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Scale and Sustainability for the ECE Industry: An Overview of Shared Services Louise Stoney, Alliance for Early Childhood Finance December 9, 2009. INVENTED THE NEXT NEW THING. GOT A MUCH BETTER JOB AND PAID MORE TAXES. DIDN’T START SELLING DRUGS. DIDN’T DROP OUT OF HIGH SCHOOL.

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slide1

Scale and Sustainability for the ECE Industry:

An Overview of Shared Services

Louise Stoney, Alliance for Early Childhood Finance

December 9, 2009

slide2

INVENTED THE NEXT NEW THING

GOT A MUCH BETTER JOB AND PAID MORE TAXES

DIDN’T START SELLING DRUGS

DIDN’T DROP OUT OF HIGH SCHOOL

DIDN’T HAVE TO REPEAT A GRADE

DIDN’T BEAT UP A BOY

Source: Paul Sheldon, Citicorp. Based on data from ECE model programs like Perry Preschool and Abecedarian

High-Quality ECE is Essential

COST

BENEFIT

Dollars

Age

21

increased focus on quality accountability results
Higher Standards

More accountability

More complexity – in service

delivery and reporting

Increased costs

Increased Focus on Quality, Accountability, Results

Achieving good results for kids isn’t easy!

ece is market based most revenue is tuition fees
ECE is Market-Based:Most Revenue is Tuition & Fees

Consumer tuitionis the largest source of revenue, roughly 57% of total industry receipts

Private sectorrevenue has increased dramatically but still less than 4% of total

Government funding

@ 39% of total, and

is primarily portable

funding (vouchers or tax benefits)

market challenges
Market Challenges

Lack of effective demand from

consumers for high quality services.

Insufficient product differentiation makes it difficult for consumers to obtain information on the quality of early care and education services.

Low profitability due to high labor costs, quality standards, and price-sensitive consumers.

No economies of scale in an industry composed of very small businesses.

bottom line issues for ece businesses
Bottom Line Issues for ECE Businesses

Ensure Full Enrollment – every day, in every classroom

Collect Tuition & Fees – in full and on-time

Maintain High Quality Services (fees cover cost or have 3rd party revenue source)

….

slide8

The Answer Is Not Just Money: It’s a Paradigm Shift

  • Forge new alliances within the industry – to gain economies of scale but keep the benefits of small sites
  • Understand & respond to consumers
  • Build infrastructure to maximize public/private investments in ECE
  • Use private sector $ strategically (as venture capital to fuel change)
forge alliances to share costs services
Forge Alliances to Share Costs & Services
  • Quality Support (QRIS, curriculum, child assessments, etc.)
  • Management/Administration (e.g. team of directors/supervisors)
  • Fiscal (Billing and Fee Collection
  • Marketing
  • Fundraising
  • Human Resources & Staffing
  • Health/Mental Health/Family Support
  • Food Services
  • Purchasing goods & services
slide10

A Potential ECE Network

Administrative Services: payroll, billing, fee collection, marketing, tax/finance support, etc.

Research & Development:

Information Technology,

data collection & analysis, etc.

Happy Acres Day Care

Green Hills Child Care Center

Tender Tots Pre-School

Human Resources including health & retirement benefits,

Unemployment Insurance, etc.

Bulk Purchase of Goods and Services

Network

Hub

(Shared Staff)

Comprehensive Services: health, mental health, social services, family support

The Newberry After School Program

Annie’s Nursery School

Staff Recruitment & Screening, including substitutes

Mary’s Family Child Care Home

Classroom Supports: mentor teachers, classroom assessments, QRIS support, etc.

Fundraising and Fund Development (from public and private sources)

slide11

A Potential ECE Network

Happy Acres Day Care

Payroll, billing, fee collection, etc.

Tender Tots Pre-School

Green Hills Child Care Center

Shared Staff: health, MH, SS, family support, etc.

