managing prudential risk in residential aged care

D18-2874491

MANAGING PRUDENTIAL RISK IN RESIDENTIAL AGED

CARE

DISCUSSION PAPER

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Discussion Paper – Managing Prudential Risk in Residential Aged Care

Introduction

This discussion paper has been developed to support consultation with the residential aged

care sector and the broader community on the issue of managing prudential risk in residential

aged care. The Department of Health (the Department) invites submissions from all interested

parties on this topic.

Prudent financial management is critical to a provider’s ongoing viability and ability to

deliver quality care to residents. It is also critical to a provider’s ability to refund lump sum

accommodation payments to residents or their families on leaving care. Residential care

providers hold around $25 billion of resident lump sum accommodation payments, up from

around $15 billion in 2014. It is essential that these resident monies are prudently invested

and that providers are able to refund these payments when residents leave care.

There is an existing prudential framework in place under the Aged Care Act 1997 to support

this objective, however, this has been in place for some time and two recent reviews (Ernst

and Young and the Tune Review) have recommended that the prudential framework be

strengthened.

The Government announced in the 2018-19 Budget (in the Better Quality Care – Managing

Prudential Risk in Residential Care measure) that it supported strengthening of the prudential

framework with the detail of changes to be further considered after consultation with the

sector on options.

This discussion paper outlines options for strengthening the prudential framework, drawing

on the recommendations from the reviews undertaken to date.

Options suggested to date

While Government has not yet made any decisions on the extent of changes necessary to

appropriately strengthen the standards, the key options that have been recommended in recent

reviews include:

1. Improved and more detailed reporting to the Department of corporate structures in

provider groups to improve transparency and understanding of related party

transactions.

2. Introducing a specific liquidity requirement so that a provider must maintain a

prescribed percentage of liquid assets, for example, 10% of the value of lump sum

accommodation payments held.

3. Introducing a specific capital adequacy requirement so that a provider must maintain a

prescribed percentage of net assets, for example, assets must exceed liabilities by an

amount exceeding 20% of total assets.

Managing Prudential Risk in Residential Aged Care

Part 1: Overview

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4. Enhancing information and disclosure requirements to the Department where

‘significant events’ occur, such as major changes in corporate structure or ownership,

significant related party transactions and where a provider is at imminent risk of no

longer being able to continue operations.

5. Enhanced governance and financial risk management requirements to strengthen a

provider’s own prudent management and oversight of its financial position and

operations.

6. Improved disclosures to residents/families of how lump sum accommodation

payments are held/invested and rules around refunds.

7. Limiting or phasing out discretionary trusts.

8. Providing greater regulatory powers to the Department to enable it to seek information

from providers and investigate issues relating to the prudential financial management

of providers.

9. Introducing a requirement that providers comply with Tier 1 financial reporting

arrangements to improve the clarity of information reported to the Department.

Structure of discussion paper

The discussion paper is split into 2 parts:

Part 1: Background and overview of the current prudential standards and the Ernst and Young

review

Part 2: Options under consideration

How to provide your submission

Submissions are due by 15 March 2019.

Please email your completed submission along with your name, organisation and contact

details to the following address. [email protected]

Please direct any enquiries to the contact officer using the same address.

Some of the questions you may wish to consider when formulating your responses include:

How do you see the options impacting on aged care providers and residents?

What do you see as the benefits, costs and risks of implementing the options outlined

in this paper?

Are there particular issues with transitioning to new arrangements and what would be

an appropriate commencement time for changes?

Are there other issues or other options that need to be considered when considering

reforming the prudential framework?

Additional information and resources

Additional resources are also available from the Managing Prudential Risk in Residential

Care consultation page of the Department’s Consultation Hub.

mailto:[email protected]

https://consultations.health.gov.au/residential-and-flexi-aged-care-division/managing-prudential-risk-in-residential-aged-care

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This includes links to the following documents:

Additional supporting technical information

Excerpts from key legislation including Prudential Standards and Permitted Uses

The Ernst and Young Review

The Tune Review

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The Standards

The Prudential Standards (Standards) as set out within the Fees and Payments Principles

2014 (No 2) outline the regulatory requirements of providers in respect of their prudential

management of refundable accommodation payments or deposits (RADs1). Their purpose

includes serving as a mechanism for:

protecting refundable deposit balances, accommodation bond balances and entry

contribution balances (Liquidity Standard);

providing sound financial management (Records Standard);

governance systems for managing refundable deposit balances, accommodation bond

balances and entry contribution balances held on behalf of care recipients (Governance

Standard); and

the provision of information about the financial management of approved

providers (Disclosure Standard)2.

The Standards include requirements with regard to liquidity, record keeping, governance and

disclosure. The consequences of non-compliance with the Standards, Principles or other

regulatory obligations under the Aged Care Act 1997 can include those set out under the

Sanctions Principles 2014.

The Liquidity Standard

The overarching objective of the Liquidity Standard is to ensure that at any time, approved

providers of residential age care (providers) have sufficient funds in liquid form to refund all

the RADs which they would expect to fall due within the following 12 months (a provider’s

minimum level of liquidity).

To support that objective, providers are expected to develop a liquidity management strategy

(LMS). The LMS should incorporate a systematic approach to the objective. The Standard

sets out that the LMS must address specific matters such as;

the total amount of liquid funds required to satisfy the minimum level of liquidity

objective; and

the form(s) that the provider’s liquid funds can take; noting that at all times the funds

must be readily accessible such as cash, bank deposits, bank bills and stand-by lines of

credit.

The provider must ensure their LMS continually complies with these requirements and is kept

up to date.

1 RADs includes refundable accommodation deposits, accommodation bonds, entry contributions and

unregulated lump sums. 2 Explanatory Statement to the Fees and Payments Principles 2014 (No 2).


Part 1: The Prudential Standards, the Ernst and Young Review of the

Standards and related background

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The Records Standard

Under the Records Standard providers are required to record and maintain accurate, up to date

information about the RADs that they collect from residents. This information is recorded

within a ‘refundable deposit register’ that assists the provider return RAD balances when a

care recipient (resident) leaves a service. The minimal amount of information required to be

entered on the register includes3;

the resident’s name and their Resident Identification Number;

the date the resident entered the aged care service;

the date on which the whole or each part of the RAD was paid for entry to the service

and the amount of each payment;

the amount of any deduction made from the RAD; the date it was made and the reason

for that deduction;

the RAD balance as at the end of each calendar month during which the provider held

a RAD balance; and

where a resident paid an amount that was more than was properly payable

(overpayment), the amount of the overpayment4 that was refunded to the resident and

the date of that refund.

The Standard has other RAD related requirements in relation to the time and manner in which

a resident may cease to receive care from a service. In each case, the key dates that indicate

the cessation of care and the return of RAD balances and the amounts returned including any

interest that was paid, need to be entered on the register by the provider.

The Governance Standard

The objective of the Governance Standard is to ensure that providers only use the balance of

RADs for a permitted use and that balances are returned to residents or their estate as and

when required5. The standard sets out specified outcomes rather than requiring the use of a

particular or specific governance system.

Section 49 of the Standard sets out that the governance system used by a provider should at a

minimum provide for;

an allocation of responsibilities to key personnel for the management of RAD

balances;

the monitoring, controlling and delegation or outsourcing of the allocated

responsibilities;

reporting mechanisms for the allocated responsibilities that ensure that the key

personnel who are responsible for the executive decisions of the provider can

effectively monitor and control the use of RAD balances;

assurance that the key personnel (including those to whom responsibilities are

delegated or outsourced) are aware of the requirements of the Act and Principles in

relation to RADs; and

detecting, recording and responding to any failure to comply with the requirements

under the Act or the Principles in relation to RADs.

3 Sections 46, 47 and 48 of the Records Standard set out requirements in respect of refundable deposits,

accommodation bond balances and entry contributions. 4 Including any Interest that may be payable. 5 The Governance Standard applies specifically to the arrangements for the management and protection of RADs

and does not address matters of broader corporate governance.

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The provider must keep any written documentation relating to their governance system and

ensure that documentation is up to date. Where the system no longer complies with the

requirements of the Act or Principles, the provider must modify or replace it.

In addition to maintaining a governance system, providers intending to invest RAD balances

in a fund or financial product6 must adhere to the requirements of section 50, which sets out

that a provider must maintain a documented investment management strategy (IMS). At a

minimum, that IMS must set out;

the investment objectives of the provider;

the assessed level of risk of the provider’s ability to refund the RAD balances;

a strategy for achieving the investment objectives whilst ensuring the ability to

refund the RAD balances;

the asset classes the provider is able to invest in and the investment limits for each

asset class; and

the key personnel who have responsibility for implementing the investment

management strategy.

The provider must also ensure that;

the key personnel responsible for the provider’s executive decisions approve the IMS;

the investment of any RADs is in accordance with the IMS;

the IMS is kept up to date and complies with requirements set out in the Act and

Principles; and

the IMS is modified or replaced if the provider becomes aware that it no longer

complies with the requirements of the Act and Principles.

The Disclosure Standard

The focus of this Standard includes the requirements within sections 51 to 547 for providers

to;

supply the Department with a completed Annual Prudential Compliance Statement

(APSC) within four months of the end of each financial year; and

make available information to RAD paying residents or prospective RAD paying

residents about the provider’s level of compliance with the prudential requirements,

including the permitted uses of RAD balances.

