Wednesday, 23 February 2011

Profit and childcare don’t mix

Wednesday, 16 February 2011
Patrick McClure, Ethics Fellow – Centre for Social Impact
Fairfax National Times, Sydney Morning Herald
The importance of childcare and early childhood development cannot be overstated writes Patrick McClure, Ethics Fellow at the Centre for Social Impact, in an opinion piece in the Sydney Morning Herald.

Ethical dilemmas in childcare

Most of our development as individuals takes place in early childhood. Research shows that it is from birth to age five that children rapidly develop the foundations on which subsequent development builds.

The increase in working parents in Australia has highlighted the importance of affordable, accessible and quality child-care services. It also raises an ethical dilemma.

Is child care about quality of services that includes higher staff-child ratios and better qualified staff?

Or is child care a corporate business making large profits and returns for investors? Or is it a mix of quality services and profitable business?

A report last year from the Office of Early Childhood Education and Child Care showed that 64 per cent of child-care centres are now privately run commercial companies.

When ABC Learning rapidly expanded its child-care business, non-profit child-care centres could not understand how the large, publicly listed company was making the profits it reported.

In submissions to a Senate inquiry, non-profit organisations stated that their services operated with staff costs typically at 80-90 per cent of operating revenues. In addition they did not pay rent, had similar fee structures to ABC and their education services were cost-neutral. Yet ABC Learning was reporting profits 30-40 per cent higher than them.

The subsequent demise of ABC Learning and other listed child-care companies appeared to show that profit and quality child care do not necessarily mix despite annual government subsidies of $4 billion.

The non-profit sector argues that it offers higher-quality care for children at an inevitable cost.

KU Children’s Services stated in a Senate submission that the non-profit model is more expensive than the ABC Learning model due to higher quality of care including higher staff-to-child ratios and better qualified and experienced staff, as well as the inclusion of children with special needs. In NSW the staff-child ratio for children under two increased this year from 1 to 5 to 1 to 4.

GoodStart Childcare, the consortium of non-profit organisations that bought many of the failed ABC Learning centres, is a hybrid of the profit-making and non-profit models.

GoodStart’s chairman, Robin Crawford, said recently that the organisation was on track to generate possibly $10 million this year. It also relies on a charity exemption from payroll tax reportedly worth $20 million per year.

With a high fixed-cost base, occupancy levels are the make or break indicator for child-care centres. An industry report from IBISWorld estimates that long daycare centres require occupancy rates of at least 70 per cent to be profitable.

It is a reflection of the problems facing ABC Learning that its founder, Eddy Groves, reportedly told institutional investors that 90 per cent occupancy of child-care centres was the desired metric for the company. Anything less than this and the company would struggle.

The ASX-listed G8 Education, a merger between publicly listed Early Learning Services and a private company Payce, has acquired child-care centres in Australia and Singapore. Its website states it now operates/manages 108 of them.

Even with industry regulation, the failure of a large, publicly listed company such as ABC Learning has not been in the interests of Australians.

The successful organisations providing quality care appear to be non-profit or small to medium-sized commercial companies. Given this history, it will be very interesting to watch GoodStart Childcare’s performance.

It is a consortium of non-profit organisations with funding from the federal government, non-profit partners, high-net-worth individuals, foundations and a bank loan. One hopes that it will be successful in providing the affordable, accessible and quality care that Australian children deserve.

Full story click here

We need people who take risks

Saturday, 19 February 2011
By John Witheriff
Opinion Piece,

BEING in business means at some stage taking a risk.

That risk might turn an opportunity into a goldmine, or it could result in incalculable loss — or just about anywhere in between.

But risk in its own right is not inherently a bad thing.

And so it is interesting to see the sentiment among many sectors of the community — the public, government officials, creditors and even the legal fraternity — when it comes to prosecution of failed risk-takers.

This week, as I watched the evening news, I saw Eddy Groves leaving a Brisbane courthouse, having been brought there to answer matters

arising out of his involvement with the crashed childcare giant ABC Learning Centres.

It reminded me of my experience some years ago in Sydney when I was acting for a corporation unfortunately involved in the collapse of the Spedley and Rothwells merchant banks.

I entered the courtroom, which resembled an old church, down a laneway in Sydney and sitting in the back was a seemingly broken and forlorn figure. Upon closer examination I noticed that it was Alan Bond. Having seen Alan as the king of the America’s Cup and champion of entrepreneurism in Australia, I was shocked to see this lonely and dejected figure sitting by himself in this courtroom.

The Groves case, the Bond case and many, many others all directly arise out of the obligation that directors and officers of corporations have to act honestly and diligently.

This is as it should be — with the privilege of running a shareholder business comes a responsibility to ensure it is operated appropriately.

I really have no issue with this principle. It is critically important that a high level of responsibility is shown by individuals who act as directors and officers because, after all, they are dealing in large part with other people’s money.

What I find troubling is the way the post-collapse investigation process so carefully goes over every minute detail of the past actions and activities of a company to try to find an instance that would be sufficient grounds for prosecution.

This application of 20-20 hindsight to the conduct of companies can, at times, create the risk of a miscarriage of justice. Liquidators and regulators come under increasing pressure from angry creditors to find anything upon which they can ground a prosecution.

There is an element of revenge and vindictiveness in the pressure applied by some of the people affected by the collapse. There is also a large demand by the public to see “justice” delivered.

Over the next couple of years we will see the fallout from the global financial crisis manifest itself in a range of prosecutions. Many, many of them will be deserved but some won’t and the enormous strain and personal difficulties suffered by individuals as they are prosecuted through our justice system is of great concern to me.

I recently had lunch with a senior Queen’s Counsel and we talked about this very topic. He argued that it was important to send a message to all directors that they will be prosecuted if they have lost investors’ money.

