1995. TRD-9508595 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: August 2, 1995 Proposal publication date: May 30, 1995 For further information, please call: (512) 834-7728 Chapter 166. Physician Registration 22 TAC sec.166.2 The Texas State Board of Medical Examiners adopts an amendment to sec.166. 2, without changes to the proposed text as published in the March 24, 1995, issue of the Texas Register (20 TexReg 2191). The section as adopted will ensure that only those physicians who have complied with the continuing medical education requirements will be re-registered each year. The section as adopted will function by clarifying the penalties for failure to comply with the requirement of obtaining at least 24 hours of continuing medical education each year as a prerequisite to physician annual registration. One comment was received from The University of Texas Medical Branch at Galveston concerning the requirement that those physicians completing residency/fellowship training more than six months, but less than one year, prior to their renewal application would be subject to the continuing medical education requirement for the current year. The commenter felt that a physician completing training during the twelve months prior to registration should be exempt from the current year's CME requirement. The board considered the comment, but felt that the six month time period was adequate. The amendment is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this act. Article 4495b, sec.3.025 is affected by this amendment. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 12, 1995. TRD-9508594 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: August 2, 1995 Proposal publication date: March 24, 1995 For further information, please call: (512) 834-7728 Chapter 187. Procedure Subchapter B. Prehearing 22 TAC sec.187.17 The Texas State Board of Medical Examiners adopts an amendment to sec.187. 17, without changes to the proposed text as published in the March 24, 1995, issue of the Texas Register (20 TexReg 2192). The section as adopted will streamline the administrative process through the use of certified copies of depositions. The section as adopted will function by using certified copies of depositions in the event the original is unavailable. No comments were received regarding adoption of the amendment. The amendment is adopted under the Medical practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this act. Article 4495b, sec.4.05, is affected by this amendment. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 12, 1995. TRD-9508591 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: August 2, 1995 Proposal publication date: March 24, 1995 For further information, please call: (512) 834-7728 Chapter 199. Public Information 22 TAC sec.199.4 The Texas State Board of Medical Examiners adopts the repeal of sec.199.4, without changes to the proposed text as published in the March 24, 1995, issue of the Texas Register (20 TexReg 2192). The section as adopted will eliminate obsolete language. The section as adopted will function through clarification by omission. No comments were received regarding adoption of the repeal. The repeal is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this act. Article 4495b, sec.3.10, is affected by this repeal. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 12, 1995. TRD-9508593 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: August 2, 1995 Proposal publication date: March 24, 1995 For further information, please call: (512) 834-7728 The Texas State Board of Medical Examiners adopts new sec.199.4, without changes to the proposed text as published in the March 24, 1995, issue of the Texas Register (20 TexReg 2192). The section as adopted will identify the charges for copies of routinely requested items. The section as adopted will function by establishing reasonable charges for copies of public records. No comments were received regarding adoption of the new section. The new section is adopted under the Medical Practice Act, Texas Civil Statutes, Article 4495b, sec.2.09(a), which provide the Texas State Board of Medical Examiners with the authority to make rules, regulations and bylaws not inconsistent with this act as may be necessary for the governing of its own proceedings, the performance of its duties, the regulation of the practice of medicine in this state, and the enforcement of this act. Article 4495b, sec.3.10, is affected by this new section. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 12, 1995. TRD-9508592 Bruce A. Levy, M.D., J.D. Executive Director Texas State Board of Medical Examiners Effective date: August 2, 1995 Proposal publication date: March 24, 1995 For further information, please call: (512) 834-7728 Part XXII. Texas State Board of Public Accountancy Chapter 521 Fee Schedule 22 TAC sec.521.1 The Texas State Board of Public Accountancy adopts an amendment to sec.521. 1 without changes to the proposed text as published in the May 19, 1995, issue of the Texas Register (20 TexReg 3705). The amendment allows the reduction of the annual fee for a license issued to a practice unit. The amendment will function by reducing the fee amount required to register a practice unit to a more accurate cost recovery amount. No comments were received concerning adoption of the rule. The amendment is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provides the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law; and sec.19, which requires each practice unit to register with the Board. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 29, 1995. TRD-9508530 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: August 1, 1995 Proposal publication date: May 19, 1995 For further information, please call: (512) 505-5566 Chapter 523. Continuing Professional Education Continuing Professional Education Standards TAC sec.521.1 The Texas State Board of Public Accountancy adopts an amendment to sec.523. 32, without changes to the proposed text as published in the April 28, 1995, issue of the Texas Register (20 TexReg 3129). The amendment requires CPAs to complete a four-hour course on the Board's Rules of Professional Conduct at least once every three years. The amendment will function by ensuring that licensees know which ethics courses are acceptable to the Board, informing ethics course sponsors whether the content of their ethics courses are acceptable to the Board, assuring the public that Certified Public Accountants are completing appropriate ethics courses, and by having Certified Public Accountants current on the Board's rules of professional conduct. Two comments were received concerning adoption of the rule. The first comment was from D. Kent Kay, Treasurer of the Texas Association of College University Auditors ("TACUA"). TACUA opposes the amendment because TACUA believes that there should be a transition period to allow sufficient time for course sponsors to develop their programs pursuant to Board directives. TACUA states if the amendment must be adopted then the rule should be effective far enough into the future to allow enough time to secure the CPE committee's course approval. TACUA feels adopting the rule amendment effective May 29, 1995 is detrimental. Response to TACUA: The Board adopted this amendment on June 29, 1995 with an effective date of approximately a month later. This should effectively provide the transition period requested. The second comment was from Robin Abbott, a staff attorney for the Office of the State Auditor ("OSA"). OSA does not take issue with the part of the amendment which requires Board approval of courses, but requests it be permitted to complete courses in progress. OSA suggests the rules be modified to approve other areas of ethics study for CPAs not in private practice. OSA has designed a five-hour, four-part training course on ethics focusing on state laws, standards of conduct, and ethical decision making relevant to CPAs who are state government auditors, and two of these parts have already been presented. OSA says the remaining two parts will be presented after the amendment's effective date; these two remaining parts will not be in compliance with the amendment; the courses were prepared to comply with the earlier rule which was not so specific; some resources will have been expended for naught; and in-house training at state expense for non-state related subjects is inappropriate. OSA wants course work completed or in progress prior to the amendment's adoption to be grandfathered, and a modification to allow governmental accountants to study ethical rules and standards relevant to their particular practice. Response to OSA: Course work completed under the current rule before the effective date of the amendment would satisfy the current rule's requirements. The Board appreciates OSA's efforts to offer ethics courses which address the rules of professional conduct but are geared toward a unique class of CPAs. The Board considers a four-hour course on its rules of professional conduct once every three years to be important and necessary to insure ethical conduct. Although many of the ethics rules required to be taught may not apply to CPAs in government and industry practice, many of the CPAs are simultaneously in the client practice of public accountancy and need an understanding of these rules. In addition, the Board has also experienced numerous instances where CPAs in industry and government practice move back to client practice. All of the ethics rules need to be taught in order to insure that CPAs understand their responsibilities regardless of the type of their current practice. The amendment is adopted under Texas Civil Statutes, Article 41a-1, sec.6, which provides the Texas State Board of Public Accountancy with the authority to make such rules as may be necessary or advisable to carry in effect the purposes of the law and Section 15A, which requires Certified Public Accountants to participate in continuing professional education courses. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on June 29, 1995. TRD-9508529 William Treacy Executive Director Texas State Board of Public Accountancy Effective date: August 1, 1995 Proposal publication date: April 28, 1995 For further information, please call: (512) 505-5566 TITLE 22. EXAMINING BOARDS Part XXIII. Texas Real Estate Commission Chapter 535. Provisions of the Real Estate License Act Licensed Real Estate Inspectors 22 TAC sec.535.222 The Texas Real Estate Commission adopts an amendment to sec.535.222, concerning standards of practice, with changes to the text as published in the March 17, 1995, issue of the Texas Register (20 TexReg 1856). The section provides minimum inspection guidelines for inspectors licensed by the commission when inspecting the parts, components and systems typically found in residential property. The amendment was recommended by the Texas Real Estate Inspector Committee, an advisory committee of nine professional inspectors commission. The amendment primarily reorganizes the section, combining related components into the same subsection for clarity and ease of reading. Wherever possible, related items are grouped along with their related components, and a number of specific limitations which generally list what inspectors are not required to do in the course of an inspection have been eliminated as unnecessary. Recognized hazards specifically listed in the section as such would continue to be required to be reported as in need of repair. Language has been added for precise identification of the parts or components being inspected, and a number of nonsubstantive language changes were made for clarity. Adoption of the amendment is necessary for the commission to provide clear minimum standards for licensed inspectors to follow. Upon the recommendation of the Texas Real Estate Inspector Committee, the section was adopted with a change addressing the inspector's report. The report must be arranged in the same order as the parts, components and systems are listed in the section; the inspector is not required to follow this format, however, if either an agency of the federal government or a client who buys or sells properties in the course of the client's business requires a different form of report to be used. The Texas Association of Realtors (TAR) suggested a number of changes to the proposed text of the amendment related to specific conditions which the section requires the inspector to report as in need of repair when they are found in the home. TAR suggested that a general definition of the term "hazard" should be added and that the inspector should be required to report all hazards as in need of repair. TAR also suggested changes to provisions relating to ground fault circuit interruptor devices, water heaters, switches and oven thermometers. The commission concluded changes to the section as proposed were not appropriate, as the section addresses specific conditions posing the greatest risk of injury or property loss due to fire, electrocution or explosion. The commission also concluded that the inspector should not be required to report all hazards as in need of repair; the section as adopted will continue to require the inspector to report on all visible and recognized hazards, and the inspector is permitted to provide a higher level of inspection performance than required by the section. A number of inspectors commented in opposition to provisions in the section which would cause the inspector to determine whether an item functioned in a safe manner, urging deletion of safety-related provisions unless specific guidelines were also provided for the inspector's use. The commission determined that where the section requires the inspector to address safety-related issues, it is not necessary for the section to provide detailed guidelines for the inspector to inspect for safety in accordance with established codes or industry standards. The commenters also suggested the elimination of the requirement that the inspector report specific conditions as in need of repair, expressing concern that the list of specific conditions would expand and create financial hardships for sellers compelled to make repairs. The commission determined that the section addressed the conditions posing the greatest risk to the consumer, and declined to make the requested change. Commenters also suggested adding exceptions to take the place of deleted specific limitations and offered a number of wording changes to the proposed text. The commission determined that it was not necessary to expand on the exceptions, since the section only requires the inspector to perform the specific tasks set forth for each part, component or system, and that other wording changes were not needed. The amendment is adopted under Texas Civil Statutes, Article 6573a, sec.5(h), which authorize the Texas Real Estate Commission to adopt and enforce all rules and regulations necessary for the performance of its duties. sec.535.222. Standards of Practice. (a) Definition of terms. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1)-(3) (No change.) (4) Identify-To determine and report as a particular item, condition or thing. (5)-(11) (No change.) (b) Scope. The standards of inspection practice established by this section are the minimum levels of inspection practice required of inspectors for the accessible parts, components, and systems typically found in improvements to real property, excluding detached structures, decks, docks and fences. The inspection is of conditions which are present and visible at the time of the inspection. All mechanical and electrical equipment, systems, and appliances are operated in normal modes and operating range at the time of the inspection. The inspector shall observe, render an opinion and report which of the parts, components, and systems present in the property have or have not been inspected. The inspector's report must specifically indicate if the inspected parts, components or systems are not functioning or in need of repair. The inspector shall report on visible existing recognized hazards and shall report as in need of repair any recognized hazard specifically listed as such in this section. The report used by the inspector must address all of the parts, components, and systems contained in subsections (e)-(g) of this section and found in the property being inspected, listed in the same order as they appear in this section. Provided, however, the inspector may use a form of report which is arranged differently than in the manner required by this section if use of a different form of report is required by an agency of the federal government or by a client who buys or sells properties in the due course of the client's business. All written inspection reports must contain the name and license number of the inspector who performed the inspection. The inspector may provide a higher level of inspection performance than required by this section and may inspect parts, components, and systems in addition to those described by this section. In the event of a conflict between a specific provision and a general provision, the specific provision shall control. These standards do not apply to the following: (1)-(3) (No change.) (c)-(d) (No change.) (e) Structural systems. (1) (No change.) (2) Components for inspection. (A) Foundations. (i) Inspection guidelines. The inspector shall do the following: (I)-(II) (No change.) (III) inspect the crawl space area to determine the general condition of foundation components and report the method used to observe the crawl space when an area is not entered due to inaccessibility or hazardous conditions or when access or visibility is limited; (IV)-(VII) (No change.) (ii) Specific limitations. The inspector is not required to enter a crawl space or any areas where headroom is less than two feet, or where the inspector reasonably determines conditions or materials are hazardous to health or safety of the inspector. (B) Interior walls, doors, ceilings and floors. (i) Inspection guidelines. The inspector shall do the following: (I) observe the deficiencies of the surfaces of walls, ceilings and floors as related to structural performance or water penetration; (II) inspect operation of accessible doors; (III) inspect steps, stairways, balconies and railings. (ii) Specific limitations. The inspector is not required to do the following: (I)-(II) (No change.) (III) determine the condition of paints, stains and other surface coatings; (IV) determine condition of cabinets; or (V) inspect for the presence of safety glass. (C) Exterior walls and doors, windows and door glazing. (i) Inspection guidelines. The inspector shall do the following: (I) observe deficiencies of exterior walls as related to structural performance and water penetration; (II) (No change.) (III) inspect the condition of windows and exterior