Through the APSC, provider must report on;

the RADs they received and refunded during the financial year and those still held at

the end financial year;

their level of compliance or non-compliance with;

o the requirements for refunding RADs;

o the Prudential Standards8;

6 Other than making and maintaining a deposit in a deposit taking facility. 7 The information requirements of the APSC vary slightly for refundable deposits, accommodation bonds and

entry contributions (sections 52, 53 and 54). 8 In accordance with section 55.

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whether or not obtained from RADs, the total amount of their expenditure on capital

items, investment in financial products, loans, repaying debt (in accordance with

permitted uses; and

the amount that has been returned to the provider during the financial year from the

sale, disposal or redemption of financial products covered by paragraphs 52N-1(3)(b)

to (e)9 or paragraph 63(c)10,11 of the Principles.

Section 56 sets out that the provider must ensure that the information within the APCS is

supported by an independent audit that has been provided by a registered company auditor or

a person approved by the Secretary.

The Disclosure Standard also sets out a range of matters on which providers must disclose

information to residents (section 57) and prospective residents (section 58) including;

a summary of the permitted uses for which the provider has used RAD balances

during the year;

if investing RAD balances, the provider’s investment objectives and the asset classes

in which the provider may invest in (in accordance with the investment management

strategy);

the provider’s compliance or non-compliance with the requirements for refunding

RAD balances in the previous year;

financial information about the provider including the provider’s most recent audited

accounts; and

a copy of the refundable deposit register that relates to the resident at the time of the

request.12

The Standard also provides for an application by a provider of flexible care to the Secretary of

the Department to permit a financial reporting year to be a year starting on a date which is not

1 July.

Permitted Uses

In addition to the Prudential Standards the use of RADs by providers is regulated by and

limited to those uses set out within the Permitted Uses (Part 6) of the Principles.

The legislation permits RADs to be used by providers as a source of capital financing or

expenditure. This is consistent with a long held practice in the sector of financing the

refurbishment or expansion of a residential facility or the purchase of additional facilities

using their resident’s RADs. Compared with regular forms of financing, RADs have little or

no direct cost to providers.

In addition to capital financing, there are some further permitted uses of RADs including;

9 Includes debentures, stock or bond issued by the Commonwealth or State; a security; or, in relation to a

registered scheme – an interest, the right to an interest or option to acquire an interest in that scheme. 10 Includes investments in a fund but not a controlling entity of a fund, listed in item 2 of the first Schedule to

Banking exemption No. 1 of 2013 made under the Banking Act 1959. A controlling entity means a person or

body corporate who or which is the trustee of or otherwise concerned in the management of a fund. 11 Item 2 of the first Schedule to the Banking exemption No 1 in 2013 sets out a list of organisations that may be

controlling entities of funds; are recognised at law as being formed for religious and charitable purposes (as

stated within the funds constitution) and are operated as not for profit entities. 12 Providers may but are not required to provide a copy of the register to prospective residents.

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in the case of new residential care businesses, to assist pay reasonable business losses

in the first year;

making loans13, but only where the purpose of that loan is to;

o refund or repay debt that accrued for the purposes of refunding RADs; and or

o repay debt accrued for the purposes of capital expenditure; and

to invest in a financial product that may include a;

o deposit made with a deposit taking facility;

o debenture, stock, bond or security;

o registered scheme; and

o an interest or right to acquire an interest in financial products in relation to an

aged care investment scheme that has been established for the purpose of

investment in residential or flexible aged care; that is

a managed investment scheme14; and is

not a registered scheme15.

There are no other uses of RADs that are permitted.

Note: The full text of each of the Prudential Standards and the Permitted Uses legislation is

available on the consultation website.

Accountability Principles 2014

While distinct from the Fees and Payments Principles 2014 and Prudential Standards, the

Accountability Principals 2014 are also relevant to prudential management in residential care

as they set out the financial reporting requirements of providers. This includes the

requirement that providers submit an aged care financial report (ACFR) annually to the

Department16.

Division 2 of the Principles also sets out the requirement for a residential provider17 to submit

a general purpose financial report18 (GPFR) setting out information about all the residential

services supplied by the provider during the most recent financial year. The provider’s GPFR

is required to be audited by a registered auditor19.

This audit responsibility includes providing an audit opinion as to whether the GPFR has been

prepared in a manner that is compliant with the requirements of Australian Accounting

Standards and gives a true and fair view of the provider’s financial position and performance.

The Ernst and Young (EY) review

The EY review20 on the prudential framework and standards was published as an attachment

to the Tune review. It included options that were directed towards improving and

strengthening the prudential legislation as well as the Department’s regulatory effectiveness.

In taking account of potential future changes to the legislation, EY also developed options

13 Loans are required to be made on a commercial basis and supported by a written agreement. 14 Within the meaning of ‘managed investments’ of the Corporations Act 2001. 15 Within the meaning of ‘registered schemes’ of the Corporations Act 2001 16 Responsibilities of Providers - Division 2 of the Accountability Principles 2014 17 Section 35A – non government providers. 18 In accordance Australian Accounting Standards and the Statement of Accounting Concepts SAC 1. 19 Section 36. Within the meaning of the Corporations Act 2001. 20 Review of Aged Care legislation which provides for the regulation and protection of Refundable

Accommodation Payments in Residential Care, 2017 (EY report).

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focused on communication and education activity (led by the Department) that would support

provider compliance. Following its own consultations with the sector and the Department, EY determined that there

were a number of key risks that needed to be addressed in order that the objectives of the

legislation and the Guarantee Scheme could continue to be met. EY looked closely at the quality and scope of the prudential and financial information held by

the Department, as made available by providers. Based on its review of that information EY

reported that;

“the primary finding from our Desktop Review was that the data that the Department

is given is inadequate for it to assess whether or not Approved Providers comply with

the Prudential Standards”21 In considering the responsibilities of the Department as the key regulator, EY also indicated

that the Department needs;

“a much deeper understanding of, and more structured process to evaluate approved

providers financial positions (adequately capitalised and access to sufficient liquidity

to repay refundable deposits) and practices and the wider risks to the sector”22 In summary, EY stated that there were a number of high level risks linked to the existing

prudential legislation and concluded that;

there is insufficient transparency in provider reporting;

the Liquidity Standard does not provide for specific provider liquidity requirements

and needs to be redefined;

there should be more specific provider capital adequacy requirements;

provider disclosures to the Department as well as residents and families were

inadequate;

the governance requirements of some providers including financial risk management

were deficient; and

the use of discretionary trusts by some providers did not support a required level of

transparency.

Based on the above, EY developed a set of options for change – both to the requirements of

prudential legislation and the processes used by the Department to conduct its oversight role. Given the nature and use of RADs including as a source of capital and investment for

providers, EY approached their study in part by drawing comparisons with the regulatory

frameworks of other sectors. After testing their approach with parts of the residential sector,

EY were able to argue that the proposals they formulated were;

“largely consistent with the tests under which financial service providers and larger

for profit and non for profit providers [currently] operate under”23

The specific proposals developed by EY and the issues to which they were designed to

respond are set out within Part 2 of this discussion paper.

21 EY review page 5. 22 Ey review 10. 23 EY review page 9.

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The Guarantee Scheme

The Commonwealth Government’s Budget measure ‘Better Quality Care – managing

prudential risk in residential care’ also sets out changes in the approach to underwriting of the

risk of the non-return of RADs to residents through the Guarantee Scheme (the Scheme).

In effect, the Scheme is a guarantee that RADs will be repaid (refunded to residents) by the

Government where the provider cannot, as a result of financial insolvency. Currently, a

provider’s default on their obligation to return RADs to residents as a result of their financial

insolvency may trigger the Scheme.

To date, the Government has absorbed all the costs of returning RADs to residents as a result

of provider financial insolvency. Since 2006, the direct costs to Government of refunding

RADs have totalled more than $43 million.

However as announced in the Budget, from 1 July 2019, where the Government’s RAD

refund costs exceed $3 million in a financial year commencing with the 2018-19 financial

year, residential providers will be levied to recover the Government’s costs. The Government

is developing legislation to give effect to this announcement and will consult with the sector

separately on the legislation for this measure once developed.

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Part 2 Outline

As discussed in Part 1, EY identified some of the key risks associated with the prudential

framework including its effectiveness in protecting resident owned RADs. To address those

risks, actions were proposed for each of the key stakeholders; government (legislation

change), the Department and providers.

The primary purpose of this discussion paper is to support consideration by the sector and

general public on all the proposed options for strengthening the prudential legislation. In

developing this paper the following were also taken into account:

1. In its report, EY put forward additional options K to O that were intended to support

the Department and the sector’s understanding and adoption of any new requirements.

For example, in the event of changes to the Standards, the Department might take up

option K which advocates for provider education regarding those changes.

As options K to O focus on matters that may arise subsequent to changes to prudential

legislation rather than the legislation itself, they have not been included within this

paper.

2. Where it was thought that aspects of some of EYs options would benefit from further

clarification minor amendments or additional explanation have been included where

necessary.

3. Following discussion with the Prudential Advisory Group (PAG)24 and technical

experts on the EY options, further risks, issues and benefits were identified. These

additional considerations have resulted in the development of some alternative

approaches to achieving the outcome proposed by EY. Where included, these are set

out below the original EY option.

4. The Department has included within this paper three new options that are not directly

linked to those put forward by EY. These new options, labelled as AA1, AA2 and

AA3, address issues concerning the financial viability of providers and transparency.

The following table sets out all the options currently under consideration for strengthening the

prudential legislation. Your consultation feedback may also include other options you wish to

propose.

