Every Co-operative Society accepting deposits and granting cash credits shall maintain fluid resources in such form and according to such standards as may be fixed by the Registrar, from time to time, by general or special order.
63 28-A. Declaration by a member borrowing loans from certain societies.- (1) A declaration under clause (1) of sub-section (1) of Section 33 shall be in form I.
(2) A register of such declaration shall be kept by the society in form II.
1. Rule 24-A inserted by Notification No. CO 226 CLM 2014, dated 6-6-2015, w.e.f.6-6-2015
2. Rule 25 omitted by Notification No. CO 200 CLM 2009, dated 15-12-2009, w.e.f.16-12-2009
3. The words “and except with the general or special sanction of Government” omitted by Notification No. CO 200 CLM 2009, dated 15-12-2009, w.e.f.16-12-2009
4. Substituted for the word “committee” by Notification No. CO 200 CLM 2013, dated 10-7-2013, w.e.f.10-7-2013
5. Substituted for the words “twenty-five per cent” by Notification No.CO 200 CLM 2009, dated 15-12-2009, w.e.f.16-12-2009 [28-B. General Meetings.- x x x x x 28-C. Committee Meetings.- x x x x x.]
[28-D. Foreign tour of Office bearers and members of Co-operative Society.- The provisions relating to foreign tours of office-bearers and members shall be as following namely.-
(1) Foreign tour by a director or an office bearer of a Co-operative Society shall not be considered more than twice in their tenure with prior permission of the Government;
(2) If the director is on two boards, he shall not undertake foreign tour from both the societies during the same tenure;
(3) Foreign tour by chief executive or Officer or Official of a Co-operative Society shall not be considered more than twice in five years with the prior permission of Government;
(4) Foreign tour by the members of a Co-operative Society shall not be considered more than twice in five years
(5) The above foreign study tour shall be to acquire special knowledge and skills improvement, to attend workshop, seminar also.
Provided the above proposals of such Co-operative Societies which are in continuous profit during last three years and where there is no accumulated loss shall only be considered for foreign tours.]
64 Chapter VI Audit 3[29. Subject-matter of audit.- (1) A cooperative society shall maintain books of accounts and registers having regard to its objects and showing a true and accurate picture/status of all the transactions relating to its affairs particularly with reference to all receipts and payments; all income and expenditure; administration and management;
business operations; every contact made with members and those having business relationship with the society; conduct of general meetings/ board meetings/sub-committee meetings and such other meetings; transaction with members and nonmembers; loans and advances to the members and recovery of such loans; its assets and liabilities; all purchases and sales of goods; production, processing and manufacturing; utilization of
1. Rule 28-B and 28-C as inserted by Notification No. CO 226 CLM 2005, dated 6-7-2006, w.e.f.6-7-2015, omitted by Notification No. CO 223 CLM 2006, dated 29-11-2007, w.e.f.29- 11-2007
2. Rule 28-D inserted by Notification No. CO 226 CLM 2014, dated 6-6-2015, w.e.f.6-6-2015
3. Rule 29 substituted as Rules 29 and 29-A to 29-F by inserted by Notification No. CO 14 CLM 2013, dated 10-7-2013, w.e.f.10-7-2013 materials or labour; recruitment and promotion of employees and disciplinary action against them; raising resources and utilization of the funds; investment of funds; bank accounts;
accounts and audit; distribution of profit etc., It shall maintain the original registration certificate; its byelaws with the registered amendments; the service rules with upto date amendments; its business rules / subsidiary regulations with upto date amendments; the Cooperative Societies Act and rules with upto date amendments; other law books applicable to its business and administration; etc., It shall also keep such account books and registers in connection with the business of the society as the Registrar of Co-operative Societies may from time to time, require.
Explanation:- For the purpose of this rule “Annual audit” means the audit of accounts of a cooperative society for the cooperative year to be conducted after the close of that co-operative year under Section 63. It culminates in the submission of audited financial statements along with the accompanying audit report after verification of the financial statements and the records and documents of the cooperative society.
(2) The audit under sub-section (1) of Section 63 shall include, in addition to the matters specified in sub-sections (2) and sub-sections (14) to (18) of the said section, the following particulars.-
(a) examination of the programmes and activities undertaken by the society with reference to the objectives mentioned in the bye-laws;
(b) verification of receipts and payments/ income and expenditure with reference to original receipts and vouchers about their genuinty and property.
