BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Carol Liu, Chair
2013-2014 Regular Session
BILL NO: AB 812
AUTHOR: Mitchell
AMENDED: June 26, 2013
FISCAL COMM: Yes HEARING DATE: July 3, 2013
URGENCY: No CONSULTANT: Lynn Lorber
SUBJECT : Child care contracts.
SUMMARY
This bill eliminates the required 90-day notice prior to
the immediate termination of a child care contract,
prohibits a contractor from continuing to provide care to
children while appealing an immediate termination, expands
the reasons for which a contract may be immediately
terminated, and makes other changes relative to contracts
with the California Department of Education for child care
and development services.
BACKGROUND
Current law:
1) Authorizes local government agencies or non-profit
organizations to contract with the CDE to operate
Alternative Payment Programs and provide alternative
payments and support services to parents and child
development providers. Alternative Payment Programs
help parents arrange child care services and makes
payments directly to the provider, which may be
in-home care, family child care or center-based care,
and either licensed or license-exempt. (Education
Code § 8220)
Contract classification
2) Requires the Superintendent of Public Instruction
(SPI) to establish a contract classification system to
identify, monitor and provide technical assistance to
contracted child care and development providers and
Alternative Payment Programs.
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3) Defines a "clear contract" as a designation of a
contracted agency that is in full compliance withal
applicable statutory provisions, funding terms and
conditions, and applicable program quality guidelines.
4) Defines a "provisional contract" as designation of
a newly awarded contract to an agency, under which the
timeframe of this status is at the discretion of the
CDE.
5) Defines a "conditional contract" as a designation
of a high risk contracted child care agency that is
out of fiscal or programmatic compliance.
6) Prohibits a child care agency under a "conditional
contract" from applying for additional state child
development program funds. (EC § 8406.6)
Contract termination
7) Authorizes the California Department of Education
(CDE) to suspend or immediately terminate a contract
for chronic fiscal or program violations of a felony
nature, which include the following violations:
a) Fraud or conspiracy to defraud;
b) Misuse of state funds in violation with the
California Accounting
Manual;
c) Embezzlement;
d) Threats of bodily or other harm to state officials;
e) Bribery or attempted bribery of a state official;
f) Unsafe or unhealthy physical environment or
facility;
g) Substantiated abuse or molestation of children;
h) Failure to report suspected child abuse or
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molestation;
i) Theft of supplies, equipment or food; and
j) Places a person in position of fiscal
responsibility or control who
has been convicted of specified crimes, including
financial crimes.
(EC § 8406.7)
8) Requires the CDE to provide to a contractor a
90-day notice of suspension or termination except if
there is imminent danger to the health and safety of
children. (EC § 8257)
9) Provides due process rights to a child care agency,
which include the right to an independent appeals
process administered by the Office of Administrative
Hearings. (EC § 8402)
10) Authorizes the CDE to suspend or terminate a
contract of an agency that places a person in a
position of fiscal responsibility or control who has
been convicted of burglary, forgery, counterfeiting,
larceny, embezzlement, or extortion. (EC § 8406.9)
Current regulations establish an internal dispute review
process within the California Department of Education
(CDE). (California Code of Regulations, Title 5, § 18308)
ANALYSIS
This bill eliminates the required 90-day notice prior to
the immediate termination of a child care contract,
prohibits a contractor from continuing to provide care to
children while appealing an immediate termination, expands
the reasons for which a contract may be immediately
terminated, and makes other changes relative to contracts
with the California Department of Education (CDE) for child
care and development services. Specifically, this bill:
Immediate termination of a contract
1) Eliminates the requirement that fiscal or program
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violations be chronic.
2) Expands the reasons for which the CDE may immediately
terminate a contract to include:
a) Cessation of operations without
the permission of CDE or abandoning the
contracts.
b) Failure of a program to fully
reimburse a significant number of approved child
care providers within 15 calendar days after the
date set in the plan for timely payments adopted
by the contracting agency, unless the failure is
due to a delay in receiving apportionments from
the state.
c) Failure to pay salaries owed to
employees, pay federal payroll tax, or fully
reimburse a significant number of child care
providers for more than 15 days after the
employee salaries, federal payroll taxes, or
reimbursement payments were due, unless failure
is due to a delay in receiving apportionments
from the state.
