2.4 – Eligible and Ineligible Expenses for CWELCC Program

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. 

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 #