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(c) verification of balances at the credit of the depositors and creditors and of the amounts due by the society’s debtors, of such proportion thereof as may be fixed by the Registrar of Co-operative Societies or the Reserve Bank of India or NABARD as the case may be;
(d) examination of the transactions of the members of its board.
(e) examination of the recruitment and promotion of the employees including their service conditions and disciplinary actions against them;
(f) examination of the services provided to the members and the extent of utilization of the said services by the members/directors;
1. substituted for the words “ and taken” by Notification No. CO 226 CLM 2014, dated 6-6- 2015, w.e.f.6-6-2015
(g) maintenance of accounts-adequacy and updating computerization of the transactions of the society;
(h) compliance with the transparency and other related laws to the extent applicable to the co-operative societies in the various transactions and operations of the society;
(i) examination of the statement of accounts of the society to the prepared by the board in such form as may be stipulated by the Registrar of Cooperative Societies or the Reserve Bank of India or the NABARD as the case may be;
(j) certification of the profits actually realized or loss actually incurred;
(k) whether, in the case of a cooperative bank, the guidelines, etc., issued by the Reserve Bank of India and NABARD have been adhered to;
(l) any other matter that may be specified by the Register of Co-operative Societies or the Reserve Bank of India or the NABARD as the case may be:
Provided that the audit shall, in addition to financial audit, also include administrative audit, performance audit, propriety audit and cost audit.
(3) The board of every cooperative society shall ensure that the annual financial statements like the receipts and payments / income and expenditure, profit and loss and the balance sheet along with schedules and other statements are prepared and presented for audit before the auditor or auditing firm within thirty days of the close of the cooperative year:
Provided that the schedules and returns to be furnished to the auditor or auditing firm shall include the following.- 66
(a) statement of general information and working of the society;
(b) statement of verification by the board of cash and closing stock as at the end of the cooperative year;
(c) statement of bank reconciliation and balance confirmation;
(d) membership and share schedule;
(e) list of employees and members of the board;
(f) loans and advances to the directors;
(g) loans and advances to the employees;
(h) demand, collection and balance statement;
(i) list of defaulter members;
(j) list of the members having right to vote;
(k) schedule of investments made and confirmation statement;
(l) schedule of bad and doubtful debts;
(m) loan confirmation statement;
(n) investment on the assets during the year;
(o) schedule of directors who have absented for three or more meetings of the board;
(p) schedule of members who have not attended three or more general meetings;
(q) schedule of members who have complied with the requirement of the bye-laws as far as obligations of membership are concerned;
(r) statement of misappropriation or embezzlement cases;
(s) schedule of unrecovered loans and advances for one year and above;
(t) schedule of the arbitration and execution cases;
(u) schedule of the reserves and other funds;
(v) schedule of the depositors if any;
(w) schedule of the assets and properties;
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(x) schedule of the closing stock;
(y) schedules relating to the objectives set out in the byelaws and the extent to which they are achieved type wise societies;
(z) schedule of loans and advances to the members.
(4) While examining the irregularities mentioned in clauses (a) & (b) of sub-section
(17) of Section 63, the auditor or auditing firm shall exercise such due care, diligence and skills as intelligent and prudent person would exercise honestly in similar circumstances and incorporate the findings in the audit report.
(5) While conducting the statutory audit of a co-operative society, the auditor/auditing firm may issue, from time to time during audit, interim objection to the chief executive of the co-operative society of to the officer performing duties of the chief executive for compliance or explaining the defects and irregularities pointed out in such objections within a period not exceeding five days. The chief executive shall return the interim objection sheets with the compliance/reply to the auditor/auditing firm within the time specified by the auditor. The auditor or auditing firm shall review the compliance report and drop such objections which, in his opinion, have been complied with satisfactorily and shall incorporate the remaining objections in the audit report.
29-A. Qualification for appointment as an auditor or auditing firm.-(1) The auditor or auditing firm who shall be included in the panel of auditors may be an auditor or auditing firm where as provided in the Act.
(2) None of the following persons shall be qualified for appointment as an auditor/auditing firm for a co-operative society.-
(i) an officer or employee of the co-operative society;
(ii) a person who is a member of that co-operative society;
(iii) a person who indebted to the co-operative society or who has given any guarantee or provided any security in connection with the indebtedness of any third person to the co-operative society prior to or during the course of audit;
(iv) a person or a member of his family who has a direct or indirect interest in the affairs of the co-operative society; and
(v) a person who is willfully not complied with the provisions of the Act or the rules during the audit of accounts of any co-operative society for the previous co-operative year.
