APRA signals end to super fund largesse

ANALYSIS

If corporate boxes and overseas fact-finding missions were ever really a problem in the superannuation industry then the Australian Prudential Regulation Authority (APRA) has called time on the phenomena.

Yesterday’s announcement by APRA that it is adopting an “intensified supervision approach” to discretionary expenditure such as travel, entertainment and conferences has sent a clear signal to the trustee boards of superannuation funds that they will need to be much more careful about how they spend members’ money.

And, as anyone who has attended superannuation industry conferences over the past two decades will attest, there was a time when some conferences attracted close to 2,000 delegates many, if not most, of whom had their attendance funded by their superannuation fund.

Did these conferences deliver continuing professional development (CPD)? Yes. Was the funded attendance of so many delegates in the best interests of members – maybe, maybe not.

APRA deputy chair, Margaret Cole has used a letter to superannuation licensees to make clear that the regulator does not think that everyone has been playing to the rules when it comes to members best interests.

“Despite obligations on RSE Licensees to consider the best financial interests of their members and consistently to promote those interests, APRA has observed deficient practices and questionable expenditure in some areas,” Cole’s letter said.

“As a result, APRA will intensify its scrutiny of fund-level expenditure to hold RSE Licensees accountable to improve practices, reduce spending that is deemed to not be in members’ best financial interests and promote the financial interests of their members.”

“APRA will take a targeted approach, partly informed by SRF 332.0 Expenses data and will initially focus its supervisory efforts on the following:

• Discretionary expenditure categories such as travel, entertainment and conferences;
• Relative and absolute size outliers, including consideration of impact to members;
• Particular types of payees and payments where benefit to members is not immediately apparent.

The letter said APRA’s focus on expenditure is part of the ongoing suite of supervision priorities but did not mean that all reported expenditure items will be reviewed.

“APRA’s intent is to focus on those items of expenditure where there is potential to improve practices and outcomes across the industry. APRA’s attention will also be informed by market intelligence and matters of public interest,” it said.

Cole’s letter said PRA was already engaging with a number of superannuation funds and intended to extend this when further financial year data comes to hand.

The bottom line is that APRA is going to insist that superannuation funds justify their expenditure demonstrate how its members’ best interests.

Conferences generating CPD-level content will no doubt continue to pass muster but corporate boxes at sporting events look likely to become a thing of the past and, so too, some sporting sponsorships.