As COVID-19 exposes serious failings in aged care, critics have blasted the system for failing to keep tabs on how federal funding gets spent.
On a recent episode of the ABC’s Q+A program, shadow assistant minister for aged care, Ged Kearney, told viewers the sector suffered from a lack of financial transparency.
“People may not know that, across the whole aged care sector, about $20 billion of federal funding goes into that sector without proper accountability or transparency for it. They don’t have to acquit for where that money goes,” she said.
Do aged care operators not have to account for how they spend their taxpayer funding?
RMIT ABC Fact Check investigates.
Ms Kearney’s claim is overreach.
The Commonwealth spends about $20 billion a year on the “whole aged care sector”, almost all of it going to three programs: basic support at home; complex services at home; and full-time residential care in nursing homes.
Residential care accounts for about $13 billion a year, or two-thirds of the total. Most of the rest is split between the two home-based programs.
In the case of residential care, experts told Fact Check that service providers were only required to report high-level information about how they spend their taxpayer subsidies. This reporting is above all focused on financial outcomes and viability.
In practice, providers can report vastly different levels of detail, and they are not required to show spending on individual facilities, let alone spending on individual residents.
However, the experts said there was some accountability.
Residential care providers must report annually to the government, with non-government operators required to include an additional, independently audited financial statement. This statement must be given to residents or their representatives if requested.
When it comes to complex care at home, providers must submit annual financial reports to the government detailing various categories of expenditure. They are also required to give consumers a monthly statement showing what services they have been charged for.
Finally, there is basic support at home, where consumers pay for services as they go. These providers report regularly to the government on the services they deliver and must return any unspent government grants.
Context of the claim
Ms Kearney made her comments in response to a question about the aged care workforce, and in the context of deadly COVID-19 outbreaks tearing through Victoria’s nursing homes.
After the audience heard stories from families of residents in St Basil’s Home for the Aged, a not-for-profit facility run by the Greek Orthodox Church, Ms Kearney said the sector had a culture problem where “you really have to question the goal” of “organisations that are run for profit”.
This, she said, was “just part of a broader systemic failure that the whole system is facing”, and claimed there was a lack of financial accountability and transparency “across the whole aged-care sector”.
Ms Kearney then returned to the families of St Basil’s, adding: “The public has a right to know, those families have a right to know, that every cent of public funding goes to care. And we don’t know that.”
While Ms Kearney did speak about privately operated residential care facilities, her claim about accountability and transparency was about the whole system, and the whole aged care sector.
What is ‘the whole aged care sector’?
As Fact Check has previously explained, aged care covers a variety of services offered by public, private and not-for-profit entities.
The federal government subsidises services through three main programs:
- The Commonwealth Home Support Program, for basic services at home;
- Home Care Packages, for people living at home with more complex needs;
- Residential aged care, for 24-hour care in dedicated facilities
The sector isn’t wholly funded by the government, with seniors also contributing to the cost of their care.
It’s also worth noting that aged care providers do not exclusively run subsidised facilities. They may also operate retirement villages, for example, which do not attract government funding.
Does the sector receive $20 billion in federal funding?
Ms Kearney said the sector received around $20 billion from the federal government.
Indeed, the government’s latest budget papers show it planned to spend roughly $20 billion across all types of aged care in 2019-20.
Data from the Aged Care Financial Authority, a statutory committee that provides advice on funding the sector, shows that in 2018-19 residential care picked up roughly 65 per cent ($13 billion) of total federal funding.
A more detailed breakdown of funding can be found in the Productivity Commission’s Report on government Services.
Is there accountability?
Ms Kearney claimed that “they don’t have to acquit for where that money goes”, which Fact Check takes to be referring to non-government care providers.
As for acquitting the money, the Australian National Audit Office has described the term “acquittal” to mean:
“Evidence provided by recipients to demonstrate grant funds have been expended in accordance with the terms and conditions of the funding agreement.”
In other words, what constitutes an acquittal depends on the agreement in question. But, broadly speaking, it can be taken to mean reporting on how funds are spent.
The three aged care types have different reporting requirements.
The home support program
Ms Kearney referred to accountability across the entire sector, which includes the Commonwealth Home Support Program.
Offering basic care services, providers receive federal funds in the form of grants, which subsidise the cost of each service as consumers access them.
The government’s manual for the program explains that grants must be spent on prescribed service types, with providers expected to lodge a “financial acquittal report” each October.
Any unspent money must be returned to the Department of Health.
As part of their “day-to-day reporting”, the department explains, providers must also “report each session of service delivered to a care recipient or carer” using a dedicated online reporting platform.
