What are RS7 returns and how does funding work?
The most critical financial return for early childhood education (ECE) services is the RS7 Early Childhood Financial Return. This is often referred to as RS7s or RS7 returns.
To qualify for financial support, each ECE service (or a service provider’s administrator) must complete their RS7 returns.
Specific legal requirements must be met to operate an early childhood service in New Zealand. These requirements are laid out in the Education (Early Childhood Services) Regulations 2008, under which licences are issued to early childhood education services. These licences establish standards in various areas such as curriculum, premises and facilities, health and safety and governance and management.
Playgroups are funded differently from licensed ECE services. You may refer to the Playgroup Funding Handbook, which reflects the latest changes.
ECE services can be set up with help from the Ministry. The Ministry of Education’s website provides steps for setting up services as well as useful links. The Early Learning Information System (ELI) and RS7 electronic submission are available at eli.education.govt.nz, or you can contact your Ministry regional office.
To find the following documents, you can refer to www.legislation.govt.nz or any bookstore that sells government publications.
- Education and Training Act 2020 (especially sections 10, 20, 548, 549, 626)
- Education (Early Childhood Services) Regulations 2008
- Education (Registration of Early Childhood Services Teachers) Regulations 2004
The four types of funding for RS7 returns
ECE Funding Subsidy
A portion of each child’s time in Early Childhood Education (ECE) is paid as part of the ECE Funding Subsidy. The maximum daily hours are six, and the maximum weekly hours are 30. Subsidies are paid three times a year—in March, July, and November.
20 Hours ECE
For three, four and five-year-olds, 20 Hours ECE provides a higher rate of funding than the ECE Funding Subsidy, up to six hours a day and 20 hours a week. This funding has additional requirements. The ECE Funding Subsidy and 20 Hours ECE funding are paid three times a year. Related to the 20 Hours ECE, Plus 10 ECE refers to the additional 10 hours a service can claim for each child beyond the 20 Hours ECE. This is the difference between 30 hours of ECE subsidies and 20 hours.
Equity Funding
Through Equity Funding, targeted communities have access to additional educational resources. Specific criteria must be met to qualify for Equity Funding, which is paid three times a year.
Annual Top-Up for Isolated Services (ATIS)
ATIS is an income top-up for small licensed ECE services in isolated areas, separate from the Isolation component of Equity Funding. This is available to licensed private and community-based services receiving less than $20,000 per year in ECE Funding Subsidy, 20 Hours ECE, and Equity Funding. ATIS is calculated annually, and payment is made with the July ECE Funding Subsidy.
Funding Schedule—when and how it is paid
Funding payments are made on the first working days of March, July and November. A four-month advance is included in each payment, along with a four-month wash-up payment. ECE services receive a four-month advance. The table below details how advance payments are calculated:
Playcentres offering 20 Hours ECE are not eligible to receive the initial advance funding. Wash-up payments are also received for ECE services. This covers the difference between the advance payment and the actual funding entitlement.
Whenever the Ministry overpays FCHs or if the service’s funding rate decreases, the overpayment is deducted from the next payment.
When a service receives funding, its “actual funding entitlement” is the amount it actually receives:
The total funding for all the services provided by a service provider is paid to the provider. They are also responsible for paying individual services. Three times a year, funding is paid on the first working day of the following months:
Due to processing time, it is not possible to collect FCH figures for the month prior to each funding payment. Wash-up payments will be delayed for February, June, and October despite the advance payment. During the processing process, these months are called “gap” months. In the table above, you can find out when the wash-up payment for February, June, or October will be made.
How costs and funding rates are related
Funding rates are made up of basic and variable components that make up standard operating costs for ECE services. These include administration costs, utilities, professional services (e.g. ICANZ accountants) and educational resources.
The variable component of the subsidy recognises that different ECE service types have main categories of “cost drivers.” This includes all-day services facing higher costs than sessional services due to different ratio requirements. Such services are required to meet teacher certification requirements associated with higher labour costs. On the other hand, centre-based services face higher facility costs than services that do not have to maintain a centre.
Plus 10 ECE rates are identical to the ECE Funding Subsidy. In order to share the costs between families and the Government, these rates are designed to subsidise the cost of providing early childhood education.
The 20 hours of ECE are funded higher since they are intended to pay for the full average costs of providing the service. ECE service costs will be reviewed by the Ministry of Education (MOE) regularly to advise the Government about changes in costs. As a result of this advice, the Government may adjust the value of some or all of the funding rates.
Funding rates
You may use the Funding Rate Table for your service type to determine your service’s funding rate. It is important to note that services can access higher funding rates by meeting quality requirements. To find out the funding rate for your service, please refer to Appendix 1 of the ECE Funding Handbook.