doors to determine whether glazing is present and undamaged; (IV) inspect insulated glass windows for fogging or other evidence of broken seals; (V) observe the presence and condition of window and door screens; (VI) inspect burglar bars for functional egress in appropriate areas; and (VII) operate windows at burglar bar locations of sleeping rooms or egress areas and a random sampling of others which are accessible. (ii) Specific limitations. The inspector is not required to do the following: (I) (No change.) (II) determine the condition of paints stains or other surface coatings; (III) determine the presence of, or extent or type of, insulation or vapor barriers in exterior walls; or (IV) check for the presence of safety glass. (D) Fireplace and chimney. (i) Inspection guidelines. The inspector shall do the following: (I) inspect the visible components and structure of the chimney and fireplace; (II) inspect the interior of the firebox and the visible flue area, excepting the adequacy of the draft or performance of a chimney smoke test; (III)-(V) (No change.) (VI) observe attic penetration of chimney flue, where accessible, for firestopping; (VII) inspect gas log lighter valves for function and for gas leaks; (VIII) inspect operation of circulating fan, if present; (IX) observe for deficiencies in combustion air vent, if present; and (X) observe chimney coping or crown, caps or spark arrestor (from ground level at a minimum). (ii) Specific limitations. There are no specific limitations for fireplace and chimney. (E) Roof, roof structure and attic. (i) Inspection guidelines. The inspector shall do the following: (I) identify the type of roof covering and inspect its visible components and their condition (excepting the life expectancy of the roof covering); (II)-(IV) (No change.) (V) enter attic space(s) except when there is inadequate access or hazardous conditions exist as reasonably determined by the inspector (observation from attic access opening only must be reported as such); (VI) report the method used to inspect roofing if the inspection is performed from other than roof level (if the inspector reasonably determines that conditions are unsafe or that damage to the roof or roof covering material may result from walking on the roof, the inspector shall report the method used to inspect the roof); (VII) observe the presence and approximate depth of insulation where visible; and (VIII) observe the general condition of visible installed gutter and downspout systems. (ii) Specific limitations. There are no specific limitations for roof, roof structure and attic. (F) Porches and Decks. (i) Inspection guidelines. The inspector shall inspect porches, decks, steps, balconies and carports for structural performance as to visible footings, joists, deckings, railings applicable. (ii) Specific limitations. The inspector is not required to inspect detached structures or waterfront structures and equipment, such as docks or piers. (f) Mechanical systems. (1) (No change.) (2) Components for inspection. (A) Inspection guidelines for appliances. (i) Dishwasher. The inspector shall do the following: (I)-(III) (No change.) (IV) observe the discharge hose or piping for condition and presence of back flow prevention; (V)-(VI) (No change.) (VII) operate the unit in normal mode with the soap dispenser closed; and (VIII) inspect operation, noting that the spray arms turn, the soap dispenser opens and the drying element operates. (ii)-(iii) (No change.) (iv) Electric or gas ranges. The inspector shall do the following: (I) inspect for broken or missing knobs, elements, drip pans or other parts; (II) inspect for operation of the signal lights and elements or burners at low and high settings; (III) observe and report materials used for the gas branch line and the connection to the appliance; and (IV) inspect for presence, location and accessibility of gas shut-off valve and for leaks at the valve. (v) Electric or gas ovens. The inspector shall do the following: (I) inspect for broken or missing knobs, handles, glass panels, lights or light covers or other parts; (II) inspect the door for gasket condition, tightness of closure and operation of the latch; (III) inspect the oven for secure mounting; (IV) inspect the heating elements and thermostat sensing element for proper support; (V) observe the operation of the heating elements or the lighting, operation and condition of the flame; (VI) inspect the operation of the clock and timer, thermostat and door springs; and (VII) observe the accuracy of the thermostat with a thermometer for a 25 degree range plus or minus of a 350 degree setting. (vi) Microwave oven. The inspector shall do the following: (I) inspect for broken or missing knobs, handles, glass panels, or other parts; (II) inspect the condition of the door and seal; (III) observe the oven operation by heating a container of water or with other test equipment, as reasonably determined by the inspector; and (IV) observe the operation of the light. (vii) Trash compactor. The inspector shall do the following: (I) inspect the overall condition of the unit; (II) operate the unit, observing noise and vibration level; and (III) check the unit for secure mounting in place. (viii) Other built-in appliances. The inspector shall inspect overall condition, operate the appliance as practicable or note otherwise in the report. (ix) Bathroom exhaust vents and electric heaters. The inspector shall operate the unit, observing sound, speed and vibration level. (x) Whole house vacuum system; The inspector shall do the following: (I) inspect the condition of the main unit; (II) operate the unit if possible; and (III) inspect the systems from all accessible outlets throughout the house. (xi) Water heaters. The inspector shall do the following: (I) identify the energy source; (II) inspect the tank and fittings for leaks and corrosion; (III) observe temperature and pressure relief valve piping for gravity drainage, size of drain pipe (no smaller than the outlet fittings), material, and termination (which conditions are recognized hazards); (IV) operate the temperature and pressure relief valve when of an operable type and operation will not cause damage to persons or property as reasonably determined by the inspector; (V) inspect for broken or missing parts, covers or controls; (VI) observe the condition of burner, flame and burner compartment or the operation of heating elements and the condition of wiring; (VII) observe and report materials used for the gas branch line and the connection to the appliance, and inspect presence, location and accessibility of gas shut-off valve and for leaks at the valve; (VIII) if applicable, inspect the type of vent pipe and its condition, draft, proximity to combustibles and its termination point, observing for adequate combustion and draft air; (IX) observe for presence of safety pan and drain when applicable; (X) observe for safe location and installation; and (XI) inspect garage units or units which are located in rooms opening into a garage for the following: (-a-) protection for physical damage to the unit; and (-b-) ignition source a minimum clearance of 18 inches above the garage floor, the absence of which is a recognized hazard. (xii) Doorbell and chimes. The inspector shall do the following: (I) inspect the condition and operation of the unit; and (II) inspect installation of all visible and accessible parts. (xiii) Attic power vents. The inspector shall do the following: (I) inspect the operation of the thermostat control, if so equipped and accessible; and (II) observe the sound, speed and vibration level. (xiv) Garage door operator. The inspector shall do the following: (I) inspect the condition and operation of the garage door operator; (II) operate the door manually or by an installed automatic door control; and (III) test whether the door automatically reverses during closing cycle. (xv) Hydrotherapy or whirlpool equipment. The inspector shall do the following: (I) observe operation; (II) inspect for the presence and operation of ground fault circuit interrupter; (III) inspect for safe location and operation of switches; (IV) observe under the tub for evidence of leaks if the access cover is available and accessible; and (V) inspect the movement of the discharge ports and the operation of air intake valves. (B) Specific limitations for appliances. The inspector is not required to do the following: (i) operate or determine the condition of other auxiliary components of inspected items; or (ii) inspect self-cleaning functions. (C) Inspection guidelines for cooling systems. (i) Cooling systems other than evaporative coolers. The inspector shall do the following: (I) (No change.) (II) operate the system using normal control devices except when the outdoor temperature is less than 60 degrees Fahrenheit; (III) (No change.) (IV) observe for the presence and drainage of the condensate drain line and secondary drain line when applicable; (V) (No change.) (VI) inspect condensing unit for clearances, air circulation, condition of fins, location, levelness and elevation above ground surfaces. (ii) (No change.) (D) Specific limitations for cooling systems. The inspector is not required to do the following: (i) inspect for the pressure of the system coolant or determine the presence of leaks; (ii) program digital-type thermostats or controls; or (iii) operate setback features on thermostats or controls. (E) Inspection guidelines for heating systems. The inspector shall do the following: (i)-(iii) (No change.) (iv) observe in gas units the burner, the condition of the burner compartment; the type, condition, draft and termination of the vent pipe and proximity to combustibles; the availability of combustion and draft air and the presence of forced air in the burner compartment (full evaluation of the integrity of a heat exchanger requires dismantling of the furnace and is beyond the scope of a visual inspection); (v)-(viii) (No change.) (F) Specific limitations for heating systems. The inspector is not required to do the following: (i) inspect accessories such as humidifiers, air purifiers, motorized dampers, heat reclaimers, electronic air filters or wood-burning stoves; (ii) determine the efficiency or adequacy of a system; (iii) program digital-type thermostats or controls; or (iv) operate radiant heaters, steam heat systems or unvented gas-fired heating appliances. (G) Inspection guidelines for ducts, vents (including dryer vents) and flues. The inspector shall do the following: (i) (No change.) (ii) inspect for air flow at all accessible supply registers in the habitable areas of the structure (except for determining the adequacy of the balance of conditioned air); (iii)-(vii) (No change.) (H) (No change.) (I) Inspection guidelines for plumbing systems. The inspector shall do the following: (i) inspect for the type and condition of all accessible and visible water supply and waste-water and vent pipes; (ii)-(v) (No change.) (vi) observe and report deficiencies in installation and identification of hot and cold faucets; (vii)-(xii) (No change.) (J) (No change.) (g) Electrical systems. (1) (No change.) (2) Components for inspection. (A) Service entrance and panels. (i) Inspection guidelines. The inspector shall do the following: (I) observe service entrance cables for integrity of insulation, drip loop, separation of conductors at weatherheads and clearances; (II) (No change.) (III) inspect for the presence of a grounding electrode conductor in the service where visible, secure connection to the grounding electrode or grounding system; (IV) inspect all accessible main and subpanels to ensure they are secured to the structure and appropriate for their location (weather-tight if exposed to weather, appropriate clearances and accessibility), with inside covers (dead fronts) in place and knock-outs filled; (V) inspect the condition of the wiring in the panels, its type (for example, copper or aluminum) and the compatibility of overcurrent protectors for the size of conductor being used and for proper sizing of listed equipment of overcurrent protection and conductors, when power requirements for listed equipment are readily available; (VI) report the presence or absence of appropriate connections, such as copper/aluminum approved devices, pig-tailed connections or crimp connections; and (VII) observe the presence of main disconnect(s). (ii) Specific limitations. The inspector is not required to do the following: (I) determine service capacity amperage or voltage or the capacity of the electrical system relative to present or future use; (II) determine the insurability of the property; or (III) conduct voltage drop calculations; (B) Branch circuits, connected devices and fixtures. (i) Inspection guidelines. The inspector shall do the following: (I) inspect all accessible receptacles to determine whether: (-a-) (No change.) (-b-) polarity is correct; (-c-) (No change.) (-d-) there is evidence of arcing or excessive heat; (-e-)-(-g-) (No change.) (II) operate all accessible wall and appliance switches to determine if: (-a-) they are operational; (-b-) there is evidence of arcing or excessive heat; and (-c-) they are fastened securely with covers in place. (III) (No change.) (IV) report inoperable or missing fixtures; (V) observe and report deficiencies of exposed wiring and junction boxes; (VI) observe and report deficiencies or absences of conduit in appropriate locations and for secure termination of conduit; (VII) inspect appliances and electrical gutters for proper bonding; (VIII) observe subpanels for bonding and grounding; (IX)-(X) (No change.) (ii) Specific limitations. There are no specific limitations for branch circuits, connected devices and fixtures. (h) (No change.) This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 7, 1995. TRD-9508319 Mark A. Moseley General Counsel Texas Real Estate Commission Effective date: January 1, 1996 Proposal publication date: March 17, 1995 For further information, please call: (512) 465-3900 TITLE 28. INSURANCE Part I. Texas Department of Insurance Chapter 9. Title Insurance Subchapter A. Basic Manual of Rules, Rates and Forms for the Writing of Title Insurance in the State of Texas 28 TAC sec.9.1 The Texas Department of Insurance adopts an amendment to sec.9.1, with changes to the proposed text as published in the May 12, 1995, issue of the Texas Register (20 TexReg 3560). The amendment concerns the adoption by reference of the 32>Basic Manual of Rules, Rates, and Forms for the Writing of Title Insurance in the State of Texas (the Basic Manual). The amended section is necessary to reflect amendments to the Basic Manual, which the section adopts by reference. The amendments to the Basic Manual modify existing promulgated rules and add or expand other rules and forms. Agenda Item 94-4 was adopted as published. This item amends Section V of the Basic Manual concerning Exhibits and Forms to include a new Insured Closing Service Letter form for the purchaser and seller. The new forms are necessary to protect the purchaser and seller in a real estate transaction against the loss of their settlement funds if such loss is a direct result of the fraud or dishonesty of the title insurance agent. The title insurance underwriter is guaranteeing replacement of the purchaser's or seller's lost settlement funds subject to the exceptions and limitations specified in the Insured Closing Service Letter form. Agenda Item 94-5 adopts new Procedural Rule P-17 with changes to the text as published. Agenda Item 94-5 was changed to add the notation "(Replaces former P-17 which was withdrawn December 17, 1976 by Board Order 31705)" as a footnote to new P-17. New P-17 provides that title insurers are allowed to computer generate or electronically produce a hard copy of any Texas promulgated endorsement form. The amendment is necessary to promote more efficient production of endorsements to title policies. Production of endorsements to a title policy can be a time consuming process because the endorsements are so varied they must be typed on a typewriter. The electronic production of endorsements would shorten production time which would reduce policy production costs and expedite the consumer's receipt of the policy. Agenda Item 94-6 was adopted as published and it amends the Revolving Credit Endorsement to the Mortgagee Title Policy (Form T-35) to except bankruptcies and governmental statutory liens and to clarify that the endorsement does not extend the date of the Mortgagee Title Policy. These changes are necessary to update the endorsement form so that it harmonizes with changes made in 1993 to Schedule A of the Mortgagee Title Policy concerning exceptions to claims arising out of bankruptcy and governmental statutory liens. Agenda Item 94-7 was adopted as published. This item amends the "Minimum Standards of Audit of Trust Funds Required of Texas Title Insurance Agents and Title Attorneys, Specific Instructions and Audit Report Forms" of the Basic Manual to collectively refer to all individuals and entities subject to escrow audits as "escrow agents"; to provide for the elimination of the State Board of Insurance; to clarify receipt, deposit, and disbursement audit procedures of good funds for every transaction; to write out the term "guaranty file" instead of abbreviating the term as "GF file"; to clarify procedures for auditing accounts in a dormant condition and escheat requirements; to clarify audit reporting procedures concerning escrow receivables; to consolidate and clarify audit procedures regarding policy guaranty fees and guaranty assessment recoupment charges; and to clarify the specific instructions for completion of the exhibits to escrow audits. Agenda Item 94-7 also amends the "Minimum Escrow Accounting Procedures and Internal Controls" of the Basic Manual to require management approval of each reconciliation for monthly bank balance, book balance, and escrow trail balance; to require that each reconciliation be prepared by or reviewed by the manager or owner; to require two signatures on all escrow checks unless the escrow agent is a sole proprietorship and the owner signs the escrow checks; to set guidelines for information entered on disbursement sheets; to set up procedures for making corrections of settlement statements; and to require signed, pre-numbered receipts for escrow funds received in cash. Agenda Item 94-8 was adopted as published and it amends the Insured Closing Service Letter form for lenders to include licensed direct operations in addition to title agents. This amendment is necessary to clarify that a title underwriter licensed as a direct operation in a particular county would also be responsible for the loss of a lender's settlement funds due to the fraud or dishonesty of a licensed Texas direct operation. Agenda Item 94-9 was adopted with changes to the text as published. This