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Mzima Springs
Savings & Credit
Society Limited
2014 Annual Report VISION
To be an organized, well managed and competitive source of development for the better of Mzima Springs SACCO members
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ABOUT MZIMA SPRINGS SACCO
Brief History
About fifteen employees of Strathmore School registered Mzima Springs SACCO in 1983.
When it was registered, it was meant to only serve the subordinate staff. As Strathmore
School expanded, more and more members joined in and by 1990 all employees of the
School were eligible to join the SACCO.
The section of the college was moved over to Madaraka estate in 1992 and this
threatened the continuity of the SACCO. However it was agreed rather than register a
new SACCO, the current members of the college will continue being members of Mzima
Springs SACCO with an appropriate management structure put in place to serve the
interest of both groups.
This agreement was vital as it led to the growth of the SACCO serving the Strathmore
fraternity. This was because any person employed by any of the Strathmore institutions
is eligible to be a member of the SACCO. These institutions include Kianda School, El
Molo, Kibondeni and Tigoni.
Current position
Currently as a result of expansion of the institutions membership the SACCO is made up
of the following institutions:
1
El Molo Residence 16 Mvule Catering Dept
2 Ewaso 17 Roshani
3 Ewaso Catering 18 Satima Study Centre - Imara
4 Faida Club 19 Solandra
5 Fanusi Study Centre 20 Strathmore Business School
6 Fontana Book Services 21 Strathmore Cafeteria
7 Glenview 22 Strathmore Creates
8 Hodari Boys Club 23 Strathmore Educational Trustees
9 Imara Educational Foundation 24 Strathmore Research Centre
10 Karima Residence 25 Strathmore School
11 Keri Residence 36 Strathmore Trust Project
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12 Kianda School 27 Strathmore University
13 Kibondeni College 28 Thigiri Catering Department
14 Kimlea G TT Centre 29 Tigoni Study Centre
15 Kivulini Residence 30 Watani Residence
As at 31 December 2014, the total members are approximately 477.
VISION
To be an organized, well managed and competitive source of development for the better
of Mzima Springs SACCO members
MISSION STATEMENT
To provide leadership in lending and promote wise borrowing to Mzima membership in
collaboration with employer centres.
VALUES
Mzima Springs Sacco is driven by strong shared values, which include:
Integrity: We value truthfulness, fairness, honesty and transparency in our internal and
external relationships, communication and transactions.
Excellence: We value professionalism and timeliness, and seek credibility in all we do.
Collaboration: We value the collective input and wisdom of our membership which
emerge when as individuals we work as a team and other stakeholders.
Innovation: We value and support innovation particularly ICT-driven initiatives which
will facilitate organizational efficiency and service delivery.
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Our core principles
Genuine representation of members’ needs without regard to their status in our
different employer centres.
Gender mainstreaming in all activities
Active participation and involvement of members and all other stakeholders
The achievement of interventions by maintaining credibility, fairness, reliability,
integrity, accountability and transparency in all operations.
Prudent financial management and adherence to lending policies of Mzima.
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Contents ABOUT MZIMA SPRINGS SACCO ...................................................................... 2
NOTICE OF THE 2014 ANNUAL GENERAL MEETING ......................................... 6
SACCO INFORMATION ...................................................................................... 8
CHAIRMAN’S STATEMENT ................................................................................ 9
MANAGEMENT COMMITTEE MEMBERS ........................................................... 15
SUPEVIRSORY COMMITTEE MEMBERS AND EMPLOYEES .............................. 17
MANAGEMENT COMMITTEE REPORT .............................................................. 18
SUPERVISORY COMMITTEE REPORT.............................................................. 28
CORPORATE GOVERNANCE REPORT .............................................................. 32
SOCIAL RESPONSIBILITY REPORT ................................................................ 37
KEY STATISTICAL INFORMATION .................................................................. 39
STATEMENT OF MANAGEMENT RESPONSIBILITIES ...................................... 40
INDEPENDENT AUDITOR’ REPORT ................................................................. 41
STATEMENT OF PROFIT OR LOSS ................................................................... 43
STATEMENT OF CHANGES IN EQUITY ............................................................ 44
STATEMENT OF FINANCIAL POSITION .......................................................... 45
STATEMENT OF CASH FLOWS ......................................................................... 46
NOTES TO THE FINANCIAL STATEMENTS ....................................................... 47
RISK MANAGEMENT REPORT ......................................................................... 57
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NOTICE OF THE 2014 ANNUAL GENERAL MEETING
Notice is hereby given that the 2014 Annual General Meeting of Mzima Springs Sacco
Ltd will be held on
Date: 25th April 2015
Time: 1.30pm
Place: Strathmore University –Auditorium
To transact the following business:
1. Confirm the minutes of the 2013 Annual General Meeting.
2. Discuss and adopt the Management Committee and supervisory committee reports.
3. Discuss and adopt the Auditor’s report together with the financial statements.
4. Discuss and adopt the budget for 2015/2016.
5. Launch of the New Sacco software system.
6. Ratify the nomination of the following members to the Management Committee:
Frederick Odhiambo – Currently the Secretary (replaced David Dimba who resigned
from Management committee)
John Njane – Currently a member (Replaced Peter Ochuodho who resigned from
Management Committee)
Were Lwanga – Currently a member (Replaced Bernard Wanjala who resigned from the
management Committee)
7. Election of one member to the Supervisory Committee:
Grace Achieng whose term is ending does not offer herself for re-election.
Please note that if you wish to serve in the Management Committee or the Supervisory
Committee, you need to apply and send your application and CV to
[email protected] by 24th April 2015 5.00 p.m. Minimum qualification is post-
secondary qualification especially in the areas of business management, administration,
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law, IT and experience in administration work. Only short listed candidates will be
presented for election in the AGM).
8. Any other business of which further notice will have been duly received (By Friday
24th April 2015 5.00 p.m.)
The following special resolution/s to be proposed at the Annual General Meeting:
- The lending period to be increased from 48 months to 60months for
development loan and from 12 months to 18 months for emergency loans.
- The maximum Loan to be sh.3 million subject to being three times the deposit
- Other special products on saving and borrowing discussed in the management
report.
- To allow Strathmore University students save with the SACCO.
In order to manage the meeting efficiently, we assume that members will have read the
various reports and therefore only important issues will be highlighted.
In case you are not able to attend the AGM, kindly let us know the proxy you will send.
We shall send you a form to fill to confirm your proxy. Ask them to come with the form
to the AGM.
Please note that for the SACCO to conduct business we need one third as quorum, so
please we encourage all members to attend and be on time.
FRED ODHIAMBO
Acting Secretary
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SACCO INFORMATION
REGISTERED OFFICE
Strathmore University next to Madaraka Estate
Student Center 2nd Floor (Left Wing using Stairs)
P.O. Box 59857-00200 (C/o Strathmore University)
NAIROBI
Telephone: 0703034336, 070303331
PRINCIPAL BANKER
Co-operative Bank of Kenya Limited
Ukulima Branch,
Nairobi
AUDITORS
Mulila & Associates
Certified Public Accountants of Kenya
P.O. Box 61924 -00200
NAIROBI
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CHAIRMAN’S STATEMENT
Geoffrey Injeni – Chairman
Introduction
I am pleased and honored to present to you Mzima Springs SACCO’s annual report and
financial statements for the year ended 31 December 2014.
2014 was a very important year as it not only marked the existence of the SACCO of
nearly 30 years, but it also marked the successful start of operations of the Mzima Springs
Investment Company. 2014 has also seen the growth of the SACCO as per statistics in
the annual reports. The rest of the report provides some information on the environment
in which Mzima Springs operate in terms of economic and regulation.
Kenyan Economy in 2014 and Trends.
