LIC’s omission of the repudiated amounts in accounting

 LIC didn’t answer my RTI questions about the amounts of money repudiated since 1997 till 2010. In my opinion, it could be because of three reasons:

 

It has not computed these amounts at all.

It has omitted these entries altogether from its Books of Accounts. (I've verified this from reliable sources)

It will show how large amounts have been repudiated arbitrarily and illegally.

For LIC, with respect to its resigning ex-employees, it is a case of ‘Out of sight, Out of mind and also Out of its Books of Accounts!’
 

What is surprising is LIC’s submission that it does not need such data for the regular working of the Corporation; hence it has not maintained it. In a Financial Institution every paisa must be accounted for; whether paid or payable to anyone.

LIC gave me a list of names of 5 ex-employees of the Western Zonal Office and 40 ex-employees of the Central Office (All Class I Officers; and only pertaining to 2010), whose arrears’ payments were repudiated. This data is incomplete as it does not pertain to all offices of the Corporation, as asked for, through my RTI application; and neither does it contain information with respect to the other employee cadres like Class II, III & IV. It didn’t inform me the amounts repudiated with respect to each of these ex-employees, though I had asked for this information in my RTI application.

Just as payments due to its policy-holders are accounted for scrupulously, so should the payments made or to be made its employees or ex-employees. Had LIC computed the repudiated amounts and shown these entries, they would have appeared as Liabilities in its Balance Sheet, since the repudiated amounts are payable but not paid. But LIC has just chosen to omit these entries altogether under the pretext that since they are not payable, there is no need to account for them! Hence the Balance Sheet of the Corporation shows a skewed picture.

What is even more appalling is the fact that none of the Auditors, either Internal or External, seem to have pointed out this glaring lacuna in their Audit Reports since 2000! This is a dangerous and unsettling trend for a Financial Institution, especially for a Public Sector Life Insurance giant like LIC. LIC has vast amounts in its Reserve Fund and is the trustee of public money. Can it afford to make such omissions? Should it be allowed to get away with such omissions, for so many years to boot?

In future, if any resigning ex-employee, were to file and win a case against LIC in a Court of Law, how does LIC propose to pay the arrears and other dues to that employee? It will probably withdraw this money from its Reserve Fund. Thus the accounting entries would differ from the situation wherein the payments would have been duly accounted for, through provisional entries; in the first place. If LIC had made provisional entries for the repudiated amounts, it could have easily informed me the repudiated amounts.

A Financial Institution must be scrupulous in all its accounting entries, under the correct heads of accounts so that it can avoid jugglery later. LIC obviously thinks otherwise!