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Office of Aged Care Quality and Compliance (OACQC)

Protecting Residents’ Savings – A guide to the arrangements for accommodation bonds from 1 October 2011

This guide has been prepared to assist approved providers, holding accommodation bonds and entry contributions to comply with the amendments made to the Aged Care Act 1997 and the User Rights Principles 1997.

From 1 October 2011, there are clearer and stronger arrangements to protect residents’ savings held in the form of accommodation bonds. The arrangements clarify the intended purpose for accommodation bonds as a source of capital for investment in aged care infrastructure. They also improve governance arrangements for accommodation bonds and provide greater transparency and accountability for accommodation bonds.

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© Commonwealth of Australia 2011

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Table of Contents

Introduction

Important dates to remember

Chapter 1: Permitted us of Accommodation Bonds

1.1 Overview
1.2 What are the permitted uses of accommodation bonds?
1.3 Capital expenditure
1.4 Investment in financial products
1.5 Loans for capital expenditure or investment in financial products
1.6 Refunding of accommodation bonds
1.7 Repayment of debt accrued for the purposes of capital expenditure or refunding of accommodation bonds
1.8 Repayment of debt accrued before 1 October 2011 for the purposes of providing aged care to residents
1.9 Operational losses during the first 12 months of an approved provider operating a service
1.10 Transitional arrangements
1.11 Deductions from accommodation bond balances
1.12 Use of retention amounts and income derived from accommodation bond balances

Chapter 2: Criminal Offences Relating to Non-Permitted Use of Accommodation Bonds

Chapter 3: The Four Prudential Standards

3.1 Overview
3.2 The Governance Standard
3.3 The Disclosure Standard
3.4 The Liquidity Standard and the Records Standard

Chapter 4: Additional Information

Glossary and Acronyms

Introduction

This Guide has been written in plain English and as a result, some aspects of the legislation and policy have been simplified. It is intended to be a general guide only and does not constitute legal advice. In cases of discrepancy between the Guide and the legislation, the legislation will be the source document for enforcement of approved provider responsibilities.
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Relevant Legislation

• Division 57, Aged Care Act 1997
• Part 4, User Rights Principles 1997
• Aged Care (Bond Security) Act 2006
• Aged Care (Bond Security) Levy Act 2006

Overview

This guide has been prepared to assist approved providers, holding accommodation bonds and entry contributions to comply with the amendments made to the Aged Care Act 1997 (the Act) and the User Rights Principles 1997 (the User Rights Principles).

From 1 October 2011, there are clearer and stronger arrangements to protect residents’ savings held in the form of accommodation bonds. The arrangements clarify the intended purpose for accommodation bonds as a source of capital for investment in aged care infrastructure. They also improve governance arrangements for accommodation bonds and provide greater transparency and accountability for accommodation bonds. This will improve consumer confidence in the aged care sector by assuring residents that their funds are being used for intended purposes and that their accommodation bond balances will be refunded when they fall due.

The arrangements:

• clarify the permitted uses of accommodation bonds
• introduce a two-year transition period for approved providers to adjust and fully comply with the permitted uses
• introduce a new Governance Standard for approved providers holding accommodation bonds
• improve reporting and disclosure for greater transparency and consumer confidence
• introduce additional information gathering powers for monitoring compliance
• remove restrictions on the use of income from accommodation bonds, retention amounts and accommodation charges
• introduce criminal penalties for the misuse of accommodation bond funds.

The new arrangements are made through the Aged Care Amendment Act 2011 and the User Rights Amendment Principles 2011 (No.3).

Why change?

The total value of accommodation bonds is growing strongly. At 30 June 2010 approved providers held more than $10.6 billion in accommodation bonds on behalf of over 63 000 residents. Past experience with approved providers that failed to meet the prudential standards and timeframes for accommodation bond refunds or triggered the Accommodation Bond Guarantee Scheme highlighted a number of risks associated with managing accommodation bonds. It was also important that regulation focus on the risk that accommodation bonds were not refunded, while removing regulation regarding the use of accommodation bond income and reducing the burden of reporting to residents.
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Important Dates to Remember

1 October 2011	The new requirements for accommodation bonds (with the exception of the Governance Standard) come into force. Transitional provisions for the permitted uses start.
1 February 2012	The requirements of the Governance Standard come into force.
30 April 2012	Approved providers with an end of financial year of 31 December are required to have lodged their 2010-11 Annual Prudential Compliance Statement (APCS) to the Department.
31 October 2012	Approved providers with an end of financial year of 30 June are required to have lodged their 2011-12 APCS to the Department.
30 September 2013	Transitional provisions for the permitted uses of accommodation bonds end.

Chapter 1:

Permitted use of Accommodation Bonds

1.1 Overview

The legislation and User Rights Principles provide for clear arrangements to protect residents’ savings held in the form of accommodation bonds. These include limiting the use of accommodation bonds to specified permitted uses that reflect the intended purposes for accommodation bonds – to provide a source of capital funding for investment in aged care infrastructure.
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Approved providers must not use accommodation bonds charged on or after 1 October 2011 for a purpose that is not a permitted use as specified in the Act. The permitted uses reinforce the role of accommodation bonds in financing capital investment in residential and flexible aged care.

The permitted uses allow flexibility to invest in and transfer accommodation bonds between corporate entities provided appropriate safeguards are in place.

Permitted uses apply to accommodation bonds charged on or after 1 October 2011. A two year transition period is in place to assist approved providers to adjust to the permitted use arrangements.

Legislative reference: Subdivision 57-EA, Aged Care Act 1997, Division 8A, User Rights Principles 1997.

1.2 What are the permitted uses for accommodation bonds?

Each of the permitted uses is defined by section 57-17A of the Act. Permitted uses are limited to:

• Capital expenditure
• Investment in particular financial products
• Loans for capital expenditure or investment in particular financial products
• Refunds of accommodation bond or entry contribution balances
• Repayment of debt accrued for the purposes of capital expenditure or refunding of accommodation bonds
• Repayment of debt that accrued before 1 October 2011 if accrued for the purposes of providing aged care to residents
• Operational losses during the first 12 months that the approved provider operates a residential or flexible aged care service.

The following table summarises the application of the permitted uses according to when the accommodation bond is charged.

	Pre-1 October 2011	Transition period	Post-transition period
Permitted uses (by type of service)	Accommodation bonds charged before 1 October 2011	Accommodation bonds charged between 1 October 2011 and 30 September 2013	Accommodation bonds charged from 1 October 2013
Residential aged care service
A purpose relating to providing residential care to residents	Yes	Yes	No
Permitted uses as defined in section 57-17A of the Act or Division 8A of the User Rights Principles 1997	Yes	Yes	Yes
Flexible aged care service
A purpose related to providing flexible care to residents	Yes	Yes	No
Permitted uses as defined in section 57-17A of the Act or Division 8A of the User Rights Principles 1997	Yes	Yes	Yes

1.3 Capital expenditure

What is capital expenditure?

