34 EMPLOYEES' PROVIDENT FUND O RGANISATION MINISTRY OF LABOUR AND EMPLOYMENT PUBLIC ACCOUNTS COMMITTEE (2015-16) THIRTY FOURTH REPORT SIXTEENTH LOK SABHA LOK SABHA SECRETARIAT NEW DELHI 1 PAC No. 2066 THIRTY FOURTH REPORT PUBLIC ACCOUNTS COMMITTEE (2015-16) (SIXTEENTH LOK SABHA) EMPLOYEES' PROVIDENT FUND ORGANISATION MINISTRY OF LABOUR AND EMPLOYMENT Presented to Lok Sabha on: 22.12.2015 Laid in Rajya Sabha on: 22.12.2015 L O K S A B H A S E C R E T A R I A T N E W D E L H I December, 2015 / Pausa, 1937 (Saka) 2 CONTENTS PAGE NO. COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2015-16) (i) COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2014-15) (ii) INTRODUCTION (iii) PART - I CHAPTER - I 1 INTRODUCTION A. Rationale for this Performance Audit and earlier Audits 1 B. Objectives and Functions of the EPFO 1 C. Applicability of the schemes 1 D. Organizational set up 2 E. Audit Objectives 3 F. Audit Scope 3 CHAPTER - II 4 FINANCIAL MANAGEMENT A. Rates of contribution and wage limit 4 B. Contribution collected 5 C. Shortfalls in Central Government share of EPS 7 D. Administration Account: Income, Expenditure and Surplus 9 E. Budget 10 F. Interest Suspense Account 13 G. Non-adoption of investment pattern as notified by the Ministry of Finance 15 H. Annual valuation 16 I. Employees' Pension Fund 18 J. Committee meetings 20 CHAPTER - III 21 COVERAGE AND ENROLMENT A. Coverage of establishments 21 B. Voluntary coverage 23 C. Inspections 25 CHAPTER - IV 26 CONTRIBUTION AND RECOVERY A. Responsibility of employers 26 B. Demand Collection Balance Register (DCBR) 26 C. Arrears of Provident Fund and Administrative Charges 27 D. Levy and realisation of damages and penalties 30 E. Determination of dues from employers in case of default 31 F. Recovery of dues from defaulters 32 CHAPTER - V 36 MAINTENANCE OF SUBSCRIBER'S ACCOUNTS A. Maintenance of Accounts 36 B. Minus balances 36 C. Transfer of accounts 39 D. Inoperative/Unclaimed Deposit Account 40 E. Non-updation of accounts 42 PART - II 3 Observations/recommendations of the Committee 44-56 APPENDICES Minutes of the Fifteenth Sitting of the Public Accounts Committee (2014-15) held on 57,61 03.02.2015 and Sixteenth sitting of PAC (2015-16) held on 21.12.2015 4 COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2015-16) Prof. K.V. Thomas - Chairperson MEMBERS LOK SABHA 2. Shri S.S. Ahluwalia 3. Shri Sudip Bandyopadhyay 4. Shri Ranjit Singh Brahmpura 5. Shri Nishikant Dubey 6. Shri Gajanan Kirtikar 7. Shri Bhartruhari Mahtab 8. Shri Ramesh Pokhriyal "Nishank" 9. Shri Neiphiu Rio 10. Shri Dushyant Singh 11. Shri Janardan Singh Sigriwal 12. Dr. Kirit Somaiya 13. Shri Anurag Singh Thakur 14. Shri Shivkumar Udasi 15. Dr. P. Venugopal RAJYA SABHA 16. Shri Naresh Agrawal 17. Shri Satyavrat Chaturvedi 18. Shri Anil Madhav Dave 19. Shri Vijay Goel 20. Shri Bhubaneswar Kalita 21. Shri Shantaram Naik 22. Shri Sukhendu Sekhar Roy SECRETARIAT 1. Shri A.K. Singh - Additional Secretary 2. Shri T. Jayakumar - Director 3. Smt. Bharti S. Tuteja - Deputy Secretary 4. Ms. Malvika Mehta - Committee Officer i COMPOSITION OF THE PUBLIC ACCOUNTS COMMITTEE (2014-15) Prof. K.V. Thomas - Chairperson MEMBERS LOK SABHA 2. Shri S.S. Ahluwalia 3. Shri Sudip Bandyopadhyay 4. Shri Ranjit Singh Brahmpura 5. Shri Nishikant Dubey 6. Shri Gajanan Kirtikar 7. Shri Bhartruhari Mahtab 8. Shri Ramesh Pokhriyal "Nishank" 9. Shri Neiphiu Rio 10. Shri Rajiv Pratap Rudy 11. Shri Janardan Singh Sigriwal 12. Shri Jayant Sinha 13. Dr. Kirit Somaiya 14. Shri Anurag Thakur 151. Vacant RAJYA SABHA 16. Shri Satyavrat Chaturvedi 17. Shri Vijay Goel 18. Dr. Satyanarayan Jatiya 19. Shri Bhubaneswar Kalita 20. Shri Shantaram Naik 21. Shri Sukhendu Sekhar Roy 22. Shri Ramchandra Prasad Singh 1 Vacant vice Dr. M. Thambidurai who has been chosen as Hon'ble Deputy Speaker, Lok Sabha and has since resigned from the membership of the Committee. ii INTRODUCTION I, the Chairperson, Public Accounts Committee (2015-16), having been authorised by the Committee, do present this Thirty Fourth Report (Sixteenth Lok Sabha) on 'Employees' Provident Fund Organisation’ based on C&AG Report No. 32 of 2013, Union Government (Performance Audit) relating to the Ministry of Labour and Employment. 2. The Report of the Comptroller and Auditor General of India was laid on the Table of the House on 18th February, 2014. 3. The Public Accounts Committee (2014-15) took up the subject for detailed examination and report. The Committee took evidence of the representatives of the Ministry of Labour and Employment on the subject at their sitting held on 3rd February, 2015. As the Report on the subject could not be finalised due to paucity of time, the PAC (2015-16) reselected the subject. Based on the evidence taken by the previous Committee a draft Report was prepared and placed before the Committee for their consideration. 4. The Committee considered and adopted this draft Report at their sitting held on 21st December, 2015. Minutes of the sittings form appendices to the Report. 5. For facility of reference and convenience, the Observations/Recommendations of the Committee have been printed in bold and form Part II of the Report. 6. The Committee thank their predecessor Committee for taking oral evidence of the Ministry of Labour and Employment and obtaining the requisite information on the subject. 