The Gross Domestic Product (GDP) in Kenya expanded 5.50 percent in the third quarter
of 2014 over the same quarter of the previous year. GDP Annual Growth Rate in Kenya
averaged 5.33 percent from 2004 until 2014, reaching an all-time high of 11.80 percent
in the fourth quarter of 2010 and a record low of 0.20 percent in the fourth quarter of
2008 according to the Kenya National Bureau of Statistics.
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Over the past half-decade, Kenya’s economic freedom score has declined by 1.8 points,
pushing the economy further down into the ranks of the “mostly unfree.” Declines in four
of the 10 economic freedoms include alarming deteriorations in business and trade
freedom that could threaten local entrepreneurs and Kenya’s integration into global
trading networks.
Banking
The Kenyan financial sector overall is now the third largest in sub-Saharan Africa, behind
those of South Africa and Nigeria. The banking sector in Kenya is notably diversified,
thanks in large part to the country’s efforts to boost financial inclusion. Kenya’s
predominant mobile money platform, M-Pesa, is perhaps the best known example, but
other elements of the Kenyan system, such as savings and credit associations,
microfinance and agency banking, also underscore the diversity and innovation within the
sector. The sector appears to have moved past a period of instability. Widespread defaults
are no longer common, and capital raising has left lenders with bigger balance sheets
and increasingly robust fundamentals as measured by common prudential ratios.
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Kenya has a liberalized economy with a GDP of $55.2bn, which grew at 5.7% in 2013.
Much of the 2013 growth was attributable to relatively low and stable inflation, and the
establishment of county governments as public expenditure rose in line with the devolved
system of government, according to an economic survey from 2014. Agriculture,
wholesale and retail trade, transport and communication, and manufacturing led growth.
As an emerging market, Kenya benefits from a number of competitive advantages, not
only within East Africa but also within the wider continental context. Kenya’s blueprint for
development and future planning, called Vision 2030, serves as an overarching guide to
the country’s goal of seeing annual GDP growth of 10% every year from 2012 to 2030.
In 24 July 2014, Kenya announced a debut to the Euro bond market selling 2 billion Euros
worth at a better-than-expected rates. The country, which had planned for this issuance
for more than six years, originally sought to raise $1.5bn, but when bids totaled $8bn,
the National Treasury ended up issuing two tranches: a five-year note with a yield of
5.875%, and a 10-year one at 6.875%.
Kenya has earmarked about $600m of the funds to repay an existing debt, while the rest
will help defray the cost of an ambitious capital spending programme, including
components of the government’s development plan Vision 2030, focused on transport,
power and other infrastructure.
INSURANCE
Insurance sector has witnessed a rapid growth over the past decade, with written
premiums reaching compound annual growth rates (CAGR) of 15.1% between 2004 and
2014. Some in-house estimates put growth in the non-life segment at 20% per annum,
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while the health insurance component is leading the expansion with a 38% growth a
year.
SACCOS
The Saccos in Kenya sub-sector is considered the fastest growing in the cooperative
movement.
Statistics show that there are 10,800 registered Co-operative Societies in Kenya with a
membership of about 3 million. Out of this, 46% are Agricultural, 38% Financial -based
(SACCOS) and, 16% are others. 63% of the Kenyan population depends on Co-operative
related activities for their livelihood with over 250,000 benefiting through direct
employment. SACCOS have been noted to contribute over 45% GDP and it is estimated
that at least one out of every two Kenyans directly or indirectly derives his /her livelihood
from these kinds of Cooperatives. The saccos in Kenya have a total asset of above 240
billion and deposits of over 150 billion by end of 2013.
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SACCO regulation and Sacco Societies Regulatory Authority (SASRA)
The Sacco Societies Regulatory Authority (SASRA) is a statutory state corporation
established under the Sacco Societies Act (Cap 490B) of the Laws of Kenya (the Act)
which came into full operation upon the gazettement of the Sacco Societies (Deposit-
taking Sacco Business) Regulations, 2010 (the Regulations 2010) on 18th June 2010.
The establishment of SASRA falls within the Government of Kenya’s reform process in the
financial sector which has the dual objectives of protecting the interests of SACCO
members and ensuring that there is confidence in the public towards the Sacco sector
and spurring Kenya’s economic growth through the mobilization of domestic savings.
Role of SASRA in Contributing Towards the Vision 2030
The Sector Plans under Vision 2030 have identified challenges that need to be addressed
in the Co-operative Sector and outlined the National Flagship Projects and key support
initiatives that need to be undertaken to address the challenges. SASRA will contribute to
the national co-operative sector flagship projects and support initiatives by developing
and implementing relevant programs and activities in the following areas:
1. Cooperative Governance in the Sacco Societies…
The Authority is responsible for the development and implementation of a sound
cooperative governance framework for the Sacco societies through effective licensing and
supervision and continuous review of the existing regulations, policies and procedures.
Safety and security of members’ deposits. This will be achieved through
establishment and implementation of the Deposit Guarantee Fund (DGF), and a member
savings insurance scheme.
2. Increasing savings and credit
This will ensure a stable Sacco sub-sector that will attract new membership; thus
expanding access to financial services especially in the un-served and low income
segment of the population where SACCOs have a better outreach.
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3. Business Process Automation in the Sacco Sub-Sector
The Authority will enforce the application of best Management Information System
practices in the delivery of services to members of Sacco Societies.
4. Research and development in the Sacco Sub-Sector
The Authority will develop a framework to enhance the level of research and development
in the Sacco sub-sector and integrating it with the information needs for both the Sacco
sub-sector and the entire financial sector.
5. Education and Training in the Sacco Sub-Sector
The Authority will partner with key stakeholders to ensure that relevant and appropriate
training and education programs are offered to the Sacco societies to promote the growth
and development of skills and technical capacities within the Sacco sub-sector.
2015 Outlook
The financial sector is expected to grow, with expectations of stable macro and micro
economic environment and continued improvement towards implementation of the
devolved system of government. The regional economy is expected to grow at between
5% and 6%. From this favorable outlook, I see good prospects for the SACCO in terms
of more savings, taking loans for economic empowerment and using the Investment
Company as a tool for increasing wealth for members.
Conclusion
I wish to express my sincere appreciation to first God, for making Mzima a good scheme
that empowers its members. Secondly, I would like to thank all the members for being
part of the big family of Mzima Springs, all my committee members and employees
without forgetting Strathmore University for all its support.
All I can say is thank you and Good bless!
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MANAGEMENT COMMITTEE MEMBERS
Geoffrey Injeni – Chairman
Geoffrey holds a Master of Commerce in Finance from Strathmore
university. He is also a member of ICPAK and ACCA. He is lecturer at
the Strathmore Business School and Strathmore University. He has over
16 years of experience in the teaching and industry and he has been a
member of the management committee since 2005.
Josephine Muli – Vice Chairman
Josephine is currently pursuing her bachelors in Hospitality
Management at Strathmore university. She has over 10 years of
industry and teaching experience. She has served in the management
committee of the SACCO since 2006. She works in Center of Tourism
and Management in Strathmore university
Josphat Manani – Treasurer
Josphat holds an MBA in Finance from University of Nairobi. He has
over 10 years of industry and Administration experience. He is currently
the examinations officer and lecturer in the School of Management and
Commerce of Strathmore University.
He joined Mzima Springs Management in 2013.
Frederick Odhiambo – Secretary
Frederick has a Master in Communication from University of Nairobi and
over 13 years of working experience as a teacher and has also served
as a secretary of another SACCO. He joined Mzima Springs
Management Committee in September 2014.
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Emma Miriti – Member
Emma is currently pursuing a Master of Science in Education
Management at Strathmore University. She has over 10 years of
teaching and working experience at Kianda School. She joined Mzima
Springs SACCO Management Committee in March 2014.