item amends Procedural Rule P-1 which is the definition section of the procedural rules in the Basic Manual. Procedural Rule P-1c which defines "Board" was amended to reflect the reorganization of the Texas Department of Insurance which dissolved the three member board and replaced it with a single Commissioner. Procedural Rule P-1p which defines "Title Insurance" was amended to include impairment of lien as one of the risks that the title policy covers. Procedural Rule P-1cc which defines "Commitment For Title Insurance" was added in order to clarify the nature of a title commitment and the role that it serves in the title insurance process. The last sentence of P-1cc which refers to abstracts of title was deleted to clarify the definition of "Commitment for Title Insurance". Procedural Rule P-1dd which defines "Department" was added to clarify that when a reference to the Department is made in a rule or form it means the Texas Department of Insurance. Agenda Item 94-10 repeals Procedural Rule P-34 which described certain conduct, relating to an agent's use of escrow funds to pay operating expenses and to an agent's failure to comply with escrow accounting procedures, that was considered to demonstrate a lack of trustworthiness and competence as a matter of law. This repeal was necessary because House Bill 1461 repealed lack of trustworthiness and competence as a ground for disciplinary action against a title agent or direct operation. Agenda Item 94-11 was not adopted. Agenda Item 94-12 was adopted with changes to the text as published. This item was changed to include a notation on Form T-40 that the jurat is not applicable to claims made under a Texas Residential Owner Policy. Agenda Item 94-12 amends Form T-40, Texas Title Insurance Proof of Loss Form to include a jurat. This amendment is necessary because the Owner Policy of Title Insurance (Form T-1) and the Mortgagee Policy of Title Insurance (Form T- 2) specify that the proof of loss must be signed and sworn to by the insured claimant. Agenda Item 94-13 was adopted with changes to the text as published. In response to comments received, the Department amends Form T-20, Owner Title Policy Commitment to the Texas State Highway Department and the Owner Title Policy Commitment for Eminent Domain Proceedings form to standardize the survey exception in the two forms so that the survey exception will be consistent with the one in the existing Commitment for Title Insurance. Agenda Item 94-13 amends Form T-20, Owner Title Policy Commitment to the Texas State Highway Department, the Owner Title Policy Form for Eminent Domain Proceedings Form, Procedural Rule P-24 and Rate Rule R-23 to reflect the name change of the Texas State Highway Department to Texas Department of Transportation and the substitution of the "Texas Department of Insurance" for the term "State Board of Insurance". Agenda Item 94-14 was adopted with changes to the text as published. This item proposed new Procedural Rule P-41 which requires title insurers, when handling residential refinance transactions, to accept an affidavit by the mortgagor in lieu of requiring a current survey. In response to amendments that were proposed at the June 14, 1995 public hearing this item was amended. First, new Procedural Rule P-41 was deleted and the substantive content of proposed P-41 was reformatted as an amendment to existing Procedural Rule P-2. Second, in the amendment to P-2 the factual content of the mortgagor's affidavit as to changes in the property is explicitly specified whereas in the original proposal the mortgagor's affidavit was conclusory and generalized. The third significant change to this item is that the prior survey being relied upon can be no older than seven years. This amendment to P-2 is necessary because in residential refinance transactions, where the survey is less than seven years old and there have been no changes made to the property, it would burden the consumer with unnecessary survey costs to require a new survey. This amendment also standardizes industry criteria for requiring a new survey in residential refinance transactions. Amended sec.9.1 incorporates by reference certain amendments to the Basic Manual which the Commissioner considered as individual agenda items at the biennial hearing on June 14, 1995. Agenda Item 94-4 adopts a new Insurance Closing Service Letter form for purchaser and seller which extends protection from loss through dishonesty of the title agent to the settlement funds of the purchaser and seller. Agenda Item 94-5 adopts a new Procedural Rule P-17 permitting computer generation of Texas promulgated endorsement forms in order to increase the efficiency of title policy production. Agenda Item 94-6 amends the Revolving Credit Endorsement to the Mortgagee Policy (Form T-35) to except bankruptcies and governmental statutory liens in order to harmonize the endorsement with previous changes made to the Mortgagee Title Policy. Agenda Item 94-7 amends the Minimum Escrow Accounting Procedures and Internal Controls in Section V of the Basic Manual. The effect of these amendments will be a strengthening of accounting controls over trust funds and a revision of the reporting instructions to facilitate understanding of the minimum standards for trust fund audits thereby improving the quality of these audits. Agenda Item 94- 8 amends the Insured Closing Service Letter for lenders to include licensed Texas direct operations. The effect of this amendment is to clarify that direct operation are also included in the coverage provided under the Insured Closing Service Letter. Agenda Item 94-9 amends Procedural Rule P-1 by clarifying the existing definitions of the term "Board" (P-1c) and the term "Title Insurance" (P-1p). The amendment also adds new definitions to P-1 for the terms "Commitment for Title Insurance" (P-1cc) and "Department" (P-1dd) . Agenda Item 94-10 repeals Procedural Rule P-34 which no longer had statutory authority because House Bill 1461 removed from Article 9.37 lack of trustworthiness and competence as a ground for disciplinary action. Agenda Item 94-12 amends the Title Insurance Proof of Loss Form so that it includes a jurat which would require a claimant to sign the loss form under oath as specified in the Mortgagee Policy. Agenda Item 94-13 amends the title insurance forms used by the Texas Department of Transportation to reflect the name change of the Texas State Highway Department and the State Board of Insurance. Agenda Item 94-13 also amends the survey exception in both the Owner Title Policy Commitment to the State Highway Department and the Owner Title Policy Commitment for Eminent Domain Proceedings so that the language is consistent with the survey exception in the Commitment for Title Insurance (Form T-1). Agenda Item 94-14 amends Procedural Rule P-2 to require title insurers, when handling refinance transactions, to accept an affidavit from the mortgagor stating that certain conditions have been met in lieu of requiring a current survey. The effect of this amendment will be to allow the borrowers to save on survey costs provided the survey is not older than seven years and there have been no significant physical changes to the property since it was last surveyed. No comments were received regarding adoption of the amendment to 28 TAC sec.9.1. Comments were received on proposed Agenda Item 94-13 which concerns modifications to the title insurance forms used in transactions with the Texas Department of Transportation. A commenter proposed that the survey exceptions in the Owner Title Policy Commitment to the State Highway Department and the Owner Title Policy for Eminent Domain Proceedings be amended to be consistent with the language of the survey exception in the Commitment For Title Insurance and the Owner Title Policy (Form T-1). The agency agrees and has made the suggested changes so that the language in the survey exception is consistent in the above referenced forms. For with changes-Texas Department of Transportation; Against-none. The amendment is adopted under the Insurance Code, Articles 1.03A, 1.02, 9. 07, and 9.21; and the Government Code, sec. sec.2001.004, et seq. Article 1.03A authorizes the Commissioner to adopt rules and regulations for the conduct and execution of the duties and functions of the Department as authorized by statute. Article 1.02 provides that a reference in the Insurance Code or another insurance law to the State Board of Insurance means the Commissioner of Insurance or the Texas Department of Insurance as consistent with the respective powers and duties of the Commissioner and the Department under Article 1.02. Article 9.07 authorizes and requires the Commissioner to hold a biennial hearing to promulgate or approve rules and policy forms of title insurance and otherwise to provide for the regulation of the business of title insurance. Article 9.21 authorizes the Commissioner to promulgate and enforce rules and regulations prescribing underwriting standards and practices, and to promulgate and enforce all other rules and regulations necessary to accomplish the purposes of Chapter 9, concerning regulation of title insurance. The Government Code, sec.sec.2001.004, et seq (Administrative Procedures Act), authorizes and requires each state agency to adopt rules of practice setting forth the nature and requirements of available procedures and to prescribe the procedure for adoption of rules by a state administrative agency. The following statutes is affected by this proposal: Articles 9.07, 9.21. sec.9.1. Basic Manual of Rules, Rates, and Forms for the Writing of Title Insurance in the State of Texas. The Texas Department of Insurance adopts by reference the Basic Manual of Rules, Rates, and Forms for the Writing of Title Insurance in the State of Texas, as amended effective August 1, 1995. The document is published by and available from Hart Information Services, 11500 Metric Boulevard, Austin, Texas 78758, and is available from and on file at the Texas Department of Insurance, Title Insurance Section, MC 103-1T, 333 Guadalupe Street, Austin, Texas 78701-1998. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 7, 1995. TRD-9508343 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Effective date: August 1, 1995 Proposal publication date: May 12, 1995 For further information, please call: (512) 463-6327 Part II. Texas Workers' Compensation Commission Chapter 166. Accident Prevention Services The Texas Workers' Compensation Commission (TWCC) adopts new sec.sec.166. 1- 166.7 and sec.166.9, and the simultaneous repeal of existing sec.166.2, sec.sec.166.100-166.108, and sec.sec.166.111-166.113, concerning accident prevention services. Rules 166.1, 166.4, 166.6 and 166.7 are adopted with changes to the proposed text as published in the April 21, 1995, issue of the Texas Register (20 TexReg 2994). Rules 166.2, 166.3, 166.5 and 166.9 are adopted without changes and will not be republished. The commission has filed a withdrawal of the current proposal of new sec.166.8, concerning qualifications of field safety representatives, and simultaneously proposed a new sec.166.8 concerning the same subject matter. The new proposal of sec.166.8 incorporates provisions statutorily mandated by HB 1089, 74th Legislature, 1995. The withdrawal and reproposal of 166.8 are published elsewhere in this issue of the Texas Register . The repeal of existing sec.166.109, which was proposed in the April 21, 1995 issue of the Texas Register, will be adopted at a later date than the other repeals in this package. The adoption of the repeal of sec.166.109, which contains some provisions that are transferred to the latest proposal of new sec.166.8, will coincide with the adoption of the latest proposal of new sec.166.8. The new rules and repeal of existing rules add and revise provisions regarding accident prevention services required of insurance companies, and add reasonable service requirements to assist policyholders with injury reduction, as well as to implement the commission's ongoing goal of rules consolidation and simplification. The differences in the new rules and the repealed rules are outlined later in this preamble. The changes made to the rules were made in response to written public comment received and testimony heard at a public hearing held on these rules on June 14, 1995, and are addressed in the summary of comments portion of this preamble. The original 14 rules in Chapter 166 have been refined and consolidated into nine, with a more conventional numbering system (sec.sec.166.1 - 166.9). New 166.8 will be adopted in the near future, as explained in the initial paragraph of this preamble. Definitions have been added for the terms "on-site" and "other appropriate services", to distinguish between the two categories of service. Service requirements (the major area of change) has been consolidated with respect to premium categories and loss ratios and expanded to include service based on a fatality. A specific requirement has been established for an "on site" visit within three days of a work-related fatality, except in the case of common carrier accidents or out of state fatalities. Provisions relating to the commission's enhanced compliance initiative (already in place) have been added, including the questionnaire and expanded inspections when non-compliance areas are detected. The timing criteria for required services to the insured by the insurance company are more specific. Services are required at least every 12 months. The requirement for on-site visits to policyholders with premiums greater than $25, 000 and a loss ratio greater than 100% and for policyholders with premiums between $5,000 and $24,999 and a loss ratio greater than 250% will likely increase the number of visits to policyholders. This increase in visits to policyholders will likely result in a decrease in the potential for injuries/accidents. Fewer injuries should result in a reduction in claim payout, savings to the insurance company (and, ultimately, the policyholder), increased production for the employer, and maintenance of a healthy, safe workplace for Texas workers. The nature of the revisions to individual Chapter 166 rules are discussed as follows. Some provisions of repealed sec.166.2 were incorporated into new sec.166.1 - the existing definitions were revised and definitions were added. Some provisions of repealed sec.166.100 were consolidated with provisions of repealed sec.166.112 to become new sec.166.4 - text revised . Some provisions of repealed sec.166.101 have become new sec.166.2 - text revised. Some provisions of repealed sec.166.102 were consolidated with repealed sec.166.103 to become new sec.166.5 - text revised. Some provisions of repealed sec.166.103 were consolidated with provisions of repealed sec.166.102 to become new sec.166.5 - text revised. Some provisions of repealed sec.166.104 were consolidated with provisions of repealed sec.166.106 to become new sec.166.6 - text revised. Some provisions of repealed sec.166.105 were consolidated with provisions of repealed sec.166.107 and provisions of repealed sec.166.108 to become new sec.166. 7 - text revised. Some provisions of repealed sec.166.106 were consolidated with provisions of repealed sec.166.104 to become new sec.166.6 - text revised. Some provisions of repealed sec.166.107 were consolidated with provisions of repealed sec.166.105 and repealed sec.166.108 to become new sec.166.7 - text revised. Some provisions of repealed sec.166.108 were consolidated with repealed sec.166.105 and repealed sec.166.107 to become new sec.166.7 -text revised. Some provisions of repealed sec.166.111 have become new sec.166.9 - text revised. Some provisions of sec.166.112 were consolidated with repealed sec.166.100 to become new sec.166.4 - text revised. Repealed sec.166.113 has become new sec.166.3 - text revised. The new rules include the following new provisions. In new sec.166.1, the number of defined terms has increased to provide for clarity and consistency throughout the Chapter 166 rules. New sec.166.2 contains the following new provisions: Subsection (a)(1) requires an insurance company to submit an accident prevention services program plan for evaluation and approval by the division when submitting a request to enter the workers' compensation insurance market. Subparagraph (A) provides the insurance company with a resolution mechanism should they disagree with the evaluation of the division. Subparagraphs (A-C) provide administrative procedures for the division regarding approval of accident prevention services plans. In subsection (a)(2), the time frame within which the insurance company's services will be initially inspected by the division has been changed, so that an insurance company new to the workers' compensation insurance market will have written sufficient policies to allow for a comprehensive inspection of its accident prevention services. Subsection (a)(3) provides direction to insurance companies that are reinsurers or excess insurers. Subsection (b) was expanded to include those companies who were previously approved and writing workers' compensation insurance, exited the market for a period of time, and are now re-entering the market. New sec.166.3 provides the insurance company with clearer direction on when and how to complete the annual report. New sec.166.4 contains the following new provisions: The new rule combines information pertaining to required accident prevention services under one rule. Subsection (a) requires insurance companies to maintain or provide accident prevention services and distinguishes insurance companies writing workers' compensation insurance from those desiring to write. The procedures for those desiring to write are listed under new sec.166.2. Insurance companies which write only excess or reinsurance are exempted from the requirement to provide accident prevention services. Subsection (c) establishes a 12-month time frame in which services must be provided. Previously, the use of the word "annual" in current sec.166.100 (c)(1) and (c)(2)(B)-(D) created confusion as to whether it meant calendar year, policy year or a 12-month period. Subsection (c)(2) was changed to emphasize required service, rather than the personnel performing the service. Subsection (c)(2)(A) requires that requested services, which might be provided to policyholders without a visit to the work site, be provided within 15 days. Requested services which require an on-site visit must be provided within 30 days as opposed to the 60-day time frame contained in the repealed rule. A provision was added allowing a longer time for provision of services if circumstances require and the policyholder agrees. Subsection (c)(2)(B)(i) and (ii) set out the criteria which require either an on-site visit or provision of other appropriate services. Subsection (c)(2)(C)(i) and (ii) set out the criteria which