In the Matter of the Appeal by Woodson Institute for Excellence Charter School.

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2016).

STATE OF MINNESOTA
IN COURT OF APPEALS
A17-1616

In the Matter of the Appeal by Woodson Institute for Excellence Charter School.

Filed June 18, 2018
Affirmed
Randall, Judge*

Minnesota Department of Education
File No. OAH 5-1300-33879

Michael H. Streater, Adam G. Chandler, Briggs and Morgan, P.A., Minneapolis,
Minnesota (for relator Woodson Institute for Excellence Charter School)

Lori Swanson, Attorney General, Kathryn M. Woodruff, Assistant Attorney General, St.
Paul, Minnesota (for respondent Minnesota Department of Education)

Considered and decided by Larkin, Presiding Judge; Bjorkman, Judge; and Randall,
Judge.
U N P U B L I S H E D O P I N I O N
RANDALL, Judge
Relator charter school petitioned for certiorari review of respondent Minnesota
Department of Education’s decision denying federal and state special-education-aid
reimbursement. We affirm.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.

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FACTS
Relator Woodson Institute for Excellence Charter School (WISE) operated a charter
school for the 2014 -15 school year , but ceased operations in August 2015, after the
Minnesota Department of Education (the MDE) determined that WISE was not in
compliance with federal and state requirements re lated to fiscal accountabili ty. After the
school’s closure, the MDE conducted an expenditure review to ensure that relator complied
with federal and state requirements regarding the use of special-education funds.
The MDE issued a Final Report in December 2015, determining that WISE failed
to maintain and provide supporting documentation for six employees who were
compensated, in part or in full, with federal or state special -education funds. As a result,
the MDE reduced federal and state special-education aid to WISE by $290,551.15. WISE
appealed the December 2015 Final Report to the MDE’s Audit Appeal Committee, seeking
review of the aid reductions for salaries paid to the six school employees. WISE submitted
additional materials for consideration, including an affidavit from r elator’s executive
director and employee records.
In August 2017, the MDE issued an Initial Determination decision, partially
granting WISE’s appeal with respect to three employees. The MDE determined that the
additional documentation adequately demonst rated that the three employees provided
special-education services to students, and award ed WISE an additional $123,614.84.
However, the MDE denied the appeal as to the remaining three employees, determining
that WISE failed to properly document expenditures related to them. WISE requested
reconsideration of the August 2017 decision and submitted additional materials. The MDE

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issued a final determination in November 2017, upholding the August 2017 decision. This
certiorari appeal follows.
D E C I S I O N
I.
Appellant argues that the MDE’s decision is invalid because it constitutes an
unpromulgated rule. An agency’s authority to adopt administrative rules is governed by
the Minnesota Administrative Procedures Act (MAPA), Minn. Stat. §§ 14.001-.69 (2016).
A rule is an agency’s “statement of general applicability and future effect, including
amendments, suspensions, and repeals of rules, adopted to implement or make specific the
law enforced or administered by that agency or to govern its organizat ion.” Minn.
Transitions Charter Sch. v. Comm’r of Minn. Dep’t of Educ., 844 N.W.2d 223, 233 (Minn.
App. 2014) ( quoting Minn. Stat. § 14.02, subd. 4). Agency rules “must be adopted in
accordance with specific notice and comment procedures established by s tatute.” White
Bear Lake Care Ctr., Inc. v. Minn. Dep’t of Pub. Welfare , 319 N.W.2d 7, 9 (Minn. 1982).
We will declare an agency’s rule invalid if it was adopted without compliance with
statutory rulemaking procedures. Id.
WISE argues that the MDE fail ed to comply with statutory rulemaking procedures
because the State of Minnesota has not adopted specific rules regarding the type of
documentation required to support reimbursement of special-education funding . WISE
notes that the MDE provides “guidance” to school districts regarding what kind of
documentation should be submitted during an audit . WISE argues that this “guidance”
constitutes a “rule” under Minn. Stat. § 14.02, subd. 4, and is therefore invalid because it

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has not been properly adopted. During WISE’s audit, the MDE requested documentation
related to personnel, transportation, equipment, and procurement expenditures.
The MDE has a statutory duty to perform an audit. See Minn. Stat. § 127A.41, subd.
3 (2016). This section p rovides that the MDE “shall establish procedures for conducting
and shall conduct audits of district records and files for the purpose of veri fying . . . aid
entitlements.” Id. Additionally, a school district must keep its records open to inspection
in the event the commissioner performs an audit. Id., subd. 5 (“The accounts and records
of any district must be open to inspection by the state auditor, or the commissioner for the
purpose of audits conducted under this section .”). A charter school, such as WISE , is
defined as a public school within Minnesota’s public-education system. Minn. Stat.
§ 124E.03, subd. 1 (2016).
An agency must promulgate both legislative rules and interpretive rules. Minn.
Transitions Charter Sc h., 844 N.W.2d at 233. Legislative rules are those “promulgated
pursuant to delegated powers to make substantive law,” while interpretive rules are those
that “make specific the law enforced or administered by the agency.” Id. ( quotations
omitted). An unpromulgated interpretive rule is nevertheless valid “if the agency’ s
interpretation of a [statute] corresponds with its plain meaning, or if the [statute] is
ambiguous and the agency interpretation is a longstanding one.” Id. (quotations omitted).
The MDE’s request for documentation from WISE constitutes an interpretive rule
as it “make[s] specific” the law enforced or administered by the agency —namely, the
MDE’s authorization to perform an audit and to review the “accounts and records” of the
school during the audit. Minn. Stat. § 127A.41, subds. 3, 5 ; Minn. Transitions Charter

