A recent survey by the Aged Care Quality and Safety Commission revealed that many residential aged care providers do not understand their responsibilities under the Prudential Standards. The survey found that only 25 per cent of residential aged care providers were fully compliant with the Prudential Standards. Here’s a quick summary of what you need to know.
Residential aged care providers are required to comply with the Prudential Standards set out in the Aged Care Act 1997 (Cth) and the Fees and Payments Principles 2014 (No.2). The Prudential Standards outline the regulatory requirements of providers regarding their management of refundable accommodation deposits and bonds (including entry contributions). Any provider that holds refundable accommodation deposits or bonds is required to comply with the Prudential Standards.
According to the Aged Care Financing Authority review, aged care providers held a total of $32.4 billion in refundable deposits as at 30 June 2020. With the sector holding such a high number of refundable deposits, the Prudential Standards are designed to safeguard consumers residing in aged care homes while keeping the burden and costs to the aged care industry to a minimum.
There are four Prudential Standards:
Providers holding at least one refundable deposit or bond balance must maintain sufficient liquidity to ensure that they are able to refund the deposit and bond balances that may fall due within the proceeding 12-month period.
Providers must also develop, implement, and maintain a written liquidity management strategy which details:
The provider must then maintain the level of liquidity specified in the liquidity management strategy and ensure that it is kept up to date.
A provider must maintain accurate, comprehensive, and up-to-date information on refundable accommodation deposits, bond holdings and entry contributions. This should be maintained in the form of a refundable deposit register.
The register:
A provider must develop governance systems to ensure that refundable accommodation deposits and bonds are only used for permitted purposes and are refunded to consumers as and when they fall due. The governance system that is put in place by the provider should be relevant to the complexity and size of the provider’s business. Providers who invest refundable accommodation deposits or bonds in financial products must maintain a written investment management strategy.
To comply with the Governance Standard, providers that hold refundable deposits or bonds must maintain a documented governance system that:
Providers have an obligation to disclose information of their compliance with the Prudential Standards to the Secretary of the Department of Health, residents, prospective residents, and their representatives. Providers must complete an Annual Prudential Compliance Statement if they hold refundable accommodation deposits or bonds at any time during the financial year. Providers must also disclose the total amount of the refundable deposits that they hold, their use of the refundable deposits, an independent audit report and details of their financial position. This should be submitted to the Department of Health within four months of the end of the financial period.
Aged care consumers and prospective consumers are entitled to receive information from a provider if they request it. The information that may be requested includes the following regarding the previous financial year:
It is important that residential aged care providers understand their obligations under the Prudential Standards, and particularly the Disclosure Standard. Failure to comply with the Disclosure Standard may lead to action being taken under the Aged Care Act, including being issued a Notice of Non‐Compliance or Sanctions. Non-compliance with the Disclosure Standard may be taken into consideration in future decisions.
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 called the Prudential Targeted Campaign – National Compliance Report. Click here to review the report.
The Department of Health has issued guidelines to help aged care providers complete their Annual Prudential Compliance Statement and ensure Compliance with the Prudential Standards. Click here to access the Annual Prudential Compliance Statement (APCS) Guidelines.