By: Crownover H.B. No. 4307

A BILL TO BE ENTITLED

AN ACT

relating to the creation of the office of inspector within the State Auditor's Office and the appointment of deputy inspectors general at the Health and Human Services Commission, Texas Youth Commission, Texas Department of Criminal Justice, Texas Education Agency, and Texas Department of Transportation; providing penalties.

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

SECTION 1. Section 321.001, Government Code, is designated as Subchapter A, Chapter 321, Government Code, and a heading is added to that subchapter to read as follows:

SUBCHAPTER A. GENERAL PROVISIONS

SECTION 2. Sections 321.002 through 321.023, Government Code, are designated as Subchapter B, Chapter 321, Government Code, and a heading is added to that subchapter to read as follows:

SUBCHAPTER B. STATE AUDITOR

SECTION 3. Chapter 321, Government Code, is amended by adding Subchapter C to read as follows:

SUBCHAPTER C. OFFICE OF INSPECTOR GENERAL DIVISION

Sec. 321.101. DEFINITIONS. In this subchapter:

(1) "Agency" means a state agency subject to this subchapter under Section 321.102.

(2) "Commission" means the Health and Human Services Commission.

(3) "Division" means the office of inspector general division of the state auditor's office.

(4) "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.

(5) "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 physician or other individual licensed under state law to practice the individual's profession, either as an employee or in the individual's own capacity;

(ii) a provider; 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.

(6) "Hold on payment" means the temporary denial of reimbursement under a federal program for items or services furnished by a specified provider.

(7) "Inspector general" means the inspector general appointed under Section 321.109.

(8) "Program exclusion" means the suspension of a provider's authorization under a federal program to request reimbursement for items or services furnished by that provider.

(9) "Provider" means a person, firm, partnership, corporation, agency, association, institution, or other entity that was or is approved by the 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.

(10) "Review" includes an audit, inspection, investigation, evaluation, or similar activity.

(11) "State funds" or "state money" includes federal funds or money received and appropriated by the state or for which the state has oversight responsibility.

Sec. 321.102. APPLICABILITY. (a) Except as provided by Subsections (c) and (d), this subchapter applies only to the:

(1) Health and Human Services Commission;

(2) Texas Youth Commission;

(3) Texas Department of Criminal Justice;

(4) Texas Education Agency; and

(5) Texas Department of Transportation.

(b) A state agency may not establish an office of inspector general without specific legislative authorization.

(c) A health and human services agency as defined by Section 531.001 is an agency to which this subchapter applies for purposes related to the review and investigatory authority of the division.

(d) A state agency that receives federal stimulus money is an agency to which this subchapter applies for purposes of Section 321.122.

Sec. 321.103. REFERENCE IN OTHER LAW. (a) Notwithstanding any other provision of law, a reference in law or rule to an agency's office of inspector general means, for an agency to which this subchapter applies, the office of inspector general division of the state auditor's office.

(b) Notwithstanding any other provision of law, a reference in law or rule to the commission's office of investigations and enforcement or the commission's office of inspector general means the office of inspector general division of the state auditor's office.

Sec. 321.104. INTERFERENCE PROHIBITED. The governor, the legislature or a committee of the legislature, or a state agency may not prevent the inspector general or a deputy inspector general from initiating, performing, or completing an investigation, audit, review, or any oversight, compliance, or enforcement activity pursued by the division under this subchapter or other law.

Sec. 321.105. OFFICE OF INSPECTOR GENERAL. (a) The office of inspector general is a division of the state auditor's office.

(b) The division is governed by the inspector general.

(c) The division shall have its principal office and headquarters in the state auditor's office in Austin.

Sec. 321.106. INDEPENDENCE OF DIVISION. Except as otherwise provided by this subchapter, the division and inspector general operate independently of any other agency.

Sec. 321.107. ADMINISTRATIVE ATTACHMENT. A person designated by the inspector general to serve as the deputy inspector general for an agency, together with division staff assigned to the deputy inspector general, are administratively attached to the assigned agency. The assigned agency shall provide to the division personnel administrative support services.

Sec. 321.108. SERVICE LEVEL AGREEMENT. (a) The division and each state agency to which this subchapter applies shall enter into a service level agreement that establishes the performance standards and deliverables with regard to administrative support provided to the division by the agency.