John Njane – Member
John holds a Masters in Business Management, and Part 3 level of the
Association of Chartered Certified Accountants. He is currently the
Human Resource Manager of Strathmore Business School. He served
Mzima Sacco in the supervisory role for a period of one year and joined
the Management Committee in October 2014.
Were Lwanga – Member
Were holds post experience Diploma in education management. He has
worked over 8 years of working experience as a Teacher at Strathmore
School and also as an administrator.
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SUPEVIRSORY COMMITTEE MEMBERS AND EMPLOYEES
Grace Achieng – Chairman
Grace has a Bcom Accounting from KCA University and is a member
of ICPAK. She is currently working as a teacher in Kibondeni. She
has over 15 years of teaching and working experience.
Rosalia Mwikali
Rosalia holds a diploma in leadership and Management of
Strathmore University and currently pursuing a degree in
leadership and management at St. Pauls University. She has
worked at Strathmore Cafeteria for nearly 12 years where she has
also held some administrative responsibilities.
Moses Muchemi – Secretary
Moses is pursuing his MSc in Procurement (JKUAT) and Logistics.
He is also a member of the Kenya Institute of supplies
management and Chartered Institute of Purchasing and Supplies
(UK). He has nearly five years of experience and he works in the
Universities procurement office.
EMPLOYEES
Susan Ndungu – Accountant
Hannad Muduya – Administrator
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MANAGEMENT COMMITTEE REPORT
Dear Members,
The management committee welcomes you to our Annual General Meeting for the year
2014. Several issues will be discussed in the meeting but the purpose of this report is to
update you on various aspects of the SACCO.
1 Registration The society is incorporated in Kenya under the Sacco Society Act No. 14 of 2008
vide Registration Certificate No. CS/3981 dated 21st November, 1983
2 Principal Activity
The principal activity of the society is to receive deposits from members and provide loans to them.
3 Operating Results
The operating results are as presented from page 37.
4 Management Committee and Supervisory Committee
The members of the management committee who served during the year are: Members of the Management Committee 1. Mr. Geoffrey Injeni - Chairman 2. Ms. Josephine Muli - Vice-Chair 3. Mr. David Dimba - Secretary (Resigned - August 2014) 4. Mr. Fredrick Odhiambo - Ag. Secretary (Appointed - September 2014) 5. Mr. Josephat Manani - Treasurer 6. Ms. Emma Miriti - Member (Appointed - June 2014) 7. Mr. Peter Ochuodho - Member (Resigned - May 2014) 8. Mr. Bernard Wanjala – Member (Resigned 1 January 2015) 9. Mr. John Njane Nduta - Ag. Member (Appointed - June 2014) Members of the Supervisory Committee 1. Ms. Grace Ochieng - Chairman 2. Mr. John Njane Nduta - Secretary (Resigned - April 2013) 3. Mr Jones Munyao - Member (Resigned - April 2013) 4. Mr. Moses Muchemi (Secretary ,Appointed - June 2014) 5. Ms. Rosalia Mwikali (Appointed - April 2013)
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5 Auditors
The auditors Mulila & Associates, Certified Public Accountants of Kenya, were appointed during the year 2015 in the 2014 Annual General Meeting, to serve as auditors. The auditors have expressed their willingness to continue in office and therefore offer themselves for reappointment.
6. Other issues
Progress and membership
The SACCO continues to grow in membership although the Management Committee feels
more can be done to attract members. The rate of growth is not very high and some
marketing and sensitization activities will need to be put in place to improve on the same.
The summary of the number of members over the seven years from 2007 to 2014 is
shown below:
Despite the slow growth in membership, the total funds due to members (share capital,
reserves and retained profits) has grown significantly as summarized below:
235275
318336 341
393
453477
0
100
200
300
400
500
600
2007 2008 2009 2010 2011 2012 2013 2014
Growth in Membership
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Below is a pie chart representation of total number of members from different institutions
as at December 2014:
29,039,11532,315,435
45,309,183
53,057,69453,964,953
64,221,767
71,143,372
82,295,984
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
90,000,000
2007 2008 2009 2010 2011 2012 2013 2014
Members' Deposits
Strathmore University,
61.01%Strathmore School, 12.50%
Kianda School, 8.04%
Kibondeni College, 2.98%
Kimlea G TT
Centre, 1.19%
Thigiri Catering
Department, 1.19% Others,
13.10%
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Summary composition of members by gender:
For 2015, the management committee hopes to put in place, marketing strategies that
will increase the membership. Members are also encouraged to market the SACCO
especially in their respective workstations.
Communication
Members can now contact the SACCO office and visit our website.
Via e-mail [email protected].
Or on the following telephone numbers:
Direct line 0703 034 336/1.
Accountant 0786653877
Administrator 0724706843
The SACCO website www.strathmore.edu/mzima
47.97%
52.03%
Members By Gender
Female
Male
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Implemented Projects
1. Software
The SACCO is has acquired and implemented a new software system that will increase
the speed of data entry and enable quick access and production of reports to members
and the management committee. Members should be able to access their details online.
This has been successful and the next phase is to consider loan and membership
applications online. Members are also requested to update personal information with the
Sacco e.g. and provide other details that will enable the SACCO to serve members quickly
and efficiently.
2. Investment Company
In 2012, the SACCO registered an investment company whose purpose was to invest in
real estate i.e. land and buildings and avail the same to members at affordable cost. We
are grad to inform you that we were able to sell the first phase to members during year
2014 and more is coming and more properties are being evaluated to check is they are
feasible. For details about the investment company please check in the SACCO’s website.
3. Proposed new products
The management committee is now proposing to put in place the following additional
products in relation to saving and borrowing:
MZIMA SPRINGS SACCO SUGGESTED PRODUCTS
LOANS
The Society shall give loans and advances of maturity periods ranging from one month
to 60 months. The amount granted to any one individual will range from 1000 to 30% of
core capital or as may be determined by the board of directors from time to time.
The following loans are available but their names and attributes are subject to review by
the Board of Directors in accordance with the provisions of this policy.
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Development loans
Development loans are Normal or Super. The two loans differ in size and price.
a) Development loans shall be granted for investment purposes
b) To qualify for a loan, an applicant must have completed six months membership or
such other period as the Board may determine from time to time
c) Applicants may be required to attach Supporting document as proof of project
viability
d) Applicants must attach two most recent original pay slips or any other documents as
proof of ability to repay the loan applied.
e) Loans will be repaid from a member’s salary or from members other incomes and no
member will be subjected to deductions in excess of 2/3rds of his monthly salary or
income. Where total deductions exceed two thirds of a member’s salary, the loan shall
be reduced accordingly
f) The total of all outstanding loans, must not exceed three times an applicant’s
deposits.
g) Only one development loan shall be granted at a time.
h) Every loan must be guaranteed.
i) Other securities such as land, cars, shares, insurance policies and share certificates
may be pledged as security.
1.1 Normal
a) Repayment period will be 60 months
b) The interest rate shall be 1% per month on declining balance.
c) The total of all outstanding loans, including emergency and school fees must not
exceed three times a member’s deposit.
1.2 Super Loan
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a) Repayment period shall be 60 months or as may be determined from time to time.
b) The interest rate shall be 1.25% per month on declining balance or as may be
determined from time to time.
c) The total of all outstanding loans, including emergency and school fees must not
exceed four times a member’s deposit.
d) The number of guarantors shall be six
1.3 Emergency loan
a) Emergency loan shall be granted for unforeseen circumstances.
b) The total of all outstanding loans, including school fees, emergency and development
loan, must not exceed three times a member’s deposit.
c) Repayment period shall be twelve months
d) The interest rate shall be 1% per month on declining balance or as may be
determined by the MC from time to time.
