September 26, 2024

Dear California State Preschool Program Executive Directors and Program Directors:

2024–25 California State Preschool Contract Changes

The purpose of this letter is to inform California State Preschool Program (CSPP) contractors of changes to contracts and reporting procedures beginning July 1, 2024. Please share this letter with your agency staff.

<begin add> This letter is being revised to add guidance related to reporting children in the Two Years Old and Three Years Old and the Four Years Old adjustment factor categories. For ease in determining what has been revised from the previous letter dated August 21, 2024, all new text can be seen in bold italic font with difference marking around the additions that reads <begin add> and <end add>. <end add>

Budget Act Amendments

The Early Education and Nutrition Fiscal Services (EENFS) Unit will process amendments to Fiscal Year (FY) 2024–25 CSPP contracts as a result of the 2024 Budget Act. These amendments will be processed in August 2024 and may include the funding to support the following:

• Annualization of family fee schedule changes
• Annualization of changes to the part-time/full-time definition effective March 1, 2024
• Program Cost Account (PCA) fund shift

Not all contractors will receive an allocation for each of these purposes. More information related to the allocation methodology can be found within the applicable sections of this letter. As a reminder, Budget Act amendments to CSPP contracts will be processed as allocation letters. While allocation letter amendments look like a contract amendment, they do not require a signature from the contractor. A copy of the executed amendment, including a contract face sheet detailing fiscal changes, will continue to be provided by the California Department of Education (CDE) Contracts Office.

Family Fee Allocations

In FY 2023–24, Assembly Bill (AB) 102 (Chapter 18, Statutes of 2023) allocated funding to support lost revenue due to the family fee changes effective October 1, 2023. Allocations were based on estimating the lost revenue due to family fee changes using family income as reported in the Child Development Management Information System (CDMIS) October 2022 enrollment data. ​Contractors were provided with a prorated allocation covering nine months. This allocation will be annualized and be included as part of the Budget Act amendments.

Further information on FY 2024–25 family fee requirements can be found in Management Bulletin (MB) 24-06: Assessment and Reporting of Family Fees for FY 2024–25, which can be found on CDE’s website at https://www.cde.ca.gov/sp/cd/ci/mb2406.asp.

Allocation to Support the Part-time/Full-Time Definition Change

The Budget Act of 2023 provided funding to support the change in the part-time/full-time designation definition. Allocations were provided to contractors who operated a full-day program and had reported part-time child days of enrollment (cdes) in the September 2023 Enrollment, Attendance, and Fiscal Report, or the most recent certified report, if a September report was not certified. The allocation provided to contractors in FY 2023–24 was a prorated allocation covering four months. This allocation will be annualized and be included as part of the Budget Act amendments.

Interim guidance on changes to the part-time/full-time definition was released on March 1, 2024, through the Early Education Divisions email distribution list. A copy of this interim guidance can be found on CDE’s website at https://www.cde.ca.gov/sp/cd/ci/interimguidance030124.asp.

Program Cost Account Fund Shift

In FY 2023–24, the allocation to support the part-time/full-time definition change was funded with PCA 25738 for Local Educational Agencies (LEAs) and PCA 25737 for non-LEAs. The funds associated with these two PCAs will be shifting to PCA 23038 for LEAs and PCA 25451 for non-LEAs. This shift will be included as part of the Budget Act amendments. Contractors who had PCA 25737 or PCA 25738 in their initial FY 2024–25 CSPP contract will find these PCAs reduced to zero.

Fiscal Year 2024–25 Reimbursement Rates

Section 5 of AB 116 (Chapter 41, Statutes of 2023) amended Education Code (EC) Section 8242 to specify that the annual cost-of-living adjustment for preschool programs for the 2023–24 and 2024–25 fiscal years required by EC Section 8242(b) and (c) shall be zero. As a result, there will be no allocation to increase the CSPP contract reimbursement rates in FY 2024–25.