Research & Development

Network Hub

Employee Benefits

Wage Subsidies / Employment Tax Credits

Staff Recruitment & Screening

The Newberry After School Program

Pre-K Class at Lakewood Elementary

Mary’s Family Child Care Home

Annie’s Nursery School

Briarwood CCR&R

QRIS Support

slide12

New Business Models: Administrative Structures

  • ECE Program Alliance – Independent ECE businesses contract with common administrative agency (Chattanooga, TN; Columbus, OH; Colorado ELAs)
  • ECE Consortium – Group of providers merge into single non-profit (Seattle, WA)
  • ECE Provider Trust – Group of providers form Trust, which contracts with administrative agency (Fairfax, VA)
  • ECE Cooperative – Jointly owned entity
slide13

Reinventing the Industry: New Approaches to Staffing & Budgeting

A Shared Service approach offers the opportunity to re-think staffing and supervision, job descriptions, roles, responsibilities, etc.

In ECE, staffing patterns

have a profound impact

on the budget.

slide14

Budget for Small Center: 20 Full-Time Children

Expenses

Revenues

Revenues for this center increased by $20,000 in the first year, due to improved fiscal management and full enrollment.

Thus, a total of $62,000 is now available to support shared administration and/or to invest in quality improvements in the center.

Savings to Center: $42,000

slide15

Staffing Changes in Small Center: 20 Full-Time Children

*Director spends remaining 75% of time at central office, on administrative tasks supporting ALL sites in the Alliance, including this one.

slide16

Budget for Larger Alliance Center: 65 Full-Time Children

Expenses

Revenues

Revenues for this center increased by $35,000 in the first year, due to improved fiscal management and full enrollment.

Thus, a total of $153,000 is now available to support shared administration and/or to invest in quality improvements in the center.

Savings to Center: $118,000

home based alliance revenues provider perspective
Home-Based AllianceRevenues: Provider Perspective
  • Enrollment – More likely to be full because Alliance central office recruits families
  • Fee Collection – Providers can count on a monthly check from the Alliance. The central office takes responsibility for collecting fees from parents and third party funders.
  • Quality – Alliance helps to improve quality (which helps increase access to new revenue sources.)
slide19

Benefits of Shared Services

  • Stronger Team of Professionals
  • Better Cash Flow and Fiscal Stability
  • Stronger Fundraising
  • Better Working Conditions
  • for Staff
  • Better Quality Services
slide20

Growing Philanthropic Engagement

  • Annie E. Casey FoundationDavid and Laura Merage FoundationWilliam Penn FoundationMiriam and Peter Haas FundUnited Way Agencies in CO, IA, NH, OH, TN, WA,Community Development Agencies
  • ….and many other local funders
getting started
Getting Started

Examples from new Alliances

  • Philadelphia
  • Atlanta
  • Colorado
philadelphia
Philadelphia

Shared Services on the Web

  • Led by Delaware Valley AEYC
  • Web platform (ECE Shared Resources) from CCA Global
  • Goal is to reach scale in center participation

Shared Services in Depth

  • Led by Philadelphia Health Management Corporation
  • Back-office fiscal management (automated system)
  • Additional management supports (automated staff scheduling, staff recruitment/screening, etc.)

Strategic links to Keystone Stars (QRIS)

Start-up Funding from the William Penn Foundation

atlanta
Atlanta

Shared Services on the Web

  • Led by Quality Care for Children (QCC)
  • Web platform (possibly customized version of ECE Resources site)
  • Goal is to reach scale with centers, working collaboratively with other CCR&Rs

Shared Services in Atlanta Metro

  • Coordinated by QCC in partnership with others
  • Services to be determined but could include: mentor teachers, classroom assessments, TA visits, affinity groups, child assessment, centralized staff/sub recruitment, training and screening, food program sponsor for small centers

Peer to Peer Shared Services in Atlanta Metro

  • QCC will help match needs/resources and foster shared strategies
  • Services to be determined but could include: fiscal management; bookkeeping and accounting, child and family comprehensive services, food preparation, transportation, marketing, family enrollment and referral management, janitorial and maintenance services

Start-up Supported by the Annie E. Casey and Goizueta Foundations

colorado
Colorado

Early Learning Ventures (ELV) is a private operating foundation – established by the David and Laura Merage Foundation that focuses on operational efficiencies in the early care and education industry.

elv alliance benefits
ELV Alliance Benefits

Legal Structure and Documents

Business operations/Financial modeling templates

Start-up technical assistance

ELVA Marketing Templates and Brand Recognition

ELV IT Platform-Services/Supports

Centralized relationship with Child Care Licensing

Policy & Finance Reform

Quality Rating Improvement System Supports