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.

15 hours term time only and it appears to be only for the 3 hours per day of attendance
12 days @ 564
10 days x 3 hours @ 117.64
Cost 446.40 a bit of rounding
Term starts 5 Sept?

Qwerz - originally I thought it was 3 hours per day of attendance but reading all the posts I see that the current system allow you to have the full 15 hours regardless of how many days the child is at the nursery.

I haven't checked this myself but assume it's correct as I'm sure the op will understand the current rules.

A pro rata allocation does explain the cost but that appears to be a coincidence.

The nursery manager said the free hours periods were 3 in a morning and 3 in the afternoon, which would ring true as they also offer the 30 hours funded places. There was no mention that the funded hours were reduced to 3/5 as daughter attends just 3 days.

That's not to say they aren't however and it's just the manager isn't privy to this calculation at head office. It would go some way to explaining the difference.

Though that would again be contrary to conditions in the L.A. contract that states providers must allow flexible use of the funded hours to ensure parents are given every opportunity to maximise their funded hours. To be fair our L.A. agreement does seem very strict in ensuring the benefit is wholly passed to the parent.

To look at things in a more simplistic view, I simply want to ensure that the entire value of the "benefit" being handed out by the council is being passed on to me/my child. Is that so wrong?

I can't simply accept that because adherence to the rules makes it difficult for a business to be profitable they should be allowed to ignore the rules. Imagine if that were the view taken for all businesses. "Sorry sir/madam, I know the rules say we should pay out for your stolen car, but sadly as we've had a lot of claims this year it would make it unprofitable for us so well give you enough to buy a scooter, hope that's ok."

As before, this nursery group is stable, making 7 figure profits across a group of 20 plus nurseries, so I find it hard to believe they are doing so by operating outside the law or rules. It would have been discovered before now if that were the case.

I'm simply looking for it to be explained and demonstrated on the invoice how they are passing the council benefit to myself. I think that's fair enough.

It is fair enough, however your posts have escalated into sounding like you're sure they are diddling you and you want to formally complain they are financially dodgy and as such have them investigated.

calm down, stop focusing on it and wait till you speak to them, In my experience when we go off half cocked we usually come down to earth with a bang and realise we have it horribly wrong.

My later frustration is born of recent replies that clearly havent read the thread imho. Having to explain my reasoning for my doubts over the invoice repeatedly. Obvioulsy to these new posters it may across as agressive, for which I apologise, and to people that have been following the thread from the beginning it will come across as trying to drive home the point that I believe they are overcharging. Rock and hard place.

As per the title, Im not sure if they are overcharging. As they are a large organisation established for a long time I can't believe that they are, but this conflicts with what the figures are telling me. My signing up here and posting was to guage opinion on what others thought when faced with the same figures.

It appears that these opinions range from extremes of they are overcharging and something should be done, to no they aren't and it even appears they are undercharging.

Hopefully all will become clear and we can look at how its done.

You never know, it may even help some other nurseries by seeing how this business makes the funded places, including the 30 hours places work for them.

I can understand your frustration, it should be a very easy thing to explain to parents, the not being clear might raise a rad flag for me too.

They have an obligation as any business does to make their charges transparent.

Unfortunately the quick call from the finance office came while I was out, however they did agree to email me over the reasoning behind the charges.

However, their information offers no detail what so ever as to how they arrive at the costs. Just a reitteration of them:

Relevant sections from email:

I have set out below an explanation of how we operate funded places. This has not changed from how we previously managed 15 hour funded places now that some parents are also eligible for 30 hours.

In overview our offer is that parents can opt to take their funding as either:

1. FUNDED ONLY PLACES: these are set session times and lengths offered on set days, e.g. 3 x 4 hour sessions over 47 weeks. These children just attend nursery for their funded hours and therefore there is no charge unless they select additional services such as meals or swimming lessons etc. The session times are fixed for these sessions

2. WRAPAROUND PLACES: I have attached for information a copy of our fee structure for funded places. As the Local Authority only provide funding for up to 570 hours per annum (15 hours over 38 weeks) these rates reflect any additional hours and are also priced to include services over and above the basic funded only offer, e.g. meals, EYLog system etc

With regard to your query we therefore set the prices as a rate just as we have different rates for half day/full day/full time sessions etc.

We do share pricing information with the Local Authority and have very recently had a full audit of our funding systems from XXXXX. Under the terms of our contract I am afraid we are not allowed to show funded hours as a monetary deduction and that is why we do not show hours being deducted on our invoices but instead state on our confirmation of fees the breakdown and number of hours being claimed.

The chart attached is just a copy of the laminated one I was shown at the nursery.