(3) Any person not having the qualification and experience for appointment as an auditor under Section 63 and any person no included in the panel of auditors or auditing firms 68 maintained and approved by the Director of Co-operative Audit shall not be appointed as an auditor/auditing firm for the conduct of audit of accounts of any co-operative society.
(4) An auditor or auditing firm ceases to hold office when he.-
(a) resigns; or
(b) completes his/her term of office.
(5) Only the person appointed as an auditor/auditing firm of a co-operative society shall sign the audit report or sign or authenticate any other document of the co-operative society required by law to be signed or authenticated by the auditor/auditing firm.
(6) The audit report shall be read in the general meeting of a co-operative society and shall be open to inspection by any member of the cooperative society.
29-B. Procedure for enlistment of the Auditors and Auditing firms.- (1) The Director of Cooperative Audit shall give a public notification in a widely circulated kannada news paper and through departmental website inviting applications from the intending Chartered Accountants and Chartered Accountants Firms [and Cost Accountants and Cost Accountant Firm] possessing the requisite qualification and experience and willing to be included in the list of Auditors and or Auditing firms for taking up the audit of accounts of any Co-operative societies.
(2) The Director of Co-operative Audit shall scrutinize the applications according to the rules and prepare a draft list of eligible Auditors and Auditing firms and publish in the Departmental Website.
Earlier sub-rule (3)
(3) The enlistment of the Auditor or Auditing Firm shall be valid till such period he withdraws his name or he is disqualified for any professional misconduct. Further, the Director of Co-operative Audit shall enlist any Auditor or Auditing Firm on an application made by the concerned in the format prescribed if applicant satisfied the required conditions.
Note.- The Director of Co-operative Audit shall categories the societies into three groups based on working capital and total turnover and also classify the Auditors into three categories based on their experience for assigning them to respective category of societies in the following manner.
Sl.
No.
Categories of Societies Panel of Chartered Accountant and Chartered Accountant Firms and Departmental Auditors eligible for audit 1 Group “A” Societies having more than RS.25 crores of working capital/turnover Chartered Accountants and Chartered Accountant Firms having minimum of ten years experience.
2 Group “B” Societies having Chartered Accountants Chartered Accountants and 69 and Chartered Accountant more than Rs.10 crores of working capital/turnover Chartered Accountant Firms having minimum of five years experience.
3 Group “C” Societies having less than Rs.10 crores of working capital/turnover, grouped into districtwise lists.
Chartered Accountants and Chartered Accountant Firms having minimum of three years experience and officials of the Department of Co-operative Audit, grouped into district-wise panels.
Auditors listed against ‘A’ Category Societies can Audit ‘B’ and ‘C’ Category Societies and Auditors listed against ‘B’ Category can take up the Audit of ‘C’ Category Societies.
1. Inserted by Notification No. CO 226 CLM 2014, dated 6-6-2015, w.e.f.6-6-2015 1[(3) Sl.
No.
Categories of Societies Panel of Chartered Accountant and Chartered Accountant Firms and Departmental Auditors eligible for Audit and Cost Accountants and Cost Accountants Firms 1 Group “A” Societies having more than RS.25 crores of working capital/turnover Chartered Accountants and Chartered Accountant and Cost Accountants Firms having minimum of ten years experience and officials of the Department of Cooperative Audit not below the rank of Deputy Director of Co-operative Audit.
2 Group “B” Societies having more than Rs.10 Crores of working capital/turnover and below Rs. 25 Crores of working capital/turnover.
Chartered Accountants and Chartered Accountant Firms having minimum of five years experience and officials of the Department of Cooperative Audit, having minimum of five years experience.
3 Group “C” Societies having less than Rs.10 Crores of Chartered Accountants and Chartered Accountant Firms 70 working capital/turnover, grouped into district-wise lists.
and Cost Accountants Firms having minimum of three years experience and officials of the Department of Cooperative Audit, Grouped into district-wise panels.
Auditors listed against ‘A’ Category Societies may Audit ‘B’ and ‘C’ Category Societies and Auditors listed against ‘B’ Category may audit of ‘C’ Category Societies.
