1. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Authorization form--The form designed by the comptroller that is used in accordance with this section.
   2. (2) Comptroller--The comptroller of public accounts for the State of Texas.
   3. (3) Credit entry--An electronic funds transfer that the comptroller initiates to an EFT account.
   4. (4) Custodial state agency--The state agency to which a governmental entity or a participating governmental entity submitted a properly completed authorization form to designate an EFT account or to claim an exemption from the requirement to make a recurring payment through the electronic funds transfer system.
   5. (5) Debit entry--A reversal of a credit entry.
   6. (6) EFT account--An account that has been designated in accordance with this section to receive credit entries.
   7. (7) Electronic funds transfer system--The system authorized by the Government Code, §403.016, that the comptroller uses to initiate payments instead of issuing warrants.
   8. (8) Governmental entity--An entity specifically or impliedly established by law that exercises a sovereign power of the state. The term includes state agencies, special districts, local governments, municipal corporations, and political subdivisions.
   9. (9) Include--A term of enlargement and not of limitation or exclusive enumeration. The use of the term does not create a presumption that components not expressed are excluded.
   10. (10) May not--A prohibition. The term does not mean "might not" or its equivalents.
   11. (11) Participating governmental entity--A governmental entity that receives credit entries initiated by the comptroller.
   12. (12) Paying state agency--With respect to a particular credit or debit entry, the state agency that requested the comptroller to initiate the entry.
   13. (13) Recurring payment--A regular and periodic payment that is made by the comptroller. The term includes a recurring allocation of tax revenues by the comptroller.
   14. (14) Rules--The requirements of the National Automated Clearing House Association concerning cash concentration disbursement, the Federal Reserve System's Regulation E, and the sections of this undesignated head.

2. (b) Mandatory or voluntary participation.

   1. (1) Mandatory participation.

      1. (A) Except as provided in subparagraph (B) of this paragraph, a governmental entity that receives recurring payments must be a participating governmental entity.
      2. (B) A governmental entity is not required to be a participating governmental entity if subsection (c)(2)-(4) of this section would prohibit the recurring payments to the entity from being made through the electronic funds transfer system if the entity were a participating governmental entity. An entity that is not required to be a participating governmental entity under this subparagraph must claim an exemption for each type of recurring payment in accordance with subsection (c)(5) of this section.

   2. (2) Voluntary participation.

      1. (A) A governmental entity that is not required by paragraph (1) of this subsection to be a participating governmental entity may be a participating governmental entity.

      2. (B) This subparagraph applies only to recurring payments that are not required by this section to be made through the electronic funds transfer system. A participating governmental entity and a state agency may agree on which types of nonrecurring payments from the agency will be paid through the electronic funds transfer system. Unless the comptroller is a party to the agreement:

         1. (i) the comptroller is not required to take any actions to facilitate or ensure the agency's compliance with the agreement; and
         2. (ii) the comptroller is not liable for any damages that result from the agency's failure to comply with the agreement.

   3. (3) Powers and responsibilities of the comptroller and state agencies.

      1. (A) The comptroller's revenue accounting division must ensure that each governmental entity which receives recurring allocations of tax revenues from the comptroller is a participating governmental entity. This subparagraph applies only if the entity is required by paragraph (1) of this subsection to be a participating governmental entity.

      2. (B) A state agency must ensure that each governmental entity which receives recurring payments from the comptroller on behalf of the agency is a participating governmental entity. This subparagraph applies only if:

         1. (i) the entity does not receive recurring allocations of tax revenues from the comptroller; and
         2. (ii) the entity is required by paragraph (1) of this subsection to be a participating governmental entity.
      3. (C) If a governmental entity is required but refuses or fails to become a participating governmental entity, then the entity's recurring payments may be retained by the paying state agency until the entity becomes a participating governmental entity.

3. (c) Payments by the comptroller.

   1. (1) Payment methods.

      1. (A) Except as otherwise provided in this subsection, the comptroller must make a recurring payment to a participating governmental entity through the electronic funds transfer system.
      2. (B) The comptroller may make a nonrecurring payment to a participating governmental entity through the electronic funds transfer system.
      3. (C) The comptroller may not make any type of payment to a nonparticipating governmental entity through the electronic funds transfer system.
      4. (D) The state agency on whose behalf the comptroller makes a payment is responsible for determining whether the payment is a recurring payment for the purpose of this section. The comptroller may rely on that determination.

