Evening journal., 1889-02-14
BUILDING SOCIETIES.
SOME TELLING POINTS CONCERN
ING THEIR METHODS.

4
About the Associations Way of Keep
ing Books Suggestions for the Improve
ment of a Truly Good Institution.
A gentleman who is an expert accountant
and who has had ample opportunities for
studying tho methods of large number of
building and loan associations said in con
yersation concerning The Morning News
article on the subject:
ut is a fact that very few out Of the 200
building societies in this city have any meth
cd of keeping their accounts by which an
Inspector could get at the state of their
affairs without great delay and expense, even
If the books are not falsitied by the secretary.
| have found some societies so lacking in
books that it would be almost impossible for
practical accountant 10 determine the state
Of the loans made by the institution, and
even the secretary could not unravel the
mystery, although he was present when every
loan was made How, then, can proper
disposition of premiums be made, or how can
interest be properly adjustedl In some soci-
cites there is no loan book, or even a loan
account, outside of the individual debit to
the stockholder, and sometimes not even that.
HOW DEFALcATIoEs ARE COVERED.
by a wise provision Of the inventor Of
these societies, or by line Of providential
circumstances, bookkeeping is much more
perfect as system than in any other bust
ness | know Of, for with a properly con-
Quoted set Of building society books it would
be almost impossible for any one to tamper
with the accounts without detection, even
were the auditors not bookkeepers, but
alert and honest As my experience goes
most Of the auditors are selected by the sec
rotary, and if he is inclined to fix his accounts
he seldom makes mistake in his auditors
This is the reason so many transactions have
been overlooked and such developments, as
IN the case Of the Columbia and of the Citi-
zens, have occurred.
How are these defalcations covered and
how are the stockholders protectedl By the
bonds Of the officers. II is fact known to
the directors of such OF these societies as have
have had defalcations that a secretary's bond
is like bond Of straw in many cases. and
the directors have to patch up compromise
and the society carry the loss. If this is done
and the present stockholders have the loss
distributed among themselves it is perhaps
fair and equitable; but when the loss is
carried to a suspense account or a bills re-
ceivabe' account, as is done in some socie-
ties, and new stockholders come in and absorb
stock with this incubus it is little less than
criminal, and is certainly dishonest on the
part of the directory In some cases it might
be possible for all or nearly all Of the old
stockholders to have retired and the burden
be thrown entirely on those not interested at
the time the defaleation occurred.
There are many questions that affect the
property Of building societies which might
not come under the state auditors authority
and yet which could affect the society mora
than any defalcation likely to occur. In tho
division of profits, for example, there are
as many ways Of computing profits and d.
yiding them among the series and shares as
there are secretaries. No two secretaries
figure alike 1t is probable that at the wind
ing up Of many societies there will be a sur
plus Or shortage of profits that win entail
much trouble to secretaries and treasurers.
enriching lawyers and impoverishing the
stockholders. As the building society inter-
ests approach the time when shares should
mature it viii undoubtedly produce a clamor
and excitement beyond what the peaceful
and self satisfied directory now anticipate.
SHOULD Make QUARTERLY STATEMENTS.
1T is well to look these matters souarely
in the face, and, as these societies certainly
furnish an advantage and cheap method of !
getting home, let them DO supported and |
protected. 1t is fact, that can be- demon
strated by what has been done, that a man |
can buy a home as cheap as he can pay |
rent, or, if be can pay rent, he can |
pay 1t TO himself and own his own home
when he has paid his rent or dues for
five or eight years. In well managed SO.
ciety loan Of, say, 5000 should not cost in
interest over 3 per cent, per annum, without
This fact has been demonstrated
by actual transactions in society in this city
and is beyond question. If the state auditor
could have authority TO require the books in
all building societies to be kept by the best
Known methods it would save money and
Time in inspection.
My opinion is that all societies should
make quarterly statements under one general
'ystem And the result of all should be pub
ished by the auditor, with each item Of in
itallments, loans, interest, fees, fines, ex-
)enses etc, under one headline, so that COM
PARSONS could be made at glance and
Yearly statement be made the same way.
Then it would be possible TO weed out the
Door societies This system would do away
With the necessity for an examination in
many societies, as they would close up and
iquidate as soon as the condition Of the So
'iety was exhibited. Many more would be
to readjust their affairs, and many
'thers would be found sound and worthy Of
patronage.
state inspection should begin with their
asst annual statement, say Jan. /, 1889, and
continue from that This would proven.
fixing the societies accounts if there are
my that are not in COOL shape. Unless some
hing IS done soon 70 give confidence to the
'uilding society interest there will probably
Ne a few more Of these defalcations and then
crisis which win wreck many good socie-
les and destroy confidence in all Of these
poor mems savings banks Chicago News.