Patrick Costello (Dublin South Central, Green Party)
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Apologies have been received from Deputies Brady and Murnane O’Connor and Senator Ruane. Deputy Tully will substitute for Deputy Brady. The agenda item for consideration is engagement on issues facing the early childhood sector.

Joining us are officials from the Department of Children, Equality, Disability, Integration and Youth: Dr. Anne-Marie Brooks, assistant secretary; Mr. Toby Wolfe, principal officer; Mr. Mark Considine, principal officer; Mr. Mark Doheny, principal officer; and Ms Oonagh Fleming, acting principal officer. They are all very welcome to the meeting.

Before we begin, I have a few housekeeping matters. I advise members that the chat function of MS Teams should only be used to make the team on-site aware of technical issues and should not be used to make general comments or statements.

I remind members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who is participating from outside the precincts will be asked to leave the meeting. In this regard, I ask any member partaking via Teams to confirm whether he or she is on the grounds of the Leinster House campus before making a contribution.

The opening statements will be followed by questions and answers from the members. In advance of inviting the witnesses to deliver their opening statements, I wish to advise them of the following important point in respect of parliamentary privilege: witnesses and members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

I invite Dr. Brooks to make her opening statement.

Dr. Anne-Marie Brooks:

I am grateful for the invitation to discuss issues facing the early learning and childcare sector. I am head of the early learning and childcare division in the Department of Children, Equality, Disability, Integration and Youth. I am joined today by Mr. Mark Considine, head of the access and inclusion unit; Mr. Mark Doheny, head of the governance and systems development unit, Ms Oonagh Fleming, head of the sector development unit; and Mr. Toby Wolfe, head of the quality unit.

The expert group, in its report, Partnership for the Public Good, summarised the key issues facing the sector at the time of publication in December 2021. These included unaffordable fees, particularly for families who are availing of long hours, have more than one child using services or who use unregistered services; barriers to access for families with very young children and in certain areas as well as for children with a disability or those experiencing socioeconomic disadvantage; low pay and poor conditions of employment that do not reflect the importance of work in the sector and undermine the quality of children’s experiences; and stability and sustainability concerns felt among providers.

Actions to address these issues are set out in the ten-year whole-of-government strategy for babies, young children and their families, First 5, which was published in 2018, followed by a detailed implementation plan for the first phase of the strategy in 2019 covering the period 2019-2022. Annual reports over this period set out in detail the substantial progress made on these actions, with key achievements including the introduction of Together for Better, the new funding model for early learning and childcare, which was designed in consultation with key stakeholders in the sector to address the most challenging issues the sector faces. While only in place since September 2022, we are seeing substantial benefits for children and their families, for the early learning and childcare workforce and for providers The national childcare scheme, NCS, with subsidy increases in 2022 and 2023, is supporting record numbers of children, with additional funding secured in budget 2024 that will reduce out-of-pocket costs of early learning and childcare to families by up to 50% on average. The universal ECCE programme is supporting more than 103,000 children to access preschool education. An independent evaluation of this programme is under way as a precursor to putting the scheme on a statutory footing. The access and inclusion model, AIM, is supporting more than 7,000 children with a disability to access the ECCE programme and, with funding secured in budget 2024, AIM will be extended beyond the ECCE programme for the first time.

The core funding scheme, with an allocation of €259 million in its first year and €287 million in year two, has introduced a fee freeze among 94% of services, which meant that increases to NCS subsidies were fully felt by parents. It has led to a 15% increase in the number of services offering the NCS. It has supported the agreement of employment regulation orders, EROs, which resulted in improved pay for an estimated 73% of those working in the sector with an updated ERO currently being considered by the independent joint labour committee. It extended support for graduate-led provision outside the ECCE programme, and supported a significant expansion of capacity with analysis showing the increased capacity is the type of capacity that is in highest demand relative to supply. It has led to greater stability and sustainability in the sector; with a minimum core funding floor of €8,150 now in place, and has led to greater operational and financial transparency in the use of public funding. In year three of the scheme, the core funding allocation will increase by 15% or €44 million to €331 million.

Finally, the equal participation model will be rolled out from September 2024, providing services with a proportionate mix of universal and targeted supports to support children and families accessing their services who are experiencing disadvantage. Together, as recommended by the expert group that wrote Partnership for the Public Good, the different strands of the new funding model strengthen the partnership relationship between the State and providers, giving the State a stronger role in shaping the development of the sector, to reflect the public good dimension of early learning and childcare.

In addition to the new funding model and the continuing work to implement the recommendations in Partnership for the Public Good, progress has been made on a wider reform agenda, including through Nurturing Skills, the Workforce Plan for the Early Learning and Care and School-Age Childcare Sector 2021-2028, with commitments to develop career pathways, promote careers in the sector and support staff recruitment, complementing achievements and future plans to improve pay and conditions of employment in the sector. The National Action Plan for Childminding 2021-2028 includes a commitment to opening the NCS to childminders from next autumn. The Building Blocks Capital Programme 2023-2025 is designed to meet current and long-term early learning and childcare infrastructure needs.

There is also a focus on strengthened governance at a national and local level including a series of regulatory reforms, preparation for the establishment of a new dedicated State agency for the sector and the development of an action plan for administrative and regulatory simplification, as announced recently by the Minister. The latter will build on recent measures to ease the administrative workload of providers that includes a single parental contract and a universal fees list and will be informed by a new stakeholder advisory group and a number of regional consultations.

There are positive indications of progress made from a range of sources. The OECD data show Ireland’s performance in supporting families, particularly lone parent families, with the cost of early learning and childcare is markedly improving. During the period 2019 to 2021, Ireland had the highest decrease in early learning and childcare costs to families across the EU, with net childcare costs as a share of the household's net income for lone parents on low income in 2021 falling below the EU average for the first time. Latest data from Tusla’s register show closures of early learning and care services nationally is at a five-year low, and the overall number of early learning and care and stand-alone school-age childcare services is now increasing. The most recent First 5 annual implementation report shows that the interim target for a graduate-led workforce of 30% by 2021 was exceeded, with 37% holding a degree in 2022. As well as this, the investment target, a doubling of State investment over the period 2019 to 2028, was also exceeded, five years ahead of schedule. This excludes a support package of more than €1 billion for the sector over the Covid pandemic.

There is also international recognition of this progress. The 2023 Country Report for Ireland from the European Commission rated Ireland’s progress on the country-specific recommendation to increase access to affordable and quality childcare as substantial. The OECD in its recent country policy review concluded: "Ireland is currently pursuing a strong policy agenda for Early Childhood Education and Care, with the adoption of a long-term whole-of-government strategy for babies, young children and their families covering the period 2019 to 2028."

Notwithstanding this progress, there is a clear recognition that more needs to be done to address affordability and accessibility and to improve quality, in particular to improve pay of those working in the sector. In this context, there remains an ambitious programme of work for the remainder of First 5 and the related plans that will allow us to build on the very significant reforms to date. The First 5 implementation plan 2023 to 2025, which will be published by the Minister, Deputy O’Gorman next week, will set out a multi-annual plan of actions that will be prioritised in this next phase of implementation, as well as detailed milestones. This plan will include a new investment target. We are committed to working with the sector in managing the challenges associated with the pace and scale of change associated with this level of reform and investment. I thank members for their time and attention. We are happy to answer any questions members have or to elaborate further on any of the issues raised.

Alan Dillon (Mayo, Fine Gael)
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I welcome the witnesses and thank Dr. Brooks for her opening statement. This session supports last week's session. I am sure the officials were tuned in to last week's session, when some of the challenges, issues and opportunities were raised.

I am interested in the Department's engagement with representative bodies and the composition of groups and organisations it is involved with around decision-making and policy discussions within the childcare sector.

Will the witnesses elaborate on how they will formulate the model for childcare towards the next future policy direction?

Dr. Anne-Marie Brooks:

We have an early learning and childcare stakeholder forum. This is the main mechanism through which the Minister and the Department engage with key stakeholders including provider representatives, workforce representatives, children and family representatives and other groups. We meet regularly with that forum on key issues facing the sector, most recently a number of weeks ago. In addition, there is a range of other mechanisms through which we engage with representatives to inform ongoing work. An example of this is the work in developing the funding model, which was led by an independent expert group but core to that development was very significant stakeholder engagement that ran over the two-year period of that piece of work, starting with an open call for submissions and a nationwide survey about the funding model.

The second and third phases involved engaging with the early learning and childcare stakeholder forum. The consultation for the funding model was independently run by Frontier Economics and it engaged with early learning and care stakeholder forum representatives on two occasions in phases two and three. The reports of those consultation exercises were published and did inform the work of the expert group. There are other very good examples of the way in which we engage with the sector. In the context of work that Mr. Wolfe led on, the nurturing skills, there was an advisory that worked hand in glove with the steering group that designed the nurturing skills plan. We currently have a sub-group of the early learning and care stakeholder forum soon to meet to look at workforce recruitment and retention issues.

