Part 3. OFFICE OF THE ATTORNEY GENERAL

Chapter 63. VICTIMS' ASSISTANCE GRANTS

The Office of the Attorney General (OAG) proposes new Chapter 63, §§63.1, 63.3, 63.11, 63.13, 63.15, 63.17, 63.19, 63.31, 63.33, 63.35, 63.37, 63.39, 63.51, 63.53, 63.55, 63.57, 63.71, 63.73, 63.81, 63.83, 63.85, 63.87, 63.89, 63.91, 63.101, 63.103, 63.105, 63.107, 63.109, 63.111, 63.113, 63.115, 63.117, 63.119, 63.121, 63.123, 63.125, 63.127, 63.129, 63.131, 63.141, 63.143, 63.145, 63.147, 63.149, 63.151, 63.153, 63.155, 63.157, 63.159, 63.161, 63.163, 63.165, 63.167, 63.169, 63.171, 63.173, 63.175, 63.177, 63.179, 63.181, 63.183, 63.185, 63.191, 63.193 and 63.195 relating to rules for administration of crime victims' assistance grants (VAG).

This chapter proposes implementation of new rules necessary to carry out the provisions of Texas Code Criminal Procedures Annotated article 56.541 (West 1999), which provides funds for grants or contracts that support crime victim-related services or assistance. Article 56.541 reflects the legislature's finding that it is appropriate and necessary for the state to authorize a method for the appropriation of excess money in the compensation to victims of crime fund for grants or contracts supporting victim-related services or assistance. This proposed chapter establishes a procedure by which attorneys who represent the state in criminal cases and local law enforcement authorities may apply for and administer victim assistance coordinator grants. It also establishes a procedure by which nonprofit corporations may apply for and administer VAGs for statewide training programs that benefit victims of sexual assault and grants to purchase forensic exam equipment. Article 56.541 establishes joint authority of the OAG and the comptroller to determine the proper allocation of the revenue in the compensation to victims of crime fund for purposes of the article. Article 56.541(f) authorizes the OAG to adopt rules necessary for the implementation of article 56.541. The purpose of the regulatory scheme is to establish procedures for application and administration of VAGs or contracts which support crime victim-related services or assistance and therefore carry out the purpose of the statute. The OAG may also propose rules to carry out its own independent functions under the statute. The proposed rules accomplish the objectives as set out below:

SUBCHAPTER A ( General Provisions )

Section 63.1 and §63.3 contains the general provisions of Chapter 63, including definitions of terms, a description of the statutory authority for the grant funds, the source of the grant funds, the Constitutionally dedicated purpose of the funds, and prohibitions related to the use of grant funds. These sections also contain a description of the OAG's statutory authority to adopt rules reasonable and necessary to implement article 56.541 of the Code Criminal Procedures Annotated article 56.541 (West 1999). Proposed §63.1 establishes the definitions of terms. Proposed §63.3 states the statutory authority for the creation of the fund, recognizes the authority of the Attorney General to administer the funds, and the purpose of the funds.

SUBCHAPTER B ( Grants for Victim Assistance Coordinator or Crime Victim Liaison )

Sections 63.11, 63.13, 63.15, 63.17, and 63.19 describes permissible uses for grant funds, the class of persons or entities eligible to apply for such grant funds, the funding levels for grants awarded, the limitations of use of grant funds awarded, and the duties of individuals who are employed as a result of grant awards. Proposed §63.11 defines that grants awarded may be used to defray all or part of the salary for establishing the positions of victim assistance coordinator or crime victim liaison and the duties associated with such positions. Proposed §63.13 defines the class of persons and entities eligible to obtain crime victim assistance grants to fund positions of victim assistance coordinator and crime victim liaison. Proposed §63.15 sets forth minimum and maximum amounts of funding that may be applied for and permissible uses of VAG funds. Proposed §63.17 limits the use of grant funds to payment of salaries only and stipulates that the grant funds may not be used to pay fringe benefits, such as retirement, health insurance, etc., nor office expenses or equipment expenses. Proposed §63.19 states the requirement that individuals employed in positions funded by VAG funds provide direct services to victims of crime.

SUBCHAPTER C ( Grants for Statewide Training for Programs That Benefit Victims of Sexual Assault and to Purchase Forensic Exam Equipment )

Sections 63.31, 63.33, 63.35, 63.37, and 63.39 describes permissible uses, eligible applicants, and minimum and maximum amounts of funding for grant funds applied for and awarded for statewide training for programs that benefit victims of sexual assault and to purchase forensic exam equipment for communities with certified Sexual Assault Nurse Examiner programs. Proposed §63.31 describes the purposes for which grant funds may be used. Proposed §63.33 defines entities that may be eligible to apply for grant funding. Proposed §63.35 establishes the minimum and maximum amounts for grant funding. Proposed §63.37 specifies various conditions and requirements associated with grantee tasks and activities such as the requirement that a grantee must provide volunteer services in connection with a VAG-funded project. Proposed §63.39 sets forth the proposed rule relating to the use of grant funds for travel expenses.

SUBCHAPTER D ( Grant Application, Scope of Grant, Approval )

Sections 63.51, 63.53, 63.55, and 63.57 describes the application process, including the requirement of a timely-filed application, the OAG review criteria, and discretionary determination of funding by the OAG. Proposed §63.51 establishes applicants to complete and submit an Application Kit to the OAG Grant Coordinator and requires one original and one duplicate to be filed by the first working day in May of each year for consideration for the coming fiscal year. Proposed §63.53 requires the OAG to review and evaluate timely filed applications, establishes full discretion in the OAG for all funding decisions, and establishes other criteria for the OAG to consider in funding decisions. Proposed §63.55 establishes the grant funding period and criteria for awarding second-year funding on first year performance. Proposed §63.57 addresses the ineligibility of indirect costs as an expenditure of VAG funds.

SUBCHAPTER E ( Funding of Grants )

Sections 63.71, 63.73 provides for project approval and funding outside of the annual grant cycle. This subchapter also declares that the actual funding of approved new and existing grant projects is contingent on the availability of funds. Proposed §63.71 provides for approval of nonstandard grant funding outside of the annual grant cycle. Proposed §63.73 declares that actual funding of approved new and existing grant projects is contingent on availability of funds.

SUBCHAPTER F ( Grant Budget Requirements )

Sections 63.81, 63.83, 63.85, 63.87, 63.89, and 63.91 sets forth rules governing the use of VAG funds and documentation of such use relating to personnel. The subchapter also sets forth requirements related to expenditures for professional and contractual services, rules concerning transportation, travel, and training, and use of VAG funds for equipment. The subchapter also addresses limitations on the use of grant funds.

Proposed §63.81 governs salary for VAG-funded positions, requirements concerning verification of personnel licenses and certifications, verification of personnel time and project records, and related rules concerning grant funds for personnel. Proposed §63.83 sets out prohibitions on dual compensation and documentary requirements that a grantee must meet with regard to contracts, travel allowances, reimbursements, related party transactions, and consistency with OAG professional rate schedules.

Proposed §63.85 details rules applicable to grantees concerning transportation, travel, and training expenditures and the documentation of same. Proposed §63.87 details rules applicable to grantees concerning the acquisition of equipment. Proposed §63.89 sets forth necessary OAG approvals and rules governing the use of and prohibitions regarding the use of VAG funds for supplies and direct operating expenses. Proposed §63.91 prohibits the use of grant funds for construction costs and land acquisition costs.

SUBCHAPTER G ( Special Conditions and Required Documents )

Sections 63.101, 63.103, 63.105, 63.107, 63.109, 63.111, 63.113, 63.115, 63.117, 63.119, 63.121, 63.123, and 63.125 addresses documents which VAG applicants are required to submit to the OAG for approval. All of these documents are necessary for the OAG to determine that grant funds are being awarded to entities which follow operating procedures consistent with state and federal law. Proposed §63.101 requires a current statistical report of anticipated productivity to be filed with the application for grant. Proposed §63.103 requires that the application for grant include a signed Equal Employment Opportunity Program Certification under certain circumstances. Proposed §63.105 requires that the application include an executed copy of a Certification Regarding Lobbying that no Victims Assistance Grant Funds have been paid or will be paid to any person for purposes of lobbying in connection with the grant. Proposed §63.107 requires that the application include a signed copy of the Nonprocurement Debarment Certification. Proposed §63.109 requires the application to include a signed copy of a Drug-Free Workplace Certification. Proposed §63.111 requires the application to include a signed copy of a Uniform Grants Management Standards Certification. Proposed §63.113 requires the application to include a signed copy of a Certified Assurances Certification. Proposed §63.115 requires the application to include a signed copy of a Cooperative Working Agreement which shall include statements that the project will be carried out in a significant part due to the cooperation of outside organizations and stipulates parties who have authority to execute such agreements. Proposed §63.117 requires pre-approval of the OAG for grantees to use grant funds to purchase equipment with a cost exceeding $25,000. In addition, proposed §63.117 establishes the process and documentation necessary for submission for review and approval of equipment purchases by the OAG. Proposed §63.119 requires that prior to execution of any contract in excess of $25,000, the grantee must submit said contract and documentation stipulated for review and approval by the OAG. In addition, proposed §63.119 establishes criteria and processes for the consideration of entering into contracts by grantees using grant funds. Proposed §63.121 requires that governmental entities and nonprofit organizations who submit applications obtain a resolution from the governing body that designates and authorizes officials the power to accept, reject, or amend a grant. The resolution must state that in the event of misuse of grant funds, a security bond will be obtained and the funds will be returned in full. In addition, the resolution must contain non-supplanting language. Proposed §63.123 requires an applicant to submit a current organizational chart reflecting grant and non-grant funded positions. Proposed §63.125 permits the OAG to award a grant conditioned upon a post-award survey and establishes procedures for conducting the post-award survey.

SUBCHAPTER H ( Award and Grant Acceptance )

Sections 63.127, 63.129, and 63.131 sets forth the process for the award and acceptance of grants. Proposed §63.127 requires to applicant to accept or reject in writing a grant award within 45 days of the grant award date and provides for deobligation of funds in the event a timely response is not received. This section includes the requirement that a grantee implement the VAG within 60 days of the designated start date or face relinquishment of the grant award. The section also sets forth the OAG's full discretion in approving project funding and determining grantee compliance with OAG policies. Proposed §63.129 outlines procedures for (i) an applicant's accepting or rejecting a grant award and (ii) an applicant's response to deficiencies in a filed application. Proposed §63.131 describes the process that an applicant may pursue in the event that the OAG denies an application or part of an application and sets forth the final decision-making authority of the OAG.

SUBCHAPTER I (Administering Grants, §§63.141, 63.143, 63.145, 63.147, 63.149, 63.151, 63.153, 63.155, 63.157, 63.159, 63.161, 63.163, 63.165, 63.167, 63.169, 63.171, 63.173, 63.175, 63.177, 63.179, 63.181, 63.183, and 63.185 proposes rules for the administration of VAGs. The rules establish duties and responsibilities for grant officials, requirements regarding records, requests for funds procedures, grant adjustments, copyrights, procurement procedures, and rules relating to property management, bonding, and insurance. The subchapter addresses OAG authority to withhold funds or terminate a grant under certain conditions and a grantee's ability to request a reconsideration of a decision to withhold funds or terminate a grant project. Proposed Subchapter G also contains procedures for grantee self-evaluation of a project, submission of regular progress reports to the OAG, evaluation of third party contracts, if any, and winding up a VAG administration.

Proposed §63.141 requires that each grantee designate three grant officials whose duties are described in the section. Proposed §63.143 requires OAG approval if grant funds are obligated prior to the start date or later than the ending date of the grant period. Proposed §63.145 sets forth grant records retention requirements for a period of five years and availability of the records in an electronic format for purposes of audit. Proposed §63.147 requires the grantee to file financial expenditure reports each calendar quarter on forms promulgated by the OAG and the consequences for filing to file a timely report. Proposed §63.149 requires the grantee to maintain an inventory report on file in the principal office of the grantee. Proposed §63.151 establishes time limits for the filing of the grantee's final request for funds and the consequences of a grantee's failure to submit accurate reports in a timely manner. Proposed §63.153 describes the procedure for a grantee to follow in submitting a request for a grant adjustment. Proposed §63.155 establishes the OAG's claim to a license to use copyrighted material where the purchase of such copyright was funded in any part by OAG funds. Proposed §63.157 governs procurement procedures, including OAG review and approval, to be used by a grantee who purchases equipment or professional or consultant services in excess of $25,000.

Proposed §63.159 establishes the Uniform Grant Management Standards published by the Governor's Office of Budget and Planning as the governing property management standards for a grantee. Proposed §63.161 provides guidance regarding equipment disposition methods where a grantee that has purchased equipment in whole or in part with OAG funds is no longer funded by the OAG. Proposed §63.163 provides guidance regarding the transfer of title to equipment and nonexpendable personal property acquired with grant funds. Proposed §63.165 sets forth a grantee's bonding and insurance requirements.

Proposed §63.167 addresses the OAG's authority and discretion to withhold funds from a specific project or from all projects operated by a grantee if any of the enumerated conditions or situations occur and a grantee's ability to request a reconsideration of a decision by the OAG to withhold funds. Proposed §63.169 outlines the procedures regarding cancellation or termination of a grant, the consequences of such action, and a grantee's ability to request a reconsideration of a decision by the OAG to terminate a grant project.

Proposed §63.171 sets for the requirements for de-obligation of grant funds at the end of the funding period and provides for final expenditure reports to be submitted within a certain time limit. Proposed §63.173 requires the grantee to obligate and expend all outstanding liabilities within certain specified time frames. Proposed §63.175 requires the grantee and its personnel to report immediately upon discovery to the OAG and the prosecuting attorney's office any violation of the law appertaining to the use and expenditure of grant funds. Proposed §63.177 contains a prohibition against behavior constituting a conflict of interest on the part of any person affiliated with the VAG project. Proposed §63.179 imposes contract monitoring and self-evaluation requirements on a grantee. In this section, the OAG seeks to ensure that a grantee takes a sustained, active role in assessing actual delivery of service to victims of crime through the VAG project. Proposed §63.181 imposes the requirement for the filing of timely and complete progress reports. Proposed §63.183 requires a grantee who uses grant funds to contract with a third party to maintain proper records to ensure that the requirements of the contract are met. Proposed §63.185 establishes the requirement for accuracy of grant records and the recourse for providing false information.

