WANA-ANGA SAVINGS & CREDIT SOCIETY LIMITED

Transcription

1 WANA-ANGA SAVINGS & CREDIT SOCIETY LIMITED For the year ended 31 st December 2017 Gad wekesa & Associates Certified Public Accountants P. O. Box Nairobi, Kenya

2 CONTENTS PAGE Society Information 2 Statistical Information 3 Report of the Board of Directors 4 Statement of Responsibilities of the Board of Directors 5 Report of the Independent Auditors 6-8 Financial Statements: Statement of comprehensive income 9 Statement of Financial Position 10 Statement of Changes in Equity 11 Statement of Cash flows 12 Notes to the financial statements Tax computation schedule 28 Page 1

3 SOCIETY INFORMATION Board Members S. M. Gachara - Chairman P. Omeny - Vice Chairman B. Chanzu - Hon Secretary C. Musundi - Treasurer M. Oloo - Member C. M. Ngunjiri - Member N. Maingi - Member E. Muriuki - Member C. Ambenje - Member Supervisory Committee J. Nguyo - Chairman H. Sese - Secretary C. Ogundu - Member Registered Office Principal Bankers Wana-Anga Co-operative Savings & Credit Society Ltd. Meteorological Department Headquarters, Dagoretti Corner, Ngong Road, P. O. Box NAIROBI Co-operative Bank of Kenya Ltd, Coop Bank House Branch, Nairobi Co-operative Bank of Kenya, Dagoretti Corner Branch, Nairobi Jamii Bora Bank, Nairobi Standard Chartered Bank of Kenya Limited, Karen Branch, Nairobi Consolidated Bank of Kenya Limited, Koinange Street Branch, Nairobi. National Industrial Credit Bank Limited, Junction Branch, Nairobi Independent Auditor Chief Executive Officer Gad Wekesa & Associates, Certified Public Accountants P. O. Box , NAIROBI Vincent Rota, P. O. Box NAIROBI Page 2

4 STATISTICAL INFORMATION Membership (b) Movement in membership number Number at start of the year 3,878 3,614 Admissions in the year Cessations during the year (57) (75) Number at end of the year 4,052 3,774 Statistical data Kshs Kshs Total Assets 1,182,782,378 1,110,629,678 Cash and cash equivalents 108,764,549 93,322,461 Members deposits 941,359, ,399,656 Loans to members 895,650, ,382,523 Investments 21,332,542 5,430,164 Core capital 141,955, ,508,368 Share capital 91,371,090 86,656,058 Institutional capital 53,802,755 33,070,690 Total revenue 163,356, ,466,308 Total Interest income 156,099, ,503,243 Total Expenses 128,109, ,804,976 Rebate on members deposits 30,015,628 39,263,836 Net surplus / (loss) before tax 35,247,729 17,661,332 Proposed dividend payable 13,705,664 13,594,362 Key Ratios Capital adequacy Ratios Core capital to total assets 12.0% 10.5% Core capital to deposits 15.1% 12.7% Institutional capital to total assets 4.5% 3.0% Liquidity ratios Liquid assets (cash) to short-term liabilities/deposits 11.6% 10.2% Operating efficiency & loan quality ratios Rebate on member deposits to total revenue 18.4% 21.6% Rebate on members deposits 5.0% 7.0% Dividend rate on members share capital 15.0% 15.0% Page 3

5 REPORT OF THE BOARD OF DIRECTORS The members of the Board of Directors are pleased to submit their annual report and audited Financial Statements for the year ended 31 st December 2017 Incorporation The Society is incorporated in Kenya under the Co-operative Societies Act, Cap 490 and is domiciled in Kenya. Principal Activity The principal activity of the Society continued to be the receipt, custody and investment of members savings and provision of loans to members. Results Kshs Kshs Surplus (deficit) before tax 35,247,729 16,395,040 Provision for taxation - - Net surplus (deficit) after tax 35,247,729 16,395,040 Transfer from appropriation account (7,049,546) (3,279,008) Donations (174,000) (212,000) Proposed dividend (13,705,664) (12,998,409) Honoraria (636,000) (636,000) Retained earnings 13,682, ,623 Rebate on members' deposits 30,015,628 39,263,836 Dividend / Rebates on members deposits The Board of Directors recommend payment of first and final dividend of 15% equal to 13,705,664 (2016: 15%, 12,998,409) and payment of a rebate of 5% equal to Kshs 30,015,628 (2016: 7%, 39,263,836) The Board of Directors The board members who served during the year and to the date of this report is as listed on page 2. Auditors Gad Wekesa and Associates, Certified Public Accountants, the auditors for the year 2017, have expressed their willingness to continue in office and therefore offer themselves for consideration for re-appointment under the terms of the Co-operative Societies Act. By Order of the Board of Directors Signature Hon. Secretary Date.... Page 4

