Are NTUC/PCF childcare operators really ‘non-profit’ entities?

By TR EMERITUS –

Last month, NCMP Yee Jenn Jong of The Workers’ Party outlined an alternative proposal for affordable and good quality childcare by involving all existing operators in a contestable public good model for childcare. He argued that the proposal will bring down the cost of childcare for all operators (‘WP’s proposal for transforming the child care sector‘).

The response by Minister of State for MCYS, Mdm Halimah Yacoob was that the median fees of non-profit operators is consistently below industry median. The message we have always been hearing from MCYS is that non-profit operators and in particular, anchor non-profit operators like PAP Community Foundation (PCF) and NTUC First Campus are doing consumers a big favour by bringing the cost of childcare down.

Is this really true – that PCF and NTUC are operating as non-profit entities helping to bring down the cost of childcare services for Singaporeans?

TR Emeritus (TRE) went to talk to some private operators in the childcare industry to find out. Understandably, the private operators prefer to remain anonymous for fear of antagonizing the establishment.

Currently, a typical NTUC centre charges fee of about $642 per month for full-day childcare (fees range from $588 to $674 for void deck centres but most are at $642). It typically will have a MCYS-approved capacity of between 70 – 100 children depending on the size of the centre. Let’s take 80 children for illustration.

The revenue for this centre then works out to be 80 x $642 pm, which is over $51,000 a month. If one is to include some miscellaneous charges of about $3,000 per month on average, the total revenue of a typical NTUC childcare centre will be about $54,000 a month.

On the cost side, these so-called anchor “non-profit” operators get a special rate of $2,000 a month from HDB for renting its void deck. This is based on “non-profit” rentals of $2-$4 psm and a typical centre size of 500 sqm for the 80 children.

A centre with enrollment of 80 children would require around 12-15 staff based on MCYS recommended staff-to-student ratios at different age groups and the need for two shifts. That would translate to about $25,000-$30,000 per month in manpower cost (i.e, average of about $1,600-$2,500 per staff). Other costs such as food, materials and utilities will not exceed $10,000 per month.

A simple cash flow statement per month for such a typical centre would be as follows:

Work out the simple mathematics and you can see an operating surplus of $10,000-$15,000 per month per centre. Multiple that more than 120 times, which is the number of centres NTUC currently owns, the majority of which are in low-rent sites enjoying special grants. That would give NTUC cash flow surplus of $14 to $22 million a year with an annual operating revenue of about $78 million for their childcare “business”.

The above mathematics has not factored in setup, furnishing, maintenance and recurrent manpower grants which anchor operators will get. MCYS has stated recurrent grants for anchor operators will run in $30 million a year.

Indeed, NTUC First Campus’ annual reports show that it has been profitable since incorporation in 1992. That’s an achievement even a for-profit operator will find hard to beat in this competitive business.

Its 2011’s net profit for the Co-operative and Group was $4.7 million and $1.7 million on the back of 32% increase in revenue to $84.3 million. Most of these would come from childcare operations and the rest mostly from SEEDS Institute, which trains preschool educators funded mostly with generous government subsidies.

But one has to ask, what happened to the estimated $14 to $22 million supposedly cash surplus a year compared to the announced group net profit of $1.7 million last year? Presumably, asset depreciation will account for some but it’s unlikely to be a lot since they get generous set-up and maintenance grants as an anchor non-profit operator. Talking to the private operators, all of them point to 1 thing. That is, a large chunk of their 120 centres’ operating surplus is probably used to pay for the high costs of maintaining their HQ which undoubtedly comprises of the many fat cats earning fat salaries inside the HQ. Indeed, their 2010 report shows a very high corporate administrative HQ cost of $23 million!

It is interesting to note that full financial details were given in 2009 and 2010 annual reports but are missing in 2011’s report. Hence, there are no financial details in 2011 report to see how much higher corporate administrative HQ cost may have gone up by.

The number of NTUC centres started to grow rapidly from 2010 with the Anchor Operator scheme. This is set to rise further as they will continue to get many more choice low-rental new sites from unannounced quota of child care centres by MCYS.

PCF does not publish its financial report online. Hence no analysis can be done. According to sources, PCF now has 90 childcare centres, up from just a few before the Anchor Operator scheme started. PCF started off well with fees lower than NTUC’s but the newest PCF centres have started to charge fees at about the same rate as NTUC ($600+).

NTUC and PCF may be kings of childcare here due to special privileges. However, when it comes to overseas operations, they fail miserably. NTUC’s premium brand is called Little Skool House International, which was set up in the 1990s. After so many years, the only international centre they had was in Hanoi, opened in 2009 to much fanfare.  According to industry sources, that centre has ceased operations after just 1 year. It is not listed in NTUC First Campus’ website anymore. Perhaps they operate best only in Singapore with the so-called Anchor “non-profit” operating status to protect against competition.

Private and other non-profit childcare operators operating cheaper than PCF and NTUC

Now, what’s interesting is that one can actually find private and other non-profit childcare operators charging fees even lower than that of NTUC and PCF (i.e, $642 pm)! This is despite not getting recurrent grants and private operators having to pay higher competitive rents (currently at $10,000 a month but this is going to increase soon due to dwindling supply of the many void decks and places which have already been reserved for the expansion of the Anchor “non-profit” operators, NTUC and PCF).

The following are some of the monthly fees charged by private and other non-profit childcare operators:

• Non-Profit:

1. ABC Children’s Place in Tampines – $480
2. Chee Hwan Kog Child Care in Hougang – $470
3. SGM Little Kidz in Rivervale – $450

• Private:

1. Bearrington Childcare in Sengkang – $580
2. Early Learning Centre in CCK – $560
3. Bubblesland Playhouse in Sengkang – $630
4. Island Playhouse in Pasir Ris – $580

They can even operate at lower than NTUC’s and PCF’s fees of $642 despite not getting the type of advantages NTUC and PCF get as anchor operators!

Can you imagine what childcare costs might be like if we allow these operators access to the same grants and rent privileges as the Anchor Operators? Of course, once the private ones get to enjoy these privileges, MCYS would have the rights to regulate their fees.

Bottom line is, why should parents be paying $642 to “non-profit” anchor operators like PCF and NTUC if part of the fees go to feed the fat cats in their HQs? Parents would rather their fees go to pay for better teachers at the centres!

So, based on the cash flow statement of a typical NTUC centre above, if they are truly for non-profit purpose, they ought to be charging ($40,000/80) = $500 a month for childcare. And if other non-profit centres have their kind of privileges, it is estimated that they can easily knock off another $100 from their fees to around $400 pm). Wouldn’t Singaporeans be able to truly benefit with the lower charges?

And so, do we still think that the anchor operators are really non-profit entities and doing Singaporeans a favor?

Who’s doing who a favor?