Purpose of the bill
1.1
The Aged Care Legislation Amendment (Financial Transparency) Bill 2020 (bill) was introduced in the Senate on 12 June 2020 by Senator Stirling Griff.
1.2
The bill seeks to introduce additional financial reporting requirements for providers of residential aged care in Australia in receipt of Commonwealth funding, with the aim of increasing financial transparency in the sector.
Background
1.3
Under the Aged Care Act 1997 (Aged Care Act), subordinate legislation and contractual arrangements, all aged care providers in receipt of Government subsidies have compulsory annual financial reporting requirements:
all approved providers of residential aged care and home care are required to submit an annual Aged Care Financial Report (ACFR) to the Department of Health;
for non-government providers, their ACFR must also include an independently-audited General Purpose Financial Statement (GPFS) prepared in accordance with the Australian Accounting Standards; and
any approved providers which held refundable deposits, accommodation bonds and/or entry contributions during the year must also include an Annual Prudential Compliance Statement in their ACFR.
1.4
These financial reports and statements are not currently published by aged care providers or by the Australian Government however, under the Accountability Principles 2014, an approved provider must provide a copy of the most recent report to a care recipient or their representative on request.
What is measured in an ACFR
1.5
The ACFR requires providers to report on sources of funding, such as federal and state funding and resident contributions, and detail expenditure against specified categories. Expense categories in the ACFR include:
labour costs, including contract labour;
accommodation costs, including property maintenance, rent for buildings;
catering, cleaning and laundry services; and
administration costs, including capital and financing expenses.
1.6
The Department of Health recently introduced additional requirements for the 2020–21 ACFR to improve transparency and accountability in reporting and support work towards the proposed new Australian National Aged Care Classification funding model. These changes include:
detailed residential segment income and expense statements at the individual facility level;
enhanced approved provider reporting to bring the ACFR closer in line with information included in the provider's audited GPFS and to improve reporting around liquidity;
a consolidated parent-level segment report to capture data across a consolidated group of facilities; and
reconciliation of permitted uses of refundable deposits and accommodation bonds.
Accounting Standards
1.7
Australia’s accounting standards are set by an independent accounting body, the Australian Accounting Standards Board (AASB). Australian Accounting Standard AASB 1053 sets out two tiers for all entities preparing a GPFS:
Tier 1: Australian Accounting Standards; and
Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements.
1.8
Tier 1 reporting applies to any for-profit entities in the private sector that have public accountability as defined in the standard, and to Australian, state, territory and local governments. Tier 2's reduced disclosure requirements are designed to reduce the burden and the costs of preparing and auditing financial statements for all other entities needing to prepare a GPFS who are not otherwise required by a relevant regulator to produce a Tier 1 report.
1.9
All for-profit aged care providers listed on the ASX currently comply with Tier 1 requirements and the majority of other for-profit providers meet Tier 2. Not-for-profit aged care providers have a choice of which tier to report against and the majority choose to disclose under Tier 2.
Senate inquiry into financial transparency in Aged Care
1.10
In 2018, the Tax Justice Network Australia was commissioned by the Australian Nursing and Midwifery Federation to analyse possible tax avoidance by for-profit aged care companies. The findings of that report led to the Senate Economics References Committee conducting an inquiry into the financial and tax practices of for-profit aged care providers later that year.
1.11
A key theme raised by submitters to that inquiry was the lack of publicly available information about the financial reporting and tax affairs of aged care providers, and how this was linked to concerns about quality of care in residential aged care facilities.
1.12
In considering the evidence of that inquiry, the Senate Economics References Committee noted the considerable volume of financial information already provided to regulators by aged care providers and recommended that the Australian Government should investigate options to increase the public transparency of providers' financial information held by the Department of Health and explore ways to better share information about quality of care across the sector to assist consumers and their families.
1.13
That committee also recommended that the Royal Commission into Aged Care Quality and Safety (Royal Commission) consider the tax and financial structures of aged care providers as part of its deliberations.
Government response to the Royal Commission
1.14
The final report of the Royal Commission, titled Care, Dignity and Respect, was delivered on 26 February 2021 and considered matters relating to the current aged care system, proposals for a new aged care system, and a special report on the impact of COVD-19 on aged care. Of the 148 recommendations made in the final report, recommendations 130 through to 137 directly related to prudential regulation and financial oversight of aged care, and while several other recommendations related to improving transparency in the sector and the reporting requirements of providers.
