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UGANDA REINSURANCE COMPANY LIMITED
FINANCE AND ADMINISTRATION MANUAL
Contents
page
Definitions..................................................................................................................................................... 3
Application and Implementation................................................................................................................... 4
Financial Year ............................................................................................................................................... 4
Budget and Budgetary control ...................................................................................................................... 4
Investment Policy.......................................................................................................................................... 4
Accounting policies and Computation of Investment values ........................................................................ 4
Treasury Bonds ............................................................................................................................................. 6
Procedures for Receipts ................................................................................................................................ 8
Payments and Operation of Bank Accounts ................................................................................................ 9
Tenders.......................................................................................................................................................... 9
Acquisition of Goods and Services ............................................................................................................. 10
Acquisition and Disposal of Assets ............................................................................................................ 13
Provision for Doubtful Debt Policy ............................................................................................................ 13
Mail ............................................................................................................................................................. 13
Telephone and Reception Services ............................................................................................................. 13
Company Stationary.................................................................................................................................... 13
Security ....................................................................................................................................................... 14
Use of Company’s assets ............................................................................................................................ 14
Financial protocol (underwriting) ............................................................................................................... 14
Guidelines for Project Management ........................................................................................................... 17
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INTRODUCTION
The purpose of the controls and procedures in this manual is to guide to guide the Company for
the purpose of planning, control and directing the company’s operations. These regulations and
procedures are adhered to at all times and may be amended from time to time, subject to
approval by the board.
1. DEFINITIONS
1.1. For the purpose of these Regulations:(a) “Company” shall mean the Uganda Reinsurance Company limited.
(b) “Board” shall mean the Board of Directors of the Company.
(c) “Funds” shall mean funds owned by the Company or kept under its custody.
(d) “Short-term investments” shall mean funds invested by the company in any financial
security whose maturity does not exceed one year or any such security whose maturity
exceeds one year but is held with a positive intent to sell within three years.
(e) “Long-term investments” shall mean investment by the company in any financial security
whose maturity exceeds one year with positive intent and ability to hold such security to
maturity or where funds are invested in any asset intended to be available for sale after
three years.
(f) “Budget” shall mean the Company’s
i. Revenue/Expenditure budget.
ii. Underwriting budget.
iii. Other special budgets
iv. Investment budget.
v. Capital expenditure budget.
(g) “CEO/PO” shall mean the Chief Executive Officer/Principal Officer.
“HFO” shall mean the Head, Financial Operations
“CS” shall mean the Company Secretary.
“HTO” shall mean the Head, Technical Operations.
“Manco” shall mean the Management Committee comprising Heads of Departments and
Chief Executive Officer/Principal Officer).
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2. APPLICATION AND IMPLEMENTATION
2.1. These regulations shall govern the financial administration of the Company.
Any amendment to these regulations shall require prior approval of the Board.
2.2. The CEO/PO and the HFO shall make and enforce such financial rules
within these regulations.
3. FINANCIAL YEAR
3.1. The financial year of the company shall begin on the 1st January and end on 31stDecember
of each year.
4. BUDGETS AND BUDGETORY CONTROL
4.1. The CEO/PO shall submit the budget to the Board for approval in accordance with the Board
plan.
4.2. The appropriations made in the budget approved by the Board shall constitute an
authorization for the management to enter into obligations and make payments for the
purpose.
4.3. The Company may by administrative instruction lay down rules, guidelines and limits within
which members of the Management may authorize expenditure.
4.4. The CEO/PO and the HFO shall closely monitor the approved Budget to
ensure proper implementation and compliance. Quarterly status report will therefore be
presented to the Board for budgetary control purposes.
4.5. A three-year Business Plan, prepared on a rolling basis, will be presented to the Board
annually.
5.0 INVESTMENT POLICY
Reference shall be made to the separately approved investment policy in place
6.
ACCOUNTING POLICIES AND COMPUTATION OF INVESTMENT VALUES
6.1. The Company’s financial assets are initially measured at their acquisition cost plus the
transaction costs that are directly attributed to their acquisition.
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Depreciation is recognized in the statement of comprehensive income on a straight line basis
over the useful life of each part of an item of property, plant and equipment. Land is not
depreciated.
