New Delhi, Feb 6 (PTI) A Rs 1,731 crore "hidden treasure"that was not credited to 4.7 crore provident fund accounts iswhat enabled fund manager EPFO to offer a higher 9.5 interestrate to subscribers this fiscal, the Comptroller and AuditorGeneral has found.
The EPFO has been giving 8.5 per cent interest to PFsubscribers since 2005-06. However, in 2010-11, the PF fundmanager increased the rate to 9.5 per cent, citing a surplusof Rs 1,731.57 crore.
The accumulation in the interest suspense account (ISA)of the fund manager was due to "non-updation" of accounts of4.72 crore members as on March, 2010, sources in the FinanceMinistry said. There are about 10 crore accounts with EPFO.
"... It was observed that interest on 4.72 crore members''accounts were yet to be credited and were pending as on March31, 2010," the CAG said in its report.
The Comptroller and Auditor General (CAG) wrote a letterin this connection to Labour Minister Mallikarjun Kharge lastweek, they informed. The EPFO falls under the purview of theLabour Ministry.
As of March, 2010, the EPFO had a balance of Rs 4,672crore in the ISA. The total income received in each year isparked in the ISA.
The actual interest liability on 4.72 crore pendingaccounts is not ascertainable, the CAG said, adding, "In theabsence of the same, the adequacy of the above balance of Rs4,671.83 crore to meet the future interest liability forpending accounts can not be verified in audit."
However, the EPFO in its reply during the audit had saidtaking the actual income each year and accrued liability eachyear, the cumulative position at the end of 2009-10 has beenworked out.
"... This reveals the net balance of Rs 1,731.57 crore inthe ISA. The remaining amount in the ISA is attributable tothe members on account of interest due to them in the past orup to the end of 2009-10," it said.
However, the CAG said the interest should be paid onlyafter the EPFO has updated members'' accounts.
The auditor also asked the EPFO to shift to an accrualbasis of accounting from the current practice. The EPFOcurrently follows a cash basis of accounting for calculatinginvestments, while it calculates the interest liability on thebasis of accruals.
EPFO should update all the member accounts, then "itshall determine its interest liability" so that the balanceremaining thereafter can be declared as a surplus, the letterto Kharge said.