More governance needed when super transparency is not so super

AS THE financial services regulator continues to keep mum about its investigation into one of the country's biggest super funds, MTAA Super, it can be revealed that the MTAA Ltd trade association is embroiled in another investigation related to conflicting information it has lodged with different bodies in relation to wages and directors' fees. A letter, written in March by the department of treasury's ACT Revenue Office, with a subject heading "National payroll tax investigation of MTAA", reveals the investigation is continuing.

The contents of the letter reveal that the ACT Revenue Office was having trouble reconciling two sets of accounts that exist in relation to the amount the motor trade association MTAA paid to MTAA Super directors. For instance, the directors' fees MTAA declared in its payroll tax returns between 2005 and 2010 totalled $1.17 million, compared with $2.9 million stated in its profit and loss accounts filed with ASIC.

Sound confusing and complicated? It is. The information supplied was so confusing that it prompted the ACT Revenue Office to say it had "grave concerns" about MTAA's ability to provide year-to-date payroll and superannuation summaries from the payroll system, as required by the notice of investigation dated September 6, 2010.

The letter also draws attention to fringe benefits and states that the information supplied by MTAA does not identify the recipients of all benefits. The letter gave MTAA until March 18 this year to supply it with more information. "All information and records supplied by March 18 will be reviewed and considered prior to the national payroll tax investigation being finalised."

It is not known why different sets of numbers exist in relation to the payment of directors fees over the past few years because nobody will comment. However, it epitomises the need for more transparency among super funds. It also shows why it is important for super funds to publicly release the remuneration of directors and senior executives.

Few super funds release details of how much they pay directors because they don't have to. Indeed, some super funds don't even bother to inform members who the directors are, how long they have been on the board, how many times they attend board meetings, or give details of their background.

MTAA Super chairman John Brumby, the former premier of Victoria, decided earlier this month to introduce changes aimed at improving its "transparency, accountability and governance".

This included publicly releasing its annual accounts as well as the remuneration of directors and executives.

But it has taken a huge amount of controversy to get MTAA Super to this point. It is one of the worst-performing funds over one, three, five and seven years, it is being investigated by the Australian Prudential Regulation Authority and earlier this month its chief executive Michael Delaney announced he would step down just weeks after a meeting of MTAA Ltd directors passed a no-confidence motion in him.

Until a restructure last December, the motor trade association was the service provider to the MTAA Super fund trustee. Since then most of the staff have moved across to MTAA Super, and MTAA remains the owner of the super fund trustee company, which gives it the right to nominate three of the nine directors of the super fund.

This column revealed that in August last year Delaney wrote a letter to trustees that said the trustee of the fund had been "bedevilled by APRA" for years, had been subject to "lurid" allegations by the Australian Prudential Regulation Authority and had been issued with a show-cause notice.

APRA is yet to make an official statement about its investigation, but the silence has left the $1.3 trillion superannuation industry and members of the $5.8 billion MTAA Super Fund confused and angry about the lack of transparency in an industry that manages their retirement savings.

The MTAA saga has cast the spotlight directly on the opaqueness of super funds and the importance of knowing how much directors are paid. Unfortunately change won't come from recommendations about to be released in a draft report into superannuation by an industry panel headed by Paul Costello. The draft report is expected to be released next week and it is expected to focus on My Super.

It wasn't the fault of Costello or his fellow panellists that corporate governance was largely ignored. It was the fault of the Gillard government, which excluded most issues related to transparency and corporate governance from the terms of reference. The upshot is directors' fees, transparency of financial reporting and consideration of the need for an overhaul of the structure of super boards were carved out.

With super funds making decisions on the fourth-largest pool of managed money in the world, largely built from compulsory savings, more needs to be done to direct the spotlight on governance, board composition, conflicts of interest and the standard of education of board and trustee members.

MTAA's poor performance raises questions about the country's default super fund scheme. The regulatory separation between APRA and the Fair Work Australia framework for default super means APRA cannot remove a super fund from an award because Fair Work Australia has legislative power over default fund selection.

aferguson@fairfaxmedia.com.au