Sumalo Pty Ltd and Minister for Aged Care
[2001] AATA 245
•27 March 2001
DECISION AND REASONS FOR DECISION [2001] AATA 245
ADMINISTRATIVE APPEALS TRIBUNAL ) Nos N2000/123
) N2000/237
GENERAL ADMINISTRATIVE DIVISION )
Re SUMALO PTY LIMITED
Applicant
And MINISTER FOR AGED CARE
Respondent
DECISION
Tribunal The Hon Mr R N J Purvis, QC, Deputy President
Date27 March 2001
PlaceSydney
Decision The decisions under review are affirmed.
[sgn]R N J Purvis
Deputy President
CATCHWORDS
Health and Family Services – validation investigations – departmental audit of financial affairs – nursing home proprietor's claims care aggregated module costs – worker's compensation expenditure – payroll tax – long service and superannuation costs – pharmaceutical expenses – director of nursing – performing clerical duties
National Health Act 1953, ss 40AA(7), 46D(1)
Financial Arrangements Principles 1989
REASONS FOR DECISION
The Hon Mr R N J Purvis, QC, Deputy President
THE APPLICATIONS
There are presently before the Tribunal two applications made on behalf of Sumalo Pty Limited ("the Applicant"). By agreement of the parties they have been heard together, the evidence in the one, where relevant and appropriate being taken as evidence in the other.
The applications relate to the financial affairs of a nursing home, the Ardee Nursing Home under which name the Applicant conducts its affairs, such affairs being at all relevant times directed and managed by a Mr V John.
The financial affairs of the Applicant were the subject of validation investigations conducted by officers of the Department of Health and Family Services. This validation procedure entails a departmental audit process which checks a nursing home proprietor's claims care aggregated module costs, relating to costs of nursing and personal care staff in providing nursing and personal care to residents, and other reimbursed expenditure covering workers' compensation and payroll tax for all staff and long service and superannuation for nursing and personal care staff.
The audit process is conducted in order to ensure that such claims are accurate and that any funding advance is spent in accord with the Nursing Home's Financial Arrangements Principles 1989 formulated under subsection 40AA(7) of the National Health Act 1953 ("the Act").
THE VALIDATIONSConsequent upon validations, two decisions the subject of the current applications were made by the delegate of the Respondent, namely:
(1)the decision made on 11 November 1999, affirming a decision of 29 April 1999 made by the delegate of the Secretary of the Department of Health and Aged Care under subsection 46D(1) of the Act, determining a notional scale of fees in respect of the Home for the accounting period 1996-97 (application No N2000/123); and
(2)the decision made on 19 October 1999, affirming two decisions made on 18 June 1998 and 24 March 1999 by the delegate of the Secretary of the Department of health and Aged Care under subsection 46d(1) of the Act, determining notional scales of fees in respect of the Home for the accounting periods 1994-95 and 1995-96 respectively (application No 237).
Implicit in a determination of the above rentioned notional scale of fees was an acceptance by the delegate of alterations and adjustments made to the Applicant's claims for reimbursement but subject to the result of the audit process. As relevant to the present applications, the audit process raised a number of claims which were and are said to be inaccurate of ill-founded. Whilst various issues in relation to some of the accounting periods were not the subject of specific findings by the delegate, the Respondent accepts that the Tribunal is competent to deal with any matter or issue relevant to the decisions under review.
The claims identified by the parties at the hearing before the Tribunal as being now in issue are:
(1) Payroll Tax
the Respondent maintains that the claim in respect of payroll tax was not in accord with the Principles and a relevant circular. More particularly
whether by disallowing the amounts of $629 and $3,052 for the 1991-92 and 1992-93 accounting periods in respect of payroll tax, the correct and preferable decisions in accordance with Principle 19 of the Nursing Homes Financial Arrangements Principles 1989 ("the Principles") were reached;.
whether by disallowing the amounts of $520, $1,447 and $3,006 in respect of the 1993-94, 1994-95 and 1995-96 accounting periods in respect of payroll tax, the correct and preferable decisions in accordance with Principle 19 were reached;
whether by disallowing the amount of $8,153 in respect of payroll tax for the 1996-97 accounting period, the correct and preferable decision in accordance with Principle 19 was made; and
:
(2)Annual Leave
Nursing and personal care staff were claimed to have been paid salary whilst on annual leave.
The Respondent maintains that pursuant to the Principles, these claims should be disregarded.
(3) Workers' Compensation:
An amount of $10,000 claimed in respect of accrued cost of insurance and $1,705 discrepancy between the amount claimed on account of pharmaceutical and medical supplies, and the profit and loss statement entry were both disallowed.