SUBCHAPTER J ( Program Monitoring and Audits )

Sections 63.191, 63.193, and 63.195) contains provisions concerning OAG monitoring activities, compliance reviews, and auditing authority and standards as well as procedures for grantee appeals of OAG decisions relating to audit findings.

Proposed §63.191 explains that OAG monitoring will attempt to ensure that a grantee is achieving VAG performance goals and that grant awards are used in accord with applicable laws, rules, and grant agreements. Proposed §63.193 requires a grantee to be required to file independent annual audits in accordance with UGMS and GAAS. Proposed §63.195 contains guidance as to the substance of OAG reviews and the substance of required annual audits.

Drew T. Durham, Assistant Attorney General, has determined that for the first five-year period the proposed rules are in effect, there will be no fiscal implications to the state or to local governments as a result of enforcing or administering the rules as proposed.

Drew T. Durham, Assistant Attorney General, has determined that for the five-year period in which the proposed rules are in effect, the anticipated public benefit is the administration of the VAG program by the Office of the Attorney General, as mandated by the Texas legislature, without increased costs to the state. The proposed rules will enable direct service providers to victims of crime to provide more services to the victims of crime and to enhance the payment of benefits to victims of crime from the Victims of Crime Fund.

Drew T. Durham, Assistant Attorney General, has determined there will be no direct adverse effect on small businesses or micro-businesses because these rules do not apply to single businesses.

Drew T. Durham, Assistant Attorney General, has determined there will be no economic costs to persons required to comply with the rule.

Comments may be submitted, in writing, no later than 30 days from the date of this publication to Drew T. Durham, Assistant Attorney General, Office of the Attorney General, (512) 475-3397, P.O. Box 12548, Austin, Texas 78711-2548 or be e-mail to drew.durham@oag.state.tx.us .

Subchapter A. GENERAL PROVISIONS

1 TAC §63.1, §63.3

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.1. Definitions.

The following words and terms, when used in this chapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1)

GAAS Generally Accepted Auditing Standards.

(2)

Local law enforcement agency the police department of a municipality or the sheriff's department of any county in this state.

(3)

Local criminal prosecutor a district attorney, a criminal district attorney, a county attorney with felony responsibility, or a county attorney who prosecutes criminal cases.

(4)

OAG Office of the Attorney General.

(5)

SANE Sexual Assault Nurse Examiner.

(6)

UGMS Uniform Grant Management Standards published by the Governor's Office of Budget and Planning.

(7)

VAG Victims' Assistance Grant.

§63.3. Source and Purpose of Funds.

The Victims' Assistance Grant Fund is established by the Code of Criminal Procedure, Articles 56.54-56.541, and designates the OAG as the administering agency. The source of grant funds is a biennial appropriation by the Texas Legislature from specified court costs and fees. These funds are constitutionally dedicated, by the Texas Constitution, Article I, §31. Funds under this chapter are limited to providing assistance and services directly to victims of crime. Compensable services or assistance does not include monetary compensation or financial assistance to victims. Activities unrelated or marginally related to the provision of direct services to victims are ineligible for funding.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001151

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §§63.11, 63.13, 63.15, 63.17, 63.19

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.11. Eligible Projects.

Grants awarded under this subchapter may be used only to defray all or part of the salary of the positions of victim assistance coordinator or crime victim liaison. A grantee shall aggressively pursue training for those persons employed in these VAG-funded positions. To the extent possible, a grantee shall use all available resources to enhance victim services, increase the filing of applications for benefits for victims of crime, protect the rights of victims, and fulfill the duties established for these positions under the Code of Criminal Procedure, Chapter 56.

§63.13. Eligible Applicants.

A local criminal prosecutor may apply for a grant to fund the position of a victim assistance coordinator. A local law enforcement agency may apply for a grant to fund the position of crime victim liaison.

§63.15. Funding Levels.

The minimum amount of funding that may be applied for is $10,000 for each paid position. The maximum amount of funding that may be applied for is $30,000 for each paid position. The salary of a Victim Assistance Coordinator and Crime Victim Liaison is set at $30,000 per annum for each paid position.

§63.17. Use of Grant Funds.

The use of grant funds is limited to salaries only for the position of Victim Assistance Coordinator and Crime Victim Liaison. The grant funds may not be used to pay for fringe benefits, including, but not limited to, retirement, health insurance, etc. In addition, the grant funds may not be used to pay for other operational costs, including, but not limited to, travel, computer equipment, telephone service, office rent, or other office equipment.

§63.19. Duties of Funded Positions.

Individuals who are employed in positions funded under this subchapter must perform and must spend all of their work time on tasks related to direct-service delivery to victims of crime and the discharge of the duties established in the Code of Criminal Procedure, Chapter 56.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001152

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §§63.31, 63.33, 63.35, 63.37, 63.39

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.31. Eligible Projects.

Grants awarded under this subchapter may be used only:

(1)

for projects that enhance statewide training for programs that benefit victims of sexual assault by the creation or expansion of existing programs; or

(2)

to purchase forensic exam equipment for communities with SANE programs which have been certified by the OAG.

§63.33. Eligible Applicants.

A statewide nonprofit organization whose membership consists of individuals or groups of individuals who have expertise in establishing training programs that benefit victims of sexual assault, and which purchases forensic exam equipment for communities with SANE programs that have been certified by the OAG may apply for grant funds under this subchapter.

§63.35. Funding Levels.

The minimum amount of grant funds that may be applied for is $10,000. The maximum amount of grant funds that may be applied for is $500,000.

§63.37. Grant Conditions.

(a)

Individuals who are employed in positions funded under this subchapter must perform and must spend all of their work time on victim-related tasks for which the grant has been awarded.

(b)

A grantee must provide volunteer services in connection with the VAG funded project.

(c)

New positions for the second-year of a two-year project must be bona-fide new positions that expand the services being provided by the project. The increased services must be clearly demonstrated in the program narrative.

(d)

Grant funds spent for personnel must be for the purpose of providing direct services. Salaries, fees, and other reimbursable expenses traditionally associated with administrators, executive directors, coordinators, and other individuals are ineligible unless these expenses are incurred while providing direct services to crime victims or unless a detailed justification in writing is provided in advance to the OAG that states such supervision is necessary and essential to providing direct services to crime victims, as well as being a cost-effective method in serving more crime victims.

§63.39. Transportation, Travel, and Training.

Grant funds may be used for travel to one national meeting or training conference per grant year with the prior approval of the OAG. The OAG may limit the number of attendees for whom expenses may be paid with grant funds.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001153

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §§63.51, 63.53, 63.55, 63.57

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.51. Grant Application.

(a)

An applicant for a grant under this chapter must complete and submit a VAG application package to the OAG Grant Coordinator, 300 West 15th Street, 15th Floor, P.O. Box 12548, Austin, Texas 78711-2548. An applicant may contact the OAG by telephone (512-463-2191) or in writing for information about application requirements and for application packages.

(b)

The original and one copy of the application package must be filed with the OAG by the first working day in May of each year. Applications received after the deadline for submission will not be considered.

§63.53. Approval of Grants.

The OAG will review and evaluate each timely application. The OAG has full discretion in making all funding decisions. The OAG will base grant award decisions on an applicant's eligibility, cost effectiveness of the proposed grant, and the service needs within the geographic area of an applicant. Grant award decisions by the OAG are final and not subject to judicial review.

§63.55. Grant Period.

(a)

A project will be funded for a 12-month period, beginning no earlier than September 1 of each year, and ending August 31 of each year.

(b)

The maximum number of years that a project may be funded is two years.

(c)

An applicant may submit an application for funding for two years. If the application is approved, the project will be funded for the first year, and will receive automatic consideration for second year funding. No additional application will be required for the second year, but the OAG may require a grantee to submit updated attachments, contracts, bonds, resolutions, and other information as necessary. The OAG will base its final decision on second-year funding on first year performance, including the timeliness and thoroughness of reporting, the success of the project in meeting its goals, and the outcomes of OAG on-site visits.

§63.57. Indirect Costs.

Indirect costs are an ineligible expense, and grant funds for this purpose will not be awarded to any grantee.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001154

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §63.71, §63.73

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.71. Nonstandard Funding.

The OAG may fund projects, upon application, outside of the annual grant cycle or at amounts higher or lower than provided in this chapter based on availability of funds and a particularized need, consistent with the Code of Criminal Procedure, Chapter 56.

§63.73. Continuation Funding.

There is no commitment by the OAG that a grant, once funded, will receive subsequent funding. Continuation of funding for existing grant projects must meet all requirements of this chapter and have a history of timely submission of progress and financial reports. Continuation of funding of new and existing projects is contingent on the availability of funds.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001155

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §§63.81, 63.83, 63.85, 63.87, 63.89, 63.91

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.81. Personnel.

(a)

Salaries for VAG-funded positions must comply with a grantee's position classification schedule and be reasonable. If an applicant does not have a classification schedule, the applicant must demonstrate, in the application, that the proposed salary is commensurate with that paid in the geographic area for positions with similar duties and qualifications. In any event, the OAG will determine whether or not a salary is reasonable and may limit the OAG-financed portion of any salary.

(b)

A grantee shall have available on file a copy of required licenses or certifications of any individual who hold a VAG-funded position.

(c)

A grantee shall document all VAG-funded positions with time and attendance records. These records must include the number of hours worked each day on the project, the signature of the employee, and the signature of the supervisor. For law enforcement and prosecution grants, these time records must also indicate the specific hours worked, and the case or cause numbers or other indicators of assignments for audit and monitoring purposes.

(d)

The OAG will not fund positions for less than 25% of full-time. If the salary of a position is paid partially from VAG funds, the grantee must disclose the sources of the remainder of the salary.

(e)

The OAG will not approve any salary increase from year-to-year unless an applicant provides adequate justification in the grant application to show the basis for the increase as well as to demonstrate that the increase is reasonable, as determined by the OAG.

(f)

A grantee shall not use grant funds to pay overtime.

(g)

A granted shall not reallocate personnel funds that are not expended because of a vacancy for a period in excess of 90 days to other budget line items, either within the personnel category or in other categories.

§63.83. Professional and Contractual Services.

(a)

An individual in a VAG-funded position may not receive dual compensation from a non-grant employer and the retaining grantee for work performed during the same period of time even if the services performed benefit both.

(b)

A contract for services for which grant funds will be paid must be in writing, and consistent with a grantee's usual practices for obtaining such services and OAG requirements.

(c)

A grantee must provide adequate documentation to verify time and services expended and the rates of compensation.

(d)

Travel allowances for consultants must be consistent with OAG travel policy. Travel expenses include meals, lodging, transportation and incidental expenses.

(e)

Contracts must ensure that the work or services claimed for reimbursement are directly and exclusively devoted to the grant.

(f)

A grantee must advertise any ongoing contract to purchase services annually through a competitive procurement process. A contract must include a statement that if VAG funds are no longer available, the contract is terminated. A grantee must document in project records the procurement process and the criteria used to select contractors.

(g)

All contracts or group of contracts to a single vendor that are in excess of $25,000 require OAG approval in advance. A grantee may submit such contract, including sole-source justification, if applicable, with the grant application or, at the grantee's option, immediately following the grant award, but prior to a grantee's obligating or expending any funds. If a grantee chooses the latter option, it must transmit the contract including sole-source justification, if applicable, to the OAG by a letter signed by the authorized official named in the grant or by the person designated in a grantee acceptance notice to initiate grant adjustments.

(h)

A grantee may not expend more than the amount listed for any service included in the OAG maximum rate schedule.

(i)

Any person or vendor that participates directly in writing an invitation for proposal or a grant application may not benefit financially from a related contract or any related VAG award.

(j)

A grantee must disclose in writing to the OAG all related-party transactions. A related party transaction is a transaction which occurs when a grantee enters into the contract with an individual or an organization with which a member of a grantee organization has a personal or business relationship. The applicant must include an explanation of any such arrangement in the grant application.

(k)

A grantee must maintain documentation for audit and monitoring purposes to show how oversight of contracts is accomplished, including all records of the oversight of a contract.

(l)

All professional and contractual services must be within the following OAG maximum rate schedule:

(1)

Individual consultants rates generally may not exceed $450 per day or $56.25 per hour, without the prior written approval of the OAG. The rate must be based on the prevailing market rate for the type of work being performed. The payment may include actual time for preparation, evaluation, and travel, in addition to the time for the presentation. A grantee may also pay for travel costs.

(2)

The maximum daily rate for consultants associated with educational institutions is the consultant's annual academic salary, divided by 260.

(3)

A grantee must procure a consultant employed by a for-profit or nonprofit corporations through competitive bidding. The cost for such consultant is not subject to any maximum rate.

(4)

If an established organization provides accounting or bookkeeping services, a grantee may accept the lowest responsive bid. If such services are provided by an individual who is an independent contractor, the maximum rate per hour is $56.25.

(5)

A grantee that receives less than $300,000 in grant funds may not use VAG funds to purchase an annual audit.

(6)

A grantee may engage a licensed attorney on a fee basis to provide training to staff and volunteers of the project engaged in delivering victim assistance. No other attorney services are allowable as expenses of the grant project without prior OAG approval. The maximum rate per hour is $90.00.

§63.85. Transportation, Travel, and Training.

(a)

A grantee is limited to mileage reimbursement for the use of a personal car at the rate of $.28 per mile and in-state per diem of $25 per day unless a grantee's travel policy provides a lesser reimbursement. Hotel, car rental, airfare, and out-of-state per diem expenses will be paid according to a grantee agency's established policies. If a grantee does not have an established policy, it must use state employee travel guidelines for all travel expenses as provided in the current state appropriations act. For more information on the state travel guidelines, contact the General Services Commission, Travel Management System, P.O. Box 13047, Austin, Texas 78711-3047, (512-463-3559).

(b)

A grantee must maintain adequate travel logs that include, at a minimum, dates, destinations, mileage amounts, and explanations of grant-related activities performed during the travel.

(c)

A grantee will be reimbursed only for travel expenses related to the purposes described in the original grant application or approved in advance by the OAG through grant adjustment notices.

(d)

The OAG will approve travel expenses only for individuals assigned to the grant project and listed in the approved budget. Payment of expenses of other individuals require the prior approval of the OAG.

(e)

Local travel means travel within the service area of the grant for purposes related to the grant project.

(f)

In-state travel means travel within Texas for purposes related to the grant project.

(g)

Travel to points outside the state requires approval in advance by the OAG through the original grant award or through a grant adjustment.

