Funding follows the child and the national standard for early learning and childcare providers: guidance on criteria 7 - business sustainability

Section 1: Business Sustainability in the National Standard

9. A financially sustainable provider is important for children and their families, particularly in ensuring consistency and continuity of care. Consistency in setting and staff is key to a child’s development. When young children come into a setting, they need a happy, secure environment, rich in opportunities which promote learning and physical activity which at the same time are calm, comforting and responsive.

10. This is why the National Standard for ELC Providers includes criteria regarding the business sustainability of providers who wish to become funded providers.

11. To ensure the delivery of a ‘provider neutral approach’, the National Standard will apply to all providers regardless of whether the funded hours are provided in the public, private or third sectors, including provision offered by childminders.

12. The National Standard criteria for Business Sustainability states:

“Settings wishing to deliver the funded entitlement must be able to demonstrate that they are financially viable providers.”

This is expanded upon in the National Standard Operating Guidance which states:

• Existing settings delivering the funded entitlement must ensure that they are able to demonstrate – when required – that their business model continues to be financially viable through the provision of appropriate financial information, for example, accounts and business forecasts / projections. A Business Continuity Plan must also be in place.
• Newly registered settings wishing to deliver the funded entitlement will have had a financial viability check completed by the Care Inspectorate upon registration and this can be used as evidence of business sustainability in the funded provider probationary status period. When the probationary funded status is under review, the criteria for existing settings will apply.
• Childminding settings wishing to deliver the funded entitlement will be expected to have a contingency plan in place, detailing arrangements for the children in their care should they stop providing the service e.g. if the service was temporarily unavailable due to illness or the service was closed permanently.

13. To ensure fairness and transparency, a comparable approach to requesting and reviewing Business Sustainability evidence for all providers, regardless of whether they currently deliver the funded hours or what type of provider they are, is required. This is in line with the ‘provider neutral’ Funding Follows the Child approach.

14. Principles and best practice are set out on the following pages to support local authorities to adopt an appropriate, transparent and clear approach to requesting and reviewing Business Sustainability evidence, and to support providers with demonstrating that they meet the Business Sustainability criteria.

Why does a local authority need to review this?

15. Under Funding Follows the Child, local authorities are the guarantors of quality and the key enablers of flexibility. They play a key role in ensuring that those settings offering the funded entitlement are meeting the National Standard criteria. As the Business Sustainability criteria is part of the National Standard, local authorities must assure themselves that funded providers meet this criteria.

16. Evidence of Business Sustainability will be requested and reviewed by a local authority at the point a provider applies to be able to offer the funded hours, unless the provider is a newly registered setting and has undergone these checks through the Care Inspectorate as part of the process of registration (see Section 7.1 for more information).

17. It is likely that a local authority will request or review this information on an ongoing basis as part of their role in monitoring whether settings are meeting the National Standard. The frequency at which this information is requested should be proportionate, reflecting a balance of managing risk and minimising the burden on providers. For example, a local authority may look to request this information on an annual basis or less frequently if the setting is deemed lower risk. This will assure the local authority that the provider’s setting can be sustained and offer continuity of care to children and families as part of their funded ELC entitlement.

18. This guidance note aims to highlight best practice and provide examples of appropriate and reasonable evidence that can be requested from providers, using a risk-based approach.