3) Eliminates the requirement that CDE provide a written
notification 90-days prior to the immediate
termination of a contract, and deletes the condition
that an immediate termination be based on imminent
danger to the health and welfare of children.
4) Prohibits a contractor from continuing to operate
during the period of appeal of an immediate
termination of the contract, and deletes the condition
that a contractor cease operation only if the
termination is based on imminent danger to the health
or welfare of children.
5) Requires a notice of immediate termination to be
served on the contracting agency by personal service
or at the last address on file with the CDE, by
overnight mail or certified mail. This bill provides
that service may be proved in the manner authorized in
a civil action, and that service by mail is complete
at the time of deposit. (Notice of immediate
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termination is still required, but does not give
contractor 90-days prior to termination.)
6) Deletes from the list of offenses for which, if
committed by a person in a position of fiscal
responsibility, a contract may be immediately
terminated, burglary, forgery, counterfeiting,
larceny, embezzlement, or extortion.
7) Replaces on the list of offenses for which, if
committed by a person in a position of fiscal
responsibility, a contract may be immediately
terminated, a crime involving misuse or
misappropriation of state or federal funds, or a state
or federal crime involving moral turpitude.
8) Eliminates obsolete references to the suspension of
contracts.
Conditional contract status
9) Deems a contracting agency (all contracts with that
agency) to be on conditional status if that agency has
at least one contract on conditional status.
10) Removes the prohibition on a contractor with
conditional status from applying for additional child
care and development funds.
11) Clarifies that a conditional contract status may be
imposed for both fiscal and programmatic
non-compliance (not just one or the other).
Internal appeal
12) Requires the California Department of Education (CDE)
to provide an internal appeal procedure to resolve a
dispute between CDE and a contracting agency regarding
a dispute regarding the interpretation or application
of a term or condition of a contract, or to dispute a
finding made by the CDE resulting from a fiscal or
programmatic review, including an error rate
notification.
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13) Requires a contracting agency to have the right to
appeal the finding of a fiscal or programmatic review,
including an error rate finding, by submitting a
request for appeal in accordance with the internal
appeal procedure developed by the CDE.
STAFF COMMENTS
1) Need for the bill . According to the author, "In the
last two years, there have been incidents where child
care contractors involved in financial malfeasance
ceased operating or ceased reimbursing providers, but
would not relinquish their contracts. In these
circumstances, the CDE had no authority to immediately
remove those contracts and re-direct funding to
contractors who would continue services to eligible
children and families. CDE could only withhold
funding, which did nothing to protect children."
2) Immediate termination of a contract . This bill
further defines and provides for greater distinction
between the immediate termination of a contract when a
90-day notice is not appropriate, and "regular"
(non-immediate) termination of a contract. This bill
eliminates the reference to "chronic" fiscal or
program violations, which has necessitated the
California Department of Education (CDE) to document
evidence of repeated violations while the contractor
continues to operate. In conjunction, this bill
eliminates the requirement that CDE provide a 90-day
notice prior to the immediate termination of a
contract, and prohibits an agency whose contract has
been immediately terminated continuing to operate
during an appeal of the contract termination.
3) Application for additional funds . The bill removes
the prohibition on a contractor with conditional
status from applying for additional child care and
development funds. The CDE sees this as unnecessary
and overly punitive, and it precludes as contracting
agency with many contracts from seeking additional
funds for any existing or new contract. This can have
a wider negative impact during times of a reduced
availability of child care slots.
4) Fiscal impact . According to the Assembly
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Appropriations Committee, this bill would impose
minor, absorbable General Fund administrative costs to
CDE.
SUPPORT
Children's Advocacy Institute
Superintendent of Public Instruction
OPPOSITION
None on file.