Chiang

This declaratory relief and writ of mandate action concerns the validity of two auditing rules used by defendant State Controller (Controller). The Controller used these rules in reducing state-mandated reimbursement claims for employee salary and benefit costs submitted from plaintiff school districts and community college districts (hereafter plaintiffs).

Contemporaneous Source Document Rule (CSDR)

The first auditing rule is referred to by plaintiffs as the contemporaneous source document rule (CSDR). The Controller used this rule to reduce reimbursement claims for the following four state-mandated school district programs during the challenged period straddling fiscal years 1998 to 2003: (1) the school district of choice (SDC) program (SDC Program); (2) the emergency procedures, earthquake procedures and disasters program (EPEPD Program); (3) the intradistrict attendance program (Intradistrict Attendance Program); and (4) the collective bargaining program (Collective Bargaining Program). We conclude this rule was an invalid underground regulation under the state Administrative Procedure Act (APA) during this period. (Gov. Code, § 11340 et seq.) Consequently, we…