Dear Executive Directors, Child Care and Development Programs:
Fiscal Year 2017–18 Year-End Reporting Reminders
The purpose of this letter is to remind contractors of the due dates and reporting requirements for the fiscal year ending June 30, 2018. Please share this letter with your agency staff, as the information will be useful in closing Fiscal Year (FY) 2017–18. A subsequent letter will be issued in the coming weeks to inform contractors of any changes to child care and development contracts and reporting procedures for FY 2018–19.
Contracts or Contract Amendments
All original contracts and any remaining contract amendments for FY 2017–18 must be signed and returned to the Contracts Office as soon as possible. Child Development and Nutrition Fiscal Services (CDNFS) cannot make payments based on amended terms until the amendment has been signed and returned.
Year-end attendance and fiscal reports are due in the CDNFS office by July 20, 2018. Postmarks do not qualify as receipt dates. A delinquent report results in withholding any remaining apportionments due for FY 2017–18. Additionally, apportionments for FY 2018–19, beyond the initial payment, will be withheld until the contractor has complied with this contract requirement.
Reporting Enrollment vs. Attendance
It has come to our attention that child days of enrollment and days of attendance are frequently reported incorrectly on CDNFS center-based report forms. The purpose of this section is to clarify reporting requirements and instructions for reporting days of enrollment and days of attendance.
A day of enrollment is a day that a child is certified to attend a program per the contractor’s Notice of Action (NOA) approval for services. Days of enrollment for certified children are reported on CDNFS center-based report forms on page one. When a child is absent from the program, days of enrollment reported on page one should not deviate from what is approved for services on the NOA.
Child days of enrollment should be reported in the special criteria and time base category for which the child is certified to attend the program. For example, if a child has a set schedule and is certified to attend a Preschool program Monday through Friday 8:00 a.m. to 5:00 p.m. (i.e. nine hours per day), the child’s enrollment should be reported as full-time on CDNFS reports for every day the contractor is providing services, even if the child is absent or attends less than nine hours on any given day. A common error CDNFS encounters is a day of enrollment omitted on the CDNFS form due to a child’s absence. Whether a child is present or has an excused or unexcused absence, the child’s enrollment should always be reported in line with their certified hours of enrollment on the NOA.
Families with variable schedules should be certified as such, and should claim both the days and hours of enrollment and attendance only when the child is present and receiving services in the program. For example, if a child with a variable schedule is certified to attend a general child care program up to five days per week and up to six hours per day, the child’s attendance and enrollment will be claimed on CDNFS report forms only on the days the child is signed in and out of the program and for the number of hours the child attended, not to exceed the maximum days and hours the child is certified to attend. Because the child is certified to attend no more than six hours per day, attendance will be claimed as either part-time (up to four hours per day) or three-quarter-time (between four and six and a half hours per day), depending on the number of hours the child attends on any given day.
A day of attendance is a day that a certified child is present in the program for any part of the day for which they are enrolled or have an excused absence. A child’s attendance cannot be reported on CDNFS report forms prior to the contractor certifying the child’s enrollment and issuing a NOA to the family. Daily sign-in/out sheets are used as the primary source documentation for tracking and reporting days of attendance. If a child has an excused absence, the excused absence must be documented and the child’s absence should be included as a day of attendance. If the child’s absence is unexcused, the absence is not included as a day of attendance. Days of attendance are reported on CDNFS report forms in aggregate, and not by special criteria or time-base category.
Year-end reports must be received by the deadline of July 20, 2018 to avoid becoming delinquent. However, revisions to year-end reports may be submitted later under limited circumstances. Please refer to the Revised Reports section of the Greenbook for the due dates for various programs. The Greenbook is available online at https://www.cde.ca.gov/fg/aa/cd/documents/greenbook17.pdf.
Support Contract Reports
Support contracts such as Health and Safety (CHST) or Local Child Care Planning Council (CLPC) contracts also require a year-end fiscal report (form CDNFS 9529) by the July 20, 2018 deadline. Contractors who have expended and reported the full contract amount prior to the end of the year are still required to submit a year-end fiscal report by July 20, 2018.
Local Child Care Planning Council and Child Care Initiative Project Match Requirement
Local Child Care Planning Council (CLPC) contracts require a local match. Per the CLPC Program Requirements, each contractor shall contribute a match, in the form of monetary and/or in-kind services. The required local contribution for each CLPC contract is shown on the contract face sheet, and is part of the total CLPC Maximum Reimbursable Amount (MRA). Match contributions are to be reported as Restricted Income on the CDNFS 9529 fiscal form. The expenses associated with the reported match contribution should be included within the expenses portion of the report.
