How are allowances arranged for residential foster care?

Allowances for residential foster care are set out in a written financial arrangement between the fostering provider and the foster carer. The arrangement explains what the regular payment covers, which costs are reimbursed separately, how additional needs are funded and when the amounts will be reviewed. It should be clear before the placement starts so that financial decisions do not become an unnecessary source of uncertainty.

What the allowance is designed to cover

The main allowance is intended to contribute towards the costs of caring for a child or young person. Depending on the provider’s policy, this may include food, clothing, personal items, household costs, transport, activities and other ordinary expenses connected with day-to-day care. The amount is not simply a payment for having a spare room; it reflects the responsibilities and costs involved in caring for the particular child.

A separate professional fostering fee may also form part of the package. This recognises the carer’s time, responsibilities and participation in training, meetings, recording and planning. The way this is described differs between fostering services, so prospective carers should ask whether the figures they are given refer to the child’s maintenance, the carer’s fee or the overall package.

How the amount is worked out

Providers usually consider several factors when arranging an allowance, including:

• the child’s age and everyday requirements;
• the type and complexity of the placement;
• any health, behavioural, educational or communication needs;
• the level of supervision and practical support required;
• travel, contact arrangements, activities or equipment linked to the placement; and
• whether the placement involves additional responsibilities for the household.

Residential foster care can involve needs that are more intensive or specialised than those associated with a standard placement. In those circumstances, the provider should explain whether enhanced funding, agreed expenses or other financial arrangements apply. These should be linked to the child’s assessed needs rather than assumed by the carer.

What should be agreed before a placement

The placement plan or associated financial agreement should identify the regular payment, the date and method of payment, and the expenses that are included. It should also explain which items need prior approval and what evidence may be required for reimbursement. This could include larger purchases, specialist equipment, travel for family contact, educational costs or activities outside the usual household budget.

Ask for clarification if an expense is described as discretionary or subject to approval. In particular, establish whether the carer should pay first and claim the money back, whether the provider pays a supplier directly, and who authorises urgent or unexpected expenditure. Keeping these arrangements in writing helps the carer, provider and placing authority work from the same information.

Additional funding during a placement

Financial arrangements may need to change if the child’s circumstances change. For example, a new assessment may identify a need for specialist equipment, additional transport, therapeutic input or a different level of supervision. The foster carer should raise this with the supervising social worker rather than taking on an ongoing cost without agreement.

Any proposed change should be considered alongside the child’s care plan and placement plan. The provider may need information from social workers, education professionals or health services before agreeing extra funding. If the placement moves to a different level of care, the financial package should be reviewed rather than relying on an informal promise.

Reviews and ending arrangements

Allowances should be reviewed when there is a significant change in the placement, the child’s needs or the duties expected of the foster carer. A review may also be part of the provider’s ordinary fostering procedures. The carer should receive an explanation of any change, including when it takes effect and which costs it covers.

When a placement ends, payments and approved expenses should be dealt with according to the written agreement. Ask how final expenses, outstanding receipts, damaged or essential equipment and any transition arrangements are handled. The answer may depend on whether the child moves home, transfers to another placement or reaches a planned change in care.

Questions to ask a fostering provider

• What part of the package is the child’s maintenance allowance and what part is the fostering fee?
• Does the amount vary according to age, needs or placement type?
• Which regular costs are included?
• What expenses require approval before they are incurred?
• How are travel, contact, activities, clothing and specialist items dealt with?
• How are payments reviewed if the child’s needs increase?
• What records or receipts must the carer keep?
• Could the payments affect tax, benefits or other household finances?

Fostering payments can have tax and benefits implications, and the position depends on the carer’s circumstances and the rules in force at the time. A provider can explain its own arrangement, but independent advice from HM Revenue and Customs or a qualified benefits and tax adviser may be appropriate before making a decision based on the expected income.

The most useful comparison is therefore not the headline amount alone. Look at what is included, how additional costs are authorised, whether the arrangement reflects the child’s assessed needs and what support is available when circumstances change. A clear written agreement gives the foster carer a practical basis for budgeting while keeping financial decisions connected to the child’s care.