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AG provides only ‘qualified opinion’ on EPF 2011 accounts
Harsha says CB delayed releasing accounts because of AG observations
AG says several companies invested in had yielded no income for EPF Fund is shrinking: Harsha
EPF was investing in ‘pump and dump’ shares, says UNP MP
The Auditor General has provided a qualified opinion on the accounts of the Employees’ Provident Fund run by the Central Bank, citing management deficiencies, bad investments and the failure of the fund manager to answer audit queries.
In accounting parlance, a qualified opinion suggests that the information provided was limited in scope or that the institution being audited has not maintained generally-accepted accounting practices (GAAP).
“I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my qualified audit opinion,” Auditor General H.A.S. Samaraweera said in his review of the 2011 Annual Report of the EPF.
Making the startling revelation yesterday, UNP Parliamentarian and Economist Dr. Harsha De Silva said the Auditor General’s remarks in the preamble of the EPF Annual Report exposed the Central Bank’s reasons for delaying the release of the report for nearly three years.
“The country’s main private pension fund cannot be audited without being qualified by the Auditor General. If this was a bank or company that was audited this way, it would make the shareholders very concerned,” De Silva charged, addressing a press briefing in Sirikotha yesterday.
The Auditor General has also highlighted the Central Bank’s failure to answer audit queries, he said.
De Silva has relentlessly pursued the EPF controversy, insisting that the fund was being mismanaged and poorly invested and demanding the release of the EPF’s audited accounts for 2011.
The UNP Legislator said that by 2011, 76% of EPF contributions were going towards repayments, from 30% in 1990 and 56% in 2006.
De Silva said the higher percentages paid out from the contributions of members indicated that the fund’s capital was increasingly unproductive.
The fund would be in deep trouble if repayments soon exceeded contributions, he said.
“The EPF is shrinking. It is the working peoples’ hard earned savings and it is being mismanaged,” he said.
The Government was making plans to amend the EPF Act to be allowed to make EPF repayments in parts rather than in full, because the money was dwindling, the UNP MP charged.
Pointing to what he said was a major conflict of interest, Dr. De Silva said whatever the EPF was made as profits was going towards providing soft loans for the Government.
“The Central Bank is not only borrowing on behalf of the Government, it is also the lender as the fund manager for EPF,” he explained.
The UNP MP said that the conflict of interest was blatant, since the Government’s aim was to borrow at the lowest possible interest, while it was to the benefit of 2.5 million provident fund account holders to obtain the best possible return on capital. “Whose voice is ultimately heard by the Central Bank?” De Silva questioned.
He called for employee representation on the EPF management mode, which would look after the interests of the account holders and prevent controversial investments.
The EPF had been used to invest in the ‘pump and dump’ shares when they were at peak, De Silva said, referring to the recent scandals that rocked the Colombo Stock Exchange, which led to several securities regulators quitting.
“Who made money during the pump? How are they connected to the Central Bank and the managers of the EPF?” De Silva asked.
“White collar crooks are running this fund,” the UNP MP charged.
The Auditor General in his review of EPF accounts points to several unyielding investments in the fund’s portfolio, saying Rs. 500 million in invested in 1,863,676 units of an airline company in July 2010 had not yielded any income to the fund since the date of investment.” The EPF has also invested Rs. 500 million in SriLankan Catering.
However, in April, EPF officials defended these investments saying that the companies in question would gradually turn a profit, saying these were ‘market to market unrealised losses.”
“Therefore these unrealised losses/gains do not increase or decrease the benefits distributed to the members,” the EPF said.
But de Silva says the fund must be invested according to good investment practices.
“No one is saying don’t invest in the Stock Exchange. No one is saying all the transactions are bad. But out of a hundred there are a few and someone is making a lot of money from it,” he added.
The UNP MP said that while investing the EPF in commercial banks was expressly prohibited, the Central Bank had gone ahead with the investments. “As a result the Central Bank has a hold on all of the commercial banks. Former Central Bank officials are taking over as chairpersons of commercial banks,” De Silva charged. (DB)
