The board of Keva, the €35.3bn local government pension institution of Finland, has admitted its management did not follow good practises in corporate governance in the previous running of the scheme.
Keva insures 1.3m Finns working or having retired from jobs at the local government, the state and the Evangelical Lutheran Church of Finland.
In November, a scandal rocked the scheme when Finnish media accused Keva’s then-managing director Merja Ailus of charging the institution for some of her personal expenses, failing to inform the tax office of the full value of her employee-sponsored flat and receiving child benefits from two countries simultaneously.
The crisis led to Ailus’s resignation and the launch of an investigation on Keva’s management culture.
The investigation by the fund’s own finance director Tom Kåla found that regulations on management’s fringe benefits had not been detailed enough on all aspects and said a review of them is necessary.
On Wednesday, Keva chairwoman Laura Räty told a press conference: “[Keva’s] guidelines for fringe benefits are not sufficient. Where guidelines exist, they have not always been followed. Good corporate governance has not been followed in all situations.”
Kåla said the current regulations, for example, did not clearly define which matters Keva’s board should decide on, or which were subject to the managing director’s decision.
Kåla’s report noted that policies on fringe benefit flats and cars need to be revamped.
According to him, current guidelines on deciding the price of a fringe benefit residence or refurbishing fringe benefit flats are insufficient.
In the future, actions and decisions on these issues also need to be recorded and documented.
There should also be more effective communication between accountants and internal audits and Keva’s board.
Keva’s budget will be revamped, and operational costs will be presented in a more detailed and transparent manner.
For example, costs incurring from purchases, representational costs and travel costs will all have to be declared and explained in more detail – an issue that obviously played a significant role in the scandal of last month.
In a mutual statement released Wednesday, Keva’s board said: “There is also a need to develop leadership culture and atmosphere at Keva by other means than just instructions and rules.
“Fairness, openness and transparency should be visible in the everyday work of the whole organisation. The management of the institution, in particular, has to run the institution in an exemplary manner, uphold the right attitude and maintain its commitment to the values that guide the institution.”
The fund will embark on reforming its management guidelines in January 2014.
Keva’s board has set a separate, six-member working group consisting of its management and a representative of its scheme members, to prepare for the reform with a deadline before the board meeting of March 2014.
New rules for the scheme’s management will come into force over next year.
“Keva’s board is monitoring the progress of this work,” Räty added.
“The working group can use an external consultant for this project.”