Harsha slams govt. over non-publication of EPF 2011 annual report:
‘Contempt and callous disregard for good governance’



Opposition lawmaker Dr. Harsha De Silva slammed the government for not publishing the 2011 annual report of the country’s largest superannuation fund, the trillion rupee EPF, which is used to finance the state, manipulate interest rates and invest in questionable stocks at the country’s bourse.


The national list MP and economic spokesman of the UNP Dr. Harsha De Silva has officially written to the chairman of the Parliamentary Committee on Public Accounts (COPA) Deputy Finance Minister Dr. Sarath Amunugama requesting that officials of the Department of Labour, the administrative mangers of the EPF, and the Central Bank, financial manager of the trillion rupee fund, be summoned before the committee.


"The 2011 annual report has not been published and presented to parliament to-date and this is totally unacceptable. This clearly shows the contempt and callous disregard this government has for good governance and transparency," Dr. De Silva told The Island Financial Review yesterday (16).


"I have requested the chairman of COPA to summon the officials managing the EPF because there are questions that need to be answered as to how the EPF was used to invest in loss making state enterprises and dubious companies in the stock exchange. We already have a preliminary report from the Auditor General’s Department with regard to some of these investments but COPA is yet to address these issues," he said.


While the Central Bank regulates the country’s banks and non-bank finance companies issuing guidelines into good governance and best practices, with specific requirements for the timely disclosure of financial reports, Dr. De Silva said he was ‘sick and disgusted’ with how the Central Bank was handling the EPF.


"There are allegations of misappropriation and fraud and we cannot look into this because the 2011 annual report has not been made public as yet," he said.


The opposition lawmaker also charged that it was unethical for the Deputy Finance Minister to chair an important committee such as COPA which looked into public finances and the conduct of the finance ministry.


Earlier this year COPA summoned the EPF for the first time in six years and opposition lawmakers later told parliament that proceedings were abruptly adjourned before audit queries could commence. Dr. De Silva said he has written to the COPA chairman thrice requesting the recommencement of COPA proceedings with the EPF.


A special report submitted to COPA by the AG Department said that as of January 15, 2013, Rs. 54 billion worth of EPF investments in relation to 57 listed companies had lost Rs. 11.7 billion of their value. The EPF had invested in 76 listed companies at a total value of Rs. 63.16 billion as at 15 January 2013, the report said.


Analysts have also pointed out to the apparent conflict of interest when the Central Bank, as regulator of bank and non-bank financial institutions, invested EPF funds in these entities.


The Central Bank itself has shown the captive use of the EPF to finance the government.


"Non-bank sector, consisting of Employee Provident Fund (EPF) and National Savings Bank (NSB), insurance companies, and other official funds, continued to be the major holders of domestic debt of the government at the end of 2012. The share of total non-bank sector holdings of domestic debt of the government debt in the total domestic debt stood at 67.26 per cent at the end of 2012 in comparison to 68.40 per cent in 2011," the Central Bank said in a report earlier this year.


"Private business entities and individuals and insurance funds had reduced their holdings in the Government securities by Rs. 21.4 billion (4.78 per cent) and Rs. 0.6 billion (1.74 per cent) to Rs. 426 billion and Rs. 33.8 billion respectively, while Provident and Pension Funds increased their holdings of domestic debt instruments of the government by Rs. 245.4 billion or 25.58 per cent during the year to Rs. 1,204.7 billion as at the end of 2012 from Rs. 959.3 billion at the end of 2011," it said.


Dealers trading in government securities said captive sources such as the EPF and state banks were often used to manipulate interest rates especially at the weekly auction of Treasury bills conducted by the Central Bank.


The EPF grew by 12.4 percent in 2012 to Rs. 1.14 trillion (Rs. 1,144 billion) from Rs. 1.01 trillion in 2011, the Central Bank annual report for 2012 showed.


The interest rate paid on member balances stayed unchanged from the previous year at 11.5 percent in 2012.


The investment portfolio of the fund grew by 12.2 percent to Rs. 1.1 trillion in 2012 from Rs. 985.6 billion in 2011.


Rs. 1.01 trillion, or 91.5 percent of the total portfolio, was invested in government securities, Rs. 23.1 billion, or 2.1 percent, in rupee loans to the government, Rs. 8 billion, or 0.7 percent in corporate debentures and Rs. 59.2 billion, or 5.4 percent of the total portfolio, in equities listed on the Colombo Stock Exchange which has attracted much criticism from government and opposition MPs alike.


The EPF earned an income of Rs. 121.4 billion in 2012, up 4.6 percent from a year earlier.


 
 
 
 
 
 
 
 
 
 
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