require a mandatory on-site visit. Subsection (c)(2)(D) establishes when a safety professional must visit a policyholder site that has experienced a fatality. Subsection (c)(2)(E) requires written solicitation of comments from each policyholder every 12 months together with a new requirement for a notification of availability of accident prevention services. Subsection (c)(4) consolidates and clarifies all requirements for written procedures into one paragraph. Subsection (c)(6) requires written notification of actual claims experience every 12 months. The word "periodic" in repealed sec.166.100(c)(7) offered no definitive time frame in which claims experience and accident analysis must be provided to policyholders. Subsection (c)(7) contains the "Notification to Policyholders of Accident Prevention Services" in repealed sec.166.112. New sec.166.5 contains the following new provisions: Subsection (a) eliminates reference to a time frame associated with a certificate of inspection. Paragraph (a)(1) requires inspection of accident prevention services at least every two years and new sec.166.7 provides information on inspection and issuance of certificates. Subsection (a)(3) identifies mailing as the method of notification for upcoming inspections. The change clarifies the method of notification. Subsection (b)(2) allows insurance companies with no office in Texas to request that TWCC inspectors travel to the insurance company home office at the insurance company's expense for the inspection. Presently insurance companies with no office in Texas are required to travel to TWCC headquarters. New sec.166.6 contains the following new provisions: Subsection (a)(1)(A) identifies material required by TWCC for use in performing the inspection of the insurance company. This material is used to identify those accounts to be reviewed by TWCC and was previously requested by TWCC letter. Incorporating the requirement for specific information in the rules will facilitate the flow of necessary material. Subsection (a)(3) incorporates a questionnaire required for the inspection. This questionnaire has been used since August, 1993. Subsection (b)(1) clarifies the "as of" date for the information necessary for the inspection. Subsection (b)(1)(D) includes information regarding fatalities as necessary for the inspection. The information is necessary to properly assess the insurance company's performance following the fatality. Subsection (b)(1)(G) allows procurement of additional information if an expanded inspection (such as described in new sec.166.7(a)(3)) is necessary. Subsection (b)(3) identifies a procedure to be followed by the division inspector which allows procurement of authenticated documents. New sec.166.7 contains the following new provisions: Subsection (a)(1)(A) clarifies the "as of" date for TWCC's inspection of insurance company services. Subsection (a)(3) allows for an extended inspection should inspectors determine non- compliance. Subsection (b)(3) eliminates quarterly progress reports and allows inspectors to establish reporting dates based upon the gravity and complexity of the discrepancies identified. Subsection (b)(4) allows insurance companies a means to appeal ratings. New sec.166.9 contains the following new provisions: The title of the rule was changed to more closely reflect the contents of the rule. Subsection (b) establishes that only accredited educational institutions may apply for approval to conduct occupational health and safety education programs. In subsection (d), the five-year approval period was changed to three years. This provides for more frequent oversight to ensure programs are meeting commission requirements. Subsection (e) specifies that organizations approved to conduct occupational health and safety education programs will submit an annual report for review by the commission. This change allows the division to track active education programs. Subsection (f) adds language to allow on-site monitoring of approved occupational health and safety education programs to insure standardization and compliance with TWCC direction. Written comments were received on the proposed new rules from the following individuals and organizations: Austin Community College; Reliance National; CNA Insurance Companies; the American Insurance Association (AIA); ITT Hartford; Liberty Mutual; Texas Workers' Compensation Insurance Fund; Alliance of American Insurers; the Travelers Companies; American International Companies; CIGNA Property and Casualty; the National Association of Independent Insurers (NAII); and Colonial Casualty Insurance Company. Representatives from the following organizations gave testimony at the public hearing held on June 14, 1995: Cigna Property and Casualty; Liberty Mutual; State Farm Insurance; Chubb and Sones, Inc.; National Association of Independent Insurers (NAII); Lumberman's Insurance Company; American Insurance Association (AIA); and the Alliance of America Insurers. All commenters expressed overall opposition to the majority of the proposed rules. Following is a summary of the comments received and testimony heard, and the commission's responses. The following general comments were received regarding sec.166.1. COMMENT: One commenter requested definitions for numerous phrases and requested the opportunity to review them before adoption. The recommendation is to develop definitions for "accident prevention services questionnaire", "A. M. Best Hazard Index", "actual claims experience", "business record affidavit", "catastrophic type accidents", "exposure indices" and "solicitation of comments". Another commenter requested that the components of the "loss ratio" calculation be defined and that a definition of "days" be included and defined as "working days". RESPONSE: The commission agrees in part. The commission disagrees that the terms "accident prevention services questionnaire", "actual claims experience", "catastrophic type accidents" or "solicitation of comments" require further definition, since they are clear or defined by use in the appropriate paragraphs in the rules. No definition of the A.M. Best Hazard Index on exposure indices is necessary because the A.M. Best Hazard Index requirement has been deleted from Rule 166.4 and Rule 166.6. The term "exposure indices" has been deleted from sec.166.4(c)(1)(A). The commission agrees that "business record affidavit" requires clarification and has done so in sec.166.6(b)(3) (See the commission response to a comment on sec.166.6(b)(3) regarding business record affidavit.) The commission does not agree with the modification of "days" to mean "working days". Reference to a time frame serves only to establish intervals necessary to accomplish tasks. Converting to working days would extend the time for the entire inspection process beyond the time necessary to complete all necessary tasks. The commission agrees that "loss ratio" should be defined as part of Rule 166.1. The following definitions have been added to Rule 166.1 in alphabetical order: Loss Ratio - Loss ratio is the result of dividing the accumulated claims (including reserves) in a policy year by the manual premium determined when the policy is written, but before any adjustments or discounts are applied. The following comments were received on sec.166.1 regarding the definition of "Field Safety Representative" (FSR). COMMENT: The commenter recommended retaining the present definition of a Field Safety Representative. RESPONSE: The commission disagrees, since the proposed definition is specifically designed to formalize the distinction between a Field Safety Representative and an Approved Professional Source qualification. The following comments were received on sec.166.1 regarding the definition of "on-site visit". COMMENT: One commenter requested use of modern technology in providing accident prevention services and recommended that the definition read "On-site visit - A survey, consultation or training conducted on the premises of the policyholder either in person or by means of video-based telecommunication." Another stated that "on the premises of the policyholder" may not always be the most appropriate location for conducting training during an "on-site visit", and recommended "premises" be redefined to include other appropriate locations. A third commenter stated that the definition of an on- site visit needs clarification as to which policyholder's premises would satisfy this requirement and recommended that "on-site visit" be defined to include "any premises upon which the policyholder operates a business within the State of Texas." RESPONSE: The commission agrees in part. Insurance companies should have the opportunity to select policyholder operating locations for service, based upon hazard potential, loss history and policyholder desires. The commission does not agree that "on- site" can be defined as providing safety training or materials through any means other than physical presence of an FSR at the site. Such activity would more appropriately fit within the definition of "other appropriate services". The definition of "On-site visit" has been amended to read "On-site visit - A survey or consultation, or training conducted at any premises upon which the policyholder operates a business within the State of Texas." The following comments were received on sec.166.1 regarding the definition of "other appropriate services". COMMENT: Commenters disagreed with the definition requiring service "specifically tailored" to policyholder history and operations. One commenter recommended deleting the definition or, along with another commenter, substituting "applicable" for "specifically tailored". Another recommendation was to define "other appropriate services" as ". . . specifically tailored to the nature and loss of similar policyholders' operations, designed to help policyholders implement hazard exposure controls and further safety management practices." RESPONSE: The commission agrees with changing "specifically tailored" to "applicable". The definition has been changed to read "Other appropriate services - Services provided in lieu of on-site visits which require direct contact between the insurance company and the policyholder and are applicable to the nature and loss history of each policyholders' operations. " The following comments were received on sec.166.1 regarding the definition of "other appropriate services". COMMENT: The commenter requested that the section be modified so that a carrier might take advantage of existing and emerging technology as a service option. RESPONSE: The commission disagrees. No amendment is necessary. While the commenter's request is valid, the definition of "Other appropriate services" does not preclude use of technological means to achieve direct contact or provide such services. The following comments were received on sec.166.3(a) regarding the annual report to the commission. COMMENT: The commenter felt annual reports to the commission are expensive and redundant because the information could be obtained by the commission from a carrier's annual report to the State. The commenter stated that when a carrier writes multi-line coverage it is often impossible to distinguish between kinds of services provided for workers' compensation exposures and others and recommended that this rule be deleted. RESPONSE: The commission disagrees. The annual report is required by sec.411. 065 of the Texas Labor Code. This report is needed for industry data base development to determine program effectiveness. The annual report also assists the commission in identifying the companies currently writing workers' compensation insurance and requiring inspection. The following comments were received on sec.166.3(e) regarding expenses for accident prevention services. COMMENT: The commenter stated that most carriers do not equate "underwriting visits" with "accident prevention services" and recommends deletion of the paragraph as unnecessary and confusing. RESPONSE: The commission disagrees. A significant portion of the accident prevention services survey reports routinely seen by commission inspectors indicate the survey took place as a part of a larger underwriting inspection. Some are presented to inspectors as workers' compensation accident prevention services surveys when they deal only with other lines and other underwriting concerns. This requirement is to ensure workers' compensation policyholders receive recognizable, defined accident prevention services. The following comments were received on sec.166.4(b) regarding providing services at no charge. COMMENT: Commenters generally objected to the requirement that insurance companies provide accident prevention services at no charge to the insured. Commenters stated that carriers write various types of policies. In "loss sensitive" contracts, final costs depend upon policyholder claims for the contract period. These policies often unbundle loss control services from the rest of the premium either because policyholders do not believe they need such service or because it is more equitable to require employers that want these services to purchase them individually. Including the costs of accident prevention services creates a pricing scheme that distributes these costs among all employers, even among those who do not want them. Commenters also expressed concern that there is no statutory authority to require that service be provided at no charge. Additionally, one stated that no payment for accident prevention services exists in the premium paid by the policyholder and that insurance shoppers should have the right to purchase an insurance program that suits their individual needs. It was recommended that workers' compensation carriers be allowed to charge a reasonable, negotiated fee for providing loss control services to employers that want services. One commenter stated that there are costs to providing accident prevention services and that it should be acknowledged that these costs are passed on to policyholders in the rate structure. He recommended modifying the definition by deleting "at no charge" and adding "within the premium structure." RESPONSE: The commission disagrees. The commission acknowledges that a cost for providing accident prevention services is already accounted for in the premium rate structure submitted by insurance companies and approved by the Texas Department of Insurance (TDI), and is paid for by the policyholder. A policyholder should not be charged a second time for these services. The Texas Labor Code, Chapter 411, Subchapter E. Accident Prevention Services, requires accident prevention services, but does not provide that insurance companies may impose additional charges for such service. In fact, the State Board of Insurance position on this issue is that accident prevention services must be at the expense of the insurer and cannot be waived. There are provisions in the Texas Insurance Code (Article 5.76-3, sec.10(k) and Article 5.76-2, sec. 4. 06(k)) and in the Texas Labor Code, sec.411.048, which mandate that the commission charge for accident prevention services it provides to an employer. In addition, commission rule 164.3(g) allows consultants who perform accident prevention services under the Extra-Hazardous Employer Program to charge for services. These situations are specifically mentioned by statute and rule because they are out of the ordinary and distinguishable from regular required accident prevention services. The commission has no other means to recoup the expenditures for accident prevention services as opposed to an insurance carrier which is expected to consider such expenses when setting premium rates. In the case of accident prevention services under the Extra-Hazardous Employer Program, such services are not anticipated when setting premiums and are therefore in addition to the premium. The absence of statutory authority for insurance companies to charge for accident prevention services implies that the authority was intentionally excluded. COMMENT: One commenter pointed out that the expression, "at no charge," is inconsistent with the wording in Rule 166.4(c)(7) and recommended that TWCC change the wording in this paragraph to "at no additional charge." RESPONSE: The commission agrees. Section 166.4(b) has been amended to change "at no charge" to read "at no additional charge". COMMENT: A commenter stated that insurers should be allowed to adequately fund for anticipated and/or agreed to services based upon the policy form chosen with the insured. Agents, brokers and policyholders often interpret the rule as allowing any safety related services to be "free of charge". There needs to be clarity in what is intended and what kinds of policy forms will be recognized. Safety service is a cost which must be recovered by the insurance company. The commenter recommended that the rule specifically identify and clarify policy forms and costs to be included. RESPONSE: The commission agrees in part. The commission disagrees that costs for services need to be specified, since the Act and the rules are specific about services and service frequency required. The costs to perform such service would vary by insurance company. The forms of policies effected, however, should be specified. Section 166.4(a) has been revised to exclude excess and reinsurance policies from the requirement to provide service. The following general comments sec.166.4(c)(2) regarding accident prevention servicing requirements. COMMENT: Commenters stated that the rule will: increase on-site visits; significantly increase workload and costs; require insurers to provide services to recalcitrant employers, which will not be used, thus wasting safety resources; and force unwanted or unnecessary service on policyholders, especially small policyholders. Using loss ratios as indicators for service was thought to be not as good as using measures of frequency or severity. Some commenters anticipate that resources would be diverted from employers who need services. One commenter additionally stated that although a company operates under a questionable classification, it does not necessarily follow that they will have uncontrollable losses. It was expressed that the annual evaluation coupled with the offer of accident prevention services and the ability of the commission to require services for extra-hazardous employers should adequately address those risks which need service. A commenter stated that as the volume and specificity of regulations increase, insurance companies must spend more and more of their resources to review, analyze, administer and comply with regulations. Additionally, the commenter stated he can note no improvement in the workers' compensation results of his subscribers that can be directly linked to any of the recently-enacted regulations. A commenter felt service should only be provided when