(4) Director of Nursing Performing Clerical Duties:
The Director of Nursing carried out functions other than those prescribed by the Principles as claimable care aggregated module costs, being day to day clerical type functions.
At the time of the applications for review being lodged and indeed at earlier times other matters were in dispute between the parties. However, the above are the areas of difference now to be resolved. Accordingly it is not necessary for this decision that the structure of the National Health Act 1953, the Aged Care Act 1997 or the Nursing Home Funding Scheme be detailed. Suffice to say that the scheme entails the payment to nursing home proprietors of advances of Commonwealth benefit under the legislation on the expectation that amounts of benefit to which a proprietor is entitled will be established. Changes have occurred over the years in the manner of calculating the entitlements. The validation procedure could result in an overpayment or underpayment of care benefit and was primarily conducted to ascertain the actual nursing and personal care expenditure of the nursing home in order to determine the notional scale of fees. The latter covers different care classifications of nursing home patients.
The Tribunal accepts that the determination of the notional scale of fees must be in accordance with the Financial Arrangements Principles 1989 formulated under the National Health Act 1953 which principles detail how nursing and personal care costs of a nursing home are to be dealt with inter alia for determining the above components.
The Principles make provision for adjustments entailing recovery or payment of amounts relating to earlier years to be included in a later notional scale of fees.
In aid of applying the Principles, or amendments to them, to particular situations the Commonwealth Department of Health, Housing and Community Services has from time to time issued circulars. The circulars are not statutory instruments and are not binding on the delegate or the Tribunal. However, they should be persuasive and of assistance in clarifying the application of a Principle.
THE HEARINGAt the hearing of these applicantions the Applicant was represented by Mr V John, and the Respondent by Mr Andras Markus, an authorised officer of the Australian Government Solicitor.
Documents lodged with the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 were received into evidence and marked T1–T24 and ST1–ST4 in proceedings N2000/123, and T1–T34 in proceedings N2000/237. The following written material was tendered on behalf of the Respondent and marked as exhibits.
Exhibit No Description
A Letter from Ardee Nursing Home to Administrative Appeals Tribunal dated 14 February 2000
One Agreement dated 14/7/1994 between Sumalo Pty Limited T/A Ardee Nursing Home and Malti Devi Prasad
Two Agreement dated 14/7/1994 between Sumalo Pty Limited T/A Ardee Nursing Home and Malti Devi Prasad
No oral evidence was called on behalf of either party, the Tribunal being invited to give such weight as it deemed appropriate to the material placed before it.
THE ISSUES(1) Payroll Tax
The case as put on behalf of the Applicant with reference to payroll tax was detailed by Mr John as follows:
"…
I had a small number of people who provided services to the NH under a contractual basis. They were paid on a fortnightly basis in accordance with the amount included in their individual contracts. We sought clarification from the NSW Office of State Revenue regarding the payment of payroll tax for these people. They confirmed that payroll tax was payable and we therefore raised this issue with the Commonwealth Department of Health & Aged Care as substantial levels of payments had not been recognised in their funding. …
In short, the Department has not accepted our argument because the relevant contracts do not identify the amount of payroll tax to be paid separately. Given that payroll tax was not included in the contract cost, this omission is fair, reasonable and understandable. Why refer to a cost that is outside the contract provisions?
…" (T2.4)Relevant contracts with contractors expressly recited that the relationship between the parties was that of "contractors and not employer and employee". Nevertheless the NSW Office of State Revenue maintained that, under the "Payroll Tax legislation wages paid to contract workers …are subject to payroll tax".
Principle 2(1) provides, so far as here relevant:"… the part of the notional scale of fees that:
(a)relates to workers' compensation insurance, payroll tax, superannuation and long service leave; and
(b)is determined under Part 5;
…"
Principles 19(1) and 19(3) in Part 5 provide:
"19.(1) The Secretary shall determine the other cost reimbursed expenditure component, as it applies to payroll tax, for a nursing home for an accounting period by taking into account, at the relevant award rates, the actual expenditure incurred in respect of payroll tax for all staff of the nursing home, including contract staff, determined in accordance with subprinciples (2) and (3).
…
19.(3) For the purposes of subprinciple (1), the actual expenditure incurred in respect of payroll tax shall include payroll tax costs in relation to contract staff only where these costs are separately identified by the contractor."
