The AICPA special committee on assurance services (SCAS) has identified over 200 possible assurance services and has developed business plans for six of them. We looked at risk assessment in the September 1997 Practicing CPA. Here, let's discuss elder care.
Why elder care is needed
Improved diet and medical care are contributing to more people living longer than earlier in this century. For example, life expectancy at birth was 47 years in 1900 and had increased to 76 years by 1991. But not only are people living longer; the U.S. Bureau of the Census projects that the percentage of persons 65 years of age and over in the entire population will increase from 12.76 percent in 1996 to 16.48 percent in 2020, to 20.00 percent in 2050.
As the population ages, there is a similar increase in the amount of wealth concentrated in the elderly. It has been estimated that between $11 trillion and $13 trillion of wealth is controlled by persons aged 65 and over. The U.S. Bureau of the Census reported that in 1993, the medium net worth of households with members 65 and over in the fourth and highest quintiles of income were $199,581 and $354,781, respectively. This concentration of wealth attracts all sorts of predators. News reports reveal that senior citizens are the frequent targets of fraudulent investment, Home-improvement, and other schemes.
Concurrent with the aging of the population, families have become widely separated and can no longer be relied upon to live nearby and assist in the care of elderly family members. In addition, there has been an increase in households where both spouses work. In earlier years, one spouse was usually available to assist in the care of elderly family members. Today, unfortunately, institutional care is, maybe, the only choice for the elderly who have no children or whose children do not have the time available to satisfy both their job requirements and the requirements of tending to or assisting an elderly family member or supervising the provision of care.
Elder care is a service designed to provide assurance to family members that care goals are achieved for elderly family members no longer able to be totally independent. The service will rely on the expertise of other professionals, with the CPA serving as the eyes and ears of the family members or responsible party.
The purpose of the service is to provide assurance in a professional, independent, and objective manner to third parties (children, family members, or other concerned parties, or in some cases, the elderly persons, themselves) that the needs of the elderly person to whom they are attached are being met. Or to put it in simpler terms: to provide the opportunity for elderly persons to live out their lives in their own homes with dignity and protection from predators who would take advantage of them. Following are some aspects of providing elder care.
Consulting services
One of the biggest problems facing relatives who must arrange for care for an elderly relative is finding out whether home care is an option (as opposed to institutional care), what services are available in the community, and what to expect from the care providers. Often, this information can only be obtained through care providers themselves or through word-of-mouth from other persons who have been faced with similar problems.
The consulting services portion of elder care envisions the CPA as the focal point to assist family members in defining the standards of care needed and expected for the elderly person. This service could include providing the family members (the person responsible for care of an elderly person) with a listing of the services and options available in the community and working with them to establish goals for assistance; developing a customized delivery plan, indicating the types of service providers required to accomplish the care goals; and communicating expectations of required levels of performance to each service provider, including the identification of criteria to be used to measure performance.
There are several important concepts involved in this part of the service. Each plan has to be tailor-made to the needs of the particular elderly person. The goals for assistance for one individual may be simply arranging for transportation or for someone to take care of routine financial matters, such as paying bills and making deposits. In another case, the goals may include live-in or continuous sitters or nurses, housekeeping personnel, and home health services, in addition to the services required above.
As a part of consulting services, the practitioner may assist family members in selecting a care provider for each type of assistance required (although the family member or responsible party should make the final decision), communicate the family's expectations regarding the level of service to each care giver (formally in writing), and work with the care giver to establish performance measurement systems, including identification of information to be accumulated by the care giver to demonstrate compliance with the criteria for performance. All such systems should allow for independent verification of some, or all, of the information being produced.
Direct service provision
In some instances, either because of a lack of commercial providers in the community or because of the unique competencies of the CPA, the practitioner may be engaged to take a more active role in the management of elderly care. This might include routine tasks that would normally be performed by the elderly person or a family member-tasks such as
- Receipt, deposit, and accounting for income, or making sure the expected revenues are received.
- Supervision of investments and accounting for the estate.
- Making arrangements for the appropriate level of care (in-home sitters, cooks, etc., or retirement facility care), and periodically visiting the client to ensure care being received meets the standards set by family members.