7. The Committee would also like to express their thanks to the representatives of the Ministry of Labour and Employment for tendering evidence before them and furnishing information in connection with the examination of the subject. 8. The Committee place on record their appreciation of the assistance rendered to them in the matter by the office of the Comptroller and Auditor General of India. NEW DELHI; PROF. K.V. THOMAS 21 December, 2015 Chairperson, 30 Agrahayana, 1937 (Saka) Public Accounts Committee iii PART-I CHAPTER-I INTRODUCTION 1.1 The Employees’ Provident Fund Organisation (EPFO) is vested with the responsibility of implementing three Schemes framed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (the Act), which extends to whole of India except Jammu & Kashmir. These are Employees’ Provident Funds Scheme (EPF), Employees’ Pension Scheme (EPS) and Employees’ Deposit Linked Insurance Scheme (EDLI). EPFO works under administrative control of the Ministry of Labour and Employment (the Ministry). A Rationale for this Performance Audit and earlier Audits 1.2 Efficient working of EPFO affects large number of subscribers and during 2010- 11 there were reports about non-crediting interest to subscribers’ accounts resulting in large accumulation in Interest Suspense Account, delays in settlement of claims, announcement of higher rates of interest by the CBT, etc. With these inputs and after suitable risk analysis, performance audit of EPFO was taken up by Audit. B Objectives and Functions of the EPFO 1.3 The objective of the EPFO is to extend social security benefits to the working class in the form of Provident Fund, Pension and Insurance benefits. The broad functions of EPFO are as under :  Enforcement of provisions of Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;  Recovery and management of money held in Trust; and  Providing satisfactory service to the members of Schemes. C Applicability of the schemes 1.4 The provisions of the Act and the schemes apply to every establishment specified in Schedule I (Schedule I under the Employees’ Provident Funds and Miscellaneous Proviosions Act, 1952, gives a list of classes of industries and establishments wherein the Act is applicable) which employ 20 or more persons. The Act does not apply to any establishment registered under the Co-operative Societies Act, 1912 and employing less than 50 persons and working without aid of power. There were 4.44 crore members of EPF, 26.53 lakh pension beneficiaries and 4.72 lakh 2 establishments on 31 March 2007, which increased to 8.55 crore members of EPF, 41.03 lakh pension beneficiaries and 6.91 lakh establishments by 31 March 2012. D Organisational set up 1.5 The EPFO is administered by the Central Board of Trustees (CBT), consisting of Chairman (Union Labour Minister), Vice-Chairman, five members representing the Central Government, 15 members representing State Governments and 10 members representing employers and employees each. 1.6 The CBT is assisted by Executive Committee, constituted by the Central Government and four Sub-Committees namely (a) Finance and Investment Committee; (b) Committee on Exempted Establishement (c) Pension Implementation Committee and (d) Technical Committee or Committee on implementation of IT Reforms. 1.7 The Central Provident Fund Commissioner is Chief Executive Officer of EPFO and ex-officio member of CBT. The implementation of the schemes is carried out through its Central Office at New Delhi, 40 Regional Offices (ROs) and 80 Sub-Regional Offices (SROs) spread across the country. The EPF Scheme provides for constitution of Regional Committees for each State to advise CBT. 1.8 On being asked to provide details of the manpower sanctioned, in-position and shortfall during the last three years in all the groups of employees viz. A, B&C of EPFO, the Ministry of Labour and Employment in their written replies stated, “The details of manpower sanctioned, in position and shortfall during the last three years in all group of employees as reported through Annual Reports is as below: Nature 2011-12 2012-13 2013-2014 Sanctioned In Position Sanctioned In Position Sanctioned In Position Group 1042 762 1057 732 1132 883 ‘A’ Group 6368 5086 9032 7027 6361 4670 ‘B’ Group 17681 13980 14649 11209 17166 13348 C The shortfall is as follows: NATURE 2011-12 2012-13 2013-14 GROUP A 280 325 249 2 3 GROUP B 1282 2005 1691 GROUP C 3701 3440 3818 E Audit Objectives 1.9 The Performance audit was taken up to assess the economy, efficiency and effectiveness of implementation of the schemes by the EPFO. F Audit Scope 1.10 The performance audit covered test check of records of Central Office of EPFO, 26 out of 40 ROs (65 per cent), 49 out of 80 SROs (61 per cent) (Details in Annex). States having two or more than two ROs, a minimum of two ROs with the respective SROs were selected and in other States, the RO along with respective SROs were selected for audit. 1.11 The performance audit, however, did not cover the Regional and Sub-Regional Offices at Himachal Pradesh, Uttarakhand and North Eastern Region due to low density of establishments in these States. Records of activities for the period April 2006 to March 2012 were audited. 3