Question:3#

Question: Can you help with an introduction for this report(min 200Words)

The Three Bears Creche and Pre-School.

Overview of the business.

The Three Bears Creche and play school was opened in 2005 in a large and growing suburb of Dublin by Mary Bird in a four bedroomed semi-detached house which she owns and uses rent and mortgage free. Mary has put considerable time into building the business to its current level. She has a low staff turnover and a steady customer base. Mary has also trained in FETAC Level 6 childcare and has completed courses on business management and staff management.

The creche caters for pre-schoolers and school aged children. The creche offers both full time care, part time care and pre-school sessions supported by the Early Childhood Care and Education (ECCE) Scheme.

Babies under 2 years old are no longer cared for in the creche as this is a very low profit margin business and requires a separate sleep room unless less than 6 children are being cared for in one room. Children aged over 2, needing sleep or rest have access to a low-level mat.

The pre-school offers two sessions of educational programs for children with a duration of 3 hours. One session is in the morning and the other in the afternoon. This is funded by the Early Childhood Care and Education (ECCE) Scheme. The pre-school education provided must conform to Solta, the national framework for early years care and education. Each ECCE pre-school class has 9 children in attendance. Some of these children also attend full time or part time in the creche.

School age children from 5 to 13 years are offered a breakfast club, afterschool and camps during the summer and a drop off and collection service to and from school.

The adult child ratio in line with the requirements of the family and child agency TUSLA, which requires that at least 2 adults are on the premises at all times and also specifies the following:

Age	Adult to Child Ratio
2-3 years	1:6
3-6 years	1:8
Child availing of ECCE scheme and attending sessional pre-school (up to 3.5 hours)	1:11
After 3.5 hours (when ECCE finished) and child is staying on in the Full Day Care Service.	1:8 or 1:6

Revenue

Fees and Top Up Fees

The average fees received directly from parents are 100 per week per child, there are on average 23 children in the creche, some of whom also avail of the ECCE Scheme for pre-school. The payments received from parents are in addition to the ECCE payments made by the government to the Three Bears Creche. Not all children are on the premises at the same time, 5 children are in primary school and do not avail of the ECCE scheme. Payments are required for each week, including holidays.

ECCE Scheme

A set amount per child is paid under the ECCE to the Three Bears Creche as it is a participating day care service. In return the Three Bears Creche provides free childcare to children within the qualifying age range, that is from 2 years 8 months to not older than 5 years and 6 months, at the end of the pre-school year, 30^th June.ECCE covers 3 hours a day for 5 days a week, over the school year. Anything over this time has to be paid by the parent as a top up fee. ECCE Payments are made at the end of every month in the school year. Excluded from the payments are mid-term breaks, Easter, Christmas and Summer holidays, in total, 14 weeks. The ECCE payment per child is 69 per week which is received from the beginning of September to the end of June directly by the creche. Where a child is in full time or part time service the ELC provider must reduce the fees paid by the parent or guardian by the ECCE payment, so the parent/ guardian only pays the top up directly to the creche. As neither Mary Bird or any of her staff have a HETAC Level 7 childcare qualification, the Three Bears cannot avail of an extra payment of 12 per child per week which is available to creches that have staff with that qualification.

Costs

The creche was given planning permission by South Dublin County Council when it commenced trading, however, it was noted at the last inspection, that due to the nature of the building and its location in a busy housing estate, that this would not be granted under current regulations. As the planning permission has already been granted, there is currently no issue. Some parking is available at the front of the building. However, parking has been an issue with neighbours complaining about cars blocking driveways. This requires monitoring and careful management and is a constant source of worry to the owner. The premises are charged Rates at an average amount of 4,756 per year by the County Council.

Significant capital has been invested into the building and the garden, with the provision of a soft surface costing 9,350, and outdoor play equipment to the value of 2,500 in line with regulations, these are expected to have a useful life of 10 years. All toys, equipment, materials and furniture are regularly checked for damage and wear and tear and in the event of remedial action required, these must be replaced or maintained. Average maintenance costs on the premises and equipment are estimated at 2,100 per year.

The creche also has a dedicated car for transporting the children to and from school. A second-hand people carrier car was purchased for 8,000 and is currently depreciated by 12.5% straight line. Fuel costs for the car are on average 2,300 per year and running costs of the car are on average 1,300 per year.

Fire safety is a requirement for premises used for early years services, and alarms must be maintained based on the requirement of the Fire Safety in Pre-Schools 1999 regulation. Smoke alarms must be tested at least once a month and records must be kept and be available for inspection by parents, guardians, employees and authorised people.The fire Alarm has to be upgraded and the estimated cost is 3,784 and is expected to have a useful life of 8 years.

The school has to be adequately insured, including public liability, fire and theft, buildings and insurance for any outings, as well as motor insurance for vehicles used by the service to transport children to and from school.Insurance is a significant cost. Insurance costs increased to 1,310 per annum in the past year and are expected to stay at this level or rise in the future.

A cleaning schedule and programme is available and documented. Cleaning is carried out by staff and the owner.

The HSE Environmental Health are also authorised to carry out inspections of childcare facilities. The Three Bears provides food and hence also falls under the remit of the Food Safety Authority of Ireland, who audit day-care food providers. The Three Bears must as a registered provider, ensure that all children attending the service receive a nutritious and varied diet, taking account of the children's individual needs and preferences. The annual food bill for the last three years has been 4,140 on average. Food is prepared on site in the kitchen. The average expenditure on furniture and fixtures, including electrical equipment such as microwaves and fridges etc is 750 per year. This equipment is capitalised and depreciated at 10% per annum straight line. A new fridge was purchased this year as it was a requirement from an audit by the Food Safety Authority for the storage of lunches brought by children attending the ECCE classes. This cost is included in the average costs of 750 for the year.

