A bunch of cooperative unions got adverse audit opinions in the 2022/23 financial year owing to unprofessional financial reporting of auctioned agro products alongside poor internal auditing of the cooperatives’ assets actual value.

This journalist has established that over 60 percent of cooperative unions in the country have been hiring temporary internal auditors who lack professional skills in drafting financial statements.

However, there are notable weaknesses about assets auditing thus leading the collective schemes into adverse, disclaimer and qualified audit opinions by the apex state owned auditing firm-Cooperative Audit and Supervision Corporation (COASCO).

Jeremiah Mugeta, COASCO Acting Director General said in a recent interview that as of June 30, 2023, the corporation audited 3,911 unions, an equivalent of 78.22 percent of the set target of auditing 5,000 unions in the 2022/23 financial year.

Of the audited cooperative unions, he said, 479 unions (12.25 per cent) received qualified opinions, 2,475 unions (63.28 percent) received adverse opinions, 830 unions (21.22 percent) received disclaimer opinions and 127 unions (3.25 per cent) received unjust opinions.

Mugeta was responding to this journalist’s questions while quoting the audit report on cooperatives for the financial year 2022/23 as he remarked that unions were audited in different groups namely: the Tanzania Federation of Cooperatives (TFC), Regional Cooperative Unions, Savings and Credit Cooperative Societies (SACCOS), Agricultural Marketing Cooperative Societies (AMCOS), Joint Enterprises and other unions in the economic sectors of mining, beekeeping, fishing and vegetable.

He asserted that the audit report shows that qualified opinions have increased from 339 in 2021/22 to 479 in 2022/23. Adverse opinions have increased from 2,393 in 2021/22 to 2,475 in 2022/23.

According to Mugeta, disclaimer opinions have decreased from 1,198 in 2021/22 to 830 in 2022/23 while unjust opinions have decreased from 2,075 in 2021/22 to 127 in 2022/23.

"The results generally show that the state of performance in Cooperatives has begun to improve but there are still weaknesses in the internal auditing system;

The weakness is seen in the recording of transactions, the maintenance of financial records as well as the preparation of financial statements according to accepted accounting standards," said Mugeta.

He said that as for the Savings and Credit Cooperative Societies (SACCOS), the results show that there are improvements with regard to strengthening of the unions as qualified opinions increased from 249 in 2021/22 to 310 opinions in 2022/23.

Adverse opinions have decreased from 711 in 2021/22 to 594 in 2022/23. Disclaimer opinions have also decreased from 264 in 2021/22 to 159 in 2022/23 and unjust opinions decreased from 625 in 2021/22 to 33 in 2022/23.

"In general, SACCOS auditing results show that the performance has improved in the financial year 2022/23 compared to the preceding financial year of 2021/22," said Mugeta.

Mugeta recommends that a way forward should be for stakeholders within the cooperative unions to take urgent initiatives by initiating programs that equip cooperative auditors and managers with required professional skills of drafting financial statements.

This journalist has established that poor preparation of financial statements and auditing reports by cooperatives internal auditors are contrary to Section 55 (2) of the Cooperative Societies Act No. 6 of 2013 which states: ‘Every registered society shall keep proper accounts and other records in relation thereto and shall within three months prepare in respect of every financial year a statement of accounts in a form which conforms to the best accounting standards.’

The weaknesses are also contrary to Section 23 (1) of the Cooperative Societies Regulations 2015 which state: A cooperative society shall prepare and maintain at its registered office or at any other place in Tanzania as designated by its board the financial or accounting records, membership register setting out their names and addresses, the number of any membership shares owned and the amount of any loans among other aspects.

In a follow-up to establish what initiatives are cooperatives stakeholders observing in addressing the highlighted challenges, this journalist spoke to the Tanzania Federation of Cooperatives (TFC) chief who shared insights on the initiatives that the apex body is administering?

Florian Haule, TFC Executive Secretary, in his response, said the federation had since January 2022 enrolled sensitization and capacity building workshops to cooperative auditors and managers through its sensitization programme dubbed ‘Cooperatives Financial Management Transformation-CFMT-P’ which is being implemented in phases.

“We started with the Morogoro region where a huge number of cooperatives got adverse and disclaimer audit opinions. We are training cooperative auditors and managers on how to draft professional financial statements. Tabora came next where the programme is ongoing,” said Haule.

According to him, other regions to be covered in the programme are Shinyanga, Simiyu, Geita, Kilimanjaro, Singida, Mbeya, Pwanii and Mara.

He said the reason behind selecting these regions as the programme’s prioritized areas is aligned with their poor auditing performance as indicated in the COASCO report.

Dr Benson Ndiege, Registrar and Chief Executive Tanzania Cooperative Development Commission (TCDC) said that his office has been closely coordinating the resolving of all the arising challenges in collaboration with stakeholders from the private sector.

Agriculture Minister Hussein Bashe admitted that there are weaknesses for cooperatives in preparing financial statements and internal auditing reports of cooperatives' assets.

"When I was appointed as a minister for this ministry, I found that 95 percent of the cooperatives were in a bad situation of preparing financial statements;

It was a big challenge that I chose to start working on and now the situation has started to improve," said Bashe.

He said that immediately after he was appointed; he went on instructing the TCDC to start training 57 cooperative union leaders on ethics, corruption, and mental health from the regions of Tabora, Katavi, Rukwa, Mbeya and Njombe.

According to Bashe, in strengthening the capacity of leaders and executives to manage cooperative unions, he instructed TCDC to collaborate with TFC, SCCULT, COASCO and MoCU to provide training on preparing accounting books and register 40,253 cooperative members, 5,553 cooperative leaders and 7,517 cooperative executives on the Cooperative Societies Database Management System.

 He said that as of April, 2024, TCDC conducted a leadership audit of all AMCOS and found that 65 percent of executives did not have the qualifications to lead in their positions.

As a result, the Commission directed the relevant cooperatives to hire qualified executives.

"Through TCDC, the ministry has instructed the AMCOS to hire qualified leaders, and unqualified union leaders, including chief accountants who do not hold CPA to go back to universities within the period of three years as of December 2026," said Bashe.

The minister said that in resolving the challenge, TCDC prepared three types of standard operating guidelines namely: Human resource management guidelines based on employment management procedures, Disciplinary guidelines and Termination guidelines based on operational requirements.

"TCDC has facilitated the recruitment of chief executive officers for three cooperative unions namely Nyanza Cooperative Union, Shinyanga Region Cooperative Union and Simiyu Cooperative Union to strengthen the operational capacity of the unions. The officers have been recruited to the unions through the secondment procedure," said Bashe.