Alan Dillon (Mayo, Fine Gael)
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In terms of feedback from the providers, does the Department take their issues on board? Has the Department made any amendments to policy in recent weeks or months? If so, can Dr. Brooks provide any examples?

Dr. Anne-Marie Brooks:

Certainly, I can give some examples in the context of core funding. As the Deputy knows, core funding is in its second year and commenced in September 2022. In the first year of core funding, a number of concerns were raised by representative groups, particularly concerning small sessional services and the impact or value of core funding to services of that size. Arsing from that, and there was some very significant engagement with sector representatives, an independent financial review of sessional services was commissioned by the Minister, Deputy O'Gorman, and Frontier Economics undertook that review. There were also changes introduced for year two of core funding to address the concerns raised by representative groups, particularly for small, sessional services, in that there was a flat rate allocation for sessional services in year two of core funding of €4,150. In addition to that, a core funding floor was introduced in year two of core funding, so no service gets less than €8,150.

Alan Dillon (Mayo, Fine Gael)
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The issue that was apparent last week was around the fees being capped since 2017. Certainly, with rising utility bills and inflationary costs, there is a huge fear about survival among many of these providers. As local public representatives we hear this on a daily, if not weekly basis. What are the Department's intentions? There certainly is an imbalance in the system at present for those who are now entering and setting fees at a higher rate compared with those who are restricted by entering the core funding model. What will the Department do to rectify this?

Dr. Anne-Marie Brooks:

The introduction of fee controls in the context of the new funding model through core finding was informed by recommendations in the Partnership for the Public Good report. The expert group advised that we first move to stabilise what fees are charged to parents and that essentially was the fee freeze that we are seeing in years one and two of the scheme. The funding that is put through core funding will offset and address the extra costs that services face. The fee freeze will be introduced in a safe and sustainable way. For year three of core funding, we hope to evolve the fee management under core funding. The Minister has secured additional funding in year three of core funding and there is more than €21 million available for enhancements to the scheme.

Alan Dillon (Mayo, Fine Gael)
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Does the Department accept the difficulties being faced by some providers now who have fees which are frozen at present and that are finding it very difficult to keep their doors open?

Dr. Anne-Marie Brooks:

We are aware there is a disparity in fees charged right across the country and sometimes in some counties. What is on offer through core funding does offset the increased cost and ensures the core funding keeps apace of any increased costs providers are facing. We are looking to evolve that through year three core funding and the additional money the Minister secured in the budget.

Alan Dillon (Mayo, Fine Gael)
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There are some providers who possibly will not make it to the third year.

Dr. Anne-Marie Brooks:

We have a sustainability fund in place.

Alan Dillon (Mayo, Fine Gael)
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What does that entail?

Dr. Anne-Marie Brooks:

There is a specific sustainability fund in place for services in contract for core funding. If they have viability concerns, they can come forward through their city and council childcare committee and work with Pobal to go through a case management process and identify if there are supports that can be put in place for them. Once support would be sustainable-----

Alan Dillon (Mayo, Fine Gael)
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How many cases has the Department dealt with today as regards that funding model? How much has it actually-----

Dr. Anne-Marie Brooks:

Allocated?

Alan Dillon (Mayo, Fine Gael)
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Yes.

Dr. Anne-Marie Brooks:

Two services have received funding under sustainability funding in 2023, year to date, but no service has been allocated under strand 12, which was the strand associated with core funding and partner services.

Alan Dillon (Mayo, Fine Gael)
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Relatively, there is a very low uptake on that.

Dr. Anne-Marie Brooks:

There is a very low uptake.

Alan Dillon (Mayo, Fine Gael)
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Really, it is not working. If it was working then multiple service providers would look for it.

Dr. Anne-Marie Brooks:

The scheme and the fund is open for providers to access.

Alan Dillon (Mayo, Fine Gael)
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Can I ask-----

Patrick Costello (Dublin South Central, Green Party)
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Sorry, I am conscious of the time.

Alan Dillon (Mayo, Fine Gael)
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I have a final question about the chart of accounts because it was very late when some providers were informed about the burden that was being imposed on them in respect of having to provide access to accountancy packages. What was the thought process around this? Was there any recognition from the Department relating to the additional burden that would place on providers, which may have multiple operations, and which for the past decade returned accounts in a very professional manner but are now burdened again with additional administration requirements?

Dr. Anne-Marie Brooks:

I might invite my colleague Ms Fleming to come in on this. One of the key recommendations and what was set out in Partnership for the Public Good was the need for increased transparency in how public funding is allocated and used in the early learning and childcare section. Core to that is ensuring the investment decisions are good, the allocation model is addressing the needs of the sector, and funding is being used for its intended purpose. Back in 2021 when that report was published, it was very clear that we would be seeking financial returns from services. Again, when the core funding agreement was published in May 2022, we were very clear about the financial requirements and the need for returns from core funding partner services. Ms Fleming might come in on the additional ask from providers.

Ms Oonagh Fleming:

We did look and carefully examine the reporting requirements providers already have. We are aware they all report to Revenue in the January to December timeline for tax returns. We are aware that those who are registered with the Charities Regulator have another set of requirements. Those that are registered with the Companies Registration Office will have annual return dates specific to their own businesses. We were faced with a very diverse section that has different reporting requirements, depending on business size. We had to find a way that would be proportionate such that a sole trader with no employees would only have a smaller ask on a report. The approach we took was a chart of accounts, which is a list of nominal codes for income and expenditure. To ensure it was sector-specific we went out to consult with the sector on-----

Alan Dillon (Mayo, Fine Gael)
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Did Ms Fleming consult the providers?

Ms Oonagh Fleming:

Yes.

Alan Dillon (Mayo, Fine Gael)
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What was the feedback?

Ms Oonagh Fleming:

The feedback was that we got additional codes to added so there were areas of income and expenditure we had not considered. Providers provided us with information as to the percentage of them that use accountancy packages or use the services of a financial expert to make returns to either Revenue or the Companies Office.

We needed to get a sense of what kinds of supports we might need to put in place to support the sector to meet the financial returns we would require. We will continue to engage and we met the stakeholder forum-----

Alan Dillon (Mayo, Fine Gael)
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With regard to supports-----

Patrick Costello (Dublin South Central, Green Party)
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I am sorry, Deputy Dillon, you have gone way over time. Please let the witness answer the question. There are others waiting to speak.

Alan Dillon (Mayo, Fine Gael)
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That is fine.

Ms Oonagh Fleming:

We met the stakeholder provider representatives as recently as last week and we have done that throughout the evolution of core funding. We have met them on a regular basis and we will be meeting again next week or the week after. We will continue to provide supports to providers to meet the financial reporting requirement.

To provide a bit of clarity, what is being sought is a trial balance. It is a list of income and expenditure. It is not monthly returns and it is not the detail underpinning those. It is the annualised amounts, and it is possible to extract that from existing accountancy packages. We have done as much as we can to meet the requirements of our sanction from the Department of Public Expenditure, National Development Plan Delivery and Reform because core funding is a grant and it is covered under circular 13/2014. We sought a balancing act because we are aware of the different levels of financial accountability across this very diverse sector.

Erin McGreehan (Fianna Fail)
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I welcome the witnesses. Childcare is something that we all take very seriously across the parties and across the Houses. It is at the forefront of the thoughts of many of us here, including myself as a mammy of four boys. Childcare is very relevant.

First, I congratulate the Department on its work because there have been massive changes in childcare provision over the past couple of years. I note in the opening statement that the doubling of State investment over the period was exceeded five years in advance, which is not to be put down and, as was said, that is not including the €1 billion for the sector over the Covid-19 period. In periods of dramatic change, there are going to be times of flux. Things are moving quickly and things have to change, and I hope the flexibility in the Department will work with the whole system because, as we know, times are changing.

I have a few questions, similar to the points made by Deputy Dillon in regard to the regulatory and administrative burden on childcare providers. This is something that comes to us quite often - in fact, more than quite often – and it has been the theme of much of our correspondence and conversation with providers. I note what was said in regard to the action plan for administrative and regulatory simplification. What are the timelines for that and for the action plans? What can we expect from those administrative changes? There are always ways to simplify reporting methods. We will agree that there are burdensome parts to what the Department has put down, and there is a learning for the service providers also. What can we expect from the timelines and what can we expect in that action plan for change?

I would like to know a bit more about the Building Blocks capital programme and how it will work to meet the long-term needs. There was a group in here last week who spoke about modelling and how the Department of Education will look at birth rates and the projections for what is needed in a certain area. What is the Department doing in this regard to make sure there is childcare provision in all geographic areas?

