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CSD Initiates to Empower Internal Auditor

In a proactive effort to fortify the microfinance sector, the Centre for Self-help Development (CSD) orchestrated a successful three-day training program titled "Internal Audit & Control" from December 20-22, 2023 (Poush 04-06, 2080). The program was designed and catered specifically to 24 internal auditors of different microfinance institutions (MFIs) and microfinance cooperatives (MFCs), aiming to familiarize them with role and significance of internal auditors. The training was focused on procedures for controlling internal audit and different forms of fraud and errors and ways to mitigate. The objective of this training was to update internal auditors about the guidelines and standards set by Nepal Rastra Bank (NRB), Credit Information Bureau (CIB), and Inland Revenue Department.


Mr. Bechan Giri, Executive Chief of CSD, stressed the pivotal role of internal auditors as the backbone of MFIs. He highlighted their responsibility in ensuring efficient risk management, governance, and internal control procedures, which is crucial for upholding the reputation and trust of members. He urged participants to share their experiences in dealing with fraud and mitigation strategies.
Mr. Sopan Bista, Assistant Director of CSD, addressed the impact of negligence in internal control practices on the rise of fraud cases imposing negative impact on MFIs and cooperatives’ reputation. He requested all participants to actively participate and implement the knowledge and skills accessed from the training in their respective sector.
Training was facilitated by different thematic experts including Mr. Revati Prasad Nepal, Executive Director of Microfinance Institutions Supervision Department, Nepal Rastra Bank; Mr. Shyam Acharya, Tax Officer of Inland Revenue Department, Government of Nepal; Ms. Mahima Dangol, Trainer of CIB; CA Paras Mani Aryal; Mr. Bhes Raj Panthi, Former CEO of First Microfinance Laghubitta Bittiya Sanstha Ltd.; and Mr. Dana Raj Panta, DCEO of First Microfinance Laghubitta Bittiya Sanstha Ltd.
Mr. Revati Prasad Nepal emphasized the importance of internal auditors in monitoring policy compliance and addressed major issues affecting MFIs’ performance. He pointed out unhealthy competition, ineffective analysis of members’ background, weak compliance of microfinance principles, investment in unproductive sector, and so on as the major issues behind the drop in the performance of MFIs.  Addressing these issues, he informed that NRB has taken major steps such as timely amendment of policies, introduction of credit information system, focuses highly on client protection and financial awareness, and so on. He further added that every MFIs should focus on undertaking comprehensive research, selecting the right business model, focusing on product development, changing leadership plan, and working with regulators to remain competitive in the market. Moreover, he recommended internal auditor to highly focus on loan appraisal so as to minimize the risk.
Mr. Shyam Acharya delve into the topic of Tax and VAT. Furthermore, he emphasized the regular payment of taxes by MFIs and outlined transaction reporting requirements, including reverse VAT for foreign transactions.
Ms. Mahima Dangol provided insight regarding the reporting system in CIB and its provisions to deal with clients. Ms. Dangol requested to provide accurate information to the MFIs.
CA Paras Mani Aryal suggested that the internal auditors not just provide accurate accounting throughout the year, but also provide independent evaluations of financial and operational activities of their organization which helps them in identifying fraud and errors. In support of this, Mr. Bhes Raj Panthi discussed about the fact that internal auditor provides management with information, appraisals, recommendations, and counsel about the examined issues. In order to become an effective and independent auditor, they should possess risk management skills, problem solving skills, communication skills, project management skills, and so on. 
Mr. Dana Raj Panta prescribe to prepare checklist that includes stock book, fixed asset register, vault register, attendance by the internal Auditor and verify and ensure that the organization is pursuing the policies and guidelines effectively.
The training program was ended with the opinion of the participants regarding the training and the valuable insights they have gained. During the sharing sessions, Mr. Raju Dhodari conveyed he will change his way of doing internal audit. He further stated that it is crucial to provide financial literacy training to the members so that they know negative impacts of taking loans from different institutions. Additionally, Mr. Subash Dhital requested CSD to organize the training related to internal audit frequently. Three-day training program was officially closed by distributing the certificate of achievement to all participants.

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