The FY 2024–25 county reimbursement rates can be found at https://www.cde.ca.gov/fg/aa/cd/ratereformresources.asp.

Cost of Care Plus Rate Allocations

Senate Bill (SB) 140 (Chapter 193, Statutes of 2023) authorized the CDE to provide family childcare providers and centers with the monthly cost of care plus rate beginning January 1, 2024, through June 30, 2025. Pursuant to Sections 10(b) and 11(b), allocations are based on a per-child rate amount dependent upon the region in which the family children provider or center is located and include a ten percent administrative fee to state preschool programs for distributing payments to providers or subcontractors. The regions and per-child amounts are defined in SB 140 as follows:

The CDE will continue issuing cost of care plus rates as quarterly advances to CSPP contractors in FY 2024–25. Payment advances will be reconciled using CDD-801A enrollment data submitted by contractors via CDMIS. CSPP contractors will receive an email from their EENFS fiscal analyst that includes payment details and requirements for these allocations.

For additional information on the cost of care plus rate allocations, please refer to the Allocations Paid Outside of the CSPP Contract Frequently Asked Questions (FAQs), which can be found at https://www.cde.ca.gov/fg/aa/cd/allocationsfaq.asp.

Change to the California State Preschool Program Apportionment Schedule

The CSPP apportionment schedule has been revised for FY 2024–25. Contractors will receive an apportionment payment equal to one month beginning with the apportionment associated with the December service month, typically received in November.

The table below shows the updated apportionment schedule. The apportionment percentage will be applied to the amount a contract is projected to earn (the lesser of the maximum reimbursable amount (MRA) or net reimbursable program costs, explained in further detail in the FY 2024–25 California State Preschool Program Hold Harmless for Enrollment and Attendance section in this letter).

*The expected month apportionments will be received assumes timely execution of the contract and compliance with all contract requirements.

As a reminder, Prekindergarten and Family Literacy Support (CPKS) contracts are advanced 25% of the MRA at the beginning of the fiscal year. Subsequent apportionment payments are based on reported costs identified on certified Support Contract Expenses Reports submitted in the California Preschool Accounting Reporting Information System (CPARIS).

Reporting Family Fees

Contractors must report the amount of family fees assessed between July 1, 2024, and June 30, 2025, on the line Family Fees for Certified Children in the FY 2024–25 Enrollment, Attendance, and Fiscal Reports submitted in CPARIS. Contractors are reminded that family fees reported on the Family Fees for Certified Children line must be based on the amount of fees the contractor expects to collect in the report month, regardless of when the revenue is received. Reporting fees according to this directive will ensure the CDE is reimbursing contractors accurately.

In instances where a family has children enrolled in both a CSPP administered by the CDE, and a childcare program administered by the California Department of Social Services (CDSS), with the same number of hours, the contractor has the discretion on where to report the assessed fee (i.e., to either the CDE or the CDSS contract). However, to ensure consistency from one report month to the next, contractors must have written policies or procedures on how they determine the program to which they report the family fee.

Reporting Two-Year-Olds Served in a CSPP

Pursuant to SB 163 (Chapter 73, Statutes of 2024), two-year-old children may be served in the CSPP through June 30, 2027. The adjustment factors for two-year-olds are identical to the adjustment factors for three-year-olds. Therefore, the Three Years Old lines of the FY 2024–25 Enrollment, Attendance, and Fiscal Reports in CPARIS has been updated to Two Years Old and Three Years Old. Contractors will report both two-year-old and three-year-old child days of enrollment in this section.

A forthcoming MB is expected to be released by EED with more information.

