planning, budgeting and the preschool funding model · • long-term budgeting for viability •...

PLANNING, BUDGETING AND THE PRESCHOOL FUNDING MODEL

Sustainability planning

© CCSA

“Someone's sitting in the shade today because someone planted a tree a long time ago.”

Warren Buffett

2015

CCSA acknowledges the contribution of the traditional custodians of this land. We acknowledge the contribution of Aboriginal Australians, Torres Strait Islander peoples and Non-Aboriginal Australians to the education and care of all children and people in this country we live in and share

SESSION OUTLINE

9:30 – 11:00am Service Design and Operation • Funding Agreements • Policies related to Universal Access • Key Demographic Inputs

11:15 – 1:00pm Financial Management • Using Not-for-profit Status • Quality • Long-term Budgeting for Viability • Pre-school Funding Model • Operational Support and Viability Funding • Supporting non-eligible children

Lunch

1:45 – 4:00pm Financial Planning and Viability • CCSA Preschool Financial Planning Tool

Too strong a focus on the changes to the Preschool Funding Model:

Funding Agreements

• Legally binding documents

• For a specified period

• Outline requirements and expectations

• Refer to ‘how’ (methods) as well as ‘what’ (outcomes/outputs)

• Do not cover everything you do

• Do not tell you how to run your business but influence it

• Do not set budgets or policies (but influence them)

DoE Terms & Conditions

April 2015

Cl. 3. The Department provides funding for the provision of education and care services

7. (c) The Approved Funded Provider (AFP) must spend the Funds only for purposes that directly relate to the provision of the Services in accordance with the Funding Agreement and in particular the applicable Funding Specification.

DoE Terms & Conditions

8. The AFP Warrants that:

(f) it has the expertise, skills, qualifications and resources required to perform its obligations under the Funding Agreement

The AFP must provide the services:

7. a(i)(D) with due care, skill and diligence and in a proper and professional manner (including in a timely manner) and ensure that the AFP’s Personnel do likewise

7. a(ii) if requested (from time to time), provide input to the Department's Early Childhood Education and Care planning processes including providing any requested data to assist with such planning

DoE Terms & Conditions

7. (iii) At all times, act in an ethical manner which is consistent with and meets the requirements in the Department’s ‘Statement of Business Ethics’.

https://www.det.nsw.edu.au/media/down

loads/doingbusiness/statement.pdf

DoE Terms & Conditions

7. (i)(E)

in accordance with all applicable laws and regulatory requirements, relevant Australian industry standards, best practice and guidelines and all authorisations, licences and consents

Variations to Funding 6.2.b The Department may: (i) increase the amount of Funding, from time to time, on written notice. Such increase(s) will be taken to be accepted by the AFP unless the AFP notifies the Department in writing within 7 days of the Department’s notice. (ii) decrease the amount of Funding from time to time, by notice in writing.

(the department will use reasonable efforts to provide 30 days notice of such decrease- however such decrease may occur immediately under clause 19(a).)

Funding Amounts

Priority of Access

These guidelines require services to give priority access to:

• children who are at least 4 years old on or before the 31 July in that preschool year and not yet in compulsory schooling

• children who are at least 3 years old on or before 31 July and from a disadvantaged background (i.e. from a family holding a Health Care Card and/or is Aboriginal)

Priority of Access

• children with English as a second language (ESL)

• children with disabilities

• children who are at risk of significant harm (from a child protection perspective).

DoE Terms & Conditions

• written policies demonstrate proper and professional practice

• they provide evidence of an effective and considered process to determine a framework and validation of decisions taken

• they inform incoming committee and staff of the reasons that underpin the policy

Policies related to Universal Access • Enrolment

Procedure

Waiting List

Attendance patterns

Form

Priority of access

• Fees Setting

Collection

Receipting/banking

Reporting

Policies (cont’d)

• Budget process

Patterns – history

Projections – demographics, predictions based on

past/current/future events

Equity places – additional investment & acquittal

Opportunities/barriers to participation

Demographics/AEDC

Equity places

• Delegations & Responsibilities

Approvals (with levels)

DoE Terms & Conditions

25.12 This Funding Agreement does not create a relationship of partnership, employment, principal and agent, or of trustee and beneficiary.

