HB3700

Regular Session

Relating to the prevention, detection, and investigation of fraud, waste, and abuse in programs administered by the Texas Workforce Commission or by the commission's contractors or grantees.

ModeratePlan for compliance

Low Cost

Effective:2025-05-29

Enforcing Agencies

Texas Workforce Commission

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: May 29, 2025 (Signed with immediate effect).
Compliance Deadline: Immediate. TWC authority to investigate current contracts and grants is active; "waste" protocols apply to current expenditures.
Agency Rulemaking: TWC is currently developing detection procedures. The period between now and the first legislative report (September 1, 2026) represents a high-risk "gray zone" where enforcement precedents regarding "waste" will be set before formal definitions are fully codified.

Immediate Action Plan

Conduct a Gap Analysis: Audit current TWC-related expenditures against a strict "necessity" standard by July 15, 2025.
Update Whistleblower Policies: Strengthen internal reporting channels to resolve issues before employees utilize the new public TWC portal.
Review Insurance Coverage: Verify Employment Practices Liability Insurance (EPLI) covers whistleblower retaliation and Professional Liability covers administrative audit defense.
Notify Subcontractors: Issue a formal memo to all downstream vendors alerting them to the new FWA standards and their liability.

Operational Changes Required

Contracts

Review Master Service Agreements (MSAs) for "cooperation" and "audit access" clauses. You must flow down FWA compliance requirements to all subcontractors immediately; under this regime, you are strictly liable for "waste" or "abuse" committed by your downstream vendors.

Hiring/Training

Update employee handbooks to explicitly address "waste" (inefficiency) and "abuse" (misuse of position), not just fraud. Train finance and procurement staff that "inefficient" spending is now a compliance violation subject to clawback, even if the expenditure was technically legal.

Reporting & Record-Keeping

Implement "Justification Logs" for all TWC-related grant or contract expenditures to prove *necessity*, not just receipt. Prepare IT systems for data interface requests; the law authorizes TWC to utilize technology to detect irregularities, which may result in demands for direct API access or bulk data dumps from your payroll or accounting systems.

Fees & Costs

No new statutory fees. However, organizations should budget for increased administrative costs related to audit defense and potential clawbacks for expenditures deemed "wasteful" by TWC auditors.

Strategic Ambiguities & Considerations

The statute fails to strictly define "waste" and "abuse," leaving TWC auditors subjective discretion to penalize inefficiencies (e.g., paying a premium for expedited service) as "waste." Additionally, the scope of "technology" TWC can use to access vendor data is undefined; businesses must monitor the Texas Register for rulemaking regarding whether TWC will demand direct access to internal private sector servers.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsLabor Labor--general Fraud Workforce Commission, Texas

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

C.S.H.B. 3700

By: Vo

Delivery of Government Efficiency

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee of concerns from the Texas Workforce Commission (TWC) over a lack of statutory requirements for fraud, waste, and abuse prevention and detection in TWC programs, including programs concerning workforce development and vocational rehabilitation services, which is an issue that was identified through agency reports and program evaluations. While fraud, waste, and abuse detection and prevention measures currently exist in statute for the TWC subsidized child-care program, there is currently no statutory guidance concerning these issues in other TWC programs.

C.S.H.B. 3700 seeks to remedy this situation by requiring TWC to develop procedures and systems to detect, prevent, and investigate fraud, waste, and abuse activities across programs administered by TWC and its grantees and contractors. The bill further requires TWC to develop a method for the public, grantees, and contractors to report instances of fraud, waste, and abuse, including through an online reporting system.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 3700 amends the Labor Code to require the Texas Workforce Commission (TWC) to develop the following:

·procedures to prevent, detect, and investigate fraud, waste, and abuse in programs administered by TWC, under contract with TWC, or by a person awarded a grant by TWC;

·systems to detect fraud, waste, and abuse in the administration, provision, and delivery of those programs; and

·methods for a person to report to TWC fraud, waste, or abuse in the delivery of those programs, including an option for reporting through TWC's publicly available website.

The bill authorizes TWC to obtain any information or technology necessary to enable TWC to meet its responsibilities under the bill's provisions or under other law in regard to the prevention, detection, and investigation of fraud, waste, and abuse in TWC programs.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 3700 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

The introduced and the substitute both require TWC to develop procedures, systems, and reporting methods for the prevention, detection, and investigation of fraud, waste, and abuse in certain programs, but the two versions differ in the following ways:

·whereas the introduced specified the applicable programs as all programs administered by TWC, or its subrecipients, and any contractors of either, the substitute specifies the programs as those administered by TWC, under contract with TWC, or by a person awarded a grant by TWC;

·whereas the introduced specified the goal of the systems as detecting fraud, waste, and abuse in the administration, provision, and delivery of all programs and services, the substitute specifies the goal as such with respect to programs administered by TWC, its contractors, or grantees; and

·whereas the introduced required TWC to develop a method to report fraud, waste, and abuse on TWC's website and another method for TWC's subrecipients, contractors, and those contractors' subrecipients to report fraud, waste, and abuse related to the programs they administer on TWC's behalf, the substitute requires TWC to develop methods for a person to report to TWC fraud, waste, or abuse in the delivery of the applicable programs, including an option for reporting through TWC's publicly available website.

