A Model Accounting Policy & Procedures Manual for SACCOs

MODEL ACCOUNTING POLICIES AND PROCEDURES MANUAL FOR SACCOs IN UGANDA Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda This manual was read and approved at the Committee Meeting held on the…………….Day of ……….2007 ……………………………………………………………………… CHAIRMAN ……………………………………………………………………. TREASURER …………………………………………………………………. SECRETARY Page 2 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Section 1.1 1.2 1.3 1.4 1.5 1.6 CHAPTER CH AP PT TE ER R ON E:: IN TR RO OD DU UC CT TIIO ON N CHA ONE INT Foreword Background of SACCOs Objectives of the Accounting Manual Finance Department, giving its set-up and functions Summary of Policy Statements Duties of the Accounting and Finance Department Page 8 8 8 8 10 11 CH AP PT TE ER R TW O:: BO OK KS S OF CO OU UN NT T AN D FI NA AN NC CIIA AL L CHA TWO BOO OF AC ACC AND FIN RE PO OR RT TIIN NG G REP 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 Policy statements on Books of Account Chart of Accounts Proper Books of Account The Trial Balance Comparative information Related Parties Income Statement Balance Sheet Cash flow Statement Statement of changes in equity Notes to the Financial Statements 15 15 17 24 24 24 25 26 26 27 27 CH AP PT TE ER R TH RE EE E:: BU DG GE ET TIIN NG G CHA THR BUD 3.1 3.2 3.3 Policy Statement The Budgeting Process Budgetary Performance and Control 28 28 29 CH AP PT TE ER R FO UR R:: CA SH H MA NA AG GE EM ME EN NT T CHA FOU CAS MAN 4.1 4.2 4.3 Policy Statement Cashiering Safe/Vault Cash Management 30 30 33 Page 3 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 4.4 Transferring Cash Section CHAPTER 34 Page CH AP PT TE ER R FI VE E:: BA NK K PR OC CE ED DU UR RE ES S CHA FIV BAN PRO 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 Policy Statement Opening of Bank Accounts Bank Signatories Cheque book maintenance and Cheque Payments Cash/Cheque deposits and Cheque clearance Cash Withdrawals from the Bank Bank Reconciliation Presentation in the Financial Statements 35 35 35 35 36 39 39 40 CH AP PT TE ER R SI X:: LO AN NS S RE CE EIIV VA AB BL LE E CHA SIX LOA REC 6.1 6.2 6.3 6.4 6.5 6.6 Policy Statement Types of Loans Loan Disbursement Loan Repayments Recording Loan loss Provisioning 41 41 41 42 42 43 CH AP PT TE ER R SE VE EN N:: AC CO OU UN NT TS S RE CE EIIV VA AB BL LE E CHA SEV ACC REC 7.1 7.2 7.3 7.4 7.5 7.6 Policy Statement Interest Receivable on Loans Interest Receivable on Investments Prepayments Staff loans and Advances Sundry Debtors 48 48 49 49 49 51 CH AP PT TE ER R EI GH HT T:: IN VE EN NT TO OR RY Y CHA EIG INV 8.1 Management Policies 8.2 Procurement 8.3 Obsolete stationery 52 53 53 Page 4 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Section CHAPTER Page CH AP PT TE ER R NI NE E:: PR OP PE ER RT TIIE ES S,, PL AN NT T AN D EQ UIIP PM ME EN NT T CHA NIN PRO PLA AND EQU 9.1 Management Policies 9.2 Physical Control 9.3 Revaluation 54 55 57 CH AP PT TE ER R TE N:: AC CO OU UN NT TS S PA YA AB BL LE E CHA TEN ACC PAY 10.1 10.2 10.3 10.4 10.5 10.6 10.7 10.8 10.9 Members' Savings Loans and Balances due to Banks Other Borrowed Funds Capital Grants Interest Payable Payroll Liabilities Accruals Other Accounts Payable Corporation Tax 59 64 64 65 66 66 68 68 68 11.1 11.2 11.3 11.4 CH AP PT TE ER R EL EV VE EN N:: CA PIIT TA AL L AN D RE SE ER RV VE ES S CHA ELE CAP AND RES Members' Contributions Handling Members' Applications and Payment for Share Capital Equity Grants Applied Reserves 70 70 71 73 12.1 12.2 12.3 12.4 12.5 12.6 CH AP PT TE ER R TW EL LV VE E:: IN CO OM ME E CHA TWE INC Management Policies Types of Revenue Interest Income Operating Grant Income Other Income Disclosure in the Financial Statements 74 74 75 75 76 76 CH AP PT TE ER R TH RT TE EE EN N:: EX PE EN ND DIIT TU UR RE E CHA THIIR EXP 13.1 Management Policies 77 Page 5 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 13.2 Types of Expenses at SACCOs 13.3 Accounting Procedure 13.4 Payroll Costs Section CHAPTER 78 79 82 Page CH AP PT TE ER R FO UR RT TE EE EN N:: AU DIIT T AN D SU PE ER RV VIIS SIIO ON N CHA FOU AUD AND SUP 14.1 14.2 14.3 14.4 14.5 14.7 14.8 Management Policy Internal Audit and Supervision Appointment of External Auditors Suitability of External Auditors The Audit Process Distribution of Audited Accounts Removal of External Auditors 86 86 86 86 87 88 88 AP PE EN ND DIIC CE ES S:: APP · · · · Committee’s Statement of Responsibility Model Chart of Accounts Sample Accounting Books, Forms and Documents Worked-out Examples Page 6 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Page 7 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda ACRONYMS CGAP AGA GAAPs AMFIU FSDU GL LL SL ITA UCSCU TB UCA LPO MCAP NSSF PAYE PSDPC PMT SACCO Rural SPEED URA - The Consultative Group to Assist the Poor Annual General Assembly Generally Accepted Accounting Principles Association of Micro Finance Institutions in Uganda Financial Sector Deepening Uganda Project General Ledger Loans Ledger Savings Ledger Income Tax Act Uganda Cooperative Savings and Credit Union Ltd Trial Balance Uganda Cooperative Alliance Local Purchasing Order Matching Grant Capacity Building Program National Social Security Fund Pay As You Earn Private Sector Development Promotion Centre Performance Monitoring Tool Savings and Credit Cooperative Society Rural Savings Promotion and Enhancement of Enterprise Development Uganda Revenue Authority Page 8 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda CHAPTER ONE: INTRODUCTION 1.1 INTRODUCTION An Accounting Manual is a set of Accounting Policies and Procedures set up by Management as a tool to foster an organized Internal Control Environment. This Manual was Funded by Financial Sector Deepening Program Uganda (FSDU) that contracted Kisaka & Company Certified Public Accountants and Management Consultants. This Manual gives applicable Accounting and financial Policies that management uses as a guiding tool in making financial and accounting decisions. It also contains step by step procedures derived from the policies above to assist management in capturing, analyzing, recording, summarizing and reporting accurate, reliable, relevant and timely financial information. The Manual also describes the effective, economical and efficient ways of financial management, as well as the responsibilities of planning, reviewing, monitoring, supervision and control of financial resources. It takes care of all compliance issues with Uganda Revenue Authority (URA), the Cooperative Societies Statute 1991, the Cooperative Regulations 1992, the Consultative Group to Assist the Poor (CGAP) and applicable Generally Accepted Accounting Principles (GAAPs), and addresses the General framework within which individual Savings and Credit Cooperative Society (SACCO) Bye Laws are formulated. This Manual is a model or exemplary/illustrative that has not been written for a specific SACCO but in view of a number of industry players. It has been written in consultation with Post Bank Uganda (PBU), Uganda Cooperative Alliance (UCA), Uganda Cooperative Savings and Credit Union Limited (UCSCU), Rural SPEED, GTZ, and the Ministry of Finance. It can therefore be used as a benchmark and then customized to suit particular a SACCO needs. 1.2 BACKGROUND OF SACCOs SACCOs are one form of cooperative societies whose business is to provide financial services to its members. SACCOs are owned by their members through subscription for share capital and membership fees. 1.3 OBJECTIVES OF THE ACCOUNTING MANUAL To define the Accounting Policies of SACCOs both in general and specific nature To ensure that SACCOs carry out their business activities and contracts, in compliance with Ugandan law and Generally Accepted Accounting Principles To provide a reference for staff in their day-to-day work and ensure that accounting policies are well defined and formally documented Page 9 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda To ensure quality and consistency of accounting records To act as a training manual especially for new staff recruited in the accounting function of SACCOs As far as practicable, each Component has been written to show the Policies, Accounting, Internal Controls and Financial Reporting Disclosures 1.4 ORGANISATION STRUCTURE OF A MODEL FINANCE DEPARTMENT Annual General Assembly Finance Committee Audit and Supervision Committee Manager Accountant Cashier Accountants Assistant a) Financial Year Each SACCO shall decide on when its financial year ends, preferably 30 June 0r 31 December. Page 10 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda b) The Finance Hierarchy The Finance Committee of the Board is charged by the Byelaws and the Cooperative Societies Statute 1991 with the overall authority to direct the affairs of a SACCO (both accounting and financial). It is required to ensure that true and accurate books, records and accounts are kept of the SACCO’s money, property, capital, reserves, liabilities, incomes and expenses. Where the SACCO has employees, the same committee may delegate to an official or employee (Manager) of the Society such powers as it deems fit. 1.5 SUMMARY OF POLICY STATEMENTS 1.5.1 Policy Statement on Compliance SACCOs will devise all means to comply with the Cooperative Societies Statute 1992, all applicable Laws and Regulations of Uganda, the Generally Accepted Accounting Principles, the Cooperative Regulations 1992 and guidelines for financial institutions and any other applicable laws and regulations as may be communicated from time to time. 1.5.2 Policy statement on Books of Account Proper books of Account as defined by the Laws and regulations of Uganda and the Generally Accepted Accounting Principles shall be kept at all times. 1.5.3 Policy statement on Financial Reporting SACCO Management shall ensure that proper books of account are maintained and kept, to enable the preparation of relevant, reliable, consistent and comparable information to assist it in assessing the financial position and performance of the SACCO and to make accurate and timely economic decisions and comply with all the relevant Regulations and Guidelines. 1.5.4 Policy statement on Budgets Management shall prepare short, medium and long term budgets using a participative bottom-up approach as a basic tool for defining a SACCO’s periodic goals and objectives and against which results will be compared to permit performance evaluations and considerations in change of strategies. 1.5.5 Other Accounting, Operational and Administrative Policies and Procedures Operational and Administrative Policies and procedures covered in other manuals shall be complied with such other manuals include the Administration Manual, Personnel Manual, Liquidity Manual, procurement Manual, Security Manual, Credit Manual and any other manuals approved by management. Page 11 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Other Accounting Policies have been detailed-out in the respective Sections of this Manual. 1.6 DUTIES OF THE ACCOUNTING AND FINANCE DEPARTMENT 1.6.1 Duties of the Audit and Supervision Committee a) Perform such functions as the AGA may, from time to time specify in relation to ensuring sound management of a SACCO’s business b) Carrying out the Internal Audit Function c) Overall supervision of the Accounting and Finance Department of a SACCO 1.6.2 Duties of the Finance Committee a) Perform such functions as the Committee may specify in relation to establishing broad guidelines for a SACCO’s tolerance for risk and expectations from investments. b) Review and recommendation of a SACCO’s budget for approval by the Committee /Annual General Assembly c) Introduce measures that may serve to enhance the credibility and objectivity of financial statements and reports prepared with reference to the affairs of the SACCO. Such measures shall include but not limited to; 1.6.3 Limits on loan to deposit ratio; Limits on loan to capital ratio; Limits on exposure to single or related customers; Flexible limits on the percentage reliance on a particular deposit liability category; Limits on maximum and minimum maturities for existing categories of assets and liabilities; Limits on the sensitivity of the net interest margin on changes in market interest rates; Maximum percentage imbalance between rate sensitive assets and liabilities; Limits on minimum liquidity provision to be maintained to sustain operations while longer term adjustments are made Primary sources of meeting Funds that should be quantified. General Duties of the Manager Page 12 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda a) General supervision of the Accountant b) Approving transactions that are above the authority limits of the Accountant and the Cashier c) Budgeting, budgetary controls for the operations and capital projects and budgetary performance appraisal for the SACCO. d) Provision of inputs and participation in the preparation of a SACCO’s periodic and strategic plans. e) Custody, management and control of assets and records thereof. f) Management of loans, Grants and any other lending and borrowings. g) Reporting to a SACCO’s stakeholders like UCA, UCSCU, AMFIU, shareholders, employees, management, government etc of any required accounting and financial information. 1.6.4 Duties of the Accountant (some may be delegated to the Accounts Assistant) The overall duties shall include but limited to the following; a) Maintenance of Proper Books of Account To keep proper Books of Account as defined by the Laws and regulations of Uganda and the Cooperative Statute. b) Reliable Financial Reporting To ensure that proper books of account are maintained and kept, to enable the preparation of relevant, reliable, consistent and comparable information to assist it in assessing the financial position and performance of the organisation and to make accurate and timely economic decisions and comply with all the relevant Regulations and Guidelines. c) Budgetary control To prepare short, medium and long term budgets using a participative bottom-up approach as a basic tool for defining SACCO’s periodic goals and objectives and against which results will be compared to permit performance evaluations and considerations in change of strategies. d) To communicate between the Manager, the Staff, the auditors and other superiors of financial and operational affairs. Page 13 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda e) Fixed Assets Management – To maintain a comprehensive Fixed Assets Register; Identify fixed asset needs; carry out semi-annual physical asset counts of all assets. f) Planning – design monthly activity plans, perform monthly budget variance reviews and carry out operational and strategic plans. g) Loan Portfolio Management – Ensure that all loan disbursements are properly documented, posted, monitored in terms of quality and accuracy and correctly reported on a daily basis. h) Savings Portfolio Management – Manage all the documentation, recording, and verification and follow up of all accounts. i) Procurent- Ensure that SACCOs gets value for money and keeps proper procurement records. j) Security and internal controls- Jealously guard all SACCO records and software from unauthorized people by employing appropriate control. Such internal controls will include, reviewing and validating all batch postings, reports, access controls etc. k) General supervision of the Cashier l) Any other duties as may be determined from time to time. 1.6.5 Duties of the Cashier (Teller) The overall duties shall include but limited to receiving and paying-out cash and preparing the relevant documents. Such duties include. a) Ensuring the safety of the Cash, Cheques, Books, vouchers, stamps and all assets that are still in his/her control b) Ensuring adequate Cash levels in the Till c) Receiving all SACCO Cash and cheques irrespective of their sources. d) Issuing receipts in respect of the Cash and cheques received to the customers, members and to fellow staff in case of refunds or other payments e) Ensuring that the physical Cash or value of the cheques received are in agreement with the documents to support such transactions f) Ensuring that the physical Cash or cheques received are genuine g) Updating client and members pass-books with all Cash transactions h) Maintaining orderliness in the Till. The till must be free of unnecessary things i) Paying authorized persons and ensuring that the recipients acknowledge receipt of the payment j) Ensuring that payments are made to the right people by verifying their identities and mandate Page 14 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda k) Promptly informing/consulting the immediate supervisor on any extra ordinary events or activities and not to take any decisions on such matters without their consent l) Accounting for all of the till transactions by preparing the Till Sheet m) Any other duties assigned by the supervisor CH AP PT TE ER R TW O:: BO OK KS S OF CO OU UN NT T AN D FI NA AN NC CIIA AL L RE PO OR RT TS S CHA TWO BOO OF AC ACC AND FIN REP 2.1 POLICY STATEMENTS ON BOOKS OF ACCOUNT 2.1.1 SACCO books of Account shall be kept for a minimum of 10 years 2.1.2 Financial reports namely; Balance sheet, Income Statement, Cash Flow Statement, Statement of Changes in Equity and Notes to the Financial Statements shall be produced annually and as and when required by Management 2.1.3 Underlying Documents 1) All transactions will conform to the internal control objectives. 2) All transaction will be supported by appropriate vouchers and other sources documents to provide an audit trail through the accounting system, eliminating redundant writing of documents wherever possible that identify the business reason for the transaction, who originated the transaction, who authorized the transaction, who verified the transaction, and archived in such a manner as they are manageably retrieved. 3) The Accountant is responsible for the correctness and reliability of all transactions. 4) Transaction authorization limits will be set by the Audit and Supervision Committee and advised to individuals charged with this authority in writing. “Limits” refers not only to amounts, but also to the types of transactions individuals may exercise that authority on. 5) All transactions will be recorded at the time they occur, or batched for end of day processing. In any event, the day’s activities will be posted on the day they occur, and will be checked for authorization and reconciled to authorized amounts. The objectives of the above policy will be to show a true and fair view of a SACCO’s state of affairs and to explain its transactions and financial position to enable the stakeholders to determine whether the SACCO is operating in line with its set objectives and in compliance with the relevant laws and guidelines. 2.2 THE CHART OF ACCOUNTS Page 15 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda A Chart of Accounts is the coding elements used to classify, record, budget and report financial transactions. Every transaction must be properly coded to be a valid posting to a ledger. A SACCO’s Chart of Accounts should ensure the liquidity reporting sequence to govern the structure of the general ledger as shown below. See (Appendix 2) for a detailed Chart of Accounts. 2.2.1 Basis of Formulation of the Chart of Accounts The Chart of Accounts has been developed on the basis of three types Ledgers namely; · General Ledger (GL) – Ledger 1 · Savings Ledger (SL) – Ledger 2 · Loans Ledger (LL) – Ledger 3 General Structure of Account Numbers Account type Specific A/C No. All Account numbers shall comprise of a seven-digit number separated by dashes as follows; XX-X-XXXX. The first digit represents the type of Ledger; the next digit represents the product, the next digit (in between the dashes) represents the Account-type and the last four digits represent the specific Account Number. This is illustrated in the table below. Product Ledger-type 2.2.2 X X -X- XXXX This manual suggests five Account-types for all the ledger-types as summarized in the table below Account-type -1-2-3-4-5- General Ledger Assets Liabilities Equity Income Expenses Loans & Savings Ledgers Females Males Groups Institutions Others Page 16 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda This structure therefore supports the tracking of both Savings and Loans according to the various products and also according to the Nature of the Account holder (Male, Female, Group, Institutions, and Others) 2.2.3 The General Ledger (GL) General ledger shall comprise of all impersonal accounts for the SACCO and shall also contain Control accounts for the personal Ledgers and sub-ledgers. The GL shall have five major categorizations as follows. 10-1-XXXX 10-2-XXXX 10-3-XXXX 10-4-XXXX 10-5-XXXX 2.2.4 Assets Liabilities Equity Revenue Expenses The Savings Ledger (SL) All SL accounts shall comprise of a seven digit number separated by dashes as follows; 2X-X-XXXX. The first digit represents the Savings Ledger (Ledger 2); the digit represents the savings product, the next digit (in between the dashes) represents the nature of the account holder and the last four digits represent the specific account number. For example: The structure of the Savings Account numbers may cater for up to nine Producttypes and five other categorizations according to the nature of the accountholder(s). This is illustrated in the tables below Structure of Savings Account numbers according to Product Account No. Structure 21 -XXXXX 22 -XXXXX 23 -XXXXX 24 -XXXXX 25 -XXXXX 26 -XXXXX 27 -XXXXX 28 -XXXXX 29 -XXXXX Classification Savings Product 1 A/C Numbers Savings Product 2 A/C Numbers Savings Product 3 A/C Numbers Savings Product 4 A/C Numbers Savings Product 5 A/C Numbers Savings Product 6 A/C Numbers Savings Product 7 A/C Numbers Savings Product 8 A/C Numbers Savings Product 9 A/C Numbers Page 17 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Structure of Savings Account numbers according to the nature of the Account-holder Account No. Structure 2X -1XXXX 2X -2XXXX 2X -3XXXX 2X -4XXXX 2X -5XXXX 2.2.5 The SL shall have sub-ledgers to cater for the distribution of Savings either according to Product or according to the nature of the account-holder There shall be Control accounts to correspond to the respective sub-ledgers so that the Trial Balance shall reflect the distribution of savings accordingly. The Loans Ledger (LL) 2.3 Classification Female Savers’ A/C Numbers Male Savers’ A/C Numbers Group Savers’ A/C Numbers Institutional Savers’ A/C Numbers Other Savers’ A/C Numbers The Account-number structure, sub-ledgers and Control-accounts for the Loan shall be similar to those explained in respect of Savings except that the Loan account numbers shall start with 3 to signify the Loans ledger (Ledger 3); in other words their general structure shall be 3X-X-XXXX. PROPER BOOKS OF ACCOUNT Section 21 of the Cooperative Societies Statute requires the auditor to express an opinion as to whether proper books of Account have been kept and whether or not the business administration of the Society has been conducted efficiently, in line with the corporative principles, and in accordance with the objectives and byelaws of a SACCO. A full set of Books of Account that ought to be maintained by a SACCO will include, but not limited to the following. Books General Ledger Savings Account Ledger (Female A/Cs) Savings Account Ledger (Male A/Cs) Loan Ledger (Female A/Cs) Loan Ledger (Male A/Cs) Dormant Savings Account Ledger Register of Members Books Fixed Asset Register Savings Registers per Ledger Page 18 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Loan Registers per ledger Reserve Book (Cash book) Incoming Cheque Register Outgoing Cheque Register Cash count book Minute Books for each Committee and Staff meetings Correspondences files (as appropriate) Certificate of Registration Byelaws Memorandum of Association Such other books and records as the committee or registrar may decide from time to time. The contents and formats of these books and records are set out in the respective appendices where necessary. 2.3.1 Basis of Preparation of Books of Account Section 12 of the Cooperative Regulations 1992, requires that a SACCO’s Books of Account shall be prepared in Compliance with GAAPs. GAAPs include: 1) Principle of regularity: Regularity can be defined as conformity to enforced rules and laws. This principle is also known as the Principle of Consistency. 2) Principle of sincerity: According to this principle, the accounting unit should reflect in good faith the reality of the SACCO’s financial status. 3) Principle of permanence of methods: This principle aims at allowing the coherence and comparison of the financial information published by the SACCO. 4) Principle of non-compensation: One should show the full details of the financial information and not seek to compensate a debt with an asset, revenue with an expense, etc. 5) Principle of prudence: This principle aims at showing reality “as is”. One should not try to make things look better or worse than they actually are. Typically, revenue should be recorded only when it is certain and a provision should be entered for an expense which is probable. 6) Principle of continuity: When stating financial information, one should assume that the business will not be interrupted. This principle is mitigating the previous one about prudence: assets do not have to be accounted at their disposable value, but it accepted that they are at historical value (See depreciation). 7) Principle of periodicity: Each accounting entry should be allocated to a given period, and split accordingly if it covers several periods. If a client pre-pays a subscription (or Page 19 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda lease out, etc), the given revenue should be split to the entire time span and not counted for entirely on the date of transaction. 2.3.1 Ledgers 1) A Ledger, in the context of this manual is a collection of Ledger Cards that relate to a similar activity or aspect of accounting for example, Savings, Loans etc. Ledgers that relate to personal Accounts e.g. Savings and Loans must have a Control Account and shall be categorized into sub Ledgers. 