In this post I will discuss prudential audits of residential aged care services. The Commission has always completed a small handful of these audits each year, and, I thought it would be timely to explain their purpose as we look to increase the number we will be doing in the year ahead.
The first thing I want you to know is that we use these audits to assess the understanding that a residential aged care provider has of their financial and prudential obligations under the Prudential Standards in relation to the management of refundable accommodation deposits (RADs).
RADs held by providers are often a substantial part of an older Australian’s remaining wealth, so it is important that providers have sufficient controls in place to protect those deposits. Where we find a compliance issue through a prudential audit, we will work with the provider on strategies to fix the non-compliance.
We will only resort to using formal enforcement powers where we encounter resistance or reluctance by providers to take the necessary remedial action to return to compliance, or where we become concerned about the high level of risk that the non-compliance is exposing consumers to.
In short, our desire is always to try and work with providers because many of the practices the Prudential Standards promote (management of liquidity and investments, provision of correct information, record keeping and financial governance) are good business practices to adopt in managing other operational risks.
The second benefit of prudential audits is that it provides the Commission with invaluable insights about common problems that providers are experiencing in understanding or complying with the prudential regulations. This helps us to better tailor resources and educational products. It also ensures that we direct our time and effort within the sector to where it is most needed.
This year we will be looking to increase our prudential audit activity to work more closely with small rural, remote, and regional services. We see this as an opportunity to gain a much better understanding of the unique barriers that these providers face in meeting their prudential obligations. Through this we hope to improve the support we as a Commission can provide in lifting financial and prudential capability.
The prudential audit program is supplementary to the targeted review program and investigation function, rather than being a stand-alone program. For example, where an investigation into a specific issue suggests a provider might be experiencing broader problems, a prudential audit will be used as the framework to complete a full review of the provider’s compliance.
If you have any questions about the prudential audit program, you can direct them to firstname.lastname@example.org.