Note.- District Central Co-operative Banks and Apex Bank shall select Chartered Accountants or Chartered Accounts Firms from the panel of auditors prepared and maintained by the National Bank.]
(5) The categorization of Auditors and grouping of co-operative societies shall be made/updated every year after the end of financial year.
(6) The general body of every cooperative society shall select an auditor/ auditing firm out of the panel communicated by the Director of Cooperative Audit for being appointed as the Auditor/auditing firm, for the audit of accounts of the cooperative society. But, the same person shall not be appointed as an auditor or auditing firm of the same cooperative society for more than two years consecutively.
1. Sub-rule (3) substituted by Notification No. CO 226 CLM 2014, dated 6-6-2015, w.e.f.6-6- 2015
(6) The Auditor/Auditing firm so appointed by the general body shall complete the audit of accounts of the cooperative society for the previous cooperative year in accordance with the provisions of the Act and these Rules as early as possible and submit the audited financial statements and the accompanying audit report within thirty days from the date of completion of audit or by the first day of September, whichever is earlier, to the cooperative society, the Registrar and the Director of Cooperative Audit and the financing agency, if any.
(7) Provided for the audit of co-operative year 2012-13, including arrears of audit if any, the board of a co-operative society is competent to appoint the Auditor from the panel communicated by the Director of Co-operative Audit and shall get its accounts audited before 1st of September, 2013.
(8) The chief executive of the society shall communicate the appointment of the auditor or auditing firm within five days from the date of the general body meeting, to the auditor / auditing firm and Director of Cooperative Audit.
(9) When a Co-operative Societies is newly registered, the General Body of the society is in its first general meeting shall appoint the Auditor or Auditing Firm from the list of eligible Auditors and Auditing Firms in the respective panel of Auditors published in the Departmental Website.
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(10)The Director of Co-operative Audit shall co-ordinate with the cooperative societies audit as scheduled. Any problem arising in the conduct of and or concerning audit shall be referred to the Director of Cooperative Audit, who shall arrange for its redressal and issue necessary directions to the concerned.
(11) The audit report shall also contain schedules and statements with particulars of-
(a) all transactions which appear to be contrary to the provisions of the Act, the rules or the byelaws of the cooperative society;
(b) all transactions which appear to be contrary to the guidelines issued by the Reserve Bank of India and National Bank;
(c) schedules and statements as in sub-rule(3), duly verified and certified.
(12) The Director of Co-operative Audit shall be competent to issue necessary guidelines to the auditors or auditing firms for the purpose of ensuring timely completion of Audit.
(13) The Director of co-operative audit shall update the list of cooperative societies of every district as on 1st of April every year; reconcile it with that of the Registrar of Cooperative societies of that District.
29-C. Audit of a Cooperative Society which is defunct or under liquidation.–Where a society is under liquidation, the liquidator shall convene a General Body Meeting which shall appoint an Auditor or Auditing Firm out of the list of eligible Auditor or Auditing Firm published in the Departmental Website. Where it is not possible to convene the general body meeting the liquidator shall follow the procedure in Rule 33(i).
29-D. Submission of the Audit Report of an Apex society to the Government.- For the purposes of sub-section (11) of Section 63, the Director of Cooperative Audit shall submit a copy of the audit report of an apex cooperative society to the State Government to lay before the State Legislature.
29-E. Requisition for Re-audit of the account by the General body.- When the general body of a cooperative society resolves to provide for re-audit of any account of the society under sub-section (12) of Section 63, it shall appoint a different auditor or auditing firm for conducting such re-audit. The cost of such re-audit shall be borne by the cooperative society.
29-F. Re-audit of an account by the order of the State Government.- When the State Government orders for the re-audit of the accounts of a cooperative society, the Director 72 of Co-operative Audit shall arrange for such re-audit by a different auditor or auditing firm. The cost of such re-audit shall be borne by the co-operative society.]
1[29-G. Preservation of audit report- Co-operative Societies shall maintain Audit report as a permanent record. Director of Co-operative Audit and District Deputy Director of Co-operative Audit shall maintain audit reports in digitalised format up to a period of ten years:
Provided in the event of any dispute or the pendency of a criminal case, The Department of Cooperative Audit shall preserve the record of a co-operative Society till such dispute or the criminal case is finally decided.]