(a) Subrecipients that enter into a contract with the
Department to administer programs are required to follow all Legal
Requirements governing these programs.
(b) If a subrecipient fails to comply with program
and contract requirements, rules, or regulations and in the event
monitoring or other reliable sources reveal material deficiencies
in performance, or if the Subrecipient fails to correct any deficiency
within the time allowed by federal or state law, the Department may
apply one or more of the sanctions described in paragraphs (1) - (5)
of this subsection:
  (1) Deny the subrecipient's requests for advances and
place it on a Modified Cost Reimbursement method of payment until
proof of compliance with the rules and regulations are received by
the Department:
    (A) Subrecipients placed on a Modified Cost Reimbursement
method of payment must comply with the reporting requirements outlined
in §5.211 of this title (relating to Subrecipient Reporting Requirements); §5.406
of this title (relating to subrecipient Reporting Requirements); §5.506
of this title (relating to subrecipient Reporting Requirements); §5.1006
of this title (relating to Performance and Expenditure Benchmarks);
and §5.2007 of this title (relating to Reporting), as applicable;
    (B) Subrecipients on a Modified Cost Reimbursement
method must provide all supporting documentation to the Department
no later than seven (7) days after the reporting due date;
    (C) If subrecipient has not submitted documentation
required for cost reimbursement review in accordance with reporting
deadlines, Subrecipient may be required to enter a monthly report
containing zero amounts and submit documentation required for the
review as part of the next's month reporting;
    (D) Subrecipients reporting a monthly report containing
zero amounts throughout the program year shall submit all required
support documentation to the Department for review by the last regular
monthly report (before the final report); and/or
    (E) The Department will review and assess supporting
documentation submitted by subrecipient no later than the seventh
(7th) day of the following month.
  (2) Withhold all payments from the Subrecipient (both
reimbursements and advances) until acceptable confirmation of compliance
with the rules and regulations are received by the Department, reduce
the allocation of funds (with the exception of Community Services
Block Grant ("CSBG")) to Eligible Entities as described in §5.206
of this title (relating to Termination and Reduction of Funding) and
as limited for LIHEAP funds as outlined in Texas Government Code,
Chapter 2105 or impose sanctions as deemed appropriate by the Department's
Executive Director, at any time, if the Department identifies possible
instances of fraud, waste, abuse, fiscal mismanagement, or other serious
deficiencies in the subrecipient's performance;
  (3) Suspend performance of the contract or reduce funds
until proof of compliance with the rules and regulations are received
by the Department or a decision is made by the Department to initiate
proceedings for contract termination;
  (4) If possible, elect not to provide future grant
funds to the Subrecipient until appropriate actions are taken to ensure
compliance; or
  (5) Terminate the contract. Adhering to the requirements
governing each specific program administered by the Department, as
needed, the Department may determine to proceed with the termination
of a contract, in whole or in part, at any time the Department establishes
there is good cause for termination. Such cause may include, but is
not limited to, fraud, waste, abuse, fiscal mismanagement, or other
serious deficiencies in the Subrecipient's performance. For CSBG contract
termination procedures, please refer to §5.206 of this title.

(c) Contract Closeout. When the Department moves to
terminate a contract and such termination takes effect, the procedures
described in paragraphs (1) - (12) of this subsection will be implemented.

  (1) The Department will issue a termination letter
to the subrecipient no less than thirty (30) days prior to terminating
the contract. If the entity is an Eligible Entity under the CSBG Act
the Department, after the rights and due processes of the CSBG Act
have been followed will simultaneously initiate proceedings to terminate
the Eligible Entity status and the effectiveness of the contractual
termination will be stayed automatically pending the outcome of those
proceedings. The Department may determine to take one of the following
actions: suspend funds immediately or allow a temporary transfer to
another provider; establish a Modified Cost Reimbursement plan for
closeout proceedings, or provide instructions to the Subrecipient
to prepare a proposed budget and written plan of action that supports
the closeout of the contract. The plan must identify the name and
current job titles of staff that will perform the closeout and an
estimated dollar amount to be incurred. The plan must identify the
CPA firm which will perform the Single Audit. The Department will
issue an official termination date to allow all parties to calculate
deadlines which are based on such date.
  (2) If the Department determines that a Modified Cost
Reimbursement is an appropriate method of providing funds to accomplish
closeout, the subrecipient will submit backup documentation for all
current expenditures associated with the closeout. The required documentation
will include, but not be limited to, the chart of accounts, detailed
general ledger, revenue and expenditure statements, time sheets, payment
vouchers and/or receipts, and bank reconciliations.
  (3) No later than thirty (30) days after the contract
is terminated, the subrecipient will take a physical inventory of
client files, including case management files, and will submit to
the Department an inventory of equipment with a unit acquisition cost
of $5,000 or greater or having a useful life of more than one year.
  (4) The terminated subrecipient will have thirty (30)
days from the date of the physical inventory to copy all current client
files. Client files must be boxed by county of origin. Current and
active case management files also must be copied, inventoried, and
boxed by county of origin.
  (5) Within thirty (30) days following the subrecipient
due date for copying and boxing client files, Department staff will
retrieve copied client files.
  (6) The terminated subrecipient will prepare and submit
no later than thirty (30) days from the date the Department retrieves
copied client files, a final report containing a full accounting of
all funds expended under the contract.
  (7) A final monthly expenditure report and a final
monthly performance report for all remaining expenditures incurred
during the closeout period must be received by the Department no later
than sixty (60) days from the date the Department determines that
the closeout of the program and the period of transition are complete.
  (8) The subrecipient will submit to the Department
no later than sixty (60) days after the termination of the contract,
an inventory of the non-expendable personal property acquired in whole
or in part with funds received under the contract.
  (9) The Department may transfer title to equipment
having a unit acquisition cost (the net invoice unit price of an item
of equipment) of $5,000 or greater or having a useful life of more
than one year, to the Department or to any other entity receiving
funds under the program in question. The Department will make arrangements
to remove equipment covered by this paragraph within ninety (90) days
following termination of the contract.
  (10) Upon selection of a new service provider, the
Department will transfer to the new provider client files and, as
appropriate, equipment.
  (11) As required by any OMB circular or other circulars
and standards as applicable to the contract, as amended from time
to time, a current year Single Audit must be performed for all agencies
that have exceeded the federal expenditure threshold under OMB Circular
A-133 or the State expenditure threshold under Uniform Grant Management
Standards. The Department will allow a proportionate share of program
funds to pay for accrued audit costs, when an audit is required, for
a Single Audit that covers the date up to the closeout of the contract.
The terminated subrecipient must have a binding contract with a CPA
firm on or before the termination date of the contract. The actual
costs of the Single Audit and accrued audit costs including support
documentation must be submitted to the Department no later than sixty
(60) days from the date the Department determines the closeout is
complete.
  (12) Subrecipients shall submit within sixty (60) days
after the date of the closeout process all financial, performance,
and other applicable reports to the Department. The Department may
approve extensions when requested by the Subrecipient. However, unless
the Department authorizes an extension, the Subrecipient must abide
by the sixty (60) day contractual requirement of submitting all referenced
reports and documentation to the Department.


Source Note: The provisions of this §2.202 adopted to be effective November 19, 2014, 39 TexReg 8976