Discussion paper: proposed changes to
financial reporting for providers of
residential aged care and home care
Introduction
The Department seeks the views of residential and home care providers, as well as other
stakeholders, on this discussion paper, which outlines the proposed changes to financial and
prudential reporting requirements for residential and home care. It is proposed that a
Comprehensive Financial Report (CFR) consolidate and replace the current reporting
requirements for residential and home care providers. Attached are mock-ups of the proposed
reports – there are three versions, of which providers would complete one based on their
circumstances – and a document that contains the definitions.
Submissions are due by close of business on Friday 27 February 2015.
Please provide your comments by email to ffbconsultation@dss.gov.au or by post to:
Director, Financial Performance Section
Aged Care Policy and Reform Group
Department of Social Services
PO Box 7576
Canberra Business Centre ACT 2610
Background
In January 2014, the Assistant Minister for Social Services asked the Aged Care Financing
Authority (ACFA) to provide advice on options to improve the collection of appropriate
financial data from aged care providers, including options to rationalise current financial
reporting requirements.
ACFA’s report Improving the Collection of Financial Data from Aged Care Providers was
released on Tuesday 28 October 2014 and is available on the Department's website at
https://www.dss.gov.au/our-responsibilities/ageing-and-aged-care/aged-care-reform/reforms-bytopic/aged-care-financing-authority. The report recommends that:

a new Comprehensive Financial Report (CFR) be introduced to consolidate and replace
the General Purpose Financial Report (GPFR), the Annual Prudential Compliance
Statement (APCS), the Survey of Aged Care Homes (SACH) and home care Financial
Accountability Reports (FAR);

the Department form a design and implementation group – including residential and
home care providers and representatives from ACFA – to assist in the design of the new
CFR;

that the new CFR collect income and expenditure information at the service level (i.e.
individual facility);

the CFR be introduced for optional reporting for residential care providers for the 2014-15
financial year;

the CFR be introduced for compulsory reporting for residential and home care providers
for the 2015-16 financial year; and

