The purpose of this report is to provide the Board with an overview of the funding problems confronting child care centres. There will be a summary of the province wide issues and some local impacts. The report begins with the program components and then details the funding streams. This report does not cover issues related to Special Needs Resourcing or Family Resource Centre funding. The report contains general recommendations for reform of the funding system and specific recommendations to reform the local system of paying fee subsidy.

Following are the major program activities funded under the child care envelope:

Licensed, or regulated care, is child care licensed by the Ministry of Children, Family and Community Services (MCFCS) under the Day Nurseries Act. The Act establishes minimum standards including physical space, staff qualifications, child to staff ratio, health and safety, nutrition, and basic programming which operators of day nurseries and private-home day care agencies must meet. These standards are in place to ensure the safety and quality of care for children in licensed child care settings.

Where care is provided to more that five children, not of common parentage, less than 10 years of age, a license to operate a day nursery is required from the Province. A license is also required for private-home day care agencies. Under the Day Nurseries Act, MCFCS licenses and regulates day nurseries and private-home day care agencies. Licensed centre-based care is provided in a variety of physical settings. Licensed home-based child care is monitored by home child care agencies licensed by MCFCS. Providers are allowed to care for up to five children (less than 12 years of age) in addition to their own. Home child care agencies train and support home child care providers. The agencies are required to visit and inspect each home once every three months.

Participants in employment assistance or Community Placement activities under the Ontario Works Act, 1997 may be eligible to receive funding for care of a child less than 12 years of age, or under 18 years of age for a child with a developmental or physical handicap. Ontario Works participants may receive assistance up to the per diem established by ADSAB for licensed care, and up to established ceilings for informal care. Child care costs for children with Special Needs may also be reimbursed. Subsidized child care is provided to support the employment, training and educational needs of parents. Ontario Works participants making the transfer to employment and families most in need are a priority group for child care services. Ontario Works child care funding can be used to support both licensed and unlicensed child care.

Prior to 1995 there was limited, sporadic funding for the capital construction of Child Care centres. At that time, the Province normally funded 100% of construction cost. There was, in some instances, local contributions. There has been no capital funding since 1995 despite huge demand increases in some parts of the province.

Fee subsidies provide financial assistance towards the cost of centre based child care or private home day care services. Parents who are “persons in need” (as defined in the DNA) and parents of children with special needs (“handicapped child” as defined in the DNA) may be eligible to receive fee subsidies. This Board’s Eligibility Determination Officers (EDO) s determine eligibility for the level of subsidy to be provided based on a detailed application and means test. The eligible client does not directly receive the subsidy but the cost of care is paid, in whole or in part, to the child care centre providing the service. Regular fee subsidy funds can only be used to support full and part-time child care in the licensed system as per the Day Nurseries Act (DNA).

Some child care centres are highly dependent on the funds from this Board as their facilities are filled by parents receiving subsidy. Other centres are less dependent on funds from this Board because their parents are able to pay the full cost of their children’s care.

Prior to the transfer of service management responsibilities to this Board, the Ministry was not reconciling payment for fee subsidy back to actual eligible clients. Prior to the transfer, the centres would be flowed an amount of money based on a predetermined level of care. However, the Ministry did not follow its own requirement that these expenditures be reconciled back to actual days of care for actual eligible clients. The switch, in January 2000, to monthly reconciliation of these fee subsidy funds put immense pressures on all child care centres in our jurisdiction. Ultimately, several centres survived the change because enough eligible clients were found to fill the spaces. One centre closed because of its high perdiem costs and the implementation of the mandatory reconciliation process.

At present, the Board pays a District wide set amount for each level of care. The decision to move to a flat rate was taken in 1999 at the time of the program transfer from the Ministry. That rate was established by looking at the existing provider rates. The highest and lowest rates were removed from this calculation as they distorted the averaging process. The remaining rates were averaged. The fee schedule, once set, was increased in 2001 by 1.5% and 2002 by 2% to try to offset some inflationary pressures.

The essential problem with the fee subsidy method of funding child care centres is that it fails to recognize fixed ongoing costs and rigid Ministry standards. The centres must stay open and meet many ongoing and largely uncontrollable costs regardless of the level of occupancy. They continue to have fixed costs during times of the year in which there is low occupancy.

A more reasonable approach, which we have suggested to the Ministry, is to set a portion of the budget based on local capacity and the associated fixed costs. A smaller portion of the budget based on actual usage would then provide the balance of the funding. However, there appears to be no Ministry movement to reform the clearly inadequate funding regime for child care centres.

