Home > For Health Professionals > Aged care > Residential Care > Financial Information > Conditional Adjustment Payment (CAP)

Conditional Adjustment Payment (CAP)

Information about the Conditional Adjustment Payment.

You may download this document in PDF format:

PDF printable version of Conditional Adjustment Payment (CAP) (PDF 81 KB)

Table of contents

About CAP

• What is CAP?
• Who is eligible for CAP?
• What are the eligibility criteria for CAP?
• What is the purpose of CAP?
• How much is CAP?
• CAP financial reporting requirements
• Checklist for financial requirements of the Principles
• Alternative arrangements
• Review of CAP
• How can I get further information?

What is CAP?

CAP stands for the ‘Conditional Adjustment Payment’. It is a significant payment available to eligible approved providers of residential aged care in Australia.

Top of page

Who is eligible for CAP?

Approved providers of residential aged care who are eligible, under the Aged Care Act 1997, for the payment of a basic subsidy in respect of a resident are also eligible to receive a Conditional Adjustment Payment if they meet the CAP eligibility requirements set out in Part 10, Division 4 of the Residential Care Subsidy Principles 1997 (the Principles).

Apart from a small number of approved providers who have opted out of CAP, all approved providers of Australian Government-funded residential aged care services are currently eligible for CAP, and payment to each approved provider will continue unless and until the approved provider fails to meet one of the eligibility criteria for CAP, or elects not to receive CAP funding.

What are the eligibility criteria for CAP?

The eligibility requirements for the receipt of CAP are set out in the Principles. A copy of the Principles relating to CAP or a complete copy of the Aged Care Principles can be found at www.comlaw.gov.au.

In general, for approved providers to be eligible to receive CAP, they must satisfy all of the following eligibility requirements:

1. They must encourage staff training at the residential aged care service and provide information about the training opportunities that were offered to staff.

2. They must, in the relevant financial year, provide a copy of the audited General Purpose Financial Report (GPFR) for the previous financial year to any recipient of the service, potential recipient, or their representatives who ask for a copy.

3. They must participate in any aged care workforce census / survey conducted by, or on behalf of, the Department of Health and Ageing.

In addition to satisfying these requirements, approved providers must give the Secretary of the Department (Secretary) a copy of the audited GPFRs for the relevant financial year by 30 November and Staff Training Statements by 28 February.

Top of page

What is the purpose of CAP?

The aim of CAP is to improve the quality, accessibility and sustainability of the aged care sector to better meet the needs of an ageing population.

CAP will strengthen financial management and corporate governance arrangements in the aged care industry, and assist approved providers to improve their services so that they can continue to provide high quality care to residents.

How much is CAP?

The amount of CAP payable in respect of a resident is calculated as a percentage of the basic subsidy amount payable in respect of a resident.

The level of the CAP is 8.75 per cent of the basic aged care subsidy for each resident.

There is no requirement for approved providers to include details on how the CAP was used, nor are approved providers required to submit any compliance reports on expenditure of the payment.

Top of page

CAP financial reporting requirements

In order to continue to receive CAP after 30 November, approved providers must:

• complete a GPFR for the relevant financial year;
• report at the approved provider or residential aged care service level;
• report on all residential aged care services it operated for all or part of the financial year;
• have their GPFR audited by a Registered Company Auditor;
• treat residential care as a reportable segment in their GPFR;
• lodge their GPFR and audit report (signed & dated) with the Department, C/ - Forms Administration Pty Ltd (Forms Administration) by 30 November; and
• be assessed as eligible for CAP by the Department – see the Checklist for financial requirements of the Principles. Please note the GPFR must be in accordance with the applicable accounting standards and give a true and fair view of the financial position and performance of the entity.

