By: Deuell, et al. S.B. No. 750

(In the Senate - Filed February 19, 2007; March 7, 2007, read first time and referred to Committee on Government Organization; April 16, 2007, reported adversely, with favorable Committee Substitute by the following vote: Yeas 5, Nays 0; April 16, 2007, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 750 By: Whitmire

A BILL TO BE ENTITLED

AN ACT

relating to the creation of the Office of State Inspector General.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle B, Title 4, Government Code, is amended by adding Chapter 422 to read as follows:

CHAPTER 422. OFFICE OF STATE INSPECTOR GENERAL

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 422.001. DEFINITIONS. In this chapter:

(1) "Covered entity" means a person, entity, or representative that has an employment, agency, contractual, financial, or fiduciary relationship with a state agency that administers or implements state or federally funded programs. The term includes a provider.

(2) "Fraud" means an intentional deception or misrepresentation made by a person with the knowledge that the deception could result in some unauthorized benefit to that person or some other person. The term includes any act that constitutes fraud under applicable federal or state law.

(3) "Furnished," in reference to items or services:

(A) means items or services provided directly by, provided under the direct supervision of, or ordered by:

(i) a practitioner or other individual, either as an employee or in the individual's own capacity;

(ii) a covered entity; or

(iii) another supplier of services; and

(B) does not include services ordered by one party but billed for and provided by or under the supervision of another.

(4) "Hold on payment" means the temporary denial of payment or reimbursement for items or services furnished by a covered entity. The term includes the temporary denial of reimbursement under a state or federal program for items or services furnished by a specified provider.

(5) "Office" means the office of state inspector general established under this chapter.

(6) "Practitioner" means a physician or other individual licensed under state law to practice the individual's profession.

(7) "Program exclusion" means the suspension of a covered entity's authorization under a state or federal program to request payment for, or reimbursement of, items or services furnished by that entity.

(8) "Provider" means a person, firm, partnership, corporation, agency, association, institution, or other entity that was or is approved by the Health and Human Services Commission to provide:

(A) medical assistance under contract or provider agreement with the commission; or

(B) third-party billing vendor services under a contract or provider agreement with the commission.

(9) "State inspector general" means the state inspector general appointed under Section 422.052.

Sec. 422.002. APPLICATION OF SUNSET ACT. The office of state inspector general is subject to Chapter 325 (Texas Sunset Act). Unless continued in existence as provided by that chapter, the office is abolished and this chapter expires September 1, 2019.

Sec. 422.003. REFERENCE IN OTHER STATUTES. Notwithstanding any other provision of law, a reference in law or rule to the Health and Human Services Commission's office of investigations and enforcement or the Health and Human Services Commission's office of inspector general means the office of state inspector general established under this chapter.

[Sections 422.004-422.050 reserved for expansion]

SUBCHAPTER B. ADMINISTRATION AND COMPLAINTS

Sec. 422.051. OFFICE OF STATE INSPECTOR GENERAL. (a) The office of state inspector general is an agency of this state.

(b) The office is under the direction and supervision of the state inspector general.

(c) The office shall have its principal office and headquarters in Austin.

Sec. 422.052. STATE INSPECTOR GENERAL: APPOINTMENT BY GOVERNOR; QUALIFICATIONS. (a) The state inspector general is appointed by the governor with the advice and consent of the senate.

(b) The appointment shall be made without regard to race, color, disability, sex, religion, age, or national origin.

(c) In making the appointment, the governor shall consider the person's knowledge of laws, experience in the enforcement of law, honesty, integrity, education, training, and executive ability.

Sec. 422.053. ELIGIBILITY. (a) A person is not eligible for appointment as state inspector general if the person or the person's spouse is an employee, officer, or paid consultant of a trade association in a field under the office's jurisdiction.

(b) A person who is required to register as a lobbyist under Chapter 305 because of the person's activities for compensation in or on behalf of a profession related to a field under the office's jurisdiction may not serve as state inspector general.

(c) A person is not eligible for appointment as state inspector general if the person has a financial interest in a corporation, organization, or association receiving state or federal money under contract with this state or a political subdivision of this state.

Sec. 422.054. TERM. The state inspector general serves a two-year term expiring February 1 of each odd-numbered year.

Sec. 422.055. MERIT SYSTEM. (a) The office may establish a merit system for its employees.

(b) The merit system may be maintained in conjunction with other state agencies that are required by federal law to operate under a merit system.

Sec. 422.056. PUBLIC INTEREST INFORMATION AND COMPLAINTS. (a) The office shall develop and implement policies that provide the public a reasonable opportunity to appear before the office and to speak on any issue under the office's jurisdiction.

(b) The office shall prepare information of public interest describing the functions of the office and the office's procedures by which complaints are filed with and resolved by the office. The office shall make the information available to the public and appropriate state agencies.

(c) The office shall keep an information file about each complaint filed with the office relating to a state agency, license holder, or entity receiving state or federal money and falling under the jurisdiction of the office.

Sec. 422.057. ANNUAL REPORT. (a) The state inspector general annually shall prepare a complete and detailed written report describing the activities of the office during the fiscal year. The report must separately describe each major investigation, audit, review, fraud prevention effort, and agency assistance effort completed during the fiscal year.

(b) The annual report must meet the reporting requirements applicable to financial reporting provided in the General Appropriations Act.

(c) The state inspector general shall deliver a copy of each annual report to:

(1) the governor;

(2) the lieutenant governor;

(3) the speaker of the house of representatives;

(4) the presiding officer of each house and senate committee having jurisdiction over an agency to which this chapter applies;

(5) the presiding officer of each agency to which this chapter applies; and

(6) the comptroller.

(d) Each agency to which this chapter applies shall post the annual report on its agency website.

(e) The state inspector general shall issue the annual report not later than the 60th day after the last day of each fiscal year.

[Sections 422.058-422.100 reserved for expansion]

SUBCHAPTER C. GENERAL POWERS AND DUTIES

Sec. 422.101. GENERAL RESPONSIBILITIES AND POWERS. (a) The office is responsible for the audit, detection, investigation, prevention, and review of fraud, waste, and abuse, as defined in applicable state and federal law, in this state's implementation or administration of all state or federally funded programs, including health and human services programs provided under Chapter 531, and in the enforcement of state law relating to those programs.

(b) The office shall set clear objectives, priorities, and performance standards for the office that emphasize:

(1) coordinating investigative efforts to aggressively recover money;

(2) allocating resources to cases that have the strongest supportive evidence and the greatest potential for recovery of money; and

(3) maximizing opportunities for referral of cases to the attorney general in accordance with this chapter.

(c) The office has all the powers necessary or appropriate to carry out its responsibilities and functions under this chapter and other law.

(d) The state inspector general shall establish policies and procedures to guide the operation of the office and to ensure that the work and practices of the office are in accordance with commonly used and adopted professional standards related to the fields of investigation and auditing in public administration environments.

(e) An investigation, audit, or review conducted by the office must conform to professional standards and best practices for offices of inspectors general.

Sec. 422.102. RULEMAKING AUTHORITY. The state inspector general may adopt rules necessary to implement this chapter and to carry out the duties of the office under this chapter and other law.

Sec. 422.103. INFORMATION AND TECHNOLOGY. The office may obtain any information or technology necessary to enable the office to meet its responsibilities under this chapter or other law.

Sec. 422.104. OFFICE STAFF; TRAINING. The office shall employ and train office staff to enable the staff to pursue fraud, waste, and abuse cases as necessary.

