1. (a) The assistant executive director may decide to temporarily withhold funds from a specific project, part of a project, or subsequent awards to a project or temporarily disallow all or part of the cost of a noncomplying activity or action for:

   1. (1) failure to comply with any applicable federal or state law or the grant or subgrant agreement;
   2. (2) failure to submit required reports, including expenditure, status, or progress reports, at the times and in the manner established for the reports;
   3. (3) significant deficiencies or irregularities in records maintained by the subgrantee for operation or administration of the grant or subgrant project;
   4. (4) failure to conduct the grant or subgrant project according to the terms of the application for grant or subgrant, the grant or subgrant award document, the subgrantee acceptance notice, or a grant or subgrant adjustment notice;
   5. (5) failure to comply with a standard or special condition of the grant or subgrant award document;
   6. (6) failure to comply with an improvement action plan; or
   7. (7) failure to begin project operations within the period specified in the grant or subgrant award document or if no period is specified in that document, within 45 days after the project start date.

2. (b) The assistant executive director may decide to temporarily withhold funds or disallow costs from all projects operated by a subgrantee for:

   1. (1) failure to respond to a deficiency listed in subsection (a) of this section;
   2. (2) failure to return to the department within the required time any unused grant or subgrant funds remaining on an expired grant or subgrant; or
   3. (3) failure to return to the department any grant or subgrant funds that have been improperly accounted for or expended for ineligible purposes under a grant or subgrant.
3. (c) Funds withheld under this section may be released or costs disallowed under this section may be allowed if the assistant executive director receives satisfactory evidence that the deficient conditions have been corrected. If the deficient conditions are not corrected within the period set by the department, the assistant executive director may decide to permanently disallow all or part of the cost of a noncomplying activity or action or may suspend or terminate the grant or subgrant under §9.136 of this subchapter (relating to Suspension or Termination for Cause).
4. (d) At the assistant executive director's discretion, the withholding of funds or disallowance of costs under this section may be imposed immediately and will not be stayed during the pendency of an appeal. Funds may be withheld or costs disallowed under this subsection while more severe enforcement action is pending.

Source Note:The provisions of this §9.135 adopted to be effective June 17, 2010, 35 TexReg 5077.