APRA investigates Cbus spending after it handed millions to unions

The construction industry super fund handed more than $2m to unions in fiscal 2024 and is facing a fresh insurance scandal.

APRA is investigating Cbus’ spending practices, including payments to unions. Picture: David Clark

The prudential regulator will probe Cbus’ payments of millions of dollars to unions after taking action against the fund over its governance and risk practices that were “not fit for purpose”.

The Australian Prudential Regulation Authority has kicked off an investigation into the $100bn super fund and whether its spending — the fund handed $4.5m to unions in 2023 and 2024 — breached the SIS Act, as Cbus agreed to a court-enforceable undertaking to address the risk and governance failures.

APRA on Tuesday also revealed further wrongdoing by the fund on the insurance front, including that Cbus had over and under-charged members for insurance, failed to provide insurance cover when required and provided cover when it should not have.

Cbus’s trustee, United Super, notified ASIC of the latest insurance blunders in late December.

“Whilst United Super’s investigations into and rectification of the administrative errors remains ongoing, APRA is concerned that United Super may not be acting in compliance with its obligations,” the regulator warned.

The fresh insurance scandal comes days after The Australian revealed fellow union-backed fund Rest Super had “switched on” 2500 members’ insurance cover in error, and will keep charging them for it unless they opt out.

It also comes months after the corporate regulator sued Cbus for allegedly mishandling $20m of insurance money owed to grieving families and people with disabilities.

Data released by APRA in January showed Cbus handed $2.2m to unions in the 2024 financial year, including just under $1m to the CFMEU, as part of the $36m it spent on marketing over the 12 months. That was a jump of $3m on the year prior.

The fund spent a further $98m on admin services, an $18m lift on 2023, while board expenses came in at $20m, a more than 200 per cent jump on the $6.3m spent the year before.

“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. Where an entity’s practices are found wanting, APRA will not hesitate to take action to protect members’ interests,” APRA deputy chair Margaret Cole said.

The investigation comes months after APRA warned funds on their spending habits.

“Sports conference sponsorships, conferences, travel, discretionary expenditure … sometimes it’s not obvious what benefits that gives to members,” Ms Cole said in October.

“We understand that expenditure is required and that expenditure on marketing is required, but there are some things that just do not look as if they’re going to pass the test.”

Cbus’ links with the CFMEU have long been an issue of tension but were put front and centre last year amid allegations of corruption in the union and links to criminal gangs.

Three CFMEU directors were forced off Cbus’ board in August but union heavyweights Paddy Crumlin, Jason O’Mara and Lucy Weber all joined the board months later, despite APRA warning it was “not yet satisfied” the fund had gone through the required licensing conditions.

APRA deputy chair Margaret Cole. Picture: John Feder/The Australian

Newly released documents show the regulator has held concerns about Cbus’s risk and governance standards since as far back as 2021.

A series of warnings from the regulator followed its initial review, including in September 2022, when APRA told the fund it was taking too long — more than 12 months — to come up with a plan to improve its risk framework.

A second review conducted by the regulator in December 2024 found the fund had broadly the same risk and governance failures as it had in 2021. Risk management decisions were based on “incomplete and inconsistent” information about risks and compliance obligations, as well as risks from third-party service providers, the regulator said.

“United Super’s approach to operational risk management is not fit for purpose for the scale and complexity of (its) evolving business model,” APRA warned.

The court-enforceable undertaking agreed with APRA will see an independent expert identify the root causes of the systems failures, after which Cbus will need to prepare a plan and agree a timeline with APRA to resolve the issues.

Senator Andrew Bragg warned Cbus could now lose its licence.

“The fund has handed cash to the CFMEU and failed to meet its legal obligations to members. Mr Swan faces contempt of the Senate … He should consider his position,” Mr Bragg told The Australian.

Cbus chief executive Kristian Fok on Tuesday said the fund was committed to improving practices to ensure members receive the best possible services.

“Our priority is to ensure Cbus meets the highest standards that are rightfully expected of us by our members as one of Australia’s leading superannuation funds,” he said.

“We take our responsibilities to our members very seriously and are committed to ensuring that we operate to the highest standards of governance and compliance to provide the best retirement outcomes for our members.”

Mr Fok in December left the door open to the fund continuing the payment of millions of dollars to the CFMEU, which in turn funnels millions into the Labor Party. “We do believe there is incredible value in that relationship,” he told a Senate hearing.

The enforceable undertaking will see Cbus undertake a risk transformation program to fix the behavioural, cultural and governance failures.