Why reporting obligations matter; building a more transparent sector.
In my last post I mentioned I would talk about what excellence in financial governance looks like. However, I thought it would be more timely to talk about quarterly financial reporting (QFR) as two deadlines have now passed for providers, and quarter 3 is due early May. I will talk about financial governance in a future post.
One of the observations of the Royal Commission into Aged Care Quality and Safety was the importance of up-to-date data and information from providers.
‘Prudential and financial risks occur in real time. This means that information relevant to these risks must be identified by the regulator in real time as well. Regular reporting – for example, on a monthly or quarterly basis - would provide the regulator with relevant information that could identify risks more promptly and before they pose a risk to the continuity of care to people receiving aged care services.’ (page 162 Final Report: Care Dignity and Respect Volume 1)
In response to the Royal Commission, the Government introduced obligations commencing in late 2022 that require providers to report a range of information to the Department of Health and Aged Care on a quarterly basis. The Commission is responsible for ensuring compliance with that obligation and uses the data and information reported to understand provider risk.
We know that this reporting obligation has been more challenging for some providers than for others. We are also aware that in some cases it has involved providers having to set up systems to capture data and information they previously did not collect. Although initially requiring an investment of time by providers, we consider that the collection of that information is ultimately beneficial for them, as it means they now have visibility of activities and expenditure patterns that are important to delivering high quality and safe care. It also means that the Department and the Commission are better able to assess provider risk, enabling us to better target our efforts and give greater regulatory attention to higher risk providers.
We recognise that the sector has been adapting to these new reporting obligations. We have taken this into account when deciding whether to use informal processes rather than formal compliance procedures where a provider has not submitted required information by the deadline. Now that 6 months have passed since this obligation was introduced, the tolerance around such delays has reduced; particularly given the reason the obligation was introduced was to improve transparency through regular and timely reporting by providers.
Overall, most providers have been compliant. For non-lodgement of quarter 1 reports, we took formal compliance action in 35 cases (34 home care providers & 1 multi-purpose service). This number was reduced for quarter 2 non-lodgement, with formal compliance action taken in 27 cases (26 home care providers & 1 residential aged care provider). This demonstrates that overall, the sector is doing a great job in actively putting processes in place to enable them to meet their reporting obligations. More details around QFR compliance will be published in an Insights Report in the coming months. In the meantime, to help manage governance around financial reporting obligations, we have developed an Aged Care Financial Reporting Calendar 2023 for providers to actively track and plan ahead.
Next time I want to discuss why liquidity matters and why it will, along with capital adequacy, become an area of much greater focus for the Commission over the next couple of years.
Peter Edwards Executive Director, Financial and Prudential Regulation