(a) Work performed by the department. The department and the applicant may agree that the department will, consistent with state law, provide all or part of the work connected with the project in the department's normal course of business. For work performed by the department, the following provisions will apply.
  (1) The department will account for all costs of the project in the normal course of business in accordance with applicable law.
  (2) The department will make progress payments or set aside funds from the bank on behalf of the applicant as the department deems necessary. Such actions shall bind the applicant to repayment according to the terms of the agreement(s). Interest shall accrue from the date of the payment or setting aside of funds.
  (3) The department's actions and decisions regarding the project shall not be contestable by the applicant, except as expressly provided in the financial assistance agreement.
  (4) The applicant shall provide the department, and if applicable, the Federal Highway Administration, and the Federal Transit Administration, or their authorized representatives as applicable, with right of entry or access to all properties or locations necessary to perform activities required to execute the work, inspect the work or aid otherwise in the prompt pursuit of the work.
(b) Work performed by applicant. For work performed by the applicant, the following provisions apply.
  (1) The applicant shall comply with applicable state and federal law, and with all terms and conditions of an applicable agreement. If approval or concurrence of the Federal Highway Administration, the Federal Transit Administration, or any other federal agency is required, the department may require that the applicant seek that approval or concurrence through the department.
  (2) The applicant shall maintain its books and records in accordance with generally accepted accounting principles in the United States, as promulgated by the Governmental Accounting Standards Board, the Financial Accounting Standards Board, or pursuant to applicable federal or state laws or regulations, and with all other applicable federal and state requirements, subject to any exceptions required by existing bond indentures of the applicant that are applicable to the project, and any exceptions the applicant has historically implemented that have been acceptable to the public debt markets.
  (3) For loans of more than $1 million, the applicant shall, at the applicant's cost, have a full audit of its books and records performed annually by an independent certified public accountant selected by the applicant and reasonably acceptable to the department. The audit must be conducted in accordance with generally accepted auditing standards promulgated by the Financial Accounting Standards Board, the Governmental Accounting Standards Board, or the standards of the Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-profit Organizations, as applicable, and with all other applicable federal and state requirements. The applicant shall cause the auditor to provide a full copy of the audit report and any other management letters or auditor's comments directly to the department within a reasonable period of time after they have been provided to the governing body of the applicant.
  (4) For loans of $1 million or less, the applicant shall:
    (A) at the applicant's cost and in a format prescribed by the department, submit an annual report to the department listing project expenditures, providing an accounting of financial assistance proceeds, and providing any other information requested by the department;
    (B) on request of the department and at the applicant's cost, provide a report containing the same or similar information as required in the annual report under paragraph (4)(A) of this subsection or information relating to project expenditures that the applicant is required to provide to another local, state, or federal agency;
    (C) hold all project records, accounts, and supporting documents open for state or federal audits for the retention period described in paragraph (6) of this subsection; and
    (D) forward to the department, upon completion of the project, all project files and reports as requested by the department.
  (5) If required to have an audit under paragraph (3) of this subsection, the applicant shall retain, or cause the auditor to retain, all work papers and reports until the fourth anniversary of the date of the audit report, unless the department notifies the applicant in writing of a later date for the end of the retention period. During the retention period, the applicant shall make audit work papers available to the department within 30 days of the date that the department requests those papers.
  (6) Unless the department in writing provides a shorter period, the applicant shall retain all original project files, records, accounts, and supporting documents until the later of the date that:
    (A) project is completed;
    (B) all financial assistance under this chapter has been repaid, if applicable; or
    (C) the retention period required by applicable federal and state law ends.
  (7) If a project will become a part of the state highway system and the department will assume jurisdiction of the project, the applicant shall ensure that the project, including all its components and appurtenances, is maintained in accordance with §6.44 of this subchapter (relating to Maintenance). The applicant shall transfer all design data, surveys, construction plans, right of way maps, utility permits, and agreements with other entities relating to the project to the department when the department assumes jurisdiction of the project.

Source Note: The provisions of this §6.42 adopted to be effective January 8, 1998, 23 TexReg 151; amended to be effective January 5, 2006, 30 TexReg 8990; amended to be effective March 20, 2008, 33 TexReg 2321; amended to be effective October 21, 2010, 35 TexReg 9361; amended to be effective June 21, 2012, 37 TexReg 4433