requested by the policyholder or as determined jointly by the insurer and the insured. One commenter believes that the Act purposely leaves the details of providing services to the insurers and that rules should be flexible to allow insurers to use judgment to carry out the requirements. Most disagreed with the use of the A.M. Best Hazard Index (See the general comments at the beginning of this summary of comments and responses.) The commenters recommended that: TWCC should retain the existing rules without change; premium and loss ratio triggers for mandatory service should be eliminated; and if a reference to A.M. Best classification is included, a realistic loss component should be included, not simply a loss ratio. RESPONSE: The commission agrees in part. New requirements may result in more on-site visits and services being provided to policyholders by some insurance companies, and a corresponding increase in costs for providing such services. The commission disagrees that overall cost to insurance companies or the workers' compensation system will result, since increased service should result in fewer injuries and less costs for claims. The commission disagrees that loss ratio is not a good indicator of need for service. It is a good means of focusing service to employers who have experienced unacceptable levels of injuries. A similar reactive program is the commission's Extra Hazardous Program, which requires essentially the same type of service as the Act requires of insurance companies (surveys, consultations, etc.) and has resulted in dramatic reductions in injuries for participants. Additionally, the commission disagrees that any insurers, except the insurer of last resort, will be required to insure employers with high loss ratios, since Texas is a voluntary workers' compensation state and carriers are not required to write high risk policies. Premium amount is a product of exposure and the population exposed and assists in focusing service where it is needed by anticipating the need and preventing injuries before they occur. The commission disagrees with the comment that current regulations have had no noted success in reducing injuries in Texas. Statistics gathered since the Workers' Compensation Act took effect in 1991 indicate a significant decrease in injuries in the state and have allowed Texas to attain an injury rate well below the national average. COMMENT: Another commenter expressed confusion about servicing requirements stating that a small policy (under $25,000) with a loss ratio above 100% requires on-site service, but a very large policy must receive only a letter. RESPONSE: The commission disagrees. The commenter's assumption that a letter to a large policyholder is sufficient to constitute "other appropriate service" is incorrect. The definition of "other appropriate service" in proposed rule 166.1 requires more than a letter. Additionally, the minimum service any small policyholder (under $25,000 premium) must receive in Texas is solicitation of comments by mail at least annually. To assume this requirement can be applied as the only service a large policyholder should receive is not substantiated in the rules. The following comments were received on sec.166.4(c)(2)(A) regarding the time for response to policyholder service requests. COMMENT: A commenter stated that, while striving to respond, circumstances may not always allow them to achieve 100% timeliness. Commenters disagreed with the shortened time frames proposed for responding to requests for service, stating that: 30 days is insufficient time; the time frames will not allow for flexibility for extenuating circumstances; and that they may result in reduced service to other policyholders. A commenter also stated that insurers should be relieved of the need to provide duplicate service where in-house services or contracts with third party administrators for those services are provided and recommended allowing 90 days to provide such service or, in the alternative, the current 60 days. All commenters recommended that the new rules incorporate the time frames currently stated in the existing rules. Two commenters also recommended that "days" be changed to "working days". RESPONSE: The commission agrees in part. The time outlined in the paragraph is adequate, given the paramount concern for policyholder workplace safety and the practices and procedures of insurance companies observed by the commission in the past four years of experience. The commission agrees, however, that extenuating circumstances on the part of the policyholder may make these time frames impossible. Section 166.4(c)(2)(A) has been revised to read "(A) provide services requested by policyholders within 15 days of the date services were first requested, if appropriate services can be provided from the insurance company offices and within 30 days of the date of first request, if the services require an on-site visit. Services may be provided at a later time if circumstances require and the time is agreed upon by the policyholder; " The following comments were received on sec.166.4 (c)(2)(B)(i) regarding the A.M. Best Hazard Index. COMMENT: The majority of the commenters disagreed with the use of the A.M. Best Hazard Index as part of the criteria for determining the need for service, stating that many carriers do not use this index and adopting it would be costly, the index is arbitrary, unscientific and based on small samples, one- third of industries are not identified in the index, it is out of date and no other states use it. Some commenters felt that going to locations with no losses, just because of a potentially hazardous operation, is a waste of time and money. One commenter prefers using the Standard Industrial Classification (SIC) as it is a better tool to compare the loss level of a policyholder to the industry and recommends its use, in conjunction with Bureau of Labor Statistics (BLS) data. Another recommends use of loss ratios, restricting required service only to those with loss ratios over 100%. One additional commenter agreed with the use of the A.M. Best Hazard Index in the criteria for on-site visits as a move in the right direction by adding some measure of flexibility for employers with premiums $25,000 and over. All but one commenter recommended that the A.M. Best Hazard Index be removed from the criteria for service in the rule. RESPONSE: The commission agrees with removing the A.M. Best Hazard Index criteria from the rules. While the A.M. Best Hazard Index is the most widely used product of its type in the insurance industry, it is not an industry standard and requiring its use could result in significant administrative costs. However, the purpose for its inclusion, a proactive approach to injury reduction, is still relevant. This goal shall be met with the use of premium triggers for service. All references to A.M. Best Hazard Index have been removed from the proposed rules. The following comments were received on sec.166.4(c)(2)(C)(ii) regarding service provided to policyholders with premiums under $25,000 and loss ratios over 100%. COMMENT: Most commenters disagreed with the criteria set out in the subject subparagraph due to the minor nature of injuries which could cause a loss ratio of over 100%. The concern was also expressed that this rule could lead to increase in premiums for small companies and would add cost without proven benefit. One commenter suggested that group seminars designed specifically to help small business employers would be more appropriate. Additionally, one commenter agreed that service is appropriate for an employer with a high loss ratio, since such criteria does indicate a safety problem. Another commenter stated that the large majority of his company's business is with small policies and that requiring on-site visits, as well as any other services required in the proposed rules, would double or triple costs to his company. Numerous commenters recommended that the insurance companies be allowed to provide "other appropriate services" in lieu of a mandatory on-site visit or that paragraphs (B) and (C) be combined, as in the current rule. One commenter recommended allowing the field safety representative to determine the need for service. Another commenter recommended the subsection be deleted, or, in the alternative, that, if an account's annual premium is less that $25,000 and its loss ratio exceeds 100%, then an on-site survey would be mandatory only if that account has experienced at least one lost-time injury or multiple injuries other than lost- time injuries. RESPONSE: The commission agrees in part. The commission disagrees that loss ratio should be eliminated as a trigger for service. Loss ratio is an indicator of past loss history, with all its ramifications, and it is available throughout the insurance industry. Most insurance companies use loss ratio to focus services where needed. Its use will also alert the policyholder to safety problems and attempts will be made to prevent recurrence. The commission agrees, however, that an on-site visit may not always be the most appropriate service to prevent recurrence of an accident. References to A.M. Best Hazard Index has been deleted. Section 166.4(c)(2)(B) and (C) have been revised to read: "(B) an on-site visit, or provision of other appropriate services, on a periodic basis and at least every 12 months to each policyholder with: (i) a premium of less than $25,000 and a loss ratio greater than 100% or (ii) a premium of $25,000 or more; (C) a mandatory on-site visit on a periodic basis and at least every 12 months to each policyholder with: (i) a premium of $25,000 or more and a loss ratio greater than 100%; or (ii) a premium between $5,000 and $24,999 and a loss ratio greater than 250%; The following comments were received on sec.166.4(c)(2)(D) regarding on-site visit for a fatality within three days. COMMENT: Commenters disagreed with the requirement for an on-site visit within three days of a workplace fatality because OSHA and law enforcement would also have investigators on the site or the distance to the site may preclude response within three days. Commenters also stated that visits should not be required for fatalities such as vehicle fatalities, homicides, terrorist activities, medical related deaths or other unpreventable acts. Other concerns expressed were: three days is not enough time to determine cause or relationship; making the trip to visit the site non-productive, a TPA may be handling claims and the carrier will receive late notification; the carrier's data system does not classify fatalities separately; the fatality may be out-of-state; and compensability may not be clear. Recommendations included: eliminating the requirement; extending the time frame allowed for the visit (15 days, 30 days and/or as determined by the carrier); and allowing carriers to determine the need for services. RESPONSE: The commission agrees in part. The commission disagrees that the requirement for service be deleted or that insurance company accident prevention services are not appropriate when a fatality occurs. Such service will provide assistance to an employer to help prevent recurrence and would be significantly more productive than no visit. The commission recognizes that a fatality may occur out-of-state, at a site no longer in operation or at a transient site and does not intend that "an on-site visit" necessarily means at the scene of the fatality. The intent is to assist the employer, as previously stated. The commission agrees that carriers should be allowed to determine need for services in these cases, but only after a visit with the employer involved has provided sufficient information to make such a determination. The commission also agrees that fatalities can occur which have no direct association with the job. As a result, sec.166.4(c)(2)(D) has been revised to read "(D) a visit to the insured within three working days of notification and/or knowledge of a fatality. If the fatality occurred outside of Texas or was the result of an accident on a common carrier, no visit is required;" The following comments were received on sec.166.4(c)(2)(E) regarding solicitation of comments. COMMENT: One commenter stated that carriers should not be required to solicit information regarding the policyholder's need for accident prevention services because: carriers are already required to provide service; it implies that the carriers services must be used; it creates the unrealistic expectation that the services may reduce accidents; and policyholders may want to use outside consultants. Other commenters stated that "A policyholder's wants may not reflect the actual needs for managing accident potential", and that mandating this solicitation creates significant expenses with no clear indication of additional benefit. The recommendation is to delete the provision. RESPONSE: The commission disagrees. Policyholder needs and wants are essential elements when determining services to be provided. Employers have the greatest knowledge of their processes and, when properly advised by insurance company accident prevention services experts, can be very instrumental in decisions about how potentially harmful situations may be alleviated. See the commission response later in this preamble to the comment regarding annual notification of services available to policyholders The following comments were received on sec.166.4(c)(3) regarding sufficient number of FSRs. COMMENT: The commenter stated that the term "sufficient" when referring to the number of FSRs needed to provide service is too vague for evaluation purposes. The recommendation is for TWCC to eliminate this requirement altogether or define the term "sufficient." RESPONSE: The commission disagrees. If adequate services are provided according to the Workers' Compensation Act and commission rules, it would be considered that the insurance company employs a sufficient number of FSRs. The following comments were received on sec.166.4(c)(4) regarding maintaining written procedures. COMMENT: The commenter stated that carriers should develop their own procedures to meet their own needs. Moreover, it is unreasonable to require "Texas-only" procedures. The recommendation was to retain the original language of Rule 166.100(c)(4). RESPONSE: The commission disagrees. Written procedures serve as policy statements and guidance to those required to adhere to them. Experience has shown the commission that lack of procedures specifying Texas requirements has often led to non-compliance with essential accident prevention services program elements. The following comments were received on sec.166.4(c)(5) regarding evidence of services provided. COMMENT: The commenter stated that the requirement would result in a burden for carriers and not improve the safety of Texas employees. The recommendation is to delete the provision. RESPONSE: The commission disagrees. Complete records are necessary not only for audit purposes, but also for determination of reasonable service to policyholders by insurance companies. Requiring the insurance companies to maintain records of accident prevention services provided to policyholders helps insurance companies and the commission to evaluate the need for services and the most efficient application of those services. Comment category D(11): 166.4(c)(6) Written notification of claims experience COMMENT: The commenter recommended that a notification of claims experience be necessary required only for those accounts that have experienced claims during the applicable 12-month period. RESPONSE: The commission agrees that if no claims have occurred with the applicable 12-month period, no notification of claims should be filed. The following comments were received on sec.166.4(c)(7) regarding notification of services on the declarations page. COMMENT: One commenter pointed out that the change to placing the notification on the front of the policy is unnecessary since the requirement was recently changed to make sure it is on the declarations page. Another commenter recommended that carriers be allowed to use an additional page stapled to the policy, or a permanently affixed sticker or stamp that displays this notice prominently without obliterating any other important policy language. Another alternative offered is to permit notices to appear on either the declarations page or on the front of the policy. RESPONSE: The commission agrees. Subsection (c)(7) has been revised to read "(7) evidence that each workers' compensation insurance policy delivered or issued for delivery in Texas shall contain the following notice on the declarations page or on the front of the policy in at least 10 point bold type: . . ." The following comments were received on sec.166.4(c)(8) regarding annual notification of services available to policyholders. COMMENT: The commenters disagree with the notification requirement and state that their company makes contact with policyholders generating $25,000 or more in premium to offer loss control services and only 6.0% respond. The commenters concluded that requiring an annual notification to policyholders with premiums of less that $25,000 could triple administrative workload. The commenters also state that such workload increase would result in no real benefit. Commenters recommended that this requirement be eliminated and the notification of services on the declarations page be used. One commenter also recommended combining similar requirements into one requirement. RESPONSE: The commission agrees in part. The intent of this requirement is to ensure that all policyholders, regardless of size, are made aware of all accident prevention services available to them. Many insurance carriers inspected by the commission already provide such information. The commission agrees that adding this requisite in addition to the "solicitation of comments" in sec.166.4(c)(2)(D) is redundant and could add to administrative expenses. Section 166.4(c)(8) has been deleted and subsection (c)(2)(D) has been changed to read "(D) written solicitation of comments from each policyholder, at least every 12 months to determine the need for safety information or assistance. Such letter shall specifically explain that accident prevention services, including surveys, recommendations, training programs, consultations, analysis of accident causes, industrial hygiene and industrial health services, are available at no additional charge and shall be provided upon request directly to the policyholder. This requirement is in addition to the requirements in paragraph (7) of this subsection;" The following comments were received on sec.166.5(a)(1) regarding required periodic inspection of insurance companies. COMMENT: One commenter pointed out that a large carrier uses 20 person/days for an inspection and recommended that inspections take place every two