6 STATEMENT OF THE BOARD OF DIRECTORS RESPONSIBILITIES The Sacco Societies Act No. 14 of 2008 requires the Board of Directors of a deposit taking Savings and Credit Co-operative Society to prepare annual financial statements which give a true and fair view of the state of affairs of the society as at the end of the financial year and of its operating results for that year in accordance with the International Financial Reporting Standards. It also requires the Board of Directors to ensure that the society keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the society. They are also responsible for safe guarding the assets of the society and ensuring that the business of the society has been conducted in accordance with its objectives, by-laws and any other resolutions made at the Society s general meeting. The Board of Directors accepts responsibility for the accompanying financial statements for the year 2017, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgments and estimates, in conformity with International Financial Reporting Standards and in the manner required by the Sacco Societies Act No.14 of The Board of Directors is of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the society and of its operating results in accordance with the International Financial Reporting Standards. The Board of Directors further accepts responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as for maintenance of an adequate system of internal financial control. Nothing has come to the attention of the Board of Directors to indicate that the society will not remain a going concern for at least twelve months from the date of this statement. Approved by the Board of Directors on.. and signed on its behalf by: Signature. Chairman Signature. Treasure Signature. Hon. Secretary Page 5

7 Gad Wekesa & Associates Certified Public Accountants Nacico Co-op. Plaza P.O.Box Ground Floor Nairobi-Kenya Landhies Road Tel: Mobile: / REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF WANA-ANGA CO-OPERATIVE SAVINGS AND CREDIT SOCIETY LIMITED Report on the financial statements We have audited the accompanying financial statements of Wana-anga Co-operative Savings and Credit Society Limited, set out on pages 8 to 28 which comprise the statement of financial position as at 31 st December 2017, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Opinion In our opinion, the financial statements present fairly, in all material respect the financial position of the Society as at 31 st December 2017 and of the results of its performance and cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) and the requirements. Basis of opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of this report. We are independent of the Society in accordance with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and without qualifying our opinion, we draw attention to the following key audit matter:- (i) Institutional Capital Ratio The Sacco s non-compliance with the requirement under Regulation 9(c) of the Sacco Societies (Deposit-taking Societies Business) Regulations, 2012, to maintain the ratio of its institutional capital to total assets at not less than 8% at all times, In 2017 the Sacco s institutional capital ratio was 4,5%. The Sacco operated below the required ratio throughout the year as disclosed under Note 29 of the notes to the financial statements. Page 6

8 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF WANA-ANGA CO-OPERATIVE SAVINGS AND CREDIT SOCIETY LIMITED (CONTINUED) Responsibilities of the Board of Directors for the Financial Statements The directors are responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards (IFRS), with the requirements of the Kenyan Co-operative Societies Act, and for such internal control as directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the society s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intends to cease operations of the society or have no realistic alternative but to do so. Nothing has come to our attention to make us believe that the society will not continue as a going concern at least for one year from the date of these financial statements. Those charged with governance are responsible for overseeing the society s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements The Objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISA) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain skepticism throughout the audit. We also: (i) (ii) (iii) (iv) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 the Society s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Society s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our report. However, future events or conditions may cause the Society to cease to continue as a going concern. Page 7

9 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF WANA-ANGA CO-OPERATIVE SAVINGS AND CREDIT SOCIETY LIMITED (CONTINUED) (v) (vi) (vii) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Society to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion Perform such other procedure as we consider necessary in the circumstances We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on other legal requirements As required by the Sacco Societies Act No. 14 of 2008, we report to you that the financial statements are in agreement with the books of accounts kept by the society and that, based on our audit, nothing has come to our attention that causes us to believe that the society s business has not been conducted: i) In accordance with the provisions of both the Kenyan Co-operative Societies Act, Cap 490 and the Sacco Societies Act No. 14 of ii) In accordance with Wana-anga Sacco Society s objectives, by-laws and any other resolutions made by the society members at a general meeting. Engagement Auditor The engagement partner responsible for the audit resulting in this independent auditors report is CPA Phanuel Gad Wekesa, P/No. 946 Certified Public Accountants (Kenya) NAIROBI Date Page 8

10 STATEMENT OF COMPREHENSIVE INCOME (Notes) Kshs Kshs Revenue Interest on loans to members (2) 154,832, ,324,071 Other interest income (3) 1,266,935 23,179,172 Total interest income 156,099, ,503,243 Interest expenses (4) (77,898,216) (98,635,009) Net interest income 78,201,702 73,868,234 Other income (5) 7,257,011 8,963,065 Operating income 85,458,713 82,831,299 Operating expenses Financial expenses (6) 2,773,280 9,802,765 Staff costs (7) 14,670,091 14,272,628 Administrative expenses (8) 20,903,913 27,546,000 Governance expenses (9) 10,540,492 11,966,900 Amortization & Depreciation expense (10) 1,323,209 1,581,674 Operating expenditure 50,210,984 65,169,967 Surplus / loss for the year before tax 35,247,729 17,661,332 Page 9

