Opinion: Educares shouldn’t require excessive accounting standards for funding

Grant funding can dramatically assist Educares in impoverished communities. However accessing grants requires wading through layers of red tape, which may include excessive accounting requirements.

Jane the owner of Jane’s Educare in Ivory Park started her business in 2012. By 2017, when researchers of the book Township Economy visited her, Jane’s Educare looked after 35 children, provided her with an estimated R5 000 a month income and employed two additional caregivers.

The researchers note, “Janes took particular pride in the quality of the education, maintaining a structured programme and teaching the children in the English language. ‘When my grade R go to primary school,’ she made a point of telling us, ‘they always win academic awards.’”

However, an obstacle in the way of expansion for Jane was registering her Educare with the Department of Social Development as required by law. This would also enable her to qualify for a per-child subsidy.

In 2017, Jane charged school fees of R250 per month. The subsidy would pay out R330 per child, more than doubling her income.

“Every time I go to hand in the papers, the tellers tell me that I haven’t brought in the right information,” she told researchers. Nor is Jane’s experience isolated.

The authors of Township Economies write, “Across the cohort, 71 respondents (36%) reported that they were registered with the Department of Social Development and 33 (16%) said that they were registered with the Department of Basic Education. Yet merely 25 of these received the state subsidy for child attendees.” 

At the time the book was written, Educares had to register with the Department of Social Development for grants for younger children, and the Department of Basic Education for grants for older children. Recently all registration and grants have moved to the Department of Basic Education. 

Jane’s major obstacle to registration was related to land use and building requirements. However, even if she had overcome this obstacle, she would have needed to meet certain accounting-related requirements. 

How much financial assurance is enough? 

Although registration of Educares is governed by the Children's Act, the exact requirements including those related to accounting differ by province.

For instance, the Western Cape gives the option of applicants only needing to provide three months' bank statements if their centre's income is less than R450 000 per year.

By comparison, the guidelines given by the Mpumalanga Provincial Department of Education are unclear but more onerous.

A recent submission by CIBA to the department points out that one section of the department's guidelines indicates that financial statements must be prepared which, “must be reviewed by an independent reviewer or certified auditor, but later the guidelines refer only to ‘audit’, with it’s exact meaning unclear.

The fees of auditors are generally more expensive than those CIBA’s Business Accountants in Practice charge.  An important factor for informal Educares who have low turnovers.

Members have contacted CIBA indicating that they’re no longer on the Mpumalanga Department’s database of accounting suppliers for Educares. At the time of publishing, the department did not respond to questions regarding the database or registration requirements. 

CIBA believes its members are well-placed to add assurance via independent reviews without the costs of an audit. They’re also experts in the field. 

In order to enter CIBA’s Business Accountants in Practice (BAP) to work with schools and Educares, they are required to obtain a license by completing training specifically related to assisting educational organisations. 

“We suggest departments use a differentiated approach,” says Eszter Rapanos, technical manager at CIBA. The level of financial reporting required should depend on the size and maturity of the Educare.”

Putting carts in front of the horse

There is an argument that strict registration requirements are necessary when trying to regulate and support an industry that is responsible for looking after and most vulnerable in society. Formal Educares, with brick-and-mortar buildings and audited financial statements, may seem safe and worth investing in, but it’s an unrealistic goal for many. 

A 2010 study by the government and Unicef of unregistered Educares found that a significant number of buildings were rated as being in a bad or very bad condition. However, as the authors of this paper note, “The main reason many of these facilities are unregistered is directly related to the fact that they cannot meet the infrastructure requirements necessary for registration.”

More recently GroundUp reported that more than 60 creches in the informal settlement of Dunoon in Cape Town are unable to register because of the high compliance cost and burden. 

The many unregistered Educares in South Africa have few financing options and a compliance headache if they’re ever to meet governments’ requirements. Excessive accounting standards shouldn’t be one of them.