(h)

All travel must be adequately justified in the budget narrative.

(i)

A grant to develop and provide training through conferences or academies may not use VAG funds to pay for travel and expenses for participants.

(j)

Travel outside of the project's service area for training must directly relate to the delivery of services or to the central focus of the grant project.

(k)

Registration fees for training conferences should be reflected in the travel and training budget schedule.

(l)

A person attending training funded by the grant must complete the course. If the person does not complete the course, a grantee must submit a reason in writing. If the OAG does not accept the reason, the individual or the program represented is liable for repayment of expenses such as the registration fee and travel paid by grant funds. A grantee must maintain records in the project file, including training certificates and other records that verify completion of training.

§63.87. Equipment.

(a)

Equipment is any item with a unit cost of $1,000 or more and any other item, regardless of the cost that a grantee chooses to capitalize in its own accounting records. Also considered to be equipment are computer hardware or software and training and educational films or videos, regardless of cost.

(b)

The OAG must approve each item of equipment through the original grant award or in subsequent grant adjustment notices prior to purchase. The OAG will base approval on a grantee's demonstration that the requested equipment is necessary to the successful operation of the grant project and reasonable in cost.

(c)

Equipment is an eligible expense only if it is part of a project that includes personnel assigned to the project unless this chapter limits the use of grant funds to salaries only. The OAG may make exceptions in the cases of grants for innovative, cutting-edge technology used in providing services to victims of crime.

(d)

A grantee must use equipment only for the intended grant-related purposes and not for personal or non-grant related purposes.

(e)

Equipment purchases in excess of $25,000 require OAG approval as part of the special condition on equipment review and approval. A copy of this special condition is available in the application package. A grantee is not exempt from this policy if the actual amount expended is less than $25,000 because of a trade-in allowance.

(f)

The OAG will not fund vehicles.

§63.89. Supplies and Direct Operating Expenses.

(a)

Supplies and direct operating expenses are cover expenses directly related to the day-to-day operation of the grant project and not included in other budget categories. Allowable expenses include such items as office rent, utilities, office supplies, shared usage costs of office equipment, vehicle operating expenses, fidelity bonds, paper, printing, postage, classroom instructional supplies, production costs for public service announcements, educational resource materials, Yellow Page listings, and vehicle leases.

(b)

The OAG will not approve funds for project promotion through paid advertisements, including Yellow Page advertisements, or for promotional gifts, such as matchbooks, bumper stickers, pens, T-shirts, or hats.

(c)

The OAG will not approve funds to purchase admission fees or tickets to any amusement park, recreational activity, or sporting event.

(d)

Under no circumstances may funds be used to purchase food, meals, beverages, or other refreshments for meetings or program participants. The OAG will not pay for these items, and a grantee may not use program income to purchase them.

(e)

Justification for office rental must include the square footage of the space.

(f)

A grantee must have an allocation plan for shared office equipment or must maintain equivalent receipts and records.

(g)

Office rent and other occupancy costs including space needs must be reasonable and justifiable. Occupancy costs must be supported by submitting to the OAG an allocation plan, lease agreement, and expenditure receipts or other approved methods of determining actual occupancy costs.

§63.91. Funding Limitations.

The OAG will not approve funds for construction or land acquisition.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001156

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §§63.101, 63.103, 63.105, 63.107, 63.109, 63.111, 63.113, 63.115, 63.117, 63.119, 63.121, 63.123, 63.125

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.101. Current Statistical Report.

An application for VAG funding must include a copy of the applicant's current statistical report or other written evidence that demonstrates anticipated productivity.

§63.103. Equal Employment Opportunity Program Certification.

An application for funds in excess of $25,000 must include a signed copy of an Equal Employment Opportunity Program certification. Such certification verifies that an agency employing 50 or more people which has received or applied to the OAG Grants Coordinator, for funds in excess of $25,000 has implemented an equal employment opportunity program in accordance with 28 CFR 42.301, et seq. , Subpart E.

§63.105. Certification Regarding Lobbying.

(a)

An application must include a signed copy of a Certification Regarding Lobbying in which the applicant certifies that "No Victims' Assistance Grant funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of an agency, a member of the Texas Legislature, and officer or employee of the Texas Legislature, or an employee of a member of the Texas Legislature in connection with this grant." The applicant shall complete and submit the standard form, "Disclosure Form to Report Lobbying," in accordance with its instructions.

(b)

The language of the certification will be included in the award documents for all sub-awards at all tiers and that all sub-recipients shall certify accordingly.

(c)

A grantee must file the most current edition of this certification and disclosure form, if applicable, with each submission that initiates agency consideration for an award of a contract or grant.

(d)

The certification required by this section is a material representation of fact upon which reliance was placed when this transaction was made or entered into.

§63.107. Nonprocurement Debarment Certification.

An application must include a signed copy of the Nonprocurement Debarment Certification. It certifies that neither the applicant nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation in this transaction by a federal or state department or agency. If the prospective lower tier participant is unable to certify to any of the statements in this certification, the prospective participant must attach an explanation to the application.

§63.109. Drug-free Workplace Certification.

An application must include a signed copy of the Drug-free Workplace Certification.

§63.111. UGMS Certification.

(a)

An application must include a signed copy of the Uniform Grants Management Standards Certification.

(b)

A grantee shall, within 60 days following the date of the grant award, furnish the following information to the OAG:

(1)

The identity of the organization conducting the audit;

(2)

The approximate time the audit will be conducted;

(3)

The audit coverage to be provided.

§63.113. Certified Assurances.

An application must include a signed copy of the Certified Assurances Certification.

§63.115. Cooperative Working Agreement.

When an application includes statements explaining that the project will be carried out in a significant part due to the cooperation of outside organizations, a cooperative working agreement must be signed by an authorized person from each external organization. The applicant must provide to the OAG a signed copy of this agreement between a grantee and each significant external organization whose collaboration and cooperation are essential in achieving the goals of the grant project. The applicant shall include any such agreement with the grant application.

§63.117. Equipment Review and Approval.

(a)

Prior to obligating or expending grant funds for equipment purchases in excess of $25,000, a grantee shall submit the following documentation to the OAG for review and approval. Documents must be transmitted with a letter signed by the authorized person named in the grant or by the person designated in the "Grantee Acceptance Notice" to initiate grant adjustments.

(1)

A brief narrative description of the procurement procedures used;

(2)

An unequivocal statement of which low compliant bid was selected;

(3)

A list of vendors requested to bid or respond;

(4)

A copy of the public advertisement;

(5)

A copy of the Request for Proposal (RFP) or the Invitation for Bid (IFB) with bid specifications;

(6)

One copy of the awarded bid;

(7)

Bid tabulation sheet;

(8)

When a grantee does not accept the apparent low bid, a description of the selection process used to select the successful bidder, with a copy of the evaluation of all proposals. The transmittal letter must state the reasons why a bid is rejected when a higher bid is selected; and

(9)

A copy of the sales or purchase contract, if applicable.

(b)

A grantee, must at a minimum, comply with its own procurement procedures and the Local Government Code, if applicable.

(c)

RFPs or IFBs issued by a grantee or a subgrantee to implement the grant or subgrant project must provide notice to prospective bidders that the OAG organizational conflict of interest provision is applicable in that contractors who develop or draft specifications, requirements, statements of work and/or RFPs for a proposed procurement shall be excluded from bidding or submitting a proposal to compete for the award of such procurement.

(d)

State agencies using the purchasing services of the General Services Commission are exempt from submitting bidding documentation to the OAG for review and approval prior to purchasing equipment.

§63.119. Contract Review and Approval.

(a)

All contracts or groups of contracts with a single vendor that are in excess of $25,000 must be submitted to the OAG for approval prior to a grantee obligating or expending any grant funds for contractual services. Each contract must be transmitted by a letter signed by the authorized person named in the grant or by the person designated to initiate grant adjustments and be accompanied by the following:

(1)

A brief narrative description of the procurement procedures used and an unequivocal statement of which low compliant bid was selected;

(2)

A list of vendors requested to bid or respond. State agencies using the purchasing service of the State Purchasing and General Services Commission are not exempt from this paragraph. An RFP or IFB issued by a grantee to implement the grant project must provide notice to prospective bidders that the OAG organizational conflict-of- interest provision is applicable in that contractors who develop or draft specification, requirements, statements of work, and/or RFPs for proposed procurement shall be excluded from bidding or submitting a proposal to compete for the award of such contract or order;

(3)

A copy of the public advertisement;

(4)

A copy of the RFP or the IFB, with specifications;

(5)

A copy of the awarded response;

(6)

A description of the selection process used to select the successful bidder, with a copy of the evaluation of all proposals;

(7)

If only one response is received, an explanation of why only one response was received; and

(8)

If sole source procurement is necessary (i.e., contract is awarded to any organization without conducting a formal advertising and competitive bidding process or without soliciting proposals from potentially qualified contractors) or if only one bid was received, the documents submitted to the OAG must include an explanation justifying the selection of the sole source contractor. The explanation shall include the signature, title, and organization of either the authorized person named in the grant or of the person designated to initiate grant adjustments.

(b)

Two or more contracts of a value that exceeds $25,000 and are with one individual or firm are subject to this section and require OAG approval.

(c)

Justification for sole source procurement must be presented in a format prescribed by the OAG in the application package.

§63.121. Resolutions.

(a)

For governmental entities where the authorized official designated in the grant application is not the executive officer of the governmental entity, the entity must submit a resolution from its governing body that gives the authorized official the power to accept, reject or amend a grant. The resolution must state that in the event of loss or misuse of OAG funds, the governing body assures that the grant funds will be returned to the OAG in full, and that it will secure a fidelity bond covering the full amount of the OAG funds upon acceptance of any grant award as provided in §63.165 of this title. The resolution from the governing body shall contain a statement that the governing body of the governmental entity may not use the existence of a grant award to offset or decrease total salaries, expenses, and allowances that the applicant receives from the governing body at or after the time the grant is awarded.

(b)

For a nonprofit organization where the authorized official designated in the grant application is not the executive officer of the organization, the organization must submit a resolution from its governing body that gives the authorized official the power to accept, reject or amend a grant. The resolution must state that in the event of loss or misuse of OAG funds, the governing board assures that the grant funds will be returned to the OAG in full, and that it will secure a fidelity bond covering the full amount of the OAG funds upon acceptance of any grant award as provided in §63.165 of this title.

§63.123. Organizational Chart.

An applicant must submit a staff organizational chart for its project that shows both grant-paid and non-grant-paid personnel in its organization. If a staff member is paid partially from OAG funds, then the applicant must attach information explaining the source of the remainder of the staff member's salary. If a grantee makes changes to the organization during the year, the grantee must submit a revised copy of the organizational chart to the OAG.

§63.125. Post Award Survey.

When there is a question about whether an application meets all eligibility requirements, the OAG may award the grant conditioned upon a post-award survey. When such condition is placed on a grant award, an OAG staff member will visit the project after award to make a final eligibility determination. The OAG will not release funds to the project until such determination is made.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001157

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §§63.127, 63.129, 63.131

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.127. Notification of Award.

Each applicant must accept or reject in writing a grant award within 45 days of the grant award date. Failure by the applicant to execute the grantee acceptance notice within this time period and promptly forward that notice to the OAG shall be construed as a rejection of the grant award, and the funds will be deobligated. In addition, each applicant who accepts a grant award must implement the grant within 60 days of the designated start date indicated on the statement of grant award. Failure to do so will be construed by the OAG as relinquishment by the applicant of the grant award. Any exception to this rule will require the review and written approval of the OAG Grants Coordinator.

§63.129. Application Deficiencies and Application Process.

(a)

If the OAG finds deficiencies in an application upon initial review, the OAG will send a deficiency report to the applicant. The applicant may file a response with a correction in the application. Deficiency reports are preliminary assessments only and do not represent a final action or determination by the OAG. Receipt of a deficiency report is not a commitment to fund any portion of the project. Additional deficiencies may be identified after the date of a deficiency report.

(b)

An application for funding will go through many reviews at the OAG. At any point during those reviews a decision to approve or deny project funding may be made, and such decision is within the discretion of the OAG. Once an award is made, the OAG has discretion to determine whether or not a grantee is complying with OAG policies and may, upon such a negative determination, deobligate the grant and require reimbursement to the OAG of grant funds already disbursed.

(c)

The OAG will inform the applicant of its decision regarding a grant award through either a Statement of Grant Award or a denial letter signed by the Attorney General or his designee.

(d)

Applicants may not contact staff members of the OAG to seek support of an application. Additionally, under no circumstances, may a grantee use grant-funded equipment, supplies, personnel, or indirect costs to influence or encourage others to influence the outcome of a grant funding decision by the OAG except as allowed under the OAG review process provided in §63.131 of this title. A decision to award a grant or not will be based only on the application package and OAG records.

§63.131. Review of Denial.

(a)

If the OAG denies an application or any part of an application, an applicant may notify the OAG of its intent to ask for a review of the decision by writing to the Office of the Attorney General, Grants Coordinator within ten days from the date of notification. Review requests must be based on a verifiable error made during the review process, and the applicant must be able to show that the error actually caused the application or portion of the application not to be funded. The applicant may submit written documentation in support of the review request.

(b)

Letters and phone calls of support will not be considered as part of the review. The Attorney General or his designee will consider any documentation submitted by the applicant that meets the criteria as outlined in this section. The decision concerning a review is final and not subject to judicial review.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001158

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §§63.141, 63.143, 63.145, 63.147, 63.149, 63.151, 63.153, 63.155, 63.157, 63.159, 63.161, 63.163, 63.165, 63.167, 63.169, 63.171, 63.173, 63.175, 63.177, 63.179, 63.181, 63.183, 63.185

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.141. Grant Officials.

A grantee must have three persons designated to serve as grant officials as follows:

(1)

The project director must be an employee of the grantee who will be responsible for operation or monitoring of the project and be able to readily answer questions about its day-to-day operations.

(2)

The financial officer must be the chief financial officer of the grantee. Such officer might be, for example, county auditor, city treasurer, comptroller, or treasurer of a nonprofit corporation's board. The financial officer may not serve as the project director or the authorized official.

(3)

The authorized person is the person authorized to apply for, accept, decline, or cancel the grant for the applicant agency. This person may be, for example, the executive director of the state agency, county judge, mayor, city manager, assistant city manager, or designee if authorized by the governing body, and the name must be consistent with the signature on application page VAG-1.

§63.143. Obligating Funds.

