Appendix BBackground due diligenceYou gathered much information as part of your due diligence beforeaccepting the board position at GR&Kare. You researched governmentregulations around the aged care industry. You also reviewed the company’swebsite and annual reports from the last five years.Your notes are summarised below.An overview of the aged care industryAustralia’s rapidly ageing population will put pressure on the aged caresector in the future. It has been projected that the number of people aged 65years and older in Australia will increase by 91 per cent over the next 20years.According to the latest annual survey of Australian residential aged carehomes by Stewart Brown, the EBITDAR (earnings before interest taxdepreciation amortisation and rent) decreased from $6,760 per bed perannum in 2018 to $5,531 in 2019. The proportion of aged care facilitiesoperating at a deficit increased from 45.1% in 2018 to 53.3% in 2019. At thesame time, the average bond held, known as a Refundable AccommodationDeposit (RAD), rose from $295,209 in 2018 to $316,876 in 2019. Thedeposit-which must be repaid after the resident chooses to leave the facilityor dies-is effectively an interest-free loan to a residential aged careoperator.The Australian Government has established a scheme whereby privateproviders can provide in-home care to the aged rather than the aged movingout of their homes and entering residential aged care. This not only alleviatessome of the financial pressure on the government and the individual, but alsoallows people to feel happier that they can stay in their own home andreceive outside help which is financially supported by the government.
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