I told him I could not disagree more. I acknowledged that directors needed to be careful and act honestly but if he had his way we would not see the economic activity needed to continue to drive a vibrant economy.

If the outcome of the next tranche of prosecutions is to reduce honest company directors’ appetite for risk, then the best interests of our community will not have been served.

Full story click here

Childcare rebate to be paid weekly

Monday, 21 February 2011
By Dan Harrison
Sydney Morning Herald

THOUSANDS of families will be able to receive the childcare rebate weekly under changes to be introduced to Parliament this week.

The changes honour a Labor election promise to move to fortnightly payments of the benefit, which is currently paid quarterly.

But the Minister for Child Care, Kate Ellis, yesterday announced the changes would allow families to receive the benefit as soon as their childcare centre submits their attendance data to the government.

While centres are only

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required to provide this information fortnightly, many submit the data on a weekly basis, allowing families with children in those centres to receive the benefit weekly. Before last year’s election, the Coalition had promised to pay the benefit weekly.

Ms Ellis said the change, to take effect from July, would affect up to 207,000 families in NSW.

Families can choose to have their rebate paid directly to their childcare centre and receive a reduction on their bills, or receive the benefit directly. They also have the option of receiving the benefit annually or quarterly.

Ms Ellis said the changes could reduce the out-of-pocket costs for some families by more than $100 a week.

A family earning $80,000 with one child in full-time care would currently face out-of-pocket costs of about $240 a week. By receiving the benefit more regularly their out-of-pocket costs could drop to $138 a week, Ms Ellis said.

Full story click here

Essential to know the pitfalls of childcare

Wednesday, 23 February 2011
By Anne Connolly
Sydney Morning Herald

A few years ago, when I was due to return to work just as my second child was turning one, I found myself with the common problem of having no organised child care. My son’s name was inching up several long waiting lists when a gleaming new (and expensive) child-care centre opened next door to my four-year-old daughter’s preschool. Signing up meant I would achieve the dream of every working parent – a common drop-off and pick-up point every day. I begged the manager for a place and my son was enrolled.

We went for two preliminary visits to help him settle in. What I observed set off alarm bells – disengaged staff, bored infants wandering aimlessly, a lack of attention and warmth from carers. Morning tea was distributed without a please or a thank-you.

Although the ratios of staff to children seemed to adhere to regulations, the supervision was laissez-faire with more concern shown to taking photos of the children to display on the afternoon slide show than engaging them in group play.

Through a window I watched an older group being hustled inside with the aid of Hi-5 playing on a giant TV screen. I was concerned but, like many parents with few options, I was forced to turn a blind eye and hope I was just witnessing an unusually bad day. Or two.

My son never made it past the first week. When I popped in on his third morning to check on him, I found him strapped in a pram asleep. He was hot and sweating and the air conditioning was turned off. The monitor was switched off and staff were a long way from his room. The manager tried to reassure me it would never happen again but, after observing my son’s unusual distress over the following days, I never returned. I cobbled together a collection of family and paid carers and waited for a spot at the community childcare centre my daughter had attended. It has chipped paint and old play equipment but the staff treat the children with care and attention. When a spot came up, my son settled in without a problem.

Fortunately, I had the advantage of having seen the difference between good and bad care. But what of the parents who have no alternatives to judge by? Even if they had would they feel inclined to complain when there is such a shortage of places?

Like many others I’ve spoken to with similar experiences, I did not complain to either the state or federal authorities. Last year, only 363 people complained to the National Childcare Accreditation Council and fewer than a quarter of these lodged an actionable complaint in writing. The child-care centres in question were required to present evidence to the council that the matter had been resolved and that was the end of that.

Whether they were later subject to spot checks or other penalties, the

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council was unwilling to say and there is nothing on the public record. This means that parents assessing a potential child-care centre have no idea whether it has been the subject of no complaints or a dozen.

There are plenty of excellent child-care centres in NSW but when I related my experience to several workers in the industry they were not surprised. The centres with the worst reputations are those seeking big profits via a tighter-than-necessary budget.

Overworked and underpaid staff with few entitlements are more likely to let standards drop. With

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private child-care centres dominating the landscape, it is pertinent to ask: can Australia successfully balance a role for private enterprise with the need for quality, affordable care for all children? As my brief experience shows, it’s quite possible for a centre to meet all the regulatory standards yet fail to provide a nurturing and educational environment.

Long-awaited reforms are designed to overcome some of these problems. In three years’ time, child-care workers will need to be better qualified. And since the beginning of this year, increased carer-to-child ratios have been instituted. Let’s hope similar changes to the complaints system are in the pipeline because parents have a right to more information when deciding where their children spend their crucial formative years.

Full story click here

Historical Independent Consultant Articles

Article Title Article Provider Date

Australian Industry Newsletter – 10 February 2012
Australian Industry Newsletter – 16 January 2012
Australian Industry Newsletter – 4 November 2011
Australian Industry Newsletter – 31 August 2011
Australian Industry Newsletter – 24 August 2011
Australian Industry Newsletter – 04 August 2011
Australian Industry Newsletter – 29 June 2011
Australian Industry Newsletter – Tuesday, 15 June 2011
Australian Industry Newsletter – 08 June 2011
Australian Industry Newsletter – 01 June 2011
Australian Industry Newsletter – 30 March 2011
Australian Industry Newsletter – 23 March 2011
Australian Industry Newsletter – 16 March 2011
Australian Industry Newsletter – 23 February 2011
Australian Industry Newsletter – 16 February 2011
Australian Industry Newsletter – 09 February 2011
Australian Industry Newsletter – 26 January 2011
Australian Industry Newsletter – 10 November 2010
Australian Industry Newsletter – 03 November 2010
Australian Industry Newsletter – 27 October 2010

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