CAG Discovers 1,336-cr Gap in EPFO Books
The country's chief auditor has uncovered a.1,336-crore negative balance in the books of the Empoyees Provident Fund Organisation (EPFO), the custodian of 8.15 crore formal sector workers lifetime savings. A report, prepared by the Comptroller and Auditor General (CAG) and reviewed by ET, says this discrepancy in the EPFOs books for 2011-12 could grow further. For beneficiaries, this could mean lower returns on provident fund savings for 2012-13 and 2013-14, if the difference remains. The CAGs findings indicate that the PF rate for 2012-13 could have been as much as 9% if its accounts were in order. On Monday, the EPFOs trustees are expected to consider an interest rate of 8.5% on the provident fund savings for 2012-13. The payout last year was at 8.25%. The EPFO had updated 16.62 crore pending accounts of PF subscribers in 2011-12, under a special drive to rectify its accounts. This resulted in the PF office paying out Rs 1,336 crore more than the funds available with it, the auditor has highlighted. The interest suspense account (ISA), where income from EPFOs investments is parked, had a balance of Rs 22,461 crore at the beginning of 2011-12, but the EPFO credited. 23,797 crore into members accounts during the year. (This) had resulted in negative balance of.1336.12 crore in the ISA. Exhibition of negative balance in the balance sheet resulted in understatement of total liabilities and assets, the auditor said, adding they are unable to form an opinion on the correctness of the amount paid out to members in the absence of details and break up of interest credits. The CAG report has warned that the negative balance will expand as the EPFO had 38.74 lakh accounts pending for updation on March 31, 2012. The updation of these accounts will further increase the negative balance and consequential decrease in amount of interest to be credited in the next year, the report says. The boards finance committee had refused to discuss the EPF rate proposal at its meeting on February 15, but the CAGs comments on the negative balance and its impact on the interest rate were debated upon. In its response to CAGs observations, the PF office has admitted that such negative balances resulting from overdrawal of funds are adjusted while calculating the next years PF rate. To buttress the argument, it has pointed to the negative balance of.510 crore in 2010-11 that was adjusted from estimated interest income of 2011-12. The EPF rate saw the sharpest cut in a decade in 2011-12, when it was slashed from 9.5% to 8.25%.If the PF office hadnt begun this year with a.1,336 crore negative balance, the feasible EPF rate could have been 0.5% higher, or 9%, as per the income and liability estimates for 2012-13. The same approach will be taken while proposing rate of interest for the year 2012-13, to insure there is no net overdrawal, the EPFO has said. The department has justified the negative balance saying the EPF rate is declared by comparing estimated interest income and liability. Since this exercise involves assumption of certain figures, the actual result may be different. On the warning that the negative balance could increase in 2012-13 and depress the EPF rate for 2013-14, the EPFO has said that the principal amount corresponding to the 38.74 lakh pending accounts is not known. Therefore,interest thereon to be credited is also not known at present. The audit findings and the EPFOs response would also be examined by the board.
Economic Times, New Delhi, 25-02-2013