Additionally, with respect to the authorization for TWC to obtain any information or technology necessary to enable TWC to meet its responsibilities, the substitute specifies that those responsibilities are in regard to the prevention, detection, and investigation of fraud, waste, and abuse in TWC programs, while the introduced did not include that specification.

House Authors

Rep. Hubert VoDemocrat · Primary Author

Joint Authors

Senate Sponsors

Cosponsors (2)

Bill Text(with markup)

H.B. No. 3700

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to the prevention, detection, and investigation of fraud,
	waste, and abuse in programs administered by the Texas Workforce
	Commission or by the commission's contractors or grantees.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. Chapter 301, Labor Code, is amended by adding
	Subchapter L to read as follows:
	SUBCHAPTER L. PREVENTION, DETECTION, AND INVESTIGATION OF FRAUD,
	WASTE, AND ABUSE IN COMMISSION PROGRAMS
	Sec. 301.201. PREVENTION, DETECTION, AND INVESTIGATION OF
	FRAUD, WASTE, AND ABUSE. (a) The commission shall develop:
	(1) procedures to prevent, detect, and investigate
	fraud, waste, and abuse in programs administered:
	(A) by the commission;
	(B) under contract with the commission; or
	(C) by a person awarded a grant by the
	commission;
	(2) systems to detect fraud, waste, and abuse in the
	administration, provision, and delivery of programs described by
	Subdivision (1); and
	(3) methods for a person to report to the commission
	fraud, waste, or abuse in the delivery of programs described by
	Subdivision (1), including an option for:
	(A) reporting through the commission's publicly
	available Internet website; and
	(B) anonymous reporting by an employee of the
	commission.
	(b) The commission may obtain any information or technology
	necessary to enable the commission to meet its responsibilities
	under this subchapter or other law in regard to the prevention,
	detection, and investigation of fraud, waste, and abuse in
	commission programs.
	(c) Not later than September 1 of each year, the commission
	shall submit to the legislature a written report that includes for
	each report of fraud, waste, or abuse in a program described by
	Subsection (a)(1) received by the commission under this section in
	the most recent calendar year:
	(1) a copy of the report;
	(2) any findings made by the commission in
	investigating the report; and
	(3) if fraud, waste, or abuse was found in
	investigating the report, any actions taken by the commission to
	resolve the matter.
	(d) The commission may not terminate or otherwise retaliate
	against an employee who in good faith reports to the commission
	under this section fraud, waste, or abuse in the delivery of
	programs described by Subsection (a)(1).
	SECTION 2. The Texas Workforce Commission shall submit the
	initial report required by Section 301.201(c), Labor Code, as added
	by this Act, not later than September 1, 2026.
	SECTION 3. This Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


March 31, 2025

TO:	Honorable Giovanni Capriglione, Chair, House Committee on Delivery of Government Efficiency

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	HB3700 by Vo (Relating to detection and prevention of fraud, waste, and abuse in all Texas Workforce Commission programs.), As Introduced

No significant fiscal implication to the State is anticipated.

It is assumed that any costs associated with the bill could be absorbed using existing resources.

Local Government Impact

No significant fiscal implication to units of local government is anticipated.

Source Agencies:

320 Texas Workforce Commission

LBB Staff:

JMc, RStu, GDZ, JBel

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Frequently Asked Questions

Common questions about HB3700

What does Texas HB3700 do?

HB3700 is effective immediately, mandating the Texas Workforce Commission (TWC) to aggressively enforce protocols against fraud, waste, and abuse (FWA) across all agency programs. This law expands liability for TWC contractors, grantees, and vendors, subjecting them to heightened audit scrutiny regarding "wasteful" spending and establishing new public whistleblower reporting mechanisms. Implementation Timeline Effective Date: May 29, 2025 (Signed with immediate effect).

Who authored HB3700?

HB3700 was authored by Texas Representative Hubert Vo during the Regular Session.

When was HB3700 signed into law?

HB3700 was signed into law by Governor Greg Abbott on May 29, 2025.

Which agencies enforce HB3700?

HB3700 is enforced by Texas Workforce Commission.

How urgent is compliance with HB3700?

The compliance urgency for HB3700 is rated as "moderate". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of HB3700?

The cost impact of HB3700 is estimated as "low". This may vary based on industry and implementation requirements.

What topics does HB3700 address?

HB3700 addresses topics including labor, labor--general, fraud and workforce commission, texas.

Legislative data provided by LegiScanLast updated: November 25, 2025

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