EXPLANATORY STATEMENT

Issued by the Authority of the Minister for Ageing

Aged Care Act 1997

Amendment to the Residential Care Subsidy Principles 1997

The Aged Care Act 1997 (‘the Act’) regulates the Australian Government’s role in supporting quality aged care in Australia. One function of the Act is to determine the rules under which parties that provide aged care may operate. These parties are described as being ‘approved providers’ under the Act. There are also rules that set out how approved providers must deal with persons receiving residential care, or approved to receive residential care. These persons are often described as ‘care recipients’ and ‘prospective care recipients’. One of the areas covered by the Act relates to the payment of residential care subsidies to approved providers in respect of the care they supply to care recipients.

Background – Principles made under the Aged Care Act 1997

Subsection 96-1(1) of the Act allows the Minister to make Principles providing for various matters required or permitted by a part or section of the Act.

Subsection 96-1(2) of the Act makes any Principles made under subsection 96-1(1) of the Act disallowable instruments.

The Residential Care Subsidy Principles 1997 (the Principles) are one of the sets of Principles made under the Act.  These Principles deal with eligibility for the residential care subsidy (a payment by the Australian Government to approved providers for providing residential care to care recipients).  The Principles detail the eligibility requirements for the subsidy including how it is paid and what amount is paid.

Context of the Residential Care Subsidy Amendment Principles 2005 (No. 4)

On 10 February 2005, the Residential Care Subsidy Amendment Principles 2005 (No. 1) were made.  These amendments required approved providers to comply with the following three conditions in order to remain eligible for a conditional adjustment payment (CAP):

(a)   encourage staff training and provide a notice each year to the Department of Health and Ageing (the Department) confirming that the provider has encouraged staff training at the residential care service;

(b)   prepare a financial report that complies with requirements set out in the Principles and have that report audited each year.  If requested, the provider must provide a copy of the most recent audited financial report to: a recipient of the service (or their representative); a person approved as a recipient of residential care (or their representative) who is considering receiving care through that service; and a person or agency authorised by the Department.  The provider must also provide a written notice each year to the Department confirming that they met the requirements for the previous financial year; and

(c)   participate in any aged care workforce census conducted by or on behalf of the Department.

The second of these eligibility requirements (requirements relating to financial reporting) takes effect from 1 November 2005.  In preparing for implementation of this requirement, the Department has continued to consult with approved providers and accounting firms on the operation of the Principles.  Through this process, opportunities have been identified for clarifying the Principles and assisting with the smooth and efficient delivery of appropriate transitional arrangements for approved providers.

These amending Principles therefore clarify the operation of arrangements in relation to the financial reporting requirement for the conditional adjustment payment and clarify the policy intent of government.

Details of the amendments are set out in the Attachment.

The Act specifies no conditions that need to be met before the power to make the Principles may be exercised.

The Principles are a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Consultation

The policy underpinning the amendments has been developed based on consultations with approved providers and accounting firms.  These consultations highlighted the need to clarify the operation of the transitional arrangements relating to the financial reporting requirements for the conditional adjustment payment to streamline processes and facilitate maximum compliance by approved providers.

ATTACHMENT

NOTES ON CLAUSES

Clause 1 provides that the amendments are to be cited as the Residential Care Subsidy Amendment Principles 2005 (No.4).

Clause 2 provides for the Principles to commence on 1 July 2005.

Clause 3 provides for Schedule 1 to amend the Residential Care Subsidy Principles 1997 (the Principles).

Schedule 1 – Amendment

Item [1]

This item replaces subsection 21.26B(3) with a new provision which clarifies that the Secretary has 28 business days within which to grant or refuse a determination under subsection (2), being a determination for an alternative financial period, relevant calendar year, relevant financial year or training period.  Any time during which the Secretary has requested information from the approved provider, and is awaiting receipt of such information, is not counted in the 28 business days.  “Business day” is defined in the dictionary of the Act as a day that is not a Saturday, Sunday or a public holiday in the place concerned.

Item [2]

This item amends the heading of section 21.26C from “Requirements for notices” to “Requirements for notices and applications for exemptions”.  This change reflects the fact that, as a result of the amendment detailed at Item 3, section 21.26C now not only applies to written notices but also applications for requests for exemption under subsection 21.26FA(1) or (2). 

Item [3]

This item amends section 21.26C to clarify that any applications for exemption (as well as any notices provided to the Secretary in accordance with subparagraphs 21.26E(2)(b) or 21.26F(2)(b)) must be in a form approved by the Secretary, include all the statements and information required by the form, must not contain false or misleading information and must be signed by a person who is one of the approved provider’s key personnel and is authorised by the approved provider to sign the notice.

Item [4]

This item replaces subsection 21.26F(1) and clarifies that the financial reporting requirements detailed in 21.26F do not commence until 1 November 2005.