Grant funds may not, without advance written approval by the OAG Grants Coordinator, be obligated prior to the start date or after the ending date of the grant period. Obligated funds must relate only to approved budget items and purposes. Grant-funded personnel may use grant funds only for project activities stated in the approved grant application.

§63.145. Retention of Report Records.

(a)

Except as provided in subsections (b) and (c) of this section, a grantee must maintain all financial records, supporting documents, statistical records and all other records relating to the grant for at least five years following the closure of the most recent audit report. Retention is required for the purposes of federal and state examination and audit. Records may be retained in an electronic format. All of the retained records are subject to audit or monitoring during the entire retention period.

(b)

Records for equipment purchased, non-expendable personal property, and real property shall be retained for a period of three years from the date of the disposition or replacement or transfer at the discretion of the OAG.

(c)

If any litigation, claim, or audit is initiated before the expiration of the three-year period, the records shall be retained until all litigation, claims, or audit findings involving the records have been resolved. All of these records are subject to audit or monitoring during the entire retention period.

§63.147. Financial Reports.

A grantee must submit financial expenditure reports each calendar quarter. The OAG will provide the appropriate forms and instructions to each grantee along with deadlines for submission. The financial officer designated for the grant must sign and submit such reports. Failure to submit such reports on a timely basis will result in the OAG placing a grantee on financial hold and may affect future funding requests.

§63.149. Inventory Reports.

A grantee must maintain an inventory report on file at its principal office of all equipment purchased as part of the grant project. This report must be consistent with the final financial expenditure report. The grantee must submit the report to the OAG with the final progress report. The grantee must complete and submit to the OAG an inventory of grant property at least once every two years.

§63.151. Requests for Funds.

A grantee must ensure that its final Request for Funds is received or postmarked no later than the 90th day calendar day (liquidation date) after the end of the grant period. If this date falls on a weekend or federal holiday, then the OAG will honor receipt or a postmark on the next business day. On the liquidation date, if grant funds are on hold for any reason, the funds will lapse and cannot be recovered by the grantee. Under no circumstances will the OAG make payments to a grantee who submits its Request for Funds with a postmark after the above deadline.

§63.153. Grant Adjustments.

(a)

When it becomes necessary to change any significant program or budget element of a grant, a grantee may request a grant adjustment. This adjustment, if approved by the OAG in writing, will allow the grantee to move funds between budget categories, change officials, revise the scope or target of the program, or alter project activities. The person designated in the grantee acceptance notice to request grant adjustments or the authorized official must sign all requests. The OAG must approve an adjustment in advance through a grant adjustment notice mailed to the project director and the financial officer for the grant.

(b)

The OAG will not consider more than four grant adjustments each grant year where the request is to alter the approved or previously amended budget. This allotment does not include changes in the names of officials, addresses, or phone numbers. The OAG will consider additional budget adjustments only if the OAG expressly requests the budget amendment for reasons other than to resolve deficiencies found during monitoring visits or other examinations of grantee records.

(c)

The OAG will not allow a request to reallocate personnel funds that are not expended because of a vacancy to other budget line items, either within the personnel category or to another budget category.

(d)

The OAG will record grant adjustments that request changes other than those to the budget or the activities of the program. Such changes of basic information will not be acknowledged in writing by the OAG.

(e)

A grantee shall notify the OAG in writing of any change of the designated project director, financial officer, or authorized official within five days following the change. When such notification records a change of the financial officer, the letter must include a sample signature of the new official.

(f)

A grantee is responsible for initiating a grant adjustment. The request for adjustment may be made by letter, although any information that clarifies the request may be included. A grantee must secure OAG approval, through a grant adjustment notice, in advance and each request must include a detailed justification for any:

(1)

Out-of-state travel that was not included by individual trip in the approved budget;

(2)

Changes in the need, objectives, methodology, scope, or geographical location of the grant; transfers of funds among direct cost categories exceeding five percent of the total grant budget over the grant year;

(3)

Changes in the number or job descriptions of personnel specified in the grant;

(4)

Changes in equipment amounts, types, or methods of acquisition;

(5)

Changes in the grant period or in the period for liquidating all encumbered funds;

(6)

New line items to be included in the budget or changes to existing line items; and

(7)

Cost-of-living and merit increases for a budgeted salary (include documentation of approval by the governing body and effective date of the increases).

(g)

A grantee may submit a written request for a grant extension. The OAG Grants Coordinator will approve such requests only in extraordinary circumstances. The OAG will not extend a grant for more than 12 months.

(h)

The OAG will not honor facsimile copies of grant adjustment requests and will not give verbal approvals.

(i)

No budgetary grant adjustment requests will be honored 30 days prior to the end of the grant period.

(j)

Over the course of the funding year, a grantee may transfer funds between direct cost line items in different budget categories not to exceed a cumulative total of five percent of the grant budget during that year. All such budget transfers must comply with all relevant policies in this chapter. Adjustments must occur before funds are expended or were scheduled to be expended in the approved budget. Total transfers during a grant year that exceed five percent of the OAG portion of the grant budget require a grant adjustment.

§63.155. Copyrights.

If a grantee uses any OAG funds to purchase or receive a copyright or for a subcontractor to purchase or receive a copyright, The OAG reserves a royalty-free and irrevocable license to reproduce, publish, use, or authorize others to use the copyrighted material.

§63.157. Procurement Procedures.

(a)

Prior to obligating grant funds for equipment purchases or professional or consultant services in excess of $25,000, a grantee must submit all documents to the OAG for review and approval. A grantee is not exempt from this policy if the actual amount is lower than $25,000 because of a trade-in allowance. A grantee must submit documents with a letter signed by the authorized person named in the grant or by the person designated to initiate grant adjustments. The documents must contain:

(1)

A brief narrative description of the procurement procedures used and a statement of which low compliant bid was selected;

(2)

A list of vendors requested to bid or respond. State agencies using the purchasing service of the general Services Commission of Texas are not exempt. RFPs or IFBs issued by a grantee to implement the grant project must provide notice to prospective bidders that the OAG organizational conflict-of-interest provision is applicable. This provision states that contractors that develop or draft specifications, requirements, statements of work, and RFPs for proposed procurement shall be excluded from bidding or submitting a proposal to compete for the award of such a contract;

(3)

A copy of the public advertisement;

(4)

A copy of the RFP or the IFB, with specifications;

(5)

A copy of the acknowledgment of contract receipt;

(6)

A description of the selection process used to select the successful bidder, with a copy of the evaluation of all proposals;

(7)

If sole-source procurement is necessary or if only one response is received, a justification for selecting the sole source or an explanation of why only one response was received a long with a description of the program, what is being contracted for, and why it is necessary to contract non-competitively, such as expertise of the contractor, responsiveness and knowledge of the program, time constraints, and uniqueness; and

(8)

A copy of the proposed contract.

(b)

Each state agency grantee must comply with the Government Code, Chapter 2254, when securing consultant services.

(c)

Cities and counties must comply with the requirements governing advertising for bids, in the Local Government Code, chapters 252 and 262, for cities and counties respectively.

(d)

State agencies contracting for professional or consultant services in excess of $15,000 are not required to submit to the OAG a copy of the contract for approval, but shall provide the OAG a copy for its records. State law requires that state agencies must submit such contracts to the General Services Commission for approval.

(e)

A grantee must make a good-faith effort to encourage Historically Underutilized Businesses (HUBs) to bid on services for grant-funded projects and to report the amount of grant dollars contractually awarded to HUBs. A Historically Underutilized Business is defined as: a corporation formed for profit in which at least 51% of the equity is owned by one or more Black, Hispanic, Asian, Pacific Islander, Native American, or female person; a sole proprietorship 100% owned, operated, and controlled by such a person; a partnership in which such person(s) owns at least 51% of assets and interest and has proportionate control of partnership affairs; a joint venture of HUBs; or a supplier contract between a HUB and a prime contractor under which the HUB manufactures, distributes, or warehouses and ships the supplies. A grantee must report this information on the HUB-PAR form with the quarterly financial expenditure report. A copy of the Historically Underutilized Business Progress Assessment Report (HUB-PAR) is in the application kit.

(f)

Any lease-purchase in excess of $15,000 must be a result of competitive procurement. The OAG will not approve lease-purchase agreements or leasing of computer systems (computer hardware and software) unless the applicant demonstrates that lease-purchase is cost-effective. An applicant requesting a lease-purchase should reflect the items in budget schedule D of the grant application form and must attach justification for requesting the lease-purchase method. Any interest charges resulting from such a purchase are not allowable as expenditures under the grant. If approved, lease-purchase is subject to the same requirements for grantee contributions as equipment purchases.

(g)

A grantee must retain ultimate control of and responsibility for the grant project, and any contractor shall be bound by grant agreements, grant conditions, and any other requirements applicable to a grantee.

(h)

A grantee may make purchases up to $2,000 on a spot purchase basis, without comparative pricing.

(i)

Purchases between $2,000.01 and $5,000 will require a minimum of three verbal bids based on identical specifications. A grantee is required to maintain records for audit that show the name, telephone number, date, and bid amount of each source contacted. A grantee must select the lowest compliant bid.

(j)

Purchases between $5,000.01 and $15,000 require a grantee to issue written invitations for bids, using identical specifications, to a minimum of three prospective suppliers. Such invitations must clearly state the deadline for receipt of written bids. A grantee is required to maintain records for audit that include copies of all invitations and all written responses, including original signatures. A grantee must select the lowest compliant bid.

(k)

Purchases above $15,000 require formal newspaper advertising soliciting bids. A grantee must maintain records for audit that include copies of the advertisement(s) and all written responses, including original signatures. A grantee must select the lowest compliant bid.

(l)

When the required services, supplies, or skills are so unique that the purchaser cannot identify a minimum of three prospective sources and the cost exceeds $2,000, a grantee must request guidance from the OAG. In such cases, a grantee must provide to the OAG a letter containing all relevant facts and a proposed course of action.

(m)

Audit organizations and individual independent auditors typically will not respond to an invitation for bid, without precise specifications stipulated by the purchaser. In such cases, the purchaser must extend an invitation for proposal, which permits the prospective supplier to develop specifications and to quote a relevant cost. A grantee must select the most responsive proposal that meets its needs.

(n)

In all instances, prior to the delivery of services, a written contract must be executed to secure professional or consultant services.

§63.159. Property Management Standards.

A grantee shall use the property management standards set forth in the UGMS . The UGMS are incorporated in this chapter for all proper purposes. A grantee must comply with the UGMS and all applicable state and local laws and regulations.

§63.161. Disposition of Property.

(a)

If a grantee no longer funded by the OAG purchases equipment in whole or in part with OAG funds, a grantee must write to the OAG for instructions on the disposition of any piece of equipment with a current per-unit fair market value of $1,000 or more. A grantee may use equipment with a current per-unit fair market value of less than $1,000 for other activities without reimbursement to the OAG, or sell the equipment and retain the proceeds without OAG approval.

(b)

The request for disposition of property must include an explanation of a grantee's preferred disposition. Disposition is subject to OAG approval as follows:

(1)

If a grantee wishes to continue to use the equipment in the project or in activities similar to those of the original project, the OAG may approve such action and transfer title of the equipment to the grantee.

(2)

If a grantee wishes to use the equipment in activities that are not a part of the project or not in activities similar to those of the original project, the OAG may approve transfer of the equipment, provided that the grantee makes compensation to the OAG. The compensation to the OAG is the percentage of the current per-unit fair market value of the equipment equal to the percentage of the OAG share of the original purchase price.

(3)

If a grantee no longer needs the equipment, the OAG may approve sale of the property. If a grantee sells the property, it must then reimburse the OAG for a percentage of the sale in an amount equal to the percentage of the OAG share in the original purchase price. The sale of the property shall be a bona fide, arms-length sale. The grantee shall reimburse the OAG its pro rata share upon receipt of the purchase monies.

(4)

The OAG may instruct a grantee to transfer the equipment to another agency needing the property. If so instructed, the benefitting agency shall reimburse the grantee for the percentage of the current per unit fair market value equal to the percentage of the grantee's share in the original purchase price;

(5)

If the OAG instructs a grantee to dispose of the property in a manner other than that stipulated in paragraphs (1)-(4) of this subsection, the OAG will reimburse the grantee for costs incurred in the disposition.

§63.163. Transfer of Title of Equipment and Nonexpendable Personal Property.

(a)

The OAG may transfer title of grant-acquired property having a unit cost of $1,000 or more to the federal government or to a third party eligible as provided by law.

(b)

Property to be transferred must be identified in the grant or otherwise made known to the grantee in writing.

(c)

The OAG will issue disposition instructions within 120 calendar days after the end of grant.

(d)

When title to property is transferred, the grantee will be paid an amount calculated by applying the percentage of participation in the purchase to the current fair market value of the property.

§63.165. Bonding and Insurance

Each nonprofit organization receiving funds from the OAG must obtain and submit with the grant application a fidelity bond on any employee administering VAG funds. The bond must indemnify the OAG against the loss and theft of the entire amount of VAG funds. The cost of such a bond is an eligible expense of the grant. Second-year funding projects must submit a copy of the bond on or before September 1 of the second year of the grant. If a grantee is self-insured, it must submit documentation of self-insurance with the grant application. An applicant, other than nonprofit organizations, must include in the resolution from its governing body a statement that in the event of loss or misuse of OAG funds, the governing body assures that funds will be returned to the OAG in full.

§63.167. Withholding Funds.

(a)

The OAG may withhold funds from a grantee if a grantee fails to comply with established guidelines, grant conditions, or contractual agreements or when funds are depleted or insufficient to fund allocations.

(b)

The OAG may withhold funds from a specific project for reasons that include, but are not limited to:

(1)

failure to comply with any applicable federal or state law, rule, regulation, policy, or guideline, or with the terms of any grant agreements;

(2)

failure to submit reports of expenditures and the status of funds, grantee progress reports, or special required reports at the times and in the form established for such reporting;

(3)

failure to maintain proper records as required by these rules;

(4)

failure to conduct the grant project according to the terms of the application for a grant, the statement of grant award, the grantee acceptance notice, or a grant adjustment notice;

(5)

failure to comply with any condition that has been made a part of the statement of grant award by reference or inclusion therein, or through the issuance of a grant adjustment notice;

(6)

failure to commence project operations within 60 days of the project start date;

(7)

failure to submit audit reports, including management letters, responses to audit findings or management letters;

(8)

failure to provide timely and adequate responses to audit or monitoring report findings; or

(9)

failure to provide accurate information in a grant application, in grantee records, or in reports to the OAG.

