Co-operative governance

CO-OPERATIVE GOVERNANCE
A Summary of the Code of Best Practices for Co-operatives

INTRODUCTION
The main pillars of the Good Governance are transparency, accountability, risk
management and control. Though the Co-operatives Act 2005 and the Co-operatives
(Amendment) Act 2006 have made provisions for greater transparency and accountability at the
level of co-operative societies, the Cooperatives Division of the Ministry of Industry, Small and
Medium Enterprises, Commerce and Co-operatives has worked out this Code of Best Practices,
in consultation with main stakeholders of the co-operative movement in Mauritius. The Code of
Best Practices provides effective guidelines for the proper functioning of co-operatives and
eventually ensures sound co-operative development.
Co-operative governance regulates the relationship between members of co-operatives, the
Board of representatives of members (that advises management on behalf of members) and
management (that has the care and control of the co-operative).
The good co-operative governance will:
ensure that board and management pursue objectives that are in the interests of co-operatives and members; lead to effective monitoring of activities of societies; ensure efficient and effective use of available resources; increase accountability and transparency in co-operatives. This document includes Code of Best Practices for: Co-operative organizations are advised to select clauses and codes that can be implemented at their level and be fully committed to the implementation of the relevant parts of the Code of Best Practices. Recognizing that societies differ in sector, size and resources, it is understood that levels of implementation of the code will differ.
CODE OF BEST PRACTICES FOR THE BOARD OF DIRECTORS


As per the co-operatives legislation, a Board of Directors shall manage a co-operative society.
The Board of Directors (BOD) shall exercise all the powers of the co-operative society subject to
any limitations contained in the law and the constituting instruments. The BOD shall abide by
the following codes of ethics and good governance:
Leadership & Management
• The BOD should exercise leadership, entrepreneurship, integrity and sound judgment in
directing the affairs of the co-operative • The BOD shall provide guidance for long-term and short-term planning
Transparency and Accountability
• Directors shall adopt the principles of transparency and accountability
• The BOD should ensure good governance
Compliance
• The BOD shall ensure that the society complies with all statutory and legal requirements,
together with co-operative values, principles and prescribed codes of best practices
Control and Supervision
•
The BOD shall set up a monitoring mechanism to assess the performance of societies The BOD shall ensure that regular performance appraisal of the management and staff is carried out
Independence of the Board of Directors
• The majority of Board members should be independent non-executive directors
• Directors must not involve in related party transactions
Remuneration
• The Board members should be paid a realistic financial compensation for their work
Communication
• The BOD should establish effective and ongoing communication between stakeholders at all

Appointment of Chairperson
• A Chairperson having the ability, power and commitment to guide and organize the work of
the Board, initiate and monitor strategic decisions and having the know-how and experience should be appointed
Members
• The Board should ensure expansion of membership, the participation of members in the
operation of the society, and that members are aware of their rights
Co-operative Principles and Values
• Boards should adopt co-operative principles and adhere to co-operative values while
managing the affairs of the co-operative societies CODE OF BEST PRACTICES FOR MEMBERS

In accordance with the Cooperatives Act 2005, a “member” means a person who holds a share
in a society. No individual shall become a member of a society unless he has attained the age
of 18, except in the case of a school society or credit union. An individual, a society and/or a
body corporate may be a member of a primary society. A member shall comply with the
following codes of ethics and good governance:
Rights of Members
• Members should know their rights as members and exercise these rights as members/ • Members should have access to relevant and required information on a timely basis and in an understandable manner for analysis and comments thereon Participation of Members
• Members should participate actively and fully in all activities of societies • Members should participate actively in deliberations at the annual general meetings and Responsibilities of Members
• Members should abide by rules of the society and observe co-operative values and • Members should refrain from acting to the detriment of societies • Members should ensure that policies and performance are in accordance with the stated aims of societies and values and principles of co-operatives • Members should use the services of societies and settle their liabilities/ debts relating to CODE OF BEST PRACTICES FOR INTERNAL CONTROLLER

As per the co-operatives legislation, a co-operative society shall have an internal controller. The
Board of Directors and Management of the co-operative society shall establish an internal
control system to ensure efficiency and effectiveness of operations, reliability of financial
reporting and compliance with appropriate laws and regulations. The internal controller shall
comply with the following codes of ethics and good governance:
Appointment of Internal Controller
• The Board and Management/ Audit Committee shall define the profile, qualifications and experience of the internal controller and his/ her scope of work • A panel comprising members of the Board and Management should select the internal controller. The panel, after obtaining the approval of the Audit Committee, should propose the selected internal controller for appointment at the annual general meeting.
Functions of Internal Controller

