EPF to rectify huge losses in past, bad investments
View(s):The state–managed private sector superannuation endowment, Employees Provident Fund (EPF) has lost billions of rupees through investments in unlisted and loss-making companies under several regimes, a new government audit has estimated.
Some of these companies were poultry farms without chickens, a hotel chain with no building under its name, and property development companies without land and property, the Auditor General Department’s latest report revealed.
The EPF had invested Rs 83.46 billion in 83 listed companies. However, the market value of the said investments had dropped by Rs.12.65 billion representing 15 per cent to Rs.70.80 billion, the report said.
A sum of Rs.205 million had to be written off from the fund due to cancellation of the license of a company which had invested in up to the year 2020 under review.
Moreover, a sum of Rs.5 billion representing 56 per cent from investing shares in unlisted companies had been invested in constructions of the Canwill Holdings Hotel Complex in the year 2013, it observed.
The report said the EPF had bought stocks without checking, without approval of an investment committee, and there were no documents to indicate who bought them in some cases. The EPF had bought Rs. 737 million worth of stock in one company and invested in banks against the investment and trading guidelines.
The investment policy of the Fund is based on providing a long-term positive real rate of return to the members while ensuring the safety of the Fund and availability of the adequate level of liquidity to meet refund payments and other expenses of the Fund.
However these irregular investments have been made without considering this policy, the government audit query observed highlighting that the EPF money changed hands among a few errant businessmen with political backing as reserves in shadow companies confined only to name boards.
While these malpractices have been carried out during the periods of previous governments, at present all investments are being done in a transparent manner in accordance with relevant regulations, Central Bank sources said.
The practice investing in loss-making entities has been rectified and measures are being taken to avoid such financial loses at present, a senior official of the finance ministry said.
No benefits whatsoever had been reaped from the said investments as business transactions thereof had not been commenced even by the end of the year 2020 under review.
Moreover, only dividends of Rs.466 million had been received during that period from two companies out of investments of unlisted companies. It had decreased by 87 per cent as compared with the preceding year.
According to the Finance Ministry, 93.4 percent of the fund’s investment portfolio was in government securities by the end of last year.
Only 2.8 percent of the assets were in equities, with the balance spread through corporate debentures, fixed deposits and reverse repurchase agreements in the proportions of 1.2 percent, 2.0 percent and 0.6 percent, respectively.
The total investment income of the EPF in 2020 was Rs.285.4 billion, an increase of 10.2 percent compared to 2019.
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