These frequently asked questions (FAQs) give you answers to common questions about the new Financial and Prudential Standards (new Standards).
The new Standards will replace the current Financial and Prudential Standards from 1 July 2025. They apply to registered aged care providers and set minimum requirements for good financial and prudential management. This makes sure providers are financially stable and can deliver aged care services long term.
If you can’t find the answer to your question here, please email us at our dedicated inbox: New_FP_Standards@agedcarequality.gov.au
The new Financial and Prudential Standards
Why is the Commission developing new Financial and Prudential Standards?
In July 2023, we took over the financial and prudential regulation of aged care from the Department of Health and Aged Care.
As part of this responsibility, we are developing new Financial and Prudential Standards to replace the current Standards under the new Aged Care Act.
What are the new Standards?
There are 3 new Standards:
- Financial and Prudential Management Standard
- Investment Standard
- Liquidity Standard.
These will replace the 4 current Standards (Governance Standard, Liquidity Standard, Disclosure Standard, Records Standard).
What has happened to the requirements under the current Records and Disclosure Standards?
The Records Standard and Disclosure Standard requirements have been moved into the Rules. This will include reporting and disclosure processes. The Rules are currently being drafted.
The Records Standard and Disclosure Standard requirements have been moved into the Rules. This consolidates reporting and disclosure requirements.
What do the new Financial and Prudential Standards do?
The new Standards set minimum requirements for good financial and prudential management for registered aged care providers. They make sure providers are financially stable and sustainable so they can provide long-term care for older people.
The Standards make sure that a provider’s governing body:
- manages finances responsibly
- considers how its decisions affect the wellbeing of older people receiving care.
The Standards make sure that providers:
- have enough funds to meet the conditions of their registration and to pay bills, refunds and debts
- can provide consistent, safe and high-quality services
- can manage financial stress by showing that they comply with their minimum liquidity amount.
- can provide ongoing and continuous care for older people by making sure financial or operational challenges don’t affect the quality of their services
- protect refundable deposit balances by properly managing these funds.
The Standards reduce financial risks to the Australian Government , including claims on the Accommodation Payment Guarantee Scheme.
What do the new Standards mean for older people?
The new Standards mean that older people can be confident that their provider is managing finances responsibly and considering how decisions will impact their wellbeing. Good financial management is important for providers to continue to deliver safe, high-quality care.
Financial and Prudential Management Standard
This Standard makes sure providers have systems and strategies to:
- manage finances well
- make financial and prudential decisions that are fair, reasonable and in the best interests of people receiving care.
Investment Standard
This Standard makes sure providers responsibly select, manage and monitor their investments, including refundable deposits, so they can continue to deliver safe, high-quality aged care.
Liquidity Standard
This Standard makes sure providers:
- have enough money on hand to cover unexpected expenses
- can repay refundable deposits on time and in full.
What are the main changes between the current and the new Standards?
The 3 new Standards (Financial and Prudential Management Standard, Investment Standard and Liquidity Standard) will replace the 4 current Standards (Governance Standard, Liquidity Standard, Disclosure Standard, Records Standard). The requirements under the current Records Standard and Disclosure Standard have been moved into the Rules, to keep all reporting and disclosure requirements together.
Key changes include:
Minimum liquidity requirements
The Liquidity Standard now includes an enforceable minimum liquidity amount for all residential aged care providers, tailored to their circumstances.
A liquidity amount is an amount that you can quickly turn into cash when you need it.
Providers must calculate their minimum liquidity amount each quarter, using this formula:
- 35% of quarterly cash expenses
- + 10% of refundable deposit liabilities (if holding refundable deposits).
New obligations for home care services providers
Home care service providers (in categories 4 and 5) must now comply with the Financial and Prudential Standards, specifically the Financial and Prudential Management Standard. However, they do not need to meet the Liquidity or Investment Standards - these Standards, which only apply to residential aged care providers.
Liquidity requirements for all residential aged care providers
All residential care providers must comply with the new Liquidity Standard requirements, even if they do not hold refundable deposits.
Enhanced financial reporting and risk management
There are extra requirements for financial reporting, investment decisions and managing risk to improve transparency and governance practices.
Financial and Prudential Management Standard
Who does the Financial and Prudential Management Standard apply to?
Registered providers in categories 4, 5 and 6 (excluding government entities and local government authorities), including:
- providers delivering funded aged care services in residential homes
- providers delivering funded aged care services in categories 4 and 5 in the community.
Investment Standard
Who does the Investment Standard apply to?
Registered providers delivering funded aged care services
in an approved residential care home (excluding government entities and local government authorities).
Why do I need an investment management strategy for all my investments, not just those associated with refundable accommodation deposits?
A written investment management strategy will make sure you have clear investment aims and effective risk management. It will help you to:
- be financially stable
- have stronger governance
- protect refundable accommodation deposits.
Liquidity Standard
Who does the Liquidity Standard apply to?
Registered providers that are providing funded aged care services in a residential care home (excluding government entities and local government authorities).
This Standard does not apply to home services providers.
What happens if I can’t meet the liquidity minimum?
If a provider doesn’t meet their minimum liquidity amount, we will work with you to see if other strategies (for example third-party arrangements, loans or lines of credit) will give you the liquidity and financial capacity you need.
If there are no other options, we’ll expect you to show us evidence of your plan to meet the minimum liquidity amount.
We will only take regulatory action if providers don’t have a reasonable plan and a commitment to meet this Standard.
What happens if my financial reports show I don’t meet the new Liquidity Standard, but I have other liquidity arrangements?
We understand that some providers have other ways to access the liquidity they need. An example is through third-party arrangements that aren’t included in quarterly financial reporting.
If we think those other arrangements are strong enough, we may:
- apply a condition of registration to maintain supervision of these arrangements
- ask you to report changes to the arrangements that might increase your level of risk.
Our compliance approach
How will the Commission regulate the new Standards?
If a provider doesn’t meet their new requirements, we’ll:
- contact them directly
- work with those who want to comply to help them strengthen their financial governance and make the changes
- only resort to using our regulatory powers where a provider demonstrates a lack of commitment to managing risk.
Transition from the current Standards to the new Standards
How will the Commission manage compliance during the transition to the new Standards?
The new Financial and Prudential Standards take effect from 1 July 2025.
We will continue to enforce the existing Standards until July 2025.
Providers should continue to comply with the existing requirements and prepare for the transition. There will be some flexibility as you adapt to the new Standards.
To help with the transition to the new Standards, we will:
- provide information to help you understand and implement the new requirements
- support providers that have compliance issues
- regulate in a way that is in proportion and based on the risk people receiving care face.
Is the current advice on financial and prudential requirements still valid?
Yes.
Any advice given during a financial review or audit is valid until 1 July 2025, when the new Standards take effect.
If you have more questions about the new Standards or need help, please email us at New_FP_Standards@agedcarequality.gov.au
More information
If you have more questions about the new Standards or need help, please email us at New_FP_Standards@agedcarequality.gov.au
If you’re confused about what a term means, you can find definitions in the Financial and Prudential Standards – consultation draft.
You can find information about fees or subsidies, charging and refunding refundable deposits, and accommodation payments on the Department of Health and Ageing website.
