Accounting bodies agree registrable superannuation entities (RSEs) need to increase transparency of reporting but are concerned the regulatory overlap created by the Government’s proposed legislative amendments will leave fund members to bear the additional compliance costs.
In a joint submission into the financial and auditing requirements for superannuation funds the Chartered Accountants Australia and New Zealand (CA ANZ), CPA Australia, and the Institute of Public Accountants (IPA), said a while of government approach to regulatory policy should be adopted.
“We are concerned about the potential for regulatory overlap created by these proposed legislative amendments. Ultimately, it will be fund members who bear additional compliance costs incurred by RSEs, which comes at a time when RSEs are being strongly encouraged to focus on cutting costs to improve member outcomes,” they said.
The bodies said RSEs already had significant reporting and audit obligations to the Australian Prudential Regulation Authority (APRA) and their members, under the Superannuation Industry (Supervision) Regulations 1994, Corporations Act, Corporations Regulations 2001 and the Financial Sector (Collection of Data) Act.
“We encourage a whole-of-government approach to regulatory policy and look for opportunities to streamline regulatory processes and address instances of regulatory overlap, while maintaining strong safeguards, in line with the Commonwealth Government’s Deregulation Agenda,” they said.
“We believe that the introduction of the requirements in the bill requires a full ‘red-tape reduction’ review to ensure that there are no competing/conflicting legislative requirements introduced inadvertently by the new legislation. This would be consistent to other red-tape reduction reviews that have been conducted for listed entities in the past.”
The accounting bodies noted that while they broadly agreed with the premise of using publicly- listed companies as a benchmark for introducing statutory financial reporting and audit requirements for RSEs, there were important differences between the characteristics of RSEs and those of publicly listed companies, as well as the ultimate user-needs of financial reports prepared by them.
Other recommendations the bodies made were:
Opportunities to streamline regulatory processes and address instances of regulatory overlap should be identified.
- An explicit statutory requirement should be introduced for RSEs to make annual financial reports available on their website;
- Annual financial report access fees normally charged by the Australian Securities and Investments Commission (ASIC) should be waived in the instance of RSE reports;
- RSEs should have an explicit statutory requirement to prepare annual financial statements in accordance with the Australian Accounting Standards (AAS);
- Preparation of financial reports for sub-funds should be deferred until the reporting objective, and the definition of “sub-fund”, are clarified;
- The effective date for funds publishing interim financial statements should be delayed for at least two years after the legislation is enacted, so that a cost/benefit analysis can be undertaken to determine whether this requirement should be retained;
- Disclosures should reflect fee categories which help to differentiate the services which may create a threat to the auditor’s independence, by inclusion of an additional category for “audit-related services”;
- RSEs auditors should have an explicit statutory requirement to comply with the Australian Auditing and Assurance Standards;
- Strict liability for auditors is inappropriate; and
- Draft regulations should be released for consultation as soon as possible, with a timeframe for feedback that permits appropriate levels of consultation and for well-informed submissions to be made.