The Australian Prudential Regulation Authority has published its findings on fund expenditure.
In APRA’s review of expenditure on advertising, sponsorships and promotions by trustees, many were found to have failed to “rigorously measure and assess anticipated and achieved benefits” to members.
APRA found that there was a lack of evidence that clear metrics were in place to assess how marketing expenditure benefits members and limited evidence of reviews into whether expenditure had achieved its intended outcomes.
It also found instances where funds were unable to demonstrate how the additional benefits of sponsorships such as free tickets to sporting events as well as merchandise and hospitality for fund directors, executives and staff had resulted in any improved outcomes for members.
APRA provided multiple examples of sponsorship agreements where funds had not established a link between expenditure and benefits to members, including situations where sponsorships were renewed without analysing their effectiveness and one case where there was no evidence that a business case had been considered by the board.
The review, conducted between November 2020 and October 2021, involved a dozen trustees from a cross-section of the industry. It considered whether a certain expenditure was in the best interest of beneficiaries and also assessed whether trustees had applied “appropriate governance and oversight” to their spending decisions.
Released alongside reviews into strategic and business planning as well as unlisted asset valuation practices, APRA said its reviews outlined the risks and vulnerabilities that trustees must consider to ensure better practices and improve the outcomes of their members.
“Australians expect those they entrust with growing and protecting their retirement savings to deliver value from every business plan enacted, dollar spent, and investment made,” said APRA member Margaret Cole.
“Overwhelmingly, these reviews illustrate that robust frameworks, clear accountability and holistic approaches to business planning are essential ingredients in running what are, in most cases, multibillion-dollar businesses with enormous fiduciary responsibilities.”
The expenditure review also identified an “over-reliance on aggregate, or high-level considerations of marketing expenditure impact” such as changes to membership numbers without demonstrating specific improvements for members.
“We expect all trustees to review their operations in light of these findings with a view to identifying any substandard practices and improving processes and procedures,” Ms Cole said.
“While the expenditure review was conducted prior to the introduction of the best financial interests duty, where certain expenditure has continued beyond on 1 July this year, we have challenged trustees to demonstrate how it complies with the new law.
“Once their responses have been assessed, APRA will consider what, if any action, is necessary to protect the interests of superannuation members.”
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