Amended in Senate June 26, 2013

Amended in Assembly May 15, 2013

Amended in Assembly May 7, 2013

Amended in Assembly April 22, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 812

Introduced by Assembly Member Mitchell

February 21, 2013

An act to amend Sections 8257, 8402, 8403, 8406.6, 8406.7, 8406.9, 8407, and 8408 of, and to add Section 8401.5 to, the Education Code, relating to child care.

LEGISLATIVE COUNSEL’S DIGEST

AB 812, as amended, Mitchell. Child care: contracts: termination and suspension.

(1) Existing law requires the State Department of Education to apply sanctions against contracting agencies that have serious licensing violations, as defined and reported by the State Department of Social Services and provide 90 days’ written notification to any contractor whose agreement is being terminated, unless there is imminent danger to the health and welfare of children if agency operation is not terminated promptly.

This bill would require a 90-day written notification as specified, except in the case of certain immediate terminations.

(2) Existing law requires the department to provide an independent appeal procedure in certain instances, including, but not limited to, contract termination or suspension, to each contracting agency providing specified child care and development services.

This bill would delete the requirement that the department provide the independent appeal procedure for contract suspension. The bill would additionally require the department to provide an internal appeal procedure to resolve a dispute between the department and a contracting agency providing specified child care and development services regarding the interpretation or application of a contract term or condition, or to dispute the findings of a fiscal or programmatic review.

(3) Existing law requires the Superintendent of Public Instruction to establish a contract classification system with 3 classes of contract designations; a clear contract, a provisional contract, and a conditional contract, as specified. begin insert Existing law requires the Child Development Division of the department to provide technical assistance to agencies with conditional contracts. end insert

This bill would revise the 3 classes of contract designations, as specified. begin insert The bill would require that technical assistance also be provided to any contracting agency making a written request to its assigned consultant or administrator within 60 days of receipt of the request. end insert

(4) Existing law authorizes any contracting agency that evidences chronic fiscal or program violations of a felony nature, as specified, to have its contract immediately suspended or terminated provided there is documented evidence of the violations and upon review and recommendation of the general counsel of the department.

This bill would instead authorize a contracting agency that evidences any specified acts or omissions to have its contract or contracts immediately terminated provided there is documented evidence of the acts or omission and upon review and recommendation of the general counsel of the department. The bill would add additional acts or omissions, as described, that may result in immediate termination of begin delete an end delete begin insert a contracting end insert agency’s contract or contracts and require the notice of immediate termination of a contract to be served in a specified manner.

(5) Existing law authorizes a contracting agency that places a person in a position of fiscal responsibility or control who has been convicted of certain crimes to have its contract immediately suspended or terminated if there is documented evidence of the conviction and upon review and recommendation of the general counsel of the department. Existing law authorizes a contracting agency whose contract is terminated for the reasons described above to appeal the contract termination, and require the contract termination to occur after notice, as specified, is provided at least 90 days before termination.

This bill would instead authorize a contracting agency that has in place or places a person in a position of fiscal responsibility or control who has been convicted of a crime involving misuse or misappropriation of state or federal funds, or a state or federal crime involving moral turpitude, to have its contract immediately terminated if there is documented evidence of the conviction and upon review and recommendation of the general counsel of the department. The bill would repeal the authority of a contracting agency whose contract is terminated for the reasons described above to appeal the contract termination, and the requirement that this termination occur after notice, as specified, is provided at least 90 days before termination.

(6) Existing law authorizes local contracting agencies to continue to operate under their contract during an appeal of termination, unless the specified action is based on imminent danger to the health and welfare of children. Existing law requires, if the contract is being terminated based on imminent danger to the health and welfare of children, the reason for the termination to be specified by the department in its notice of termination.

This bill would instead authorize local contracting agencies to continue to operate under their contract during an appeal of termination, unless the action is an immediate termination action, as specified, in which case a local contracting agency would not be authorized to continue to operate under the contract after the effective date given in the notice of immediate termination.

(7) This bill would make conforming and nonsubstantive changes to these provisions.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 8257 of the Education Code is amended
to read:

8257.  

The department shall do all of the following in
administering the provisions of this chapter:

(a) Apply sanctions against contracting agencies that have
serious licensing violations, as defined and reported by the State
Department of Social Services pursuant to Section 1597.11 of the
Health and Safety Code.

