Early childhood education center financial policies and procedures

It is often when guidelines are bent and procedures short-cut that healthy relationships between families or staff and the program become disrupted or hostile.

Early childhood administrators need to be familiar with financial policies and procedures and take responsibility for fulfilling them in a consistent, reliable manner.

Early childhood administrators need to be familiar with financial policies and procedures and take responsibility for fulfilling them in a consistent, reliable manner.

Formal policies and procedures are critical for keeping a business organized, on-target toward their financial goals and ethically-responsible. Well-thought-through policies and procedures speak to justice, fairness and equal treatment for families and staff as well as provide a set of guidelines for staff to conduct business. Financial policies and procedures originate from the laws of the state and nation, and should follow standard accounting procedures as established by the accounting profession. As an early childhood administrator, you need to be familiar with your program’s financial policies and procedures and take responsibility for fulfilling the policies in a consistent, reliable manner. Further, you need to document your actions when completing procedures so you may show proof of the fairness and accuracy of your actions.

Let’s start with the definitions in order to distinguish between policies and procedures. A policy is a principle of action adopted by a business. Common synonyms include strategy or approach. It is what we are going to do. A procedure is an established or official way of doing something. Synonyms may include method, system or plan of action. It is how we are going to implement a policy we just adopted.

The purpose of a policy and a procedure is to provide consistent guidelines for how you will conduct your business and apply the policy to all staff and families. An example of an early childhood education center policy might be the full-fee collection policy stated as follows:

“This program has a policy of full-fee collection. It is expected families will pay the full tuition balance owed every month on the first business day of the month. If tuition is paid later than the first business day of the month, fees for late payment will be assessed at no more than 10 percent of the outstanding balance per week. Tuition fees that are more than 30 calendar days in arrears will be sent to a collection agency and your child will be dis-enrolled from the center immediately. Tuition may not be excused or waived for any family.”

An example of an early childhood education center procedure for the collection of late tuition payments may look like this:

  1. The director will contact the families with overdue tuition in-person or on the telephone within five days of the first business day of the month. The purpose of the contact will be to discuss additional fees, circumstances and arrangements for payment. The director will remind the family of the full-fee collection policy as it is stated in the Parent Handbook. The director may use her/his discretion in making payment arrangements.
  2. The director will monitor the account of families who are late in payment on a daily basis and update the tuition records immediately upon receiving late payment.
  3. The director will continue to contact the family each week until the payment is updated or until the account is sent to collection.
  4. The director will send any outstanding tuition balances to a collection agency after 30 days.
  5. The director will inform the family of dis-enrollment of the family if an unpaid balance is still owed to the center after 30 days.
  6. The director will keep a log of all contacts with the family regarding late payment.
  7. The director will keep a log of all collection agency activity for each family.

Financial policies may address issues that arise every day and issues that are somewhat uncommon.

Typically, the financial policies of an early childhood education program address record keeping requirements such as which financial reports are used by the business, as well as salary ranges, pay schedules and benefits for staff, establishment of and rules concerning bank accounts and credit cards, preparation of budget documents, tuition collection records, invoice payment records and so on. Many early childhood education organizations publish their financial policies on the internet so you can scan a few to get an idea of specific policies at specific types of organizations. A good resource to help administrators and boards of directors to develop policies can be found at the Early Childhood Iowa website: “Developing policies and Procedures: Organizational and Fiscal.”

This may all seem too formal or too rigidly-structured for some. After all, early childhood care and education is a people-friendly business and strict rules and procedures can interfere with warm relationships with families.

I respectfully disagree.

It is often when guidelines are bent and procedures short-cut that healthy relationships between families or staff and the program become disrupted or hostile. Here is an example of what can happen when formal policies and procedures are disregarded.

At the local site of a large child care organization, there is fear and hostility in the air. The new site director has just been alerted that the application for the renewal of a substantial grant is due in less than 10 days. This grant was not mentioned at her orientation and she had no idea the center even had a grant. When the director goes to the administrative assistant to investigate last year’s financial reports, she finds the assistant flustered and uncomfortable. After many hours of searching through financial records (invoices, receipts, time sheets, deposits slips, etc.) and interviewing staff, the new director uncovers an atypical record of monies received and spent. It appears the former director used some of the grant monies for line items not included in the grant. Further, no report to the granting agency has been filed for two years. This administrator is now uneasy if not outright distressed. Not only has she uncovered evidence of past wrong-doing, she now faces a loss of funding for the center as well as suspicion and distrust among her staff.

If the former director had followed the policies of the center, the guidelines of the grant and the typical operating procedure for the program, none of this would have happened. It can literally put a program’s continued operation at risk.

A final reason, if you still need one, to use a set of standard policies and procedures is that it can save an organization from possible lawsuits from staff or families. When you adhere to policy and use proper procedures, everyone is treated fairly. Every staff member can expect to be paid according to the salary schedule or every family can expect to be charged the same fees for late payment. No one receives special treatment or inconsistent treatment. Even if the policies seem harsh to some, they respect the organization that follows their own rules in a fair manner.

For more articles on early childhood education and child development please visit the Michigan State University Extension website.

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