(b) The service level agreement must be reviewed at least annually to ensure that services and deliverables are provided in accordance with the agreement.

Sec. 321.109. APPOINTMENT. (a) The governor, with the advice and consent of the senate, shall appoint an inspector general to serve as director of the division.

(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. 321.110. TERM; VACANCY. (a) The inspector general serves a two-year term that expires on February 1 of each odd-numbered year.

(b) The governor shall fill a vacancy in the office of inspector general for the unexpired term.

Sec. 321.111. ELIGIBILITY. (a) A person is not eligible for appointment as inspector general or designation as a deputy inspector general if the person or the person's spouse:

(1) is an officer or paid consultant of a business entity or other organization that holds a license, certificate of authority, or other authorization from an agency to which this subchapter applies or that receives funds from an agency to which this subchapter applies;

(2) owns or controls, directly or indirectly, more than a 10 percent interest in a business entity or other organization receiving funds from an agency to which this subchapter applies; or

(3) uses or receives a substantial amount of tangible goods or funds from an agency to which this subchapter applies, other than compensation or reimbursement authorized by law.

(b) A person is not eligible to serve as inspector general or deputy inspector general if the person or the person's spouse is required to register as a lobbyist under Chapter 305 because of the person's or spouse's activities for compensation related to the operation of an agency to which this subchapter applies.

Sec. 321.112. CONFLICT OF INTEREST. (a) The inspector general may not serve as an ex officio member on the governing body of a governmental entity.

(b) The inspector general may not have a financial interest in the transactions of the division, the state auditor's office, or an agency to which this subchapter applies.

(c) The inspector general and the deputy inspector general designated for the commission may not have a financial interest in the transactions of a provider.

Sec. 321.113. REMOVAL. The governor, with the advice and consent of the senate, may remove the inspector general from office as provided by Section 9, Article XV, Texas Constitution.

Sec. 321.114. DEPUTY INSPECTORS GENERAL. (a) The inspector general, in consultation with the office of the governor and as necessary to implement this subchapter, shall designate persons to serve as deputy inspectors general for each agency to which this subchapter applies.

(b) A deputy inspector general shall report to and perform duties as directed by the inspector general.

(c) Each agency to which this subchapter applies shall provide to the agency's designated deputy inspector general facilities and support services, including suitable office space, furniture, computer and communications equipment, administrative support, and salary and benefits as provided by the General Appropriations Act.

Sec. 321.115. PEACE OFFICERS. (a) The division may employ and commission peace officers to assist the inspector general in carrying out the duties of the division relating to detection, investigation, and prevention of fraud, waste, and abuse in programs at an agency to which this subchapter applies or in programs receiving state or federal funds that are implemented, administered, or overseen by or for the agency.

(b) A commissioned peace officer or otherwise designated law enforcement officer employed by the division is not entitled to supplemental benefits from the law enforcement and custodial officer supplemental retirement fund unless the officer transfers from a position, without a break in service, that qualifies for supplemental retirement benefits from the fund.

Sec. 321.116. EXPERTS. Subject to the availability of funds, the inspector general and deputy inspectors general may contract with certified public accountants, qualified management consultants, or other professional experts as necessary to independently perform the functions of the division.

Sec. 321.117. EMPLOYEES; TRAINING. (a) The inspector general may employ personnel as necessary to implement the duties of the division.

(b) The inspector general shall train division personnel to pursue, efficiently and as necessary, fraud, waste, and abuse cases in programs at an agency to which this subchapter applies or other state or federally funded programs implemented, administered, or overseen by or for the agency.

Sec. 321.118. ASSISTANCE BY AGENCY EMPLOYEES. (a) The inspector general may require employees of an agency to which this subchapter applies to provide assistance to the division in connection with the division's duties relating to the investigation of fraud, waste, and abuse in the provision of services for programs at an agency to which this subchapter applies or state or federally funded programs implemented, administered, or overseen by or for the agency.

(b) The inspector general or the deputy inspector general for the commission may also require employees of any health and human services agency to provide assistance under Subsection (a).

