July 9, 2025

Dear California State Preschool Program Executive Directors and Program Directors:

Fiscal Year 2024-25 June Year-End Contract and Reporting Reminders

The purpose of this letter is to compile reporting information provided throughout Fiscal Year (FY) 2024–25 and to provide contractors with the due dates and reporting requirements for June year-end and audit reports for the fiscal year ending June 30, 2025. Please share this letter with your agency staff. A subsequent letter will be issued by the Early Education and Nutrition Fiscal Services (EENFS) unit in the coming weeks to inform contractors of any changes to California State Preschool Program (CSPP) contracts and reporting procedures for FY 2025–26.

Contracts and Contract Amendments

Any outstanding original contracts and contract amendments requiring signature for FY 2024–25 must be signed and returned to the California Department of Education (CDE) Contracts Office as soon as possible. The CDE cannot make payments based on amended terms until amendments requiring signature have been signed and returned.

As a reminder, due to the Allocation Letter process implemented in FY 2021–22, most original contracts and amendments do not require a signature. Contractors unsure whether an amendment requires a signature should contact the CDE’s Contracts Office at EarlyEducationContracts@cde.ca.gov. 

Fiscal Year 2024–25 June Year-End Reports Reporting Deadline

FY 2024–25 June Enrollment, Attendance, and Fiscal Reports are due by July 21, 2025. All reports must be submitted online through the California Preschool Accounting Reporting Information System (CPARIS). Acceptable reports not certified by July 21, 2025, will be considered delinquent. Pursuant to California Code of Regulations, Title 5 (5 CCR) Section 17814, a delinquent report will result in the withhold of any remaining apportionments due for FY 2024–25. Additionally, apportionments for FY 2025–26, beyond the initial payment, will be withheld until the contractor has complied with this contract requirement.

CPARIS can be found on CDE’s website at https://cparis.cde.ca.gov/cparis/. The CPARIS User Manual, which provides CSPP contractors with instructions on how to navigate the web-based application, can be found at https://www.cde.ca.gov/fg/aa/cd/cparishomepage.asp.

Fiscal Year 2024–25 California State Preschool Program Hold Harmless for Enrollment and Attendance

Education Code (EC) Section 8245.5(c), specifies that for FY 2024–25, CSPP contractors that remain open and operating in accordance with their approved program calendar, and remain open and offering services through the program year, shall be reimbursed for an audited claim that is the least of the following:

1. One hundred percent of the maximum reimbursable amount as stated in the annual preschool contract; or
2. The net reimbursable program costs.

Fiscal Year 2024-25 Enrollment, Attendance, and Fiscal Reporting

Reporting Family Fees for Certified Children

Contractors are required to calculate and assess family fees at initial certification and recertification for all full-day CSPP families not exempt from family fees using the FY 2024–25 family fee schedule. Contractors must report all assessed family fees on the Family Fees for Certified Children line of the Enrollment, Attendance, and Fiscal Report in CPARIS. Family fees reported on the Family Fees for Certified Children line must be based on the amount the contractor expects to collect in the report month, regardless of when the revenue is received.

For additional details, please refer to Management Bulletin (MB) 24-06, which can be found here: https://www.cde.ca.gov/sp/cd/ci/mb2406.asp.

Commingled Classroom Reporting

A contractor who has a commingled classroom, i.e. providing services to both CSPP certified children and non-CSPP certified children in the same classroom at the same time, may choose to report enrollment and expenses for both CSPP certified and non-CSPP certified children on the Enrollment, Attendance, and Fiscal Reports. However, contractors should keep in mind how reporting commingled classrooms may affect contract reimbursement.

Contractors with commingled classrooms where both subsidized and non-subsidized children are served at the same time are reminded that the reporting of non-certified enrollment and expenses is dependent on the amount received for non-certified children not differing greatly from the CSPP reimbursement rate.

For instances where the amount received for non-certified children is equal to the CSPP reimbursement rate, and services for each child in the program are equitable regardless of the funding source, contractors are encouraged to report the enrollment and the entire classroom expenses for both CSPP certified and non-CSPP certified children on the Enrollment, Attendance, and Fiscal Reports. The contract earnings calculations will prorate costs based on the percentage of certified and non-certified enrollment reported.

