Preface

The Report of the Comptroller and Auditor General of India for the year ended March 2012 containing the results of the Performance Audit of Employees’ Provident Fund Organisation (EPFO) has been prepared for submission to the President of India under Article 151 of the Constitution.

The Performance Audit was conducted through test check of records of the EPFO and its Regional Offices (ROs) and Sub-Regional Offices (SROs) for the period 2006-07 to 2011-12. Audit observations were issued to EPFO as well as the Ministry and the replies have been considered and appropriately incorporated in the Report.

Executive Summary

The Government of India has enacted a number of legislations in the area of social security. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is an important Act in this regard. The Act provides for compulsory provident fund, pension and deposit linked insurance in factories or establishments employing twenty or more employees in industries mentioned in Schedule I to the Act. The Government of India administers the Act through Employees’ Provident Fund Organisation.

Important findings of the Performance Audit Report are given below:

• Wage limit for coverage of employees under EPF Scheme was 6500 which has been continuing since June 2001.

(Paragraph 2.1)

• There were consistent shortfalls in receipt of contributions from the Central Government.

(Paragraph 2.1.2).

• Income of EPFO collected by way of administrative charges, etc. has been more than its expenditure on running of schemes.

(Paragraph 2.1.3)

• The balance in the ‘Interest Suspense Account’ increased consistently from 12445.29 crore in March 2007 to 22461.15 crore in March 2011.

(Paragraph 2.3)

• The EPFO did not follow prescribed pattern of investments.

(Paragraph 2.5)

• 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.

(Paragraph 2.6)

• 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.

(Paragraphs 3.3 and 3.4)

• A sum of RS. 313.20 crore was recoverable on account of EPF arrears from 20974 establishments in selected ROs/SROs of the five States as on 31 March 2012.

(Paragraph 4.3)

• Outstandings towards realisation of damages from unexempted establishments increased from RS. 151.78 crore to RS. 265.75 crore during 2006-07 to 2011-12.

(Paragraph 4.5)

• Employers of exempted establishments did not deposit RS. 129.20 crore to their respective Boards of Trustees. An amount of RS. 299.78 crore was not invested by the BOTs of 249 exempted establishments which was in violation of the provisions of exemption.

(Paragraphs 4.6.1 and 4.6.2)

• More than 70,000 Subscribers’ accounts had minus balances totalling RS. 45.06 crore, which is indicative of withdrawal in excess of available balance. Possibility of unauthorised withdrawals could not be ruled out.

(Paragraph 5.2)

• Balance in Inoperative/Unclaimed Deposit Account increased from RS. 332.14 crore to RS. 2948.11 crore during 2006-12. Further, number of inoperative accounts increased from 25,12,793 in 2006-07 to 73,00,262 in 2011-12.

(Paragraph 5.4)

Summary of Recommendations

• The wage limit may be suitably revised at regular intervals.

• Central Government should remit its contribution to EPFO in time.

• The EPFO may revise its administrative charges suitably.

• The EPFO may frame the budget estimates with due care as per provisions in GFRs. Ministry may scrutinize the budget proposals adequately before according sanction.

• The EPFO should prudently match its earnings with interest payouts to its subscribers.

• Government must immediately act on pending Valuers’ report and decide its impact on EPS accounts and carry out necessary corrections. The valuation exercise should be done annually on regular and timely basis and the impact thereof should be disclosed.

 • The Ministry may take appropriate action to reconcile the figures.

• The minimum number of meetings of the Committees should be held as per prescribed norms.

• The EPFO should closely monitor targets and ensure compliance for conducting regular surveys and inspections of establishments. Further, it needs to welcome establishments opting for voluntary coverage and ensure that notifications are issued in a time bound manner.

• The EPFO should ensure comprehensive updation of DCBRs, generate appropriate defaulters list and initiate necessary recoveries.

• The EPFO may monitor timely remittance of its deposits by SRI.

• The EPFO should evolve a procedure for constant monitoring and control mechanism to ensure that number of in-operative accounts are minimised.

• Updation of subscribers’ accounts should be done on a regular basis.

Conclusion 

The Employees Provident Fund Scheme together with the Employees Pension Scheme (EPS) and Employees Deposit Linked Insurance (EDLI) Scheme aims to provide social security to employees and their family members. It is, therefore, important that all establishments which satisfy the requirements of the EPF Act, are brought under its ambit without delays. EPFO ensures this through surveys and inspections. Significant shortfalls were noticed in this regard. Also, EPFO was not found to be very encouraging towards voluntary coverage of its schemes.

The Interest Suspense Account balance was not a true reflection of sums available for distribution as interest to subscribers, in the absence of updation of about 38.74 lakh subscribers’ accounts as of March 2012. Further more than 70,000 subscribers’ accounts reflected negative balances, indicating excess withdrawls. 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.

The revenue collection processes in the EPFO were deficient. Arrears in determination of dues, outstanding amount recoverable on account of administrative charges from the unexempted establishments, inspection charges from the exempted establishments were significant.

The EPFO did not exercise expected control on the employers of exempted establishments to ensure that the exempted establishments transferred the EPF accumumulations to their BOTs and the BOTs invested the money transferred to them.

Many of the weaknesses, in the implementation of scheme, included in this Report, have been persisting despite earlier assurances rendered to the PAC through Action Taken Notes.

Source- Report no.-32 of 2013-Union Government Civil Autonomous Bodies (Ministry of Labour and Employment)- Report of the Comptroller and Auditor General of India on Performance Audit of Employees’ Provident Fund Organisation

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