TITLE 40. SOCIAL SERVICES AND ASSISTANCE

PART 19. DEPARTMENT OF FAMILY AND PROTECTIVE SERVICES

CHAPTER 700. CHILD PROTECTIVE SERVICES

SUBCHAPTER M. SUBSTITUTE-CARE SERVICES

PART 20. TEXAS WORKFORCE COMMISSION

CHAPTER 809. CHILD CARE SERVICES

SUBCHAPTER F. FRAUD FACT-FINDING AND IMPROPER PAYMENTS

The Texas Workforce Commission (TWC) adopts amendments to the following sections of Chapter 809, relating to Child Care Services:

Subchapter F. Fraud Fact-Finding and Improper Payments, §§809.111 - 809.115 and §809.117

TWC adopts the following new section to Chapter 809, relating to Child Care Services:

Subchapter F. Fraud Fact-Finding and Improper Payments, §809.116

Amended §§809.111, 809.114, 809.115, and 809.117, and new §809.116 are adopted without changes to the proposal, as published in the March 27, 2026, issue of the Texas Register (51 TexReg 2020), and, therefore, the adopted rule text will not be published.

Amended §809.112 and §809.113 are adopted with changes to the proposal, as published in the March 27, 2026, issue of the Texas Register (51 TexReg 2020), and, therefore, the adopted rule text will be published.

PART I. PURPOSE, BACKGROUND, AND AUTHORITY

The purpose of the Chapter 809 rule change is to strengthen the integrity of the child care services program by enhancing fraud detection, prevention, and enforcement mechanisms. The amendments clarify procedures for investigating suspected fraud, specify corrective actions, establish clear accountability measures for Local Workforce Development Boards (Boards), and reinforce TWC's authority to recover improper payments. These changes are designed to safeguard public funds and ensure that child care subsidies are directed to eligible Texas families and qualified providers.

PART II. EXPLANATION OF INDIVIDUAL PROVISIONS

(Note: Minor editorial changes are made that do not change the meaning of the rules and, therefore, are not discussed in the Explanation of Individual Provisions.)

SUBCHAPTER F. FRAUD FACT-FINDING AND IMPROPER PAYMENTS

TWC adopts the following amendments to Subchapter F:

§809.111. General Fraud Fact-Finding Procedures

Section 809.111 is amended to clarify TWC's authority over fraud cases and its oversight role with Boards and to better align the definition of fraud. Amendments to §809.111 also include technical corrections regarding the use of "Agency" and "Commission."

Section 809.111(b) is amended to redefine the knowledge standard for fraud from "knowing it to be false" to "knew or should have known" standard, consistent with program integrity best practices.

Section 809.111(e), (f), and (g) are amended to clarify TWC's procedures and Board responsibilities for reporting, investigating, and documenting cases of suspected fraud.

New §809.111(h) explicitly states TWC's jurisdiction to intervene in fraud cases when a Board fails to adhere to established procedures or needs assistance.

New §809.111(i) requires Fraud Deterrence and Compliance Monitoring approval before a Board restricts a provider's eligibility to provide Commission-funded child care services due to a finding of fraud, which will allow TWC to ensure consistent standards are applied.

§809.112. Suspected Fraud

Section 809.112 is amended to make several technical edits including correcting the use of "Agency" and "Commission," clarifying that suspected fraud includes payments, clarifying what constitutes suspected fraud, and removing reference to specific eligibility periods.

§809.113. Action to Prevent or Correct Suspected Fraud

Section 809.113 is amended to more clearly delineate the corrective actions that TWC or a Board may take against a provider versus a parent when fraud is found. A key amendment adds language allowing TWC to prohibit future eligibility for providers determined to have committed fraud, owners and directors of those providers, or individuals found to have engaged, aided or abetted the fraudulent activities, and is a critical tool to prevent fraudulent actors from reentering the program under a new business name.

