PARLIAMENTARY SUPERANNUATION SCHEME

 

 

FUNCTIONAL RESPONSIBILITY AND STRUCTURE

 

Establishment

 

The Parliamentary Superannuation Scheme (the Scheme) and the South Australian Parliamentary Superannuation Board (the Board) were established under the Parliamentary Superannuation Act 1974 (the Act).

 

Functions

 

The Board is responsible for the administration of the Scheme which provides for the payment of benefits to persons who have served as members of Parliament and also makes provisions for the families of such persons.

 

The Scheme is administered through the Parliamentary Superannuation Fund (the Fund).  The Fund, established under the Act, records as income to the Fund, members’ and the Government’s contributions and revenue derived from the investment of those monies, and also records benefit payments and administration costs.

 

Amendments to the Act came into operation on 15 September 2005 effectively creating a new component of the Scheme. The Scheme now has three components:

 

·                     PSS 1 (old scheme) — a compulsory superannuation scheme for the provision of pension based benefits which was closed to new members in 1995;

·                     PSS 2 (new scheme) — a compulsory superannuation scheme for the provision of pension based benefits which was closed to new members in 2005;

·                     PSS 3 (current scheme) — an employer sponsored contributory superannuation scheme for new members. The PSS 3 also allows members to make contributions.

 

Further information on these components is provided in Note 1(d) of the financial report.

 

The investment management responsibility for the Fund is vested with the Superannuation Funds Management Corporation of South Australia (Funds SA) under the Act.

 

The Board utilises the services of the Department of Treasury and Finance - Superannuation Office (Super SA) to administer the Scheme.

 

 

AUDIT MANDATE AND COVERAGE

 

Audit Authority

 

Audit of the Financial Report

 

Subsection 31(1)(b) of the Public Finance and Audit Act 1987 provides for the Auditor-General to audit the accounts of the Parliamentary Superannuation Scheme for each financial year.

 

Assessment of Controls

 

Subsection 36(1)(a)(iii) of the Public Finance and Audit Act 1987 provides for the Auditor-General to assess the controls exercised by the Board in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities.

 

This assessment also considers whether those controls are consistent with the prescribed elements of the Financial Management Framework as required by Treasurer’s Instruction 2 Financial Management Policies.

 

Scope of Audit

 

The audit program covered major financial systems and was directed primarily to obtaining sufficient evidence to form an audit opinion on the financial report and internal controls.

During 2005-06, specific areas of audit attention included:

 

·                     contributions from members and employers

·                     pension payments

·                     liability for accrued benefits.

 

The audit did not include a review of the investment and management of the Scheme assets as these areas were reviewed as part of the audit of Funds SA.

 

 

AUDIT FINDINGS AND COMMENTS

 

Audit Opinions

 

Audit of the Financial Report

 

In my opinion, the financial report presents fairly, in accordance with the Treasurer’s Instructions promulgated under the provisions of the Public Finance and Audit Act 1987, applicable Accounting Standards, and other mandatory professional reporting requirements in Australia, the financial position of the Parliamentary Superannuation Scheme as at 30 June 2006, the results of its operations and its cash flows for the year then ended.

 

Assessment of Controls

 

In my opinion, the controls exercised over the Parliamentary Superannuation Scheme in relation to the receipt, expenditure and investment of money, the acquisition and disposal of property and the incurring of liabilities are sufficient to provide reasonable assurance that the financial transactions of the Parliamentary Superannuation Scheme have been conducted properly and in accordance with law.

 

Audit Communications to Management

 

The audit of the Scheme indicated that the internal controls over its operations were satisfactory.  No significant issues were raised as a result of the audit.

 

 

INTERPRETATION AND ANALYSIS OF FINANCIAL REPORT

 

Highlights of Financial Report

 

	2006	2005	Percentage
	$’million	$’million	Change
OPERATING REVENUE
Contributions	4.2	4.1	2
Net investment earnings	25.8	19.0	36
Total Operating Revenue	30.0	23.1	30
OPERATING EXPENDITURE
Transfer to Consolidated Account	17.0	8.0	n/a
Benefits and other expenses	12.3	19.1	(36)
Total Operating Expenses	29.3	27.1	8
Operating Result	0.7	(4.0)	n/a
Net Cash Flows from Operations	(22.9)	(9.7)	n/a
ASSETS
Investments	138.1	135.1	2
Other assets	0.2	0.3	(33)
Total Assets	138.3	135.4	2
LIABILITIES
Liability for accrued benefits	134.1	131.7	2
Other liabilities	0.6	0.7	(14)
Total Liabilities	134.7	132.4	2
EXCESS OF NET ASSETS OVER LIABILITIES	3.6	3.0	20

Operating Statement

 

Operating Revenues

 

Investment activity for the year resulted in a net return of $25.8 million ($19 million).  Investment returns are further discussed in the commentary for Funds SA.

 

Operating Expenses

 

Benefits expense decreased by $6.8 million to $12.1 million for the year.  Benefits expense comprises the benefits paid and the change in the liability for accrued benefits.  Benefits expense can fluctuate significantly due to changing assumptions in the calculation of the estimated liability for accrued benefits.  An actuarial review is undertaken every three years but the assumptions from this review are used to calculate the accrued liability in years between reviews.

 

In 2005 the actuarial review was completed which resulted in revised assumptions.  The most significant change was a reduction in the pensioner mortality rates resulting in a further increase in the Liability for Accrued Benefits.  In 2006 the same assumptions were applied, increasing the Liability for Accrued Benefits by $2.4 million ($13.2 million).  Refer to Note 7 ‘Liability for Accrued Benefits’.

 

Transfer to Consolidated Account

 

After an actuarial assessment for the employer estimated accrued liabilities, the Treasurer approved a transfer of $17 million ($8 million) to the Consolidated Account. 

 

Operating Result

 

The year’s result represents the excess of net investment revenue of $25.8 million and contributions of $4.2 million over benefits expense of $12.1 million and a transfer to the Consolidated Account of $17 million.

 

Statement of Financial Position

 

As at 30 June 2006, there was an excess of net assets over liabilities of $3.6 million ($3 million); the Scheme is therefore fully funded.  The estimated liability for accrued benefits increased by $2.4 million to $134.1 million ($131.7 million) for which net assets of $137.7 million ($134.6 million) were available to pay benefits.  Refer to ‘Operating Expenses’ for an explanation of the increase.

 

In comparison the vested benefits as at 30 June 2006 were $150.2 million.  Vested benefits represent benefits which members are entitled to receive had their membership been terminated at reporting date.  Vested benefits are greater than accrued benefits by $16.1 million as vested benefits are based on the involuntarily expiration of services.  As a result members would be entitled to the benefits immediately.

 

 

FURTHER COMMENTARY ON OPERATIONS

 

Pensioners

 

The number of pensioners, and pensions paid for the past four years, was:

 

	2006	2005	2004	2003
Pensioners	112	97	101	103
Pensions paid ($’000)	5 659	5 307	5 292	5 018

 

Contributions by Members

 

The number of contributors, and contributions received from members for the past four years, was:

 

	2006	2005	2004	2003
Contributors	69	69	69	69
Contributions received ($’000)	1 047	1 065	1 070	962