2) SACCOs shall maintain the following ledgers namely; Savings ledger, Loan Ledger, and General Ledger (GL). 3) A General Ledger is a collection of Ledger cards that relate to impersonal Accounts e.g. Fixed Assets, Equity, Bank, Income and Expenditure etc. It also contains Control Accounts for the Savings and Loan Ledgers and its structure is governed by the Chart of Accounts. 4) Both the Savings and Loan Ledgers shall be categorized into Sub Ledgers for the different types of Accounts (Females, Males Groups and Institutions). The purpose is to facilitate the generation of qualitative information that will be used for updating the PMT. 5) A sub Ledger is a collection of personal Ledger cards that relate to a specific operational activity and arises out of the need to reclassify the main Ledger so as to generate more qualitative information 6) A Control Account is an accounting record that contains the daily totals of transactions of a particular set of Accounts; for example total savings withdrawals/deposits, total loan disbursements/repayments and so on. The source of information for updating Control Accounts is the Day Sheets1 (DOC15) 7) A Ledger Card is an accounting record that is maintained in respect of a particular Account Title. Each Account Title must have a unique Account number derived from the structure of the Chart of Accounts for example all Savings Accounts will comprise of seven digits starting with 2 and structured as 2X-X-XXXX 2.3.2 Updating Savings and Loan Ledgers (Posting the transactions) 1) This activity shall be performed by the Accountant or Accounts Assistant and will be supervised by the Manager or the most immediate supervisor. Where resources permit, the Official in charge of updating the Ledgers should be different from the Cashier so as to uphold the ‘Segregation of Duties’ Control. 1 Represents the daily Trial Balance of all Accounts that have been operated Page 20 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 2) The Ledgers must be updated on daily basis so as to ensure that their balances are as current as possible 3) The process of updating the Savings and Loan Ledgers i. The sources of information used to update the Ledgers are set out in the table below. Information source 1. Savings deposit slips 2. Savings Withdrawal Slips 3. None Cash Savings vouchers 4. Loan repayment slips 5. None Cash loan vouchers 6. Disbursements vouchers Ledger cards that are Updated -Saving Ledger cards -Loan Ledger cards ii. Prior to this, the Teller processes (see Cashiering) must be completed and the Day Sheet must have been prepared and approved iii. The Savings Ledger cards (DOC12) should be updated before the close of each day so that they have up-to-date information at all times. The following should be observed. All Cash deposits must be recorded/posted in the Credit column of the Savings Ledger card while Cash withdrawals must be recorded/posted in the Debit column. The corresponding entries shall have affected Teller Cash and must not be passed again. The double entry for none cash transactions shall be written on the face of the vouchers and must be respected while posting All Cash deposit and withdrawal vouchers must be stamped ‘POSTED’ and initialed by the Official who posted them before they are filed or kept Page 21 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda None Cash transactions must be approved by the manager before they are posted to the Ledger Cards and thereafter they should be stamped ‘POSTED’ and filed or kept. iv. The Loan Ledger cards shall be updated after a split (principal, interest income, Interest arrears, surcharge etc) of the total amount paid by the client or transferred from the client’s savings account has been done and written on the face of the voucher preferably in red ink. v. The split of the repayment shall be symbolized as in the table below Item of the Split Principal Current Interest Accrued Interest Surcharge/Penalty 2.3.3 Symbol P I AI S Account to credit Principal loan interest Income Interest Receivable Other Loans Income (as per Chart of Accounts) Updating the General Ledger (Posting GL transactions) 1) This activity shall be performed by the Accountant or Accounts Assistant and will be supervised by the Manager or the most immediate supervisor. 2) The Ledger cards must be updated on daily basis so as to ensure that their balances are as current as possible 3) The process shall start by having the Day Sheet prepared by the Accountant and approved by the Manager. The preparation of the Day Sheet is as follows. All of the day’s cash vouchers, none cash vouchers, receipts (for income and shares), and payment vouchers shall be categorized according to their respective Ledgers Expenditure vouchers shall be categorized by Account code and recorded in the debit column of the Day Sheet Disbursement vouchers shall be categorized by Ledger and recorded in the debit column of the Day Sheet Page 22 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 4) The Accountant or designated official shall prepare and sign the Day Sheet (DOC15) by classifying and totaling all of the day’s vouchers and receipts and deriving appropriate accounting entries. A Day Sheet represents the daily Trial Balance of all Accounts that have been operated and therefore must balance. 5) The Manager shall approve the Day Sheet after checking it against underlying documents before its contents are used to update the respective GL accounts 6) The figure of the Day Sheet are then used to update the GL and afterwards both the Day Sheet and underlying documents are stamped ‘POSTED’ and filed The sources of information used to update the Ledgers are set out in the table below. Information source 1. The Day Sheet 2. Cheque Payment vouchers 3. None Cash vouchers (bank charges) 2.3.4 Ledgers that are Updated -Income Ledger cards -Expenditure Ledger cards -Equity Accounts -Ledger Control Accounts Bank Accounts Balancing the Savings and Loan Ledgers 1) This activity shall be performed by the Accountant or Accounts Assistant and will be supervised by the Manager or the most immediate supervisor. 2) Balancing the Savings and Loan Ledgers shall be done regularly as management may decide. 3) The process of Balancing the Ledgers Each Ledger must have a Control Account in the GL that shall be up-dated from the Day Sheet (DOC15) The individual Ledger Card balances (for each sub Ledger) shall be extracted/machine-listed and the extracted totals compared with balances on the Page 23 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Control Accounts. Ideally the balance on the respective Control Accounts should agree to the total of the listing. The Accountant or ledger keeper must ensure that all transaction vouchers have been posted to their respective Ledger Cards before balances are extracted. When each ledger has been confirmed/balanced, the lists of balances shall be signed by the Accountant and approved by the Manager before they are filed or kept. 4) Balancing the number of personal accounts Account-opening and Closing Registers (BK1) shall be maintained with respect to each sub ledger and their records shall be summarized on a monthly basis so as to provide accurate information on the number of Accounts per category as at the close of every month. The details are in the respective Chapters of this manual. The total number of accounts in a particular sub ledger listing of monthly balances must balance with the respective Account-opening and Closing Register. Where the number of accounts is less than the number in the Opening and Closing Accounts Register, check for the opened accounts entered twice and closed accounts entered twice by checking the entries in the register 5) Dormant Savings Accounts A savings account shall be declared dormant if it does not transact in six consecutive months A Dormant Account Register (shall have a similar lay-out as the Account Opening Register) shall be maintained A listing of dormant savings accounts with their respective balances shall be extracted from the sub ledgers in the process of balancing ledgers and the ledger cards shall be relocated to the Dormant Accounts Ledger. The following entries shall be passed using the total of the listing: A/C code Account Name Debit Shs X Credit Shs Saving (According to Sub-ledger) Dormant Savings Accounts X Narration: Being extraction of dormant accounts from …… (Sub-Ledger) for the month of ……… Movements from the Dormant Accounts for reactivation shall always be recorded in the Dormant Accounts register and shall be authorized by the Manager. The Page 24 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda ledger cards shall be replaced into the respective Sub Ledger and the following entries shall be passed for every activated account: A/C code Account Name Debit Shs X Credit Shs Dormant Savings Accounts Saving (According to Sub-ledger) Narration: Being Activation of ….. (Member’s name)’s dormant accounts 2.4 X The records of the dormant account register shall be summarized on a monthly basis so as to provide accurate information on the number of dormant accounts as at the close of every month. TRIAL BALANCE 1) A Trial Balance (TB) is a listing of all GL balances as at a certain date presented in four columns; the first column to the left represents the Account code, the second represents the Account Title, the third takes on the debit balances and the fourth takes on the Credit Balances. 2) A TB shall be produced and signed by the Accountant on a monthly basis after all the ledgers have been balanced and shall be and approved by the manager. A balanced TB shall prove that double-entry was observed while posting transactions. 3) The process of extracting the TB 2.5 i. The Ledgers and sub ledgers shall first be reconciled with their respective control accounts (See 2.3.3 iii)), and all the GL ledger cards updated. ii. The individual Ledger Card balances (for each sub Ledger) shall be extracted/machine-listed and then fed into the format of the TB described in subSection i) of this Section. The contents shall be chronologically arranged according to the chart of Accounts. iii. The columns shall be totalled and ideally total debits must be equal to total credits COMPARATIVE INFORMATION Comparative information shall be disclosed in respect of a previous period for all numerical information in the financial statements. Comparative information shall be included in narrative Page 25 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda and descriptive information when it is relevant to the understanding of the current period’s information. 2.6 RELATED PARTIES 2.6.1 Definition of a Related Party A Party is related to an entity if it has the capacity to exercise significant financial or operational control e.g. subsidiaries, joint ventures, jointly controlled entities, members of the key management personnel of the entity or its parent, close members (Partners, Children or Parents) of other related parties, Post employment benefit plans for the benefit of employees. 2.6.2 Definition of a Related Party Transaction A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. 2.6.3 Related Party Disclosures If there have been transactions between related parties and a SACCO, the SACCO shall disclose the nature of the related party relationship as well as information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements. At a minimum, disclosures shall include: a) The amount of the transactions b) The amount of outstanding balances and; Their terms and conditions, including whether they are secured, and the nature of the consideration to be provided in settlement; and Details of any guarantees given or received c) Provisions for doubtful debts related to the amount of outstanding balances, and; d) The expense recognized during the period in respect of bad or doubtful debts due from related parties. 2.7 INCOME STATEMENT SACCOs shall present income statements which group income and expenses by nature and disclose the amounts of the principal types of income and expenses. Page 26 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Disclosures The disclosures in the Income Statement or the Notes to the Financial Statements should include, but are not limited to, the following items of income and expenses. 2.8 Interest and similar income Interest expense and similar charges Fee and commission expense Gains less losses arising from investment securities Other operating income Losses on loans and advances General administrative expenses; and Other operating expenses BALANCE SHEET SACCOs shall present balance sheets that group assets and liabilities by nature and list them in an order that reflects their relative liquidity and demandability. It will show the following: Disclosures The disclosures in the balance sheet or the notes to the financial statements should include, but are not limited to, the following assets and liabilities. Assets Cash and balances with the banks Government and other securities held for dealing purposes Placements with, and loans and advances to, other SACCOs/ Banks Loans and advances to customers and Investment securities. Liabilities Deposits from other SACCOs/ banks Other money market deposits Amounts owed to other depositors Other borrowed Funds. Members’ deposits Page 27 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Equity 2.9 Share Capital Retained earnings Share Transfer Fund (Duty to set up this Fund is imposed on the SACCOs by Section 43 of the Regulations) A Reserve Fund into which 10% of the annual net surplus must be put. (Duty to set up this Fund is imposed on the SACCOs by Section 34 of the Regulations) CASH FLOW STATEMENTS 1) Cash is the life-blood of SACCOs’ business. Therefore, information on its cash flows is vital for its proper financial management. 2) SACCOs will provide information on the historical changes in cash and cash equivalents. This shall be done by way of a cash flow statement, which classifies cash flows during the period into operating, investing and financing activities. These are defined as follows. 2. 0 2.110 Operating activities are the principal revenue producing activities of SACCOS. Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Financing activities are activities that result in changes in the size and composition of SACCOs' share capital and borrowings. Cash equivalents are short-term and liquid investments that are readily convertible to cash. STATEMENT OF CHANGES IN EQUITY 1) A separate component of SACCOs’ financial statements, called a statement of changes in equity shall be presented showing: i. The net profit or loss for the period ii. Each item of income and expense, gain or loss which, as required by other standards, is recognized directly in equity, and the total of these items; and iii. The cumulative effect of changes in accounting policy and the correction of Fundamental errors dealt with under the Benchmark treatments. Page 28 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 2) The accounting policies section of the notes to the Financial Statements shall describe the following: 2. 11 1 2.1 i. The measurement basis (or bases) used in preparing the Financial Statements; and ii. Each specific accounting policy that is necessary for a proper understanding of the Financial Statements NOTES TO THE FINANCIAL STATEMENTS 1) The notes to the Financial Statements shall: o Present information about the basis of preparation of the Financial Statements and the specific accounting policies selected and applied for significant transactions and events o Disclose the information required by GAAPs that is not presented elsewhere in the Financial Statements, and o Provide additional qualitative information which is not presented on the face of the financial statements but that is necessary for a fair presentation. 2) Notes to the Financial Statements shall be presented in a systematic manner. Each material item on the face of the balance sheet, Income Statement and cash flow statement shall be cross-referenced to any related information in the notes. CH AP PT TE ER R TH RE EE E - BU DG GE ET TIIN NG G CHA THR BUD 3.1 POLICY STATEMENTS Budgets are the basic tool used to define SACCO goal and objectives for the current year of a SACCO’s strategic plan, and against which results are compared to permit changes in strategy to improve performance. Each unit and/or activity can be incorporated in the budget to ensure results of operations of all components of a SACCO’s operation can be measured and evaluated. Each unit is responsible for performance goals included in the planning process to insure their commitment to the goals as well as their understanding of the goals. 3.1.1 SACCOs shall develop strategic plans (covering at least 3 years), reviewed annually, to ensure that annual budget strategies are still in line with it. 3.1.2 Management will be responsible for providing an environmental analysis and projections for key budget assumptions to all budget holders, as well as defining units and/or activities to be included in the budget process. 3.1.3 Each budget holder will be responsible for preparing their own projections for their unit for the coming year, considering external factors in their own operating environments as well as the key budgetary assumptions provided by Management. Page 29 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 3.2 3.1.4 The final budget be prepared and reviewed by the Audit and Supervision Committee to ensure that it is realistic and consistent with a SACCO’s longer-term objectives, and will be approved by the Board of Directors. 3.1.5 Monthly budget variance reports shall be produced for monthly reviews by management, and the Board as required. Management will establish guidelines for the reporting of budget variances for individual line items as well as net profit. THE BUDGET PROCESS 3.2.1 The Audit and Supervision Committee The Audit and Supervision Committee shall hold a final meeting with management to ensure that the budgets are in line with the SACCO’s mission and achieve interdepartment coherence. The committee shall discuss the draft budget with management before it is submitted to the Board of Directors. The minutes of the meeting shall be documented to ascertain the action points. 3.2.2 Budget Presentation To The Board The Audit and Supervision Committee shall present the agreed budget to the Board of Directors/Annual General Assembly for approval. Should any amendment be required, these shall immediately be communicated to the Audit and Supervision Committee for corrective action. 3.2.3 Budget Reviews Management shall continuously review their budgets against prevailing conditions to ensure that those budgets are realistic. Where amendments to the budget are required, a report shall be submitted to the Audit and Supervision Committee. The procedure of approval of the supplementary budget shall be similar to that for the original budget. 3.3 BUDGETARY PERFORMANCE AND CONTROL 3.3.1 The Accountant shall prepare a consolidated monthly budgetary performance report for management. This report shall show comparison between actual income and expenditure and cash flows against budget. 3.3.2 The variances in value and percentage shall be shown together with detailed notes explaining the causes of the variances. In addition, the corrective action to be taken shall be indicated. Page 30 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda CH AP PT TE ER R FO UR R - CA SH H MA NA AG GE EM ME EN NT T CHA FOU CAS MAN 4.1 POLICY STATEMENT All Cash and cheque transactions of the SACCO must be handled by the Cashier. All Cash and cheques received during the day must be handed over to the Accountant for onward transmission to the Vault/Safe 4.2 CASHIERING Cashiering is the process of carrying out all of the activities implied by the responsibilities of a Cashier as spelt out in 1.6.4. The details of such activities are as follows. 4.2.1 Till Management 1) Till management involves; the planning, organising and controlling of all the Till Sheet activities so as to ensure that services to clients and members are smooth and free of inaccuracies whether intentional or otherwise. It therefore follows that all the staffs that have a role to play in Cash management, have a role to play in Till management but the cashier is particularly responsible for this. Page 31 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 2) The following guidelines shall serve to ensure sound Till management a) Each Cashier shall be provided with a PAID and RECEIVED Stamp bearing a SACCO’s name and the Cashier’s identification number. b) The Cashier will also be provided with the following stamps: Passbook stamp Duplicate stamp c) Cashiers are strictly prohibited from altering or preparing clients’ deposit and withdrawal vouchers. d) The Clients shall countersign all alterations of deposits and withdrawal vouchers. e) All withdrawal vouchers shall be signed and countersigned by the clients and where applicable record his/her telephone number at the back. f) Counterfeit notes shall be confiscated from the client and perforated, however this must be done with due care in order not to cause undesired reaction from the affected clients. Refer to the Manager if it gets complicated g) Cash handed over to the accountant shall be counted in the presence of the concerned cashier and the accountant shall endorse/initial on the Cash count form to signify agreement with the record h) SACCOs shall maintain a CASH OVERAGES ACCOUNT in their General Ledgers to which all Cash overages shall be credited. The (none cash) voucher to recognise the overage shall be prepared by the Cashier and approved by the Manager after the Accountant has verified the Till Sheet. The double entry is; A/C Code Account Name Debit Shs X Credit Shs Cash Cash Overages A/C Narration: Being Cash overage from ……………… (Teller’s name) X i) Reversals from the Overages account shall be on the basis of proven, documented and approved reasons. None cash vouchers, with such documentation(s) as the attachment(s) shall be prepared by the Accountant and approved by the Manager before reversals are effected. The double entry is; A/C Code Account Name Debit Shs X Credit Shs Cash Overages A/C Credit Client’s A/C X Narration: Being Correction of Cash overage that resulted from the omission/ misstatement of ……… (Client’s name)’s savings deposit/ loan repayment/ fees Page 32 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda payment etc, on ……… (Date) by ……… (Teller’s name). j) SACCOs shall NOT maintain a CASH SHORTAGE ACCOUNT in their General Ledgers instead; all shortages shall be debited on the respective Tellers’ debtor Accounts. The (none cash) voucher to recognise the shortage shall be prepared by the Cashier and approved by the Manager after the Accountant has verified the Till Sheet. The double entry is; A/C Code Account Name Debit Shs X Teller’s Debtor A/C Cash A/C Narration: Being Cash Shortage from ……… (Teller’s name) Credit Shs X k) Cash shortages shall be recovered from the Cashier’s salary within reasonable time or at the earliest opportunity. l) Persistent cash excess OR cash shortages in the Till shall be investigated and appropriate action taken. 4.2.2 Preparing the Till Sheet 1) Preparing the Till Sheet (DOC16) is accounting for all the Cash received and the payments made for the day. It therefore follows that all till transactions must be captured on the Till Sheet and that the Till Sheet must balance 2) The following guidelines shall serve to ensure proper preparation of the Till Sheets a) Each Cashier shall prepare his or her own Till Sheet and sign it before handing over cash to the Accountant. b) Each transaction (personal or none personal, like expenses and income) shall constitute a complete record to be entered onto the Till Sheet. The voucher number, account name, account number and the amount shall be captured in the respective columns. c) The Till Sheet shall be prepared in an orderly manner i.e. all entries must flow in the order of their categories. The categories shall be set according to Ledgers so as to facilitate subsequent processing d) Loan repayments shall be recorded onto the Till Sheet as a whole; the split into interest, principal surcharge etc, shall be done while posting the entries onto Ledger cards Page 33 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda e) The following are examples of transactions that must be entered on the respective sides of the Till Sheet. Debit side ü Cash from reserve ü Cash from Bank ü All cash receipt ü Savings Deposits ü Loan repayments ü Cash Overages ü Physical Cash Balance Credit side ü Savings withdrawals ü Loan Disbursements ü All other Payments ü Cash shortages f) Cheque receipts shall be entered on the credit side of the Till Sheet after cash transactions have been balanced. There should be some space to separate them. 4.3 SAFE/RESERVE/VAULT CASH MANAGEMENT Safe or Vault Cash is the Cash that is kept away from the main operating area for safe custody and for providing a buffer from which immediate cash requirements can be satisfied The Safe can also be used for keeping other valuables like; client security documents, the SACCO’s important documents etc. A register must be maintained for every thing that is kept in the Safe and must be updated with every movement of such contents, whether permanent or temporary. 