The company depreciates its fixed assets at the following rates:Motor vehicles
Computer equipment
Furniture, fittings and equipment
25%
33.3%
12.5%
The Company charges full year depreciation in the year of acquisition and disposal of the assets
6.2. The Company’s accounting treatment of financial assets subsequent to initial recognition
depends on how they are classified.
6.3. The Company classifies its investment into the following categories:
6.3.1. Held-for trading financial assets
A financial asset is classified as held-for-trading if it is acquired principally for the purpose
of selling in the short term or if it forms part of a portfolio of financial assets in which there
is evidence of short term profit-taking.
The financial asset is marked to fair value with all realized and unrealized gains and losses
passing through the income statement. Quoted shares are included in this category.
6.3.2. Held-to-maturity financial assets
Debt securities that the Company has the positive intent and ability to hold to maturity and
that have fixed or determinable payment are classified in this category and are reported at
amortized cost using the effective interest rate method. The effective yield or yield to
maturity brings the asset’s value to its face value on the date of maturity.
The impact of temporary fluctuations in fair value of the debt securities is not reflected in
the Company’s financial statements.
Government securities (excluding treasury bonds classified as available-for-sale) and
deposits with approved banks/financial institutions are included in this category.
6.3.3. Loan and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not
quoted in an active market other than those that the company intends to sell in the short term
or that it has designated as at fair value through income or available-for sale.
Loans and receivables include staff loans and mortgage loans, are held at amortized cost
using the effective interest rate method.
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6.3.4. Available-for-financial assets
Debt and equity securities classified in this category are those that are acquired with the
intent of being sold to address liquidity and other needs of the Company.
Available-for-sale financial assets are marked to fair value, with unrealized gains and losses
shown in equity net of tax until disposal or impairment. Upon disposal or impairment all
previous unrealized gains and losses are carried through the income statement.
6.4. A financial asset includes cash at hand, deposits at the central and other banks, bills
securities, loans & advances and derivatives.
6.5. A financial asset is de-recognized when the company’s contractual rights to receive the
asset’s cash flows expire; the company transfers the risks and rewards of the asset or when the
company transfers control of the assets.
6.6. The fair values of quoted investments are based on the current bid prices. If the market for a
financial asset is not active, the Company establishes fair value by using valuation techniques
which include the use of recent arm’s length transactions, reference to other instruments that are
substantially the same and discounted cash flow analysis.
6.7. Dividends, interest, and realized gains and losses are recognized and recorded in the period
they occur. The Company’s computation of mark-to-market investment return includes
unrealized gains and losses.
6.8. Unrealized gains and losses are tracked through the use of market value adjustment, which is
the difference between the fair market value of the investment, and its carrying value on a given
date. Unrealized gains and losses are reflected in changes in the market value adjustment from
one date to another.
7. Treasury Bonds
7.1. The initial carrying amount is the amount paid to acquire the bond (present value of the
coupons expected to be received over the life of the bond and the face value of the bond
discounted at the market rate), and not necessarily the face value of the bond.
7.2. The effective interest rate on the bond is the yield to maturity (not the coupon rate) at the
time of the bond’s issuance and interest income is that yield multiplied by the bond carrying
amount at a particular point in time.
7.3. The coupon rate and face value of the bond determine the actual cash flows to be received
from the bond investment.
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7.4. Total interest income expected over the life of the bond is equal to the summation of the
undiscounted coupons expected to be received from the bond investment and the face values less
the amount paid out at the bond’s issuance date (present value of the coupons expected to be
received over the life of the bond and the face value of the bond discounted at the market rate).
7.5. The carrying amount over time is a function of the initial carrying amount and the
relationship of periodic interest income to the actual cash flows received and is equal to the
present value of the remaining receipt, discounted at the yield in effect at the time of the
issuance of the bond.
7.6. Treasury Bonds issued at par
When the yield to maturity equals the coupon rate, the bond is issued at par; that is, the
amount paid to acquire the bond equals the face value of the bond.
In this case, the initial carrying amount equals the face value since the bond has been issued
at a yield to maturity which is equal to the coupon rate.
Periodic interest income equals the periodic cash receipt and there will be no discount or
premium to be amortized over the bond’s life.
The carrying amount of the bond will remain constant throughout the bond’s life.
