Review of the Cost of a Full-Day Childcare Placement · Review of the Cost of a Full-Day Childcare...

Deloitte & ToucheDeloitte & Touche HouseEarlfort TerraceDublin 2

Unit 12c,Bluebell Business ParkBluebell, Dublin 12www.ncna.ie

Review of the Cost

of a Full-Day Childcare Placement

on behalf of the National Children’s Nurseries Association

15 November 2007

Deloitte & Touche Deloitte & Touche House Earslfort Terrace Dublin 2

Review of the Cost of a Full-Day Childcare Placement on behalf of the NCNA

(National Children’s Nurseries Association)

15 November 2007

Review of the Cost of a Full-Day Childcare Placement 15th November 2007

GLOSSARY

BCCN Border Counties Childcare Network

CBRE CB Richard Ellis, Auctioneers & Estate Agents

Full-day A pre-school service offering a structured day care service for pre-school children for more than 5 hours a day

NCNA National Children’s Nurseries Association

the Model The model prepared by NCNA to set out the typical costs arising in a full-day pre-school service

Model Facility The facility upon which the Model is based. This is defined as one providing a full-day pre-school service which is compliant with the Regulations and reflects the number and profile of children attending such a facility, as set out in Section 2.3

The Regulations Childcare (Pre-School Services) (No 2) Regulations 2006, issued by the Department of Health & Children

Valuation Office The State property agency responsible for the valuation of all commercial and industrial property throughout the country for rating purposes

We Like This Place Guidelines for Best Practice in the Design of Childcare Facilities, issued by Area Development Management

WTE’s Whole Time Equivalents


TABLE OF CONTENTS

Executive Summary ...............................................................................................................1

1. Background 1 2. Model Childcare Facility 1 3. Primary Cost Drivers 2 4. Conclusion 3

1. Scope and Basis of Review.........................................................................................4

1.1 Purpose 4 1.2 Scope & Methodology 4 1.3 Sources of Information 4

2. Model Childcare Facility ...........................................................................................5

2.1 Background 5 2.2 Full-Day Care Service 5 2.3 Number and Profile 6 2.4 Staffing 7 2.5 Facility 7 2.6 Occupancy 7 2.7 Direct Costs 7

3. Costs of Model Facility...............................................................................................8

3.1 Introduction 8

4. Staff Costs ...................................................................................................................9

4.1 Introduction 9 4.2 Staff Numbers 9 4.3 Salaries 10 4.4 Employer’s PRSI and Pension 12 4.5 Training Costs 13 4.6 Staff Events 13 4.7 Recruitment Expenses 13

5. Building Costs ...........................................................................................................14

5.1 Introduction 14 5.2 Space Requirements 14 5.3 Rent 16 5.4 Rates, Water and Bin Charges 18 5.5 Maintenance, Repairs and Painting 18 5.6 Insurance 19 5.7 Depreciation 19 5.8 Interest 20


6. Direct Costs ...............................................................................................................21

6.1 Introduction 21 6.2 Food Costs 21 6.3 Utilities 22 6.4 Audit, Accountancy & Payroll 22 6.5 Other Costs 22

7. Sensitivity Analysis...................................................................................................23

7.1 Sensitivities 23 7.2 Full Occupancy 24

Appendices ............................................................................................................................25

Appendix I 26

Review of the Cost of a Full-Day Childcare Placement 1 15th November 2007

EXECUTIVE SUMMARY

1. Background

There has been a significant increase in both the demand for and cost of childcare services in Ireland in recent years. In addition, the sector has been subject to increased regulation, most notably under the Childcare (Pre-School Services) (No 2) Regulations 2006 (“the Regulations”).

The NCNA, as the representative body in Ireland for full-day pre-school service providers, has been keen to ensure that the costs of providing childcare services are properly understood, particularly as providers are required to comply with the Regulations. Cost in this context reflects cost to the provider before any profit margin.

In order to better understand and determine the cost of a full-day childcare place, the NCNA has developed a model for a pre-school service, based upon a typical childcare facility providing full-day care provision. Ordinarily between 40% to 50% of childcare places are full-day, so the Model is representative of the service being provided in the sector.

It should be noted that the Model is based on the recommended staffing and space requirements set out in the Regulations.

Whilst the Model reflects the cost in a typical facility, it should be noted that the costs may vary across the sector depending on factors such as location, property type, size of facility, profile of children and service provided.

2. Model Childcare Facility

The costing for the Model Facility was developed using the following key assumptions;

•••• The Model is based on the provision of a full-day pre-school service only, which is defined in the Regulations as a service of more than 5 hours per day. It has been assumed that neither sessional nor part-time services are provided in the Model facility. The Model Facility is based on a pre-school service operating an eleven hour day, for example from 7am to 6pm, and is deemed to be appropriately staffed during this period.

