One of the most progressive laws introduced since independence was the Employees' Provident Fund Act of 1958.
It was introduced and implemented by the S.W.R.D. Bandaranaike Government as the biggest ever social security scheme that today has about 2.5 million members or beneficiaries and provides substantial retirement benefits for them and their families.
The scheme was expected to be carefully handled under the stewardship of the Central Bank which until recent years was widely respected and trusted as an independent non-political institution. As of December 2010, the EPF had about Rs.899.6 billion, which is equivalent to 16% of the Gross Domestic Product (GDP). The EPF offers a joint action plan by the employer and the employee to save money by targeting retirement and future benefits for private and public sector employees.
What has happened to the EPF, which is expected to be maintained with sacred trust because it could be the only source of income for EPF members after they retire, with even their family members often having to depend on it? According to the front page lead story in Tuesday’s Daily Mirror, the Auditor General in his review of the EPF for 2011 says the country’s main social security fund has lost nearly Rs.11.7 billion through investments in 58 private institutions.
Auditor General H.A.S. Smaraweera says these losses have resulted in a 1% decrease in benefits payable to 2.5 million EPF members in 2011 when compared with 2010.
In his audit review presented in October last year, Mr. Samaraweera says this is a decrease in investment income of Rs.5 billion in 2011.
Of the long term and short term investments amounting to Rs.63 billion made by the EPF in 76 companies in the share market by January 15, 2013, the value of investments made in 58 companies amounting to Rs.54 billion had diminished by Rs.11 billion.
Some 500 million rupees invested in 1,863,676 units of an airline company in 2010 had not yielded any income to the fund since the date of investment. In its response, the Central Bank says it is confident of future profits from the companies with the losses decreasing gradually.
Commenting on unsound or risky investments in private company equities, the AG says that Rs.2,975 million invested in 29,750,000 units of an electricity-generating company from April 2007 to November 2008 had not yielded any income to the Fund in 2008, 2009 and 2010 while Rs.540,909,091 had been received twice in 2011 as dividend income.
Nearly Rs.205,489,613 was used to purchase 5,091,200 shares in a Finance Company from February 23, 2011 to November l, 2011 and the loss of Rs.4,285,937,284 as revealed in the last published accounts of the Company had not been taken into consideration at the time it was decided to invest in this finance company.
Even during the year under review this company had lost Rs.3,830,135,175. The company shares had been purchased at an average price of Rs.40.36 a share when the market price of a share was Rs.24.
If the losses or gambling with people’s money was so huge in 2011 it must be much more now because of many more unsound and risky investments as exposed in the media. Opposition members have raised questions as to why the AG’s report for 2011 was not presented and debated in Parliament while the people demand to know how grave the EPF crisis is now and why leading economic officials are being allowed to gamble probably because of the casino mentality of the ruling party and its top officials. All this could be attributed to the breakdown of democratic principles, accountability and transparency along with widespread corruption and fraud resulting in integrity and honesty becoming lonely words.