Sec. 321.119. MERIT SYSTEM. (a) The division 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. 321.120. GENERAL RESPONSIBILITIES. (a) The division is responsible for the investigation of fraud, waste, and abuse, as defined in applicable state and federal law, in the provision or funding of services by or for an agency to which this subchapter applies or under a program implemented, administered, or overseen by or for the agency.

(b) The division shall set clear objectives, priorities, and performance standards for the division 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 office of the attorney general in accordance with this subchapter and other applicable law.

Sec. 321.121. GENERAL POWERS. The division has all the powers necessary or appropriate to carry out its responsibilities and functions under this subchapter and other law. In addition to performing functions and duties otherwise provided by law, the division may:

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

(2) audit the use and effectiveness of state or federal funds, including contract and grant funds, administered by a person or an agency to which this subchapter applies;

(3) conduct reviews, investigations, and inspections relating to the funds described by Subdivision (2);

(4) recommend policies promoting economical and efficient administration of the funds described by Subdivision (2) and the prevention and detection of fraud, waste, and abuse in administration of those funds; and

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

Sec. 321.122. FEDERAL STIMULUS MONEY RESPONSIBILITIES. (a) The division has oversight responsibility for any federal stimulus funds provided to this state or a state agency by the federal government.

(b) The division shall monitor:

(1) actions of the federal government related to efforts to promote economic recovery by providing federal funds to the states; and

(2) actions of any state agency that receives federal stimulus funds to prevent fraud, waste, and abuse in the use of the funds.

(c) The division shall study appropriate provisions of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5) and any subsequent federal economic stimulus legislation that may make federal stimulus money available to this state and any federal regulations and executive orders connected to the federal legislation to:

(1) determine the extent to which federal stimulus money is available for the programs of any state agency;

(2) provide oversight for the use of federal stimulus funds by a state agency that receives the funds; and

(3) recommend to the legislature any state legislation necessary to maximize this state's receipt of federal funds.

(d) Notwithstanding Section 321.114, the inspector general shall appoint a deputy inspector general for an agency to which this subchapter applies solely under Section 321.102(d) and this section only if the inspector general determines that the agency receives enough federal stimulus money to warrant the appointment.

Sec. 321.123. HEALTH AND HUMAN SERVICES RESPONSIBILITIES. The division is responsible for:

(1) the investigation of fraud, waste, and abuse in the provision or funding of health or human services by this state;

(2) the enforcement of state law relating to the provision of those services to protect the public; and

(3) the prevention and detection of crime relating to the provision of those services.

Sec. 321.124. RULEMAKING BY INSPECTOR GENERAL. (a) Notwithstanding Section 531.0055(e) and any other law, the inspector general shall adopt the rules necessary to administer the functions of the division, including rules to address the imposition of sanctions and penalties for violations of state or federal law and due process requirements for imposing sanctions and penalties.

(b) A rule, standard, or form adopted by an agency to which this subchapter applies that is necessary to accomplish the duties of the division is considered to also be a rule, standard, or form of the division and remains in effect as a rule, standard, or form of the division until changed by the inspector general.

(c) The rules must include standards for the division 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 office of the attorney general.

Sec. 321.125. STATE AUDITOR AUDITS, INVESTIGATIONS, AND ACCESS TO INFORMATION NOT IMPAIRED. This subchapter or other law related to the operation of the division does not:

(1) take precedence over the authority of the state auditor to conduct audits under this chapter or other law; or

(2) 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. 321.126. EXECUTIVE ORDERS. (a) The governor may issue executive orders directing state agencies to implement recommendations issued by the division for corrective or remedial actions promoting the economical and efficient administration of money and the detection of fraud.

(b) The governor may submit to the lieutenant governor, the speaker of the house of representatives, the state auditor, and the comptroller a report of the executive orders issued under this subchapter and the compliance by state agencies with those orders.

Sec. 321.127. DEFENSE BY ATTORNEY GENERAL. The attorney general shall defend any action brought against the inspector general, a deputy inspector general, or an employee or officer of the division as a result of that person's official act or omission, whether or not the person has terminated service with the division at the time the action is instituted.

