With the Provident Fund rate for 2006-07 still in limbo, the Employees’ Provident Fund Organisation (EPFO) is expected to crop up when Prime Minister Manmohan Singh inaugurates the Indian Labour Conference on Friday. But besides the PF rate, also on the table will be the urgent need for modernisation of the EPFO’s archaic manual accounting system — a system that’s behind the “disappearance” of Rs 2,481 crore into an accounting black hole.

In a letter to an EPFO member, the government has admitted the lapse but says it does not want to “open” the issue as the balance-sheets were “already audited by state and central auditors,” approved by the Board and placed before Parliament.

EPFO is the country’s second largest non-banking financial institution after the LIC of India. But while the Insurance Regulatory Development Authority regulates LIC, EPFO is both the regulator as well as the service provider.

Ironically, the accounting entries in question were made in an attempt to quell repeated objections and criticism from auditors and board members on surplus balances in the Interest Suspense Account (ISA).

The ISA is the account where earnings on EPF’s investments are parked until they are credited to workers’ accounts. Although the process of computing and crediting interest to individual accounts is computerised at the micro-level, there is no system in place to reconcile the EPFO’s balance sheet with total interest credited to workers.

This happens because while the Board may announce the PF rate for a year, it never revisits whether the said returns were actually credited to each member account — with a manual system in place, EPFO almost never manages to credit everyone.

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