Kiwi families conned by promise of 'free' childcare

By Kathryn Powley

20 hours' free childcare for 3- and 4-year-olds was hailed as a world-leading initiative to provide happy learning environments for the nation's children and allow mums and dads to return to work. But a Herald on Sunday investigation reveals the Government has turned a blind eye as preschools quietly force parents through a variety of hoops, making them pay through the nose

Holly Carrington is more than happy to pay $100 a week for care for her twins Felix and Samantha. Photo / Doug Sherring
Holly Carrington is more than happy to pay $100 a week for care for her twins Felix and Samantha. Photo / Doug Sherring

Holly Carrington's 3-year-old twins Samantha and Felix go to daycare twice a week, six hours a day, and they love it. "They have lots of arts and crafts that they do. It's so messy and we do not have the room at home. They also have mat time with songs and stories."

They get a cooked lunch "better than they get at home", laughs Carrington, 45.

Staff at Grey Lynn Preschool were also supportive and helpful with the twins' toilet training. All this for just $100 or so a week. Carrington and husband David could not have been more pleased.

The notion that such great service and facilities might be available for free didn't really come into it as Carrington rang around preschools in Central Auckland. Of course she'd heard the term "20 hours free" but didn't really know how it would work, if it was still going, and how it would apply to her family.

"Nowhere I rang said it would be free," she says. "It's obviously not free, but it's so much cheaper than what it was before they turned 3."

Whatever happened to 20 hours' free childcare, then? A Herald on Sunday investigation has discovered nearly half of all early childhood providers we surveyed supplement their 20 hours Early Childhood Education (ECE) with extra "optional charges" or compulsory hours of paid enrolment.

Labour introduced the scheme in 2007 but, in January 2009, National dropped the word "free" from the policy. Some say this better reflects reality because, from the beginning, childcare centres were finding ways around the rules and charging extra.

Nevertheless the Ministry of Education's website still says: "The Government will fully fund the cost of early childhood education (ECE) for up to 6 hours per day, and up to 20 hours per week. ECE services cannot charge any fees for hours claimed as 20 hours ECE."

In theory, any parent can enrol their 3-year-old at a pre-school and not pay a cent. But in reality many parents pay for the privilege. It's true that some childcare centres charge nothing extra, and some charge as little as 20 cents an hour top-up.

But many are charging much more. Some preschools charge $30 for the single hour they force parents to enrol children in, at the end of the day after the subsidy runs out. Others demand parents top-up the Ministry of Education's $11.25/hour subsidy with an additional $5, totalling $100 over the 20 "free" hours.

Two centres even admitted their "optional charges" were mandatory. One, a community not-for-profit preschool, said: "We charge a recovery fee of 40 cents per hour that the child is booked within the 20-hour subsidy - although we know the ministry say we can't do this."

Grey Lynn Preschool owner Sheree Macready, who also owns three other childcare centres, says she initially didn't join the 20 hours programme. Then she discovered other centres were setting a seven-hour minimum day to boost revenue. She realised it was a way to make the funding system work for her, and signed up, billing $25 to $30 for that seventh hour.

As the rules stand, families can claim only six hours' free childcare a day, and 20 in a week. Preschools such as Grey Lynn do not allow parents to take their child home after the six free hours: they insist the 3- or 4-year-old be enrolled for an additional hour. It's in that single hour that the preschools turn a profit.

But if ministry rules ban providers from charging extra for the programme, how can Macready and many other providers do this?

First, the rules allow providers to ask for "optional charges" for things such as meals, transport or a higher-than-required staffing ratio.

Secondly, the rules also allow centres to set a minimum number of hours for enrolment and to charge as much as they like for hours over and above the 20 hours a week, or six hours in one day.

Of course, preschools don't have to sign up to the 20 hours ECE programme but most do, because the cost to parents is still less than if they didn't offer the 20 hours.

The "optional" charges, donations or extra hours aren't technically breaking any rules. The centres are simply finding creative ways - some might say loopholes - to bring in extra revenue.

Our anonymous survey of more than 300 providers touched a nerve with centres. Nearly 45 per cent told us they top up their Government funding for the 20 hours scheme.

The first 27 per cent do this by asking for an "optional charge"; 11 per cent have minimum hours sometimes called "packaged enrolment"; and 7 per cent have a mix of both.

Some claim the top-ups are necessary because they say the funding simply doesn't cover their costs.

However, an Education Ministry study last year found the government subsidy alone was enough to cover 115 per cent of the child care costs at most centres - before the centres start imposing top-up fees.

Charlotte Clapcott, from Hopscotch Early Learning Centre in Otorohanga, believes such top-ups are unethical and are in fact a "rort".

"I think it's disgusting," she says.

Centres that insist on 6 or 7-hour days are "greedy", she fumes. "They're ripping off the system."

Clapcott says the point of 20 hours ECE is to get more children into early-childhood education, but many families don't take part because the 20 hours are not truly free.

"20 hours ECE was brought out by the Government under the title of 20 hours free. However, that was changed not long after because somebody decided that it wasn't actually free due to the ability of centres to charge an optional charge. But by changing its name, parents don't now understand that it should be free.

"They believe they're getting a good deal by paying $40 a day for seven hours of childcare. Whereas in fact, they're paying $40 for one hour of care, and the remaining six hours are actually free."

Parents at Hopscotch pay an optional charge of $30 a week to help with lunches. Although about 30 per cent of parents don't pay, their children get a meal. So the charge really is optional - but that's not the case in all centres. Some tell parents that if they don't pay, they'll have to go elsewhere, our survey reveals.

One nanny service manager told us if parents "quibble" over paying an optional charge, she insists on the child enrolling for 13 hours a week with one seven-hour day instead.

