(Transcript from World News Australia Radio)
Melbourne liquidator Dye and Co is examining the books of Brunswick Manor, a 60-bed nursing home that closed suddenly in September after being stripped of its government accreditation because of serious health and safety breaches.
Former residents are owed more than two million dollars for the bonds they paid and people who worked at Brunswick Manor have also been left out of pocket.
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Finding a place for an elderly person in residential aged care can be an emotional and costly process.
Many aged care homes charge what are called accommodation bonds which can be anything from several hundred thousand dollars to more than a million dollars.
The bonds are the equivalent of a loan to the nursing home.
They are designed to be repaid when someone leaves aged care, after deducting fees called retention amounts.
But no refunds have been forthcoming for people who lived at Brunswick Manor nursing home in Melbourne.
After losing its accreditation for serious health and safety breaches, the operator closed it down and it's now gone into liquidation.
Families have been left hundreds of thousands of dollars out of pocket and former workers are chasing their entitlements.
Liquidator Shane Deane, of Dye and Co, is investigating whether Brunswick Manor could have been trading while insolvent.
Mr Deane says the rules that govern the use of accommodation bonds are more stringent than in the past but he's a little surprised that accommodation bonds don't have to be held in trust accounts.
"My understanding is under the new regulations monies can't be drawn as they were in the past, they have to be drawn in a much stricter fashion. But look, as a generality, you'd like to think that those funds were held on trust as opposed to being in a standard bank account and therefore would be subject to trust rules. That's what, as a lay person looking at it and as a liquidator looking at it, you'd think that those funds would be held on trust if they're there to provide service to someone and to be refunded at some point in the future."
Ian Yates from the Council on the Ageing, COTA Australia, says there are legitimate reasons why accommodation bonds are not required to be kept in trust funds.
"This is part of the operating finances of the industry so it's used for building purposes, it's used to reduce debt or it's used to generate income which is used for aged care purposes so you couldn't lock it up in trust where it couldn't be used. We'd have to then have a different financing mechanism for the sector. The sector is probably in our view overly dependent on bonds compared to the use, for example, of investment equity."
The federal Member for the Melbourne seat of Wills, Kelvin Thomson, is trying to help the families who are out of pocket.
Mr Thomson made a speech in parliament urging the federal government to refund the bonds as quickly as it can using a scheme set up especially to protect families when nursing homes are unable to repay the accommodation bonds.
"The scheme ensures that if the aged care home can't pay back the bond, the Commonwealth refunds the accommodation bond balance. The Commonwealth then assumes their right as a creditor to pursue the defaulting provider to recover the accommodation bond money that they've paid out."
Ian Yates from COTA Australia says new regulations that come into force next July will make it easier for families to make more informed and less pressured decisions when faced with finding a residential care place.
Mr Yates says one important reform will be a requirement for nursing homes to be transparent about the real cost of their bonds because currently they can charge whatever the market allows.
"Many providers would interview a prospective resident and ascertain their assets and then determine the bond based on effectively how much the person could pay less an amount that has to be retained by them. From 1 July next year (2014) the reforms require that providers advertise both their refundable accommodation deposits and the daily charge so the people can work out what one home is going to cost compared to another and secondly think about how they want to pay for it."
