The Premier League has recommended a deduction of up to 12 points for Everton over alleged breaches of financial rules, according to a report on Wednesday.
The Daily Telegraph has reported that the league has asked an independent commission hearing charges against the Merseyside club to impose a severe sanction.
A 12-point deduction would leave Everton on minus five points in this season's league table. The club and the Premier League have not commented on the report.
The league referred the club to the commission in March over an alleged breach of its profitability and sustainability (P&S) rules over a period ending with the 2021-22 season.
The league's P&S rules allow clubs to lose a maximum of £105 million (€120.4m) over a three-year period or face sanctions.
Everton said in a statement issued on the day that news of the referral was confirmed: "The club strongly contests the allegation of non-compliance and together with its independent team of experts is entirely confident that it remains compliant with all financial rules and regulations.
"Everton is prepared to robustly defend its position to the commission. The club has, over several years, provided information to the Premier League in an open and transparent manner and has consciously chosen to act with the utmost good faith at all times."
Everton have recorded annual losses for five consecutive years - more than £430 million (€493.2m) in total over the period.
The club are the subject of a takeover bid by American private investment firm 777 Partners, which last week denied a New York Times report that its bid had stalled because of a failure to supply information to the Financial Conduct Authority (FCA).
Meanwhile, Everton and Republic of Ireland captain Seamus Coleman and manager Sean Dyche have paid tribute to chairman Bill Kenwright.
The pair laid flowers at the Dixie Dean statue outside Goodison Park on Tuesday morning.
Kenwright died at the age of 78 following a battle with cancer, the club announced on Monday.
Kenwright, who succeeded Phillip Carter as chairman in 2004 after first joining the board at Goodison Park in 1989, had a cancerous tumour removed from his liver in August.
Liverpool-born Kenwright was a successful theatre and film producer when asked to join the Everton board in 1989.
He bought a majority 68% stake in the club in 1999 and became deputy chairman before replacing Carter.
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