---
title: 2.4 – Eligible and Ineligible Expenses for CWELCC Program
description: "**By Jane Fung, P. Eng - Visit [QuietDeal™](https://quietdealnetwork.com/) when you are ready to buy or sell daycare and private schools.** Based on the provided Ministry of Education document, here is a summary of the eligible and ineligible expenses under the…"
url: "https://operatorjourney.ca/docs/eligible-expenses-for-cwelcc-program/"
updated: "2026-10-10"
category: "Childcare Centre / Module 2 - CWELCC Strategy"
---

# 2.4 – Eligible and Ineligible Expenses for CWELCC Program

**By Jane Fung, P. Eng - Visit [QuietDeal™](https://quietdealnetwork.com/) when you are ready to buy or sell daycare and private schools.**

Based on the provided Ministry of Education document, here is a summary of the eligible and ineligible expenses under the Canada-Wide Early Learning and Child Care (CWELCC) program.  [See the Government Guidelines and Law for CWELCC module](/government-guidelines-and-laws). 

Funding eligibility is determined by a principle-based definition. Costs must be **Attributable** to childcare, **Appropriate** for the operation, and **Reasonable** in quality and amount.

### **1. Eligible Expenses (Fully or Partially Funded)**

Eligible expenses are costs that an "ordinary prudent person" would incur to operate a comparable, high-quality, safe, and inclusive childcare center.

| **Expense Category** | **Specific Rules & Conditions** | **Concrete Examples from Document** |
| --- | --- | --- |
| **Kitchen Equipment** | Must be required for the provision of childcare. | **Eligible:** A standard refrigerator, microwave, kettle, or oven used to prepare children's food. |
| **Minor Repairs** | Necessary for the upkeep of the facility where care is delivered. | **Eligible:** Fixing a single broken window in a classroom. |
| **Audit Services** | Often a contractual requirement of the CWELCC agreement itself. | **Eligible:** Fees paid to a CPA for required audited financial statements. |
| **Insurance Premiums** | Used to mitigate risks and safeguard children, staff, and the facility. | **Eligible:** Property, liability, and accident insurance required for licensing. |
| **3rd Party Mortgages** | Must be on facilities actively used to deliver childcare included in the base fee. | **Eligible:** Principal and interest payments on the building currently housing the daycare. |
| **Shareholder Loans** | Interest is eligible if the loan is for a non-recurring eligible cost and has a contract. The rate must be comparable to market rates. | **Eligible:** Interest on a loan from a shareholder used to purchase necessary playground equipment. |
| **Financing/Loan Interest** | Eligible interest must not exceed Canada Small Business Financing Program rates (Prime + 3% for loans, Prime + 5% for lines of credit). | **Eligible:** Interest on a bank loan (within rate caps) used to finance a necessary, non-recurring expense. |
| **Bad Debt Expense** | refers to uncollectible accounts receivable and cannot exceed the total accounts receivable. | **Eligible:** Writing off unpaid fees from a family that has left the center (subject to rules). |
| **Franchise Fees** | Must be necessary for the operation of the specific eligible center. | **Eligible:** Monthly franchise fees paid by a licensee operating a franchise location. |
| **Owner’s Compensation** | Salaries, wages, and benefits paid to owners for actual labor are eligible and *not* capped. | **Eligible:** A market-rate salary paid to an owner who also works as the center's Director. |
| **Depreciation/Amortization** | Eligible only if related to an asset that is an eligible cost and was not funded by another public source. | **Eligible:** Annual depreciation on a van purchased by the center (not via a grant) used to transport children. |

### **2. Ineligible Expenses (Not Funded)**

Expenses are deemed ineligible if they fail the "attributable, appropriate, or reasonable" tests, represent perks in lieu of profit, are funded by other sources, or result from penalties.