years, and every three years for carriers that: are in good standing with the Division; and have adequate internal procedures in place to ensure regulatory compliance. Another commenter disagreed that inspections should occur every two years for insurance companies which are familiar with the accident prevention services requirements and recommended that: insurers who have passed two consecutive inspections should be inspected every three or four years; and when the inspection occurs, it be of an audit format to verify continuing compliance instead of the full inspection RESPONSE: The commission disagrees. Inspections are required at least every two years by the Texas Labor Code, sec.411.064. Based upon the past four years of compliance inspection experience, the statutory frequency of inspections appears to be sufficient for the commission to adequately provide insurance companies assistance with maintaining compliance or returning to compliance with the Act. The following comments were received on sec.166.5(a)(3) regarding the 60-day inspection notification. COMMENT: The commenter stated that the 60-day notification of an insurance company inspection should be identified as 60 working days. RESPONSE: The commission disagrees. See the previous commission response in this preamble to the comment on sec.166.4(c)(2)(B)(i) regarding the a.m. Best Hazard index. The following comments were received on sec.166.5(b)(2) regarding the site of inspection. COMMENT: The commenter supports the provision allowing inspections out-of- state, on a reimbursement basis, if requested by the carrier RESPONSE: The commission agrees. The following comments were received on sec.166.6(a)(1),(2),(3), and (5) regarding the timing for exchange of information. COMMENT: The commenter stated that the established periods for submittal are not consistently defined. The recommendation is for TWCC to change the referenced "days" to "working days". RESPONSE: The commission disagrees. (See the general comments at the beginning of this summary of comments and responses.) The following general comments were received on sec.166.6 regarding the exchange of information for the inspection. COMMENT: Commenters stated that the information required is very detailed, extensive and, perhaps, unnecessary and that most information requested is not readily available to the carriers' loss control unit. Concern was expressed regarding the commission's broad authority under the rule to seek any source of information and the possibility that this authority could be abused. One recommended paring down the material necessary for the inspection while another recommended that information should only be provided for the accounts being audited. Two recommended that TWCC retain existing rules without change. RESPONSE: The commission disagrees. The information requested is necessary to conduct a comprehensive inspection of the adequacy of the accident prevention services provided by the insurance company and to assist in selection of policyholders for mandated job site inspections. The following general comments were received on sec.166.6(a) and (b) regarding the exchange of information for the inspection. COMMENT: The commenter expressed concern with the rule making process and the fact that some of the information is already being requested, without going through the formal rule making process. The commenter specifically noted the detailed information in sec.166.6(a)(1)(A), the Accident Prevention Services Questionnaire and loss runs. RESPONSE: The commission agrees that some of the information listed is already being requested for inspections. The purpose of this rule is to formalize the information requirements for inspections in the rules structure. However, the commission disagrees that requiring loss run information is not in the current rules. This requirement is in current Rule 166.106(a)(4). The following comments were received on sec.166.6 (a)(1)(A) regarding the A.M. Best Hazard Index information. COMMENT: Several commenters disagreed with the requirement to include the A. M. Best Hazard Index on the policyholder list submitted for inspections. Many do not use the Index in normal operations. One felt that the loss ratio is a more accurate criterion. They all recommended that TWCC delete the requirement for the A.M. Best Hazard Index from the paragraph. RESPONSE: The commission agrees. Reference to A.M. Best Hazard Index has been deleted. See the previous commission response in this preamble to the comment on sec.166.4(c)(2)(B)(i) regarding the A.M. Best Hazard index. The following comments were received on sec.166.6(a)(1)(A) regarding the information required since preparation of the last inspection policyholder list. COMMENT: One commenter stated they cannot isolate policies written since the last inspection list was prepared and another stated that providing lists of policies in effect since the last list had been prepared would be labor intensive. One recommendation was that the list include only those policies written since preparation of the previous list. RESPONSE: The commission disagrees that the time frame inspected should be reduced. The Texas Workers' Compensation Act requires inspection at least every two years. Exclusion of those policies in effect at the time of the last inspection, and, often, for many months after that inspection, would be contrary to the intent of the statute and not allow for a full inspection of services rendered. COMMENT: One commenter was unsure which policies the division is desiring information about in subsection (a)(1)(A). He asked whether the subsection applies to new policies or canceled or expired policies. He also asked if the rule requires a complete and separate listing of current in-force business. RESPONSE: The commission disagrees that the subsection is confusing. The language clearly states "The list shall . . . include all policies which have been in effect or have been written since the policyholder list was prepared for the last inspection. . .". This includes new policies, policies cancelled or expired since the last inspection, and policies currently in effect. The following comments were received on sec.166.6(a)(4) regarding the Accident Prevention Services worksheets. COMMENT: Commenters were of the opinion that the rule requires that a new accident prevention services form be prepared for inspections and one disagreed with changing the format. One commenter requested participation in developing the worksheet. RESPONSE: The commission disagrees that the rule indicates that a new form is necessary. The current form is essentially unchanged since February, 1991, and sufficient for inspection purposes under the new rules. The following comments were received on sec.166.6(b)(1)(A) regarding providing account files for the inspection. COMMENT: Commenters stated that the loss control department should have access to loss control files, but not account files because their availability is of no value in the inspection process and having them may disable the operation of other insurance company departments during the inspection. They recommended deleting reference to "account files". RESPONSE: The commission agrees. Section 166.6(b)(1)(A) has been revised to read, "the loss control files corresponding to the requested worksheets;" The following comments were received on sec.166.6(b)(1)(E) regarding FSR training information. COMMENT: The commenter expressed concern with the requirement that carriers report training received by FSRs, because many carriers use third party FSRs and it is difficult to get such information from these entities. Commenter recommends that this rule apply only to FSRs employed by the carrier. RESPONSE: The commission agrees in part. If the need for training records applies, it should apply to all Field Safety Representatives (FSR) acting on behalf of an insurance company, regardless of affiliation. The insurance company alone is responsible to assure that loss control staff servicing its policyholders meet TWCC requirements. The comment, however, does give rise to a question about FSR continuing education. Recently passed legislation (HB 1089) mandated that the commission establish qualifications for FSRs. The new rule does not include continuing education requirements. Because continuing education is not required at this time, sec.166.6(b)(1)(E) has been modified to add " if continuing education or training are required by the commission,. . . " This revision does not, however, relieve the insurance company of providing proof that approved certifications of their FSRs are current. The following comments were received on sec.166.6(b)(3) regarding business record affidavit. COMMENT: One commenter stated that "requiring carriers to provide 'any documents requested' and 'business record affidavits' is an open opportunity to add unnecessary bureaucracy to the already burdensome and complicated audit process". Another expressed uncertainty about what the affidavit is and who may sign it, and a third pointed out that the Business Record Affidavit required input from many sources and that one person in the Loss Prevention department could not attest to the accuracy of all records provided. The recommendation was to delete the provision. RESPONSE: The commission agrees in part. Business record affidavits attest to the fact that documents are maintained in the regular course of business, not to the accuracy of the information in the documents. They are requested only when documentation is needed to verify inspection findings. Also, the rule clearly states that the insurance company will determine who is authorized to be the responsible individual, and that the form shall be provided by the TWCC inspector. The commission agrees, however, that the information which may be requested should be specified in the rule. Section 166.6(b)(3) has been revised to read "(3) Upon request from the division inspector, the insurance company shall provide copies of documents requested, accompanied by a notarized Business Record Affidavit. Information which may be requested shall be limited to records of surveys, consultations, recommendations, training provided, training materials available, loss runs and loss analyses, industrial health and hygiene services, accident prevention procedures and Field Safety Representative qualifications. The Business Record Affidavit form shall be provided by the inspector and shall be completed and signed by an individual authorized by the insurance company." The following general comments were received on sec.166.7. COMMENT: The commenter expressed concern that many insurance companies have been inspected by individuals with limited knowledge of insurance industry loss control and recommends that TWCC inspectors meet the same qualifications as those required by carrier field safety representatives. RESPONSE: The commission agrees that all commission inspectors conducting inspections of insurance company accident prevention services must be and are field safety representative qualified, as required by sec.411.067 of the Texas Workers' Compensation Act. No commission personnel are allowed to perform inspections independently until qualified to do so. The following comments were received on sec.166.7(a)(1)(C) regarding complaints from policyholders. COMMENT: Commenters disagreed with the need to review "any complaints" from the policyholder, as time could be wasted on potentially frivolous complaints. The Commenters recommended inserting the word "written" between the words "any" and "complaints." RESPONSE: The commission disagrees since complaints about insurance company service can come verbally as a result of policyholder inspections, other Workers' Health and Safety inspections, by telephone and from various other sources. Policyholders in Texas have the right to contact TWCC through any means available. COMMENT: The commenter felt the section needs clarification. RESPONSE: The commission agrees. Section 166.7(a)(1)(C) has been revised to read "(C) any complaints from policyholders which have been received by the division since the insurance company's last inspection relating to accident prevention services;" The following comments were received on sec.166.7(a)(3) regarding extended inspections. COMMENT: Commenters felt this section was too broad and added to the complexity and time involved in the inspection. The term "possibly out of compliance" and the possible frequency of use of the rule were questioned. Another commenter stated that objective inspection standards are inherently limited and that broadening an inspection does not alleviate these difficulties nor provide any better indication of the adequacy of the services. Commenters recommended either deleting the section, deleting the phrase "to be possibly out of compliance" or establishing a benchmark or measure appropriate for a demonstrated pattern of non-compliance. RESPONSE: The commission agrees in part. A benchmark for non-compliance is unnecessary, since the Act and rules are specific concerning when and how required services must be provided. An extended inspection will become necessary when the inspectors have selected only a sampling of files to inspect. If the files indicate non-compliance, the degree to which the insurance company is out of compliance cannot be determined until the extended inspection is complete. The word "possibly" has been deleted from sec.166.7(a) (3), because the initial inspection would already indicate compliance status. The following comments were received on sec.166.7(b)(3) regarding inspection of accident prevention services: conducting and reporting. COMMENT: The commenter recommends an administrative mechanism that allows the carrier to respond to the inspectors allegations that carrier services are inadequate. RESPONSE: The commission agrees. Section 166.7(a)(2) has been revised to read, "(2) Based on the information obtained under subsection (a)(1) of this section and a review of the selected files and other accident prevention related information, the division inspector shall make the insurance company representative aware of any areas of non-compliance noted. The insurance company will be afforded an opportunity to respond to the findings. The inspector shall evaluate the adequacy of the accident prevention services of the insurance company and, if no other relevant information is available or anticipated, advise the insurance company's representative of the resulting conclusions." The following comments were received on sec.166.7(b)(3) regarding required actions from inspections. COMMENT: The commenter disagreed with having to respond to all discrepancies noted in an inspection, rather than just the serious ones, since inspections can perform not only a statutory function, but also provide suggestions for improvement. The commenter's concern was that the rule would elevate all issues to serious issues and focus too much time on non-serious discrepancies. The recommendation was to retain the current reporting requirements. RESPONSE: The commission disagrees. The rule anticipates that deficiencies noted will be those which require corrective action by the insurance company and justify the time spent addressing them in a report. The following comments were received on sec.166.8 regarding qualifications for Field Safety Representative (FSR). COMMENT: The commenter expressed concern that insurance company representatives who are not considered "qualified" cannot make recommendations to policyholders if they identify clearly unsafe conditions or procedures. RESPONSE: The commission agrees that unqualified individuals cannot perform functions which require FSR qualifications. The commission suggests, however, that, if a non-FSR qualified insurance company representative recognizes a situation which might require the services of a trained safety specialist, the representative should refer the case to the company's loss control department for action. The following comments were received on sec.166.8(b)(3) regarding qualifications for Field Safety Representative (FSR). COMMENT: Commenters suggested that Associate Safety Professional (ASP), Occupational Health and Safety Technician (OHST) and the Associate in Loss Control Management (ALCM) be approved certifications for qualification as a Field Safety Representative. RESPONSE: The commission agrees in part. The process exists by which a certifying organization may request approval by the Division for FSR qualification. The Board of Certified Safety Professionals (BCSP) has requested and the Division has approved the Occupational Health and Safety Technician (OHST) as a qualification for FSR. No request has been made to the division to establish the Associate Safety Professional (ASP) certification as a means of FSR qualification. The ALCM has been a certification which the commission accepts as qualification to be a FSR for many years and will continue to be so. The following comments were received on sec.166.8 Qualifications for Field Safety Representative (related to The Texas Labor Code, sec.411.062 as amended by HB 1089, 74th Legislature, 1995). COMMENT: Numerous commenters discussed a draft FSR qualification rule developed to implement recent legislation (HB 1089, 74th Legislature, 1995). RESPONSE: These comments address a rule which has not been proposed by the commission for adoption. The passage of HB 1089 necessitated some revisions to the proposed sec.166.8. As a result, the previous proposal of sec.166.8 is being withdrawn by the commission and a new proposal of sec.166.8, incorporating the legislative amendments, is simultaneously published in this issue of the Texas Register. Comments to the new proposal are being solicited elsewhere in this edition of the Texas Register. All comments on sec.166.8 which were previously submitted to the commission will be retained and addressed together with additional comments received. The following comments were received on sec.166.9 regarding FSR training courses. COMMENT: The commenter expressed the concern that the cost to hire and train a FSR applicant would prohibit insurance companies from choosing to train FSRs. RESPONSE: The commission agrees that maintaining a training program as outlined in the rule could be costly. The decision to use this method of qualifying a FSR belongs entirely to the organization considering it. Recent legislation (HB 1089, 74th Legislature, 1995) has made a change to Field Safety Representative (FSR) qualifications necessary. A new rule establishing FSR qualifications has been proposed and includes a provision for an intern program which insurance companies may use to train and qualify FSRs. Currently approved or proposed FSR training programs can be utilized as an intern program as long as the program meets the new requirements. The following comments were received on sec.166.9 regarding FSR training courses. COMMENT: Commenters expressed concern that insurance companies were eliminated from the option to have their own training programs and pointed out that the new wording in this rule cancels training programs previously approved for five years by TWCC. Commenters recommended that insurance companies have the option to conduct their own training programs, approved by the division, as is allowed in the current rules. RESPONSE: The commission disagrees. See the commission response to the comment immediately preceding this one. The following comments were received on sec.166.9 regarding educational programs. COMMENT: The commenter disagreed with adopting more rigorous standards for occupational safety and health education programs used to train FSRs and stated the adequacy of the services insurers provide is most appropriately measured by the audit of services provided, not standards of the program used to train the personnel providing the services. The recommendation is for TWCC to retain existing rules without change. RESPONSE: The commission disagrees. The standards in the proposed rules are essentially the same as required in the current rule. The most significant change is to restrict these programs to educational institutions. Insurance company intern programs may be used as an option to institutional programs to meet insurance company needs. See the commission response to the first comment regarding FSR training courses. 