For instances where the amount received for non-certified children greatly differs from the CSPP reimbursement rate, contractors should not consider these children as non-certified for reporting purposes. In this instance, the non-certified enrollment would not be reported. To receive accurate reimbursement, contractors must allocate and report only the expenses allocated for the CSPP.

Reporting Cost of Care Plus Rate Allocations

The Cost of Care Plus Rate allocation is a monthly payment to providers, based on the number of children enrolled in a CSPP. These payments were issued to CSPP contractors beginning January 2024 and continued in FY 2024–25. Eligible CSPP contractors were sent notification emails from their fiscal analyst s allocations were released to contractors.

CSPP contractors who provide service through a Family Childcare Home Education Network (FCCHEN) provider or who subcontract with centers are required to distribute funds to family childcare providers and subcontractors. Contractors who distribute funds to family childcare providers must report payments on the line Direct Payments to Providers: FCCH Only in CPARIS. Contractors who distribute funds to subcontractors must report payments on the line Direct Payments to Subcontractors: Cost of Care Plus & One-Time Allocations Only in CPARIS. 

Cost of Care Plus Rate funds are considered restricted income. Allocations funded by the State General Fund or Proposition 98 shall be reported on the line Restricted Income: Other in CPARIS. For more information on how to report the revenue and expenses, please refer to the Reporting Revenue and Expenses section of this letter below.

For additional information on this allocation, including methodology and timeframes for distributing funds to family childcare providers and subcontractors, please refer to the Allocations Paid Outside of the CSPP Contract Frequently Asked Questions (FAQs), which can be found at https://www.cde.ca.gov/fg/aa/cd/allocationsfaq.asp.

Reporting Revenue and Expenses

Contractors must follow Generally Accepted Accounting Principles (GAAP) for accrual accounting and shall follow the accounting procedures specified in the most recent edition of the California School Accounting Manual (CSAM). The CSAM specifies that under an accrual basis of accounting, revenues are recorded when earned, and expenditures are recorded when a liability is incurred, regardless of when the receipt or payment of cash takes place.

Contractors are reminded that reporting revenue is dependent on the source of the income and how it is spent. Revenue should only be reported when its corresponding expenses are also reported. Restricted revenue reported in the Restricted Income categories in the Enrollment, Attendance, and Fiscal Report is income provided for a specific, limited purpose, and that can only be expended for certified children (5 CCR Section 17700).  

Additionally, if contractors earned government funding, such as Paycheck Protection Program, Employee Retention Tax Credit funding, or prior year exceptional needs set aside, related to expenses claimed as reimbursable to a contract, that revenue is considered program revenue, and the funds must be reported as restricted income. It is important to ensure all restricted income is correctly reported throughout the year. Restricted income that is not reported until a contractor’s audit could result in a large, unexpected billing.

When determining whether an expense may be charged to the contract, contractors should follow GAAP. This guidance includes situations where a contractor prepays supplies or equipment in one contract year and does not receive those supplies or equipment until the following contract year. Per 5 CCR, Sections 18037 and 18063, except for audit costs, expenses considered incurred in a future year per GAAP are not reimbursable under the current year contract.

For additional details, please refer to the CSAM, which can be found at https://www.cde.ca.gov/fg/ac/sa/.

Reporting Unearned Prior Year Exceptional Needs Service Level Exemption Credit

Pursuant to EC Section 8208(c)(1), beginning FY 2022–23, CSPP contractors are required to set aside five percent of funded enrollment for children with exceptional needs, including those that are severely disabled, as defined in EC Section 8205. Since FY 2022–23, contractors not earning the set aside through enrollment have been fully funded for the percentage of funded enrollment set aside amounts, pursuant to EC Section 8208(c)(2)(B), to ensure that funding was available to enroll children with exceptional needs within the required set aside. In instances when a contractor does not fully spend the amount advanced by the CDE to serve children with disabilities through the set aside within the FY in which it was provided, they may receive additional revenue from their CSPP contract that otherwise would not have been apportioned.