(c)

The OAG may withhold funds from all projects operated by a grantee for reasons that include, but are not limited to:

(1)

failure to respond to any deficiency listed in this section;

(2)

failure to return to the OAG within the required time unused grant funds remaining in the expired grant; or

(3)

refusal to return to the OAG any grant funds improperly accounted for or expended for ineligible purposes under a grant that has expired.

(d)

The OAG will not give advance notice that a grantee may be placed on financial hold. It is the responsibility of a grantee to submit all reports and other required information in a timely fashion and to comply with OAG grant guidelines.

(e)

The OAG will notify a grantee when a grant is placed on financial hold. A grantee may, within ten days of receiving notification, request in writing a reconsideration of the determination to withhold funds. A grantee should direct this request to the OAG grants coordinator, together with any documentation in support of the reconsideration. The grants coordinator will review the determination to withhold funds based on the documentation submitted. The OAG will send the final determination to the grantee in writing.

(f)

The OAG will release funds when the grantee has provided satisfactory evidence of the correction of the deficient conditions unless the OAG has terminated the grant as provided in §63.169 of this title.

§63.169. Grant Termination.

(a)

A grantee shall notify the OAG, in writing, of the cancellation of any VAG funded project immediately upon the decision to cancel the project.

(b)

The OAG may terminate a grant for failure to comply with applicable federal or state laws, rules, regulations, policies, or guidelines, or any OAG grant agreement with the grantee.

(c)

The OAG may terminate a grant if deficient conditions make it unlikely that the grant's objectives will be accomplished; deficient conditions cannot be corrected within a period of time judged acceptable by the OAG; a grantee provided inaccurate information in a grant application, in grantee records, or in reports to the OAG; or a grantee has acted in bad faith.

(d)

The OAG will notify a grantee of deficient conditions and grounds for termination. When a grant is terminated all unexpended or unobligated funds awarded to a grantee will revert to the OAG. The OAG may consider a grantee ineligible for any future grant award if the OAG has terminated a grant for cause.

(e)

In lieu of termination a grant project, the OAG may require the transfer of the grant project by moving the administration of the project to a different agency.

(f)

A grantee may ask for a review of the termination of a grant by writing to the Deputy Attorney General for Criminal Justice of the OAG, within ten days from the date of the suspension or termination notification. A grantee may submit written documentation in support of its request. The Deputy Attorney General for Criminal Justice will consider any documentation submitted by a grantee in support of an appeal. The decision of the Deputy Attorney General for Criminal Justice concerning termination is final and not subject to judicial review.

§63.171. De-Obligation of Grant Funds.

A grantee must liquidate all properly incurred obligations under the award no later than 90 days after the end of the funding period. Final expenditure reports must be submitted at that time or on the following expenditure report if the end of the liquidation period does not fall at the end of a calendar quarter. In addition, a grantee must submit any unexpended funds and cash match shortages with the final expenditure report.

§63.173. Payment of Outstanding Liabilities.

A grantee must properly obligate and expend all outstanding liabilities no later than 90 days after the end of the grant period. The OAG will not make any reimbursements to a grantee unless the final request for funds is postmarked by the 90th day after the end of the grant period. If the 90th day falls on a weekend or federal holiday, the OAG will honor receipt or a postmark on the next business day. All payments made after the completion of the grant period must relate to obligations encumbered prior to the end of the grant period.

§63.175. Violations of Laws.

A grantee and its personnel must notify in writing, immediately upon discovery, the OAG and, if applicable, the local prosecutor's office, any knowledge, suspicion, or evidence of a violation of the law encountered by a grantee or discovered during monitoring visits, including, but not limited to, misappropriation of funds, fraud, theft, embezzlement, forgery, or any serious irregularity or noncompliance with the requirements of this chapter.

§63.177. Conflict of Interest.

Failure to comply with this section shall result in termination of the grant award and may affect future funding decisions. No grantee personnel, member of a grantee board or governing body, or other person affiliated with the grant project may participate in any proceeding or action where grant funds personally benefit, directly or indirectly, the individual or any relative. Grant personnel or officials must avoid any action that might result in or create the appearance of using their official positions for private gain; giving preferential treatment to any person; losing complete independence or impartiality; making an official decision outside of official channels; or affecting adversely the confidence of the public in the integrity of the program or the OAG.

§63.179. Evaluating Project Effectiveness.

A grantee must regularly evaluate the effectiveness of its project. This evaluation includes reassessment of individual project activities and services to determine if they remain relevant and effective. A grantee must be able to show that grant activities are well thought out and provide actual services that directly impact an identified problem statement and bring the project closer to accomplishing its goals. The OAG will assess project effectiveness through review of required progress reports, on-site visits, and desk reviews. Information relating to project evaluations must be maintained in the project's files and must be available for review by OAG staff.

§63.181. Progress Reports.

(a)

A grantee must submit progress reports in accordance with the instructions provided by the OAG and as outlined for each specific program area. To remain eligible for funding, a grantee must be able to show not only the number of services provided, but the impact and quality of those services.

(b)

A grantee must submit reports only for those activities supported by OAG grant funds, grantee match, and program income.

(c)

The OAG may prescribe forms for such reports, which a grantee must use.

(d)

The project director must sign all progress reports.

(e)

The OAG will automatically place projects on financial hold for failure to submit complete and correct progress reports by the specified deadline. The OAG will not send reminder notices or make reminder telephone calls prior to placing funds on hold. A history of delinquent reports may affect future funding decisions.

(f)

The OAG will not make a grant award for second-year funding projects unless all progress reports due by the award date are complete, correct, and on file at the OAG.

§63.183. Oversight of Contracts.

A grantee that uses any portion of VAG funds to contract with a third party must maintain records in a grantee project file showing the specific steps taken to ensure that the terms of the contract are met and that the services provided are evaluated by a grantee annually.

§63.185. Accuracy of Grant Records

Providing false information, knowingly or unknowingly, on a grant application, in grantee records, or in reports to the OAG may cause an application to be denied or a grant to be terminated and the grant funds deobligated. In some circumstances, such action may also be considered tampering with government records which is a criminal offense.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001159

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

1 TAC §§63.191, 63.193, 63.195

The new rules are proposed under the Texas Code of Criminal Procedure, Article 56.541, which the OAG interprets as authorizing the Office of the Attorney General to adopt rules reasonable and necessary to implement Chapter 56, and in order to provide funds for grants or contracts that support crime victim-related services or assistance.

The new rules affects Texas Code of Criminal Procedure, Chapter 56.

§63.191. Monitoring.

(a)

The OAG will monitor grants throughout their existence. A grantee must make all grant-related records available to OAG representatives unless the information is sealed by law.

(b)

The OAG will monitor both financial and program aspects of a grant project to evaluate progress and determine compliance. Monitoring will include both on-site and desk reviews and may involve any information that the OAG deems relevant to the project. The purposes of this monitoring program are to ensure that a grantee is meeting performance goals and that grant funds are expended in compliance with applicable laws, rules, grant agreements and other contracts. On-site monitoring includes, but is not limited to the review of the:

(1)

adequacy of the accounting systems, files, equipment and property management, and administration;

(2)

relationships of actual expenditures and match requirements compared to approved budgets;

(3)

accuracy of financial information, reasonableness of cost allocation plans, and expenditure documentation;

(4)

timeliness of submission of financial expenditure and progress reports;

(5)

need for, reasonableness of, and authorization for costs;

(6)

charges to cost pools used in calculating indirect cost rates;

(7)

adherence to federal, state, and OAG guidelines and program requirements;

(8)

accuracy of statistics on project activities and goal achievement indicators; and

(9)

documentation of and progress toward achieving the project's output and outcome goals.

(c)

A grantee must maintain current files. The OAG may make unannounced visits at any time.

(d)

The OAG reserves the right to conduct its own audit, or contract with another to audit any grant.

(e)

A grantee must provide access to project records to all OAG representatives and properly designated monitors or auditors.

(f)

A grantee must, within 30 working days of the date of an audit monitoring report, submit documentation to the OAG responding to findings and questioned costs contained in an audit or monitoring report. Documentation may be submitted to the OAG, at 300 W. 15th Street, William P. Clements Building, 15th Floor, Austin, Texas 78701 or by mail to the OAG, Grants Coordinator, Post Office Box 12548, Austin, Texas 78711. The OAG will review the documentation for legal, financial, and program acceptability under state, federal and OAG rules.

(g)

A grantee may request a review of a decision by the OAG after submission of responses to OAG findings, by writing to the Office of the Attorney General, Grants Coordinator. A review board will make recommendations to the Deputy Attorney General for Criminal Justice for approval, disapproval, or approval with modifications of audit or monitoring exceptions. The OAG will send the written determination by the Deputy Attorney General for Criminal Justice to the grantee within 30 calendar days of a decision. A grantee must, within 30 calendar days, refund all funds due after a final determination. Failure to comply with this provision will subject a grantee to the provisions of this Plan relating to the conditions for withholding funds from a grantee. The determination of the Deputy Attorney General for Criminal Justice is final and not subject to judicial review.

§63.193. Independent Annual Audit.

The OAG will require an audit of a grant, including subgrants passed through from a VAG grantee, based on state audit requirements, as follows:

(1)

A grantee expending a total of $300,000 or more in state funds, regardless of the source, must submit an annual single audit in accordance with the UGMS;

(2)

A grantee expending less than a total of $300,000 but $50,000 or more in state funds, regardless of the source, must submit a program-specific audit.

(3)

A grantee expending less than a total of $50,000 in state funds, regardless of the source, must submit financial statements audited in accordance with GAAS.

§63.195. Audit Standards.

(a)

A grantee must submit to the OAG copies of all audit reports, including audits as required in the Independent Annual Audit and all other audits that a grantee undergoes, regardless of the purpose.

(b)

A grantee must ensure that required audits are completed and submitted to the OAG on or before 30 days after the issuance of an auditor's report.

(c)

A VAG will bear its fair and reasonable share of audit costs required by the OAG in accordance with applicable federal and state cost principles governing allowability and allocation.

(d)

A grantee, regardless of level of funding, is subject to random, periodic on-site reviews and audits by the OAG. These reviews are designed to complement, not duplicate, any single audit performed.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001160

Elizabeth Robinson

Assistant Attorney General

Office of the Attorney General

Earliest possible date of adoption: March 26, 2000

For further information, please call: Andrea Younger at (512) 463-2110

Chapter 355. MEDICAID REIMBURSEMENT RATES

The Texas Health and Human Services Commission (HSSC) proposes the repeal of §355.307; proposes an amendment to §355.306, concerning cost finding methodology; and proposes new §§355.307 and 355.308, concerning reimbursement setting methodology, and enhanced direct care staff rate, in its Medicaid Reimbursement Rates chapter. The purpose of the proposal is to implement the Texas Department of Human Services (DHS) appropriations rider 38 regarding nursing facilities passed by the 76th legislature. The proposal establishes procedures for providers to obtain additional funds for increased staffing for registered nurses (RNs) and licensed vocational nurses (LVNs) in nursing facilities. Providers receiving the additional funds must demonstrate compliance with enhanced staffing requirements. Providers who choose not to receive additional funds will have their direct care staff rate increase each year limited to routine inflation. All providers must spend 85% of the revenues received for direct care staff compensation for RNs, LVNs, medication aides, and certified nurse aides or funds intended for those purposes are recouped by DHS. The proposal modifies the cost areas to separate the new direct care staff cost center from the other resident care cost center and separates the dietary cost center from the general and administrative cost center.

Don Green, chief financial officer, has determined that for the first five-year period the sections are in effect there will be fiscal implications for state government as a result of enforcing or administering the sections. The effect on state government for the first five-year period the sections will be in effect is an estimated additional cost of $5,359,654 in fiscal year (FY) 2000; $14,893,604 in FY 2001; $17,639,025 in FY 2002; $16,265,500 in FY 2003; and $16,317,470 in FY 2004. There will be no fiscal implications for local government as a result of enforcing or administering the sections.

Commissioner Don Gilbert has determined that for each year of the first five years the sections are in effect the public benefit anticipated as a result of enforcing the sections will be a mechanism for increasing RN and LVN staffing in nursing facilities. There will be no adverse economic effect on small or micro businesses. No changes in practice are required of any business, large or small. The proposed rules will provide some additional funding for providers who choose to increase the RN and LVN staffing in their facility above minimum requirements.

A public hearing on this proposal will be held on March 9, 2000, at 1:30 p.m. in the DHS public hearing room, room 125E, at 701 West 51st Street, Austin, Texas.

Questions about the content of this proposal may be directed to Pam McDonald at (512) 438-4086 in DHS's Rate Analysis Department. Written comments on the proposal may be submitted to Supervisor, Rules and Handbooks Unit-154, Texas Department of Human Services E-205, P.O. Box 149030, Austin, Texas 78714-9030, within 30 days of publication in the Texas Register .

Under §2007.003(b) of the Texas Government Code, the department has determined that Chapter 2007 of the Government Code does not apply to these rules. Accordingly, the department is not required to complete a takings impact assessment regarding these rules.

Subchapter C. REIMBURSEMENT METHODOLOGY FOR NURSING FACILITIES

1 TAC §§355.306, 355.307, 355.308

The amendment and new sections are proposed under the Government Code, §531.033, which authorizes the commissioner of the Health and Human Services Commission to adopt rules necessary to carry out the commission's duties, and §531.021(b), which establishes the commission as the agency responsible for adopting reasonable rules governing the determination of fees, charges, and rates for medical assistance payments under Chapter 32, Human Resources Code.

The amendment and new sections implement the Government Code, §§531.033 and 531.021(b).

§355.306.Cost Finding Methodology.

(a)

(No change.)

[ (b)

Cost determination by cost centers. DHS combines adjusted expenses from the rate base into two cost centers.]

[ (1)

Recipient care cost center. The recipient care cost center includes all direct recipient care expenses; nursing care; and consultant, social service, activity, training, laundry, and housekeeping expenses.]

[ (2)

All-other cost center. This composite cost center combines:]

[ (A)

dietary costs, consisting of food, food service, and dietary consultant expenses;]

[ (B)

facility costs, consisting of expenses to operate and maintain buildings, equipment, and capital necessary to provide recipient care; and]

[ (C)

administration costs, consisting of administrative salaries, supplies, and interest on working capital loans.]

