As a result of the Royal Commission into Aged Care Quality and Safety, the Australian Government announced that it will implement recommendations to increase the financial reporting requirements and strengthen the prudential requirements of its approved providers. This recommendation will be implemented through a new Financial and Prudential Monitoring, Compliance and Intervention Framework (the Framework). This Framework will be phased in from the 2020 - 2021 reporting period.
Phase 1 of the framework has introduced:
- new legislative requirements under the Accountability Principles 2014; and;
- changes to the Aged Care Financial Report (ACFR), including new legislated reporting requirements that commence from the 2020-21 ACFR.
Changes to the Aged Care Financial Report from 30 June 2021 include:
1. Consolidated Parent Level Segment Report
Many approved providers have operating and capital activities beyond those governed by the Aged Care Act 1997 and are part of corporate structures that did not submit financial information to the Department. In order to make a reasonable assessment of the approved provider’s overall financial viability and adherence to their prudential legislative requirements, greater visibility over the financial operations of the consolidated group is required.
2. Strengthened Approved Provider Reporting
The following additional items will now be collected in the ACFR:
- Reconciliations statements for financial assets, loans receivable (related and nonrelated entities), non-current assets, refundable loans and borrowings. This will allow the ACFR to be more closely aligned with providers’ audited GPFS and should mostly not require additional calculations not already disclosed in providers’ GPFS.
- Liquidity Balance Sheet: The liquidity balance sheet allows providers to split RADs into amounts payable within 12 months and after 12 months, in turn providing the Department with a better understanding of an approved provider’s liquidity position.
3. Residential Segment Income Statement
The following new sections will be introduced to the ACFR:
- Residential income: Captures similar residential aged care income data items as the current ACFR Residential Income Statement but at the individual facility level;
- Residential expenses: Captures residential aged care expense data in more detail than in the current ACFR Residential Income Statement and at the individual facility level. New data requirements include more details on staff costs across care, hotel, accommodation and administration, including care staff hours, hotel costs split between catering, cleaning, laundry and maintenance and more details on non-labour care costs.
For approved providers that may not have the appropriate accounting system set up to capture transitional requirements, the Department will allow transitional reporting provisions. Facility level reporting will become mandatory for the 2021-2022 year.
4. Signature of the ACFR
If an approved provider is not a State, a Territory, an authority of a State or Territory or a local government authority, ACFR must be signed by:
- a director of the body corporate (if the provider is a body corporate that is incorporated under the Corporations Act 2001); and
- a member of the provider’s governing body (in any other case).
5. Provision of financial support statement
An approved provider of residential aged care that is a subsidiary of another body corporate must provide a financial support statement both as part of their ACFR from 2020-21 and on request by the Secretary.
The financial support statement:
- states whether the ultimate holding company of the provider either is or is not willing and able to provide any financial support to the provider to enable to pay its debts; and
- must be signed by either a director of the body corporate of the ultimate holding company or a member of the ultimate holding company’s governing board.
More details in regard to changes to the ACFR can be found here.