Home care and residential care
For people with more complex needs, funding for home care packages and residential care is allocated to a specific person and calculated based on the level of individual care required.
The money is then paid to the provider, which spends it on their behalf.
Hal Swerissen, La Trobe University emeritus professor and a visiting fellow at the Grattan Institute, told Fact Check that while home care providers had to spend their taxpayer funding on the specific person to whom it was originally allocated, this was not the case for residential care providers, who could “move the money around” once they received it.
Home care reporting
Home care recipients receive monthly statements showing every service they have been charged by the provider.
This statement must include: “an itemised list of the care and services provided to the care recipient during the month and the total amount paid or payable in relation to each kind of care or service”.
It also includes administrative fees paid by the care recipient, although the October 2019 interim report of the Royal Commission into Aged Care Quality and Safety highlighted a lack of transparency in how these fees were calculated.
“The Accountability Principles 2014, made under Section 96-1 of the Aged Care Act 1997, require approved providers to submit a financial report in a form approved by the Secretary of the Department of Health.”
A spokesman for the department told Fact Check there were “no other sector wide requirements” for reporting financial information.
Lodged annually, the reports contain separate figures for several categories of income and expenditure.
Expenditure covers spending on care staff, non-care staff, administration costs, care related costs (for medications etc.) and subcontracted services, among other things.
However, the financing authority has warned that the information reported varies between providers due to differing interpretations of accounting standards, noting that “a significant portion of data submitted … has not been independently verified”.
Its latest report highlights problems with incomplete data and discrepancies in providers’ home care statements, including instances where expenses were rolled into other categories or “not disclosed in their entirety”.
Residential care reporting
Residential care providers are also subject to the above legislated reporting rules.
The details collected by the department differ somewhat, covering, for example: expenditure on care (staffing, contract staffing, and other care); residential accommodation (staffing, rent and property maintenance); and several subcategories of administration, catering and cleaning costs.
In addition, non-government facility operators must submit a “general purpose financial report” to the health department.
The department says this report must be independently audited in accordance with the Australian Accounting Standards and include:
“A statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows, and notes, comprising a summary of significant accounting policies and other explanatory information”.
Providers do not have to report for individual facilities, it said, meaning they can submit one report “covering all of [their] residential aged care services and all [their] other activities”.
Upon request, providers must give a copy of their latest general purpose report to current or prospective residents, or their representative, as per the government’s accountability principles.
While some organisations must lodge their reports with the Australian Securities and Investments Commission (ASIC) or the Australian Charities and Not-for-profits Register (ACNC), this requirement is not specific to aged care operators.
Notably, the Australian Accounting Standards allow not-for-profits and non publicly-listed companies to avail themselves of “substantially reduced disclosure requirements” when preparing their general purpose statements.
In June 2020, South Australian Centre Alliance senator Stirling Griff introduced a bill to the Senate that would amend the Corporations Act 2001 to force residential aged care providers to include “detailed financial information in their annual financial statements”.
Fact Check has excluded prudential reports from its analysis, as these relate to consumer bonds and deposits rather than federal subsidies.
Is there transparency?
Ms Kearney also spoke of a lack of “transparency” around how taxpayers’ money was spent, which Fact Check takes to mean reporting to the general public.
According to a 2017 review of residential aged care by Kate Carnell and Ron Paterson, the current regulatory scheme “collects a large volume of information” but what gets published “tend[s] to be high-level process data”.
The health department provides the financing authority with data collected from the providers’ financial reports, with identifying information removed.
But according to the authority’s latest annual report, the “vast majority” of the information it gets is at the provider level.
It said that since “many providers have services in multiple locations, [the authority] is constrained in its ability to analyse performance at facility or service level”.
The foreword to the royal commission’s interim report said the aged care system “lacks transparency in communication, reporting and accountability”.
Later, referring to residential care providers, it noted that the financing authority only publishes aggregated data for each “market segment level”, according to size, location and whether for-profit or not-for-profit.
The report then states emphatically: “There is no public information on the way [residential care] providers use taxpayers’ funds and individuals’ contributions to deliver aged care services.”
Swerissen said that while home care package providers were obliged to give recipients “an individual, hour by hour costing” of services, “nothing like that” existed in residential care facilities.
According to the explanatory memorandum of Senator Griff’s bill, his proposed legislation would require providers to publicly “disclose their income, their spend on food and medication, the amount spent on staff and staff training, accommodation, administration, and how much they pay out to their parent bodies”.