24 A consultation group with representatives from the sector.


Part 2: Options

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Part 2: Table 1 - Options for consideration

Issue: Risk /

Response

EY Option (with alternative approach included*)

1. Insufficient

transparency in

reporting

A1

Require Approved Providers to report their corporate structures including the

identity of ultimate shareholders and any significant changes to their ownership.

A2

Allow Approved Providers to report on a single entity or consolidated group basis.*

A3

Where an Approved Provider or Approved Provider group wishes to transfer

assets outside the group:

The loan to value ratio of the asset to the liabilities should not exceed 80%

of the value of the underlying asset.

The use must be secured by appropriate security, such as a mortgage

(ranking below bank secured debt).*

2. Need to

redefine the

Liquidity

Standard

B1

Set a liquidity threshold as a defined percentage of Accommodation Payment

money held by the Approved Provider Group, such as the higher of 10%, where an

Approved Provider is a single site, single facility operation with a smaller

Accommodation Payment pool and low resident turnover, a higher threshold.*

B2

Phase in the threshold over a 5-10 year period. For example, require 5% within

5 years; 7.5% within 7.5 years and 10% within 10 years.*

B3

Define the form of liquidity as real liquid or accessible funds being a combination

of unpledged/unencumbered cash in the bank; a bank facility (such as an overdraft

or line of credit) or money that can otherwise be accessed immediately.

3. Introduce a

capital

adequacy

requirement

C1

Introduce a capital adequacy metric, such as 20% equity on the balance sheet.

C2

Define quality of capital to include tangible assets such as land, buildings

and intangible assets which are able to be valued, such as, bed licences.

4. Enhance

disclosures to

the Department

D1

Amend section 9(1) of the Act to require notification “as soon as it happens and in

no event more than 14 days after it happens”.

D2

Require the prior consent of the Department to be given to material changes in the

legal ownership or control of an Approved Provider

D3

Require Approved Providers to adopt an industry standard such as APS330 or

Direct2APRA (D2A) reporting. Approved Providers would be obligated to disclose

the following to the Department;

changes in corporate structure;

significant related party transactions, which are required to be reported in

the GPFR;

cash flow in accordance with the Accounting Standards to show the

financial position of the Approved Provider;

compliance with the liquidity standard (including any period of non-

compliance and how it was rectified); and

compliance with the capital adequacy metric (including any period of

noncompliance and how it was rectified).*

5. Independent

Auditor

E1

Reinstate / Do not remove the requirement for an independent auditor to signoff the

APCS. Note: This recommendation has already been implemented.

6. Strengthen

governance

requirements

F1

Develop the Governance Standard to adopt generally accepted corporate

governance principles (such as those adopted by ASIC, APRA, ASX and the

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Issue: Risk /

Response

EY Option (with alternative approach included*)

ACNC). This includes (leveraging ASX corporate governance principles 3rd ed.)

to;

lay foundations for the management and oversight of the organisation;

to act ethically and responsibility;

safe guard reporting; and

prepare a code of conduct for “key personnel” to improve industry

practices to operate in accordance with recipients of care’s best interests.

Impose an obligation for Approved Providers to produce a corporate governance

statement which describes the extent to which they have complied with the code of

practice and principles.

G1

Incorporate a financial risk management standard into the Governance

Standard.

7. Enhance

disclosures to

the resident /

family

H1

Require Approved Providers to disclose to recipients of care and their families

how Accommodation Payment money will be held, when it will be refunded and

how recipients of care rank on a winding up of an Approved Provider.

8. Limit or

phase out

discretionary

trusts

I1/I2

Limit or phase out discretionary trusts.*

9. Compliance

with new

adequacy

requirements

J1

If the Approved Provider capital falls below the liquidity or capital adequacy

Thresholds;

require the Approved Provider to make up the shortfall; such as by

injecting additional capital or by entering into a subordinated loan with

shareholders; and

restrict the charging of new Accommodation Payments until the capital

metric is achieved. This may also require an amendment to the Sanctions

Principles accordingly.

Issue:

Risk /

Response

Further Options (Department of Health)

10. Assessment

of financial

viability

AA1

Create legislative authority to support the assessment of the financial viability of

Approved Providers:

Allow independent review by the Commonwealth of provider’s current

financial information (audited and unaudited).

Allow the Department to require the provision of current financial

information where there are concerns of provider’s financial viability

when warranted.

Allow the Department to require the provision of relevant supporting

information including current financial reports for the provider and / or

related entities where there are concerns relating to a providers financial

viability, prudential compliance and/or permitted use.

AA2

Require Approved Providers to inform the Secretary (under Section 9(1) of the Act)

of concerns relating to financial viability.

AA3

Support the migration of all providers to Tier 1 financial reporting.

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Issue: Insufficient Transparency in Reporting. Options A1, A2 and A3

In their report, EY identified a gap between what applicants must disclose to become

Approved Providers and what they report under the Prudential Requirements.

There is currently no requirement for providers to inform the Department when there are

changes to their corporate structure, ultimate shareholders, ownership or control. Because of

this gap, the Department does not always have a clear understanding of a provider’s structure

in order to evaluate the impact this may have on their financial position. Ultimately, relying

on outdated information could result in an unmonitored risk to the Guarantee Scheme.

Example A1.1

Based on information received, the Department as regulator forms a view that the financial

and prudential matters that concern it relate to a provider who is believed to have or is part of

the following corporate structure. Note that the provider has not supplied the Department with

any updates on its corporate structure including its relationship to other entities since

approved provider status was granted.

A1.

Require Approved Providers to report their corporate structures including identity

of ultimate (beneficial) shareholders and any significant changes to their ownership

or control.

Trustee Company Pty Ltd

Unit Trust

trading as

Aged Care Facility

X

(Provider A)

Related Party

Service

Company

Trustee

Company

Pty Ltd

Related Party

Unit Trust

(B)

(Owns aged care building)

Family Unit Trust

Unknown

connection

Holds fixed and floating charges over existing

and future assets and undertakings

Service fees paid

Holds

mortgage

over

property

Interest received on loan

Related party loan advance

Annual rent payment

Annual profit

distributed to unit

holders

Annual profit

distributed to unit

holders

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Key considerations:

Providers could include within their annual reporting a diagrammatic attachment and any

necessary explanatory information to better explain complex corporate structures:

This would assist the Department improve its understanding of potential risks

including where a fuller understanding of risk requires transparency of the linkages

between the provider and other entities.

Results in a reduction in the need for the Department to contact providers to clarify

their corporate structures.

Providers may only be required to report significant changes to ownership or control

within 28 days of the event.

Could be regulated through the Annual Prudential Compliance Statement (APCS)

similar to the Records Standards or Governance Standards.

EY refer to ‘significant changes’. With regard to shareholders, ownership or control,

‘significant influence’ as defined by the Australian Accounting Standards paragraphs

5-9 of AASB 128 (see additional supporting information) could be used.

Aged care providers vary in organisational type (for-profit, not for-profit, government), size

(single or multiple facilities) and location (metropolitan, regional, rural and remote). In some

cases they are part of multi-national companies. There is also considerable variety in the

corporate structures they adopt or are adopted to.

A consequence of complex structures including those with related entities is complexity in

reporting. EY identified that there is considerable inconsistency in the ways in which

providers reported financial information to the Department.

For example, it is not always clear to the Department which components of a provider’s

business have been included by the provider within their General Purpose Financial Report

(GPFR). There are concerns that where a provider’s financial information shows indicators of

high-risk behaviours, the Department will not be able to adequately assess their financial

viability.

The following is a typical example of the complexity a reporting entity can display when

reporting to the Department.

Example A2.1

Several approved providers operate under the ultimate control of one individual

entity [Entity 1]. Some of those approved providers also have related parties that

may or may not participate in some way in their aged care business.

Currently each of the approved providers report separately on all their operations

(not restricted to residential aged care), even though they are all ultimately

controlled by Entity 1. Related parties that participate in their operations are not

required to report on their performance or position.

A2.

Allow Approved Providers to report as a single entity or consolidated (approved

provider) group basis.

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EY indicated that the purpose of enhancing disclosure is to “create a transparent and public

framework for the Department and residents to see where the money is at all times and for

what use it is going to be put”.

Option A2 proposes that the current lack of transparency might be circumvented by providers

nominating for financial reporting purposes, that they are either a single entity or a

consolidated approved provider group (AP Group) in relation to their aged care operations.

Example A2.2

Under EY’s option A2 providers could;

A) be a single approved provider entity (AP single entity) as currently contemplated by

the Act.

Under a single approved provider number, the provider can operate one or multiple

residential facilities. The provider may also operate other aged care services such as

home care.

In the example chart below, a provider is shown as having residential and home care

services as well as trust structure that the provider indicates has an aged care purpose

(shaded grey). For example, the trust may hold a number of aged care financial assets

such as securities or property.

Under EYs proposal this provider would supply financial and prudential reporting on

the aged care services it provides (residential and home care). Within its reports, the

provider also indicates financial matters including transactions related to the aged care

businesses which may flow to and from the trust.

The provider is not required to report on the non-aged care related entity (yellow) as it

does not have a transactional relationship with any of the aged care entities.

Reporting Not reporting

AP single entity – operating with one

AP number only

AP Home care – one

or more services AP Residential care –

one or more facilities

Related entity -aged

care (trust)

Related entity - not aged

care

- 18 -


B) consolidate themselves within an approved provider group (AP Group).

In the chart below the Parent entity shown in yellow, has both aged care and non-aged

businesses within its structure. There are also a number of discretionary (DT) and unit

trusts (UT) in use.

