Dear Executive Directors, Child Care and Development Programs:
FISCAL YEAR 2019–20 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, 2020. Please share this letter with your agency staff, as the information will be useful in closing Fiscal Year (FY) 2019–20. 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 2020–21.
Contracts or Contract Amendments
All original contracts and any remaining contract amendments for FY 2019–20 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 Reports Reporting Deadline
Year-end attendance and fiscal reports are due by July 20, 2020. FY 2019–20 year-end reports will be accepted by your fiscal analyst via email with e-signature. If you are unable to sign electronically, the completed report form can be sent via email to your CDNFS fiscal analyst, with an original signed hardcopy to follow via US mail. Acceptable reports not received by July 20, 2020 will be considered delinquent. A delinquent report results in withholding any remaining apportionments due for FY 2019–20. Additionally, apportionments for FY 2020–21, beyond the initial payment, will be withheld until the contractor has complied with this contract requirement.
FY 2019–20 Emergency Closure Requests
The Early Learning and Care Division (ELCD) released Management Bulletin (MB) 20-11 COVID-19 Guidance: Emergency Closure, providing guidance to contractors about emergency closure requests due to the state declared State of Emergency related to the coronavirus (COVID-19) pandemic. COVID-19 Emergency Closure Request will be reviewed and approved by the contractor’s ELCD regional consultant and CDNFS fiscal analyst. Contractors will receive an approval letter, which will indicate the approved credits, prior to submitting year-end fiscal and attendance reports. The approved credits must be included in the contractor’s year-end reports in order for the contractor to be reimbursed correctly.
Contractors who submit an emergency closure request must not report the days of enrollment and/or attendance associated with the days of closures until the CDE issues an approval letter indicating the appropriate credits. Approval letters for emergency closure requests will serve as backup documentation for audit purposes, as well as support for CDNFS attendance and fiscal reports.
FY 2019–20 Emergency Childcare Reporting Reminder
Pursuant to MB 20-06 COVID-19 Guidance regarding Emergency Childcare Services for Essential Workers and At-Risk Populations, contractors who remained open during the state declared State of Emergency related to COVID-19 were authorized to enroll children of essential workers and other at-risk populations in Emergency Childcare under the criteria set forth in the MB.
MB 20-06 clarified that children enrolled in Emergency Childcare were considered certified children and no change to the CDNFS report forms were made. Contractors who enroll children in a center-based program, on the basis of Emergency Childcare eligibility, were instructed to report the days of enrollment in the appropriate adjustment factor categories for certified children. Contractors who enroll children in an Alternative Payment or California Family Child Care Home (CFCC) program, on the basis of an Emergency Childcare eligibility, were instructed to report the provider payments on the Direct Payments to Providers line of the Fiscal Report submitted online.
Center-based and CFCC contractors who submitted an emergency closure request and enrolled new children, pursuant to the directive in MB 20-06, must report the child days of enrollment associated with those families on the CDNFS report forms to ensure that these enrollments are included in the reimbursement calculation. Contractors are reminded that the CDNFS year-end report should include the sum of (1) enrollment prior to the emergency closure (2) emergency closure credits approved by CDE and (3) new enrollments associated with children of essential workers and at-risk populations.
FY 2019–20 Family Fee Waiver
ELCD released MB 20-05 COVID-19 Guidance: Temporary Waiver of Family Fees providing a directive to contractors that family fees must not be imposed or collected for the months of April, May and June 2020. MB 20-05 instructed contractors to report March family fees as usual, and the waived family fees for April through June 2020 should not be reported on the CDNFS Attendance and Fiscal Reports.
Year-End Reporting Reminders
The purpose of this section is to clarify reporting requirements and instructions related to year-end reporting. For further information, please refer to the specific page numbers of Child Development Attendance & Fiscal Reporting & Reimbursement Procedures (CDNFS Fiscal Handbook) identified in each of the sections below. The CDNFS Fiscal Handbook can be found at https://www.cde.ca.gov/fg/aa/cd/.