The primary policy intent of accommodation bonds is to provide approved providers with a source of capital funding for investment in residential and flexible aged care infrastructure. Capital expenditure improves services for residents and provides asset backing to support the refund of accommodation bond balances. Capital expenditure is broadly defined and includes ancillary expenses directly linked to capital expenditure.
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Approved providers may use accommodation bonds, if it is reasonable under the circumstances, for expenditure to:

• acquire land on which an existing residential or flexible aged care service is built
• acquire land for building residential care services or flexible care services
• acquire, build or significantly alter premises for providing residential care or flexible care
• acquire or install furniture, fittings or equipment used in providing residential care or flexible care. This is a permitted use where the premises are initially erected or following an extension, a significant alteration or significant refurbishment
• pay for costs that are directly attributable to the above expenditure.

Legislative reference: ss 57-17A(1) (a) and 57-17A(2), Aged Care Act 1997

In administering and enforcing the permitted use requirements, the Department will principally focus on the primary use or purpose of the capital expenditure. In order to meet the requirements, the primary use or purpose of the capital expenditure must be for the delivery of residential or flexible care services. The use of infrastructure funded by accommodation bonds for non-residential or flexible care services would be acceptable provided it is an incidental or ancillary use.

Capital expenditure is only permitted if it is reasonable under the circumstances. The inclusion of this “reasonableness test” (which is commonly used in legislation and readily interpreted by courts) is to avoid approved providers using accommodation bonds for other than their intended purposes. It also affords protection against paying above market rates for capital items and other associated costs.

For example, approved providers are able to use accommodation bonds to acquire land on which premises for providing residential or flexible care services are to be built, and expenditure directly attributable to such an acquisition, if the expenditure is reasonable. In order for this reasonableness to be demonstrated, the Department may request from the approved provider documented evidence to demonstrate the intention to use the land for building premises for providing residential or flexible care such as development approvals, evidence of land zoning, architects plans, feasibility studies and contracts of sale. The Department might also request evidence of the market value of the land at the time of purchase.

Accommodation bonds must not be used for paying unreasonable fees to building contractors or others. For example, it is expected that any architects fees would be directly attributable to the erection or significant alteration of an aged care service. However, in order for accommodation bonds to be used to meet such an expense, the fees must be reasonable in the circumstances i.e. they must be charged at commercial, arms’ length rates. It would be unreasonable for an approved provider to pay inflated fees to related parties who may provide services to the approved provider (for example, partners or family members who are also builders or architects).

Example

An approved provider with three residential aged care services intends to build another residential aged care service nearby. The following are examples of what would constitute permitted capital expenditure of accommodation bonds:

• the initial purchase of the land
• architect and other professional fees
• council fees
• site remediation
• foundation works
• construction of the service
• installation and purchase of furniture, fittings and equipment.

During the design of the building, the approved provider asks their architect and construction team to add an additional room, for use as a General Practitioner/Nurse Practitioner/allied health professional consultation room for residents. Since the primary purpose of the building is for the provision of residential aged care, the approved provider may use accommodation bonds to pay for the capital works associated with the General Practitioner/Nurse Practitioner/allied health professional consultation room.

Example

An approved provider would like to significantly refurbish its service. The approved provider has arranged for all residents to move temporarily to other services during the refurbishment. A supermarket and restaurant have approached the approved provider and offered to rent the ground floor space, which would also be refurbished. The approved provider is permitted to use accommodation bonds to pay for the significant refurbishment of premises used to provide residential aged care. However, it would not be permitted to use accommodation bonds to pay for the refurbishment of the space used by the supermarket and restaurant.

Example

An approved provider enters into a lease arrangement for an old building where the approved provider plans to operate a residential aged care service. The approved provider has approval to significantly alter the premises by adding a new wing to the service as well as refurbishing the entire building. These would all be permitted uses of accommodation bonds.

Example

An approved provider wants to use accommodation bonds to purchase the land and buildings of an existing aged care service from another approved provider. This would be a permitted use of accommodation bonds.

What is not capital expenditure?

Except for reasonable business losses in the first 12 months of operating a service (see section 23.64B) of the User Rights Principles), accommodation bonds must not be used for routine repairs or maintenance such as painting, plumbing, electrical work, gardening or vehicle leasing. Accommodation bonds must not be used to cover the normal day to day costs of operating a service such as staff wages or the purchase of consumables.

Accommodation bonds must not be used for routine replacement of furniture items such as wardrobes or lounges. It is expected that approved providers would use operational budgets to replace worn furniture. By contrast, if a significant refurbishment is planned whereby, for example, all furniture is removed and replaced, this would constitute a significant refurbishment and accommodation bonds could be used for this purpose (as it is improving the capital value of the service). Similarly, if an approved provider were to repair an existing call bell system this would not be capital expenditure for which accommodation bonds can be used. However, if the approved provider were to replace the call bell system with an entirely new and improved system and this represented a significant capital outlay then accommodation bonds could be used for this purpose.

In determining whether or not expenditure is significant, the Department will take into account the circumstances of the investment and whether or not the expenditure was reasonable in the circumstances.

Example

An approved provider wants to replace one lifting device in one of its residential aged care services. It would be expected that the approved provider would use its operational budget to replace this piece of equipment. By contrast, if the approved provider was to replace all lifting devices as part of a significant refurbishment or alteration, accommodation bonds could be used for this purpose.

Example

An approved provider wishes to replace the bus used for the transport of residents to social events and appointments. As this bus is not furniture, fittings or equipment for premises used or proposed to be used for providing residential care or flexible care, and could not be considered to be purchased following a significant alteration or a significant refurbishment of a premises used for providing care, its purchase or leasing is not a permitted use. Sources of funding other than lump sum accommodation bonds are available for the purchase or leasing of a facility bus. Such funding includes accommodation charges, retention amounts and interest earned on the investment of accommodation bonds.

1.4 Investment in financial products

Where accommodation bonds are not immediately required for other permitted uses, approved providers may choose to invest them in order to generate additional income. Approved providers are able to invest accommodation bonds in a broad range of permitted financial products.
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What financial products can approved providers invest in?

Where accommodation bonds are not immediately required for other permitted uses, investing the accommodation bonds to generate additional income is a legitimate use. Accommodation bonds may be invested in a broad range of financial products, subject to the provider being able to demonstrate it has an appropriate level of risk management in place. The use of the profit from these investments in not regulated by the Act.

Given that bond balances must be refunded within statutory timeframes, an approved provider must consider the impact of investment risks on its ability to refund accommodation bond balances as they become due.