In keeping with the EY option, for prudential and financial reporting purposes the

Parent entity has consolidated all of its previously separate approved providers and

related trusts, home care services and other aged care related businesses (shaded grey).

Note that aged care related businesses may be defined as including care type services

such as home care, or supporting operations such as aged care laundry and cleaning.

An aged care related business could be a financial entity supporting infrastructure

development or investment of aged care funds.

The consolidated entity (shaded green) will provide consolidated prudential and

financial information for all its aged care entities including any transactions between

them.

The requirements of the consolidated AP Group are in accordance with those of the

Corporations Act 2001. While trust structures are not governed by this Act, where the

trust is identified by the provider as having an aged care purpose, the provider would

be required to report on the trust.

Where the trust does not have an aged care purpose, or where the provider does not

wish to report on the trust to the Department, then the trust could not be included

within the AP Group or transact with any of the entities in the AP Group. The Parent

entity would not report to the Department on the parts of its business which were not

within the consolidated AP Group (yellow; blue shaded).

DT1 UT1 DT2 UT2

AP Group:

Consolidated reporting - prudential

and financial for aged care related

entities in the group Company under the Corporations Act

DT1

Parent Entity

UT1

Residential provider –

multiple facilities


single facility


multiple facilities

Home Care services

Related

entity - not

aged care

Discretionary

Trust - aged

care

Other operations –

defined as aged care:

e.g. laundry; transport;

infrastructure

development or

investment

Related

entity - not

aged care

- 19 -


Key considerations:

Currently, providers are free to change their structure if it can assist them to better

account for their aged care positions provided they comply with their obligations as

outlined under the Act and principles.25

Under this option, where providers organise themselves in an AP Group they would

be required to consolidate their group structure for prudential and financial regulation

reporting purposes. This could include reporting any intra-group or related party

transactions.26

Accordingly, AP Groups would be required to prepare consolidated financial reports

at Group level in line with the requirements of the Australian Securities Investment

Commission (ASIC) ‘Wholly owned Companies Instrument’27 and put in place cross

guarantees across all of the AP Group.

Where an provider wishes to transfer RAD monies outside the AP Group an enhanced

disclosure and security regime would apply (see A3 below).

To support the financial viability of the individual organisations within the group, the

AP Group members will only be permitted to undertake activities that are consistent

with “aged care”.

For the purposes of this proposal, ‘aged care’ will need to be clearly defined outlining

what activities would and would not be allowed within an AP Group and reported.

For example, EY suggested that business activities such as share trading and health

insurance should not be permitted within an AP Group.

While a consolidated AP Group might capture the aged care operations of a group, it

would not necessarily capture other related parties that have interests in the provider

or AP Groups operations, but are outside of aged care. In some cases, further

disclosure may still be required by the Department.

There may be some administrative burden for providers who choose to adopt this

reporting structure. For instance, those providers that carry on operations outside of

the scope of what will be defined, as ‘aged care’ would need to separate operations

into segments outside of the AP Group.

Under the Aged Care Act 1997, the individual provider continues to bear the ultimate

responsibility for the management, use and return of RADs.

Unique to each provider is their Approved Provider number.

The reporting obligations for single entity providers would be unchanged.

Alternative options

25 Including section 35 (aged care financial reports) of the Accountability Principles 2014. 26 EY review. Appendix D. 27 Instrument 2016/785.

A2. Alternative option 1

Allow Approved Providers to report on a single entity or consolidated group basis (as for

EY) while ensuring that the segment reporting for residential and home care

requirements are retained.

- 20 -


Key considerations:

Under this alternative option 1, if providers choose to organise themselves as an AP

Group, the only change from EY’s A2 proposal would be that the current requirement

for segment reporting for residential and home care providers would be retained.

Retaining segment reporting avoids a possible loss of transparency of individual

provider’s financial performance data. This data is collected by the Department for

modelling, trend analysis and reporting by the Department and the Aged Care

Financing Authority (ACFA).

Key considerations:

Alternative option 2 continues to recognise that there are transparency in reporting

issues that impact the Department’s ability to appropriately regulate and monitor risks

to the Guarantee Scheme. However, under this alternative approach there would be

no change to the current reporting obligations for providers.

Additional education activities could be undertaken to develop all provider’s

understanding of their reporting obligations; making clear the reasons for requiring

clear and concise reporting. For example, the Department could provide additional

communication through a separate GPFR guide (similar to the APCS guide) that

clearly outlines reporting expectations.

There may be opportunity to increase transparency and disclosure in reporting by

carrying forward some of the other options proposed by EY (or their alternatives).

Due to the implementation of the Guarantee Scheme levy, if the risks of provider

default are not appropriately managed, all providers will share in the costs of the

default.


Retain current Approved Provider reporting requirements, but increase the quality of

current reporting through targeted education of current and future reporting obligations

(if other recommendations are carried forward) of Providers.

- 21 -


* This is equivalent to what is required by financiers when lending against real property. Where a borrower is

more highly geared, a financier will require them to take out insurance to secure the balance of the value of the

property. Lenders place a large emphasis on the LVR when assessing the amount being lent in order to ensure

there is adequate security in place to secure against thin capitalisation.

Noting that providers are ultimately responsible for the use, management and return to

residents of RADs, EY reported that there is a level of risk to the protection of those RADs

associated with the transfer of assets by a provider to related parties.

These assets may originate from the RADs paid by residents and be in the form of cash or

other current financial assets or property related assets.

Without disclosure of such transfers, the Department has no view of the function or use of

RADs and a limited or no ability to enquire about those uses in a timely manner. Similarly,

the Department has limited or no knowledge of the financial viability of the parties who

received those assets.

This results in an unmonitored risk to the Guarantee Scheme.

The A3 option was designed by EY to complement options A1 and A2 addressing

transparency in reporting. The option proposed that transfers between providers and related

entities who were sitting outside of the AP Group28, or in the case of an AP single entity,

outside their organisation, would be better protected where transfers were only allowable on

meeting certain conditions.

Note that in accordance with the legislated permitted uses of RADs (Fees and Payments Principles 2014), transfers of any provider assets are to be treated as loans.29

The requirement set out as part of the option included that a stipulated loan to valuation ratio

(LVR) be met. In this case the value of the loan must not exceed 80% of the value of the

underlying asset and that appropriate security, such as property be required.

28 Entities whose activities are not specific to aged care. 29 Section 63.

A3.

Where an Approved Provider wishes to transfer assets outside the Approved

Provider;

the loan to value ratio of the asset to the liabilities should not exceed 80% of

the value of the underlying asset;* and

the use must be secured by appropriate security, such as a mortgage (ranking

below bank secured debt).

- 22 -


Example A3.1

While related party loans can be made more secure and certain through an LVR and security,

a risk continues to exist where the transfer or loan is to be made by a provider to an entity or

trust structure operating outside the AP Group.

Example A3.2

The above example demonstrates that additional disclosures would still be required to satisfy

RAD use and security concerns.

Key considerations:

The permitted uses legislation makes clear that any loans of RAD monies by a

provider must be made on commercial terms. However these requirements are

expressed in general terms only and so varying interpretations can be applied. For

example, permitted uses do not expressly refer to transfers of assets other than RADs,

even though some assets may be purchased using cash sourced from RADs. In

essence the legislation is not as rigorous as it could be and permits low levels of

security against lending.

A provider’s investment options in relation to the use of RADs are governed by the

permitted uses to assist in the protection of RADs. However, once RAD funds are

A building purchased or built by the provider using RAD monies and used for

residential aged care is a permitted use of RADs i.e. capital expenditure (section 62 of

the Principles). However, the provider elected to hold ownership of the building and

property within a trust through a related party.

As the related party is not the approved provider and not bound by the same permitted

use or disclosure obligations, the Department has limited visibility if any, of the

functions or financial position of the related party and the assets contained within the

trust.

An approved provider operates as a single entity or an AP Group. The provider seeks

to transfer cash of $800,000 to a non-aged care related party.

In accordance with the permitted uses legislation, a transfer of this kind must be

treated as a loan and the conditions of the loan are required to be set out within a

written loan agreement.

The related party that is the recipient of the loan currently holds total assets of

$1 million cash. Under EY’s option, while the loan amount to the related party equals

80 per cent of their cash asset, the cash does not provide appropriate security for the

loan.

Without appropriate security such as mortgage (ranking below bank secured debt) that

is held outside the single entity or AP Group, the loan to the related party should not

be made.

- 23 -


transferred to related entities, the use of those funds and the available security is not

visible or verifiable.

Alternative option

Example A3.3


Strengthen the permitted uses legislation, such that transfers outside of the Approved

Provider or AP Group must;

be adequately secured by appropriate security, such as a mortgage (ranking

below bank secured debt);

have a clearly outlined loan agreement with repayment conditions clearly

stated;

be reported on clearly through the GPFR, including the purpose, terms and

obligations of transfer/loan; and

the GPFR including documentation relating to the transferor and transferee

must be made available to the Department if requested.

If the asset transferred is a physical asset, such as a building, there would be an

independent valuation of the asset and appropriate remuneration for the transfer. This

would be clearly outlined in the GPFR.

An approved provider seeks to make a transfer to a related party. The transfer must be

treated as a loan that is appropriately secured.

The provider and related party propose that the related party’s sole asset which is a

property fully owned by the related party and valued at $5 million is appropriate

security. The loan agreement must set out details of the property providing the security.

Under EY’s proposed 80 per cent LVR, the maximum loan value would be $4 million

calculated as:

($4 million loan ÷ $5 million property value) x 100 = 80% LVR.