<begin add> Reporting Three- and Four-Year Old Reminder

Contractors are reminded that reporting child days of enrollment within the Two Years Old and Three Years Old and the Four Years and Older adjustment factor categories are based on the statutory age definitions. For example, a child whose third birthday is on or before December 1, 2024, is statutorily three years old and shall be reported within the Two Years Old and Three Years Old adjustment factor category for the entire fiscal year. Similarly, a child whose fourth birthday is on or before December 1, 2024, is statutorily four years old and shall be reported within the Four Years and Older adjustment factor category for the entire fiscal year. <end add>

Change to Reporting Children Turning Four

In FY 2022–23, AB 210 (Chapter 62, Statutes of 2022) amended EC Section 8244, adding a new adjustment factor category for children ages 47 months or younger (i.e., three-year olds). Previous reporting guidance stated that children reported in the Three Years Old adjustment factor category must be ages 47 months or younger and once the child turned four years old, the contractor must begin reporting the child in the Four Years Old adjustment factor category.

SB 163 (Chapter 73, Statutes of 2024) amended EC Section 8244(b)(5), removing the reference to 47 months or younger and specifying that the adjustment factor for two-year-old and three-year old children shall be 1.8. As a result, for children who turn four mid-program year, contractors should no longer report a child in the Four Years Old adjustment factor category on the child’s fourth birthday. Instead, contractors shall continue reporting the child in the Two Years Old and Three Years Old adjustment factor category for the entire fiscal year.

<begin add> For example, a three-year-old who turns four on October December 26 would continue to meet the statutory definition of a three-year-old after their fourth birthday. Therefore, the contractor would continue to report the enrollment of that child in the Two Years Old and Three Years Old adjustment factor category through the end of the fiscal year, June 30. <end add>

Fiscal Year 2024–25 California State Preschool Program Hold Harmless for Enrollment and Attendance

For FY 2024–25, if a program is open and operating in accordance with their approved program calendar and remains open and offering services through the program year, the CSPP contract reimbursement amount will continue to be based on the lesser of either of the following:

1. One hundred percent of the contract maximum reimbursable amount MRA.
2. Net reimbursable program costs.

For information on how CSPP contract reimbursement is calculated in FY 2024–25, please refer to the Limits of Reimbursement Section of the FY 2023–24 Enrollment, Attendance, and Fiscal Reporting, and Reimbursement Procedures for Early Education Contractors, also known as the EENFS Fiscal Handbook, located at https://www.cde.ca.gov/fg/aa/cd/. Once available, the FY 2024–25 EENFS Fiscal Handbook will include the same limits of reimbursement guidance as found in the FY 2023–24 EENFS Fiscal Handbook.

Serving Children with Exceptional Needs in the California State Preschool Program

EC Section 8205(ae) defines funded enrollment as the number of subsidized children funded to be enrolled, based on the MRA, contract rate, inclusive of any adjustment factors, and approved program calendar, by a CSPP contractor. Pursuant to EC Section 8208(c)(1), in FY 2024–25, CSPP contractors are required to set aside five percent of funded enrollment for children with exceptional needs as defined in EC Section 8205.

EENFS developed an Exceptional Needs Funded Enrollment Calculator which contractors can use as a tool to determine the number of children associated with the five percent set aside requirement in determining the number of children funded to serve by service county, as well as the number of children required to meet the set aside to serve children with exceptional needs and children with severe disabilities. The Funded Enrollment calculator can be found at https://www.cde.ca.gov/fg/aa/cd/documents/fundedenrollmentcalculator.xlsx. Additionally, a video walkthrough of how to use the funded enrollment calculator can be found at https://www.youtube.com/watch?v=c1i0d4RIe8Q .

Reimbursement for the Required Set Aside

To ensure funding is available to enroll children with exceptional needs within the required set aside, contractors will be fully funded for the percentage of funded enrollment set aside amounts, pursuant to EC Section 8208(c)(2)(B). The CDE will advance funding set aside for children with exceptional needs based on the normal apportionment schedule, regardless of whether the contractor is fully earning their set aside amount.