•••• The number of children attending the Model Facility has been estimated by reference to the average number attending a pre-school service across the sector. A recent survey conducted by Focus One indicated that the average pre-school service has 44 children attending. To optimise staffing ratios, it was assumed that the Model Facility has 47 children in attendance.


•••• The Model Facility has four age groups attending, with the mix being made up as follows;

Table 1 Model Facility Profile

Type Age Range Child Numbers ProfilePre School 3-6 years 16 34%Toddlers 2-3 years 12 26%Wobblers 1-2 years 10 21%Babies 0-1 years 9 19%

47 100%

Source: NCNA

•••• The Regulations set out the recommended adult/child ratios for a full-day service. Based on the number and profile of children described above, a total of 12 staff is required to comply with the Regulations.

•••• The Regulations set out the recommended space required per child. The total space required to cater for the number and age of children outlined above is estimated at c.375 square metres.

•••• The space required determines the overall rental cost for the facility. The rental rate used is an average for Ireland of €17.80 per square foot (excluding VAT). The rentals are based on average quality space in a residential location and exclude car parking spaces.

As regulated childcare services are a VAT exempt activity under the Childcare Act 1991, VAT is an additional cost for those providers paying a rent. For this reason VAT has been included as part of the overall rental charge for the Model Facility.

•••• The Model Facility is assumed to operate at full occupancy for optimal utilisation of staff and space.

•••• Other costs of running the facility have been estimated by reference to the actual costs incurred by comparable facilities in the sector.

3. Primary Cost Drivers

Table 2 Summary of Costs

Staff Costs €373,587Building Costs €125,762Direct Costs €54,324Total €553,673

No. of Children 47

Cost per week per Child €227

Source: NCNA


The analysis above revealed that the principal cost driver for the Model Facility is staff costs, which represent c.67% of total costs.

Building costs are also a key driver of costs representing c.23% of the total cost base of the Model Facility.

4. Conclusion

The cost base developed for the Model Facility reflects the assumptions described above. The result of the analysis indicates that the average cost of a childcare place in a full-day pre-school service is €227 per child.

The average cost of a full-day childcare place may vary according to location, property type and staffing. The table below assesses two potential variances to the cost of a full-day childcare place.

The first variance assessed is the impact of changes in the rental charge according to location. CBRE provide the NCNA with rental for a childcare facility based on various locations across the country. The cost of a full-day childcare place is reduced by €12 per week based on the lowest rental rate on this scale of €12.50 per square foot. The cost increases by €16 per week based on the highest rent on this scale of €25 per square foot.

The second variance assessed was the impact on salaries if the full staff complement was required to cover an eleven hour day, ie. from 7am to 6pm. This resulted in an increase of €11 to the cost of a full-day childcare place per week.

Table 3 Impact of Sensitivities on the Full-Day Cost of Childcare per Week

Lowest Highest

Base Case €227 €227Rental Sensitivity (€12) €16Cost per child per week €215 €243

Base Case €227 €227Salary Sensitivity €11Cost per child per week €227 €238

Combined Sensitised cost per child per week €215 €254

Range

Source: Deloitte Analysis

The result of these sensitivities indicates the cost of a full-day childcare place can vary between €215 and €254 in the Model Facility.


1. SCOPE AND BASIS OF REVIEW

1.1 Purpose

In October 2007, Deloitte & Touche were engaged by the NCNA to independently examine the NCNA’s assessment of the cost to the provider of a full-day childcare placement in Ireland. This Report sets out the findings of that examination.

1.2 Scope & Methodology

Our work comprised a review of the costing model developed by the NCNA for the purposes of estimating the cost of a full-day childcare placement in Ireland, and included the following:

•••• A review of the assumptions contained in the Model for consistency with the recommendations set out in the Regulations, particularly those relating to staffing and space requirements.

•••• The examination of the significant cost items in the Model, such as staff costs and building costs, by reference to independent market data, where available.

•••• Reasonableness tests on the direct costs included in the Model against those being incurred by providers in the sector.

Our procedures and enquiries do not constitute an audit in accordance with Auditing Standards on any aspect of the financial information contained in this report.

1.3 Sources of Information

The following sources of information were used in our work:

•••• Information from and discussions with the NCNA

•••• BCCN Report

•••• CBRE Reports

•••• Laois County Council Reports

•••• Fingal County Childcare Committee

•••• Media Research

•••• Company Accounts

•••• Child Care Regulations 2006

•••• Estate Agent Research

•••• Irishjobs.ie

•••• Valuation Office

•••• Focus One Survey, completed on behalf of NCNA

•••• ‘We Like This Place’ Report


2. MODEL CHILDCARE FACILITY

2.1 Background

There has been a significant increase in both the demand for and cost of childcare services in Ireland in recent years. In addition, the sector has been subject to increased regulation, most notably under the Childcare (Pre-School Services) (No 2) Regulations 2006 (“the Regulations”).

