October 20, 2022

Dear California State Preschool Program Executive Directors and Program Directors:                   

2022–23 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, 2022. Please share this letter with your agency staff.

Budget Act and Contract Amendment Process

The Early Education and Nutrition Fiscal Services (EENFS) Unit will process CSPP contract amendments as a result of the enacted 2022 Budget Act. These amendments will be processed in early November 2022.

As a reminder, beginning in Fiscal Year (FY) 2021–22, the California Department of Education (CDE) implemented a new contract process. To streamline the contract and payment process, Budget Act amendments to CSPP contracts will be processed as Allocation Letters. While Allocation Letter amendments look similar to 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 CDE Contracts Office.

Reimbursement Rate Increases

The Budget Act of 2022 includes a 6.56 percent cost-of-living adjustment effective July 1, 2022. Assembly Bill (AB) 185 amended Education Code (EC) Section 8242(c), specifying that CSPP contractors shall be reimbursed at the greater of the 75th percentile of the 2018 regional market rate survey, or the contract per-child reimbursement amount as of December 31, 2021, increased by the cost-of-living adjustment. As a result, all contractors that previously had a full-day rate less than $55.27 and/or a part-day rate less than $34.23 will automatically receive a rate increase effective July 1, 2022. This increase will be incorporated as part of the Budget Act amendment in early November 2022.

The county reimbursement rates effective July 1, 2022, can be found at https://www.cde.ca.gov/fg/aa/cd/documents/csppcontractrates.xlsx.

Child Days of Enrollment Calculator

Prior to January 1, 2022, the minimum child days of enrollment (cdes) listed on the contract face sheet were calculated by taking the maximum reimbursable amount (MRA) and dividing by the contract rate. Effective January 1, 2022, reimbursement is based on the county in which preschool services are provided. This means that contractors who serve in more than one county now have multiple rates, which complicates the calculation of the minimum cdes and precludes it from being reflected on the contract face sheet. EENFS has developed the cdes calculator to provide contractors with a tool to calculate the minimum, full-time equivalent cdes needed to fully earn their contract. The cdes calculator can be found at https://www.cde.ca.gov/fg/aa/cd/documents/childdaysofenrollmentcalculator.xlsx.

Adjustment Factor Changes

AB 210 (Chapter 62, Statutes of 2022) amended EC Section 8244(b) increasing adjustment factors for children with exceptional needs, children with severe disabilities, and dual language learners. Additionally, AB 210 added a new adjustment factor category for children ages 47 months or younger (i.e. three-year-olds) which provides CSPP contractors with additional reimbursement for serving children ages 47 months or younger who are served in center-based or family home setting. These adjustment factor increases were effective July 1, 2022. Changes to the full-time adjustment factors can be found in Table 1.

Table 1. Updates to Full-Time Adjustment Factors

EC Section 8244(e)(2) also allows CSPP contractors to receive an additional adjustment for children served in classrooms where Early Childhood Mental Health Consultation Services (ECMHCS) are provided. Prior to July 1, 2022, this additional adjustment was 0.05. Effective July 1, 2022, the ECMHCS adjustment has increased from 0.05 to 0.1. Table 2 identifies the changes to the full-time ECMHCS adjustment factors.  

Table 2. New ECMHCS Full-Time Adjustment Factors

Adjustment Factor Updates in the Child Development Provider Accounting Reporting Information System

The FY 2022–23 Enrollment, Attendance, and Fiscal Reports, found in Child Development Provider Accounting Reporting Information System (CPARIS), have been updated to reflect the adjustment factor changes outlined above. To account for the new adjustment factor category for children ages 47 months or younger, the category formerly known as Three Years and Older has been split into two categories. Contractors will now see an adjustment factor category for three-year-old children and an adjustment factor category for four-year-old children on the Enrollment, Attendance, and Fiscal Reports.

Children reported in the Three Years Old adjustment factor category must be ages 47 months or younger. Once the child turns four years old, the contractor must begin reporting the child in the Four Years Old adjustment factor category.

Allocations to Support Various Adjustment Factor Changes

The Budget Act of 2022 provided funding to support the new Three Years Old adjustment factor category and adjustment factor increases for children with exceptional needs, children with severe disabilities, and dual language learners. Allocations will be provided as part of the Budget Act amendment contractors will receive in early November 2022.  