The CDE will determine the extent to which contractors are earning their set aside amount based on the cdes reported within the exceptional needs and severely disabled adjustment factor categories. Contractors who are not fully earning the amount set aside to serve children with exceptional needs will receive a service-level exemption credit, which allows the contractor to be reimbursed for identified expenses without meeting the service requirement.

The EENFS contract earnings calculations, found in CPARIS in the Certified Reports section, include the required set aside amount, the earnings associated with the set aside amount, and the service-level exemption credit, if applicable. Contractors can use this information to track their earnings related to the set aside amount.

Reporting Unearned Prior Year Service-Level Exemption Credit

Pursuant to EC Section 8208(c)(2)(B), contractors were fully funded in FY 2022–23 and FY 2023–24 for the percentage of funded enrollment set aside amounts to ensure funding was available to enroll children with exceptional needs. Contractors that did not fully earn the FY 2022–23 or FY 2023–24 set aside through providing services to exceptional needs and severely disabled children received a service level exemption credit in those fiscal years. The CDE will not be invoicing the portion of the credit that remained unspent. Instead, these funds will be considered deferred revenue, and contractors may use that funding to cover FY 2024–25 expenses. In addition to reporting the expenses in the appropriate categories, the total should be reported on the Total Exceptional Needs/Severely Disabled Service Level Exemption Credit Expenses line in the FY 2024–25 Enrollment, Attendance, and Fiscal Report in CPARIS.

The deferred revenue related to unspent FY 2022–23 or FY 2023–24 set aside should be spent prior to other income sources, including current year contract funds, and must be reported as restricted revenue on the Restricted Income: Exceptional Needs/Severely Disabled Service Level Exemption Credit line in the FY 2024–25 Enrollment, Attendance, and Fiscal Report in CPARIS. As a reminder, revenue should only be reported when its corresponding expenses are also reported.

California State Preschool Program/General Childcare and Development Transfer Requests

During the year, a contractor may find that projected services or funding needs have changed, requiring a transfer of funds between their CSPP and General Childcare and Development (CCTR) contracts. EC Section 8216 requires that the CDE arrange intra-agency adjustments between CSPP and CCTR contracts for the same agency and funding allocation to promote the full utilization of childcare and development funds. Although administration of CCTR programs has shifted to the CDSS, contractors may still request a transfer between their CCTR and CSPP contracts. Transfers between contracts can only be requested for the current fiscal year.

There are two periods for non-LEA contractors to submit transfer requests: (1) January 1, 2025, to January 15, 2025, and (2) April 1, 2025, to April 15, 2025. Transfer requests for CSPP will be available during the transfer periods and must be submitted in CPARIS. For information on how to submit the corresponding CCTR transfer request, please contact the assigned CDSS fiscal analyst.

As a reminder, LEA and Community College District (CCD) CSPP contracts are funded entirely by Proposition 98 funding. This change in the appropriation for CSPP funding began in FY 2015–16 and remains in effect. LEAs and CCDs therefore cannot transfer funds between CSPP and CCTR contracts.

If a significant portion of the contract’s MRA is being requested to transfer, the EED may require a Program Narrative Change form. The Program Narrative Change form should describe any changes to the number of sites operated by the contractor, any changes to the age group of children served by the contractor, and/or any significant changes in the provision of full-day versus part-day CSPP services. For further information or instructions on completing this form, please contact your assigned EED, Program Quality Implementation (PQI) office Regional Consultant.

For further information or instructions on completing the request, please contact your assigned EENFS fiscal analyst.

Reporting Requirements and Reminders

Enrollment, attendance, and fiscal data provided to EENFS must adhere to all applicable laws, regulations, and the contract terms and conditions. CSPP contractors should review written policies and procedures related to enrollment, attendance, income, and expenditure reporting no less than annually, and update procedures as frequently as necessary. The beginning of a fiscal year is also a good time to review cost allocation plans and equipment inventory records. Additionally, clearly written procedures should be developed to ensure accurate reporting to the EENFS, which may include a procedure for data reconciliation.