In addition, our local decision to have a fixed per diem rate for all providers fails to recognize the variable costs among providers. This fixed per diem approach has led to some centres incurring deficits within 2001 and within this year. As a result, we are recommending later in this report to move to a range of per diems effective the beginning of this year. Since we are under spending our global fee subsidy allocation we will be able to implement this funding change and still stay within the existing budget.

Another issue related to fee subsidy has come to our attention within the last year. We have been advised that, under provincial rules, we should not be paying fee subsidy at a rate which is higher than that charged by that child care centre to full fee paying parents. In some cases this is now occurring. The second recommendation calls for this to change as we move to the proposed new variable rate schedule. Existing parents paying the full fee would be red circled for a period of up to one year in order not to create undue hardship. New full fee subsidy parents will be required to pay the provider the same fee subsidy per diem as paid by ADSAB.

Wage Subsidies were introduced by the Province in 1987 to offset low wages in the child care field and to help to pay for mandatory Pay Equity settlements. These funds were based on mathematical calculations and the funds were flowed directly to each regardless of the number of fee subsidy parents using that facility.

When the financial information was transferred, as part of the Child Care Service Management Transfer Plan, ADSAB was not provided with any guidelines as to how the wage subsidy amounts which were in pay at that time, had been calculated. Specifically, no information was transferred with respect to the calculation of the Pay Equity portions of this payment. ADSAB was advised that the responsibility to continue to make wage subsidy payment in the exact amounts provided by the Ministry rested with them. ADSAB continued to make those payments as per the Ministry direction up to and including December 31, 1999.

It was later determined that, of the seven operators, none was being paid the correct payments under the Ministry rules for Wage Subsidy. Some centres were receiving more than they should while others were being short changed. Once again, this could not be resolved in 1999 due to restrictions within the transfer plan. As part of the 2000 Service Agreement negotiations with the operator ADSAB included the Wage Subsidy Guidelines as provided by the Ministry. Due to the closure of the City of Elliot Lake Day Care, an opportunity was provided to revisit each of the wage subsidy calculations and the 2000 budgets paid each of the operators according to their entitlement for that year.

However, wage subsidy pressures have subsequently been created due to the start up of new child care centres. Since the wage subsidy portion of the budget is provincially capped there has not been sufficient wage subsidy funds to treat all child care providers equitably. This is a significant problem province wide and there seems to be no consensus on an equitable solution. At this time, we are not proposing any change in the existing distribution system for these limited wage subsidy dollars.

Some of the funds which the Board must reinvest in services to children under the NCB have been allocated to relieve child care funding pressures. In 2002, $20,000 was allocated to upgrade child care Staff Training and Upgrading. The purpose was to provide funding for staff district-wide to gain consistent training and upgrading in technology, child care advances and new initiatives. This will not be repeated in the 2003 NCB Reinvestment plan

In addition in 2002, $25,000 was allocated for one time start up program costs for new child care operations in Dubreuilville, Spanish and Elliot Lake. In 2003 we are not proposing as part of the NCB reinvestment fund to provide any additional start up funds. However, we are proposing an expansion of the funding provided in 2002 for Special Needs Resourcing. The 2003 NCB Reinvestment plan will be discussed at the November 28 Board meeting.

The following recommendations were gleaned from several reports related to child care funding. There is a Children’s Services Working Group established among the twelve Consolidated Municipal Service Managers in Northern Ontario. We are proposing that working through the Northern Ontario Services Delivers Association (NOSDA) we ask the province to address the following general issues.

1. Reintroduction of cost of living adjustments for CMSM child care global budgets.

4. Provision of 100% funding to enable child care service providers to comply with new Canadian Standards Association (CSA) Playground Standards imposed by the Province as a requirement in 1999.

5. Provision of new funds for new administrative costs since the transfer of system management responsibilities.

7. Develop a provincial strategy to address professional development needs for child care staff.

8. Conduct a study of ways to improve accessibility/availability of rural child care services.

10. Reform the wage subsidy system to ensure equitable funding of all providers.

1. Introduce a variable range for child care per diem effective January 1, 2002. Those child care centres that request a per diem above the middle of the range will be asked to provide budgetary information to support their request. Total fee subsidy payments for 2002 and subsequent years will remain within the ADSAB global fee subsidy allocation.

The following range was developed based on financial information of actual costs from several child care providers in our jurisdiction.

Category of Care	Existing schedule	Proposed range
Infant	46.60	52.00 -62.00
Toddler	36.20	40.00 - 45.00
Preschool	30.10	30.00 - 40.00
School age	30.10	30.00 - 40.00

2. New full fee subsidy parents will be required to pay the provider the same fee subsidy per diem as paid by ADSAB effective January 1, 2003. Existing parents paying the full fee would be red circled at their existing rate for a period of up to one year (December 31, 2003) in order not to create undue hardship.