1.4 School fees loan
a) School fees loan shall be granted for school fees purpose.
b) Repayment period shall be 12 months
c) The interest rate shall be 1% calculated on declining balance or as shall be
determined from time to time
d) The total of all outstanding loans, including emergency and development loan, must
not exceed three times an applicant’s deposit.
1.5 Salary advance
a) Members who are eligible for this loan are those that have never defaulted on
their monthly deposits
b) This facility allows an applicant to get up to Ksh 10,000 as salary in advance.
c) Repayment period is one month
d) A commission will be 5% per month or as may be determined from time to
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time.
1.6 A Refinance Loan (Top up Loan)
A Refinance Loan is an additional loan to an already existing normal loan. This Loan is
issued where a member is unable to finalize a project with the loan earlier taken, and
needs a top up to finish his/her project.
The new/refinancing loan repayment period is determined by the previous loan
repayment period.
1. Repayment of this loan should end at the same time with the loan earlier taken.
2. The loan shall be granted within a member's entitlement.
3. Entitlement is three times the savings/deposit less any other loans.
4. The interest Charged is 1% per month, on a reducing balance
5. A commission of 2% of the amount the top up shall be charged
Savings
(i) MZIMA Junior
Children' Saving
Scheme
These are Sub-accounts of the principle members
Registration/ Entrance fee is KES 500
Minimum monthly deposit is KES 500
Deposits can be used as Security for principle members loan but, not used to
compute the upper loan limit
Child Account will earn interest like all other members deposits
Three months’ notice is required for withdrawal by principle member
Withdraw able Savings Fund (WSF) Account Special savings scheme for
members:-
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1. Any emergency (immediately)
2. Christmas and holidays (to withdraw in December of every year)
4. Education Day:
Members’ education day was held on 25th October 2014 where members were advised
on various issues. Key issues were as follows:
SACCO ACT and its implications to the Society:
o There must be a distinction of Shares Capital and Share Deposits.
Members Shares cannot be used as a basis of computing loans. Only deposits
can be used for securing loans.
o The Government requires a minimum of Kshs10million as Share Capital
from the Sacco which should be raised over four years.
o Interest on members’ deposit: there shall be an initial reduction in dividend
and interest on deposits to members as a result of attaining the core capital
and institutional capital requirement. More funds shall be allocated to the
reserves.
Investment company:
The investment company is operational. The main objective of the company was to seek
more viable projects like Land/ house purchase, invest more in bonds and other
worthwhile schemes. It is open to Mzima Sacco members and only requires a minimum
of only shs 500 per share.
- Membership forms are available in the Mzima Sacco’s office and on the Sacco’s
website.
- After filling in the application form, purchase of shares can be made through the
payroll check off system or even through cash.
- The company was able to sell the first phase of land to members during year 2014
and more projects are on the way.
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Ministry officials and Members of Staff from CIC also talked to members about their
products.
FINALLY
The management committee would like to thank the members for their continuous
support that has led to the growth of the SACCO and as a committee we are driven by
your faith and it is our pleasure to serve you. Your suggestions on what the SACCO can
do to be better are welcome.
Let us remain committed to the philosophy of saving more and borrowing wisely for
personal development.
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SUPERVISORY COMMITTEE REPORT
Role of the Supervisory Committee
• Act as the “watchdog” of the Sacco to protect and safeguard member assets.
• Ensure that records are maintained properly, honestly and accurately.
• Make sure that policies are established according to law and carried out faithfully.
• Check to see that proper internal controls are in place.
• Ensure that members receive the best possible service.
In light of the above the Supervisory Committee exercised its mandate as stipulated in
the BY laws by carrying out the operations and affairs of the Sacco.
Nature and Scope of work done in 2014
1. Reviewed all loans issued to members to confirm adherence to the loan issue
procedures as stipulated in the Sacco by laws
2. Reviewed the effectiveness and efficiency of loan recovery from members, as well as
the default rate of loans issued to members and efforts made to recover the debts
owed in full
3. Checking on the progress of the Sacco System
4. Checking on the growth of the Sacco in terms of members and share contributions.
5. Reviewed minutes of the Supervisory committee as a way of confirming that all the
meetings were approved in advance and exclusively healed to advance the Sacco
business
6. Reviewed the progress on the investment company.
7. How to protect guarantors in case of a de-faulting member.
Summary of the Outcome.
Reviewed all loans issued
After the reviewing of the Sacco records from 2014 to the date of compilation, we
discovered that at least 99% of all loans were issued to eligible Sacco members and that
29 | P a g e
the right procedure was followed. Most of these loans were issued within the stipulated
timeframes in the Sacco bylaws. In addition, these loans were being recovered from
Loanees on a monthly basis. We also urge members to adhere to the 75% rule of
clearance of a previous loan before applying for another one.
Defaulters
The amount on Loan defaulters has drastically reduced to Ksh.900,000 quoted on the
2012-2013 report to around 200,000KES.Even though this is an improvement, we feel
that a lot more efforts should be directed towards full collection since a failure to recover
the loans in full might lead to bad debts arising and subsequently resulting to losses to
the Sacco.
Sacco System:
We are happy to report that during our audits and regular interactions with the Sacco
officials this year, we noted that a Sacco system was procured and is running quite well.
The software has a very user friendly interface and is helping a lot in maintain Sacco
records and member details.
Unlike the excel worksheets that would take long to update, retrieving of members loan
repayment schedule can now be done by the click of a button. Hence making the whole
Sacco account operations very easy to manage and run with a lot of efficiency.
Growth of the Sacco
Further to our meetings we discovered that the Sacco has grown in size by the full
registration of some net 50 plus (more joining than leaving) more members since the last
AGM. We commend the efforts of the MC for creating more awareness to new and existing
members of the Sacco. We now also urge the members to also try and sell the Mzima
Sacco idea to their colleagues at work both new ones and those who are yet to join the
Sacco.
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Growth of the Investment Company
We also noticed that since its inception the investment Company has grown from the
initial 36 members to 121 members. With a minimum share going for 10,000kes and a
maximum of 15,000kes.We feel that this is a positive although growth and more can still
be done towards selling the idea.
Purchase of Land in Kitengela
We are also happy to note that through the investment Company the Sacco finally
purchased an 8 acres parcel of land in Kitengela and subdivided it into ¼ Acers that was
all sold to members. The purchase of a second piece of land is also in the pipeline and
members will be duly updated on the progress.
Issues Arising
Protecting Guarantors
The issue of defaulters has refused to go away! This is mainly because the guarantor’s
shares will always be at risk when one defaults to repay a loan. This has been seen as a
major hindrance as it is affecting the Sacco spirit.
We request that the MC sees how best to deal with defaulters and also advise members
on how to recover monies from a defaulter who has refused to pay and the money has
been recovered from the guarantors shares.
Improving of Sacco staff terms
With the growth of the Sacco in terms of members and with the introduction of the
investment company the SC feels that some something needs to be done in terms of
remuneration vis-à-vis the growth and increase in workload.
Conclusion.
In the SC opinion, based on the monthly audits on the Sacco’s internal control
environment, we fell that there was a reasonable assurance that the financial statements
are complete, accurate and reliable. The Sacco’s operations were also compliant with the
by-laws.
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With a comparison to last year’s report a lot of commendable progress has been made
towards the achievement of the Sacco’s vision and mission. We in the Supervisory
Committee are more that determined to serve you and to ensure that Mzima Springs
Sacco remains to be your partner of choice in development.
We would like to express our earnest gratitude to all members for the collaboration and
assistance they accorded us as we carried out our duties as the Supervisor Committee in
the year ended. We reiterate our commitment to serving you and look forward to a more
successful years ahead.
