The Comptroller and Auditor General (CAG) is looking into the performance of fund managers appointed by the Employees’ Provident Fund Organisation (EPFO) to manage its huge corpus of Rs 3.5 lakh crore as part of a five-year “performance audit” of the retirement fund body.
The performance audit report for 2005-10 is likely to be finalised by June-end and will be sent to the labour ministry for comments before being tabled in Parliament, sources said.
“The report is likely to be tabled in the monsoon session,” a source said. The CAG will look into the overall financial management of the EPFO as well as the adequacy of internal controls and the use of IT.
The audit will also look into the basis of declaration of interest rates by the EPFO and whether the subscriber accounts are being updated on a regular basis and claims are settled on time.
The EPFO had appointed four fund managers — ICICI, HSBC, Reliance Capital and the State Bank of India — for the first time in July 2008, to provide a better rate of return on deposits to its 4.72-crore subscribers. Prior to that, the SBI was the sole fund manager since its inception in 1952. Sources said the CAG audit would look into the method adopted for the selection of the fund managers and whether proper checks and balances were conducted prior to the appointment.
Last year, the central board of trustees — the EPFO’s apex decision-making body — had announced that the PF fund managers would pay an interest rate of 9.5 per cent for 2010-11, citing a surplus of Rs 1,731.57 crore. The EPFO had been giving 8.5 per cent interest to PF subscribers since 2005-06.
However, the CAG had cautioned that the accumulation in the interest suspense account of the fund manager was because of “non-updation” of accounts of 4.72-crore members as on March 2010. There are about 10 crore accounts with the EPFO. At present, the EPFO follows a cash basis of accounting for calculating investments, while it calculates the interest liability on the basis of accruals.
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