Parent Deposits and Prepaid Fees in a Daycare Sale

A daycare's bank balance can include money for care the seller has not yet provided, deposits that families may recover, and charges whose permissibility needs checking. Before treating that cash as part of the business you are buying, establish what each payment was for, whether it was permitted under the centre's funding arrangements, and who will deliver the care or repay the family after closing.

These are separate questions. A purchase agreement can allocate a liability between buyer and seller; it cannot, by itself, make a prohibited fee permissible or remove a parent's rights. The useful closing document is therefore a reconciled opening-balance schedule, not simply a list headed “deposits transferred.”

Start with the fee's purpose and the centre's funding agreement

As checked on September 8, 2026, B.C.'s provider guidance says centres receiving base funding cannot charge waitlist or waitlist-related fees. This covers charges connected to joining, maintaining or changing a waitlist position. The ministry determines the classification. A refundable label does not solve the problem: the current CCFRI glossary expressly includes refundable and non-refundable waitlist fees. B.C. provider guidance, 2026–27 CCFRI guidelines, glossary.

That does not make every payment collected before attendance a waitlist fee. B.C.'s information for families distinguishes deposits to hold spaces, which it permits at the provider's discretion, from waitlist charges. Ask whether an actual space has been offered and accepted, for which care category, days and start date. An invoice saying “reservation” is weak evidence if the family is merely paying to remain on an uncertain list. B.C. information for families, “Waitlist fees and deposits”.

Use the following distinctions when examining the ledger:

Application fees require particular care because the word describes a process, not its legal treatment. Is the charge for joining a waitlist, or for administration once a place is offered? Do not recategorize it in the sale spreadsheet to obtain a preferred answer.

CCFRI adds its own controls. Its 2026–27 guidelines generally prohibit mandatory charges above the approved parent fee except permitted administrative fees. Established facilities' administrative fees were frozen from April 1, 2022; new and new-to-CCFRI facilities have a different entry rule, with no later additions or increases once enrolled. Modified facilities may retain the same administrative fee charged immediately before the relevant change. Mandatory recurring charges belong in the reported parent fee. CCFRI guidelines, sections 4 and 4.5.

Do not export those administrative-fee exceptions to every funding program. The province's published 2025-intake Phase 2 Operating Funding Model manual, section 5, says $10 a Day centres, including that test group, cannot charge waitlist-related or registration fees. It also limits additional optional charges. For a particular acquisition, obtain the signed funding agreement, applicable intake manual and amendments; the published manual is not a substitute for that centre's current contract. OFM Phase 2, 2025 intake manual, page 22.

A centre outside these funding arrangements needs a separate review of its contracts and applicable law. Being outside base funding is not proof that any proposed charge is lawful. Conversely, restrictions attached to a particular funding program should not be described as an identical rule for every B.C. daycare.

A real deposit policy still needs a transaction-specific reading

An operator's published policy can demonstrate why “deposit” and “registration fee” are not interchangeable. Beaufort Children's Centre's admissions page describes a $100 deposit after a space is offered and accepted. Its parent-resources page describes repayment after care ends, less outstanding fees, and forfeiture if the reserved space is not used. Elsewhere on that page, the deposit is described as applying to the final month's fees. Those statements were checked on September 8, 2026; they are that operator's published terms, not a universal rule or proof of ministry approval for another centre. Beaufort admissions, Beaufort parent resources.

For a centre you are buying, resolve any difference between the website, handbook, signed contract and actual practice. Check withdrawal notice, vacation or illness credits, and ownership-change terms against the service period and promises already made. If the seller routinely refunds a deposit despite restrictive printed wording, obtain the transaction history and outstanding promises. If a parent has already chosen to apply the deposit to the final month, it cannot also remain as an unused deposit in the closing schedule.

A debit authorization or successful card payment only establishes something about collection. It does not establish that the underlying charge was permitted, earned or non-refundable. Payment-system migration is a separate handover task; it should not decide how the purchase price is adjusted.

Build the opening liability before deciding where the cash goes

For every outstanding balance, record the family account reference, receipt date, service period, fee classification, governing policy version, amount collected, amounts already earned or applied, refunds already paid, and remaining obligation. Use restricted-access records rather than distributing children's identifying information in a general deal summary.

Match the account-level total to the billing ledger, then reconcile receipts and refunds to bank or processor settlement evidence. A receipt that has been reversed is not available cash. A credit entered twice is not two obligations. An aged receivable is not money already collected and should not be netted against another family's refundable deposit merely to make the total look smaller.