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CORPORATE GOVERNANCE REPORT
Previously research has shown that corporate governance in Sacco’s in Kenya has not
been effectively regulated and supervised. It is important to emphasize that good
corporate governance practices in the SACCOs is imperative if the cooperative movement
is to effectively play a key role in the overall development in Kenya. The Center for
Corporate Governance and SASRA have recommended good corporate governance
principles that the SACCO has tried to adopt and implement.
Mzima Springs Sacco lives by the following principles:
1)Participation
Members’ participation is essential for effective and efficient governance and
management. All members shall have a voice in the decision-making process either
directly, or through the organs that represent them. Such participation shall be free of
intimidation, duress or undue influence. This is reflected during our annual general
meeting where members are involved in approving the budget, election of qualified
officials and adoption of accounts.
2) Transparency and Easy Access to Information
All processes, decisions and relevant information shall be transparent, and accessible to
all those concerned. Governance organs shall hold regular meetings to direct the SACCO’s
affairs. In this respect, the Board/Committee and its Sub-Committees shall meet at least
once a month, while the General Meeting shall be held at least once a year and in any
case not later than 3 months following the close of the SACCO’s financial year. For issues
that require special resolution, like changing bylaws, all members shall be invited.
Similarly, the Supervisory/Audit Committee shall meet regularly to provide effective
supervision of Mzima Springs Sacco operations and general business.
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3)Accountability
All decision makers shall be accountable to immediate supervisors and higher organs and
ultimately, to the members and communities.
4) Consensus Orientation
The different organs and officials shall endeavor to reach consensus on all matters critical
to the Mzima springs Sacco operations. This is achieved through a participatory approach,
transparent systems and operations, and full accountability to the members. People in
power shall be open to differing viewpoints.
5)Efficiency and Effectiveness
Mzima Springs Sacco ltd has governance organs that have policies, processes and
procedures that produce results that meet the needs of members. Hence, the SACCO’s
resources shall be used efficiently.
6) Equity
All members have equal opportunity to benefit from services offered by Mzima springs
Sacco ltd , without discrimination and are treated with utmost fairness at all times.
7) Respect for Rules, Policies and Regulations
Mzima Springs Sacco ltd is regulated by the Sacco’s Act and it By-laws .The Sacco always
ensure that it members are updated on any changes through continues education that it
holds annually.
8) Strategic and Visionary Leadership
Mzima Springs Sacco ltd is led by leaders and management who have a vision and
commitment to the Sacco, and passion to improve members and the communities at
large.
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COMMITTEES AND THEIR ROLES
Management Committee (Main Committee)
1. Develop, review and uphold the bylaws. 2. Set and implement a strategic direction for the SACCO. 3. Ensure SACCO meets legislative requirements. 4. Develop SACCO policies and procedures and ensure they are documented and in a manual. 5. Manage SACCO resources financial and non-financial. 6. Manage membership. 7. Records and document management. 8. Deliver on delegated tasks and assignments.
The following table shows the attendance of the Management Committee for the year
ended 31st December 2014
Month Jan Feb March April May June July Aug Sept Oct Nov Dec
Geoffrey
Injeni
Josephine
Muli
Josphat
Manani
Bernard
Wanjala
David Dimba
Emma Miriti
Fred
Odhiambo
John Njane
Notes
Fred Odhiambo joined the Management Committee from September 2014 to replace
David Dimba. David Dimba resigned from the SACCO
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John Njane joined the Management Committee from October 2014 to replace Peter
Ochuodho.
Were Lwanga joined the SACCO in February 2014 to replace Bernard Wanjala who also
left the Sacco and this coincided with his retirement from the management committee.
The Management Committee is made up of the following Sub- committees:
1. Audit, Risk and Finance
Audit 1. Appointment of both internal and external auditors. 2. Coordinate the audit and registration of financial statements with the ministry. 3. Coordinate the internal audit activities and reports. Risk 1. Prepare a risk management policy and procedures manual 2. Prepare a report on current risks facing the SACCO and how the necessary actions. Finance 1. Coordinate the finance and administration activities of the office 2. Prepare the finance and administration policy and Procedures manual. 3. Preparation of financial statements (On a quarterly basis) to be discussed in the meetings. 4. Coordinate the activities of the Investment company. 5. Identifying and proposing accounting and administration softwares to be used in the SACCO. 6. Identify a suitable insurance company for the SACCO. 7. Ensure the SACCO records and other documents are properly safeguarded
2. Nomination and Education
Nominations 1. Prepare a policy and procedures manual for nominating members in the management/supervision and employment in the SACCO. 2. Identify, select and recommend suitable persons to the SACCO. 3. To recommend the best corporate governance practices and principles in the SACCO. 4. Prepare job descriptions for the various positions. 5. Conduct Staff and committee member appraisals. Education 1. Prepare the Education policy and procedures manual for Education. 2. Identify the training needs for the MC, SC and SACCO employees.
36 | P a g e
3. Coordinate the education events of the SACCO. 4. Liaise with all the relevant stakeholders of the SACCO i.e. CIC, KUSCO, the ministry and others.
3 Marketing and Communication
Marketing 1. Prepare the marketing strategy for the SACCO. 2. Coordinate all the marketing activities and promote the SACCO. 3. Design promotional materials to be posted at different media including the website. 4. Promote the SACCO brand, engage in other promotional activities, and give talks and other events. Communications 1. Coordinate all the correspondence to members through the various channels (emails, mobile phones and website) 2. Ensure that the website content is up to date and interactive 3. Check all other information that is to be distributed to employees or other parties:
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SOCIAL RESPONSIBILITY REPORT
Over the past years Mzima Springs Sacco has been donating to various entres towards
their bursary schemes. In year 2014, Mzima Springs made donations as follows:
Strathmore University (Ksh 30,000)
Strathmore School (Ksh 20,000)
Kianda School (Ksh 20,000)
Kibondeni College (Ksh 10,000)
Community Outreach Programme(COP) run by Strathmore University (Ksh 20,000)
The amount donated to COP was used to paint the Sosiani Primary.
Christine Garashie, one of the organizers of the program:
“I would like to thank all of you at Mzima Springs SACCO for the donation of Kshs 20,000 towards community service projects. With the donations, we were able to paint a school in Eldoret. Thank you once again, it is with partners like you that we are able to lift up the communities where we live!” Some of the photos for the project:
38 | P a g e
“Community Outreach program from Strathmore University painting at the Sosiani
primary School in Eldoret”
The SACCO also received letters of appreciation from other Centers.
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KEY STATISTICAL INFORMATION
DECEMBER 2014
2014 2013 2012
Membership 477 453 393
Members' Deposits (sh.) 82,295,984 71,143,372 64,221,767
Core Capital (sh.) 9,350,756 6,350,953 5,155,291
Loan to Members (sh.) 87,702,729 79,714,564 64,655,336
Investment (sh.) 64,000
88,038
88,038
Assets (sh.) 97,012,323 82,810,626 73,488,740
Liabilities (sh.) 87,661,566 76,459,673 68,333,450
Interest Income (sh.) 9,597,824 7,495,616 6,967,351
Other Incomes (sh.) 34,376
35,279 132,024
Key Ratios
Liquidity Ratio 13.4:1 2:1 2:1
% of Expenses to Gross Turnover 68.81% 84.00% 88.57%
% of Interest on Members Deposits to Turnover 41.53% 53.00% 56.00%
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STATEMENT OF MANAGEMENT RESPONSIBILITIES
STATEMENT OF MANAGEMENT COMMITTEE'S RESPONSIBILITIES
FOR THE YEAR ENDED 31 DECEMBER 2014
Statements of responsibilities
The Management Committee is required to prepare financial statements for each financial year that give a true and fair view of the Society's state of affairs of the society as at the end of the financial year and of its surplus or deficit and cash flows for that year. The Management Committee should ensure the society keeps proper accounting records that disclose, with reasonable accuracy, the financial position of the Society. It is also responsible for safeguarding the assets of the Society.