Sec. 321.128. INTERAGENCY COORDINATION. (a) The division 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 programs at an agency to which this subchapter applies or in programs receiving state or federal funds that are implemented, administered, or overseen by the agency.

(b) The memorandum of understanding shall require:

(1) the division 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 to maximize the imposition of penalties, the recovery of money, and the successful prosecution of cases;

(2) the division to refer each case of suspected fraud, waste, or abuse to the attorney general not later than the 20th business day after the date the division 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, which action may include 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, a district attorney, or a county attorney, or referral to a collection agency for initiation of civil litigation or other appropriate action;

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

(A) the agency 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 division to notify each appropriate unit of the office of the attorney general of each case referred by the division;

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

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

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

(9) the division 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) An exchange of information under this section between the attorney general and the division or any other state agency does not affect whether the information is subject to disclosure under Chapter 552.

(d) With respect to Medicaid fraud, in addition to the provisions required by Subsection (b), the memorandum of understanding required by this section must also ensure that no barriers to direct fraud referrals to the attorney general's Medicaid fraud control unit or unreasonable impediments to communication between Medicaid agency employees and the Medicaid fraud control unit are imposed and must include procedures to facilitate the referral of cases directly to the attorney general.

Sec. 321.129. INFORMATION AND TECHNOLOGY; PUBLIC INTEREST INFORMATION AND COMPLAINTS. (a) The division may obtain information or technology necessary to enable the division to meet its responsibilities under this subchapter or other law.

(b) The division shall develop and implement policies that provide the public a reasonable opportunity to appear before the division and to speak on any issue under the division's jurisdiction.

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

(d) The division shall keep an information file about each complaint filed with the division relating to a state agency or entity receiving state or federal money and falling under the investigatory jurisdiction of the division.

Sec. 321.130. REVIEW, INVESTIGATION, AND AUDIT AUTHORITY. (a) The inspector general may evaluate any activity or operation of an agency to which this subchapter applies, a provider, if applicable, or a person in this state that is related to the investigation, detection, or prevention of fraud, waste, abuse, or employee misconduct in a program at an agency to which this subchapter applies or in a state or federally funded program implemented, administered, or overseen by or for the agency. A review may include an investigation or other inquiry into a specific act or allegation of, or a specific financial transaction or practice that may involve, impropriety, malfeasance, or nonfeasance in the obligation, spending, receipt, or other use of state or federal money.

(b) The division shall conduct reviews and inspections to protect the public and detect and prevent fraud, waste, and abuse in the provision or funding of services or programs described by Subsection (a).

(c) A state agency or the governing body or governing officer of a state agency may not impair or prohibit the inspector general from initiating or completing a review.

(d) With respect to an agency to which this subchapter applies, the inspector general may audit and review the use and effectiveness of state or federal funds, including contract and grant funds, administered by a person or agency receiving the funds in connection with an agency or state or federally funded program implemented, administered, or overseen by or for the agency.

Sec. 321.131. CLAIMS CRITERIA FOR INVESTIGATIONS. The division by rule shall set specific claims criteria that, when met, require the division to begin an investigation.

Sec. 321.132. INITIATION OF REVIEW. The inspector general may initiate a review:

(1) on the inspector general's own initiative;

(2) at the request of an agency to which this subchapter applies or the governing body or governing officer of the agency; or

(3) based on a complaint from any source concerning a matter described by Section 321.130.

Sec. 321.133. INTEGRITY REVIEW FOR MEDICAID PROGRAM. (a) The deputy inspector general designated for the commission shall conduct an integrity review to determine whether there is sufficient basis to warrant a full investigation on receipt of any complaint of fraud, waste, or abuse of funds in the state Medicaid program from any source.

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

(c) If the findings of an integrity review give the division reason to believe that an incident of fraud involving possible criminal conduct has occurred in the state Medicaid program, the division must take the following action, as appropriate, not later than the 30th day after the completion of the integrity review:

(1) if a provider is suspected of fraud involving criminal conduct, the division must refer the case to the state's Medicaid fraud control unit, provided that the criminal referral does not preclude the division from continuing its investigation of the provider or preclude the imposition of appropriate administrative or civil sanctions; or

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

Sec. 321.134. ACCESS TO INFORMATION. (a) To further a review conducted by the division, the inspector general or a deputy inspector general is entitled to access all books, records, accounts, documents, reports, vouchers, databases, systems, or other information, including confidential information, electronic data, and internal records relevant to the functions of the division that are maintained by or for a person, state agency, or provider, if applicable, in connection with an agency to which this subchapter applies or a state or federally funded program implemented, administered, or overseen by or for the agency.

