PREVENTIVE CONTROL MEASURES IN A CO-OPERATIVE

The following categories of preventive controls can be adopted to guard against possibility of fraud occurring in the Sacco.

  1. The society should maintain excellent portfolio quality
  2. There is need for simplicity and transparency of systems and procedures
  3. Fraud- preventive human resource policies
  4. Client education and awareness
  5. Strict, transparent policies and procedures of write –offs and rescheduling loans
  6. Policy for custody and handling collateral
  7. Credit committee- Credit committee not only play an important role in reducing credit risk, but also are an essential element of an operational integrity and fraud prevention strategy.
  8. Cash handling policy-Basic controls recommended to mitigate the risk of misappropriation for the society include;
  • Use of standardized, pre-printed, pre-numbered loan/membership application forms.
  • The society should prepare loan agreements in quadruplicate.
  • The society should include all vital details in the loan agreements, to reduce manipulation.
  • The society also needs to restrict access to blank loan agreements.
  • The society staff should do a final pre-disbursement vetting and verification of compliance for each loan and in case of anomalies should report to management committee.
  • Additional mandatory checks should be done by the staff before disbursing.
  • The society should elaborately document the disbursement process e.g. by making sure cheque or cash collections are recorded.
  • The society should retain one copy of the disbursement receipt and give the other to the payee.
  • In disbursing funds directly to the borrower, the staff should check for evidence that the person accepting funds is the real borrower.
  • An accountant or someone else should compare payee disbursement request and loan agreement signatures.

 

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