4.3.1 Reserve Cash Management i) Till management involves; the planning, organising and controlling of all the activities that affect the SACCO’s Cash-at-Hand so as to ensure that services to clients and members are smooth and free of unnecessary Cash shortages, while at the same time avoiding the accumulation of too much Cash in the SACCO’s hands for security reasons. ii) The following guidelines shall serve to ensure sound Reserve Cash management a) An analysis book called the RESERVE BOOK (BK2) shall be maintained by the Accountant and shall record all the transactions between Vault Cash and the Cashiers and also provide a record of the SACCO’s Cash-at-Hand as at the close of business on any working day. b) Transactions for a new month shall start on a fresh page Page 34 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda c) A Cash account shall be maintained in the GL to correspond to the reserve book d) The Audit and Supervision Committee shall carry out spot cash counts (and verify Safe contents), and write a report as evidence of the exercise e) Adequate cash to cater for daily withdrawals and petty payments shall be maintained in the Vault. The benchmark may be 15 to 20% of total savings depending on the SACCOs deposit/withdrawal patterns f) Special days when cash requirements are projected to be higher e.g. Disbursement days must be planned for a week ahead so that authority to withdraw Cash from Banks is secured in time. 4.4 TRANSFERING CASH This section provides guidelines on transferring cash from the Vault to the from the Bank to the SACCO. 4.4.1 Bank and also Transferring Cash from Vault to Bank i) All the possible security precautions must be taken while moving Cash from vault to Bank. ii) The accountant shall raise a none-cash voucher, which shall be approved by the Manager. The accounting entries are as follows; A/C code Account Name Debit Shs X Credit Shs Bank Cash X Narration: Being transfer of Cash from Vault to the ……… (Bank name) A/C. iii) A copy of the deposit slip duly stamped and endorsed by the Bank cashier shall be attached to the none-cash voucher. Page 35 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda CHAPTER FIVE: BANK PROCEDURES 5.1 POLICY STATEMENT SACCOS shall operate Bank Savings or Current Accounts with Commercial banks for their excess cash. 5.2 OPENING OF BANK ACCOUNTS SACCOS shall follow the procedures stipulated by the bank in which an account is to be opened. Copies of the application shall be maintained in a Bank Correspondences file at SACCO’s offices. A separate file shall be maintained for each bank account for correspondence with SACCOS banker. Monthly bank statements and other correspondences shall be kept in these files. 5.3 BANK SIGNATORIES Page 36 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 5.4 5.3.1 SACCOS shall have at least two signatories to each of the bank accounts. The Committee in a Board resolution must approve selection of bank signatories on The SACCO bank accounts in writing. The Committee shall also authorize management to approve the opening of bank accounts for SACCO. 5.3.2 The Manager shall be the Principal Signatory while the Treasurer or the Chairperson shall be the second signatory. The chairperson shall only sign in the absence of the Treasurer. 5.3.3 The authority levels of each signatory shall be documented. In the event of a signatory leaving the SACCO, the bank shall be instructed in writing to remove him or her from the signatories’ list immediately. CHEQUE BOOK MAINTENANCE AND CHEQUE PAYMENTS 5.4.1 Cheque Books and the Cheque Register i) There shall be an Outgoing Cheque Register (BK10) in which all Cheque payments shall be recorded. The signatories to the accounts shall initial against the entry in the Cheque register upon authorizing the transaction ii) The Accountant shall be responsible for the safety of both the Cheque Books and the Register and they shall be under key and lock at all times 5.4.2 Cheque payments i) All Cheque payment shall be supported by Cheque payment vouchers duly approved by the relevant authorities depending on the nature of the transaction and the amounts involved. ii) All Cheque payment vouchers shall be supported by, at least one of the following; a) Duly approved Payment Requisition form b) Original Invoice and/or receipt c) Any other documents in support of the transaction iii) Where a payment is settling an outstanding obligation, the creditor’s reconciled statement should be attached among the supporting documents. iv) The Accountant will attach the supporting documents with a cheque payment voucher and forward it to the Manager for verification and approval. The verification shall include checking the following; a) Arithmetic accuracy Page 37 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda b) c) d) e) f) Creditor details and balances Budget Status with respect to the payment Adequacy and appropriateness of supporting documents Correctness of procurement procedures Account codes, and the double entry, their authorization as well as reviewing reconciliation statements if any. v) All payment vouchers together with the related supporting documents shall be date stamped ‘PAID’ immediately after payment. vi) The payment accountant shall ensure that a receipt is obtained and that the payee signs on the payment voucher or delivery book in acknowledgement for payment. vii) Where receipts may not be easily obtainable e.g. payments to individuals, a photocopy of the paid-out Cheque shall be made and the recipient of the Cheque shall sign on it 5.5 CASH AND CHEQUE DEPOSITS AND CHEQUE CLEARANCE Cash and Cheques may be deposited on the SACCO’s Bank account by either the SACCO’s Management or by the SACCO’s clients especially as they pay back loans Cash deposits by the SACCO’s Management has already been covered under (Transferring Cash from Vault to the Bank) section 4.4.1 5.5.1 Cash and Cheque Deposits on the Bank Account by Members Cash and Cheque deposits on the Bank Account by Members shall be under special arrangement between the SACCO and the Bank (the SACCO does not have to open a separate Account for this). The purpose for this is to facilitate tracking of such transactions on the Bank statement and to ease the reconciliation process. The special arrangement shall emulate the set up of a ‘School fees Account by a school’ as follows; a) There shall be special deposit slips made in quadruplicate with features such as; the SACCO’s account name and number, a serial number and labelling of the copies i.e. Bank copy, 2 SACCO copies and, Client’s copy. b) Clients wishing to directly deposit their repayments onto the Bank account shall be supplied with a few special deposit slips c) A memorandum register of such clients may be maintained for reference purposes Page 38 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda d) Clients who pay back in this arrangement shall, at the earliest opportunity provide a copy of the special deposit slip to the accountant who shall keep it on their loan file or Loan Ledger Card e) Crediting the respective accounts shall be on the basis of copies that are directly obtained from the Bank or on the basis of transactions that are directly traceable to the Bank statement. Duly supported and approved none-cash vouchers must be raised for such transactions 5.5.2 Cheques from Members i) There shall be an Incoming Cheque Register (BK5) to record the particulars of all Cheques received as follows; a) Name of the Client or Member b) Account number of the Client or member c) Bank on whom the Cheque is drawn and the Account number d) Cheque number e) Receipt number issued to the depositor f) Date of deposit into the Bank g) Date of clearing or bouncing ii) Incoming cheques shall be banked at the earliest opportunity but a cost benefit assessment must be done where Banks are significantly distant from the SACCO premises iii) Crediting the respective accounts shall be on the basis of clear evidence from the Bank that the Cheque actually cleared and such evidence shall, where applicable be attached to the none cash voucher raised in that regard iv) The following accounts shall be maintained to cater for incoming Cheque transactions Incoming Cheques (Current Asset account) Page 39 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Un-cleared Cheques (liability Account) v) The accounting treatment of Incoming Cheques shall be as follows; a) On receiving the Cheque A/C Code Account Name Debit Shs X Credit Shs Debit Shs X Credit Shs Incoming Cheques Bank X Narration: Being recognition of Cash/Cheque number …… from …… (Member’s name) for ……… (Purpose of Cheque received) b) On depositing the Cheque into the Bank A/C Code Account Name Bank Incoming Cheques A/C X Narration: Deposit of ……… (Member’s name)’s Cheque number …….. c) On receiving evidence that the Cheque cleared A/C code Account Name Debit Shs X Credit Shs Un-cleared Cheques A/C Member’s Savings A/C X Narration: Clearance of Cheque number …… from …… (Member’s name) for ……… (Purpose of Cheque received) d) On receiving evidence that the Cheque Bounced Page 40 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda A/C Code Account Name Debit Shs X Credit Shs Incoming Cheques Bank X Narration: Being reversal of bounced-Cheque number …… from …… (Member’s name) for ……… (Purpose of Cheque received) e) On issuing the Bounced Cheque back to the Member A/C Code Account Name Debit Shs X Credit Shs Un-cleared Cheques Incoming Cheques Narration: Return of bounced-Cheque number …… to …… (Member’s name) X vi) All costs associated with processing Incoming Cheques shall be charged to the beneficiaries/depositors of the Cheques by debiting their savings accounts and crediting the Bank account (after raising the relevant vouchers). This shall be done at the earliest opportunity as clients may withdraw all of the free balance from their accounts before the charges are recovered. vii) An extract of pending Cheques shall be made at every month end and reconciled/compared to the respective Account balances 5.6 CASH WITHDRAWALS FROM THE BANK i) Cash withdrawals from the Bank shall be done by an agent to the account whom shall be appointed by the Board. ii) All feasible security precautions (armed guards, bullion van, reliable transport, means of quick communication, insurance etc) shall be taken with regard to cash in transit from the Bank to the SACCO premises and vice versa. iii) A Cheque payment voucher shall be raised in the names of the agent and shall be given to the Cashier together with the withdrawn cash so that the transaction is incorporated in the Cashier’s transactions for the day iv) The accounting entries are implied by the Till Sheet Page 41 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 5.7 BANK RECONCILIATION i) Monthly Bank statements shall be obtained from the Banks by the 3rd of every month or at the earliest opportunity so that Bank reconciliations can be prepared in time ii) Both the Bank statement and the Bank Ledger card (which represents the Cash book side of the Bank A/C) shall be photocopied and used in the reconciliation process as follows; a) All Bank charges shall first be extracted from the Bank statement and posted on the Bank ledger card and Bank charges expense account as below (after raising the relevant vouchers) Account code Account Name Debit Shs X Credit Shs Bank charges Bank X Narration: Being Bank charges on the ……… (Bank’s name) account for the month of ……… b) Entries that appear on both the Bank statement and the ticked Bank Ledger card shall be c) A Bank reconciliation statement shall then be prepared according to the format in (FM13) d) Reconciling items that remain outstanding for unreasonably long periods shall be reported to the Audit and Supervision committee so that appropriate action can be taken on them 5.8 PRESENTATION IN THE FINANCIAL STATEMENTS i) SACCOs, in their Financial Statements, shall report Bank balances as per cards and not Bank Balances as per Bank statement. Bank Ledger CH AP PT TE ER R SI X:: LO AN NS S RE CE EIIV VA AB BL LE E CHA SIX LOA REC 6.1 POLICT STATEMENT SACCOs shall take all the steps necessary to ensure sound loan management because loans form their biggest asset and the biggest source of revenue 6.2 TYPES OF LOANS Page 42 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda SACCOs may have a variety of loan products depending on the needs of their clients and members. The loan products and the appropriate disbursement methods are summarized in the table below Loan Type Agricultural loans Asset Financing loans Commercial loans Low Salary earners’ loan Scheme School fees loans Solar energy loans 6.3 Disbursement Procedure Hard cash/transfer to Savings Account The SACCO buys the Asset for the client and retains title till the loan is paid off Hard cash/Transfer to savings Account Hard Cash/Transfer to Savings Account Hard Cash/Transfer to Savings Account Hard Cash/Transfer to savings Account LOAN DISBURSEMENTS i) Loans shall only be disbursed to members whom have gone through all the steps of the appraisal process (these are covered in the lending manual). ii) The responsibility of the Accountant shall be to ensure compliance with guidelines laid down in the lending manual. The following questions, for instance shall be answered ‘YES’ before a loan is disbursed. 1. 2. 3. 4. 5. Whether the recipient applied for the loan. Whether the recipient is a member of the SACCO. Whether the recipient was appraised by a SACCO Official. Whether the loan was approved by the loan committee. Whether all the required documentation for the loan is on file. iii) All members whom have accessed loans from the SACCO shall have loan files which shall contain the following with respect to each loan disbursed to them. a) b) c) d) Loan application Appraisal details Copy of receipt in respect of loan processing fees A sketch map to their residences and or work places e) f) g) h) i) The members contacts (persons, telephone number(s), LC officials etc) The collateral securities pledged (if any) Copy of the disbursement voucher Paid-up Loan Ledger Card(s) Any other necessary documents iv) Irrespective of the method of disbursement, the recipient must acknowledge receipt of the loan by signing on the relevant documents Page 43 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda v) Where cash disbursements involve large sums of money, the Accountant or Manager may assist the cashier to disburse so as to give members some confidentiality; however, all the disbursement vouchers and the accountability for the Cash disbursed shall be handed over to the Cashier for incorporation into the Till Sheet. 6.4 LOAN REPAYMENTS i) Loans repayments may be received in Cash or through none cash transactions that arise out of; direct deposits onto the SACCO’s Bank account, transfers from Savings accounts and other accounting adjustments. The repayments may be split into; a) Principal b) Interest c) Surcharge or Penalties 6.5 RECORDING LOANS 6.5.1 On Disbursement i) The Accountant or Loan Official shall start a new Loan Ledger card for each loan disbursed. ii) The Cashier, in his or her Till Sheet, shall record loan disbursements on the credit side, because they are a cash outflow. iii) The Accountant, in his or her Day sheet, shall record Total loan disbursements per Loan Ledger or category on the debit side, because they are an increase in the current Assets. 6.5.2 On Receiving Repayments i) The Cashier, in his or her Till Sheet, shall record loan repayments as a whole (because the basis of splitting may not be readily available to him or her) ii) Splitting the repayment shall be the responsibility of the Accountant and shall be done concurrently with the posting of repayments onto the Loan Ledger cards. iii) The priority of recovering the different elements of a loan repayment shall be as follows; Page 44 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Element Surcharge or penalties Interest arrears Current Interest Principal arrears Current Principal Prepaid Principal Prepaid Interest Priority First Second Third Fourth Fifth Sixth Last iv) The split of the transaction, according to the above priority, shall be written on the face of the voucher preferably in red ink 6.6 LOAN LOSS PROVISIONING AND WRITE OFFs 6.6.1 Meaning of Loan Loss Provisioning i) Loan loss provisioning is an accounting adjustment on the profit or loss position of a SACCO and its objective is to provide or avail a reserve against which unrecoverable loans can subsequently be written-off instead of affecting the prevailing or subsequent profit or loss position. ii) Advantages of Loan Loss provisioning a) Provisioning is a standard accounting practice and requirement and therefore upholding it is upholding compliance with such standards b) Bad debts expense (specific) is an allowable deduction according to Section 24 of the Income Tax Act and therefore the SACCO shall have less taxable profits and hence less tax liability if it provides for loan loss. c) Loan Loss Provisioning brings the SACCO’s profit position closer to reality 6.6.2 Policy on Provisioning All doubtful loans shall be provided for in accordance with the CGAP guidelines and best practice. The provisioning shall be in respect of only the principal in arrears because interest and other fees are recognized on modified cash basis. SACCOs shall provide for loan loss on two fronts namely; General provisions and Specific Provisions. The adequacy of loan loss provisions shall be reviewed on Quarterly basis as laid down in subsection ii) of Section 6.6.3. Page 45 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda i) General Provision General provision means a loss reserve held against future and presently unidentified losses and is thus freely available to meet losses, which subsequently materialize. This implies that a flat 1% should be charged on all loans in arrears as and when management may decide. ii) Specific provision a) Meaning of specific Provisions Specific provision means a loss reserve held against future and presently identified losses or potential losses and thus not available to meet previously unidentified losses, which subsequently materialize. A loan that has due to some reasons been specifically identified as doubtful under the respective loan categories should have an addition provision of at the corresponding rates. However, cash held as security may be deducted from the outstanding balance of the credit facility before determining the specific provisions Specific provisions on the due but unpaid principal shall be made for all loans in view of the inherent credit risk of the industry by applying varying rates to the different loan bands similar to the repayment periods. b) Basis of Specific Provisions Specific provisions shall be based on the number of days that have passed since a particular loan installment (principal only) fell due but has remained unpaid for any reasons. The rates applicable according to the numbers of days in arrears may be based on the classifications below. 1-7 8-15 16-30 31-60 61-90 91-120 212-180 181 and above 6.6.3 Rate Shall be determined by Committee Classification (No. of Days in arrears) Computing Loan Loss Provisions Page 46 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda i) The First Time of Provisioning Provisioning shall be done as an End-of-Period adjustment (Quarterly or Annually) The Loan ledger cards shall be reviewed one by one and a list of all loans in arrear as at the close of the period extracted. The list shall then be categorized accordingly (based on the days in arrears and the applicable rates. The principal in arrears column shall then be summed-up and the relevant rates applied to the category totals so as to derive the provision amounts per category The provision amounts per category shall be summed-up and the following Accounting entries shall be passed A/C code Account Name Debit Shs X Credit Shs Bad Debts Expense Provision for Bad Debts (specific) X Narration: Being provision for Bad debts as at ………… (End of the period) The lists used in the computations shall be attached to the none cash voucher as support documents and shall be filed such that they are easily accessible for reference in subsequent computations. ii) Computing Loan Loss Provisions after the First time The loan listings to be used shall be extracted as described above and the provision amounts per category computed as above The new provision amounts per category shall be compared to the respective prior period amounts so as to establish an increase or decrease per category The increases and decreases shall be summed-up and the following Accounting, depending on the net result, shall be passed Where the net result is an INCREASE in the provisions amount; A/C code Account Name Debit Shs X Credit Shs Bad Debts Expense Provision for Bad Debts (specific) X Narration: Being increase in provision for Bad debts as at ………… (End of the period) Page 47 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Where the net result is a DECREASE in provision amount; A/C code Account Name Debit Shs X Credit Shs Provision for Bad Debts (specific) Bad Debts Expense X Narration: Being decrease in provision for Bad debts as at ………… (End of the period) 6.6.4 The lists used in the computations shall be attached to the none cash voucher as support documents and shall be filed such that they are easily accessible for reference in subsequent computations Write offs i) A loan shall be written off if it is in arrears for extraordinarily long periods and under the following conditions; a) The loan term must have expired b) The last principal instalment must have been in arrears for over 90 days c) It must be uncollectible in the opinion of management ii) Authorization of Write-offs Authority to write off loans shall be obtained from the Annual General Assembly after management has given the Board of Directors a report to that effect. iii) Accounting entries for writing off loans a) Loans shall be written off against the Loan loss Reserves created (Specific and General Provisions) as follows; A/C code Account Name Provision for Bad Debts (specific/general) Loans (category) Narration: Being (Category) loans written off Debit Shs X Credit Shs X b) Where the balances on the reserves is inadequate, write off shall be against; Specific loan loss provisions, General loan loss provisions and the Bad debts expense account in that order of priority. Page 48 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda A/C code Account Name Provision for Bad Debts (specific) Provision for Bad Debts (general) Bad Debts Expense Loans (according to category) Narration: Being (Category) loans written off Debit Shs X X X Credit Shs X NB: It is assumed that by the time a loan becomes bad, it may have been categorized as a non- performing loan and provided for. iv) Recovery of written-off loans a) Loan Ledger cards for written off loans shall be kept in a separate file so that they can be referred to in case of subsequent recoveries/repayments. b) Recovery of written off loans shall be recognised as other income as follows A/C code Account Name Debit Shs X Credit Shs Cash Other income X Narration: Being a recovery on……… (Member’s name)’s written off loan per journal reference ……. Dated ………. Page 49 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda CH AP PT TE ER R SE VE EN N:: OT HE ER R AC CO OU UN NT TS S RE CE EIIV VA AB BL LE E CHA SEV OTH ACC REC 7.1 POLICY STATEMENT Other Accounts receivable shall comprise of all receivables except for loans. It shall cover receivables like. 1) 2) 3) 4) 5) 6) 7.2 Interest receivable from loans Interest receivable from investments Prepayments Salary Advance Accountable Advance Sundry Debtors INTEREST RECEIVABLE ON LOANS Generally Accepted Accounting Principles require that Interest should be recognized on accrual basis, however because of the difficulties associated with tracking of interest as it falls in a manual accounting system, a hybrid approach shall be adopted as follows 1) During the ordinary course of the Accounting period, interest should be recognized on cash basis 2) The accrual of interest shall be an ‘End of Period’ adjustment whereby the status of each loan with respect to interest shall be reviewed and a listing of due but unpaid interest shall be extracted 3) The following accounting entries shall be passed at the end of each Accounting period on the basis of the total sum of the lists. A/C code Account Name Debit Shs X Interest receivable Accrued Interest Income Narration: Being accrued Interest on loans as at ……… (Period end date) Credit Shs X 4) A detailed schedule of Accrued interest shall be maintained and be updated with subsequent repayments. 5) Repayments in respect of accrued interest shall be recorded as credit entries on the ‘Interest Receivable on Loans’ account. This shall be captured in the Day sheet. Page 50 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 6) Accrued interest that remains unpaid for unreasonably longer periods shall be extracted in a report and forwarded to the Audit and Supervision committee with a recommendation to write it off against the Bad debts expense account. 7.3 INTEREST RECEIVABLE ON INVESTMENTS Ordinarily the need to accrue interest on investments shall not arise as Financial institutions shall readily credit the SACCO’s account within time, however where the need arises, the following entries shall be passed. A/C code Account Name Debit Shs X Interest receivable Accrued Interest Income Narration: Being accrued Interest on loans as at ……… (Period end date) 7.4 Credit Shs X PREPAYMENTS 1) Where a SACCO paid for a services for a periods longer or for a periods that do not fall within the Accounting period (financial year), and such a payments were debited to expense accounts, adjustments shall be passed on such expense accounts such that only the portion of the expense that relates to the Financial year have an effect on the balances on the accounts. 2) The adjustments shall be passed as follows A/C code Account Name Debit Shs X Credit Shs Prepayments (accordingly) Respective expense account X Narration: Being adjustment for Prepaid ……… (Expense) as at ……… (Period end date) 3) Corresponding adjustments shall be passed at the onset of the subsequent accounting period in a reverse manner 7.5 STAFF LOANS AND ADVANCES 7.5.1 Staff Loans Page 51 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 1) The decision on whether on not to avail loans to SACCO staff shall be taken by the Annual General Assembly and the policy guidelines on Staff loans shall be formulated by the Audit and Supervision Committee (a consultant may be involved for better work). 