Exceptional Needs Set Aside FAQs

Set Aside Requirements

1. Is there a requirement for California State Preschool Program (CSPP) contractors to serve children with exceptional needs or severe disabilities?

   Yes, pursuant to Education Code (EC) Section 8208(c)(1), effective fiscal year (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.

2. What are the criteria for a child with exceptional needs or severe disabilities?

   Education Code (EC) 8205(h) defines children with exceptional needs as:
   
   

   • Children with active individualized family service plans (IFSPs) and receiving early intervention services or
   • Children with active individualized education programs (IEPs) and receiving services or appropriate special education
     

   
   In addition, EC Section 8205(s) now defines “children with severe disabilities” as children with exceptional needs from birth to 21 years of age, inclusive, who require intensive instruction and training in programs serving pupils with the following profound disabilities: autism, blindness, deafness, severe orthopedic impairments, serious emotional disturbances, or severe intellectual disabilities.

3. What documentation does a CSPP contractor need to maintain for serving children with exceptional needs?

   For each child enrolled that will be reported under the exceptional needs or severely disabled adjustment factor category, the contractor shall establish and maintain a family data file that includes:

   • Application for services
   • Parent(s) self-certification of income
   • Birth records for all children included in the family size
   • Copy/evidence of active individualized education program (IEP) or individualized family service plan (IFSP)
   • Notice of Action

4. What are the program requirements for serving children with exceptional needs?

   Pursuant to Education Code (EC) sections 8208(c)(3) and (d)(2)(C), children with disabilities attending CSPP must be educated in the least restrictive environment (LRE). To the maximum extent appropriate, children with disabilities must be educated with children who are nondisabled, and special classes, separate schooling, or other removal of individuals with disabilities from the educational environment may only occur if the nature or severity of the disability is such that education in the regular classes with the use of supplementary aids and service cannot be achieved satisfactorily.

   Pursuant to the Individuals with Disabilities Education Act (IDEA), the individualized education program (IEP) team is responsible for determining the placement of a child with a disability, taking into consideration the LRE provisions. CSPP program directors should be aware that, among other team members, the IEP team must include at least one regular education teacher, if the child is, or may be, participating in the regular education environment. Therefore, a regular education teacher from the CSPP may be required to participate as a member of the child’s IEP team.

5. What if a CSPP contractor is not meeting the five percent set aside requirement?

   Contractors who have not fully enrolled enough children to meet the five percent set aside requirement must:

   • Maintain open space/slots to enroll children with disabilities
   • Conduct community outreach to special education partners to recruit and enroll additional children with disabilities

Set Aside Reimbursement

1. How is reimbursement for the set aside determined?

   The California Department of Education (CDE) determines the extent to which contractors are earning their set aside amount based on the child days of enrollment (cdes) reported within the exceptional needs and severely disabled adjustment factor categories on the Enrollment, Attendance and Fiscal Report.

   In order to report the cdes within the exceptional needs and severely disabled adjustment factor categories, the child must meet the definition of a child with exceptional needs or severe disabilities, which requires the child to have an active individualized education program (IEP) or individualized family service plan (IFSP).

2. How does reimbursement work if a contractor is not fully earning the set aside?

   Contractors who are not fully earning the amount set aside to serve children with exceptional needs will receive a service-level exemption credit. This credit allows the contractor to be reimbursed for identified expenses without meeting the service requirement and ensures funding is available to enroll children with exceptional needs or severe disabilities, within the set aside, at any point during the fiscal year (FY).

3. How is the five percent set aside requirement calculated?

   The five percent set aside is calculated by multiplying the contract Maximum Reimbursable Amount (MRA) (without considering any amount temporarily received or temporarily relinquished through the Voluntary Temporary Transfer (VTT) and CSPP/General Child Care (CCTR) Transfer Process) by five percent by the full-time exceptional needs/severely disabled adjustment factor of 2.4.

   Example:

   A contractor has a CSPP contract MRA of $500,000. $60,000 will be reserved to serve children with exceptional needs, which is a result of the following calculation:
   
   (Contract MRA + VTT & CSPP/CCTR Transfer Exception) x 5% x 2.4 adjustment factor)

   ($500,000 + 0) x 5% x 2.4 = $60,000

4. Where can contractors find their required set aside amount?

   The required set aside can be found on the earnings calculation found in California Preschool Accounting Reporting Information System (CPARIS). This information is located in the contract terms section of the earnings calculation.

