Effective October 1, 2024, the Massachusetts Department of Early Education and Care (EEC) shifted its contract reimbursement from a primarily unit-rate model to a mix of unit-rate and cost-reimbursable contracts. Under the new contracts, childcare seats will be reimbursed on a unit-rate basis while administrative and supportive services will be funded through cost reimbursement contracts. To bridge the gap, organizations will receive bi-monthly equal payments through April on cost reimbursement contracts but will need to reconcile actual costs incurred on its contracts for June contract payments. AAFCPAs advises that clients use this opportunity to reassess and optimize business processes and systems to maximize efficiency and align with new requirements.

How To Prepare for This Shift

• Track Actual Costs. Under the new funding model, organizations must have a clear understanding of actual costs. Based on populations served, organizations may have up to six unit-rate and ten cost-reimbursable contracts. This requires that processes and systems quickly and accurately capture the right data to report these costs. Organizations should take this opportunity to update their cost allocation methodologies to ensure all expenses are appropriately tracked and reported.
• Improve Financial Management. With the shift to cost-reimbursable contracts, you will need to produce detailed financial reports to support incurred costs. This means improving financial management practices like budgeting, forecasting, and reporting. Strengthening processes can help organizations maximize funding and maintain financial stability.
• Enhance Internal Controls. Organizations may want to review and update internal control objectives to help management measure performance, assess processes, and reduce risks. This protects assets and supports compliance with new funding requirements.
• Upgrade Technology and Systems. The right technology and systems can make this transition easier for staff by supporting efficient data collection, analysis, and reporting. Investing in these tools helps organizations get paid faster, reduces the time staff spend on data tasks, and provides a foundation for valuable performance metrics and analytics. This may include systems to track billed units, unit rates, reimbursable expenses per contract, contract budgets, allocations, and financial reports for state reporting.

The shift in the EEC funding model goes beyond changes in provider reimbursement; it gives an organization a chance to review business processes and systems and prepare staff for new requirements. Embracing this change can lead to improved financial management, strengthened internal controls, and the ability to better serve children and families.

Enhance Your Processes

AAFCPAs helps clients navigate EEC financial reporting, streamline business processes, and improve accounting systems to boost efficiency and strengthen controls. Our Business Process & IT Consulting team draws on decades of experience to offer practical support—whether evaluating current workflows or implementing easy-to-use budgeting tools.

Our business process specialists work directly with client teams to document, analyze, and adjust operations for greater control, accuracy, and reporting quality. For companies aiming to simplify budgeting, we can set up cloud-based tools that enhance collaboration, reduce errors, and speed processes. With focused business process consulting and tailored technology solutions, AAFCPAs helps clients build effective, adaptable systems that support sound decision-making and measurable progress.

If you have questions, please contact David Kelleher, CPA, CGMA, Partner at 774.512.4042 or dkelleher@nullaafcpa.com, Robyn Leet, Partner, Business Process Assessments & Attestations at 774.512.4010 or rleet@nullaafcpa.com—or your AAFCPAs Partner.