When deciding whether or not to invest in financial products, and the classes of financial products to invest in, approved providers should consider their business model, their liquidity needs, and the risks of such investments to their liquidity and capacity to meet accommodation bond balance refunds as, and when, they become due.

Permitted financial products are:

• deposits with an authorised deposit-taking institution (ADI) made available in the course of its banking business (e.g. deposits in bank accounts and term deposits)
• debentures, stocks or bonds issued by the Commonwealth, States or Territories
• securities
• registered managed investment schemes
• unregistered managed investment schemes established for the purpose of investment in residential or flexible aged care.

Where an approved provider invests accommodation bonds in investments other than deposits with an authorised deposit-taking institution made available in the course of its banking business, then investment risk must be assessed and managed through the Governance Standard, including the investment management strategy.

Legislative reference: ss 57-17A(1) (b) and 57-17A(3) of the Aged Care Act 1997, s 23.64C of the User Rights Amendment Principles 2011 (No. 3)
Financial products are listed in section 764A of the Corporations Act 2001. Not all financial products listed in section 764A of the Corporations Act are permitted uses of accommodation bonds. For example investment in derivatives is not a permitted use of accommodation bonds. Approved providers may wish to seek professional advice if unsure whether a financial product is a permitted use for accommodation bonds.

Approved providers investing accommodation bonds in financial products, other than a deposit with an ADI, from 1 February 2012 are required to have in place an investment management strategy (IMS) prior to making such investments. (Refer to section 3.2 of this guide for further information regarding the IMS).

Example

Approved provider ACMI Pty Ltd is in negotiations with approved provider ACE Pty Ltd to fully acquire ACE Pty Ltd. ACE Pty Ltd is registered under the Corporations Act 2001 and has 100 issued shares. ACMI Pty Ltd may use accommodation bonds to purchase the issued shares in ACE Pty Ltd at an agreed price.

Example

An approved provider has taken $5 million in accommodation bonds since 1 October 2011. Their normal business practice is to place a portion of their accommodation bonds into a bank account to ensure they have sufficient liquidity to refund accommodation bonds as they fall due. They would also like to invest $500 000 in shares in a blue chip company and a further $500 000 in an unregistered managed investment scheme that complies with the requirements for such schemes in the Corporations Act and was established for the purpose of investment in residential aged care services. In doing so this approved provider will have invested their accommodation bonds in permitted financial products.

Since the approved provider has invested in financial products other than deposits with an ADI, it will need to implement an IMS prior to making such investments. (Refer to section 3.2 of this guide for further information regarding the IMS).

Example

The executive decision makers of an approved provider wish to invest in an unregistered managed investment scheme established for the purpose of providing capital for the development of retirement villages. Investing accommodation bonds in such an unregistered managed investment scheme would not be a permitted use, as a retirement village is not a residential or flexible aged care service.

Amounts returned from the sale, disposal or redemption of permitted financial products

When accommodation bonds have been invested in permitted financial products and the products are sold, disposed of or redeemed, the approved provider must use the original amount invested from accommodation bonds for permitted uses. There are no restrictions on the profit made from investment in permitted financial products. The requirements regarding the permitted uses of accommodation bonds continue to apply regardless of how many investments are made using the same accommodation bond amount.

Example

In accordance with their IMS, an approved provider has invested $20 million of accommodation bonds in shares in blue chip companies. The executive decision makers of the approved provider decide to sell the shares for $22 million. The $2 million profit can be used at the approved provider’s discretion. However, the principal amount of $20 million (the accommodation bond amount invested) must only be used for permitted uses.

1.5 Loans for capital expenditure or investment in financial products

The permitted use arrangements recognise the diversity of approved providers and the wide range of corporate structures that are utilised within the aged care sector. The arrangements ensure that there is flexibility to shift accommodation bonds between different entities, provided appropriate safeguards are in place.
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Approved providers may use accommodation bonds to make a loan that meets the following conditions:

• the loan is not made to an individual
• the loan is made on a commercial basis
• there is a written agreement in relation to the loan
• it is a condition of the written agreement that the money loaned will only be used for capital expenditure or investment in financial products defined by section 57-17A of the Act
• the agreement includes any other conditions specified in the User Rights Principles (as at 1 October 2011 there are no other conditions specified in the User Rights Principles).

What is the meaning of ‘on a commercial basis’ for the purposes of section 57-17A(1)(c)(ii) of the Act?

A loan is made on a commercial basis if the borrower and the lender, even if they are related parties, deal with one another at arms length, i.e. in a way that independent parties would normally deal with one another. The written loan agreement will include a legal requirement to repay the loan within a specified period, a method for working out the interest payable on the loan and an appropriate guarantor or other security. An interest free loan, or a loan with no security or backed only by a letter of comfort, or a loan for an indefinite period would not be a loan made on a normal commercial basis.

Example

An approved provider is part of a larger group of companies. The business of the group includes residential care services and independent living units. The approved provider has $15 million in accommodation bonds in a banking account with an ADI. The executive decision makers of the group are considering how they will fund the construction of a new independent living unit complex by one of the group’s companies. In this case, the approved provider cannot lend the $15 million for the purposes of constructing the independent living units. Loans may only be made conditional on the money only being used for permitted uses specified in section 57-17A(1)(a) and 57-17A(1)(b) of the Act. Independent living units are not capital expenditure within the meaning of section 57-17A(2) of the Act as they are not premises for providing residential care or flexible care.

Example

An approved provider is part of a larger group of companies. The business of the group includes residential care services and independent living units. The approved provider has $15 million in accommodation bonds in a banking account with an authorised deposit-taking institution. The executive decision makers of the group are considering how they will fund the construction of a new residential aged care facility by one of the group’s companies. In this case, the approved provider can lend the $15 million for the purposes of permitted capital expenditure. The loan agreement must specify that the loan monies must only be used for investment in permitted capital expenditure.

1.6 Refunding accommodation bonds

It is a permitted use for accommodation bonds to be used to refund accommodation bond balances or entry contribution balances.

1.7 Repayment of debt accrued for the purposes of capital expenditure or refunding of accommodation bonds

If an approved provider accrues debt from capital expenditure (see above section for what constitutes capital expenditure) or from refunding accommodation bond balances, it is a permitted use for accommodation bonds to be used to repay this debt.

1.8 Repayment of debt accrued before 1 October 2011 for the purposes of providing aged care to residents

If an approved provider has accrued debt before 1 October 2011 incurred for the purpose of providing aged care, it is a permitted use for accommodation bonds to be used to repay this debt.