Another question concerns the workforce. Obviously, a huge part of core funding is to ensure that the workforce is properly paid and supported because if we do not do that, then we are not serious about the professionalisation of the sector. What supports will be given to the workforce on an individual level or a service level to ensure that the workforce is professionalised and that target is reached and expanded on?

Dr. Anne-Marie Brooks:

I thank the Senator. I will start and I will then invite colleagues to speak to the action plan, the workforce issues and regulatory issues she has raised. I agree there has been an enormous amount of change over recent years and a very significant increase in investment. The sector has responded very well to that. It has been very flexible and has embraced change in many ways, including the doubling of the ECCE places to two years, the access and inclusion model and the core funding model. There has been enormous change, which the sector has worked with us on.

We accept that all of those changes and that increased investment have led to some complexity in the system and have increased the administrative ask on providers. There is funding allocated through core funding to address administrative costs and in year two of core funding, that will increase to €37 million. In addition, we have tried to take a number of steps to simplify processes this year and to ease the administrative workload, as I mentioned in my opening statement around the parent statement and the single fees list. The Minister, Deputy O'Gorman, in recognising the challenges expressed by the sector, has asked us to progress this action plan for administrative and regulatory simplification and work on that is advanced. My colleague, Mr. Doheny, will give the detail on that.

Mr. Mark Doheny:

Expressions of interest have just closed over the mid-term. We are currently in the process of notifying the membership of the advisory group which is going with the action plan. The intention is to have the first meeting in the coming weeks; the working date is 1 December but we have not notified that to the members as the correspondence is due to issue. We have prioritised work over the last couple of weeks since this has been announced and we will be prioritising work over the coming months. We envisage that we will be inviting providers and wider stakeholders in the early years sector to come in to the stakeholder sessions to give observations, particularly parents. There is a lot of focus on providers but we also have to consider the burden on parents in terms of applying for the national childcare scheme, NCS. We are conscious of that duality of roles but, obviously, the advisory group will have a blank canvas to look at all of the administration requirements.

Mr. Toby Wolfe:

On the regulatory aspect of minimising the burden on providers, clearly, the regulations are very important and they are the minimum standards to protect children but, wherever possible, we look for ways to minimise the burden to ensure they are proportionate. One significant change that was made last year was a change to the reregistration system. In the past, if someone was reregistering, which they have to do every three years, effectively, they had to go through the entire initial registration process again. We changed the regulations and worked with Tusla, and it is now a much more streamlined process where it is really just the minimum. People have to prove they have up-to-date Garda vetting and that the insurance is still in place, and they just declare whether there is any change to their initial registration. It is a much improved and streamlined process.

Regulatory reform is also part of the process that my colleagues were talking about, in that we are developing this action plan on administrative and regulatory reform. We will be listening to the sector for any other suggestions about ways in which we could further streamline the regulations consistent with continuing to protect children adequately.

The inspection system is also part of what we look at in trying to ensure that we have proportionate arrangements in place. For some years, we have been working closely with the two inspectorates to ensure that they, for example, align the timings of their inspections so they do not go into the same provider too close to each other. We asked the OECD to do a review of our inspection system a couple of years ago and it made a series of recommendations that we are working through, which includes taking further steps to streamline and better co-ordinate our inspection system.

Mary Seery Kearney (Fine Gael)
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I thank the officials, particularly Dr. Brooks, for their engagement over the last number of years. One of the big problems in childcare is that change is not happening fast enough for parents and providers. I know there are to challenges to change but when the Department says year 3, I echo Deputy Dillon's view that there are providers who do not believe that they will be in business in year 3. Having a plan for them is not okay.

Since 4 p.m. yesterday, I have received well in excess of 180 emails from childcare providers all around the country. These are not cut-and-paste messages or copies. They are individual expressions of the challenges providers have. This is unprecedented. The childcare sector is notoriously under-resourced as regards its ability to access computers, given the sheer complexity of the day in the sector. For providers to sit down and write their individual stories tells me there is a problem, regardless of the very good news. There has been very good news since the budget of last year at least. However, there are real challenges that appear to be going unheard. "Disheartened" and "stressed" are words consistently used when I have meetings with childcare providers. I wonder if the administrative requirements have been road-tested. Are they road-tested by people who do not know that anything can crop up on any day? I have managed a service. My colleague in my office has been part of the inspectorate over the years. People can decide, with the best of intentions, to do three hours of administration on a day but may not get to it. The administrative burdens in childcare are very high. Providers need a dedicated administrator and smaller services should have access to people who will provide such a service for them.

On the chart of accounts, I hear the point that it is merely a trial balance but, given the alignment of the years, from September 2022 to August 2023, and that the deadline is January 2024, a lot of people do not have the competencies to pull this off their system and they have to engage an accountant to do it. There is a cost to that and there should be some reimbursement of that cost. There should be some recognition of it. One of the arguments coming across is that the annual early years sector returns should have sufficient information to extract what is necessary for the reporting and the objectivity of this.

Regarding the sustainability fund, I have gone back over notes I received when going on media and I have sought advices. The sustainability fund was flagged to me in all briefings going back to last year's budget. They indicated that if there are challenges, this would be the fact. The reality on the ground is that it is of absolutely no use to people because the reputational damage caused by accessing funding, if a provider accesses the sustainability fund, pretty much puts it out of any private financing. That came across really strongly last week. Another mechanism has to be found to make up for the fact that there is clear inequity there and that some services have not raised their fees since 2017. They did the right thing and tried to balance the books. They then found themselves using the employment wage subsidy scheme, EWSS, which was a fantastic response. It was brilliant, and I congratulate the Department on its quick response and everything that was done during Covid-19. As a consequence, however, providers are experiencing real hardship. That has to be responded to more quickly.

Then we have the whole capital grant issue. I do not know how many times this year I have asked when that capital grant is going to be released. There is one service in Cherry Orchard, the community crèche, which is fantastic but it has 186 children on a waiting list. It has planning permission. It has been in a five-year process and is waiting on the announcement of capital funding for its extension. It is an exemplary service that holds onto its staff because it is so good. It implements high scope and does everything that should be done right but it cannot move on with this because it is waiting. It is providing in area that has the highest deprivation score in the country. The need for children to be engaged in childcare in the area is very high, yet there is this sense on the outside that it is all moving far too slowly. I know that on the inside, the Department works very diligently, and I know that Dr. Brooks in particular is very passionate about this. We have to marry these two things up and deal with the issue.

When we talk about evolving the payments, we have to make sure more providers are opening up and the sector is becoming an attractive place to go. There is, however, a narrative in the media and real-life experience. Childcare providers do not come out and protest in the manner in which we have seen unless there are very real issues. I was behind some of the protests going back to the beginning of the early childhood care and education, ECCE, scheme in working with childcare providers. They feared what would happen and there ways and workarounds on that. I need to say to the witnesses all the things that are coming through and reflect what is being said in all of these emails.

Dr. Anne-Marie Brooks:

With regard to the chart of accounts and the level of emails Senator Seery Kearney has received, we are aware of the concerns that are being expressed by providers and the need for support in fulfilling this requirement for training supports and potentially otherwise. The Minister has asked us to look at the potential for targeted supports where services might find it financially difficult to meet this reporting requirement. That is something we are looking at. My colleague, Mr. Doheny, has described a more strategic process that we are embarking on now with regard to addressing administration and regulatory simplification. We are absolutely committed to doing that. We understand the challenges of new schemes, the additional requirements of increased funding and what that brings to providers. We are listening and looking to address that and work with providers on it.

On the sustainability fund and the concerns the Senator expressed about that, we are constantly reviewing the strands of funding available through the fund. We are doing that currently to make sure that if it is not accessible to providers who need it, it will be.

On the question around reputational damage, the fear that if one avails of the sustainability fund, it will be a blemish on one's credit record has been raised with us separately by others. That is just not the case and we have committed to communicating that to providers and through representative groups. We need to look at how we send out messaging around the sustainability fund. It is a grant to services. We can look to improve our communications on that.

The building blocks capital grant is an allocation of €20 million in 2024, with further funding in 2025. In the next number of weeks, we will be opening applications for that capital grant. We are concluding a needs assessment. As I said, it is €20 million. The funding will be targeted where there is most need and highest levels of undersupply.

Mary Seery Kearney (Fine Gael)
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With due respect, €20 million is a drop in the ocean in the context of what could be done here. A figure of €80 million was discussed last year.

Dr. Anne-Marie Brooks:

The building blocks capital grant under the national development plan, NDP, is for 2023 to 2025. It is €69 million in total over that three-year period. There is €20 million next year and additional funding the year after, which will be used to address unmet need and areas of undersupply.

