PF interest rate may be on the table but look at mess underneath

The Director General of Audit found so many problems with EPFO’s annual accounts statement for 2003-04, that its comments take up 16 pages of the 55-page report. The import of its findings: Liabilities under-stated by Rs 2,468.11 crore, as were assets by Rs 4.62 crore, and both Income and Expenditure Accounts under-stated by Rs 3.29 crore.

‘‘In successive reports, the auditors have pointed out that EPFO is not following the format for accounts, stipulated for government organisations,’’ says W R Varadarajan, secretary of the Centre of Indian Trade Unions (CITU) and a trustee on EPFO’s board.

What’s worse, consider this comment from the auditor: ‘‘Investments are accounted for the organization at face value and not at their realizable value. No disclosure to this effect is made in the accounts.’’

A majority of the auditor’s observations deal with transactions much before 2003-04, some originating as far back as 1993. Yet, little has been done by the EPFO to put these decade-old accounting anomalies in order. Here’s how:

• Most alarming for members is the way the Interest Suspense Account is growing. The interest earned during a year is credited to this account, from where it is transferred to workers’ accounts at the end of the year. But on March 31, 2004, there was a credit balance of Rs 8,408.88 crore in this account.

EPFO claims that Rs 2,332.18 crore pertains to interest earned up to 2002-03. This is to be credited to those members’ accounts, which have not been compiled up to 2002-03. The rest of the money, Rs 6076.7 crore, is the interest earned during 2003-04 that was to be credited to members’ accounts during next year, EPFO states.

Why should EPFO wait for a year or two to credit the interest earned in the current year? The auditor found EPFO’s stance untenable. Yet, the closing balance in the account has been increasing each year.

• Fraudulent payments by EPF offices have grown from Rs 72.16 lakh in 1999-2000 to Rs 2.71 crore in 2003-04. Of this, Rs 1.96 crore fraudulent payments were made in 2003-04. While the auditor recommends a thorough investigation into this, what’s worse is that the EPFO has depicted these fraudulent payments as assets in its balance sheet.

That’s not all—this was also pointed out in the previous years’ audit reports, but no efforts have been made to recover the amounts. In reply, the EPFO stated that regional offices have initiated civil and criminal proceedings against those involved.

• Just like fraudulent payments, over-payments have also grown from Rs 16.79 lakh in 1999-2000 to Rs 57.01 lakh in 2003-04. Again, these payments have been shown as assets in the balance-sheet for years.

• At least nine receipt and payment accounts had erroneous or missing debits and credits. The actual balances can’t be ascertained in these nine accounts. By March 31, 2004, erronous credits over the years had accumulated to Rs 94.25 crore and erroneous debits were Rs 139.39 crore. Of this, EPFO has only been able to fix the errors pertaining to debits of Rs 1.72 crore and credits of Rs 5.53 crore.