Catholic fund to send 2500 cheques after unit pricing error

The $3.5 billion Catholic Super & Retirement Fund (CSRF) will this month recompense 2500 ex-members affected by a tax-related unit pricing error made two years ago.

The CSRF members impacted were those who left the accumulation fund between May 2005 and July 2006, according to deputy CEO, Sam Hallab. Equity markets performed strongly during most of that period, but when they softened in the final June quarter, the tax accruals overseen by CSRF’s outsourced unit pricing provider – BNP Paribas Securities Services (BNP Paribas) – were not adjusted accordingly. “;The tax accrual being swept from member accounts was way too big in that particular quarter…there was a lot of staff turnover at BNP Paribas around that time and someone dropped the ball on it,”; Hallab said. However Hallab stressed the fund was confident that BNP Paribas had since beefed up its controls, and indeed CSRF renewed its master custody contract late last year after a review by Mercer Sentinel. BNP Paribas had “;worked very closely with CSRF to resolve this issue quickly and with the best interests of CSRF clients in mind,”; said head of coverage Ken Shaw. Hallab said the mistake was discovered during an internal audit shortly after 2005/06 year end, and most of the over-accrual – understood to be over $20 million – was immediately swept back into existing member accounts. Hallab said that unit price readjustments were extremely common in superannuation, but after liaising with APRA it was determined that the disadvantage to departed members was large enough to constitute an error in this case. CSRF then called in Bravura, provider of its internal administration platform, SAS, to perform data extracts and determine how much members who had left the fund during the relevant period were owed. After a period of negotiation between CSRF, BNP Paribas, external auditors (Deloitte for the fund, PwC for the custodian) and APRA, an amount was agreed payable by BNP Paribas to cover the shortfall. Hallab said he expected cheques and an explanatory letter to reach the affected former members this month. In the case of death benefits, the rightful recipients will receive a cheque directly, other former members will have the cheque paid to their rollover fund or allocated pension. About $2.1 million will be paid to former members in total, according to Hallab. He said CSRF had “;learnt”; from the experience, and its audit and risk management committee would now conduct a site visit and audit BNP Paribas’ processes on a six-monthly basis. BNP Paribas’ Shaw added: “;We take pride in the services we provide to our clients, so we were disappointed when this error was discovered. We are confident in the strength of our risk and control processes, particularly our ability to identify and resolve issues when they occur. We are pleased that we have been able to maintain a strong relationship with CSRF and that they chose to renew their contract with us.”;