(a) A breed registry may use horse industry escrow account funds only for events that further the horse industry.
(b) The following types of costs may not be paid from funds allocated from the account:
  (1) capital improvements;
  (2) donations or contributions made to any individual or organization without express approval from the Commission for such contribution or donation;
  (3) costs of entertainment, amusements, social activities, and incidental costs relating thereto, including tickets to shows or sports events, meals, alcoholic beverages, lodging, rentals, transportation, tips, and gratuities;
  (4) fines, penalties, or other costs resulting from violations of or failure to comply with federal, state, or local laws and regulations;
  (5) liability insurance coverage not specific to a particular event or series of events for which the Commission has allocated funds from the account;
  (6) expenses related to litigation;
  (7) professional association fees or dues for the breed registry or an individual;
  (8) legislative expenses such as salaries and other expenses associated with lobbying the state or federal legislature or similar local governmental bodies, whether incurred for purposes of legislation or executive direction; or
  (9). fundraising.
(c) The following types of costs may only be paid with funds allocated from the account, in an amount not to exceed five percent of the amount allocated for the event for which it is allocated, if specifically approved by the Commission:
  (1) operating expenses, including the salaries of breed registry staff, interest and other financial costs related to borrowing and the cost of financing, contributions to a contingency reserve or any similar provision for unforeseen events, and audits or other accounting services; and
  (2) the purchase of capital assets.
(d) A breed registry may pay a cost out of funds awarded from the horse industry escrow account if it satisfies subsections (a) through (c) of this section and is reasonable and adequately documented.
  (1) A cost is reasonable if the cost does not exceed that which would be incurred by a prudent individual or organization under the circumstances prevailing at the time the decision was made to incur the cost and it is necessary to achieve the purpose for which the funds were sought.
  (2) A cost is adequately documented if the cost is supported by Generally Accepted Accounting Principles, the breed registry's accounting records, and documented in accordance with §303.325 of this subchapter (relating to Quarterly Reports).
(e) Use of funds allocated to a breed registry from the account shall comply with the current Uniform Grant Management Standards or Texas Grant Management Standards.
(f) If a previously approved and funded event is canceled, the funds shall be returned to the Commission within 45 days after the cancelation of the event. All funds expended with respect to any canceled event or event that does not otherwise occur shall be accounted for and such accounting shall accompany the return of the balance of such related canceled event funds.
(g) The Commission may require a breed registry to repay any funds not expended in accordance with Section 2028.204 of the Act and this section after the completion of an event.

Source Note: The provisions of this §303.322 adopted to be effective November 19, 2019, 44 TexReg 7041; amended to be effective August 11, 2020, 45 TexReg 5508