1.9 Operational losses during the first 12 months of an approved provider operating service

The permitted use requirements reflect the intended purposes for accommodation bonds – to provide a source of capital funding for investment in aged care infrastructure; this does not include operational costs. However, recognising that the construction of a new aged care service or the acquisition of an existing aged care service may involve losses in the initial stages of operation, and that these losses are closely related to the capital investment, a time limited capacity to use accommodation bonds to support operational costs is available.
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Operational losses may be incurred during the start up of a residential or flexible care service, including where a new service opens or where an approved provider makes changes to the business operations of a newly purchased existing service. It is permitted for an approved provider to use accommodation bonds to meet operational losses of that service for the first 12 months of that service beginning to be operated by the new approved provider. If using accommodation bonds to meet operational losses, the approved provider must ensure that they have sufficient liquidity to repay accommodation bond balances as, and when, they fall due.

Example

On 9 March 2012 an approved provider opens a new residential care service. The executive decision makers of the approved provider wish to use accommodation bonds to pay for the recruitment, training and retention of staff in anticipation of projected occupancy. The approved provider may use accommodation bonds to meet such operational losses up to and including 8 March 2013.

Example

On 25 January 2012 approved provider Acme Pty Ltd purchases the existing residential care service from approved provider Ace Pty Ltd that is experiencing financial difficulty. Acme Pty Ltd can use accommodation bonds to purchase the land and buildings and fund costs directly attributable to purchasing the residential care service. The executive decision makers of Acme Pty Ltd also want to use accommodation bonds to improve the business operations of the purchased service. Acme Pty Ltd may use accommodation bonds to establish new record keeping systems and to cover other operational losses up to and including 24 January 2013.

1.10 Transitional arrangements

Legislative reference: Schedule 1, Part 2, Aged Care Amendment Act 2011

The new permitted use arrangements take effect from 1 October 2011. There is a two year transition period to 30 September 2013 to allow approved providers to become familiar with the permitted use requirements and make any necessary adjustments to fully comply with them.

During the transition period, an approved provider may use accommodation bonds charged for entry on or after 1 October 2011 for a purpose relating to providing residential or flexible aged care. That is, during the transition period, approved providers will be able to continue to use accommodation bonds for both capital and non-capital purposes in delivering these aged care services.

Approved providers may continue to use accommodation bonds acquired before 1 October 2011 in line with the requirements that were in place before
1 October 2011.

If relying on the transitional arrangements, the approved provider must ensure that they have sufficient liquidity to repay accommodation bond balances as, and when, they fall due.

1.11 Deductions from accommodation bond balances

Approved providers may make the following deductions from an accommodation bond only if a valid accommodation bond agreement has been entered into:

• retention amounts. For further information, see section Funding for permanent residential aged care of chapter 4 – Funding for residential aged care, residential respite and capital grants of the Residential Care Manual.
• amounts owed to the approved provider by the resident under an accommodation bond agreement, a resident agreement or an extra service agreement
• interest on the amounts owed to the approved provider by the resident under an accommodation bond agreement, a resident agreement or an extra service agreement.

Approved providers must not deduct any other amounts from the accommodation bond balance.
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1.12 Use of retention amounts and income derived from accommodation bond balances

Approved providers are entitled to retain income derived from investing accommodation bond balances. The Aged Care Amendment Act 2011 removed the restriction on the use of retention amounts and income derived from accommodation bond balances. This means that an approved provider may use these amounts at their discretion. This provides more flexibility to manage cash flow and helps offset the limits on permitted uses for the lump sum element of the accommodation bonds.

Chapter 2

Criminal Offences Relating to Non-Permitted Uses of Accommodation Bonds

Legislative reference: s 57-17B, Aged Care Act 1997
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The introduction of criminal offences for serious non-compliance encourages compliance with the permitted uses and builds consumer confidence in paying accommodation bonds. It clearly reinforces the importance of appropriately managing accommodation bond funds.

From 1 October 2011, approved providers will be committing a criminal offence if they misuse accommodation bonds and fail financially, owing accommodation bond balance refunds within two years of the misuse occurring. Offences apply to both approved providers and to key personnel who knew about the misuse, or were reckless or negligent as to whether the accommodation bonds were being misused, if they could have taken steps to prevent the misuse but failed to do so.

The offences are intended to reinforce the significance of approved providers’ obligations to their residents in dealing appropriately with residents’ funds and ensuring that refund obligations are met. They are not intended to be used in circumstances where a breach has been minor and unintentional. Rather, they are structured to ensure that they only become available in the most extreme of circumstances – where an approved provider has failed to comply with their statutory obligations on the use of accommodation bonds and they have been unable to meet their refund obligations to residents.

It is not necessary that the non-permitted use of the accommodation bond can be shown to have actually caused the insolvency, but simply that there was a non-permitted use and there was also an insolvency event (and failure to repay one or more accommodation bonds) within two years.

The penalties can only apply to key personnel where they have known that accommodation bonds are being used for non-permitted purposes, they have not taken reasonable steps to prevent the misuse of accommodation bonds and, within two years of the misuse, the approved provider has been placed into liquidation while owing refunds of accommodation bonds.

An individual commits an offence (punishable by up to 2 years imprisonment) if:

• the individual is one of the key personnel of an approved provider or former approved provider (noting that key personnel is defined by a person’s role and not through notifying the Department of their key personnel status)
• the approved provider or former approved provider uses an accommodation bond for a non-permitted use
• the individual knew that, or was reckless or negligent as to whether, the accommodation bond would be used for a purpose that was not permitted
• the individual was in a position to influence the conduct of the entity in relation to the use of the accommodation bond
• the individual failed to take all reasonable steps to prevent the misuse of the accommodation bond
• within 2 years of the non-permitted use of the accommodation bond, the Accommodation Bond Guarantee Scheme was triggered. In other words, an insolvency event (within the meaning of the Aged Care (Bond Security) Act 2006) has occurred in relation to the approved provider or former approved provider and there is at least one outstanding accommodation bond balance. Strict liability applies to this element of the offence
• at the time that the accommodation bond was used for the non-permitted use, the approved provider (or former approved provider) was a corporation. Strict liability also applies to this element of the offence.

An individual convicted of such an offence would automatically become a disqualified individual for the purposes of Act and would be unable to be one of the key personnel of any other approved provider.

Approved providers can avoid potential liability for an offence by using accommodation bonds for permitted uses only.

Regardless of whether or not an approved provider has failed financially, sanctions can be imposed if approved providers do not comply with one or more of their prudential obligations. For further information, see section – Providers responsibilities and non-compliance of chapter 5 – Caring for residents and providers’ responsibilities of the Residential Care Manual.

Chapter 3

The Four Prudential Standards

3.1 Overview

All approved providers holding accommodation bonds or pre-1997 entry contributions are required to comply with four prudential standards:

• the Governance Standard
• the Disclosure Standard
• the Liquidity Standard
• the Records Standard.

Legislative reference: ss 57-3 and 57-4, Aged Care Act 1997, Division 3, User Rights Principles 1997

Approved providers must report to the Secretary annually on their compliance with the prudential standards within four months of the end of their financial year – i.e. approved providers operating on a standard financial year of 1 July to 30 June must report on compliance by 30 October each year.

