The Texas Education Agency (TEA) proposes new §109.3001 and §109.3003, concerning federal fiscal compliance and reporting. The proposed new rules would provide guidance for local educational agencies (LEAs) that has been developed in conjunction with federal statutes and guidance from the United States Department of Education (USDE) regarding local maintenance of effort (MOE) and indirect cost rates.

The TEA currently provides guidance for financial accounting for school districts, charter schools, and education service centers through the Financial Accountability System Resource Guide (FASRG), which is adopted by reference as rule in 19 TAC §109.41. The FASRG is currently under review and will undergo significant revision. As a result, updated provisions relating to federal fiscal compliance and reporting would be adopted in 19 TAC Chapter 109, Subchapter CC, instead of the FASRG.

Proposed new 19 TAC Chapter 109, Subchapter CC, would align TEA guidance for federal fiscal compliance and reporting with current federal statutory authority and USDE guidance for local MOE and indirect cost rates. The proposed new subchapter would consist of proposed new 19 TAC §109.3001, Local Maintenance of Effort, and 19 TAC §109.3003, Indirect Cost Rates.

Proposed new 19 TAC §109.3001 would adopt in rule Figure: 19 TAC §109.3001(c)(1), which would establish the MOE requirements for a grant under the Individuals with Disabilities Education Act, Part B, and Figure: 19 TAC §109.3001(c)(2), which would establish the MOE requirements for a grant under the No Child Left Behind Act.

Proposed new 19 TAC §109.3003 would adopt in rule Figure: 19 TAC §109.3003(d), which would establish definitions, standards, and procedures used to govern indirect cost rates.

The TEA intends to update 19 TAC §109.3001 and 19 TAC §109.3003 annually as needed to align with subsequent updates, modifications, and amendments to the federal statutory authority and USDE guidance.

The proposed new rules would have no procedural or reporting implications beyond those already in place. Entities required to meet MOE requirements must provide certain fiscal and compliance information in order for the TEA to determine compliance with the MOE requirement and subsequent reporting to the USDE. Additionally, entities requesting an indirect cost rate must provide all documentation required by the USDE to support the entity's request and subsequent approval by the TEA of the indirect cost rate. The proposed new rules would have no locally maintained paperwork requirements beyond those already in place. Participating LEAs are required to retain all financial and programmatic records specific to the local MOE and indirect cost rate requirements.

Nora Hancock, associate commissioner for grants and federal fiscal compliance, has determined that for the first five-year period the new sections are in effect there will be no additional costs for state or local government as a result of enforcing or administering the new sections.

Dr. Hancock has determined that for each year of the first five years the new sections are in effect the public benefit anticipated as a result of enforcing the new sections will be to ensure that state guidance regarding local MOE and indirect cost rates is clear and based on current federal statute and guidance. There is no anticipated economic cost to persons who are required to comply with the proposed new sections.

There is no direct adverse economic impact for small businesses and microbusinesses; therefore, no regulatory flexibility analysis, specified in Texas Government Code, §2006.002, is required.

The public comment period on the proposal begins November 1, 2013, and ends December 2, 2013. Comments on the proposal may be submitted to Cristina De La Fuente-Valadez, Rulemaking, Texas Education Agency, 1701 North Congress Avenue, Austin, Texas 78701, (512) 475-1497. Comments may also be submitted electronically to rules@tea.state.tx.us or faxed to (512) 463-5337. A request for a public hearing on the proposal submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 14 calendar days after notice of the proposal has been published in the Texas Register on November 1, 2013.

The new sections are proposed under the Texas Education Code (TEC), §7.021(b)(1), which authorizes the agency to administer and monitor compliance with education programs required by federal or state law, including federal funding and state funding for those programs; and TEC, §7.031(a), which allows the agency to seek, accept, and distribute grants awarded by the federal government or any other public or private entity for the benefit of public education, subject to the limitations or conditions imposed by the terms of the grants or by other law.

The new sections implement the TEC, §7.021(b)(1) and §7.031(a).