(b) The inspector general or deputy inspector general may not access data or other information the release of which is restricted under federal law unless the appropriate federal agency approves the release to the division or its agent.

Sec. 321.135. COOPERATION REQUIRED. To further a review conducted by the division, the inspector general or deputy inspector general may require medical or other professional assistance from an agency to which this subchapter applies or an auditor, accountant, or other employee of the agency.

Sec. 321.136. REFERRAL TO STATE MEDICAID FRAUD CONTROL UNIT. (a) At the time the division learns or has reason to suspect that a health or human services provider's records related to participation in the state Medicaid program are being withheld, concealed, destroyed, fabricated, or in any way falsified, the division shall immediately refer the case to the state's Medicaid fraud control unit.

(b) A criminal referral under Subsection (a) does not preclude the division from continuing its investigation of a health or human services provider or the imposition of appropriate administrative or civil sanctions.

Sec. 321.137. HOLD ON CLAIM REIMBURSEMENT PAYMENT; EXCLUSION FROM PROGRAMS. (a) In addition to other instances authorized under state or federal law, the division shall impose without prior notice a hold on payment of claims for reimbursement submitted by a health or human services provider to compel production of records related to participation in the state Medicaid program or on request of the state's Medicaid fraud control unit, as applicable.

(b) The division must notify the health or human services provider of the hold on payment not later than the fifth working day after the date the payment hold is imposed.

(c) The division shall, in consultation with the state's Medicaid fraud control unit, establish guidelines under which holds on payment or exclusions from a health and human services program:

(1) may permissively be imposed on a health or human services provider; or

(2) shall automatically be imposed on a provider.

(d) A health or human services provider subject to a hold on payment or excluded from a program under this section is entitled to a hearing on the hold or exclusion. A hearing under this subsection is a contested case hearing under Chapter 2001. The State Office of Administrative Hearings shall conduct the hearing. After the hearing, the division, subject to judicial review, shall make a final determination. The commission, a health and human services agency, and the attorney general are entitled to intervene as parties in the contested case.

Sec. 321.138. REQUEST FOR EXPEDITED HEARING. (a) On timely written request by a health or human services provider subject to a hold on payment under Section 321.137, other than a hold requested by the state's Medicaid fraud control unit, the division shall file a request with the State Office of Administrative Hearings for an expedited administrative hearing regarding the hold.

(b) The health or human services provider must request an expedited hearing not later than the 10th day after the date the provider receives notice from the division under Section 321.137(b).

Sec. 321.139. INFORMAL RESOLUTION. (a) The inspector general shall adopt rules that allow a health or human services provider subject to a hold on payment under Section 321.137, other than a hold requested by the state's Medicaid fraud control unit, to seek an informal resolution of the issues identified by the division in the notice provided under that section.

(b) A health or human services provider that seeks an informal resolution must do so not later than the 10th day after the date the provider receives notice from the division under Section 321.137(b).

(c) A health or human services provider's decision to seek an informal resolution does not extend the time by which the provider must request an expedited administrative hearing under Section 321.138.

(d) A hearing initiated under Section 321.137 shall be stayed at the division's request until the informal resolution process is completed.

Sec. 321.140. EMPLOYEE REPORTS. The inspector general may require employees at an agency to which this subchapter applies to report to the division information regarding fraud, waste, misuse or abuse of funds or resources, corruption, or illegal acts.

Sec. 321.141. SUBPOENAS. (a) The inspector general may issue a subpoena to compel the attendance of a relevant witness at a hearing or deposition under this subchapter or to compel the production, for inspection or copying, of relevant materials in connection with a review, hearing, or deposition conducted under this subchapter.

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

(c) If a person fails to comply with a subpoena, the inspector general, 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 hold in contempt 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. 321.142. INTERNAL AUDITOR. (a) In this section, "internal auditor" means a person appointed under Section 2102.006.