The NCNA, as the representative body in Ireland for full-day pre-school service providers, has been keen to ensure that the costs of providing childcare services are properly understood, particularly as providers are required to comply with the Regulations. Cost in this context means cost to the provider before any profit margin.

In order to better understand and determine the cost of a full-day childcare place, the NCNA has developed a model for a pre-school service, based upon a typical childcare facility providing full day care provision. In this context, “typical” reflects the number of children attending and the age profile of such attendees, as set out in Section 2.3 below. Ordinarily between 40% to 50% of childcare places are full-day, so the Model is representative of the service being provided in the sector.

It should be noted that the Model is based on the recommended staffing and space requirements set out in the Regulations.

2.2 Full-Day Care Service

The costing model developed by NCNA reflects the cost base of a full-day care service only. As such, it has been assumed that the service in the Model Facility does not provide sessional or part-time day care services.

A full-day care service is defined in the Regulations as being a “pre-school service offering a structured day care service for pre-school children for more than 5 hours a day”.

It has been assumed that the Model Facility operates an eleven hour day, for example from 7am to 6pm and is appropriately resourced for this period.

Whilst the Model reflects the cost of a typical full-day care facility, it should be noted that actual costs may vary across the sector depending on factors such as location, property type, size of facility, profile of children and service provided, ie. fulltime, part time or sessional. The bases and assumptions used in costing the model facility are set out in the sections which follow.


2.3 Number and Profile

The appropriate number and profile of children attending the service was determined from a survey on the sector completed by Focus One on behalf of the NCNA. The report indicated that the average number of children attending a typical childcare facility was 44. This figure was rounded up to 47 in the Model, in order to ensure full utilisation of staff. The assumptions the NCNA have used to determine the child profile attending the service are set out in Table 2.1 below:

Table 2. 1 Typical Child Profile

Type Age Range Child Numbers ProfilePre School 3-6 years 16 34%Toddlers 2-3 years 12 26%Wobblers 1-2 years 10 21%Babies 0-1 years 9 19%

47 100%

Source: NCNA

It can be seen that the Model Facility assumes that;

•••• The majority of children being looked after are in the 3-6 year category.

•••• Children in the 1-2 year category represent 21% of the total. NCNA experience is that fewer facilities are willing to take on babies and 1-2 year olds, as the staffing ratios are higher and the cost per head is higher. This has influenced the proportions in relation to higher numbers being taken on in the toddler and pre-school categories.

•••• Fewer numbers are assumed to be attending in the 0-1 year category due to the higher number of parents caring for new born babies in the home.

As part of our work we examined the child mix in a number of providers in the sector to assess the reasonableness of the assumptions used by the NCNA in the Model. Table 2.2 below outlines the average child profile mix of a number of such providers:

Table 2. 2 Average Child Profile Mix

Type Age Range Average ProfilePre School 3-6 years 21 36%Toddlers 2-3 years 17 29%Wobblers 1-2 years 13 22%Babies 0-1 years 8 14%

57 100%

Source: Actual Operators

Our analysis confirms the reasonableness of the child profile mix used in the Model Facility.


2.4 Staffing

The number and age profile of children attending a childcare facility determines the staffing requirements for that service. The Regulations set out the recommended adult/child ratios for each age-group attending a full-day childcare facility, and these recommendations have been applied in the Model.

Accordingly, based on the number and profile of children attending the Model Facility, a total of 12 staff are required to comply with the Regulations. Please see Section 4 for further details.

2.5 Facility

The number and age profile of children attending a childcare facility determines the space required to provide that service. The Regulations set out the recommended space ratios per child for a full-day care service, and these recommendations have been applied in the Model. On this basis, the space required to provide the childcare services described in Section 2.3, was estimated at 374.2 sq. metres. Please refer to Section 5 for further details.

In order to determine an appropriate rental charge for the service, it has been assumed that the Model Facility has recently commenced operations and is renting an average quality space in a residential area and excludes car parking spaces.

Rental charges vary according to region in Ireland, with Dublin being the most expensive location. Rental charges were compiled for the various regions with an average for Ireland of €17.80 per sq. foot used as the rental charge for the Model Facility.

2.6 Occupancy

Fluctuations in occupancy rates have not been factored into this analysis. The Model Facility has been costed on the basis of full utilisation of space and staff at all times.

2.7 Direct Costs

Other costs of running the facility have been estimated by reference to the actual costs incurred by comparable facilities in the sector. These costs represent c.10% of total operating costs of the Model Facility.


