Approved providers of residential aged care are required to comply with prudential responsibilities set out in the Aged Care Act 1997 (the Aged Care Act) and the Fees and Payments Principles 2014 (No.2) (the Principles), in particular:
- responsibilities of approved providers (section 56-1 of the Aged Care Act)
- managing refundable deposits, accommodation bonds and entry contributions (Part 3A.3 of the Aged Care Act and Parts 6 and 7 of the Principles)
- the Prudential Standards (Part 3A.3 of the Aged Care Act and Part 5 of the Principles).
There are 4 Prudential Standards (the Standards) requirements, as follows.
An approved provider must develop, implement and maintain a liquidity management strategy (LMS); and maintain, in the form specified in the strategy, the minimum level of liquidity.
Refundable deposit or bond balance
The Liquidity Standard, section 43-44 of the Principles, requires any provider holding at least one refundable deposit or bond balance (including entry contributions) during the financial year to:
- maintain sufficient liquidity to ensure they can refund refundable deposit balances and bond balances (including entry contributions) that can be expected to fall due in the following 12 months
- implement and maintain a written LMS, which identifies:
- the minimum level of liquidity expressed as an amount of whole dollars required to ensure the provider has sufficient liquidity to refund bond balances and refundable deposits (including entry contributions) as they fall due
- the factors the provider considered in determining the minimum level of liquidity
- the form in which the provider will maintain the minimum level of liquidity.
Common forms of evidence required from the approved provider to confirm minimum liquidity is maintained are an LMS, bank statements or lines of credit balances.
An approved provider must establish and maintain a refundable deposit register containing information about refundable deposit balances, accommodation bond balances and entry contribution balances.
The Records Standard, section 45-48 of the Principles, requires the approved provider to maintain accurate, comprehensive and up-to-date information on refundable accommodation deposits (RADs), bond holdings (if any) and entry contributions.
Refundable deposit register
Under the Records Standard, all providers holding RADs, bond holdings and entry contributions must establish and maintain a refundable deposit register (RAD register).
- may be maintained at either the service level or at provider level, noting that for the APCS, it is at provider level
- can be either in hard copy or electronic
- must include relevant details on payments made – for example, lump sum, part lump sum and daily accommodation payments or periodic payments
- must include resident ID number and resident name, RAD or bond details, the date the resident entered the service (or the date if the resident transferred from another service) and date payment/s were made (inclusive of any instalments).
Common forms of evidence required to assess compliance are RAD register entries for individual care recipients and RAD refunds.
An approved provider that holds refundable deposit balances or accommodation bond balances must implement and maintain a governance system that ensures the balances are only used for permitted uses and can be refunded as and when they fall due.
The Governance Standard, section 49-50 of the Principles, requires approved providers to develop sound governance systems to ensure RADs and bonds (if any) are only used for permitted uses and are refunded to residents as and when they fall due, as required under the Aged Care Act.
The Governance Standard promotes sound business practices by requiring providers to develop and implement governance arrangements in accordance with the size and complexity of a provider’s business. In effect, providers who hold RADs or bonds are required to have a governance system in place to manage these. The system will ensure that refundable deposit balances and bond balances are only used for permitted uses and for the purpose of refunds for residences in accordance with the Aged Care Act.
Investment management strategy
Approved providers are required to maintain a written investment management strategy (IMS) if they invest RADs or bonds in financial products, as outlined in S52N-1(3)(b) of the Aged Care Act and s.63(c) of the Fees and Payments Principles.
The Governance Standard only applies to the management of RADs and bonds, and not corporate governance within providers’ commercial business arrangements.
Common forms of evidence required to assess compliance with the Governance Standard are:
- governance policies and procedures in relation to managing and controlling RADs
- job descriptions
- training documentation in relation to RADs responsibilities
- RADs refund policies and procedures
- financial delegations in relation to RADs refunds
- loan documents to related parties
- evidence of capital expenditure
- evidence of investments.
An approved provider must provide the Secretary of the Department of Health, residents, prospective residents and their representative, information on their compliance with the Liquidity, Governance, Records and Disclosure Standards, including information on their compliance with the Prudential Standards, the total of the refundable deposits they hold and their use of refundable deposits, an independent audit report and details of their financial position. This information must be submitted to the Department within 4 months of the end of the financial year.
Providing information to the Department of Health
The Disclosure Standard, section 51-58 of the Principles, requires providers holding refundable deposits and bonds (including entry contributions) to provide the Secretary of the Department of Health, residents, prospective residents and their representative, information on their compliance with the Liquidity, Governance, Records and Disclosure Standards, including information on their financial position, as set out below:
- to consumers who have paid a refundable deposit or to prospective consumers, on request – information about the refundable deposits, refundable deposit balances, accommodation bonds, accommodation bond balances, entry contributions and entry contribution balances held during the financial year
- details of (non-residential) fees paid by residents through My Aged Care and via their website (if applicable)
- to the Secretary of the Department of Health statements and other information required as part of their Annual Prudential Compliance Statement (APCS) within four months of the end of the financial year
- to consumers who have paid a refundable deposit – annual disclosure of the resident’s entry in the RAD register within four months of the end of the financial year to consumers who have signed an accommodation agreement – a summary of the permitted uses of RADs, details of the approved provider’s prudential compliance including non-compliance with refunding refundable deposits and details of any investment objectives if refundable deposits are used for investment within seven days of signing the accommodation agreement or within seven days of a request by the consumer.
Breaches of the Disclosure Standard
The APCS is part of the Disclosure Standard and therefore late submission of any part of the APCS is a technical breach of the Disclosure Standard and should be reported in the following year’s APCS. Similarly, letters to care recipients or their representatives sent after 31 October each year must be reported as a breach.
Common forms of evidence required to assess compliance with the Disclosure Standard are:
- the APCS
- letters sent to care recipients within four months of the end of the financial year
- accommodation agreements
- information on the approved provider’s website.
Prudential targeted campaign – national compliance report
Between November and December 2020 the Aged Care Quality and Safety Commission audited a sample of approved providers across Australia to assess their understanding of their refunding obligations and the Liquidity Standard.
The aim was to identify areas for further education and support for providers regarding their obligations with refunding refundable deposit balances and liquidity management.