   2. (2) Exemption based on cost. Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not make a recurring payment to a participating governmental entity through the electronic funds transfer system if:

      1. (A) the comptroller determines that making the payment by warrant would cost less to the state;
      2. (B) the entity determines that making the payment by warrant would cost less to the entity; or
      3. (C) the state agency on whose behalf the comptroller would be making the payment determines that making the payment by warrant would cost less to the agency.

   3. (3) Exemption based on impracticality.

      1. (A) Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not make a recurring payment to a participating governmental entity through the electronic funds transfer system if:

         1. (i) the comptroller determines that making the payment through the electronic funds transfer system would be impractical to the state;
         2. (ii) the entity determines that making the payment through the electronic funds transfer system would be impractical to the entity; or
         3. (iii) the state agency on whose behalf the comptroller would be making the payment determines that making the payment through the electronic funds transfer system would be impractical to the agency.
      2. (B) Notwithstanding subparagraph (A)(iii) of this paragraph, a state agency must adopt a written policy before it may determine that making a recurring payment to a governmental entity through the electronic funds transfer system is impractical to the agency. The policy must clearly state the circumstances under which the agency will find impracticability. The policy must be made available to the comptroller, the state auditor, and governmental entities upon request.
   4. (4) Exemption based on inability to obtain an account. Notwithstanding paragraph (1)(A) of this subsection, the comptroller may not make a recurring payment to a participating governmental entity through the electronic funds transfer system if the entity is unable to obtain an account at a financial institution that may be used to receive credit entries.

   5. (5) Claiming an exemption.

      1. (A) The exemption provided in paragraph (2)(B), (3)(A)(ii), or (4) of this subsection does not apply until a governmental entity or a participating governmental entity properly claims the exemption in accordance with this paragraph.
      2. (B) A governmental entity that is not required to be a participating governmental entity under subsection (b)(1)(B) of this section must properly claim an exemption for each type of recurring payment in accordance with this paragraph. A governmental entity that fails to comply with this requirement must be a participating governmental entity.

      3. (C) A governmental entity or participating governmental entity may claim an exemption for a particular type of recurring payment only by properly completing an authorization form and submitting the form to:

         1. (i) the comptroller's revenue accounting division if the entity receives recurring allocations of tax revenues from the comptroller; or
         2. (ii) the state agency on whose behalf the recurring payments are made if the entity does not receive recurring allocations of tax revenues from the comptroller.
      4. (D) A custodial state agency must permanently retain the authorization forms on which governmental entities and participating governmental entities have claimed the exemptions provided by this subsection. The agency may not send the forms to the comptroller. The agency must make the forms available to the state auditor and the comptroller upon request.

4. (d) Commencement and termination of participation.

   1. (1) Obtaining authorization forms. Except as provided in subsection (e)(3) and (5) of this section, a governmental entity or a participating governmental entity may obtain an authorization form from any state agency that has the forms.

   2. (2) Becoming a participating governmental entity.

      1. (A) A governmental entity that is required or that wants to be a participating governmental entity must properly designate an EFT account in accordance with subsection (e)(1) of this section.
      2. (B) A governmental entity is not a participating governmental entity until the entity has properly designated at least one EFT account and the designation has become effective.

   3. (3) A participating governmental entity's termination of the entity's participation.

      1. (A) A participating governmental entity may terminate its participation if:

         1. (i) the entity voluntarily became a participating governmental entity under subsection (b)(2) of this section; or
         2. (ii) none of the recurring payments that the entity receives are still required by law to be paid through the electronic funds transfer system.
      2. (B) A participating governmental entity may terminate its participation only by terminating the designation of each of the entity's EFT accounts in accordance with subsection (e)(3) of this section.
      3. (C) The comptroller may not initiate a credit entry to a participating governmental entity on or after the effective date of the termination of the designation of the entity's last EFT account.

   4. (4) A custodial state agency's termination of a participating governmental entity's participation.

      1. (A) A custodial state agency may terminate a participating governmental entity's participation only if the agency is the only custodial state agency for the entity.

      2. (B) A custodial state agency may terminate the participation of a participating governmental entity if:

         1. (i) the agency determines in accordance with subsection (c)(3) of this section that continued participation would be impractical to the agency;
         2. (ii) none of the recurring payments that the entity receives are still required by law to be paid through the electronic funds transfer system; or
         3. (iii) continued participation would be impossible because no state agency makes recurring payments to the entity.
      3. (C) If a custodial state agency is authorized under this paragraph to terminate the participation of a participating governmental entity, then the agency may do so only by terminating the designation of each of the entity's EFT accounts in accordance with subsection (e)(4) of this section.
      4. (D) The comptroller may not initiate a credit entry to a governmental entity on or after the effective date of the termination of the designation of the entity's last EFT account.
      5. (E) A participating governmental entity's participation may be terminated under this paragraph without prior notice to the entity.

