There is not enough transparency when it comes to the aged care sector’s use of funds from government and people in care, an independent report has found.
Releasing the report on Tuesday, the aged care royal commission said the sector had received about $25 billion in government and consumer funds in 2018/19.
To help with its inquiry the royal commission tasked global accounting firm BDO to analyse the finances of the aged care sector, including assessing profitability and financial viability.
BDO said analysing financial data for approved providers was complex due to different reporting obligations put on the sector by the Department of Health.
Providers are able to use group structures in order to maximise their returns and reduce risk.
It found there are huge differences in the ways aged care providers structure their operations, resulting also in a variety of costs related to management fees, rent and interest.
“It is not unusual for entities to use group structures to maximise returns and minimise risk through a range of strategies,” the report says.
“This is perfectly reasonable. Under the current reporting obligations. However, the transfer of funds to a related party results in a significant loss in transparency and traceability.”
But BDO says that while it’s perfectly reasonable for providers to use group structures, lack of governance and transparency of the entities increases the risk of loan recoverability and understanding of returns.
The firm has advised being cautious in changing policies in the space, as it’s unlikely to have a significant impact on the whole sector.
Labor spokeswoman for seniors Julie Collins says taxpayers shouldn’t be in the dark on how their money is spent.
“Any money going into aged care needs to have full transparency so it’s improving the care of older Australians,” she said.
Aside from the royal commission the federal government’s handling of the sector is under intense scrutiny amid coronavirus outbreaks at nursing homes causing resident deaths.