8 (a) The Department may at any time carry out monitoring of the AFP's operations and compliance with the Funding Agreement (including compliance with applicable laws and Program Guidelines)

DoE Terms & Conditions

The Department has statutory obligations to ensure the accountability of funds and, accordingly, the Approved Funded Provider is required to be accountable for all Payments received under this Funding Agreement and must assist the Department in fulfilling its obligations.

12.4. Timing of submission of financial documents The documents and statements which the AFP must submit to the Department or otherwise complete online under clauses 12.1, 12.2 and 12.3 (as the case may be), must be submitted/completed to the Department by electronic lodgement through the ‘Early Childhood Contract Management System’ within 4 months of the end of the AFP’s financial year.

EOFY = 30 June Acquit by 31 October EOFY = 31 December Acquit by 30 April

DEMOGRAPHIC PROFILES, GAPS & BARRIERS

Profiles • Develop a service profile

• Develop a community profile

• Identify any differences and particularly any under-representation in the target groups

• Consider why those differences might exist with reference to:

– reliable information about family choices regarding prior to school services.

– your community context

Key Demographic Inputs

• Council Social Plans

Dubbo City Council Social Plan 2014/15

Key Demographic Inputs

• Council Social Plans

• Community Profiles

– communityprofile.com.au

– profile.id.com.au

– Australian Bureau of Statistics (abs.gov.au)

communityprofile.com.au

communityprofile.com.au

Dubbo City Council Community profile

Key Demographic Inputs

• Council Social Plans

• Community Profiles

– communityprofile.com.au

– profile.id.com.au

– Australian Bureau of Statistics (abs.gov.au)

• Links with Other Services / Agencies

– e.g. Family Day Care, LDC

– Local businesses (e.g. Real Estate Agents)

• Medicare Local / Local Health District

• Identify and run primary health care programs related to early years

– Education and Healthy Child Development are recognised as key determinants of health

– Can assist with identifying barriers to access

• Track Immunisation Rates by Postcode

– Identify future years’ preschool cohorts

Some strategies

• As an organisation ask:

What can we do to bridge the gaps?

• Invest in the organisation’s knowledge and skill

• Identify key people and organisations for the target groups and make connections/build relationships

• Be proactive – be prepared to go to them rather than have them come to you

• Make a plan and budget for it

Financial Management

Not-for-profit Status

“Not-for-profit” does not mean “For-loss”

“Not-for-distribution”

Financial Viability requires that, over time,

Total Income > Total Expenditure

Charitable Institutions

Advancing education on a not-for-profit basis is a charitable purpose, which covers

community preschools.

Register online at www.acnc.gov.au

Maximise use of tax and other concessions!

Determining Viability

Quality Requirement

Determining Viability

Quality Requirement

Expenditure Requirement

Determining Viability

Quality Requirement

Expenditure Requirement

Income Requirement

Determining Viability

Quality Requirement

Expenditure Requirement

Income Requirement

Surplus / (Deficit) = Viability

Quality Requirement

• Education and Care Services National Law / Regulations

– Dictate minimum obligations, not necessarily high quality

• National Quality Framework

– Early Years Learning Framework

• Provides a foundation for quality ECEC decision-making

– National Quality Standards

• Provide a pathway towards improved quality

Quality Requirement

• What are our minimum requirements under the Education and Care Services National Law?

• What are our additional requirements to achieve a quality outcome through the National Quality Framework?

• What more do we need to do to meet parental expectations for quality?

• What more do we need to do to meet our own expectations for quality?

Expenditure Requirement

• How do we meet our quality requirement?

• List all expenses to meet the quality requirement = BUDGET

Budget Expense Line Items

Expenditure Requirement

• How do we meet our quality requirement?

• List all expenses to meet the quality requirement = BUDGET

• Where do we start? LAST 3 YEAR’S ACTUALS

• Systematically review all expenses for increased costs:

– CPI?