Standard Business Reporting (SBR) be adopted over the longer term, post the 2015-16
financial year.
On 22 October 2014 the Assistant Minister wrote to Ms Lynda O’Grady, ACFA Chairman, to
indicate his support in-principle for the general direction for financial reporting outlined in
ACFA’s report, subject to further consultation with the sector.
To enable further consultation with the sector and detailed consideration of the implementation
process, it is proposed that the CFR would be introduced for compulsory reporting for all
residential and home care providers for the 2015-16 financial year. Providers would report on the
2014-15 financial year under the current reporting framework, as set out under the Aged Care
Act 1997. The longer term move towards SBR will be the subject of future consultation.
The context of ACFA’s recommendations
ACFA is an independent statutory committee whose role is to provide independent, transparent
advice to the Australian Government on financing and funding issues in the aged care sector.
ACFA considers issues in the context of maintaining a viable, accessible and sustainable aged
care industry that balances the needs of consumers, providers, the workforce, taxpayers,
investors and financiers.
In developing its recommendations on financial reporting ACFA recognised the opportunity to
both reduce the cost and complexity of financial reporting (evidenced in the recommendations to
move to consolidate numerous existing requirements and in the longer term to Standard Business
Reporting) and also to improve the quality and usability of financial data to meet the
requirements of the sector, ACFA and the Department of Social Services. It noted that the
financial information needs to be sufficient to both inform government policy and provide
information and analysis to the sector and other stakeholders on industry issues, developments
and trends. To meet this need ACFA recommended that certain information also be collected at
service level to enable proper analysis of issues affecting the sector at different levels. For
example, allowing a better understanding of the operation of individual services in regional, rural
and remote locations, and comparison to those in inner regional and metropolitan areas. In
addition, the information obtained through the collection of a residential aged care segment
balance sheet would give ACFA valuable insights into the investment in and funding of
residential aged care.
Structure of the Comprehensive Financial Report
The new CFR would replace the current reporting framework for residential and home care
providers, consolidating the GPFR, the APCS and the SACH completed by providers of
residential care, and the FAR completed by providers of home care. This would streamline the
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current financial reporting events, enabling residential and home care providers to report once
annually, submitting the appropriate CFR by 31 October each year. The new CFR would reduce
duplication across the current financial and prudential reports, establishing a minimum data set
that would be collected from all providers.
The Department proposes to introduce three versions of the CFR, and providers would complete
one of these reports, depending on their circumstances. The form would be tailored to the
provider, depending on the type of aged care they deliver and any other non-aged care related
parts of their business.
Table 1 sets out the reporting requirements specific to each version of the CFR. The left-hand
column lists the three versions of the CFR, while the header row indicates the level of reporting
required for each CFR.
Table 1 – Structure of the CFRs
Statement of
Income and
Expenses
Statement of
Financial
Position
Statement of
Cash Flow
Notes to the
Financial
Statements
Prudential
Standards
Building and
Investment
Activity
CFR 1
Provider of
home care
and other
services
(excluding
residential)
CFR 2
Residential
care only
provider
Home care
service level
N/A
N/A
N/A
N/A
N/A
Residential
care service
level
Approved
provider level
Approved
provider level
Approved
provider level
Approved
provider level
Residential
care service
level
CFR 3
Provider of
residential
care and
other
services
Home care
service level (if
applicable);
residential care
service level;
and
approved
provider level
Residential
care segment
level; and
approved
provider level
Approved
provider level
Approved
provider level
Approved
provider level
Residential
care service
level
CFR 1 would be completed by providers who deliver home care (and possibly other services),
but not residential care. This is the simplest report, and is very similar to the FAR currently used
by home care providers, but with some proposed changes to reflect the introduction of Consumer
Directed Care.
CFR 2 would be completed by providers who only deliver residential care. This includes a
statement of income and expenses to be completed for each residential aged care service, with a
statement of financial position (or ‘balance sheet’) completed for the approved provider as a
whole. This would also include the cash flow and prudential items currently captured in the
APCS, and the questions about building activity from the SACH.
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CFR 3 would be completed by those providers who deliver residential care and other services,
which may include home care and/or another aged care or non-aged care related business (for
example, independent living units). CFR 3 would include a statement of income and expenses
completed for each residential service and each home care service (if applicable) and for the
approved provider as a whole. This would also include a statement of financial position (or
‘balance sheet’) for the residential segment (the overall residential aged care part of the business)
and for the approved provider as a whole. CFR 3 would also include the cash flow and prudential
items currently captured in the APCS, and the questions about building activity from the SACH.
It is envisaged that providers could complete and submit the CFR either on-line or use an Excel
file and email it to the Department.
Consultation
On Friday 21 November 2014, the Department held a targeted design and implementation
workshop with residential and home care providers, representatives from the South Australian
Innovation Hub, ACFA and industry accounting firms. Workshop participants raised a number
of issues, which are reflected in the discussion below. We would like to seek the views of the
sector more broadly on these issues.
As part of the consultation process, the Department has spoken with a number of software
vendors that develop financial software for the aged care sector, and has also spoken with a
number of auditors about the proposed changes. The Department is also working closely with a
number of home care providers on the issues about reporting for home care packages offered on
a CDC basis.
Issues
Replacing the GPFR with the CFR for the purposes of the Aged Care Act 1997 (the Act).
The introduction of the CFR would mean that providers no longer need to submit a GPFR for the
purposes of meeting their obligations under the Act. However, the Department notes that some
providers may be required to prepare audited GPFRs or Special Purpose Financial Reports
(SPFRs) for other purposes. The intention of the CFR is to reduce duplication between the
financial statements currently collected under the Act, while streamlining reporting events. A
longer term move to Standard Business Reporting1 would further streamline this process.