At this time, the CDE will not invoice CSPP contractors for any unused service level exemption credits. Instead, these funds are considered deferred revenue, and contractors may use this revenue to support contract expenses in future FYs. The CDE recommends that the deferred revenue related to unspent prior year service level exemption credits should be spent prior to other income sources, including current year contract funds. Deferred revenue must be reported in the Enrollment, Attendance, and Fiscal Reports as restricted income on the line Restricted Income: Exceptional Needs/Severely Disabled Service Level Exemption Credit. As with all other revenue, these funds should only be reported when the associated expenditures are also reported.

Note that the amount of deferred revenue that a contractor can utilize in subsequent FYs may be less than the service-level exemption credit reflected in the contractor’s earnings calculation in CPARIS. The amount of deferred revenue is dependent upon the contractor’s expenditures reported within the same FY the credit is calculated. For questions regarding the service-level exemption credit, contractors can reach out to their assigned fiscal analyst.

Reporting Start-up Allowance

Contractors with a FY 2024–25 CSPP contract containing approved start-up associated with expansion funding must report any expenses associated with the start-up allowance on the Start-up Expenses line in CPARIS. Start-up expenses should be reported only on the Start-up Expenses line and not included in the expenses reported in categories 1000-6500.

Allowable start-up expenses are negotiated and approved by the CDE and are specific to each contract. Expenses reported on the start-up line must only include what was requested by the contractor and approved by the CDE.

Reporting Staff Training Costs

EC Section 8251 allows contractors to schedule up to two days of staff training, per contract period, using state reimbursement funding on the topics including procedures for emergencies in preschool programs, licensing regulations relating to preschool programs, recognition and reporting of suspected abuse of children in preschool programs, managing challenging behaviors and preventing expulsion of children, and addressing items on the program’s Quality Rating and Improvement System (QRIS) Quality plan. While staff training days have always been a reimbursable expense, EC Section 8251 allows the CDE to reimburse expenses associated with professional development without requiring contractors to meet the service requirement for their contract.

Contractors taking advantage of these optional staff training days will report all reimbursable costs, including those associated with up to two staff training days, in expense categories 1000 through 5000 on the Enrollment, Attendance, and Fiscal Report. Additionally, contractors must identify the amount to which the total expenses reported within categories 1000 through 5000 are associated with staff training costs, on the Total Staff Training Cost line of the Enrollment, Attendance, and Fiscal Report. This identification will allow the CDE to collect the necessary data to reimburse these expenditures and adjust the contract earnings accordingly.

For more information on implementing optional staff training days, please refer to MB 19-05, which can be found here: https://www.cde.ca.gov/sp/cd/ci/mb1905.asp.

Reporting Quality Rating and Improvement System (QRIS)

The 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. Contractors are reminded that income and expenses associated with the use of these funds must be reported on the Enrollment, Attendance, and Fiscal Report. In most cases, these grant funds should be reported as supplemental revenue and expenses.

Reporting Reminders for the Prekindergarten and Family Literacy Support Contract

The Prekindergarten and Family Literacy Support (CPKS) contract is a support contract that also requires that a June year-end fiscal report be certified by the July 21, 2025, deadline. CSPP contractors who hold a CPKS contract must submit their June year-end fiscal report in CPARIS, even if the contractor fully expended and reported the full contract amount prior to the end of the year.

Revised June Year-End Reports

June year-end reports must be certified by the deadline of July 21, 2025, to avoid becoming delinquent. Upon approval by EENFS, a preliminary contract earnings calculation will be viewable in CPARIS based on the June year-end report. Revisions to year-end reports may be submitted later under the limited circumstances outlined below by non-Local Education Agency (LEA) and LEA.

CSPP Contractor Revision Deadlines for Non-LEAs

Non-LEA contractors may submit revised year-end reports through August 20, 2025. As with initially submitted June year-end reports, a preliminary contract earnings calculation will be viewable in CPARIS based on revised June year-end report received by the August 20^th deadline. Revised reports cannot be submitted after this date; contract closure and year-end reimbursement calculations will be based on the contractor’s audit.

CSPP Contractor Revision Deadlines for LEAs

LEA contractors may submit revised June year-end reports according to the deadlines below. Contract closure and year-end reimbursement calculations for an LEA are based on the June year-end report, so it is vital that information is complete and accurate. LEAs should submit a revised report, if necessary, to EENFS as soon as possible, but contractors have sixty (60) days from the due date for submission of the audit to submit a revised report to their EENFS Fiscal Analyst (FY 2024–25 Contract Terms and Conditions (CT&C)).

