Preschool Reserve Account FAQs

Preschool Reserve Basics

1. What is a Preschool Reserve Account?

   A Preschool Reserve Account is an account held and maintained by a California State Preschool Program (CSPP) contractor. Preschool Reserve Account funds are state funds that the contractor holds in reserve as deferred revenue until they are either properly spent or returned to the California Department of Education (CDE). Preschool Reserve Account funds become a supplemental source of state dollars available when reimbursable costs exceed contract reimbursement.

2. How do I establish a Preschool Reserve Account?

   To establish a Preschool Reserve Account, the contractor must certify a Statement of Intent to Establish and Maintain a Preschool Reserve Account in the California Preschool Accounting Reporting Information System (CPARIS) on or before July 20, along with the June report.

Preschool Reserve Account Reporting

1. Are contractors that hold a Preschool Reserve Account required to submit a report?

   All contractors that hold a Preschool Reserve Account are required to submit an annual Preschool Reserve Account Activity Report in the California Preschool Accounting Reporting Information System (CPARIS) by July 20. If the Preschool Reserve Account has a balance greater than zero, a copy of the Preschool Reserve General Ledger (GL), verifying the interest and balances maintained in the Preschool Reserve Account, must be emailed to the fiscal analyst.

2. Where do we find the Preschool Reserve Account Activity Report?

   The Preschool Reserve Account Activity Report is located in the California Preschool Accounting Reporting Information System (CPARIS). Once logged into CPARIS, users can navigate to the Preschool Reserve menu and click on the Reserve Account Reports submenu. This will take users to the list of Preschool Reserve Account Reports. From this page, users can search by year, if needed.

Preschool Reserve Account during Hold Harmless

1. How does the Preschool Reserve Account work during Hold Harmless?

   Hold harmless has no impact on the Preschool Reserve Account. Although the limits of reimbursement have changed during hold harmless, contractors are still required to report child days of enrollment (cdes). If service earnings are greater than net reimbursable costs, the contract earnings calculation may indicate a transfer to the Preschool Reserve Account, provided the reserve account is not at its cap. Other factors may determine whether a transfer is calculated. Contractors should reach out to their Early Education and Nutrition Fiscal Services (EENFS) fiscal analyst if they have questions about transfers into the reserve.

Preschool Reserve Account Cap

1. What is the cap for the Preschool Reserve Account?

   Pursuant to California Education Code (EC) Section 8336(b)(2), reserve account balances cannot exceed 15 percent of the contractor’s California State Preschool Program (CSPP) contract(s) maximum reimbursable amount (MRA) or $2,000 whichever is greater.

2. Is the 15 percent Preschool Reserve Account cap adjusted each year if the maximum reimbursable amount (MRA) amount changes?

   Yes, the MRA is adjusted as the MRA increases or decreases. Maximum California State Preschool Program (CSPP) reserve account limits do not include temporary changes to the contract’s MRA, such as changes due to intra-agency or Voluntary Temporary Transfers.

3. Can we transfer 15 percent of our contract MRA to the Preschool Reserve Account every fiscal year (FY) or are contractors limited to 15 percent of the current contract MRA?

   The maximum amount that can be transferred in a given FY is limited to 15 percent of that year’s contract MRA. The actual amount of California State Preschool Program (CSPP) contract funds that can be transferred to the Preschool Reserve Account is calculated at the end of the contract period and authorized by the California Department of Education (CDE).

Transfers into the Preschool Reserve

1. When do we transfer funds into the Preschool Reserve Account and how do we know how much to transfer?

   The California Department of Education (CDE) recommends that contractors wait until contracts are closed before transferring funds into the reserve account. Timeframes of contract closure and final year-end earnings are dependent upon the agency type. For example, Local Educational Agencies (LEAs) report data is considered final after February 13 following the end of the FY, report data is considered final after March 1 following the end of the FY for Community College Districts (CCDs), and varies for Non-LEAs (private agencies), as report data is considered final once an acceptable audit is submitted and processed.  