2) Where Staff loans are allowed, a separate loan sub Ledger shall be maintained and all the guidelines that relate to Accounting for SACCO loans shall apply. 7.5.2 Staff Salary Advances and Accountable Advances 1) Staff Salary Advances a) The staff who is in need of a Salary advance shall complete an Advance Form (FM9) which shall be approved by the Manager or in case of the Manager by a member of the Audit and Supervision Committee. b) The amounts accessible and how they are derived shall be determined by the Board of Directors from time to time c) The monthly installments to recover such advances shall not exceed 50% of ones monthly Net Pay d) All outstanding Salary advances as at the end of the Accounting period shall be acknowledged by the staff from whom they are due by signing against their respective balances on a schedule extracted by the Accountant to support the GL balance on the Salary Advance Account 2) Accountable Advances a) Accountable Advances shall be given to staff in situations where expenses cannot be estimated with reasonable accuracy, for instance extraordinary field visits like Recovery Task Forces b) Accountable Advances shall be requisitioned-for just like Salary Advances but shall be accounted for immediately after the activity c) Un-accounted-for Accountable Advances shall be recovered from the concerned staff’s Saving account at the earliest opportunity and the manager shall authorize such recoveries d) All outstanding Accountable Advances as at the end of the Accounting period shall be acknowledged by the staff from whom they are due by signing against their respective balances on a schedule extracted by the Accountant to support the GL balance on the Accountable Advance Account 3) Accounting Entries for Advances Page 52 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda a) The GL shall have two Advance accounts; one for Salary Advances and the other for Accountable Advances. The entries on these accounts shall reflect the following with respect to every Advance issued. ü Date of advance; ü Name of payee; ü Amount advanced; ü Brief description of purpose of payment; ü Reference number of the payment voucher b) Where Salary Advances are issued for a period of more than three months, a Ledger card shall be maintained to track the repayments c) On receiving accountability for Accountable Advances, the following entries shall be passed by use of a none cash voucher A/C code Account Name Debit Shs X X Credit Shs Expense(s) (accordingly) Cash (with the balance) Accountable Advance X Narration: Being ……… (Staff’s name)’s accountability for Funds issued on ……… (Date) in respect of ……… (Activity/Activities) d) Salary advances shall be recovered from the payroll and therefore the accounting entries in this regard are considered in the Payroll section of this manual 7.6 SUNDRY RECEIVABLES This account shall take care of all the debtors’ balances that cannot fit in any of the above mentioned classifications and shall have a schedule showing the par-individual breakdown of the balance there-on as at the Accounting period end. The schedule shall be supported by genuine documentation of the composite transactions and shall be approved by the Manager. Page 53 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda CH AP PT TE ER R EI GH HT T:: IN VE EN NT TO OR RY Y OF AT TIIO ON NE ER RY Y CHA EIG INV OF ST STA 8.1 MANAGEMENT POLICIES 8.1.1 Recognition guidelines a) During the ordinary course of the Accounting Period, all stationery purchases shall be expensed by debiting the Stationery expense account b) Recognition of stationery stock/inventory shall be an End-of-Period adjustment preceeded by a Stock count which shall be documented on a Stock count form (FM14) and witnessed by a member of the Audit and Supervision Committee. 8.2 ACCOUNTING FOR STATIONERY The Accounting shall be as follows; a) On recognition of the Inventory A/C code Account Name Debit Shs X Stationery Stock Stationery expense account Narration: Being recognition of Stationer Stock as at ……(Period end Date) Credit Shs X b) On the on set of the subsequent accounting period or on the basis of an (Externally) audited position; A/C code Account Name Debit Shs X Stationery expense account Stationery Sock Narration: To expense Stationer Stock as at ……(Prior Period end Date) Credit Shs X NB Copies of the stock count sheets shall be attached to the none cash vouchers raised Page 54 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda c) The minimum value of such Stationery to be recognized as inventory or to warrant an adjustment shall be determined by the Audit and Supervision committee from time to time (the benchmark is Ushs 500,000) 8.3 8.4 PROCUREMENT OF STATIONERY 8.3.1 The supply of printed stationery shall be from a reputable supplier recommended by the Audit and Supervision Committee 8.3.2 The SACCO shall invite at least three bids for the selection of such a supplier. 8.3.3 Local Purchase Orders (LPO) shall be placed to the supplier in a timely manner so as to avoid unnecessary shortages. 8.3.4 Un-printed stationery may be purchased from any shops but the purchase shall be supported by authentic invoices and/or receipts. OBSOLETE STATIONERY 8.4.1 Items of stationery shall be declared obsolete if they are no longer usable in their current state or if no value at all, can be derived from them. 8.4.2 While carrying out stationery stock counts, the obsolete items shall be recorded on separate the stock count sheets (clearly labeled ‘OBSOLETE’) and no adjustments shall be passed in respect of such obsolete items. This implies that the value of such items shall remain part of the Stationery expense. 8.4.3 Obsolete items shall be burnt immediately after the stock count upon the authority of the member of the Audit and Supervision Committee that witnessed the stock count and the Stock count sheets shall be filed on the Stationery file. Page 55 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda CH AP PT TE ER R NI NE E:: PR OP PE ER RT TY Y,, PL AN NT T AN D EQ UIIP PM ME EN NT T CHA NIN PRO PLA AND EQU 9.1 MANAGEMENT POLICIES 9.1.1 Definition Property, Plant and Equipment shall include tangible assets that are held for use in the production of goods or services, for rental to others or for administrative purposes and are expected to be used for more than one year. They may also include items held for maintenance or repair of such assets. 9.1.2 Procurement a) The Manager shall identify the need for the asset and raise a Purchases Requisition Form (FM10) to the appropriate Committee for authorization and approval of the purchase of the asset. b) SACCOs shall invite at least three bids for major purchases. c) The Manager shall identify a list of suppliers of small items such as stationery for The Committee/Committee approval. d) An order shall be placed to a supplier whose offer is the best on the market list (the market list gives different stationery items with different offers in the locality, and it is updated periodically). The accountability documents shall usually be; the requisition form, and the invoice/receipt. e) All purchases shall be processed through a Local Purchase Orders (LPO). i. These start by requesting at least three suppliers to express their offer for item(s) called a pro forma invoice ii. The several pro-forma invoices are put together and evaluated to see who has the best offer iii. The best offer is chosen on the basis of quality, price, delivery conditions, and terms of payment iv. The award of tender is made known by issuing a supply order, which specifies the requirement and the terms of supply as per the winning offer Page 56 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda f) On receipt of goods, the goods are checked for quality, quantity and price. If the goods have serial numbers, these must correspond with those on paper. The supporting documents shall be the invoices, LPO, supply order, delivery and Goods Received Notes. g) The Delivery Note shall be ticked to ensure that the goods are received as listed and that the delivery is in agreement with the order. 9.1.3 Recording 1) Capitalization of assets takes place when the benefits of the expenditure are expected to extend over periods beyond one year and the cost is more than Shs 500,000 or as management may agree or as allowable for capitalization in the Income Tax Act1997 2) Donated assets should be capitalized at their market value at the time of donation. 3) The capitalization value of assets is the cost involved in bringing the asset to its present location and condition i.e. transportation, clearing charges, taxes and installation costs should be added to the purchase cost of such assets. 9.1.4 Depreciation 1) Depreciation shall be calculated on the straight-line basis to write down the cost of each asset at their residual values over their estimated useful life as follows: Fixed Asset Class Freehold land and Buildings Motor vehicles and cycles Furniture and office equipment Computer equipment-Hard ware Computer software Applicable rates Nil 12.5% to 25% 5% to 12.5% 12.5% to 33.3% 20% to 33.3% 2) Depreciation shall be calculated per item of Plant, Property and Equipment, and the calculation shall be detailed out in the Fixed Asset Depreciation form (FM15) a copy which shall be appended onto the none cash voucher raised to that effect 3) Accounting entries shall be passed with respect to each Fixed Asset class as follows; A/C code Account Name Debit Shs X Credit Shs Depreciation expense Accumulated depreciation (accordingly) X Narration: Being depreciation expense on ……(Asset Class) for the yea ended Page 57 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda ……(Period end Date) 9.2 PHYSICAL CONTROLS 9.2.1 Physical Inspections The fixed assets shall be physically inspected on an annual basis to coincide with SACCOS’ Year-End. An inspection report shall be prepared by the Accountant and submitted to the manager for action. The results of the inspection shall be documented and where necessary, adjustments shall be made to the fixed assets register (BK14) and general ledger. 9.2.2 Engraving of Fixed Assets 1) All moveable property such as furniture/fittings and computer equipment shall be engraved with unique reference numbers for easy identification. These identification numbers shall be indicated against the relevant item in the Fixed Asset Register. These numbers shall be used during the annual physical inspections. 2) All assets should permanently be marked with indelible identifications as belonging to SACCO. 9.2.3 Insurance of Property All SACCO property shall be insured with a reputable insurance firm. The terms of the insurance policies shall be followed in order to avoid loss. All assets should be insured under a comprehensive policy at their market values. The amount insured should be reviewed periodically and at least once a year. 9.2.4 Safe Custody A person using the assets shall take particular responsibility over each asset item in his/her possession and to ensure its proper use and custody. Management will issue rules regarding the location and times for parking assets. 9.2.5 Disposal of Assets Page 58 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 1) Assets will be disposed of when they are rendered obsolete or due to unforeseen break down. 2) Assets may be disposed of by sale, donation to charitable organisations or abandoned. 3) Before disposal of the assets, the Manager shall obtain the authority to do so from The Committee/Committee (the Manager must present the condition to the authority and request for disposal) 4) The Manager shall then dispose off the asset. 5) Upon sale of the assets, the cost and accumulated depreciation are removed from the accounting records. 6) For any difference between net book value and net proceeds from sale, the accounting shall be as follows; If the difference is a gain: A/C code Account Name Debit Shs X X Credit Shs Debit Shs X X Credit Shs Cash/Bank (with the total proceeds) Accumulated dep. (with the prevailing balance) Fixed Asset class (with the cost) X Other income (with the gain) X Narration: To derecognize ……(Item) after it was disposed/sold off to ……(Purchaser) If the difference is a loss: A/C code Account Name Cash/Bank (with the total proceeds) Accumulated dep. (with the prevailing balance) Loss on Sale of Fixed Asset X Fixed Asset class (with the cost) X Narration: To derecognize ……(Item) after it was disposed/sold off to ……(Purchaser) Page 59 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda NB Copies of the disposal documents shall be attached to the none cash vouchers raised 9.3 REVALUATION OF ASSETS 9.3.1 A SACCO may have its property, plant and equipment revalued regularly by a firm of competent quantity surveyors and valuation professionals, such that the carrying amount does not differ materially from that which would be determined using fair value at balance sheet date. The valuation figures in the valuation report shall be used to replace the cost figures in the Fixed Asset Register and general ledger. When a particular fixed asset is to be revalued, the entire class of fixed assets to which that item belongs shall be revalued. Revaluation should be done evenly over the chosen periods, preferably after every five years. 9.3.2 The following entries shall be made: A/C code Account Name Debit Shs X Credit Shs Fixed Asset (with the revaluation amount ) Revaluation Reserve Narration: To recognize Revaluation of ……(Item) as at ……(Revaluation Date) 9.3.3 X The balancing figure in the revaluation account is either a revaluation reserve or a revaluation loss, posted to the revaluation reserve account or profit and loss as the case may be. Page 60 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda CH AP PT TE ER R TE N:: AC CO OU UN NT TS S PA YA AB BL LE E CHA TEN ACC PAY This chapter covers the following elements. 10.1 Members’ Deposits Loans And Balances due to Banking Institutions Deferred Grant income Interest Payables and other Liabilities Tax Payable MEMBERS’ DEPOSITS 10.1.1 Opening and Operating Savings Accounts. The SACCOs saving accounts may be personal, joint, minor, group or institutional and shall be opened by members only. The following guidelines have to be followed in the opening and operation of the Savings accounts by members. 1) The applicant shall complete the Application Form for Opening a Savings Account (FM2) and affix his/her photograph. 2) The details of the applicant shall be recorded on the Savings Ledger Card (DOC12) to which shall be affixed his/her photograph. The applicant shall affix his/her specimen signature on the Personal Savings Ledger Card. Personal Savings Ledger Cards shall be kept in a lockable box and access shall be restricted to designated officials only. 3) In case the applicant would like to authorize other people to withdraw money from his/her Savings Account, the applicant shall complete the Third Party Mandate Form (FM11) as required. Page 61 of 164 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 4) The Manager or designated official shall complete and issue a Pass book to the applicant. The Passbook shall contain the Member’s passport photograph and specimen signature duly stamped and certified by the Manager or designated official. 5) The applicant shall complete a Savings Deposits Slip (DOC9) for depositing at least the minimum deposit required for the SACCO’s Savings Account. Every member of the SACCO shall be required to have a savings account. 6) The Cashier shall receive the Passbook, Savings Deposits Slip and cash. He/she shall then count the cash and check the information filled in the Savings Deposits Slip to ensure that it is correct, keep the cash and pass on the pass book and deposit slip to the Manager or his/her representative for authorization. 7) The Manager/Accountant shall check the Deposit Slip and initial it, record the amount deposited into the Passbook and Savings Ledger Card (DOC12), work out the new outstanding balance, initial and return the passbook and Deposit Slip to the Cashier and keep the Savings Ledger Card. 8) The Cashier shall return the Passbook to the applicant or client and keep the Deposit Slip. The Cashier shall not keep members’ Passbook after they have completed their transactions. 9) In course of the day and in particular at the end of the day, the Cashier shall give each Deposit Slip a unique serial number for the day and post them to the day’s Till Sheet (DOC16) 10) The Cashier shall staple/ tie together all savings Deposits Slips for the day with a rubber band and pass them on to the Manager/Accountant together with the Till Sheet. 11) After preparing the Waste Sheet (DOC20) the Manager shall securely keep the Savings Deposit Slips in a lockable cup-board, which has controlled access. 12) At the end of the day, the manager/Accountant shall record all Pass Books issued in the Passbook Distribution Register (BK11). The Accountant or designated Official shall also complete the Account Opening Register (BK1). 10.1.2 Handling Full Passbooks or Savings Ledger Cards. 1) Whenever the depositor’s passbook is full, the balance thereon shall be transferred to a new Passbook which shall be given the same number as the old one. Other personal details shall also be transferred. 62 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 2) Whenever the personal Savings Ledger Card (DOC12) is full, it shall be treated like a full Passbook. 10.1.3 Lost Passbook In case a Depositor loses his/her Passbook: 1) He/She shall immediately report it to the SACCO Manager. 2) The Manager shall immediately mark the Personal Savings Ledger Card in red and bold “Lost Passbook notified’, and put the notification date and his or her initials 3) The depositor shall confirm the account balance as reflected on the Personal Ledger Card in writing and this shall be filed on the Savings accounts queries file. 4) A new Personal Saving Account shall be allocated and a new Personal Savings Ledger opened. 5) A new Passbook shall be issued bearing a new number and personal details. The balance from the old account that has been confirmed by the client shall be crosschecked to the old Personal Savings Ledger Card and if confirmed, be transferred to the new Passbook and Personal Savings Ledger Card. 6) The client shall pay the associated charges for lost Passbook replacement. 7) Issuance of a new Passbook implies automatic cancellation of the old one. 8) Should the member find the old passbook, he/she shall present it to the SACCO Manager who shall register and destroy it. 10.1.4 Closing A Savings Account Whenever a depositor wishes to close his/her savings account, the manager or Records Assistant/ Accountant shall do the following. 1) 2) 3) 4) 5) Retrieve the Passbook from the client Retrieve the Personal Savings Ledger Card Mark both the Passbook and the Personal Savings Ledger Card “Closed” Enter the account into the accounts opening and closing register. Calculate the interest due on the client’s savings account and pass necessary entries by debiting interest on savings expense account and crediting the client’s savings account. 6) Calculate total amount due less the account closing charges and pass necessary entries by debiting the client’s account and crediting the relevant income account. 7) Prepare a Withdrawal Slip/Voucher for the net balance due and have it signed by the client. 8) The Manager shall approve the Withdrawal Slip after which the cashier shall pay cash to the client. 63 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Reasons for closing a savings account may include: 1) 2) 3) 4) The client making request to close his/her account. If the client passed away (Deceased’s Estate). If the SACCO has been wound up If the client has been expelled from the SACCO 10.1.5 Fixed Deposits Only SACCO members can make fixed deposits. The periods for fixed deposit maturities may be 3, 6, 9 or 12 months. In some situations, the maturity period may be longer than one year. SACCOs shall accept fixed deposits because the Funds are simple to manage since their life in the Institution is well known which makes it easy for planning. However, fixed deposits attract higher interest rates than ordinary saving deposits and therefore, a SACCO shall accept them only if it can lend them out at a higher interest rates than it will pay to the depositors. The process shall be as follows. 1) A Fixed Deposit Slip (DOC2) shall be completed for each and every fixed deposit 2) The Cashier shall receive cash, count it, check the fixed deposit slips and ensure that it has been correctly filled, keep the cash, endorse the Deposit Slip and pass it on to the Manager/Accountant. 3) The Manager/Accountant shall open the fixed deposit account for the member in the Fixed Deposit Register (BK4) and record it accordingly. 4) The Manager shall prepare a Fixed Deposit Certificate (DOC1), which shall be countersigned by the Chairperson of the Audit and Supervision Committee and issue it to the member. 5) The Manager shall keep a diary for the maturity dates of all fixed deposits. 6) On the maturity date, the manager shall instruct the Accountant to update the member’s Fixed Deposit (FD) account by passing the necessary entries as follows. A/C code Account Name Debit Shs X Credit Shs Interest on FDs expense (with the gross interest according to the rate) Member’s FD account (with 85% of the X gross interest) Withholding Tax Payable (with 15% of X the gross interest) Narration: Being interest on …… (Member’s name)’s FD for … ……… (FD Period) less 15% WHT. 7) On withdrawal, the client shall submit his/her Fixed Deposit Certificate to the Cashier who shall pass it to the Manager. 64 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 8) The Manager shall cancel the fixed deposit certificate and pass it to the cashier for payment. 9) At the end of the day, the Cashier shall record the Fixed Deposit receipts and payments in the Till Sheet. 10.1.6 Paying Withdrawals From Savings Accounts A. Where a member is withdrawing his/her own Savings and has a passbook 1) A member wishing to withdraw cash from his/her savings account shall complete a Cash Withdrawal Slip (DOC8) for ach and every withdrawal. 2) The Cashier shall check the cash Withdrawal Slip to ensure that it has been properly completed. 3) A cashier shall crosscheck the Withdrawal Slip to the Pass Book to ensure that the amount to be withdrawn is available on the member’s account and when satisfied, shall send it together with the pass book to the Accountant/Manager. 4) The Accountant/Manager shall compare the Pass Book to the Savings Ledger to ensure that the member has enough money on his/her account to cover the drawing required. Furthermore, the Accountant/Manager shall check to ensure that the signatures are similar and that the person requesting to draw the money from the account is the owner of the account. 5) When satisfied, the Accountant/Manager shall authorize the payment by endorsing on the withdraw slip and giving back the passbook to the cashier to effect the payment. 6) The Cashier shall check the amount authorized for payment, write the denominations to be paid at the back of the Withdrawal Slip and get the member to sign for it. 7) The cashier shall then count the money with the member looking on and pass it on to him/her together with the passbook. 8) The cashier shall stamp “PAID” on every Withdrawal Slip that has been paid, give it a consecutive number for the day and keep it. 9) The cashier shall never keep the member’s passbooks. 10) At the end of the day, each Withdrawal Slip shall be posted to the Till Sheet. 11) The cashier shall staple/tie together all Withdrawal Slips for the day with a rubber band and hand them over to the Manager/Accountant. 12) After preparing the Day sheet, the Manager/Accountant shall keep securely the Withdrawal Slips in a lockable cupboard, which has controlled access. B. Withdrawal without a Passbook Withdrawal without passbooks shall be restricted to very few and exceptional cases. Where such a withdrawal is to be made, it shall be justifiable and on a written recommendation by the SACCO treasurer or a committee/Board member. Such cases shall always be posted to the client’s passbook at the earliest opportunity. Only internal non-cash transactions authorized by the manager shall be made without the passbook but shall always be posted to the clients’ passbook at the earliest opportunity. 65 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda C. Withdrawal by third parties Withdrawals by third parties is exceptional and not a right. In any case the account holder ought to have completed third party mandate form (FM11) indicating the authorized third party. The third party must always present the passbook (withdrawals without the passbook are totally forbidden). In addition to checking the Withdrawal Slip to the passbook and personal ledger card, they shall also be checked to the third party withdrawal mandate form. If satisfied, the manager shall authorize the cashier to pay the cash for the withdrawal request. 10.1.7 Using SACCOs’ Cheques Depending on the level of development of a systems and operations, a SACCO may introduce cheques to be used by its members in effecting transactions, amongst themselves. The following guidelines shall serve to ensure proper utilization of SACCO Cheques. i) SACCOs’ cheques shall be used for transactions between SACCO members only. ii) The member seeking to withdraw money from his/her savings account shall not fill the Withdrawal Slip. A well prepared cheque shall be presented to the Cashier along with the member’s Passbook. The transaction shall be treated as a normal withdrawal. In this case however the cheque will act as a Withdrawal Slip iii) A member who has been given a cheque by another member shall fill the cheque Deposit Slip and present it together with a cheque and he/her Passbook to the cashier iv) The cashier shall check to confirm that the Deposit Slip has been correctly filled after which he/she shall pass them on to the Manager/Accountant. v) The Manager shall check the documents and retrieve the Ledger cards of the member depositing the cheque and that of the member depositing who drew the cheque. vi) If the signature of the member who drew the cheque is correct and he/she has money on his/her account, then the Manager/Accountant shall credit the depositor’s Personal Savings Ledger Card and the passbook. The Manager/Accountant shall debit the cheque drawer’s Personal Savings Ledger Card. The cheque drawer’s passbook shall be debited at the earliest opportunity. vii) The Manager/Accountant shall return the passbook to the cashier who shall return it to the member. 