The latest report of the Registrar of Friendly Societies has highlighted several weaknesses in how credit unions and trade unions are run.

It says that while "the vast majority of credit unions are carrying on their business in a competent and prudent manner", there are problems in the area of auditors, savings stamps, investments and computerisation.

In terms of trade unions the registrar said not enough of them submit their accounts for audit to a qualified accountant.

The Registrar of Friendly Societies supervises 435 credit unions, 95 friendly societies, 74 trade unions and 985 industrial and provident societies.

In his report for 1997, Mr Noel Martin Sisk said he referred specific details about two credit union auditors to the appropriate authorities and two successful prosecutions for breaches of company law resulted. He does not discuss in detail what the two individuals engaged in.

However he said recent experience suggests that some auditors of credit unions "are still failing to perform their functions in an adequate manner and in a limited number of cases have failed miserably to do so".

He added that he was putting all auditors of credit unions on notice that where an auditor has failed to perform his functions adequately action would be taken.

"Too many boards select auditors primarily on the basis that their fees are lower than their competitors. This criterion should never be used in the selection process and those credit unions which have selected their auditors on that basis have come to regret their decision," said the registrar.

The use of saving stamps, which are similar to post office savings stamps, should be handled with more care, said Mr Martin Sisk. "As such stamps are the equivalent of cash the provisions of this service requires the setting up of very strict internal controls," he said.

"Unfortunately some credit unions have ignored this requirement and have suffered the consequences," he added.

In terms of computerisation the registrar said that some credit unions have purchased systems which were unsatisfactory in some respects. For example, some of the systems did not record arrears properly or were unable to hold past ledger accounts of members.

In terms of the investments made by credit unions, he said some of these have been "imprudent". He said many were made in equities and all such "investments can only be regarded as speculative and therefore not appropriate for credit unions".

He added that other credit unions had invested with brokers who promised high returns but whose solvency "cannot be guaranteed".

In terms of trade unions, Mr Martin Sisk, said that some trade unions have not been meeting their statutory obligation to make annual returns to the registrar. According to figures in the report, of the 74 unions registered, some 21 had not filed any returns.