Local government watchdog warns nurseries over top-up fees for 'free entitlement'

Nicole Weinstein
Thursday, January 28, 2021

A dad has won a landmark ruling over nursery top-up fees for funded places that could have wider implications for nurseries and local authorities across the country.

The Local Government Ombudsman said that nurseries must be transparent when invoicing parents for the free entitlement funding
The Local Government Ombudsman said that nurseries must be transparent when invoicing parents for the free entitlement funding

Following an investigation by the Local Government Ombudsman (LGO), Damian Roche has this week been paid back over £1,000 in extra fees that should have been part of his daughter’s free entitlement at Kiddi Caru Day Nursery in Market Harborough, Leicestershire.

Meanwhile, councils are being warned by the LGO to ensure that nurseries are not placing extra charges on the Government’s 15- and 30-hour free entitlements.

Mr Roche first raised the issue with the nursery in March 2019, when he realised that an invoice was more than double the previous month’s.

Interviewed on BBC Radio 4's Today programme, he said, ‘They advised me that they effectively smoothed out the funding over 52 weeks because the funding is only available for term time effectively, 38 weeks.

‘I went away and did some calculations and it still didn’t add up. So I queried it and they basically advised me that they received £3.50 from the County Council and they took that from the £4.85 that was their hourly charge. So I went back and challenged that it was not giving my daughter the free 30 hours a week, and they were effectively subsidising it – or I was subsidising it.’

Mr Roche took his complaint to the LGO which found that Leicestershire County Council did not have sufficient oversight of the way the nursery charged parents when administering the free early years places.

Michael King, the Local Government and Social Care Ombudsman, said, ‘Free must mean free, but in this case it was not possible for the man to see how the invoice was calculated or whether his daughter was receiving her entitlement free of charge.’

Recommendations laid out in the report investigation said that the council should apologise to the parent involved and take ‘whatever action is necessary’ to ensure that he, and any other parents who have been charged top-up fees by Kiddi Caru Nursery and Preschool in Market Harborough, ‘receive their money back’.

Leicestershire County Council audited the nursery but the LGO said that it had ‘failed’ to identify any problems with the nursery’s invoices or charges.

The LGO also ruled that the council failed to work with the Kiddi Caru to ensure its invoices were ‘clear, transparent and itemised’, and failed to identify that the nursery’s charging policy does ‘not comply with government guidance’.

Mr King said, ‘While I acknowledge local authorities - and the early years sector - are struggling financially, the Government's intentions have always been that these places are provided free of charge to parents, and it is up to local authorities to administer them accordingly.

‘Guidance states that councils should work with providers to ensure invoices are clear, transparent and itemised…We are concerned that local authorities may not be delivering on the Government’s pledge to parents, so I would urge other councils across the country to check their processes to ensure providers in their area are not making the same errors.’

Deborah Taylor, Leicestershire County Council cabinet member for children and families, said, ‘We work with 539 providers who deliver the Free Early Education Entitlement (FEEE) scheme.

‘In the case of one nursery, the Ombudsman has concluded that its charging arrangements did not comply with the statutory scheme. Most unusually, when charging for private nursery care, this particular nursery sought to charge a variable hourly rate.

‘We have reviewed their charging arrangements and accept that, during the period of investigation, they were unnecessarily complex. Due to the variable hourly charge, it was hard for the concerned parents to understand precisely what they were being charged for in relation to each hour of private nursery care. Improvements have since been made at this nursery.

‘We continue to work with this and other providers to ensure the successful delivery of state funded nursery care which benefits approximately 11,500 children in Leicestershire each year. Not only does the FEEE scheme substantially improve the life chances of thousands of local children, it also supports families by enabling their parents to continue working.’

A spokesperson for Kiddi Caru Day Nurseries Group said, ‘We fully acquired the nursery in question in July 2017. After completing a full understanding of the newly acquired nursery and inherited funding methodology, we not only changed the way we offered the free early education entitlement, but also improved the transparency of the invoices, to ensure a greater understanding for our families but also to ensure a consistency of approach that is embedded across our other nurseries in the group.

‘We will continue to work with local authorities, including Leicestershire County Council, as they monitor early years’ providers around the delivery of the free early education entitlement to families.’

SECTOR RESPONSE

Guidance for local authorities published by the Department for Education in June 2018, states that free places must be delivered completely free of charge and that councils should ensure that providers do not charge parents top-up fees, which is the difference between a provider’s normal charge to parents and the funding they receive from the local authority to deliver free places.

Providers can charge for meals and snacks, and consumables such as nappies or sun cream, as part of a free entitlement place, although these charges must be voluntary.

Purnima Tanuku, chief executive of the National Day Nurseries Association (NDNA), said, ‘Early years providers offer a wide range of services and options to parents depending on their individual circumstances. As a result there is not a one size fits all approach to costs for services that are being delivered. Providers can charge for additional consumable items, food, nappies and activities which may be covered by parental agreements.

‘We would always advise providers to be very clear in their communications to parents about any additional costs.

‘Nurseries are working hard to give children access to high quality early years educational opportunities. However, since the funded hours policy was brought in we have been providing evidence that the rates paid to, and by, local authorities do not cover the actual costs of delivering these places. The funding rates have never kept pace with National Minimum Wage increases and other rising business costs.

‘The places aren’t "free" because the hourly rate provided by Government does not cover the full cost of the delivery. In the end it is parents and providers who pay the price of chronic underfunding to the sector.'

Neil Leitch, Early Years Alliance chief executive, said,While we fully support the principle of "free" childcare and early education, and recognise the valuable role that it plays in supporting families across the country, the fact is that this policy has been severely underfunded for several years now, and this is putting many early years providers in an impossible position.

‘Parents rightly do not expect to pay for something they have been told is free, but equally, it cannot be right that nurseries, pre-schools and childminders are expected to deliver these places at an often substantial loss, simply because government refuses to fund its flagship childcare policy adequately.

‘If Government is truly committed to ensuring that parents can access genuinely free early years places, then it needs to invest what is needed into the sector. With the additional financial impact of Covid on providers, this is more vital, and more urgent, than ever.’

A Department for Education spokesperson said, ‘Keeping nurseries and childminders open will support parents and deliver the crucial care and education for our youngest children. Our guidance is clear that local authorities are responsible for making sure all eligible children can take up their childcare place free of charge and that providers’ charging policies enable this.

‘We are funding nurseries as usual and where nurseries do see a drop in income from either parent-paid fees or Government income, they can use the furlough scheme. Working parents on coronavirus support schemes will still remain eligible for childcare support even if their income levels fall below the minimum requirement. We will be closely monitoring both take-up of places by parents and the capacity and response of providers.'

  • Download the ombudsman's report here

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