So - in short, absolutely no further answers what so ever.

I have asked for a breakdown of the specific elements (food etc) to show how they calculate the hourly rate and therefore where the funded hours deduction is made.

I don't know if anyone suggested this already, but the hourly charge is not the same as the day rate divided by number of hours. So the way ours does it, is that there are funded hours and unfunded hours and then their are whole days you pay at the daily rate (outside of term time, for instance or when you run out of hours for a week, there is often then a whole day left over charged at the daily rate if you are there full time as we are). So basically I pay,

30 hours per week funded hours = free
Unfunded hours = at the hourly rate whatever that is, but it's higher than the daily rate divided by 8 (our daily rate is for 8 hours). I suspect it's the same for you.
Then there are extra days left over which are then charged at the daily rate.
All this added up together is what we are invoiced for at the end of the month.

I would just ask them to account for the hours and show how it's calculated. I've done that plenty of times when I've not understood the charges.

But just to add, if they won't show you how they calculated that number, yes, that would be a red flag for me. Our nursery has always been very forthcoming about how invoices are calculated. They should easily be able to give you a breakdown of the hourly rate and how many hours you are being charged at that rate, plus the funded hours and any top up charges.

I agree with you op they should be able to show the breakdown of costs.

Presumably if they are only giving 3 hours in the morning and three in the afternoon to you as funded hours, and you only attend 3 days a week then they are only claiming 18 funded hours for you from the local authority?

The nursery we use, which is fantastic, passes it onto parents correctly. However they are a small business and I suspect they own the building - thus no rent or mortgage to pay.

Well, Ive had another response from this time a director, and as yet the figures still dont stack up.

response as follows, with my comments in bold

As you are aware our full day rate is £48.00 which equates to £6.00 / hour. this confuses me as the daily rate is £47 and runs for 10 hours, 8-6
The Local Authority is paid an hourly rate to provide Childcare and education in their region, this is currently around £4.50 (between £4.38 and £4.63).
The Local Authority then pays to us £4.00 / hour after they have deducted their costs to administer.

From this £4.00 we are then entitled to retain an element for costs for provision for Education and materials, we therefore process the Early Years Funding at a rate of £3.72/ hour. This difference equates to £13.30 / month (£0.28 * 570/12).
As XXXXX quite rightly says we are audited every year (again a cost) not just by XXXXshire, but XXXX, XXXXshire, XXXXX, XXXX, XXXXXshire, XXXXshire, XXXX and XXXXXshire and all of these Local Authorities agree that we are administering the funding in the intended manner.

As a Parent I appreciate that you have a choice of which childcare provider you choose, but the current level of funding does not cover the cost of providing an outstanding service in fantastic settings. I accept that if you are not entirely happy with the way we administer the funding then you have the choice to use your funding elsewhere, however I hope that you now clearly understand how the funding is administered.

no, i do not, but these figures give me more to work on, and certainly seem to suggest I am right in my assumptions that they fudge the hourly rates for funded places to make extra revenue - and by the looks of it with the full consent of the councils

What do you want them to do? Make staff redundant? Cut down on heating? Supplies? Hire 'apprentices' aged under 24 years old and pay them £3.50 an hour?

Because this is what is happening in many settings. Read about it on www.facebook.com/groups/ChampagneNurseries/

But I am sure you already know about that facebook group...

Omg
They are making a whole £250 odd profit a year!?!?
While in the meantime, the manager probably has sleepless nights worrying about how stressed she is
The staff probably bring in their own resources and work many more hours a week than they are paid for
While the director is running into the sunset with the £250 you feel you are being fiddled out of
The banks have fleeced millions out of us, but you are making a huge drama out if £250
Unbelievable
Watch this please
champagnenurseries.co.uk/

Apprentices thing is already happening at our placement. Very few make it beyond 21 or 25 due to the minimum wage changes. Always replaced with apprentices.

My problem now not them making a profit, but them using the funding system to make revenue beyond the level they set for private funding (Which one presumes is set at a profitable level). It bery much appears that they are rigging the hourly rate to ha e some of the funding for themselves.

Parents get a reduced bill and they get increased revenue. Where they should be passing on at least the funding level to parents if it is below their private hourly rate.

Keep at it, OP. They should provide a full breakdown and show how it affects your bill.

As far as I can see it is correct.

Your problem is that you are assuming you can have the full 11hrs free per week, but you don't attend 2 of the 5 free sessions so you only actually get 3/5. If you use that then it all works out just fine and dandy.

11 hours per week.
You only attend 3 days, so you only get 3/5 of that.
(11x3/5=6.6)

(Or 15hrs 3 hrs 5 days a week, but only pays out for 38/52 of the year, so you get 6.6 hrs per week 'free'?)

