EPFO audit shows serious gaps in management of provident fund accounts

An internal audit conducted by the Employees’ Provident Fund Organisation (EPFO) has thrown up major discrepancies in the way it has been managing the provident fund accounts and settling dues.

Some of the accounts of formal sector workers, whose provident fund savings are parked with the EPFO, showed “negative” or “adverse” balance. According to EPFO officials, in a few cases, the audit observed negative balance to the tune of Rs 100,000 or more.

This, officials said, might be a result of fraud or accounting errors. In some cases, employees or EPF subscribers might have been paid more than their savings due to clerical mistakes, thereby affecting other accounts. 

"We do not know the reasons for the same and have written to specific units of the EPFO to furnish their response," a senior EPFO executive said, requesting anonymity. 

It was not clear how many such cases were discovered by the EPFO. However, an EPFO official said that of the active subscriber base of 45 million, their share would be small.

The EPFO also accidentally transferred provident fund savings of employees to the bank accounts of other subscribers in some cases.

These are part of the findings of the internal account for 2018-19, commissioned by the EPFO across its 135 units. While the audit is still in progress, some of the reports have been submitted to the EPFO headquarters for necessary action.

“Some of the audit reports were placed before the CPFC for his perusal. It was instructed that common irregularities should be brought to the notice of all the concerned and systematic reforms initiated to plug the loopholes,” a communication sent by EPFO Additional PF Commissioner (audit) S B Sinha to all regional offices stated.

It further added that “responsibility needs to be fixed early and action taken accordingly. Caution needs to be executed to prevent loss of revenue to the exchequer”.

The audit report showed major compliance issues in a major amnesty campaign launched by the EPFO on January 1, 2017, which 10 million employers joined. The scheme gave an opportunity to all employers to voluntarily declare details of all such employees who were entitled to PF membership between April 2009 and December 2016 but could not be enrolled for any reason with negligible penalty. But employers were required to pay the pending contribution of employees.

“Many establishments have given declaration but the establishments have not remitted the corresponding amount (of PF dues) as per their declaration. No action (has been) taken (against them),” the audit report pointed out.

Further, establishments were found to be contributing towards PF benefits of workers at a rate lesser than the statutory requirement. At present, employers are required to contribute 24 per cent towards PF contribution of workers – 12 per cent as the employee's share and 12 per cent as the employer's share.

Some other serious inconsistencies were found in the internal audit such as “more than one pension paid to a pensioner for his different spells of employment” and “same Aadhaar number linked to multiple pensioners”. “Pension granted was less than the minimum pension. In some cases, the pension amount was zero,” the audit has observed.

Not only this, pension was disbursed to some subscribers every month even as no bank accounts were found to be linked. Further, the EPFO made payment towards Employees’ Deposit Linked Insurance scheme benefits even to those establishments that were exempted from it.

The EPFO has three schemes: Employees' Pension Scheme, Employees' Provident Fund, and Employees’ Deposit Linked Insurance scheme (insurance cover provided in case of death during service). Every eligible worker is supposed to get a minimum pension of Rs 1,000 a month upon retirement. The central government pays subsidy every year to ensure minimum pension of Rs 1,000 a month is given to workers.