28 TAC sec.sec.166.1-166.7, 166.9 The new rules are adopted under the Texas Labor Code, sec.402.061, which authorizes the commission to adopt rules necessary to administer the Act; the Texas Labor Code, sec.401.011, General Definitions; the Texas Labor Code, sec.411.061, which requires an insurance company to provide accident prevention services; the Texas Labor Code, sec.411.062, as amended by HB 1089, 74th Legislature, 1995, which mandates the commission to establish qualifications for field safety representatives; and the Texas Labor Code, sec.sec.411.063 - 411.068, which require an insurance company to provide qualified accident prevention personnel, notice of the accident prevention services, set certain specifications for the program, require an insurance company to annually submit information to the commission, require bi-annual inspections by the division; and provides for an administrative penalty for violation of the requirements. sec.166.1. Definitions of Terms. The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise. Accident prevention facilities - All personnel, procedures, equipment, materials, documents, buildings and programs necessary to provide accident prevention services to the policyholder. Division - The Workers' Health and Safety Division of the Texas Workers' Compensation Commission. Field safety representative - An individual providing accident prevention services to workers' compensation policyholders. Qualification as a field safety representative under this chapter does not qualify the individual as an approved professional source, as described in sec.164.9 of this title (relating to Approval of Professional Sources for Safety Consultations). Loss Ratio - Loss ratio is the result of dividing the accumulated claims (including reserves) in a policy year by the manual premium determined when the policy is written, but before any adjustments or discounts are applied. Nature of the policyholders' operations - Type of business or industry with specific reference to potential for accident, injury or disease determined by the standard hazards associated with the most hazardous industrial operations in which the policyholder is engaged. On-site visit - A survey or consultation, or training conducted at any premises upon which the policyholder operates a business within the State of Texas. Other appropriate services - Services provided in lieu of on-site visits which require direct contact between the insurance company and the policyholder and are applicable to the nature and loss history of each policyholders' operations. sec.166.4. Required Accident Prevention Services. (a) An insurance company writing workers' compensation insurance in Texas shall maintain or provide accident prevention facilities and services and shall have them inspected by the division. An insurance company writing only excess or reinsurance are not required to maintain or provide such facilities or services. (b) An insurance company shall provide accident prevention services to policyholders at no additional charge. (c) An accident prevention service program as required by the Texas Labor Code, sec.411.061, shall provide, at a minimum: (1) an evaluation of the policyholder's need for accident prevention services every 12 months based on the following criteria: (A) hazard, including classification by hazard group, probability of serious or catastrophic type accidents, probability of frequent accidents, and probability of occupational illness or disease; (B) experience, including loss ratio, experience modifiers, frequency rate, and severity rate; and (C) size, including total number of employees, number of locations per policyholder business and number of employees per location. (2) service in accordance with the following requirements: (A) provide services requested by policyholders within 15 days of the date services were first requested, if appropriate services can be provided from the insurance company offices and within 30 days of the date of first request, if the services require an on-site visit. Services may be provided at a later time if circumstances require and the time is agreed upon by the policyholder. (B) an on-site visit, or provision of other appropriate services, on a periodic basis and at least every 12 months to each policyholder with: (i) a premium of less than $25,000 and a loss ratio greater than 100%; or (ii) a premium of $25,000 or more; (C) a mandatory on-site visit on a periodic basis and at least every 12 months to each policyholder with: (i) a premium of $25,000 or more and a loss ratio greater than 100%; or (ii) a premium between $5,000 and $24,999 and a loss ratio greater than 250%; (D) a visit to the insured within three working days of notification and/or knowledge of a fatality. If the fatality occurred outside of Texas or was the result of an accident on a common carrier, no visit is required; and (E) written solicitation of comments from each policyholder, at least every 12 months, to determine the need for safety information or assistance. Such letter shall specifically explain that accident prevention services, including surveys, recommendations, training programs, consultations, analysis of accident causes, industrial hygiene and industrial health services are available at no additional charge and shall be provided upon request directly to the policyholder. This requirement is in addition to the requirements in paragraph (7) of this subsection; (3) a sufficient number of qualified personnel performing the duties of field safety representative to provide service at the frequency required in paragraph (2) of this subsection; (4) written procedures for: (A) determining the appropriate accident prevention services to be provided to a policyholder; (B) the time frame and manner in which the services identified under paragraph (2) of this subsection will be delivered to a policyholder; (C) providing safety training to policyholders and providing promotional and course materials that are available for each safety training program; and (D) providing written reports to the insurance company and the policyholders which identify hazardous conditions and work practices on the policyholders' premises; (5) written records, reports, and evidence of all accident prevention services provided to each policyholder; (6) written notification at least every 12 months to policyholders of actual claims experience and, if the policyholder meets the criteria of paragraph (2)(B) and(C) of this subsection, a loss analysis; (7) evidence that each workers' compensation insurance policy delivered or issued for delivery in Texas contains the following notice on the declarations page or on the front of the policy in at least 10 point bold type: "(Name of company) is required by law to provide its policyholders with certain accident prevention services as required by the Texas Labor Code, sec.411.066, at no additional charge. If you would like more information call (insurance company's loss control division or provider's telephone number). If you have any questions about this requirement, call the Division of Workers' Health and Safety, Texas Workers' Compensation Commission at 1-800-452-9595." ; and (8) annual reports as required by sec.166.3 of this title (relating to Annual Report to the Commission). sec.166.6. Exchange of Information for the Inspection. (a) Pre-Inspection Exchange of Information (1) At least 45 days prior to the date set for inspection, the insurance company shall provide the division with: (A) a list of policyholder accounts by policyholder name, policy number, effective date or expiration date of policy, written premium before any adjustments, including deductibles or discounts and Texas locations. The list shall be taken from the insurance company's most current records, separated by affiliated companies, arranged in descending order by premium, and include all policies which had been in effect or have been written since the policyholder list was prepared for the last inspection of the insurance company's accident prevention services by the division; and (B) a list of the name, location, status (whether employee or contractor), and proof of qualifications as set forth in the Texas Labor Code sec.411.062 and sec.166.8 of this title (relating to Qualification of Field Safety Representatives) of each person acting as a field safety representative for the insurance company. (2) Within 10 days of receipt of the list, the division shall select the specific accounts to be evaluated and notify the insurance company of those accounts. The list of policyholder accounts will be kept confidential to the extent permitted by law. The division shall return the list to the insurance company at the time of the inspection. (3) At least 35 days prior to the date set for inspection, the insurance company shall provide the division with the completed Accident Prevention Services Questionnaire provided by the Commission. The questionnaire shall have been completed and signed by an individual authorized by the insurance company to be responsible and whose signature has been notarized on the questionnaire form. (4) For each account selected by the division, the insurance company shall prepare an accident prevention services worksheet on the form prescribed by the commission. (5) At least five days prior to the date of the inspection, the insurance company shall file the completed worksheets with the division. (b) Information to be Made Available at the Inspection (1) The insurance company shall make available the following information, as of the date of the last inspection or start of writing worker's compensation coverage, whichever is later,at the time and site of the inspection: (A) the loss control files corresponding to the requested worksheets; (B) evidence that the policyholder has been provided the notice required by this chapter and any other material used to notify policyholders of the accident prevention services; (C) a copy of all accident prevention services procedures; (D) a copy of loss runs for each selected account that will include: (i) number of injuries; (ii) accident or illness types; (iii) body parts involved; (iv) injury causes; and (v) fatalities; (E) if continuing education or training are required by the commission, a record of any training received by the field safety representatives since the previous inspection (F) a sample of policyholder training materials, audio visual aids, and training programs; and (G) other information requested by the inspector which is necessary to complete the inspection. (2) The insurance company shall also provide the information required by subsection (a) of this section which is not already in the possession of the division. (3) Upon request from the division inspector, the insurance company shall provide copies of documents requested, accompanied by a notarized Business Record Affidavit. Information which may be requested shall be limited to records of surveys, consultations, recommendations, training provided, training materials available, loss runs and loss analyses, industrial health and hygiene services, accident prevention procedures and Field Safety Representative qualifications. The Business Record Affidavit form shall be provided by the inspector and shall be completed and signed by an individual authorized by the insurance company. sec.166.7. Inspection of Accident Prevention Services: Conducting and Reporting. (a) Conducting the Inspection (1) The division inspector and the insurance company's representative shall review: (A) the insurance company's accident prevention services since the last inspection; (B) any changes that have been made in response to recommendations made during previous inspections; (C) any complaints from policyholders which have been received by the division since the insurance company's last inspection; and (D) if appropriate, services rendered under the extra hazardous employer program. (2) Based on the information obtained under subsection (a)(1) of this section and a review of the selected files and other accident prevention related information, the division inspector shall make the insurance company representative aware of any areas of non-compliance noted. (3) An insurance company determined by inspectors, in the course of the inspection, to be out of compliance with the Act shall receive an extended inspection, if necessary, to provide inspectors with sufficient information to determine if an administrative violation of the Act has occurred. (4) In addition, the division inspector will make scheduled or unscheduled inspections of policyholder job sites, conducted and completed during normal work hours, to obtain additional information about the insurance company's accident prevention services. (b) Written Report of Inspection (1) The division inspector shall prepare a written report of the inspection and shall provide a copy to the insurance company's executive management and to the Texas Department of Insurance, Loss Control Regulation Division. The division shall, whenever possible, prepare and provide this report within 30 days of the completion of the inspection. (2) The report shall contain the division inspector's rating for services set out in the Texas Labor Code, sec.411.061 and sec.166.4 of this title (relating to Required Accident Prevention Services), to include specific findings and required corrective actions. The rating will state that the mandatory service either meets or does not meet standards. (3) An insurance company with deficiencies shall comply with the required actions contained in the report and submit reports to the division until certified in writing, by the division, that they are in compliance. (A) The reports shall detail the corrective actions being taken to address each specific finding. (B) The date on which the reports are due shall be specified in the report of the inspection prepared in accordance with this section. (4) Any appeal of the report by the insurance company shall be made in accordance with the applicable commission rules and the Texas Labor Code, sec.415.034. (5) The division shall issue a certificate of inspection to each insurance company after completion of an inspection in which the mandatory services meet the standards. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 12, 1995. TRD-9508646 Susan Cory General Counsel Texas Workers' Compensation Commission Effective date: September 1, 1995 Proposal publication date: April 21, 1995 \ For further information, please call: (512) 440-3700 Subchapter A. Accident Prevention Services Program Transfer 28 TAC sec.166.2 The repeal is adopted under the Texas Labor Code, sec.402.061, which authorizes the commission to adopt rules necessary to administer the Act; the Texas Labor Code, sec.401.011, General Definitions; the Texas Labor Code, sec.411.061, which requires an insurance company to provide accident prevention services; the Texas Labor Code, sec.411.062, as amended by House Bill 1089, 74th Legislature, 1995, which mandates the commission to establish qualifications for field safety representatives; and the Texas Labor Code, sec.sec.411.063- 411.068, which require an insurance company to provide qualified accident prevention personnel, notice of the accident prevention services, set certain specifications for the program, require an insurance company to annually submit information to the commission, require bi-annual inspections by the division; and provides for an administrative penalty for violation of the requirements. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 12, 1995. TRD-9508648 Susan Cory General Counsel Texas Workers' Compensation Commission Effective date: September 1, 1995 Proposal publication date: April 21, 1995 For further information, please call: (512) 440-3700 Subchapter B. Program Inspections and Certification of Field Safety Representatives 28 TAC sec.sec.166.100-166.108, 166.111-166.113 The repeals are adopted under the Texas Labor Code, sec.402.061, which authorizes the commission to adopt rules necessary to administer the Act; the Texas Labor Code, sec.401.011, General Definitions; the Texas Labor Code, sec.411.061, which requires an insurance company to provide accident prevention services; the Texas Labor Code, sec.411.062, as amended by House Bill 1089, 74th Legislature, 1995, which mandates the commission to establish qualifications for field safety representatives; and the Texas Labor Code, sec.sec.411.063- 411.068, which require an insurance company to provide qualified accident prevention personnel, notice of the accident prevention services, set certain specifications for the program, require an insurance company to annually submit information to the commission, require bi-annual inspections by the division; and provides for an administrative penalty for violation of the requirements. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority. Issued in Austin, Texas, on July 12, 1995. TRD-9508647 Susan Cory General Counsel Texas Workers' Compensation Commission Effective date: September 1, 1995 Proposal publication date: April 21, 1995 For further information, please call: (512) 440-3700 TITLE 40. SOCIAL SERVICES AND ASSISTANCE Part I. Texas Department of Human Services Chapter 19. Nursing Facility Requirements for Licensure and Medicaid Certification Subchapter U. Inspections, Surveys, and Visits 40 TAC sec.19.2009 The Texas Department of Human Services (DHS) adopts new sec.19.2009, with changes to the proposed text as published in the May 9, 1995, issue of the Texas Register (20 TexReg 3445). As a result of public comments and the statutory changes to the Human Resources Code, sec.32.021(h), made by the 74th Legislature, the department has decided to adopt the rules incorporating by reference the federal enforcement requirements. Section 19.2009 is being amended to include only the information on the conduct of hearings in Texas, which is not included in the comparable federal regulation. The title of the abbreviated section is now more appropriately titled "Hearings on Complaints of Resident Neglect and Abuse, and Misappropriation of Resident Property in Medicaid-Certified Facilities." The justification for the new section is establishment of federally-mandated procedures for pre-referral hearings, including notification and appeal of findings of an individual's responsibility for resident neglect, abuse, and misappropriation of resident property in Medicaid nursing facilities. The amendment will function by establishing federally-mandated procedures for pre-referral hearings including the notification and appeal of findings of an individual's responsibility for resident neglect, abuse, and misappropriation of resident property in Medicaid nursing facilities. The department received one comment regarding the section from Texas Health Care Association. Comment: Regarding subsection (b), why is the department not allowing a formal hearing for abuse and neglect? All hearings must be consistent with the APA. Abuse and neglect cases must also allow for a formal hearing consistent with Government Code, Chapter 2001.001. Delete "DHS will conduct the hearing according to DHS's rules for informal hearings found in Chapter 79 of this title (Relating to Legal Services), except in cases involving medication aides. " Response: Except for medication aides and nurse aides, disciplinary or other adverse action is not taken by DHS against individuals affected by this section. If DHS finds that there is reason to believe that grounds exist for a referral to the appropriate licensing authority the referral will be made; it is up to the licensing agency to then give a hearing in accordance with state law before adverse action is taken against the individual. With respect to medication aides and nurse aides, the department's hearings prior to taking any adverse action meet all state and federal requirements. The new section is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the department to administer public and medical assistance programs; and under Texas Civil Statutes, Article 4413(502), sec.16, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The new section implements the Human Resources Code, sec. sec.22.001-22.024 and sec.sec.32.001-32.042. sec.19.2009. Hearings on Complaints of Resident Neglect and Abuse, and Misappropriation of Resident Property in Medicaid-Certified Facilities. With the following two exceptions, hearings required by 42 Code of Federal Regulations (CFR), sec.488.335 will be conducted by an impartial Long Term Care - Regulatory staff person who may hear testimony in person or by telephone for the purpose of determining whether sufficient grounds exist for a referral of an individual to the appropriate licensure authority and the facility administrator. Cases involving nurse aides will be conducted according to the Texas Department of Human Services' rules for informal hearings found in Chapter 79 of this title (relating to Legal Services). Cases involving medication aides and nurse aides who are also certified as medication aides will be conducted according to the rules for formal hearings found in the same chapter. The hearings referenced in this section are not applicable to information provided by the department pursuant to 42 CFR sec.488. 325(h). This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 10, 1995. TRD-9508457 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: July 31, 1995 Proposal publication date: May 9, 1995 For further information, please call: (512) 450-3765 Subchapter V. Enforcement The Texas Department of Human Services (DHS) adopts the repeal of sec.sec.19. 2121, 19.2122, 19.2124, 19.2126, 19.2128, 19.2130-19.2132, 19.2134, 19.2136, 19.2138, and 19.2142, and adopts new 19.2149-19.2151, without changes to the proposed text as published in the May 9, 1995, issue of the Texas Register (20 TexReg 3446) and will not be republished. DHS also adopts an amendment to sec.19.2120, and new sec.sec.19.2121, 19.2128, 19.2133, 19.2144, 19.2146 and 19. 2147 with changes to the proposed text. DHS is withdrawing sec. sec.19.2122- 19.2127, 19.2129-19.2132, 19.2134-19.2143, 19.2145, and 19.2148. The justification for the repeals, amendment, and new sections is the implementation of new federal enforcement rules for Medicaid nursing facilities. The sections will function by implementing federal Medicaid nursing facility enforcement rules. DHS received comments from two provider associations: Texas Health Care Association and Texas Association of Homes and Services for the Aging. Many of the comments requested the use of the actual federal language in the rules. As a result of these comments and the statutory changes to the Human Resources Code, sec.32.021(h), made by the 74th Legislature, the department has decided to adopt the federal enforcement requirements and retain only those rules regarding additional or alternative remedies and appeals. Consequently, most of the comments are rendered moot. Responses to comments related to the remaining rules follow. Comment: Numerous comments objected to the additional and alternative remedies the department has chosen. These remedies include the "three strike rule," and the existing procedures, established in state law, for appointment of a trustee and the emergency closure of a facility, in place of the federal procedures for appointment of a temporary manager and emergency closure, respectively. Response: Federal law provides for the states to choose alternative or additional remedies, if they can justify their use to be more effective in achieving compliance. The alternative or additional remedies must be submitted to the Health Care Financing Administration (HCFA) for approval as part of the Medicaid State Plan amendment on enforcement. When HCFA approves the alternative or additional remedies, they will possess the same status as federal rules. Therefore, the department will retain the additional or alternative remedies which were proposed. Comment: Regarding sec.19.2128, these rules do not allow for a voluntary trustee to be placed in a facility as a remedy. Add a voluntary appointment of a trustee as an available optional remedy. Response: The department has not chosen a voluntary trustee as one of the additional remedies. The option is always available to a facility under the licensure regulations. Comment: Regarding sec.19.2128(d)(1), sec.19.2143 is Termination of Provider Agreement and not Duration of Remedies. Delete "Duration of Remedies" and replace it with "Termination of Provider Agreement". Response: The correction has been made. Comment: Regarding sec.sec.19.2149, 19.2150, and 19.2151, what is undesignated head in each of these sections? Response: Undesignated head is a rule-making term similar to a subchapter heading. In this instance, it refers to the rules sub-titled "Enforcement Remedies in Medicaid-Certified Facilities." Comment: Regarding the definition of vendor hold in sec.19.2120, this item should cross reference and specify "as referenced in 19.2145." We object to the use of vendor hold as a remedy since it is a state specific rule and does not follow the federal enforcement rules for certification purposes. Response: The department is withdrawing sec.19.2145, regarding vendor hold, in response to comment. Comment: Regarding sec.19.2147(1)(A), the amount of time for the facility to submit a written request and supporting documentation and the amount of time for the Long Term-Regulatory staff to respond is different. The facility should have the same amount of time to respond as the survey staff. Response: The department disagrees. It is the department's prerogative to set the time frames. Comment: Regarding sec.19.2147(4), this item indicates that upon request, DHS will provide the facility with written notification of the informal dispute resolution process. What is written notification of the informal dispute resolution process? Response: In response to comment, this portion of the rule has been deleted. All definitions, except for "accountability period," are being deleted from sec.19.2120 because they are contained in 42 Code of Federal Regulations sec.488. 301. The deleted definitions, some of which existed in the rule and some of which were proposed, are for compliance letter, contract violation, deficiency, dually participating facility, immediate family, immediate jeopardy, immediate jeopardy to health and safety, misappropriation of property, neglect, new Medicaid admission, noncompliance, plan of correction, requirements for participation, scope, severity, standard survey, substandard quality of care, substantial compliance, survey, and vendor hold. Section 19.2121 was changed to state that enforcement actions will be performed according to the federal regulations. Changes were made to sec.19.2128 and sec.19.2133, inserting references to the comparable remedies in the CFR. Changes were made to sec.19.2144 and sec.19.2146 for clarification. Medicaid Remedies 40 TAC sec.sec.19.2121, 19.2122, 19.2124, 19.2126, 19.2128, 19. 2130-19.2132, 19.2134, 19.2136, 19.2138, 19.2142 The repeals are adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the department to administer public and medical assistance programs; and under Texas Civil Statutes, Article 4413(502), sec.16, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The repeals implement the Human Resources Code, sec.sec.22.001-22.024 and sec.sec.32.001-32.042. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 10, 1995. TRD-9508458 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: July 31, 1995 Proposal publication date: May 9, 1995 For further information, please call: (512) 450-3765 Remedies in Medicaid-Certified Facilities 40 TAC sec.sec.19.2120, 19.2121, 19.2128, 19.2133, 19.2144, 19. 2146, 19.2147, 19.2149-19.2151 The new sections and amendments are adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the department to administer public and medical assistance programs; and under Texas Civil Statutes, Article 4413(502), sec.16, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The new sections and amendments implement the Human Resources Code, sec.sec.22. 001-22.024 and sec.sec.32.001-32.042. sec.19.2120. Definitions Pertaining to Medicaid Remedies. The following term, when used in this undesignated head, Remedies in Medicaid-Certified Facilities, shall have the following meaning, unless the context clearly indicates otherwise. Accountability period -A 24-month period which begins each time the Texas Department of Human Services (DHS) imposes on a facility a required Category II or III remedy. Accountability periods may overlap. sec.19.2121. General Provisions. Enforcement actions in Medicaid-certified facilities are performed according to regulations found in 42 Code of Federal Regulations, sec.sec.431.151, 431.153, 488.301, 488.325(g), 488. 330, 488.331, 488.335, 488.400-488.414, 488.417-488.425, and 488.430-488.456. a Trustee. (a) Definition. Appointment of a trustee means the appointment by the court of a trustee under the Health and Safety Code, Chapter 242. This remedy is the alternative remedy to temporary manager, as specified in 42 Code of Federal Regulations (CFR), sec.488.415. (b) Qualifications. The trustee must: (1) be qualified to oversee correction of deficiencies on the basis of experience and education, as determined by the Texas Department of Human Services (DHS); (2) not have been found guilty of misconduct by any licensing board or professional society in any state; (3) have, or a member of his or her immediate family have, no financial ownership interest in the facility; and (4) not currently serve or, within the past two years, have served as a member of the staff of the facility. (c) Payment of salary. The trustee's salary: (1) is paid directly by the facility while the trustee is assigned to that facility; and (2) must be at least equivalent to the sum of the following: (A) the prevailing salary paid by providers for positions of this type in the facility's geographic area; (B) additional costs that would have reasonably been incurred by the provider if such person had been in an employment relationship; and (C) any other costs incurred by such a person in furnishing services under such an arrangement or as otherwise set by DHS. (3) may exceed the amount specified in paragraph (2) of this subsection if the state is otherwise unable to attract a qualified trustee. (d) Failure to relinquish authority to a trustee. (1) Termination of provider agreement. If a facility fails to relinquish authority to the trustee as described in this section, DHS terminates the provider agreement in accordance with 42 CFR sec.488.456, concerning termination of provider agreement. (2) Failure to pay salary of trustee. A facility's failure to pay the salary of the trustee is considered a failure to relinquish authority to appointment of a trustee. (e) Duration of appointment of a trustee. Appointment of a trustee ends as determined by the court. (f) Exemption from notification. The remedy of appointment of a trustee is not subject to the notification requirements found at 42 CFR sec.488.402, relating to General Provisions. sec.19.2133. Closure of a Facility or Transfer of Residents, or Both. For the remedy of closure of a facility or transfer of residents, or both, see sec.19.2108 of this title (relating to Emergency Suspension and Closing Order). These remedies are not subject to the notification requirements found in 42 Code of Federal Regulations, sec.488.402, concerning general provisions. This remedy is the alternative remedy to closure of a facility or transfer of residents, or both, found in 42 CFR sec.488.426. sec.19.2144. Procedures Following Termination of the Provider Agreement. (a) The Texas Department of Human Services (DHS) may continue payments for no more than 30 days from the date DHS cancels a facility's provider agreement if DHS determines that: (1) reasonable efforts are being made to transfer the residents to another facility, to community care, or to other alternate care; and (2) additional time is needed to effect an orderly transfer of the residents. (b) When a facility's provider agreement is terminated by DHS, the department will not enter into another provider agreement with the facility until 30 days have expired. If the facility reapplies for a provider agreement, DHS conducts an on-site visit to determine if the facility is complying with Medicaid requirements. If the facility is complying with Medicaid requirements and a provider agreement with the facility is not prohibited by DHS debarment rules, DHS enters into a provider agreement with the facility. This remedy will be applied in any category which results in the termination of the provider agreement. sec.19.2146. Termination of Provider Agreement on the Basis of the Imposition of Enforcement Actions Three Times Within an Accountability Period. (a) The Texas Department of Human Services (DHS) notifies the facility in writing of its decision to terminate the facility's provider agreement when DHS has imposed required Category II or III remedies on the facility three times within an accountability period. (b) The provider agreement is terminated on the 20th day after the facility receives notice of DHS's decision to terminate the provider agreement. (c) The appeal for this remedy is the appeal on the issue of noncompliance that led to the imposition of enforcement actions for the third time within the accountability period. sec.19.2147. Informal Dispute Resolution. Facilities may request an informal opportunity to dispute survey findings upon the facility's receipt of the official statement of deficiencies as follows. The Texas Department of Human Services (DHS) provides the following informal opportunities to dispute survey findings. (1) For survey findings which constitute immediate jeopardy to resident health and safety, a written request and all supporting documentation must be submitted to the Regional Director, Long Term Care-Regulatory, within five calendar days of receipt of the official statement of deficiencies. Long Term Care-Regulatory staff will provide a written response to the facility within seven calendar days after receipt of the request. (2) For survey findings which do not constitute immediate jeopardy to resident health and safety, a written request and all supporting documentation must be submitted to the Regional Director, Long Term Care-Regulatory, within seven calendar days of receipt of the official statement of deficiencies. Long Term Care-Regulatory staff will provide a written response to the facility within ten calendar days after receipt of the request. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 10, 1995. TRD-9508459 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: July 31, 1995 Proposal publication date: May 9, 1995 For further information, please call: (512) 450-3765 Chapter 96. Certification of Long-Term Care Facilities 40 TAC sec.96.7 The Texas Department of Human Services (DHS) adopts an amendment to sec.96. 7, without changes to the proposed text as published in the May 9, 1995, issue of the Texas Register (20 TexReg 3456). The justification for the amendment is compliance with federal regulations. The amendment will function by implementing amendments to federal rules which specify that the informal reconsideration rules apply only to the intermediate care facilities for the mentally retarded. The department received no public comments regarding the adoption of the rules. The amendment is adopted under the Human Resources Code, Title 2, Chapters 22 and 32, which authorizes the department to administer public and medical assistance programs; and under Texas Civil Statutes, Article 4413(502), sec.16, which provides the Health and Human Services Commission with the authority to administer federal medical assistance funds. The amendment implements the Human Resources Code, sec. sec.22.001-22.024 and sec.sec.32.001-32.042. This agency hereby certifies that the rule as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. Issued in Austin, Texas, on July 10, 1995. TRD-9508461 Nancy Murphy Section Manager, Media and Policy Services Texas Department of Human Services Effective date: July 31, 1995 Proposal publication date: May 9, 1995 For further information, please call: (512) 450-3765