A deep dive into the new Aged Care Financial and Prudential Standards | Part 1: Financial and Prudential Management Standard

On 1 November 2025, the Aged Care Financial and Prudential Standards 2025 (Financial Standards) commenced with the introduction of the Aged Care Act 2024 and Aged Care Rules 2025. These new Financial Standards replaced the former prudential standards under the Aged Care Act 1997 and brought with them a higher level of responsibility for registered aged care providers and their governing bodies.

There are three Financial Standards that providers must comply with as a condition of their registration, depending on their registration categories:

1. Financial and Prudential Management Standard

2. Liquidity Standard

3. Investment Standard

In Part 1 of this three-part series, we will be taking a deep dive into the Financial and Prudential Management Standard.

What is the Financial and Prudential Management Standard?

The Financial and Prudential Management Standard requires registered providers to implement and maintain a written Financial and Prudential Management System. Whilst this is an existing but expanded requirement for residential care providers, it is a new requirement for those delivering support at home services in certain categories.

What are the requirements of the Financial and Prudential Management Standard?

The purpose of the Financial and Prudential Management Standard is to ensure that registered providers have strong governance systems to manage finances responsibly. Section 8(2) of the Financial Standards sets out the objects of the standard, which must be identified and articulated within the framework of the management system.

However, merely articulating the objects is not enough – a provider must demonstrate compliance and show how it is meeting these objects. Among other inclusions, the management system must:

• Set out the roles, accountabilities and responsibilities of certain people involved with the provider’s finances and deposited amounts (if applicable);

• Include processes for the provider to monitor and control any roles, accountabilities or responsibilities which have been delegated or outsourced; and

• Have sufficient reporting mechanisms and compliance detection processes in place.

How aged care providers can practically comply with the Financial and Prudential Management Standard

1. Diarise key Financial and Prudential Management System review dates

   The Financial and Prudential Management System is not a “set and forget” action item. A registered provider must review the system:

   • Regularly and at least once a year;

   • When updates to the system may be required to achieve its objects;

   • When the system or its implementation is non-compliant with the Financial Standards; and

   • When the provider identifies or becomes aware of new or evolving financial risks.

   To assist in achieving this, a registered provider should identify key review and compliance dates, and diarise within the organisation.

2. Review existing financial governance frameworks and policies

   The Financial and Prudential Management System will likely interact with other existing policies and procedures within the organisation. It is important that a provider examines these existing frameworks to ensure that the requirements of this standard are met.

   For example, a provider may undertake a review of employees’ position descriptions to ensure there is a clear designation of responsibilities. This will be particularly relevant to those who form part of the organisation’s finance department and those who handle the provider’s deposited amounts (such as RADs and accommodation bonds).

3. Review procurement, outsourcing and financial management arrangements

   The organisation’s procurement processes, arrangements and contracts should be examined to ensure that there are appropriate oversight and controls in place for any parts of the management system that are outsourced. This becomes increasingly relevant as registered providers continue to invest in software and IT systems to manage their finance functions.

   Although a provider may outsource or delegate a task, the provider ultimately remains responsible for maintaining the Financial and Prudential Management Standard.

Stay tuned for Part 2 and 3 of Cowell Clarke’s series into the Financial Standards, which will consider the Liquidity Standard and Investment Standard.

Cowell Clarke’s dedicated Aged Care and Retirement Living Team continues to work closely with providers to ensure their best possible outcomes are achieved whilst ensuring compliance.

For further information, please contact our Aged Care, Retirement Living and Health Team.

Megan and Claudia would like to thank Ashley McConnell-Daish for her contribution to this insight.