On capital and supply management, core funding has already proven to be a very good lever in addressing capacity issues in the sector. We saw that in the first year. In year 2 of core funding, €8 million was set aside to fund a 3% gross incapacity, which has materialised. The Minister has secured additional funding in year 3, €9 million of which will be used to improve capacity and increase it by another 3%. The sector is expanding. What we have seen through the Tusla data is that we have 113 more new services, net, to date this year. There are very strong signs that the sector is expanding and more services are opening.

Seán Sherlock (Cork East, Labour)
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I will stay on the accounting issue because that is the issue of the day for the hundreds of providers that have contacted us. It was raised as an issue last week. I thank Dr. Brooks and Ms Fleming for engaging with me last Friday morning. I appreciate that. I also thank the Secretary General who took my call last week as well.

I will quote from a synopsis of the issue that I asked one provider to provide me with.

I believe he speaks for every provider who is dealing with the accountancy issue. With the Chair's permission, I will very briefly refer to his email. He says that any owner who has an accounting period different from that of the Department of Children, Equality, Disability, Integration and Youth, as most crèches large and small do, must now produce a second set of accounts each year to match the accounting period proposed by the Department. Yesterday, providers got a note from the Department saying that all they needed to do for the year ending in August 2023 was to provide a trial balance. The provider says this is very disingenuous as a trial balance is, in fact, a full set of accounts. I know reference has been made to trial balances. Could that point be addressed in the Department's response? The provider continues to say that anybody who did not have an accounting background would have thought this was a compromise. The sender of the email is an accountant and assures me that it is not. For the 2023-24 year, the Department has produced a working Excel spreadsheet that most providers will need to use to produce the Department-specified accounts each year. Most providers will now have to employ a bookkeeper as the sheet is very technical and knowledge of accounting is required.

In the core agreement, there was no mention of accounting period requirements and everyone assumed that they could use their own accounting periods when providing the figures the Department would look for. This provider says that under no circumstances should a funder insist on a different accounting period without this being contractually required and a longer lead-in time being given to allow providers to prepare. Owners with multiple crèches now have the financial burden of producing a full set of accounts or trial balances for each of their centres and this is totally unsustainable. He says that most multiple crèche owners will have centralised bank accounts for income and costs. The providers have asked how this will work but no solution had been provided up to the time of the email. That was this morning because I spoke to him when I was coming up on the train. When he emailed me, I rang him back straight away. He sent me a note within an hour so that is the situation as of a number of hours ago. He says the whole process seems to be totally ill-thought out.

According to the email, accountants cost a minimum of €100 to €150 per hour and this will be a very costly exercise for all providers but especially for small and medium-sized providers that do not have economies of scale. The provider says that, in a nutshell, the main problem is the production of multiple accounts to address this different accounting period, resulting in a minimum of two sets of accounts each year for each provider. He says it is also pertinent to again mention that different accounting periods are not specified in core funding contracts and that, even if they were, it would have been raised as a huge issue long before now.

That crystallises the issue for me and, notwithstanding our engagement here, I do not sense any concrete message to the sector that this issue is being addressed. The witnesses have used words like "review" and said they are looking at it and there is no question but that they are sympathetic to the challenges providers face. However, what those providers need to hear from the Department, the Minister and the Government is some language dealing with the lead-in time and the resource issues. It seems the Department is reviewing the sustainability fund with a view to its potential use in this regard and it has said it might look at targeted supports. Is there anything more it can offer by way of language that deals with this issue and moves the narrative on? Another person who contacted me said that the work they will now have to do is basically unpaid work. They are happy to receive core funding but finding that time is taxing. As other speakers have said, it is time providers just do not have. The Department fully understands this and is absolutely engaged on the issues. There is no question about that. What I am hoping for is hopeful language around getting over this hurdle, making the system as seamless as possible and reducing the cost and burden on people.

Ms Oonagh Fleming:

Dr. Brooks noted that we are looking at potentially providing targeted financial supports to support the procurement of an accountant or additional accounting hours for those who already have an accountant. We recognise that some providers will not have accessed an accountant previously and that this is a new ask of them. We are also looking at providing more targeted training. We have an independent contractor in place who has been working with us and they are being retained. They are going to be looking at individual bespoke questions regarding multi-site operations and shared bank statements. We will do everything we can to support people in getting answers to such questions and will work with people on a one-to-one basis. That is why sustainability funding is important. It gives access to case management support that can be tailored to individual requirements. If people have difficulties in preparing these accounts, we will find a way of getting support to them. That is the most important thing.

Seán Sherlock (Cork East, Labour)
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Can I go back to the providers who have contacted me and tell them that there is now headroom on the submission of accounts? Can I tell them the Department will not come down heavily on them if they do not provide these accounts and that this is being worked on as an issue within the Department? Some comfort there would really help the sector.

Ms Oonagh Fleming:

The return date for the accounts as it currently stands is 28 February. We are meeting providers' representatives again next week. I do not think the date has been issued yet. If we get more detail on what is required, we will respond to that. However, it is important to note that the detail we require, a list of income and expenditure items, is very important with regard to all the other questions the Deputy has asked about cost drivers and whether services are sustainable or viable. That is the only way we will ever understand those issues. We have to understand different providers' incomes. One provider may put their telephone costs under utilities while another may keep them separate. Does the Deputy understand? The only way to get consistent detail is to use a chart of accounts. All accountants love charts of accounts and nominal codes. They are built into all of the accounting packages. That will provide answers for us, for the sector and for the committee with regard to the cost drivers. We will have a better understanding of where more funding is needed and why. We will understand whether it comes to down to size or location. All of that will come under these reports.

Seán Sherlock (Cork East, Labour)
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I accept that answer. Again, if the sector could hear more solid language around when a funding line will be provided, which should be well in advance of February, if possible, that would be beneficial to the sector.

Pauline Tully (Cavan-Monaghan, Sinn Fein)
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I thank the Department for its presentation. Can the witnesses confirm when the Minister will publish the access and inclusion model, AIM, report? It is important that report be published to highlight the areas needing improvement and to give a clearer picture of how the model is working in practice. Budget 2024 highlighted some changes to how AIM is applied. Could we get more information on that for parents and providers? I make the argument that AIM should really be extended beyond the three hours in the morning because children also need supports if they remain in services for the afternoon or after school.

I echo the concerns expressed by my colleagues with regard to the second set of accounts because it is causing a great deal of anxiety for many providers. I do not really understand the rationale for it. It will place a financial and administrative burden on providers. The gathering of accounts is expensive. It could potentially be done through the Revenue system instead. It does not even relate to the providers' financial years.

The rules around the entitlement to have fees paid for absentee children are quite stringent, unworkable and out of step with the rules in other countries. For example, a child might be minded one afternoon by a grandparent or even a parent who does not work. That seems to be affecting capitation. That does not happen in primary school or secondary school if a child is absent or taken out for any reason. Obviously, attendance is monitored but every single day or half-day should not have to be accounted for.

Could we get an update on the pay talks? Is the Department working on a staffing strategy for the sector? Working from budget to budget is causing staffing issues. It would be better if we could have a five-year plan instead. AIM staff working in the sector are trained and face uncertainty as to what is going to happen from one year to another. Many are leaving to work as special needs assistants or to work for Tusla.

I just think there needs to be more consultation done on that.

Dr. Brooks referred to capital funding. An issue that was raised with me is that a number of years ago the Government encouraged primary schools to request preschools to provide a service on the same site, which many did, but now in cases where the school has grown in numbers it requires the accommodation to be returned. Childcare service providers are inquiring about capital funding for relocation and they seem to think it is not available. Perhaps Dr. Brooks could clarify if there is funding available for existing childcare service providers that need to relocate because a primary school needs the space back? This affects a number of providers.

Dr. Anne-Marie Brooks:

I will comment and then invite my colleagues to contribute. The AIM report being undertaken by the University of Derby is close to completion and the Minister hopes to publish it by the end of this year. As mentioned in regard to budget 2024, we are already looking to introduce enhancements to AIM on foot of the findings from that evaluation. Budget 2024 allocated an additional €14 million for the AIM. Some €7 million was to support an increasing number of children who are coming through the ECCE programme requiring AIM supports. That is around 7,000 children this year. There is an additional €7 million then allocated for an expansion of AIM beyond the ECCE programme from September 2024. In the first phase of the expansion the AIM supports will be extended to children who are in the ECCE programme. Those in receipt of AIM supports who may be in full daycare or part-time provision will be supported to stay beyond the three hours of the ECCE programme. The funding is in place for both in-term time and outside it. The ECCE programmes run for only 38 weeks of the year but this funding will allow a child to remain and have extended supported hours in early learning and care over a 52-week period, should that be what the parent is looking for. Those improvements will come into place from September 2024.

I invite Mr. Considine to talk about the NCS rules of attendance.

