Waterbury evening Democrat., 1889-02-16
BUILDING SOCIETIES.
SOME TELLING POINTS CONCERN
 ING THEIR METHODS.

What an old Accountant Has to Say
 About the Associations' Way of Keep
 ing Books-Suggestions for the Improve
 ment of Truly Good Institution.
 A gentleman who is an expert accountant and who has had ample opportunities for studying the methods of 0 large number of building and loan associations said, in con- versation concerning The Morning News article on the subject:
 ''It is 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 falsified by the secretary. 1 have found some societies so lacking in books that it would be almost impossible for a practical accountant to 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 0 proper disposition of premiums be made, or how can interest be properly adjusteds In some soci- cities there is no loan book, or even a loan account, outside of the individual debit to the stockholder, and sometimes not even that.
 HOW DEFALCATIoNs ARE COVERED.
 By wise provision of the inventor of these societies, or by line of providential circumstances, bookkeeping is much more perfect as a system than in any other busi- ness I know of, for with @ properly con ducted 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 retary, and if he is inclined to fix his accounts he seldom makes a 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 protecteds By the bonds of the officers. It is a fact known to the directors of such of these societiAs 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 suspense account or bills re- ceivable' 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 dedication 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 more than any dedication likely to occur. In the division of profits, for example, there are as many ways of computing profits and di- viding them among the series and shares as there are secretaries. No two secretaries figure alike. It is probable that at the wind ing up of many societies there will be 8 sur plus or a shortage of profits that will 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 will undoubtedly produce a clamor and excitement beyond what the peaceful and self satisfied directory now anticipate. SHOULD MAKE QUARTERLY sTATEMENTs. "It is well to look these matters squarely 1 in the face, and, as these societies certainly ! furnish an advantage and cheap method of getting home, let them be supported and protected. It is a fact, that can be demon strated by what has been done, that O man l can buy a home as cheap as he can pay ! rent, or, if he can pay rent, he can pay it to himself and own his own home when he has paid bis rent or dues for l five or eight years. In a we'll managed SO ciety loan of say, $3,000 should not cost ir
 interest over per cent per annum, withou, 1 commission. This fact has been demonstrated by actual transactions in @ society in this city ! and is beyond question. If the state auditor 1 could have authority to require tho books ir all building societies to be kept by the bes, l known methods it would save money and time in inspection.
 My opinion is that all societies should 1 make quarterly statements under one general l system. And the result of all should be pub l lished by the auditor, with each item of in 1 stallments, loans, interest, fees, fines, e1. penses, etc., under one headline, so that com. l parisons could be made at a glance, and a 1 yearly statement be made the same way l Then it would be possible to weed out the poor societies. This system would do away with the necessity for an examination ir
 many societies, as they would close up and hquidate as soon as the condition of the SO ciety was exhibited. Many moro would bt compelled to readjust their affairs, and many others would be found sound and worthy o1 patronage.
 1 "State inspection should begin with thei,
 last annual statement, say Jan. 1, 1889, and l continue from that. This would proven fixing the societies. accounts if there art any that are not in good shape. Unless some
 thing is done soon to give confidence to thu
 building society interest there will probably be few more of these defalcations and ther | crisis which will wreck many good socie
 ties and destroy confidence in all of thes< | poor mems savings banks. '"-Chicago News