7.7. Treasury Bonds issued at a premium
When the yield to maturity is less than the coupon rate, the Company is willing to pay a
premium above the face value of the bond.
Because the yield maturity is less than the coupon rate, the Company will pay more to
obtain the higher coupon amounts attached to the bonds.
The total premium at the time of issuance will be capitalized and amortized over the life of
the bond.
The book value of the bond will converge to the bond’s par or face value upon its maturity
rate.
The interest income will be lower than the coupon received. The amortization of the bonds
premium will serve to reduce the interest income that is reported in the income statement.
The interest income will equal the coupon received less the premium amortization.
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7.8. Treasury Bonds issued at a discount
When the yield to maturity exceeds the coupon rate, the Company is unwilling to pay the
face value of the bond.
The total discount at the time of issuance will be recognized in the liability side of the
balance sheet and amortized towards zero over the bonds life.
The book value of the bond will converge to the bond’s par or face values upon maturity
date.
The interest income will be higher than the coupons received. The amortization of the
bond’s discount will serve to increase the interest income that is reported in the income
statement. The interest income will equal the coupon received plus the discount
amortization.
7.9. Treasury Bonds issued with a zero coupon
Since they have no periodic coupon receipt, they are recognized in the books at a deep
discount to the par or face value of the bond.
The Company amortizes the discount over the bond’s life and this will serve to increase the
interest income that is reported in the income statement. The interest income will equal the
discount amortization.
8. PROCEDURE FOR RECEIPTS
The following procedures and controls will be effected for money received by the Company.
8.1. A Company acknowledgement must be issued for all cash, cheques and telegraphic
transfers received.
8.2. All cash and cheques received must be banked intact in the Company’s bank accounts
on the same day or the following working day.
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9. PAYMENTS AND OPERATION OF BANK ACCOUNTS
The user department shall certify that goods or services have been received or rendered to the
division’s satisfaction and attach the Goods Received Note. The HFO shall authorize the
disbursement of funds after all the necessary documents are received and verified.
9.1. CHEQUE PAYMENTS
This shall be in accordance with the Board’s approved Bank mandate.
9.2. CASH PAYMENTS
The Company shall maintain a cash float for small items of expenditure.
The operation of float will be as follows:9.2.1. The amount of float will be Ugsh. 2,000,000/= and will be reviewed by Management from
time to time. Petty requisitions for amounts less than Ugx 100,000 will be approved by the
Head, Financial operations and those above Ugx 100,000 shall be approved by the
CEO/Principal Officer.
9.2.2. The user department will request for cash in writing stating the purpose for which it is
required. This request will be approved by the HFO or the CEO/PO and the money issued on
anI.O.U basis.
9.2.3. Cash issued will be accounted for by way of original receipts and invoices.
The head of the division using goods or services will countersign the receipts for approval. All
invoices and receipts shall be stamped “PAID”.
Request for reimbursement of petty cash will be made to the HFO accompanied by the
expenditure receipts which are duly approved, a summary of expenses paid and cash at hand.
9.2.4. A petty cash register will be maintained.
10. TENDERS
10.1. All tenders will be handled by the Management Committee.
The main objective is to obtain supplies of goods and services at the lowest costs without
compromising on quality in an accountable and transparent manner.
10.2. The Management Committee will make decisions for supplies based on quality, costs, and
reliability of the supplies. The committee will therefore not be bound to approve bids only
on the basis of lowest costs.
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10.3. The HFO and the responsible head of Department will source items from the supplies
approved by the tender committee. However, if the items are not obtainable from the
approved suppliers, then they can obtain at least two quotations from other suppliers.
10.4. The Management Committee will be responsible for the acquisition/disposal of any item
with value/historical cost of up to US$ 5,000. Any item with a value in excess of US$
5,000 will require the approval of the Board (see also item 12.3 below).
11. ACQUISITION OF GOODS AND SERVICES
11.1. The user division will advise the Head, Financial Operations of goods or services
which are required by raising a requisition note, for approval.
11.2. The responsible head of department and the Head, Financial Operations will source at
least two quotations from suppliers for the purchase of items in excess of Ugsh.
1,500,000
11.3. The requisition note and the quotations will be checked by the Head, Financial
Operations to ascertain whether there is budgetary provision.