(b) The internal auditor for an agency to which this subchapter applies shall provide the inspector general with a copy of the agency's internal audit plan to:

(1) assist in the coordination of efforts between the inspector general and the internal auditor; and

(2) limit duplication of effort regarding reviews by the inspector general and internal auditor.

(c) The internal auditor shall provide to the inspector general all final audit reports concerning audits of any:

(1) part of the agency;

(2) contract, procurement, or grant; and

(3) program conducted by the agency.

Sec. 321.143. COOPERATION WITH LAW ENFORCEMENT OFFICIALS AND OTHER ENTITIES. (a) The inspector general may provide information and evidence relating to criminal acts to the state auditor's office and appropriate law enforcement officials.

(b) The inspector general may refer matters for further civil, criminal, and administrative action to appropriate administrative and prosecutorial agencies, including the attorney general.

(c) The inspector general may enter into a memorandum of understanding with a law enforcement or prosecutorial agency, including the attorney general, to assist in conducting a review under this subchapter.

Sec. 321.144. COOPERATION AND COORDINATION WITH STATE AUDITOR. (a) The state auditor may, on request of the inspector general, provide appropriate information or other assistance to the inspector general or division, as determined by the state auditor.

(b) The inspector general may meet with the state auditor 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 inspector general, including vouchers, electronic data, internal records, and information obtained under Section 321.134 or subject to Section 321.152.

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

Sec. 321.145. PREVENTION. (a) The inspector general may recommend to an agency to which this subchapter applies or the presiding officer of the agency policies on:

(1) promoting economical and efficient administration of state or federal funds administered by an individual or entity that received the funds from a state agency; and

(2) preventing and detecting fraud, waste, and abuse in the administration of those funds.

(b) The inspector general may provide training or other education regarding the prevention of fraud, waste, and abuse to employees of a state agency. The training or education provided must be approved by the presiding officer of the agency.

Sec. 321.146. AWARD FOR REPORTING FRAUD, WASTE, ABUSE, OR OVERCHARGES. (a) If the division determines that the report results in the recovery of an administrative or civil penalty imposed by law, the division may grant an award to an individual who reports:

(1) activity that constitutes fraud, waste, or abuse of money related to any agency programs or in programs receiving state or federal funds that are implemented, administered, or overseen by the agency; or

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

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

(c) The division 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 division:

(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. 321.147. RULEMAKING BY PRESIDING OFFICER OF AGENCY. The presiding officer of an agency may adopt rules governing the agency's response to reports and referrals from the inspector general on issues identified by the inspector general related to the agency or a contractor of the agency.

Sec. 321.148. ALLEGATIONS OF MISCONDUCT AGAINST PRESIDING OFFICER. If a review by the inspector general involves allegations that a presiding officer of an agency has engaged in misconduct, the inspector general shall report to the governor during the review until the report is completed or the review is closed without a finding.

Sec. 321.149. PERIODIC REPORTING REQUIRED. The inspector general shall timely inform the governor, the attorney general, the state auditor, and the presiding officer of the relevant agency of the initiation of a review of an agency program and the ongoing status of the review.

Sec. 321.150. REPORTING DIVISION FINDINGS. The inspector general shall report the findings of the division in connection with a review conducted under this subchapter to:

(1) the presiding officer of the agency;

(2) the governor;

(3) the lieutenant governor;

(4) the speaker of the house of representatives;

(5) the comptroller;

(6) the state auditor; and

(7) the attorney general.

Sec. 321.151. FLAGRANT VIOLATIONS; IMMEDIATE REPORT. The inspector general shall immediately report to the presiding officer of the agency associated with the review, the governor's general counsel, and the state auditor a particularly serious or flagrant problem relating to the administration of a program, operation of the agency, or interference with an inspector general review.

Sec. 321.152. INFORMATION CONFIDENTIAL. (a) Except as provided by this subchapter, all information and material compiled by the inspector general during a review under this subchapter is:

(1) confidential and not subject to disclosure under Chapter 552; and

(2) not subject to disclosure, discovery, subpoena, or other means of legal compulsion for release to anyone other than the state auditor's office, the agency that is the subject of a review, or the division or its agents involved in the review related to that information or material.