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Sch., 844 N.W.2d at 233. The MDE’s request for documentation corresponds to the plain
meaning of the statute and is valid under the exception for plain-meaning interpretations.
See Minn. Transitions Charter Sch. , 844 N.W.2d at 233-34. We conclude the MDE’s
decision is valid. It was not a chapter 14 violation or an unpromulgated legislative rule.1
II.
Agency decisions “enj oy a presumption of correctness ,” and o ur review of a
certiorari appeal from a n agency decision is narrow. Indep. Sch. Dist. No. 281 v. Minn .
Dep’t of Educ., 743 N.W.2d 315, 321 (Minn. App. 2008) (quotation omitted). We review
the merits of a controversy to consider whether the agency’s decision “ was arbitr ary,
oppressive, unreasonable, fraudulent, under an erroneous theory of law, or without any
evidence to support it.” Anderson v. Comm’r of Health, 811 N.W.2d 162, 165 (Minn. App.
2012) (quotation omitted), review denied (Minn. Apr. 17, 2012). We defer to the agency’s
decision as long as it is reasonable and supported by substantial evidence and we will not
replace the agency’s findings with our own. In re Rocheleau, 686 N.W.2d 882, 891 (Minn.
App. 2004), review denied (Minn. Dec. 22, 2004). Legal issues are reviewed de novo.
Cable Commc’ns Bd. v. Nor -West Cable Commc’ns P’ship , 356 N.W.2d 658, 668 -69
(Minn. 1984). The party challenging the agency’s decision bears the burden of proof. In

1 Following commencement of this action, the Minnesota legislature amended Minn. Stat.
§ 127A.41, related to the distribution of school aid and appropriation, and clarified that
“[audit] [p]rocedures adopted under this subdivision are not subject to chapter 14, including
section 14.386, and may differ from the procedures under section 127A.42 [permitting
MDE to withhold funds in other circumstances].” Minn. Stat. § 127A.41, subd. 3 (Supp.
2017).

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re Reichmann Land & Cattle, LLP , 847 N.W.2d 42, 46 (Minn. App. 20 14), aff’d, 867
N.W.2d 502 (Minn. 2015).
WISE has not satisfied that burden here. WISE argues that the MDE’s decision was
arbitrary, capricious, and not grounded in substantial evidence in the record. Substantial
evidence is “(1) such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion; (2) more than a scintilla of evidence; (3) more than some evidence;
(4) more than any evidence; and (5) evidence considered in its entirety.” AAA Striping Serv.
Co. v. Minn . Dep’t of Transp. , 681 N.W.2d 706, 718 (Minn. App. 2004) (quotation
omitted). A decision is arbitrary or capricious if the agency
(a) relied on factors the legislature never intended it to
consider, (b) entirely failed to consider an important aspect of
the problem, (c) offered an explanation for the decision that
runs counter to the evidence, or (d) rendered a decision so
implausible that it could not be ascribed to a difference in view
or the result of agency expertise.
Watab Twp. Citizen All . v. Benton Cty. Bd. of Comm’rs , 728 N.W.2d 82, 89 (Minn. App.
2007), review denied (Minn. May 15, 2007).
Here, upon completion of a financial audit , the MDE determined that the charter
school received special-education funds in excess of the amount owed and denied WISE’s
request for reimbursement of those expenses in a December 2015 decision. WISE appealed
the decision and provided additional information on six employees. The MDE granted
WISE’s appeal as to three of its employ ees, determining that the new documentation
adequately demonstrated that each of these three employees provided special -education
services to students during the school year. However, the MDE denied the appeal as to the

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remaining three individuals because it felt the documentation did not justify additional
reimbursement. On reconsideration, the MDE reviewed additional materials and again
determined that the school failed to properly document its expenses.
Substantial evidence in the record supports the MDE’s decision. For employee C.J.,
WISE submitted a certification signed in October 2017, over two years after the school
closed and three years after some of the pay periods at issue. The MDE reasoned that the
timing was inconsistent with federal law and basic fiscal accountability standards and
raised integrity concerns. The final determination also denied the appeal regarding
employee M.D. , stating that the certification for this employee contained a generic
statement that M.D. spent 100% of her time as a “special education teacher or other service
provider,” but did not adequately describe her employment duties and activities. The MDE
concluded that the appeal was “inadequate to support time spent on special-education
activities.” T he MDE noted that the certification was created “over two years after the
applicable employment period,” and that there was no documentation submitted providing
adequate support for the expense. Lastly, the MDE denied the appeal for employee C.B.,
determining that her employee certification contained only a generic statement that she
worked 100% of her time “as a special education teacher or other service provider,” but
failed to describe the special -education activities in which she allegedly engaged. The
MDE determined that WISE failed to provide adequate documentation in support of its
reimbursement request for these three employees.
We find the agency’s decision to deny WISE’s reimbursement request was
supported by substantial evidence with respect to each of the three employees . WISE, as

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the party seeking relief, bears the burden of establishing that the MDE’s findings are not
supported by the evidence in the record. Reserve Mining Co. v. Herbst, 256 N.W.2d 808,
825 (Minn. 1977). WISE did not meet that burden.
WISE has not satisfied its burden of demonstrating that the MDE’s decision was
arbitrary or capricious in that it relied on factors the legislature never intended the agency
to consider, ignored an important aspect of the problem, explained its decision in a way
that ran counter to the evidence, or rendered an implausible decision. Watab Twp. Citizen
All., 728 N.W.2d at 89. WISE has not identified evidence suggesting that the MDE’s
decision “represent[ed] the agen cy’s will and not its judgment.” In re Review of 2005
Annual Automatic Adjustment of Charges, 768 N.W.2d 112, 118 (Minn. 2009) (explaining
that an agency’s decision is arbitrary or capricious if agency exercises its will, rather than
reasoned judgment).
Affirmed.