Royal Commission puts governance on the agenda for aged care

A chilly wind blew through the boardrooms of Australia’s 2300 government funded aged care providers in October.


The announcement by the Federal Government of the Royal Commission into aged care quality and safety on 9 October, following the disastrous stories of elder abuse at places like Oakden in South Australia, have shocked this $16 billion sector to the core.

In response, it is likely a new item has just appeared on pre-Christmas board agenda papers – good governance.

Over the last decade the aged care sector have been grappling with massive intergenerational funding and workforce implications associated with the change in Australia’s ageing population. More than 15% of Australians are currently aged over 65 and this is expected to grow to 22% by 2056.

That has put pressure on aged care providers, many of whom are not for profit mission-based, to start acting like corporations operating in free markets.

But while they have been getting up to speed with developing new consumer driven business models, implementing technology to improve efficiency and service delivery, and developing their brands, many have overlooked one of their core functions of risk mitigation.

As the Royal Commission rolls out over the next 12 months, boards would benefit from tabling the the Australian Institute of Company Directors (AICD) Good Governance Principles and Guidance for Not-for-Profit (NFP) organisations as a conversation starter.

The 10 key principles

1. Roles and responsibilities:

There should be clarity regarding individual director responsibilities, organisational expectations and the role of the board. Charters and terms of reference help with this.

2. Board composition:

The board should be a strong mix of members – having regard to each member’s background, skills and experience and how each person can contribute to the collective capability and effective functioning of the board. Within aged care, this requires clinical skills, given the core business of care.

3. Purpose and strategy:

The board plays an important role in setting the vision, purpose and strategies of the organisation. Members play a key role in helping the organisation to understand these and encouraging adaptation of the direction or plans across the organisation.

4. Recognition and management of risk:

Boards can increase the likelihood that their organisation will deliver on its purpose by putting in place appropriate levels of oversight and internal controls.

5. Organisational performance:

The degree to which an organisation is delivering on its purpose can be difficult to assess, but this can be aided by the board determining and assessing appropriate performance categories and indicators for the organisation.

6. Board effectiveness:

A board’s effectiveness may be greatly enhanced through:
• Careful forward planning of board-related activities;
• Board meetings being run in an efficient manner;
• Regular assessments of board performance;
• Having a board succession plan; and
• The effective use of sub-committees, where appropriate – for example, clinical governance.

7. Integrity and accountability:

It is important a board have in place a system where there is flow of information to the board that aids decision-making, there is transparency and accountability to external stakeholders and where integrity of financial statements and other key information is safeguarded.

8. Organisation building:

The board has a role to play in enhancing the capacity and capabilities of the organisation they serve.

9. Culture and ethics:

The board sets the tone for ethical and responsible decision-making throughout the organisation.

10. Engagement:

The board helps an organisation to engage effectively with stakeholders.

Recognising risk

While the responsibility of the Board in recent times may have been repurposing service provision and market positioning, during this upcoming period of enquiry into the aged care sector Boards will need to turn their attention to the recognition and management of risk.

Boards need to ask themselves if they have appropriate levels of reporting based on pre-determined performance indicators – including clinical, quality and consumer advocacy. How will Directors know if the organisation is living up to its purpose and values? How are internal and external complaints managed?

Are you, as a board or executive manager, familiar with the terms of reference of the Royal Commission? Are you comfortable with the quality of aged care services your organisation provides and your visibility over the engagement it has with clients? How do you know if “mistreatment and abuse” or “systemic failures” are occurring under your noses?

Are you “ensuring that aged care services are person-centred, including allowing people to exercise greater choice, control and independence in relation to their care, and improving engagement with families and carers on care-related matters”.

These all require radical pivots in existing service provider business models – from internal, process focused models, to consumer and quality led.

Bentleys has been working with mission-based – known by others as not for profit – organisations both large and small, and ranging from large church and charitable groups to government funded organisations, such as primary health networks and hospital and health services, for more than 65 years.

We help forward thinking providers redesign their business models, manage enterprise risk, develop and implement customer value led innovation programs and customer advocacy engagement programs and evolve their governance, risk and strategic plans.

We are aware most organisations are operated to (and often exceed) the letter of the regulatory law and provide outstanding care to their clients and a positive workplace for their staff.

However, the Royal Commission must be viewed as an opportunity rather than a threat – a time in your board’s life cycle to evolve your governance procedures and ready your organisation for the future of Australian Aged Care (Aged Care 3.0).

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