Chapter 6 Funding the Program ©2013 Cengage Learning. All Rights Reserved.

Chapter Objectives Describe the director’s role in obtaining funding for a center. List several resources potentially available for child care financing. Explain how tuition rates may be determined. Describe several types of financial reports that funders may require. ©2013 Cengage Learning. All Rights Reserved.

Funding a New Center Start-up capital Community support Grants Bank loans Tuition Community resources Government funding Foundations Fund-raising ©2013 Cengage Learning. All Rights Reserved.

Start-up Funding Sources: –personal capital –business loans –investor –foundation –community support ©2013 Cengage Learning. All Rights Reserved.

Discussion Questions 1. What role does the director play in obtaining funding for a new center? 2.When approaching a bank for a loan, what documents or information do you think they will require? ©2013 Cengage Learning. All Rights Reserved.

Reporting to Funders Directors report to funders to give them information on how the business is doing Funders could be….. –Stockholders investing for profit –School board members –Members of a parent co-op –Organizations providing support (i.e., United Way, employer sponsored centers) –Individuals who own the center ©2013 Cengage Learning. All Rights Reserved.

Reporting to Funders Accurate, timely, and understandable reports are necessary –Center Enrollment Report –Accounts Receivable Report –Budget Comparison Report –Statement of Financial Position –Income Statement –Annual Report ©2013 Cengage Learning. All Rights Reserved.

Center Enrollment Report Report includes: –Number of children enrolled –Number of children in each age group that center serves –Projection of children who are expected to move up to next age group on a month-by- month basis ©2013 Cengage Learning. All Rights Reserved.

Accounts Receivable Report Indicates the amount of tuition that is owed –Should be generated on a weekly basis ©2013 Cengage Learning. All Rights Reserved.

Budget Comparison Report Indicates what was spent the proceeding month in each category compared to the budgeted amount in each category –Should include actual and budgeted spending for proceeding month AND year-to-date Report used to: –Spot cash flow problems –Analyze expenditures –Project remaining expenses –Revise budget (if necessary) ©2013 Cengage Learning. All Rights Reserved.

Statement of Financial Position Report indicates: –Assets (what center owns) –Liabilities (what center owes) Should be generated on monthly basis ©2013 Cengage Learning. All Rights Reserved.

Income Statement Statement reflects: –Total revenues earned in fiscal year –Total expenses incurred in fiscal year Net income –If income is greater than expenses Net loss –If expenses are greater than revenue ©2013 Cengage Learning. All Rights Reserved.

Annual Report Final report –Shows amount budgeted in each category and amount spent –Up-to-date cash flow statement ©2013 Cengage Learning. All Rights Reserved.

Managing Funds It is the director’s responsibility to manage available resources –Create policies and procedures –Implement and follow these policies and procedures ©2013 Cengage Learning. All Rights Reserved.

Interim Chapter Summary A quality center requires funding from: –tuition –government support –private support –sponsoring agencies ©2013 Cengage Learning. All Rights Reserved.

Discussion Questions 1.Why is it important to implement financial policies and procedures? 2.What do you think would happen if a director was lax in collecting tuitions from parents? ©2013 Cengage Learning. All Rights Reserved.

Managing Funds Results of lax financial policies and procedures results in: –Reduced financial resources –Reduced salaries –Staff reduction –Limited money for supplies and equipment –Lowered program quality –Possible center closure ©2013 Cengage Learning. All Rights Reserved.

Managing Funds Three ways funds can diminish 1.Collections 2.Fraud 3.Lawsuits against center ©2013 Cengage Learning. All Rights Reserved.

Collections Outline financial procedures in parent handbook –Timing (when tuition is due) –Method (check, credit card, cash, voucher) –Number of overdue reminders –Penalty for late payment –At what point will the child not be able to attend program because of past due payment –Under what conditions can child re-enter program (if space is not filled, if parent pays in cash) ©2013 Cengage Learning. All Rights Reserved.

Fraud Fraud is embezzling money –Theft of cash –Charging for more hours than actually worked –Keeping person on payroll for a period after they leave and writing extra checks to themselves –Charging personal expenses to the business ©2013 Cengage Learning. All Rights Reserved.

Fraud To prevent fraud: –Be aware of financial records (cross-check time cards, payroll) –Do not accept cash –Have enforceable and enforced financial policies ©2013 Cengage Learning. All Rights Reserved.

Lawsuits Lawsuits can be deterred –Establish policies that will reduce likelihood of being sued –Training staff and appropriate documentation –Appropriate supervision –Maintenance of equipment, building, grounds ©2013 Cengage Learning. All Rights Reserved.

Lawsuits Lawsuits can be deterred –Policies about who has access to premises and who may take the children –Review policies on hand washing, food storage, and food serving –Maintaining positive relationships with families –Policies to maintain a financially stable center ©2013 Cengage Learning. All Rights Reserved.

Chapter Summary Operating a quality center requires significant amount of funding It is director’s responsibility –Have a knowledge of funding sources –To operate within a balanced budget of appropriate revenues and expenses –To establish and maintain financial policies and procedures to protect against collection issues, fraud, and lawsuits ©2013 Cengage Learning. All Rights Reserved.