The Management Committee accepts responsibility for the annual financial statements which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and the Co-operative Societies (Amendment) Act 2008.
The Management Committee is of the opinion that the financial statements give a true and fair view of the state of financial affairs of the society and its results. The Management Committee further accepts responsibility for the maintenance of accounting records that may be relied upon in the preparation of the financial statements, as well as adequate systems of internal financial control.
Nothing has come to the attention of the Management Committee to indicate that the Society will not remain a going concern for at least 12 months from the date of this report.
Chairman ________________________
Treasurer ________________________
Secretary ________________________
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INDEPENDENT AUDITOR’ REPORT
TO THE MEMBERS OF MZIMA SPRINGS SACCO LIMTED
FINANCIAL STATEMENT FOR YEAR ENDED 31st DECEMBER 2014
Report on the financial statements
We have audited the accompanying financial statements of the Mzima Springs Savings &
Credit Cooperative Society set out on pages 37 - 51 which comprise the statement of
financial position at 31st December 2014, the statement of profit or loss, statement of
changes in equity and statement of cash flows for the year then ended, together with a
summary of significant accounting policies and other explanatory notes.
The Responsibility of the Management Committee for the financial
statements
The management committee is responsible for the preparation of financial statements
that give a true and fair view in accordance with International Financial Reporting
Standard and the requirements of the Kenyan Cooperative Societies' Act 2008
(Amendment) and for such internal controls as management committee may determine
are necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
The Auditor’s responsibility
Our responsibility is to express an independent opinion on these financial statements
based on our audit. We conducted our audit in accordance with International Standards
on Auditing. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance whether the financial statements
are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risk of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
42 | P a g e
the institution's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Opinion
In our opinion the accompanying financial statements give a true and fair view of the
state of financial affairs of the society as at 31 December 2014 and of its financial
performance and cash flows for the year then ended in accordance with the International
Financial Reporting Standards and the requirements of the Kenyan Cooperatives Societies
Act.
Report on other legal requirements
As required by the Cooperative Societies Act (Amendment) of 2008 we report to you,
based on our audit, that:
(i) We have obtained all the information and explanations which to the best of our
knowledge and belief were necessary for the purposes of our audit;
(ii) In our opinion proper books of account have been kept by the society, so far as
appears from our examination of those books; and
(iii) The society's statement of the financial position and statement of comprehensive
income are in agreement with the books of account.
The engagement partner responsible for the audit resulting in this
independent auditors' report is CPA Anthony Mulila P/No.1897.
Mulila & Associates
Certified Public Accountants of Kenya
Nairobi, Kenya
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STATEMENT OF PROFIT OR LOSS
Statement of profit or Loss for the year ended 31 December
2014 2013
Revenue Note Kshs Kshs
Interest from Members Loans 16 9,597,824 7,495,616
Less: Interest on Members Deposits (4,000,000) (4,000,000)
Net Interest from Members Loans 5,597,824 3,495,616
16
Interest income from Bank 3,576 3,768
Total Net Interest Income 5,601,400 3,499,384
Other Incomes 16 30,800 31,511
Total Income 5,632,200 3,530,895
Administrative Expenses 16 (2,627,777) (2,329,941)
Financial Expenses 16 - -
Net Operating Surplus for the year 3,004,423 1,200,954
Income Tax Expense (4,620) (5,292)
Net Surplus for the year after tax 2,999,803 1,195,662
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STATEMENT OF CHANGES IN EQUITY
Share Statutory Entrance Retained
Capital Reserve Fees Surplus Total
Year Ended 31 December 2013 Notes Kshs Kshs Kshs Kshs Kshs
As at January 2013 4,000,000 514,730 80,500 560,061 5,155,291
Surplus for the year 16- - -
1,200,954 1,200,954
Tax Provision for the year- - -
(5,292) (5,292)
Transfer to surplus Statutory Reserve Fund-
239,133 -
(239,133)-
As at 31 December 2013 4,000,000 753,863 80,500 1,516,590 6,350,953
Year Ended 31 December 2014
As at January 2014 4,000,000 753,863 80,500 1,516,590 6,350,953
Surplus for the Year 16- - -
2,999,803 2,999,803
Transfer to surplus Statutory Reserve Fund-
599,961 -
(599,961)-
As at 31 December 2014 4,000,000 1,353,824 80,500 3,916,433 9,350,756
45 | P a g e
STATEMENT OF FINANCIAL POSITION
Notes 2014 2013
Kshs Kshs
ASSETS
Cash and Bank Balances 5 3,759,979 1,779,864
Trade & Other Receivables 6 5,201,692 996,682
Loans to members 7 87,702,729 79,714,564
Investments 8 64,000 88,038
Property, Plant & Equipment 9 163,924 205,086
Intangible Assets 10 - 26,392
Work-In-Progress (System) 11 120,000 -
97,012,323 82,810,626
LIABILITIES
Members Deposits 12 82,295,984 71,143,372
Trade and Other Payables 13 701,940 658,133
Tax Provision 4,432 5,104
Interest on Members Deposits 14 4,659,211 4,653,064
87,661,566 76,459,673
EQUITY AND LIABILITIES
Share Capital 15 4,000,000 4,000,000
Retained Earnings 5,350,756 2,350,953
9,350,756 6,350,953
TOTAL EQUITY AND LIABILITIES 97,012,323 82,810,626
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER
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STATEMENT OF CASH FLOWS
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER
2014 2013
Note Kshs Kshs
Cash Flows From Operating Activities
Interest receipts 15 9,597,824 7,495,616
Other operating income 30,800 31,511
Interest Payments (3,993,851) (3,018,602)
Payment to employees and suppliers (2,586,616) (2,196,120)
3,048,157 2,312,405
Increase/Decrease in Operating Assets
Net Loans to members (7,988,165) (15,059,228)
Trade & Other receivables (4,205,010) 344,970
(12,193,174) (14,714,258)
Increase/Decrease in Operating Liabilities
Deposits from members 11,152,612 6,921,605
Trade and other payables 43,807 242,174
Honoraria paid - -
11,196,418 7,163,779
2,051,401 (5,238,074)
Tax paid (5,292) (39,246)
Net Cash received (used) in operating activities 2,046,109 (5,277,320)
Cashflows From Investing Activities
Investment 24,038 -
Purchase of equipment (120,000) (18,000)
Interest received 3,576 3,768
Disposal of assets 26,392 -
Net cashflow from Investing Activities (65,994) (14,232)
Net Decrease/Increase in cash and cash equivalent 1,980,115 (5,291,552)
Cash and Cash Equivalents as at 1st January 1,779,863 7,071,415
Cash and Cash Equivalents as at 31st December 5 3,759,978 1,779,863
47 | P a g e
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
The principle accounting policies adopted in the preparation of these financial
statements are set out below:
a) Statement of compliance & basis of preparation
The financial statements are prepared under the historical cost convention
and are in compliance with International Financial Reporting Standards and the Co-
operative Societies (Amendment) Act 2008, and are presented in the functional currency.
b) Revenue recognition
Income is recognized to the extent that it is probable that the economic benefits will flow
to the Sacco and the revenue can be reliably measured. Revenue is recognized at fair
value of consideration received or receivable taking into account contractually defined
terms of payment (mostly monthly) and recognized net taxes. The following recognition
criteria must be met before revenue is recognized:
i) Interest from loans to members
Interest on loans to members is calculated on a reducing balance method at a monthly
rate of 1%. Interest income is recognized on a time basis by reference to the principal
outstanding and the effective interest rate applicable.
ii) Fees and commission income
Fees and commission income is recognized at the time of effecting the transactions.
iii) Dividend Income
Dividend income from equity investment is recognized when the society's right to receive
payments as a shareholder is established.