3. COSTS OF MODEL FACILITY

3.1 Introduction

The NCNA Model provides an estimate of the total costs involved in running a full-time pre-school service, based on the Model Facility assumptions outlined in Section 2. The Model Facility caters for 47 children. The Model assumes compliance with the recommended staffing and space requirements set out in the Regulations. Table 3.1 details the costs under the following headings: Staff Costs, Building Costs and Direct Costs.

Table 3. 1 Overall Costs

Staff CostsSalaries €320,589 58%Employer PRSI & Pension €44,463 8%Training €3,300 1%Staff Events €2,250 0%Recruitment Expenses €2,985 1%Subtotal €373,587 67%

Building Costs

Maintenance & Repairs €2,650 0%Painting €2,000 0%Rent - Building €86,720 16%Rates, Water & Bin charges €10,406 2%Buildings Insurance €2,800 1%Insurance €750 0%Depreciation €13,964 3%Interest Expense €6,472 1%Subtotal €125,762 23%

Direct CostsProvision of Food €21,507 4%Cleaning €3,000 1%Classroom Materials €4,500 1%Advertising €4,750 1%Printing, Postage & Stationery €2,700 0%Telephone €4,000 1%Motor & Travel Expenses €1,500 0%Utilities €5,667 1%Audit, Accountancy & Payroll €4,500 1%Bank Interest & Charges €700 0%Legal & Consultancy €1,500 0%Subtotal €54,324 10%

Overall Total €553,673 100%

Cost per week per Child €227

Source: NCNA

We review the assumptions used in compiling the above table in Sections 4 to 6 of this report.


4. STAFF COSTS

4.1 Introduction

Staff Costs are broken down into the following headings:

Table 4. 1 Staff Costs

Reference Section Cost €

Salaries 4.3 320,589 Employer PRSI & Pension 4.4 44,463 Training 4.5 3,300 Staff Events 4.6 2,250 Recruitment expenses 4.7 2,985

Source: NCNA

4.2 Staff Numbers

Under the heading Management and Staffing, Part II of the Regulations state that a pre-school service should ensure that;

(a) a sufficient number of suitable and competent adults are working directly with children at all times;

(b) the service has a designated person in charge and a named person who is able to deputise as required;

(c) at all times during the period when the service is being carried on, the designated person in charge is on the premises.

With this in mind, the Regulations recommend the following adult/child ratios for a full day care service.

Table 4. 2 Adult/Child Ratio

NCNA Category Age Range Adult/Child RatioPre School 3-6 years 1:8Toddlers 2-3 years 1:6Wobblers 1-2 years 1:5Babies 0-1 years 1:3

Source: Child Care Regulations 2006

The adult/child ratios in Table 4.2 above have been applied to the profile of children attending the Model Facility (please refer to Section 2) to determine the number of staff required.


Table 4. 3 Adult/Child Numbers

Type Age Range Child Numbers Staff Numbers RatioPre School 3-6 years 16 2 1:8Toddlers 2-3 years 12 2 1:6Wobblers 1-2 years 10 2 1:5Babies 0-1 years 9 3 1:3Manager 1Float 1Cook/Cleaner 1Total 47 12

Source: NCNA

It is evident from the table above, that based on the Regulations a total of 12 staff is required for the profile of children in the Model Facility. The staff can be divided into the following categories:

•••• In accordance with the adult/child ratios set out in the Regulations, 9 adults are required to work directly with the children attending the facility.

•••• In accordance with the Regulations, a manager who is the designated person in charge is required to be present at all times.

•••• A floating staff member is required to cover annual leave or sick leave, thereby ensuring that the staffing ratios are met at all times.

•••• A staff member is required to prepare the children’s meals, to ensure the facility meets appropriate hygiene standards at all times and to provide ancillary services as required.

4.3 Salaries

Total salary costs are calculated based on the number of staff outlined in Table 4.3 above, and their respective level of experience.

The only publicly available payscales for the Sector have been issued by BCCN, who are a network funded by the Irish Government and part-financed by the EU under the NDP 2000-2006 and by the HSE North Eastern and Western areas. BCCN guidance on the payscales recommended for childcare workers is based on qualification and years of experience working in the sector. These payscales have been used for the purposes of this analysis.


Table 4.4 sets out the BCCN salary levels considered relevant for this analysis (please refer to Appendix I for further details).

Table 4. 4 BCCN Recommended Child Care Worker Salaries

Childcare Assistant Point 1 €19,328

Childcare Assistant Point 6 €22,295

Manager Point 10 €40,411

Float Point 6 €22,295

Cook/Cleaner Point 6 €22,295

Source: BCCN

•••• A Childcare Assistant with little or no experience is considered to be at Point 1 on the scale.

