Is my nursery overcharging?

[CSphere]

Hi,

First post to mumsnet, sorry if this is going over a well worn topic (which Im sure it is), but Im looking for some opinion on whether the way m nursery is implementing the free hours is correct.

Firstly, Im not wanting to diddle the nursery out of money, and I appreciate that the amount the council pay my nursery per hour is less than they charge, so although you should get a certain amount of "hours" free, Im happy to consider this difference in money and make allowance for the nursery on that side, its a nice place and I wouldn't want to see them suffer due to making a loss on these hours.

That being said, my simple maths seems to suggest they are buring the candle at both ends.

The standard day is 10 hours. The cost for a day is £47 fully inclusive of meals. I make that £4.70 an hour.

I note from the councils publications they pay the providers £3.92 an hour.

The 15 hours a week for term times is allowed to be spread over the full year, so they give 11 hours per week. My daughter attends 3 days a week.

For the month of September the nursery is charging for 12 days. (4 weeks @ 3 days).

At full price that would be 12 days at £47 = £564.

If the nursery deducted a straight 44 hours, disregarding the difference between what the council pay and what their usual rate is, then they would be deducting 11 hours x £4.70 = £206.80, so the final invoice should be something like:

Full price: £564
less 11 hours @ 4.70 (£206.80)
Total: £357.20

Even allowing for the nursery to deduct from the invoice just what the council pay them (meaning Im paying the top up to the standard rate), I would expect the invoice to be:

Full price: £564
less 11 hours @ 3.92 (£172.48)
Total: £391.52

However, in actual fact, the invoice is £446.33

Can somebody help here? Am I going terribly wrong in my maths, or are the nursery actually burning the candle at both ends here?

Many thanks for any help or advice.

Nursery fees are never as simple as hourly rates based on (day rate/hours in day).

Nope, still doesn't add up.

The nursery manager was no help either. They work it out over the whole year and divide by 12 to make invoices equal each month so I needed to revisit my maths, however they also stated that they "then just deduct what the council pays them"

Which, although is not how it's supposed to work, still doesn't add up.

When I questioned why they don't itemize the invoice to show how they work out the cost before deducting any funded hours, or why they don't show how much the funding deducts, they said "were not allowed to by law". Which sounded incredibly fishy to me. Especially as the council publish the rate they pay.

They just referred to sheets that came from head office saying how much to charge per week for funded children depending on how many hours funded they were eligible for and how many days they attend.

They are having the finance manager at head office call me to advise how it's all worked out.

Our nursery gave up trying to make it work and just forward us the money from the council when it comes through termly.
Partly this is cause the money for the term beginning September doesn't come from the council till the end of November! Annoying for us as individual families but for the nursery it was a cash flow disaster.

When I questioned why they don't itemize the invoice to show how they work out the cost before deducting any funded hours, or why they don't show how much the funding deducts, they said "were not allowed to by law". Which sounded incredibly fishy to me. Especially as the council publish the rate they pay

I suspect what she means by that, is that they know they're not allowed to simply deduct the amount of funding they receive from an invoice, and therefore don't want to put it in writing so there is no paper trail for them to be caught...

I'd suggest working out a whole year of funded hours and subtract that from a whole year of actual sessions, then divide by 12.
I suspect there may be an issue with switching between weeks and months in the calculations.

I'm going to wait until the finance manager phones to explain it, as we couldn't get it to add up correctly no matter which way the nursery manager tried to spin the figures.