As the LVR is not greater than 80 per cent the provider could make the loan and comply

with the proposed requirements provided the conditions and security were clearly set out

within a written loan agreement.

If the related party’s property (the security) was mortgaged to a financier, then the value

used in the LVR calculation should not exceed the related party’s equity or realisable

value they currently hold in that property. Where the property has a lower realisable

value, the loan amount should be adjusted downwards accordingly.

Where the related party’s property asset has a realisable value of $2 million:

$2 million x 80 per cent LVR = $1.6 million maximum loan value.

Where the underlying asset used to support the approved provider’s loan was not

property but a higher risk form of asset, for example securities, the LVR should be lower

than for property (proposed 80%) to reflect that higher risk. A reduced loan amount

against that higher risk asset class may also be appropriate in order to lower the

potential impact on the provider, should the loan default.

- 24 -


Key considerations:

Like A3, this alternative option recognises the need for the permitted uses legislation

to contemplate an appropriate mortgage backed security for transferred assets, but

unlike A3 allows the risk level of the underlying asset to determine or influence the

LVR.

The provider would be required to detail the security provided in the notes to the

financial statements of their audited GPFR.

The provider would also be required to outline the specific use of the assets once

transferred to the related party, including repayment periods.

If a provider chooses not to adhere to this, they would be required to give detailed

advice to the Department and seek an exemption.

Exceptions would be determined on a case by case basis. Providers who do not report

the information required would also be subject to more scrutiny under the

Department’s risk profiling.

The introduction of additional disclosure requirements of the transferor (the provider)

to capture and provide information about the related parties holding transferred assets.

Issue: Need to Redefine the Liquidity Standard. Options B1, B2 and B3

*For example, 10 per cent of RAD monies held by the provider or the amount RADs refunded by the provider in

the preceding 3 months.

EY indicated in their report that the Liquidity Standard currently puts the onus and risk of

determining an appropriate level of liquidity on the individual Providers.

EY also found that the Standard lacked robustness and an underlying quantitative and

qualitative methodology to support the liquidity requirements. While the APSC guidelines

outline the acceptable forms of liquidity and what should be considered within a provider’s

liquidity management strategy30, a defined minimum level of liquidity is not expressed within

the Standard.

Key considerations:

Recent data shows that a significant majority of providers already have a minimum

liquidity level equal to or greater than 10% of their RADs.

Providers who do not maintain a level of 10 per cent or more, such as some smaller

providers, may have some difficulty reaching and maintaining that prescribed level of

liquidity.

If a 10 per cent limit was imposed, comments are sought on whether there should be

any exceptions. Suggestions for exceptions have included;

30 Refer Part 3 - Additional supporting technical information.

B.1

Set a liquidity threshold as a defined percentage of Accommodation Payment

money held by the Approved Provider (or AP Group), such as the higher of 10%;*

where an AP is a single site, single facility operation with a smaller Accommodation

Payment pool and low resident turnover - a higher threshold.

- 25 -


o an exception for the first 12 months of a provider’s operation as the first round

of RADs are sometimes used31 to pay off constructions debt; or

o exceptions for a limited time on the grounds that the provider is investing in

an expansion of aged care.

Liquidity rates could be monitored through the APCS and GPFR similar to the current

process with appropriate guidance material made available.

An amended Liquidity Standard could encompass clear advice about the minimum

requirements for a provider’s Liquidity Management Strategy (LMS) including;

o a framework for identifying and monitoring the risks or concerns a provider

may have about their current or future liquidity profile, as well as planning

and systems that assist to rectify any problems;

o the supporting governance arrangements and clearly defined responsibilities;

o the amount of liquidity required expressed in dollars;

o the form in which that the liquid funds are held; and

o an authorised policy and procedure for notifying the Department when there

have been significant changes to the provider’s LMS, including where the

provider was not able to maintain the minimum level of liquidity and the

contributing factors.

Key considerations:

The alternative offered here is that all providers would adhere to the same level of

minimum liquidity rather the potentially discretionary levels for specified groups or

types of providers as outlined in the EY recommendation.

This alternative maintains all the key considerations outlined under the EY

recommendations in implementation planning.

In order to mitigate the impacts of implementing a minimum liquidity threshold, the threshold

requirement could be phased in over time. This recommendation considers two options for

phasing in a threshold over an appropriate timeframe.

Key considerations:

Analysis of financial data submitted by providers through their 2016-17 GPFRs,

shows that the majority of providers already hold a ten percent or greater level of

31 Including by smaller providers and those operating in regional and remote areas.

B2.

Phase in the liquidity threshold over a 5-10 year period. For example, require 5%

within 5 years; 7.5% within 7.5 years and 10% within 10 years.

B1. Alternative option 1

Require providers to adhere to a minimum level of liquidity of no less than 10 per cent of

RAD monies held by the provider at any point in time.

- 26 -


liquidity. Only 23 percent of providers32 would be impacted by the implementation

of a minimum level of liquidity – at the ten per cent level.

Key considerations:

This alternative approach advocates for a reduced period for phasing in a threshold.

Seventy seven per cent of providers were assessed as having adequate Liquid Assets

to achieve a minimum ten percent liquidity level in 2016-17. If those levels were

maintained those provides would not be adversely impacted by a 10 per cent

threshold.

The following table shows analysis of the 2016-17 provider GPFRs in respect of the

number not currently meeting a ten per cent threshold (based on initial APCS33

reports). The table shows that for the period, 23 per cent of providers had less than the

proposed ten per percent level. Alternative periods for phasing in a ten per cent level

are also shown relative to the current levels with additional time permitted for those

furthest from the minimum.

Table B2.1

Liquidity ranges:

less than 10%

liquidity

Amount of providers

currently in that

range

Period of time

(recommended

phase in - years)

Period of time

(alternative phase in

- years)

7.5-10% 6.7% 5 2

5.7.5% 8.2% 7.5 4

0-5% 8.2% 10 6

77 percent of providers reporting having adequate liquid assets to achieve a minimum 10

percent liquidity threshold in 2016-17. On that basis, and where maintained, they would

not be adversely impacted by the implementation of this requirement.

Key considerations:

This option seeks to legislate a definition of liquidity assets.

32 Approximately 200 providers. 33 Based on 869 provider reports.

B3.

Define the form of liquidity as real liquid or accessible funds being a combination of

unpledged/unencumbered cash in the bank; a bank facility (such as an overdraft or

line of credit) or money that can otherwise be accessed immediately.

B2. Alternative option 1

Phase in the threshold over a 3 to 6 year period. For example, require a minimum of 5%

within 2 years; 7.5% within 4 years and 10% within 6 years.

- 27 -


The Department’s expectations of acceptable forms of liquidity are currently described

within the APCS guidelines34. However this is general advice only; as such there are

no requirements for specific types of liquid assets.

It is expected that most providers already adhere to what would likely be determined

to be acceptable forms of liquidity.

If implemented, the impact on most of the sector is likely to be minimal.

An amended Standard could outline what would be excluded as liquid holdings such

as intangible assets.

Letters of comfort (assurances from the provider) do not provide a form of liquidity

suitable to meet the Liquidity Standard.

Issue: Introduce a Capital Adequacy Requirement. Options C1, C2

Under current legislation there is no requirement for providers to maintain a minimum level

of capital adequacy. EY proposed that requiring providers to maintain a minimum level of

capital will further strengthen the financial viability of the residential aged care sector.

This will ensure that providers are adequately capitalised and with access to sufficient liquid

funds to repay RADs when they fall due as well as ensuring a level of viability.

Sufficient capital also provides additional financial reserves to better support providers in the

event of a loss.

Key considerations:

Capital adequacy is an essential business requirement that enables providers to meet

their financial commitments as and when required.

Adequate capital reserves provide the ability to withstand a level of losses.

Achieving a capital adequacy of 20% equity on the balance sheet will be a significant

requirement for some providers.

The possible risks of implementing a capital adequacy requirement include;

o stalling construction activities; and

o curbing investment activity for smaller providers.

The Department would potentially consider whether special consideration would need

to be given to certain categories of providers,35 including a lower level of capital

adequacy or a longer timeframe to in which to achieve a prescribed level.

Analysis of provider 2016-17 GPFR financial data suggests implementing a capital

adequacy requirement would initially impact approximately 36 percent of providers36.

34 Including cash, bank bills, standby lines of credit, and Deeds of cross guarantee. 35 For example, not-for-profit, CALD and community based providers. 36 The amount that currently hold less than the 20% level.

C1.

Introduce a capital adequacy metric, such as 20% equity on the balance sheet.

- 28 -


The Department is continuing to further assess the type and quality of capital currently

held across the sector.

This recommendation could include requiring providers to develop a Capital

Management Strategy (CMS).

Annual reporting of compliance with a minimum capital adequacy levels could occur

through the APCS.

Where a provider’s capital adequacy was at a lower level than the required minimum,

additional reporting may be required.

If this proposal were implemented from 1 July 2020 (for example), a minimum level of 2.5

per cent of capital adequacy could be required of providers with rising levels phased in over

an extended period as follows.

Table C1.1

Equity levels Timeframe for achievement

2.5% 3 years

5% 5 years

12.5% 10 years

20% 15 years

There are no rules outlining the quality and composition of a provider’s balance sheet and no

measures protecting against the risks of thin capitalisation.

Thin capitalisation occurs where the level of debt exceeds the level of equity within an

organisation, creating a higher level of financial risk. This can arise from the fact that the

organisation’s growth has been financed through borrowing (loans) rather than equity. This

creates an obligation to make loan repayments and to pay interest.

