The Australian Prudential Regulation Authority (APRA) said on Tuesday it is taking further steps to address material prudential concerns detected by a review into the fund’s trustee and the issues identified in the independent report from Deloitte published in November 2024.
The steps include the acceptance of a court enforceable undertaking (CEU) from Cbus, which obliges the fund to undertake a “holistic risk transformation program” to address concerns, and the publication of a rectification plan to address weaknesses in the fund’s governance and expenditure processes.
In addition to this, APRA said it is investigating whether Cbus breached the Superannuation Industry (Supervision) Act 1993 (SIS Act) with a focus on expenditure management practices.
“APRA expects trustees to have robust governance, compliance and risk management frameworks in place to prevent, detect and/or mitigate potential adverse outcomes such as operational risk incidents,” APRA deputy chair Margaret Cole said.
“Where an entity’s practices are found wanting, APRA will not hesitate to take action to protect members’ interests,” Cole added.
Specifically, under the CEU, Cbus will engage in a holistic risk transformation program to rectify underlying behavioural, cultural and/or governance failures within the trustee observed by APRA following the prudential review.
The review identified significant and persistent weaknesses in Cbus’ operational risk management framework, in addition to concerns related to insurance administration and outsourcing.
According to APRA, the super fund has acknowledged its concerns and has committed to:
- Engage independent experts to undertake reviews of its governance, risk management and insurance administration processes, as well as undertake a review of the root causes of APRA’s concerns.
- Prepare an integrated plan that details all activities Cbus is undertaking, or will undertake, to address the issues identified, and which specifies who is accountable for each activity, incorporating APRA’s feedback, for approval by Cbus’ board.
- Appoint an independent reviewer to provide assurance reports on the implementation of the plan, whether it is sustainable and whether further work is necessary to ensure the root causes of the weaknesses are addressed.
“APRA will work closely with Cbus to develop a workable time frame for the delivery of sustainable rectification under the integrated plan to ensure that actions are implemented quickly, efficiently and in the appropriate order of priority,” the regulator said, adding that the CEU means if Cbus breaches any of the undertakings, APRA can enforce them in the Federal Court.
Additionally, the undertakings given by Cbus are separate to the licence conditions that were imposed by APRA in August, which will remain in force.
Meanwhile, Cbus will publish its rectification plan under additional licence conditions imposed in August 2024, following misconduct allegations involving the Construction, Forestry and Maritime Employees Union (CFMEU), addressing an independent report’s findings on trustee assessments and fund expenditure, released in November.
“Cbus is now required under the licence conditions to publish the rectification plan. APRA will hold Cbus accountable for the implementation of its rectification plan and will engage the full range of supervisory and enforcement responses where warranted,” APRA said.
On Monday, commenting on the release of the Samuel review of Cbus Super 10 years after its completion, Senator Andrew Bragg noted that the issues on APRA’s radar are not new issues and have persisted at the fund for decades.
“Cbus is facing another prudential review and a new governance report by Deloitte. These are not new issues. A report was completed by Graeme Samuel in 2015 into these same issues,” Bragg said in a statement.
“The report makes clear the governance standards at Cbus were as broken then as they are now.”
The Samuel report, which was authored by former Australian Competition and Consumer Commission chairman Graeme Samuel, recommended that in order to dilute the union influence at the fund, Cbus needed to undergo chair appointment reform, appoint more independent directors, and establish anti-CFMEU conflict rules, among other things.
“It appears no progress has been made in a decade. The government seems uninterested at best and seems unwilling to make improvements for consumer,” Bragg said.