| **Expense Category** | **Why it is Ineligible** | **Concrete Examples from Document** |
| --- | --- | --- |
| **"Perks" in Lieu of Profit** | Non-essential benefits designed to reward the controlling owner. | **Ineligible:** A year-end performance bonus paid to the controlling owner. |
| **Non-Essential Equipment** | Items not required to deliver childcare. | **Ineligible:** A coffee machine or wine fridge. |
| **Major Capital Repairs/Renewal** | Major repairs (often covered by other funding sources, like school boards) are excluded from benchmarks. | **Ineligible:** Replacing all the windows in a facility unnecessarily (beyond minor repair). |
| **Unreasonable Costs** | Costs exceeding what is necessary or fit-for-purpose, or purchased at non-competitive prices. | **Ineligible:** A "top-of-the-line" refrigerator with features the center does not need. |
| **Ineffective/Unsafe Assets** | Items that cannot support the delivery of safe care. | **Ineligible:** A second-hand refrigerator that cannot maintain safe temperatures. |
| **Redundant Assets** | Replacing items that work well or buying supplements that are not needed. | **Ineligible:** Replacing a working refrigerator that already supports operations. |
| **Costs for Ineligible Children** | Expenses must be split methodology if serving children ages 6-12. | **Ineligible:** The portion of rent, utilities, or food costs attributed to the school-age program (ages 6+). |
| **Other Public/Insurance Funding** | Costs covered by other government grants or insurance claims cannot be double-counted. | **Ineligible:** Setup costs funded by a Start-up Grant; repairs paid for by an insurance claim. |
| **Income Taxes** | A business obligation, but not attributable to *providing* childcare. | **Ineligible:** The corporation’s annual income tax payment. |
| **Penalties and Fines** | Result from violations, not from operating childcare. | **Ineligible:** Late filing penalties, health violation fines, or liquidated damages. |
| **Vacant/Non-Childcare Facilities** | Mortgages/costs on facilities not actively providing CWELCC care. | **Ineligible:** Mortgage payments on a separate, vacant building owned by the licensee. |
| **Accrued Interest on Equity** | Not considered a cost attributable to childcare provision. | **Ineligible:** Bookkeeping entries for interest "owed" on shareholder investments. |

When navigating CWELCC funding, the old adage "it's better to be safe than sorry" absolutely applies. While the Principle-Based Definition provides flexibility, it also places a significant burden of proof on you, the licensee, to demonstrate that every dollar spent was attributable, appropriate, and reasonable.

### **The Real Cost of Ineligible Spending**

This is not a hypothetical accounting exercise. The Accountability Framework gives municipalities the authority to conduct cost reviews and reconciliation.

If a review determines that funding was spent on **ineligible items** (like those examples of owner perks, non-essential equipment, or double-counted capital costs), the consequences are severe:

**You, as the daycare owner, must return that funding to the government out-of-pocket.**

Depending on the scale of the ineligible spending, this could create a devastating financial crisis for your center.

### **Final Key Takeaway**

Do not view CWELCC funding as a general grant or passive revenue. View it as a highly restrictive, cost-based reimbursement program. You must be extremely diligent about which costs you attribute to the program.When in doubt, consult your CMSM/DSSAB for clarity *before* making a major expenditure, and ensure your bookkeeping perfectly aligns with the principles of value-for-money outlined by the Ministry.

### Useful Links

[Ontario Childcare Guidelines: CWELCC Cost-Based Funding Guideline (Read Chapter 2)](https://efis.fma.csc.gov.on.ca/faab/CCChapters.htm)

[Ontario Cost-Based Child Care Funding Estimator](https://www.ontario.ca/cost-based-child-care-funding-estimator/)

[The Operator Journey: Government Guidelines and Laws](/government-guidelines-and-laws/)

[Janefung.ca: How to use the CWELCC Funding Estimator](https://janefung.ca/estimating-cwelcc-funding-a-step-by-step-guide/)

[Janefung.ca: Regional CWELCC Links](https://janefung.ca/ontario-cwelcc-regional-links-and-application-updates/)

**Are you looking to buy or sell your daycare or private school? Visit [QuietDeal™](https://quietdealnetwork.com/) to learn more.**