Sec. 422.105. STATE AGENCY INSPECTORS GENERAL. (a) The state inspector general, in consultation with the office of the governor and as necessary to implement this chapter, may designate persons to serve as agency inspectors general for state agencies that implement or administer state or federally funded programs. A state agency inspector general may be colocated with a state agency.

(b) An agency inspector general shall report to and perform duties as directed by the state inspector general.

(c) A state agency shall provide facilities and support services including suitable office space, furniture, computer equipment, communications equipment, and administrative support, to each state agency inspector general colocated at the agency and the state agency inspector general's staff.

(d) The office and each state agency that has a designated state agency inspector general shall execute a service level agreement to establish performance standards regarding the facilities and support services provided by the agency. The agreement must be reviewed at least annually to ensure that facilities and support services are provided in accordance with the agreement.

Sec. 422.106. PEACE OFFICERS. (a) The office may employ and commission peace officers, in a number not to exceed 10 percent of the total number of employees of the office, to assist the state inspector general in carrying out the duties of the office under this chapter or other law.

(b) A commissioned peace officer or other designated law enforcement officer employed by the office is not entitled to supplemental benefits from the law enforcement and custodial officer supplemental retirement fund under Title 8.

Sec. 422.107. AWARD FOR REPORTING FRAUD, WASTE, ABUSE, OR OVERCHARGES. (a) If the office determines that the report results in the recovery of an administrative or civil penalty imposed by law, the office may grant an award to an individual who reports:

(1) activity that constitutes fraud, waste, or abuse of money related to any state or federally funded program implemented or administered by a state agency; or

(2) overcharges in a program described by Subdivision (1).

(b) The office may not grant an award to an individual in connection with a report if the office or attorney general had independent knowledge of the activity reported by the individual.

(c) The office shall determine the amount of an award granted under this section. The amount may not exceed five percent of the amount of the administrative or civil penalty imposed by law that resulted from the individual's report.

(d) In determining the amount of an award granted under this section, the office:

(1) shall consider the importance of the report in ensuring the fiscal integrity of the program; and

(2) may consider whether the individual participated in the reported fraud, waste, abuse, or overcharge.

(e) A person who brings an action under Subchapter C, Chapter 36, Human Resources Code, is not eligible for an award under this section.

Sec. 422.108. STATE AUDITOR AUDITS, INVESTIGATIONS, AND ACCESS TO INFORMATION NOT IMPAIRED. This chapter or other law related to the operation of the state inspector general or a state agency inspector general does not prohibit the state auditor from conducting an audit, investigation, or other review or from having full and complete access to all records and other information, including witnesses and electronic data, that the state auditor considers necessary for the audit, investigation, or other review.

Sec. 422.109. AUTHORITY OF STATE AUDITOR TO CONDUCT TIMELY AUDITS NOT IMPAIRED. This chapter or other law related to the operation of the state inspector general or a state agency inspector general does not take precedence over the authority of the state auditor to conduct an audit under Chapter 321 or other law.

[Sections 422.110-422.150 reserved for expansion]

SUBCHAPTER D. INVESTIGATIONS AND ENFORCEMENT ACTIONS

Sec. 422.151. AGENCY COOPERATION. Each state agency shall provide assistance as necessary for the office to perform the office's duties relating to the investigation of fraud, waste, and abuse in the implementation or administration of state or federally funded programs. The office is entitled to access any information maintained by a state agency or by any covered entity, including internal records, relevant to the functions of the office.

Sec. 422.152. CRITERIA FOR INVESTIGATIONS. The office by rule shall set specific criteria, including claims criteria, that when met require the office to begin an investigation.

Sec. 422.153. INTEGRITY REVIEWS. (a) If the office receives a complaint of fraud, waste, or abuse from any source, the office shall conduct an integrity review to determine whether there is sufficient basis to warrant a full investigation.

(b) The office shall begin the integrity review not later than the 30th day after the date the office receives a complaint or has reason to believe that fraud, waste, or abuse has occurred. An integrity review must be completed not later than the 90th day after the date the review began.

(c) If the findings of an integrity review give the office reason to believe that fraud, waste, or abuse involving possible criminal conduct has occurred in the administration or implementation of a state or federally funded program, the office shall take the following action:

(1) if a covered entity is suspected of fraud, waste, or abuse involving criminal conduct, the office shall refer the case to the appropriate state or local official having jurisdiction to prosecute the criminal conduct; or

(2) if there is reason to believe that a recipient has defrauded a federally funded program, the office may conduct a full investigation of the suspected fraud.

(d) A criminal referral by the office does not preclude the office from continuing its investigation of the covered entity and imposing appropriate administrative or civil penalties.

Sec. 422.154. WITHHELD, CONCEALED, OR DESTROYED RECORDS; HOLD ON PAYMENT OF CLAIMS. (a) If the office learns or has reason to suspect that a covered entity's records are being withheld, concealed, destroyed, fabricated, or in any way falsified, the office shall immediately refer the case to the appropriate state or local official having jurisdiction to prosecute criminal conduct.

(b) A criminal referral by the office does not preclude the office from continuing its investigation of the covered entity and imposing appropriate administrative or civil penalties.

(c) In addition to any hold on payment of claims authorized under other state or federal law, the office shall impose, without prior notice, a hold on payment of money owed or claimed to be owed, including a claim for reimbursement, submitted to a state agency by a covered entity:

(1) to compel production of records; or

(2) on request by the appropriate state or local official having jurisdiction to prosecute a case under this section.

(d) The office shall notify the covered entity of the hold not later than the fifth working day after the date the hold is imposed.

Sec. 422.155. ADMINISTRATIVE HEARING ON PAYMENT CLAIM HOLD. (a) On timely written request by a covered entity subject to a hold on payment of claims under Section 422.154, other than a hold requested under that section by an appropriate state or local official having jurisdiction to prosecute, the office shall file a request with the State Office of Administrative Hearings for an expedited administrative hearing regarding the hold.

(b) The state inspector general shall adopt rules that allow a covered entity subject to a hold under Section 422.154, other than a hold requested under that section by the appropriate state or local official having jurisdiction to prosecute, to seek an informal resolution of the issues identified by the office in the notice provided by the office.

(c) A covered entity subject to a hold shall seek an expedited hearing under Subsection (a) or an informal resolution under Subsection (b) not later than the 10th day after the date the entity receives notice of the hold from the office.

(d) A covered entity's decision to seek an informal resolution under Subsection (b) does not extend the time by which the entity must request an expedited administrative hearing under Subsection (a). An expedited hearing initiated under Subsection (a) shall be stayed at the office's request until the informal resolution process is completed.

Sec. 422.156. GUIDELINES FOR IMPOSING PAYMENT CLAIM HOLDS OR PROGRAM EXCLUSIONS. The office shall establish guidelines under which holds on payment of claims or program exclusions:

(1) may discretionally be imposed on a covered entity; or

(2) shall automatically be imposed on a covered entity.