   5. (5) Inquiries.

      1. (A) A participating governmental entity must contact the paying state agency before contacting the comptroller when the entity has a question about a particular credit entry or debit entry.
      2. (B) If a participating governmental entity receives an unidentified credit entry or debit entry, the entity must first contact its financial institution to obtain necessary information about the entry. If the financial institution is unable to provide the information, then the entity may ask the comptroller for the information.
      3. (C) A participating governmental entity may contact any state agency if the entity has a question about this section.
   6. (6) Rules. A participating governmental entity shall comply with the rules as amended from time to time.

5. (e) EFT accounts.

   1. (1) Designating an EFT account.

      1. (A) A governmental entity or a participating governmental entity may designate an EFT account if:

         1. (i) the entity properly completes and submits an authorization form;
         2. (ii) the account to be designated as an EFT account is a checking or savings account of the entity; and
         3. (iii) the account to be designated as an EFT account is at a financial institution that allows credit entries to be made to the account.

      2. (B) A governmental entity or a participating governmental entity may submit a properly completed authorization form only to:

         1. (i) the comptroller's revenue accounting division if the entity receives recurring allocations of tax revenues from the comptroller; or
         2. (ii) a state agency on whose behalf recurring payments are made to the entity if the entity does not receive recurring allocations of tax revenues from the comptroller.
      3. (C) A custodial state agency shall promptly submit a properly completed authorization form or the information on the form to the comptroller in accordance with the comptroller's requirements.
      4. (D) If a governmental entity or a participating governmental entity properly designates an EFT account, the effective date of the designation is the fourteenth calendar day after the comptroller processes the information on the authorization form. The comptroller may initiate credit entries to the EFT account on or after the effective date.

   2. (2) Multiple EFT accounts.

      1. (A) Notwithstanding anything else in this paragraph, a governmental entity may require each state agency that makes recurring payments to the entity to be the custodial state agency for one EFT account of the entity. The entity may impose this requirement without obtaining the consent of any agency.
      2. (B) This subparagraph applies when a governmental entity wants a state agency that makes recurring payments to the entity to be the custodial state agency for more than one of the entity's EFT accounts. The entity may not designate a second or subsequent EFT account unless the agency consents to each account beyond the first account.
      3. (C) Subject to the other requirements of this paragraph, a participating governmental entity may designate a second or subsequent EFT account by properly completing an authorization form and submitting the form to either the custodial state agency for the first account or any other state agency that makes recurring payments to the entity.
      4. (D) A state agency may not submit a participating governmental entity's authorization form to the comptroller if the form would designate an EFT account for the entity that has already been designated by the entity.

      5. (E) A participating governmental entity that has multiple EFT accounts and a state agency may agree that a certain type of payment will be made only to the account or accounts designated in the agreement. Unless the comptroller is a party to the agreement:

         1. (i) the comptroller is not required to take any actions to facilitate or ensure the agency's compliance with the agreement; and
         2. (ii) the comptroller is not liable for any damages that result from the agency's failure to comply with the agreement.

   3. (3) A participating governmental entity's termination of the designation of an EFT account.

      1. (A) A participating governmental entity may terminate its designation of an EFT account if the termination would not result in a violation of subsection (b)(1)(A) of this section.
      2. (B) A participating governmental entity may terminate the designation of all the entity's EFT accounts if the entity is authorized by subsection (d)(3) of this section to terminate its participation.

      3. (C) A participating governmental entity may terminate its designation of an EFT account only by:

         1. (i) obtaining an authorization form from the custodial state agency for the account;
         2. (ii) properly completing the form; and
         3. (iii) submitting the form to the custodial state agency.
      4. (D) A custodial state agency shall promptly submit a properly completed authorization form or the information on the form to the comptroller's claims division in accordance with the division's requirements.
      5. (E) The comptroller may not initiate a credit entry to an EFT account on or after the date on which the comptroller's claims division processes the information on the authorization form that terminates the designation of the account.

   4. (4) A custodial state agency's termination of the designation of an EFT account.