- Arranging transportation for clients. One of the fears of elderly people who are still mobile is the loss of their car or their license to drive. Yet, due to the danger to themselves and to others, this frequently occurs.
- Supervising household expenditures and making arrangements for unusual or unexpected requirements, such as home maintenance and repair and medical emergencies.
- Arranging for an assessment of the elderly person by a social worker, geriatric care manager, or geropsychiatrist.
These direct services assume added importance when decisions must be made in a timely manner and there is no one in the client's community on whom to rely.
Assurance services
Elder care assurance services are close to traditional services rendered by CPAs, except that the engagement does not involve traditional financial matters. The client or responsible family member would establish goals for care and specify measurement criteria to be used in determining whether the specified goals were being achieved. The practitioner would then periodically perform procedures to measure the achievement of the care goals, based upon the specified criteria. Assurances might be given on the following:
- Review of routine financial transactions for reasonableness and adherence to criteria established for such transactions.
- Investigating and providing information to family members for handling of unusual or unexpected situations such as home maintenance and repair or medical emergencies.
- Inspection of logs, diaries, and other evidence (including direct observation) to determine whether care givers are meeting the performance criteria agreed upon with the client/family member.
- Reporting to client or family members. As a part of any assurance engagement, there should be a clear understanding as to whom reports are to be issued and in what frequency.
The range of services is limited only by the imagination of the practitioner and the needs of the client. Each engagement needs to be customized and the service rendered to be within the technical competence of the CPA.
Understanding the elderly client
Practitioners have always dealt with elderly clients, but, typically, the contact has involved taxes, estate planning, and so on. Although elder care has a financial element, it is directed toward an entirely different purpose - personal care and security for the older client.
Elder care engagements require a different approach. They involve much more frequent contact with the older client and on a more personal level. Each individual is different, and you need to be aware of these differences, particularly as they apply to the aging process and the capabilities and limitations of each client.
Practitioner's Publishing Company's Guide to Nontraditional Engagements, Third Edition, includes a practice aid for use in assessing the needs of older clients. In situations where family members are responsible for arranging elder care, there is a practice aid which asks for their assessment of the elderly person's needs. It is recommended that both practice aids be consulted in elder care engagements.
The elderly frequently assess their own needs and abilities quite differently from independent observers. By having both the elderly client and another party assess the former's needs and abilities, you can be aware before the engagement commences of any conflicts which might exist and tactfully try to resolve them.
At the beginning of the engagement, the practitioner should determine which family member (or other party) is responsible for the care of the elderly person and make sure that individual is fully informed of actions taken. In addition to the reports agreed to be provided under the elder care arrangements, copies of any correspondence pertaining to the elderly person should be provided to the responsible person. In many cases, that individual will make decisions concerning matters on which the practitioner accumulates the necessary information. If the responsible family member is to have the right of final decision, it is advisable to have this arrangement formalized through a power of attorney granted by the elderly person to the responsible family member. The client's attorney should be consulted to prepare the necessary documents.
At the outset of the engagement, you should establish what responsibility you have to family members other than the person primarily responsible for the care of the elderly client. There may be conflict, mistrust, and suspicion among family members, and, if so, you should attempt to arrange a course of action that will minimize future disagreements.
Developing an elder care practice
To get started in elder care, you will need to commit to providing staff and resources that will truly serve the purposes of the client. You will be at the hub of a wheel of providers, conducting ongoing and objective reviews of the performance of each of the service providers. It may mean your hiring permanent or on-call staff, or developing a relationship with a geriatric care manager or other elder care professionals, to assist in meeting the needs of elder care clients.
When responsible family members do not live in the same community as the elder care client, they have no way of knowing what services are available in the community and, therefore, what assistance can be provided to help their elderly relatives with independent living. If the needed assistance is not available, the family may have to consider relocating the elderly person to institutional care.
One of your first steps should be to determine the availability of services such as in-home housekeeping services, home health care organizations, providers of home health care equipment, nursing services, sitter services, shopping services, hospitals, senior service providers, reputable sources for home maintenance and repair, and bonded and licensed yard maintenance services.
