Aged care providers face dual compliance burden as new laws loom: RSM

RSM has urged aged care providers to dedicate adequate resources to ensure their compliance with new aged care standards, set to come into effect in November under the Aged Care Act 2024.

“As part of new Act reforms, the existing financial and prudential standards will be replaced by new standards of financial management, investment, and liquidity,” RSM aged care partner Ray Scott said.

“These new standards are designed to ensure that providers are not only solvent but also financially resilient and capable of delivering high-quality care over the long term.”

The Aged Care Act 2024, set to come into effect in November, was created in response to the Royal Commission into Aged Care, which found that the current regulatory standards were not fit for purpose.

The new rules have sought to put the rights of older people at the centre of the aged care system and ensure quality care. One area targeted by the new act was the financial management of aged care facilities, leading to new reporting obligations for aged care providers, RSM said.

The incoming regulations meant that aged care providers had to shoulder the dual mandate of meeting existing obligations while preparing for a new regulatory regime that would “fundamentally change how they operate,” Scott said.

The new rules require aged care facilities to adhere to new liquidity standards, including maintaining 35 per cent of their annualised cash expenses and an additional 10 per cent of their refundable accommodation deposit (RAD) liabilities, if they hold them.

It also increased the maximum RAD cap from $550,000 to $750,000, allowing providers to charge higher up-front fees without government approval.

Scott said this would introduce a new, predictable revenue stream for aged care institutions, but would also necessitate more sophisticated financial planning strategies to manage the timing of cash inflows and outflows.

In preparation for the incoming rules, Scott noted that many aged care providers had conducted gap analyses, reviewed their governance structures and updated their financial systems.”

Some also engaged with transition support programs offered by industry associations and the Aged Care Quality and Safety Commission.
RSM noted that the EOFY would trigger a “cascade” of financial reporting obligations for firms, to demonstrate financial viability and compliance with prudential standards.

These obligations have included quarterly financial reports for the June quarter, annual financial statements and an annual prudential compliance statement.

Scott said aged care businesses were under more pressure than usual this financial year as they faced the dual mandates of adhering to old standards and preparing for incoming rules.

Regardless, he noted that aged care providers were committed to the importance of reform.

“In working with many aged care providers, it is clear that despite the challenges they face, there is strong sector-wide commitment to the importance of reform, to ensuring readiness for the changes ahead and of providing assurance to some of this country’s most vulnerable people.”