Sec. 422.157. ASSESSMENT OF ADMINISTRATIVE PENALTIES; INJUNCTIONS; AUDITS AND INVESTIGATIONS. In addition to performing functions and duties otherwise provided by law, the office may:

(1) assess administrative penalties authorized by law on behalf of the state agency implementing or administering the state or federally funded program and retain from amounts collected money sufficient to cover investigative and collection costs;

(2) request the attorney general to obtain an injunction to prevent a person from disposing of an asset identified by the office as potentially subject to recovery by the office due to the person's fraud, waste, or abuse;

(3) provide for coordination between the office and special investigative units formed by managed care organizations under Section 531.113 or entities with which managed care organizations contract under that section;

(4) audit the use and effectiveness of state or federal money, including contract and grant money, administered by a person or state agency receiving the money from a state agency;

(5) conduct reviews, investigations, and inspections relating to the money described by Subdivision (4);

(6) recommend policies promoting economical and efficient administration of the money described by Subdivision (4) and the prevention and detection of fraud, waste, and abuse in the administration of that money; and

(7) conduct internal affairs investigations in instances of fraud, waste, and abuse and in instances of misconduct by employees, contractors, subcontractors, and vendors.

Sec. 422.158. FINAL REPORTS; CONFIDENTIALITY. (a) The office shall prepare a final report on each audit or investigation conducted under this chapter. The final report must include:

(1) a summary of the activities performed by the office in conducting the audit or investigation;

(2) a statement regarding whether the audit or investigation resulted in a finding of any wrongdoing; and

(3) a description of any finding of wrongdoing.

(b) A final report on an audit or investigation is subject to required disclosure under Chapter 552. All information and material compiled during the audit or investigation remains confidential and is not subject to disclosure, except as provided by Section 422.162.

(c) Unless otherwise prohibited by this chapter or other law, the state inspector general shall deliver a copy of each final report that concerns the implementation or administration of a state or federally funded program to:

(1) the presiding officer of the subject agency;

(2) the governor;

(3) the lieutenant governor; and

(4) the speaker of the house of representatives.

Sec. 422.159. AGENCY RESPONSE. (a) Not later than the 60th day after the date a state inspector general or state agency inspector general report that identifies deficiencies or recommends specified corrective measures in the operations of a state agency is issued, the agency shall file with the office a response that includes:

(1) an implementation plan and timeline for implementing corrective measures; or

(2) the agency's rationale for declining to implement corrective measures for the identified deficiencies or to implement the state inspector general's or state agency inspector general's recommended corrective measures.

(b) The office by rule shall specify the format and requirements of a state agency response.

(c) A state agency to which this chapter applies shall adopt rules to respond to reports and recommendations from the state inspector general or a state agency inspector general.

Sec. 422.160. FRAUD PREVENTION INFORMATION. (a) The office shall compile and disseminate accurate information and statistics relating to:

(1) fraud prevention; and

(2) post-fraud referrals received and accepted or rejected from the office's case management system or the case management system of a state agency.

(b) The office shall:

(1) aggressively publicize successful fraud prosecutions and fraud-prevention programs through all available means, including the use of statewide press releases; and

(2) maintain and promote a toll-free hotline for reporting suspected fraud in state or federally funded programs implemented or administered by an agency.

Sec. 422.161. ADMINISTRATIVE SUBPOENA. (a) The office may issue an administrative subpoena in connection with an investigation conducted by the office to compel the attendance of a relevant witness or the production, for inspection or copying, of relevant evidence that is in this state.

(b) A subpoena may be served personally or by certified mail.

(c) If a person fails to comply with a subpoena, the office, acting through the attorney general, may file suit to enforce the subpoena in a district court in this state.

(d) On finding that good cause exists for issuing the subpoena, the court shall order the person to comply with the subpoena. The court may punish a person who fails to obey the court order.

(e) The reimbursement of the expenses of a witness whose attendance is compelled under this section is governed by Section 2001.103.

Sec. 422.162. CONFIDENTIALITY. (a) Information and material subpoenaed or compiled by the office in connection with an audit or investigation is confidential and not subject to disclosure under Chapter 552. The information and material is not subject to disclosure, discovery, subpoena, or other means of legal compulsion for release to anyone other than the office or its employees or agents involved in the audit or investigation conducted by the office, except that the information may be disclosed to the attorney general, the state auditor's office, and law enforcement agencies.

(b) A person who receives information under Subsection (a) may disclose the information only in accordance with Subsection (a) and in a manner that is consistent with the authorized purpose for which the person received the information.

Sec. 422.163. INTERAGENCY COORDINATION. (a) The office and the attorney general shall enter into a memorandum of understanding to develop and implement joint written procedures for processing cases of suspected fraud, waste, or abuse, as those terms are defined by state or federal law, or other violations of state or federal law under any state or federally funded program implemented or administered by a state agency.

(b) The memorandum of understanding must require:

(1) the office and the attorney general to set priorities and guidelines for referring cases to appropriate state agencies for investigation, prosecution, or other disposition to enhance deterrence of fraud, waste, abuse, or other violations of state or federal law, including a violation of Chapter 102, Occupations Code, in the programs and maximize the imposition of penalties, the recovery of money, and the successful prosecution of cases;

(2) the office to refer each case of suspected covered entity fraud, waste, or abuse to the attorney general not later than the 20th business day after the date the office determines that the existence of fraud, waste, or abuse is reasonably indicated;

(3) the attorney general to take appropriate action in response to each case referred to the attorney general, including the direct initiation of prosecution with the consent of the appropriate local district or county attorney, direct initiation of civil litigation, referral to an appropriate United States attorney, district attorney, or county attorney, and referral to a collections agency for initiation of civil litigation or other appropriate action;

(4) the office to keep detailed records for cases processed by the office or the attorney general, including information on the total number of cases processed and, for each case:

(A) the agency and division to which the case is referred for investigation;

(B) the date on which the case is referred; and

(C) the nature of the suspected fraud, waste, or abuse;

(5) the office to notify each appropriate division of the attorney general's office of each case referred by the office;

(6) the attorney general to ensure that information relating to each case investigated by the attorney general is available to each division of the attorney general's office with responsibility for investigating suspected fraud, waste, or abuse;

(7) the attorney general to notify the office of each case the attorney general declines to prosecute or prosecutes unsuccessfully;

(8) representatives of the office and of the attorney general to meet not less than quarterly to share case information and determine the appropriate agency and division to investigate each case; and

(9) the office and the attorney general to submit information requested by the comptroller about each resolved case for the comptroller's use in improving fraud detection.

(c) With respect to Medicaid fraud, in addition to the requirements under Subsection (b), the memorandum of understanding must:

(1) ensure that barriers to direct fraud referrals to the office of the attorney general's Medicaid fraud control unit or unreasonable impediments to communication between Medicaid agency employees and the Medicaid fraud control unit are not imposed; and

(2) include procedures to facilitate the referral of cases directly to the attorney general.

Sec. 422.164. EXCHANGE OF INFORMATION. An exchange of information under this subchapter between the attorney general and the office or any other state agency does not affect whether the information is subject to disclosure under Chapter 552.

Sec. 422.165. SEMIANNUAL REPORT. (a) The office and the attorney general shall jointly prepare and submit a semiannual report to the governor, lieutenant governor, speaker of the house of representatives, state auditor, and comptroller on:

(1) the activities of the attorney general and the office in detecting and preventing fraud, waste, and abuse under any state or federally funded program implemented or administered by a state agency that is reviewed by the office under this chapter; and

(2) the activities of the office during the fiscal year, including separate descriptions of each major investigation, audit, review, fraud prevention effort, and agency assistance effort completed during the fiscal year.

(b) The report may be consolidated with any other report relating to the same subject matter the office or the attorney general is required to submit under other law.

Sec. 422.166. ASSESSMENT AND COLLECTION OF CERTAIN FEES AND COSTS. (a) The office and the attorney general may not assess or collect investigation or attorney's fees on behalf of any state agency unless the attorney general or other state agency collects a penalty, restitution, or other reimbursement payment to this state.

