A toolkit for governing the aged care sector

The final report of the Royal Commission into Aged Care Quality and Safety recommends a major overhaul of how aged care facilities are governed.

The AICD has welcomed the report and strongly supports the recommended principles, including a universal right to high-quality, safe and timely care. It also recognises that funding reform is critical in addressing the sector’s systemic challenges. Many of the recommendations — such as those relating to staffing, funding and the creation of new standards and a new regulator, will have a significant impact on companies.

Board composition/governance

The AICD generally supports the Royal Commission’s recommended changes to board structure, composition and governance. These include:

• The majority of the board should be independent, non-executive directors
• A mandatory care governance committee, chaired by a non-executive member with appropriate experience in care provision
• A fit-and-proper-person test for key personnel, including directors
• That boards have a mix of skills, experience and knowledge of governance to ensure the safety and high quality of care provided
• A nominated board member attesting annually on behalf of the board that it is satisfied the provider has in place the structures, systems and processes to deliver safe high-quality care.

Broader governance

The Royal Commission made other corporate governance recommendations the AICD supports. These include:

• Governance standards requiring boards to establish systems for feedback and receiving complaints, and a proper risk management practice
• Acknowledgment by boards of their role in providing leadership on culture
• Express obligation to notify the regulator of changes to key personnel, including directors
• Enhanced mandatory annual reporting to governments by providers.

New duties on providers/director liability

A key recommendation is the insertion of new duties in the Aged Care Act 1997 for providers. While these are not directors’ duties, they will be important for directors discharging their role in governance. There are also new provisions for liability for breach of the duty by providers as well as accessorial liability for directors.

Financial reporting

The Royal Commission recommends increased financial reporting for prudential purposes by the regulator. Boards will need to have some oversight of that additional reporting, which may increase workload in monitoring, audit and compliance.