Reporting of data at residential facility level
The CFR, as proposed by ACFA, would require providers to complete a Statement of Income
and Expenses at the individual residential facility level. As ACFA noted in its report, the
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Standard Business Reporting (SBR) has been available for use by Australian businesses for financial and payroll
reporting since mid–2010. It reduces red-tape by simplifying business reporting to government through the use of
harmonised reporting definitions and standardised electronic reporting. SBR is based on the idea that information
can be ‘captured once, and used often’ to enhance business efficiency and productivity. SBR works as a by-product
of natural business systems, allowing businesses to report through a single online channel to government directly
from those systems on a ‘machine to machine’ basis (rather than through a portal), saving time and money and
allowing more time for core business activities.
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majority (63%) of residential care providers are single service facility providers who would
effectively be reporting at facility level anyway, while 29% of providers have two to six
facilities.
It was noted in the workshop that the comparison and analysis of facility level income and
expenses data could be problematic, partly because a comparison of facilities (both within a
provider and across the sector) would not be able to account for differences in how providers
operate their facilities. For example, it was pointed out that larger providers, unlike smaller and
single-facility providers, are more likely to have centralised costs which are not allocated to
individual facilities. Workshop participants did go on to suggest that where providers did not
have established allocation methods for certain items, notional allocations could be made for the
purpose of determining the financial performance of facilities. Combining this information with
non-financial information such as facility size, layout, location etc. enables a deeper
understanding of the operation and viability of facilities and the segment more generally.
Allocation of facility income and expenses to care, accommodation and hoteling categories
The proposed CFR asks providers to allocate (or apportion appropriately) certain income and
expense items between residential care, accommodation and hoteling categories. In the workshop
the Department specifically sought providers’ views about whether, for example, the basic daily
fee and extra service fee could be allocated or apportioned under ‘accommodation’ or ‘hoteling’
on the income statement. Feedback on this was mixed, with some providers allocating the basic
daily fee clearly under hoteling and others not. More general feedback received at the workshop
indicated that while allocating or apportioning expense items would not be overly difficult – and
a number of providers may already be reporting in this way internally – it is more difficult for
income items.
Reporting of segment level balance sheet
ACFA’s proposed CFR included the collection of a residential care segment balance sheet.
Workshop participants advised that entities that operate more than residential care do not
disaggregate their balance sheet to segment level, and that to do so would be subjective and
arbitrary. However, the information obtained through the collection of a residential aged care
segment balance sheet would allow valuable insights into investment in residential aged care and
how it is funded.
Removal of auditing requirements
ACFA’s report recommended that an attestation of compliance replace the current requirement
that financial statements submitted to the Department be audited. Workshop participants pointed
out that some organisations would choose to have the CFR audited to fulfil their own
management obligations, or to give confidence to the boards or staff member attesting to the
accuracy of the report. It is proposed that an authorised person from the provider attest to the
accuracy and completeness of the CFR.
Home care statement of income and expenses
The statement of income and expenses included in the CFR presented at the design and
implementation workshop was substantially similar to the FAR that home care providers used to
report for the 2013-14 financial year. However, a number of issues have been raised about the
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accounting treatments for home care packages offered on a Consumer Directed Care (CDC)
basis.
Advice from providers is that they will be recording the Government subsidy and the client
contribution as a liability in the balance sheet as they are received. As services are provided this
liability would be reduced and income recognised in the statement of income and expenses. It
would be difficult to determine the amount of subsidy and client contribution when recognising
this income and it is therefore likely that this income will be recognised as a single line item in
the statement of income and expenses. The balance of the package would then be reconciled with
the outstanding liability on the balance sheet. As such, reporting using a standard statement of
income and expenses would not provide the full picture, as the split between subsidies and client
fees would not be captured.
To account for this, the home care statement of income and expenses in CFRs 1 and 3 has been
revised. It now proposes to collect a combination of items from the income and expenses
statement and client statements, in order to capture the full income picture. The revised CFRs
also propose to collect a small number of additional items from the balance sheet – namely, cash
and liquid assets – in order to understand the balance of package liabilities and liquidity. This
would enable a better assessment of the viability of the home care sector as it transitions to CDC.
Prudential items
From the perspective of prudential compliance and regulation, the proposed CFR has been
formulated to collect the minimum data set that the Department would be relying on to assess
providers’ compliance with their prudential obligations, viability, and use of refundable
accommodation deposits. Workshop participants were largely supportive of the changes to
reporting requirements at approved provider level, including items in the Statement of Cash
flow, adding that further specificity to the Operating and Investing items might be useful.
Building activity
ACFA’s report recommended that the SACH be discontinued once the CFRs are introduced for
mandatory reporting. The SACH module on building activity (Part 2 of the current SACH) will
be incorporated as part of the CFRs for residential aged care providers. The 1 July 2014 changes
to the accommodation payment arrangements means the previous modules in the SACH are now
obsolete. Section A of Part 1 has not been incorporated as part of the CFRs: data on
accommodation payments is currently collected as part of the Aged Care Entry Record. Those
questions from Section B of Part 1 not already covered off by other parts of the CFRs have been
excluded.
Comments sought
The Department seeks the views of residential and home care providers on these issues, and on
the definitions document (Combined Definitions for CFR1, 2, and 3) and detailed data items
contained in the CFRs (CFR1 – home care only CDC, CFR 2 – residential care only, and
CFR3 – residential care and other).
Questions during the consultation period should be directed to ffbconsultation@dss.gov.au.
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