How many weeks does the nursery charge for per year, if we assume its 50 your annual charge would be

3 days per week x 50 weeks x £47 per day = 7050

You are allowed 11 hours per week for the number of school weeks per year (say 38, you;d need to check) which gives a deduction of

11 hours per week x 38 weeks x £3.92 per hour = £1368

Leaving you to pay £7050 - £1368 = £5412 which divided by 12 gives £451

Your bill is £446.33 - the fiver difference will be due to my assumptions

sandydenny - it's 15 hours over 38 weeks OR 11 hours if stretching over a year. Not 11 hours over 38 weeks

OK, I see I misread the OP, I thought he meant it was 11 hours per week as the DD was only there on 3 days a week, my mistake but funny that it worked out right

My nursery allocate the 15 free hours in to 5 hour sessions as opposed to the actual hours so dd does 2.5 days @52.00 per full day and 35 per half day. Rather than deduct the free hours they allocate the free hours against the three morning sessions and charge me the half daily rate of 35.00 so effectively I am paying £70 for one day each week

They worked out the full price as 3 days x £47 x 52 weeks, (£7332) divided by 12 to give monthly cost of £611.

The chart/table they showed me that head office produced for them showed a cost of 141 per week for 3 days without funding (Which matches the 47 per day rate). It also showed a cost of 103 per week for a 3 day place with 15 hours funding. 103 x 52 / 12 = £446.33 Which matches the invoice for the month.

So it seems the 15 hours a week (11 per week when spread over the 52 weeks) is buying me £38 a week. An hourly rate of 3.45. When the local authority is paying 3.92 an hour.

Nowhere is any of this itemized it's only ever shown as per the attached invoice previously. There is no way of seeing how these costs break down. They don't even do it on the contract, they just show a weekly cost.

I'm starting to wonder if there is some fudging of the figures to get more than they should be for funded places. If they are indeed getting the 3.92 per hour x 15 hours x 38 weeks off the govt, and charging me £446, then they are actually making more from a funded place than a non funded place.

It would explain why I see an awful lot of providers either closing or refusing to offer funded places, while this one seems to be actively promoting funded places. The new 30 hours funded is the headline advert on their website.

Surely a large organisation wouldn't be cooking the books though. I must be missing something.

I'd be wary of trusting the local authority figure too though. I know I've heard nursery bosses on the radio say they don't actually get what the LA say they pay.

As museumum says, each LEA is given a figure per hour from central government, but they sometimes take a portion of that money out for EYPP and other flexibility supplements. That then reduces the hourly rate that they then actually give to each provider. I think in my LEA, they have to give 84% of the headline rate to providers. The only way to know for sure, would be to call your LEA funding team and ask them to confirm the actual amount they pay as the base rate to your provider.

Just place marking as I'm waiting on the figures from my nursery too. It's so hard to work out what the nurseries are doing with the 30 hours.

The LA is allowed by government to keep some of the money for their administrative costs - so the nursery often gets less than the amount funded by government

Just to advise, the £3.92 rate is published by the local authority as the rate they pay providers. I understand the Government are paying the LA more than this.

Attached is the relevant section of the agreement my LA has with providers.

It seems on the face of it that my provider is doing something similar to a thread I found from 2012: www.mumsnet.com/Talk/nurseries/1428181-Is-my-nursery-overcharging-me

If taking up my place non funded it is a very simple:
£47 x 3 days x 52 weeks = £7,332 (£611 per month)

Now the place is funded it is £5,356 (£446.33 per month)

However the funding from the LA would be 15 hours x 38 weeks x £3.92 = £2234.40

So for a non funded place £0 from LA, £7,332 from client = £7,332
for a funded place £2234 from LA, £5,356 from client = £7,590.40

So it appears they are making £258.40 a year more from a funded place than a non funded place.

The funded sessions they have are (I believe) 3 hours in a morning and 3 hours in an afternoon. So over 3 full days my daughter easily gets all the 15 hours. (11 per week when stretched).

Whilst waiting for the finance manager to call, Ive been playing around with excel and there simply doesnt seem any way I can think of to make these numbers add up. Even allowing for a different hourly rate imposed during the funded hours.

Out of interest, If they are overcharging you, which you seem sure of, what will you do?

If there is no way they can explain these figures away, then I will be taking my findings to the Local Authority and or OFSTED.

If the nursery are not passing on the funding from the council to the parents, then I would hazzard a guess at possible fraud and almost certainly an in depth investigation into where the money has gone and which parents are due refunds.