10.1.8 Non – Cash Transactions These are SACCO transactions, which take place but do not involve cash moving in and out of the SACCO. Examples include interest paid on savings accounts by way of crediting the members’ accounts, dividends which are capitalized or credited to the members share capital accounts, collections made on behalf of members, ledger fees charged to the members’ accounts etc. The process of none cash transactions on members’ savings shall be as follows. i) For each non-cash transaction, the staff initiating the transaction shall raise either non cash Transaction Debit Voucher (DOC4) or non cash transaction credit voucher (DOC3) 66 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda supported by relevant authority documents and have it approved by the Manager. After approval, the records assistant/accountant shall incorporate the transactions into the Day Sheet and later post the transactions to the accounts they affect. ii) The Depositor’s Passbook shall be adjusted for any entries at the earliest opportunity. 10.2 OTHER BORROWED FUNDS 10.2.1 These may include both short and long term borrowed Funds from donors, other financial institutions and directors or members. 10.2.2 Copy of the loan agreement, correspondences, monthly statements and reconciliation, evidence of payments made, repayment schedules etc, shall be kept by the Manager or any other designated official. 10.2.3 Unused Operating Grants This account is used to record those Grants received purposely to cover future expenses. Debits on this account shall be made as the expense is realized, which is when the Grant income has to be recognized. The i. On receiving the Grant; A/C code Account Name Debit Shs X Credit Shs Respective Bank Account Deferred Grant income with total Grant Narration: To defer Grant income received until prescribed Grant conditions are met ii. X Monthly amortization of the operating Grant A/C Code Account Name Debit Deferred Grant Income Grant income Credit X X Narration-To recognize income that had been deferred with respect to the Grant terms 10.3 CAPITAL GRANTS This account is used to record Grants for the purchase of equipment or those Grants for the Capitalization of credit subject to restrictions with regard to the use of the Funds. They are 67 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Equity Grants because they contribute to the creation of capital and because they will eventually become part of the organization’s equity. i. On receiving A/C Code Account Name Asset Account Deferred Capital Grant Amount (Shs) Debit Credit X X Narration: To Defer capital asset Grants until when earned ii. On recognition A/C ode Account Name Amount (Shs) Debit Credit Deferred Grant Income X Depreciation/Equity-Reserves X Narration: To recognize the asset portion realized as equity (to compensate depreciation expense) for the period with regard to asset…… a) Sufficient provision shall be made for depreciation, bad loans and accrued expenses. b) Provision for doubtful and bad loans shall be made in accordance with the ageing structure for loans using recommended rates as stipulated in SACCOS Lending Policies and Guidelines. 10.4 INTEREST PAYABLE AND OTHER LIABILITIES These will cover the following accounts Interest on Member Savings Accounts Other Interest Payable To record the accrued interest payable in a time period the following accounting entries shall be made. A/C Code Account Name Amount (Shs) Debit Credit 68 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Respective interest expense account X Interest payable X Narration-To recognize income with respect to the Grant terms 10.5 PAYROLL LIABILITIES 10.5.1 Payroll liabilities include net salaries payable, PAYE payable, NSSF payable, Gratuity payable etc. 10.5.2 PAYE is a form of withholding tax from an employee’s gross pay recorded as follows: i) On recognizing the liability A/C Code Amount (Shs) Debit Credit Salary expense X PAYE payable X Narration: To recognize PAYE payable for ……. (month & year) ii) Account Name On payment A/C Code Account Name PAYE payable Bank Account Amount (Shs) Debit Credit X X Narration: Payment of ……. (month & year) PAYE 10.5.3 NSSF is contributed to by both the employee (5%) and employer (10%) of the employee’s gross remuneration as shown below: A/C Code Account Name NSSF SACCO’s contribution-10% Salary expense - (Employee contribution)-5% Amount (Shs) Debit Credit X X 69 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda NSSF/Statutory pensions payable X Narration: To recognize NSSF payable for ……. (month & year) On payments to NSSF A/C Code Account Name NSSF /Statutory pensions payable Bank/Cash Amount (Shs) Debit Credit X X Narration: Payment of ……. (month & year) PAYE 10.6 ACCRUALS 10.6.1 Accrued expenses arise when goods or services have been received or services utilized prior to the end of the accounting period, but where payment has not been made. Accruals should not be made simply to show expenditure in the period in which it was budgeted, unless the goods or services were actually received in that period. 10.6.2 For monthly accounts, accruals should only be made where they are material. 10.6.3 To accrue expenses, the following entries shall be passed by use of none cash vouchers duly supported with the bases for accrual as attachments. A/C Code Amount (Shs) Debit Credit Expense account (accordingly) X Payables (accordingly) X Narration: To accrue …….. (No of months)’s …….. (Expense name) as at …… (Period end Date) 10.7 Account Name OTHER ACCOUNTS PAYABLE 10.7.1 Creditors should only be recognized where the invoice for the goods or services has been received prior to the end of the accounting period, but where payment has not been made. Recognition of creditors shall be an End of Period process/activity. 10.7.2 Unpaid but accrued invoices shall be marked ‘ACCRUED with the date of accrual’ and initialed by the Accountant 70 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 10.7.3 Other known creditors e.g. Telephone, Electricity, Water etc. shall be accrued after the Manager’s approval. 10.8 CORPORATION TAX 10.8.1 The Income Tax Act 1997 demands that all the gross income of a person for the year less total deductions allowed under the same Act is income subject to corporation tax at the prescribed rate, currently at 30 %. 10.8.2 After taking into consideration all the necessary income tax provisions, a provisional final installment amount will be provided for in the accounts. To arrive at the final installment tax payable, the overall 30% tax liability computed for the year should be adjusted with all the provisional installments that were made during the year. 10.8.3 Final Tax Returns A final return of income for each year of income is required not later than 6 months after the end of that year in the form prescribed by the commissioner and signed by the tax payer declaring completeness and accuracy of the return together with a statement of income and expenditure and a statement of assets and liabilities. 10.8.4 Provisional Returns Provisional tax returns should be submitted as follows: Before 30 June Before 31 December Before 30 April 1st provisional return 2nd provisional return 3rd and Final tax return Computation Each installment of provisional tax shall be computed as follows: 50% X (A-B), where; A – Estimated tax payable by the SACCO for a year of income B – Amount of tax withheld under the Income Tax Act prior to the due date for payment of installment for which the SACCO has tax certificates. 71 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda CH AP PT TE ER R EL EV VE EN N:: CA PIIT TA AL L AN D RE SE ER RV VE ES S CHA ELE CAP AND RES 11.1 MEMBERS’ CONTRIBUTIONS Subject to the provisions and the rights attaching to any class of shares, the holders are entitled pari passu amongst themselves to the profits of the SACCO available and recommended for distribution. On a winding up of the SACCO, the balance of the assets available for distribution shall, subject to any sanction as required by the statute be divided among the members in proportion to the amount of capital paid up on each Ordinary Share. This is in addition to voting rights. Other rights are enshrined in the bye laws. The SACCO should disclose in the notes for each class of share the following details; ü The number of shares authorized ü The par value per share ü Rights relating to each class of shares 11.2 HANDLING MEMBERSHIP APPLICATIONS AND PAYMENTS FOR SHARE CAPITAL 11.2.1 Admitting members to a SACCO The process of admitting members to a SACCO shall be as follows 72 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda i) Anyone wishing to become a member of a SACCO shall fill a Membership Application Form (FM1). An individual, group or institution can apply to become a member of a SACCO. ii) The Cashier shall check to ensure that the applicant has correctly filled the application form and that the applicant meets the minimum requirement e.g. share capital, membership fee and that the applicant is a resident of the target area. iii) The Manager shall check and ensure that the information given is correct and if satisfied, approve it. iv) Authentic identification documents shall be presented together with the Application form and where possible copies shall be attached to the form v) The Cashier shall receive the payments (share capital and membership fees), issue cash receipt, write the number of the cash receipts on the application form, stamp it “PAID” and return it to the Manager. vi) The Manager shall issue and complete relevant sections of the Passbook, which shall be returned to the Applicant through the Cashier. vii) At the end of the day, the Cashier shall summarize share capital and membership fees payments into the Till Sheet (DOC16) for the day. viii)At the end of the day, the Passbook Distribution Register (BK11) shall be updated. ix) The Membership Application Form shall be sent to the SACCO Chairperson and Secretary for authorization and issue of Share Certificate (DOC5) after which it shall be filed. x) In case a member is illiterate, the Manager of the SACCO shall ensure that he/she is facilitated to complete the necessary documentation. In addition to the photograph, a specimen of his/her thumbprint shall be affixed to the relevant documents. The cashier or any other person of his/her choice shall complete the documentation which shall be read to him/her after which he/she shall affix his/her thumbprint. The manager shall again read the documents to such a member before authorizing the transaction. 11.2.2 Recording Share Capital and Membership Fees The process of Recording Shares and Membership fees shall be as follows. i) Receipts shall be written such that membership fees are separate from Share Capital contributions because they are accounted for separately ii) The cashier, in his/her Till Sheet, shall separate Membership fees from Share Capital contributions 73 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda iii) The Accountant in his/her Day Sheet, shall record total membership fees received as Membership fees income and Credit the Share Capital account with the total shares purchased iv) At the end of the day, the Members’ Register (BK9) and Share Capital Register (BK12) shall be updated. The custody of the register of members is a duty of the Secretary according to Section 28 of the Cooperative Regulations 1992. Therefore, for day-to-day operations, management shall maintain a preliminary register that will capture members’ data as they are recruited. The data will then be used to periodically update the statutory members register that the Secretary keeps. v) Whenever any member wants to buy more shares in the SACCO (increase his/her Share Capital), he/she shall complete the Application Form for Purchase of additional shares (FM3) that shall be checked by the Manager and approved by the Chairperson and Secretary. This is to ensure that the maximum shareholding regulations of the society are complied with. 11.3 EQUITY GRANTS APPLIED 11.3.1 Accounts under this category A/C Code A/C name Portfolio equity Grants Fixed assets equity Grants 11.3.2 These accounts show the balances of Grants in fixed assets and portfolio free of special restrictions by the donors and, therefore, taken in as part of the SACCO’s equity. 11.3.3 The following entries shall be made in respect of Equity Grants depending on whether: Ø A Grant has been receive free of restrictions Ø The Grant received is restricted Ø The restrictions on the Grant have been freed/fulfilled Ø The Equity Grant /donation is in kind On receiving a Grant free of restriction: A/C Code Account Name Amount (Shs) Debit Credit X X Cash/ Bank (accordingly) Portfolio/FA Equity Grant (accordingly) Narration: To recognize donated Equity from …….. (Donor’s name) On receiving a Grant that has restriction: 74 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda A/C Code Account Name Amount (Shs) Debit Credit Cash/ Bank (accordingly) X Differed Grants (accordingly) X Narration: To recognize restricted Grant(s) from …… (Donor’s name) When the restrictions on the Grant have been fulfilled: A/C Code Account Name Amount (Shs) Debit Credit X Deferred Grants (accordingly) Portfolio/FA Equity Grant (accordingly) Narration: To recognize donated Equity from …….. (Donor’s name) 11.4 X RESERVES 11.4.1 Definition of Reserves Disclosure; ü ü ü ü The reserves representing the appropriations of the retained earnings Reserves required by statute Revaluation reserves Foreign currency translation reserves 11.4.2 Retained Surplus/Deficit b/f This is used for the purpose of showing profits or losses from previous fiscal years. Since this is a capital account, it generally has a Credit balance. This account is used for the purpose of showing (accumulated) surplus (deficit) from the previous fiscal years. The account is debited with losses and credited with surpluses from earlier periods. The account may also be affected by duly approved and justified adjustments relating to similar prior periods. 75 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 11.4.3 Current Year Surplus of Deficit This account is used for the purpose of showing profits or losses earned during the current fiscal year. Only one account can exist for the current year. It shows the accrued balance of financial income. At the end of a fiscal year all the income accounts should be debited to nil and the expense accounts credited to nil; the current year surplus or deficit shall be posted to the ‘Current year Surplus/Deficit Account. 11.4.4 Statutory Reserves Statutory reserves include the following 1) Reserve Fund According to Section 34 of the Cooperative Regulations 1992, 10% of the annual operational net surplus shall be put into the Reserve Fund and withdrawals from this Fund must be permitted by the Registrar. 2) Share Transfer Fund According to Section 9 of the Cooperative Regulations 1992, payment to exmembers in respect of shares must be from a Share Transfer Fund and duty to maintain this Fund is imposed on SACCOs by Section 43 of the Cooperative Regulations 1992. CH AP PT TE ER R TW EL LV VE E:: IN CO OM ME E CHA TWE INC 12.1 MANAGEMENT POLICIES 12.1.1 Definition Income shall encompass both revenue and gains. Revenue is income that arises in the ordinary course of business e.g. fees, interest, dividends, royalties, penalties, commission. Gains may or may not arise in the ordinary activities of an enterprise e.g. disposal of non-current assets. 12 1..2 2 Revenue shall not be recognized unless it meets certain standards of transfer of 12..1 ownership, certainty, collectability and measurability. 12.1.3 Capital and reserve Grants shall be disclosed in equity on a cumulative basis, against the related accumulated costs over time. Grants relating to operating expenditure shall be shown as non-operating income in the income statement. 12.2 TYPES OF REVENUE 76 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The major sources of revenue shall be categorized as follows: Loans Income A/C Code A/C Name Interest received on loans Loan Commitment fees Surcharge on loans Collection fees Savings and Membership fees Income A/C Code A/C Name Membership fees Sale of stationery Saving Ledger fees Account closure fees Other Income A/C Code A/C Name Grant income Interest from Bank A/C Profit on Sale of Fixed Assets Foreign Exchange gain Miscellaneous income 12.3 INTEREST INCOME 12.3.1 Interest on Loans Interest on loans shall be recognized on modified accrual basis as described in Section 7.2 of this manual. 12.3.2 Interest on Investments Interest on Investments ordinarily arises out of Fixed Deposit Placements with other Financial Institutions and the SACCO shall pay 15% WithHolding Tax thereon, in accordance with Section 117 of the Income Tax Act. The 15% WithHolding constitutes a Tax credit which is deductible from Gross Tax liability at the end of the Financial Year and must therefore be accounted-for properly. Every time Interest is received on Investments, the following entries shall be passed. 77 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda A/C Code Amount (Shs) Debit Credit Bank (85% of the Gross Interest) X WithHolding Tax Claimable (15%) X Interest on Investmants (100%) X Narration: To recognize Interest on FD Placement for …….(Investment Period) with …….(Bank) 12.4 Account Name OPERATING GRANT INCOME 12.3.3 This represents income that is not from an internal source or that is outside the SACCO’s normal business activities. The account is used to record and accumulate the income from Grants. Entries are made transferring Funds from deferred Grant income to operating Grant income as and when expenses for which they were donated are incurred. 12.3.4 Accounting Policies a) All Grants shall be recognized as income over the period necessary to match them with the related costs, which they are intended to compensate on a systematic basis. They should not be credited directly to shareholders’ interests. b) Grants shall be recorded at fair value only where there is reasonable assurance that the SACCO will comply with the conditions attached to the Grant and that the Grant will be received c) Revenue shall not be recognized unless the SACCO meets certain standards of transfer of ownership, certainty, collectability and measurability d) Capital and Revenue Grants shall be disclosed in equity on a cumulative basis, against the related accumulated costs over time e) Grants relating to operating expenditure shall be shown as non-operating income in the Income Statement f) Grant income shall be recorded as the correspondence expense (In case of fixed asset Grants) is being made. 12.3.5 RECORDING The Manager shall maintain a schedule for the expected and budgeted Grants/loans to be received from donors and government and when received. 12.3.6 ASSET GRANTS 78 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Grants or donations in form of assets shall be recorded as deferred income that will be recognized as no-operating income on a systematic and rational basis over the life of the depreciable asset by way of a reduced depreciation charge. The accounting entries shall be passed as follows. To recognize the Asset Grant in the SACCO books: A/C Code Account Name Amount (Shs) Debit Credit Respective asset account X Deferred asset Grant X Narration: To recognize donated ……. (Asset name) from …….. (Donor’s name) To recognize income on a systematic basis/depreciation charge A/C Code Amount (Shs) Debit Credit Deferred asset Grant X Grant Income (with the Depn. Charge) X Narration: To recognize income on depreciation of donated ……. (Asset name) from …….. (Donor’s name) 12.5 Account Name OTHER INCOME Other income shall be from non-recurring sources like profit or loss from the sale of fixed Assets or investments, profit or loss on exchange of a foreign currency, recovery of bad debts etc. 12.6 DISCLOSURE IN THE FINANCIAL STATEMENTS 12.2.1 Grant income shall be disclosed as non-operating income separately after net operational income in the income statement. 12.2.2 In the balance sheet, Grants, donations and in kind contributions shall be disclosed as accumulated donations under equity. A note reconciling the previous year’s opening balance to the current years’ closing balance per donor should be included in the notes to the financial statements. The following should also be disclosed; 79 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda a) The accounting policy adopted for Grants, donations and in kind contributions, including the methods of presentation adopted in the financial statements. b) The nature and extent of Grants, donations and in kind contributions recognized in the financial statements. c) Unfulfilled conditions and other contingencies attaching to Grants, donations and in kind contribution. CH AP PT TE ER R TH RT TE EE EN N:: EX PE EN ND DIIT TU UR RE E CHA THIIR EXP 13.1 MANAGEMENT POLICIES 1) All SACCO expenses shall be recognized immediately they are incurred (expenses shall be treated on accrual basis). 2) All SACCO expenses must be in the approved budget and shall be incurred only when there is still a balance on the budget item or upon the approval of the Board of Directors if it is over and above Budget. 80 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 3) The Committee shall set expenditure limits for the Manager beyond which he/she shall seek the authorization of the Treasurer. The Manager shall not incur repetitive expenditure as a way of defeating the expenditure limit. Where it is discovered, the Committee shall discipline the Manager. 4) Expenditure above Shs 500,000 meant to benefit more than one accounting period or month shall be spread over the period it is to benefit. However, expenditures below Shs 500,000 shall be expenses during the period it is incurred. Similarly, expenses whose period of benefit cannot be ascertained with reasonable degree of accuracy like in case of motor vehicle repairs shall be written off during the period they are incurred. 5) The Manager shall be fully responsible for all SACCO expenses and no expenditure shall be incurred without his or her authorization. 6) All expenses shall be properly budgeted for and any expenditure not in the budget shall be approved by the Committee based on a supplementary budget, which will be reported at the Annual General Meeting. 7) Every expense shall be supported by an expenditure voucher, to which a supporting document shall be attached. The expenditure shall be approved by SACCO’s Manager and by any relevant SACCO authorities for any expenditure beyond the Manager’s limit. 8) A Payment Voucher (DOC6 ) shall show the following The name of the payee The serial numbers of the voucher The account to be charged The purpose of payment and the documents justifying the payment The amount being paid (in words and figures) The name and title of SACCOS Official raising it. The authorization by the Manager or Treasurer (where applicable) Signature of the payee acknowledging receipts of payment 9) After payment, the Payee shall acknowledge receipt of payment and provide SACCO with his/her own receipt. 10) All SACCO capital expenditure shall be initiated by the Manager, authorized and approved by The Board of Directors/Committee. 11) The Committee minute authorizing the expenditure shall be quoted on the expenditure documents. 12) The Chairperson and SACCO Secretary/Treasury shall sign the minutes. 13) The capital expenditure documents shall include: i. ii. The Voucher The original copies of the suppliers invoices 81 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda iii. Analysis of the evaluation report and award of the tender where more than one quotation was received. 14) All paid Vouchers shall be kept in the order of date paid, batched and kept by SACCO Manager 15) The Finance Committee of the Board shall, from time to time, set procurement guidelines to streamline the processing and management of large expenses. 13.2 TYPES OF EXPENSES AT SACCOs Expenses of SACCOs shall be categorised into the following categories; 1) Financial expenses e.g. Interest on voluntary savings Interest on Borrowed Funds 2) Direct Loan Costs Bad debts Expense Loan appraisal costs Loan monitoring and recovery costs Legal Fees on Loans 3) Personnel/Staff costs e.g. Gross salaries Staff welfare and incentives NSSF – 10% Gratuity Staff trainings, workshops and capacity building Other Personnel Expenses 4) Office and Administration Stationery expenses Rent of office premises Office expenses Telephone Internet and e-mail Professional fees 82 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Transport and travels Advertisement, announcements and publicity Power/fuel costs Accommodation allowances Duty allowances Community mobilisation Audit costs & legal fees Depreciation Loss on Sale of Fixed Assets Equipment Repairs & Replacement Security expenses Computer expenses Miscellaneous expenses 5) Governance General meeting expenses Registration/affiliation fees B.O.D and committee expenses 6) Statutory expenses 13.3 Contribution to the Cooperative development Fund Members’ training Remittances to Secondary Society (Education Fund) ACCOUNTING PROCEDURES 13.3.1 Expenditure Processing 1) Initiation of payments Users on identifying a requirement shall raise a requisition that shall be recommended by the user for approval by the Manager, before it can be processed for payment. 2) Authorization of payments In line with budgetary limits and any other managerial considerations, payments or any advance claims shall be verified and approved by the manager. 