Since its introduction in the 2021 Federal Budget, the Canada-Wide Early Learning and Child Care ("CWELCC") System has been amended and updated several times (most recently in December 2023). The legislation will likely continue to evolve as childcare centres adjust to the framework and seek further clarity.
While the legislation is well intended, and has increased accessibility for many families, it has also put significant stress and strain on childcare operators and their staff who already operate in a highly demanding and highly regulated environment. The initial implementation phase focused on increasing access for families and quickly reducing fees for families. The next phases, as outlined by government, will focus on longer-term sustainability and are expected to include closer engagement and consultation with service system managers, operators and other participants in the ecosystem.
Understanding Key Components of the CWELCC System
The CWELCC System, a landmark initiative by the Canadian government, aims to make childcare more accessible and affordable across the country. The legislation includes several provisions for both Licensees and Service System Managers, and should be read in its entirety, along with its addendums. Understanding the primary points and details of the legislation is crucial for operators to remain compliant.
For our purposes, we will highlight three core components for participating licensees.
Affordable Childcare: A central goal is to reduce the average childcare fee to $10 per day by 2026. Taking a staged approach, Base Fees for parents were reduced by 52.75% in 2023 compared to 2022 rates. Non-Base Fees (charges for optional services or fees pursuant to operator agreement, e.g., fees for picking up a child late) are not subject to CWELCC.
Workforce Compensation: The program emphasizes support and retention of RECEs through improved compensation for low wage earners. The legislation introduced a wage floor and an annual wage increase for eligible RECEs. The new funding is in addition to the Child Care Wage Enhancement Grant (Provincial Wage Enhancement), which requires separate application.
Accountability and Reporting Requirements: All participants in the CWELCC program must submit financial information as well as audited financial statements to their Service System Managers to verify that the funding provided was used for the purpose(s) intended. In Addition, service managers will be required to complete audits on a random sample of participants on an annual basis to confirm that funding has been used for its intended purpose. Compliance will be tested and verified through both financial and operational measures (see more detail below).
Workforce Compensation - Recent Update
In November 2023, the Ontario government announced plans to further increase wages for RECEs, as it aims to address workforce shortages and improve recruitment and retention of qualified educators. As part of the strategy, the government announced plans to increase wage floors for RECEs, as well as the previously announced wage ceilings for annual wage increase subsidies. The planned changes are summarized in the following table:
Recently Announced Changes (November 2023) | Effective 2024 |
RECE Program Staff | |
Wage Floor | $23.86/hr (up from $20 previously) |
Wage Cap (for Workforce Enhancement and Annual Wage Increases) | $26.00/hr (up from $25 previously) |
RECE Childcare Supervisors | |
Wage Floor | $24.86 (up from $22 previously) |
Wage Cap (for Workforce Enhancement and Annual Wage Increases) | $29.00 (up from $25 previously) |
These updates were confirmed in May 2024, with funding distributed shortly thereafter.
As with prior CWELCC guidance, licensees will need to include workforce compensation payments in each pay cheque or payment made. Operators are not permitted to make a lump sum payment for these enhancements at year-end.
Accountability and Reporting Requirements
Prior to enrollment in CWELCC, the majority of operators would not have needed to prepare audited financial statements. The cost and time commitments of a financial audit can be surprising. While they're not fun, audit fees and demands on your team's time can be reduced by being prepared, having strong systems and internal controls in place, clear accounting policies and well-trained staff (we're here to help!).
In addition to the financial audits, System Service Managers are tasked with reviewing compliance related to the policies, parameters and directives set on in CWELCC. As per the guidance, "the audit program must focus on compliance to ensure that the goals of the CWELCC System are being achieved, including reduced base fees being implemented consistently, and to ensure compliance with the workforce compensation requirements including increasing wages to support a mandated wage floor and annual wage increase." Operators should ensure they have the systems in place to show financial compliance. Ensuring that all required information and disclosures are included in your Parent Handbook should also be top of the list.
The Role of ChildcareCPA
At ChildcareCPA, our full-service accounting practice only works with Canadian childcare centres. We understand the nuances of your business and the evolving industry legislation. We put the systems in place and take over your accounting and finance functions, so you and your team can focus on your children and their families. We'll work with your Service System Manager and Auditor to save you time, money and help you thrive.
If you'd like to discuss further, we'd love to hear from you! Email us at hello@childcarecpa.ca