•••• A Childcare Assistant with 3 to 4 years experience is considered to be at Point 6 on the scale.

•••• It is reasonable to assume that a management or designated person in charge of a facility would have 4 to 5 years experience at this level and therefore would attract a salary at Point 10 on the scale.

•••• The float staff member and cook/cleaner are assumed to be at Point 6 on the scale.

The NCNA have issued guidance that each category of child should have at least one Childcare Assistant with 3 to 4 years experience, or at Point 6 on the salary scale. Accordingly the remaining staff attending to that category can have less experience and for this analysis are assumed to be at Point 1 on the scale.

Based on the payscales above, Table 4.4 above sets out the salary cost per category for each level of childcare worker required.

It should be noted that we have assumed that the BCCN salary scales apply to a childcare worker who is working a standard 8 hour day. In practice a childcare facility could stay open for up to 11 hours and therefore extra staff are required to cover the additional hours.

In a typical facility, certain children will attend for 5 to 8 hours, while others may be present for the full 11 hours of opening. It is assumed in the Model Facility that the additional hours beyond the standard day will require staff cover at 50% of the normal complement, or 6 staff (which equates to 2.25 WTE’s).


Table 4. 5 NCNA Child Care Worker Salaries

SalaryService Type BCCN Scale 8 Hour DayPre School Childcare Assistant 1 19,328.40

Childcare Assistant 6 22,295.00Toddlers Childcare Assistant 1 19,328.40

Childcare Assistant 6 22,295.00Wobblers Childcare Assistant 1 19,328.40

Childcare Assistant 6 22,295.00Babies Childcare Assistant 1 19,328.40

Childcare Assistant 6 22,295.00Childcare Assistant 6 22,295.00

Manager Manager 40,410.77Float Childcare Assistant 6 22,295.00Cook/Cleaner Room Leader 22,295.00Subtotal 273,789.37

Salary Costs for Additional Cover (2.25 WTE's) 46,800.00

Total Salary Cost 320,589.37

Source: NCNA

The three operational staff, Manager, Float and Cook/Cleaner, are assumed to work a standard eight hour working day.

4.4 Employer’s PRSI and Pension

Employer’s PRSI per the NCNA costings was calculated at the rate of 10.75% of total salary cost for the year. This has been reviewed and independently verified as being the correct contribution rate to use. This calculation is set out in Table 4.6 below.

In addition, a provision of €10,000 per annum has been made for employers pension contributions.

Table 4. 6 Employer PRSI Calculation

Total Salary €320,616

Employer PRSI @ 10.75% €34,466

Pension Provision €10,000

Total PRSI & Pension €44,466

Source: NCNA


4.5 Training Costs

According to Part II of the Regulations, induction training should be provided to staff members by the childcare centre. The NCNA costings assume the following mandatory training courses have been provided at the expense of the employer; HACCP’s food safety & hygiene, manual handling and first aid courses.

Our research indicates that the cost of attending these courses ranges from €75 to €600. The NCNA costings assume a cost of €275 per staff member, which is considered reasonable. Table 4.7 below outlined the calculation of the training expense.

Table 4. 7 Training Costs

Total Cost per person €275.00

Total number of staff 12.00

Total Training Cost €3,300

Source: NCNA

4.6 Staff Events

The cost for 12 staff members to attend conferences, seminars and social events for the year, has been estimated to be in the region of €2,250. This appears a reasonable estimate.

4.7 Recruitment Expenses

Due to the relatively low salaries paid in the Childcare Sector, staff turnover tends to be high, with a recent NCNA report estimating it to be in the region of 20 - 30% per annum. On this basis it is likely that out of the 12 staff in the Model Facility, 3 will need to be replaced during the year.

The cost of recruitment is estimated by the NCNA to be in the region of €2,985 per annum for a typical childcare centre. This is based on the fee charged by Irishjobs.ie. of €9,950, which covers a 12 month period for 10 placements. On this basis, the cost has been apportioned for the Model Facility to reflect the cost of three placements.

This information has been verified and reviewed and appears to be reasonable. The breakdown of the cost is set out in Table 4.8.

Table 4. 8 Recruitment Expenses

Irishjobs.ie cost for 10 jobs for 12 months €9,950

Irishjobs.ie cost for 3 jobs for 12 months €2,985

Source: NCNA


5. BUILDING COSTS

5.1 Introduction

Building costs are broken down into the following headings:

Table 5. 1 Building Costs

Reference Cost €

Rent 5.5 86,720 Rates 5.4 10,406 Maintenance, Repairs and Painting 5.5 4,650 Insurance 5.6 3,550 Depreciation 5.7 13,964 Lease Interest on Fixtures & Fittings 5.8 6,472

Source: NCNA

This section reviews the assumptions for the costs set out above, with space being identified as the key driver for these costs.