Teacher-led services
Five variables determine ECE funding rates:
Home-based services
To receive funding, home-based early childhood education (ECE) services must be assigned either the “standard” or “quality” funding rate and cannot switch between rates on a daily or weekly basis; instead, they must complete the EC11 Form.
Parent/whānau-led services
Funding for parent/whānau-led services is allocated based on either the “standard” or “quality” funding rates and cannot fluctuate between the two on a daily or weekly basis. To change between these rates, services are required to use the EC11 Form.
Recovery of early childhood education funding
If the Ministry of Education finds that an Early Childhood Service has been provided with more funding than it is entitled to, the service must repay the excess amount to the Ministry when requested. The excess amount will be treated as a debt and offset against any funding owed to the service provider. The Ministry will credit a service provider’s nominated bank account as soon as possible when underpayments occur, though a funding claim audit may be conducted before payments are made.
The ECE Funding Handbook is your go-to resource for funding terms and conditions in New Zealand. This handbook is issued under section 548(5) of the Education and Training Act 2020.
Preparing your RS7 returns in Discover
You can submit your RS7s returns directly from the Discover SMS. Discover has several reports you can run to ensure everything is in order before submitting your RS7 returns. These reports will draw your attention to any issues you need to address before making your final submission.
We invite you to refer to this recorded webinar for a guided walkthrough of submitting your RS7 returns in Discover. We also maintain a video library and support articles you may find helpful when submitting your RS7 returns.
Frequent absences report
If children attending your service have excessive absences from school, Discover will immediately reduce their funding. Discover automates the process of applying financial adjustments, so you never have to worry about manually doing it yourself. This saves you time and allows you to focus on providing excellent care to children.
For any absence types where a child is showing signs of breaking rules, Discover will show a yellow mark as a warning and a red mark to indicate that funding has been withdrawn or restricted for whatever reason.
The most critical detail to remember when dealing with a child’s absence pattern is that if the child has been absent for one month, they can still claim funding. But if the pattern continues for a second month, their enrolment agreement must be reconfirmed with their parent/guardian to be able to claim funding for the child’s absences. By the end of the third month, the funding will stop, and funding for absences in the fourth month cannot be claimed. If a child leaves your care, you cannot claim funding for them.
Centre funding report
The centre funding report should be run for the funding period for which you are submitting your RS7 returns. This will ensure that the discretionary hours, which have been increased to 80 permanently, are calculated correctly. Sections highlighted in red/yellow indicate there are missing/incomplete attendances. You can click on the date and drill further down into the day to review the recorded information.
When you drill down on a specific day, the teacher/ child ratios section highlights compliance breaches, such as not meeting the required ratios. Navigate to the roster and the date in question to view these breaches. The roster will indicate how many children are present and how much staffing is required during each block of time.
Centre calendar
Teachers can update the centre calendar with stat days and any closures for the following period to ensure that the advance funding days are correct. You can double-check the calculation of current and future funding amounts by checking your Centre Calendar under Centre –> Centre Calendar for holidays during the period covered by this submission and the following two.
Discretionary hours
A significant feature of Discover is its capability to cap the hours at 80, ensuring that no child is claimed for more than the maximum allowed hours in a given funding period. Once the RS7, the return of service form for ECE providers, has been submitted, Discover automatically sends the required paperwork to the Ministry of Education. This eliminates the manual process of transmitting these documents, saving childcare services considerable time and effort.
Submitting your RS7 returns
RS7 funding can be submitted by selecting the menu option Ministry –> RS7 and selecting the correct funding period. Services can submit as many times as needed before the cut-off date is set, and the Ministry will review the latest submission once it is passed. If you miss the cut-off date, contact the Discover support team.
RS7 returns in Discover
The Discover platform has a section dedicated to past RS7s, which can be easily accessed and reviewed. From this section, the submission process simply involves clicking through a few simple steps and answering the accompanying questions to the funded hours being submitted.
If you determine a mistake has been made and need to submit your RS7s again, Discover makes it easy. You can resubmit as often as needed before the submission period closes. The last submission will always be the one to be paid out.
If you get an audit and they come through and they see, you’ve used discretionary hours, then you’d be actually able to say, “Here’s my evidence”. I use Discover for that.
Todd Painter | Independent Accredited Trainer for Discover
Please refer to this detailed checklist to assess whether your current student management system (SMS) meets your RS7 returns needs. If you’d like more information on how the Discover by Xplor ecosystem can help your early childcare service, we’d love to hear from you.
Dean Comeau
Marketing Team Lead