(b)

[ (c) ] Reimbursement determinations and allowable costs. Providers are responsible for reporting only allowable costs on the cost report, except where cost report instructions indicate that other costs are to be reported in specific lines or sections. Only allowable cost information is used to determine recommended reimbursement. DHS excludes from reimbursement determinations any unallowable expenses included in the cost report and makes the appropriate adjustments to expenses and other information reported by providers.

(c)

[ (d) ] General information. In addition to the requirements of this section, cost reports pertaining to provider's fiscal years ending in calendar year 1995 and subsequent years will be governed by the information in §355.101 of this title (relating to Introduction), §355.106 of this title (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports), §355.107 of this title (relating to Notification of Exclusions and Adjustments), §355.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs), and §355.110 of this title (relating to Informal Reviews and Formal Appeals). Cost reports pertaining to providers' fiscal years ending in calendar year 1997 and subsequent years will be governed by the information in §355.104 of this title (relating to Revenues).

§355.307.Reimbursement Setting Methodology.

(a)

Case mix classes. The Texas Department of Human Services (DHS) reimbursement rates for nursing facilities (NFs) vary according to the assessed characteristics of recipient. Rates are determined for 11 case-mix classes of service, plus a 12th, temporary classification assigned by default when assessment data are incomplete or in error.

(b)

Reimbursement determination. DHS applies the general principles of cost determination as specified in §355.101 of this title (relating to Introduction).

(1)

Rate Components. Under the case mix methodology, reimbursements are comprised of five cost-related components: the direct care staff component, the other recipient care component; the dietary component, the general/administration component; and the fixed capital asset component. The direct care staff component is calculated as specified in §355.308 of this title (relating to Enhanced Direct Care Staff Rate).

(A)

The dietary rate component is constant across all case mix classes.

(i)

For rates effective May 1, 2000, using the inflation factors used in determination of the nursing facility rates in effect January 1, 2000, project the costs in the 1998 Texas Nursing Facility Cost Report data base to the rate period beginning January 1, 2000, and ending August 31, 2000. Using these projected costs, determine the median per diem dietary cost (weighted by Medicaid days of service in the data base) in the array of allowable per diem costs for all contracted nursing facilities included in the January 1, 2000, data base, multiplied by 1.07.

(ii)

For rates effective September 1, 2000, multiply the dietary per diem rate from clause (i) of this subparagraph by 1.016.

(iii)

For rates effective September 1, 2001, and thereafter, the dietary component is calculated at the median cost (weighted by Medicaid days of service in the rate base) in the array of projected allowable per diem costs for all contracted nursing facilities included in the rate base, multiplied by 1.07.

(B)

The general/administration rate component is constant across all case mix classes.

(i)

For rates effective May 1, 2000, the general/administration rate component is equal to the difference between the general, administration, and dietary rate component in effect January 1, 2000, and the dietary rate component as calculated in paragraph (1)(A)(i) of this subsection.

(ii)

For rates effective September 1, 2000, multiply the general/administration per diem rate from clause (i) of this subparagraph by 1.016.

(iii)

For rates effective September 1, 2001 and thereafter, the general/administration component is calculated at the median cost (weighted by Medicaid days of service in the rate base) in the array of projected allowable per diem costs for all contracted nursing facilities included in the rate base, multiplied by 1.07.

(C)

The fixed capital asset component is constant across all case mix classes.

(i)

For rates effective May 1, 2000, the fixed capital asset component is equal to the fixed capital asset component in effect January 1, 2000.

(ii)

For rates effective September 1, 2000, the fixed capital asset component is equal to the fixed capital asset component from clause (i) of this subparagraph multiplied by 1.016.

(iii)

For rates effective September 1, 2001 and thereafter, the fixed capital asset component is calculated as follows:

(I)

Determine the 80th percentile in the array of allowable appraised property values per licensed bed, including land and improvements. Appraised values for this purpose are determined as follows:

(-a-)

For proprietary facilities, tax exempt facilities provided an appraisal from their local property taxing authority, and tax exempt facilities not provided an appraisal from their local property taxing authority because of an "exempt" status whose independent appraisal is in the first year of its five-year interval as described in §355.402(f)(2)(B)(ii) of this title (relating to Cost Report Requirements: 1997 and Subsequent Cost Reports), allowable appraised values are determined as described in §355.402(f) of this title (relating to Cost Report Requirements: 1997 and Subsequent Cost Reports).

(-b-)

For tax exempt facilities not provided an appraisal from their local property taxing authority because of an "exempt" status whose independent appraisal is not in the first year of its five-year interval as described in §355.402(f)(2)(B)(ii) of this title (relating to Cost Report Requirements: 1997 and Subsequent Cost Reports), allowable appraised values are determined by indexing the facility's allowable appraised value as determined in §355.402(f) of this title (relating to Cost Report Requirements: 1997 and Subsequent Cost Reports) to the median increase in appraised values among contracted facilities in the state as a whole from the reporting period coinciding with the first year of the facility's five-year interval to the reporting period upon which reimbursements are to be based.

(-c-)

Those facilities that do not report an allowable appraised value as described in §355.402(f) of this title (relating to Cost Report Requirements: 1997 and Subsequent Cost Reports) are not included in the array for purposes of calculating the use fee.

(II)

Project the 80th percentile of appraised property values per bed by one-half the forecasted increase in the personal consumption expenditures (PCE) chain-type price index from the cost reporting year to the rate year.

(III)

Calculate an annual use fee per bed as the projected 80th percentile of appraised property values per bed times an annual use rate of 14%.

(IV)

Calculate a per diem use fee per bed by dividing the annual use fee per bed by annual days of service per bed at the higher of 85% occupancy, or the statewide average occupancy rate during the cost reporting period.

(V)

The use fee is limited to the lesser of the fee as calculated in subclauses (I)-(IV) of this clause, or the fee as calculated by inflating the fee from the previous rate period by the forecasted rate of change in the PCE chain-type price index.

(2)

Case-mix classification system. All Medicaid recipients are classified according to the Texas Index for Level of Effort (TILE) classification system described in 40 TAC §19.1812 (relating to Case Mix Classification System). The TILE classification system includes four clinical categories, which are further subdivided on the basis of an activity of daily living (ADL) scale, resulting in a total of 11 TILE case-mix groups. A 12th group is used by default when a recipient's case-mix group membership is indeterminate because of assessment errors or omissions. Each of the 12 case-mix groups, including the default group, is assigned a case-mix index of effort. This index indicates the relative amount of staff time required on average to deliver care to recipients in that group. The case-mix index for each of the 11 TILE groups is determined through statistical and clinical analyses of recipient resource utilization data previously collected in Texas NFs. The lowest index for the 11 TILE groups is used as the case-mix index for the default group.

(3)

Per diem rate methodology. Staff determine per diem rate recommendations for each of the 11 TILE groups and for the default group according to the following procedures:

(A)

Determine the statewide average case mix index for all Medicaid recipients, except those in the default group. Weight the indexes from paragraph (2) of this subsection, which are based on a sample of nursing facilities, by the estimated statewide recipient days of service by case mix group during the cost reporting period covered by the rate base and determine the weighted average. The statewide average index is based on the most recent and complete data available indicating recipient days of service by case mix group that correspond to the period covered by the cost reports included in the rate base.

(B)

Determine the standardized statewide case mix index for each of the 11 TILE groups by dividing each of the indexes described under paragraph (2) of this subsection by the statewide average case mix index described under subparagraph (A) of this paragraph.

(C)

The other recipient care rate component varies according to case mix class of service.

(i)

For rates effective May 1, 2000, using the inflation factors used in determination of the nursing facility rates in effect January 1, 2000, project the costs in the 1998 Texas Nursing Facility Cost Report data base to the rate period beginning January 1, 2000, and ending August 31, 2000. Using these projected costs, determine the sum of other recipient care costs in all nursing facilities included in the 1998 data base. Then divide the total by the sum of recipient days of service in all facilities in the 1998 data base. Multiply the resulting weighted, average per diem cost of other recipient care by 1.07. The result is the average other recipient care rate component. To calculate the other recipient care per diem rate component for each of the 11 TILE case mix groups and for the default group, multiply each of the standardized statewide case mix indexes used in determination of the nursing facility rates in effect January 1, 2000, by the average other recipient care rate component.

(ii)

For rates effective September 1, 2000, multiply the average other recipient care per diem rate from clause (i) of this subparagraph by 1.016. To calculate the other recipient care per diem rate component for each of the 11 TILE case mix groups and for the default group, multiply each of the standardized statewide case mix indexes used in determination of the nursing facility rates in effect January 1, 2000, by the average other recipient care rate component.

(iii)

For rates effective September 1, 2001, and thereafter, the average other recipient care rate component is calculated as follows. Adjust the raw sum of other recipient care costs in all nursing facilities included in the rate base in order to account for disallowed costs and inflation, as specified in §355.306 of this title (relating to Cost Finding Methodology). Then divide the adjusted total by the sum of recipient days of service in all facilities in the current rate base. Multiply the resulting weighted, average per diem cost of other recipient care by 1.07. The result is the average other recipient care rate component. To calculate the other recipient care per diem rate component for each of the 11 TILE case mix groups and for the default group, multiply each of the standardized statewide case mix indexes from subparagraph (B) of this paragraph by the average other recipient care rate component.

(D)

Total case mix per diem rates vary according to case mix class of service and according to participant status in the Enhanced Direct Care Staff Rate described in §355.308 of this title (relating to Enhanced Direct Care Staff Rate).

(i)

For each participating facility, for each of the 11 TILE case mix groups and for the default group, the recommended total per diem rate is the sum of the following five rate components:

(I)

the dietary rate component from paragraph (1)(A) of this subsection;

(II)

the general/administration rate component from paragraph (1)(B) of this subsection;

(III)

the fixed capital asset use fee component from paragraph (1)(C) of this subsection;

(IV)

the case mix group's other recipient care per diem rate component by case mix group from paragraph (3)(C) of this subsection; and

(V)

the case mix group's total direct care staff rate component for that participating facility as determined in §355.308 (relating to Enhanced Direct Care Staff Rate).

(ii)

For nonparticipating facilities, for each of the 11 TILE case mix groups and for the default group, the recommended total per diem rate is the sum of the following five rate components:

(I)

the dietary rate component from paragraph (1)(A) of this subsection;

(II)

the general/administration rate component from paragraph (1)(B) of this subsection;

(III)

the fixed capital asset use fee component from paragraph (1)(C) of this subsection;

(IV)

the case mix group's other recipient care per diem rate component by case mix group from paragraph (3)(C) of this subsection; and

(V)

the case mix group's total direct care staff rate component for non-participants as determined in §355.308 of this title (relating to Enhanced Direct Care Staff Rate).

(E)

Qualifying ventilator-dependent residents may receive a supplement to the per diem rate specified in subparagraph (D) of this paragraph.

(i)

To qualify for supplemental reimbursement, a resident must require artificial ventilation for at least six consecutive hours daily and the use must be prescribed by a licensed physician.

(ii)

A ventilator-dependent resource differential case mix index is calculated, based on time-study research data. This resource differential index reflects the difference between direct nursing services for ventilator-dependent residents and services for residents in the most severe heavy-care TILE group.

(I)

The per diem rate supplement for participants in the Enhanced Direct Care Staff Rate described in §355.308 of this title (relating to Enhanced Direct Care Staff Rate) is calculated by multiplying the resource differential case mix index times the per diem average other recipient care rate component, as described in paragraph (3)(C) of this subsection and by the average direct care staff rate component for participating facilities staffing at the minimum levels required for participation as described in §355.308(l) of this title (relating to Enhanced Direct Care Staff Rate) and summing the products.

(II)

The per diem rate supplement for non-participants in the Enhanced Direct Care Staff Rate described in §355.308 of this title (relating to Enhanced Direct Care Staff Rate) is calculated by multiplying the resource differential case mix index times the per diem average other recipient care rate component, as described in paragraph (3)(C) of this subsection and by the average direct care staff rate component for non-participating facilities as described in §355.308(k) of this title (relating to Enhanced Direct Care Staff Rate) and summing the products.

(iii)

The supplemental reimbursement for residents requiring continuous artificial ventilation is 100% of the per diem ventilator rate supplement.

(iv)

The supplemental reimbursement for residents not requiring continuous artificial ventilation daily but requiring artificial ventilation for at least six consecutive hours daily is 40% of the per diem ventilator rate supplement.

(F)

Qualifying children with tracheostomies requiring daily care may receive a supplement to the per diem rate specified in subparagraph (D) of this paragraph.

(i)

To qualify for supplemental reimbursement, a resident must be less than 22 years of age; require daily cleansing, dressing, and suctioning of a tracheostomy; and be unable to do self care. The daily care of the tracheostomy must be prescribed by a licensed physician.

(ii)

The supplemental reimbursement for children receiving daily tracheostomy care is 60% of the per diem ventilator rate supplement as specified in subparagraph (E) of this paragraph.

(G)

Children with qualifying conditions as specified in subparagraphs (E) and (F) of this paragraph may receive only one of the supplemental reimbursements. Therefore, children with tracheostomies who are also ventilator-dependent are not eligible to receive both supplemental reimbursements.

(4)

Case-mix classification effective periods. The effective periods of case-mix classifications are defined as follows.

(A)

A recipient's case-mix classification and associated per diem rate payment remain in effect until the recipient's next required assessment, unless one of the following events takes place:

(i)

a provider submits an off-cycle assessment as specified in 40 TAC §19.2412(a)(5) (relating to Texas Index for Level of Effort (TILE) Assessments);

(ii)

a DHS nurse reviewer revises the recipient's assessment and TILE classification under the provisions of 40 TAC §19.2412(b) (Texas Index for Level of Effort (TILE) Assessments); or

(iii)

the recipient is discharged from the Medicaid nursing facility vendor payment system for more than 30 days prior to receiving a permanent medical necessity determination.

(B)

The case mix classification and associated per diem payment rate of a recipient in the default group are changed retroactively when the provider furnishes DHS with corrected data that permit classification in one of the 11 TILE case mix groups.

(c)

Experimental reimbursement class. DHS may define experimental reimbursement classes of service to be used in research and demonstration projects on new reimbursement methods. Demonstration or pilot projects based on experimental reimbursement classes may be implemented on a statewide basis or may be limited to a specific region of the state or to a selected group of providers.

(d)

Nurse aide training and competency evaluation costs.

