Going forward, the audit committee of the National Agricultural Cooperative Federation must check the status of internal control operations at least once a year and report to the board of directors. The aim is to strengthen the board's function of checking the federation president's power. Oversight of the operation of the member cooperative support fund (interest-free funds), which had faced criticism for favoring certain regional cooperatives, will also be strengthened.
According to related government ministries and the financial sector on the 29th, the government is pushing to revise the Enforcement Decree of the Agricultural Cooperative Act to this effect.
The amendment includes requiring the audit committee to check at least once a year how internal control standards are being operated to assess the adequacy of the federation's internal control standards. The audit committee must notify the executive director of the results, and the executive director must report them to the board. Until now, the National Agricultural Cooperative Federation had no separate internal control inspection standards.
The federation must establish internal control standards on par with financial companies. In particular, when reviewing the status of internal controls, it must closely examine matters related to the operation, allocation, and evaluation of the member cooperative support fund.
The member cooperative support fund is operating and business funding that the federation provides interest-free to local agricultural and livestock cooperatives nationwide. In practice, the federation president holds full authority over how the funds are allocated. As a result, criticism has persisted that support has been concentrated in certain cooperatives, such as those whose cooperative heads are concurrently serving as federation directors.
Of the top 10 cooperatives that saw the largest increases in funding after Chair Kang Ho-dong took office, seven were cooperatives located in the Yeongnam region. Kang is from Hapcheon, South Gyeongsang Province. With internal control standards for the member cooperative support fund in place, the practice of channeling funds to cooperatives in specific regions at the president's discretion is expected to improve.
Internal control standards for regional cooperatives will also be strengthened. Regional cooperatives must establish internal control standards at the level of financial companies, and any changes to the standards must be approved by a board resolution. Regional NongHyup cooperatives with total assets of 300 billion won or more as of the end of the previous fiscal year must undergo an external audit annually. Currently, regional NongHyup cooperatives with total assets of 50 billion won or more are required to undergo an external audit only once during the cooperative head's four-year term.