Efficient accounting, proper records making CPS risk free

As the need to address the problems bedevilling past pension schemes in the country necessitated the enactment of the Pension Reform Act 2004, it must be appreciated that it has not been business as usual for operators under the new pension regime in the country.

It was in this regard that all Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFC) licensed by the regulatory authority in the industry, National Pension Commission (PenCom) are required to keep proper books of accounts and records showing income, expenditure, assets, the investment and the returns on investment made with the contributions being managed or held by them.

The pension fund administrators or custodians are also mandated to, not later than four months from the end of the year cause their accounts to be audited by qualified external auditors.

The audited financial accounts of every pension fund administrator or custodian are to be submitted to the commission for approval not later than 120 days from the end of its financial year.

Once the audited account has been approved by PenCom, the operators are expected to publish the audited account approved in at least two daily newspapers printed and circulating in the country within one month of the approval by the commission.

Thereafter, the PFAs and PFCs are required to exhibit approved audited accounts in a conspicuous position in each of their offices and branches within 30 days of the approval throughout the financial year.

Besides, the pension fund administrator and custodian are further required to, not later than four months from the end of the financial year submit to the commission an annual report in respect of the immediate preceding year on the pension funds being managed by them and such report shall include the audited accounts.

It will be instructive to stress here that any external auditor appointed by a pension fund administrator or custodian as required under Section 56 of the Act, have responsibility to the commission for the protection of pension funds and shall, in the discharge of his duties to the pension fund administrator, report certain situations to the commission. The external auditor is required to report to PenCom any extreme situation such as evidence of imminent financial collapse of the pension fund administrator or custodian.

The auditors are also to report to the commission, any evidence of an event or occurrence which has led or is likely to lead to material diminishing of the net assets of the pension fund administrator or custodian.

In case there is any evidence that there has been a significant weakness in the accounting and other records or the internal control systems of the pension fund administrator or the custodian, the auditor is expected to furnish PenCom with such information.

The auditors are also compelled to disclose to the commission, any evidence that the management of the pension fund administrator or custodian has reported financial information to the commission which is misleading in a material particular.

Where the external auditor believes that a fraud or other misappropriation has been committed by the directors or the management of the pension fund administrator or custodian or has evidence of an attempt by the directors or senior management to commit such fraud or misappropriation, he is required to intimate it to the commission forthwith.

In addition, it is the responsibility of auditor to inform PenCom where there has been an event or occurrence which affects or is likely to affect the auditor’s confidence in the competence of the directors or the senior management to conduct the business of a pension fund administrator or custodian in a prudent or safe and sound manner.

It should be appreciated that these obligations of external auditors to PenCom highlighted above are inevitable to ensure the safety of pension funds and assets, as well as prevent pension schemes from possible collapse.

In discharging these responsibilities, this should not be construed to be breach of the duty of the auditor to a pension fund administrator or a custodian by reason only of his communicating in good faith to the commission, whether or not in response to a request made by the commission, any information or opinion on any matter or situation to which this section applies.

The auditors of pension fund administrators and custodians should also bear it in mind that should they act in contravention of or fail deliberately or negligently to comply with any of these provisions of the Pension Act, they have committed an offence and the affected auditor is liable on conviction to a fine not less than N10,000,000 for the firm or imprisonment of a term not less than three years for the responsible partner or principal officer or to both such fine and imprisonment.

Again, in view of the significant growth in the size of nation’s pension assets and the changing dynamics of pension business in Nigeria, all the licensed PFAs are now required to create a minimum of 11 departments each.

The departments PFAs are required to create are Contributions/Collections; Investment; Benefit Administration; Business Development/Relationship Management; Finance; Information Technology; Compliance; Risk Management; Internal Audit; Administration/Human Resources; and Legal/Company Secretary.

On a more specific note, the Finance Department is comprised of two units, one each for Fund Accounting and the other for Company accounts. The Department is responsible for maintaining adequate books of accounts and records of all funds under management as well as the company in accordance with Nigerian Accounting Standards and guidelines issued by the Commission.

It is needless to stress here that the directive has assisted in strengthening the operations of the PFAs managing the contributory pension scheme in the country.