• Ensure that all activities follow approved and established procedures • Ensure that all books of societies are kept up to date • Carry out inspections of money, stocks, books and other assets of society • Ascertain the authority and validity of all expenditures, payments, loans and advances as • Examine regularly accounts of societies and ensure that all transactions of societies are properly recorded in respective books, accounts and other relevant documents Responsibilities of Internal Controller
• The internal controller shall, within a reasonable period, identify errors or irregularities in transactions already processed, and missing assets/ invalid disbursements • The internal controller shall safeguard the assets of the society • The internal controller shall secure the completeness and reliability of the records of the • The internal controller should produce reviews on the control effectiveness of the society • The internal controller should ensure that there is separation of duties and that no individual has control over a transaction. For societies where separation of duties is not possible because of insufficient staff, vacations, etc., the transactions should have written approval of the manager
Access to Information
• The internal controller shall have unrestricted access to all records, property and
Reporting
• The internal controller should provide timely and quarterly reports to the Board and to the Registrar of Cooperative Societies on significant audit findings and recommendations; and to the Audit Committee, if any • The internal controller should provide timely information to the Audit Committee or the Board concerning suspected fraudulent activities, significant instances of non-compliance or abuse, if any
Confidentiality
• The internal controller shall keep confidential all information obtained in the exercise of CODE OF BEST PRACTICES FOR AUDIT COMMITTEE
An Audit Committee may be defined as a Committee of non-executive Directors, responsible for liaising with the full Board, Internal Audit and External Audit. It may be composed of 3 to 5 non-executive members (members of the Board of Directors who are neither officer nor employee having the responsibility to maintain contact with the internal and independent auditors of the society). The Audit Committee shall abide with the following codes of ethics and good governance:
Setting-up of an Audit Committee

• Audit Committees should be formally constituted as subcommittees of the main Board • There should be written Terms of Reference, which deal with membership, authority and • There should be a minimum of three and a maximum of seven members in the Internal Audit Committee and members elected for the Audit Committee shall hold office for a period of three years • Members of Audit Committees must have skills and knowledge in accounting and • Audit Committees should have at least one discussion annually with auditors but without executive Board members, to ensure that there are no unresolved issues of concern • Audit Committees should have explicit authority to investigate on matters within its Terms of Reference and should have full access to relevant information
Role and Functions of Audit Committee

Audit Committees should:
• Acquire a good understanding of the entire audit function, both external and internal • Review the whole system of accounting, internal control and reporting • Review the annual financial statements before submission to the Board for approval • Consider the appointment, Terms of Reference, remuneration and findings of auditors • Review findings of external auditors and make appropriate recommendations • Review the effectiveness of internal audit and its reports and discuss the scope and • Ensure that the activities of societies are in compliance with the rules and regulations of the Cooperatives Act 2005 and the Co-operatives (Amendment) Act 2006 • Submit a quarterly Management Report to the Board CODE OF BEST PRACTICES FOR MANAGEMENT
Accountability and Responsibility

Management should:
• Ensure that policy decisions taken by the Board are implemented • Follow the objectives and guidelines set out by the Board • Ensure that the functioning of the society is in line with co-operative values and principles, and the Co-operatives Act 2005 and the Co-operatives (Amendment) Act 2006 • Be accountable to the Board and member owners Efficient Management
• Ensure that resources of the society are used productively for the betterment of the • Build up the image of the society so that trust, reliability and confidence prevail Transparency
• Be committed to integrity and transparency in operations • Ensure that financial statements are transparent and that the statements give a true and fair view of the state of affairs of the society Supply of Information
• Supply all required information on a timely basis and in the correct format • Keep up to date information, especially as regards the books and accounts of the society Conflict of Interests in the Society
• The posts of Chairperson of the Board and Management Executive should not be held by • The posts of Chief Executive and Secretary should not be held by one and the same • Inform the society of any activity being undertaken that may lead to potential conflict of
Communication

Management should have effective and regular communication with the Board and other stakeholders.

Source: http://cooperatives.gov.mu/English//DOCUMENTS/CODEOFBESTPRACTICES06.PDF