Cbus hit with new APRA EU

Big industry fund, Cbus, has been hit with another enforceable undertaking imposed by the Australian Prudential Regulation Authority (APRA).

APRA announced it has taken further action to address material prudential concerns identified with United Super Pty Ltd (United Super) and to support improved outcomes for its members.

It said that United Super is the trustee for Construction and Building Unions Superannuation Fund (Cbus), which has over 920,000 member accounts and around $100 billion in funds under management.

APRA has taken steps to ensure that its prudential concerns from a recent prudential review and the issues identified from the independent expert report published in November 2024 are addressed through:

• APRA’s acceptance of a court enforceable undertaking (CEU) from Cbus to undertake a holistic risk transformation program to address concerns in relation to Cbus’ risk management and related issues; and
• the publication of a rectification plan prepared by Cbus to address weaknesses in governance and expenditure processes identified by an independent review as required under the additional licence conditions imposed by APRA in August 2024.

APRA is also exploring possible breaches of the Superannuation Industry (Supervision) Act 1993 (SIS Act) by Cbus through an investigation with a focus on expenditure management practices.

APRA Deputy Chair Margaret Cole said: “APRA expects trustees to have robust governance, compliance and risk management frameworks in place to prevent, detect and/or mitigate potential adverse outcomes such as operational risk incidents. Where an entity’s practices are found wanting, APRA will not hesitate to take action to protect members’ interests.”

The CEU from Cbus pledges to undertake a holistic risk transformation program to rectify underlying behavioural, cultural and/or governance failures within the trustee observed by APRA following a recent prudential review. The review identified significant and persistent weaknesses in Cbus’ operational risk management framework, in addition to concerns related to insurance administration and outsourcing.

Cbus has acknowledged APRA’s concerns and has committed to:

• engage independent experts to undertake reviews of its governance, risk management and insurance administration processes, as well as undertake a review of the root causes of APRA’s concerns;
• prepare an integrated plan that details all activities Cbus is undertaking, or will undertake, to address the issues identified, and which specifies who is accountable for each activity, incorporating APRA’s feedback, for approval by Cbus’ board; and
• appoint an independent reviewer to provide assurance reports on the implementation of the plan, whether it is sustainable and whether further work is necessary to ensure the root causes of the weaknesses are addressed.

APRA will work closely with Cbus to develop a workable timeframe for the delivery of sustainable rectification under the integrated plan to ensure that actions are implemented quickly, efficiently and in the appropriate order of priority.

The effect of the CEU will mean that if Cbus breaches any of the undertakings given to APRA in the CEU, APRA can enforce those undertakings in the Federal Court. The undertakings given by Cbus are separate to the additional licence conditions that were imposed by APRA in August 2024, which will remain in force and will not be affected by the CEU.

Cbus has responded to the EU noting that the work program “builds on progress Cbus has made in recent years to improve its operational risk management following changes to senior management to enhance capabilities”.

“Cbus notes APRA’s intention to review historic strategic expenditures including partnership payments to unions and employer groups. The issues raised by APRA continue to be addressed as part of a Rectification Plan, published today in response to the Deloitte review which will assist us demonstrate how partnership arrangements will be undertaken in the best financial interests of members,” it said.