Under these arrangements, approved providers are responsible for the corporate governance and financial management of their business and meeting their regulatory responsibilities. The aim of the prudential arrangements is to reduce the risk of default on the refund of accommodation bond balances or that accommodation bonds are used for other than permitted uses.

3.2 The Governance Standard

Legislative reference: Subdivision 3.3A, Schedule 2, User Rights Amendment Principles 2011 (No.3)
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The Governance Standard is designed to help approved providers develop sound governance systems to ensure accommodation bonds are only used for permitted uses and are refunded in accordance with the timeframes required by the Act. The Governance Standard promotes sound business practices by requiring governance arrangements in line with the size and complexity of an approved provider’s business.

The Governance Standard requires approved providers who hold accommodation bonds to have a governance system in place to manage accommodation bonds. The governance system must ensure that accommodation bonds are only used for permitted uses and that accommodation bond balances are refunded to residents in accordance with the timeframes required by the Act. Approved providers are also required to implement and maintain a written investment management strategy (IMS) if they propose to invest accommodation bonds in particular financial products.

The Governance Standard is designed to ensure that approved providers that hold accommodation bonds have governance systems in place to:

• manage the risks of non-compliance in relation to the permitted uses of accommodation bonds
• ensure the board or governing body of the approved provider have sufficient information to exercise their responsibilities in relation to their accommodation bond obligations
• reduce the exposure of the approved provider to fraudulent or otherwise imprudent activities in relation to accommodation bond balances held.

The Governance Standard does not prescribe the particular type of system. Instead, it describes the key features that need to be incorporated. This allows approved providers the flexibility to implement a governance system that suits their particular size and corporate structure and that is appropriate for prudent and accountable management of the accommodation bonds they hold, regardless of when the accommodation bonds were charged.

Requirements covering permitted uses of accommodation bonds and changes to the Disclosure Standard take effect from 1 October 2011; however, the Governance Standard takes effect from 1 February 2012. This period is intended to allow approved providers sufficient time to document and implement their governance system. During this period approved providers may choose to seek professional advice to ensure their governance system complies with the Governance Standard.

Requirements of the Governance Standard

The purpose of the Governance Standard is to ensure that, where an approved provider holds accommodation bonds, there is an appropriate system in place to ensure that the approved provider complies with their prudential responsibilities in relation to accommodation bonds.

The Governance Standard only applies to the management of accommodation bonds. Broader corporate governance is a matter for commercial judgement, taking into account wider statutory requirements such as the legislation under which the approved provider is incorporated and best practice resources such as voluntary national standards.

To comply with the Governance Standard, approved providers that hold accommodation bonds need to implement and maintain a documented governance system that:

• allocates responsibilities to key personnel for managing accommodation bonds held by the approved provider
• monitors and controls any delegation or outsourcing of these responsibilities
• ensures relevant key personnel, and anyone to whom responsibilities are delegated or outsourced, are aware of the legal requirements for accommodation bonds
• has reporting mechanisms to ensure responsible key personnel can monitor and control the use of accommodation bonds
• detects, records and addresses any instances of non-compliance.

Approved providers need to document their governance system and ensure this documentation is up-to-date.

If an approved provider becomes aware that their governance system no longer complies with these requirements, they need to modify or replace it with a system that does comply.

Allocating responsibilities to key personnel

Although approved providers are required to disclose their key personnel to the Department, and update any changes to key personnel, whether or not a person is one of an approved provider’s key personnel is defined by a person’s role and not through notifying the Department of their key personnel status. For further information, see Chapter 2 – Approved provider, allocations, accreditation and certification of the Residential Care Manual).

In the context of the Governance Standard, key personnel are people who have authority or responsibility for (or significant influence over) planning, directing or controlling the management of accommodation bonds.

It is important for approved providers to clearly define the person or position that has responsibilities for managing accommodation bonds, and what those responsibilities are. This ensures that people with responsibilities for accommodation bonds are aware of their role and that the giving of responsibility for the management of accommodation bonds is conscious and documented. This will also assist the Department in managing any compliance issues.

The key personnel responsible for accommodation bonds will vary depending on the corporate complexity of the approved provider. For a small approved provider with a single service, the key personnel may, for example, be the Director of the approved provider entity. For more complex approved providers, the key personnel may, for example, be the Chief Financial Officer and the members of the governing board.

Monitoring and controlling delegations

Key personnel responsible for managing accommodation bonds, and staff with delegated responsibilities for managing accommodation bonds, should have their responsibilities documented as part of their position descriptions. Responsibilities that might be delegated by key personnel to staff include calculating and processing accommodation bond balance refunds, monitoring the allocation and use of accommodation bonds, updating the bond register and responding to requests for information.

Ensuring relevant key personnel, including people to whom those responsibilities are delegated or outsourced, are aware of their responsibilities

The Department’s compliance monitoring program has identified that late accommodation bond refunds are often due to inadequate administrative controls over the refund processes or a lack of knowledge by staff of refund obligations.

The governance system must ensure that key personnel responsible for managing accommodation bonds, and staff or other people who have a role in managing accommodation bonds, are aware of the legal requirements for accommodation bonds. This should include ensuring that an approved provider plans for when these staff are on leave or unexpectedly absent. Such leave or absence does not in any way affect an approved provider’s obligations to refund accommodation bond balances when they fall due.

Reporting mechanisms

The reporting mechanisms an approved provider may have in place to ensure that responsible key personnel can monitor and control the use of accommodation bonds will depend on the size and complexity of the approved provider and the sophistication of the management of accommodation bonds. For example, a small approved provider with a single service may deposit all of its accommodation bonds into a banking account with an ADI and use that account to refund accommodation bond balances. In this case, the reporting mechanism may be as simple as ensuring periodic review of the bond register and statements for the banking account. Larger and more complex businesses will require more sophisticated monitoring and control of the use of accommodation bonds.

Detecting, recording and addressing non-compliance

Approved providers holding accommodation bonds must ensure that their governance system has mechanisms for detecting, recording and addressing non-compliance with the requirements for accommodation bonds.

Approved providers should establish, for example, mechanisms to identify and address the late repayment of accommodation bonds, insufficient liquidity to pay accommodation bond balances, non-compliance with requests for information from residents, and non-compliance with permitted use requirements.

Review of the governance system

Approved providers may experience changes to their business which may require updating their documented governance system, including:

• changes to key personnel
• changes to corporate structure
• changes to outsourcing of responsibilities for managing accommodation bonds
• acquisition or divestment of aged care services

Where an approved provider detects non-compliance with the requirements for accommodation bonds, the governance system should be reviewed.

Can the requirements of the Government Standard be incorporated into existing corporate governance documents?