Mr. Mark Considine:

There can be a little bit of a misunderstanding about these rules. It just does not happen that if a child is picked up early we take the money back. The scheme is designed to ensure that the money is spent as best as we possibly can on children who are in attendance and the money follows the child. We want to strike a balance with that and remove some uncertainties from providers by saying that if attendance varies from week to week, it does not adjust the allocation unless it happens over an extended period. They would get a notice at eight weeks that the number of hours the parent indicated was required had not been used and then, after 12 weeks, they would need to adjust the position if that has not changed. It reflects what the parent actually wants from the provider.

The original design, as well as ensuring that the money follows the child, also reflected the varying usage of provision by parents. Families do not always work from 9 a.m. to 5 p.m. They work on different days and they do shiftwork. They might need three days. Their actual need for provision varies greatly so it enables them to articulate how many hours they want. A measure of provision is then agreed with a provider and then the State helps to pay for the provision for children. It strikes the balance between ensuring the money is used efficiently and making sure that there are not wild fluxes in funding the services.

The balance of the attendance-based model needs to be taken in conjunction with the core funding, which we have spoken about. Other models are not related to attendance and provide funding across the board, reflecting the capacity and attendance pieces and making sure the parents are not penalised for picking their children up early. I have heard that reported several times but it is not the case.

Pauline Tully (Cavan-Monaghan, Sinn Fein)
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I have heard that from providers who said that was the case. They said they do not deal with the parent but lose out themselves.

Mr. Mark Considine:

There is an adjustment after 12 weeks if a parent has not attended for the number of hours that was agreed with the providers.

Pauline Tully (Cavan-Monaghan, Sinn Fein)
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The indication they gave is that the period was not that long.

Mr. Mark Considine:

I appreciate that. Some of the older schemes were more restrictive. The national childcare scheme introduced a more flexible regime to reflect some of the concerns. We talked earlier about the consultation with providers. Part of the feedback we had from providers was to increase the level of flexibility. I know that providers can struggle sometimes with the hours-based model but the flexibility is there and we have tried to reinforce the communication of that flexibility to both parents and providers over time.

Michael Creed (Cork North West, Fine Gael)
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I apologise that I cannot join the meeting in person as I am trying to keep track of the proceedings in another committee as well. I welcome the opportunity to engage with officials from the Department.

I think all of us feel a little bit frustrated, none more so, I am sure, than the representatives of the Department, that at a time when we are spending large amounts of public funds on childcare, which is increasing year on year, we seem to be getting an endless stream of communication from providers expressing dissatisfaction with where we are at. I concur with the sentiments of the previous speakers in terms of all the emails we have received over the past 48 hours.

I want to raise two issues. While welcome in many respects, the new funding model for childcare appears not to assist in any meaningful way the providers who are delivering the ECCE-only model. I visited a number of them in constituency. As far as I can see, it is not an urban or rural issue but generally a case of whether the childcare provider is large or small. The small childcare providers, who, because of parental choice, are delivering the ECCE-only model, seem to be significantly financially disadvantaged under the new funding model for childcare.

I understand the Minister has committed to an overview of the funding regime. If I recall correctly from replies to parliamentary questions, it is Queen's University Belfast that is carrying out this overview. When can we expect the report and, more important, when can we expect some lifeline for those providers in the ECCE-only model? I fear that quite a number of them will go out of business. I suspect the overwhelming majority of those who have already gone out of business are smaller ECCE-only providers both in urban and rural settings. That is unfortunate because it is a model of childcare choice. People do not need full daycare in all circumstances. The ECCE model is very important of itself.

I concur with the points made by previous speakers about the accounting issues that arise. It appears that we are in danger of swamping providers, in particular small and medium providers, with the increasing demands of regulation. If these were about child welfare issues, I do not think anybody would object. We have made a lot of progress in that area, rightly so, but it does appear that day after day, there is one demand after another. We are incrementally suffocating these businesses with regulation and red tape. The most recent requirement is for what is virtually a second set of accounts. For small businesses there comes a time when they will say enough is enough and they are not going to stay in the business. In the current economic environment there are a lot of opportunities for people to do other things. It is only when we see a flight from the childcare sector that we will realise what we have done.

Having said that, I acknowledge that enormous progress has been made. There has been a very substantial increase in public funds for childcare but we need to be extremely vigilant that we are not putting people out of business as a result of the increasing administrative demands being imposed on them. All of that has perhaps been articulated by others far better than I can articulate it but I just wanted to add my voice to the concerns among childcare providers. As far as I can determine from visits that I have made to such providers in my constituency over a period of time, they tend to be the smaller providers and in some respects the more niche providers, as in ECCE-only providers.

I would like the Department and Minister to reflect on that and find a way to ensure that we can accommodate all of these important providers, large or small, urban or rural, to continue in the business.

Dr. Anne-Marie Brooks:

I will respond but colleagues might want to add to the points I raise.

Regarding core funding, the new funding model and the impact for ECCE-only services, I referred earlier to year 1 of core funding where concerns were raised by representative groups on the core funding allocation for ECCE and sessional services. Arising from that, the Minister commissioned a review of the financials of sessional services which was undertaken by Frontier Economics. It was a case-study report and a very small number of services participated in the review. We hope to finalise that publication and make it available in the coming weeks or months.

On foot of the concerns raised in year 1 of core funding by representative groups, the Minister introduced targeted measures for year 2 of core funding. This was the flat rate allocation for sessional services of €4,150 and the core funding floor I mentioned of €8,150. That benefited, and was primarily designed for, small sessional services.

In year 2 of core funding, the average allocation increased by 7% for services, but the allocation for sessional-only services increased by 32%, rising from €14,000 to €18,600. In year 2 of core funding, through those targeted measures, there was a very direct attempt to support small sessional services. On the financial returns, Ms Fleming referred to the importance of that data to make further decisions in relation to year 3 of core funding and the allocation model which will be announced next spring. Those financial returns are important so that we can respond to any particular needs of different service types, such as those in rural areas described by the Deputy. Funding is available through year 3 with €21 million unallocated as yet to bring forward enhancements to core funding and to address any of the issues, concerns, or challenges being faced by services.

Regarding the separate review of the ECCE programme, this evaluation was carried out by Stranmillis University College in Belfast. The work is being undertaken as a precursor to putting the scheme on a statutory footing. It has been in place since 2009-2010 and has been doubled in terms of the years of preschool families can avail of. We have strong uptake. Some 96% of children participate in the preschool programme and it is bringing enormous benefits to children and families. There is a commitment to continued investment in the scheme. There is also a commitment by the Minister to put the scheme on a statutory footing. That piece of work is close to conclusion also, with a view to it being published in Q1 of next year.

Tom Clonan (Independent)
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I thank the witnesses for attending today. I want to apologise. Like many of my colleagues, I was at another meeting. My apologies if I duplicate some of the questions or points that have been raised already.

Following on from the meeting last week, I am not sure if it is my colleagues' experience, but I received an enormous volume of correspondence from early childhood care providers. This is the largest volume of correspondence I have received since we began to discuss the Criminal Justice (Incitement to Violence or Hatred and Hate Offences) Bill 2022, which is very controversial. This issue rivals that in terms of the amount of correspondence.

In advance our meeting today, I tried to collate it. We tried to tabulate the primary concerns. I will boil it down to two recurring issues for the sake of brevity. One is an almost universal assertion that the core funding is inadequate and does not allow care providers to plan a sustainable and coherent service. I am sure that we all agree that this is investment in our citizens at a crucial stage in their development. In a previous life, I was a primary school teacher. I attended Stranmillis University College on a student exchange from Trinity College. Those were happy days back in the 1980s and interesting times in Belfast.

In terms of value for money, if we were to look at it in really crude, quantitative terms, it is an invaluable investment in our little citizens, to get them at that age and stage of their development. The question of core funding has come up, with the almost universal assertion that it is inadequate. Is there anything on the horizon about increased investment in the core funding? Are the witnesses cognisant of these calls for greater investment?

The other thing that came up, and apologies if this has been mentioned, is what appears to be a duplication in the financial reporting. Almost all the providers tell me that they have one set of accounts they must submit to Revenue that are fully audited. I presume it is SORP-compliant reporting.

In addition to that, they are now being asked to provide a parallel or duplicate set of reports for a third party. They all say that this is very time consuming and expensive. They are having problems getting auditors and accountants who are prepared to do this. Is there any possibility of discretion in this regard and making it one set of accounts that have to be returned?

Dr. Anne-Marie Brooks:

I will address the investment question first and ask my colleague Ms Fleming to come in on the financial reporting.