5.2 Space Requirements

Part V of the Regulations sets out the recommended space requirement for each category of child attending a pre-school service. The ratios for a full day care service are set out in Table 5.2 below. It should be noted that these space ratios relate to clear floor space per child only, and do not include communal, storage or food preparation space.

Table 5. 2 Recommended Floor Area per Child

NCNA Category Age Range Floor Area per ChildPre School 3-6 years 2.3 sq metresToddlers 2-3 years 2.35 sq metresWobblers 1-2 years 2.8 sq metresBabies 0-1 years 3.5 sq metres

Source: Child Care Regulations 2006

Table 5.3 sets out the space requirements per the Regulations and also takes account of the following;

•••• Regulation 28 recommends that babies and children under 2 be provided with suitable sleeping facilities away from the general play area.


The Model Facility has 9 babies and 10 children under the age of 2, requiring a separate sleep area from the play area for both categories. It has been assumed that the Model Facility will provide a separate sleeping room for this children. In this case the Regulations do not specify a recommended space requirement, however, NCNA guidelines indicate that a space of 2sq. metres per child be provided in the sleeping room.

On this basis table 5.3 below outlines the sleeping room requirements, together with the required space per child. It has been assumed that not all children will sleep at the same time, therefore the space required has been calculated based on six babies and six wobblers requiring the sleeping room at any one time.

•••• It is considered good practice in the sector to ensure the provision of sufficient storage and shelving space. 20% of the space requirements is deemed to be the norm.

Table 5. 3 NCNA Space Ratios

NCNA Category

No. of Rooms

No. Of Children

Sq Meters Required per Child Subtotal

Shelving Space Totals

Total per Category

Pre School 1 16 2.30 36.80 7.36 44.16 44.16Toddlers 1 12 2.35 28.20 5.64 33.84 33.84Wobblers 1 10 2.80 28.00 5.60 33.60Sleeping Area 1 6 2.00 12.00 2.40 14.40 48.00Babies 1 9 3.50 31.50 6.30 37.80Sleeping Area 1 6 2.00 12.00 2.40 14.40 52.20

178.20

Source: NCNA & Deloitte Analysis

Further space is required in the facility, as shown in Table 5.4, to accommodate communal areas, including toilets, kitchen and corridors. An estimate of space required for these areas has been determined by reference to the Regulations and the ‘We Like This Place’ report, which takes account of the following;

•••• A minimum of 1 toilet and 1 wash hand basin should be provided for every 10 toilet using children. There are 16 pre-school children included in the NCNA figures, which implies the requirement for 2 toilets and 2 wash hand basins in the Model facility. It is also deemed necessary to include a toilet in the toddler room, as these children will be toilet training.

•••• A minimum of 1 toilet and 1 wash hand basin should be provided for every 8 adults. There are 12 staff which would imply the need for 2 toilets and 2 wash hand basins.

•••• A separate kitchen, laundry, nappy changing and storage areas should be provided to ensure the safety of those being cared for.

•••• For each of the other communal areas, separate dining, office and reception areas should be provided.


Table 5. 4 NCNA Communal Space Requirements

Communal SpacesNo. of Rooms

Sq Meters Req

Total Sq Meters

Toilets 3 6.00 18.00Nappy Changing Rooms 2 6.00 12.00Ventilated Lobby 4 2.00 8.00Kitchen (Main) 1 10.00 10.00Milk Kitchen 2 6.00 12.00Corridors 1 45.00 45.00Store Room 3 6.00 18.00Laundry 1 4.00 4.00Disabled 1 5.00 5.00Dining Area 1 20.00 20.00Office 1 10.00 10.00Reception 1 10.00 10.00Staff Room 1 12.00 12.00Staff Toilet 2 6.00 12.00Total 196.00

Source: NCNA

The total space required to operate the Model Facility is set out in Table 5.5.

Table 5. 5 Total Space Requirements in Sq Meters

Total Children's Floor Area Requirement 178.20

Total Communal Space Requirements 196.00

Total Space Requirements 374.20

Source: NCNA & Deloitte Analysis

The total space requirements appear reasonable and are in line with NCNA recommendations and are in line with the estimated space requirements set out in the ‘We Like This Place’ Report. The total space requirement figure impacts on the main building cost line items such as rent, rates and maintenance.

5.3 Rent

Rental charges have been estimated using rental costs per square foot obtained by the NCNA from CBRE for a number of regions across the country, with an average calculated for Ireland. The rentals are based on average quality space in a residential location and exclude car parking spaces. The figures used are detailed in Table 5.6 below.