The key elements of the CAP financial reporting requirements are as follows:

Top of page

1. Complete a General Purpose Financial Report (GPFR)

• Approved providers must complete a GPFR within the meaning of Statement of Accounting Concepts SAC 2, that states that GPFRs are prepared to provide users with information about the reporting entity that is useful for making and evaluating decisions about the allocation of scarce resources.
• The first note of the GPFR should specify that it is a GPFR and the auditor should confirm that it is a GPFR that has been audited.
• All GPFRs are required by the accounting standards to include a statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, comprising a summary of significant accounting policies and other explanatory information.
• A Special Purpose Financial Report is not acceptable.
• Any general statement of revenue and expenses is not acceptable.
• The GPFR and audit report must be signed and dated.
• The reduced discosure requirements are available to approved providers that are Tier 2 entities. However, for the purpose of segment reporting, approved providers must report as if they are a Tier 1 entity.

2. Report at the Provider (NAPS ID) or Service(s) level (RACS ID)

• Reporting at the approved provider level means the provision of one report covering all of an approved provider’s residential aged care services and all its other activities.
• A GPFR at the group level for more than one approved provider is not acceptable. Approved providers should not submit one financial report that covers more than one approved provider.
• Reporting at the Service level means the provision of GPFRs that cover each residential aged care service or groups of services (in any combination but each service should be reported only once).
• Where approved providers report at the Service level the audited GPFRs must together list all the services for which the approved provider is receiving Commonwealth subsidy including the RACS ID for each service.
• If approved providers choose to provide separate reports at the Service level, each report must be a GPFR and separately audited.

3. Report on all residential aged care services

• Approved providers must report on all residential aged care services they operated for all or part of the relevant financial year (in order for CAP funding to continue for that Service).
• Approved providers will be eligible for CAP funding only in respect of those residential aged care services that they have reported on in an audited GPFR.
• Approved providers must provide details of their residential aged care services that are not being reported on.

Top of page

4. Have the GPFR audited by a Registered Company Auditor

• To receive CAP, approved providers must have their GPFR audited by a Registered Company Auditor (RCA). Section 1281 of the Corporations Act 2001 (Cth) provides that the Auditor-General of the Commonwealth or a State or Territory is taken to be a RCA. It is the approved provider’s responsibility to ensure that its auditor is a RCA. One method of checking is to perform a search on the ASIC website using the following web address: www.search.asic.gov.au/pro.html and then select registered auditors and type in the family or organisation name. Company auditors will need to comply with all applicable auditor independence requirements in the Corporations Act 2001 (Cth).
• The only exception to a GPFR being audited by a RCA is where approval has been given for an alternative auditor. The Secretary will not routinely approve a person who is not a RCA to audit financial reports. The application form is to be used to cover exceptional circumstances only.
• The audit report must be signed and dated by the auditor before it is deemed complete and must be lodged with the financial report by the due date.

5. Provide one of the following notes on residential aged care operations

• Approved providers that deliver only residential aged care services, should include a note in the GPFR attesting that:
  “The approved provider delivers only residential aged care services and this GPFR therefore relates only to such operations.”
• For approved providers involved in other operations in addition to residential aged care services a Segment Note is required within the meaning of the accounting standard (AASB 8 'Operating Segments') - see the Suggested Segment Information table and the note below.
• The Segment Note should include residential aged care operations as defined under the Aged Care Act 1997 separate from other aged care operations such as community or flexible care, or independent living units for seniors.
• If a Segment Note is required but not provided then the approved provider will not be eligible for CAP after 30 November until the start of the month following the date on which the requirement is met.

Note: The following table identifies important elements of the residential care operations that the Department seeks in the segment note. Additional information may be required to comply with the accounting standards. Users should seek independent advice regarding the implications and disclosures requirements of AASB 8 for their particular circumstances. Approved providers are to apply AASB 8 as if they are Tier 1 entities.