(b) As the inspector general determines appropriate, information relating to a review may be disclosed to:

(1) a law enforcement agency;

(2) the attorney general;

(3) the state auditor; or

(4) the agency that is the subject of a review.

(c) A person that receives information under Subsection (b) may not disclose the information except to the extent that disclosure is consistent with the authorized purpose for which the person received the information.

Sec. 321.153. DRAFT OF FINAL REVIEW REPORT; AGENCY RESPONSE. (a) Except in cases in which the division has determined that potential fraud, waste, or abuse exists, the division shall provide a draft of the final review report of any investigation, audit, or review of the operations of an agency to the presiding officer of the agency before publishing the division's final review report.

(b) The agency director may provide a response to the division's draft report in the manner prescribed by the division not later than the 10th day after the date the draft report is received by the agency. The inspector general by rule shall specify the format of and requirements for the agency response.

(c) Notwithstanding Subsection (a), the division may not provide a draft report to the presiding officer of the agency if in the inspector general's opinion providing the draft report could negatively affect any anticipated civil or criminal proceedings.

(d) The division may include any portion of the agency's response in the division's final report.

Sec. 321.154. FINAL REVIEW REPORTS; AGENCY RESPONSE. (a) The inspector general shall prepare a final report for each review conducted under this subchapter. The final report must include:

(1) a summary of the activities performed by the inspector general in conducting the review;

(2) a determination of whether wrongdoing was found; and

(3) a description of any findings of wrongdoing.

(b) The inspector general's final review reports are subject to disclosure under Chapter 552.

(c) All working papers and other documents related to compiling the final review reports remain confidential and are not subject to disclosure under Chapter 552.

(d) Not later than the 60th day after the date the division issues a final report that identifies deficiencies or inefficiencies in, or recommends corrective measures in the operations of, an agency, the agency shall file 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 inefficiencies or the division's recommended corrective measures, as applicable.

Sec. 321.155. COSTS. (a) The inspector general shall maintain information regarding the cost of reviews.

(b) The inspector general may cooperate with appropriate administrative and prosecutorial agencies, including the attorney general, in recovering costs incurred under this subchapter from nongovernmental entities, including contractors or individuals involved in:

(1) violations of applicable state or federal rules or statutes;

(2) abusive or wilful misconduct; or

(3) violations of a provider contract or program policy.

Sec. 321.156. SEMIANNUAL REPORT. The division and the attorney general shall jointly prepare and submit a semiannual report to the governor, the lieutenant governor, the speaker of the house of representatives, the state auditor, the comptroller, and each member of the legislature concerning the activities of the division and the attorney general in detecting and preventing fraud, waste, and abuse under any agency programs or in programs receiving state or federal funds that are implemented, administered, or overseen by a state agency that is reviewed by the division under this subchapter. The report may be consolidated with any other report relating to the same subject matter the division or the attorney general is required to submit under other law.

Sec. 321.157. ADMINISTRATIVE OR CIVIL PENALTY; INJUNCTION. (a) The division may:

(1) act for an agency to which this subchapter applies, including a health and human services agency, in the assessment by the division of administrative or civil penalties the agency is authorized to assess under applicable law; and

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

(b) If the division imposes an administrative or civil penalty under Subsection (a) for an agency:

(1) the agency may not impose an administrative or civil penalty against the same person for the same violation; and

(2) the division shall impose the penalty under applicable rules of the division, this subchapter, and applicable laws governing the imposition of a penalty by the agency.

SECTION 4. The following sections of the Government Code are repealed:

(1) Section 531.102;

(2) Section 531.1021; and

(3) Section 531.103.

SECTION 5. (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 6. (a) The person serving as inspector general under Section 531.102(a-1), Government Code, on the effective date of this Act shall serve as the inspector general appointed under Subchapter C, Chapter 321, Government Code, as added by this Act, until February 1, 2011, and may be reappointed under Subchapter C, Chapter 321 if the person has the qualifications required under that chapter.

(b) A person serving on the effective date of this Act as inspector general for a state agency subject to Subchapter C, Chapter 321, Government Code, as added by this Act, shall serve as the deputy inspector general designated for the agency under Subchapter C, Chapter 321, Government Code, as added by this Act, unless and until replaced by the inspector general.