Regarding calls for greater investment, we have seen unprecedented levels of investment over the last number of years. In my opening statement I referred to the meeting of the First 5 investment target set for 2028 being five years ahead of time. Next year, investment in early learning and childcare will exceed €1.1 billion, so it is rising very substantially over time. Within the allocation, core funding is in place. In its first year, there was a €259 million allocation of core funding for this new scheme. The allocation increased by 11% in year 2 to €287 million and the Minister secured funding in budget 2024, which will allow for a 15% increase again on the core funding allocation for year 3 to €331 million. There is a very substantial allocation through core funding for the third year running. This will help achieve a range of objectives, including improved pay and conditions and address issues of affordability and sustainability of provision and stability for providers. The funding is increasing over time.

Next week the Minister will publish the First 5 implementation report for the next three years, running to 2025. In it there will be a new investment target for early learning and childcare. The Minister has signalled that he has ambitions to continue to grow core funding allocation and also to grow the provision across the other streams, Together for Better, the national childcare scheme, NCS, the ECCE programme and the new equal participation model which will be rolled out from next year.

Ms Oonagh Fleming:

The Senator's correspondents raised the issue of the financial reporting requirements under core funding and the fact that they already report to Revenue, perhaps the Companies Registration Office and perhaps the Charities Regulator. The periods they report against are different. Everybody registered with the Companies Registration Office has their own annual return date.

The Form 11 return to Revenue would be their annual report and that runs from January to the end of December. Our funding year is the school year running from September to the end of August so that would give rise to two Form 11 returns from Revenue to cover the period we were looking for. We needed the chart of accounts, which is the list of nominal codes, in order to be sure that we were getting consistency in inputs across the entire sector so that we would understand the cost drivers in each of the different sizes and styles of service. I am using sole traders as an example but percentage wise across our sector, it is almost half and half between companies, including not-for-profit companies, and sole traders, which would include child minders. They are making Form 11 returns to Revenue and by tomorrow they will have returned their Form 11 for 2022. That will cover our period from September to the end of December 2022. The Form 11 for the period from January to the end of August 2023 is not due to be returned until next year. That gap in the information around the financial understandings of the services means it is too late for us to be able to design a response, from a policy perspective, to what they are experiencing. Our requirement is against our programme year, so that we can match it against the funds that are going in, to see what changes need to be made. The providers who have done their Form 11 now have those accounts prepared for September to the end of December. They will also have paid preliminary tax for 2023 at the same point in time which has to be as good as they can make it, accuracy wise. In that sense, they must have looked at their financial whereabouts between January and the end of October in order to make a good estimate of the preliminary tax they need to pay. Underpayment of preliminary tax can give rise to financial penalties so most people do take it seriously. They will have to prepare those accounts to get them to a trial balance for us before they have to return them to Revenue. We acknowledge that but when it comes to the return for Revenue, they will already have eight months done, so they will only have the next four to do. It is not quite two sets of accounts but rather a question of timing. Some of the preparation they will be doing for us means they will have that work done when they are submitting their return at the right time to Revenue or to the Companies Office, whichever they have to return to.

Patrick Costello (Dublin South Central, Green Party)
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The time is up. I now call Senator O'Sullivan and then we will have a second round.

Ned O'Sullivan (Fianna Fail)
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I will not detain everyone for too long. First, I must apologise for being late. The Seanad ran late and I did not have an opportunity to put my ear to the proceedings. Basically, what I wanted to know was covered in the question from Senator Clonan and answered very well by Ms Fleming.

I would like to make an observation. We had a family retail business in a small town in Kerry for five generations. I ran it myself for 20 years. We had a small number of staff and we made a good living out of it. The biggest problem we had was the red tape with Revenue. Things have improved now but the Government appeared to think that shopkeepers were there to gather money in for it. One had to look after one's VAT and pay it, one had to do the PRSI for staff, and one had to pay one's income tax, naturally. We always seemed to be getting work to do. Our principal, core business was selling but an awful lot of our time was devoted to non-selling. I sympathise a lot with crèche owners and all of those who have been before this committee and who have contacted us. Obviously everyone in business is obliged to fill out a Revenue statement at the end of the year and no one would object to that. However, it seems to be rather unfair that a very similar type of process is required to comply with the core funding rules. Having listened to Ms Fleming, it seems possible that there could be better co-ordination between Revenue and the Departmentvis-à-vischildcare. It is not an insurmountable problem. The expenses incurred by people running crèches in completing their accounts can be claimed against their tax liability and I presume they can do that twice if they have to prepare two sets of accounts. Nonetheless, I am sure they would prefer to get one set complete that would do for both Revenue and the Department. After all, it is the State we are talking about, whether it is Revenue or the Department. We are talking about the State and surely it should be made easier for what is a very hard-working sector of society that is offering a vital and invaluable service. What would the State do if it was thrown over on itself?

I have gotten the gist of it now and while I thank Ms Fleming for explaining it, I am wondering if an attempt has ever been made to streamline the process between the Department and Revenue.

Dr. Anne-Marie Brooks:

What I would say in relation to the returns and the fact that the programme date runs from September to August, is that we are mirroring the approach taken by the financial support services unit, FSSU, for schools. Schools have the same reporting requirement and operate within the same reporting calendar as well and have done so for a number of years. We have taken lessons from that approach in designing our own process and the chart of accounts. We accept that there are challenges and additional administration that State funding brings to early learning and childcare providers. The State is now the primary funder of these services. In many instances, the State fully funds services. Approximately one in three services is fully funded by the State and a very large share of the remainder get the majority of their funding from the State. We have obligations to ensure that funding is used for its intended purposes and that there is transparency in relation to its allocation. It is also really important - in the context of issues raised today where services are expressing concerns around viability and are challenged - that we have those data available to us so we can make good decisions in relation to the allocation of funding and how we can address the challenges that are faced by those working in the sector.

My colleague, Mr. Doheny, described earlier some of the steps we are going to take to try to ease administration and simplify our processes. The Minister has committed to an action plan on administrative and regulatory simplification and that work is under way. We have a team in the division who are leading on that and we are seeking expressions of interest for an adviser group made up of parent and stakeholder representatives. We will be undertaking regional consultations with providers and others who have a view on this. Work is under way with a third party to review our end-to-end processes around the schemes and that will culminate in an action plan which we hope will identify short, medium and more long-term actions that we can take to ease the administrative and regulatory burden faced by providers.

Ned O'Sullivan (Fianna Fail)
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That is good to hear.

Mary Seery Kearney (Fine Gael)
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I have a couple of questions and comments. One of the banes of one's life in managing a childcare service is managing staff. There are instances where people are out sick, services have to be compliant with the Organisation of Working Time Act so staff need breaks, people need to take holidays and so on. There is a one to three ratio in a baby room and if a room is a certain size, a provider can have so many baby places. One can move up through the rooms and make a bare calculation of the staff needed but this will be lower than the number of staff actually needed to be in compliance with the need for breaks, relief and so on. The funding is following the child and one of the requisites is flexibility for the parents, which we want to encourage, but the childcare provider still has to provide employment in compliance with employment law. There must be a predictable contract of employment with predictable working hours and so on but how is that funded? When the Department sits down to figure it out, how does it fund for all of that, rather than putting a per-hour rate on a child? How does it fund for those sorts of things? This is where challenges arise in the running of services, as well as from the cost-of-living increases.

Dr. Anne-Marie Brooks:

I am sure some of my colleagues will want to come in on this.

Most services have a multiple of funding sources: the ECCE programme is one, the national childcare scheme is a second, core funding, AIM, and the soon-to-be equal participation model, EPM, but also many of the services are funded through parental fees. It is a combination of all of them.

In 2018, we did an independent review of the cost of delivering early learning and childcare to understand what the cost drivers are but also the cost breakdown. Regarding the delivery of childcare, the key cost driver is staff costs, which is around 70% of the cost of delivery. That kind of percentage holds regardless of whether a service is small or large, by and large, and whether they are operating in Dublin or in other parts of the country. Those data informed, among other things, the allocation for core funding. However, core funding is just one element of the funding streams a provider can get. Core funding is allocated on the basis of staffed capacity. If you are offering a baby room, for example, you would get more money in core funding because that reflects the higher cost of delivery for a baby room by virtue of the staff ratios. If you are operating for 52 weeks rather than for 38 weeks of the year, you would get more money in core funding because you have higher costs, most likely tied into the staffing requirements of that provision. Similarly, there is a sliding scale in respect of core funding. The core funding is less for services operating sessional rooms with a 1:11 ratio because the staffing costs are less. The cost of delivery is less by virtue of the regulation. Those data go into informing the core funding allocation model but there is much broader funding available for providers to operate, and the fee charged by providers takes that into account.

Mary Seery Kearney (Fine Gael)
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There are multiple sources and I get that, but then there is multiple accounting and balancing of that - or is it one return? They have multiple sources of reporting, for example, from a compliance perspective and from a food perspective. How is funding tailored for each individual service?

