About the framework
The Financial and Prudential Monitoring, Compliance and Intervention Framework means aged care providers must adhere to:
- stricter reporting and disclosure obligations
- strengthened financial oversight and prudential requirements.
We are working with providers to roll out the framework through a phased approach, over multiple years.
Phase 1
Phase 1, started in July 2021. It introduced:
- a 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
- a requirement for the ACFR to be signed off by directors or members of the provider’s governing body
- new powers for the Government to request financial information from approved providers
- increased information collection in the 2020-21 Aged Care Financial Report (ACFR) and future ACFRs, including:
- detailed income and expense statements at the facility level
- enhanced approved provider reporting
- consolidated parent entity segment report
- the permitted use reconciliation.
Phase 2
Phase 2, started in September 2022. It introduced:
- new quarterly financial reporting to enable earlier identification of at-risk providers
- a new requirement that General Purpose Financial Reports (GPFR) must be published within 5 months of the end of the provider’s financial year
Legislative changes were made to protect refundable accommodation deposits (RADs) paid by residents. These changes:
- increased the timeframe in which the misuse of RADs would count as an offence, from 2 years to 5 years
- allowed the Aged Care Quality and Safety Commissioner and the Secretary of the Department of Health, Disability and Ageing to request information or documents on the use of RADs from the borrower of a loan made with a RAD, and issue infringement notices for noncompliance
- made noncompliance with a valid request for information or documents on the use of RADs an offence
- clarified that RADs can only be used for capital expenditure when the expenditure relates to providing residential or flexible care.
The legislative changes were made through the:
- Aged Care and Other Legislation Amendment (Royal Commission Response) Act 2022.
- Aged Care Legislation Amendment (Financial Information) Principles 2022.
Phase 3
Phase 3 started with the new Aged Care Act. It simplified the previous framework by replacing four Standards (Liquidity, Governance, Records and Disclosure) with 3 updated Standards:
- Financial and Prudential Management Standard
- Liquidity Standard
- Investment Standard
The new Standards strengthen the financial governance and sustainability of aged care providers, so they can deliver high quality care and services and maintain continuity of care for older people.
Who we have consulted to date
We have consulted with:
- the public
- technical experts
- peak organisations in the aged care sector.
Why it is important
We need stable and sustainable aged care providers to help us face challenges of:
- an ageing population
- increase in chronic disease.
We also want to make sure that:
- aged care recipients receive quality care
- residential providers are able 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 – through the reduced risk of a disruption to their care because of a provider closing.