11 STATEMENT OF FINANCIAL POSITION AS AT 31 ST DECEMBER B2017 (Notes) Kshs Kshs ASSETS Cash and cash equivalents (11) 108,764,549 93,322,461 Trade and other receivables (12) 130,853,936 70,852,619 Restricted funds (13) 14,017,752 77,071,009 Taxation (14) 897, ,107 Loans to members (15) 895,650, ,382,523 Financial Assets (16) 21,332,542 5,430,164 Intangible assets (17) 369, ,780 Property, plant and equipment (18) 10,896,830 10,516,015 Total assets 1,182,782,378 1,110,629,678 LIABILITIES Members' deposits (19) 941,359, ,399,656 Rebate payable (20) 30,015,628 39,630,047 Proposed dividend (22) 14,085,921 12,998,409 Trade and other payables (23) 1,785, ,039 Interest earning liabilities (24) 10,667,322 13,234,329 Wana-Anga Risk Fund (25) 5,113,331 3,881,666 External borrowings (26) 16,466,435 - Total liabilities 1,019,494, ,691,146 EQUITY Share capital (27) 91,371,090 86,656,058 Statutory reserve fund 26,871,006 19,821,460 Capital revaluation reserve 18,114,162 2,211,784 Retained surplus 26,931,750 13,249, ,288, ,938,532 Total liabilities and equity 1,182,782,378 1,110,629, These financial statements and accompanying notes set out on pages 13 to 27 were approved by the Board of Directors on and signed on its behalf by:-.... (Chairman) (Treasurer) (Board Member) Page 10

12 STATEMENT OF CHANGES IN EQUITY Share capital Statutory reserve Capital revaluation reserve Retained Earnings Proposed Dividend Total Kshs Kshs Kshs Kshs Kshs Kshs Year ended Balance at ,861,864 16,542,452 2,211,784 13,770, ,386,375 Prior year adjustment-dividend paid (638,668) - (638,668) Balance restated 80,861,864 16,542,452 2,211,784 13,131, ,747,707 Surplus (loss) for the year ,395,040-16,395,040 Taxation Transfer from appropriation reserve - 3,279,008 - (3,279,008) - - Donations Proposed dividend (12,998,409) 12,998,409 - Proposed honoraria Additions during the year 5,794, ,794,194 Balance at ,656,058 19,821,460 2,211,784 13,249,230 12,998, ,936,941 Year ended Balance at ,656,058 19,821,460 2,211,784 13,249,230 12,998, ,936,941 Prior year adjustment-dividend paid (12,618,152) (12,618,152) Balance restated 86,656,058 19,821,460 2,211,784 13,249, , ,318,789 Surplus (loss) for the year before tax ,247,729-35,247,729 Taxation Transfer from appropriation reserve - 7,049,546 - (7,049,546) - - Donations (174,000) - (174,000) Proposed dividend (13,705,664) 13,705,664 - Proposed honoraria (636,000) - (636,000) Additions during the year 4,715,032-15,902, ,617,410 Balance at ,371,090 26,871,006 18,114,162 26,931,750 14,085, ,373,928 Page 11

13 STATEMENT OF CASH FLOWS Note(s) Kshs Kshs Cash flow from operating activities Interest income received (2. 3) 156,099, ,503,243 Other receipts (5) 7,257,011 8,963,066 Interest and rebate payments (4, 19) (87,146,424) (100,949,641) Payments to employees and suppliers (6, 7, 8, 9) (48,123,546) (65,471,651) ,086,958 15,045,017 (Increase) / decrease in operating assets Trade and other receivables (12) (1,238,840) (14,466,036) Restricted funds - (77,071,009) Loans to members (13) (40,917,361) (41,588,388) Increase / (decrease) in operating liabilities Deposits from members (18) 22,960,199 (48,749,209) Increase (decrease) in interest bearing liabilities (24, 25, 26, 27) (2,567,007) (1,873,977) Risk fund 1,231,665 (3,640,220) Trade and other payables (23) 1,238,840 (181,990) Cash flow from operating activities before taxes 8,794,455 (172,525,812) Income tax paid (21) - (158,238) Net cash from operating activities after tax 8,794,455 (172,684,050) Cash flow from investing activities Purchase of property and equipment (17) (1,545,699) (380,944) Purchase of intangible assets (computer software) (16) (369,974) - Net cash from investing activities (1,915,673) (380,944) Cash flow from financing activities Share capital contributions (29) 4,715,022 5,794,194 Proceeds from long-term borrowings (28) 16,466,435 - Dividends paid (20) (12,618,152) (12,146,080) Net cash flow from financing activities 8,563,305 (6,351,886) Net (decrease) / increase of cash and cash equivalent 15,442,087 (179,416,880) Cash and cash equivalents at start of the year 93,322, ,739,342 Cash and cash equivalents at end of the period 108,764,549 93,322, Page 12