"The reason we have the minimum seven hours is basically so that if we have a family that refuses to sign the optional charge, we can charge whatever amount we want for that seventh hour. We could charge $500 for that seventh hour if we wanted."

She says the Ministry of Education is fixated with making sure nobody charges for the 20 hours ECE. "We all need to be creative in this area to meet the MoE's requirements in a cost-effective way."

Sara Stewart owns and runs The Cottage Kindergarten in rural Waimauku, northwest Auckland. She has an optional charge to maintain high staffing levels. If a child attends just six hours, she asks parents for a $10 "optional" top-up fee. If the child attends 6 hours, the family must pay a mandatory $16 fee. That's $16 for 30 minutes childcare.

Her roll is 30. Keeping track of so many tots is a joy for Stewart, and a business.

"I'm an early childhood teacher. I want to work as a teacher, so I run my own business and I work in the business. I'm the head teacher and I'm the admin person."

She says funding is a juggling act that makes her head spin. "If the children come with only the 20 hours ECE funding we ask for an optional fee to be paid of $10 a day because we have above-ratio staffing.

"At the moment, we are still growing and on our busiest day we have 21 children and four teachers. The required ratio for that many would be three teachers."

Eighty per cent of her staff are fully qualified, meaning she gets the highest level of funding - $11.25 per hour, per child. (Under Labour, there had been a policy to provide more funding for centres staffed by 100 per cent qualified teachers, but National pulled the plug on that).

Stewart knows she is lucky to have parents who are happy to pay her optional charge. "Without it we wouldn't be able to maintain the teacher-to-child ratios."

Parents not willing to pay optional charges or enrol in minimum hours could always shop around and that's what Education Minister Hekia Parata advises, on learning the results of the Herald on Sunday survey.

"Parents obviously have choices around options," she says. "Parents must not be charged for 20 hours ECE. Over and above that, centres can obviously charge fees. The Ministry of Education investigates all alleged breaches of funding."

The Government wants 98 per cent of preschool children getting early childhood education by 2016. New Zealand's annual expenditure per child in ECE is the second highest in the OECD. But ECE is provided by private organisations, Parata says, and the Government has no control over their fees. That's why she advises parents to take control.

Taking control, shopping around: that is exactly what one Hamilton mum did. When her daughter turned 3 she took her out of the daycare she'd attended since the age of 9 months because the centre wanted her to pay $20 a day, at least two days a week. She chose a provider down the road that was completely free.

That's all very well for someone who lives in the city, but it is not an option for someone in small-town New Zealand, if the only preschools in town demand hefty top-up fees.

Is it any wonder ECE providers are finding creative solutions to supplement their revenue?

Peter Reynolds, chief executive officer of the Early Childhood Council, says the Government has consistently, through three successive budgets, carved revenue from mainstream ECE services.

"I'm not saying they've had a budget cut, because the Government will say we've actually put more money into sector. They have, but it's targeted," he says. "So mainstream centres have lost money. In that 2010 Budget they lost an average of $50,000 to $70,000 off their bottom line."

Reduced funding had led to redundancies, less training, buttoning down costs, and inevitably an increase in parent fees.

We also asked Education Ministry ECE group manager Karl Le Quesne what he thought about centres topping up their funding with extra charges or hours. "If it's more affordable for parents then that's what we're trying to achieve. The information that we use to monitor the policy shows that it's 32 per cent more affordable than it was in 2007."

That's all very well but if more of the subsidy goes to boosting the preschool's revenue than it does to lowering families' fee, the economics are at best questionable. And what about centres at which the top-up charges are compulsory?

"If that's the experience of a parent we would want to know that," Le Quesne says. "Any parent who thinks a provider may not be following the requirements should get in touch with the Ministry and we will follow up with the provider."

Ultimately, the reason providers can impose extra charges is that parents are more interested in getting the best care for their children than they are in getting the best deal for their bank accounts.

Parents like Holly Carrington, of Grey Lynn, don't realise they are entitled to free childcare; they simply see the funding as a discount for 3-year-olds. She never baulked at paying $100, on top of the Government's $270 subsidy, for her twins' 12 hours in care.

She says the fee is money well spent. Daycare is fun, and Samantha and Felix are having a ball.

"I definitely knew about it," Carrington says of the 20 hours' funding, "but I didn't know how it translated, and how much it would cost until I rang around. They all said 'there's this charge until your kids turn 3, and then there's this charge'. To me that translates into a discount."

Parents like Carrington celebrate their reduced costs but it's clear childcare fees aren't the only things being discounted. The very transparency and integrity of the 20 hours' free childcare regime has been discounted entirely.

How families pay for 'free' childcare

The Herald on Sunday surveyed childcare centres on their charges and donations for children receiving 20 hours 'free' care. More than 300 responded.

55% - No extra charge on top of 20 hours free ECE
26% - Ask families to top up government subsidy
11% - Require families to pay for additional hours
8% - Require families to pay for additional hours and ask them to top up subsidy

The gambits

30 hour week: Three- and four-year-olds are required to enrol for a minimum 30 hours a week. The centre claims the $11.25 government subsidy for 20 hours and a smaller subsidy for the next 10 hours - as well as charging families for those 10 hours.

7 hour day: Childcare centres insist children enrol for a minimum 6½ or 7 hour day. They claim the $11.25 government subsidy for the maximum six hours, then charge families as much as $25 for the seventh hour.

The 'optional' charge: On enrolling, families are pressured to sign up to pay an additional charge of up to $5 an hour to cover additional staff or registered teachers.

The donation: Families are encouraged to make donations to cover costs like childcare centre administration.

- Herald on Sunday

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