(b) A district attorney, county attorney, municipal attorney, or private collection agency may collect and retain:

(1) costs associated with a case referred to the government attorney or private collection agency in accordance with procedures adopted under this section; and

(2) 20 percent of the amount of the penalty, restitution, or other reimbursement payment collected.

Sec. 422.167. ASSISTING INVESTIGATIONS BY ATTORNEY GENERAL. (a) The office and the attorney general shall execute a memorandum of understanding under which the office shall provide investigative support, as required, to the attorney general in connection with cases under Subchapter B, Chapter 36, Human Resources Code. Under the memorandum of understanding, the office shall assist in performing preliminary investigations and ongoing investigations for actions involving the attorney general under Chapter 36, Human Resources Code.

(b) The memorandum of understanding must:

(1) specify the type, scope, and format of the investigative support provided to the attorney general under this section; and

(2) ensure that barriers to direct fraud referrals to the state's Medicaid fraud control unit by Medicaid agencies or unreasonable impediments to communication between Medicaid agency employees and this state's Medicaid fraud control unit are not imposed.

Sec. 422.168. COOPERATION AND COORDINATION WITH STATE AUDITOR. (a) The state auditor may, on request of the state inspector general or a state agency inspector general, provide appropriate information or other assistance to the state inspector general or office, as determined by the state auditor.

(b) The state inspector general or a state agency inspector general may meet with the state auditor's office to coordinate a review conducted under this subchapter, share information, or schedule work plans.

(c) The state auditor is entitled to access all information maintained by the state inspector general or a state agency inspector general, including vouchers, electronic data, internal records, and information obtained from a state agency or covered entity subject to Section 422.162.

(d) Any information obtained or provided by the state auditor under this section is confidential and not subject to disclosure under Chapter 552.

Sec. 422.169. PERIODIC REPORTING TO STATE AUDITOR AND GOVERNOR REQUIRED. The state inspector general shall timely inform the state auditor and the governor of the initiation of a review of a state agency program by the state inspector general or a state agency inspector general and the ongoing status of each review by the state inspector general or a state agency inspector general.

Sec. 422.170. FLAGRANT VIOLATIONS; IMMEDIATE REPORT. The state inspector general or a state agency inspector general shall immediately report to the governor's general counsel and the state auditor a particularly serious or flagrant problem relating to the administration of a program, operation of a state agency program, or interference with a review by the state inspector general or a state agency inspector general.

SECTION 2. Section 531.001, Government Code, is amended by adding Subdivision (4-a) to read as follows:

(4-a) "Office of state inspector general" means the office of state inspector general established under Chapter 422.

SECTION 3. Subsection (c), Section 531.008, Government Code, is amended to read as follows:

(c) The executive commissioner shall establish the following divisions and offices within the commission:

(1) the eligibility services division to make eligibility determinations for services provided through the commission or a health and human services agency related to:

(A) the child health plan program;

(B) the financial assistance program under Chapter 31, Human Resources Code;

(C) the medical assistance program under Chapter 32, Human Resources Code;

(D) the nutritional assistance programs under Chapter 33, Human Resources Code;

(E) long-term care services, as defined by Section 22.0011, Human Resources Code;

(F) community-based support services identified or provided in accordance with Section 531.02481; and

(G) other health and human services programs, as appropriate;

(2) [the office of inspector general to perform fraud and abuse investigation and enforcement functions as provided by Subchapter C and other law;

[(3)] the office of the ombudsman to:

(A) provide dispute resolution services for the commission and the health and human services agencies; and

(B) perform consumer protection functions related to health and human services;

(3) [(4)] a purchasing division as provided by Section 531.017; and

(4) [(5)] an internal audit division to conduct a program of internal auditing in accordance with [Government Code,] Chapter 2102.

SECTION 4. Section 531.105, Government Code, is amended to read as follows:

Sec. 531.105. FRAUD DETECTION TRAINING. (a) The office of state inspector general [commission] shall develop and implement a program to provide annual training to contractors who process Medicaid claims and appropriate staff of the commission and other health and human services agencies [the Texas Department of Health and the Texas Department of Human Services] in identifying potential cases of fraud, waste, or abuse under the state Medicaid program. The training provided to the contractors and staff must include clear criteria that specify:

(1) the circumstances under which a person should refer a potential case to the office [commission]; and

(2) the time by which a referral should be made.

(b) The commission and other health and human services agencies [The Texas Department of Health and the Texas Department of Human Services], in cooperation with the office of state inspector general [commission], shall periodically set a goal of the number of potential cases of fraud, waste, or abuse under the state Medicaid program that each agency will attempt to identify and refer to the office [commission]. The office [commission] shall include information on the agencies' goals and the success of each agency in meeting the agency's goal in the report required by Section 422.165 [531.103(c)].

SECTION 5. Subsections (a), (b), and (d) through (g), Sections 531.106, Government Code, are amended to read as follows:

(a) The office of state inspector general [commission] shall use learning or neural network technology to identify and deter fraud in the Medicaid program throughout this state.

(b) The office of state inspector general [commission] shall contract with a private or public entity to develop and implement the technology. The office [commission] may require the entity it contracts with to install and operate the technology at locations specified by the office [commission], including the office of state inspector general's [commission] offices.

(d) The office of state inspector general [commission] shall require each health and human services agency that performs any aspect of the state Medicaid program to participate in the implementation and use of the technology.

(e) The office of state inspector general [commission] shall maintain all information necessary to apply the technology to claims data covering a period of at least two years.

(f) The office of state inspector general [commission] shall investigate [refer] cases identified by the technology and shall refer cases to the [commission's office of investigations and enforcement or the office of the] attorney general for prosecution, as appropriate.

(g) Each month, the learning or neural network technology implemented under this section must match bureau of vital statistics death records with Medicaid claims filed by a provider. If the office of state inspector general [commission] determines that a provider has filed a claim for services provided to a person after the person's date of death, as determined by the bureau of vital statistics death records, the office [commission] shall investigate [refer] the case [for investigation to the commission's office of investigations and enforcement].

SECTION 6. Section 531.1061, Government Code, is amended to read as follows:

Sec. 531.1061. FRAUD INVESTIGATION TRACKING SYSTEM. (a) The office of state inspector general [commission] shall use an automated fraud investigation tracking system [through the commission's office of investigations and enforcement] to monitor the progress of an investigation of suspected fraud, waste, abuse, or insufficient quality of care under the state Medicaid program.

(b) For each case of suspected fraud, waste, abuse, or insufficient quality of care identified by the learning or neural network technology required under Section 531.106, the automated fraud investigation tracking system must:

(1) receive electronically transferred records relating to the identified case from the learning or neural network technology;

(2) record the details and monitor the status of an investigation of the identified case, including maintaining a record of the beginning and completion dates for each phase of the case investigation;

(3) generate documents and reports related to the status of the case investigation; and

(4) generate standard letters to a provider regarding the status or outcome of an investigation.

(c) The office of state inspector general [commission] shall require each health and human services agency that performs any aspect of the state Medicaid program to participate in the implementation and use of the automated fraud investigation tracking system.

SECTION 7. Subsection (a), Section 531.1062, Government Code, is amended to read as follows:

(a) The office of state inspector general [commission] shall use an automated recovery monitoring system to monitor the collections process for a settled case of fraud, waste, abuse, or insufficient quality of care under the state Medicaid program.

