What is subsidy and how does it impact childcare?

Subsidies are common in childcare but not always fully understood. What does it mean to receive a subsidy? What are the requirements? How does the process work? Subsidy procedures can often cause confusion among parents, resulting in an influx of questions and admin work for childcare directors. However, it does not have to be that way. With the proper knowledge and subsidy management for your center, it can become an easy-to-understand, seamless process for parents and educators alike. 

What is a subsidy? 

In childcare, a subsidy is simply a sum of money provided through a government program that contributes to childcare payments based on specific parameters. In most regions, childcare providers apply for subsidies on behalf of their parents and receive funds directly from the organizational bodies. Parents that meet the requirements of receiving a subsidy are then charged less than the full amount of childcare and pay this amount directly to their provider. Providers can use subsidy management software to keep track of which children are on subsidy and their individual payment statuses. 

Subsidy in childcare 

Childcare can be one of the biggest expenses for families. Depending on how many children a family needs care for,  it can be close to a monthly rent or mortgage payment! In order to make childcare more affordable, most state or provincial governments provide subsidy programs in their regions. For example, in Canada, many childcare providers are opting into a new federal government program offering affordable childcare (as low as $10/day) for parents. In Alberta, eligible families with a combined gross income under $180,000 a year can receive subsidies to further reduce childcare fees.

For more information about subsidies in your region, visit the following resources: 

• Ontario, Canada
• California, US 
• New York, US
• Alberta, Canada

Childcare centers generally have to opt-in to administer subsidies and sometimes have to complete training programs. Above is an overview of the general subsidy process at a childcare center! (Tip: these can count toward your professional development hours, so be sure to check your state or provincial guidelines!). 

Many programs have requirements that families need to meet in order to enroll. These may include factors such as where they live, their income, the number of children they have, etc. If parents meet these requirements, they will be accepted into the program and their center will receive a specified sum of money towards their childcare payments. A co-payment is the portion of childcare fees that a parent is still required to pay personally as part of their subsidy agreement.

In most programs, money is provided to centers proactively and parents are charged a reduced rate. In some cases, parents will have to submit receipts for their childcare expenses and then be reimbursed.

Organizations that provide subsidies will often commission a market study to determine the average daily cost of tuition in a specific region based on the maximum amount that the region considers reasonable for a time period of care. If a center’s fees are higher than the average found in the survey, the families will have to pay the difference.

Subsidy impacts on childcare center directors 

Centers must fill out attendance forms for each child on a subsidy, tracking the time in and time out every day for each child, and submit this to the governing agency. The governing agency is a council or third-party organization that works in conjunction with a government office. The council or organization is normally responsible for the administration of the subsidy program for childcare organizations. The state or province generally sets the main regulations, then the agency at the municipal level governs the distribution of the program. For example, calWORKS in California! 

The subsidy process for directors: 

1. Sign up your childcare center to opt-in to your local subsidy program
2. Submit information on your tuition rates and a list of subsidized children
3. Receive money from governing body (sometimes on a debit card or direct deposit or cheque) in a lump sum
4. This is followed by a report that breaks down the per-child amount 
5. Limited time is provided to review the information and ensure it is correct
6. Directors can contest any poor payments

And in many cases, this is all done on pen and paper! 

Subsidy management tool – HiMama Billing

If you’re using HiMama, the billing module allows you to create, manage, and track subsidies all in one convenient place!

The subsidies tab within the app displays a list of all subsidies you have ever recorded. By default, the list will display the most recently created subsidies at the top but, if needed, you can search for a specific child by entering their name on the search bar, or you can use the date range filter.

HiMama Subsidy Management allows directors to:

• Keep track of all subsidy information in one organized place! 
• Add a status for each child record and identify a child as ‘subsidized’ or ‘not-subsidized’
• Keep track of all subsidy-related payments no matter where they come from! 
• And more!