The requirements of the Governance Standard can be included in broader corporate documents of the approved provider. However, approved providers must clearly identify where the governance arrangements relate to the management of accommodation bonds in order to demonstrate their compliance with the prudential requirements to their auditor.

Investment management strategy

Where accommodation bonds are not immediately required for other permitted uses, approved providers may choose to invest them in order to generate additional income. The Act allows for accommodation bonds to be invested in a broad range of financial products. This enables approved providers to manage their financial investments in line with their broader business model and corporate capabilities and provides an additional source of income.

While investment in particular financial products is a permitted use for accommodation bonds, these investments bring with them a range of risks that need to be recognised and appropriately managed. If investing in financial products other than a deposit facility (made available by an authorised deposit-taking institution (ADI) in the course of its banking business) approved providers must implement and maintain an investment management strategy (IMS). If an approved provider invests solely in a deposit taking facility provided by an ADI, then the approved provider is not required to implement an IMS. A list of ADIs is located on the Australian Prudential Regulation Authority website at: www.apra.gov.au/adi/pages/adilist.aspx.

The aim of an IMS is to ensure that approved providers have arrangements in place to make informed and prudent decisions on the investment of accommodation bonds, to assess the risks of financial investments, including to their liquidity and obligation to refund accommodation bond balances, and respond to changing risk. This approach ensures that regulation targets the main risks arising from approved providers investing accommodation bonds, while minimising the regulation of low risk investments.

The requirement for an IMS ensures that the executive decision makers of approved providers have considered and addressed the prudential and other risks that these investments may pose.

If the only financial product that an approved provider invests in is a deposit provided by an ADI in the course of its banking business, then the approved provider is not required to implement an IMS.

Requirements of an investment management strategy

At a minimum, an IMS must:

• set out the approved provider’s investment objectives
• set out the approved provider’s assessment of the level of risk to the approved provider’s ability to refund accommodation bond balances in accordance with the Act
• detail a strategy to achieve the approved provider’s investment objectives whilst ensuring that the approved provider is able to refund accommodation bond balances in accordance with the Act
• specify the asset classes the approved provider may invest in and the investment limits for each asset class
• detail key personnel with appropriate skills and experience who are responsible for implementing the IMS.

The IMS must be approved by the key personnel who are responsible for the approved provider’s executive decisions.

Approved providers must ensure that any investment of accommodation bonds is in accordance with the IMS.

Approved providers are responsible for keeping their IMS up-to-date and modifying or replacing strategies that do not comply with the requirements.

Considerations for an IMS

Where accommodation bonds are not immediately required for other permitted uses, it is a legitimate use to invest the accommodation bonds to generate additional income. Investment in financial products must not be undertaken in such a way that the approved provider might not be able to refund accommodation bond balances when they fall due. Approved providers should not invest accommodation bonds in financial products where those accommodation bonds are required to maintain sufficient liquidity to repay accommodation bond balances.

The IMS requires approved providers to carefully consider their approach to investing accommodation bonds in financial products. This should be undertaken considering a wide range of factors including the nature and complexity of their business, the availability of surplus funds, any existing investments and access to skills and advice to determine and manage their investments.

Approved providers must analyse the risk of any investment under consideration for its effect on the ability to refund accommodation bonds when they fall due. Approved providers may wish to seek professional advice when considering these risks.

Approved providers that invest in financial products (other than deposits with ADIs made available in the course of their banking business) must document a strategy for achieving the investment objectives and ensuring that they are able to repay accommodation bonds when they fall due. This strategy should include triggers for disposing of the investment and making up any losses incurred.

The IMS must document the asset classes (i.e. the permitted financial products, and any sub-groups of those products) and the limits of investments in those classes that the approved provider considers to be prudent.

Approved providers must ensure that only key personnel with appropriate skills and experience are responsible for implementing the IMS. These key personnel must ensure that the investment of accommodation bonds in financial products is undertaken in accordance with the IMS. Accommodation bonds should not be invested in financial products requiring an IMS if the key personnel of the approved provider are not suitably skilled and experienced in making financial investments.

The IMS must be documented and approved by those key personnel who have responsibilities for executive decisions of the approved provider. Depending on the size and complexity of the approved provider, these may or may not be the same key personnel with allocated responsibilities for managing accommodation bonds as identified through documenting the governance system.

As a minimum, the IMS should be reviewed when:

• there is a change in executive decision makers
• there is a change in key personnel with responsibilities for managing accommodation bonds
• there is a change in the objectives of the investments
• there is a significant devaluation of any of the financial products invested in.

Example

An approved provider has accommodation bonds invested in ADIs as well as shares that they assessed as being low risk. Even though the approved provider assessed investment in shares as low risk, they would still be required to implement and maintain a written IMS for the accommodation bonds invested in shares. The approved provider is not required to include deposits made with ADIs in this IMS, but may choose to do so.

Example

An approved provider has $5 million in accommodation bonds charged prior to 1 October 2011. They are not receiving new accommodation bonds. The $5 million in accommodation bonds has been invested in a registered managed investment scheme. The approved provider did not develop a written IMS at the commencement of the investment; however, from 1 February 2012 the approved provider is required to implement and maintain a written IMS for the investment of the accommodation bonds in the registered managed investment scheme.

Example

An approved provider, as part of current business practice, invests in shares of a management company related by common directors. In this case the approved provider is required to implement and maintain a written IMS for the investment in shares in the management company.

Example

An approved provider only uses its accommodation bonds for deposits in a banking account and refunding bond balances. This approved provider is not required to implement and maintain an IMS.

3.3 The Disclosure Standard

Legislative reference: Division 3, Subdivision 3.4, User Rights Principles 1997
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The Disclosure Standard ensures approved providers maintain transparency in the management of accommodation bonds and their compliance with prudential requirements. By disclosing information to residents and prospective residents, approved providers improve consumer confidence in the aged care sector. The Disclosure Standard requires approved providers holding accommodation bonds (including entry contributions) to give specified information to the Secretary, residents, prospective residents or their representatives.

Disclosure to residents

Legislative reference: s 23.42, User Rights Principles 1997

There are three triggers for information to be provided to residents or their representatives by approved providers.

On entry

Within seven days of entering into an accommodation bond agreement, an approved provider must provide the resident or their representative with:

• a copy of the accommodation bond agreement
• a written guarantee of refund to the resident of their accommodation bond balance
• a written statement explaining the other information that is available on request – see below for a statement that the Department considers to be compliant with this requirement.