(c) Not later than February 1, 2011, the governor shall appoint an inspector general for the office of inspector general division of the state auditor's office established under Subchapter C, Chapter 321, Government Code, as added by this Act, to a term expiring February 1, 2013.

SECTION 7. A contract or proceeding primarily related to a function transferred to the office of inspector general division of the state auditor's office established under this Act is transferred to the division. The transfer does not affect the status of a proceeding or the validity of a contract.

SECTION 8. (a) All personnel and assets currently assigned to the inspector general of a state agency subject to Subchapter C, Chapter 321, Government Code, as added by this Act, by operation of Section 321.102(a) or (c), Government Code, shall be promptly transferred to the office of inspector general division established under Subchapter C, Chapter 321 along with any equipment, documents, and records currently assigned to or used by the inspector general of that agency. Inventory of personnel, equipment, documents, records, and assets to be transferred under this section shall be accomplished jointly by the transferring agency and the inspector general serving under Subchapter C, Chapter 321. All funds previously appropriated or used, from any source, by the transferring agency in support of the transferred functions, personnel, equipment, documents, records, or assets shall also be contemporaneously transferred to the division.

(b) For purposes of this section, "currently assigned" means:

(1) all personnel and vacant full-time equivalent positions assigned to or supporting a transferred function at any time during the state fiscal biennium beginning September 1, 2007; and

(2) all inventory and equipment assigned to a transferred function or transferring personnel or that was in the possession of transferring personnel on or at any time after October 31, 2008.

(c) 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 inspector general division of the state auditor's office established under Subchapter C, Chapter 321, Government Code, as added by this Act, shall be reallocated to the division.

(d) For purposes of federal single state agency funding requirements, any federal funds for an agency subject to Subchapter C, Chapter 321, Government Code, as added by this Act, that may not be appropriated directly to the office of inspector general division shall be transferred from the single state agency receiving the funds to the office of inspector general division established under Subchapter C, Chapter 321 if the funds are intended for a function performed by the division.

SECTION 9. On the effective date of this Act:

(1) all functions, activities, employees, rules, forms, money, property, contracts, memorandums of understanding, records, and obligations of a previously established office of inspector general of an agency subject to Subchapter C, Chapter 321, Government Code, as added by this Act, by operation of Section 321.102(a) or (c), Government Code, become functions, activities, employees, rules, forms, money, property, contracts, memorandums of understanding, records, and obligations of the office of inspector general division of the state auditor's office established under Subchapter C, Chapter 321, without a change in status; and

(2) all money appropriated or budgeted for the operations of a previously established office of inspector general at an agency subject to Subchapter C, Chapter 321, Government Code, as added by this Act, by operation of Section 321.102(a) or (c), Government Code, including money for providing administrative support, is considered appropriated for the use of the office of inspector general division established under Subchapter C, Chapter 321.

SECTION 10. (a) Each agency subject to Subchapter C, Chapter 321, Government Code, as added by this Act, by operation of Section 321.102(a) or (c), Government Code, shall take all action necessary to provide for the orderly transfer of the assets and responsibilities of any previously established office of inspector general for that agency to the office of inspector general division of the state auditor's office established under Subchapter C, Chapter 321.

(b) A rule or form adopted by a previously established office of inspector general of an agency subject to Subchapter C, Chapter 321, Government Code, as added by this Act, by operation of Section 321.102(a) or (c), Government Code, is a rule or form of the office of inspector general division of the state auditor's office established under Subchapter C, Chapter 321 and remains in effect until changed by the inspector general.

(c) A reference in law or administrative rule to a previously established office of inspector general of an agency subject to Subchapter C, Chapter 321, Government Code, as added by this Act, by operation of Section 321.102(a) or (c), Government Code, means the office of inspector general division established under Subchapter C, Chapter 321.

SECTION 11. If before implementing any provision of this Act a state agency determines that a waiver or authorization from a federal agency is necessary for implementation of that provision, the agency affected by the provision shall request the waiver or authorization and may delay implementing that provision until the waiver or authorization is granted.

SECTION 12. 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, 2009.