Board questions PF body’s Rs 2,481-cr 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).

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.

So even though the ISA is supposed to have zero balance at the end of each year, it ends up with a closing balance. This balance increased substantially over the years until it touched a high of Rs 9,180 crore in 1999. This wouldn’t have gone unquestioned if workers had a facility by which they could check their retirement account balances routinely.

At the same time, had the EPFO instituted a simple reconciliation of past accounts and broken down the balance in the ISA, it could have undone the mess. However, to stave off criticism, in 1999, the Central PF Commissioner ordered regional offices to take “all possible steps so that the organisational balance sheet shows better picture for the financial year 1998-99.”

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