11.4. The supported requisitions shall be approved by the HFO and the Principal Officer.
However, requisitions for routine purchases below Ugsh 150,000,000 shall be
approved by the Head, Financial operations.
11.5. Local Purchase Orders shall be raised against approved requisitions. The LPOs
should be issued before and not after the goods or services are supplied.
11.6. In the case where the cost of an item cannot be established beforehand, payment will
be made against the supplier’s invoice but a confirmation LPO will be issued
accordingly.
11.7. For the time being, in view of the size of the Company, purchase of goods must be
based on short term requirements for immediate use.
12. ACQUISITION AND DISPOSAL OF FIXED ASSETS
12.1. Acquisition
Acquisition of company assets provided for in the annual budget shall be in
accordance with the authority limits described above. At least three competitive
quotations will be sought from reputable suppliers. Where valuation is deemed
necessary, professional valuers will be requested to present a valuation for the asset
and this value will be the maximum that the Company shall pay.
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12.2. Capitalization
The Company will maintain a register of all Company assets which will be updated
with acquisition of new assets and disposal of old assets. Only assets which cost in
excess of Ugsh. 1,500,000/= and supported by invoices and/or receipts will be
capitalized and entered in the fixed assets register.
12.3. Disposal of Fixed Assets
12.3.1. Disposal of Company assets will be undertaken when necessary. Items whose book
value is zero or whose retention means more costs than value, may be set aside for
disposal.
12.3.2. A thorough analysis of all item earmarked for disposal for disposal will be
prepared by the Finance & Administration department. The following information
will be captured:
• A clear description of the stock items
• Quantity of items to be disposed
• Any identification details e.g. serial number
• Book value of item
• Reason for disposal
12.3.2.1. Management shall approve disposal of the Company’s fixed assets
where the historical cost is not more than US$ 5,000. Over and above
this limit, approval of the Board of Directors is required..
12.3.2.2. Purchasers will be allowed a specific day for viewing, after which sealed
bids, appropriately labeled, will be dropped in the Tender Box.
The successful bidder will be that bidder whose bids is found to be the
most competitive when bids are opened, subject to a reserve price based
on values advised by dealers/valuers or any person with expertise as may
be considered appropriate. Where there is a tie in bids, those bidders will
be requested to submit new bids, until the highest bidder is determined.
All items dispose through staff purchases will be removed from
Company premises as soon as possible as will be determined by
Management. An official gate pass will be issued from Finance and.
Administration department, without which no items may be removed
from the premises.
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13. PROVISION FOR DOUBTFUL DEBTS POLICY
Provision for doubtful debts will be made on specific delinquent debtors that have been
placed under receivership, administration or statutory management, or have discounted
operations due to insolvency, operational difficulties or otherwise, or are unlikely to settle
outstanding amounts owing for over one year, unless Management have reason(s) to believe
that such debts are recoverable. Bad debts write-offs will be subject to approval by the
Board.
14. MAIL
14.1. Incoming mail
14.1.1. Mail will be collected by the messenger as may be necessary but atleast three
times a week from the post office
14.1.2. The Receptionist/Office administrator will receive and open all incoming mail
from the messenger, and stamp (with date) them as having been received using
the Company stamp for the purpose.
14.1.3. The Receptionist/Office administrator will sort the mail by department then
forward all of them to the CEO/PO before they are given to the respective
heads of departments for distribution after signing them.
14.1.4. All incoming mail must be distributed on the same day if they are received in
the morning or not later than the following morning for those received in the
late afternoon.
14.2. Outgoing mail
14.2.1. Outgoing mail will be taken to the post office and the various dropping
points on a daily basis.
14.2.2. All outgoing mail must be registered in the relevant registers reflecting
the intended mode of delivery, namely hand delivery, courier service
delivery, registered mail and normal postage.
14.2.3. Depending on the urgency and deadlines, if any, certain mail may also be
sent by fax or e-mail.
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15. MESSENGER SERVICES
The Company will have a messenger/motor cyclist allocated a motor cycle to handle all the
messenger services.
The messenger will not undertake unofficial errands unless authorized by Head, Financial
Operations/CEO/PO and any such service may be handled by the HR officer on the basis of
merit. However, urgent official matters will be given priority.