Reporting Revenue (p. 24)
CDNFS has received many questions related to reporting revenue received from various sources to support business expenses during the COVID-19 pandemic. Contractors are reminded that reporting revenue is dependent on the source of the income and how it is expended. Revenue should only be reported when its corresponding expenses are also reported. Generally, any funds received by a contractor that are allocable to the child development program and which the contractor does not have to return, such as a funds received through the Paycheck Protection Program, should be reported as restricted revenue. The associated expense must also be reported.
Enrollment vs. Attendance Reporting for Center-Based Contractors (p. 49)
A common error found on the CDNFS attendance and fiscal reporting form is center-based contractors reporting days of enrollment in the special criteria and time base categories only when the child attends the program. Children certified with a set schedule should always be reported in the special criteria and time base categories based on their certified enrollment, regardless of their actual attendance on any given day. As a reminder:
- 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, reported on the certified enrollment pages of the CDNFS center-based report forms, should not deviate from the days the child is certified to attend the program, regardless of the child’s attendance.
- 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. Days of attendance will be less than the reported days of enrollment if there are unexcused absences.
- 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.
Reserve Accounts (p. 92)
A Reserve Account Activity Report is required for each type of Reserve Account a contractor maintains, regardless of whether those reserve accounts have a balance. Contractors that have one or more Reserve Accounts must submit the Reserve Account Activity Report form (CDNFS 9530-A) for each Reserve Account with a copy of the contractor’s general ledger report page(s) that reflects the cash balances maintained in the Child Development Reserve Account by July 20, 2020.
The following discrepancies may delay the acceptance of the Reserve Account and the calculation of the year-end attendance and fiscal report, which could result in an apportionment withholding:
- The beginning balance reported on the FY 2019–20 Reserve Account Activity Report does not match the ending balance of the most recent FY 2018-19 CDNFS 9530 Reserve Account Status Report supplied by CDNFS. Balances must reconcile before the Reserve Account Activity Report is deemed acceptable.
- The contractor submits a Reserve Account Activity Report indicating a balance but has reported no interest. Reserve Account funds must be kept in an interest-bearing account within the contractor’s Child Development Fund. Reserve Account Activity Report forms received by CDNFS that indicate a balance with no interest reflected will not be calculated by the fiscal analyst.
- Transfers from Reserve do not match what is reported in Section III – Expenses of the CDNFS 9530-A and the “Transfer from Reserve” line of the year-end attendance and fiscal report.
- Transfers from a center-based reserve account to a California State Preschool Program (CSPP) contract, do not have the expenses split by the type of expense it is covering. All transfers from a reserve account to a CSPP contract should be separated by amounts transferred to cover professional development expenses (professional development of CSPP instructional staff) and those transferred for general expenses (reimbursable cost for any center-based contract) as indicated on the form. Transfers from the reserve to any other center—based contract should be reported on the lines for “Other Contracts.”
- The Reserve Account Activity Report does not include the general ledger or the general ledger provided does not verify the interest or correct ending balance.
Quality Rating and Improvement System (QRIS) Reporting (p. 25)
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 Attendance and Fiscal Report for CSPP (form CDNFS 8501 or CDNFS 8501 MHCS). In most cases, these grant funds should be reported as supplemental revenue and expenses. For additional information, refer to the CSPP QRIS Block Grant Frequently Asked Questions (FAQ) on the California Department of Education (CDE) website at: http://www.cde.ca.gov/sp/cd/op/csppqrisbgfaq.asp
Support Contract Reporting
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, 2020 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, 2020.
Local Child Care Planning Council and Child Care Initiative Match Requirement
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.
Start-up Allowance Reporting (p. 35)
Contractors with a FY 2019–20 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 2019–20 Child Development contract are specific to FY 2019–20, and as such must be expended by June 30, 2020. The goods and services associated with these start-up expenses must also be received by June 30, 2020. Contractors may revise start-up requests through June 30, 2020. Please contact your fiscal analyst if there is an amount of unused start-up for FY 2019–20 due to unforeseen circumstances that caused a delay in receiving or purchasing items identified on the approved start-up budget. Contractors may request unspent start-up funds to be moved to the FY 2020–21 contract if the request is received by June 20, 2020.
Year-end reports must be received by the deadline of July 20, 2020 to avoid becoming delinquent. However, revisions to year-end reports may be submitted later under limited circumstances. Please refer to the Revised Reports section on page 41 of the CDNFS Fiscal Handbook for the due dates for various programs.
