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Annual inspection of co-operative societies

Friday, November 24, 2017

To overcome the major problem of incomplete audit and other inspections, a circular has been issued by The Commissioner for Co-operation and Registrar Co-operative Societies, Pune, pertaining to Annual Inspection of co-operative societies. Vishwasrao Sakpal explains what it encompasses

Effective, regular and perfect audit is a tonic for making the co-operation movement healthy and strong. Since the co-operative housing societies are included in section 81 (1) (B) of the Maharashtra Co-operative Societies Act, 1960, the audit of the said societies should have to be made themselves. It is obligatory to make audit from the panel auditors kept on the level of Sub-Registrar, Co-operative Societies. Audit cannot be made from the same auditor for continuous more than three years period.

The appointment of the auditor should be made in the Annual General Meeting of the society. As per Maharashtra Co-operative Societies Act, 1960, under section 81, it is obligatory to complete auditing work of co-operative societies conducted for financial year within four months from the end of financial year i.e., to be completed before 31st July. Similarly, certified and appointed auditor is obliged to submit Audit Report within period of one month from /since completion of auditing work and under any circumstances to be submitted to the Sub-Registrar and to the society before circulating notice of Annual General Meeting.

The societies came in difficulties, the root cause of their difficulties is faults of auditors. Auditors put on the faults on the societies. As per the available report, approximately 1,55,000 societies audit was not completed during the last 3 years. This is a serious matter. It is reliably learnt that "show cause notices" have been issued to about 82,000 societies including housing societies. The panel auditor responsible for audit of these societies have been served"show cause notices” by the Co-operation Department. To overcome this phenomenon, a circular has been issued by The Commissioner for Co-operation and Registrar Co-operative Societies, Pune, pertaining to Annual Inspection of co-operative societies under rule no. 81 - A :-- Circular No. General/Circular/K-81(A) Inspection/1660/2017 dated 03.10.2017

What the circular says
The Annual Inspection is, as per the provision of Maharashtra Co-operative Societies Act, 1960, and under section 81 (A). The said annual inspection is important from the legal point of view. Hence, instead of implementing the annual inspection programme all together, the inspection should be on merit and effective under section 81 (A). To know the financial status, to unearthen the accounting irregularity and serious matter in the societies affair, to submit the documents in time to the concerned authority, identify whether the society follows the act and bye-laws in day to day affair and to improve the working and have an effective control, the annual inspection is very essential.

The inspection of societies is as per Maharashtra Co-operative Societies Act, 1960, under section 81 (A) on the following points :--
1)  The societies adhere to the provisions of act, rule and societies' bye-laws.
2)  Maintenance of books of accounts and records in the prescribed manner.
3)  To ensure that societies' work being carried out on commercial basis and under the professional and expert management.
4)  To ensure that the societies are complying with the co-operative principles and provisions of act and the rules as per the state government's principles and directions.
5)  To ensure that the detailed accounts are submitted under section 79, regularly and in the orderly manner.

As per the set target as set out in the circular and use of provisions, the inspection of co-operative societies is essential by the Registrar. In view of the above the following instructions are being issued :--

To prepare a list of panel auditors, to prepare a list of societies having completed and not completed audits, to issue orders to carry out audit by the co-operative societies, to examine closely audit report and audit rectification report received from the societies, re-audit and test-audit (test-audit of at least 20% of the audit report received), to plan for criminal action pertaining to specified reports, to ensure whether action is being taken on specified reports, to try to increase the merits of audit, to plan action against the auditor failed to perform his duties. The action to be taken by the Registrar under section 81 (A) of the Maharashtra Co-operative Societies Act, 1960 :-

While preparing the state-wise annual inspection programme, area, district and Taluka level, by the Registrar, under section 81 (A) only the following societies are to be included :--
1)      Societies which are in loss.
2)      Societies which are were in profit last year but running in loss this year.
3)      Societies which earned less profit as compare to last year.
4)      Societies facing closure.
5)      Societies with minus capital value.
6)      Complaints received against the societies.
7)      Co-operative credit societies facing problems.
8)      Societies with audit class "K " and "D ".
9)      Large urban co-operative banks / credit societies.
10)    Urban co-operative banks included for TAF CUB by the Reserve Bank of India.

At least 24 co-operative societies on state level will be inspected by the Commissioner's Office. While undertaking the very important inspection programme on societies level, share capital and number of members are to be considered on the following points :--

The inspection shall be completed definitely every year of the state-wise and area-wise societies to be planned.

Inspection strategy for co-operative societies with paid up share capital over 1 lakh should be completed once in 2 years.

Inspection of selected co-operative societies with less than 50 members, paid up share capital below 1 lakh and  various types of societies, to be carried out once in 3 years.

Inclusion of state-wise and area-wise societies for annual inspection to be completed in the month of January every year.
Likewise, district and taluka-wise societies to be included in the month of February every year. The Registrar-wise consolidated annual inspection plan for the state to be forwarded to the higher authorities by 15th March every year.  As per the annual plan, the implementation of the said inspection programme effective 1st April every year. If the within finalisation of accounts is not completed in April and May, then in that case inspection may be completed on the basisof last year's financial statements. Once the inspection report is received by the respective Registrar, to ask for the audit rectification report about serious offences and points within 1 month with inspection officer's remarks and comments and take appropriate action as per the existing act within 1 month.

The Assistant Registrar on Taluka level to prepare consolidated report about the statutory action taken against the societies involved in serious offences at the completion of inspection repot and forward the same to the District Sub-Registrar by 5th of every month.After collecting monthly report (with District level societies) prepare a consolidated district monthly report and forward the same to the Divisional Sub-Registrar, Administration, by 7th of every month. The Divisional Sub-Registrar, administration, after collecting the consolidated monthly report, will forward it to The Commissioner for Co-operation and Registrar co-operative Societies, Co-operative Societies, Maharashtra State, Pune, by 10th every month.

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