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 2022–23, CSPP contractors are required to set aside five percent of funded enrollment for children with exceptional needs as defined in EC Section 8205. The set aside amount will increase to 7.5 percent in FY 2023–24 and to 10 percent in FY 2024–25.

Calculating the Required Set Aside to Serve Children with Exceptional Needs

For FY 2022–23, the five percent set aside will be calculated by multiplying the contract MRA by the full-time exceptional needs adjustment factor of 2.4 by five percent.

Example:

A contractor has a CSPP contract MRA of $1,000,000. For FY 2022–23, $120,000 will be reserved to serve children with exceptional needs, which is a result of the following calculation: Required Set Aside = Contract MRA x 2.4 adjustment factor x 5% = $1,000,000 x 2.4 x 5% = $120,000

Determining the Number of Children Associated with the Set Aside Requirement

EENFS will be developing 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. Contractors will identify the counties in which they plan to serve children with exceptional needs, the percentage associated with each county, and the percentage of enrollment they expect to have in their full-day and/or part-day programs. With this information the Exceptional Needs Funded Enrollment Calculator will calculate the number of children with exceptional needs, including children with severe disabilities, the contractor can enroll to fully earn the set aside requirement.

The Exceptional Needs Funded Enrollment Calculator will be available on the EENFS web page at https://www.cde.ca.gov/fg/aa/cd/.  

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 will be updated to include the required set aside amount, the earnings associated with the set aside amount, and the service-level exemption credit, if applicable. Contractors will be able to use this information to track their earnings related to the set aside amount.

Determining the Service-Level Exemption Credit 

Below are examples of how the service-level exemption credit will be calculated when the contractor is projected to fully earn, partially earn, or have no earnings associated with the required set aside. In the following examples, the contractor’s daily reimbursement rate is $55.27 and $120,000 has been reserved to serve children with exceptional needs.

Example 1: Fully Earning the Set Aside Requirement

Based on data reported in the exceptional needs and severely disabled adjustment factor categories of the Enrollment, Attendance, and Fiscal Report, the contractor is projected to have 2,171.1598 adjusted cdes. The following calculation is used to determine the projected earnings associated with serving children with exceptional needs and severe disabilities:

Projected Earnings: Projected adjusted cdes x daily reimbursement rate = 2,171.1598 x $55.27 = $120,000

This represents 100 percent of the amount set aside and reserved for children with exceptional needs and severe disabilities, and therefore, the contractor would not receive a service-level exemption credit.

Service-level exemption credit: Required Set Aside – Projected Earnings = $120,000 - $120,000 = $0

Example 2: Partially Earning the Set Aside Requirement

Based on data reported in the exceptional needs and severely disabled adjustment factor categories of the Enrollment, Attendance, and Fiscal Report, the contractor is projected to have 1,171.1598 adjusted cdes. The following calculation is used to determine the projected earnings associated with serving children with exceptional needs and severe disabilities:

Projected Earnings: Projected adjusted cdes x daily reimbursement rate = 1,171.1598 x $55.27 = $64,730

The contractor will receive a service-level exemption credit of $55,270, which was determined by taking the difference between the required set aside amount and the projected earnings.

Service-level exemption credit: Required Set Aside – Projected Earnings = $120,000 - $64,730 = $55,720

Example 3: No Earnings Associated with the Set Aside Requirement

Based on data reported in the exceptional needs and severely disabled adjustment factor categories of the Enrollment, Attendance, and Fiscal Report, the contractor has reported no children in these categories. Therefore, the contractor is projected to have 0 adjusted cdes. The contractor will receive a service-level exemption credit of $120,000, which was determined by taking the difference between the required set aside amount and the projected earnings.

Service-level exemption credit: Required Set Aside – Projected Earnings = $120,000 - $0 = $120,000

Increase to Annual Audit Threshold

EC Section 8335 requires CSPP contractors to submit an annual single independent financial and compliance audit, unless the contractor received less than the thresholds stated in EC Section 8335(f). Prior to FY 2022–23, any CSPP contractor that received less than $25,000 per year from any state agency was allowed to submit their audit biennially, unless there was evidence of fraud or other violation of state law in connection with the contract. AB 210 amended EC Section 8335(f)(1), increasing the annual audit threshold from $25,000 to $100,000, effective FY 2022–23. This means that a contractor who receives less than $100,000 per year from any state agency can submit their audit biennially, whereas a contractor who receives over $100,000 per year is required to submit an annual audit.

