Why financial reporting is important and the link with good corporate governance
Approved providers recently completed the submission of their annual financial reports for the 2022–23, including the Aged Care Financial Report, the Quarterly Financial Report, Annual Prudential Compliance Statement, and General Purpose Financial Reports.
Why are these reports so important? Financial and prudential reporting ensures transparency in financial management. This includes providing insight into a provider’s management of refundable accommodation deposits. As the regulator of the sector, the Commission uses this information to assess provider stability and identify financial risk. The Commission works with providers to address these risks, ensuring viability and improving outcomes for older people.
The reports go beyond regulatory compliance. They offer a window into a provider’s financial health. Financial statements reveal profitability, liquidity, capital adequacy, solvency, and overall financial performance. More than just numbers, they narrate how resources were managed. Providers can also use these reports to evaluate strategies, operational efficiency, and the adequacy of their resources.
Financial reports also contribute to a culture of accountability within an organisation. Close scrutiny encourages prudent decisions in the best interests of all stakeholders. This culture of accountability, in turn, can help prevent poor decision-making, financial misconduct, and unethical behaviour. Ultimately this protects both the provider and people receiving care.
Financial reports serve as a basis for internal controls, risk management and adherence to compliance standards. Financial statements are a significant part of how providers demonstrate effective corporate governance. Proactive review of the statements and financial performance throughout the year can also enable informed business decisions and identify and mitigate risk.
Ultimately, financial statements aren’t just regulatory requirements. They empower organisations to review and mitigate their risk, stay transparent and remain accountable. Using financial statements as a tool for analysis and decision-making, helps chart a course for a financially healthy and sustainable future, and builds trust among stakeholders.
Until next time…
Peter Edwards
Executive Director, Financial and Prudential Regulation