In the governmental arena, Area Agencies on Aging (or Councils on Aging) can provide information on a variety of services for older adults. Other agencies which might be contacted to determine the availability of services include state departments on aging, state and county mental health agencies, Veterans Administration offices and hospitals, and the offices of local elected officials.
Don't overlook other local nonprofit or religious organizations - some have extensive programs for the elderly. And keep in mind that financial institutions are beginning to direct a broad range of services to this group, and that in many areas of the country, organizations (emergency medical services, police departments, and others) have instituted programs to check on elderly people daily.
Initially, you should attempt to obtain as much information as possible about each source listed in your inventory, including references, if applicable, and simply list the information without judgment. As you become involved with the various providers, additional information can be developed which will help family members make better judgments as to the provider they wish to engage.
Be careful about making positive recommendations as to potential service providers to avoid being blamed if a situation does not work out. Rather, you should objectively list both good and not-so-good information about each provider and allow the family members to make informed decisions about whom to engage.
As a part of the inventory of services available, you should also develop information concerning the rates normally charged, how billing is to be done, and when payment is to be made.
Because elder care primarily focuses on individuals who are living in their own homes, many of the needs to be addressed involve ordinary in-home living needs. Routine housekeeping, meal preparation, and yard maintenance may be beyond the physical abilities of some elderly people, and security is typically a foremost concern.
How to identify potential clients
The type of care envisioned in an elder care engagement will probably be more expensive than institutional care. Consequently, the services will be available only to those able to pay the cost. Within your clientele, elder care clients will typically come from 1) older clients, many of whom may have been clients for tax preparation or estate planning purposes, and 2) clients who are responsible for the care of an aging relative. By making the client and the children aware of the elder care services you can offer, during tax preparation or estate planning meetings, you can position yourself to be of assistance as the needs arise.
You can use direct mail to illustrate the services you offer, but take care not to imply that the elderly client is in need of those services at the present time. Referrals are also a good way of identifying potential elder care clients. Beneficial contacts could include physicians, particularly those specializing in geriatrics, hospitals, attorneys, bankers and trust officers, church leaders, and home health agencies. You can provide key contacts with a simple brochure describing the elder care services you offer. Again, don't imply that a particular person needs the services.
Information you need to know about the client
In order to customize services for the elder care client, you need to obtain a great deal of information about the person. Depending on the engagement, this might include
- Names, addresses, and telephone numbers of children, grandchildren, and in-laws. List their relationship to the elder care client, whom you should contact in emergencies, and note whether there are any family conflicts or estrangements which could cause problems.
- Names and addresses of the client's attorney, accountant, and primary care physician.
- An informal assessment by the elderly person (or responsible family member) of his or her assistance needs.In many cases, a formal assessment by a GCM, nurse, or geropsychiatrist will be necessary.
- Information pertaining to all real estate owned. This would include mortgage information, rental income, and copies of leases and fire and casualty insurance policies.
- A personal financial statement. This should indicate all retirement assets, investments, and liabilities.
- Annual cash flow analysis. This will enable you to determine that all income is being received and whether expenditures are within reasonable limits.
- Copies of all insurance policies and other personal documents. The latter would include wills, tax returns, trust instruments, guardian nominations, powers of attorney, care agreements and contracts, and any long-term care insurance policies.
- Religious and other planning information. Many religious organizations have outreach programs for elderly members. Also, it might help to know whether the client is receiving Medicare benefits, preferences as to hospi-tals, and whether the client has pre-paid medical transportation policies.
It is recommended that all elder care engagements commence only when there is a signed engagement letter. If possible, both the elderly clients and the responsible family member(s) should agree to the terms of the engagement. If the elder care engagement is being performed under attestation standards, written assertions will be required from responsible parties. The engagement letter should list the types of assertions which will be required, from whom they will be required, and should also clearly set forth the conditions under which the engagement may be terminated. 4
— by George A. Lewis, CPA, Broussard, Poch, Lewis and Breaux, Lafayette, Louisiana, tel. (318) 988-4930
and Ann Elizabeth Sammon, Assurance Services, Jersey City, New Jersey, tel. (201) 938-3464, FAX (201) 938-3516
