Guidelines for Bank Account - Northern Province

Circular No: 03/2017

Reference: NP/19/06/P1/Circular/2017/03
Date: 19.07.2017

To: District Rural Development Officers, All Divisional Rural Development Officers / Development Officers, Department of Rural Development, Northern Province.

Subject: Maintenance of Bank Accounts by Village and Women's Rural Development Societies

Background

Currently, societies are opening various types of accounts in multiple banks and conducting their banking activities. Due to this, many societies are functioning without adhering to Section 12(a) of the Society By-law.

Legal Provision

According to Section 12(a) of the Society By-law, a society must maintain a savings account in a government bank (National Savings Bank, Bank of Ceylon, People's Bank) located in close proximity to its division. Accordingly, the society must maintain:

(i) If participating in revolving fund activities, one savings account for that purpose; and
(ii) One savings account for the society's general activities (contract work, society subscription funds, society savings, etc.).

Only these accounts should be maintained.

Required Compliance

Therefore, it is mandatory that a registered society maintains either one or two savings accounts only in an approved government bank located within the vicinity of the society. All banking transactions must be conducted through these permitted accounts.

Procedure for Changes

If valid reasons exist for making changes regarding the above matters, a written request must be submitted to the Director. Only after obtaining proper approval may decisions regarding banking operations be made.

Detailed Explanation

Why This Guideline is Necessary

The proliferation of multiple bank accounts across different banks has created several problems:

• Difficulty in monitoring society funds by Rural Development Officers
• Increased administrative burden on society office bearers
• Risk of funds being scattered and difficult to track
• Complications during audit processes
• Potential for mismanagement or misappropriation
• Non-compliance with the established by-law provisions

Permitted Account Structure

Under this circular, societies may maintain:

Key Requirements

1. Single Bank: Both accounts (if two are maintained) must be in the same approved government bank.
2. Proximity: The bank should be located in close proximity to the society's division.
3. Government Bank Only: Accounts must be maintained in approved government banks only:
   • National Savings Bank (NSB)
   • Bank of Ceylon (BOC)
   • People's Bank
4. Savings Accounts Only: Accounts must be savings accounts, not current accounts or other types.
5. Maximum Two Accounts: Societies may have either one account (if no revolving fund) or two accounts (revolving + general).

Rationale

• Simplified Monitoring: Rural Development Officers can more easily monitor society finances.
• Reduced Administrative Burden: Society treasurers manage fewer accounts.
• Audit Compliance: Easier for auditors to track all transactions.
• Fund Consolidation: Prevents scattering of funds across multiple institutions.
• Better Financial Control: Concentrated funds are easier to manage and protect.
• By-law Compliance: Adherence to Section 12(a) of the Society By-law.

Action Required by Societies

1. Review all existing bank accounts currently maintained.
2. Identify any accounts not in compliance with this circular (accounts in non-approved banks, multiple accounts beyond permitted number, etc.).
3. For societies with non-compliant accounts:
   • Select one approved government bank (NSB, BOC, or People's Bank) for all society banking.
   • Close all accounts in other banks or non-approved accounts.
   • Transfer all funds to the selected bank.
   • Ensure either one savings account (if no revolving fund) or two savings accounts (revolving + general) are maintained.
4. Update bank mandate forms with correct signatories as per by-law.
5. Inform the Rural Development Officer of the consolidated banking arrangements.

Process for Seeking Exceptions

If a society believes there are valid reasons to maintain a different banking arrangement, the following procedure must be followed:

1. Prepare a written request explaining the exceptional circumstances.
2. Submit the request to the Director through the proper channel (via Rural Development Officer and District Rural Development Officer).
3. Await written approval from the Director before making any changes.
4. Only after receiving approval may the society proceed with alternative arrangements.

Penalties for Non-Compliance

Societies that fail to comply with this circular may face:

• Difficulties during audit processes
• Qualified audit reports
• Suspension of fund releases
• Potential deregistration proceedings
• Action against office bearers for by-law violations

Benefits of Compliance

• Streamlined financial management
• Easier audit clearance
• Better oversight by Rural Development Officers
• Reduced risk of financial mismanagement
• Compliance with legal requirements
• Simplified reporting and monitoring
• Eligibility for departmental programs and funding

Implementation Timeline

All societies are expected to achieve compliance with this circular within a reasonable timeframe. Rural Development Officers should assist societies in their divisions to regularize their banking arrangements and report on compliance status to the District Rural Development Officer and the Department.

Responsibilities

Society Office Bearers:

• Review current banking arrangements
• Take necessary steps to achieve compliance
• Maintain only permitted accounts in approved banks
• Ensure all funds are properly deposited and accounted for

Rural Development Officers:

• Identify societies with non-compliant banking arrangements
• Guide societies to achieve compliance
• Verify compliance during field visits
• Report compliance status to District Rural Development Officer
• Process any exception requests from societies

District Rural Development Officers:

• Monitor overall compliance in the district
• Consolidate reports from Divisional Officers
• Submit compliance status to Department
• Process exception requests to Director

Summary for Society Office Bearers

What you need to do:

• Check how many bank accounts your society currently has.
• If you have accounts in different banks or non-approved banks, choose ONE approved government bank (NSB, BOC, or People's Bank) to keep all accounts.
• Close extra accounts and transfer all money to your chosen bank.
• You may have either:
  • ONE savings account for everything (if no revolving fund), OR
  • TWO savings accounts in the SAME bank (one for revolving fund, one for general activities).
• If you think you need a different arrangement, write to the Director for permission first.

Remember: Following these rules helps protect your society's money, makes audits easier, and keeps your society in good standing with the Department.

S. Srijeyanthan
Director
Department of Rural Development
Northern Province

Distribution List

1. Chief Secretary, Northern Province – for information.
2. Secretary, Ministry of Fisheries, Transport, Trade and Commerce, Rural Development, Road Development and Motor Transport, Northern Province – for information.
3. District Secretary (Government Agent) – for information.
4. Assistant Auditor General, Northern Province – for information.
5. Chief Internal Auditor, Northern Province – for information.
6. Divisional Secretary – for information and necessary action.
7. Divisional Federations and District Women's Rural Development Societies – for information and implementation.

This circular supersedes any previous inconsistent instructions and comes into effect immediately.