All federal and state funds allocated for the CSPP are subject to audit, including allocations outside of contract such as cost of care plus rate allocations. All income and expenditures must be appropriately tracked by contractors, which includes maintaining records for payments to Family Childcare Home Education Network (FCCHEN) providers, and all purchase orders or receipts must be maintained to verify appropriate use of funds.

All expenses related to the preschool program should be reported in CPARIS. Expenses reimbursable to the contract must be reported in the Reimbursable Expenses section; this includes salaries, operating expenses, and supplies. Any restricted revenue used for those expenses should be reported in the Revenue section. Income used to enhance the program beyond the basic early education services should be reported in the Supplemental Revenue section, and the associated expenses in the Supplemental Expenses section.

EENFS calculates projections based on data provided by programs and the omission of expenses could lead to a cash flow shortage for the program. We encourage a thorough review of program expenses to ensure that all reimbursable expenses are being reported appropriately to EENFS.

California Code of Regulations, Title 5 (5 CCR), Section 17816 requires that contractors report expenditures on an accrual basis. Costs are projected by EENFS to determine payment. The effect of reporting costs on a cash basis is an under- or over-payment. To ensure proper cash flow, and to remain in compliance with 5 CCR and Contract Terms and Conditions (CT&C), it is imperative that programs accrue their costs.

California Preschool Accounting Reporting Information System Resources

CPARIS can be accessed through https://cparis.cde.ca.gov/cparis/logon.aspx.

Monthly or quarterly CSPP Enrollment, Attendance, and Fiscal Reports and CPKS Support Contract Expenses Reports must be submitted through CPARIS. The CPARIS User Manual, which has been updated as of August 2024, can be found at https://www.cde.ca.gov/fg/aa/cd/documents/cparisusermanual24.docx. The User Manual provides further information and detailed instructions on online reporting, including guidance related to adding new users to the system, viewing payment data, and submitting report data.

Additionally, contractors may reference the CPARIS FAQs regarding logging in, passwords, adding new users, user roles, and reporting. The FAQs can be found at https://www.cde.ca.gov/fg/aa/cd/cparisfaqs.asp as well as on the home page of the CPARIS. If additional assistance is needed, contractors may email CPARIS Support at cparissupport@cde.ca.gov.

Additional Contract Resources

The EENFS webpage contains valuable resources for contractors, including the Enrollment, Attendance, and Fiscal Reporting, and Reimbursement Procedures for Early Education Contractors, also known as the EENFS Fiscal Handbook. Supplemental fiscal guidance, such as contract-related updates, rate reform resources, a link to CPARIS, the CPARIS User Manual, and FAQs, and links to view past webinars, can also be found on the EENFS webpage at https://www.cde.ca.gov/fg/aa/cd/.

Enrollment, Attendance, and Fiscal Reporting and Reimbursement Procedures

The Enrollment, Attendance, and Fiscal Reporting and Reimbursement Procedures, also referenced as the EENFS Fiscal Handbook is in the process of being revised for FY 2024–25. Contractors will be notified via the EED email distribution list when the FY 2024–25 EENFS Fiscal Handbook is posted to the EENFS webpage. Contractors may sign up for the EED email distribution list at https://www.cde.ca.gov/sp/cd/ci/emailindex.asp.

Analyst Directory

The CDE understands that contractors may need additional support throughout the fiscal year due to changes in reimbursement and reporting requirements and encourages contractors to reach out for assistance in navigating these changes. If you have any questions about a specific contract or need clarification about any topic covered in this letter, please contact your assigned EENFS fiscal analyst.

Please refer to the EENFS analyst directory at http://www.cde.ca.gov/fg/aa/cd/faad.asp for up-to-date fiscal analyst county assignments and contact information.

Sincerely,

Corey Khan, Staff Services Manager III

Early Education and Nutrition Fiscal Services

Fiscal and Administrative Services Division