Any Child Care Initiative Project (CCIP) contracts with a local match requirement shall report the match as Restricted or Unrestricted Income. Reporting associated with CCIP contracts should be done on the CCIP specific report form titled CDNFS 9529 CCIP.
Reserve Account Activity Reports
The Reserve Account Activity Report (CDNFS 9530-A) for FY 2017–18, which is also due by July 20, 2018, requires supporting documentation in the form of a copy of the contractor’s general ledger report page(s) that reflects the cash balances maintained in the Child Development Reserve Account. Please ensure the beginning balance for FY 2017–18 reported on the Reserve Account Activity Report matches the ending balance per the FY 2016–17 CDNFS 9530 Reserve Account Status Report (audited report for private contractors) supplied by CDNFS. If the balances do not reconcile, this will delay approval of the year-end attendance and fiscal report, which could result in an apportionment withholding.
The Reserve Account Status Report (CDNFS 9530), which is sent to the contractor after the contractor submits a Reserve Account Activity Report (9530-A), displays beginning and ending Reserve Account balances, as well as any transfers in and out of the Reserve Account. The CDNFS 9530 also includes a breakdown of the maximum reserve amounts. The reserve cap for center-based contractors that do not operate a California State Preschool (CSPP) contract is five percent of the sum of all center-based MRA(s).
The CDNFS 9530-A includes Section III–Expenses, which is used to report transfers to contracts from the reserve. Expenditures (amounts requested to transfer to contract(s) in Section III–Expenses) from the Reserve Account must match income (amounts reported on the “Transfer from Reserve” line) reported on appropriate service contract reports, e.g. CDNFS 9500, CDNFS 8501, etc. Incorrect or missing Reserve Account Activity Reports and/or missing support documentation will constitute a delinquent report resulting in the withholding of any remaining apportionments due for FY 2017–18, as well as apportionments for FY 2018–19 beyond the initial payment. Form CDNFS 9530-A is available online at Reporting Forms (FY 2017-18).
Contractors are required to submit this report on the most recently updated version of the form. Any CDNFS 9530-A reports submitted on a prior version of this form will not be accepted. Additional information associated with establishing and maintaining a Reserve Account, as well as Reserve Account requirements, can be found in the Reserve Account section of the Greenbook.
A Reserve Account Activity Report is required for each type of Reserve Account a contractor may have:
- Child Development Center-Based Reserve Account
- Child Development Resource and Referral Reserve Account
- Child Development Alternative Payment Reserve Account
Alternative Payment (AP) and CalWORKs contractors should note that although the Reserve Account Activity Report is available online, a hard copy must be mailed and received by CDNFS by July 20, 2018.
Reminder of Reserve Account Cap for California State Preschool Program Contracting Agencies
The Reserve Account cap for California State Preschool Program (CSPP) contracting agencies is broken down into five percent multiplied by the sum of all center-based MRA(s) to calculate the “maximum general center-based reserve” amount, and 10 percent multiplied by the sum of all center-based MRA(s) to calculate the “maximum professional development reserve” amount. The two amounts together make up the total 15 percent, or the “total maximum center-based reserve” amount for the Reserve Account for CSPP contractors.
Transfers from the reserve to a CSPP contract should be separated by amounts transferred to CSPP to cover professional development expenses, and those transferred for general expenses as indicated on the form. Transfers from the reserve to any other center-based contract should be reported on the lines for “Other Contracts.”
Any transfer amount in excess of the general portion of the reserve (five percent of the sum of all center-based MRAs) must be used for CSPP professional development expenses only.
Example of a reserve account cap calculation for a contractor with two center-based contracts–General Child Care (CCTR) and CSPP:
CCTR MRA: $200,000
CSPP MRA: $100,000
Sum of center-based MRAs: $200,000 + $100,000 = $300,000
Maximum center-based reserve: 15 percent x $300,000 = $45,000
Maximum general center-based reserve: 5 percent x $300,000 = $15,000
Maximum professional development reserve: 10 percent x $300,000 = $30,000
The funds maintained in the Reserve Account are earned but unexpended state funds that the contractor holds as deferred revenue until they are either properly spent or returned to the California Department of Education (CDE). As funds transfer into the Reserve Account, they will be considered general reserve funds up to the five percent general center-based reserve cap. These general reserve funds can be used on any reimbursable cost for any center-based contract. The remaining 10 percent is only to be used for the specific purpose of professional development of CSPP instructional staff. CSPP contractors can also utilize the general center-based reserve funds for professional development of CSPP instructional staff.
