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Pre-school to pay $265,500 for misleading parents about ECE funding

8 June 2017

Kowhai Montessori Pre-School Limited (Kowhai) was today ordered to pay a total of $265,500 after pleading guilty to charges that it misled parents about the amount of funding it was receiving under the Government’s early childhood education (ECE) scheme.

In addition to a fine of $254,099.10, Kowhai was also ordered to pay $11,400.90 in reparation to four parents who complained to the Commission and agreed to be witnesses in the prosecution.

Kowhai told parents that it was receiving significantly lower funding than it in fact received, and parents were asked to make up the supposed shortfall between the pre-school’s hourly charge and the subsidy received.

Between October 2013 and October 2014 Kowhai sent parents invoices and letters which misrepresented the subsidy being paid to Kowhai under the government’s ECE funding.

The invoices initially represented that Kowhai was receiving a subsidy of $4.70 per child per hour. The correct figure under the Government’s “20 hours’ free” ECE funding scheme was $10.32 per child per hour, for eligible children attending Kowhai.

In September 2014, Kowhai advised parents that the hourly ECE subsidy was increasing to $5.70. In fact Kowhai was by then receiving an hourly ECE subsidy of $11.43 for eligible children.

Kowhai did not inform parents at all about a further “plus 10 ECE” subsidy which was payable for eligible children, initially at $5.73 per child per hour, later increasing to $6.70.

In sentencing in the Auckland District Court, Judge Jelas said the offending involved representations which were “grossly wrong” and required parents to pay significant additional amounts in childcare costs.

She said “one obvious motivation was to maximise an unlawful financial gain” and Kowhai “undermined the purpose of the ECE programme by making its services appear more expensive than they ought to have been.”

Commissioner Anna Rawlings said “the case is a reminder that it is critical that service providers who are Government subsidised, as well as part-charging the public, accurately reflect the subsidies they are receiving and do not mislead the public about the existence or amount of public funding for their services.”

“Over the period covered by the charges, in our best estimate Kowhai received $221,632.15 in ECE funding which was not disclosed to parents,” said Ms Rawlings.

Former manager and director Rebecca Jayne Brindle has signed a personal court enforceable undertaking to pay any part of the fine that Kowhai fails to pay.

Kowhai Montessori Pre-School was sold in 2015 and now operates under a new name and under new management.

The Ministry of Education’s Deputy Secretary of Sector Enablement and Support, Katrina Casey says it’s unacceptable that parents were misled by an early learning service.

“Parents should be able to get accurate information from their early learning service about how fees are calculated and about funding they’ve received from us. We are very disappointed that this didn’t happen at Kowhai Montessori. While we believe this is an isolated case, we will be reminding all early learning services that they need to provide accurate information to parents on how fees are calculated,” she said.

Background

Under the Government’s 20 Hours ECE funding scheme, children aged 3-5 years are eligible to receive funding for their attendance at a licensed ECE service provider or kōhanga reo.

Funding under the ECE scheme is primarily designed to reduce the cost of ECE services for parents and encourages participation of children in education from an early age. The structure of the funding also incentivises providers to employ fully qualified staff. The highest funding bracket is available only to those providers who have at least 80% of staff who are fully qualified teachers.

ECE funding is administered by the Ministry of Education and comprises two parts:

  • 20 hours ECE: the Ministry of Education pays a prescribed hourly rate to the ECE service provider to provide education for up to a maximum of 6 hours per child per day for 20 hours per week
  • Plus 10 ECE: an ECE service provider can claim a further 10 hours of funding for each child at a lower prescribed hourly rate to the 20 Hours ECE. Used in conjunction with 20 Hours ECE, a service provider can offer up to 30 hours of subsidised attendance per child.

Fees must not be charged by the ECE provider for hours claimed as 20 Hours ECE. Fees may be charged by a service provider for hours of attendance exceeding the 20 hour weekly maximum, including for hours where a child attends over the 6 hour daily limit. However, these fees must incorporate any subsidy the provider has received under the Plus 10 hours ECE scheme where applicable.

While no compulsory fees can be charged for the 20 hours that are subsidised, ECE and kohanga reo are permitted to charge optional fees for aspects of education and care that are above the regulated minimum standards. Examples that the Ministry states on its website, include excursions, transport, sunscreen and food.

More information on ECE funding can be found here.