By adopting the definitions cited and followed by the Ethics Commission in reaching this decision, the proposed rule sought to insure that the decisions of the Ethics Commission interpreting the Penal Code will provide useful guidance to charter holders in this area. However, it appears that the definition proposed for "misuse of funds or property," at §100.1011(12), would serve to define "misapplication of funds or property" as well. That definition was taken from the current Penal Code, §39.01(2). Penal Code, §32.45 (Misapplication of Fiduciary Property or Property of Financial Institution), provides a similar definition for "misapply." In light of these later statutory changes, it does not appear that separate definitions for "misuse" and "misapplication" are justified.

The proposed rule has been modified to delete the separate definition of misapplication of funds or property at §100.1011(13). Instead, the definition proposed for misuse of funds or property at §100.1011(12) has been modified to cover both misuse and misapplication of funds or property.

Comment. ATPE requested that the definition of "management services" in proposed §100.1011(14)(E) and (F) be modified to include legal services. An attorney could perform the same services as a management company- or even be an employee of a management company- and thereby skirt the intent of TEC, §12.1012(5). In the alternative, proposed §100.1011(14)(E) and (F) should be clarified to provide that attorneys working for a management company, or under contract with a management company, may not provide legal services to a charter school unless it is part of an approved management contract with that charter.

Agency Response. The agency disagrees with the comment. Under §100.1011(14) as proposed, an attorney cannot perform any "management services" other than those described in §100.1011(14)(E) and (F) without falling within the definition of a "management company." As a regular part of the practice of law, the practitioner may be called upon to give legal advice to the client concerning policies, procedures, or practices presenting legal vulnerabilities. The agency does not interpret TEC, §12.1012(5)(E), to mean that such legal advice is included within the definition of "management services." However, an attorney engaged in any other function listed in §100.1011(14) would be a "management company" under that subsection.

An attorney retained or employed by a "management company" to provide legal services to a charter holder need not be included in the coverage of §100.1011(14)(E) and (F). If an entity provides any "management services" to a charter holder, it will be covered by §100.1011(14) as proposed; and if an entity (other than a law firm) employs or retains an attorney to provide the services described in §100.1011(14)(E) and (F), that entity will also be covered.

Comment. ACE and HCJJCS suggested that professional services subject to regulation by another state or federal agency- such as certified public accountancy services- be excluded from the definition of management services at §100.1011(14)(E) and (F).

Agency Response. The agency agrees, in part, with the comment and has modified the section. The proposed rule has been modified to exclude both public accountancy services and legal services from the definition of "management services" in proposed §100.1011(14)(E) and (F), adopted as §100.1011(13)(E) and (F). The practice of certified public accountancy is similar to the practice of law in that, as a regular part of providing public accountancy services, the practitioner may be called upon to give advice to the client concerning policies, procedures, or practices to address weaknesses in financial management and related areas. The agency does not interpret TEC, §12.1012(5)(E), to mean that such public accountancy services are included within the definition of "management services."

Comment. ACE and HCJJCS suggested that services provided by education service centers be excluded from the definition of management services at §100.1011(14)(E) and (F).

Agency Response. The agency agrees, in part, with the comment. The proposed rule has been modified to exclude regional education service center from the definition of "management company" in proposed §100.1011(15), adopted as §100.1011(14). The agency does not interpret TEC, §12.1012(4), to mean that a regional education service center providing services to charter schools pursuant to its mission under TEC, Chapter 8, Subchapter B, is included within the definition of a "management company." At the same time that it added TEC, §12.1012(4), the 77th Legislature amended TEC, §12.104, to provide that a charter school is entitled to the same level of services provided to school districts by regional education service centers.

Comment. An individual asked if a "franchise structure" meets the definition of management services in reference to TEC, §12.1012(4).

Agency Response. The agency disagrees with the comment. The agency interprets TEC, §12.1012(4), to mean that any type of business entity that provides management services to a charter school is generally included within the definition of "management company." A franchise structure is not a separate legal entity, but simply a contractual arrangement among two or more legal entities.

Comment. ATPE suggested that the exceptions in the definition of "management company" in §100.1011(15)(B) should be removed, as this is a loophole around the management company regulations that could allow anyone to donate services to a charter school by offering them to the non-profit organization controlling that charter.

Agency Response. The agency disagrees with the comment. Under §100.1011(15)(B) as proposed, only a narrow class of persons may donate "management services" to a charter holder without falling into the definition of a "management company." The person must be a non-profit corporation, must be exempt from taxation under 28 USC §501(c)(3), and must be the parent corporation of the charter holder receiving the donated services. In essence, the provision covers only a situation in which a parent 501(c)(3) corporation exists, but its subsidiary 501(c)(3) corporation is technically the charter holder.

Comment. ACE and HCJJCS suggested that the exceptions in the definition of "management company" in §100.1011(15) should be expanded to include shared services arrangements among charter schools, cooperative arrangements among charter schools, and non-profit associations and resource centers that provide technical assistance to charter schools.