(b) Except in the case of immediate terminations taken pursuant
to Sections 8406.7 or 8406.9, provide 90 days’ written notification
to any contractor whose agreement is being terminated.
Notwithstanding Article 18 (commencing with Section 8400), the
department shall establish procedures for placing a contractor
whose agreement is being terminated into receivership. Action to
initiate receivership shall be at the discretion of the department,
and may be taken against a contractor whose agreement is being
terminated either immediately or within 90 days. The receiver shall
not be a department employee. The receiver shall have sufficient
experience in the administration of child care and development
programs to ensure compliance with the terms of the receivership.

SEC. 2.  

Section 8401.5 is added to the Education Code, to
read:

8401.5.  

(a) The department shall provide an internal appeal
procedure to resolve a dispute between the department and a
contracting agency providing child care and development services
pursuant to Section 8262 regarding the interpretation or application
of a term or condition of a contract, or to dispute a finding made
by the department resulting from a fiscal or programmatic review,
including, but not limited to, an error rate notification.

(b)  A contracting agency shall have the right to appeal the
findings of a fiscal or programmatic review, including, but not
limited to, an error rate finding, by submitting a request for appeal
in accordance with the internal appeal procedure developed by the
department pursuant to subdivision (a).

SEC. 3.  

Section 8402 of the Education Code is amended to
read:

8402.  

(a) The department shall provide an independent appeal
procedure to each contracting agency providing child care and
development services pursuant to Section 8262 that shall be
conducted by the Office of Administrative Hearings and shall be
provided upon an appeal petition of the contracting agency in any
of the following circumstances:

(1) Termination of a contracting agency’s contract.

(2) Denial of more than 4 percent or twenty-five thousand dollars
($25,000), whichever is less, of a local contracting agency’s
contracted payment for services schedule.

(3) Demand for remittance of an overpayment of more than 4
percent or twenty-five thousand dollars ($25,000), whichever is
less, of a local contracting agency’s annual contract.

(b) Before filing an appeal petition for an action taken pursuant
to paragraph (2) or (3) of subdivision (a), the contracting agency
shall have submitted all previously required standard monthly or
quarterly reporting forms to the department.

SEC. 4.  

Section 8403 of the Education Code is amended to
read:

8403.  

All hearings required by Section 8402 shall be conducted
according to the provisions of the Administrative Procedure Act
(Chapter 5 (commencing with Section 11500) of Part 1 of Division
3 of Title 2 of the Government Code), except as otherwise directed
in this article.

SEC. 5.  

Section 8406.6 of the Education Code is amended to
read:

8406.6.  

begin insert (a) end insert begin insert   end insert The Superintendent shall establish a contract
classification system for purposes of identifying, monitoring, and
providing technical assistance to contractors as follows:

begin delete

(a)

end delete

begin insert (1) end insert  Clear contract. This designation shall be given to a contract
that is neither a provisional contract, as described in begin delete subdivision
(b), end delete begin insert paragraph (2), end insert nor a conditional contract, as described in
begin delete subdivision (c) end delete begin insert paragraph (3) end insert .

begin delete

(b)

end delete

begin insert (2) end insert  Provisional contract. This designation applies to an
agency’s first contract for any particular service or to the contract
of an existing contracting agency for a new, modified, or different
type of service. The timeframe of a provisional contract is at the
discretion of the department and is given to ensure that the
contracting agency can demonstrate fiscal and programmatic
compliance before the contract is designated as a clear contract.
The contract status shall be reviewed annually.

begin delete

(c)

end delete

begin insert (3) end insert  Conditional contract. This designation applies to a high-risk
contract awarded to a contracting agency that evidences fiscal or
programmatic noncompliance, or both fiscal and programmatic
noncompliance. A contracting agency with one or more contracts
designated as conditional is deemed to be on conditional status
with the department for all child care and development program
purposes and is subject to any restrictions deemed reasonable to
secure compliance. The conditional contract shall include a bill of
particulars detailing the items of noncompliance, the standards
that must be met to avoid termination of contract and to qualify
the agency for clear contract status, and technical assistance plan.
Failure to demonstrate substantive progress toward fiscal or
program compliance within six months of that designation shall
constitute a breach of contract and may subject the contract to
termination for any applicable cause specified in Section 8406.7
or 8407, in accordance with Section 8402.

begin delete

(d)

end delete

begin insert (b) end insert  Agencies with conditional contracts shall receive technical
assistance from the Child Development Division of the department.

begin insert

(c) Notwithstanding subdivision (b), technical assistance shall
be provided to any contracting agency making a written request
to its assigned consultant or administrator within 60 days of receipt
of the request.

end insert

SEC. 6.  