SECTION 8. Subsections (a), (b), and (f), Section 531.107, Government Code, are amended to read as follows:

(a) The Medicaid and Public Assistance Fraud Oversight Task Force advises and assists the [commission and the commission's] office of state inspector general [of investigations and enforcement] in improving the efficiency of fraud investigations and collections.

(b) The task force is composed of a representative of the:

(1) attorney general's office, appointed by the attorney general;

(2) comptroller's office, appointed by the comptroller;

(3) Department of Public Safety, appointed by the public safety director;

(4) state auditor's office, appointed by the state auditor;

(5) office of state inspector general, appointed by the state inspector general [commission, appointed by the commissioner of health and human services];

(6) [Texas] Department of Aging and Disability [Human] Services, appointed by the commissioner of aging and disability [human] services;

(7) Texas Department of Insurance, appointed by the commissioner of insurance; and

(8) [Texas] Department of State Health Services, appointed by the commissioner of state [public] health services.

(f) At least once each fiscal quarter, the [commission's] office of state inspector general [of investigations and enforcement] shall provide to the task force:

(1) information detailing:

(A) the number of fraud referrals made to the office and the origin of each referral;

(B) the time spent investigating each case;

(C) the number of cases investigated each month, by program and region;

(D) the dollar value of each fraud case that results in a criminal conviction; and

(E) the number of cases the office rejects and the reason for rejection, by region; and

(2) any additional information the task force requires.

SECTION 9. Section 531.108, Government Code, is amended to read as follows:

Sec. 531.108. FRAUD PREVENTION. (a) [The commission's office of investigations and enforcement shall compile and disseminate accurate information and statistics relating to:

[(1) fraud prevention; and

[(2) post-fraud referrals received and accepted or rejected from the commission's case management system or the case management system of a health and human services agency.

[(b) The commission shall:

[(1) aggressively publicize successful fraud prosecutions and fraud-prevention programs through all available means, including the use of statewide press releases issued in coordination with the Texas Department of Human Services; and

[(2) ensure that a toll-free hotline for reporting suspected fraud in programs administered by the commission or a health and human services agency is maintained and promoted, either by the commission or by a health and human services agency.

[(c)] The office of state inspector general [commission] shall develop a cost-effective method of identifying applicants for public assistance in counties bordering other states and in metropolitan areas selected by the office [commission] who are already receiving benefits in other states. If economically feasible, the office [commission] may develop a computerized matching system.

(b) [(d)] The office of state inspector general [commission] shall:

(1) verify automobile information that is used as criteria for eligibility; and

(2) establish a computerized matching system with the Texas Department of Criminal Justice to prevent an incarcerated individual from illegally receiving public assistance benefits administered by the commission.

(c) [(e)] The office of state inspector general [commission] shall submit to the governor and Legislative Budget Board a semiannual report on the results of computerized matching of office [commission] information with information from neighboring states, if any, and information from the Texas Department of Criminal Justice. The report may be consolidated with any other report relating to the same subject matter the office [commission] is required to submit under other law.

SECTION 10. Section 531.109, Government Code, is amended to read as follows:

Sec. 531.109. SELECTION AND REVIEW OF CLAIMS. (a) The office of state inspector general [commission] shall annually select and review a random, statistically valid sample of all claims for reimbursement under the state Medicaid program, including the vendor drug program, for potential cases of fraud, waste, or abuse.

(b) In conducting the annual review of claims under Subsection (a), the office of state inspector general [commission] may directly contact a recipient by telephone or in person, or both, to verify that the services for which a claim for reimbursement was submitted by a provider were actually provided to the recipient.

(c) Based on the results of the annual review of claims, the office of state inspector general [commission] shall determine the types of claims at which office [commission] resources for fraud, waste, and abuse detection should be primarily directed.

SECTION 11. Subsections (a) and (c) through (f), Section 531.110, Government Code, are amended to read as follows:

(a) The office of state inspector general [commission] shall conduct electronic data matches for a recipient of assistance under the state Medicaid program at least quarterly to verify the identity, income, employment status, and other factors that affect the eligibility of the recipient.

(c) The commission and other health and human services agencies [Texas Department of Human Services] shall cooperate with the office of state inspector general [commission] by providing data or any other assistance necessary to conduct the electronic data matches required by this section.

(d) The office of state inspector general [commission] may contract with a public or private entity to conduct the electronic data matches required by this section.

(e) The office of state inspector general [commission, or a health and human services agency designated by the commission,] by rule shall establish procedures to verify the electronic data matches conducted by the office [commission] under this section. Not later than the 20th day after the date the electronic data match is verified, the commission and other health and human services agencies [Texas Department of Human Services] shall remove from eligibility a recipient who is determined to be ineligible for assistance under the state Medicaid program.

(f) The office of state inspector general [commission] shall report biennially to the legislature the results of the electronic data matching program. The report must include a summary of the number of applicants who were removed from eligibility for assistance under the state Medicaid program as a result of an electronic data match conducted under this section.

SECTION 12. Section 531.111, Government Code, is amended to read as follows:

Sec. 531.111. FRAUD DETECTION TECHNOLOGY. The office of state inspector general [commission] may contract with a contractor who specializes in developing technology capable of identifying patterns of fraud exhibited by Medicaid recipients to:

(1) develop and implement the fraud detection technology; and

(2) determine if a pattern of fraud by Medicaid recipients is present in the recipients' eligibility files maintained by the commission and other health and human services agencies [Texas Department of Human Services].

SECTION 13. Section 531.113, Government Code, is amended to read as follows:

Sec. 531.113. MANAGED CARE ORGANIZATIONS: SPECIAL INVESTIGATIVE UNITS OR CONTRACTS. (a) Each managed care organization that provides or arranges for the provision of health care services to an individual under a government-funded program, including the Medicaid program and the child health plan program, shall:

(1) establish and maintain a special investigative unit within the managed care organization to investigate fraudulent claims and other types of program waste or abuse by recipients and service providers; or

(2) contract with another entity for the investigation of fraudulent claims and other types of program waste or abuse by recipients and service providers.

(b) Each managed care organization subject to this section shall adopt a plan to prevent and reduce fraud, waste, and abuse and annually file that plan with the [commission's] office of inspector general for approval. The plan must include:

(1) a description of the managed care organization's procedures for detecting and investigating possible acts of fraud, waste, or abuse;

(2) a description of the managed care organization's procedures for the mandatory reporting of possible acts of fraud, waste, or abuse to the [commission's] office of inspector general;

(3) a description of the managed care organization's procedures for educating and training personnel to prevent fraud, waste, and abuse;

(4) the name, address, telephone number, and fax number of the individual responsible for carrying out the plan;

(5) a description or chart outlining the organizational arrangement of the managed care organization's personnel responsible for investigating and reporting possible acts of fraud, waste, or abuse;

(6) a detailed description of the results of investigations of fraud, waste, and abuse conducted by the managed care organization's special investigative unit or the entity with which the managed care organization contracts under Subsection (a)(2); and

(7) provisions for maintaining the confidentiality of any patient information relevant to an investigation of fraud, waste, or abuse.

(c) If a managed care organization contracts for the investigation of fraudulent claims and other types of program waste or abuse by recipients and service providers under Subsection (a)(2), the managed care organization shall file with the [commission's] office of inspector general:

(1) a copy of the written contract;

(2) the names, addresses, telephone numbers, and fax numbers of the principals of the entity with which the managed care organization has contracted; and

(3) a description of the qualifications of the principals of the entity with which the managed care organization has contracted.