3) Refunds 83 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda In the case of refunds, a Refund Claim Form (FM15) shall be filled out and accompanied by proper supporting documents. In the case of allowances not paid through the payroll, an authorization form must be attached to the claim. 4) Payment of claims by cashier Claims and advances authorized for payment shall be forwarded to the cashier to effect payment. The payee shall be required to acknowledge receipt of payment by signing on the payment voucher and the cashier shall be required to stamp, sign and date the claim form and all supporting documents with the “PAID” stamp 13.3.2 Computation of Interest on Members’ Savings a) SACCOs mobilize and provide safe custody for members’ savings. They shall ensure profitability, sustainability, and secure members’ confidence to save with them. b) SACCOs shall in turn pay interest on the members’ deposits from the income earned from their operations particularly loans. c) SACCOs’ Board/Committee shall determine the rate of interest to be paid on the members’ savings and shall be reviewed from time to time. In determining the rate of interest to pay, The Committee shall take into account, among other things the following: i. ii. iii. iv. v. The interest rate paid on Saving Deposits by Commercial banks particularly the rates applied by the Bank on its Account. The interest rate applied by other players in the Microfinance industry. The lending interest rates other SACCOs charge on loans The inflation rate The Cost of Capital or Required Rate of Return d) SACCOs must note that interest payable on savings deposits is a cost and they shall have the capacity to pay. e) Interest on Savings Account shall be calculated twice a year as follows: Minimum balance held during months 1 & 2 TIMES the applicable interest rate DIVIDE by 6 PLUS Minimum balance held during months 3 & 4 TIMES the applicable interest rate DIVIDE by 6 PLUS 84 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Minimum balance held during months 5 & 6 TIMES the applicable interest rate DIVIDE by 6 Below is an example of how a SACCO can calculate interest on a Savings Deposit Account Month Minimum balance held A Shs 1 2 3 4 5 6 Applicable annual interest B 60,000 120,000 200,000 250,000 100,000 50,000 AxB Interest payable per month C/6 C Shs D Shs 3% 1,800 300 3% 6,000 1,000 3% 1,500 250 Total Interest Payable for Six Months 1,550 At the end of 6 months and end of the year, DEBIT interests paid on Savings Account and CREDIT respective members’ Accounts as follows; A/C Code Account Name Amount (Shs) Debit Credit Interest on Members’ deposits expense X Member’s savings Account (85%) X Withholding Tax Payable (15%) X Narration: Interest paid on member’s accounts for ….. Months ended …. (Date) 13.3.3 Expenditure Documentation The following documents shall constitute expenditure supporting documents. · · Appointment letters, Training application form, Leave application forms Overtime Claim Forms, Payroll, Pay advice slips 85 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda · · · · · · · 13.4 Bank summary and bank schedules, Expenditure Claim Forms Petty cash Payment Voucher, Cheque Payment Voucher Accountability statement, Purchase order, Requisition forms Order Forms Journal Voucher Form Invoices, GRN, Delivery notes Etc PAYROLL COSTS 13.4.1 Introduction · Payroll costs include the cost of hiring staff on a permanent or on a casual basis. It does not, however, include costs of hiring consultants. · The overall policy on staff is set out in a separate manual. This document only serves to cover the accounting aspect. 13.4.2 Personnel Files Each employee shall have a personal file kept by the Official responsible for staff matters. These files shall contain among others, the employee bio-data, photographs, application, interview details, CV, job description, salary scale and monthly gross pay, appraisal reports and any other documentation. These files shall be updated on a regular basis · · A Pay Roll (FM8) shall be prepared monthly and shall reflect the payments due to all employees. A payroll summary will be filled for all permanent staff salaries paid by the respective departments. All casual staff wages will be paid by cash. 13.4.3 Salary Deductions 1) National Social Security Fund · A SACCO shall have all its employees registered with the National Social Security Fund (NSSF) as stipulated in the NSSF Act 1987. · SACCOs shall comply with the National Social Security Fund (NSSF) Act and deduct NSSF, from each employee’s gross pay, in accordance with the Act. In addition, SACCOS shall contribute towards each employee’s NSSF as stipulated in the Act. Contributions shall be as follows: 86 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda · · Employee - 5% of the employee’s gross pay Employer (The SACCO) -10% of the employee’s gross pay ii) Pay As You Earn (PAYE) SACCOs shall comply with the Income Tax Act and deduct PAYE, from each employee’s gross pay, in accordance with the tax tables in place at any point in time. Computation of PAYE Gross Pay range (GP) Less or equal to Shs 130,000 More than Shs 130,000 but less than Shs 235,000 More than Shs 235,000 but less than Shs 410,000 More than Shs 410,000 Rate NIL 10% (GP-130,000)*20%)+10,500 (GP-410,000)*30%)+45,500 iii) Other Deductions Any other lawful deductions as Management may decide from time to time shall be effected on the Payroll 13.4.4 Remittance Of Deductions a) National Social Security Fund NSSF deductions shall initially be credited to a liability account under Statutory Deductions Payable pending remittance to the NSSF. SACCOs shall also comply with the time frame stipulated in the NSSF Act so as to avoid penalties levied by the NSSF. Deductions [in total 15% of each employee’s gross pay] shall be remitted to the NSSF by the 15th of the month following the month of deduction (e.g. deductions for the month of May shall be remitted by 15 June etc). SACCOS shall submit the NSSF return and obtain a receipt for the payment made as evidence that the liability has been settled. b) Pay As You Earn PAYE deductions shall initially be credited to a liability account under NSSF payable pending remittance to the URA. SACCOs shall also comply with the time frame stipulated in the Income Tax Act so as to avoid penalties levied by the URA. Deductions shall be remitted to the URA by the 15th of the month following the month of deduction (e.g. deductions for the month of May shall be remitted by 15 June etc). 87 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda In the event of failure to raise the Funds to remit statutory deductions or to pay Salaries for a given month, the Manager shall contact the relevant authorities before the expiry of the remittance deadline for advice. 13.4.5 Payroll Processing Payrolls shall be prepared using the format laid out in (Appendix) and shall be processed into a special Day Sheet or Journal Voucher (JV) to ensure that all the necessary accounting has been done. The Day Sheet is elaborated below. “SACCO NAME” DAY SHEET Date …………………………………………………………………………………… A/C Code Account Name Debit Credit Shs Shs Gross Pay X Allowances (accordingly) X NSSF 10% (employers contribution) X Statutory deductions Payable(PAYE &NSSF 15%) X Salary Advance X Other accounts (accordingly) X Staff Savings A/Cs (accordingly) with the NET Pay X Totals XX 13.4.6 PAYMENT OF SALARIES a) Authorization of Salary Payments The Manager shall authorize payment of Salaries by approving the Payroll together with the Payment Vouchers and none cash vouchers that shall be prepared in respect of the accounting entries derived there-from. b) Mode of Payment It is preferable that all SACCO staff operate Savings accounts with the SACCO such that their monthly salaries may be deposited/credited to those accounts. c) Date of Payment Salary payments shall be effected within the fourth week of the month for which Salaries are being paid so as to uphold the matching concept. CH AP PT TE ER R FO UR RT TE EE EN N:: AU DIIT T AN D SU PE ER RV VIIS SIIO ON N CHA FOU AUD AND SUP 88 of 158 XX Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 14.1 MANAGEMENT POLICY In accordance with the Cooperative Societies Statute 1991, the members shall nominate for appointment annually or after 3 years a Certified Public Accountant, or a firm of qualified auditors whose duty shall be to perform an audit of the financial statements of a SACCO and to give an opinion in accordance with International Standards on Auditing as adopted in Uganda. 14.2 INTERNAL AUDIT AND SUPERVISION Internal Audit and Supervision shall be carried out by the audit and supervision committee appointed by the Annual General Assembly 14.3 APPOINTMENT OF EXTERNAL AUDITORS The members shall give management the mandate to identify suitable external auditors and to fix the remuneration and terms of reference. The identified auditors shall be presented to the Annual General meeting, and by a resolution shall be nominated for appointment. Engagement Letter The appointed auditor shall be given an engagement letter tailored to the nature of the engagement, indicating the scope of work, the agreed fees, deliverables, time schedule, his responsibility and management’s responsibility and the need to provide a management letter. 14.4 SUITABILITY FOR NOMINATION The following qualifications shall be used as benchmarks for assessing the auditor’s suitability for nomination: 14.5 · Every partner (of the Audit firm) must be a registered member of the Institute of Certified Public Accountants of Uganda. · The partner(s) with their staff must not have any financial, personal or other relations with SACCO that may impair their independence. · A valid professional indemnity insurance cover for negligence in the performance of its duties. THE AUDIT PROCESS 89 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 14.5.1 Planning for the Statutory Audit The Accountant shall ensure that draft financial statements for audit are ready within one month after the end of the financial year. The audit shall start latest in the second month following end of the fiscal year. 14.5.2 Execution of the Audit The Accountant shall ensure that all the relevant schedules for the audit are ready so that the exercise is expedited. The external audit fieldwork shall be completed in the third month after the end of the fiscal year. 14.5.3 Report to Management The Manager shall receive a draft report from the external auditors. An internal meeting with the Audit and Supervision Committee shall be held to discuss the findings by the external auditors and the comments from management. The Management shall then submit a final response to the external auditors for consideration. The final report shall be submitted to the Board at their next meeting. 14.5.4 Draft Audited Financial Statements The Management shall receive the draft audited financial statements. The Manager shall then forward them to the Audit and Supervision Committee for review and comment. The draft Statements shall be distributed to the members of the Board of Directors for review and comment. If management and the members of the Board are satisfied with the draft Statements, the external auditors shall be requested to submit copies for signature of two members of the Board of Directors. 14.5.5 Board Meeting The Board of Directors shall meet to approve the financial statements. The Balance Sheet shall be signed by two of the directors. The Secretary shall sign the Directors Report. Both documents shall be appropriately dated. 14.5.6 Letter of Representation The Manager shall sign a letter of representation and submit it to the external auditors. This letter confirms the nature of representations made to the firm during their audit. 90 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 14.5.7 Director’s Responsibility Report Whereas the audit report contains a statement to the effect that directors are responsible for the financial statements, a separate statement called a director’s responsibility report is meant to remind the directors of their responsibility for the preparation of financial statements which present a true and fair view of the results of operation of the entity for an accounting period and of its financial position as at the end of the accounting period and which comply in all material respects with Generally Accepted Accounting Principles and the Cooperative Regulations 1992. The directors (preferably those who sign the financial statements) should sign this statement on behalf of the board. 14.6 DISTRIBUTION OF AUDITED ACCOUNTS 14.6.1 Registrar of Cooperatives and U.R.A The SACCO’s Secretary shall within 42 days after the Annual General Meeting for the year send copies of the final signed financial statements to the Registrar of Cooperatives and the revenue authorities. 14.6.2 SACCO Management and the Board The SACCO Management shall retain a copy of the Audited Accounts for reference purposes and the Secretary shall keep a copy for record purposes 14.7 REMOVAL OF EXTERNAL AUDITORS 14.7.1 At any Annual General Meeting, a retiring auditor shall be deemed re-appointed unless the auditor is disqualified for re-appointment, or a resolution has been passed appointing another auditor, or the auditor has given written notice to a SACCO of his unwillingness to be re-appointed. No auditor shall be removed or changed except with approval of the Annual General Assembly. 14.7.2 An audit firm should not serve as an Auditor, continuously for more than four years. 91 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda APPENDIX 1: COMMITTEE’S STATEMENT OF RESPONSIBILITY STATEMENTS OF THE COMMITTEE’S RESPONSIBILITIES It is the duty of the Committee to prepare financial statements for each year that show a true and fair view of the state of affairs of the SACCO as at the end of the financial year. The Committee is also required to ensure that the SACCO keeps proper books of account and records, which disclose with reasonable accuracy, at any time, the financial position of the SACCO. They are also responsible for safeguarding the assets of the SACCO. The Committee accept responsibility for the annual financial statements, which have been prepared using appropriate accounting polices supported by reasonable and prudent judgments and estimates, in conformity with Generally Accepted Accounting Principles and in a manner required by the Cooperative Societies Statute 1991 and the Cooperative Regulations 1992. The Committee is of the opinion that the financial statements give a true and fair view of the state of affairs of the SACCO and of its operating results. The Committee further accept responsibility for the maintenance of accounting records, which may be relied upon in the preparation of financial statements, as well as adequate systems of internal control. Nothing has come to the attention of the Committee to indicate that the SACCO will not remain a going concern for at least the next twelve months from the date of this statement. Yours faithfully, _______________________ Date ________ Chairperson ___________________ Date___________ Secretary 92 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda APPENDIX 2: MODEL CHART OF ACCOUNTS The General Ledger A/C Code A/C Title 01-10000 ASSETS 01-1-1000 Cash and Bank Balances N/A 10-1-1001 10-1-1005 Cash at Hand Cash at Bank 1 Cash at Bank 2 Cash at Bank 3 Cash at Bank 4 A A A A A 10-1-2000 Loans Outstanding N/A 10-1-2001 10-1-2005 Loans to Females Loans to Males Loans to Groups Loans to Institutions Loans to Others A A A A A 10-1-3000 Advances N/A 10-1-3001 Employee advances A 10-1-4000 Investments N/A 10-1-4001 10-1-4002 Short Term Investment Long Term Investment A A 10-1-5000 Prepayments N/A 10-1-5001 Prepaid Rent Prepaid Utilities Other Prepayments A A A 10-1-1002 10-1-1003 10-1-1004 10-1-2002 10-1-2003 10-1-2004 10-1-5002 10-1-5003 Active/ Not Active 93 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 10-1-6000 Receivables N/A 10-1-6001 10-1-6003 Interest receivable on Loans Interest receivable on Fixed Deposits Overdrawn Savings Accounts A A A 10-1-7000 Amounts Receivable from Related Party N/A 10-1-7001 10-1-7002 Advances to Board Members Other receivables from Board Members A A 10-1-8000 Stock N/A 10-1-8001 10-1-8003 Stock of T-Shirts Stock of Stationery Stock of Other Assets A A A 10-1-9100 Tangible Assets N/A 10-1-9101 Motor Vehicles/Cycles Equipment Furniture & Fittings Computers & Accessories Land and Buildings A A A A A 10-1-9202 Intangible Assets Software Goodwill N/A A A 10-2-0000 LIABILITIES 10-2-1000 Savings and Time deposits N/A 10-2-1001 10-2-1005 Members’ savings - Females Members’ savings - Males Members' Savings - Groups Members' Savings - Institutions Members' Savings - Others A A A A A 10-2-2000 Interest and Dividends Payable N/A 10-2-2001 Interest payable on Savings by Females Dividends payable to Members A A 10-1-6002 10-1-8002 10-1-9102 10-1-9103 10-1-9104 10-1-9105 10-1-9200 10-1-9201 10-2-1002 10-2-1003 10-2-1004 10-2-2003 94 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 10-2-3000 Other Accounts Payable and Accruals N/A 10-2-3001 Interest payable on Borrowed Funds Withholding Tax payable Income Tax Liability Professional fees Payable Suppliers Payable NSSF payable PAYE payable Affiliation fees Payable Net Salaries/Wages Payable A A A A A A A A A 10-2-4000 10-2-4001 10-2-4002 10-2-4003 Other Liabilities N/A General Loan loss provisions Specific Loan loss provisions Accumulated Depreciation A A A 10-2-5000 10-2-5001 10-2-5002 10-2-5003 10-2-5004 Non-Current Liabilities N/A Deferred Grant Income Members’ Deposits – Long-term Fixed Deposits Long term Debt Market rate Long term Debt Subsidized rate A 10-3-0000 EQUITY AND RESERVES 10-3-1000 Member shares N/A 10-3-1001 10-3-1003 Shares Class 1 Shares Class 2 Shares Class 3 A A A 10-3-2000 Statutory Reserves N/A 10-3-2001 10-3-2002 Reserve Fund Share Transfer Fund A A 10-3-3000 Retained earnings N/A 10-3-3001 Retained Profit Current Year Profits A A 10-2-3002 10-2-3003 10-2-3004 10-2-3005 10-2-3006 10-2-3007 10-2-3008 10-2-3009 10-3-1002 10-3-3002 95 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 10-3-4000 Capital Grant (Donated Equity ) N/A 10-3-4001 10-3-4004 Donor 1 Donor 2 Donor 3 Other Donors A A A A 10-4-0000 INCOME 10-4-1000 Loans Income N/A 10-4-1001 10-4-1003 Interest income on Loans Commission on loans Penalty and Surcharge Other Loans Income A A A A Donor 3 Donor 4 Savings and Membership fees Income N/A 10-4-2005 Membership fees Entrance fees Sale of stationery Saving Ledger fees Account closure fees A A A A A 10-4-3000 Grant Income N/A 10-4-3001 10-4-3002 Grant Income for Loan Capital Grant Income for Operations A A 10-4-4000 Investments Income N/A 10-4-4001 10-4-4002 Interest on Fixed Deposits Other Investment Income A A 10-4-5000 Other income N/A 10-4-5001 Recovery of loans previously written off Interest from Bank A/C Profit on Sale of Fixed Assets Foreign Exchange gain Miscellaneous income A A A A A 10-3-4002 10-3-4003 10-4-1002 10-4-1003 10-4-2001 10-4-2002 10-4-2003 10-4-2004 10-4-5002 10-4-5003 10-4-5004 10-4-5005 96 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda EXPENDITURE Financing Costs N/A N/A 10-5-1004 Interest expense on Members' Savings Interest expense on Borrowed Funds Interest expense on Time Deposits Other Financing Costs A A A A 10-5-2000 Direct Loan Costs N/A 10-5-2001 10-5-2003 Bad debts Expense Loan appraisal costs Loan monitoring and recovery costs 10-5-2004 10-5-2005 Legal Fees on Loans Other Direct Loan Costs A A A A A 10-5-3000 10-5-3001 10-5-3002 10-5-3003 10-5-3004 10-5-3005 10-5-3006 Staff Costs N/A Gross salaries Staff welfare and incentives NSSF – 10% Gratuity Staff trainings, workshops and capacity building Other Personnel Expenses A A A A A A 10-5-4000 Administration expenses Stationery expenses Rent of office premises Office expenses Telephone Internet and e-mail Professional fees Transport and travels Advertisement, announcements and publicity Power/fuel costs Accommodation allowances Duty allowances Community mobilisation Audit costs & legal fees Depreciation N/A A A A A A A A A A A A A A A 10-5-0000 10-5-1000 10-5-1001 10-5-1002 10-5-1003 10-5-2002 10-5-4001 10-5-4002 10-5-4003 10-5-4004 10-5-4005 10-5-4006 10-5-4007 10-5-4008 10-5-4009 10-5-4100 10-5-4101 10-5-4102 10-5-4103 10-5-4104 97 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 10-5-4105 Loss on Sale of Fixed Assets A 10-5-4106 10-5-4022 Equipment Repairs & Replacement Security expenses Computer expenses Donations and gifts Bank charges Affiliation fees expense Miscellaneous administrative expenses A A A A A A A 10-5-5000 Governance expenses N/A 10-5-5001 10-5-5004 General meeting expenses Registration fees Committee expenses Other Governance expenses A A A A 10-5-6000 Statutory Expenses N/A 10-5-6001 Cooperative development Fund Contribution Members’ training Remittances to Secondary Society (Education Fund) Other statutory Expenses A A A A 10-5-4107 10-5-4108 10-5-4109 10-5-4020 10-5-4021 10-5-5002 10-5-5003 10-5-6002 10-5-6003 10-5-6004 Key to symbols used; A refers to ‘Active’ N/A refers to ‘Non – Active’ 98 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The Savings Ledger A/C Number format Classification of Accounts Comments 2X1XXXX Savings by Females · Corresponds to GL Control Account 1021001 · Shall contain all female savers Savings accounts 2X2XXXX Savings by Males 2X3XXXX 2X4XXXX 2X5XXXX Savings by Groups Savings by Institutions Savings by Others · Corresponds to GL Control Account 1021002 · Shall contain all female savers Savings accounts · Corresponds to GL Control Account 1021003 · Shall contain all female savers Savings accounts · Corresponds to GL Control Account 1021004 · Shall contain all female savers Savings accounts · Corresponds to GL Control Account 1021005 · Shall contain all female savers Savings accounts The Loans Ledger A/C Number format 3X1XXXX 3X2XXXX 3X3XXXX Classification of Accounts Loans to Females Loans to Males Loans to Groups Loans to Institutions 3X4XXXX 3X5XXXX Loans to Others Comments · Corresponds to GL Control Account 1012001 · Applies to all Female borrowers Loan Accounts irrespective of the Loan Product · Corresponds to GL Control Account 1012002 · Applies to all Male borrowers Loan Accounts irrespective of the Loan Product · Corresponds to GL Control Account 1012003 · Applies to all Group borrowers Loan Accounts irrespective of the Loan Product · Corresponds to GL Control Account 1012004 · Applies to all Institutional borrowers Loan Accounts irrespective of the Loan Product · Corresponds to GL Control Account 1012005 · Applies to all Other borrowers Loan Accounts irrespective of the Loan Product 99 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda APPENDIX 3: SAMPLE ACCOUNTING BOOKS, FORMS AND DOCUMENTS BK1: ACCOUNT OPENING REGISTER “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD Account Opening Register Date Title of Account Account No. Cumulative No. of Accounts Remarks This Register should be a Counter Book with prenumbered pages BK2: RESERVE CASH REGISTER. “SACCO NAME” COOPERATIVE & CREDIT SOCIETY LTD RESERVE CASH REGISTER Date Shilling Notes Shilling Coins 50,000 20,000 10,000 5,000 1,000 500 200 100 50 20 10 5 2 1 Total Initials This Register should be a Counter Book with Prenumbered pages. 100 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda BK3: CASH COUNT BOOK “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD Cash Count Book Cashier 1 Shs Notes Date …………………… Cashier II Shs Total Shs 50,000 20,000 10,000 5,000 1,000 Coins 500 200 100 50 20 10 Spoilt Cheques etc Excess/ shortages Reserve Balance B/F Cash in Cash out Balance Total Cashier’s Signature: ……………………………………. Checked by: …………………………………………….. 101 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda BK4: FIXED DEPOSITS REGISTER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Fixed Deposits Register Date Title of A/C A/C No Amount Deposited Period Expiry Date Interest Rate Total at Maturity The register should be a counter book with prenumbered pages BK5: INCOMING CHEQUE REGISTER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Incoming Cheque Register Date Cheque No Amount AC/ No. Deposited on Title of A/c Remarks 102 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The register should be a counter book with prenumbered pages BK6: STATIONERY INVENTORY REGISTER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Stationery Inventory Register Date Particulars Number Cost per Unit Total Value Remarks BK7: LEDGER CARD REGISTER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Ledger Card Register Date Name of customer Account No Ledger No Initial of Manager 103 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The register should be a counter book with prenumbered pages 104 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda BK8: DOCUMENT MOVEMENT REGISTER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Document Movement Register Date Date of voucher Bundle Ledger Reason for Removal Authorization Official Name & Date Signature Returned of Official Signature of returning Official Signature of receiving Official BK9: MEMBERSHIP/SHARES REGISTER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Membership/Shares Register Name: ………………………………………… Membership No: ………………………………… Address: ……………………………………………………. Date of Nature of No of Value of shares Transaction Transaction Shares purchased (Shs) Value of shares sold (Shs) Other capital transactions Balanc e (Shs) The register should be a counter book with prenumbered pages 105 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda BK10: OUT GOING CHEQUE REGISTER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Out going Cheque Register Date Cheque No Drawee A/c Number Amount Remarks The register should be a counter book with prenumbered pages BK11: PASSBOOK DISTRIBUTION REGISTER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Passbook Distribution Register Date Name Owner’s Account No Passbook No Owner’s Signature Initial of Manager 106 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The register should be a counter book with prenumbered pages BK12: SHARE CAPITAL REGISTER “SACCO NAME” COOPERATIVE & CREDIT SOCIETY LTD SHARE CAPITAL REGISTER Date Opening Balance (Ugshs) Transactions for the day No. of Shares Value of shares purchased (Ugshs) Value of shares sold (Ugshs) Closing Balance (Ugshs) Other share capital transactions This Register should be a Counter Book with Prenumbered pages BK13: UNPAID CHEQUE REGISTER “SACCO NAME” COOPERATIVE & CREDIT SOCIETY LTD UNPAID CHEQUE REGISTER Date of receipt Depositor’s Cheque Name No. Cheque Drawee A/c No. Date Amount Bank on whom Chq is drawn Remarks 107 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda This Register should be a Counter Book with Prenumbered pages. BK14: FIXED ASSETS REGISTER “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD Fixed Assets Register Asset description Manufacturer’s Serial No. Date of Purchase Value (shs) Unique Identification Location No. (eg office) User Remarks 108 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda FM1: APPLICATION FOR MEMBERSHIP Name: …………………………………………………………………………………………………………….