Education Audit Appeals Panel

Education Audit Appeals Panel

Appeals

Summary Reviews

Grounds

The EAAP statutes provide for a “summary appeals process,” conducted by the executive officer acting independently of the panel, if the audit exceptions involved “clearly constitute substantial compliance” (see below). The law further provides that “if the conditions for finding substantial compliance are not clearly met or involve substantial questions of fact, the executive officer may deny the request for summary review.”

Process

The law provides that the summary review process is “voluntary [and] informal” and that the executive officer may seek comment from the Department of Finance and Superintendent of Public Instruction. Summary review is not subject to the provisions of the Administrative Procedure Act and does not involve a hearing.

Outcomes

The law provides that if the total audit exceptions for which an agency seeks summary review involve less than 150 units of average daily attendance (ADA) or $750,000, whichever is less, “the executive officer may waive or reduce the reimbursement or penalty upon a finding of substantial compliance and that other remedial measures are sufficient to induce full compliance in the future.” For exceptions involving larger total amounts of ADA/funding, “the executive officer may waive or reduce the reimbursement or penalty upon a finding of substantial compliance and order other remedial measures that are sufficient to induce full compliance in the future, if he or she has the written approval of the Department of Finance and the Superintendent.”

Relationship of Summary Reviews and Formal Appeals

The EAAP statutes provide that the summary review process is “in addition to the normal appeal process,” further stating that the right to a formal appeal to the panel is “independent” of the summary review provisions, and that “an appellant may pursue his or her appeal [to the panel] regardless of the result [of summary review].” If an appellant first requests summary review and then, dissatisfied with the outcome, chooses to pursue a formal appeal, the formal appeal is de novo, as if the summary review had never taken place.

Formal Appeals

Grounds

The EAAP statutes provide three grounds on which K-12 local education agencies may formally appeal audit findings to the panel itself:

·        errors of fact

·        errors of interpretation of law

·        substantial compliance

The first two grounds are not explained further in the EAAP statutes. With respect to the third, one of the EAAP statutes provides that:

“Substantial compliance” means nearly complete satisfaction of all material requirements of a funding program that provide an educational benefit substantially consistent with the program's purpose. A minor or inadvertent noncompliance may be grounds for a finding of substantial compliance provided that the local educational agency can demonstrate it acted in good faith to comply with the conditions established in law or regulation necessary for apportionment of funding. The panel may further define “substantial compliance” by issuing regulations or through adjudicative opinions, or both.

Process

The law provides that a hearing shall be held in each appeal to the panel, and that the panel shall consider appeals pursuant to the provisions of the Administrative Procedure Act. As standard practice, the panel delegates the hearing to an administrative law judge from the state’s Office of Administrative Hearings, who then proposes a decision for the panel's consideration. After reviewing the law and the record, the panel may adopt the decision as proposed or reject it and adopt a different one. The panel is specifically authorized to “approve settlements and make findings of fact and interpretations of law.” The Controller is automatically a party to every appeal to the panel, and the State Department of Education and Department of Finance are empowered to intervene as parties if they choose to do so.

Outcomes

With regard to the first two grounds, the law provides that if the panel determines that the appealing agency is correct in its assertion of error with regard to an audit finding, the agency is freed of its obligation to repay the penalty or apportioned funding associated with the finding. If the panel finds there was substantial compliance, it may waive or reduce the payment otherwise required “and may also order other remedial measures sufficient to induce full compliance in the future . . . includ[ing] restoration of a reduction or penalty amount if full compliance is not rendered in the future, ordering special audits, and requiring special training.”

Settlements

Education Code Section 41344.1(b) provides in part that EAAP may approve settlements. Section 1028 of Title 2, California Code of Regulations, provides that any party to an action that is proceeding pursuant to the Administrative Procedure Act (APA), as is the case with all of EAAP's formal appeals, may request settlement discussions at any time. The APA itself provides that the possibility of settlement may be explored during any prehearing conference (Government Code § 11511.7). The parties may also negotiate and present a proposed settlement on their own. (Government Code § 11415.60.)