Retirement fund body EPFO paid lesser amount as interest on PF deposits of over five crore subscribers than its earnings between 2007-08 and 2010-11, government auditor CAG has said.
"EPFO (Employees' Provident Fund Organisation) has been paying lesser amount as interest to subscribers than it has been earning on the corpus (except in 2006-07 and 2011-12)," the Comptroller and Auditor General of India (CAG) has said in a report on EPFO for 2011-12, tabled in Parliament today.
The CAG has analysed data on interest earned and paid to subscribers by EPFO between 2006-07 and 2011-12.
It observed that EPFO earned less on investments and paid more to subscribers in 2006-07 and 2011-12.
According to the report, EPFO earned Rs 7,779.63 crore in 2006-07 and credited Rs 7,976.24 crore into subscriber accounts in the same year. Similarly in 2011-12, it earned Rs 17,879.95 crore and credited Rs 23,145.81 crore accounts of PF subscribers.
In 2007-08, it earned Rs 8,706.88 crore on investments but credited Rs 7,854.60 crore only into subscriber accounts. Similarly a lesser amount of Rs 9,268.15 crore was credited in members'accounts as against an income of Rs 10,667.43 crore in 2008-09.
In 2009-10, it credited Rs 9,631.96 crore as interest compared to its income of Rs 11,933.88 crore
It credited an amount of Rs 8,719.53 crore against an income of Rs 14,181.90 crore in 2010-11.
CAG has said there were gaps between declared rate of interest and the rate at which it was earning on investments.
EPFO's earnings on investments were 7.49 per cent, 7.17 per cent, 7.46 per cent in that order for three straight fiscals starting 2006-07.
The earnings were 7.09 per cent, 7.05 per cent and 7.53 per cent for 2009-10, 2010-11 and 2011-12, respectively.
However the EPFO declared 8.5 per cent rate of interest on PF deposits for four consecutive financial years starting 2006-07.
It raised the rate of interest on PF deposits to 9.5 per cent in 2010-11 after discovering surplus in interest suspense account and then reduced it to 8.25 per cent for 2011-12.
CAG also observed that "total amount of money under EPF corpus was more than cumulative balance with all its subscribers, and the difference was increasing over the years. The gap could be due to non-updation of accounts, unclaimed accounts, and moneys in transit, etc. which is reflective of inadequate services to its subscribers."
According to the report, the Interest Suspense Account balance was not a true reflection of sums available for distribution as interest to EPF subscribers, in the absence of non-updation of about 38.74 lakh subscribers' accounts as of March 2012.
"More than 70,000 subscribers' accounts reflected negative balances, indicating excess withdrawals. These reflected inadequate service to its subscribers.
"Its income was consistently more than expenditure on running of schemes. The EPFO also did not adhere to the investment pattern prescribed by the Ministry of Finance," CAG said.
CAG also criticised EPFO for not regulating properly the private PF trusts or exempted establishments which manage their workers PF money and accounts.
"The EPFO did not exercise expected control on the employers of exempted establishments to ensure that the exempted establishments transferred the EPF accumulations to their Board of Trustees (BOTs) and the BOTs invested the money transferred to them." it said.
It further said that the revenue collection processes in the EPFO were deficient.
"The EPFO was not very encouraging towards voluntary coverage of its schemes. Inspections of establishments were less than prescribed targets, which led to insufficient controls over establishments."
The CAG has also pointed out raising the wage ceiling of Rs 6,500. The EPFO has recently raised it to Rs 15,000 per cent month.
The workers getting basic wages including basic pay and DA up to the prescribed wage ceiling can become members of schemes run by EPFO. However once someone become a member of EPFO schemes, he remains to be subscribers even in case his or her basic wages breaches the ceiling.
About the Employees' Pension Scheme 1995, the report said: "Valuation of Employees Pension Fund is not being done in time, nor are the reports received in a time bound manner and there is significant delay in action on valuation reports."
"Many of the weaknesses, in the implementation of scheme, included in this Report, have been persisting despite earlier assurances rendered by the Ministry (of Labour) to the PAC (Public Accounts Committee) through Action Taken Notes," it said.