by Bill Johnston
Having looked at the Leeds City Credit Union Accounts I set out
my findings:
1.The Department of Works and Pensions have agreed that almost £2million
can be deemed to be reserves. This means that they have effectively
given the credit union that money and that they do not require
that this money be lent out in accordance with the original objectives
of the growth fund.
This sets a precedent for other credit unions who are in difficulty
to demand the same treatment.
2. Dividends of £260,570 have been paid, which was not covered by a surplus. There is a duty on directors to ensure that dividends are only paid out of a surplus and if they failed to ensure this then they are negligent and can be asked to repay this amount.
3. After adjusting for dividend the credit union has only attracted £48,463 of savings (after withdrawals). Having increased its staff from 54 to 70 in the year can this be indicative of a very inefficient credit union.
4. There has been some creative accounting to ensure that there is a surplus of £76,495 of reserves (after bringing in the DWP reserve). Please note the following:
Banking Commission of ££27,795 has been included
in income but shown as not yet received.
Prepayments are up from £46,926 to £78,166 an increase of £31,240.
When you can only report a measly £76,495 in net reserves it does mean that work has gone on to ensure that the reserve is a positive one. Lets hope the directors are right with their bad loan reserves.
5. The following cost headings have increased substantially: -
Administration up from £1,195,801 to £1,568,653 an
increase of over 31%
Financial up from £98,133 to £323,555 an increase of
nearly 230%. Is this the effects of the banking project? If so
this should be very worrying as there are ongoing commitments on
this project.
6. The LEGI grant has to be repaid.
7. The auditors have heavily qualified their audit report on no less than 6 items. It seems that the problems of under provisioning of loans has been going on for a number of years. They cannot confirm that a cash balance of £247,204 is present at the year-end. Bank reconciliations have not been done and finally that the share and loans listing could not be reconciled to the nominal ledgers at the year-end. They are supposed to be on Curtains 2 .Any computer system should ensure that at least arithmetically that the system balances. What has been going on here!!
© Copyright 2009 W.P.(Bill) Johnston F.C.A. mobile 07778934125
Bill Johnston is a chartered accountant specialising in the credit union industry for more than 40 years. He has build a successful audit practice serving at one time nearly 200 credit unions and currently directs Conaccess Ltd which services the IT needs of almost 150 credit unions.
Tel: 01274 592800