On request

When a resident who has previously entered into an accommodation bond agreement (or their representative) requests the following information, an approved provider must provide within seven days:

• a summary of the permitted uses that accommodation bonds have been used for in the previous financial year
• if accommodation bonds have been invested in financial products other than through an ADI, a statement explaining the approved provider’s investment objectives and the asset classes they may invest in (applicable from 1 February 2012)
• information about whether the approved provider has complied with the prudential requirements (including from 1 February 2012, the Governance Standard) and permitted uses for accommodation bonds
• a copy of the independent audit opinion of the Annual Prudential Compliance Statement (APCS) from the previous financial year
• information about the number of accommodation bond balances that were not refunded in accordance with the Act or, for entry contributions, a formal agreement
• the approved provider’s most recent audited accounts or, if the service is part of a broader organisation, the statement relating to the aged care component
• (if the resident has already paid an accommodation bond) a copy of the resident’s entry in the bond register, current at the time of the request.

Approved providers are required to provide any of the above information to residents (or their representatives) within seven days of a request being made. The information must be correct at the time the request was made. The above does not limit the information that an approved provider may voluntarily choose to give a resident (or their representative).

The information needed to meet these requirements should already have been created when documenting the APCS and governance system (see information about the Governance Standard in this Guide). Disclosure of these items may be limited to high-level statements and approved providers are not expected to provide significant detail of the permitted uses to which bond balances have been used for and the investment objectives or asset classes in which accommodation bonds have been invested in.

Annually

Within four months of the end of their financial year, approved providers must provide each resident (or their representative) with:

• a copy of the resident’s entry in the bond register
• a written statement explaining the other information that is available on request – see below for a statement that the Department considers to be compliant with this requirement.

For approved providers with an end of financial year of 30 June, this information must be provided to each resident (or their representative) no later than 31 October. For approved providers with an end of financial year of 31 December, this information must be provided to each resident (or their representative) no later than 30 April.

Disclosure to prospective residents

Legislative reference: s 23.43, User Rights Principles 1997

A prospective resident is a person approved as a recipient of residential care and who is considering receiving residential care through that service. In the case of residential aged care services, a prospective resident is someone who is approved to receive aged care by an Aged Care Assessment Team (ACAT or ACAS in Victoria). An approved provider may want to confirm that somebody is a prospective resident if that person requests information.

Prospective residents or their representatives may request the following:

• a summary of the permitted uses that accommodation bonds have been used for in the previous financial year
• a statement explaining the approved provider’s investment objectives and the asset classes they may invest in (applicable from 1 February 2012), if accommodation bonds have been invested in financial products other than through ADIs
• information as to whether the approved provider has complied with the prudential requirements (including from 1 February 2012, the Governance Standard) and permitted uses for accommodation bonds
• a copy of the independent audit opinion from the previous financial year
• information about the number of accommodation bond balances that were not refunded in accordance with the Act or, for entry contributions, a formal agreement
• the most recent audited accounts or, if the service is part of a broader organisation, the statement relating to the aged care component

If a prospective resident or their representative requests any of the above information then the approved provider must provide the information to the prospective resident or their representative within seven days of the request being made. The information must be correct at the time the request was made. The above does not limit the information that an approved provider may voluntarily choose to give a prospective resident or their representative.

The information needed to meet these requirements should already have been created when documenting the APCS and governance system.

This statement is taken by the Department of Health and Ageing to be a statement that complies with paragraphs 23.42(1)(c) and 23.42(2)(b) of the User Rights Principles 1997. This statement is provided as a guide only. Approved providers may draft their own statements.

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Disclosure Statement

Information you are entitled to

[insert approved provider’s name] is the approved provider for [insert the name of the service]. Under the Aged Care Act 1997 (the Act), residents and prospective residents or their representatives are entitled to receive particular information from their approved provider on request.

This includes, in relation to the previous financial year:

• a summary of the permitted uses for which we have used accommodation bonds
• information about whether we complied with the requirements for permitted uses of accommodation bonds and with the prudential requirements for accommodation bonds
• information about the number of accommodation bond balances (if any) that were not refunded in accordance with the timeframes set by the Act. For entry contributions (payable before 1997), information about the number (if any) that were not refunded in accordance with the entry contribution agreement
• a copy of the independent audit opinion on our compliance with the prudential requirements for accommodation bonds
• our most recent statement of audited accounts.

We must also provide:

• if you have already paid an accommodation bond, a copy of your entry in the bond register
• [insert from 1 February 2012] if we invest accommodation bonds in particular kinds of permitted financial products, our investment objectives and the asset classes we may invest in.

Residents, prospective residents or their representatives may request any or all of the available information. We must provide the information within seven days of the request, and the information must be correct at the time of the request.

More details are in section 23.42 and section 23.43 of the User Rights Principles 1997 available from <www.comlaw.gov.au>.

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An approved provider has implemented an IMS in accordance with the Governance Standard. The IMS details the investment objectives for investment in a registered managed investment scheme. The approved provider wants to ensure that they comply with the Disclosure Standard and would like to know who they must disclose the IMS to.

The approved provider is only required to disclose the investment objectives and asset classes that they invest in to residents and prospective residents. Under normal circumstances, an approved provider is not required to disclose its IMS to the Department. However, if the Secretary of the Department has reasonable concerns about the approved provider’s compliance with the prudential requirements, including its capacity to refund accommodation bond balances, information such as an IMS may be requested.

Legislative reference: s 9-3B, Aged Care Act 1997

Keeping records of disclosures to residents, prospective residents or their representatives

Approved providers must demonstrate their compliance with the Disclosure Standard on an annual basis, as part of their APCS. Approved providers will therefore need to keep records in order to be able to demonstrate their compliance with the requirement to provide information to residents, prospective residents or their representatives. In order to do this, and so as to provide evidence of compliance to auditors or the Secretary, approved providers should keep records of the following types of information:

• the number of requests made
• whether the information was provided within seven days.

An approved provider may want to specify that information requests be made in writing. If a request is made in writing, an approved provider should keep a copy of it. If the request is not in writing, it is advisable that the approved provider may wish to make a note of the date the request was made, the type of information requested and the date the information was provided.

Disclosure to the Secretary of the Department

The Department will issue an APCS form to approved providers at the end of the approved provider’s financial year requiring them to provide the following information:

Information about accommodation bonds held:

• total number of accommodation bond balances and entry contributions held by the approved provider as at the end of the approved provider’s financial year
• total value of accommodation bond balances and entry contributions held by the approved provider as at the end of the approved provider’s financial year
• total amount deducted from accommodation bonds by the approved provider during the financial year such as through retention amounts and any other applicable amounts in accordance with section 57-19 of the Act
• whether there was any period during the year when the approved provider was not permitted to charge accommodation bonds.

APCS cash flow statement

From 2012, approved providers are required as part of the APCS to give the Department an annual cash flow statement which reports on gross accommodation bond receipts, retentions and refunds. The annual cash flow statement also requires reporting on expenditure on permitted uses from any source of funding.