Prescribing what can be considered as an acceptable form of capital to meet adequacy

requirements can mitigate against this risk.

Key considerations:

The quality of capital could be defined to include tangible assets such as cash, cash

equivalents, land and buildings, ASX listed investments37.

Comments are sought on whether (if the proposal is implemented) consideration be

given to whether different rules should apply to certain categories of providers (not-

for-profit, CALD and community based providers) on the level of capital adequacy, or

a longer timeframe to achieve prescribed levels of capital.

Comments are also sought on whether consideration be given to whether the

calculation of assets should exclude intangible assets or if intangible assets are to be

37 Possibly limit this to where a tradeable market exists and liquidation of the amount invested is highly likely.

C2.

Define quality of capital to include tangible assets such as land and buildings; and

intangible assets which are able to be valued and only in instance where the value is

significantly discounted and can only count for a portion of the total value of capital

adequacy.

- 29 -


included, whether certain intangibles such as bed licences only be permitted at a

discounted rate.

Issue: Enhance Disclosures to the Department. Options D1, D2 and D3

EY’s study found that information required by the Department is often delayed, which

reduces their ability to be more proactive in regulating provider compliance with prudential

requirements.

Under S9(1) of the Act a provider must notify the Secretary within 28 days of a change of

circumstances that materially affects the provider’s suitability to be a provider of aged care38.

Key considerations:

Shortening the length of time for notifications ensures that the Department becomes

aware of changes that significantly affect a provider sooner.

This could allow the Department to take action or verify the circumstances of reported

changes in order to ensure that a provider is not in breach of their prudential

obligations.

It would be valuable to obtain information relating to a provider’s corporate structure

(as outlined in option A1) or financial viability (as outlined in option AA1 below) as

soon as it occurs.

Issue

There is a gap between what applicants must disclose to become an Approved Provider

(provider) and what they are required to report under the prudential requirements. Currently

there is no requirement for providers to notify the Department of changes that don’t materially

impact their suitability.39

However some provider changes, such as changes in ownership or control may impact on

provider suitability.

38 See excerpts from legislation. 39 See excerpts from legislation.

D1.

Amend section 9(1) of the Act to require notification as soon as it happens and in no

event more than 14 days after it happens.

D2.

Require the prior consent of the Department to be given to material changes in the

legal ownership or control of an Approved Provider.

- 30 -


Key considerations:

The Department is interested in obtaining information relating to material changes in

the legal ownership or control of a provider. However, proposal A1 (where adopted)

sets out that providers would be required to report their corporate structures, including

identity of ultimate (beneficial) shareholders and any significant changes to their

ownership or control. If A1 were adopted, proposal D2 may not be required.

*Australian Prudential Standard 330 – Public Disclosure.

APS 330 is a prudential standard applicable to locally incorporated authorised deposit-taking institutions (ADIs).

It is designed to meet minimum requirements for the public disclosure of information on its capital, risk

exposures, remuneration practices and, where applicable, its leverage ratio, liquidity coverage ratios. See APRA

Standard - Public disclosure

The EY Report identified deficiencies in the Disclosure Standard which impact on the

Department’s ability to obtain information and to assess provider compliance with prudential

requirements. EY recommended amending this standard to require the adoption by providers

of an industry standard on public disclosure.

Key considerations:

Enhancing the Standard to require providers to report by exception (when a change

occurs) or quarterly.

This would be a shift to more recent and meaningful reporting rather than a historical

record of a provider’s compliance40

This approach will ensure that reporting is proactive and offers continuous disclosure

of a provider’s financial performance, viability and compliance.

This will bring the Department’s compliance oversight function into line with other

regulatory bodies.

40 Reports are received up to four months after a provider’s financial year, commonly 31 October 2018.

D3.

Enhanced Disclosure Standard: Require approved providers to adopt an industry

standard on disclosure such as APS330*. Approved providers would be obligated to

disclose the following to the Department:

i. Changes in corporate structure.

ii. Significant related party transactions which are required to be reported in

the GPFR.

iii. Cash flow in accordance with the Accounting Standards to show the financial

position of the approved provider (currently reported annually).

iv. Compliance with the Liquidity Standard (including any period of non-

compliance and how it was rectified) note: also currently required within the

Annual Prudential Compliance Statement).

v. Compliance with a capital adequacy metric (including any period of non-

compliance and how it was rectified).

https://www.apra.gov.au/sites/default/files/Final%2520revised%2520APS%2520330%2520Public%2520Disclosure%2520-%25201%2520July%25202018.pdf

https://www.apra.gov.au/sites/default/files/Final%2520revised%2520APS%2520330%2520Public%2520Disclosure%2520-%25201%2520July%25202018.pdf

- 31 -


Significant related party transactions and cash flow (EY option D3 numbers ii and iii) have

been excluded from this alternative approach as providers already report on these items

annually through the GPFR in accordance with the Accounting Standards.

Key considerations:

This approach only requires reporting on changes to organisation structure, liquidity

and capital adequacy metrics on an exception basis, that is, on occasions when change

occurs or the provider falls below the minimum requirement.

In relation to continuous disclosure (as discussed by EY), the Department’s ability to

react to potential non-compliance issues in a timely manner depends both on accurate

reporting by providers and their compliance with the requirements of continuous

disclosure.

Some providers may not disclose because they have not adequately monitored the

proposed liquidity or capital adequacy metrics.

A phased introduction to the required level of the new metrics should mean that many

providers would only have a minimal amount of additional reporting.

Requiring providers to report as and when the change to their corporate structures

occurs is already a component of the proposed implementation approach of option A1.

Requiring providers to report when they drop below the prescribed liquidity and

capital adequacy thresholds are a component of the proposed implementation

approach of EY options as set out as B and C above.

Key considerations:

An alternative to continuous or exception reporting might be ‘regular’ reporting for all

providers, for example reporting quarterly against key items or metrics such as those

above. This would permit providers to assess their compliance with prudential

obligations at that point in time.

D3. Alternative option 1

Limit disclosure to i), iv) and v) above and only require reporting by exception (as and

when a change occurs)

D3. Alternative option 2

Limit disclosure to i), iv) and v) of above at a specified period of time, such as quarterly.

- 32 -


Issue: Independent Auditor. Option E1

Issue: Strengthen Governance Requirements. Option F1, G1.

The current Governance Standard does not limit the scope of a provider’s governance system

but nor does it reflect a view of organisational governance beyond matters directly related to

RADs.

Currently the Standard only stipulates that providers receiving RADs must;

document, implement and maintain a governance system;

have an investment management strategy; and

keep them both up to date.

The Standard’s current narrow focus also means that the Department cannot be assured that a

provider (or even the wider sector generally) has adopted, at the Board/Directorship level,

other important aspects of contemporary organisational governance; including its practices

and scope of oversight.

Key considerations

There are a number of non-aged care specific regulators such as those pointed to by

EY including the Australian Securities Investment Commission (ASIC), Australian

Prudential Regulatory Authority (APRA), Australian Stock Exchange (ASX) and the

F1.

Develop the Governance Standard – Introduce Part 1 Corporate Governance.

Develop the Governance Standard to adopt generally accepted corporate

governance principles (such as those adopted by ASIC, APRA, ASX and the ACNC).

This includes (leveraging ASX corporate governance principles 3rd ed.):

Lay foundations for the management and oversight of the organisation.

To act ethically and responsibility.

Safe guard reporting.

Prepare a code of conduct for “key personnel” to improve industry practices

to operate in accordance with recipients of care’s best interests.

Impose an obligation for Approved Providers to produce a corporate governance

statement which describes the extent to which they have complied with the code of

practice and principles.

E1.

Retain requirement for an independent auditor to sign off the APSC.

Please note: This proposal was adopted by government in 2017 and is no longer a

consideration.

- 33 -


Australian Charities and Not-for-Profits Commission (ACNC) who address matters

related to corporate governance.

Desktop research indicates that ASIC41 provide a more generic form of guidance

materials compared to either APRA42 or the ASX. The guidance on corporate

governance for these regulators centres more on the financial sector and in the case of

the ASX, for listed companies.43

The ACNC44 administers governance standards for not for-profit and charitable

organisations and has developed a set of high level generic governance standards with

which those organisations must comply.45

It is likely that many providers currently have some form of governance policies and

documentation in place. The Department could consider leveraging existing

governance documentation from providers with effective practices, in order to provide

a guide or minimum standard requirement across the aged care residential sector.

At a minimum, building on the recommendation by EY, the governance functions and

requirements to be articulated within a revised Governance Standard could require

providers to;

o lay the foundations for the management and oversight of the organisation by

making clear disclosures about;

the respective roles and responsibilities of its Board/directors and

management;

the matters expressly reserved to the Board/directors and those to

management;

o act ethically and responsibly in terms of financial management;

by implementing a code of conduct for directors, senior executives and

employees which align with the best financial interests of care

recipients;

disclosing that code;

o safe guard integrity in reporting;

by having processes in place for the independent verification of the

integrity its corporate and other reporting requirements;

o make timely and balanced disclosures;

have documented policies for complying with disclosure requirements;

and

o recognise and manage risks by having processes in place for overseeing the

management of risks through a risk management framework.