The NCNA Model uses the average rental charge for Ireland of €17.80 per square foot and applies this to the estimated space requirement. Taking an average rental charge allows for the variance in rents across the country.


Table 5. 6 Average Rental Charges

RegionsCBRE Rent per Sq Foot

Dublin South 25.0Dublin North 21.0Greater Dublin 19.0Leinster Urban 17.5Leinster Rural 12.5Cork 18.0Galway 19.0Sligo 15.0Waterford 15.0Limerick 16.0Ireland Average 17.8

Source: CBRE

As part of our work, we obtained market information from a range of sources on rental levels across the country. The additional information that we have obtained validates the average figures used in the Model.

Table 5. 7 Total Rental Charge

Total Space Required Sq Meters 374.20

Total Space Required Sq Foot 4,026.39

Average Rent per Sq Foot €17.80

Total Rental Charge €71,669.78

VAT @ 21% €15,050.65

Total Rental Charge Inc VAT €86,720.43

Source: NCNA

The basis of calculating the rental charge in the Model Facility is set out in Table 5.7. The NCNA have used the VAT inclusive price of €86,720 in their costings. Regulated Childcare facilities are exempt from VAT, and as such are not in a position to recover VAT on inputs.


5.4 Rates, Water and Bin Charges

Rates, Water and Bin Charges have been calculated at a rate of 12% of the cost of the rental charge.

During our work, we liaised with the Valuation Office, who informed us that rates, water & bin charges typically represent between 10% and 17.5% of the annual rental charge.

The NCNA carried out its own survey of rental prices and rates, water and bin charges paid by childcare facilities around the country. The survey highlighted, in comparison to rental rates, an average of roughly 0.4% for water charges, 2.2% for bin charges and 9.3% for rates. This results in an overall rate of roughly 12%. Based on conversations with the Valuation Office, this appears a reasonable rate to use.

Table 5.8 below outlines the rates calculation estimated by the NCNA.

Table 5. 8 Rates Charge

Total Rental Charge Inc VAT €86,720.43

Rates Charge @ 12% €10,406.45

Source: NCNA

5.5 Maintenance, Repairs and Painting

The Maintenance & Repairs charge includes the contract cost for alarm, key holding, pest control, boiler maintenance, fire expenses and general repair costs.

The NCNA has estimated the Painting cost of €2,000 on the basis that 2/3 rooms will be painted per year in rotation. This appears reasonable given the nature of the use of the building. Table 5.9 below outlines the costs arising in relation to maintenance, repairs and painting. These costs have been compared to industry norms and are deemed reasonable. As compared to the industry averages, the maintenance, repairs and painting costs are roughly 1% of total costs, which correlate to the estimated figures.

Table 5. 9 Maintenance, Repairs and Painting Costs

Maintenance & Repairs €2,650

Painting €2,000

Total Maintenance, Repairs & Painting €4,650

Source: NCNA


5.6 Insurance

The Regulations state that it is essential to have adequate insurance, which at a minimum should cover Public Liability and Fire & Theft.

As part of our work insurance quotes were obtained for both building and general insurance from Lockton Insurances, the worldwide insurance broker. This quote is detailed in the table below.

Table 5. 10 Insurance Costs

Buildings Insurance €2,800General Insurance €750Total Insurance €3,550

Source: NCNA

5.7 Depreciation

The depreciation expense in the NCNA costings is calculated on the basis that fit out costs are depreciated over 7 years. This is considered a standard rate of depreciation for such items.

The fit out costs used in Table 5.11 were supplied by a childcare provider who recently set up a childcare facility. These costs were allocated on a space requirement pro rata basis by the NCNA. These costs are depreciated over 7 years as outlined in the table below.

Table 5. 11 Depreciation Expense

Kitchen €16,000Room 1 €8,000Room 2 €8,000Room 3 €8,000Room 4 €8,000Sleep Room 1 €2,500Sleep Room 1 €2,500Reception & Office €5,000Flooring €17,750Outdoor play area €22,000Total €97,750

Depreciation

Total Fit out Costs €97,750.00

Depreciation Period 7 years

Annual Depreciation €13,964.29

Source: NCNA

The ‘We Like This Place’ Report indicated a fit out cost in the region of €2,290 per childcare place, which would result in a cost of €107,630 for a 47 place facility. In light of this, the €97,750 fit out cost used in the analysis appears reasonable.


5.8 Interest

The interest cost is an estimate of the first year cost of servicing borrowings taken out to fund the fit out of the facility over 5 years. The fit out costs used are per Section 5.7.

The interest cost is based upon a quote for lease finance supplied by Bank of Ireland at 7.5%, over a 60 month repayment period.

The interest amount will reduce over the 60 month period as the principal is repaid.


