Conduct special audit of PF trusts: parliamentary panel to labour ministry
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New Delhi: A parliamentary panel has asked the labour ministry to conduct special inspection or audit of private Employees’ Provident Fund (EPF) trusts that have been found to be investing their workers’ retirement savings in own firms through mutual funds.
The private trusts, regulated by the Employees’ Provident Fund Organization (EPFO), maintain Provident Fund (PF) accounts and retirement savings and are required to invest these funds as per the investment pattern approved by the government.
These trusts are called exempted establishments because they do not deposit EPF contributions of their employees with the EPFO. “Investing in own business is improper and is being done to serve their own interest,” the Parliamentary Standing Committee on Labour said in its report tabled in Parliament on 7 April .
The panel further said, “There is need to have special inspection or audit of all such companies and the EPFO should take early action on the requisite process for restricting investment through this route and take immediate corrective steps and re-divert such investments in other... instruments.” It further observed: “From the list of 317 such firms, on whose board of trustees surcharge was levied (for deviating from the investment pattern), most of the establishments were closed against which the cancellation orders were issued... such futile exercise needs to be tackled with regular physical inspection.”
As per the EPF scheme, the violation of not sticking to the investment template is only limited to three instances, and beyond that, the exemption granted to the firm can be cancelled. The panel suggested that the exemption given to these private EPF trusts should be reviewed after a prescribed period so that the EPFO is aware of the exact financial status of the firms, which will help in protecting the interest of employees.
It also suggested that it should be made mandatory to check the demat account of these trusts to verify the pattern of investments as well as the returns received by these trusts during the compliance audit.
The panel noted that as on December 31, 2016, the total corpus of these trusts was around Rs2.57 lakh crore, including the unclaimed EPF amount of Rs5,475 crore. It also called for a suitable amendment in the scheme without delay so that not just the name of the worker for whom unclaimed amount is available gets reflected in the annual account statement of the PF fund, but the funds get transferred to the EPFO after a specified period. It also asked the ministry to explore the possibility of depositing the unclaimed amount so revived in the special reserve fund (SRF).