Your Money in the Employees Provident Fund may be in Trouble!!
source: Forward Mail
For the first time in 60 years the Provident Fund (PF) office may miss its deadline for presenting its accounts to the Parliament. This predicament is due to violation of accounting standards by the EPFO’s book-keeping system and thereby not conforming to the format specified by the Government which in turn has delayed clearing of PF office’s accounts by the Comptroller and Auditor General (CAG) of India.
In the recent past the PF office discovered a surplus of 1,733 crore and recommended a 9.5% PF rate. The Finance Ministry agreed to the 9.5% rate on the condition that the PF office updates all the member accounts within six months and ensure there is no shortfall in income. On both the counts, the EPFO has failed to deliver.
Moreover, nearly 4.85 crore accounts were still to be updated on November 22, 2011, as per EPFO’s submissions to its board’s finance committee last week. More critical is the admission that it had made a huge 5.7% error in its income estimates for 2010-11 that led to an eventual income shortfall of 854 crore. Given that it now manages a corpus of 4,66,000 crore, an error of this magnitude is alarming. With interest payments promised at 9.5%, the PF office ended up with a 510 crore deficit on its 2010-11 operations – which it will now be forced to fund from its income for 2011-12.
This accounting fiasco may have forced EPFO to recommend a 1.25% cut in the EPF rate so that it doesn’t end up with more contingent liabilities. But there are other pressure points which will make it hard to explain when the Finance Minister reviews its state of affairs and the minutes of the EPFO board’s finance committee. EPFO officials had hoped to boost income for 2011-12 with a decision to stop interest credits from April 2011 on old inoperative accounts, where no fresh contributions have come for three years or more. They had hoped to use the savings from these accounts to fund a higher EPF rate for the year.
In our opinion the EPFO should be strictly held accountable in mis-handling employees provident fund accounts. There needs to be more governance and untimely rate hikes should not be allowed as they turn out to be just a gimmick, and when interest rates are reduced have a detrimental impact on retirement savings. Management of such crucial funds should be done with utmost care take into account the interests’ of several people, and Government should step-in in such dire times.
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