• A County Superintendent of Schools/School District audit is due on December 15 (EC Section 41020). The revised report deadline for FY 2024–25 is February 13, 2026.
• A Community College audit is due to CDE on December 31 (CT&C). The revised report deadline for FY 2024–25 is March 1, 2026.

Preschool Reserve Account Reporting

If a CSPP contractor has a preschool reserve account, a Preschool Reserve Account Activity Report is required, regardless of whether the preschool reserve account has a balance. A copy of the contractor’s general ledger report page(s) that reflects the cash balances maintained in the preschool reserve account must be submitted via email to the assigned EENFS Fiscal Analyst by July 21, 2025.

To be considered acceptable, the Preschool Reserve Account Activity Reports must comply with the following:

• Verify the beginning balance displayed on the FY 2024–25 Preschool Reserve Account Activity Report is correct and matches the ending balance of the most recent FY 2023–24 Reserve Account Status Report provided by EENFS. For those contractors whose FY 2023–24 audit has been processed, the beginning balance should match the FY 2023–24 Audited Preschool Account Status Report in CPARIS.
• Report interest earned on preschool reserve account funds. The preschool reserve account funds must be kept in an interest-bearing account within the contractor’s early education fund. Preschool Reserve Account Activity Reports submitted to EENFS with a balance and no interest reported will be deemed unacceptable.
• The general ledger must be submitted by email to the assigned EENFS Fiscal Analyst.

Contractors transferring funds from a preschool reserve account to a CSPP contract for expenses incurred in FY 2024–25 must report the transfer on the Transfer from Preschool Reserve Account line in the Revenue section of the June Enrollment, Attendance, and Fiscal Report. The Enrollment, Attendance, and Fiscal Report must be certified prior to the Preschool Reserve Account Activity Report; the transfer amount is determined based on the transfer amount entered in the Enrollment, Attendance, and Fiscal Report, and will be auto populated in the Preschool Reserve Account Activity Report.

Establishing a Preschool Reserve Account

Contractors who do not currently have a preschool reserve account and wish to open one can do so in CPARIS. The request to open a preschool reserve account can be found in the Preschool Reserve/Establish Reserve Account submenu. Requests to open a preschool reserve account must be received by July 21, 2025, to be established as of FY 2024–25. Requests received after that date will be effective FY 2025–26. Contractors should contact their assigned fiscal analyst to ensure the request to establish a reserve is processed.

Requests to establish a preschool reserve account do not need to be made annually; contractors that established a preschool reserve account in prior years do not need to establish a reserve account again in FY 2024–25.

For further information, please refer to the preschool reserve account instructions in the CPARIS User Manual, which can be found at https://www.cde.ca.gov/fg/aa/cd/cparishomepage.asp .

Closing a Preschool Reserve Account

Contractors who wish to close a preschool reserve account may do so by completing the Request to Close Reserve Account in CPARIS. The request to close a preschool reserve account can be found in the Preschool Reserve/Reserve Account Close Request submenu.

When a preschool reserve account is closed, any balance currently held in the account, and any interest accrued by the funds, must be returned to CDE. Contractors closing preschool reserve accounts will be invoiced for the full balance. Requests to close a preschool reserve account should be submitted on the same date the contractor’s June year-end Enrollment, Attendance, and Fiscal Reports are submitted, which are due July 21, 2025. When closing a preschool reserve account, contractors must contact their assigned fiscal analyst to ensure the closure is processed.

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.

Pursuant to 5 CCR Section 17825(c), contractors that fail to produce or submit an acceptable audit within one year of the due date, as specified in 5 CCR Section 17814, may be billed for 100 percent of the preschool funding received by the contractor for that fiscal year.

Fiscal Year 2024–25 AUD Forms

CDE’s Audits and Investigations Division (A&I)’s resource page, including audit guidelines and Audited Attendance and Fiscal Reports (AUD forms) and instructions for FY 2024–25 will be posted by July 31, 2025, at https://www.cde.ca.gov/fg/au/pm/.