(d) The [commission's] office of inspector general may review the records of a managed care organization to determine compliance with this section.

(e) The state inspector general [commissioner] shall adopt rules as necessary to accomplish the purposes of this section.

SECTION 14. Subsections (b) and (g), Section 531.114, Government Code, are amended to read as follows:

(b) If after an investigation the office of state inspector general [commission] determines that a person violated Subsection (a), the office [commission] shall:

(1) notify the person of the alleged violation not later than the 30th day after the date the office [commission] completes the investigation and provide the person with an opportunity for a hearing on the matter; or

(2) refer the matter to the appropriate prosecuting attorney for prosecution.

(g) The office of state inspector general [commission] shall adopt rules as necessary to implement this section.

SECTION 15. Section 533.001, Government Code, is amended by adding Subdivision (8) to read as follows:

(8) "State inspector general" means the state inspector general appointed under Chapter 422.

SECTION 16. Subsection (a), Section 533.005, Government Code, is amended to read as follows:

(a) A contract between a managed care organization and the commission for the organization to provide health care services to recipients must contain:

(1) procedures to ensure accountability to the state for the provision of health care services, including procedures for financial reporting, quality assurance, utilization review, and assurance of contract and subcontract compliance;

(2) capitation rates that ensure the cost-effective provision of quality health care;

(3) a requirement that the managed care organization provide ready access to a person who assists recipients in resolving issues relating to enrollment, plan administration, education and training, access to services, and grievance procedures;

(4) a requirement that the managed care organization provide ready access to a person who assists providers in resolving issues relating to payment, plan administration, education and training, and grievance procedures;

(5) a requirement that the managed care organization provide information and referral about the availability of educational, social, and other community services that could benefit a recipient;

(6) procedures for recipient outreach and education;

(7) a requirement that the managed care organization make payment to a physician or provider for health care services rendered to a recipient under a managed care plan not later than the 45th day after the date a claim for payment is received with documentation reasonably necessary for the managed care organization to process the claim, or within a period, not to exceed 60 days, specified by a written agreement between the physician or provider and the managed care organization;

(8) a requirement that the commission, on the date of a recipient's enrollment in a managed care plan issued by the managed care organization, inform the organization of the recipient's Medicaid certification date;

(9) a requirement that the managed care organization comply with Section 533.006 as a condition of contract retention and renewal;

(10) a requirement that the managed care organization provide the information required by Section 533.012 and otherwise comply and cooperate with the [commission's] office of state inspector general;

(11) a requirement that the managed care organization's usages of out-of-network providers or groups of out-of-network providers may not exceed limits for those usages relating to total inpatient admissions, total outpatient services, and emergency room admissions determined by the commission;

(12) if the commission finds that a managed care organization has violated Subdivision (11), a requirement that the managed care organization reimburse an out-of-network provider for health care services at a rate that is equal to the allowable rate for those services, as determined under Sections 32.028 and 32.0281, Human Resources Code;

(13) a requirement that the organization use advanced practice nurses in addition to physicians as primary care providers to increase the availability of primary care providers in the organization's provider network;

(14) a requirement that the managed care organization reimburse a federally qualified health center or rural health clinic for health care services provided to a recipient outside of regular business hours, including on a weekend day or holiday, at a rate that is equal to the allowable rate for those services as determined under Section 32.028, Human Resources Code, if the recipient does not have a referral from the recipient's primary care physician; and

(15) a requirement that the managed care organization develop, implement, and maintain a system for tracking and resolving all provider appeals related to claims payment, including a process that will require:

(A) a tracking mechanism to document the status and final disposition of each provider's claims payment appeal;

(B) the contracting with physicians who are not network providers and who are of the same or related specialty as the appealing physician to resolve claims disputes related to denial on the basis of medical necessity that remain unresolved subsequent to a provider appeal; and

(C) the determination of the physician resolving the dispute to be binding on the managed care organization and provider.

SECTION 17. Subsections (a), (b), (c), and (e), Section 533.012, Government Code, are amended to read as follows:

(a) Each managed care organization contracting with the commission under this chapter shall submit to the office of state inspector general [commission]:

(1) a description of any financial or other business relationship between the organization and any subcontractor providing health care services under the contract;

(2) a copy of each type of contract between the organization and a subcontractor relating to the delivery of or payment for health care services;

(3) a description of the fraud control program used by any subcontractor that delivers health care services; and

(4) a description and breakdown of all funds paid to the managed care organization, including a health maintenance organization, primary care case management, and an exclusive provider organization, necessary for the office [commission] to determine the actual cost of administering the managed care plan.

(b) The information submitted under this section must be submitted in the form required by the office of state inspector general [commission] and be updated as required by the office [commission].

(c) The office [commission's office] of state inspector general [investigations and enforcement] shall review the information submitted under this section as appropriate in the investigation of fraud in the Medicaid managed care program. The comptroller may review the information in connection with the health care fraud study conducted by the comptroller.

(e) Information submitted to the office of state inspector general [commission] under Subsection (a)(1) is confidential and not subject to disclosure under Chapter 552[, Government Code].

SECTION 18. Subsection (b), Section 2054.376, Government Code, is amended to read as follows:

(b) This subchapter does not apply to:

(1) the Department of Public Safety's use for criminal justice or homeland security purposes of a federal database or network;

(2) a Texas equivalent of a database or network described by Subdivision (1) that is managed by the Department of Public Safety;

(3) the uniform statewide accounting system, as that term is used in Subchapter C, Chapter 2101;

(4) the state treasury cash and treasury management system; [or]

(5) a database or network managed by the comptroller to:

(A) collect and process multiple types of taxes imposed by the state; or

(B) manage or administer fiscal, financial, revenue, and expenditure activities of the state under Chapter 403 and Chapter 404; or

(6) the office of state inspector general's use, for criminal justice and statutorily mandated confidentiality purposes, of a federal or state database or network.

SECTION 19. Subsection (b), Section 21.014, Human Resources Code, is amended to read as follows:

(b) The [person employed by the department as] inspector general shall make reports to and consult with the chairman of the board regarding:

(1) the selection of internal audit topics;

(2) the establishment of internal audit priorities; and

(3) the findings of each regular or special internal audit initiative.

SECTION 20. Section 32.003, Human Resources Code, is amended by adding Subdivision (5) to read as follows:

(5) "Office of state inspector general" means the office of state inspector general established under Chapter 422, Government Code.

SECTION 21. Section 32.0291, Human Resources Code, is amended to read as follows:

Sec. 32.0291. PREPAYMENT REVIEWS AND POST PAYMENT HOLDS. (a) Notwithstanding any other law, the office of state inspector general [department] may:

(1) perform a prepayment review of a claim for reimbursement under the medical assistance program to determine whether the claim involves fraud, waste, or abuse; and

(2) as necessary to perform that review, withhold payment of the claim for not more than five working days without notice to the person submitting the claim.

(b) Notwithstanding any other law, the office of state inspector general [department] may impose a postpayment hold on payment of future claims submitted by a provider if the office [department] has reliable evidence that the provider has committed fraud, waste, abuse, or wilful misrepresentation regarding a claim for reimbursement under the medical assistance program. The office [department] must notify the provider of the postpayment hold not later than the fifth working day after the date the hold is imposed.