§809.114. Failure to Comply with Commission Rules and Board Policies

Section 809.114 is renamed "Failure to Comply with Commission Rules and Agency and Board Policies."

Section 809.114 is amended to require parents and providers to comply with TWC's policies, to include "other contracted entity" to the list of parties subject to corrective action, which reinforces that all entities involved in the child care system must comply with Commission rules. New §809.114(d) requires Boards to develop and implement a plan to monitor child care providers compliance with Commission rules and TWC and Board policies. The monitoring plan must include in-person site visits. New subsection (e) clarifies the authority for the Director of Child Care Services to issue corrective actions or sanctions for a Board's failure to comply with the requirements of Chapter 809.

§809.115. Corrective Adverse Actions

Section 809.115 is amended to make several technical edits including correcting the use of "Agency" and "Commission."

§809.116. Referral for Criminal Prosecution

New §809.116 is added to mandate that Boards refer cases of fraud to prosecutors for criminal prosecution in accordance with TWC policy. New §809.116 strengthens the program's stance against fraud by pursuing legal consequences beyond administrative recovery and requires that such referrals be documented in TWC's case management system.

§809.117. Recovery of Improper Payments to a Provider or Parent

Section 809.117 is amended to clarify the responsibilities for recovering improper payments, assigning recovery efforts to the entity that issued the determination (either TWC or the Board).

PART III. PUBLIC COMMENTS

The comment period ended on April 27, 2026.

TWC received comments from the following:

--Day Nursery of Abilene

--TXPOST

COMMENT: Day Nursery of Abilene stated that fraud does not appear to be the primary concern related to improper payments in their area. The provider noted concerns with accurate and timely payment to providers, clear and consistent communication, and documentation being modified after the fact.

RESPONSE: The Commission appreciates the comment and understands the provider's concerns. The Commission recognizes the importance of accurate and timely payment for CCS providers and agrees that most improper payments are not related to fraud. TWC and the Boards will continue to work to improve communication and eliminate issues related to provider payments. However, the purpose of this rulemaking is to strengthen the integrity of the child care services program by enhancing fraud detection, prevention, and enforcement mechanisms; therefore, the commenter's concerns fall outside the scope of the proposed rulemaking. No changes were made in response to this comment.

COMMENT: TXPOST expressed concern that including "board member" in the proposed rule language for §809.113(a)(4) could create unintended consequences for volunteers serving on the boards of nonprofit child care providers. The commenter suggested replacing "an owner, director, or board member of the provider" with either "controlling person" or "designee." The commenter recommended tightening §809.113(a)(4) and tying it to the individuals listed on a provider's license.

RESPONSE: The Commission appreciates the comment, which identified a potential unintended consequence for volunteer board members. The Commission agrees that board members should be removed from §809.113(a)(4)(B), because board members are not involved in the day-to-day operations to the same degree as owners and directors. However, if a board member is found to have engaged, aided, or abetted in fraudulent activities, the board member could be prohibited from future participation in Commission-funded child care services under §809.113(a)(4)(E).

Accordingly, TWC has modified §809.113(a)(4)(B) to remove board members. Board members, including volunteer board members, will not be included under §809.113(a)(4) unless they are found to have engaged, aided, or abetted in fraudulent activities.

COMMENT: Day Nursery of Abilene stated their support for the proposed rules and efforts to further alleviate fraud. The provider noted that further integrating automated platforms for child care authorizations and provider tracking tools can significantly reduce the risk of fraud by eliminating duplicate data entry, ensuring real-time consistency, and strengthening oversight across systems. Additionally, active caseworkers conducting periodic on-site visits provide an essential layer of independent verification. This approach maintains clear roles between providers who focus on delivering quality care and the case management responsibilities of the child care contractor. With adequate training and open communication, services can be delivered seamlessly with reduced administrative burdens on providers.

