Saturday, July 13, 2024
NewsGov’t incapacity pushes Commission to outsource cooperative audits

Gov’t incapacity pushes Commission to outsource cooperative audits

There are over 100,000 farming cooperatives in Ethiopia

A draft law in the works from experts at the Ethiopian Cooperative Commission looks to outsource the auditing of farmers’ cooperatives as a solution to the challenges faced by the prevailing government auditing practice.

The new directive was prompted by a shortage of auditors, highlighting the pressing need for its implementation. Only 20 percent of cooperatives have undergone audits, further emphasizing the urgency and importance of addressing this significant gap.

Operating under the purview of the Ministry of Agriculture, the Ethiopian Cooperative Commission oversees a vast network comprising 401 cooperative unions, five federations, and over 100,000 cooperatives.

The Commission has submitted the draft to the Ministry of Justice. Following a comprehensive technical review, the Ministry is expected to grant its approval and assign a unique identifier to the directive.

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Dubbed the “Cooperative Audit Performance Directive,” it would shift the responsibility of auditing cooperatives from government auditors to private firms.

Once approved, the Commission plans for swift dissemination to all federal and regional entities for immediate implementation.

The directive is poised to play a crucial role in the Commission’s ongoing reform efforts, providing a systematic framework for auditing the extensive network of cooperatives across the country.

The driving force behind the directive lies in the scarcity of auditors within the Federal Cooperative Commission and its regional branches.

Only 20 percent of cooperatives have undergone audits, underscoring the critical need for a comprehensive strategy to address this shortfall, according to Teha Diga, head of the audit department at the Commission.

“The directive aims not only to bridge this expertise gap but also to instill confidence among members and facilitate cooperative access to essential financial resources,” said Teha.

Given the sheer scale of cooperatives, it is evident that government auditors alone cannot effectively manage them.

Cooperatives, which are not dependent on a government budget, are now poised to benefit from the flexibility of hiring outsourced auditors, as permitted by the new guidelines.

The auditing process will involve individuals licensed by the Commission, organized as a cooperative society, ensuring a standardized and professional approach.

To streamline the outsourcing process, cooperatives will engage audit firms through a competitive tendering process. The Commission, along with its regional branches and cooperative extension offices, will oversee the delegation of auditors and provide necessary support.

In a proactive move, existing cooperative federations have taken steps to conduct audits voluntarily, with 402 cooperative unions conducting audits bearing the expense themselves.

The directive emphasizes the establishment of a robust complaint resolution mechanism. Once the cooperative audit report is submitted, parties with grievances will be informed about the resolution process, fostering what officials hope will be a transparent and accountable system.

Beyond the audit framework, plans for cooperative societies to establish their own bank are underway, with the Prime Minister providing a clear policy direction for a unique approach distinct from other commercial banks.

“As these audit performance directives take shape, they mark a significant stride towards fortifying the foundation of Ethiopia’s cooperatives, ensuring accountability, and paving the way for sustainable growth,” said Teha.

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