(c) On timely written request by a provider subject to a postpayment hold under Subsection (b), the office of state inspector general [department] shall file a request with the State Office of Administrative Hearings for an expedited administrative hearing regarding the hold. The provider must request an expedited hearing under this subsection not later than the 10th day after the date the provider receives notice from the office [department] under Subsection (b). The office [department] shall discontinue the hold unless the office [department] makes a prima facie showing at the hearing that the evidence relied on by the office [department] in imposing the hold is relevant, credible, and material to the issue of fraud, waste, abuse, or wilful misrepresentation.

(d) The state inspector general [department] shall adopt rules that allow a provider subject to a postpayment hold under Subsection (b) to seek an informal resolution of the issues identified by the office [department] in the notice provided under that subsection. A provider must seek an informal resolution under this subsection not later than the deadline prescribed by Subsection (c). A provider's decision to seek an informal resolution under this subsection does not extend the time by which the provider must request an expedited administrative hearing under Subsection (c). However, a hearing initiated under Subsection (c) shall be stayed at the office's [department's] request until the informal resolution process is completed.

SECTION 22. Section 32.032, Human Resources Code, is amended to read as follows:

Sec. 32.032. PREVENTION AND DETECTION OF FRAUD AND ABUSE. The state inspector general [department] shall adopt reasonable rules for minimizing the opportunity for fraud and abuse, for establishing and maintaining methods for detecting and identifying situations in which a question of fraud or abuse in the program may exist, and for referring cases where fraud or abuse appears to exist to the appropriate law enforcement agencies for prosecution.

SECTION 23. Subsections (a) through (d), Section 32.0321, Human Resources Code, are amended to read as follows:

(a) The office of state inspector general [department] by rule may require each provider of medical assistance in a provider type that has demonstrated significant potential for fraud or abuse to file with the office [department] a surety bond in a reasonable amount. The office [department] by rule shall require a provider of medical assistance to file with the office [department] a surety bond in a reasonable amount if the office [department] identifies a pattern of suspected fraud or abuse involving criminal conduct relating to the provider's services under the medical assistance program that indicates the need for protection against potential future acts of fraud or abuse.

(b) The bond under Subsection (a) must be payable to the office of state inspector general [department] to compensate the office [department] for damages resulting from or penalties or fines imposed in connection with an act of fraud or abuse committed by the provider under the medical assistance program.

(c) Subject to Subsection (d) or (e), the office of state inspector general [department] by rule may require each provider of medical assistance that establishes a resident's trust fund account to post a surety bond to secure the account. The bond must be payable to the office [department] to compensate residents of the bonded provider for trust funds that are lost, stolen, or otherwise unaccounted for if the provider does not repay any deficiency in a resident's trust fund account to the person legally entitled to receive the funds.

(d) The office of state inspector general [department] may not require the amount of a surety bond posted for a single facility provider under Subsection (c) to exceed the average of the total average monthly balance of all the provider's resident trust fund accounts for the 12-month period preceding the bond issuance or renewal date.

SECTION 24. Section 32.0322, Human Resources Code, is amended to read as follows:

Sec. 32.0322. CRIMINAL HISTORY RECORD INFORMATION. (a) The office of state inspector general and the department may obtain from any law enforcement or criminal justice agency the criminal history record information that relates to a provider under the medical assistance program or a person applying to enroll as a provider under the medical assistance program.

(b) The office of state inspector general [department] by rule shall establish criteria for revoking a provider's enrollment or denying a person's application to enroll as a provider under the medical assistance program based on the results of a criminal history check.

SECTION 25. Subsection (d), Section 32.070, Human Resources Code, is amended to read as follows:

(d) This section does not apply to a computerized audit conducted using the Medicaid Fraud Detection Audit System or an audit or investigation of fraud and abuse conducted by the Medicaid fraud control unit of the office of the attorney general, the office of the state auditor, the office of state [the] inspector general, or the Office of Inspector General in the United States Department of Health and Human Services.

SECTION 26. Subsection (e), Section 33.015, Human Resources Code, is amended to read as follows:

(e) The department shall require a person exempted under this section from making a personal appearance at department offices to provide verification of the person's entitlement to the exemption on initial eligibility certification and on each subsequent periodic eligibility recertification. If the person does not provide verification and the department considers the verification necessary to protect the integrity of the food stamp program, the department shall initiate a fraud referral to the [department's] office of state inspector general.

SECTION 27. Section 20.038, Business & Commerce Code, is amended to read as follows:

Sec. 20.038. EXEMPTION FROM SECURITY FREEZE. A security freeze does not apply to a consumer report provided to:

(1) a state or local governmental entity, including a law enforcement agency or court or private collection agency, if the entity, agency, or court is acting under a court order, warrant, subpoena, or administrative subpoena;

(2) a child support agency as defined by Section 101.004, Family Code, acting to investigate or collect child support payments or acting under Title IV-D of the Social Security Act (42 U.S.C. Section 651 et seq.);

(3) the office of state inspector general [Health and Human Services Commission] acting to investigate fraud, waste, or abuse in state agencies under Chapter 422, Government Code, or other law [under Section 531.102, Government Code];

(4) the comptroller acting to investigate or collect delinquent sales or franchise taxes;

(5) a tax assessor-collector acting to investigate or collect delinquent ad valorem taxes;

(6) a person for the purposes of prescreening as provided by the Fair Credit Reporting Act (15 U.S.C. Section 1681 et seq.), as amended;

(7) a person with whom the consumer has an account or contract or to whom the consumer has issued a negotiable instrument, or the person's subsidiary, affiliate, agent, assignee, prospective assignee, or private collection agency, for purposes related to that account, contract, or instrument;

(8) a subsidiary, affiliate, agent, assignee, or prospective assignee of a person to whom access has been granted under Section 20.037(b);

(9) a person who administers a credit file monitoring subscription service to which the consumer has subscribed;

(10) a person for the purpose of providing a consumer with a copy of the consumer's report on the consumer's request;

(11) a check service or fraud prevention service company that issues consumer reports:

(A) to prevent or investigate fraud; or

(B) for purposes of approving or processing negotiable instruments, electronic funds transfers, or similar methods of payment;

(12) a deposit account information service company that issues consumer reports related to account closures caused by fraud, substantial overdrafts, automated teller machine abuses, or similar negative information regarding a consumer to an inquiring financial institution for use by the financial institution only in reviewing a consumer request for a deposit account with that institution; or

(13) a consumer reporting agency that:

(A) acts only to resell credit information by assembling and merging information contained in a database of another consumer reporting agency or multiple consumer reporting agencies; and

(B) does not maintain a permanent database of credit information from which new consumer reports are produced.