RESPONSE: The Commission appreciates the comment and the commenter's support. The Commission is continuously evaluating efforts to improve program integrity and service deliver and will take these suggestions into consideration. No changes were made in response to this comment.

PART IV. STATUTORY AUTHORITY

The rules are adopted under the authority of:

--Texas Labor Code, §301.192, which requires TWC to ensure that corrective action is taken against a child care provider or parent who commits fraud; and

--Texas Labor Code, §301.0015(6) and §302.002(d), which provide TWC with the authority to adopt, amend, or repeal such rules as it deems necessary for the effective administration of TWC services and activities.

The adopted rules relate to Texas Labor Code, Title 4, particularly Chapters 301 and 302, and Texas Government Code, Chapter 2308.

§809.112. Suspected Fraud.

(a) A parent, provider, or any other person in a position to commit fraud may be suspected of fraud if the person presents or causes to be presented to the Agency, Board, or its child care contractor one or more of the following items:

(1) A request for payment or reimbursement in excess of the amount charged by the provider for the child care; or

(2) An application, document, record, or statement related to the eligibility to receive or provide child care services or to receive payment of child care funds, if evidence indicates that the person may have:

(A) known, or should have known, that child care services were not provided as claimed;

(B) known, or should have known, that information provided is false or fraudulent;

(C) received child care services during a period in which the parent or child was not eligible for services;

(D) known, or should have known, that child care subsidies were provided to a person not eligible to be a provider; or

(E) otherwise indicated that the person knew or should have known that the actions were in violation of this chapter or state or federal statute or regulations relating to child care funds.

(b) The following parental actions may be grounds for suspected fraud:

(1) Not reporting or falsely reporting at initial eligibility or at eligibility redetermination:

(A) household composition, or income sources or amounts that would have resulted in ineligibility or a higher parent share of cost; or

(B) work, training, or education hours that would have resulted in ineligibility; or

(2) Not reporting during the eligibility period inclusive of the 90-day initial job search period, if applicable:

(A) changes in income or household composition that would cause the family income to exceed 85 percent of SMI (taking into consideration fluctuations of income); or

(B) a permanent loss of job or cessation of training or education that exceeds 90 days; or

(C) improper or inaccurate reporting of attendance.

§809.113. Action to Prevent or Correct Suspected Fraud.

(a) The Agency or Board may take the following actions pursuant to Agency policy if the Agency or Board finds that a provider has committed fraud:

(1) Temporarily or permanently withholding payments to the provider for child care services delivered;

(2) Recoupment of funds from the provider;

(3) Stop authorizing care at the provider's facility or location;

(4) Prohibiting future eligibility to provide Commission-funded child care services or to participate in the management, ownership, or operation of a provider engaged in Commission-funded child care services for any of the following:

(A) the provider;

(B) an owner or director of the provider;

(C) an individual who, either alone or in connection with others, has the ability to influence or direct the management, expenditures, or policies of the provider;

(D) a family member of subparagraph (A), (B), or (C) of this paragraph; or

(E) an individual who was found to have engaged, aided, or abetted in the fraudulent activities; or

(5) Any other action consistent with the intent of the governing statutes or regulations to investigate, prevent, or stop suspected fraud.

(b) The Agency or Board may take the following actions pursuant to Agency policy if the Agency or Board finds that a parent has committed fraud:

(1) recouping funds from the parent;

(2) prohibiting future child care eligibility, provided that the prohibition does not result in a Choices or SNAP E&T participant becoming ineligible for child care;

(3) limiting the enrollment of the parent's child to a regulated child care provider;

(4) terminating care during the eligibility period if eligibility was determined using fraudulent information provided by the parent; or

(5) any other action consistent with the intent of the governing statutes or regulations to investigate, prevent, or stop suspected fraud.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on May 19, 2026.

TRD-202602114

Les Trobman

General Counsel

Texas Workforce Commission

Effective date: June 8, 2026

Proposal publication date: March 27, 2026

For further information, please call: (737) 301-9662