In a submission to a Senate review of the bill, the Australian Medical Association said it supported introducing a requirement for itemised reporting “across a matrix of services” to show, for example, “funding per resident that goes to covering the cost of nursing staff, care workers, food, accommodation, and administration”.
Similarly, Joseph Ibrahim, head of Monash University’s Health Law and Ageing Research Unit, told Fact Check that more transparency was needed to show taxpayers what they get for their money, and to show residents how much is allocated and ultimately spent on their care. Ideally, he said, this would be provided as a personalised report.
In Parliament on August 26, Minister for Aged Care Richard Colbeck acknowledged that”financial accountability is a very, very important element of where we go with the aged care sector post the royal commission” and said the government would address “financial disclosure issues” as part of its response to the commission.
What the experts say
Experts told Fact Check there was some accountability for the money given to aged care providers, but in the case of residential care, it was insufficiently detailed, and hardly transparent.
David Hayward, emeritus professor of public policy with RMIT, told Fact Check “there is oversight, and there is an acquittal” of residential care funding.
But, speaking about the 10 largest residential care providers, he said: “You go to the [publicly available] company reports and you can’t get the level of information you would assume you’d get to be able to work out where the money is going. It’s too high level.”
Hayward explained that the nature of the system made it impossible to know where every taxpayer dollar was spent, “because there’s a mixture of private money and public money going into those providers”.
Kathy Eagar, director of the University of Wollongong’s Australian Health Services Research Institute, told Fact Check: “[Providers] do report expenditure, but they don’t actually report it at a level that allows for any level of accountability.”
“What they have to do is report on their expenditure according to these big chunks,” she said.
“But they don’t actually have money that is quarantined to care.”
Swerissen said there was a level of acquittal that covered spending on staffing, for example, but said “[t]he care that is actually provided (number of hours etc) is not directly acquitted by the Commonwealth”.
“The claim that agencies don’t have to acquit where the money goes is therefore partially true,” he said.
Swerissen explained that the annual reports were focused on financial outcomes, meaning they were not about “having to demonstrate exactly what [the provider] spent the money on” but about the financial viability of each business and the sector as a whole.
Indeed, in its submission to a 2018 Senate inquiry into the tax practices of the sector, the health department said it used the reports to undertake a risk analysis to identify “any issues of financial concern with the provider which may affect their ability to continue to operate and repay accommodation deposits”.
- Ged Kearney, Q&A, August 3, 2020
- Fact Check: Is aged care a federal responsibility?, August 15, 2020
- ACFA, Eight report on the funding and financing of the aged care sector, July 2020
- ACFA, Update on funding and financing issues in the residential aged care industry, 2019
- Productivity Commission, Report on government services 2020: Aged care, January 23, 2020
- Federal budget, Paper No. 1, 2019-20
- Federal Budget, Economic and fiscal update, July 2020
- ANAO, The Administration of Grants … in Small to Medium Organisations, November 2002
- Department of Finance, Commonwealth Grants Rules and Guidelines, December 23, 2019
- Department of Health, The Commonwealth Home Support Program, accessed August 2020
- Department of Health, CHSP program manual, June 2020
- My Aged Care, Aged care homes, accessed August 2020
- My Aged Care, Your guide to Home Care Package services, July 1, 2019
- Department of Health, The aged care funding instrument, accessed August 2020
- Department of Health, Aged care assessment programs, accessed August 2020
- Aged Care Act 1997 (Cwth)
- Accountability Principles 2014 (Cwth)
- User Rights Principles 2014 (Cwth)
- AASB, Application of Tiers of Australian Accounting Standards (AASB 1053), June 2010
- ACNC, Charity size (financial reporting obligations), accessed August 2020
- Department of Health, Aged care report (ACFR), Definitions and guide, accessed August 2020
- Ron Paterson & Kate Carnell, Review of the national aged care quality regulatory processes, October 2017
- Royal Commission into Aged Care Quality and Safety, Interim report, October 31, 2019
- Royal Commission into Aged Care Quality and Safety, Consultation paper 2: financing aged care, June 24, 2020
- Parliament, Aged Care Legislation Amendment (Financial Transparency) Bill 2020, accessed August 24, 2020
- AMA, Submission to committee inquiry on the Financial Transparency Bill 2020, July 29, 2020
- Richard Colbeck, Senate Hansard, August 24, 2020
- Senate standing committee on economics, Report: Financial and tax practices of for-profit aged care providers, November 27, 2018
- CICTAR, Caring for growth: Australia’s largest non-profit aged care operators, July 2020
- Tax Justice Network, Tax avoidance by for-profit aged care operators, May 2018