The Australian Prudential Regulation Authority (APRA) has raised concerns with the Energy Industries Superannuation Scheme (EISS) over structural changes and executive departures at financial services and administration firm FuturePlus.

In a report to the EISS trustee, APRA asked the super fund to seek assurance from FuturePlus, as a key service provider, to demonstrate its ability to continue to provide services in accordance with the service-level agreement, and conduct an adequate level of analysis on the risk tolerance to its continued investment in FuturePlus.

The prudential regulator is concerned over the large number of staff departures at FuturePlus.

In addition, the Audit Office of New South Wales said in an audit opinion of EISS published last month that the fund might have to provide funding to FuturePlus for the firm to remain compliant and that trustees might have to consider a merger of the super fund to ensure an efficient structure.

"EISS may need to provide funding to FuturePlus to support infrastructure investments to comply with the proposed Stronger Super regulatory reform," NSW Auditor-General Peter Achterstraat said in the Volume Five report.

"The Treasurer should review the complex structure of the Energy Industries Superannuation Scheme and associated entities to ensure an efficient structure that minimises operational risks to its members.

"This may include mergers in line with the proposed superannuation regulatory reforms."

The report shares the concerns of APRA about the recent departures at the fund, which include operational and investment executive roles.

"The loss of key staff presents a significant risk to EISS, which requires careful management," it said.

FuturePlus managing director Madeline Dermatossian brushed aside the concerns and said EISS had not raised the issues with her.

"FuturePlus is a commercial organisation, which is not bound by APRA as they have no jurisdiction over administrators," Dermatossian told Investor Weekly.

"EISS has not raised any issues with FuturePlus as a service provider. FuturePlus is in a very strong financial position with a revitalised, experienced and commercial executive team.

"FuturePlus has absolutely no difficulty in providing our contracted services to all of our clients."

EISS chief executive Richard Powis said the APRA report was completed six months ago and the issues had been addressed.

"As CEO of EISS, we have no concerns regarding the delivery of administration services provided by FuturePlus," Powis said.

"Our regular reporting from FuturePlus is on target."

He said he could not comment on the NSW Auditor-General's report, but the APRA report was concluded six months ago.

"The Auditor-General's report is based on an APRA report which was completed six months ago and is now outdated," he said.

"Since then, FuturePlus has appointed a highly experienced team which resolves the key personnel issue raised by APRA as a significant risk.

"Also, the financial position of FuturePlus has improved considerably and it now has a very sound set of accounts. EISS does not expect to have to fund any money, unless there are changes under legislative requirements that superannuation funds will need to address."

APRA had requested EISS to continually monitor FuturePlus as it was a main service provider, he said.

NSW Treasurer Mike Baird said he would look into the Auditor-General's suggestions next year.

"The NSW Liberals and Nationals want to ensure that the Energy Industries Superannuation Scheme meets the needs of its members and at the lowest cost to the state," Baird told Investor Weekly.

"The government will be considering this recommendation and will respond next year."

Industry participants have said that if EISS were to merge, State Super would be the obvious candidate to take it over.

But Investor Weekly understands that no approach has been made.

EISS took over full ownership of FuturePlus at the end of 2010, acquiring the 50 per cent stake held by Local Government Super (LG Super).

FuturePlus still provides administration services to LG Super, with which it negotiated a three-year contract following the buyout.

LG Super chief executive Peter Lambert said the fund was monitoring the developments at FuturePlus.

"We are aware of that concern and we are looking to seek assurances from FuturePlus regarding the executive changes," Lambert said.

"We are focused on what those changes mean to the services they provide to us."

He said LG Super had not received a report from APRA about the firm, but he indicated the regulator did point out the fund's responsibilities in that regard.

"APRA has made it clear to Local Government Super that they believe we should maintain an adequate level of oversight into FuturePlus' business to ensure that these risks don't materialise," he said.

LG Super's administration contract runs until December 2014, but he said it would look to tender for a new contract well in advance.

"Provided that FuturePlus can continue to deliver the services we require from them, there is no reason to break the contract early," he said.

"But at some stage prior to that date, we are going to have to start looking at our long-term future and, clearly, as part of that decision we would be looking at what we think are the long-term prospects of FuturePlus in terms of their human and financial resource capacity to meet our ongoing requirements, regardless of whom is the ultimate owner of that business."

APRA said it was not allowed to comment on individual cases.