14 NOTES TO THE FINANCIAL STATEMENTS: 1. Summary of Significant Accounting Policies The principal 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 in accordance and comply with International Financial Reporting Standards. These Financial Statements are presented in the functional currency, Kenya shillings (KSh) rounded to the nearest shilling and prepared under the historical cost convention, as modified by revaluation of certain assets as prescribed by IFRS s b) Revenue recognition Interest on loans is calculated on a reducing balance method accrued on monthly basis on balances outstanding at the beginning of the month based on the interest rate determined by the Board of Directors Dividend income is recognized when received. c) Property, plant and equipment All property, plant and equipment are initially recorded at cost less depreciation. Increases in carrying value amounts arising on revaluations are credited to the revaluation reserve. Each year, the difference between the depreciation based on revalued carrying amount of the asset (the depreciation charged to profit and loss account) and depreciation based on the assets original charge is transferred to retained earnings. Depreciation is calculated using the reducing balance method to write down the cost of each asset to its residual value over its estimated useful life. The annual depreciation / amortization rates in use are: Asset Rate (%) Office furniture and Fittings % Computer Equipment % Computer software 30% Tool & equipment % Motor Vehicles % Land 0% The assets residual values and lives are reviewed, and adjusted if appropriate at each balance sheet date. Gains or 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. On disposal of a revalued asset, amount in the revaluation reserve relating to that asset is transferred to retained earnings. De-recognition The carrying amount of an item of property, plant and equipment shall be derecognized: On disposal; or When no future economic benefits are expected from its use or disposal The gain or loss arising from de-recognition of an item of property, plant and equipment shall be included in the profit and loss account when the item is derecognized. Page 13

15 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: d) Financial instruments Financial assets and liabilities are initially recognized on the society s balance sheet at cost using settlement date accounting, when the society has become a party to the contractual provisions of the instrument. i) Staff loans and other receivables originated by the Society and not held for trading Staff loans and other receivables originated by the Sacco and held to maturity are measured at amortized cost. ii) Held to maturity instruments Financial instruments with fixed or determinable payments and fixed maturity where the society has the positive intent and ability to hold to maturity other than staff loans and other receivables originated by the society are measured at amortized cost. iii) Financial assets at fair value through profit and loss This category has two sub-categories: financial assets held for trading and those designated at fair value through profit and loss at inception. Financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by the management. Gains and losses arising from changes in fair value are recognized in the income statement iv) Available for sale financial assets Financial assets that are not (a) loans and receivables originated by the society, (b) held to maturity investments, or (c) financial assets held for trading are measured at their fair values. Gains and losses arising from changes in fair value are recognized in equity. v) Impairment and collectability of financial assets At each balance sheet date, all financial assets are subject to review of impairment. If it is probable that the society will not be able to collect all amounts due (principal and interest) according to the contractual terms of staff loans, other receivables, or held to maturity investments carried at amortized cost, an impairment or bad debt loss has occurred. The carrying amount of the asset is reduced to its estimated recoverable amount either directly or through use of an allowance account. The amount of loss incurred is included in the income statement for the period. vi) Financial liabilities After initial recognition, the society measures all financial liabilities other than liabilities held for trading at amortized cost. Liabilities held for trading (financial liabilities acquired principally for the purpose of generating profit from short term fluctuations in price or dealer s margin) are subsequently measured at their fair values. vii) De-recognition of financial assets and liabilities The Sacco derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. The society derecognizes a financial liability when, and only when, the Sacco s obligations are discharged. e) Intangible assets Software license costs are stated at historical cost less estimated accumulated amortization and accumulated impairment losses. Amortization is calculated using the reducing balance method to write down the cost of the software to its residual value over the estimated useful life using an annual rate of 25%. f) Taxation Current tax expense represents the sum of the current tax payable computed using a corporation tax rate of 30% based on the 50% of the investment income in line with the tax laws. The society does not have timing differences for purposes of recognition of deferred tax Page 14