(1)

DHS reimburses nursing facilities for the actual costs of training and testing nurse aides as required under the Omnibus Budget Reconciliation Act of 1987 (OBRA '87). Payments are based on cost reimbursement vouchers that are to be submitted quarterly. Allowable costs are limited to those costs incurred for training provided after October 1, 1990, for:

(A)

actual training course expenses up to a set amount determined by DHS per nurse aide;

(B)

competency evaluation; or

(C)

supplies and materials used in the nurse aide training not already covered by the training course fee.

(2)

Nurse aide salaries while in training are factored into the vendor rate and are not to be included on the reimbursement voucher.

(3)

Training program costs that exceed the DHS cost ceiling must have prior approval from DHS before costs can be reimbursed. A written request to Provider Billing Services must include:

(A)

name and vendor number of facility.

(B)

description of training program for which the facility is seeking reimbursement approval, to include:

(i)

name, telephone number and address of the nurse aide training and competency evaluation program (NATCEP);

(ii)

whether the NATCEP program is facility or non-facility-based; and

(iii)

name of the NATCEP program director.

(C)

an explanation of why the cost for the NATCEP exceeds the reimbursement ceiling. The explanation must include:

(i)

a completed nurse aide unit cost calculation form for a facility-based NATCEP; or

(ii)

a breakdown of the nurse aide unit cost by the instructor fees and training materials for a non-facility-based NATCEP.

(D)

an explanation of why the nursing facility cannot utilize a training program at or below the reimbursement ceiling and what steps the facility has taken to explore more cost efficient training courses. The explanation must include:

(i)

the availability of NATCEPs, such as the location or the frequency of training offered, in the geographic region of the facility;

(ii)

the name and address of each NATCEP that the facility has explored as a provider of nurse aide training; and

(iii)

the cost per nurse aide for each NATCEP identified in clause (i) of this subparagraph, as specified in subparagraph (C)(i) of this paragraph or subparagraph (C)(ii) of this paragraph.

(4)

All prior approval requests as outlined in paragraph (3) of this subsection must be submitted to DHS, Provider Billing Services that:

(A)

may request additional information in order to evaluate a reimbursement request; and

(B)

will make the final decision on a reimbursement request.

(5)

All nurse aide training courses must be approved by DHS before costs associated with them can be reimbursed.

(6)

Nursing facilities are responsible for tracking and documenting nurse aide training costs for each nurse aide trained. All documentation is subject to DHS audits. If substantiating documentation for amounts billed to DHS cannot be verified, DHS will immediately recoup funds paid to the facility.

(7)

Individuals who have successfully completed a nurse aide training and competency evaluation program (NATCEP) may be directly reimbursed for costs incurred in completing a NATCEP. The individual must meet all of the conditions specified in subparagraphs (A)-(E) of this paragraph.

(A)

The individual must not have been employed at the time of completing the NATCEP.

(B)

The individual must have been employed by, or received an offer of employment from, a nursing facility not later than 12 months after successfully completing the NATCEP.

(C)

The individual must have been employed by the facility for no less than six months.

(D)

The nursing facility must not have claimed reimbursement for training expenses for the individual.

(E)

The individual must be listed on the current Nurse Aide Registry.

(8)

Individuals must submit cost reimbursement vouchers to DHS with proof that the individual has been employed by a facility for no less than six months.

(9)

Individuals who leave nursing facility employment before accruing the required six months of employment, as specified in paragraph (7)(C) of this subsection, may receive 50% reimbursement as long as the individual was employed for no less than three months.

(10)

Reimbursement to individuals may not exceed the reimbursement ceiling as detailed in paragraph (1)(A) of this subsection.

(e)

Oxygen costs. Oxygen costs incurred on or after January 1, 1995, will not be reimbursed on cost reimbursement vouchers. Those oxygen costs must be reported as expenses on the cost report.

§355.308.Enhanced Direct Care Staff Rate.

(a)

Direct care staff cost center. This cost center will include compensation for employee and contract labor Registered Nurses (RNs), Licensed Vocational Nurses (LVNs), Medication Aides and Certified Nurse Aides (CNAs) performing nursing-related duties for Medicaid contracted beds.

(1)

Compensation to be included for these employee staff types is the allowable compensation defined in §355.103(b)(1) of this title (relating to Specifications for Allowable and Unallowable Costs) that is reported as either salaries and/or wages (including payroll taxes and workers' compensation) or employee benefits. Benefits required by §355.103(b)(1)(A)(iii) of this title (relating to Specifications for Allowable and Unallowable Costs) to be reported as costs applicable to specific cost report line items are not to be included in this cost center.

(2)

Direct care staff who also have administrative duties not related to nursing must properly direct charge their compensation to each type of function performed based upon daily time sheets maintained throughout the entire reporting period.

(3)

CNAs must meet the qualifications enumerated under 40 TAC §94.3 (relating to Facility Requirements) to be included in this cost center.

(4)

Contract labor refers to personnel for whom the contracted provider is not responsible for the payment of payroll taxes (such as FICA, Medicare, and federal and state unemployment insurance) and who perform tasks routinely performed by employees. Allowable contract labor costs are defined in §355.103(b)(2)(C) of this title (relating to Specifications for Allowable and Unallowable Costs).

(b)

Rate year. The standard rate year begins on the first day of September and ends on the last day of August of the following year. An implementation rate period will begin on May 1, 2000, and end on August 31, 2000. Except where otherwise noted, all the rules in this section apply to the implementation rate period as well as the standard rate year.

(c)

Open enrollment. Implementation open enrollment begins on April 1, 2000, and ends on April 14, 2000. Standard open enrollment begins on the first day of June and ends on the last day of that same June preceding the standard rate year for which payments are being determined.

(d)

Enrollment contract amendment. All contracted facilities must submit an enrollment contract amendment during the open enrollment period. On the enrollment contract amendment the provider must specify for each facility its desire to participate or its desire not to participate. The provider also must submit with the contract amendment all required documentation to the Texas Department of Human Services (DHS), in a manner specified by DHS. Required documentation includes the reporting of total days of service provided to residents in Medicaid contracted beds during the reporting period including: total days of service by TILE group for Medicaid recipients, total days of service by RUG III group for Medicare Part A recipients, and total days of service for all other residents as well as other items required by DHS. Facilities failing to submit an acceptable enrollment contract amendment by the end of the open enrollment period will be placed on vendor hold until such time as an acceptable enrollment contract amendment is received and processed by DHS.

(e)

New facilities. For purposes of this section, for each rate year a new facility is defined as a facility delivering its first day of service to a DHS recipient after the first day of the open enrollment reporting period, as defined in subsection (c) of this section, for that rate year. New facilities that underwent an ownership change are not considered new facilities. New facilities must complete the enrollment contract amendment specified in subsection (d) of this section within 30 days of notification by DHS. Facilities failing to submit an acceptable enrollment contract amendment within 30 days of notification by DHS will be placed on vendor hold until such time as an acceptable enrollment contract amendment is received and processed by DHS. Based on the enrollment contract amendment information received, the facility's direct care staff rate will be adjusted effective on the sixty-first day of the contract with DHS. New facilities will receive the direct care staff rate associated with minimum staffing requirements as determined in subsection (j)(1) of this section for the first 60 days of their contract with DHS.

(f)

Staffing and Compensation Report submittal requirements. Staffing and Compensation Reports must be submitted as follows:

(1)

All contracted facilities. All contracted facilities will provide DHS, in a method specified by DHS, an Annual Staffing and Compensation Report reflecting the activities of the facility while delivering contracted services from the first day of the rate year through the last day of the rate year. This report will be used as the basis for determining compliance with the staffing requirements and recoupment amounts as described in subsection (n) of this section for the last quarter of the rate year, and as the basis for determining the spending requirements and recoupment amounts as described in subsection (o) of this section. Facilities failing to submit an acceptable Annual Staffing and Compensation Report within 30 days of the end of the rate year will be placed on vendor hold until such time as an acceptable report is received and processed by DHS. For the implementation rate period, a Staffing and Compensation Report is required reflecting the activities of the facility while delivering contracted services from June 1, 2000, through August 31, 2000.

(A)

When a facility changes ownership, the prior owner must submit a Staffing and Compensation Report covering the period from the beginning of the rate year to the date recognized by DHS as the ownership-change effective date. This report will be used as the basis for determining any recoupment amounts as described in subsections (n) and (o) of this section.

(B)

Facilities whose contracts are terminated either voluntarily or involuntarily must submit a Staffing and Compensation Report covering the period from the beginning of the rate year to the date recognized by DHS as the contract termination date. This report will be used as the basis for determining any recoupment amounts as described in subsections (n) and (o) of this section.

(C)

Participating facilities who voluntarily withdraw from participation as per subsection (r) of this section must submit a Staffing and Compensation Report covering the period from the beginning of the rate year to the date of withdrawal as determined by DHS. This report will be used as the basis for determining any recoupment amounts as described in subsections (n) and (o) of this section.

(2)

Participating facilities. Within 30 days of the end of each of the first three quarters of the rate year, all participating facilities will provide DHS, in a method specified by DHS, with a Quarterly Staffing and Compensation Report reflecting the activities of the facility while delivering contracted services from the first day of the quarter through the last day of the quarter. These reports will be used as the basis for determining compliance with the staffing requirements and recoupment amounts as described in subsection (n) of this section for the first three quarters of the rate year. Facilities failing to submit an acceptable Quarterly Staffing and Compensation Report within 30 days of the end of each of the first three quarters of the rate year will be placed on vendor hold until such time as an acceptable report is received and processed by DHS.

(3)

Other reports. DHS may require other Staffing and Compensation Reports from all facilities as needed.

(g)

Staffing and Compensation Report contents. Each Staffing and Compensation Report will include the following information:

(1)

Total hours worked by the staff types identified in subsection (a) of this section during the reporting period. CNAs must meet the qualifications enumerated under 40 TAC §94.3 (relating to Facility Requirements) for their hours to be included.

(2)

Total accrued compensation identified in subsection (a)(1) of this section for employees and subsection (a)(4) of this section for contract labor from the direct care staff cost center by the staff types identified in subsection (a) of this section during the reporting period.

(3)

Total days of service provided during the reporting period including: total days of service by TILE group for Medicaid recipients, total days of service by RUG III group for Medicare Part A recipients and total days of service for all other residents.

(4)

Other information determined necessary by DHS.

(h)

Completion of Staffing and Compensation Reports. All Staffing and Compensation Reports must be completed in accordance with the provisions of §§355.102-355.105 of this title (relating to General Principles of Allowable and Unallowable Costs, Specifications for Allowable and Unallowable Costs, Revenues, and General Reporting and Documentation Requirements, Methods, and Procedures) and may be reviewed or audited in accordance with §355.106 of this title (relating to Basic Objectives and Criteria for Audit and Desk Review of Cost Reports).

(i)

Enrollment. Facilities choosing to participate in the enhanced direct care staff rate must submit to DHS a signed contract amendment as described in subsection (d) of this section, before the end of the open enrollment period. Participation will remain in effect, subject to availability of funds, until the facility notifies DHS in accordance with subsection (r) of this section that it no longer wishes to participate. Facilities voluntarily withdrawing from participation will have their participation end effective on the date of the withdrawal as determined by DHS.

(j)

Determination of staffing requirements for participants. Facilities choosing to participate in the enhanced direct care staff rate agree to maintain certain staffing levels for registered nurses (RNs) and licensed vocational nurses (LVNs).

(1)

Minimum staffing levels. DHS determines, for each participating facility, minimum RN and LVN staffing levels as follows.

(A)

Determine statewide average RN minutes and LVN minutes per resident day of service associated with each Texas Index for Level of Effort (TILE) case mix group based on time study data, cost report information and other appropriate data sources.

(B)

Based on utilization data provided in the enrollment contract amendment from subsection (d) of this section, determine for each facility the total days of service by TILE group for Medicaid residents, total days of service for Medicare Part A residents and total days of service for all other residents.

(C)

For RNs and LVNs separately, multiply the statewide average minutes for each TILE group from subparagraph (A) of this paragraph by the facility's Medicaid days of service in each TILE group from subparagraph (B) of this paragraph and sum the products.

(D)

For RNs and LVNs separately, multiply the estimated statewide average minutes for Medicare residents by the facility's Medicare Part A days of service.

(E)

For RNs and LVNs separately, divide the sum from subparagraph (C) of this paragraph by the facility's total Medicaid days of service and multiply the result by the facility's other resident days of service.

(F)

For RNs and LVNs separately, sum the results of subparagraphs (C), (D) and (E) of this paragraph, divide the sum by the facility's total days of service and multiply by 0.95. The results of these calculations are the minimum number of RN and LVN minutes per resident day a participating facility must provide.

(2)

Enhanced staffing levels. Participating facilities desiring to staff above the minimum requirements from paragraph (1) of this subsection may request staffing enhancements from an array of enhanced staffing options and associated add-on payments during open enrollment.

(3)

Granting of staffing enhancements. DHS divides all requested enhancements into two groups: pre-existing enhancements that facilities request to carry over from the prior year and newly- requested enhancements. Newly-requested enhancements may be enhancements requested by facilities that were nonparticipants in the prior year or by facilities that were participants in the prior year desiring to be granted additional enhancements. For the granting of enhancements to be effective September 1, 2001 and thereafter, for an enhancement to qualify as a pre-existing enhancement, a facility must have actually met the enhancement's staffing requirements during at least two quarters of the prior rate year. Using the process described herein, DHS first determines the distribution of carry-over enhancements. If funds are available after the distribution of carry- over enhancements, DHS then determines the distribution of newly- requested enhancements.

(A)

DHS determines projected units of service for facilities requesting each enhancement option and multiplies this number by the rate add-on associated with that enhancement as determined in subsection (l) of this section.

(B)

DHS compares the sum of the products from subparagraph (A) of this paragraph to available funds.

(i)

If the product is less than or equal to available funds, all requested enhancements are granted.

(ii)

If the product is greater than available funds, enhancements are granted in a proportional manner. Based upon an examination of existing staffing levels and staffing needs, DHS may grant certain enhancement options priority for proportional distribution.

(4)

Notification of granting of enhancements. Participating facilities are notified, in a manner determined by DHS, as to the disposition of their request for staffing enhancements.

(k)

Determination of direct care staff rates for nonparticipating facilities.

(1)

Determine the sum of recipient care costs from the direct care staff cost center in subsection (a) of this section in all nursing facilities included in the Texas Nursing Facility Cost Report database used to determine the nursing facility rates in effect on January 1, 2000, (hereinafter referred to as the initial database).

