Welf. & Inst. Code, § 15200.4

(a) In administering the Aid to Families with Dependent Children program provided for under Chapter 2 (commencing with Section 11200), excluding provisions relating to foster care, the director may impose sanctions as provided by this section to assure adequate county administration performance. Fiscal sanctions may be imposed against a county only if the department has conducted, within the county, a statistically reliable and valid case sample with a confidence level of at least 95 percent.

(b) The director may hold counties financially liable for aid paid to ineligible persons and aid paid to eligible persons in excess of the amount to which they are entitled as represented by a dollar error rate. There shall be established annually in the Budget Act a dollar error rate standard which shall be the basis for computing a county’s liability under this section for the two subsequent quality control review periods for which error rates are generated. Counties which exceed the standard during the sanction period may be apportioned a sanction no greater than the state share of the Aid to Families with Dependent Children program payments multiplied by the amount by which the statistical measure of the lower point estimate of their error rate exceeded the standard.

(c) If a federal fiscal sanction is imposed against the state as a result of the state’s dollar error rate being above the federally established tolerance level, the director shall pass the sanction on to the counties in accordance with regulations adopted by the director which establish a method for equitable distribution of the sanction. The amount assessed to any county may be reduced or set aside if the director finds that extenuating circumstances existed and that imposition of the full sanction amount would unfairly penalize the county.