16. TELEPHONE & RECEPTION SERVICES
The Receptionist/office administrator will be in charge of the PABX system and will assist in
receiving all incoming and outgoing call through the switchboard and a register maintained
(manual or electronic) of all international/mobile calls made
All extensions will have dialing facilities for Uganda only and external dialing facilities outside
Kampala will be available to the CEO/PO and Receptionist/office administrator. Further,
selected staff, depending on the job function, may be allowed international dialing facility via
VOIP only. A telephone monitoring system is installed for the purpose of printing a listing of
telephone calls made by extension and personal code number so as to identify callers, places
called and duration of the call.
The cost of unauthorized calls considered unofficial will be recoverable from the callers.
17. COMPANY STATIONERY
All official communication must be on the Company’s official stationery in a standard typeface
and font.
All Company letterheads will have the logo at the top right hand corner. The Company’s
registered full name, physical and postal address, telephone and fax number and e-mail and
website addresses will be at the bottom left hand corner, while the Directors will be shown at the
bottom right hand corner.
Only one format of the approved letterhead will be used by all departments.
Business cards will be issued to positions which justify the need for such cards, as considered by
Management. The format of all the business cards must be the same.
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All Company envelopes will have the Company’s logo with the name “UGANDA RE” and
postal address printed at the front bottom left hand side. The full name of the Company shall
appear on the envelopes.
18. SECURITY
All company property should not leave the office without proper authorization by Head,
Financial Operations. The property leaving the office should be recorded in a register maintained
by the Head, Financial Operations
19. USE OF COMPANY’S ASSETS
The company’s assets such as motor vehicles will be solely used for business purposes. The
Company will take care of all fuel and maintenance expenses of the company motor vehicles.
20. FINANCIAL PROTOCOL (UNDERWRITING)
INTRODUCTION
A financial protocol to clarify and clearly define transactions in our financials are recorded
below.
Pipeline Premiums
An estimate of the outstanding premiums due to us for a specified financial period.
Written Premiums
Actual Premiums (excluding any portfolio premiums) plus “pipeline premiums”
Gross Premium
Written Premiums (which includes pipeline premiums) plus Premium portfolio Entries minus
Premium Portfolio Withdraws.
Retrocession Premium
The total of all premiums payable to retrocessionaires.
Net Written Premiums
Written Premiums minus Retrocession Premium.
Net Earned Premiums
Net Premiums plus Net Unearned Premium Reserve brought forward minus Net Unearned
Premium Reserve carried forward.
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Net Commissions
Gross Commission minus Retrocession Commissions.
Unearned Premium Reserve (UPR)
The proportion of written premium which is estimated to be earned in the following year.
Gross and Net UPR are determined using Gross and Net values as applicable. Net
UPR is Gross minus Retrocession UPR
Pipeline Claims Paid
An estimate of the claim still to be paid in any given financial year.
Retrocession Claims
All claims recoveries due to us from our retrocessions.
Gross Claims Paid
Gross Claims paid minus Gross Portfolio Loss Entry plus Gross Portfolio Loss Withdrawal.
Net Claims Paid
Gross Claims Paid minus Retrocession Claims
Outstanding Claims
Outstanding claims comprise a provision by the company of its estimated cost of settling all
reported but unpaid claims as at the balance sheet date.
This figure for outstanding claims is determined by the company’s Actuaries using data provided
by the Company. The Company will also determine an estimate of the outstanding claims and
compare/ ratify this with the amount determined by the Actuaries. The Actuary gives the
estimate of outstanding claim by class of business only. The figures provided by the Actuary
include provision for Incurred But Not Reported loss (IBNR) and the Company should ensure
that there is minimum IBNR amount is not below 15% of the outstanding claims..
The Actuary gives the Gross figure only and the Company determines the amount recoverable
from the retrocessionaires depending on the current
Retrocession programme in place.
Outstanding claims provision should take into consideration Portfolio Loss
Withdrawals already accounted for in the 4th Quarter, i.e. no double provision to be made.
Net Claim Incurred
Net Claim Paid plus Net Outstanding Claim carried forward minus Net
Outstanding Claim brought forward plus Net Loss Portfolio Withdrawal minus Net Loss
Portfolio Entry.
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Commission Payable
This is the total commissions payable by us to our cedents.
Commission Payable = Commission plus Reinsurance Brokerage plus profit Commission.