Agency Response. The agency disagrees with the comment. The agency interprets TEC, §12.1012(4), to mean that a tax-exempt entity providing management services to a charter school is generally included within the definition of "management company." Shared services arrangements and cooperatives among charter schools are not separate legal entities, but simply contractual arrangements among two or more charter holders.

Comment. ACE and HCJJCS asked for clarification whether the term "assurances" in §100.1011(16)(E) includes oral representations, and under what circumstances oral statements are included.

Agency Response. The agency agrees, in part, with the comment and has modified the section to clarify that proposed §100.1011(16)(E), adopted as §100.1011(15)(E), includes an oral statement, assurance, commitment, and/or representation made to the State Board of Education during a public meeting. Section 100.1011(16)(E) as proposed covers statements, assurances, commitments, and/or representations made by the charter holder "in its application for charter, attachments, or related documents." It is ambiguous because oral statements, assurances, commitments, and representations made to the State Board of Education during public meetings of that body are routinely documented, and may relate to the charter holder's application for charter. Such oral statements, assurances, commitments, and/or representations can induce- indeed are offered to induce- the board to act favorably on the pending application. Accordingly, the charter holder should be held accountable for its statements, assurances, commitments, and representations made to the board.

Comment. ACE and HCJJCS suggested that volunteers should not be included within the definition of "officer of a charter school" at §100.1011(17)(B).

Agency Response. The agency disagrees with the comment. The purpose of TEC, §12.1012(6), is to identify those individuals who are operating a publicly funded charter school. Accordingly, the definition of an "officer," as articulated in §100.1011(18)-(21), is a purely functional one. If a person performs the functions described in the rule, that person is an officer. Distinctions such as employee/contractor or paid/unpaid worker are irrelevant to the fundamental question addressed by the rule.

Comment. An individual commented that the duties and title descriptions used in defining "officer of a charter school" in proposed §100.1011(17) should be standard. The terminology should be consistent with the terminology in use at independent school districts, i.e., superintendent, principal, vice-principal, etc. The individual cites the duties of the chief operating officer of a charter school as an example of the sort of confusion caused by non-standard usage of these terms.

Agency Response. The agency disagrees with the comment. The titles, functions, powers, and duties of the officers of an independent school district are all clearly defined by statute. See, for example, TEC, §11.201 and 11.202. By contrast, the organizational structure of a charter school is not defined by law, and varies widely from one charter holder organization to the next. Since 1995, there has been no standard terminology used by charter holders to describe their principal operating officers. Using similar terms to describe positions that are not similar would create confusion and ambiguity.

Comment. ACE and HCJJCS suggested that the exceptions listed in §100.1011(14)(E) and (F), to include attorneys, accountants, auditors, and regional education service center representatives, should also be exceptions to the definition of an officer under §100.1011(17)(B). In addition, ACE questioned including legal services provided by a licensed attorney within the definition of officer at §100.1011(19)(C), (G) and (H).

Agency Response. The agency agrees, in part, with the comment. Section 100.1011(19)(G) and (H), as proposed, describe substantially the same functions as §100.1011(14)(E) and (F), and should receive similar treatment under the rules. The proposed rule was modified to exclude services provided by attorneys and certified public accountants from the functional definition of a "central administration officer" in proposed §100.1011(19)(G) and (H), adopted as §100.1011(18)(G) and (H), to the same extent as they are excluded from the definition of "management services" in adopted §100.1011(13)(E) and (F).

Comment. ACE and HCJJCS suggested removing the word "including" and substituting "where general duties include" in §100.1011(19) and (20).

Agency Response. The agency disagrees with the comment. In response to another comment, the agency has modified proposed §100.1011(19) and (20), adopted as §100.1011(18) and (20), to eliminate paragraphs proposed (19)(K) and (20)(G). The suggested change, in combination with the change already made, would introduce an ambiguity in the rules.

Comment. ACE suggested that the phrase "initiating the termination, non-renewal, or suspension of an employee" in §100.1011(19)(D) should be replaced with "terminating, non-renewing, or suspending an employee." The term "initiating" is vague and ambiguous.

Agency Response. The agency agrees, in part, with the comment. The word "initiating" has been deleted in proposed §100.1011(19)(D), adopted as §100.1011(18)(D).

Comment. ACE and HCJJCS stated that the word, "assisting" in §100.1011(19)(K) and (20)(G) is vague and ambiguous. The term could include anyone who provides any assistance of any type. Paragraphs (19)(K) and (20)(G) should be eliminated entirely. An individual suggested that §100.1011(19) and (20) need clarification on the definition of administration officer and a campus administrative officer to exclude the perceived inclusion of clerical staff, volunteers, etc.

Agency Response. The agency agrees with the comment. The functions listed in proposed §100.1011(19) and (20) are prefaced by the phrase, "including one or more of the following functions." As proposed, the subsections already include persons who are charged with assisting, or who assist, another in performing the functions listed, such that an assistant director, assistant CEO, or assistant principal, etc., is already included in the definitions for director, CEO, or principal, etc. Consequently, proposed §100.1011(19) and (20), adopted as §100.1011(18) and (20), has been modified to eliminate paragraphs (19)(K) and (20)(G).

