Amend HB 776 by adding an appropriately numbered SECTION to
read as follows and by renumbering existing SECTIONS accordingly:
      SECTION _____. Subchapter A, Chapter 495, Government Code, is
amended by adding Section 495.008 to read as follows:
      Sec. 495.008.  AUDITING AND MONITORING CONTRACTS. (a)  The
department shall develop a comprehensive methodology for enhanced
auditing and monitoring of all facilities operated under contract
with the department that house inmates of the department and
releasees under the supervision of the department.  To achieve this
objective, the department shall first review existing auditing,
monitoring, and oversight capabilities of the department to
determine what further procedures and resources are necessary to
achieve this goal.
      (b)  The department shall ensure that all new and renewed
contracts described by Subsection (a) include:
            (1)  a provision that the department or a designee of
the department may conduct periodic contract compliance reviews,
without advance notice, to monitor vendor performance;
            (2)  minimum acceptable standards of performance
prescribed by the department that include provisions regarding the
health, safety, and welfare of inmates and releasees;
            (3)  a provision that if a review determines that a
vendor is not in compliance with the contract, the department may
require that the vendor's per diem compensation be withheld until
the vendor meets contract requirements or the vendor is replaced;
            (4)  a provision requiring a vendor not in compliance
with the contract to implement a plan of corrective action approved
by the department; and
            (5)  a provision under which the state is indemnified
for costs of litigation and for any damages in lawsuits alleging
that the health, safety, or welfare of an inmate or releasee in a
contract facility is not protected.
      (c)  The department shall complete at least one enhanced
audit for each facility described by Subsection (a), without regard
to whether the facility is operated by a public or  private vendor.
The enhanced audit must include an enhanced contract compliance
review of any vendors hired by a community supervision and
corrections department to operate a facility.
      (d)  The department, in conjunction with an advisory
committee composed of state officials and private officials from
within the industry, shall adopt rules to implement  the
requirements of this section.
      (e)  The department shall develop an appeals process,
incorporated by reference into all new and renewed contracts, under
which a vendor may appeal any imposed sanction under the contract,
with the appeals process including the right to a formal hearing
and a right to a final determination by the board.
      (f)  The department shall submit a report to the governor and
the Legislative Budget Board not later than January 1, 2003,
describing its efforts to implement the requirements of this
section.  The report must include a summary of contracts and
vendors, compliance reviews conducted, incidents of contract
noncompliance, sanctions imposed, corrective actions taken, and
current contract status. This subsection expires February 1,
2003.