16 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: g) Statutory reserves Transfers are made to the statutory reserve fund at a rate of 20% of net operating surplus after tax in compliance with the provision of section 47 (1& 2) of the Co-operative Societies Act, Cap 490. h) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits held at call with banks and other shortterm highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. i) Provisions for liabilities and other charges Provisions are recognized when the Society has a present obligation (legal or constructive). j) Retirement benefit obligations The Society operates a defined contribution retirement benefit scheme for its permanent employees. The assets of the scheme are held in a separate trustee administered funds, which are funded by contributions from both the society and employees. k) Critical accounting estimates and judgments in applying the entity s accounting policies In the process of applying the society s financial accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities within the next financial year. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates including expectations of future events that are believed to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an on- going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision only affects that period or in the period of revision and future periods if the revision affects both current and future periods. l) Key sources of estimation uncertainty The following is the key assumption concerning the future and other key sources of estimation uncertainty at the balance sheet date that has significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year: Property, equipment and intangible assets Critical estimates are made by the society in determining depreciation and amortization rates of property, equipment and intangible assets. Impairment At each balance sheet date, the society reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the society estimates the recoverable amount of the cash generating unit to which the asset belongs. Page 15

17 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: Kshs 2. Interest income on loans and advances to members FOSA loans 86,816,960 82,557,314 Normal loans 31,564,118 26,897,401 New Instant loans 26,062,483 29,511,595 Rudi Nyumbani loans 5,266,791 1,842,144 College fee loans 1,391,718 2,427,697 Instant Normal loans 1,157,897 3,541,962 School fees loans 1,015,371 1,130,450 Emergency loans 742, ,540 New College fee loans 651,801 - Normal Gold loans 163, ,792 Silver loans - 254, ,832, ,324, Other Interest income Interest from fixed deposits - - Interest from other savings deposits 1,266,935 23,179,172 1,266,935 23,179, Interest Expenses Interest expense short term deposits 47,642,325 59,074,751 Interest on ordinary savings 240, ,422 Rebates payable on members' deposits 30,015,628 39,263,836 77,898,216 98,635, Other Operating Income Commissions and fees 5,970,519 7,155,309 Commissions on cash withdrawals 216,512 Mpesa commissions 437, ,408 Entrance fees 35,500 37,736 Dividends income 490,984 1,109,686 Other income 105, ,926 7,257,011 8,963,065 Page 16

18 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: 6. Financial Expenses Bank and Mpesa charges 1,773,280 1,802,765 Provision for loss on restricted funds - 7,000,000 Provision for loan losses 1,000,000 1,000,000 2,773,280 9,802, Personnel Expenses Salaries and wages 13,416,996 13,091,072 NSSF 155,180 - Gratuity 1,097,915 1,181,556 14,670,091 14,272, Administrative Expenses Telephone, postage and internet 376, ,428 Printing and stationery 680, ,437 Dividend administration 2,560,000 3,079,000 Insurance 8,166,295 10,471,005 System annual maintenance 193, ,200 Sasra deposit fee 967, ,607 Sasra license fee 53,000 53,000 Affiliation fees 101, ,375 Office expenses 157, ,904 Motor vehicle fuel & maintenance 313, ,964 Travelling expenses 2,195,050 1,737,650 Computer Data services 281, ,045 Ushirika Day Celebrations 596, ,000 Apex bodies activities 816,250 1,498,325 Repairs and maintenance 228, ,400 Security expenses 418, ,200 Front office expenses 1,195,000 1,760,500 Audit fee 300, ,000 VAT on audit fee 48,000 48,000 Legal fees 120, ,385 Consultancy and workshop expenses 729,750 2,429,575 Sundry expenses 405,698-20,903,913 27,546,000 Page 17

19 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: 9. Governance expenses Board expenses 1,898,350 2,397,250 Members education 560, ,550 Annual General Meeting expenses 5,490,413 5,569,345 Honoraria - 636,000 Subsistence expenses 2,591,229 2,530,755 10,540,492 11,966, Depreciation / Amortization Amortization (Note 18) 158,326 67,620 Depreciation (Note 19) 1,164,883 1,514,054 1,323,209 1,581, Cash and cash equivalents Petty cash account 3,893 - Treasury cash account 11,188,249 8,424,320 Mpesa bank account 6, ,669 Safaricom account 3,530,693 1,927,201 Co-op. Bank savings account 191, ,989 Co-op. Bank current account 23,544,667 25,682,634 Co-op. Bank collateral account 900,000 - Mobile banking settlement account 36,925 - Cash MPesa outlet 457,669 - Coop agent account 70,000 - Standard bank 477,612 - NIC bank 276,632 - Jamii Bank 17,063 - Fixed deposit accounts 68,063,097 56,225, ,764,549 93,322,462 Page 18

20 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: 12. Trade and other receivables Remittances due from employers 16,277,119 18,188,067 Prepayments 400, ,000 FOSA salaries 254,887 - Accrued interest on loans 33,485,698 48,728,506 Loan arrears account - 74,423,765 - Prepaid NSSF, - 25,920 Prepaid NHIF - 17,940 Wanameco 6,012,467 3,362,524 Wanabefu - 129, ,853,936 70,852, Income tax recoverable Balance brought forward (897,107) (1,095,212) Tax assessed for the year - 1,053,493 Tax withheld during the year - (855,388) Tax paid in cash during the year - - (897,107) (897,107) Page 19

