Report says facility appeared to be insolvent at the end of 2006

The 2006 audit report on the accounts of the Clerical and Commercial Workers Coopera-tive Credit Union has cited  transgressions of accounting procedures, apparent irregularities and imprudent  management of the facility and questioned whether its 2006 financial statements represent “a true and fair picture” of its financial affairs.

This newspaper has seen a copy of the audit report on the Credit Union’s 2006 accounts prepared by the firm Rupert Foster Accounting, Taxation, Auditing and Management in which the auditors “question the reliability of the Credit Union’s accounts, citing, among other things,  “woefully inadequate loan coverage,” “transgression in accounting principles” and what it believes was the credit union’s resort to a financially imprudent  bank loan at a higher rate of interest than the interest rate applied to borrowers from the facility.

“The Credit Union appeared to be insolvent because it resorted to an overdraft facility it negotiated with the NBIC (now Republic Bank) and borrowed expensive money to extend cheap loans to its members.”

The report which was tabled for discussion at  the July 27th Annual General Meeting of  the Credit Union provides details of a number of inadequately secured or unsecured loans. The report cites examples of unsecured loans of more than $500,000 and other loans in excess of $1m with less than 30% security. And according to the report while the management of the Credit Union says that its membership in 2006 totalled 1,653 persons, the list of balances produced in its 2006 financial statement accounted for only 1,425 members.

According to the audit report the Credit Union’s 2006 financial statement indicates that of the 868 loans that remain outstanding only 226 were secured.

According to the audit report the Credit Union “is not in a healthy financial state despite its current working capital of more than $130m.  The report notes that outstanding loans total more than $134m which represents 86 per cent of the Credit Union’s net current assets. According to the report about 70 per cent of those loans totalling more than $94m are unsecured.

The report notes that   loan repayments for 2006 totalled $8.1m less than new loans granted for the year.

According to the auditor’s report while the union’s efforts to recover loans has been affected by employment changes and relocation among borrowers, there was evidence there were cases in which “no proper assessment of the borrowers’ credit standing was made when the loans were considered and approved.”