Masaka Elders Savings and Credit Cooperative Society (SACCO) Limited has lost at least Shs399.7 million to fraud, a special financial audit has revealed.
According to an audit report by Felbright and Company auditors, the microfinance institution lost the money between January 2016 and May this year.
The report was read before the SACCO’s special general meeting convened in Masaka on Monday.
The audit was prompted by a petition by a section of SACCO delegates to the Ministry of Industries and Cooperatives, in which they complained of suspicious financial mismanagement and manipulation of internal controls by the current board of directors.
Charles Kilibo, an auditor in Felbright and Company Auditors while presenting their audit findings on Monday indicated that the SACCO had been wrecked by serious governance weaknesses that created room for fraud and other habits of financial mismanagement.
He says that the SACCO was found to have been operating with a weak and divided board of directors who were also rocked in leadership struggles, hence the failure to secure members’ savings.
Kilibo explains that the money was lost in irregular transactions by SACCO board members and staff, high default rate, uncoordinated loan approvals and other suspicious cash transfers from the institution’s accounts.
“For the period we were reviewing, that is January 2016 to May 2019, about 40 percent of the loans were in default.
The average loan in Masaka SACCO is about Shs2.2million. There are those who have up to Shs30 million.
There is limited analysis to confirm whether somebody has the capacity to pay.
The other weakness we found is that there are loans that were disbursed before they were approved,” Kilibo said.
The audit report has also indicated that at least Shs75 million was also lost through Mobile money transaction debtor and some unscrupulous SACCO staff who were trusted to service members’ loans.
Kilibo explains that they established that many people were paying their loans through mobile money accounts of some staff who however could not transmit the monies to SACCO accounts.
“We found many loans with a period of more than 24 months. Some of these loans are to board members. Some of the loans that were given beyond the limit were also defaulted, including ne of Shs30 million.”
The report has made recommendations to the Registrar of Cooperatives at the Ministry of Industry at Cooperatives to hold the implicated board members and management staff individually accountable for the money that was lost.
The auditors also recommended the immediate suspension of the SACCO board of directors and staff implicated in the report until the money is fully recovered.
But Margret Ntambaazi, the current SACCO board of directors’ chairperson has denied participating in the said fraud, arguing that they inherited some of these problem from the previous leadership.