SECTION 28. Article 2.12, Code of Criminal Procedure, is amended to read as follows:

Art. 2.12. WHO ARE PEACE OFFICERS. The following are peace officers:

(1) sheriffs, their deputies, and those reserve deputies who hold a permanent peace officer license issued under Chapter 1701, Occupations Code;

(2) constables, deputy constables, and those reserve deputy constables who hold a permanent peace officer license issued under Chapter 1701, Occupations Code;

(3) marshals or police officers of an incorporated city, town, or village, and those reserve municipal police officers who hold a permanent peace officer license issued under Chapter 1701, Occupations Code;

(4) rangers and officers commissioned by the Public Safety Commission and the Director of the Department of Public Safety;

(5) investigators of the district attorneys', criminal district attorneys', and county attorneys' offices;

(6) law enforcement agents of the Texas Alcoholic Beverage Commission;

(7) each member of an arson investigating unit commissioned by a city, a county, or the state;

(8) officers commissioned under Section 37.081, Education Code, or Subchapter E, Chapter 51, Education Code;

(9) officers commissioned by the General Services Commission;

(10) law enforcement officers commissioned by the Parks and Wildlife Commission;

(11) airport police officers commissioned by a city with a population of more than 1.18 million that operates an airport that serves commercial air carriers;

(12) airport security personnel commissioned as peace officers by the governing body of any political subdivision of this state, other than a city described by Subdivision (11), that operates an airport that serves commercial air carriers;

(13) municipal park and recreational patrolmen and security officers;

(14) security officers and investigators commissioned as peace officers by the comptroller;

(15) officers commissioned by a water control and improvement district under Section 49.216, Water Code;

(16) officers commissioned by a board of trustees under Chapter 54, Transportation Code;

(17) investigators commissioned by the Texas Medical [State] Board [of Medical Examiners];

(18) officers commissioned by the board of managers of the Dallas County Hospital District, the Tarrant County Hospital District, or the Bexar County Hospital District under Section 281.057, Health and Safety Code;

(19) county park rangers commissioned under Subchapter E, Chapter 351, Local Government Code;

(20) investigators employed by the Texas Racing Commission;

(21) officers commissioned under Chapter 554, Occupations Code;

(22) officers commissioned by the governing body of a metropolitan rapid transit authority under Section 451.108, Transportation Code, or by a regional transportation authority under Section 452.110, Transportation Code;

(23) investigators commissioned by the attorney general under Section 402.009, Government Code;

(24) security officers and investigators commissioned as peace officers under Chapter 466, Government Code;

(25) an officer employed by the [Texas] Department of State Health Services under Section 431.2471, Health and Safety Code;

(26) officers appointed by an appellate court under Subchapter F, Chapter 53, Government Code;

(27) officers commissioned by the state fire marshal under Chapter 417, Government Code;

(28) an investigator commissioned by the commissioner of insurance under Section 701.104 [Article 1.10D], Insurance Code;

(29) apprehension specialists commissioned by the Texas Youth Commission as officers under Section 61.0931, Human Resources Code;

(30) officers appointed by the executive director of the Texas Department of Criminal Justice under Section 493.019, Government Code;

(31) investigators commissioned by the Commission on Law Enforcement Officer Standards and Education under Section 1701.160, Occupations Code;

(32) commission investigators commissioned by the Texas [Commission on] Private Security Board under Section 1702.061(f), Occupations Code;

(33) the fire marshal and any officers, inspectors, or investigators commissioned by an emergency services district under Chapter 775, Health and Safety Code; [and]

(34) officers commissioned by the State Board of Dental Examiners under Section 254.013, Occupations Code, subject to the limitations imposed by that section; and

(35) officers commissioned by the office of state inspector general established under Chapter 422, Government Code.

SECTION 29. The following sections of the Government Code are repealed:

(1) Section 531.102;

(2) Section 531.1021;

(3) Section 531.103; and

(4) Section 531.104.

SECTION 30. (a) The repeal by this Act of Section 531.102, Government Code, does not affect the validity of a complaint, investigation, or other proceeding initiated under that section before the effective date of this Act. A complaint, investigation, or other proceeding initiated under that section is continued in accordance with the changes in law made by this Act.

(b) The repeal by this Act of Section 531.1021, Government Code, does not affect the validity of a subpoena issued under that section before the effective date of this Act. A subpoena issued under that section before the effective date of this Act is governed by the law that existed when the subpoena was issued, and the former law is continued in effect for that purpose.

SECTION 31. (a) The office of state inspector general under Chapter 422, Government Code, as added by this Act, is created on the effective date of this Act.

(b) On January 1, 2008, the office of inspector general of the Health and Human Services Commission created under Section 531.102, Government Code, as that section existed before amendment by this Act, is abolished.

(c) Not later than January 1, 2008:

(1) all powers, duties, obligations, rights, contracts, records, personal property, unspent appropriations, state and federal funds, including overhead costs, support costs, and lease or colocation costs, of the office of inspector general of the Health and Human Services Commission shall be transferred, as consistent with this Act, to the office of state inspector general;

(2) all personnel, vacant full-time equivalent positions, and assets assigned, as of the effective date of this Act, to the office of inspector general of the Health and Human Services Commission or engaged in the performance of the functions of that office shall be transferred, as consistent with this Act, to the office of state inspector general;

(3) each state agency for which a state agency inspector general is designated by the state inspector general on or before October 1, 2007, shall transfer to the office of state inspector general, as consistent with this Act, all personnel, vacant full-time equivalent positions, and assets engaged in the performance of or the support of agency functions relating to the detection, investigation, and prevention of fraud, waste, and abuse in the implementation or administration of state or federally funded programs;

(4) all state and federal funding, including funding for overhead costs, support costs, and lease or colocation lease costs, for the functions to be transferred to the office of state inspector general shall be reallocated to that office; and

(5) for purposes of federal single state agency funding requirements, any federal funds that may not be appropriated directly to the office of state inspector general shall be transferred from the single state agency receiving the funds to the office of state inspector general if the funds are intended for a function performed by that office.

(d) All future federal funding to be allocated to the office of inspector general of the Health and Human Services Commission, including drawing funds and transferring funds, shall be renegotiated by the state inspector general for reallocation to the office of state inspector general.

(e) A state agency for which a state agency inspector general is designated by the state inspector general after October 1, 2007, shall, not later than the 90th day after the date of the designation, transfer to the office of state inspector general, as consistent with this Act, all personnel, vacant full-time equivalent positions, and assets engaged in the performance of or the support of agency functions relating to the detection, investigation, and prevention of fraud, waste, and abuse in the implementation or administration of state or federally funded programs.

SECTION 32. (a) The Health and Human Services Commission shall take all action necessary to provide for the orderly transfer of the assets and responsibilities of the commission's office of inspector general to the office of state inspector general. In the event a transfer is not completed by the date required under this Act, all possible efforts shall be made to promptly conclude the transfer.

(b) A rule or form adopted by the office of inspector general of the Health and Human Services Commission is a rule or form of the office of state inspector general and remains in effect until changed by the state inspector general.

(c) A reference in law or administrative rule to the office of inspector general of the Health and Human Services Commission means the office of state inspector general.

SECTION 33. (a) This section does not prohibit a person serving as inspector general of the Health and Human Services Commission under Subsection (a-1), Section 531.102, Government Code, immediately before the effective date of this Act, from being appointed under Chapter 422, Government Code, as added by this Act, if the person has the qualifications required under that chapter.

(b) As soon as possible after the earlier of the expiration date of the term of the inspector general of the Health and Human Services Commission under Section 531.102, Government Code, or the date the position of inspector general under that law otherwise becomes vacant, the governor shall appoint the state inspector general under Chapter 422, Government Code, as added by this Act, to an initial term expiring February 1, 2009.

SECTION 34. The abolition by this Act of the office of inspector general of the Health and Human Services Commission under Section 531.102, Government Code, as that section existed before repeal by this Act, does not affect the validity of an action taken by that office before it is abolished.

SECTION 35. If, before implementing any provision of this Act, a state agency or the state inspector general appointed under Chapter 422, Government Code, as added by this Act, determines that a waiver or authorization from a federal agency is necessary for implementation of that provision, the agency affected by the provision or the state inspector general shall request the waiver or authorization and may delay implementing that provision until the waiver or authorization is granted.

SECTION 36. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2007.

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