Suggested Segment Information (SSI) Residential aged care
Income Statement
Revenue	2010-11	2009-10	Expenses	2010-11	2009-10
Operating revenue
Commonwealth subsidies			Wages & superannuation - care
State grants			Wages & superannuation - admin
Resident/client charges			Wages & superannuation - other
Bond retentions (if applicable)			Management fees
Interest			Depreciation & amortisation
Trust distributions			Interest
Donations and contributions			One-off expenses
Other operating revenue
Total operating revenue
Non-operating revenue			Staff on-costs (ex superannuation)
Capital grants			Building/repairs & maintenance
Profit/loss on sale of assets			Insurance
Revaluation increase/(decrease)			Motor vehicles
Insurance claims			Rent
Other non-operating revenue			Utilities
			Other expenses
Total non-operating revenue
Total Revenue			Total Expenses
NET Profit (Before Tax)
Balance Sheet
Assets	2010-11	2009-10	Liabilities	2010-11	2009-10
Current assets			Current liabilities
Cash			Short term borrowings
Liquid assets (non cash)			Trade payables
Trade receivables			Employee provisions
Inventory			Accommodation bonds (if applicable)
Other current assets			Other current liabilities
Total current assets			Total current liabilities
Non-current assets			Non-current liabilities
Loans			Long term borrowings
Property, plant & equipment			Employee provisions
Investments			Accommodation bonds (if applicable)
Intangibles			Other non-current liabilities
Other non-current assets
Total non-current assets			Total non-current liabilities
Total Assets			Total Liabilities
NET Assets

Top of page

6. Lodge the GPFR and the audit report by 30 November

• lodge the GPFR and audit report (both signed & dated) with the Department, C/- Forms Administration Pty Ltd by 30 November.
• Early lodgement is encouraged as this will give approved providers time to fix any problems detected by the Department.
• If approved providers are unable to lodge their financial report by 30 November, a request for a later reporting date must be lodged by 30 November, or CAP payments will automatically cease from 1 December (and not resume until the start of the month following the date on which the approved provider becomes CAP compliant again).
• An extension will be granted only if the Secretary is satisfied, on reasonable grounds that it would be impracticable for an approved provider to comply by the due date. An extension of the reporting date is from one to three months (unless exceptional circumstances apply) depending on the approved provider’s individual circumstances.
• Each financial report should be clearly marked with the National Approved Provider System (NAPS) or Residential Aged Care Service (RACS) identification number it relates to and include an Australian Business Number (ABN).
• The audit report must be signed and dated before it is deemed to be complete.
• In an attachment, provide details of the approved provider’s residential aged care services that are not being reported on.
• Provide details of a contact officer that the Department can contact should further information be required regarding the GPFR.

If an approved provider fails to lodge its GPFR and audit report by 30 November, its CAP will cease from 1 December and will not be reinstated until the first day of the month following the date on which they become CAP compliant.

7. Assessed as eligible for CAP by the Department

To be eligible for CAP in relation to each residential care service, approved providers must comply with the following statements in the Checklist for financial requirements of the Principles.

Checklist for financial requirements of the Principles

To be eligible for CAP in relation to each residential care service, approved providers must comply with the following statements (which are set out in the Residential Care Subsidy Principles 1997) for each financial report that is prepared in respect of a residential aged care service(s)

1.	A General Purpose Financial Report (GPFR) within the meaning of the Statement of Accounting Concepts SAC 2: ‘Objective of General Purpose Financial Reporting’. (The GPFR must include an Income Statement, Balance Sheet, Statement of Cash Flows, and Notes to the Financial Statements)
2.	The GPFR is written as if the entity is a reporting entity within the meaning of the Statement of Accounting Concepts SAC 1: ‘Definition of the Reporting Entity’. (Report must be at the approved provider (NAPS ID) or Service level (RACS ID)
3.	The GPFR is in accordance with all applicable accounting standards in force at the time the report was made.
4.	The GPFR gives a true and fair view of the financial position and performance of the entity for the financial year.
5.	The GPFR treats residential aged care as a reportable segment within the meaning of the accounting standard (AASB 8 ‘Operating Segments’) relating to segment reporting that applies to the relevant financial year – see suggested format. (Segment Note on residential care operations is required if the approved provider is involved in other operations in addition to residential care services)
6.	The GPFR has been audited by a registered company auditor within the meaning of the Corporations Act 2001 or by an alternative person approved by the Secretary of the Department of Health and Ageing.
7.	The auditor has provided an audit opinion, including a statement as to whether the financial report: was prepared in accordance with the applicable accounting standards as in force at the time the report was made gives a true and fair view of the financial position and performance of the entity for the relevant financial year (The audit report must be signed and dated before it is deemed complete)
8.	Provide a copy of the audited financial report for the relevant financial year to the Department by 30 November, and in the relevant financial year provide a copy of the audited financial report for the previous financial year to any recipient of the service, potential recipient, or their representative who request a copy.
Note:	The approved provider will be taken to have complied with these compliance statements in relation to a residential care service during any of the relevant financial year that the approved provider was not responsible for the operation of the residential care service.