6. DIRECT COSTS

6.1 Introduction

Direct Costs are broken down into the following headings:

Table 6. 1 Direct Costs

Reference Costs €

Food Costs 6.2 21,507 Utilities 6.3 5,667 Audit, Accountancy & Payroll 6.4 4,500 Other Costs 6.5 22,650

Source: NCNA

Direct costs are driven by the number of children attending the pre-school service, the number of staff members employed in the facility, and other general recurring expenses necessary to run such a service.

6.2 Food Costs

The Regulation states that “a pre-school service shall ensure that suitable sufficient, nutritious and varied food is available for a child attending the service”. On this basis the provider must ensure that children are provided with regular drinks and food in adequate quantities to their needs. For those children in full day care services, at least two meals and two snacks must be served, with one meal being hot. If children attend for a long day, an evening meal should also be provided.

The NCNA has estimated the cost of providing a child with adequate meals in accordance with the Regulations as being €8.80 per week. This cost estimate includes breakfast, 2 snacks and dinner daily, and is based on industry average food costs.

Table 6. 2 Food Costs

Cost per child per year €457.60No. of Children 47Total Food Cost €21,507

Source: NCNA

Our research of the sector indicates that food costs represent up to 5-6% of total operating costs. The above figure represents approximately 4% of the total estimated operating costs of the Model full-day facility and appears in line with sector norms.


6.3 Utilities

Utilities include light, heat and gas based on a new building with under floor heating. NCNA estimated a total utilities cost for the Model Facility of €5,667, or 1% of total costs, based on an analysis of costs incurred in the Sector. Our research of comparable facilities indicates that the cost estimate is reasonable.

6.4 Audit, Accountancy & Payroll

NCNA estimated the cost of the audit, accounting and payroll services for the Model Facility at €4,500, representing c.1% of total costs. Our research indicates that this is reasonable.

6.5 Other Costs

Other costs include a number of additional line items, which are detailed in Table 6.3 below. These items are relatively immaterial in comparison to the total cost of the Model Facility, and therefore have been analysed together. In total they represent roughly 4% of total operating costs, which is reasonable relative to experience across the sector.

Table 6. 3 Other Costs

Cleaning €3,000Classroom Materials €4,500Advertising €4,750Printing, Postage & Stationery €2,700Telephone €4,000Motor & Travel €1,500Bank Interest & Charges €700Legal & Consultancy €1,500Total Other Costs €22,650

Source: NCNA


7. SENSITIVITY ANALYSIS

The cost per week per child in the Model Facility is €227. The following are possible variances on this cost.

7.1 Sensitivities

7.1.1 Rental Variations

The Model Facility assumes a rent per square foot of €17.80. Table 5.6 shows that rental costs may vary from €12.50 to €25 per square foot depending on location. The impact on the cost per child per week is as follows;

Table 7. 1 Rental Variations

Lowest HighestLeinster Rural Dublin South

€12.50 €25

Rent (€8.73) €11.86VAT (€1.83) €2.49Rates (€1.27) €1.72Impact on cost per child per week (€11.83) €16.07

Range


7.1.2 Staffing Levels

The Model Facility assumes that staff cover at 50% of full operating levels is required to provide the necessary care after the standard day. This will depend on the duration of stay of the children at the facility. Were all children to be present in the Model Facility for the full eleven hours of opening each day, the staff numbers after the standard day would need to be increased to full complement. This would result in an increase of €10.60 in the cost per child per week.

Table 7. 2 Staffing Variations

Full Staff Complementfor 11 Hour Day

Salary €9.57PRSI €1.03Impact on cost per child per week €10.60



The impact of the sensitivity analysis on the cost of a child per week of €227 in the Model Facility is shown in the table below.

Table 7. 3 Impact of Sensitivities on Cost of Child per Week

Lowest Highest

Base Case €227 €227Rental Sensitivity (€12) €16Cost per child per week €215 €243

Base Case €227 €227Salary Sensitivity €11Cost per child per week €227 €238

Combined Sensitised cost per child per week €215 €254

Range


It can be seen that when the impact of these sensitivities are considered, the overall cost of a full-day childcare place is in the range of €215 to €254.

7.2 Full Occupancy

The Model Facility assumes full occupancy of childcare places. Were the facility to operate at less than full occupancy, the cost per week per child would increase because costs are not strictly variable.

At 90% occupancy, the cost of a full-day childcare place per week is estimated to increase by approximately €14, from €227 to €241.


APPENDICES

Review of the Cost of a Full-Day Childcare Placemen 62 t15th November 2007

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NCNA, Unit 12c Bluebell Business Park, Old Naas Road, Bluebell, Dublin 12.Tel: 01 460 11 38 Fax: 01 460 11 85 Email: [email protected] www.ncna.ie

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