   Contractors can find the amount to be transferred to the reserve account on the line Transfer to Preschool Reserve Account, found on both the earnings calculation worksheet and the Preschool Reserve Account Status Report. No other amount (greater or lesser) should be transferred into the reserve account.

2. If the California State Preschool Program (CSPP) contract is underspent by the end of the FY, will the remaining funds be transferred to the Preschool Reserve Account?

   Not necessarily. If the contract is underearned, the remaining balance will not automatically be transferred to the Preschool Reserve Account. A transfer to the Preschool Reserve Account occurs when reimbursable service earnings exceed reimbursable costs, not to exceed the contract MRA and capped at the reserve account limit.

Using Preschool Reserve Funds

1. When can we use Preschool Reserve Account Funds?

   Preschool Reserve Account funds are available for future use, when contract reimbursement is not sufficient to cover a program’s reimbursable expenditures.​ Preschool Reserve Account funds cannot be used within the year they were earned. For example, if you transferred contract funds into the Preschool Reserve Account in FY 2023-24, the amount transferred could not be utilized until FY 2024-25 or any subsequent year.

2. Where can I find a list of allowable expenses for Preschool Reserve Account funds?

   Preschool Reserve Account funds can be used for any reimbursable program expense. Contractors can refer to the annual Contract Terms and Conditions that outlines costs that are reimbursable to the CSPP contract. Contractors are reminded that all program costs must be reasonable and necessary. Contact your Program Quality Implementation (PQI) consultant for specific questions related to reimbursable costs.

3. Are Preschool Reserve Account funds only used at year-end?

   Contractors typically do not need to use Preschool Reserve Account funds as outside revenue until the end of the year when they have determined that contract reimbursement will not be sufficient to cover program costs. Reasons why contract reimbursement may not be sufficient to cover program costs could be due to the contractor fully maximizing the contract’s MRA or if costs exceed service earnings (when contract earnings are based on the three limits defined in California Code of Regulations, Title 5 (5 CCR) Section 17812).

Preschool Reserve Account Interest

1. If interest earned isn't posted until after July 20, how should we report interest for the year on the Preschool Reserve Account, due July 20?

   The annual CSPP Contract Terms and Conditions require that contractors submit a Preschool Reserve Account Activity Report by July 20 following the end of the FY and reports not submitted by July 20 will be deemed delinquent. The California Department of Education (CDE) recommends that contractors submit their Preschool Reserve Account Activity Report by the deadlines set forth and include a reasonable estimate of the interest earned in the FY. Once actual interest becomes available, contractors can revise their Preschool Reserve Account Activity Report. Non-Local Educational Agencies (LEAs) can submit a revision to their Preschool Reserve Account Activity Report through August 20 following the end of the FY and any revisions beyond August 20 can be included in the audit. LEAs can revise their Preschool Reserve Account Activity Report through February 13 of the following FY, Community College Districts (CCDs) have until March 1.

2. Is the interest reported on the Preschool Reserve Account Activity Report derived from all of the contractor's accounts or from the Preschool Reserve Account only?

   The interest reported on the Preschool Reserve Account Activity Report earned should be based on the CSPP Preschool Reserve Account balance only.

3. If we keep CSPP contract apportionments and CSPP reserve funds together in the same account, do contractors report all of the interest that was earned or do funds need to be kept in separate accounts?

   Preschool Reserve Account funds do not need to be kept in a separate bank account from contract payments, but contractors must have a way to identify the funds and interest associated with the Preschool Reserve Account.

4. Is there a procedure and/or spreadsheet to determine interest earned on the Reserve Account?

   The California Department of Education (CDE) does not have a procedure and/or spreadsheet to determine interest earned on reserve funds. The Education Code (EC) requirement is that reserve funds must be held in an interest-bearing account. If those funds are held with other fund types, contractors will need to develop a methodology that can be applied to the balance to determine the portion of the interest related to the preschool reserve funds.

Preschool Reserve Billings

1. When are contractors billed for the Reserve Account?

   Contractors will receive a reserve billing if the reserve ending balance exceeds the reserve account cap, or if a reserve account is closed.