……… Date: ……………………………………………………………………………………………………………… I hereby apply for Membership in the Society. Applicants full names Residential Address Sex: : Location of Business Date of Birth: Occupations: ……………………………………………………………………………………………………… Name and address of employer: (if any) …………………………………………………………………………. If Application is acceptable, I agree to pay an entrance fees of Shs ……………………………………….and Share Capital of Shs ………………………………. For ……………………………….shares. I agree to abide by the byelaws and any other rules and regulations of the society. In case of death, I nominate……………………………………………………… to take over my shares in the society. Signature of Applicant: …………………………………………………………………………………………. FOR OFFICIAL USE ONLY This application has been approved/rejected by the committee during the society Committee/Board meetings of ………………………………, minute no…………………………….. Membership number allocated ………………………………………… Signed …………………………………. Signed ………………………………………… MANAGER CHAIRPERSON Date: …………………………………… Date: …………………………………………. *Please give reasons for rejection **Group applicants should attach supporting documents 109 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda FM 2: APPLICATION FORM FOR OPENING A PERSONAL SAVINGS ACCOUNT Name of SACCO: …………………………………………………………………………………… Date: ……………………………………………………………………………………………………………… Dear Sir, We/I hereby request you to open a Savings Account in my names (entitled ……………………………………. ……………………………………………………………………………………………………………………. You are requested to honour any drawings instructions bearing my signature as per the specimen given below, and on your specimen of signature cards and also the signatures of any person who may be given my mandate to sign on my behalf. In case of death the following person can take over my Savings Account and their particulars: Name: …………………………………………Village/Address:………………………………………………. I hereunder also supply the following personal particulars to which I testify their correctness. Present address: Village : …………………………………………. Parish: …………………………………………… Sub county……………………… Age: …………………………….. P O Box ………………………………………… Tel: ……………………………………………… 110 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Occupations: ……………………………………………………………………………………………………… Name and address of employer: (if any) …………………………………………………………………………. I hereby agree to conform to the rules governing SAVINGS Account at your society Signature of Applicant: 1…………………………………………………………………………………….. 2…………………………………………………………………………………….. Our/my first savings deposit is Shs ……………………………………paid by …………………………….. Other Bankers…………………………………………Branch ……………………………………………… Introduced by: 1. …………………………………..A/C………………………Signature…………………... 2……………………………………A/C……………………….Signature …………………. Checked By……………………………………………… Approved by:…………………………………………….Account No: …………………………………….. FM3: APPLICATION FORM FOR PURCHASING ADDITIONAL SHARES Name of SACCO I am applying to purchase shares in the society as per the following particulars; Name of applicant: …………………………………………………………………………………………. ID/No/GPT No: ……………………………………………………………………………………………... Membership No: in the society ……………………………………………………………………………... Residential address (Village, Parish, Subcounty …………………………………………………………... Number of Shares Applied for; ……………………………………………………………………………... Total Value of shares Shs ………………………………………………………………………………….. The undersigned agree to abide by the society’s bylaws, which govern the subscription of the society’s shares. Signed: …………………………………………….. Date: ……………………………………………… (GPT stands for Graduate Pool Tax Ticket No) N B Your Cheque/Cash will be acknowledged immediately by the Manager of the Society and Share Certificate will be issued in due course. See Notes: Please Read through the following Notes: 111 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The limit of the number of shares and individual can buy is subject to the Society’s byelaws and the Cooperative Act based on the following criteria. 1. The value of one share is Shs ………………………………………… 2. Entrance fee is Shs ……………………………………………………. 3. The Minimum number of shares to be purchased by an individual are ………………shares OFFICIAL USE ONLY Date Received ……………………………………………………………………………………………. Amount Received: ………………………………………………………………………………………… Cash receipt No: ………………………………………….Dated:………………………………………. Share Certificate No: ……………………………………………………………………………………… Cashier’s Siganature……………………………………. Manager’s Siganature…….……………………………. FM4: RESERVE CASH LODGMENT FORM “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Reserve Cash Lodgment Form Name: ………………………………… Date: ………………………..20……….. Notes Coins 50,000 20,000 10,000 5,000 1,000 500 200 Subtotal (notes) 100 50 Subtotal (notes) Grand total Amount in words:______________________________________________________________________ Cashier’s Name : __________________________ Signature: _____________________________ 112 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Authorized by : __________________________ Manager Signature: _____________________________ FM5: RESERVE CASH REQUISITION FORM “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Cash Reserve Requisition Form Name: ………………………………… Date: ………………………..20……….. Subtotal (notes) Notes Coins 50,000 20,000 10,000 5,000 1,000 500 200 100 50 Subtotal (notes) Grand total Amount in words:____________________________________________________________________ 113 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Cashier’s Name : __________________________ Signature: __________________________ Authorized by : __________________________ Manager Signature: __________________________ FM6: LOAN APPLICATION FORM “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Name: ……………………………………………………………………………………………………………... Name of Application Membership No: Residential Address Location of Business Savings Account No: 114 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Amount of Loan Applied for Shs ………………………………………(Amount in words)……………………………… ………………………………………………………………………………………………………………………………. Purpose for which the Loan is required: ……………………………………………………………………………………. Date when the loan is required: …………………………………………………………………………………………….. From where will you get the money to repay the loan? …………………………………………………………………… Securities offered: 1……………………………………………Approximate Value (shs) ……………………………….. 2……………………………………………Approximate Value (shs)………………………………… 3……………………………………………Approximate Value (Shs)……………………………….. Value of shares in the society:…………………………………………………………………………………………….. Balance on my Savings Account deposit in the Society (Shs) …………………………………………………………… Guarantors: I/we, the undersigned agree to repay from our own sources, the total amount of the loan owed by the applicant to the society if the applicant fails to repay the loan Granted by the society by the time it is due Name: …………………………………….Membership No…………Savings A/c……………signature…………………. Name: …………………………………….Membership No…………Savings A/c……………signature…………………. I undertake to fully repay the loan applied for with interest thereon the due dates agreed upon with the society. I also authorize the society to deduct from my savings Account, Share Capital or sell my assets pledged as a securities for the loan without any hindrance from me or anyone else to recover any amount of the loan that I will have failed to pay Name : ………………………………...Signature of applicant………………………Thumb print……………………… I agree with and hereby give permission to my spouse to borrow from the society Shs ………….. for the purposes of ………………………….and pledge the securities mentioned above. Name : …………………………….….Signature of applicant………………………Thumb print……………………… Verified by LC1 (Name & Signature and Stamp)…………………………………………………………………………. FM7: PAYMENT REQUISITION FORM “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD Box number and physical address Registration No PAYMENT REQUISITION FORM This request is being made by: ……………………………………………………………………………………... On this date of………………………………………………………………………………………………………. 115 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The amount requested is ……………………………………………………………………………………………. ……………………………………………………………………………………………………………………….. ……………………………………………………………………………………………………………………….. ………………………………………………………………………………………………………………………. And the amount requested will be used in the following manner …………………………………………………... ……………………………………………………………………………………………………………………….. ……………………………………………………………………………………………………………………….. (Use separate sheet if this not enough) Signature: …………………………………………………………………………………………………………… ACCOUNTANT Payment can be made/Not made/Payment referred to next date Note Item: …………………………………………………………………………………………………………... Unexpended balance………………………………………………………………………………………………… Signature: …………………………………………………………………………………………………………… MANAGER Payment Approved/Disapproved: FM8: PAYROLL FORM “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD PAYROLL FORM a Name of Employee Basic Pay b c = a+b Allowances Gross Pay d e f PAYE NSSF Other deduction deduction deductions g = c (d+e+f) Net Pay 116 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Totals Prepared by: ……………………… Checked by: …………………… Approved by: ………... Date : ……………………… Date : ………………….. Date : ………… FM9: SALARY ADVANCE REQUEST FORM “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Salary Advance Request Form Name: …………………………………………….. Designation: ………………………………………. Salary advance requested for Shillings ………………………………………. Amount in words. …………..……………………………………………………………………………………………………..) Purpose fro which the advance is sought ……………………………………………………………………… …………………………………………………………………………………………………………………. To be recovered from my salary in …………………………………………………….months (please note that all salary advances shall be recovered in a period of not more than 4 (Four) months. Signature: ……………………………………. ……… Date: ………………………………………. Recommended by:…………………………………… (Manager) Date:……………………………………….. Authorised by: ………………………………………. Date:……………………………………….. Received by: ………………………………………… Date:……………………………………….. FM10: PURCHASES REQUISITON FORM “SACCO NAME” COOPERATIVE & CREDIT SOCIETY PURCHASES REQUISITON FORM Date……………………………………… No. Items requested Quantity 117 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda _____ ____________________________________ ___________________ _____ ____________________________________ ___________________ _____ ____________________________________ ___________________ _____ ____________________________________ ___________________ _____ ____________________________________ ___________________ _____ ____________________________________ ___________________ Requested by _____________________________________ Sign ________________ Designation _______________________________________ Authorized by _____________________________________ Sign ________________ Designation _______________________________________ Received by _______________________________________ Sign _______________ Date ______________________________________ FM11: THIRD PARTY MANDATE FORM 118 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD A/C No…………………………………… Photograph of the third party THIRD PARTY MANDATE FORM TO, “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD I/We request you that, until you receive written direction from me/ us to the contrary, treat and consider my /our Mr./ Mrs/ Miss …………………………………………….. as fully empowered to draw and sign Cheques/Vouchers on my/our account, whether the same be in credit or overdrawn, and to endorse or accept Cheques, Bills and Promissory Notes and other documents in my/our name, for all of which this shall be a full and sufficient authority to you, and shall be binding upon me/us and all other persons claiming from or under me/us. ………………………………………….. Signature of Owner of Account ……………………………………………… Signature of Witness A/c No……………………………………… ……………………………………………… Signature of Third Party For internal use Checked by Cashier………………………………………………………. Approved by Manager……………………………………………………. 119 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda FM12: FIXED ASSETS DEPRECIATION FORM “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD FIXED ASSETS DEPRECIATION FORM Fixed Asset Class: ………………………….. Depreciation Rate: …………… S/N Name of the Asset Date of Purchase Cost of purchase Depreciation charge Accumulated depreciation Written down Value Remarks FM13: BANK RECONCILIATION FORM “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD BANK RECONCILIATION STATEMENT Bank Name: ………………………….. Date: …………… Date Particulars/Narration Closing balance as per cash book Add: All direct credits All unpresented cheques Shs 000 xxx xxx TOTAL ADDITIONS Less: All direct debits All un – credited cheques TOTAL DEDUCTIONS Balance as per Bank Statement Shs 000 XXX XXX XXX (xxx) (xxx) (XXX) XXX 120 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda FM14: STOCK COUNT FORM “SACCO NAME” COOPERATIVE & CREDIT SOCIETY STOCK COUNT FORM Date……………………………………… No. Item Name Quantity Counted by _____________________________________ Sign ________________ Witnessed by _____________________________________ Sign ________________ 121 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda FM15: REFUND CLAIM FORM “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD Box number and physical address Registration No ReFund Claim Form This request is being made by: ……………………………………………………………………………………... On this date of………………………………………………………………………………………………………. The amount requested is ……………………………………………………………………………………………. ……………………………………………………………………………………………………………………….. ……………………………………………………………………………………………………………………….. ………………………………………………………………………………………………………………………. And the amount requested was used in the following manner …………………………………………………... ……………………………………………………………………………………………………………………….. ……………………………………………………………………………………………………………………….. (Use separate sheet if this not enough) Signature: …………………………………………………………………………………………………………… ACCOUNTANT Payment can be made/Not made/Payment referred to next date Note Item: …………………………………………………………………………………………………………... Unexpended balance………………………………………………………………………………………………… Signature: …………………………………………………………………………………………………………… MANAGER Payment Approved/Disapproved: 122 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC1: FIXED DEPOSIT CERTIFICATE “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. FIXED DEPOSIT CERTIFICATE I certify that on ……/…./20……………………………………………………………..placed total amounting to Shs ……………….. (……………………………………………………………………..) only with …………………………………………………. The Fixed Deposit will mature after ………………….. date of placement and in any case not later than …../…./20…… the Fixed Deposit interest at the rate of …..% per …. (………… per………...) payable on security. ………………………………Date …………………… Signed ………………………………. Managers Treasurer Official SACCO stamp 123 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC2: FIXED DEPOSIT SLIP “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Fixed Deposit Slip Date: ………………………..20…….. Credit: ……………………………….. To: ………………………………………………………………………………………………………………… Please receive the following cash being deposited in respect of my fixed deposit for ………………..months. Notes Cashier’s Stamp Shs. Shs. Shs. Shs. Shs. 50,000 20,000 10,000 5,000 1,000 Coins Shs. 500 Shs. 200 Shs. 100 Shs. 50 Total Cash Total Cheque Listed overleaf Amount of Shillings in words: ________________________________________________________________ Paid by: __________________________________ Sign:________________________ Savings Account No: _______________________ Authorized by: ____________________________ Manager 124 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC3: INTERNAL CREDIT VOUCHER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. INTERNAL CREDIT VOUCHER Serial No: ___________________________ Date: _______________________________ Credit: ______________________________ A/C No: _______________________________ Being: ____________________________________________________________________________________ __________________________________________________________________________________________ Ug Shs Amount in words: ___________________________________________________________________________ __________________________________________________________________________________________ Contra Account: ________________________________ Prepared by: ___________________________________ Approved by: _________________________ 125 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Doc 4: INTERNAL DEBIT VOUCHER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. INTERNAL DEBIT VOUCHER Serial No: ___________________________ Date: _______________________________ Debit: ______________________________ A/C No: _______________________________ Being: ____________________________________________________________________________________ __________________________________________________________________________________________ Ug Shs Amount in words: ___________________________________________________________________________ __________________________________________________________________________________________ Contra Account: ________________________________ Prepared by: ___________________________________ Approved by: _________________________ 126 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC5: ORDINARY SHARE CERTIFICATE “SACCO NAME” COOPERATIVE “SACCO NAME” COOPERATIVE & CREDIT SOCIETY & CREDIT SOCIETY (Include registration number and address) Certificate No. ………………………. No of Shares…………………………. Certificate No………… Member Reg No. …………… Date of issue………………….. Date of issue……………….20……… Names……………………………….. ………………………………………. ORDINARY SHARE CERTIFICATE Address……………………………… ………………………………………. This is to certify that …………………………………………………………………. ………………………………………. of………………………………………………….is the registered holder of …………… fully paid shares of Shs………………………………………………each, in the share DISTINCTIVE NOS. capital of ………………………………… Cooperative Savings & Credit Society in accordance with the bye – laws of the society. AMOUNT Date Rpt No Shares DISTINCTIVE RECEIPT NOs. Date Receipt No No. Shares …………………………………………… Chairman Total to Date Shs Total to Date No. of Transfers…………………… No. of old Certificates…………….. Received by……………………….. AMOUNT Given under the common Seal/Stamp of ………………………………………… ………………………………………... ………………………………………… this………………day of …………..20… …………………………………………… Secretary (……………20…..) Shs ……………. NOTE: No Transfer of the above shares cannot be registered unless if accompanied by this certificate 127 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC6: PAYMENT VOUCHER “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD Box number, physical address Registration No Payment Voucher Name/Address of payee _____________________________________ Vr. No: _______________________ _________________________________________________________ Date: _________________________ Doc/Receipt No: ____________________File No: _______________ Cheque No: ___________________ Bank A/C No: _________________ Item Description of Payment Budget Line Amount Total Amount in words: __________________________________________________________________________ __________________________________________________________________________________________ Prepared by: ____________________________________ Approved by: ________________________ Date: ___________________________________________ Date: _______________________________ Received by: ____________________________________ Paid by: _____________________________ Date: _______________________________________ Date: ________________________________ 128 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC7: RECEIPT “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD “Physical address and Telephone number” RECEIPT RECEIVED with thanks from ________________________________________ ___________________________________________________________ Date ___________________________________________________________ No. The sum of Shillings _________________________________________________________________________ __________________________________________________________________________________________ Being payment of ___________________________________________________________________________ __________________________________________________________________________________________ Cash/cheque No. ____________________________ Shs . With thanks Balance _____________________________________ _________________________________________ For : “Sacco name” Coop Savings and Credit Society Ltd 129 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC8: WITHDRAWAL SLIP WITHDRAWAL SLIP Date: .../…/…. “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Box number, Tel number & Registration No Account Number Account Name: Amount in words: _________________________________________________ Customer Signature Signature Ver Amount USHS I acknowledge Receipt of the above Cash: __________________________________ Supervisor: __________________________ Manager: _________________________ 130 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC9: SAVINGS DEPOSITS SLIP “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Box number, Tel number & Registration No Savings Deposit Slip Credit: ………………………………………………………………… Date: …………………………… A/C No: Notes Cashier’s Stamp & Signature Shs. Shs. Shs. Shs. Shs. 50,000 20,000 10,000 5,000 1,000 Coins Shs. 500 Shs. 200 Shs. 100 Shs. 50 Total Cash Total Cheque Listed on reserve Amount of Shillings in words: ________________________________________________________________ _________________________________________________________________________________________ Paid by: __________________________________ Sign:________________________ 131 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC10: LOAN REPAYMENT SLIP “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Box number, Tel number & Registration No Loan Repayment Slip Credit: ………………………………………………………………… Date: …………………………… A/C No: Notes Cashier’s Stamp & Signature Shs. Shs. Shs. Shs. Shs. 50,000 20,000 10,000 5,000 1,000 Coins Shs. 500 Shs. 200 Shs. 100 Shs. 50 Total Cash Total Cheque Listed on reserve Amount of Shillings in words: ________________________________________________________________ _________________________________________________________________________________________ Paid by: __________________________________ Sign:________________________ 132 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC11: LOAN LEDGER CARD “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Loan Ledger Card Serial No. ………… Name: ………………………………………… Address: …………………………………………. Membership No: ……………………………. Savings No: ……………………………………… Principal Loan Amount (Shs) …………. Interest Amount (Shs) ………………Total …………. Loan Period …………………………………. Interest Rate……………………………………….. Date Opening Balance Repayments Closing Balance Principal Interest Principal Interest Principal Interest 133 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC12: SAVINGS LEDGER CARD “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD SAVINGS LEDGER CARD Name …………………………………………………. Serial No. ……………. Pass Book No. ……………………………………….. Account Holder’s Signature………………………….. Account Holder’s Photograph Verified by …………………………………………… (Manager’s Signature) Date Description of the transaction Debits Credits Balance Authorizing Person’s Signature 134 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC13: GENERAL LEDGER CARD “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD GENERAL LEDGER CARD Account Name ………………………………………. Serial No. …………… Account Number. …………………………………… Verified by …………………………………………… (Manager’s Signature) Date Description of the transaction Debits Credits Balance Authorizing Person’s Signature 135 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC14: SPECIMEN SIGNATURE CARD “SACCO NAME” COOPERATIVE SAVINGS & CREDIT SOCIETY LTD Specimen Signature Card Account No. ………………………………….. Current/ Savings/ Fixed Deposit Account Title/ Name of the account______________________________________________________ (Surname first followed by other names) ________________________________________________________________(fill in full names of partners if any) Name Signature Position Age _________________ _________________ ________________ _____________ _________________ _________________ ________________ _____________ _________________ _________________ ________________ _____________ _________________ _________________ ________________ _____________ Date _________________________ Authenticated by ___________________________ ___________________________ Cashier Manager Date ______________________________ ___________________________ 136 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC15: DAY SHEET “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. DAY SHEET Date: ………….. Account Code Account Number Debit (Dr.) Shs Credit (CR) Shs Totals Prepared by: ………………………………. Approved by: ………............................................ Date : ………………………………. Date : …………………………………… 137 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC16: TILL SHEET “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. TILL SHEET Cashier No: _________________________ Date: _______________________________ S/No. Name A/c Dr. S/No. Name A/c Dr. Prepared by: ____________________________Checked by:_______________________ 138 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC17: Weekly Certificate of Balance – Saving Account “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Weekly Certificate of Balance – Saving Account as at …………………………….. Ledger No No of A/cs Balance B/F Total Debits Total Credit Balance per control Balance per extract 139 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC18: WASTE SUMMARY SHEET “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD. Waste Summary Sheet Debit G/L Account Credit Cash Savings Share Capital Profit/Loss Creditors Debtors Loans Bank A/C Capital Grants Stock Stationery Payroll Liabilities Fixed Assets (G) Fixed Assets (L) Accumulated Dep. Interest Receivable 140 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Prepared by: ____________________________ Checked by: ____________________ DOC19: CONTROL SHEET “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD Control Sheet Account: ……………………………………………….. Particulars Check figure Debit Credit Balance Unit Ref 141 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 142 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda DOC20: WASTE SHEET “SACCO NAME” CO-OPERATIVE SAVINGS & CREDIT SOCIETY LTD Waste Sheet Account: ……………………………………………….. C R E D I T Proof Ref Cash Savings Current Loan Shares Banks Misce Revenue Ref A/c A/c A/c A/c A/c DEBIT Cash Saving A/c Current Loan Shares A/c A/c A/c Banks Misce Rev A/c exp 143 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda APPENDIX 4: WORKED-OUT EXAMPLES 1. Example on payroll Processing Considering a situational circumstance whereby a SACCO has 10 employees with one manager and the following Basic Pay rates. Employee Manager Supervisor Accounts Official Head of Credit Credit Official Loans Official Cashier Administrative Official. Office messenger Security guard Basic pay 600,000 400,000 350,000 320,000 305,000 280,000 250,000 200,000 120,000 50,000 · Each of the above employees, except the manager, is entitled to lunch allowance of 50,000/=. · Apart from the security guard, the rest of other the employees are also entitled to transport allowance of 50,000/=. · The Supervisor happens to have taken a salary advance of 100,000/= during the month. · The Manager is entitled to housing allowance of 100,000/=, lunch allowance of 60,000/= and transport allowance of 50,000/=. · The Manager got a loan from the SACCO. In repayment of this loan, the SACCO deducts 150,000/= from his salary on a monthly basis. · All allowances are paid or claimed on a monthly basis. · Payroll for the above situation can be prepared as shown below; Pay As You Earn (PAYE) Computation The following workings show how Pay As You Earn (PAYE) is computed for people in four different income brackets as displayed by the formulas below. A sample of four employees has been picked from the example above and their PAYE amounts have been computed to match what is shown in the example. 144 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The standard table of formulas used for PAYE in UGANDA is as shown below; Income bracket Income below 130,000/= Above 130,000/= and below 235,000/= Above 235,000/= and below 410,000/= Income above 410,000/= Where; Tax Rate charged 0% 10% X (a– 130,000/=) 20% X (b – 235,000/=) + 10,500/= 30% X (c – 410,000/=) + 45,500/= a = any income above 130,000/= but below 235,000/= b = any income above 235,000/= but below 410,000/= c = any income above 410,000/= Applying the explanation in the above table, the PAYE computations can be made for the Security Guard, Office messenger, Cashier and the Supervisor as shown below; o PAYE for the Security Guard with a Gross Pay of 100,000/=. This income is below 130,000/=. The formula is applied as below; 100,000 X 0% = 0 o PAYE for the Office Manager with a Gross Pay of 220,000/=. This income is above 130,000 /= but below 235,000/=. The formula is applied as below; (220,000130,000) X 10% = 9000 o PAYE for the Cashier with gross pay of 350,000/=. This income is above 235,000/= but below 410,000/=. The formula is applied as below; (350,000 – 235,000) X 20% + 10,500 = 33,500 o PAYE for the Supervisor with gross pay of 500,000/=. This income is above 410,000/=. The formula is applied as below; (500,000 – 410,000) X 30% + 45,500 = 72,500 The above four sampled people whose PAYE computation has been illustrated have also been recorded in the PAYROLL computation table. In this table, the values of PAYE reported tally with what has been calculated in the illustration. 145 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda NSSF computation Referring to the payroll computation above, a sample of four employees has been taken to illustrate how the NSSF value is computed. o NSSF for the Security Guard with a Gross Pay of 100,000/= (100,000 X 5%) + (100,000 X 10%) = 15,000 o NSSF for the Office Manager with a Gross Pay of 220,000/= (220,000 X 10%) + (220,000 X 10%) = 33,000 o NSSF for the Cashier with gross pay of 350,000/= (350,000 X 5%) + (350,000 X 10%) = 52,500 o NSSF for the Supervisor with gross pay of 500,000/= (500,000 X 5%) + (500,000 X 10%) = 75,000 In the above illustrations, the 10% relates to the SACCO contribution towards the savings of the staff members and 5% relates to the contribution of the staff towards their own savings in National Social Security Fund. The above illustration helps to explain why the NSSF value reported in the Day Sheet is higher than that reported in the Payroll sheet above. The Payroll sheet includes only 5% of the contribution and the Day Sheet includes both the 5% and 10% making total contribution equaling to 15%. 146 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The detailed Payroll Allowances Employee Basic pay Manager 600,000 Supervisor Accounts Official 400,000 Other deductions Housing Lunch Transport allowance Allowance Allowance PAYE NSSF 60,000 50,000 810,000 165,500 40,500 50,000 50,000 500,000 72,500 350,000 50,000 50,000 450,000 Head of Credit 320,000 50,000 50,000 Credit Official 305,000 50,000 Loans Official 280,000 Cashier Administrative Official. 250,000 Office messenger Security guard TOTALS 100,000 Gross Pay Loan Salary payment advance 454,000 25,000 100,000 302,500 57,500 22,500 370,000 420,000 48,500 21,000 350,500 50,000 405,000 44,500 20,250 340,250 50,000 50,000 380,000 39,500 19,000 321,500 50,000 50,000 350,000 33,500 17,500 299,000 200,000 50,000 50,000 300,000 23,500 15,000 261,500 120,000 50,000 50,000 220,000 9,000 11,000 200,000 100,000 5,000 95,000 50,000 50,000 2,875,000 100,000 510,000 450,000 3,935,000 494,000 196,750 150,000 Net Pay 150,000 100,000 2,994,250 147 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda The Journal Voucher that summarizes the Payroll transactions “SACCO NAME” CREDIT & COOPERATIVE SOCIETY LTD Journal voucher Account Code Account Name Gross Pay* Allowances (accordingly)** NSSF Contribution (10%) Statutory deductions PAYE NSSF*** Advances Loan Payments Employee Savings' A/c: Manager Supervisor Accounts Official Head of Credit Credit Official Loans Official Cashier Administrative Official. Dr. 3,935,000 393,500 494,000 590,250 100,000 150,000 454,000 302,500 370,000 350,500 340,250 321,500 299,000 261,500 200,000 95,000 Office messenger Security guard TOTALS Cr. 4,328,500 4,328,500 Note: * The Gross Pay to be reported here includes all fixed/absolute allowances. These allowances are obvious in the daytoday operations of the SACCOs. **Allowances entry in the JV above, will be filled up with the allowances that are given once in a while. The allowances are not absolute. *** The NSSF deduction reported here includes the 10% that is contributed by the SACCOs. That is why it is more than that reported in the Payroll schedule above. 148 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 2. Example on Income Tax Computation These Tax Computations are merely illustrative and have been based on the Financial Statements laid out in Appendix 5 i) Initial allowance computation Details Note Total Fixed Asset Additions 9 Less: Amounts that don't qualify for initial allowance (S.28ITA) Office Equipment (S.28 (3) – ITA) Computers & Accessories (S.28 (3) – ITA) Furniture & Fittings (S.28 (3) – ITA) Total deduction Qualifying Expenditure for initial allowance (S.28 (1) – ITA) 134 200 Wear and Tear Computation for a sample example on SACCOs within listed areas (S.27 – ITA) Particulars Wear & Tear Rates Written Down Value (WDV) b/f Additions Disposals Balance before charging Initial allowance Initial allowance charge (50%) (Note i) Qualifying Expenditure for Wear & Tear Wear & Tear Charged at respective rates per class WDV c/f at the end of the period iii) 4,695 (4,229) (199) (4,428) 267 Initial allowance on the qualifying expenditure 50% for SACCOs within Kampala, Entebbe, Njeru, Namanve (S.28 (1) (b) – ITA) 75% for SACCOs outside Kampala, Entebbe, Njeru, Namanve (S.28 (1) (a) – ITA) ii) Amount Shs '000 Class I Class II (40%) (35%) Shs '000 Shs '000 4,229 4,229 4,229 (1,692) 2,537 Class III (30%) Shs '000 Class IV TOTALS (20%) Shs '000 Shs '000 466 4,695 466 4,695 (134) (134) 332 4,561 (66) (1,758) 266 2,803 Wear and tear Computation for a sample example on SACCOs outside listed areas 149 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Particulars Wear & Tear Rates Written Down Value (WDV) b/f Additions Disposals Balance before charging Initial allowance Initial allowance charge (50%) Qualifying Expenditure for Wear & Tear Wear & Tear Charged at respective rates per class WDV c/f at the end of the period iv) Class I Class II (40%) (35%) Shs '000 Shs '000 4,229 4,229 4,229 Class III (30%) Shs '000 Class IV TOTALS (20%) Shs '000 Shs '000 466 4,695 466 4,695 (200) (200) 266 4,495 (1,692) (53) (1,745) 2,537 213 2,750 Calculation Of Corporation Tax Liability ( for SACCOs outside the Listed Areas) Details Note Profit before Tax Add back Disallowable expenses (S.22(2) ITA) Depreciation Donations & Gifts (S.22(1) ITA) Total Disallowables Amount Shs '000 30,390 9 24 12,036 130 12,166 42,556 Less: Allowable deductions Initial allowance (S. 28(1) ITA) Wear & Tear deduction (S.27 (1) ITA) (200) (1,745) Total allowable deductions (1,945) Taxable profits Tax Charge (30%X 41624) 41,624 12,487 150 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda v) Calculation Of Corporation Tax Liability (for SACCOs Within The Listed Areas) Details Note Profit before Tax Add back Disallowable expenses (S.22(2) ITA) Depreciation Donations & Gifts (S.22(1) ITA) Total Disallowables Amount Shs '000 30,390 9 24 12,036 130 12,166 42,556 Less: Allowable deductions Initial allowance (S. 28(1) ITA) Wear & Tear deduction (S.27 (1) ITA) Total allowable deductions (134) (1,745) (1,878) Taxable profits Tax Charge (30%X 40,678) 40,678 12,203 151 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda APPENDIX 5 MODEL FINANCIAL STATEMENTS Introductory Remarks · · This set of Management accounts shall be prepared by the Accountant and approved by the Manager on regular basis and shall be properly filed for future reference. As a sign of readiness for an external Audit, this set of Accounts shall be presented to the Auditor for him/her to express an independent opinion thereon. ‘SACCO Name’ Balance Sheet as at Year end Date Notes Current Year 20XX Shs’000 Prior Year 20XX Shs’000 ASSETS Cash and bank balances Loans Outstanding Employee Advances Short-term investments Prepayments Receivables Amounts receivable from related party Property and Equipment Intangible Assets Other assets Total Assets 3 4 5 6 7 8 9 10 11 12 377,176 93,129 7,521 1,130,304 36,323 53,608 12,990 28,188 9,300 1,481 1,750,020 90,847 49,873 3,442 1,076,165 20,398 45,575 20,592 35,528 1,342,420 13 14 15 16 1,575,855 12,543 41,323 48,457 1,678,178 1,193,738 8,409 39,852 50,826 1,292,825 17 18 33,760 8,801 29,281 71,842 29,700 5,807 14,088 49,595 1,750,020 1,342,420 LIABILITIES Savings and Short-term Time deposits Interest and Dividends payable Accounts payable and accruals Other liabilities Total Liabilities EQUITY AND RESERVES Member shares Statutory legal reserves Retained earnings Total Equity and Reserves TOTAL RESERVES AND LIABILITIES _____________________ _____________________ 152 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Manager Accountant Notes accompanying these Financial Statements form an integral part of these financial statements ‘SACCO Name’ In co om me e St atte em me en ntt fo e Pe od d En de ed d …/ …/ /2 20 0X XX X Inc Sta forr th the Perriio End …/… Notes Current Year 20XX Shs’000 Prior Year 20XX Shs’000 19 20 21 22 149,852 47,356 71,691 90,000 358,899 112,550 28,204 63,805 86,500 291,059 23 24 25 26 27 28 78,001 141,691 50,264 56,959 18,642 141 345,698 50,197 145,305 42,304 46,793 11,251 295,850 13,201 17,189 30,390 (12,203) 18,187 (4,791) 8,344 3,553 3,553 INCOME Loans Income Savings and Membership-fees Income Investments Income Other income Total income EXPENDITURE Interest expense and Other Financial Costs Direct Loan Costs Staff Costs Administration expenses Governance Expenses Statutory Expenses Total Expenditure Operating Profit/Loss for the period Grant Income Net Profit Before Tax Taxation (See Tax Computation) Profit After Tax 29 15 ‘SACCO Name’ St atte em me en ntt of an ng ge ess in uiitty y fo e Pe od d En de ed d …/ …/ /2 20 0X XX X Sta of Ch Cha in Eq Equ forr th the Perriio End …/… Member Shares Shs’000 As at Net profit for the period Additional share capital 29,700 4,060 Reserves Shs’000 5,807 - Accumulated Profits Shs’000 14,088 18,187 - Total Equity Shs’000 49,595 18,187 4,060 153 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Statutory Reserves 33,760 2,994 8,801 (2,994) 29,281 71,842 ‘SACCO Name’ Cash Flow Statement for the Period Ended …/…/20XX Notes Current Year 20XX Shs ‘000 Prior Year 20XX Shs ’000 30,390 3,553 12,036 (17,189) 3,144 28,381 6,165 1,796 (8,344) 2,556 5,726 (50,479) (15,925) (8,033) 7,602 382,117 4,134 1,471 2,617 (3,299) (10,601) (25,047) (20,592) 414,976 (1,291) 30,490 (4,083) Cash generated from operations 323,504 380,553 Net cash outflow from operating activities 351,885 386,279 (54,139) (4,696) (10,781) (543,843) (22,968) - (69,616) (566,811) 4,060 - 34,464 (15) 4,060 34,449 286,329 (146,083) Operating Activities Operating surplus for the period Adjustments for: Depreciation Impairment of stock & other assets Donor income Loan loss provisions Operating surplus before working capital changes Increase in loans to Members Increase in prepayments Increase in other accounts receivable Increase in accounts receivable from related party Increase in member savings and other deposits Decrease in interest payable Increase in other payables Increase in other liabilities 26 29 24 4 7 8 9 13 14 15 16 Investing Activities Increase in Short term investments Purchase of property and equipment Purchase of Intangible assets and other assets. 6 10 11 Net cash outflow from investing activities Financing Activities Issue of Shares Share redemption Net cash inflow from financing activities Net increase in cash and cash equivalents 17 154 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Cash and Cash Equivalents at Start of the Period Cash and Cash Equivalents at End of the Period 3 3 90,847 377,176 236,930 90,847 ‘SACCO Name’ Notes to the Financial Statements the Period Ended …/…/20XX 1. ga an niissa attiio on n an d Ba esse en ntta attiio on n 1. Or Org and Bassiiss of of Pr Pre The accounting and reporting policies adopted by “SACCO NAME” SACCO are in accordance with Generally Accepted Accounting Principles. a) kg grro ou un nd d a) Ba Bacck b) urree of neessss b) Na Nattu of bu bussiin c) nttaattiio on n an d ba naan ncciiaall St meen nttss c) Pr Preesseen and bassiiss of of Fi Fin Staatteem 2. gn niiffiic ca an ntt Ac co ou un nttiin ng g Po ciie ess 2. Si Sig Acc Polliic The principal accounting policies adopted in the preparation of these Financial Statements are set out below: a) nss,, Ba d an d Do ub bttffu ull De bttss a) Lo Loaan Bad and Dou Deb b) nu uee Re og gn niittiio on n b) Re Revveen Recco c) meen nttss c) In Invveessttm d) d Pa nssaaccttiio on nss d) Re Rellaatteed Parrttyy Tr Traan e) op peerrttyy an d Eq uiip pm meen ntt e) Pr Pro and Equ The annual depreciation rates in use are: Accordingly Accordingly Asset Class Rate Depreciation on grant funded assets is charged to the deferred income account. f) ng giib bllee As f) In Inttaan Assseettss g) naattiio on nss,, Gr nttss an d In Kiin nd d Co nttrriib bu uttiio on nss g) Do Don Graan and In--K Con h) mp paarraattiivveess h) Co Com 155 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 3. h an d Ba nk k ba an nc ce ess 3. Ca Cassh and Ban balla Cash at hand Cash at Bank 1 Cash at Bank 2 Total Current Year 20XX Shs’000 Prior Year 20XX Shs’000 138,378 213,413 25,385 377,176 86,653 2,992 1,202 90,847 4. an nss Outstanding 4. Lo Loa a) an n De aiillss a) Lo Loa Detta Current Year 20XX Shs’000 Prior Year 20XX Shs’000 Gross Loans to Females Gross Loans to Males Gross Loans to Groups Gross Loans to Institutions Gross Loans to Others 39,084 4,047 19,542 35,280 51,060 493 Total Gross Loans Provision for Bad Loans Net Loans 97,953 (4,824) 51,553 (1,680) 93,129 49,873 b) co on nc ciilliia attiio on n of ossss Lo an nss Ba an nc ce ess b) Re Rec of Gr Gro Loa Balla Balance b/f Loans disbursed out Recoveries during the period Balance (Gross Portfolio) Current Year 20XX 53,315 210,000 (165,362) 97,953 Prior Year 20XX 25,300 180,000 (151,985) 53,315 5. Em pllo oy ye ee e Ad va an nc ce ess Emp Adv Employee 1 Employee 2 Employee 3 Current Year 20XX Shs’000 5,000 2,000 300 Prior Year 20XX Shs’000 156 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Employee 4 Total 221 3,442 7,521 3,442 6. orrtt--tte errm m In ve essttm me en nttss 6. Sh Sho Inv Short Term Investment 1 Short Term Investment 2 Short Term Investment 3 Short Term Investment 4 Total Current Year 20XX Shs’000 250,200 50,000 350,000 480,104 1,130,304 Prior Year 20XX Shs’000 150,000 70,200 855,965 1,076,165 Current Year 20XX Shs’000 Prior Year 20XX Shs’000 4,983 29,040 2,300 36,323 1,640 16,758 2,000 20,398 7. ep pa ay ym me en nttss 7. Pr Pre Prepaid Rent Prepaid Utilities Other Prepayments Total Prepayments 8. ce eiiv va ab blle ess 8. Re Rec Current Year 20XX Interest receivable on Loans Interest receivable on Fixed Deposits Overdrawn Savings Accounts Total 9. ou un nttss Re ce eiiv va ab blle e fr om m Re atte ed d Pa y 9. Am Amo Rec fro Rella Parrtty Advances to Board Members Other receivables from Board Members Total Amounts Receivable from Related Parties 36,871 13,066 3,671 53,608 Current Year 20XX Shs’000 5,000 7,990 12,990 Prior Year 20XX 75 351 45,149 45,575 Prior Year 20XX Shs’000 4,000 16,592 20,592 157 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 10 op pe errtty y,, Pl an ntt an d Eq uiip pm me en ntt 10.. Pr Pro Pla and Equ Motor Cycles& Vehicle Eq’ment F’ture & Fittings Shs’000 Shs’000 Computers & Accessories Shs’000 Land & buildings TOTAL Shs’000 Shs’000 Cost As at start of Period Additions As at End of Period 5,050 139 5,189 2,920 2,920 15,229 199 15,428 16,754 4,229 20,983 8,274 128 8,402 48,227 4,695 52,922 As at start of Period Charge for the year As at End of Period 1,728 1,728 730 584 1,314 4,873 3,833 8,706 4,311 5,051 9,362 2,784 840 3,624 12,698 12,036 24,734 As at start of Period As at End of Period 5,050 3,461 2,190 1,606 10,357 6,722 12,443 11,621 5,489 4,778 35,528 28,188 11 an ng giib blle e As ettss 11.. In Intta Assse Intangible assets represent Shs 9.3 million that relates to purchase of an accounting software-Finance Solution, expected to be used in SACCO operations. The accounting software is not yet put to use as intended by SACCO management. Software Goodwill Total Current Year 20XX Shs’000 Prior Year 20XX Shs’000 7,300 2,000 9,300 * Th Thee Intangible asset has not been amortized during Current Year because it is not yet put to use 12 ve en ntto orry y 12.. In Inv Stock of TShirts Stock of Stationery Total other assets Current Year 20XX Shs’000 Prior Year 20XX Shs’000 391 1,090 1,481 158 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 13 viin ng gss an d Ot he err De po ossiittss 13.. Sa Sav and Oth Dep Member savings – Ordinary Member savings – Restricted Members' Shortterm Fixed Deposits Current Year 20XX Shs’000 Prior Year 20XX Shs’000 804,815 735,716 35,324 1,575,855 634,172 520,053 39,513 1,193,738 Total Savings and Time Deposits 14 erre esstt an d Di viid de en nd dss Pa ya ab blle e 14.. In Intte and Div Pay Current Year 20XX Shs’000 Prior Year 20XX Shs’000 Interest payable on Savings by Females Interest payable on Savings by Males Dividends payable to Members 10,530 1,013 1,000 8,409 Total Interest & dividends Payable 12,543 8,409 15 he err Ac co ou un nttss Pa ya ab blle e an d Ac crru ua allss 15.. Ot Oth Acc Pay and Acc Current Year 20XX Shs’000 Prior Year 20XX Shs’000 Interest payable on Borrowed funds Withholding Tax payable Income Tax Liability Professional fees Payable Suppliers Payable NSSF payable PAYE payable Affiliation fees Payable Salaries/Wages 13,859 5,818 12,203 1,290 5,932 817 700 664 40 30,307 4,092 1,784 1,973 1,696 Total other accounts payable & accruals 41,323 39,852 159 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 16 he err Li ab biilliittiie ess 16.. Ot Oth Lia Current Year 20XX Shs’000 Prior Year 20XX Shs’000 Taxation Loan Protection Fund Unearned Revenue Deferred Grant Income Accumulated Depreciation 12,203 8,524 2,607 24,116 1,007 5,327 3,131 40,485 1,883 Total other liabilities 48,457 50,826 Current Year 20XX Shs’000 Prior Year 20XX Shs’000 Shares Class1 Shares Class2 Shares Class3 29,700 2,060 2,000 26,500 1,000 2,200 Total Member shares 33,760 29,700 Current Year 20XX Shs’000 Prior Year 20XX Shs’000 Reserve Fund Share Transfer Fund 6,801 2,000 3,792 2,015 Total statutory reserve 8,801 5,807 Current Year 20XX Shs’000 Prior Year 20XX Shs’000 82,298 87,429 17 mb be errss Sh arre ess 17.. Me Mem Sha 18 attu utto orry y Re errv ve ess 18.. St Sta Resse 19 erre esstt on an nss In co om me e 19.. In Intte on Lo Loa Inc Interest income on Loans to Female 160 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Commission on loans Penalty and Surcharge Other Loans Income 25,343 35,039 7,172 16,389 883 7,849 Total Interest Income 149,852 112,550 20 20.. Savings and Membership fees Income Current Year 20XX Shs’000 Prior Year 20XX Shs’000 Membership fees Entrance fees Sale of stationery Saving Ledger fees Account closure fees 27,594 10,910 4,863 2,660 1,329 18,769 3,603 2,896 2,000 936 Total 47,356 28,204 Current Year 20XX Shs’000 36,322 30,022 5,347 Prior Year 20XX Shs’000 63,805 71,691 63,805 Current Year 20XX Shs’000 50,000 5,000 30,000 4,000 1,000 Prior Year 20XX Shs’000 40,000 42,000 4,500 90,000 86,500 21 ve essttm me en ntt In co om me e 21.. In Inv Inc Interest on Investments 1 Interest on Investments 2 Interest on Investments 3 Total 22 he err In co om me ess 22.. Ot Oth Inc Interest from Link Bank A/C Profit on Sale of Fixed Assets Foreign Exchange gain Recovery of loans previously written off Miscellaneous income Total Miscellaneous Income 23 na an nc ciia all Co 23.. Fi Fin Cossttss Current Year 20XX Shs’000 Prior Year 20XX Shs’000 161 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Interest expense on Members' Savings Interest expense on Borrowed Funds Other Financing Costs 59,206 14,638 4,157 38,275 9,366 2,556 Total In erre esstt Ex pe en nsse e Intte Exp 78,001 50,197 24 ec ctt Lo an n Co 24.. Di Dirre Loa Cossttss Bad debts Expense Loan appraisal costs Loan monitoring and recovery costs Legal Fees on Loans Other Direct Loan Costs Total Direct Loan Costs Current Year 20XX 3,144 31,549 60,000 32,000 14,998 Prior Year 20XX 2,556 45,000 60,000 25,000 12,749 141,691 145,305 25 affff Co 25.. St Sta Cossttss Current Year 20XX Shs’000 Prior Year 20XX Shs’000 Gross salaries Staff welfare and incentives NSSF – 10% Gratuity Staff trainings, workshops and capacity building Other Personnel Expenses 30,965 5,884 3,092 2,000 8,216 107 26,425 6,727 2,613 6,184 355 Total Staff Costs 50,264 42,304 26 miin niissttrra attiio on n Ex pe en nsse ess 26.. Ad Adm Exp Stationery expenses Rent of office premises Office expenses Telephone Internet and email Professional fees Transport and travels Advertisement, announcements and publicity Power/fuel costs Accommodation allowances Current Year 20XX Shs’000 Prior Year 20XX Shs’000 8,481 3,000 3,568 3,339 1,235 2,350 7,378 935 205 2,038 5,564 2,850 1,956 2,559 6,141 3,294 106 162 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda Duty allowances Community mobilization Audit costs & legal fees Depreciation Loss on Sale of Fixed Assets 26 26.. 4,212 101 1,220 12,036 3,790 2,996 6,165 5,212 Ad miin niissttrra attiio on n Ex pe en nsse ess (Co nttiin nu ueed d)) Adm Exp Con Equipment Repairs & Replacement Security expenses Computer expenses Donations and gifts Bank charges Affiliation fees expense Miscellaneous administrative expenses Total Administration Costs 1,543 3,353 130 1,498 225 112 1,018 1,252 1,540 1,700 125 525 56,959 46,793 27 ve errn na an nc ce e ex pe en nsse ess 27.. Go Gov exp Current Year 20XX Shs’000 Prior Year 20XX Shs’000 General meeting expenses Registration fees B.O.D and committee expenses Other Governance expenses 1,658 1,007 270 15,707 1,600 860 8,791 Total Governance Expenses 18,642 11,251 Current Year 20XX Shs’000 Prior Year 20XX Shs’000 20 15 13 93 141 28 attu utto orry y Ex pe en nsse ess 28.. St Sta Exp Cooperative development fund Contribution Members’ training Remittances to Secondary Society Education fund Other statutory Expenses Total Statutory Expenses 163 of 158 Model Financial and Accounting Policies and Procedures Manual For SACCOs in Uganda 29 an ntt In co om me e 29.. Gr Gra Inc Grant Income for Loan Capital Grant Income for Operations Total Grant income Current Year 20XX Shs’000 Prior Year 20XX Shs’000 14,298 2,891 8,344 17,189 8,344 oooOOOOooo 164 of 158

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