The cash flow statement will provide the Department with indicators of potential non-compliance with the permitted use provisions. To minimise the regulatory burden and allow approved providers to, as much as possible, utilise existing financial information they generate, reporting will be on expenditure for permitted uses from any funding source (not just accommodation bonds).

The cash flow statement will report on:

• the total value of accommodation bonds received by the approved provider during the financial year
• the total amount deducted by the approved provider during the financial year (such as through retention amounts and any other applicable amounts in accordance with section 57-19 of the Act) from accommodation bond balances that were received during the financial year
• the total amount expended by the approved provider during the financial year (whether or not obtained from accommodation bonds) on each of the permitted uses specified in section 57-17A of the Act including:
  • capital expenditure
  • financial products (deposits with ADIs)
  • financial products (others)
  • loans
  • refunding accommodation bond or entry contribution balances
  • repaying debt accrued for the purpose of capital expenditure or refunding accommodation bond balances
  • repaying debt accrued before 1 October 2011, where debt was accrued for the purposes of providing aged care
  • meeting business losses incurred in the first 12 months of receiving residential or flexible care subsidy in respect of a service
• the amount that has been returned to the approved provider during the financial year from the sale, disposal or redemption of financial products covered by paragraphs 57-17A(3)(b) to (e) of the Act (whether or not obtained from accommodation bonds) that the approved provider invested in after 1 October 2011.

It is the approved provider’s responsibility to ensure that it has systems in place to enable reporting. While approved providers report on their permitted use expenditure, this does not override the requirement of approved providers to only expend accommodation bonds on permitted uses. An approved provider can be asked to provide evidence of their compliance with this requirement at any time.

Information about compliance with accommodation bond agreement and written guarantee requirements:

• whether an accommodation bond agreement was entered into with all residents who paid an accommodation bond during the year and whether the agreements were in accordance with the legislation
• whether each resident who paid an accommodation bond during the year was provided with a written guarantee of the refund of the accommodation bond balance and a copy of the accommodation bond agreement.

Information about the repayment of accommodation bond balances:

• whether any accommodation bond balances or entry contributions were required to be refunded
• whether all accommodation bond balances (including entry contributions) that were required to be repaid were repaid within the legislated timeframes (or in the case of entry contributions, refunded within the time required by the formal agreement). If not, approved providers will be required to provide details of accommodation bonds not paid within required timeframe and the reason for delay. For further information on refunding accommodation bonds, see section Refunding accommodation bond balances of chapter 5 – Protection and responsibilities relating to accommodation bonds of the Residential Care Manual.

Information about compliance with the prudential standards:

• whether the approved provider has complied with each of the prudential standards during the financial year and if not how many times and the reasons for any non-compliance
• the amount identified in the approved provider’s liquidity management strategy, as at the end of the financial year, as the minimum level of liquidity under paragraph 23.37(1)(a) of the User Rights Principles.

Information about the use of accommodation bonds:

• the uses of accommodation bonds by the approved provider during the financial year
• if the approved provider has relied on transitional arrangements for accommodation bonds charged after 1 October 2011, their compliance with those arrangements.

Approved provider declaration:

• including all the statements and information required by the form, approved provider details and the signature of one of the approved provider’s key personnel who is authorised by the approved provider to sign the statement.

Example

An approved provider receives the Conditional Adjustment Payment (CAP). It is a requirement of CAP that the approved provider provides the Secretary with its audited General Purpose Financial Report (GPFR) each year (see chapter 4 – Funding for residential aged care, residential respite and capital grants of the Residential Care Manual). If the approved provider has disclosed the information required by the APCS cash flow statement in their GPFR, this would be taken as compliance with the Disclosure Standard. This aims to minimise any duplication of reporting requirements for approved providers.

Audit opinion

The APCS must be supported by an independent audit opinion from an independent auditor. The audit must be undertaken by a registered company auditor within the meaning of the Corporations Act 2001 or a person approved by the Secretary.

Legislative reference: s 21.26F(6), Residential Care Subsidy Principles 1997

See chapter 4 - Additional information of this Guide for a link to ComLaw for the Corporations Act.

The Secretary will only approve an alternative auditor if the Secretary is satisfied that the person has appropriate qualifications and experience.

The independent audit must include an audit opinion on whether the approved provider has complied with the prudential standards and other prudential requirements in the financial year.

Lodgment of the APCS

Approved providers are required to lodge their APCS and supporting independent audit opinion within four months of the end of their financial year. For approved providers with an end of financial year 30 June, the APCS and audit opinion must be lodged no later than 31 October. For approved providers with an end of financial year of 31 December, the APCS and audit opinion must be lodged no later than 30 April.

3.4 The Liquidity Standard and the Records Standard

No amendments have been made to the Liquidity Standard or the Records Standard as a result of the legislative amendments. Refer to chapter 5 – Protection and responsibilities relating to accommodation bonds of the Residential Care Manual for further information about these prudential standards.
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Chapter 4:

Additional Information

Department of Health and Ageing website: www.health.gov.au

Aged Care National Phone Number: 1800 200 422 – The national phone number is designed to create a single point of entry to help people find information about aged care.

Prudential Enquiries: prudential@health.gov.au

All Commonwealth legislation is available on the ComLaw website at www.comlaw.gov.au. Prior to 1 February 2012, amendments that commence on that date can be found in Schedule 2 to the User Rights Amendment Principles 2011 (No.3) on the ComLaw website.

Glossary and Acronyms

Act	Aged Care Act 1997
ADI	Approved deposit-taking institution
APCS	Annual Prudential Compliance Statement
Department	Department of Health and Ageing
GPFR	General Purpose Financial Report
key personnel	in relation to an approved provider, has the meaning given in section 9.1(2) of the Act
IMS	Investment Management Strategy
prospective resident	a prospective resident is a person approved as a recipient of residential care who is considering receiving residential care through the service
approved provider	a provider approved under the Act
prudential standards	The Act requires that all approved providers that hold lump sum accommodation bonds or entry contributions on behalf of their residents must comply with Prudential Standards.
resident	care recipient
representative	a resident’s representative includes a person nominated by the care recipient or a person who nominates themselves where the provider is satisfied that there is a sufficient connection with the resident. This may include, for example, a carer, family member or advocate.
Secretary	Secretary of the Department of Health and Ageing
User Rights Principles	User Rights Principles 1997

More information

Information has been prepared to assist in understanding the new arrangements.

Information sheets for approved providers

Protecting Residents’ Savings – information for approved providers
Disclosure Standard – information for approved providers
Governance Standard – information for approved providers

Information sheets for residents

Information Sheet No. 16 – Accommodation Bonds for Residential Aged Care

Information is correct as at 1 October 2011

Disclaimer: This document is only a guide to the Australian Government’s law and policies, and cannot take account of individual circumstances. The Department of Health and Ageing recommends that you seek appropriate professional advice relevant to your particular situation.

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