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CO-OPERATIVE SOCIETY.
IMPORTANT REPORT.
The quarteriy meeting of shareholders
of the Newcastle and Suburban Co-opera
tive Society was held in tile Wickham
School of Arts on Saturday evening. Mir.
I3. J. Stewart, chairman of directors, pre
sided, and there was a very large attend
ance, the hall being filled.
The quarterly statemnent showed that
the amount covered by sales for the period
ending IFebruary 29th amounted to
£t50,760 12s 0d. Tile share capital dli
dend and Interest withdrawn totalled
d9433 10s Gd. During the term there had
been admitted 187 new memnbers, and 1135
members Ilad withdrawn, leaving the total
at 3715 fmembers.
The statement was received on tile mo
telon of Mr. T. Davies. seconded by Mr.
R. Miaher.
Mr. Brierly, of the iirm of Brierly and
Drlerly, chartered accountants, in ia re
port read by him, stated that instruc
tions received by the firm were to conduct
an investigation Into its affairs, with
full power to examine the accounts, and
to malte such inquiries from various sour
ces as they thought fit, and to snake such
oltorations in the society's system as they
deemed advisable. Unfortunately a few
days after they had commenced investllis
tlons, a fire occurred in the grocery dc
partment, which extended to tile ofices.
This so dlsorganlscd thle work of the
staff as to render it very dificult to pro
ceed with the alteration of the system,
although they had been able to carry out
the work to some extent. For the infor
mation of the shlareholders, they made a
preliminary report, indicating the absleo
lute need of the Investigation. In the
course of tile worke they were forced to
the conclusion that the general manager
devoted too much of his time to purely
departmental management of the grocery
section. With such an important societ3.
and one having such a large turnover,
and carrying stocks in several depart
ments, there should be a general mana
ger in fact, as well as In name. They
emphaslsed the fact that a man who was
truly a ccneral manager was worth pay
ing well,. and that general management
of the cheap order was bound to prove
unprofitable in tba long run. A general
menager possessing the desired quallfitca
tions coull effect savings which would
lave a substantial margin over any in
crease in the amount of salary paid him,
in comparison with that whlich an Incom
pectent man woull be prepared to accept.
There were several glaring disadvantages
in the present system. Throughout the
establishlment there had been a total ab
senee of systm in the checking of fraods
received, iand tiecre was no hesi
tation in the assertion of the conviction
that goods had heeno paid for in the past
whilch had Cever been received. In the
matter of retnrned emptics-tins, bags,
and cascs--there had been absolutely no
check upon thie receipt of these. The cart
crs when receiving thle returns had been
allowed to give credit notes to the cls
tomers, sand the empties haid simply been
placed in the store by the cartcrd with
out being counted or checked in any way.
A presentation of the carter's credit note
to the cashier had been regacrded as sarl
elent warrant to deduct the amount from
the customer's account, and no attempt
had beei made to check those credit
notes, or to ascertain that the goods so
credited had ever been relurned to the
store. As thle credit represented a consid
erable total sum, it would he readily re
eogniscd lhow easily slips might be made
under sucll a system. Tils was mentioned
as an instance of the looseness, which
couls have bieen remedied if tile bnsiness
hlad been controlled by a general manager
who was allowed to devote his time to
tile business generally, instead of to one
department. There were other matters of
greater consideration, such as the proper
selection of merchants and nmanufacturers
from whom it was most profitable to deal.
The general manager's lime had been
taiken up with attendance on the waree
houlses of local grocery supplies, and the
work could have been done by a gro
cery departmental manager. Better still,
tile need for attcnlance at the care
house could be avoided by having the
suppliers' representactlves call upon the
departmental managers. Regarding Ce
secretarial worli. and account kbcpiig.
they regretted to report that the control
of thie work was in a deplorable state.
