Robert Wakefield and Julie Walker on the importance of keeping your administrator involved

Governance’, with a capital ‘G’, is the word on everyone's lips these days - a strategic approach and regulatory imperative that shapes and directs the entire 'who, what, where, when and why' of everything we do in pension administration.

'Frenemies', a loaded combination of friends and enemies, neatly sums up the slightly strained relationship between administrators and auditors that sits right at the heart of effective governance - both parties are willing to play ball, but each generally sticks to their own end of the pitch, eyeing the other suspiciously while occasionally moving the goalposts.

This sense of guardedness between auditors and administrators is a natural function of the audit process - anyone who has ever been on the wrong end of a pension audit knows that it can an uncomfortable and difficult experience - a potentially fraught exercise where the one-way scrutiny puts the administrator very much in the spotlight, or, as sometimes happens, in the firing lines.

Two sides to every story
If breaking bread with an enemy can be revealing - breaking bread with a room full of leading TPAs and pension auditors working together to facilitate mutual understanding, improve the overall audit process and iron out industry best practice can shed a whole new light on life on the other side of the audit fence.

The inaugural meeting of ICAS's Pension Auditor Discussion Group (PADG) and Third Party Administrator joint working group in April this year explored the audit experience from both sides, with auditors and administrators setting aside competing priorities and professional rivalries to share their own experiences and consider the audit process from a range of perspectives.

He said, we said…
Any group of administrators in any office on any day will probably come up with the same top 5 audit 'challenges'
- Different audit firms asking for different things, or the same audit firms asking for different things in different offices
- Inexperienced on-site auditors not understanding pension processes
- Audit queries coming in on 'drip feed' basis and expecting an immediate response.
- Bypassing the admin team to take minor queries/issues directly to trustees.
- Unnecessary stylistic changes to the TR&A that are about the auditor's style rather than the document's substance.

More surprisingly, and in fairly direct contradiction of anything ever said by an administrator with an audit deadline, the audit profession faces its own 'challenges' in dealing with administrators
- Different administration firms providing different things, or the same administrator firms providing different things in different offices
- Pension administrators not understanding audit requirements
- Slow response to audit queries
- Not taking account of regulatory changes to reporting basis
- Reports not reflecting background scheme issues - major issues minuted but not carried through to the TR&A

A short walk in the auditors' shoes shows that they are dealing with similar issues, obstacles and frustrations to those facing administrators - working together to come up with best practice solutions benefits everyone, leaving the way clear to focus on the major issues rather than the minor irritations.

Communication
Regardless of the robustness of the control environment, the excellence of the work carried out or the administrators' absolute faith in their processes and procedures, the level of scrutiny that comes with an audit will always be unnerving in the same way as a passing policeman will always make us feel slightly guilty. This is as it should be - since comfort and complacency go hand in hand, the audit process is instrumental in maintaining a healthy sense of administrator 'accountability'.

Underlying this though is the importance of honest communication (small c) and openness in working with our counterparts in audit to break down professional barriers and help each other get the job done.

The wider pensions world
From the administration perspective, a sit-down with the regulator could be a useful, if long, discussion - but every other pensions specialism must have its own particular version of 'why, oh why' that could perhaps be resolved by some open discussion and a clearer understanding of the other point of view.

Robert Wakefield is an associate in the Leeds office and Julie Walker is a leader of the pension administration team in the Glasgow office of Barnett Waddingham

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