California Alternative Payment Program (CAPP) Multi-Year Contracting
EC Section 8220.1 allows for under earning CAPP contractors, or contractors that did not fully expend contract funds in the first year of the contract, to fully spend the contract in the following year. At the end of FY 2018-19, contractors who were projected to under-earn their CAPP8 contract received an amendment extending the contract period from June 30, 2019 to June 30, 2020. Contractors that received an extension to their CAPP8 contract were instructed to report to the CAPP8 contract in FY 2019–20 until it was fully expended, before reporting to their FY 2019–20 CAPP contract (CAPP9).
Multi-Year CAPP8 Contracts
Extended CAPP8 contracts will reach the end of the contract period June 30, 2020, and will not receive an additional extension. All CAPP8 contractors that received an extension for FY 2019–20 are required to submit a year-end report by July 20, 2020 whether or not the CAPP8 contract was fully expended.
CDNFS will review all CAPP9 contracts to determine which FY 2019–20 contracts are projected to under earn. Those CAPP9 contracts that are not fully expended in FY 2019–20 will receive an amendment to extend the contract period to end June 30, 2021. All CAPP9 contractors must submit a year-end report by July 20, 2020 whether or not the CAPP9 contract was fully expended.
FY 2020-21 CAPP0 Contracts
All CAPP contractors will receive their FY 2020–21 contract (CAPP0) with a contract period of July 1, 2020 through June 30, 2021. Contractors are encouraged to sign and return their FY 2020–21 contract as soon as possible in order to receive an initial advance apportionment associated with FY 2020–21 contracts timely. The initial FY 2020–21 apportionments will be processed regardless if the contract is under or over-earning in FY 2019–20.
Contingency Fund Applications
Pursuant to EC Section 8222.1, CDE shall reallocate funds as necessary to reimburse CAPP contractors for actual and allowable costs incurred for additional services provided. A CAPP 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, 2020 but no later than September 30, 2020. The CDE will approve or deny applications submitted pursuant to the above EC section, and will not consider applications received after September 30, 2020 for additional costs incurred during FY 2019–20. 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, 2020 and July 20, 2020. Applications received after July 20, 2020, 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 a CAPP 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.
Contractors can submit revised year-end reports related to their CalWORKs Stage 2 and Stage 3 contracts through September 30, 2020. After September 30, 2020, contractors will be invoiced for any over-advanced CalWORKs contract funds based on the most recent 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. It is imperative that CalWORKs contractors pay these invoices as promptly as possible to avoid having the outstanding billing become delinquent and future apportionments withheld. An invoice that becomes 90 days delinquent will result in a withholding of all future apportionments.
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.
FY 2019-20 AUD Forms
Visit the CDE’s Audits and Investigations Division (A&I)’s Resources Page for upcoming links to the Audited Attendance and Fiscal Reports (AUD forms) and Instructions for FY 2019–20.
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). Note that the audit report due date for agencies with a fiscal year end of June 30, 2020, was automatically extended to February 15, 2021, due to COVID-19. For more information on the automatic audit report due date extension, see MB 20-08a COVID-19 Guidance on Procurement and Audits.
- Except for Child Development (CD) program contractors on conditional status or who received an automatic audit report due date extension per MB 20-08a, 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.
- AUD forms and supplementary information 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 of its subcontractor that includes the supplementary information detailed in Chapter 200, Exhibit A and 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):
- 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
- 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:
- 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 (FT&C, Section III.A).
- When a contractor lacks prior written approval from the Early Learning and Care Division, costs are disallowed for:
- Renovation and repairs or equipment purchases in excess of the FT&Cs thresholds (FT&C, Section III.E)
- Subcontracts for direct child care and development services (FT&C, Section IV.E)
- Rent is disallowed (FT&C, Section II.O):
- On property owned by the contractor (an expense may be claimed only as 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. (FT&C, Section VI.E).
- Costs of advertising are disallowed when the advertisement is not necessary to meet the requirements of the Child Development contract (Title 2 Code of Federal Regulations, Section 200.421).
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 Corey Khan
Corey Khan, Staff Services Manager II
Child Development and Nutrition Fiscal Services
Fiscal and Administrative Services Division