APRA tightens scrutiny on super fund spending, targets travel and entertainment

The Australian Prudential Regulation Authority has issued a stern warning to super funds about questionable expenditures. 

APRA has ramped up its scrutiny of superannuation fund spending, particularly targeting discretionary expenses like travel, entertainment, and conferences that may not be in the best interests of members.

In a letter to all RSE Licensees, APRA’s deputy chair Margaret Cole raised concerns about the use of member funds for expenses where the benefit to members isn't clear. 

“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 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”.

The regulator plans to zero in on super funds whose spending stands out as either unusually large or unclear in its member benefit, promising a targeted approach informed by market intelligence and matters of public interest.

“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,” Cole said.

“APRA’s focus on expenditure as part of the ongoing suite of supervision priorities does 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 upcoming 12-month campaign will involve fund-level reviews, starting with a closer look at financial year 2023-24 data. Super funds can expect to receive notices requiring them to justify their spending decisions and demonstrate how these expenditures align with member interests.

The watchdog has made it clear that any deficiencies identified will result in rectification measures, and enforcement actions could be made public when appropriate. 

“Information gathered during this process will inform APRA’s risk assessment of RSE Licensees and may result in heightened supervision staging,” Cole said.

Moreover, the deputy chair said as part of its transparency efforts, APRA will publish expenditure data from the financial year 2022-23 on 30 October, providing further insight into how super funds are managing their members' money.

“APRA will publish annual expenditure data on an ongoing basis and anticipates publishing financial year 2023-24 data in early 2025,” Cole said, adding that the watchdog will continue to work closely with ASIC to share information and co-operate on matters of mutual interest.