Super funds not keen on self-examination

In an era of increased compliance under APRA’s new Registrable Superannuation Entity (RSE) licensing regime one third of superannuation funds still do not have an internal audit function, according to a recent Ernst & Young survey.

“That’s probably because in superannuation a lot of the activities are outsourced. Another factor is that unlike insurance or the banking industry APRA doesn’t require superannuation funds, even public offer funds, to have an internal audit,” Denis Thorn, Ernst & Young partner and specialist in superannuation, said. The survey, of 21 superannuation funds from the retail, industry, corporate and public sector, found that of those that did not have an internal audit function half said their organisation did not plan to establish one in the next two years. “That’s surprising. With the new risk management requirements of APRA you would have thought more would have been moving to put one in place,” Thorn said. The finding comes as the responsibilities of external auditors of superannuation funds to report breaches to APRA, under the RSE regime, have been beefed up. Those of the 21 superannuation funds surveyed that did have an internal audit function, 42 per cent had fully outsourced this activity. “That reflects the fact that a lot of superannuation funds are like virtual organisations. They have very little in-house,” Thorn said. Respondents said the focus of the internal audit was to provide assurance and support to the board and trustee rather than reporting on the efficiency of operations or providing assistance to the external auditor. The survey also found that for superannuation funds the internal audit had a much smaller role in assisting in fraud investigation and corporate governance issues and a much greater role in compliance. Around 20 per cent of funds surveyed said the internal audit is seen as the policeman and the checker.