Financial and Prudential Monitoring, Compliance and Intervention Framework
Australia’s aged care providers’ financial performance will be more transparent and accountable. New requirements have been introduced through the Financial and Prudential Monitoring, Compliance and Intervention Framework.
About the Framework
The new Financial and Prudential Monitoring, Compliance and Intervention Framework (the Framework) will mean aged care providers must adhere to:
- stricter reporting and disclosure obligations
- strengthened financial oversight and prudential requirements.
We will work with providers to implement the Framework through a phased approach over three years.
Phase 1, from July 2021: new mandatory reporting and increased information collection in the 2020-21 Aged Care Financial Report (ACFR) and future ACFRs.
Phase 2, from July 2022: at-risk providers identified earlier through new quarterly financial reporting and legislative changes to strengthen provider accountability and transparency and to further protect refundable accommodation deposits paid by residents.
Phase 3, from July 2023: commence the staged introduction of minimum liquidity and capital adequacy requirements for aged care providers and introduce stronger intervention and enforcement powers for government. Consultation with the sector on Phase 3 requirements will occur in late 2021.
What will change this year?
These legislative changes introduce new powers for the government to request financial information from approved providers and require the ACFR to be signed off by directors or members of the provider’s governing body. The amendments also introduce a new requirement for residential aged care providers that are a subsidiary of another entity to submit a ‘financial support statement’ from their ultimate holding company in relation to the debts of the approved provider.
Other changes in the 2020-21 ACFR include reporting on:
- detailed income and expense statements at the facility level
- enhanced approved provider reporting
- consolidated high level segment report
- permitted use reconciliation of refundable deposits.
The due date for the 2020-21 ACFR is 31 October 2021. For more information on the reporting and template changes, see the ACFR online forms webpage.
Phase 1 responds in full or in part to Recommendations 133, 134 and 135 of the Royal Commission into Aged Care Quality and Safety.
What financial reporting and monitoring requirements are in place?
Financial reporting and prudential requirements for aged care providers are available in:
The principles outline how providers must:
- manage and protect the refundable accommodation payments or deposits of residents
- provide information on their finances.
Who has participated in consultation?
The new Framework builds on the 2018-19 Budget announcement to strengthen prudential standards and quality assurance in residential care.
We consulted with the public in early 2019 and collected views on ways to strengthen prudential standards. We have also consulted with technical experts and peak organisations in the aged care sector.
In 2020, targeted and sector wide consultations focussed on the changes proposed for the ACFR in 2021. The revised 2020-21 ACFR included this feedback.
Further sector consultations to be competed in 2021, will direct activities for Phase 3 of the Framework ahead of implementation in 2023.
Why is the Framework important?
We need stable and sustainable aged care providers to help us face challenges such as:
- an ageing population
- increase in chronic disease.
We also want to make sure that:
- senior Australians receive quality care now and into the future
- residential providers have the means to refund lump sum accommodation payments or deposits when a resident leaves their care.
Reviews recommending stronger prudential standards for the aged care sector include the:
- Royal Commission into Aged Care Quality and Safety
- Legislated Review of Aged Care 2017 Report
- Review of Legislation for Refundable Accommodation Payments in Residential Aged Care
Who will benefit?
Stronger financial oversight and monitoring standards will benefit:
- residential care providers — by improving their capability, financial sustainability and resilience
- aged care residents — by avoiding disruption to their care as a result of provider business failure.
Financial and Prudential Monitoring, Compliance and Intervention Framework contact
Contact us if you have questions about managing prudential risk in residential aged care reforms.