11.2 CWELCC Cost Based Funding

POLICY

The Manitoulin Sudbury DSB will administer CWELCC Cost-Based Funding to ensure the equitable, transparent, and accountable distribution of funds based on the actual costs incurred by licensees.

This policy is designed to improve financial oversight, standardize the allocation process, and promote the sustainability of child care programs in line with the CWELCC guidelines. Service Providers offering licensed child care will be funded based on their actual costs incurred during the calendar year, with a maximum funding limit calculated by a predefined formula.

The Manitoulin Sudbury DSB will distribute cost-based funding through regular installments and closely monitor compliance. Throughout the year, payments will be reconciled against the licensees’ reported costs.
 

The funding formula includes:

1. Program Costs: Funding to cover eligible program costs such as staffing, accommodation, and operations.
2. Amount in Lieu of Profit/Surplus: An additional amount to account for opportunity costs and the business risks associated with operating child care centres.
3. Base Fee Revenue: Licensees can continue collecting fees from families, subject to restrictions under O. Reg 137/15 under the Child Care and Early Years Act, 2014.
4. Cost-Based Funding Calculation: The sum of program costs and amounts in lieu of profit/surplus, minus expected base fee revenues.
5. Funding Reconciliation: Advanced payments will be made throughout the year, with final funding amounts determined at year-end reconciliation based on actual program costs.

Top-up funding (e.g., Growth or Legacy Top-Up) may be available to eligible Service Providers.

PROCEDURE

Eligible Costs

Eligible costs are those incurred for providing Licensed Child Care for Eligible Children during the calendar year, provided they are:

• Attributable to the provision of Licensed Child Care included in the base fee for Eligible Children.
• Appropriate and reasonable in quality and amount for providing Licensed Child Care.

Non-Eligible Costs

The following costs are non-eligible:

• Costs in lieu of profits, including in-kind benefits or perks for controlling owners.
• Capital renewal for major repairs or space upgrades.
• Costs related to ineligible children.
• Financing costs exceeding Canada Small Business Financing Program rates.
• Costs funded or reimbursed by another source (e.g., insurance claims).
• Penalties, fines, forfeitures, or liquidated damages.
• Gains or losses from the sale of capital assets funded by CWELCC.

Funding Administration

The Manitoulin Sudbury DSB will:

• Collect and review operational plans submitted by licensees, including necessary legacy data for legacy top-ups.
• Calculate funding allocations based on operational plans and legacy data, applying top-ups as necessary.
• Establish a payment schedule for advance payments and monitor timely distribution of funds.
• Conduct compliance reviews to ensure the alignment of reported costs with funding guidelines.
• Process adjustments due to changes in operational plans or emergency funding needs, ensuring timely updates.
• At year-end, collect standardized financial reports and annual attestations to verify appropriate use of funding.
• Select a 5% sample of centres/agencies for direct engagement to assess compliance with CWELCC guidelines.

Annual Reconciliation Requirements

The Manitoulin Sudbury DSB will perform annual reconciliations to compare funding received by eligible centres/agencies with their actual cost-based expenditures. This will include:

• Assessing eligible costs and ensuring they align with the funding formula.
• Reviewing the actual program cost, amount in lieu of profit/surplus, and base fee revenue offset.
• Identifying and recovering any overpayments during the year, avoiding significant recoveries at year-end.
• Returning unallocated amounts and overpayment recoveries to the ministry as part of regular financial reporting.

Cost Reviews and Direct Engagement

The cost review process aims to align providers’ costs with Ministry benchmark allocations, especially for Legacy Top-Up recipients. A 5% sample of centres/agencies will be selected for a Direct Engagement Review, which will be conducted annually by an independent third-party auditor. A report summarizing the findings and any proposed savings will be submitted to the Ministry by March 31 of the following year.

Reserves and Retained Earnings

Service Providers are permitted to accumulate reserves or retained earnings to support working capital, in line with the CWELCC cost-based funding formula.

Policy Updates

This policy will be updated periodically to reflect changes to Ministry Guidelines. Definitions relevant to CWELCC, such as "Eligible Child," "Legacy Centres," and others, are described in the Guidelines.