Comment. An individual suggested that the definition of material charter violation in §100.1011(23) be changed to read, "An action or failure to act by a charter holder that is deemed contrary by TEA to the terms of its open-enrollment charter. . ."

Agency Response. The agency disagrees with the comment. Section 100.1011(23), as proposed, states that the defined term does not "establish that any breach of a duty occurred in a given case or what sanction is appropriate under the facts of that case." The suggested change would introduce an ambiguity in the rules.

Comment. An individual suggested that the definition of management company breach in §100.1011(24) be changed to read, "An action or failure to act by a management company that is deemed contrary by TEA to a duty owed under a management contract. . ."

Agency Response. The agency disagrees with the comment. Proposed §100.1011(24), adopted as §100.1011(23), states that the defined term does not "establish that any breach of a duty occurred in a given case or what sanction is appropriate under the facts of that case." The suggested change would introduce an ambiguity in the rules.

Proposed §100.1013. Filing of Documents.

Comment. ATPE recommended providing the same five-day timeframe for charter schools to file documents requiring an original signature by facsimile. The rule provides five days for other documents to be received by TEA, and a document requiring an original signature should be subject to the same deadlines as other documents.

Agency Response. The agency disagrees with the comment. Section 100.1013(2) pertains to filing documents by U.S. mail.

Section 100.1013(2) requires the document to be mailed by the filing deadline; yet even if the document is mailed on time, it is not deemed timely filed unless the postal service actually delivers the mail in time for it to be stamped received on the fifth business day. Section 100.1013(3)(B) pertains to filing documents by facsimile, and provides for filing original signatures via facsimile.

Section 100.1013(3)(B) requires the document to be actually received by facsimile on the filing deadline. By comparison, under §100.1013(2) for documents sent by certified US mail, the receiving division might receive no version of the document until the fifth business day following its deadline. Under §100.1013(3)(B), the receiving division must receive a facsimile of the document on the deadline day. Only the original of the document might be delayed until the tenth business day following the deadline.

Comment. ACE and HCJJCS suggested that procedures and documentation required as evidence of facsimile transmissions of documents should be defined in rule. ACE and HCJJCS commented that the word "completed" in §100.1013(3)(A) is vague and ambiguous. Does this mean completed as of the time and date affixed to the facsimile machine of the receiving division, or the facsimile machine of the sending party?

Agency Response. The agency disagrees with the comment. Proposed §100.1013(3)(A) is taken from existing 19 TAC §157.1050 (relating to Filing of Documents), which has enabled attorneys with cases pending before the commissioner of education to timely file deadline-critical pleadings, motions, and briefs since at least April 7, 1993. See 18 TexReg 1928. The longstanding construction of "completed" in the context of a filing rule such as the proposed §100.1013(3)(A) is that the facsimile transmission is completed on the date and time it is actually received by the apparatus maintained by the receiving division. The chief evidence that the document was actually received is that the document exists at the receiving division. (The apparatus maintained by the sending party may print a report that purports to confirm that no errors were detected in the electronic communications for the session, but this confirmation report is not a substitute for telephonic confirmation from the receiving division that all pages were received in legible form.) Normally, the time stamp placed on the document by the apparatus maintained by the receiving division is prima facie evidence of the date and time it was received, but if good cause exists to doubt the veracity of this evidence, in rare circumstances other evidence might have to be considered. These are matters within the discretion of the receiving division, and should not be addressed by rule.

It is important to note that proposed §100.1013 does not govern applications for discretionary funding or grants, nor does it govern applications for a new open-enrollment charter. The section specifically provides: "Grant applications and other documents filed with the TEA under provisions other than this subchapter are governed by the filing rules specific to those documents." The TEA Contracts and Grants Division requires all grant applications to be physically received in its offices and officially stamped by 5:00 p.m. on the due date for the application. Similarly, the State Board of Education does not reference proposed §100.1013 as its rule for determining the timely receipt by the Division of Charter Schools of an application for a new open-enrollment charter. The board adopts the procedures for timely and sufficient filing of an application for a new open-enrollment charter each time it adopts a new application.

Comment. ACE and HCJJCS suggested that the appropriate facsimile numbers for receiving divisions be posted on the TEA website.

Agency Response. No response required.

Division 2. Commissioner Action and Intervention.

Proposed §100.1027. Accreditation Sanctions.

Comment. ACE and HCJJCS suggested that the term "cooperation" in §100.1027(b) and (c) is vague and ambiguous, and that wording similar to "failure to comply with lawful requests issued under regulatory functions" or "obstruction of regulatory functions" be substituted.

Agency Response. The agency agrees, in part, with the comment. Section 100.1027(b) and (c) has been modified to replace the word "cooperation" in the final sentence with "failure to comply with lawful requests, directives, or other agency actions under TEC, §39.131."