Nursery owners borrow money to cover delayed 30-hour payments

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Childcare providers across the country have been forced to borrow money to pay staff wages and bills because of local authorites' failure to pay the funding for the 30 hours on time.


Nursery owners are having to borrow money from banks to cover delayed funding payments for the 30 hours

Claire Kenyon, owner of the Children’s Garden Nurseries, a group of two settings, posted on the Champagne Nurseries, Lemonade funding Facebook group on Friday that she had to send her husband out in the snow to collect an emergency personal overdraft of £23,000 from her bank.

She said they needed the money to pay employees and other bills as they had not received the funding of the same amount from Lincolnshire County Council promised three weeks ago.

Ms Kenyon runs one setting in Norfolk and one in Lincolnshire. She received funding from Norfolk County Council on time.

In between receiving the first funding instalment for the spring term in January from Lincolnshire County Council and when the second funding instalment was due, Ms Kenynon had changed her bank account, but had notified the council who confirmed her details had been updated.

Since posting on Facebook, she has received the money from the council as an 'emergency payment'.

She told Nursery World, 'While we received payment at the end of the day Friday, it unfortunately came too late to pay staff, so we had to use a personal overdraft to make sure wages were paid.

'Luckily I have two nurseries, so the other setting was able to support most of the cost, but £23,000 is a huge amount to be missing from cashflow and it was three weeks late, which is unacceptable. If I hadn’t had this to fall back on it would have been very serious.

‘My husband and I had been calling Lincolnshire County Council to find out why the funding had not been paid. This is for the 35 or so three- and four- year-olds who claim the ‘free’ hours which we have supplied.

‘We had staff who all needed paying, along with our mortgage, business rates, utilities and so on. I have owned my Ofsted outstanding nursery for 20 years and for the first time ever we are having to find the money from elsewhere. My husband had to drive through the snow to get to a bank where our very helpful business manager had arranged for an emergency personal overdraft in order that I could pay my staff on time.

'He spent three hours trudging through the snow to each staff member's bank to pay cash into their accounts.'

She added, 'I am by no means the only one who is struggling with the shambolic roll-out of the 30 hours, and the Government should be ashamed that the salaries of hard-working early years staff should be put in such a precarious position.

'Banks are already questioning the cashflow situation of nurseries and this could result in banks withdrawing accounts and overdrafts. This has actually happened to some nursery owners already, and several have closed down.'

Other nurseries in Lincolnshire also reported last week they were still waiting for payment.

Lincolnshire County Council told Nursery World that due to upgrades on their financial system which affected bank account details and supplier numbers, funding for six out of 507 providers was delayed.

The council's service manager for early years Michelle Andrews said, 'We've been in contact with these providers as a matter of urgency to get them emergency payments. We apologise for any inconvenience to these providers and we will be reimbursing any provider where additional costs were incurred as a result of this delay.'

Across the country

It appears the problem is not just isolated to Lincolnshire as other childcare providers in different local authority areas report having to borrow money in lieu of Government funding.

Angela Harper, who runs two settings in the Wirral, extended her business overdraft to cover the money she had not received from the local authority for the funded hours, at a cost of a £300 arrangement fee plus interest.

A spokesperson for Wirral Council said, 'Early Years providers receive 50 per cent of their estimated funding at the start of each term. The reminder is paid approximately six weeks after the termly headcount date, although errors or queries on submissions may delay payments. 

'In response to feedback from care providers the Council has increased the spring estimate payment to 75 per cent and plan to introduce monthly payments from September, and in the meantime we are working with providers to minimise any hardship.'

Another provider, Alison Archibald, said she had to get an e-mail from the London Borough of Richmond to pass to her bank manager to honour salary standing orders. She was told by the council’s early years team the reason for the later payment date was the ‘number of checks undertaken at the end of the financial year’.

However, a spokesperson for Richmond Council said that there is not a set date by which termly payments are made to providers.

'Payments to childcare providers are always made before the end of the term to which they relate.  A proportion of the funding (60 per cent based on estimated hours) is paid in the first month of the term with the balance following before the end of the term, when the final number of free hours used by children is available.  There is not a set date by which termly nursery payments are required to be paid to providers and significant checks are undertaken before public money is paid to providers to ensure that the payments are accurate and reflect the use of the funded nursery places. 

'Where organisations have concerns about their cashflow the local authority will work with the organisation to make alternative arrangements where an earlier payment date is in the best interests of children and a business in the borough. The local authority is committed to working with childcare providers and will issue a schedule of future payment dates to ensure that providers can effectively plan their cashflows.'

A childcare provider in Cambridgeshire said she too had borrowed money to pay staff wages for the same reason.

A Cambridgeshire County Council spokesman said, 'We have very positive relationships with our providers and always keen to look to improve our service. Unfortunately, a system error with BACs caused the payment delay last week, and we informed providers immediately once known.  We also asked providers to contact us if they experienced any problems. We would be happy to hear from any provider who incurred any bank charges due to the payment delay.  Many of our providers have since contacted us to confirm that they had received their payments.'

By this September, as per the model agreement, local authorities should pay all childcare providers the funding for the 15 and 30 hours monthly, unless a provider requests otherwise and the local authority agrees.

A Department for Education spokesperson said, 'Thousands of families are accessing high quality, affordable childcare and we are pleased with how well our 30 hours offer roll out has been received by both parents and providers. By 2019-20, we will be spending £1 billion a year to deliver 30 hours of free childcare and fund the increase in rates that we have introduced.

'Local authorities are responsible for distributing the early education and childcare funding and they should be clear with childcare providers how and when they will be paid.'

  • Has your payment for the funded hours from your local authority been delayed? If this affected your business then Nursery World would like to hear from you. E-mail:
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