      1. (A) A state agency may terminate the designation of an EFT account if:

         1. (i) the agency is the custodial state agency for the account;
         2. (ii) the agency properly completes an authorization form and submits the form or the information on the form to the comptroller's claims division in accordance with the division's requirements; and
         3. (iii) the termination would not result in a violation of subsection (b)(1)(A) of this section.
      2. (B) The comptroller may not initiate a credit entry to an EFT account on or after the date on which the comptroller processes the information on the agency's authorization form that terminates the designation of the account.
      3. (C) The designation of an EFT account may be terminated under this paragraph without prior notice to the governmental entity or the participating governmental entity that owns the account.

   5. (5) Modifying information about an EFT account.

      1. (A) A participating governmental entity may modify information about an EFT account of the entity only by:

         1. (i) obtaining an authorization form from the custodial state agency for the account;
         2. (ii) properly completing the form; and
         3. (iii) submitting the form to the agency.
      2. (B) A custodial state agency shall promptly submit a properly completed authorization form or the information on the form to the comptroller's claims division in accordance with the division's requirements.
      3. (C) New information about an EFT account applies to credit entries that the comptroller initiates on or after the fourteenth calendar day after the comptroller's claims division processes the information on the authorization form that provides the new information.

6. (f) The comptroller's powers and responsibilities.

   1. (1) Initiating debit entries.

      1. (A) The comptroller may initiate a debit entry to an EFT account of a participating governmental entity if the appropriate paying state agency determines that an erroneous credit entry has been made to the account.

      2. (B) The comptroller may initiate a debit entry to an account of a governmental entity if:

         1. (i) the appropriate paying state agency determines that an erroneous credit entry has been made to the account;
         2. (ii) the erroneous credit entry was made to the account when it was an EFT account; and
         3. (iii) the erroneous credit entry was made when the governmental entity was a participating governmental entity.
      3. (C) The comptroller may initiate a debit entry without prior notice to a participating governmental entity or a governmental entity.
   2. (2) Compliance with the rules. The comptroller must comply with the rules when initiating credit entries and debit entries.
   3. (3) Contacts. The comptroller may contact a state agency or a participating governmental entity if the comptroller has a question about a credit entry or debit entry.

   4. (4) Termination of a participating governmental entity's participation.

      1. (A) The comptroller may terminate the participation of a participating governmental entity at any time if the termination would not result in a violation of subsection (b)(1)(A) of this section.
      2. (B) The comptroller may terminate participation under this paragraph without providing prior notice to the participating governmental entity.

   5. (5) Termination of the designation of an EFT account.

      1. (A) The comptroller may terminate the designation of an EFT account at any time if the termination would not result in a violation of subsection (b)(1)(A) or (c)(1)(A) of this section.
      2. (B) The comptroller may terminate the designation of an EFT account without providing prior notice to the participating governmental entity that owns the account.
   6. (6) Stop payments. The comptroller's authority to stop the payment of a credit entry is equivalent to the comptroller's authority to stop the payment of a warrant.

7. (g) Acceptance and return of credit entries.

   1. (1) Voluntary acceptance of credit entries. Neither a participating governmental entity nor a participating governmental entity's financial institution is required to accept a credit entry. However, a rejected credit entry must be returned in accordance with the rules.

   2. (2) Liability resulting from the rejection of credit entries.

      1. (A) The comptroller, the state treasurer, and a paying state agency are not liable for the consequences of the rejection of a credit entry by a participating governmental entity or the entity's financial institution.

      2. (B) When a credit entry is rejected, the State of Texas and its state agencies:

         1. (i) are not in default on any obligation; and
         2. (ii) shall not suffer any loss of discount or incur any penalty, interest, or late charge by reason of the rejection.
   3. (3) Texas Prompt Payment Act. Paragraph (2)(B)(ii) of this subsection applies to the interest that would otherwise be payable under the Texas Prompt Payment Act.

   4. (4) Rejection of credit entries. Even if a participating governmental entity or the entity's financial institution does not reject a credit entry in accordance with the rules, the entity does not accept a credit entry as being in the correct amount if:

      1. (A) the entity ensures that the paying state agency receives written notice by no later than the thirtieth calendar day after the entity's financial institution receives the credit entry; and
      2. (B) the written notice clearly states that the amount of the credit entry is erroneous.

8. (h) Credit for paying state agencies.

   1. (1) Applicability. This subsection applies unless a participating governmental entity returns a credit entry in accordance with subsection (g) of this section.
   2. (2) When credit required. A participating governmental entity shall credit the paying state agency for the amount of a credit entry on the effective date of the credit entry, regardless of when the entity's financial institution posts the credit entry to the entity's EFT account.
   3. (3) Accrual of interest and other charges or fees. The accrual of interest or other charges or fees payable with respect to the amount of a credit entry shall cease when a participating governmental entity credits the paying state agency for the credit entry.