Section 8406.7 of the Education Code is amended to
read:

8406.7.  

(a) A contracting agency that evidences any of the
following acts or omissions may have its contract or contracts
immediately terminated if there is documented evidence of the
acts or omissions, and upon review and recommendation of the
general counsel of the department:

(1) Fraud, or conspiracy to defraud.

(2) Misuse or misappropriation of state or federal funds,
including a violation of Section 8406.9.

(3) Embezzlement.

(4) Threats of bodily or other harm to a state official.

(5) Bribery or attempted bribery of a state official.

(6) Unsafe or unhealthy physical environment or facility.

(7) Substantiated abuse or molestation of children.

(8) Failure to report suspected child abuse or molestation.

(9) Theft of supplies, equipment, or food.

(10) Cessation of operations without the permission of the
department, or acts or omissions evidencing abandonment of the
contract or contracts.

(11) Failure of a program operating pursuant to Article 3
(commencing with Section 8220) or Article 15.5 (commencing
with Section 8350) to begin insert fully end insert reimburse a significant number of
approved child care providers, as determined by the department,
within 15 calendar days after the date set in the plan for timely
payments to begin insert child care end insert providers adopted by the contracting agency
pursuant to Section 18226 of Title 5 of the California Code of
Regulations, unless the failure is attributable to a delay in receiving
apportionments from the state.

(12) Failure of a program operating pursuant to this chapter to
pay salaries owed to employees, pay federal payroll tax, or begin insert fully end insert
reimburse a significant number of child care providers, as
determined by the department, affiliated with a contracting agency
pursuant to Article 8.5 (commencing with Section 8245) for more
than 15 days after the employee salaries, federal payroll taxes, or
reimbursement payments were due, unless the failure is attributable
to a delay in receiving apportionments from the state.

(b) An agency whose contract is immediately terminated
pursuant to this section retains appeal rights in accordance with
Section 8402.

(c) Notwithstanding any service provision in the Administrative
Procedure Act (Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code), a notice
of immediate termination shall be served on the contracting agency
by personal service or at the last address on file with the
department, by overnight mail or certified mail. Service may be
proved in the manner authorized in begin insert a end insert civil action. Service by mail
is complete at the time of deposit.

(d) The department shall advise child care and development
contractors of the provisions of this section within 30 working
days of the effective date of the act amending this section during
the 2013-14 Regular Session of the Legislature.

SEC. 7.  

Section 8406.9 of the Education Code is amended to
read:

8406.9.  

(a) An agency that has in place or places a person in
a position of fiscal responsibility or control who has been convicted
of a crime involving misuse or misappropriation of state or federal
funds, or a state or federal crime involving moral turpitude, may
have its contract immediately terminated pursuant to Section
8406.7 if there is documented evidence of the conviction, and upon
review and recommendation of the general counsel of the
department.

(b) For purposes of this section, “position of fiscal responsibility
or control” includes any authority to direct or control expenditure
of, or any access to, state or federal child care and development
funds received pursuant to this chapter whether that authority or
access is conferred based on the person’s status as an employee,
director, manager, board member, or volunteer, or based on any
other status.

(c) If the agency provides evidence to the department, before
the effective date given in the notice of immediate termination,
that the convicted person has been removed from the position of
fiscal responsibility or control and provides assurance that the
person will not be returned to a position of fiscal responsibility or
control, the department shall withdraw the termination action.

SEC. 8.  

Section 8407 of the Education Code is amended to
read:

8407.  

Except for causes listed in Sections 8406.7 and 8406.9,
termination of a child care and development contract shall not
occur without good cause and without notice as described in
Section 8406 at least 90 days before the effective date given in the
notice of termination.

SEC. 9.  

Section 8408 of the Education Code is amended to
read:

8408.  

Actions as defined in subdivision (a) of Section 8402
shall remain in effect during the appeal process. However, local
contracting agencies may continue to operate under the contract
during an appeal of termination, unless the action is an immediate
termination action taken pursuant to Section 8406.7 or 8406.9, in
which case a contracting agency shall not continue to operate under
the contract after the effective date given in the notice of immediate
termination.