5. How do contractors determine the number of children needed to meet the set aside requirement?

   Contractors can use the Funded Enrollment Calculator, which is a tool designed to help contractors determine the number of children required to meet the set aside associated with children with exceptional needs and severe disabilities. Throughout the fiscal year (FY), if actual enrollment differs from the percentages originally entered in the Funded Enrollment Calculator, the contractor should update the assumptions used in the calculator. Updating the calculator will provide a more accurate number of slots associated with the set aside requirement.
   
   The Funded Enrollment Calculator and Funded Enrollment Walkthrough YouTube video is available on the Funded Enrollment Resources web page found on the Early Education and Nutrition Fiscal Services (EENFS) main web page.

6. What are some examples of expenses related to serving children with disabilities?

   The five percent set aside requirement refers to the portion of a contractor’s CSPP funded enrollment that must be reserved for serving children with disabilities. Contractors are not required to reserve five percent of their expenses specifically on children with disabilities, and contract funds can continue to be used on any allowable program expense reimbursable to the CSPP. However, the intent of the set aside is to support inclusion, and contractors not serving the required percentage of children with disabilities are required to do community outreach to special education partners to recruit additional children with exceptional needs.

   Contractors who have not yet filled their set aside may use the funds for one-time costs in addition to ongoing costs, as needed. However, contractors must ensure that they can absorb the additional costs associated with enrolling more children with disabilities. Contractors who have already met the set aside requirement are free to use the set aside contract funds for a mix of ongoing and one-time costs as they see fit.
   

   Some examples of one-time expenses are:

   • Adaptive equipment
   • Renovations for meeting American with Disabilities Act compliance
   • Professional development, training, and technical assistance
   • Community outreach events and efforts
     

   Some examples of ongoing expenses are:

   • Staffing to support serving children with exceptional needs
   • Early Childhood Mental Health Consultation services
   • Possible costs associated with transporting children with disabilities to the CSPP classroom

   
   Contractors should ensure they are obtaining an Equipment Purchase Approval from their Program Quality Implementation (PQI) office regional consultant if the purchase exceeds the capitalization level established by the contractor for financial statement purposes, or the threshold stated in the annual CSPP Contract Terms and Conditions.

7. What happens if a contractor does not fully spend the funds advanced within the fiscal year (FY) associated with the set aside?

   There may be instances when a contractor did not fully spend the amount advanced to serve children with exceptional needs or severe disabilities through the required set aside within the FY in which it was provided. Contractors that do not fully earn the set aside may receive additional revenue from their CSPP contract that otherwise would not have been apportioned. At this time, the California Department of Education (CDE) will not invoice CSPP contractors for any unused service level exemption credits. Instead, these funds will be considered deferred revenue and contractors may use that funding to cover expenses in future FYs.

8. How do contractors determine the amount of funds to carry over as deferred revenue?

   The amount of deferred revenue that a contractor can utilize in subsequent years may be less than the Exceptional Needs/Severely Disabled Service Level Exemption Credit reflected on the earnings calculation in California Preschool Accounting Reporting Information System (CPARIS), depending on the contractor’s earnings.

   The deferred revenue resulting from the unused service level exemption credit is the least of these two:

   • The Exceptional Needs/Severely Disabled Service Level Exemption Credit stated on the earnings calculation in CPARIS
   • The Contract Maximum Reimbursable Amount (MRA) minus (FY Adjusted Contract Earnings minus Exceptional Needs/Severely Disabled Service Level Exemption Credit)

   
   Contract MRA - (FY Adjusted Contract Earnings - Service Level Exemption Credit)

Set Aside Reporting

1. How do contractors report deferred revenue related to the unspent prior years set aside credit in California Preschool Accounting Reporting Information System (CPARIS)?

   Contractors are encouraged to spend revenue related to the unspent prior years set aside credit before other income sources, including current year contract funds.

   As the prior year set aside credit is spent, contractors must report the deferred revenue as restricted revenue on the Restricted Income: Exceptional Needs/Severely Disabled Service Level Exemption Credit line of the Enrollment, Attendance, and Fiscal Report in CPARIS. As with all other revenue, these funds should only be reported when the associated expenditures are also reported.

2. How do contractors report expenses related to the set aside credit in CPARIS?

   All expenses reimbursable to the CSPP must be reported within the appropriate expense categories in the Enrollment, Attendance, and Fiscal Reports. Any expenses incurred related to serving children with disabilities should be reported on the Total Exceptional Needs/Severely Disabled Expenses line in CPARIS. This will allow the California Department of Education (CDE) to monitor contractors’ efforts to support children with disabilities and increase enrollment within the set aside.