Thats why I cant for the life of me think that the nursery are doing anything unlawful, they are quite a large company and have over 20 nurseries, and I can't imagine I'm the first parent to question these invoices and how they are calculated.

They were calculated the same way when my son went there a couple of years ago, but at the time we had a lot of other things going on in the family so I never actually paid attention to these invoices and just trusted they were being calculated correctly. I shall be going through these to see whether the same issue is apparent. If so then either the nursery is just doing some clever calculations and I can't figure it out (most likely), or they have been doing something wrong for years, with hundreds of funded places in over 20 nurseries for several years at least.

If this is a multi chain, then it's seems very odd that there is a standard formula that they use for all of their nurseries, as different LEAs all have different funding rates. Unless they have 20 nurseries in the same LEA. So, it could well be that the table head office have given to your nursery was actually intended for one in a different LEA where they have a lesser funding rate, which would explain why the figures don't add up? Not that it's excusable, but at least it gives some logical explanation for the discrepancy. Otherwise, I can't see there being a genuine reason for the figures not to add up to your sums, based on the info you've been given so far.

You shouldn't really need to know how much the council is giving them in funding. All you really need to know is:

(1) How many free hours you get
(2) How these are spread out across the year
(3) What you are paying for on top of your free hours
(4) And whether that matches what you expect -- and if not, why not?

If that makes sense?

Try to focus on getting a clear answer to those questions. I think your interest in the overall funding mechanisms may be distracting you from the right questions you need to ask as a customer making sure you understand the bill you've been sent!

Agreed, but if you look at the invoice I attached, its not easy to see how they are charging at all. I asked the questions plus several more last night - the answers I got from the manager were:

(1) I am entitled to 15 hours "free" per week for 38 weeks.

(2) These are added together and spread out over 52 weeks, so 11 per week (more accurately for working out costs I assume they use 10.96)

(3) Im paying for a remaining 15 hours, food, early drop off and late pickup provision. Though these are not itemised separately - just as per attached invoice

(4) It doesnt match what I expect on the face of it I would expect my current bill for 30 hours to be reduced by 11/30ths with the inclusion of 11 free hours per week. They are unable to advise what the calculations are behind the invoice, and even stated that itemising the costs for individual items like the money the council provide is "not allowed".

Its this that I want explaining....

If my current monthly bill is £611 for 30 hours per week inclusive of all the extra bits like food and early/late provisions. Then with 11 hours free per week, shouldn't my invoice be £611/30 x 19 = £386.97

Im not against them having a top up in disguise, they shouldn't be out of pocket due to this govt scheme, if thats all it was then I'd just leave it alone - but as I found the funding rate, it appears they are actually diddling me out of around £250 a year and actually making more money out of funded places. Im sure there is a decent explanation, but the longer they take to come up with one, the more I think they are just rigging the system.

But from a personal point of view I presume you still require childcare? So what if you go to another nursery and find the same issues there?

I have no intention of leaving the nursery, all I want is it explaining how they arrive at the invoice cost.

Now that I have reduced the hours I need to pay for by 37%, how come my bill has only gone down 27%

It shouldnt be black magic, and I cant believe Im the only parent across the group asking for more detail than the single line invoice to justify the difference.

I would have thought that head office would have furnished each nursery with a fact sheet that managers can hand out when asked this question, so people can see at a glance how it is worked out.

Just had a call, the most appropriate person to deal with my query is not available today, they will call tomorrow...

Yeh but if they can't offer an explanation for it or you don't like their answer?

If their answer can justify the costs while remaining within the LA guidlines on how they should offer places, then thats fine.

If the can't/wont offer an explanation then Ill be contacting the council in the first instance and raising a complaint.

I appreciate many nurseries are having to be creative in order to offer funded places, especially the 30 hours places,but there is a difference between being creative and being underhand. I hope it is the former, but without an explanation I cannot ignore the possibility of it being the latter.