When they entered upon the Investiga
tions a rood deal of the work of the ac
countant, which should have been doie
from month to month, had not been
touched since the date of the last balanc
ing, viz., 22nd November, 1915. The expla
nation was that an assistant, who was
formerly employed, was taken away, and
thus the work had got into arrears. As
the result of the request of the investiga
tors, that the work should be brought iup
to date, the assistalnt was re-engaged, and
some attempt was made to get the work
Into fair order. As to thle methods of the
past, they could only express astonish
ment that in a concern of the magnitude
of tle society the neglect of the ordinary
business methods should sare been allow
ed to prevail so long. Tile report referred
to laxity in the system of checking, and
several instances wer given of the results
of test cheleks. The method of iookkeeping
generally was slipshod and antiquated.
The ledgers were kept in a manner which
rendered it impossible, without the most
minute cxaminatlon of details, to say
whether customers' accounts had been
paid or merely written off. The cashler's
work. while very well done, had never
had any check upon it, and, flnding that
even the additions of cash received bad
not been verified, they were put to
the test, with the result that
in three months' additions errors
were discovered In aldditlons in 91 distinct
Instances. The fact that the errors were
only of a minor character was a tribute
more to tile accuracy of the cashier than
to the virtue of tile office system. Upon
cxamnlingn thle mcethods of arriving at tile
half-yearly balance, they found that the
balances of both the last half-yearly per
iods had boen wrongly arrived at biy thle
writng off the grocery sales of £1i5 is
3d for tile half-year ended 31st May, 1915,
and of £33l Is 9d for the half year ended
22nd Novelber, ]3915, a total disrrnepancy
of ACd9t Its. 'rlie difference might, sif
cosrse, be explained by the discovery of
elerical errnrs, but in view of the fect
that no attempt whatever was made to
tlnd the difference, it might be othlerwise
explained. The printed kIlance-sheet, is
sued to the shareholders, did not dis
close those differences, and as they were of
sucli substantial amounts, somnething
should certainly have been said with ce
spert to them in the half-yearly reports.
The investigators were installing a sys
tom vwhich would provide methods of cheek
for the future. The preliminary report had
been prepared in view of the quarterly
meeting. The accountant firm, it con
eluded, by stating that they were him
pressed with the soundness of tile bust
ness from the shareholders' standpoint.
Mr. R. T. Harland reviewed the posl
lion at s'onstderable length, during whicl
lie said that he had not askced for a sue
rial audit, but for a special lvestlgatelion.
Replying to an Intierection, he said thlat
in conformity with the society's rules, Sir.
Brierly was a shareholder. He contended
rhat if the proper forms of accountancy
had been adopted years ago, the business
would not have got Into the state it had.
He would not say anything derogatory of
ally member of tile staff, for the staff had
lnot been suniclient for the work to have
been done properly. It was an immense
organisation, doing over £20t,000 worth of
iuslness annually, with 150 employees,
working uinder nine awards. Thley requlir
rd a highly capablo manager, who under
stood organlsation, who would be capable
of drilling the staff, and also advertise the
stores judiciously. Hie should also have
a knowledge of accountancy and Snance,
and be able to toll whether any depart
ment was paying as It should. The busl
liesas had become a departmental store, usnd
depacrtmental managers should be given
power to do their own buying. If, In itx
inonthb, they were not doing thle business
they ought, they should get out, and make
roomn for seino one thalt could.
Mr. T: Curley said that some panlry
statements had been made ou:side. Their
rccdlng had, however, Leon between t2000
and E£3o00 better for the quarter. The
speaker referrdd to matters of financen,
anud also gave a comparison between the
trsdlng of co-operative stores In relation
to the amount of sihare capital, io con
sidered that co-operative societies had
methods speelally adapted to their own
needs, which were fotnd suitable.
Mr. Brlerly said that referring to eys
tents and methods he .would take the
system of credit note. If the credit note
was lost they got nothing. It was In
tended that when the credit note was pass
ed throush it should be sent straight to
tile cashtier.
Mr. Curley said that he had insisted
upaon a system of stated accolnts, lie
agreed with Mr. Brierly that the whole
thing Iwanted reorganisation, but the con
stitutlon needed revising to affect it. lie
bad done ail that was possible for one
tttatt ta tin.