Dr. Anne-Marie Brooks:

Regarding the ECCE programme, we have a set capitation rate, which the Senator is aware is €69 per child. That is for three hours per day, five days per week, 38 weeks of the year. That capitation is for the delivery of the ECCE programme. Services that deliver the ECCE programme can attract more funding in addition to that €69 capitation.

Regarding the national childcare scheme, we provide subsidies, both targeted and universal, through the national childcare scheme to parents, which are offset against the fees that services themselves charge. The service itself sets its fee, prior to the fee freeze that was in place, for the cost of that place.

Mary Seery Kearney (Fine Gael)
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There is built-in flexibility to allow for different areas and different demands from parents but also consistency of employment for providers.

Ms Oonagh Fleming:

I do not want to get too technical but the application process and the application form that is built on the early years hive portal has in excess of 20 validations built into it. It was tricky when people were learning to use it in year one. However, it allows for the things the Senator talked about, for example, that service providers that operate from 8 a.m. to 6 p.m. are paid for that staff capacity. There is no deduction for somebody going on a break because there is an assumption there is a cover. We used a typical week. We did not want core funding to be prohibitive. We needed it to be more intuitive to how services actually operate. It is a typical week. A provider tells us it intends to operate from whenever to whenever. I do not know need to know that it closed for two days that week because there was a funeral. Core funding is different. It is to provide a more consistent, stable income based on capacity, whether the capacity is taken up or not. The provider must name the staff and identify where it tends to allocate them. However, if a staff member was out sick for two weeks, it does not report that. We tried to build understanding into how services actually have to operate on the ground and we continue to try to improve that.

This year, for year two of core funding, to support the administrative requirement, we closed last year’s application. Services that did not make any changes or whose situation was the same did not have any work to do.

Mary Seery Kearney (Fine Gael)
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Cutting across Ms Fleming, this year, quite a number of employment rights came into being, such as sick pay and all of those. How are they accounted for, given that childcare would have a high level of absenteeism, to be fair, because people are exposed to children and all the stuff that goes through services, even with the best hygiene in the world? How is that increase in entitlement to sick pay calculated into the next year? The next level increase in core funding is in September next year, yet the increase will be in sick days, where employees are entitled to a day’s pay. How will that be catered for? I refer to domestic violence leave and all of those sort of leaves.

Dr. Anne-Marie Brooks:

I hope I answered the Senator’s question on how core funding is allocated. In year one of core funding, €259 million was allocated. Some €207 million of that was towards pay, either the combination of pay for staff but also €47 million of that was for the graduate uplift. The joint labour committee negotiated improved rates of pay that were brought into effect in September 2022, and in and around €55 million was required to achieve those minimum rates of pay. The funding allocated for pay was in excess of that, so providers had flexibility to use the core funding allocation to perhaps improve pay beyond the minimum rates of pay. They had flexibility to improve pay or offer pay for ancillary staff or other staff within the allocation. However, we know through the core funding allocation in year one and the funding that was required to meet minimum rates of pay that there was excess funding to meet the kind of costs the Senator referred to with regard to having additional staff, supporting ancillary staff and those kind of things, and, in addition to that, support for non-contact time, for example, for staff to engage in training or administrative roles. There was funding within that allocation to meet those costs.

Mary Seery Kearney (Fine Gael)
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How do they access, let us say, sick pay?

Dr. Anne-Marie Brooks:

Core funding is a grant to services. Therefore, the funding was allocated to services and they had flexibility in how they use that allocation. For example, if services were already paying staff at the minimum rates of pay that were negotiated through the independent joint labour committee, they could use their core funding allocation for other things within a prescribed list, so long as it was working towards improving children’s experiences and improving the quality of care. They had an allocation of funding and it could be used flexibly. I think there was a list of what it could be used for.

Mary Seery Kearney (Fine Gael)
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Sorry, I just need to finish this. Employers have increased costs. From an employee perspective it is fantastic but from an employer perspective, there is an increased cost of employment. Let us say a provider applied for its grant based on X. The Government brings in a right and entitlement for employees, for instance, on 28 November, the domestic violence leave will come in. Where is the elasticity for a provider? When that individual employee is out, a person still needs to be covering that.

Dr. Anne-Marie Brooks:

Regarding the allocation for core funding, we are satisfied that would cover the additional costs for floating staff and ancillary staff cover. On the sick leave-----

Mary Seery Kearney (Fine Gael)
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Do they access additional money or do they just get a grant and it is within that grant?

Dr. Anne-Marie Brooks:

It is within that grant; it is within their core funding allocation.

Mary Seery Kearney (Fine Gael)
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The additional employee entitlements between now and September next year have to be taken out of what they were already going to get and going to get anyway. They are not actually be given additional funding for that, rather, they have to take it from their current allocation.

Dr. Anne-Marie Brooks:

Yes, it is taken from the allocation.

Tom Clonan (Independent)
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I had a specific question on aligning the financial reporting with the reporting required for core funding and the mismatch between the reporting periods.

The Deputy asked the question and Dr. Brooks answered that and referred to Mr. Considine. I know from submitting annual returns myself over the past 23 years that after a period of time, there is a uniformity. I would imagine that in this sector, it is not that dynamic. For many businesses, it will be quite similar from year to year. If you can take last year's report as a snapshot of what is likely to happen, if that accelerates the process and only one set of reports was required, it would be great if that could be seen as certification. It does not make sense to have duplicate or triplicate systems but I understand its genesis.

I echo what was said here last week and what I said this morning. When you think about the psychological, emotional, intellectual and physical development of our citizens, this intervention is an essential service. The level of distress I detect in the correspondence suggests that we need to work together a bit harder. Dr. Brooks's response was that there is an allocation and if there are additional exposures to costs, they must be absorbed by the providers. In the past 48 hours, when Met Éireann issued the red alerts about Storm Debi, the bit that made my blood run cold was the announcement that all universities, schools, crèches and childcare settings would not open until 10 a.m. because without these services, there is no economy because of the transformation of society. I hope Dr. Brooks is getting the kind of alacrity and attention this issue deserves from her colleagues in other Departments and Revenue because it is an essential service that I would put with the ambulance service, health or An Garda Síochána. I know Dr. Brooks knows that but I am concerned by the distress I read in the correspondence. I thank her for her very comprehensive responses.

Dr. Anne-Marie Brooks:

We would be in full agreement with Senator Clonan regarding the benefits of the sector not just through the pandemic, where we really saw how much everybody relies on this sector to function well, but also because of the benefits it brings to children, parents and families.

Regarding the additional burden we place on providers for costs like sick pay, we are satisfied that there is sufficient funding in core funding to meet those costs. If there are services that are struggling to meet those costs, there is a safety net through the sustainability fund. We are confident the level of core funding is sufficient to cover those costs. In many cases, it is a substantial level of funding and new funding to services, which has supported a range of very positive things relating to pay, supporting the fee freeze and funding for graduates outside the ECCE programme but if there are services that are struggling to meet those costs, there is that safety net the Minister put in place for sustainability and there is more core funding coming, which is why we need good data to make decisions around how that money is allocated to address the needs and issues described by the Senator.

Mary Seery Kearney (Fine Gael)
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The difficulty with the sustainability fund is that it is not an application. It is a management process to which you must submit. I feel a bit aggrieved that I was briefed to go out on the media with this as the catch all where services were under pressure, and there are services under pressure, but it is not as dynamic and responsive as I believed it was going to be. I countered some of the arguments by asking "Where are services cut up short?" In my constituency, there are services that were challenged and that had not put up their fees since 2017 and consequently found themselves on the back foot with new providers opening up and being able to charge much higher rates. My concern is that you could have two services side by side both with similar provision, both getting core funding, one that has been longer in existence and consequently subjected to a fee freeze and a new one coming into being and having greater flexibility. This is unfair when we really want more services all of the time because it is so essential. The piece that made my blood boil the other day was the fact that if you were not going into work until 10 a.m. as an edict of the State, you did not necessarily have an entitlement to pay but most prevailed upon their employers' goodwill for it.

Another bone of contention in the sector is the inspectorate and the inconsistencies among inspectors. I know of services where an inspector has gone in at the right intervals over a ten or 12-year period and in another instance, has walked through exactly the same door and then found fault. Nothing had changed in the meantime - no preschool regulations - but all of a sudden, it was a problem because there were whatever challenges were there. Alternatively, it could be down to personality issues. If there is a finding of non-compliance, a matter might be corrected there and then during the inspector's visit but it still gets published as non-compliance. This is terribly unfair to people who slog really hard to make sure they provide the best for children. The inspectorate regime needs to ensure it is consistent regardless of who walks into the service and that it is predictable. I was involved in a service where under the previous inspectorate system, the HSE was involved in the design of the crèche and the same inspectorate came in and found fault in the design it had put in place when it was in private use later. It was so substantial in the sleep room that it ended up closing the service. There are inconsistencies and this needs to be addressed as a matter of urgency.