Fiscal Year 2022–23 California State Preschool Program Hold Harmless for Attendance

AB 210 specifies that for FY 2022–23, CSPP contractors are to be reimbursed the lesser of 100 percent of the contract MRA or net reimbursable program costs. In order to be reimbursed pursuant to the limits defined in AB 210, CSPP contractors must meet one of the following criteria:

• Be open to provide in-person early education services for enrolled families in accordance with the contracting agency’s FY 2022–23 approved program calendar, and remain open and offer services through the 2022–23 program year; or
• Not provide in-person services by the start date of the contracting agency’s FY 2022–23 approved program calendar, due to local or state public health orders or guidance that prevent the program from operating; or
• Open for in-person services in accordance with the contracting agency’s FY 2022–23 approved program calendar, with any future days of closure being due to a local or state public health order or guidance.

A forthcoming Management Bulletin (MB) will be released by the Early Education Division (EED) related to the FY 2022–23 reimbursement and requirements for CSPP Contractors.  

Reimbursement Calculation

FY 2022–23 contract reimbursement is based on the lesser of:

• Contract MRA; and
• Net Reimbursable Program Costs

The chart below illustrates an example of the difference between the reimbursement calculation prior to FY 2020–21, pursuant to California Code of Regulations, Title 5 (5 CCR) Section 17812 and FY 2022–23.

Example: Contract Reimbursement Calculation Comparison

Prior to FY 2020-21

FY 2020-21, 2021-22, and 2022-23

In this example, in FY 2022–23, the contractor will be reimbursed $745,000 to cover the cost of operating the program. Contractors should assess total expected program costs in FY 2022–23 as compared to the MRA and adjust expenditures as needed. Contractors must be aware that contract reimbursement per AB 210 is for FY 2022–23 only and should therefore not enter into any ongoing agreements that would cause them to over-expend the FY 2023–24 contract. In addition, contractors must adhere to all relevant pre-approval purchase requirements set forth in the contract terms and conditions.

Reimbursement Criteria

In addition to the change in the contract reimbursement calculation, CSPP contractors must adhere to the criteria set forth above in order to be eligible for reimbursement under the hold harmless provision. CSPP contractors that do not meet the criteria as described above must submit a revised FY 2022–23 program calendar and a program narrative change to their assigned EED, Program Quality Implementation (PQI) office Regional Consultant in order for EENFS to properly fund the contractor for the reimbursable period of operation.

Table 3 below is to assist contractors on how to report days of operation on the EENFS Enrollment, Attendance, and Fiscal Report in CPARIS, as well as to assist contractors in determining whether a revised program calendar and program narrative change must be submitted to the EED.

Table 3: Days of Operation Reporting

CSPP contractors will not be funded if they do not meet the criteria for (a) or (b). If they do not meet these criteria, they must submit a revised program calendar to their PQI office Regional Consultant, and after approval, EENFS will revise the contract to reduce the days of operation and prorate the MRA accordingly. Contractors will not report days of operation for this time period.

In instances where a revised program calendar must be submitted to the EED, the contract will be amended to prorate the contract’s MRA based on the number of days the contractor meets the criteria for reimbursement. The example below illustrates how a prorated MRA will be calculated.  

Example: Calculating a Prorated MRA

In this example, the CSPP contractor had an original MRA of $750,000. However, the contractor was closed for 126 days without a public health order or guidance. Therefore, the FY 2022–23 MRA will be revised, and reimbursement will be capped at the revised MRA of $365,850.

CSPP contractors must reimburse their subcontractors in the same manner, without regard to enrollment or attendance, so long as the subcontractor meets the requirements set forth above.

Fiscal Year 2022–23 Enrollment and Attendance Reporting

The forthcoming MB will include specific information on how to report days of operation, days of enrollment, and days of attendance in FY 2022–23. The tables below can further assist contractors with how to report days of enrollment and days of attendance on the EENFS Enrollment, Attendance, and Fiscal Report in CPARIS.

Table 4: Days of Enrolment Reporting

Programs will not be funded if they do not meet the criteria for (a) or (b). If they do not meet these criteria, contractors will not report the days of enrollment during this time.  ​

Contractors may use Table 5 below to determine how to report attendance in FY 2022–23.