48 | P a g e
iv)Other Income
Other income is recognized on an accrual basis
c) Property, plant and equipment
All categories of property, plant and equipment are initially recognized at historical cost.
All items of property, plant and equipment are stated at historical cost less accumulated
depreciation and accumulated impairment losses.
Subsequent costs are included in the asset's carrying value only when it is probable that
future economic benefits associated with the item will flow to the company and the cost
of the item can be measured reliably. Repairs and maintenance is charged to the profit
and loss account in the year to which it relates.
Depreciation is calculated using straight line method to write down the cost of each asset
to its residual value over its estimated useful life using the following annual rates:
Rate - %
Office Equipment 12.5
Computers 30.0
Property, plant and equipment are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair
value less costs to sell and value in use.
Gains and losses on disposal of property, plant and equipment are determined by
reference to their carrying amount and are taken into account in determining operating
profit.
49 | P a g e
d) Provision for liabilities and charges
A provision is recognized in the balance sheet when the society has a present legal or
constructive obligation as a result of past event and it is more likely than not that an
outflow of economic benefits will be required to settle the obligation and it can be reliably
estimated.
e) Taxation
Current tax is provided on the basis of the results for the year, as shown in the financial
statements, adjusted in accordance with tax legislation.
f) Reserves
Transfers are made to the statutory reserve fund at a rate of 20% of net operating surplus
after tax in compliance with the Co-operative Societies Act (Amendment) of 2008.
g) Cash and Cash Equivalents
For the purposes of the Cash flow statements, the year end cash and cash equivalents
comprise cash on hand and demand deposits and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to
an insignificant risk of changes in value net of bank overdrafts.
h) Intangible assets
Intangible assets include computer software stated at cost less accumulated amortization.
The cost of amortized over the expected useful life at a rate of 30% on reduced balance.
50 | P a g e
i) Interest on members loans
Interest rates are charged at reducing balances at 1% for the Normal and Emergency
loans.
j) Comparatives
Where necessary, comparative figures have been adjusted to conform to changes in the
presentation in the current year.
k) Pensions obligations
The society also contributes to statutory defined contribution pension scheme, The
National Social Security Fund (NSSF). Contributions are determined by local statute and
are currently limited to Kshs 200 per employee per month, with the school contributing a
similar amount.
The society contribution to the above schemes are charged to the statement of profit or
loss in the year in which the relate.
l) Employee entitlements
Employees entitlements to annual leave are recognized when they accrue to employees.
A provision is made for the estimated monetary liability for annual leave at the balance
sheet date and recognized as an expense accrual.
3. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including experience of future events that are believed to
be reasonable under the circumstances.
51 | P a g e
i) Critical accounting estimates and assumptions
Property, plant and equipment
Critical estimates are required in determining the depreciation rates for property, plant
and equipment. The management determines these rates of depreciation based on their
assessment of the useful lives of the various items of property, plant and equipment.
These rates are set out in policy 1 (c).
ii) Critical judgments in applying the entity's accounting policies.
In the process of applying the society's accounting policies, management has made
judgments in determining:
• The classification of financial assets and leases
• Whether assets are impaired
4. Employees
The average number of employees during the year was 2
2014 2013
Kshs Kshs
5. BANK AND CASH BALANCES
Cash-in-hand
2,905
22,450
Co-operative Bank Ltd
3,757,074
1,757,414
3,759,979
1,779,864
6. RECEIVABLES & PREPAYMENTS
Sundry Debtors
503,023
503,023
Resigned Members Loans
327,659
443,659
Prepaid Insurance
80,080
50,000
Members Remittances - December
4,290,930
-
5,201,692
996,682
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7. LOANS TO MEMBERS
Control Account Balance 87,702,729 79,345,321
Balance per Member Individual Accounts 87,706,852 79,714,564
(4,123)
(369,243)
8. INVESTMENT
KUSCO
64,000
64,000
Others
-
24,038
64,000
88,038
9. PROPERTY, PLANT AND EQUIPMENT SCHEDULE
(a)
Furniture
& Fittings Computers Totals
12.5% 30.0%
Kshs Kshs Kshs
COST
As at 1 January 2014
205,293
517,725
723,018
Additions
-
-
As at 31 December 2014
205,293
517,725
723,018
DEPRECIATION
As at 1 January 2014
88,921
429,012
517,933
Charge for the year
14,547
26,614
41,160
As at 31 December 2014
103,468
455,627
559,094
NET BOOK VALUE
As at 31 December 2014
101,826
62,098
163,924
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As at 31 December 2013
116,372
88,713
205,085
(b) 2013
Furniture
& Fittings Computers Totals
12.5% 30.0%
Kshs Kshs Kshs
COST
As at 1 January 2013
205,293
499,725
705,018
Additions
-
18,000
18,000
As at 31 December 2013
205,293
517,725
723,018
DEPRECIATION
As at January 2013
72,296
390,991
463,287
Charge for the year
16,625
38,020
54,645
As at 31 December 2013
88,921
429,012
517,933
NET BOOK VALUE
As at 31 December 2013
116,372
88,713
205,085
As at 31 December 2012
132,997
108,734
241,731
10. INTANGIBLE ASSETS SCHEDULE
(a) PROPERTY PLANT AND EQUIPMENT SCHEDULE 2014
Computers
Software Totals
30.0%
Kshs Kshs
COST
As at 1 January 2014
263,920
263,920
Disposal
(263,920)
(263,920)
Additions -
-
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As at 31 December 2014 -
-
AMORTISATION
As at January 2014
237,528
237,528
Disposal
(237,528)
(237,528)
Charge for the year
-
-
As at 31 December 2014
-
-
NET BOOK VALUE
As at 31 December 2014
-
-
As at 31 December 2013
26,392
26,392
(b) INTANGIBLE ASSETS SCHEDULE 2013
Computers
Software Totals
30.0%
Kshs Kshs
COST
As at 1 January 2013
263,920
263,920
Additions
-
-
As at 31 December 2013
263,920
263,920
AMORTISATION
As at January 2013
158,352
158,352
Charge for the year
79,176
79,176
As at 31 December 2013
237,528
237,528
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NET BOOK VALUE
As at 31 December 2013
26,392
26,392
As at 31 December 2012
105,568
105,568
2014 2013
Kshs Kshs
11. WORK-IN-PROGRESS
Accounting Computer System
120,000
-
12. PAYABLES AND ACCRUALS
Due to resigned members
386,500
106,677
Audit Fees
62,350
40,000
PAYE
-
88,200
Sundry Payables
240,575
19,579
Investment Company
12,515
399,478
Ministry of Co-operative & Marketing
-
4,200
701,940
658,134
13. MEMBERS DEPOSIT
Balance per Members Personal Accounts
82,311,542 71,143,372
Balance per Control Accounts
82,295,984 71,143,372
15,558
-
14. INTEREST ON MEMBERS DEPOSITS
Balance Brought Forward
4,653,064
3,671,666
Paid during the year
(3,993,853)
(3,018,602)
Provision for the year
4,000,000
4,000,000
4,659,211
4,653,064
15. SHARE CAPITAL
Opening Balance
4,000,000
4,000,000
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Reserves Capitalized in the year - -
4,000,000
4,000,000
2014 2013
16. DETAILED STATEMENT OF INCOME & EXPENDITURE
Kshs Kshs
Income Notes
Interest from Members
9,597,824
7,495,616
Sundry Income
-
4,811
Entrance Fees
30,800
26,700
Investment Interest
3,576
3,768
9,632,200
7,530,895
Administrative Expenses
Salaries & Wages 10
752,208
671,200
Printing & Stationery
30,856
11,243
Telephone & Postages
8,800
8,800
Legal Fees 12
3,950
37,500
Depreciation 5
41,161
54,645
Armotization
-
79,176
AGM Expense
221,640
207,300
Committee Sitting Allowance
759,615
488,900
Staff Welfare
63,000
54,185
Repairs & Maintenance
72,282
11,000
Insurance
240,240
204,500
Travelling Expenses
60,195
6,810
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Supervision Fees
-
4,200
Audit Fees - Internal
60,000
90,000
- External
50,000
40,000
Computer Expenses
40,000
27,233
Supervisory Fees
72,000
128,700
Donations
80,000
80,000
Medical Expenses
18,770
36,587
Ministry of Cooperative
3,160
20,000
NSSF Employer Portion
4,800
4,800
Bank Charges
45,100
63,162
Total Expenditure
2,627,777
2,329,941
RISK MANAGEMENT REPORT
1. Overview
2. Risk management framework
3. Governance Structure and types
of risks
4. Capital Management
5. Management of risk
6. Conclusion
1.0 Overview
Mzima Springs SACCO just like other organizations is exposed to different risks. These
risks include market risk, credit risk, liquidity risk, operational risk and reputational risk.