– Non-CPI Increases? (e.g. Electricity / Gas)

– Wages (AWR and staff progression)

Expenditure Requirement

• Non-cash Transactions (held as liabilities)

– Depreciation

– Provisions and Reserves

• Equipment Replacement (P)

• Building (R)

– Provisions for Staff Entitlements

• Annual Leave (Vests, include leave loading)

• Personal Leave (Non-vesting)

• Long Service Leave (Vests with qualifications)

Expenditure Requirement

• Don’t ‘set-and-forget’ the Budget

• Regularly review expenditure performance against Budget

• Be prepared to lock in savings, or assiduously find new ones to offset unbudgeted increases in expenses

Provisioning for LSL

Income Sources

• Preschool Funding Model

• Other Government Funding

• Parent Fees (but NOT Security Deposits)

• Fundraising

– Community

– Corporate (consider DGR status)

– Government (e.g. LGA)

• Interest

• Draw down on Provisions / Retained Earnings

Financial Viability

• Income must exceed expenditure

– Over the long term

– Not necessarily in any one given year

• Done knowingly (= Budget)

• To meet one-off, not recurrent, expenditure

• Not to the extent that solvency is risked

• Recommend budgeting on a three year rolling basis:

– Need a plan, regularly updated (so quality drives finances)

How to maximise Preschool Funding Model?

• Easiest Way? Adhere to commitments already made to Universal Access!

• Accurately complete the Annual Preschool Census

• Keep accurate records

• Use information to review and project

How to maximise Preschool Funding Model?

• Avoid Funding Cap and Operational Scaling

– Funding Cap encourages 15hr/week per child

• Enrolling many 1 day per week children risks invoking Funding Cap Scaling

• 2 days per week will activate Funding Cap Scaling

– Operational Scaling encourages 6 hours per day and 40 weeks per year operation of the preschool

Factors included in PFM

• Relative Disadvantage (SEIFA Band)

– Based on locality that preschool is located in

Support provided by PFM

SEIFA

Band

$ per

eligible

child

Average

$ per

day

SEIFA

Band

$ per

eligible

child

Average

$ per

day

1 / Equity $5,270.21 $52.70 10 $3,476.31 $34.76

2 $5,270.21 $52.70 11 $3,408.22 $34.08

3 $5,096.23 $50.96 12 $3,216.42 $32.16

4 $4,980.24 $49.80 13 $2,853.85 $28.54

5 $4,864.25 $48.64 14 $2,548.21 $25.48

6 $4,748.27 $47.48 15 $2,301.05 $23.01

7 $4,632.28 $46.32 16 $2,034.39 $20.34

8 $4,516.29 $45.16 17 $1,805.00 $18.05

9 $3,915.50 $39.16 18 $1,805.00 $18.05

Factors included in PFM

• Relative Disadvantage (SEIFA Band)

– Based on locality that preschool is located in

• Remoteness (ARIA+ Score)

– $850 per enrolment for Outer Regional locations

– $1,250 per enrolment for Remote / Very Remote locations

• English Language Loading

– $400 per child requiring support

Factors included in PFM

• Equity Support (removing barriers to access)

– Multiple Order Births (MOB)

• Triplets or more

– Aboriginal and Torres Strait Islander

• Self Identification

• Record status for Census / future audit purposes

– Low Income Health Care Card holders

• Income limits

• Check dates

• Copy for Census / future audit purposes

Low Income Health Care Card

• Qualifying Threshold

• Retention Threshold

STATUS Weekly

Income

Equivalent Annual

Income

Single, one child 913.00 47,476

Couple, one child 947.00 49,244

Each additional child 34.00 1,768

STATUS Weekly

Income

Equivalent Annual

Income

Single, one child 1,141.25 59,345

Couple, one child 1,183.75 61,555

Each additional child 42.50 2,210

Health Care Card

What about children not supported by PFM?

