A time has come to demand that the Auditor function and perform by being more of a bloodhound sniffing out Fiscal Frauds and misfeasance in Co-operative Societies and cease to be a mere toothless watchdog that neither growls nor bites. With an upsurge in Accounting Scams in Co-operative Societies including Housing Societies, the detection of Accounting Irregularities had become an emerging topic of great importance for the Government of Maharashtra.
The failure of Internal and Statutory Audit System of the Society in identifying such Accounting Frauds compelled the Office of the Commissioner for Cooperation and Registrar, Cooperative Societies, Maharashtra State, Pune to issue the following Circular on 14/07/2010.
No. URB/D-4/1442/Accounts/Misc/Funds/Action/2010 Office of the Commissioner for Cooperation and Registrar, Cooperative Societies, Maharashtra State Pune Date- 14/07/2010
Subject- Launching of prosecution on account of Misutilisation and Misappropriation of Funds of Cooperative Societies.
- Government of Maharashtra, Agriculture and Cooperation Department, No:
CCL1270/84605/C-7, Sachivalaya Annexe, Bombay - 32 Dated I31'1 June 1972
- No ADT-552 of 1972, Office of the Cooperative Societies, M.S. Poona. Dated 5th September, 1972
- Government of Maharashtra, Home Department Circular No CI1, 3769/ 52181) VII A Sachivalaya Bombay-32 Dated 7th August 1972
- Government of Maharashtra, Agriculture and Cooperation Department, Circular No: C3M-1381/30472/6-C Mantralaya Annexe Bombay-32, Dated 12th June 1981
- Government of Maharashtra, Agriculture and Cooperation Department Sachivalaya Annexe Bombay -32, 2nd February 1971, Circular No. CCI - 1270-34605-C-3
- Government of Maharashtra, Home Department Government Circular No. Gil -0108/Pra.Kra -1l/POL-12 Mantralaya Mumbai -32 Dated 14th January 2008
This Circular outlines the need and modalities of launching and monitoring prosecution against the concerned regarding misutilisation and misappropriation of funds of Cooperative Societies, the instances which came to be detected during the process of audit.
There are instances seen in recent years that misutilisation and misappropriation of funds of Cooperative Societies are ascertained in Re-Audit, Special audit, Test audit and report of flying squad which is taken subsequently by Registrar. However, Statutory Audit report does not reflect misutilisation and misappropriation of funds of Cooperative Society of the same year.
Recently, the instances are reported where the Auditors entrusted with the duty of verification and audits have been indulging in acts of misreporting consisting of two broad categories. The First category is non reporting of serious instances which are detected/ could have been detected during audit and timely reporting of which could save further complications which adversely affect the well being of Members, Depositors and Society at large.
The Second category is misreporting of instances which present an altogether different picture of the status and affairs of the Society which also due to this kind of misreporting tends to jeopardize the well being of Members, Depositors and Society at large. The first is called Suppression of Truth and the other is Representation of Falsehood. There may be a possibility that these Iwo may overlap and there may be a string of instances wherein both are present.
These instances are to be differentiated from mere negligence, though amounting to professional lapse or shortcoming; not amounting to fraudulent reporting consisting of suppression of truth or suggestion of falsehood which either singly or jointly constitutes fraud, which is an offence in itself. As such, the following guidelines are issued to take care of fraudulent reporting and not for mere negligence in conducting audit process or reporting the outcome of Audit Process.
Where fraudulent reporting is observed, it be ascertained whether the concerned professional is prima facie liable under conspiracy along with the other persons who have actually committed the acts of commission and omission while conducting the affairs of Society. If that is so, the concerned Auditor or person responsible for verification will be liable jointly and severally with the other offenders.
However, where the clement of conspiracy cannot be substantiated then it should be seen whether the concerned Professional, who is also a Public Servant while conducting his statutory responsibility, has conducted himself to protect any person from legal punishment or to save any person from punishment or to save any person from punishment of a higher degree and has tried to bring such person under another kind of a higher degree and has tried to bring such person under another kind of punishment which is of a lesser degree.
This kind of conduct is covered under Section 217 of Indian Penal Code, I860 which provides for an offence by a Public Servant disobeying direction of law with intent to save any person from punishment or any properly from forfeiture.
In the present circumstances, there is a need to analyze deviations from statutory duty minutely to ascertain whether the delinquent Office Bearers Employees and other persons are tried to be protected by Professionals who themselves are responsible for an early detection of frauds and other serious misdeeds on part of people entrusted with the management of the Societies, such, this circular is issued to take care of fraudulent reporting by Professionals where conspiracy is involved or otherwise.
Copy forwarded for information to:-
- The Chief Secretary, Maharashtra State, Mantralaya Mumbai -400 032
- The Additional Chief Secretary, (Home), Home Department, Maharashtra State, Mantralaya Mumbai - 400 032
- The Principal Secretary, (Cooperation & Marketing), Maharashstra State, Mantralaya Mumbai -400 032
Copy forwarded for information and necessary action to:-
- Divisional Joint Registrar, Cooperative Societies (All)
- Divisional Joint Registrar, Cooperative Societies (Audit) (All)
- District Deputy Registrar, Cooperative Societies, (All)
- District Special Auditor, Cooperative Societies, (All) Commissioner for Cooperation and Registrar Cooperative' Societies, Maharashtra State, Pune