The Standard could also be expanded to include a broader definition of corporate

governance such as that included within the ASX corporate governance principles. For

41 Topics include managing conflicts, Director over-sight of financials and audit, emerging risk management,

culture. This site also links to additional sources of information including the Australian Institute of Company

Directors, Governance Institute of Australia, Financial Services Council and the Australian Council of

Superannuation Investors. ASIC regulatory resources 42 APRA maintain ‘Prudential Standard CPS 510 – Governance; for APRA regulated entities. 43ASX Corporate Governance Council: Corporate Governance Principles 44 ACNC is an independent national regulator of charities. 45 ACNC Governance Standards

https://asic.gov.au/regulatory-resources/financial-services/

https://www.asx.com.au/documents/asx-compliance/cg_principles_recommendations_with_2010_amendments.pdf

https://www.acnc.gov.au/for-charities/manage-your-charity/governance-standards

- 34 -


example, ‘corporate governance describes the framework of rules, relationships,

systems and processes within and by which authority is exercised and controlled

within organisations’.46

Organisational culture is often influenced from the top down. Requiring a director or

equivalent to attest to compliance with reporting requirements, including prudential

compliance, instead of ‘key personnel’ may provide further assurance that the provider

is keenly undertaking their governance responsibilities.

Strengthened governance requirements might result in new or additional frameworks

of rules, relationships, systems and processes. Provider’s may not be required to verify

to the Department their compliance with new requirements, where that compliance can

monitored as part of activity managed within the Single Quality Framework or an

independent registered auditor.

As for F1, the current Governance Standard sets out only minimum requirements for

providers in receipt of RADs. These requirements do not adequately address the financial

practices of providers or the management of risks.

EY made suggestions for the minimum requirements of a financial risk management

framework, including;

the need to adopt a systematic approach to managing risks;

an obligation for providers to identify their financial risks and how they will mitigate

them; and

the development of the necessary risk controls, risk reporting and disclosure

obligations that would support the provider’s Investment Management Strategy;47

including, financial management plans and strategies that support any minimum

liquidity and capital adequacy levels (as set out above).

Key considerations:

It is likely that many providers currently have some form of risk management system

in place though some may not.

To guide development of a minimum requirement, the Department could consider

leveraging off;

o effective risk systems currently in use among providers;

o the risk systems and approaches promoted or mandated by other regulators.

The financial risk management framework should link to other financial management

documentation related to liquidity, capital adequacy and investment etc.

Encouraging all providers to adhere to sound financial practices are in the best interest

of the sector in terms of securing against triggers of the Guarantee Scheme.

46 As for 33.

47 While there is a current requirement for providers to assess their ability to refund deposits (while maintaining

current investment activity), as written, the Standard is insufficient to ensure providers take a broader and

systematic approach to all financial risk management. Financial controls, reporting and disclosure matters are not

currently specified including within s50 – Requirement for an investment management strategy.

G1.

Incorporate a financial risk management standard into the Governance Standard.

- 35 -


As for option F1, provider’s may not be required to verify to the Department their

compliance with new requirements, where that compliance can monitored as part of

activity managed within the Single Quality Framework or an independent registered

auditor.

Issue: Enhance Disclosures to the Resident / Family. Option H

Section 57 of the Disclosure Standard does not include an obligation for providers to disclose

to recipients of care and their families how;

RADs will be held or used by the provider;

when RADs will be refunded; or

how residents will rank in the event of financial insolvency.

Key considerations:

Sections 57 and 58 of the Disclosure Standard sets out a provider’s obligations to

residents and prospective residents to disclose information and documents either

within seven days of entering into an accommodation agreement, or within seven days

of a request by a resident.

If the EY option were adopted, the Department could work with the sector to develop

templates that will satisfy additional disclosure in terms of how RADs will be held and

used.

This disclosure could be provided and explained in plain English; it would be an

addition to the current requirement to provide copies of the APCS and GPFR.

Explaining how RAD money would be held and used may empower residents and

their families through imparting knowledge that relates directly to the financial

practices and actions of their provider. It may ensure that they are aware of the impact

of provider financial insolvency and the potential impact on RADs.

In addition to this, disclosure could include a component of proposal F1, such as the

Code of Conduct of providers with respect to financial management.

Issue: Limit or phase out discretionary trusts. Options I1, I2

The Department needs assurance that providers are financially viable. That is, adequately

capitalised and with access to sufficient liquid funds to repay RAD money when due.

H1.

Require Approved Providers to disclose to recipients of care and their families

how Accommodation Payment money will be held, when it will be refunded and

how recipients of care rank on a winding up of an Approved Provider.

I1 and 12

Limit or phase out discretionary trusts

- 36 -


There is limited transparency and disclosure of financial practices of providers who have

trusts in their structure or those who operate their services through trusts. These structures can

be opaque in terms of what assets they hold, who the beneficiaries are and for what purpose

the funds are used.

EY proposed (I1 and I2) that no new discretionary trusts be permitted within an aged care

provider’s operating or corporate structures (single entity or AP Group) and that those

existing discretionary trusts be progressively phased out of use over a ten year period.

The limited transparency of discretionary trusts and disclosure of their use, significantly

impacts the Department’s ability to determine whether the provider has sufficient funds to

satisfy their prudential requirements. Similarly, the use of discretionary trusts may make it

difficult to satisfy concerns regarding a provider’s financially viability.

Limiting or phasing out discretionary trusts could assist in embedding the principles of

protecting the residents, providers and the Government from further calls on the Guarantee

Scheme.

Key considerations:

This issue affects providers who operate from trust structures (registered as trustee

companies) as well as those operating as proprietary companies who have one or more

trusts within (linked to) their corporate structure. As with other corporate structures

with complex arrangements, it can be difficult to follow related party transactions

where trusts are employed.

As with all related party transfers, the use of trusts diminishes the transparency of a

provider’s financial practises and thereby limits the regulatory capability of the

Department, specifically in relation to gaining insights about provider’s financial

viability.

EY proposed that where unit trusts are currently included in the corporate structure,

there be minimum levels of paid up unit funds and/or subordinated loans in the unit

trust and that the unit trust has access to the assets in the unit trust.48

The Department recognises that limiting or phasing out discretionary trusts, including

discretionary trusts could result in disruption to the sector, and discourage new

entrants to the sector or result in existing providers exiting the sector.

Limiting or phasing out discretionary trusts would impact existing structures as they

would be required to transfer assets out of such structures. This may trigger

unwarranted taxation consequences.

Key considerations:

In recognition that the implementation of EY’s option I, could result in a significant

impact on parts of the sector, this alternative option does not require that a

discretionary trust or trusts be removed from a provider’s corporate structure.

Providers would report on all transfers to and from trusts or related entities, including

cash and assets (this proposal has similarities to proposal A3. Alternative option 1).

48 EY review. Recommendations page 10.

I. Alternative option 1

Retain discretionary trusts but improve transparency of all trusts and transfers to/from

them through additional reporting requirements

- 37 -


Key considerations:

This alternative option aims to limit the risks of the use of trusts by providers by

limiting the level of transfers of assets or investments into related trusts. For example,

related party trusts could be restricted to holding a fixed proportion or percentage of

the provider’s assets.

The Department would potentially consider whether special consideration would need

to be given to varying such a fixed percentage of provider assets held in related parties

for certain categories.

Your consultation feedback may also include your views on this option including an

appropriate percentage of provider assets that could be held within related party trusts

or other entities.

This option would assist mitigate the risk of the separation of provider assets from

liabilities.

Issue: Compliance with New Liquidity and Capital Adequacy

Requirements. Option J1

*EY noted that there may be limits to how much equity can be injected via subordinated debt under tax

legislation.

EY option J1 is an extension of the authority to take action for non-compliance in respect of

their earlier options B and C. (mandated levels of liquidity and capital adequacy).

Providers who do not meet the minimum level of liquidity will have 90 days to rectify their

position, or be required to make up the shortfall. They could do so by injecting additional

capital or by entering into a subordinated loan with shareholders.

Key considerations:

In order to mitigate any unintended consequences (outlined under proposals B and C),

liquidity and capital adequacy thresholds could be phased in over time.

J1.

If the approved provider’s capital or liquidity falls below the liquidity or capital

adequacy thresholds;

require the approved provider to make up the shortfall; such as by injecting

additional capital or by entering into a subordinated loan with

shareholders;* and

restrict the charging of new Accommodation Payments until the capital

metric is liquidity threshold is achieved.

I. Alternative option 2

Retain discretionary trusts but restrict the level of transfers to all related trusts

(including discretionary) or other entities.

- 38 -


Additional analysis of the sector could determine if different categories of providers

should adhere to different thresholds.

As with all compliance matters, under this option the Department’s foremost

regulatory aim is to work with providers to return them to (prudential) compliance.

It is recognised that any restrictions on the charging of new (RADs) would need to be

balanced with a providers attempt to return to compliance. A provider wilfully

disregarding compliance requirements could have their ability to charge new RADs

restricted. In such an event other compliance action could also be considered.

Issue: Assessment of Financial Viability. Options AA1, AA2 and AA3

The prudential requirements are predominantly concerned with the provider’s ability to repay

RADs. However, the Department’s authority to undertake action in instances where there are

concerns about a provider’s viability are limited. This proposal seeks to address that gap.

Ideally, having assessed a significant risk or risks to a provider’s financial viability, the

Department could take steps to mitigate triggers of the Scheme and to protect resident RADs.

Key considerations:

The current prudential legislation was introduced in 2006. At that time it did not

sufficiently contemplate;

o the current complexity of providers corporate structures;

o that there would be significant movements of RADs (within corporate groups

or financial institutions for investment or loan purposes); and

o that enhanced provider and RAD disclosures may be required.

