More cooperatives but less compliance
Published:Sunday | July 21, 2013 | 12:00 AM
The Department of Cooperatives and Friendly Societies (DCFS) is reporting a 150 per cent increase in the number of societies which applied for and received approval to operate during the fiscal period ending in March.
But the DCFS also notes that compliance among existing organisations has been on the decline.
The climb in applications has resulted in overall annual growth of about eight per cent for registered entities.
The department is responsible for oversight of credit unions and other societies that work as a collective in the management of funds for a common purpose. As an agency of the Ministry of Industry Investment & Commerce (MIIC), DCFS oversees more than 688 entities, consisting of 220 cooperatives and 468 societies. Fifty entities were added to the roll last year, according to the report.
The registered entities hold in total approximately J$75 billion of assets - of which J$74 billion is held by the credit unions - and those that are active represent more than 1.4 million members, according to information from DCFS Head of Inspectorate Sonia Smith.
As noted by the agency, cooperatives are formed to market products, to purchase supplies or to provide services such as housing, credit union, and thrift, among others.
"To achieve this objective, the people form a business organisation, which is democratically controlled through which they pool their skills and resources," says the DCFS on its website.
Friendly societies are obliged by law to provide the DCFS with annual returns, return of members and investment, quinquennial valuations - which means every five years - and financial records for audit.
Cooperative societies should turn in members share listing, quarterly financial reports and records for audit or an independent auditor's report.
"In the 2012-13 financial year, 40 societies were noted for breaches of the regulations while approximately 60 per cent complied with directives given," said DCFS Registrar Errol Gallimore.
Problems noted in the DCFS annual performance report compiled by MIIC included: failure to keep proper accounting records, which affected auditing and also delayed annual general meetings; poor management practices in most non-credit union societies; and tardiness of management to address breaches and impropriety within producers and services societies.
The report also highlighted undercapitalisation of societies; "gerontocracy in leadership" - that is, the organisations were basically run by elderly people - "and inadequate remuneration compared to the demands of job junctions".
No credit unions were cited for undercapitalisation.
Gallimore said that many societies are dependent on grants and donations for funding. The benevolent societies operate as community-based organisations and the funding received is generally for community projects.
Active benevolent societies
There are currently 41 credit unions on the DCFS register and 400 active benevolent societies.
"The registration of 50 societies under the relevant acts has contributed to employment, development in the agricultural and other sectors and improvement in the social, and economic conditions within mainly inner-city communities," the MIIC report says.
Nine cooperative societies were struck off the register, as well as 17 friendly societies.
The status of the roll of credit unions remained unchanged, with no new additions during the year.
Regarding the pending transfer of oversight of credit unions to the Bank of Jamaica, Gallimore said: "There continues to be dialogue amongst the stakeholders in order to arrive at consensus for some outstanding issues."
The central bank, which regulates deposit-taking institutions, is setting new capital and other regulatory requirements for credit unions.
DCFS' role in relation to credit unions will change once the transfer of oversight takes place, but the full scope is yet to be fully determined.
"It depends on what the new regulations finalise. BOJ will concentrate on financial operations. We will deal with amendment of rules, arbitration hearings, complaints of members, annual general meetings requirements and so on," said Smith.
"We will not certify audits as was done previously, but a copy will be filed. We will no longer be the auditor. For liquidations and suspensions, this will be done based on instructions from the BOJ. We will do the ground work after," she said.