Conduct special audit of PF trusts: Panel to labour ministry
A parliamentary panel has asked the labour ministry to conduct special inspection or audit of private 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 EPFO, maintain 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 Employees' Provident Fund Organisation (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 April 7.
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.