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) Appropriation year--The accounting period beginning on September 1st and ending the following August 31st.
   2. (2) Capital asset--A good other than a consumable that benefits a state agency during more than one appropriation year.
   3. (3) Comptroller--The comptroller of public accounts for the State of Texas.
   4. (4) Consumable--A good that perishes with use and that, under ordinary circumstances, will be entirely used during one appropriation year.
   5. (5) 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.
   6. (6) Institution of higher education--Has the meaning assigned by the Education Code, §61.003.
   7. (7) May not--A prohibition. The term does not mean "might not" or its equivalents.
   8. (8) State agency--A department, board, commission, committee, council, agency, office, or other entity in the executive, legislative, or judicial branch of Texas state government, the jurisdiction of which is not limited to a geographical portion of this state. The term includes an institution of higher education.

2. (b) General requirements and exceptions.

   1. (1) A state agency must comply with this section when determining the appropriation year to be charged for the agency's:

      1. (A) purchase of a good, service, or capital asset; or
      2. (B) payment of a grant.
   2. (2) The comptroller may require a state agency to make available to the comptroller the documentation that supports the agency's classification of a payment as a consumable, service, capital asset, or grant.
   3. (3) This section does not apply to the extent it conflicts with Texas law, including a valid rider or other provision of the General Appropriations Act.
   4. (4) This section does not apply to a purchase that is paid with non-appropriated funds.

3. (c) Purchases of consumables.

   1. (1) Except as provided in paragraph (2) of this subsection, a state agency must charge a purchase of consumables to the appropriation year in which their delivery to the agency occurs.
   2. (2) Except as provided in paragraph (3) of this subsection, a state agency may not charge a purchase of consumables to a particular appropriation year if it would be unreasonable to anticipate that the agency will consume all the consumables during that year.

   3. (3) A state agency may charge the appropriation year that immediately precedes the appropriation year in which consumables are delivered to the agency for their purchase if:

      1. (A) the agency contracted for the consumables during the immediately preceding appropriation year and, at the time of the contracting, the agency reasonably anticipated that the consumables would be delivered during that year;
      2. (B) the delivery of the consumables was delayed until the next appropriation year for reasons beyond the agency's reasonable control; and
      3. (C) the order quantity was no more than the agency could have consumed before the end of the immediately preceding appropriation year had the delivery occurred as originally expected.

4. (d) Purchases of services.

   1. (1) A state agency must charge a purchase of services to the appropriation year in which the services are rendered. The agency may not charge a particular appropriation year for the payment of a service contract that is performed during a different appropriation year.
   2. (2) Payments under a service contract that is performed over more than one appropriation year must be prorated so that each appropriation year is charged only to the extent of the services performed during that year.

5. (e) Purchases of capital assets.

   1. (1) Except as provided in paragraphs (2)-(3) of this subsection, a state agency must charge the purchase of a capital asset to the appropriation year in which the agency enters into a valid contract for the purchase. The date on which the capital asset is delivered to the agency is irrelevant.
   2. (2) A state agency may contract during a particular appropriation year for the purchase of a capital asset in reliance on an existing appropriation for a subsequent appropriation year so long as payment for the asset does not occur until after the start of the subsequent year. For example, assume that the General Appropriations Act for appropriation years 1998 and 1999 is signed by the governor on June 1, 1997. A state agency may contract after May 31, 1997, for the purchase of a capital asset and pay for the asset with appropriation year 1998 funds so long as the payment is not made until after August 31, 1997. Similarly, the agency may contract after May 31, 1997, for the purchase of a capital asset and pay for the asset with appropriation year 1999 funds so long as the payment is not made until after August 31, 1998. If the agency contracts before June 1, 1997, for the purchase of a capital asset, the agency may not use appropriation year 1998 or 1999 funds to pay for the asset because the appropriations for those years are not in existence on the date the contract is entered into.
   3. (3) A payment made under a lease-purchase agreement must be charged to the appropriation year in which the payment is made.
6. (f) Grant payments. A state agency's payment of a grant to an individual or entity must be charged to the appropriation year in which the agency contracts, awards, or otherwise legally commits to pay the grant if an appropriation for that year and purpose is available. Otherwise, the payment must be charged to the first appropriation year for which an appropriation is available. This subsection applies regardless of how the grantee will use the grant funds. This subsection also applies even if the payments under a grant contract will be made over more than one appropriation year.

7. (g) Contracts for the purchase of a combination of consumables, services, and capital assets.

   1. (1) This subsection applies only to:

      1. (A) a contract that involves the purchase of two or more of the following: a consumable, a service, or a capital asset; or
      2. (B) two or more closely related contracts that together involve the purchase of two or more of the following: a consumable, a service, or a capital asset.
   2. (2) If the dominant purpose of one or more contracts is to purchase a consumable, then subsection (c) of this section governs the determination of the correct appropriation year to charge for the purchases.
   3. (3) If the dominant purpose of one or more contracts is to purchase a service, then subsection (d) of this section would govern the determination of the correct appropriation year to charge for the purchases.
   4. (4) If the dominant purpose of one or more contracts is to purchase a capital asset, then subsection (e) of this section would govern the determination of the correct appropriation year to charge for the purchases.
8. (h) Purchase options. The appropriation year in which a state agency exercises a contractual option to purchase a good, service, or capital asset must be charged for the cost of exercising that option, subject to this section's requirements for determining the correct appropriation year to charge for the purchase.

Source Note:The provisions of this §5.56 adopted to be effective October 25, 1996, 21 TexReg 10216.