(2)

Adjust the sum from paragraph (1) of this subsection in order to account for inflation utilizing the inflation factors used in the determination of the nursing facility rates in effect January 1, 2000.

(3)

Divide the result from paragraph (2) of this subsection by the sum of recipient days of service in all facilities in the initial database and multiply the result by 1.07. The result is the average direct care staff rate component for ineligible facilities.

(4)

To calculate the direct care staff per diem rate component for nonparticipating facilities for each of the 11 TILE case mix groups and for the default group, multiply each of the standardized statewide case mix indices associated with the initial database by the average direct care staff rate component from paragraph (3) of this subsection.

(5)

The direct care staff per diem rates will remain constant except as follows. For rates effective September 1, 2000, the rate derived in paragraph (3) of this subsection will be multiplied by 1.016. Effective September 1, 2001, and thereafter, the direct care staff per diem rate will remain constant except for adjustments necessitated by increases in the personal consumption expenditures (PCE) chain-type price index.

(l)

Determination of direct care staff rates for participating facilities. Direct care staff rates for participating facilities as defined in subsection (i) will be determined as follows:

(1)

Determine the direct care staff rate associated with maintaining RN and LVN staffing at the minimum levels required for participation.

(A)

Determine the sum of recipient care costs from the direct care staff cost center in subsection (a) in all nursing facilities as included in the initial database from subsection (k)(1) of this section.

(B)

Adjust the sum from subparagraph (A) of this paragraph as specified in §355.108 of this title (relating to Determination of Inflation Indices) to inflate the costs to the prospective rate year.

(C)

Divide the result from subparagraph (B) of this paragraph by the sum of recipient days of service in all facilities in the initial database from subsection (k)(1) of this section and multiply the result by 1.07. The result is the average direct care staff rate associated with maintaining RN and LVN staffing at the minimum levels required for participation.

(D)

Case mix adjustment of direct care staff per diem rate component. To calculate the direct care staff per diem rate component associated with maintaining RN and LVN staffing at the minimum levels required for participation for each of the 11 TILE case mix groups and for the default group, multiply each of the standardized statewide case mix indices associated with the initial database from subsection (k)(1) of this section by the average direct care staff rate component from subparagraph (C) of this paragraph.

(E)

The initial database from subsection (k)(1) of this section used in determining the direct care staff rates will not change, except for adjustments for inflation from subparagraph (B) of this paragraph. DHS may also recommend adjustments to the rates in accordance with §355.109 of this title (relating to Adjusting Reimbursement When New Legislation, Regulations, or Economic Factors Affect Costs).

(2)

Determine the direct care staff rate add-on associated with each enhanced staffing level. Taking into consideration the most recently available, reliable data relating to RN and LVN compensation levels, DHS will determine a per diem add-on payment for each enhanced staffing level.

(3)

Determine each participating facility's total direct care staff rate. Each participating facility's direct care staff rate will be equal to the direct care staff rate associated with maintaining RN and LVN staffing at the minimum levels required for participation from paragraph (1) of this subsection plus any add-on payments associated with enhanced staffing levels selected by and awarded to the facility during open enrollment.

(m)

Staffing requirements for participating facilities. Each participating facility will be required to maintain RN and LVN staffing levels equal to those determined in subsection (j) of this section.

(n)

Staffing accountability. Participating facilities will be responsible for maintaining the staffing levels determined in subsection (j) of this section. Upon receipt of the quarterly staffing information described in subsections (f)(1) and (2) of this section, DHS will determine the RN and LVN staffing levels maintained by each facility during the quarterly reporting period.

(1)

Participating facilities that fail to maintain staffing at their required RN and/or LVN staffing level(s) will have their direct care staff rates and staffing requirements adjusted to a level consistent with the highest RN and LVN staffing level(s), as defined in subsection (j) of this section, that they actually attained.

(2)

Determination of staffing levels will be made on a quarterly basis with adjustments to direct care staff rates and staffing requirements made upon determination by DHS that a facility is failing to meet its staffing requirement. Facilities whose direct care staff payments and staffing requirements are adjusted due to failure to meet a staffing requirement will remain at the lower level until their quarterly staffing report supports returning them to their prior level. Facilities will not be returned to their prior level until the beginning of the quarter following determination by DHS that their quarterly staffing report supports returning them to their prior level.

(3)

Participating facilities that fail to meet the minimum direct care staff requirements for participation will be removed from participation. These facilities may choose to continue submitting quarterly staffing reports and be reinstated when their quarterly staffing reports indicate that they are meeting the minimum staffing level required for participation. Facilities will not be reinstated until the beginning of the quarter following determination by DHS that their quarterly staffing report supports reinstating them.

(4)

DHS will recoup all direct care staff revenues associated with unmet staffing goals from participating facilities that fail to meet their staffing requirements during any particular quarter.

(5)

Participating facilities which maintain staffing above their required RN and/or LVN staffing level(s) will have their direct care staff rates and staffing requirements adjusted upward to a level consistent with the highest RN and LVN staffing level(s), as defined in subsection (j) of this section, that they actually maintained. These adjustments will be made prospectively at the beginning of the quarter following determination by DHS that a facility is exceeding its staffing requirement.

(6)

During the first quarter of any rate year, staffing requirements as determined in subsection (j) of this section override any prospective adjustments made to staffing requirements under paragraphs (1)-(5) of this subsection.

(o)

Spending requirements for all facilities. All facilities, participants and non-participants alike, are subject to a direct care staff spending requirement with recoupment calculated as follows:

(1)

At the end of the facility's rate year (with the implementation rate period being treated as a rate year), a spending floor will be calculated by multiplying accrued Medicaid direct care staff revenues (net of revenues recouped by DHS due to the failure of the facility to meet a staffing requirement as per subsection (n)(4) of this section) by 0.85.

(2)

Accrued allowable Medicaid direct care staff expenses for the rate year will be compared to the spending floor from paragraph (1) of this subsection. DHS will recoup the difference between the spending floor and accrued allowable Medicaid direct care staff expenses from facilities whose Medicaid direct care staff spending is less than their spending floor.

(p)

Mitigation of recoupment. Recoupment of funds described in subsection (o) of this section may be mitigated as follows.

(1)

Calculate dietary cost deficit. At the end of the facility's rate year (with the implementation rate period being treated as a rate year), accrued Medicaid dietary per diem revenues will be compared to accrued, allowable Medicaid dietary per diem costs. If costs are greater than revenues, the dietary per diem cost deficit will be equal to the difference between accrued, allowable Medicaid dietary per diem costs and accrued Medicaid dietary per diem revenues. If costs are less than revenues, the dietary cost deficit will be equal to zero.

(2)

Calculate dietary revenue surplus. At the end of the facility's rate year (with the implementation rate period being treated as a rate year), accrued Medicaid dietary per diem revenues will be compared to accrued, allowable Medicaid dietary per diem costs. If revenues are greater than costs, the dietary per diem revenue surplus will be equal to the difference between accrued Medicaid dietary per diem revenues and accrued, allowable Medicaid dietary per diem costs. If revenues are less than costs, the dietary revenue surplus will be equal to zero.

(3)

Calculate fixed capital cost deficit. At the end of the facility's rate year (with the implementation rate period being treated as a separate rate year), accrued Medicaid fixed capital per diem revenues will be compared to accrued, allowable Medicaid fixed capital per diem costs as defined in §355.306(a)(2)(B) of this title (relating to Cost Finding Methodology). If costs are greater than revenues, the fixed capital cost per diem deficit will be equal to the difference between accrued, allowable Medicaid fixed capital per diem costs and accrued Medicaid fixed capital per diem revenues. If costs are less than revenues, the fixed capital cost deficit will be equal to zero. For purposes of this paragraph, fixed capital per diem costs of facilities with occupancy rates below 85% are adjusted to the cost per diem the facility would have accrued had it maintained an 85% occupancy rate throughout the rate year.

(4)

Calculate fixed capital revenue surplus. At the end of the facility's rate year (with the implementation rate period being treated as a separate rate year), accrued Medicaid fixed capital per diem revenues will be compared to accrued, allowable Medicaid fixed capital per diem costs as defined in §355.306(a)(2)(B) of this title (relating to Cost Finding Methodology). If revenues are greater than costs, the fixed capital revenue per diem surplus will be equal to the difference between accrued Medicaid fixed capital per diem revenues and accrued, allowable Medicaid fixed capital per diem costs. If revenues are less than costs, the fixed capital revenue surplus will be equal to zero. For purposes of this paragraph, fixed capital per diem costs of facilities with occupancy rates below 85% are adjusted to the cost per diem the facility would have accrued had it maintained an 85% occupancy rate throughout the rate year.

(5)

Facilities with a dietary per diem cost deficit will have their dietary per diem cost deficit reduced by their fixed capital per diem revenue surplus, if any. Any remaining dietary per diem cost deficit will be capped at $2.00 per diem.

(6)

Facilities with a fixed capital cost per diem deficit will have their fixed capital cost per diem deficit reduced by their dietary revenue per diem surplus, if any. Any remaining fixed capital per diem cost deficit will be capped at $2.00 per diem.

(7)

Each facility's recoupment, as calculated in subsection (o) of this section, will be reduced by the sum of that facility's dietary per diem cost deficit as calculated in paragraph (5) of this subsection and its fixed capital per diem cost deficit as calculated in paragraph (6) of this subsection.

(q)

Adjusting staffing requirements. Facilities that determine that they will not be able to meet their staffing requirements from subsection (m) of this section may request a reduction in their staffing requirements and associated rate add-on. These requests will be effective on the first day of the quarter following approval of the request. This option is not available during the implementation rate period.

(r)

Voluntary withdrawal. Facilities wishing to withdraw from participation must notify DHS in writing by certified mail. Facilities voluntarily withdrawing must remain nonparticipants for the remainder of the rate year.

(s)

Notification of recoupment based on Annual Staffing and Compensation Report. Facilities will be notified, in a manner specified by DHS, within 90 days of the due date of their Annual Staffing and Compensation Report or within 90 days of the date the report is submitted, whichever is later, of the amount to be repaid to DHS. If a subsequent review or audit results in adjustments to the Annual Staffing and Compensation Report as described in subsection (f)(1) of this section that changes the amount to be repaid to DHS, the facility will be notified in writing of the adjustments and the adjusted amount to be repaid to DHS. DHS will recoup any amount owed from a facility's vendor payment(s) following the date of the notification letter.

(t)

Notification of recoupment from Quarterly Staffing and Compensation Report. Facilities will be notified in a manner specified by DHS within 60 days of the due date of their Quarterly Staffing and Compensation Report or within 60 days of the date the report is submitted, whichever is later, of the amount to be repaid to DHS. If a subsequent review or audit results in adjustments to the Quarterly Staffing and Compensation Report as described in subsection (f)(2) of this section that changes the amount to be repaid to DHS, the facility will be notified in writing of the adjustments and the adjusted amount to be repaid to DHS. DHS will recoup any amount owed from a facility's vendor payment(s) following the date of the notification letter.

(u)

Vendor hold. Facilities required to submit a Staffing and Compensation Report due to any of the events described in subsection (f) of this section will have a hold placed on their vendor payments from the date they are notified by DHS until an acceptable Staffing and Compensation Report is received by DHS and funds identified for recoupment from subsections (n) or (o) of this section are repaid to DHS. Facilities required to submit a Staffing and Compensation Report due to a change of ownership or contract termination as described in subsection (f)(1)(A)-(B) of this section will have funds held as per 40 TAC §19.2308(2) (relating to Change of Ownership) until an acceptable Staffing and Compensation Report is received by DHS and funds identified for recoupment from subsections (n) or (o) of this section are repaid to DHS. DHS will recoup any amount owed from the facility's vendor payments that are being held. In cases where funds identified for recoupment cannot be repaid from the held vendor payments, the responsible entity from subsection (y) of this section will be jointly and severally liable for any additional payment due to DHS. Failure to repay the amount due or submit an acceptable payment plan within 60 days of notification will result in placement of a vendor hold on all DHS contracts controlled by the responsible entity and will bar the responsible entity from enacting any new contracts with DHS until repayment is made in full.

(v)

Failure to document spending. Undocumented direct care staff and contract labor compensation costs will be disallowed and will not be used in the determination of direct care staff costs per unit of service.

(w)

All other rate components. All other rate components will be calculated as specified in §355.307 of this title (relating to Reimbursement Setting Methodology) and will be uniform for all providers.

(x)

Appeals. Subject matter of informal reviews and formal appeals is limited as per §355.110(a)(3)(B) of this title (relating to Informal Reviews and Formal Appeals).

(y)

Responsible entities. The contracted provider, owner, or legal entity that received the revenue to be recouped upon is responsible for the repayment of any recoupment amount.

(z)

Change of ownership. Participation in the enhanced direct care staff rate confers to the new owner as defined in 40 TAC §19.2308 (relating to Change of Ownership) when there is a change of ownership. The new owner is responsible for the reporting requirements in subsection (f) of this section for any reporting period days occurring after the change.

(aa)

Disclaimer. Nothing in these rules should be construed as preventing facilities from adding direct care staff in addition to those funded by the enhanced direct care staff rate.

(bb)

Effective date. All rules enumerated in this section are effective as of May 1, 2000.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001149

Marina Henderson

Executive Deputy Commissioner

Texas Health and Human Services Commission

Earliest possible date of adoption: March 26, 2000

For further information, please call: (512) 438-3108

1 TAC §355.307

(Editor's note: The text of the following section proposed for repeal will not be published. The section may be examined in the offices of the Texas Health and Human Services Commission or in the Texas Register office, Room 245, James Earl Rudder Building, 1019 Brazos Street, Austin.)

The repeal is proposed under the Government Code, §531.033, which authorizes the commissioner of the Health and Human Services Commission to adopt rules necessary to carry out the commission's duties, and §531.021(b), which establishes the commission as the agency responsible for adopting reasonable rules governing the determination of fees, charges, and rates for medical assistance payments under Chapter 32, Human Resources Code.

The repeal implements the Government Code, §§531.033 and 531.021(b).

§355.307.Reimbursement Setting Methodology.

This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's legal authority to adopt.

Filed with the Office of the Secretary of State, on February 14, 2000.

TRD-200001148

Marina Henderson

Executive Deputy Commissioner

Texas Health and Human Services Commission

Earliest possible date of adoption: March 26, 2000

For further information, please call: (512) 438-3108