The Kenya Copyright Board (Kecobo) wants a forensic audit of the operations of agencies which collect and distribute royalties on intellectual works by artistes, a move that points to a crackdown on the controversial societies.
The entities commonly known as collective societies include the Music Copyright Society of Kenya (MCSK), the Music Publishers Association of Kenya (MPAKE), the Kenya Association of Music Producers (KAMP), and the Performance Rights Society of Kenya (PRISK).
Among the issues the board wants auditors to reveal is the effectiveness of internal controls and fraud or possible fraud happening in the societies.
Kecobo has made a call for expression of interest by established audit firms in the country, that will lead to digging into the Collective Management Organisations’ (CMOs) financial operations, Information Technology systems, royalty collection and management, and their corporate governance, among other issues.
The board approves and authorises operations of CMOs in the country, by issuing them licences.
“The forensic audit should cover the entire organisations’ functions such as finance and accounts; human resource; Information Technology; membership policies; procurement policies; royalty collection and management protocols; asset management; corporate governance; staff policies among others as provided in the organisation structure of the societies. The audit should include management of risk, whistle-blowing and complaints resolutions procedures,” Kecobo stated.
The board said the audits will mainly be undertaken in Nairobi between December and January 2023.
Artists in the country have particularly been complaining about how the MCSK and PRISK administer their royalties, lamenting that they receive meager revenues from the ventures.
Kecobo said among the main objectives of the forensic audit will be to assess the adequacy and effectiveness of the CMOs’ internal control systems to monitor revenue and expenditure and other financial and operational structures.
“Determine the existence of risk management policies, implementation and compliance, the integrity of distribution rules and policies, and highlight fraud or opportunities of fraudulent activity,” Kecobo directs.
Kecobo also wants the forensic audit to assess the integrity of current membership and adequacy of membership admission procedure and review the integrity of welfare schemes in the society.
The board also wants the forensic audit report to assess whether the organizations’ assets are accounted for, used for the intended purpose and are properly recorded and managed or disposed of in the fixed assets register under the CMO policies or relevant accounting standards and the adequacy of established ICT system and controls to mitigate the system risks facing the organization.
“The audit firm shall be required to prepare a report that includes findings and observations on the organisation’s systems and internal controls that were examined during the audit, deficiencies or weakness in the accounting systems and internal controls, and make a recommendation for improvement and compliance to established internal and external policies and guidelines,” Kecobo directed.
Auditors will also be required to put down matters coming to their attention during the exercise, which could have a significant impact on the operations of particular organization CMOs.
Kecobo has had run-ins with several collecting agencies. For example, the board in August last year revoked the operating licences of KAMP, PRISK, and MCSK for three months for allegedly violating licensing conditions.