• Service still has control over fee setting

• Service costs are mostly fixed

• An empty chair generates no income and, more importantly, educates no one

• Filling the empty chair with a 3yo non-equity child might reduce PFM through funding cap scaling, but only for next year

• This year there are greater parent fees, plus fees next year, plus PFM the year after

Factors included in PFM

• Transition Support

– If PFM is better than former RAM, PFM applies immediately

– If PFM is worse than former RAM:

• 2014 and 2015, former RAM applies

• 2016, mid-point between PFM and former RAM

Transition Support

• What generates Transition Support?

– Removal of Mobile Loading

– Removal of Service Loading (non-Regional or non-Remote locality in a formerly Regional / Remote LGA)

– Lower average $ per child (typically Band 14 and above)

– Removal of “grandfathered” funding received under pre-RAM arrangements

Funding Changes due to PFM

Service Example Preschool 1 PFM Rates Rate per ELIGIBLE child

Mobile Service No SEIFA Base Rate 2034

Suburb North Ryde

SEIFA Value of Suburb 1055 Effective Equity Rate 3236

DEC Funding Band 16 (Addit ional Amount paid above Base Rat e)

ARIA+ Band Major Cities of Australia

LGA Warringah Service Loading Rate 0

Number of DoE-Funded Places 25 English Language Rate 400

Weeks Open per Year 40

Days Open per Week 5

Hours Open per Week 30

RAM Rates Rate for EVERY child

$ Pre PFM 73,021 LGA Base Rate 1419

Total PFM Funding (excl Transition) 63,033 Effective Equity Rates:(Addit ional Amount paid above Base Rat e)

Enrolled Children: - ATSI 1881

Target Cohort 29 - Low Income 1581

3yr old - Non-equity 21

Total enrolled 50 Service Loading Rate 0

ATSI 0 CALD Rate 240

LIHCC 1

English Language 2 Mobile Loading 0

Analysis of Change in Funding $

Change in combined Base Rate and Equity Funding -10,308

Change in English Language Support 320

Change in Service Loading 0

Change in Mobile Loading 0

Change attributable to loss of grandfathering 0

TOTAL CHANGE -9,987

% CHANGE -14%

Funding Changes due to PFM

Service Example Preschool 2 PFM Rates Rate per ELIGIBLE child

Mobile Service No SEIFA Base Rate 1805

Suburb Hornsby Heights

SEIFA Value of Suburb 1104 Effective Equity Rate 3465

DEC Funding Band 17 (Addit ional Amount paid above Base Rat e)

ARIA+ Band Major Cities of Australia

LGA Ku-ring-gai Service Loading Rate 0

Number of DoE-Funded Places 25 English Language Rate 400

Weeks Open per Year 40

Days Open per Week 5

Hours Open per Week 30

RAM Rates Rate for EVERY child

$ Pre PFM 73,021 LGA Base Rate 1250

Total PFM Funding (excl Transition) 56,610 Effective Equity Rates:(Addit ional Amount paid above Base Rat e)

Enrolled Children: - ATSI 2050

Target Cohort 29 - Low Income 1750

3yr old - Non-equity 21

Total enrolled 50 Service Loading Rate 0

ATSI 0 CALD Rate 211

LIHCC 1

English Language 2 Mobile Loading 0

Analysis of Change in Funding $

Change in combined Base Rate and Equity Funding -8,440

Change in English Language Support 377

Change in Service Loading 0

Change in Mobile Loading 0

Change attributable to loss of grandfathering -8,348

TOTAL CHANGE -16,410

% CHANGE -22%

Operational Support and Viability

• Operational Support Program (OSP)

– Additional Support to service in receipt of Transition Funding

– Phase 1. Small Biz Connect

– Phase 2. Sector Specialist Support

• Viability Funding

– Ongoing support to services whose characteristics preclude ongoing viability

– Viability Principles

– Will need to fully participate in OSP

How do I deal with fluctuating funding amounts?

• Service still has control over fee setting

• Targeted groups priority under the agreement

• Forward planning - develop budgets over a three year period

• Provisions effectively allow you to apply income gained this year in future years

Note: DoE funding cannot be kept - must be used within the financial year for which it was provided.

Preschool Financial Planning Tool