The First Quarter Is In: Where Financial Management is Being Tested

The new Aged Care Act has been in effect for five months. In that time, we’ve supported providers through EMLA applications, financial audits, multiple room price approvals, and reviews of investment performance against regulator expectations.

From that work, a consistent pattern is emerging: financial management is being assessed as a connected system.

1. Audits Are Extending Well Beyond Liquidity

In our experience, early audits are reaching further than expected.

Requests are covering:

• Governance personnel credentials
• Delegations and decision-making frameworks
• Finance and risk team capability
• Training and education records
• Supporting policies across related functions

Regulators are looking for evidence that financial management is embedded across governance, not confined to a set of controls.

We’re seeing providers who previously focused on clinical transition now catching up in non-clinical areas. The gaps are usually in structure, documentation, and evidence rather than intent.

2. DMLA vs EMLA: Where Most Organisations Are Exposed

While we have submitted multiple EMLA notifications, most providers remain on the Default Minimum Liquidity Amount (DMLA).

The DMLA sets a baseline. It does not show whether liquidity matches your actual risk profile.

The EMLA requires modelling of RAD flows, capital commitments, and operating cash needs, and bringing that analysis to the board. In practice, this is where issues become visible.

We commonly see two outcomes under a DMLA approach:

• Cash held higher than necessary, with no clear deployment strategy
• Liquidity not stress-tested against refund patterns

There is also a compliance element. Where liquidity relies on debt facilities or related-party arrangements, an EMLA position needs to be formalised. The regulator guidance expects to see EMLA used in only limited situations, which contradicts the formal requirement to use this method in many common business structures and arrangements.

3. Room Pricing: Internal Alignment Is the Limiting Factor

Providers can set room prices up to $758,627 without approval. For providers with rooms below this level and are making losses, the regulator is asking why pricing has not been increased.

External resistance to price rises is expected. What we see more often is internal misalignment.

Boards, executives, and operational leaders are not always aligned on market prices. Where alignment is weak, pricing reviews stall or are diluted.

Where providers move forward, pricing is linked to outcomes:

• Asset condition and refurbishment
• Long-term sustainability of accommodation
• Future resident experience

For above-threshold pricing, approvals are achievable with well-supported applications. Since the new Act started, we’ve prepared successful applications from $800,000 to more than $2 million.

4. Investment Settings Are Drawing More Attention

The MPIR has been in the 7–8% range in recent months. This is now a practical reference point for accommodation returns.

Providers holding RAD balances largely in cash or term deposits are struggling to keep pace over time.

Construction and capital costs continue to rise, and the gap between returns and future funding requirements widens under these conditions.

We’re seeing this come through in regulatory conversations, particularly regulatory guidance on investment policies and feedback for loss-making providers that are taking conservative views on investment.

Investment decisions still depend on risk appetite, and providers should always seek licensed advice. What has changed is the level of scrutiny on the outcomes.

5. Capital Requirements Are Not Well Defined

Across most providers, the weakest area is the link between:

• Room pricing
• Investment returns
• Future capital requirements

Some organisations have not quantified what is required to maintain or replace their accommodation over a 10–15 year horizon. This leaves them flying blind, as they have no internal threshold for the margins needed to remain viable. 

Without a sustainable target:

• Pricing is set without a funding target
• Investment returns are assessed without a benchmark
• Capital decisions are made project by project

This creates a clearer basis for decision-making.

6. What Higher-Maturity Providers Are Doing

From what we see across those providers performing more strongly:

• Liquidity is modelled against actual cash flow. The choice of Default/Evaluated MLA is an outcome of this modelling, not the driver.
• Pricing reflects both market conditions and funding requirements. Current residents pay a fair price, so they receive better services, and future residents are not disadvantaged.
• Investment portfolios are reviewed against return expectations. Investment policies are set based on sustainable return targets, rather than risk.
• Financial governance is maintained at an audit-ready standard. Documents are up to date and being followed, and evidence is in place that management and governance personnel are actively fulfilling their roles in this framework.
• Capital planning is integrated into strategy, including targeted levels of return needed to maintain and replace assets over their lifespan.

These areas are managed together, proactively and with good governance.

7. Self-Assessment Framework

The following framework can be used by boards and executive teams to assess current maturity across four key domains.

Final Observation

The first quarter has clarified expectations. Financial management is being assessed across liquidity, pricing, investment, governance, and capital planning as a single system.

Providers that have connected these areas are operating with greater control and receiving positive feedback after regulatory audits and EMLA lodgements. Others are spending significant time responding to requirements and addressing concerns raised during these processes.

Start the Conversation

If these issues are relevant to your organisation, the next step is to establish a clear position across each area.

Pride Aged Living supports providers across liquidity management, pricing strategy, investment alignment, and capital planning.

Reach out to discuss where your organisation sits and what would make the most difference.

Next Step: Join our Upcoming Webinar

We will be expanding on these themes in an upcoming webinar on Thursday, 21 May: 

Aged Care Viability – Three decisions that can’t wait

Speakers: Stephen Rooke and James Saunders

The new Aged Care Act is in place, and there is now a clear set of policy settings and operating parameters for providers to work within.

This session focuses on the decisions boards and executives can progress now to improve financial performance and position their organisation for long-term sustainability.

We will cover three areas:

1. Short-term viability

• How to move from break-even to sustainable performance
• Revenue optimisation opportunities – Higher everyday living fees and workforce management
• Cost structure and pricing decisions that can be implemented now 

2. Long-term sustainability

• Diversification and growth pathways under current settings
• Accommodation strategy
• Positioning for capital investment or acquisition 

3. Working with uncertainty

• How to prioritise decisions in an evolving policy environment
• What requires further clarity vs what can proceed now
• A practical framework for decision-making without perfect information 

This session is designed to provide clear, actionable direction for providers looking to strengthen viability and make confident strategic decisions.

Who should attend: Board members, CEOs, CFOs, and senior executives responsible for financial performance, strategy, and organisational sustainability in residential aged care.

If your organisation has been focused on compliance implementation and is now asking "what next?" - this session will help you answer that question.

Learn more and register here.