9. (i) Credit entry information.

   1. (1) Definition. For a particular credit entry, "credit entry information" means:

      1. (A) the participating governmental entity's invoice number up to seven digits (if and as supplied to the comptroller by the paying state agency);
      2. (B) the paying state agency's voucher number (if supplied to the comptroller by the agency);
      3. (C) the agency number of the paying state agency; and
      4. (D) the telephone number of the paying state agency.
   2. (2) Responsibility of the comptroller. The comptroller shall accompany each credit entry with credit entry information.
   3. (3) Liability for refusal to provide credit entry information. The comptroller, the state treasurer, and a paying state agency are not liable for the failure, inability, or refusal of a participating governmental entity's financial institution to give credit entry information to the entity.

10. (j) Liability.

    1. (1) Liability for actions of certain parties. A participating governmental entity, the State of Texas, a state agency, a paying state agency, the comptroller, the state treasurer, and a custodial state agency are not liable for the act or omission of any automated clearinghouse, financial institution, or other person or entity except as specified in the rules.
    2. (2) Liability for actions of state agencies or paying state agencies. Neither the comptroller nor the state treasurer is liable for damages arising out of delays caused or errors committed by a state agency or a paying state agency.

11. (k) Miscellaneous provisions.

    1. (1) Effective date.

       1. (A) Except as otherwise provided in this paragraph, this section first took effect on June 10, 1992.
       2. (B) Subsections (b)(1)(A) and (c)(1)(A) of this section apply to a recurring payment to a participating governmental entity if the payment results from the comptroller's receipt of a payment voucher after June 10, 1992.
    2. (2) Applicability of section. This section applies to all governmental entities whose payments from state agencies are made through the electronic funds transfer system, including entities whose payments were first made through the electronic funds transfer system before June 10, 1992.

    3. (3) Existing accounts.

       1. (A) This subparagraph applies to each account of a governmental entity that received a payment to the entity through the electronic funds transfer system before June 10, 1992. Each account is an EFT account for the purpose of this section unless:

          1. (i) the entity properly notified the custodial state agency of the account before June 10, 1992 that the account would no longer be available to receive electronic funds transfers; and
          2. (ii) the notification was still in effect on June 10, 1992.
       2. (B) A governmental entity that had one or more EFT accounts under subparagraph (A) of this paragraph on June 10, 1992 is a participating governmental entity for the purpose of this section.
       3. (C) A custodial state agency for more than one EFT account of a participating governmental entity on June 10, 1992 may terminate the designation of one or more of those accounts only if subsection (e)(4) of this section authorizes the termination. The requirement in subsection (e)(2) of this section to obtain the consent of a state agency before designating a second or subsequent EFT account does not apply to the accounts that are EFT accounts under subparagraph (A) of this paragraph on June 10, 1992.

       4. (D) Except as otherwise provided by this subparagraph, an account that was an EFT account under subparagraph (A) of this paragraph on June 10, 1992, lost its status as an EFT account at 11:59 p.m. on June 10, 1992.

          1. (i) The governmental entity that owns the account could have prevented this loss of status if the entity had redesignated the account as an EFT account by properly completing and submitting an authorization form in accordance with this section and the redesignation had taken effect before the account lost its status.
          2. (ii) If an account has lost its status as an EFT account under this subparagraph, then the governmental entity that owns the account may reinstate the account as an EFT account if the entity redesignates the account by properly completing and submitting an authorization form in accordance with this section.

    4. (4) References to payments by the comptroller. When this section refers to the comptroller paying an individual or entity, the reference means:

       1. (A) the comptroller's issuance of a warrant or initiation of a credit entry in accordance with a payment voucher submitted to the comptroller by another state agency; or
       2. (B) the comptroller's payment of an individual or entity in satisfaction of obligations owed to the individual or entity by the comptroller as a result of the fulfillment of the comptroller's constitutional or statutory duties.
    5. (5) Conflicts. If a provision in this section irreconcilably conflicts with a law of the United States or the State of Texas, a requirement of the National Automated Clearing House Association concerning cash concentration disbursement, or the Federal Reserve System's Regulation E, then the law, requirement, or regulation prevails over the provision.

Source Note:The provisions of this §5.15 adopted to be effective June 10, 1992, 17 TexReg 3909; amended to be effective December 6, 1996, 21 TexReg 11520.