21 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: 14. Loans to members (a) Movement of loans & advances Opening balance 881,382, ,820,013 Loans repaid during the year (575,726,000) - Additional loans issued during the year 619,993,711 2,562,510 Closing balance 925,650, ,382,523 Less loan loss provision (Note 14c) (30,000,000) (29,000,000) Net loans and advances balance 895,650, ,382,523 (b) Loans Portfolio School fees loans 9,736,837 9,214,858 FOSA loans 480,724, ,010,890 Emergency loans 6,643,525 7,585,960 New Instant loans 109,037, ,382,535 Rudi Nyumbani loans 29,243,761 29,376,992 Normal Gold loans 1,876,096 2,138,783 New College fee loans 9,779,409 73,078 College fee loans 5,318,720 16,290,970 Normal loans and advances to members 273,289, ,308, ,650, ,382,523 (c) Loans Portfolio Ageing Gross at Provision at Gross at Provision at No.of A/cs , Performing (1%) (3443) 869,675, ,342,767 - Watch (5%) ( 90) 19,215, , ,044, ,201 Substandard (25%)(163) 17,364,207 4,341,052 15,107,885 3,776,971 Doubtful (50%)(102) 3,769,280 1,884,640 5,970,690 2,985,345 Loss (100%) (364) 15,626,137 15,626,137 19,917,158 19,917,158 Totals ,650,234 22,812, ,382,523 27,631,675 (d) Loans Loss Provision Balance at start of the year 29,000,000 28,000,000 Provision for loan loss current period 1,000,000 1,000,000 Loan loss provision at end of the period 30,000,000 29,000,000 Page 20

22 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: 15. Restricted Funds Restricted fixed deposit account 84,071,009 - Release to cash and cash equivalent (63,053,257) 84,071,009 Less provision Balance at start of the year 7,000,000 - Provision for loan loss current period - 7,000,000 Loan loss provision at end of the period 7,000,000 7,000,000 Net restricted funds 14,017,752 77,071, Financial Assets (a). Investments in Quoted Securities at market value (i) 127,500 Ordinary shares in Safaricom Limited (Cost each; Market each) 3,187,500 2,059,125 (ii) 100,800 Ordinary shares in Co-op Bank of Kenya Ltd (Cost each; Market each) 1,612,800 1,200,000 (iii) 6,431 Ordinary shares in Kengen (Cost 7.10 each; Market 8.00 each) 51,448 66,239 4,851,748 3,325,364 (b). Investments in Unquoted Securities at cost 1,433,544 Ordinary shares in Co-op Holdings Co-op. Soc ,762, , ,456 ordinary shares in Co-op Insurance Society ,975, ,500 Shares in Co-op Dev. Information Centre (CODEC) 10,000 10,000 Shares in KNFC Ltd. 16,000 16,000 7,172 Shares in KUSCCO Ltd at Kshs 100 each 717, ,000 16,480,794 2,104,800 Total financial assets 21,332,542 5,430, Intangible assets Cost Balance at start of the period 1,031,498 1,031,498 Additions 369,974 - Total cost 1,401,472 1,031,498 Amortization Balance at start of the period 873, ,098 Charge for the year 158,326 67,620 Balance at end of the period 1,032, ,718 Book value As at 31st December , ,780 Page 21

23 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: 18. PROPERTY, PLANT AND EQUIPMENT Freehold Buildings Computers & Motor Furniture & Office Office Totals land Accessories vehicle Fittings Equipment Partitions Kshs Kshs Kshs Kshs Kshs Kshs Kshs Kshs COST At 01 January ,425,593 6,887,073 1,232,911 4,059,100 4,432,340 2,878,340 24,915,357 Acquired during the year ,954-19,995 21, , ,944 Disposed during the year At 31 December ,425,593 7,121,027 1,232,911 4,079,095 4,453,835 2,983,840 25,296,301 At 01 January ,425,593 7,121,027 1,232,911 4,079,095 4,453,835 2,983,840 25,296,301 Acquired during the year 1,170, ,199-17,500 35,000-1,545,699 Disposed during the year At 31 December ,170,000 5,425,593 7,444,226 1,232,911 4,096,595 4,488,835 2,983,840 26,842,000 DEPRECIATION At 01 January ,832 5,483, ,811 2,035,271 2,822,584 1,898,467 13,479,520 Charge for the year - 125, ,242 97, , , ,672 1,300,767 At 31 December ,552 5,974, ,336 2,291,019 3,017,444 2,034,139 14,780,287 At 01 January ,552 5,974, ,336 2,291,019 3,017,444 2,034,139 14,780,287 Charge for the year - 122, ,829 73, , , ,713 1,164,883 At 31 December ,128 6,415,626 1,013,480 2,516,716 3,201,368 2,152,852 15,945,170 NET BOOK VALUE At 31 December ,170,000 4,780,465 1,028, ,431 1,579,879 1,287, ,988 10,896,830 At 31 December ,903,041 1,146, ,575,788,076 1,436, ,701 10,516,014 Page 22