After it hod been decided, upon the
me tlon of Mir. W. Lauer, seconded by Mr.
Camneron, to tieal with Mr. Brierly's re
port, Mr. T. Davies moved, "that the ac
Lion of the directors In appointing a firmn
of chlartered accountants be aplproved by
this society." The motion was seconded
by Air. M. O'IIagen, and, after some dis
cussion, carried almost unanimously.
Mr. CLrley asked iwhether the auditors
had to give an audit on the qouarterly
statement, or welether Mr. Brierly had to
contlitnue and brir? up an audit for the
next half-yearly moeeting.
Mr. iarlerly said that there were things
whicht it was physically impossible for
neal to do, and onle was for men to audit
the-accounts of such a vast concern in
tlleir splare time. Had he been one of
tile aluditors he would hIave thrown up tile
jrb, aind would have told them that he had
not tite to do the Job properly. The au
ditors ihad done their best for the time
for which they were paid.
Mlr. J. Boa stated tlat with regard to
tile differences in the balances, they hadl
occurred since the system was instituted
by reputed nccountants, and, acting on
the advice of tlhe gentlemen who instal
ledi th, system, the balances had been
written off. The debiit balances were not
money lost, but had merely occurred
through errors. They had drawn atten
tion to tile matters in the auditors' re
ports. IHe hoped tlhat the books would
be audited by incorporated accountants.
The resignation of tie auditors was
then telndered. The resignations were
accepted with regret by the meeting, and
Messrs. Brierly and Brierly were appolnt
ed auditors to tile society.
A member moved, "That, with the ex
cepltion of tIle thitree 'new directors, the
directors be asked to put in their resig
nations," ewhich was sneconded.
Mir. T. Miller said that hie had been a
member for about four years and a direc
tor for abot:t two years. He did neot
linow he had done anything to be ashamedl
of or to aloloegise for. Hie believed he
had studied their interests, to whicih was
associated htis own, just as diligently and
falititfully as tile "red ragcer" with more
talk than brains. He ihad been ilnformed
that some twelve years ago the society
had thought it advisable to alter their
system of accounts keeping. They em
ployed a rirm which they considered one
of repute, and cwho would place tile bookls
nit a satisfactory basis. The firm laid
down the basis for their clerical work.
The system theit inagurateid was a suili
cient and satisfactory one, but the buhsi
ness had so increascd thiat it hiad fa:r
outgrown that system. There was no one
who could blame the directors for that.
The directors had hiad considerable work
and given mulch thougi]lt and atitention to
the affairs of the society, but they could
not give tile whoile of their time. (iMr.
rierly : "iFor Ss a week. It is absurd.")
They gave their time, patinere, and faith
ftulness for ts per sitting. The mere fal t
of getting ts or 55s did not concern the
direters. Tthey ilad tile common In
terest of the society at heart. iHe doubt
ed very much If tlie best results would
be achieved by making a sweep of the
old directors. iHe asked whether the
shareCiolders' interesth would receive
closer attention at the handls of the nec
directors than of the old dircetions.
Tihere were several cries of "No."
Thr, Brierly said that tlie reflections
were on thie system in operation and not
upon any person. After the motion hiad
been spoken upon by MIessrs. Wells, Nor
man, Johnson, and others, the question
was asked whether the motion was in or
der. 'The chairman said that the meeting
had the power to move a voteto of censure,
but not to call for resignatlons. A spe
clal general meeting would have to bhe
ctlleti for such a purpose. The motion
was ruled out of order.
Reference was made by Mr. W. Laucr
to a matter havigng roepect to the dismis
sal of an official of the Wiolesiale Co-op
erative Society. He read a lengthy state
ment, whichl he said, had been tendered
by tie oicital concerned, and which con
tained certain charges. Upon Ihe motion
of Mr. Lauer, seconded by Mr. M. O'Hiagen,
it was decided to appoint a committee to
investigate the matter, consisting of
Mesers. W. Later, M. O'Hagen, T. Davies,.
R. Webber, and A. Edden.
The sreeting adjourned at 10.45 p.m.
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