There is a risk to both the Commonwealth and the sector of future triggers of the

Scheme. In part this results from the Department’s limited ability to undertake action

or investigation based on financial viability concerns arising in respect of some

providers.

AA1.

Assessment of financial viability.

Create legislative authority to support the assessment of the financial viability of

approved providers:

Allow independent review by the Commonwealth of provider’s current

financial information (audited and unaudited).

Allow the Department to require the provision of current financial

information where there are concerns of a provider’s financial viability when

warranted.

Allow the Department to require the provision of relevant supporting

information including current financial reports for the provider and / or

related entities where there are concerns relating to a provider’s financial

viability, prudential compliance including the permitted uses.

- 39 -


The Department currently addresses this gap by assessing a provider’s financial

viability through a financial risk profiling model developed in-house which is

modified on an annual basis.

This risk profiling model is used by the Department to identify those providers

considered most at risk of non-compliance with the prudential requirements and most

likely to be unable to refund RADs when they fall due.

The current model is reliant on insufficient and inadequate data to allow a robust risk

assessment to be undertaken. This is due in part to the fact that the data is historical

(from the previous financial year) and the Department has limited authority to request

up to date financial information based solely on financial concerns.

The effectiveness of the Department’s ability to mitigate insolvency risk can be

enhanced by requiring providers to;

o make available financial information as and when there are concerns about

viability;

o make available the financial information of related entities as and when there

are concerns about viability and or suspected non-compliance with the

Prudential Standards; and

o pro-actively bring relevant matters to the attention of the Department.

This proposal also recognises that providers are often aware when they are beginning

to experience financial viability concerns or high levels of viability risk. However, the

existing legislation does not require a provider to notify the Department when this

becomes evident to them.

This proposal includes a requirement for providers to inform the Secretary of the

Department49 of concerns relating to financial viability (option AA2).

Under the Corporations Act 2001, a differential reporting framework applies in respect of

entities reporting via the use of general purpose financial statements (GPFRs). This includes

approved providers of residential aged care.

The framework comprises two tiers of requirements:

Tier 1: Australian Accounting Standards; and

Tier 2: Australian Accounting Standards – reduced disclosure requirements (RDRs).

Tier 1 level reporting incorporates International Financial Reporting Standards (IFRSs) and

includes requirements that are specific to Australian entities.

49 Under Section 9(1) of the Aged Care Act 1997.

AA3.

Support the migration of all providers to Tier 1 financial reporting

AA2.

Require Approved Providers to inform the Secretary (under Section 9(1) of the Act)

of concerns relating to financial viability

- 40 -


Tier 2 level reporting comprises the recognition, measurement and presentation requirements

of Tier 1 but with substantially reduced disclosures corresponding to those requirements.50

The Australian Accounting Standard 1053 (AASB 1053) sets out a schema for determining

whether entities are required to report at either the Tier 1 or Tier 2 level with ‘public

accountability’ being a determining criteria.

Table AA3.1 SECTOR51

For-profit Not for-profit For-profit and not for-

profit

Tier 1

Full IFRS as

adopted in Australia

Publicly

accountable

All not for-profit

private sector

entities have a

choice of applying

Tier 1 or Tier 2

requirements

Commonwealth.

State/Territory and local

Governments and

general government

sector

Tier 2

Reduced Disclosure

Regime (entities

may choose to apply

Tier 1)

Non publicly

accountable

Entities other than Tier 1

entities noted above

Table AA3.2

DEFINITIONS52

General purpose

financial

statements

These are statements intended to meet the needs of users who are not in

a position to require an entity to prepare reports tailored to their

particular information needs.

Public

accountability

Accountability to those existing and potential resource providers and

others external to the entity who make economic decisions but are not in

a position to demand reports tailored to meet their particular information

needs. A for-profit private sector entity has public accountability if:

a. its debt or equity instruments are traded in a public market or it is in

the process of issuing such instruments for trading in a public market (a

domestic or foreign stock exchange or an over-the-counter market,

including local and regional markets); or

b. it holds assets in a fiduciary capacity for a broad group of outsiders as

one of its primary businesses. This is typically the case for banks, credit

unions, insurance companies, securities brokers/dealers, mutual funds

and investment banks.

Reporting entity

An entity in respect of which it is reasonable to expect the existence of

users who rely on the entity’s general purpose financial statements for

information that will be useful to them for making and evaluating

50 AASB 1053 Application of Tiers of Australian Accounting Standards, CPA, 2010. AASB 1053 Tiers of

Australian Accounting Standards, CPA 2010 Fact sheet 51 Reproduced from AASB 1053. 52 Reproduced from AASB 1053.

https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/ifrs-factsheets/factsheet-aasb1053-tiers-of-australian-accounting-standards.pdf?la=en

https://www.cpaaustralia.com.au/~/media/corporate/allfiles/document/professional-resources/ifrs-factsheets/factsheet-aasb1053-tiers-of-australian-accounting-standards.pdf?la=en

- 41 -


DEFINITIONS52

decisions about the allocation of resources. A reporting entity can be a

single entity or a group comprising a parent and all of its subsidiaries.

As defined by AASB 1053, almost all aged care approved providers are not publicly

accountable and therefore may elect, but are not required to report at Tier 1 level. The

application of public accountability means that it impacts only on some listed for-profit

entities.

Currently, all other residential aged care providers are categorised or have elected to be

categorised as Tier 2 reporting entities.

As a result of the reduced disclosure requirements (RDRs) for Tier 2 entities, a range of

amendments to 31 other AASB standards have been set out within AASB 2010-253. These

amendments indicate the matters for which disclosure in reporting can be reduced. Some of

the RDRs may not be readily applicable to aged care businesses but others, including those

dealing with reduced disclosure of transfers to related parties could be.

Compared to Tier 1 reporting, the RDRs applying to Tier 2 result in a loss of transparency of

the financial practices and transactions of providers, for the Department. The lack of visibility

of provider financial activities increases the risks posed to the Guarantee Scheme.

If the risks of provider default are not appropriately managed, all providers will share in the

costs of the default.

AASB 1053 Standard explicitly recognises the role of the regulator in determining an

appropriate Tier of reporting for the entities it regulates54. In the aged care context, the

Department of Health is a regulator of financial reporting requirements and could therefore

specify the level of reporting it requires.

Key considerations:

The Department would undertake further work to determine whether special

consideration or exceptions would be given to a Tier 1 reporting requirement. For

instance, providers who do not have related party dealings may not be required to

deliver that level of reporting.

Requiring some or all providers to report at a Tier 1 reporting level would allow:

o Transparent reporting on provider corporate structures and inter-party

transactions.

o Better transparency of provider’s businesses and how they are using RADs.

o A strengthening of the Department’s tools, resources and capability in order to

improve its compliance monitoring.

The complexities of financial activities undertaken by some providers, together with the risks

that may exist and the impact of the lack of information presented through Tier 2 financial

disclosures, can be illustrated with reference to the following example.

In the first chart (reproduced from option A1 above), the relationships of a provider with its

related entities are depicted. Below the chart are descriptions of those financial relationships

with a brief assessment of key financial metrics. The assessment highlights the gaps in

information provided to the Department that potentially pose risks to the Guarantee Scheme.

53 Australian Accounting Standards Board: Amendments to Australian Accounting Standards arising from

Reduced Disclosure Requirements, AASB 2010-2, June 2010 54 AASB 1053 Application of Tiers of Australian Accounting Standards, CPA, 2010.

- 42 -


Example AA3.1

Provider A operates a residential care business through a unit trust structure - Unit

Trust trading as Aged Care Facility X. Two separate Trustee companies hold fixed and

floating charges over the provider’s future assets and undertakings.

Two further related parties including another unit trust and a service company receive

payments from Provider A as well as receiving and providing loans to Provider A.

The related party unit trust B owns the aged care buildings from which Provider A

operates. The mortgage for this property is held by one of the above Trustee

companies.

Provider A distributes profits to unidentified unit holders.

More than half the provider’s assets are goodwill. On face value, the recoverability of

this amount in full cannot be verified as there is no supporting information to explain

what this relates to.

The provider’s asset levels (current assets) are inadequate to repay its current RAD

liability balances.

The investment in related party loans has increased by more than 40 per cent each year

over recent years and now represents one quarter of total assets. The value of this

investment is questionable as the Department receives no information on the related

parties, their net asset position and their investments.

Holds fixed and

floating charges

over existing and

future assets and

undertakings

Trustee

Company Pty

Ltd

Unit Trust

trading as

Aged Care Facility

X

(Provider A)

Related Party

Service

Company

Trustee

Company

Pty Ltd

Related Party

Unit Trust

(B)

(Owns aged care building)

Family Unit Trust

Unknown

connection

Holds fixed and floating charges over existing and future assets and undertakings

Service fees paid Holds

mortgage

over

property

Interest received on loan

Related party loan advance

Annual rent payment

Annual profit

distributed to unit

holders

Annual profit

distributed to unit

holders

- 43 -


If the provider was to go into administration / insolvency, the secured bank loans

would be repaid from the cash balance leaving inadequate funds for the repayment of

unsecured debts.

The equity level / net assets have not increased over the past few years with all profits

being paid out to unit holders annually. The details of the unitholders are unknown.

Unusual and unknown reported arrangements of fixed and floating charges on the Unit

Trust trading as Aged Care Facility X both assets and its future undertakings, presents

a risk to the repayment of the RAD liabilities.

Permitted use compliance for related party loans (the loaned funds are assumed to be

RAD funds) is unknown because no details about the loan are provided.

managing prudential risk in residential aged care

Documents