Prudential targeted review: Late lodgement of Annual Prudential Compliance Statement (APCS)

Insights report

Introduction

We do targeted reviews to help raise provider awareness of their financial and prudential responsibilities. The reviews help us to identify risks and improve provider compliance.

This targeted review focused on providers that often submitted their Annual Prudential Compliance Statement (APCS) late and didn’t comply with the Disclosure Standard.

Background

Providers of residential and flexible aged care that hold a refundable deposit, must comply with the prudential responsibilities in the:

Providers must provide information on their compliance with the prudential standards through the APCS, and submit their APCS on time, as part of their disclosure obligations.

We were keen to understand why providers weren’t complying with the Disclosure Standard. We also wanted to know if submitting the APCS late meant that providers weren’t complying with the Governance Standard.

We reviewed providers across Australia to understand why they weren’t complying with the Disclosure Standard and were regularly submitting their APCS late. We also wanted to understand if these providers were then also not complying with the Governance Standard. We did this review over January and February 2024.

Our findings

The providers we selected didn’t fully comply with the Disclosure Standard and Governance Standard.

With providers not compliant with the Disclosure Standard requirements, we found that they:

had submitted their APCS late in past years and didn’t disclose this in their current APCS
didn’t send disclosure letters, within 4 months of the financial year, to care recipients who paid a refundable deposit
didn’t include, in an annual disclosure cover letter and annual disclosure statement, that a person receiving care must get information they’ve asked for within 7 days of asking.

The Governance Standard requirements we found that providers hadn’t complied with during the review included that they:

had a weak governance system or didn’t have a written governance system
had a governance system that didn’t explain how they would record, detect and address not complying
didn’t include who the key staff were that are responsible for managing, monitoring and controlling the use of refundable deposits.

Common reasons providers hadn’t complied

The review found providers didn’t comply with the annual disclosure letter obligations because they:

didn’t know they had to send an annual disclosure letter and annual disclosure to people receiving care who paid a refundable deposit
didn’t know that they needed to send information people receiving care asked for within 7 days of receiving that request.

The review found providers didn’t comply with the Disclosure Standard and the Governance Standard because they:

had no allocated resources to document their governance system
didn’t know they needed to describe how they detect, report and record non-compliance in their governance system
didn’t keep a record, in their written governance system, of the key staff responsible for making sure the APCS was submitted on time
didn’t report submitting past years’ APCSs late and not complying because they didn’t have the knowledge or training
had no allocated staff to complete the APCS tasks, or lacked staff with suitable experience.

The review also found providers had:

gaps in communication in their organisation
had issues with their systems and didn’t have the right backup strategies
had gaps in their processes and procedures
didn’t have internal controls to track APCS reporting deadlines
relied on external auditors to complete the audit by the due date
left the APCS report until close to the due date, which gave them less time to sort out issues.

The review confirmed that not complying with the Disclosure Standard was linked to not complying with the Governance Standard.

We worked with each provider to help them understand their responsibilities. This included the changes they needed to make to their processes, policies and procedures to comply with the standards.

By the end of the review all providers understood their governance and disclosure obligations.

Things to consider

Do you prepare early and set aside time to make sure you can submit your APCS within 4 months of the end of the financial year?
Do you report if you have submitted past years’ APCSs late and not complied? Do you also report any time you, your independent auditor or the Commission said you didn’t comply in your current APCS?
Do you send disclosure letter statements to people receiving care who paid a refundable deposit within 4 months of the end of the financial year?
Do your annual disclosure letters and annual disclosure statements include that people receiving care must receive information they ask for within 7 days?
Do your processes and procedures follow the Disclosure Standard and the Governance Standard?
Do you have written documents showing that you comply with the Disclosure Standard and the Governance Standard?
Do you clearly explain the responsibilities of the key staff responsible for APCS reporting in your governance system?
Are your staff trained and do they understand their APCS reporting responsibilities?
Do you have a backup strategy for unplanned events, like your information system failing or key staff being unavailable?
Have you identified the key staff responsible for APCS reporting, and are their roles and responsibilities clearly explained? Do these key people know and understand their responsibilities?

Commission actions

Providing you with guidance and education on the Disclosure Standard and Governance Standard.
Doing more targeted reviews on the Prudential Disclosure Standard and Governance Standard to support you.
Using the information collected to improve our systems that identify risk.