Service Level Exemptions FAQs

General

1. What is a service-level exemption?

   Service-level exemptions allow the contractor to be reimbursed for identified expenses without the required enrollment to earn it. There are two types of service-level exemptions:

   1. Start-up
   2. Staff Training

2. Why would a service-level exemption be necessary?

   Service-level exemptions may be needed because California Code of Regulations, Title 5 (5 CCR) Section 17812, states that contract reimbursement is limited to the least of the following:

   • The Maximum Reimbursable Amount (MRA) as stated in the annual preschool contract, or
   • The net reimbursable program costs, or
   • The product of the adjusted child days of enrollment (cdes) for certified children, times the contract rate per cdes, times the actual percentage of attendance plus 5 percent, but in no case to exceed 100 percent of enrollment (referred to as Service Earnings)

   
   Service-level exemptions increase a contractor’s service earnings, thereby providing additional reimbursement that would not have been otherwise provided. 

Start-up

1. What is start-up?

   The California Education Code (EC) Section 8205(v) ) defines start-up costs as expenses an agency incurs in the process of opening a new or additional facility before the full enrollment of children.
   
   A start-up allowance exempts certain expenses from the service requirement by increasing actual service earnings by the amount claimed as start-up expenses.

2. What can start-up be used for?

   Pursuant to Education Code (EC) Section 8255(a), start-up can be used for the following:

   • The employment and orientation of necessary staff
   • The setting up of the program and facility
   • The finalization of rental agreements and the making of necessary deposits
   • The purchase of a reasonable inventory of materials and supplies
   • The purchase of an initial premium for insurance

3. Is there a maximum amount of start-up a contractor can request?

   Pursuant to Education Code (EC) Section 8255(a), start-up costs may be approved for an amount not to exceed 15 percent of the expansion or increase.

4. Are start-up funds in addition to the contract maximum reimbursable amount (MRA)?

   Pursuant to Education Code (EC) Section 8255(a), under no circumstances shall reimbursement for start-up costs result in an increase in the agency’s total award amount. As such, start-up is not additional funding, but is part of the contract MRA.

5. How do contractors request start-up?

   When a California State Preschool Program (CSPP) contractor is awarded new funding, either through expansion or accepting of relinquished funding, contractors can request start-up. To request start-up funds, contractors must submit a line-item budget and written justification to their Early Education and Nutrition Fiscal Services (EENFS) fiscal analyst for approval. The line-item budget should include the quantity, unit cost, and total cost. The budget narrative should provide a written description that justifies the need for each requested line item.

6. How do contractors know when start-up has been approved?

   Once the start-up request has been approved, it becomes a term of the California State Preschool Program (CSPP) contract. Contractors will receive a contract amendment, reflecting the addition of start-up.

7. How long do contractors have to expend the approved start-up funds?

   Start-up funds must be used within the fiscal year when it is approved.

8. Do start-up costs require pre-approval?

   Pursuant to the annual Contract Terms and Conditions, all equipment and equipment replacement purchases that meet either of the following criteria shall be approved in writing in advance by the California Department of Education (CDE):

   • The per-unit acquisition cost equals or exceeds the lesser of the capitalization level established by the contractor for financial statement purposes, or five thousand dollars ($5,000), including tax
   • The sum of all items included in the purchase equals ten thousand dollars ($10,000) or more, including tax

9. Who do contractors submit equipment approval requests to?

   When requesting approval for purchases, contractors must complete and submit the Equipment Purchase Approval Request (EPAR) form to their Program Quality Implementation (PQI) consultant.

10. How are start-up expenses to be reported?

    Once start-up has become a term of the contract, contractors can begin purchasing approved items from the line-item budget.

    As items are received, contractors must report the expenses on the Start-up Expenses line in the Reimbursable Expenses section of the Enrollment, Attendance, and Fiscal Report. Note that these Start-up expenses should not be reported in expenditure categories 1000–5000, 6100/6200, 6400, and 6500, but only on the line designated for start-up expenses.

Staff Professional Development (Staff Training)

1. How many days can a contractor be reimbursed for Staff Professional Development as a service-level exemption?

   While staff training expenses have always been a reimbursable California State Preschool Program (CSPP) expense, reimbursement may not have been provided due to the three limits of reimbursement as stated in California Code of Regulations, Title 5 (5 CCR) Section 17812. Education Code (EC) Section 8251 allows contractors to be reimbursed for up to two staff training days, or professional development days, each year on specified topics, provided that the contractor’s total CSPP expenses does not exceed the contract MRA.

2. What staff training topics are acceptable to be considered a service-level exemption?

   Pursuant to Education Code (EC) Section 8251, training topics, for purposes of reimbursement, are limited to the following:

   • Procedures for emergencies in preschool programs
   • Licensing regulations related to preschool programs
   • Recognition and reporting of suspected abuse of children in preschool programs
   • Managing challenging behaviors and preventing expulsion of children
   • Addressing items on the program’s Quality Counts California (QCC) Quality Improvement Plan

3. When can a contractor be reimbursed for the two staff training days as a service-level exemption?

   Contractors can be reimbursed for staff training days when:

   1. Close the program for training
   2. Remain open during training and hire qualified substitute staff to support programs while staff are being trained

    

   While costs associated with staff training days are reimbursable, additional funding is not provided beyond the contract’s MRA. Contractors should determine the cost of providing staff training days and assess whether the costs will be reimbursable under the existing MRA.

4. How do contractors get approval for staff training days?

   Pre-approval to provide staff training is not necessary in all cases. If the contractor closes the program for the training, contractors must request approval from the California Department of Education (CDE) to close the California State Preschool Program (CSPP) for staff professional development. As set forth in Management Bulletin 19-05, contractors must submit a Program Narrative Change request that includes the training topic and submit a revised Program Calendar to include those as days of closure. These must be submitted and approved prior to closing for the staff professional development days.

   Contractors who do not close the program will not need pre-approval to provide staff training, unless it exceeds any purchase thresholds as stated in the annual Contract Terms and Conditions.

   Contractors should reach out to their Program Quality Implementation (PQI) consultant if there are any questions regarding pre-approvals for staff training.

5. How are costs related to staff training days reported as a service-level exemption?

   For staff training expenses to be reimbursed as a service level exemption, the training must meet the topics provided in Education Code (EC) Section 8251. As long as the training falls within the topics allowed, contractors can report the expenses related to the training on the California State Preschool Program (CSPP) Enrollment, Attendance and Fiscal Report.

   Contractors shall report staff training expenses in categories 1000-5000 and identify the amount of staff training reported in these categories on the Total Staff Training Expense line located on the fiscal page of the Enrollment, Attendance and Fiscal report

   Costs that can be included on the Staff Training Expense line are:

   • Training and travel
   • Cost of substitute teachers

    

   Contractors must follow the general record keeping requirements stated in California Code of Regulations, Title 5 (5 CCR) Section 17820. Because contractors have the burden of proof to support claims for reimbursement, contractors must keep record of the training topics covered to ensure that training meet the topics provided in EC Section 8251.