Dr. Anne-Marie Brooks:

I think we signalled that year three of core funding is where we move from a fee freeze to evolving the fee management process so, hopefully, it addresses the concerns of the Senator. I will ask Ms Fleming to speak about sustainability and Mr. Wolfe to speak about the infection issues that were raised.

Ms Oonagh Fleming:

The sustainability fund was formalised in 2017 in response to a policy change, which involved minimum qualifications in the sectors. The community sector was going to be affected where it was using community employment workers in ratio with children. With that in mind, a response was designed and a case management approach was taken because, and I know I am talking to the converted, services are so individual. A service might look the same on the outside - you might say it caters for a certain age range and has four rooms - but how it operates and staffs those rooms and manages rosters and opening hours will all affect matters, so a case management approach was used and there are community services that will acknowledge that - not for profits. A total of €1 million was given out in 2017 while just short of €600,000 was given out in 2018. This addressed that issue over a period of time. Those are the principles underpinning the sustainability fund. It is to support a service in its own specific circumstances to move from where it is to a more sustainable and viable footing. That was the approach that was taken because the one-size-fits-all model does not really work for it. The changes that were made to sustainability took place during Covid, so it was opened up to providers in the not-for-profit sector by the Minister. Two different strands were run - one in 2020 and the other in 2021. More of the private for-profit services were funded in those two years than non-profit services.

Possibly it involves the branding and the communication - how it feels to a private business - but it is a very genuine offer of support and it works if people engage with it. Finance is often the answer but it may not be the only answer. There is that very good support on getting that operational support at local level that can probably identify things for the owner as well and we are working to make it more accessible.

Mary Seery Kearney (Fine Gael)
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I have one other question on the creation of the agency. It is a very welcome development. It is fantastic and came from our side of the House in the programme for Government. Having one place everything goes into will be fantastic. I am mindful though of the transition from the local authorities to Irish Water and worry a little about the county child care committees, CCCs, coming into the agency. I am aware a process has been engaged in and there is a memorandum of understanding and all the rest in that. Do we anticipate any issues or challenges of an industrial relations nature that might delay that process?

Mr. Mark Doheny:

I will take this. The Senator mentioned we have signed a memorandum of understanding with the partner organisations in the 30 city and county child care committees and also with Pobal and Pobal Better Start. We have appointed an overarching programme board that is going to provide expertise in organisational design, establishment of other agencies and in the early years sector some specific experts are providing an independent advisory point on the key issues of the establishment. We have been in a phase of informal information gathering, but we are entering into a more formal gathering phase now. With the MOUs in place we are starting consultations on issues such as vision and mission statement this side of Christmas, starting with the CCCs and Pobal and the boards and staff of those entities. We will expand that in 2024 to the wider sector. The desire of the programme board, and mine as project lead, is to ensure the evaluation phase and the research phase is comprehensive and inclusive. We will certainly be consulting widely with all stakeholders, VCO colleagues and stakeholders and providers as well as educators themselves, but the wider stakeholders are obviously parents. We are consulting widely throughout that 18-month phase, so it will be born of that data-led approach. We are approaching it with principles of partnership co-design with those bodies and that is the desire.

Mary Seery Kearney (Fine Gael)
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The 12 headings are very comprehensive, so I congratulate the officials on that. One of them was going to come in on the inspectorate.

Mr. Toby Wolfe:

Will I just come in on the question the Senator raised about the consistency of inspections? She referred back over a long time period and the two inspectorates have put a lot of effort in recent years into trying to ensure there is consistency in the standards applied and how different inspectors across the country apply the regulations. Measures include agreed quality and inspection frameworks that all inspectors are working to. I cannot remember the exact year the Tusla quality and regulatory framework was published. It was 2017 or 2018, so just a few years ago. There are national and regional management structures that are overseeing the inspections and trying to ensure that consistency across the board. They have training and CPD for staff to ensure a shared understanding between different inspectors so they are following the same approach and have quality assurance procedures. Before inspection reports are published there are checks to ensure they are consistent. It is hard to speak about what might have happened some years ago, but now there is a lot of effort going in to ensure that consistency.

Mary Seery Kearney (Fine Gael)
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Great. When Mr. Wolfe says "now", that is since when?

Mr. Toby Wolfe:

It has been a process of reform and trying to ensure that consistency over a period of years.

Mary Seery Kearney (Fine Gael)
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All right. I asked because as recently as 2020 it was hit and miss.

Patrick Costello (Dublin South Central, Green Party)
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Deputy Dillon is next.

Alan Dillon (Mayo, Fine Gael)
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I thank the Leas-Chathaoirleach for letting me back in. I am not sure the area of childminders was brought up previously. We rely heavily on our childminder for our two year-old and three and a half year-old. She provides a fantastic service and we cannot speak highly enough of her. She has also expressed her concerns and fears from listening to the issues from small services and what they are having to deal with around the administrative burden, etc. Consequently, I have questions about the Department's engagement with childminders. When will the public consultation on the draft legislation for childminders be published? Have any concerns been brought to the Department's attention and what type of engagement-led discussions has it had with that sector? It is crucial we maintain childminders. It is true we need to do a bit of work on the registration and the inspectorate, but childminders are critical because without them a lot of households would not be able to have that flexibility, especially when ECCE and full day care services close during Easter and the summer months. I would like the officials' feedback on that.

Mr. Toby Wolfe:

I totally agree with the Deputy on recognising the concerns many childminders have. This is a sector that has been almost entirely unregulated and unsupported, in many cases, for many years. There is understandable fear and anxiety among childminders when they are looking at the prospect of regulation coming in. The National Action Plan for Childminding (2021 - 2028) made very clear what will come in will be a regulatory framework that is proportionate, appropriate and specific to childminders. There will be childminder-specific regulations and they are being drafted at the moment. I will come to the Deputy's question on the timing, but there will be those tailored regulations and there will be training, but it will be tailored to childminders, so it is very much a bespoke response recognising the challenges they face.

The public consultation on the draft regulations will commence in the coming weeks. We have draft regulations that are nearly ready. We will go for public consultation. It will be an extended consultation period. One of the reasons it is taking time to design the consultation is we want to ensure we have a process that allows us to reach a lot of childminders we have not spoken to before to give people a chance to really listen and engage. The Deputy asked about the engagement process. The national action plan itself followed from an extended period of consultation that went right back to 2016, when a working group was first established. Childminding Ireland was asked by the then Minister to chair that working group and the group developed a blueprint that was published, with a draft childminding action plan being developed on the basis of that blueprint. There was public consultation on that with substantial engagement with childminders and that led to the childminding action plan. The action plan itself embodied a lot of childminders' perspectives and parents also fed into the consultation process in significant numbers.

Even since then an advisory group was set up to help with the process of drafting the regulations and there are childminders sitting on that group, going through the draft regulations line by line. The steering group they report too, which is going to be signing off on the draft childminding regulations that go for public consultations, also has childminders sitting on it. Childminding Ireland, as a representative body, is also on our steering group and we are moving slowly and carefully. When the Minister published the childminding action plan, he was very clear it should be a phased approach with time given to ensure we get it right in this planning phase we are in, so the regulations are proportionate and appropriate and that when we move into opening up the regulations, there will be a transition phase. As to the detail of that, it is proposed in the legislative amendment that went through pre-legislative scrutiny in the summer that there will be a three-year period during which the regulations will be optional, if you like, in that childminders will be able, but not required, to register. That will give time to adjust and get used to the regulations when they are in place. It will also be a period in which extra supports will be provided.

We have been strengthening the childminding development officer network so that by next year, there will be a childminding development officer in every city and county childcare committee providing local level support to childminders to help them meet those proportionate and appropriate requirements that will be in place. Childminding Ireland itself is funded by the Department and provides significant supports to the childminding sector as well. We recognise those supports will be needed to help childminders meet the changes. We think there are many benefits childminders will gain from this.

Alan Dillon (Mayo, Fine Gael)
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I thank Mr. Wolfe for that comprehensive response. Childminding Ireland probably would say that it is not funded to the level that is required for the outreach it needs to have in respect of these transformative measures. It is trying to get people in, trying to ensure the proper information is being shared and trying to ensure that any of the issues or challenges that childminders may have in respect of the regulations are addressed. The consultation process is very important. It is positive to hear the Department is progressing in this regard. If we look after childminders, the willingness to then transition into ECCE services or full-day services makes that a bit more streamlined and it is a win-win for everyone. I thank Mr. Wolfe for the update on that.

Patrick Costello (Dublin South Central, Green Party)
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With that, I will draw the meeting to a close. I propose to publish the opening statement on the Oireachtas website. Is that agreed? Agreed.

I thank the officials for their engagement with members. The committee stands adjourned until Tuesday, 28 November, when it meets in private session.