The Aging of North America
The North American population is aging. Improved diets, sanitation and medical care are contributing to more people living longer lives than at any time in history. In the late 1700’s life expectancy at birth was only 35 years. This increased to 47 years by 1900 and 78 by 1991.
In addition to this, the percentage of persons age 65 years and older to the entire population will is expected to increase from 12.3% in 1998 to 22.7% in 2041.
The majority of the elderly are women. Sixty percent of those aged 75 to 84 and 70% of elders 85 years and up are female. Many of these women live alone; most are widows and are unaccustomed to handling financial affairs.
Concentration of Wealth
Data indicates that seniors are more likely than younger people to own a debt-free home. In 1997, 68% of Canadian households were headed by seniors who owned their own homes; 86% of these had paid off their mortgages.
This concentration of wealth attracts all sorts of predators, from unethical money managers who churn accounts or sell risky securities to the roofer who installs a 10 year roof instead of the 25 year roof the elderly person paid for, hoping that the purchaser will expire before the roof. Not only do the elderly need protection from unscrupulous operators, their heirs need assurance that inheritances are not fraudulently depleted.
Other Demographic Changes
Concurrent with the aging of the North American population is the transition from an agrarian society to one that is urban based. At the turn of the century, families lived in close proximity to each other throughout their entire lives. Now the norm is for children to migrate from small towns to large metropolitan areas in pursuit of careers. Families no longer can be relied upon to be available to assist in the care of elderly members. More than 70% of the population 65 and over lives more than 50 KM away from their closest child.
In earlier years, even when there was a distance issue, one spouse was usually available to assist in the care of an elderly parent. Today, with the increase in households where both spouses work, most children do not have time available to satisfy the demands of jobs, parenting, and assisting elderly relatives as well. This phenomenon is referred to as the "sandwich generation."
Alternatives for the Elderly
The trend in North America is to assist the elderly to remain in their own homes as long as possible. While life expectancy is increasing, this is not to say that latter years will be free from disability. Mental and physical competence declines as we age.
Most people, given the choice, would prefer to live at home and not be institutionalized. More support services are becoming available to allow seniors to remain in their homes.
Development of ElderCare as a CPA/CA Service
An AICPA/CICA Joint Task Force was established in 1995 to look at the future of the profession and assurance services in particular. Statistics have shown that total revenues from accounting and auditing services are either static or declining when adjusted for inflation. Ten external factors were identified that would have a major impact on the profession over the next five to ten years. One of these factors was the aging of the population. Business plans were developed for eight assurance services and one of these was ElderCare.
What is ElderCare?
The nature of ElderCare can best be described as 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 accountant serves as the co-coordinator, relying on the expertise of a number of professionals. The purpose of the service is to provide assurance in a professional, independent and objective manner to children, family members, or other concerned parties that the needs of the elderly client are being met.
Aspects of ElderCare
The group of services contemplated under the heading ElderCare fall into three broad categories:
- Consulting Services
Some of the biggest problems facing relatives who are suddenly confronted with the problem of providing for the care of an elderly relative include finding out whether home care is a viable alternative, what local services are available, and what to expect from care providers. The accountant’s focus is on defining standards of care needed and expected for the elderly client and providing the family with a list of services and options available in the community.
Each plan has to be tailor-made to meet the specific needs of the particular elderly client. Goals for assistance in one instance may be limited to finding someone to take care of routine financial matters, such as paying bills and making deposits. In another case, the goals may include providing for nursing care, day sitters, housekeeping services, and arranging transportation, as well as helping with routine financial matters.
- Direct Services
In some cases, either because of a lack of commercial providers in the community or because of the unique competencies of the accountant, the accountant may be engaged to take a more active roll in the management of the elderly client’s care. Such tasks might include:
- receipt, deposit, and accounting for income
- payment of bills and conduct of routine financial transactions
- supervision of investments and accounting for the estate
- making arrangements for an appropriate level of care
- arranging for transportation services
- supervising household expenditures and dealing with emergencies
- Assurance Services
The original concept of ElderCare used by the Task Force was to develop a service in which the practitioner acted as "the eyes and ears" of the family. The accountant assists the family and the elderly client in establishing care goals. The practitioner then designs and specifies measurement criteria that can be used to assess how well the goals are being met. Assurances might be given on the following:
- review of routine financial transactions for reasonableness and adherence to criteria established for such transactions
- inspection of logs, diaries or other evidence to determine whether care givers are meeting performance criteria agreed upon
As a part of any assurance engagement, there should be a clear understanding as to whom reports are to be issued and with what frequency.
The examples of ElderCare services discussed are by no means all-inclusive. Each engagement must be customized for the individual client. The range of services is limited only by the imagination and competence of the accountant and his team and the needs of the client.
Although this document focuses on elderly clients, the concepts of ElderCare can be applied to special needs children, younger adults, or others who want or need assistance in the routines of daily living. Certain of the financial aspects can be utilized to provide services to wealthy clients who don’t want to be bothered with those aspects of daily living.
ElderCare has been designed to brand and develop a new practice area, providing services to a market that we know will grow exponentially. For many accountants, this might be a radical departure from traditional practices. There is a definite need for the service, and market acceptance is within our grasp based on our reputation for objectivity, quality of service and the high level of trust we enjoy as a profession.
Editor: William Hyde CA, CFP. Bill is a partner in the Brantford, Ontario office of Millard, Rouse & Rosebrugh. He has been a member of the AICPA/CICA Joint Task Force on ElderCare since 1997 and has presented courses, authored material and spoken on the topic throughout the United States and Canada.