National inspection to rein in errant Co-operatives begins

By Jackson Okoth
and Stephen Makabila.

The Government has launched a massive inspection of Co-operatives countrywide in an effort to rein in errant Saccos and directors who violate regulations governing the sector.
And as the impromptu inspections gain momentum, the new Commissioner for Co-operative Development, Mary Mungai has sounded a stern warning to the entire Co-operative fraternity, vowing there will be no mess in the sector under her watch.
“The nationwide inspection targets both Saccos and Housing Co-operatives, among others that will be inspected at random to ensure their operations are free from corruption and violation of regulating laws,” she noted.
Mungai told the Sacco-Review that eight Co-operatives are to be de-registered and that they have been issued with notice to that effect and have 30 days to file their appeals.
“They have been issued with de-registration notices as per Section 62 of the Co-operative Societies Act. We do not require dormant Co-operatives bloating our register,” warned Mungai.
The inspection comes weeks after the Cabinet Secretary (CS) for the Ministry of Industry, Trade and Co-operatives, Adan Mohamed called on Co-operatives in the country to embrace good corporate governance.
Those issued with the de-registration notices, Mungai said, had failed to file annual returns for three years, have membership of below 10 and have also failed to meet their objectives among other reasons.
She said that already inspection of Cooperatives had been carried out in parts of Central, Rift Valley and Nairobi regions.
Meanwhile, Director of Audit, State Department of Co-operatives-Ministry of Industry, Trade and Co-operatives Andrew Bundi Mbwi Mbwi also speaking to Sacco Review in an exclusive interview explained that under the Co-operatives Act, Cap 490- all Co-operatives are required to file annual returns as per Section 25 (10) in Form 1V A together with the financial statements.
“The Ministry of Trade, Industry and Co-operative Development will kick out officials of the Co-operatives who failed to meet the 31st April, 2017 deadline set for submitting approved audited accounts and returns for audit purposes,” he said.
Mrs Mungai warned that cases of Board members looting one Co-operative and moving to the next will cease as such persons will be blacklisted from sitting on any Board when the new Co-operative Policy takes effect from July this year. “Under the new devolved system, we have no clear structures and the new policy will help address such challenges. The Consultant working on the draft policy will help align it to constitutional and development blue-prints before validation by stakeholders. It will then go through Senate and Parliament and finally Cabinet,” explained Mungai.
Mungai had also promised to digitalize issues of data in the Co-operative sector by June this year. “The public requires services closer to them, even in the comfort of their homes through their mobiles,” noted Mungai.
Coperatives Societies Audit Department requires all Co-operative societies to provide accounts records and information necessary for Audit/Inspection purposes as and when required, Mbwi stated.
“We have to go through the huge volume of accounting statements that we have already received and extended the deadline for those who have not already filed their returns until the end of May, 2017. After this period lapses, those small Co-operatives perhaps having challenges such as resources to hire an accountant are free to seek a waiver or exemption from the Commissioner for Co-operatives,” said Mbwi.
An official of any Co-operative society who feels aggrieved by the actions of officers from the Co-operatives Audit office are free to channel their complaints to the Commissioner for Co-operative Development, he said.
Available figures indicate that while there are over 22,000 registered Co-operative Societies, some of these Societies remain dormant. Nairobi has over 2,500 registered co-operatives with most suspected to be dormant or have since transfigured into other businesses.
“Although we have more than 2,500 registered Co-operative societies in Nairobi, some of these Societies are dormant and not presenting their accounts regularly for audit purposes. We are now in the process of cleaning up the register to get rid of these dead Co-ops,” said Dolphin Aremo- Director of Co-operatives, Nairobi County.
This situation is replicated at all other counties where there are numerous Co-operative Societies who are not conducting their businesses in accordance with the Co-operative Societies Act. For instance, in Uasin Gishu County, there are over 562 registered Co­operatives Societies with 300 out of this number being farmers’ Coop­eratives.
Only 60 Co-operatives are active while the rest are dormant. While 74 new Cooperatives societies have been registered so far in Uasin Gishu County, 36 Societies that had collapsed have also been revived.
Corruption and theft of funds has been identified as the main cause of collapse of many Co-operatives.
While the County Commissioners for Co-operatives does not have powers to liquidate or dissolve such Societies- only the Commissioner for Co-operatives wields such powers- these officers can recommend that such Co-operative societies be liquidated, dissolved or deregistered all together.

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