It appears that the annual ERS returns as at 31 December funds had to submit by 15 February over the past few years has now been replaced by a quarterly ‘Chart of Accounts’ (CoA) return. Not only has NAMFISA unannounced cut down the time for submission from 15 February to 31 January for the first return as at 31 December, but this is also now a format that is quite different from what has last been under discussion and testing and totally different of course form the previous ERS returns that service providers slowly got on top of.
Our precursory assessment of these all-new reporting requirements highlights the following concerns:
- Unlike in the past no ‘operator’s manual’ has been provided and it will be up to the ‘operator’ to make assumptions of what information is to be inserted where this may not be self-evident.
- NAMFISA will not provide and Excel template to assist in completion of the return. It will thus be difficult or outright impossible to cross check the data inserted.
- The data required to be collated is overwhelming with 35 sections to be completed per fund.
- No guidance is provided anywhere by NAMFISA, e.g. do we need to insert debits as positive and credits as negative values or vise-versa?
- There is no way to cross check data inserted. Although there is a brief balance sheet check whether assets = equity + liabilities, where do you start searching if this is not the case, particularly since there is no indication whether debits, respectively credits, are to be put in as plus or as minus or without any sign. It is likely that one cannot submit the return if the balance sheet does not balance.
- On the positive side, there is a lot of ‘noise’ in the return, many fields are actually greyed out which is not visible from the pdf sheet circulated.
- Asset managers and administrators who will have to provide most of the data were not given the opportunity to align their systems to this all-new report.
- The CoA does not follow a very structured approach and the different sections make it even more difficult to follow.
This report clearly presents quite a challenge to funds and their service providers. Service providers’ service agreements would at best make provision for the submission of the ERS return on an annual basis, let alone something much more detailed in totally new format on a quarterly basis. Service agreements will have to be revised to provide for this ‘new animal’.
It seems that the Registrar has little sympathy for funds requesting extensions, on the basis that there has been sufficient forewarning for some time that a ‘new animal’ will be released from its cage and the argument that ‘all other industries’ also have to submit by 31 January 2019. (Interestingly we understand that the insurance industry was in fact granted extension.) Tough luck for you if you thought it’s going to be a house cat and it actually turned out to be a lynx since its release jbC (‘just before Christmas’). The fact that pension fund administrators administer significant numbers of financial institutions on the outsourced basis, each one of whom has to submit the all-new report, whereas the other regulated industries typically only report on their own institution on the in-sourced basis, seems not to carry any weight!
We have pointed out before that it serves little purpose to require any reporting that is not aligned to international generally accepted accounting standards, which CoA certainly is not. It is so detailed that it will be impossible to achieve consistent disclosure by all funds and hence any comparisons between funds and pension fund industries be it local or international, will not be reliable or meaningful. It is a futile exercise that will only add to the cost of compliance of funds and puts ever more in question the viability of funds other than very large funds, to retain their identity as stand-alone fund.
The following commentary by a well versed trustee gives a reflection of the current state of affairs in our industry:
“I really do not think that the Chart of Accounts is reasonable at all for Pension Funds, and this project must have been scaled down to balance the costs versus the benefits. Further, they should have developed the returns in Excel which can then be uploaded. These returns should also have been coherent and meaningful rather than an endless list. NAMFISA must act reasonably as administrators of the Pension Funds Act. Reasonability is required of administrators of all laws by our Constitution. We must go back to the drawing board, agree on what is reasonable to be provided on quarterly basis and to be provided on annual basis (together with the AFS) as well as formats and structure of the returns. They must also show their readiness on the project and remove all errors that are being encountered, things don’t balance.”
Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.