Commission Receivable
This is the total of all commissions recoverable by us from our retrocessionaires.
Commission Receivable = Commission plus Overriders plus profit
Commission plus Reinsurance Brokerage.
Taxes and other charges
Taxes and other charges are booked separately from Commissions.
Interest on Reserves
Interest on Reserves is booked as Other Income under Investment Income.
2.0. PIPELINE PREMIUM
Pipeline Premium = Premiums due to us in any given financial period not yet received/
booked by us.
2.1. Proportional Treaties
Pipeline Premium to be booked in any given financial period is obtained by subtracting the
total premium booked from the cedents’ Estimated Premium Income (EPI) per treaty.
Portfolio Premiums are not to be taken into account when determining the Pipeline
Premiums provisions. In cases where the cedent submitted revised EPI for the year, these
figures are to be used instead of the initial EPI figures advised at the beginning of the year.
In some cases even after revising the EPI figures the pipeline premium arrived at may be
negative or unusually high. In such cases an average of premium booked to date is used to
extrapolate the pipeline premium. The company’s actuaries also determine the 4th quarter
pipeline premium by the Company using data provided by the company and their figures are
then compared / ratified to/ against ours. The Company determines the Retrocession
pipeline premium depending on the current Retro programme in place.
The pipeline premium will be compared to the actual premiums (excluding any portfolio
premiums) on a continuous basis and variances reported monthly on Management.
2.2. Non- Proportional
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Minimum Deposit Premiums due and not yet booked as at the balance sheet date are to be
provided for as pipeline premium. No provisions are made for Premium Adjustment relating
to Non Proportional business at year-end.
2.3. Facultative
Pipeline premium are provided for facultative where the risks attach at year end and the
closings are still pending.
3.0. PIPELINE CLAIMS PAID
The pipeline claims paid is determined by the company’s Actuaries. The Company will also
determine an estimate of the pipeline claims paid by using the current year loss ratio
statistics provided by cedents at renewal. This loss ratio is to be adjusted for any known
reported large loss(s). This adjusted loss ratio forms the basis of determining the net claims
paid provision as at year-end. Our estimate of the claims paid will be compared and ratified
with the values determined by the Actuaries.
4.0. COMMISSIONS
Once the pipeline premium has been worked out, the commission and Reinsurance
Brokerage provided for is based on the actual commission and Reinsurance Brokerage
percentage as booked by us at the close of the period.
5.0. REVERSAL OF PROJECTIONS
The Balance sheet Pipeline estimates will be reversed during the first quarter of the
following year.
6.0. MANAGEMENT EXPENSES
The management expenses will be apportioned between the Revenue account and
investment Income. The apportionment shall be 85% to the Revenue account and 15% to the
Investment income. This basis and percentages will be reviewed by management from time
to time. The allocation of management expenses between our General and Life business will
be appointed in the ratio between the gross premiums of General Life business respectively.
7.0. BAD DEBTS
A provision for doubtful debtors in respect of debts in excess of 365 days will be made
unless considered recoverable. Management will also write off any debts considered not
recoverable, subject to Board approval.
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21. GUIDELINES FOR PROJECT MANAGEMENT
It is appreciated that projects are unique and therefore no single policy will effectively cover
all projects. However, each project should have a charter specific to that project that must
include the following:
1. Project background
2. Project objectives
3. Project justification
4. Project scope
5. Project budget
6. Company tendering and procurement procedures
7. Implementation methodology
8. Project schedule/timetable
9. Project constraints
10. Project quality control
11. Project risk management
12. Project organization and structure
i. This will include project team and TOR
ii. As a minimum, will include relevant professionals in the particular area (i.e. Architects,
Quality Surveyors, etc.).
13. Project approval
The project shall be approved by the Board
14. Reporting
The project team shall prepare regular progress reports for approval by the Board or by the
Finance Committee on behalf of the Board that will contain the following:
i. Work completed to date
ii. Schedule of work not completed
iii. Variance details and actions required
iv. Schedule of work to be carried out during the next period and resources request
v. Any proposed changes to the plan.
15. Documentation
The project manager shall maintain a project file containing all project documentation and
communications. This will be available to all project members.
16. Project agreement
The project document should be signed by representatives from both the vendor and the
Company and witnessed thereof.
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