The circular 93005 of the Commonwealth Department of Health, Housing and Community Services provides:
"Workers' compensation and payroll tax costs incurred by a nursing home in respect of contract staff …, will be reimbursed under OCRE where:
·the home's liability for workers' compensation and payroll tax in respect of the contract staff is clearly specified in the contract;
·the costs incurred on workers' compensation and payroll tax are separately identified in accounts sent to, and paid by, the nursing home. …
.the home retains all relevant documentation, including the contract and accounts, and makes these available for audit purposes." (T23)
It is apparent from the material tendered before the Tribunal that no one of the individual contractual agreements identified the amount of payroll tax to be paid nor who was to pay it. Again, contrary to the above mentioned circular, there was not a separate identification in contractual arrangements of any or all payroll tax liabilities for contract staff and there is not any evidence of a separate identification of this cost in accounts sent to and paid by the Applicant. The Applicant has not demonstrated an ability to comply with the requirements set out in the Principle and clarified by the circular. Further, there was not any evidence placed before the Tribunal so that it is possible to determine whether the designated payroll tax was paid and, if so, in what amount or amounts.
The decision referable to payroll tax is to be affirmed.(2) Annual Leave
In relation to annual leave, the Applicant maintains that:
"The Department has refused to accept annual leave payments made to nursing staff where those staff also worked during the period for which they were paid annual leave. We accept that this is in contravention of the Nursing Home & Nurses (State) Award but wish to reiterate that it was a situation beyond our control.
There can be no denying that the staff were entitled to annual leave at the time that they were paid. …
There are a number of factors that we would like to make in regard to this matter:1. The situation that occurred during the above years [1990-91, 1991-92, 1992-93] was a direct result of an inability to attract appropriate staff to work in the nursing home. The Nursing Home tried to attract replacement staff from a number of different sources including casual pool, agencies and direct advertisement. Unfortunately, no action was proven successful.
2. In one specific instance the Department has refused to accept wages paid to T. Odtojan who was the DDON during the years in question. In her case, she returned from annual leave due to the illness of S. paniker – the don. … In 90/91 and 91/92 this required T. Odtojan to be called back from annual leave. …
3. … the situation was not a common occurrence and that, where possible, we obtained other staff during annual leave ie-casual pool, agency staff etc.
…" (Exhibit A)The Respondent maintains that the combined effects of paragraph 7(1), 8(1) and 8(4) of the Principles and the provisions of the relevant award is to require that the costs of salaries, wages and allowances paid in excess and/or contrary to the relevant award rates be disregarded. So far as here relevant the Principles provide:
"7. (1) The basic nursing and personal care cost of an approved nursing home shall be the estimated cost, at the relevant award rates, of the salaries, wages and allowances paid for approved levels of nursing and personal care staff …
8. (1) In determining the estimated cost of salaries, wages and allowances for the purposes of principle 7, the Secretary shall take into account the estimated cost of replacing members of the nursing and personal care staff who are –
(a)on leave in accordance with the conditions of a relevant award, or by law; or
(b)on other leave which the Secretary determines in writing should be taken into account;
…
(4)In determining the estimated cost of salaries, wages and allowances for the purposes of principle 7, the Secretary shall disregard any salaries, wages and allowances which are paid to the extent to which they are in excess of the relevant award rates;
9. (1) In determining the basic nursing and personal care cost in accordance with principle 7, the Secretary shall disregard any cost which is unreasonable or excessive;
…(T20/14)
It is said on behalf of the Respondent that the payment of salary to a nursing and personal care staff member, whilst that staff member is on paid annual leave, is in contravention of the award and to be disregarded under the Principles. The Applicant, contends that it was unable to attract appropriate replacement staff, this leading to a need to make arrangements with staff members whilst they were on their annual leave. The Respondent, on the other hand, maintains that if annual leave was properly planned and rostered, there would have been no difficulty in obtaining appropriate relief staff but, even if this was not the case, payment of salaries, wages and allowances in excess and/or contrary to the relevant award rates was not authorised under the relevant Principles.
It is to be noted that the reference in Principle 8(4) to costs being disregarded payable to salaries in excess of relevant award rates refers to duties being performed consistent with award rates. The reference in Principle 9(1) to unreasonable or excessive costs being disallowed, likewise refers to costs incurred in respect of a staff member performing a particular task.
The Tribunal is satisfied that the cost incurred referrable to nursing and personal care staff engaged whilst on annual leave was not within the guidelines authorised under the relevant Principles and was not such as could be subject to appropriate reimbursement. The decision of the Respondent in relation to annual leave is to be affirmed.
(3) Workers' Compensation Payments, Pharmaceutical Expenses
The Applicant contends that adjustments made in respect of the 1987 and 1988 financial years on account of workers' compensation in the amount of $10,000 and on account of pharmaceutical expenses in the amount of $1075.00 were not warranted.
During the course of a validation exercise conducted on 19 February 1990 and reported on 14 March 1990, it was noted by an inspector that:"Minor insignificant errors were found with the exception of the following:
1.Workers Compensation
The accountant had correctly calculated workers compensation & general insurance on an accrual basis of $24,840, including $20,840 workers comp. (Refer F1).