The schedule should also identify who owes what after closing. In an asset purchase, the negotiated assumption of specified obligations and the treatment of parent contracts need explicit legal documentation. In a share purchase, buying the company's shares does not make the company's parent obligations disappear. The parties still need to examine what cash remains and how those balances enter the agreed working-capital calculation.

The commercial question is simple even where the accounting entries require an accountant: if a family has already paid for future care, the buyer cannot count on collecting that same payment again to fund delivery. Do not confuse the business's prepaid expenses, such as rent it has paid in advance, with amounts families have prepaid to the business. They sit on opposite sides of this cash-flow question. BDC's explanation of prepaid expenses.

A closing example: $20,000 of obligations is not $20,000 of extra value

Consider a hypothetical asset sale closing before care begins on November 1. These amounts are illustrative, not current approved fees for any identified centre. Assume the parties have verified the permitted parent charges and agreed that the buyer will honour the following balances:

The deposits are separate from November's invoices. That assumption matters: if they had already reduced those invoices, counting them again would overstate the liability. The two cancellation refunds concern different accounts and have not yet been paid.

Suppose the agreed base asset price is $400,000, before this adjustment, with no overlapping working-capital provision. Under one negotiated structure, the seller keeps the relevant cash and the buyer receives a $20,000 price credit. The buyer pays $380,000 and assumes $20,000 of obligations.

Under an economically equivalent structure for this simplified example, the buyer pays $400,000 and receives $20,000 of cash with the same obligations. Net purchase cash outflow is again $380,000. The agreement must state which structure applies. Giving the buyer both a $20,000 price credit and $20,000 cash for the same liability would count the adjustment twice unless some separately documented part of the price explains it.

Now suppose the seller pays the two $500 refunds before closing and supplies cleared-payment evidence. The remaining obligation becomes $19,000. Under the seller-keeps-cash structure, the corresponding price payment becomes $381,000. The schedule must reduce both the refund liability and the associated adjustment; merely changing the bank balance leaves the reconciliation incomplete.

Finally, imagine the ledger also contains $600 described as refundable waitlist application payments at a centre receiving base funding. Do not add it to transferable deposits and call the problem solved. Put it on a separate exception schedule for fee-classification and remediation advice. If, for this hypothetical, the parties agree the seller will refund all $600 before closing, record proof of those refunds separately. The illustrative $20,000 does not silently absorb unresolved prohibited-fee exposure.

These are negotiated cash-allocation examples, not statutory adjustment formulas or acquisition-accounting valuations. An accountant should reconcile them with the purchase agreement's definitions, working-capital target and treatment of assumed liabilities.

Download the parent-money opening-balance workpaper (PDF) to apply the two closing structures to your account-level totals. It includes the full worked example and fields for assumed obligations; use it privately without children’s identifiers.

Test the first month, not just the closing statement

Even a correct credit does not guarantee adequate operating cash. Assume November needs $22,000 of payroll, rent and other operating payments. Of the $20,000 transferred under the cash-transfer version, $3,000 supports deposits and $1,000 is earmarked for confirmed refunds in this planning example. That leaves $16,000 associated with November care, producing a $6,000 operating gap before other verified November receipts. Under the price-credit version, the buyer must actually retain and fund that equivalent cash in the business; a lower acquisition payment is not an automatic bank deposit into the operating account.

Do not fill the gap with an unverified government receivable. B.C.'s enrolment-reporting guidance distinguishes projected reports from later adjustments, and requires notification of funding overpayments. A seller's projected claim is therefore not the same as a final entitlement or cash cleared into the buyer's account. Reconcile parent money, funding receivables and possible funding repayments separately. The daycare financial-review guide covers the full-year revenue-to-cash reconciliation; the closing schedule here isolates which obligations and cash pass to the buyer. B.C. monthly enrolment reporting.

Before signing off, ask the lawyer and accountant to identify the cut-off time, assumed accounts, disputed balances, payment evidence, adjustment mechanism and post-closing correction period. The operator should be able to explain each family's opening balance in ordinary language: what has already been paid, what it covers, what remains refundable or creditable, and who will respond to an error. That is the practical connection between a sound closing adjustment and a credible parent handover.

JQ Properties can help coordinate the daycare purchase questions once the proposed parent-money obligations and closing treatment are clear; keep account-level family information in the secure transaction process.

By Justin Qiao, Personal Real Estate Corporation, Justin Qiao Group | RE/MAX Crest Realty.

Sources checked September 9, 2026.