Costs are the value of resources used by a process of transformation in a system. A system is an interconnected set of diverse parts (components) subject to a common plan or serving a common purpose. A system takes an input (or inputs) and transforms it into an output (or outputs). An ECCD program can be viewed as a system composed of administrators, caregivers, educators, health personnel, cooks, buildings, materials, food, utilities, transportation, and so on. These components are combined and directed by economic and social rules. The common purpose that unites these parts is providing services to improve children's physical and psychosocial development and thus to increase their chances of success in school and in life.
The child (input) enters the ECCD program (the system) and after a period of time is transformed into a healthier and more developed child (output) than if the child had not participated in the program. This transformation has a positive impact not only on the child but also on the family, the community, the economy, and the larger society for many years to come.1
As this transformation system is assembled and put into operation, it incurs costs. The cost of each of the components of the system is the number of units of this component used in a given period, multiplied by the unit price. For example, the cost of crayons is the number of crayons used during the period, multiplied by their unit price. Similarly, the cost of teachers in the system is the number of teachers (or, more precisely, teacher-time used during the year), multiplied by their salary. For budgetary reasons costs are usually referred to on an annual basis. In estimating the costs of an ECCD program it is important to distinguish between the costs of an establishment, or center, and the costs of an ECCD system, which can be either national or regional (table 5.1).
| Table 5.1 An illustrative cost table for a center |
| Component | Number | Unit cost | Total cost |
| Personnel | |||
| Administrators | |||
| Supervisors | |||
| Caregivers | |||
| Educators | |||
| Nurses | |||
| Service workers | |||
| Volunteers | |||
| Food | |||
| Materials | |||
| Supplies | |||
| Utilities | |||
| Rent | |||
| Transport |
In estimating the costs of an ECCD system there is a tendency to include only the costs that are registered in accounting records that can be audited—actual expenditures by cash, check, or promissory note. But these types of costs, sometimes called outlay costs, often omit components of the system that represent a cost to society in making them available and that may well have to be paid for as an outlay if the program is replicated in another environment. For example, the donation by a local church of the use of a building normally will not show up in accounting records as an outlay. But it nevertheless represents a cost to the community, which forgoes the opportunity to use that space to, for example, train unemployed youth. Moreover, if a new center is opened in a neighborhood where no donated space is available, the center would have to pay rent for the space. Because expanding ECCD systems is a major concern, that is a strong reason for reckoning such nonoutlay costs of ECCD programs. These nonoutlay costs, referred to as imputable costs, should be included in cost data for most uses, regardless of who bears the costs.
Some costs associated with ECCD programs may be paid for as outlays and duly recorded, but not by the program. For example, a ministry of education might assign teachers whose salaries it pays to an ECCD program with separate accounting. The cost of these teachers will appear as an outlay for the ministry of education, but it rarely appears in the ECCD program's books as an imputable cost to the program. The omission of imputable costs can make a significant difference, as shown by a recent study of the CURUMIM program, which provides care during off-school hours to 6- to 12-year-olds living in poverty in the Brazilian state of Minas Gerais. While the officially reported costs, based on outlays by the program, came to about $38 per child a month, the study found that once the costs of personnel used by the program but paid for by state agencies were included, the unit cost rose by 84 percent, to $70 (Pinto 1997).
What price to use?
Once the list of goods and services required for a center has been settled on, it is necessary to decide what price these inputs command. There is little controversy about the prices for materials, supplies, utilities, and similar inputs; in general, readily available market prices should be used. It is mostly in the area of imputed costs that controversy may arise. For most programs the largest imputed items are contributions of food, labor, and services and the use of buildings (or sometimes the buildings themselves). Such contributions can take two forms: provision at no charge or provision for a price or compensation below the market value.
In accounting for contributions of labor and services, the market wage for similar occupations should generally be applied. In many cases this would be the minimum wage. For those who do not qualify for a regular salary scale there is a case for using the lowest step in the lowest formal pay scale of similar formal programs. For donated buildings the value of a similar structure in the same neighborhood should be amortized over the life of the building and the yearly amortization entered as a cost. When the premises are provided free or below the market rental value, the market rental value should be used.
Imputed values may be very important for food, which is usually one of the largest items in a center's budget. Food is often provided by the government, sometimes in kind, and through food subsidies from abroad (from CARE or the World Food Program, for example). Food aid also has occasionally involved direct transfers of grant funds to purchase local commodities. It is best to present the cost of food as the outlays that would be required to buy the food at local prices. This would show what it would cost to sustain the program's food component once subsidies end.