Mr. B. Bell of O'Shea Bell Management P/L. incorrectly added on an estimate of $10,000 assuming that the same accrual that eventuated the previous year would occur in 87/88.
Workers compensation substantially reduced in 86/87 due to a new system used by the insurance companies using excess payments.
Therefore the total overclaim is $10,000.
2. Pharmaceutical & Medical Supplies
Cash Book + P&L A/c. $5,175
Nh19 $6,880
overclaim $1,705
Mr B Cheeko from the O'Shea Bell Management P/L advised that the previous years nh19 claim was incorrectly used.
It is considered that the above errors are not as a result of deliberate fraud.
It is therefore recommended that the total overclaim of $11,705 be deleted from the NH19." (ST3.24)
Notations made in the working papers of the validation inspector were to the effect that these adjustments were "advised" to Mr Bob Cheeko from the management company O'Shea Bell Management P/L and Mr John.
Mr John claims that the adjustments were notified to him only in 1995 and at a time when he had no records remaining referable to the relevant period. This claim is not consistent with the entries made in
March 1990 and is not accepted by the Tribunal. The notes made by the inspector were contemporaneous with the validation exercise and the reporting of Mr John and Mr Cecco. On the basis of the above reported entries, and there not being any evidence adduced to the contrary a the adjustments made should be maintained.
(4) Director of Nursing
The factual situation relevant to this aspect of the claimant's claim is not in dispute. As stated in the relevant validation report for the 1993-1994 year :
"DON Performing Clerical Functions
The duties performed by the Acting Director of Nursing Mrs Odtojan was reviewed at validation. In discussions with Mrs Odtojan the position of DON was responsible for the collection of resident's fees and banking of the resident's fees. Mrs Odtojan was advised that this function was not an accepted function she could perform as a DON's nursing home management duties.
… the basis of the adjustment was determined after our discussion with the Acting DON. Mrs Odtojan advised that as patients or relatives arrive at different times to pay the accommodation charges, it was not possible for her to advise how long she spent in providing this administrative function, however, it was agreed that a conservative estimate of 1.5 minutes per resident/relative to collect and prepare receipts and approximately half an hour for banking of resident's monies per fortnight. …
Please note that similar claims were made in the financial years 1988/89 to 1991/92, these having been allowed in those years per principles 26(2) and (4). However, for the financial years 1991/93 onwards the Nursing Home Financial Arrangements Principles 1989 were amended and such duties are no longer claimable." (T13)
It is contended on behalf of the Respondent that this issue is to be determined in the context of paragraph 2(g) of the Principles which paragraph describes the financial management duties of the Director of Nursing that are claimable care aggregated module costs. Paragraph 2(g) of the Principles provides that nursing and personal care with respect to staff duties and responsibilities includes:
"2. (1) …
(g)the undertaking, by the Director of Nursing, of nursing and personal care financial management to the extent necessary to manage allocated nursing and personal care funding, including –
(i)the development, maintenance and management of a nursing and personal care resources budget;
(ii) the management of the impact of admission policy on nursing and personal care budgeting;
(iii) nursing and personal care staff management;
(iiia) in relation to an accounting period commencing on or after 1 July 1995, contributing to the management of the nursing home budget to the extent required to achieve and promote nursing and personal care objectives;
but not including –
(iv) payroll preparation and associated duties;
(v) the preparation of accounting statements;
(vi) the preparation of statutory returns, such as financial information required by the Secretary, or information required in relation to taxation or workers' compensation; and
(vii) ordering supplies or arranging maintenance, other than in relation to pharmaceutical or medical supplies, and nursing and therapy equipment."
The above detailed duties, whilst including broad policy development and managerial responsibilities directly related to the delivery of nursing and personal care by nursing and personal care staff, do not relate to day-to-day clerical type functions. Indeed the preparation of accounting statements is specifically excluded.
On the basis of the evidence placed before the Tribunal, the work being performed by the Director of Nursing did not come within her responsibilities as prescribed in the relevant Principle. Accordingly the adjustment maintained by the Respondent is to be affirmed.
DECISION
In accord with the reasons earlier detailed, the adjustments referable to payroll tax, annual leave, workers' compensation and pharmaceutical expenses and Director of Nursing as made by the Respondent were proper in all the circumstances.
Accordingly the relevant decisions of the Respondent are affirmed.
I certify that the 17 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon RNJ Purvis, QC, Deputy President
Signed: .....................................................................................
AssociateDate/s of Hearing 9 March 2001
Date of Decision
Counsel for the Applicant Mr V John
Solicitor for the Respondent Mr Andras Markus
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