CAARO Update Issue #2026-02

The purpose of the California Department of Education (CDE) Categorical Allocations and Audit Resolution Office (CAARO) updates is to provide local educational agencies (LEAs) and other interested parties with timely information, such as notifications regarding key reporting deadlines, applications for funding, annual audits, and any other topics related to programs administered by CAARO.

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Key Dates

• Estimated Cash Flow for State and Federal Programs
  

Federal Categorical Program Updates

Categorical Programs

Federal Budget for Fiscal Year 2026-27

• On February 3, 2026, the President signed into law the federal funding bill for the U.S. Department of Education (ED) for Federal Fiscal Year (FY) 2026, which defines funding levels for the FY 2026-27 ESSA Title I – V grants. National funding levels for ESSA Title I–V programs remain unchanged from the prior year. Once ED releases state-level allocations, the CDE will publish preliminary ESSA program eligibility information for LEAs.
  

Application Deadline Approaching for ESSA 2025-26 Title I – V programs.

• Impacted Programs: Title I, Pt A; Title I, Pt D, Sbpt 2; Title II, Pt A; Title III, Pt A; and Title IV, Pt A
  • FY 2025–26 Application Deadline to submit the Consolidated Application for funding and the LCAP Federal Addendum is March 31, 2026.  LEAs that do not meet all application requirements by the deadline will forfeit FY 2025-26 funding.  Any forfeited will be allocated to eligible LEAs that have met the application requirements.

ESSA Comprehensive Support and Improvement (CSI)

• FY 2025–26
  • LEAs that have an approved Application for Funding Status by January 31 will receive payment in March 2026.
• FY 2025–26
  • As a condition of funding, LEA apportionment amounts will be calculated based on expenditures reported in GMART by February 28, 2026.

State Categorical Program Updates

Categorical Programs

Prop 39 California Clean Energy Jobs Act

• The CDE is coordinating with the California Energy Commission (CEC) on the recovery of unspent Prop 39 funds as identified in the final project completion reports districts submitted to the CEC.
• The CDE is preparing a final recovery of unspent Prop 39 CA Clean Energy Jobs Act funds. The schedule of the proposed recovery is posted CDE’s Prop 39 web page.
• LEAs will have approximately six weeks to review the proposed recovery amounts prior to the recovery action that will be completed by April 2026.
• LEAs that would like to dispute the proposed recovery amount may contact Christopher Meyer, California Energy Commission, by email at Christopher.meyer@energy.ca.gov.
• Other questions about Prop 39 can be sent to CDE at prop39fiscal@cde.ca.gov.

Classified School Employee Summer Assistance Program (CSESAP)

• The CDE has posted the funding letter and updated web pages for the CSESAP for fiscal year 2025–26 (for the 2026–27 School Year) on the CSESAP web page.
• Beginning in 2026–27, joint powers authorities (JPAs) made up of school districts or county offices of education will be eligible to participate, as authorized by Education Code (EC) 45500q(1). JPAs that elect to participate in the CSESAP during the 2026-27 school year must notify their classified employees by January 1, 2026, or as soon as possible, and meet the application deadlines listed below. For questions about CSESAP email csesap@cde.ca.gov.
• Application Deadlines for participation in the 2026-27 school year.
  • By March 1, 2026, classified employees must notify LEAs of their election to participate during the 2026–27 school year, EC 45500(d)(1).
  • By April 1, 2026, LEAs must report the number of participating employees and estimated withholdings for the 2026–27 school year, EC 45500(e).

Audit Resolution Updates

LEA Annual Audits

Management Decision Letters and Correction Action for 2024–25 Audit Findings

• Management decision letters for the 2024–25 audit findings are currently being issued.
• LEAs should provide corrective action to the CDE within three weeks of receiving a management decision letter.

Key Dates for 2024-25 Kindergarten Through Grade Twelve (K–12) Annual Audit

• 12/15/2025 – Submit Audit Report to CDE, State Controller’s Office (SCO), and the County Superintendent of Schools.
• 1/31/2026 – School board review of audit report and corrective actions.
  • If your LEA has an extension for the submission of the annual audit report, we recommend presenting the audit report to your board within 45 days of date the K-12 annual audit report has been submitted.
• 3/15/2026 – LEA corrective actions for audit findings due to the county office of education (COE).
• 5/15/2026 – COE certifications of annual audits due to CDE and SCO.

Key Dates for 2025-26 K-12 Annual Audit

• 4/1/2026 – LEA deadline to contract with independent auditor.

FY 2025-26 Supplemental Audit Guide

• The FY 2025–26 Supplemental Audit Guide will be available on the Education Audit Appeals Panel (EAAP) website by March 1, 2026. Procedures with substantive changes are listed below.
  • Procedure W. Unduplicated Local Control Funding Formula Pupil Counts includes a minor update to allow the Universal Benefit Application to be used as documentation to support student eligibility.
  • Procedure X. Local Control and Accountability Plan includes changes to move steps 5a and 5b to a new Step 7 that includes compliance requirements for districts, COEs, and charter schools. Step 8 was also added to include an estimate of a fiscal penalty for being out of compliance with LCAP requirements.
  • Procedure BZ. The Expanded Learning Opportunities Grant has been deleted since funds cannot be expended during the 2025–26 school year.
  • Procedure DZ. Expanded Learning Opportunities Program was updated to include clarifying information.
  • Procedure TT. Home to School Transportation Reimbursement has been updated to include the April 1st deadline for developing, adopting, or updating the annual transportation plan and to remove the October deadline for updating the data in the California Basic Educational Data System (CBEDS).
• The FY 2026–27 Audit Guide will be available on July 1, 2026.
• The SCO releases an annual audit advisory, which includes an overview of the changes proposed for the annual audit guide. The advisory for the 2024-25 fiscal year can be found on the SCO website at 2024-2025 Audit Advisory (PDF).