Most ECCD programs do not include health care in their cost calculations because it is supposed to be covered by the regular operation of the health system—whether an ECCD center is small enough so that health treatment is provided by a health post or large enough to justify having a nurse on the premises whose salary is paid by the public health system. All ECCD centers, regardless of whether they are covered by the public health system, should account for recurrent health costs represented by the time health personnel devote to treating children and by the use of medicines and facilities.
Once the quantities and prices of inputs for a particular type of center are determined, it is useful for budgeting and planning purposes to reorganize table 5.1 by program objectives, as is done in table 5.2. From this table it is possible to determine the cost of providing a particular service. The table groups the direct costs associated with the service. It also groups the overhead or joint costs, such as central administration, building and facilities, and transportation. These costs can then be allocated to each of the services as indirect costs. This way of classifying costs is also useful for analyzing the cost consequences of expanding a service or segment of the program.
| Table 5.2 An illustrative cost table for a center, organized by objective |
| Component | Cost |
| Administration | |
| Personnel | Office supplies | Misc. workers | Building and facilities | Amortization (rent) | Maintenance | Service workers | Transportation | Education | Personnel | Materials | Health care | Personnel | Health supplies | Feeding | Personnel | Food | Materials |
What is the cost of an early childhood development system?
The yearly cost of an ECCD system is the sum of the costs of all the ECCD centers plus the amortized initial investment of establishing the system and the recurrent costs of administering it (tables 5.3 and 5.4). The main costs of establishing the system are program development, curricular materials, initial training at all levels, administrative buildings and equipment, and a management information system. Operating costs include the salaries of directors and administrators, program inspectors or monitors, technical support staff, service personnel, and consultants, and the cost of office supplies, utilities, communications, transportation, per diem expenses, ongoing training, information, and dissemination. Two items warrant special attention here: program development and training.
Program development. If a variety of ECCD technologies, models, and materials have already been developed, tested, and evaluated in a country, the developmental costs associated with putting a program in place may be minimal. Even so, some adjustments to the setting will be needed in the models and materials to be used. A suitable period for development allows time for such adjustments and helps to develop local ownership of the models and materials adopted. And the process of creating (or re-creating) and testing a technology can be useful in initiating and training people who will later be responsible for applying the technology on a larger scale.
Initial training. The initial training of participants in an ECCD program is considered an investment cost here, because the results of the training will presumably be used over a number of years. The cost should therefore be amortized. Maintenance of this training-whether required because of obsolescence, attrition, or high turnover of personnel-should be treated as an operating cost. The cost of training includes:
- The salaries and benefits of trainers.
- The cost of using training sites.
- The transportation and per diem costs of trainees.
- The cost of training materials.
- The salaries of trainees, if not covered under their present employment.
| Table 5.3 Yearly costs of a national or central administration of an early childhood development system |
| Investment costs (amortized) | |
| Program development | Curricular material | Initial training | Management information system | Buildings and equipment | Vehicles |
| Operating costs | |
| Salaries | |
| Director | |
| Deputy directors (health, nutrition, curriculum, evaluation, planning and budgeting) | |
| Program inspectors or monitors | |
| Technical support staff | |
| Clerical support staff | |
| Service staff | |
| Consultants | |
| Travel and per diem | |
| Utilities | |
| Building maintenance | |
| Materials and supplies | |
| Transportation | |
| Communications | |
| Information dissemination | |
| Total |
| Table 5.4 Summary cost table for an early childhood development system |
| Central Administration Centers | |||
| Type 1 | Type 2 | Type na | |
| Number | |||
| Number of children | Expenditure item | Investment costs (amortized) | Program development | Curricular materials | Initial training | Buildings and equipment | Operating costs | Salaries | Materials and supplies | Food | Total | Grand total |
| a Centers are usually classified according to the characteristics and intensity of the program, the population served, and the program context. | |||
How much does a program cost per child?
The estimated unit cost for a program is essential for assessing how expensive ("high cost") or economical ("low cost") the program is relative to another program, to alternative modes of the program, or to some broader norm.2 The estimated unit cost also generally allows "quick and dirty" estimates of how many more children could be served if resources were increased by a certain amount or of the additional resources that would be needed to increase coverage by a certain number of children.
When policymakers and potential funders ask how much an ECCD program costs, their interest is generally not only in the program's total cost, but also in the cost per child served by the program, or unit cost. The concept of unit cost captures the crucial relationship between total costs and the number of children served by the program as a simple ratio of the two. In practice, however, calculating and interpreting unit costs is less straightforward. The term children served by the program usually has several possible meanings, ranging from a very inclusive definition, such as the children who spend any time or receive any amount of a service provided by the program in the course of a year, to a very restrictive definition, such as only the children who "graduated" from the program. So it is important to have a clear definition of this term when using the concept of unit cost.