The Sacco’s overall risk management framework focuses on the unpredictability of
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financial markets and seeks to minimize potential adverse effects on the Sacco’s financial
performance. Risk management is carried out by the Audit, Risk and Finance sub-
committee under policies approved by the overall management committee. The sub-
committee identifies, evaluates and manages financial risks together with other
subcommittees. The sub-committee has prepared a risk management policy and
procedures manual and a report on current risks facing the SACCO and the necessary
measures to be taken or taken to mitigate the risks and their effects.
2.0 Risk management framework
3.0 Governance structure
Strong independent oversight is in place at all levels throughout the SACCO.
The Audit, Risk and Finance committee (AFC) is responsible for:
(i) Reviewing the SACCOs financial position and making recommendations to the board
on all financial matters, including assessing the integrity and effectiveness of accounting,
financial, compliance and other control systems; and
•Action•Measure
•Evaluate• Identify
Credit RiskLiquidity
Risk
Operational Risk
Reputational Risk
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(ii) Ensuring effective communication between internal auditors, external auditors, the
board, management and regulators.
The group risk and credit committee (RCC) provide, among other things, independent
and objective oversight of risk and capital management of the SACCO by:
(i) Reviewing and providing oversight of the adequacy and effectiveness of the SACCO’s
risk management framework
(ii) Approving risk and capital management governance standards and policies
The SACCO has an internal auditor who carries out quarterly audits and prepare reports
to the Audit, risk and management committee. The report covers substantially the
potential risks.
Types of Risks
3.1 Credit risk
Credit risk is the risk of credit loss to the SACCO as a result of failure by a counterparty
to meet its financial and/or contractual obligations to the SACCO. This is a primary risk,
which the exposure at default (EAD) is arising from lending and related SACCO products.
3.2 Liquidity risk
Liquidity risk arises when the SACCO, despite being solvent, cannot maintain or generate
sufficient cash to meet its payment obligations as they fall due, or can only do so at
adverse terms.
This type of risk may arise where members who have always contributed to the SACCO
with deposits withdraw their deposits.
3.3 Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events. This includes information and legal risk but
excludes reputational and strategic risk.
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3.4 Business risk
Business risk relates to the potential revenue shortfall compared to the cost base due to
strategic and/or reputational and economic reasons.
3.5 Reputational risk
Reputational risk results from damage to the group’s image among stakeholders, which
may impair its ability to retain and generate business. Such damage may result from a
breakdown of trust, confidence or business relationships.
4.0 Capital management
The SACCO capital management framework serves to ensure that the SACCO is
capitalized in line with the risk profile, regulatory requirements, economic capital
standards and target ratios approved by the management committee. The SACCO capital
management objectives are to:
a. Maintain sufficient capital resources to meet minimum regulatory capital
requirements set by SASRA in accordance with Cooperative Act.
b. maintain sufficient capital resources to support the SACCO’s risk appetite.
c. allocate capital to businesses to support the SACCO’s strategic objectives,
including optimizing returns on economic and regulatory capital; and
d. Ensure the SACCO holds enough capital in order to achieve the target capital
adequacy ratios set by management committee.
4.1 Capital adequacy
The SACCO manages its capital base to achieve balance between maintaining capital
ratios to support SACCO growth and savers confidence, and providing competitive returns
to members.
The SACCO ensures that its actions do not compromise sound governance and
appropriate business practices.
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5.0 Risk management by the SACCO.
5.1 Credit risk management Credit risk refers to the risk that counterparty will default
on its contractual obligations resulting in financial loss to the Sacco. Credit risk arises
principally from the Sacco’s loans and advances to its members. This risk is the exposure
at default (EAD) arising from lending and related SACCO products. The amounts
presented in the statement of financial position are net of impairment for doubtful debts,
estimated by the committee based or prior experience and assessment of the current
economic environment. The Sacco has adopted a policy (as contained in its by-laws) of
only dealing with creditworthy counterparties and obtaining sufficient number of,
guarantors where appropriate, as a means of mitigating the risk of financial loss from
defaults. The Sacco also structures the level of credit risk it undertakes by placing limits
on amount of risk accepted in relation to one borrower. The Sacco does not have any
significant credit risk exposure to any single counterparty or any Sacco of Counterparties
having similar characteristics. Other measures that the SACCO has in place is to minimize
credit risk:
(i) To seek confirmation from the workstation regarding an employee’s status before
loans are disbursed.
(ii) To ensure that when a member who is leaving the SACCO has a loan, request tye
workstation and guarantors for clearance before the member’s benefits can be released.
(iii) Seek legal redress.
(iv) The SACCO is now planning to forward names of defaulters to the credit reference
bureau.
5.2 Liquidity risk management. The committee has built an appropriate liquidity risk
management framework for the management of the Sacco’s short, medium and long-
term funding and liquidity management requirements. The Sacco manages liquidity risk
by maintaining adequate reserves, banking facilities, by continuously monitoring forecast
and actual cash flows and matching the maturity profiles of financial assets and liabilities.
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5.3 Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes,
people and systems or from external events. The management committee has established
clear communication channels within the staff and the management committee members.
The MC also established sub committees which have well defined responsibilities and how
each subcommittee relates to one another. The SACCO commissioned development of a
new system to enhance speed of the SACCO processes.
5.4 Reputational risk
Reputational risk results from damage to the group’s image among stakeholders, which
may impair its ability to retain and generate business. Such damage may result from a
breakdown of trust, confidence or business relationships. In order to prevent such event
the SACCO adopted the current corporate governance and management practices in its
MC and staff members’ recruitment, training of every stake holders on matters concerning
the SACCO and reporting of the SACCO operations and financial performance. The new
system will increase transparence as each SACCO member will access their individual
deposit and loan statements.
5.6 Capital Risk management The Sacco manages its capital to ensure that it will be
able to continue as a going concern while maximizing the return to members through the
optimization of the debt and equity balance. The capital structure of the Sacco consists
of net debt calculated as total debt less cash and cash equivalents and equity.
6.0 Conclusion
The SACCO management committee has put in place enough mechanisms to identify and
mitigate any risk that may face it. It has built a strong risk management framework to
protect the operations and control any loss that the SACCO would be exposed to. This
has gone a long way to increase the confidence of the management to continue serving
the SACCO even in the future.