Quality Rating and Improvement System Reporting
Quality Rating and Improvement System (QRIS) is a local level block grant with a focus on improving program quality. It was created to meet the needs of early learners and ensure access to high quality programs for California’s children. The primary purpose of this funding includes training, professional development days, stipends, and bonuses.
The income and expenses associated with the use of these funds must be reported on the Attendance and Fiscal Report for California State Preschool Programs (form CDNFS 8501). These grant funds should be reported as supplemental revenue and expenses, which is defined as “paying for projects or benefits beyond the basic child development services for certified and non-certified children.”
The CDE understands that bonuses may be a common use of these funds. Bonuses are specified in Title 5 as non-reimbursable cost to the contract, unless part of a collective bargaining agreement. If the funds are used for bonuses that are not part of a collective bargaining agreement, the cost must be reported under “Non-Reimbursable Expenses, Other.” The revenue used to pay for the bonuses should be reported under “Supplemental Revenue, Other.”
Start-up Allowance Reporting Reminder
Contractors with a FY 2017–18 Child Development contract containing start-up must report any expenses associated with the start-up allowance on the “Start-up Expenses” line of the appropriate report form. Start-up expenses should be reported only on the “Start-up Expenses” line, and not included in the expenses reported in categories 1000–6500.
With the exception of a start-up/close down allowance associated with seasonal migrant contracts, allowable start-up expenses were negotiated and approved specific to each contract. Expenses reported as start-up must only include what was requested and approved on the line-item start-up request approved by the CDE.
Start-up funds associated with a FY 2017–18 Child Development contract are specific to the 2017–18 fiscal year, and as such must be expended by June 30, 2018. The goods and services associated with these start-up expenses must also be received by June 30, 2018. Any amount of unused start-up for the FY 2017–18 contract period will not be rolled over to FY 2018–19.
Contractors may be invoiced for any over-advanced CalWORKs contract funds based on their year-end earnings calculation report. This invoice will be sent to the contractor prior to the receipt of the audit in order to facilitate the dis-encumbrance of unearned CalWORKs contract funds. Contractors that need to revise their year-end reports may do so by September 30, 2018. An invoice that becomes 90 days delinquent will result in a withholding of all future apportionments.
Process to Apply for Contingency Funds
Pursuant to California Education Code (EC) Section 8222.1, CDE shall reallocate funds as necessary to reimburse Alternative Payment (AP) programs (excluding CalWORKs) for actual and allowable costs incurred for additional services provided. An AP contractor may apply for reimbursement of up to three percent of their contract amount, or for a greater amount subject to the discretion of the Department, based on availability of funds. Applications may be submitted as early as May 1, but no later than September 30, 2018. The CDE will approve or deny applications submitted pursuant to the above EC section, and will not consider applications received after September 30, 2018 for additional costs incurred during FY 2017–18.
The CDE will distribute reimbursement funds for each approved application within 90 days of receipt of the application, if the application was filed between May 1, 2018 and July 20, 2018. Applications received after July 20, 2018, are not subject to the 90 day requirement for the distribution of funds. If requests for reimbursement exceed available funds, the CDE will assign priority for reimbursement according to the order in which it received the applications. Funds received by an AP contractor pursuant to this section that are not substantiated by the program’s annual audit or a year-end report must be returned to the CDE. Billings for contingency funds are not subject to the appeal process.
Audits and Investigations Division Audited Attendance and Fiscal Reports Reminders and Changes
Please share the following information with your fiscal staff and independent auditor, e.g., Certified Public Accountant (CPA), who performs your annual audit that you submit to the CDE.
New AUD Forms
Visit the CDE’s Audits and Investigations Division (A&I)’s Resources Page for upcoming links to the new Audited Attendance and Fiscal Reports (AUD forms) and Instructions for FY 2017–18. The AUD forms for FY 2016–17 will remain on the A&I Web site for an additional year; audit reports submitted with obsolete AUD forms may be rejected. Reminders The following audit requirements of the CDE Audit Guide, referenced by section number, are important to discuss with your CPA:
- Ensure that the audit engagement letter between the agency and the CPA states that the audit will be performed in accordance with the CDE Audit Guide (see Section 160.C.2) and identifies the date that the final audit report must be submitted to the A&I (due dates in Section 210).
