Housing cooperatives no longer in vogue

By Saad Hasan and Kazim Alam, The Express Tribune

KARACHI: More than half of all housing cooperative societies registered in Karachi are currently dysfunctional, as people have lost faith in the system, speakers at a seminar said on Saturday.

“Out of 1,800 societies, only around 800 are operating with proper managing committees, regular general body meetings and recording of all financial transactions,” said Muzammil Siddiqui, ex-provincial auditor of housing societies.

“I have come to realise that the biggest setback to the system is dishonesty,” he said. “Otherwise, cooperatives happen to be the best way of helping the general public buy housing.”

Siddiqui was sharing his experience at a seminar organised at the Institute of Chartered Accountants of Pakistan (ICAP). The seminar was held to mark the International Day of Cooperatives being held across the globe in first week of July, and focussed mainly on problems in accounting faced by societies.

By law, a housing society is formed under the framework defined in the Cooperative Society Act of 1925. At least 30 members have to come together to form a society. The society then buys land from the government before distributing it among members.

“The real purpose of a society manifests itself when a member is in financial distress,” he related. “If you do not have money to pay an instalment anywhere else, you can forget the plot. But in a society, members come forward to help each other.”

In the past decade, Karachi has witnessed an increase in the number of property-related fraud cases. Encroachments and forceful occupation of houses and flats has become common practice in many areas.

Siddiqui said that cooperatives work as a wall against such crimes. “Societies maintain all land records and thereby help greatly in preventing fraud.”

The popularity of housing cooperatives was hit hard after the failure of Scheme 33, which was launched by the government in 1971. Hundreds of societies were allotted thousands of acres of land all over the city. All of them failed.

Afzaal Ahmed Farooqi, an accounts officer at the Works Cooperative Housing Society, said such societies have helped share the government’s burden in official documentation.

“In case of approving the design for a house, we do the initial vetting before it goes to the Sindh Building Control Authority (SBCA). That helps everyone, as the design gets approval quickly and SBCA does not have to do much work,” he said.

Problems in auditing

At the seminar, government inspectors and veteran accountants presented a complaint against chartered accountants: they said the latter does not bother to read the Cooperative Societies Act before auditing accounts of a cooperative housing society.

The reason given for the latter’s apathy is that the Act is not included in curriculum prescribed by the Institute of Chartered Accountants (ICAP).

“Chartered accountants are familiar with cash-flow accounts, whereas housing cooperatives have receipt and payment accounts,” Afzaal Farooqui said; adding that the ICAP should make the study of Cooperative Societies Act mandatory for its students.

There are many other differences between the Cooperative Societies Act and the Companies Ordinance, 1984. For example, a cooperative is required to undersign daily transactions with the signature of its secretary. However, no such provision exists in the Companies Ordinance. “What is surprising is that many chartered accountants do not know about this difference,” Farooqui deplored.

The complaint appeared to hold some weight, as only a handful of ICAP members and chartered accountancy students attended the lecture on Saturday.

Published in The Express Tribune, July 8, 2012.


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