Telephone, light and heat are on average 1,910 per year.

Bank charges are approximately 120 per year. Subscriptions to child care network and general supplies amount to 1,600 per year.

Staff costs.

There are three part-time staff employed, earning an average gross weekly wage of 175 for the weeks that they work. Employer's PRSI is 8.8% is charged in top of this rate. The three staff do not work during July and August, they use their annual leave for 1 week of the 8 weeks break and the rest of the weeks are unpaid during the summer.

Four staff members are full time and earn an average gross weekly wage of 277.50 with Employer PRSI on top of this of 8.8%. Staff numbers have been consistent, with some staff members with the creche since it opened in 2005. Mary has always sought to support her staff in training and continuing education and in flexible working arrangements.

The owner also works in the business and takes drawings and is self-assessed for income tax on the profits of the creche. A book keeper prepares the payroll, completes revenue returns and completes the accounts each year. The total cost of the accounting fees each year is 3,200.

The creche provides staff with on-going training each year with the average annual cost being 850 to ensure compliance with regulations. Minimum qualifications for staff are either a major aware in Early Childhood Care and Education at Level 5 on the National Framework of Qualifications, or similar. Mary has sourced a part time level 7 course which can be completed in 2 years at a total cost of 6,000, if it is started this year, if it is started next year, it will be a four-year course, costing twice that fee. Mary has not decided whether to complete this course or allow a staff member to take the course. Vetting must be completed before a person is appointed, assigned or allowed access to, or contact with, a child attending the service, including unpaid workers or contractors. There must be an adequate number of staff available at all times. These staff must be appropriate to the needs of the children, the type of service and the care provided. All relevant records must be stored and appropriately controlled and protected.

Other Considerations

Early years childcare providers are regulated by Pobal. The Health and Safety Authority also ensures that workers are protected from work related injury or ill health. The Early Years Education Inspection (EYEI) also inspects ECCE providers.

In addition, TUSLA, the child and family agency have a statutory authority to assess levels of compliance with the Childcare Act 1991 (Early years Services) regulation 2016. Regulatory inspections are carried out to determine the extent to which the service is well governed, the health, welfare and development of each child is supported and that children are safe in the service and the premises are safe, suitable and appropriate for the care and education of children. Once school child attending the creche is attending a DEIS school and the creche will be assessed by the DEIS inspector in the coming weeks.

Risk management requirements are implemented as set out in Regulation 23 of the children's Act 1991. The creche has developed, approved and distributed policies, procedures and statements to standardise approach to implementing best practice. The procedures must be reviewed regularly.

The government has recently proposed that there will be more of an investment in the childcare sector, changing this from a largely private sector (69% of creches are privately run) to a hybrid public funded and managed model.Also, the government has announced upskilling of the workforce so that by 2028, the sector will be a graduate led workforce. Average fees for the sector are 186.12 per week, and the government has indicated that fees would be capped in the future with rises in employee wages to reflect the importance of the work to children, families and society. An employment regulation order is due to be published to improve pay and conditions for employees in the sector. 45,000 people work in this sector of the economy but, staff retention has been an issue due to poor pay and conditions.

Currently many of Mary's clients pay by cash or cheque. This is costly in terms of bank lodgements and time incurred in counting, and going to the bank to make a lodgement. Mary is considering asking all parents to carry out bank transfers for payment or to set up standing orders. Recently a parent asked if she would accept a cryptocurrency as payment. Mary refused as she had no knowledge of cryptocurrencies and does not know if it is even legal tender.

Mary is concerned about the future of the business and the premises, given the changes proposed by Government for the hybrid business model and the issues around the suitability of the premises. Mary has been able to earn a reasonable living from running the creche, however, she is worried, that with no increases in revenue and increasing staff costs, that the profits will not make it worthwhile to continue running the business. The level of administration and management of all of the different agencies and requirements is becoming more onerous and expensive.

Required

Mary Bird is concerned about the future viability of The Three Bears Creche and Playschool. She has identified issues to be raised, the first is the profitability of the business and the second is the viability of moving the business to a larger purpose built and premises and the third is to develop a long-term strategy to support the ongoing viability of the creche. Mary has asked for your advice and recommendations. Mary has very limited understanding of accounting methods.

Draft a report for Mary Bird to cover the following areas:

Financials.

Prepare a statement showing the budgeted net profit or loss for the coming year ending 31^st December. All workings should be clearly explained in notes. (10 marks)

Discuss the assumptions underlying Break Even analysis for the Creche.Assuming all staff costs are direct labour and food costs are the only direct material and can be deemed to be variable. Calculate the average contribution per child per year and the number of children required to breakeven. Provide an explanation of the breakeven number and its implications to Mary.

Re-Calculate the budgeted profit if staff wages were to increase by 5% in line with Government expectations and a purpose-built building was rented at a cost of 3,000 per month in the next year and revenues were not increased. Recalculate the breakeven number of children required and explain the effect on breakeven and profits.

Strategies and Performance.

Evaluate three possible strategies that could be introduced for the Three Bears Creche and Montessori including pricing and the number of children using the creche to improve profitability and operational performance.

Describe FIVE dimensions of performance for the Creche operations that support the strategies suggested in the report. Provide a measure or criteria that could be used for each dimension of performance and explain how these measures can be used to aid in the management in translating the strategies into actions to achieve a best in class performance.

Cryptocurrency and Distributed Ledger Technology.

Provide an explanation of cryptocurrencies and distributed ledger technology for Mary. Identify and explain the possibilities and risks of accepting cryptocurrencies in the business. Outline any future possibilities of these technologies in the creche industry.