- Except for Child Development (CD) program contractors on conditional status, the A&I may grant a CD contractor a one-time-only per year, 30-calendar-day extension of the audit due date, provided the inability of the contractor to submit the audit by the due date was beyond the fault and control of the contractor. The extension request due date and instructions for submission are specified in Section 212.
- Section 310.A provides an overview of the AUD forms. Also see page 2 of the AUD General Instructions (form AUD 1000) on how to complete the AUD forms.
- Preparation of the Audited Reserve Account Activity Report (form AUD 9530-A) is explained in Section 350. Detailed instructions for preparing the AUD 9530-A form are included in the AUD form instructions.
- The AUD forms are required for subcontracts, except for subcontractors that operate CD programs for school districts (Section 345). The contractor is responsible for providing an audit report by its' subcontractor that includes the AUD forms for any subcontracts (Section 210.D).
- If start-up expenses (service level exemption) are reported on the AUD forms, the audit report must include a “Schedule of Reimbursable Start-up Expenses” (Section 320). Note that part-year Migrant Programs may also contain close-down expenses that would be reported in the same manner as start-up expenses.
- Include in the audit report a “Combining Statement of Activities” (Section 315.B). Revenues reported on the “Combining Statement of Activities” must be traceable to individual CDE contracts in the revenue section of the respective AUD form.
- If CDE reporting requirements differ from those of Generally Accepted Accounting Principles (GAAP), e.g., for depreciation, a “Reconciliation of CDE and GAAP Expense Reporting” is required (Section 315.C).
- Cost Allocation Guidance is provided in Section 718.
Costs Disallowed in Child Development Audits
The following are examples of costs disallowed in audits of CDE Child Development programs. When costs are disallowed by CPAs or the A&I, the CDE will not reimburse those costs. Each example is followed by a bracketed citation to identify the applicable requirement in the contract Funding Terms and Conditions for Child Development Programs (FT&C). As noted above, effective for FY 2015–16, the FT&C have been consolidated into one document that covers all direct service Child Development programs. The Program Requirements remain a separate document for each program. However, the definitions provided in the FT&C also apply to the Program Requirements.
- Payroll costs for salaries and benefits are disallowed when a contractor does not adequately support its claim for reimbursement, e.g., does not maintain payroll records that indicate the actual amount of time spent (performing direct cost activities) in each program per day for multi-funded employees (FT&C, Section VI.E).
- The following costs are disallowed, as they are specifically prohibited by the contract– this is only a partial list (FT&C, Section V.H):
a) Bad debts, excepting parent fees if collection attempts are adequately documented
b) Amusement and entertainment
c) Idle facilities for full-year programs, e.g., office or classroom used for storage
d) Fines and penalties
f) Costs incurred outside the contract period, except for audit fees (FT&C, Section V.I)
- Costs are disallowed if they are not reasonable and necessary to the performance of the contract (FT&C, Section V.B), for example:
a) Granite counter tops in kitchen and bathrooms
b) Cellular telephones for employees’ spouses and children
c) High-end office furnishings
- Depreciation is disallowed when claimed on: (a) assets purchased with public funds, (b) donated assets; or (c) idle or excess facilities (FT&C, Section III.A).
- When a contractor lacks prior written approval from the Early Education and Support Division, costs are disallowed for:
a. Renovation and repairs (FT&C, Section III.H), or subcontracts (FT&C, Section IV.C) of $10,000 or more
b. Equipment and equipment replacement purchases in excess of $7,500 per item (FT&C, Section III.E)
- Rent is disallowed (FT&C, Section II.O):
a. On property owned by the contractor (an expense may be claimed only as depreciation or use allowance)
b. On property owned by affiliates, officers or other key personnel of the contractor or their families, unless the contractor obtains (and claims no more than) a fair market rental cost estimate from an independent appraiser licensed by the California Office of Real Estate Appraisers
Claims for reimbursement are disallowed if there is insufficient documentation to support the claim, e.g., no paid invoice or receipt to support an expense; the contractor has the burden of proof. (FT&C, Section VI.E).
For additional information regarding the AUD forms, please contact the CDE Audits and Investigations Division at 916-322-2288.
If you have questions or need clarification about any other topic covered in this letter, please contact your assigned CDNFS analyst.
Original Signed by Andrea Johnson
Andrea Johnson, Staff Services Manager II
Child Development and Nutrition Fiscal Services
Fiscal and Administrative Services Division