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1,731 crore "hidden treasure" that was not credited to 4.7 crore Provident Fund (PF) accounts is what enabled fund manager Employees Provident Fund Organisation (EPFO) to offer a higher 9.5 interest rate to subscribers this financial year, the Comptroller and Auditor General (CAG) has found.
The EPFO has been giving 8.5 percent interest to PF subscribers since 2005-06. However, in 2010-11, the PF fund manager increased the rate to 9.5 percent, citing a surplus of1,731.57 crore.
The accumulation in the Interest Suspense Account (ISA) of the fund manager which the CAG has termed as a hidden treasure was due to non-updation of accounts of 4.72 crore members as of March, 2010, sources in the finance ministry said. There are about 10 crore accounts with the EPFO.
"It was observed that interest on 4.72 crore members' accounts were yet to be credited and were pending as on March 31, 2010," the CAG said in its report.
The Comptroller and Auditor General (CAG) wrote a letter in this connection to labour minister Mallikarjun Kharge last week, they informed. The EPFO falls under the purview of the labour ministry.
As of March, 2010, the EPFO had a balance of4,672 crore in the ISA. The total income received in each year is parked in the ISA.
The actual interest liability on 4.72 crore pending accounts is not ascertainable, the CAG said, adding, "In the absence of the same, the adequacy of the above balance of4,671.83 crore to meet the future interest liability for pending accounts can not be verified in audit."
However, the EPFO in its reply during the audit had said taking the actual income each year and accrued liability each year, the cumulative position at the end of 2009-10 has been worked out.
"This reveals the net balance of1,731.57 crore in the ISA. The remaining amount in the ISA is attributable to the members on account of interest due to them in the past or up to the end of 2009-10," it said.
However, the CAG said the interest should be paid only after the EPFO has updated members' accounts.
The auditor also asked the EPFO to shift to an accrual basis of accounting from the current practice. The EPFO currently follows a cash basis of accounting for calculating investments, while it calculates the interest liability on the basis of accruals.
EPFO should update all the member accounts, then "it shall determine its interest liability" so that the balance remaining thereafter can be declared as a surplus, the letter to Kharge said.
1,731 crore "hidden treasure" that was not credited to 4.7 crore Provident Fund (PF) accounts is what enabled fund manager Employees Provident Fund Organisation (EPFO) to offer a higher 9.5 interest rate to subscribers this financial year, the Comptroller and Auditor General (CAG) has found.The EPFO has been giving 8.5 percent interest to PF subscribers since 2005-06. However, in 2010-11, the PF fund manager increased the rate to 9.5 percent, citing a surplus of
1,731.57 crore. The accumulation in the Interest Suspense Account (ISA) of the fund manager which the CAG has termed as a hidden treasure was due to non-updation of accounts of 4.72 crore members as of March, 2010, sources in the finance ministry said. There are about 10 crore accounts with the EPFO.
"It was observed that interest on 4.72 crore members' accounts were yet to be credited and were pending as on March 31, 2010," the CAG said in its report.
The Comptroller and Auditor General (CAG) wrote a letter in this connection to labour minister Mallikarjun Kharge last week, they informed. The EPFO falls under the purview of the labour ministry.
As of March, 2010, the EPFO had a balance of
4,672 crore in the ISA. The total income received in each year is parked in the ISA.The actual interest liability on 4.72 crore pending accounts is not ascertainable, the CAG said, adding, "In the absence of the same, the adequacy of the above balance of
4,671.83 crore to meet the future interest liability for pending accounts can not be verified in audit."However, the EPFO in its reply during the audit had said taking the actual income each year and accrued liability each year, the cumulative position at the end of 2009-10 has been worked out.
"This reveals the net balance of
1,731.57 crore in the ISA. The remaining amount in the ISA is attributable to the members on account of interest due to them in the past or up to the end of 2009-10," it said.However, the CAG said the interest should be paid only after the EPFO has updated members' accounts.
The auditor also asked the EPFO to shift to an accrual basis of accounting from the current practice. The EPFO currently follows a cash basis of accounting for calculating investments, while it calculates the interest liability on the basis of accruals.
EPFO should update all the member accounts, then "it shall determine its interest liability" so that the balance remaining thereafter can be declared as a surplus, the letter to Kharge said.
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