24 NOTES TO THE FINANCIAL STATEMENTS CONTINUED: 19. Members' Deposits (a) Deposits account balances Savings accounts - FOSA 45,448,504 37,252,741 Fixed term deposits 295,598, ,229,768 Member deposits - BOSA 600,312, ,917,147 Total Members' Deposits 941,359, ,399,656 (b) Movement in total members' deposits balance Savings accounts (FOSA) At start of the year 37,252,741 22,820,329 Contributions during the year 1,318,793,887 1,429,936,621 Withdrawals during the year (1,310,598,124) (1,415,504,209) Sub-total 45,448,504 37,252,741 Fixed Term Deposits At start of the year 320,229, ,597,689 Contributions during the year 411,680, ,546,415 Withdrawals / refunds during the year (436,311,167) (462,914,336) Sub-total 295,598, ,229,768 Members Deposits (BOSA) At start of the year 560,917, ,730,847 Contributions during the year 60,420,328 66,548,594 Withdrawals / refunds during the year (21,024,921) (25,362,294) Sub-total 600,312, ,917,147 Total Members' Deposits At start of the year 918,399, ,148,865 Contributions during the year 1,790,894,411 1,855,031,630 Withdrawals / refunds during the year (1,767,934,212) (1,903,780,839) Total Members' Deposits 941,359, ,399, Rebate payable on members (BOSA) deposits Balance brought forward 39,630,047 41,944,679 Provision for rebate payable for the year 30,015,628 39,263,836 Rebate paid during the year (39,630,047) (41,578,468) Balance carried forward 30,015,628 39,630,047 Page 23

25 NOTES TO THE FINANCIAL STATEMENTS CONTINUED 21. Proposed dividends Proposed dividends b/f 13,594,362 9,004,381 Dividends paid in current period (13,214,105) (9,004,381) Proposed dividend current period 13,705,664 13,594,362 Proposed dividends c/f 14,085,921 13,594, Honoraria Payable Balance brought forward 636, ,000 Provision for the year 636, ,000 Paid during the year (636,000) (612,000) 636, , Trade and Other Payables Excise duty payable 3,799 41,539 Withholding tax payable 24,455 - Wanahewa Housing CS Limited 384,000 - Salaries Control Account - 34,475 Audit fee 300, ,000 VAT on audit fee 48,000 48,000 Un-allocated members' direct deposits 248,574 - PAYE payable 141, ,025 Provision for honoraria 636,000-1,785, , Interest Earning Liabilities (a) Wana-Anga Benevolent Fund (WANABEFU) Balance brought forward 10,410,235 18,446,358 Contributions during the year 5,610,428 6,187,145 Less repayments and claims in the year (8,558,436) (14,223,268) Balance carried forward 7,462,227 10,410,235 (b) Wana-Anga Medical Fund (WANAMECO) Balance brought forward 2,824,094 2,661,948 Contributions during the year 2,035,260 2,176,640 Claims for reimbursement paid in the year (1,654,259) (2,014,494) Balance carried forward 3,205,095 2,824,094 Total Interest earning liabilities 10,667,322 13,234,329 Page 24

26 NOTES TO THE FINANCIAL STATEMENTS CONTINUED 25. Wana-Anga Risk Fund (WANABIMA) Balance brought forward 3,881,666 7,521,886 Contributions during the year 6,199,937 - Less loans written off - deceased members (4,968,272) (3,640,220) 5,113,331 3,881, External Borrowings The Sacco's borrowing is as follows: Co-operative bank loan 16,466,435 - Total non-current borrowings 16,466,435 - The exposure of the Sacco's borrowings to interest rate changes and to contractual monthly repayment installments including 6% p.a. interest as follows:- Interest bearing bank loan at ,466,435 - Bank loan repayable in 6 months or less period 16,466,435 - The borrowing is secured by a 5,000,000 call deposit placed with the financing bank. In the opinion of the Sacco's Board members, the carrying amounts of the bank loan approximate its fair value based on discounted cash flows using the borrowing interest rate. The net movement in the Sacco's bank loan is as follows:- At start of year - - Proceeds during the year 50,000,000 - Repayments during the year (33,533,565) - Effect of foreign exchange - - At end of year 16,466,435 - Bank loan average effective interest rates: 14% p.a 0% Page 25