Please note that this checklist is for the approved provider’s own use and is not required to be submitted to the Department.
Top of page

Alternative arrangements

Up to 30 November, approved providers may apply for a different financial year, a later reporting date, and/or an alternative auditor. An approved provider may:

• apply for a determination to move from a non-standard financial year to a standard financial year by allowing it to apply for a financial year of less than 12 months;
• apply for a determination of a non-standard financial year where it is impracticable for it to comply with the standard financial year (i.e. July to June);
• request a ‘later reporting date’, if it would be impracticable (or it is unable, due to exceptional circumstances) to satisfy the financial reporting requirements by the standard reporting date of 30 November; and
• apply for an alternative auditing arrangement if the requirement for the approved provider’s accounts to be audited by a Registered Company Auditor is impracticable.

Relevant application forms can be obtained by contacting Forms Administration by phone (02) 4403 0640. Please note, the Department has 28 working days in which to process any application for alternative arrangements.

Different financial year

Approved providers with a financial year that is not the standard financial year of 1 July to 30 June, may apply for a different financial year. An approved provider should contact Forms Administration by phone on (02) 4403 0640 to obtain the necessary application form. Please note, the Secretary can only approve a different financial year for an approved provider if the Secretary is satisfied, on reasonable grounds, that it would be impracticable for the approved provider to prepare a financial report for the standard financial year. In general, a determination will only be available where an approved provider does not currently have the systems or processes in place that would reasonably allow it to meet the requirement of reporting for the standard financial year.

Later reporting date

Approved providers concerned that they may not be able to lodge their financial report by the standard financial reporting date of 30 November, may request, before 30 November, a later reporting date. An approved provider should contact Forms Administration by phone on (02) 4403 0640 to obtain the necessary application form. Please note, the Secretary can only approve a later reporting date for an approved provider if the Secretary is satisfied, on reasonable grounds, that it would be impracticable for the approved provider to comply with the requirement to lodge its financial report by 30 November.

Depending on an approved provider’s individual circumstances, an extension of the reporting date would be from one to three months, that is, from December to the end of February, and if exceptional circumstances exist, a possible further extension of three months from March to the end of May. A strong case for a later reporting date will need to be made in any application lodged and an approved provider should not assume that an extension will be granted in every case.

Top of page

Alternative auditor

Approved providers not able to readily access the services of a Registered Company Auditor (e.g. the approved provider is in a rural/remote location where there are no Registered Company Auditors) may request that the Secretary approve an alternative auditor who is not a Registered Company Auditor. An approved provider should contact Forms Administration by phone on (02) 4403 0640 to obtain the necessary application form. Please note, approval of an alternative auditor is at the discretion of the Secretary. The Secretary will not routinely approve a person who is not a Registered Company Auditor to audit financial reports. The Secretary must be satisfied with the qualifications and experience of the proposed alternative auditor. An application should be used to cover exceptional circumstances only.

Review of CAP

In the 2008-09 Budget, the Australian Government established a Review of the Conditional Adjustment Payment (the CAP Review). The CAP Review was carried out by the Department of Health and Ageing. It was informed by submissions from aged care providers, consumers, and their representatives and by the analysis of the GPFRs of approved providers and other relevant data and reports.

Submissions to the CAP Review are published on the Department of Health and Ageing website at www.health.gov.au/cap.

How can I get further information?

If you require further information regarding the CAP reporting requirements in general, please contact Forms Administration on: (02) 4403 0640 or by email: cap@formsadministration.com.au
Top of page