Reminders

The following audit requirements of the CDE Audit Guide, referenced by section number, are important to discuss with your CPA. The CDE Audit Guide can be found at https://www.cde.ca.gov/fg/au/pm/.

• Ensure that the audit engagement letter between the contractor 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 (due dates in Section 211).
• Except for contractors on conditional status, a CSPP contractor may be granted 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.
• Per Section 360, as of FY 2020–21 audit submissions, contractors are required to submit a quality review checklist along with their audit reports and include a supplemental schedule titled Notes to the Child Development Supplemental Information in the audit report. CDE will make the checklist available on its website at https://www.cde.ca.gov/fg/au/pm/ and by request at AuditSubmissions@cde.ca.gov .
• Section 310.A provides an overview of the AUD forms. Also see A&I’s Resources Page for AUD form instructions.
• Preparation of the Audited Preschool 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 and supplementary information are required for subcontracts, except for subcontractors that operate preschool programs for school districts (Section 345). The contractor is responsible for providing an audit report of its subcontractor(s) that includes the supplementary information detailed in Chapter 200, Exhibit A, and the AUD forms for any subcontracts (Section 211.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).
• 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 revenue sections 3 and 5 of the respective AUD form.
• If CDE reporting requirements differ from those of 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 Early Education Audits

The following are examples of costs disallowed in audits of preschool 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 CT&C for Preschool Programs. The CT&C can be found at https://www.cde.ca.gov/fg/aa/cd/ctc2024.asp .

• 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 (CT&C, Section VI.F).
• The following costs are disallowed, as they are specifically prohibited by the contract. Note, this is only a partial list (CT&C, Section V.G):
  • Bad debts, excepting parent fees if collection attempts are adequately documented
  • Amusement and entertainment
  • Idle facilities for full-year programs, e.g., office or classroom used for storage
  • Fines and penalties
  • Bonuses
  • Costs incurred outside the contract period, except for audit fees (CT&C, Section V.H)
  • Costs are disallowed if they are not reasonable and necessary to the performance of the contract (CT&C, Section V.A), for example:
    • Granite counter tops in kitchen and bathrooms
    • Cellular telephones for employees' spouses and children
    • 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 (CT&C, Section III.D).
  • When a contractor lacks prior written approval from the Early Education Division (EED, costs are disallowed for:
    • Renovation and repairs or equipment purchases in excess of the CT&C thresholds (CT&C, Section III.E)
    • Subcontracts for direct early learning and care services (CT&C, Section IV.E)
  • Rent is disallowed (CT&C, Section II.O):
    • On property owned by the contractor (an expense may be claimed only as a depreciation or use allowance)
    • 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. (CT&C, Section VI.F)
  • Costs of advertising are disallowed when the advertisement is not necessary to meet the requirements of the Early Education contract (Title 2 Code of Federal Regulations, Section 200.421).

For additional information regarding the AUD forms or audit requirements, please contact the CDE A&I Division at 916-322-2288.

Additional Resources

The EENFS webpage contains valuable resources for contractors, including the Enrollment, Attendance, and Fiscal Reporting, and Reimbursement Procedures for Early Education Contractors, also known as the EENFS Fiscal Handbook. Supplemental fiscal guidance, such as contract-related updates, rate reform resources, a link to CPARIS, the CPARIS User Manual, and FAQs, and links to view past webinars, can also be found on the EENFS webpage.

CSPP contractors will continue to be informed of added content to this webpage by notification through the EED Email Distribution List Subscription. The subscription page for the EED email distribution list can be found at https://www.cde.ca.gov/sp/cd/ci/progspeclist.asp. The EENFS webpage can be found at https://www.cde.ca.gov/fg/aa/cd/. Additionally, MBs distributed by the EED throughout FY 2024–25 can be found at https://www.cde.ca.gov/sp/cd/ci/allmbs.asp. The MBs also contain fiscal directives, when applicable.

If you have questions or need clarification about any other topic covered in this letter, please contact your assigned EENFS Fiscal Analyst. The EENFS Fiscal Analyst directory can be found at https://www.cde.ca.gov/fg/aa/cd/faad.asp.

Sincerely,

Corey Khan, Staff Services Manager III

Early Education and Nutrition Fiscal Services

Fiscal and Administrative Services Division