27 NOTES TO THE FINANCIAL STATEMENTS CONTINUED 27. Share capital a) Authorized Undetermined No. of ordinary shares & b) Issued and partly / fully paid up Ordinary of 20 each. 91,371,080 86,656, Capital Risk Management (a) Objectives and Policies The Society manages its capital to ensure that it will be able to continue as a going concern while maximizing service to members and fair return to members deposits and share capital. The Society is not subject to any external imposed capital requirements. (b) Financial Risk Management The Society s operations are exposed to the financial risks. These risks include market risk (including fair value interest rate risk and price risk), credit risk, liquidity risk and interest rate risk. The Society s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Society s financial performance. Risk management is carried out by the Audit and Compliance sub-committee under policies approved by the Board of Directors. The Audit and Compliance sub-committee identifies, evaluates and manages financial risks in close co-operation with various departmental heads. The Board of Directors provides written principles for overall risk, credit risk, as well as written policies covering specific management areas, such as interest rate risk, credit risk and investment of excess liquidity. The sub-committee reports quarterly to the Board of Directors on all aspects of risks including nature of risks, and measures instituted to mitigate risk exposures. Interest rate risk management The Society is exposed to interest rate risk as it borrows funds at both fixed and floating interest rates. The risk is managed through maintaining an appropriate mix between fixed and floating rate borrowings. Other price risks The Society is exposed to equity price risks arising from equity investments. Equity investments are held for strategic rather than trading purposes. The society does not actively trade these investments. Page 26

28 NOTES TO THE FINANCIAL STATEMENTS CONTINUED (c) Credit Risk Management Credit risk refers to the risk that counter-parties will default on its contractual obligations resulting in financial loss to the society and arises principally from the society s loans and advances to its members. The amounts presented in the Statement of Financial Position are net of impairment for doubtful debts, estimated by the Board of Directors based on prior experience and assessment of the current economic environment. The Society adopted a policy (as contained in its by-laws) of only dealing with creditworthy counter parties and obtaining sufficient collateral, guarantors where appropriate as means of mitigating the risk of financial loss from defaults. The Society also structures the level of credit risk it undertakes by placing limits on amount of risk accepted in relation to one borrower or group of borrowers Trade receivables consist of a large number of customers spread across-diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable and where appropriate, credit guarantee insurance cover is purchased. The Society does not have any significant credit risk exposure to any single counter-party or any society of counter parties having similar characteristics. (d) Liquidity Risk Management The Board of Directors has built an appropriate liquidity risk management framework for the management of the society s short, medium and long-term funding and liquidity management requirements. The Society manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. 29. Institutional capital Ratio Institutional capital comprises reserves, retained earnings, grants and donations all of which are not expended unless on liquidation of the Sacco. In 2017 the ratio of the Sacco s institutional capital to total assets increased by 1.5% from 3.0% at the start to 4.5% at the end of the year. Kshs Kshs Retained earnings 26,931,750 13,249,230 Statutory Reserve 26,871,006 19,821,460 Institutional capital 53,802,755 33,070,690 Total assets 1,182,782,378 1,110,629,678 Institutional capital ratio (%) 4.5% 3.0% Under Regulation 9(c ) of the Sacco Societies (Deposit - taking Sacco Business) Regulations, 2010, the Sacco is required to maintain at all times institutional capital ratio of not less than 8% of total assets. 30. Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year 31. Currency: The Financial Statements are presented in Kenya Shillings (Kshs). Page 27

29 Corporation tax computation PIN. P C Interest income Other income 2017 Total 2016 Total Kshs Kshs Kshs Kshs Interest Income Interest from bank and on savings 1,266,935-1,266,935 23,179,172 Interest on loans to members 154,832, ,832, ,324,071 Other operating income Dividend income - 490, ,984 1,109,686 Sundry income - 105, , ,926 Entrance fees 35,500 35,500 37,736 Risk management recoveries Commissions and fees on services to members - 12,652,201 12,652,201 7,703,717 Gross income 156,099,918 13,284, ,384, ,466,308 Less allowable deductions (a) Income from transactions with members Interest on loans to members 100% 154,832, ,832, ,324,071 0% entrance fees Sundry expenditure 50% - 52,926 52,926 55,963 Commissions on FOSA member income 100% - 12,652,201 12,652,201 3,851,859 (b) Wear & tear allowance other than on buildings - 1,164,883 1,164,883 1,175,047 (c) Income taxed at source Interest from bank 1,266,935-1,266,935 23,179,172 Dividend income ,588,904 Total allowable deductions 156,099,918 13,870, ,969, ,175,016 Chargeable surplus (708,708) Assessed tax for the 30% Less tax withheld at source Less tax recoverable brought forward (708,708) - (708,708) - Tax recoverable at end of period (708,708) - (708,708) (708,708) Page 28