1.15
The Australian Government announced its response to the recommendations of the Royal Commission on 11 May 2021, including $17.7 billion in additional investment in aged care and a five-pillar aged care reform plan to address matters relating to home care, residential aged care services and sustainability, residential aged care quality and safety, workforce, and governance.
1.16
The Department of Health has indicated that the government response to the Royal Commission's recommendations about transparency and reporting will be implemented over the next three years as part of this reform plan. Some key measures include:
a requirement that residential aged-care providers include information in the ACFR about how much they spend on daily living services (such as food, nutrition, linen and cleaning) in order to receive a new basic daily fee supplement of $10 per resident;
the introduction of residential aged care staffing minutes reporting, initially in the ACFR and then reported quarterly from July 2022; and
the introduction of a monthly care statement from providers to residents and their families, outlining the care received and any significant changes or events during that month.
1.17
The Department of Health is also reviewing legislation which currently precludes the public release of some information from aged care providers.
Provisions of the bill
1.18
The bill includes one Schedule amending two Acts: the Aged Care Act and the Corporations Act 2001 (Corporations Act).
1.19
Items 1 and 2 of the bill amend sections 9-2 and 96-10 of the Aged Care Act to introduce an obligation for aged care providers to provide an annual financial report for each of its aged care facilities to the Aged Care Quality and Safety Commissioner that is then made publically available. Item 1 also sets out several key financial areas to be included in these reports, such as costs of accommodation, salaries and wages for staff, operating costs, and payments to related bodies corporate.
1.20
Item 3 of the bill introduces a definition of 'financial transparency report' into Schedule 1 of the Aged Care Act.
1.21
Item 4 of the bill amends the Corporations Act to require all aged care providers in receipt of more than $10 million in Commonwealth funding to produce annual financial reports which comply with Tier 1 requirements of the Australian Accounting Standards.
1.22
Under Item 5 of the bill, the new requirements would apply for financial reporting from the commencement of the next financial year.
1.23
The Explanatory Memorandum does not outline any financial implications of the changes proposed in the bill.
Previous introduction of provisions
1.24
In December 2019, Parliament considered the Aged Care Legislation Amendment (New Commissioner Functions) Bill 2019, which transferred certain aged care regulatory functions of the Secretary of the Department of Health to the new Aged Care Quality and Safety Commissioner.
1.25
During the Senate's committee-of-the-whole consideration of that bill, Senator Stirling Griff proposed an amendment on behalf of Centre Alliance to amend the Aged Care Act to insert:
financial transparency reporting provisions nearly identical to Items 1 and 2 of the current bill; and
staff-to-care-recipient ratio reporting provisions.
1.26
That amendment to the Aged Care Legislation Amendment (New Commissioner Functions) Bill 2019 was not passed by the Senate.
1.27
In his second reading speech for the current bill, Senator Griff characterised that he had 'brought that amendment back and finessed it into this private senator's bill'.
Parallel introduction of the bill in the House of Representatives
1.28
On 19 October 2020, the Member for Mayo, Ms Rebekha Sharkie MP, introduced the Aged Care Legislation Amendment (Financial Transparency) Bill 2020 [No. 2] in the House of Representatives. This second bill was identical in form to the bill introduced in Senate and is not proceeding, as it was not called upon and therefore removed from the Notice Paper in accordance with the House of Representatives Standing Order 42.
Legislative scrutiny
1.29
Both the Senate Standing Committee for the Scrutiny of Bills and the Parliamentary Joint Committee on Human Rights considered the bill and neither committee raised any scrutiny concerns.
1.30
The Statement of Compatibility with Human Rights for the bill also notes that the bill does not raise any human rights issues.
Conduct of the inquiry
1.31
On 18 June 2020, the Senate referred the provisions of the bill to the committee for inquiry and report by 23 November 2020. The reporting date was then extended by the committee to 18 March 2021 and then 24 June 2021.
1.32
Details of the inquiry, including a link to the bill and associated documents, were placed on the committee's website. The committee wrote to relevant organisations inviting submissions to the inquiry by 31 July 2020 and inviting further and supplementary submissions by 30 April 2020. Submissions continued to be accepted after those dates.
1.33
The committee received 24 submissions and held a public hearing on 14 May 2021. Submitters and witnesses are listed at Appendices 1 and 2.
1.34
The committee thanks all who contributed to the inquiry.
Notes on references
1.35
References to the committee Hansard are to the proof transcript. Page numbers may vary between the proof and official Hansard transcript.