Table 5: Days of Attendance Reporting

Closures Due to Circumstances Beyond the Contractor’s Control

EC Section 8249 states that agencies who are unable to operate due to incomplete repairs and renovations that have been authorized by the CDE, or due to circumstances beyond their control, including, but not limited to earthquakes, fires, or floods, shall not be penalized for incurred program expenses, nor in subsequent annual budget allocations. CSPP contractors that close any of their sites and/or classrooms due to circumstances beyond the contractor’s control, may request a closure credit for any reduction in days of operation.

Contractors will receive an approval letter which indicates the number of approved days of operation and/or days of attendance credits from their PQI office Regional Consultant. Approved closure credits must be reported by the contractor on EENFS Enrollment, Attendance, and Fiscal Reports in order for the CSPP to be reimbursed for the days of closure.

Fiscal Year 2022-23 Family Fee Waivers, Reporting, and Reimbursement

AB 210 waived family fees for all families enrolled in a CSPP from July 1, 2022 through June 30, 2023. Although family fees are being waived for FY 2022–23, contractors are still required to assess the appropriate family fee. This requirement is to ensure that contractors report the correct family fee amount(s) being waived and that families are aware of the updated fee that will be applicable July 1, 2023.

Family Fee Reporting Requirements

Contractors must report the amount of family fees that were assessed and waived between July 1, 2022 and June 30, 2023 on the line Waived Family Fees for Certified Children.

Family Fee Reimbursement

In years that family fees are not waived, family fees are in lieu of contract payments, which reduces the amount of contract funds that the CDE will reimburse. Since AB 210 provides additional funds to cover family fees for FY 2022–23, contractors will receive reimbursement for the waived family fees reported on this line that would have otherwise been collected from the family.

An allocation for family fee waivers will be provided within the Budget Act amendments sent to contractors in early November 2022. FY 2022–23 allocations will be based on a proportionate share of the total reported waived family fees from June 2022 data submitted in CPARIS. Family fee data submitted throughout FY 2022–23 will be monitored by EENFS to identify shortfalls in current year funding.

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. Although administration of CCTR programs has shifted to the California Department of Social Services (CDSS), contractors will still have the ability to transfer between their CCTR and CSPP contracts. Transfers between contracts can only be requested for the current fiscal year.

As a reminder, Local Educational Agency (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 CCTR and CSPP 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, PQI office Regional Consultant.

There are two periods for non-LEA contractors to submit transfer requests: (1) January 1, 2023 to January 15, 2023 and (2) April 15, 2023 to April 30, 2023. Transfer requests will be available and must be submitted in CPARIS.

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

Child Development Provider Accounting Reporting Information System Update and Reminders for Fiscal Year 2022–23

CPARIS Update

EENFS is excited to announce CSPP contract earnings calculations will soon be available in CPARIS. Previously, earnings calculations have been generated by EENFS, and mailed or emailed to contractors. With the upcoming system update, contractors will be able to view earnings calculations generated from certified and CDE-approved CSPP Enrollment, Attendance, and Fiscal Reports.

CPARIS Reminders

Effective January 1, 2022, reimbursement is based on the county in which preschool services are provided. As such, CPARIS was updated in February 2022 to allow CSPP contractors to submit the required enrollment and attendance data by service county. The service counties displayed in CPARIS are based on the approved counties as reflected in the Child Development Management Information System (CDMIS). Any issues with the displayed service counties should be reported immediately to the CPARIS Support email at CPARISSupport@cde.ca.gov.

CPARIS Resources

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

Monthly or quarterly Enrollment, Attendance, and Fiscal Reports must be submitted through CPARIS. Contractors may refer to the CPARIS User Manual provided at the following link https://www.cde.ca.gov/fg/aa/cd/documents/cparisusermanual22.docx for further information and instructions on online reporting, including instructions related to adding new users to the system, viewing payment data, and submitting report data.

Additionally, contractors may reference the CPARIS Frequently Asked Questions (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.

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. It is recommended that CSPP contractors 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 pandemic relief funding provided in the form of stipends. 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 preschool programs that are reimbursable to the contract should be reported within CPARIS. This includes salaries, operating expenses, and supplies. 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 via CPARIS.

It is required that costs are accrued and reported as such. 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 the contract terms and conditions, it is imperative that programs accrue their costs.

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 2022–23. Contractors will be notified via the EED email distribution list when the FY 2022–23 EENFS Fiscal Handbook is posted to the EENFS webpage.

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 https://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