Item [5]

This item replaces sub-subparagraph 21.26F(2)(a)(iii)(A) with a new sub-subparagraph that clarifies that the approved provider must obtain from an auditor (or alternative person authorised by the Secretary) an audit opinion that details whether the financial report is in accordance with the applicable accounting standards.  Previously the provision required that the audit opinion must include a statement to the effect that the audit was conducted in accordance with the accounting standards specified in the opinion.  This amendment clarifies that it is not the audit that must be conducted in accordance with the accounting standards but rather the auditor must confirm whether the financial report that he/she has audited is in accordance with the applicable accounting standards. 

Item [6]

This item substitutes 21.26F(3)(c) with a new paragraph that provides that the financial report must be in accordance with the applicable accounting standards as in force at the time the report was made, other than an exempted accounting standard.  This is a technical change  that is linked to the changes to the exemption arrangements set out in Item 10. 

Item [7]

This item substitutes paragraph 21.26F(3)(e) (excluding the note) with a new paragraph.  The previous paragraph provided, in essence, that the financial report must treat residential aged care as a reportable segment within the meaning of accounting standard AASB 114 “Segment Reporting” (unless an exemption has been granted by the Secretary).  This new subparagraph deletes the reference to AASB 114 and notes that the financial report must treat residential aged care as a reportable segment “within the meaning of the accounting standard relating to segment reporting that applies to the relevant financial year”.  The amendment clarifies that the approved provider should apply the standard that applies in the relevant financial year.

Item [8]

This item inserts a new subsection after 21.26F(3) to clarify that if the Secretary grants an exemption to an approved provider from one or more accounting standards in relation to a financial report then despite this exemption, the financial report is still deemed to be a general purpose financial report within the meaning of Statement of Accounting Concepts SAC 2 “Objective of General Purpose Financial Reporting”.

Item [9]

This item deletes subsections 21.26F (7), (8), (9) and (10).  These provisions related to the arrangements for exemptions from accounting standards and the requirement to treat residential aged care as a reportable segment.  These subsections have been deleted because they are replaced with different transitional arrangements as detailed in section 21.26FA (as described at Item 10). 

The amendment retains the definition of “entity” and also adds a new definition of “exempted accounting standards”.  This is so that the term “exempted accounting standards” can be used in the Principles instead of having to repeat the phrase “an accounting standard in relation to which the Secretary has granted an exemption to the approved provider under paragraph 21.26FA(1) or (2)”.

 Item [10]

This item inserts a new section 21.26FA describing the transitional arrangements for exemptions from the requirement to comply with all applicable accounting standards and the requirement to treat aged care as a reportable segment.

Since the introduction of the CAP requirements on 10 February 2005, the Department has continued to consult with approved providers and accounting firms.  Based on these consultations, the Department expects that a significant number of approved providers will not be able to comply with the financial reporting requirements (as set out in the Principles) for 2004-05 and will need to make use of the transitional arrangements, which are intended to allow time for approved providers to reorganise their financial reporting structures. 

To facilitate compliance with the Principles (in both the first year and subsequent years) and to reflect the reality of the current diversity of financial reporting by approved providers, these amendments to the Principles streamline the process for exemptions in the first year and clarify the government’s expectations for subsequent years.

Subsection 21.26FA(1) provides that for this first financial period, the Secretary will routinely grant exemptions from the requirement to comply with the accounting standards and the requirement to treat residential aged care as a reportable segment provided that the approved provider:

• has not prepared, for a previous relevant financial year, a financial report that  complies with the accounting standards or the requirement to treat residential aged care as a reportable segment;
• has given the Secretary a transitional plan setting out how the approved provider proposes to comply with the requirements in the following financial year.  The approved provider should also include a statement confirming that they have received a written opinion from an accountant confirming the approved provider’s capacity to comply with the transitional plan; and
• has not previously been granted an exemption under this subsection.

Subsection 21.26FA(2) provides that in subsequent years a more rigorous test will be applied.   Exemptions from one or more accounting standards and from the requirement to treat residential aged care as a reportable segment will not be routinely granted by the Secretary.  However, the Secretary may grant a further exemption if the approved provider continues to meet the requirements set out above and can also satisfy the Secretary that exceptional circumstances exist that would make compliance with the requirement an unreasonable burden for the approved provider.

Subsection 21.26FA(3) provides that the Secretary has 28 business days within which to grant or refuse the exemption.  Any time during which the Secretary has requested information from the approved provider and is awaiting receipt of such information is not counted in the 28 business days.  “Business day” is defined in the dictionary of the Act as a day that is not a Saturday, Sunday or a public holiday in the place concerned.

Subsection 21.26FA (4) provides that if the Secretary’s decision is to refuse to grant the exemption, the Secretary must also give the approved provider a written statement of the reasons for the decision.

Item [11]

This is a technical amendment related to the inclusion of section 21.26FA.  This confirms that a decision by the Secretary under subsection 21.26FA(1) or (2) (exemption from an accounting standard or the requirement to treat residential aged care as a reportable segment) is a reviewable decision under section 85-1 of the Act.