I would expect your deduction to be £(4.70-0.28)x6.6 per week = £29.17 per week, or £116.69 for a 4 week period.

(The 28p they are keeping back per hour for consumables)

This would mean if your original bill was £564 then your new bill would be £447.31, which it is to within £1.

Sorry TeenTimesTwo, but that is not correct. They have sessions morning and afternoon. My daughter does indeed get her full 11 hours per week.

Original bill was/is £611.

The latest email from a director more or less sets out in black and white that they are doing exactly what the figures suggest.

Relevant lines are:

"As previously advised we receive £4.00 from the local authority, after administration and education materials costs this is credited at £3.74/ hour."

"Therefore monthly funding is 47.5 x £3.74 = £177.65"

One has to assume the normal day rate of £47 includes for these administration and materials costs - so why the need to deduct it again on these hours? That is just shifting the cost of this onto the private portion of the invoice.

Another section in the mail states:

Therefore your September invoice is calculated as follows;

3 Nursery Days
48.00 x 3 * (52/12) £624.00
Less stretched funding £177.67
Funky Feet £39.00

Total £485.33

Now, when deducting the funky feet, the monthly figure is £446.33 which indeed matches our invoice - yet again no itemisation of the "fees".

However - they have used a day rate of £48 - whereas it is published at £47. Though I noted on the charging scheme for funded places (15 hours) the difference in day rate from 3 days to 4 days does increase by £48. It appears a different day rate is in efect for funded places to "normal" places.

So, by reducing the hourly rate on the funded hours periods, and increasing the day rate to £48 for funded places, results in the increase in revenue of £25 per month.

Indeed the breakdown given above is nothing more than:

(usual fees) - (funding + admin) = invoice.

Surely by any measure this is a top up in disguise.

I have run this past a local politician who agrees that whilst almost certainly legal and abiding by the rules it appears to be against the spirit of the legislation and certainly channelling money away from the intended recipient or benefactor.

The way they have structured their charging scheme results in extra revenue courtesy of the EYF/parent.

Next step is local MP's if there is not a lot more clarity forthcoming. I have already passed the details to a local councillor who also happens to work for the authority.

i worked it out differently to you, in that you normally pay £611 a month. and now you are getting 11h free each week at £3.72 which equals 177.32 a month,

so £611 a month - £177.32 (free hours) means £433.68 payable by you to ensure the nursery have the same income from the same hours pre funding.

I'm intrigued where in the legislation it says that providers are entitled to keep a proportion of funding towards administration?

memememe - My bill is £446.33, so they are increasing their income.

The council pay them £4 per hour. They charge the funded hours at £3.76, so pocket 24p/hour for themselves for the funding.

Their standard day rate is £47

The day rate they use to calculate a funded childs place is £48.

Small differences, but they add up to £25 per month per 15 hour funded child. Their calculation method creates even more revenue on 30 hour funded places. You will note that not a lot of large nursery groups are complaining about this scheme, while hundreds of smaller operators are creating groups like champagnenurseries to challenge it.

Its because the large groups have found ways of not only circum navigating the funding defecit from their usual charges, but actually generating extra income from it.

The bottom line is that even though the funding is set at a level BELOW their usual hourly rate, they INCREASE their revenue from funded places. The council passes the nursery £190 per month, and the parents invoices are reduced by £165.

Tweetinhat - I can't find it either. However I assume they are working on the same premise that the council holds back some of the rate the government send them, so they do the same thing to the parent.

Its there in black and white now. There is no smoke and mirrors over the way they are charging. They get the funding, keep a bit for themselves and then knock that off the daily rate. Thats all the itemisation I'm getting. When pressed specifically for itemisation outside the funded hours the directors response was dismissive.

quote:

"You are on wraparound childcare I do not have to tell you any more itemisation other than that, as I've said this is audited and approved by 10 different LA's, are they all getting it wrong too?"

I agree with the fudging as it is evident at our nursery too. We have just moved from 15 hours free (he could only access 12 of them as was 'only' doing 3 days a week) to 30 hours (can only access 18 of them as 'only' doing 3 days) and in actual fact it has made a tiny difference to our bill.

That last sentence would annoy me.

It is quite possible that the LAs are getiing it wrong by not fully checking what the nursery is telling them. Without knowing what the critieria are for the audits it isn't possible to say with any certainty exactly what they have checked and in what level of detail

@CSphere

Have you seen this thread that's been started today

www.mumsnet.com/Talk/guest_posts/3027480-Guest-post-This-new-childcare-policy-should-save-around-5-000-per-year-for-each-child