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GENERAL INFORMATION
The Micro
Investment Development Agency Limited was established with the primary
objective of energizing the micro sector and facilitating the development of
micro enterprises, through the implementation of the following strategies.
* The provision of wholesale funds to establish lending
agencies for on-lending to genuine applicants, desirous of starting new
businesses or expanding existing micro businesses.
* To place special emphasis on facilitating the loan
demands of people who would otherwise experience extreme difficulty in
accessing funding from the formal commercial banking sector.
* To strengthen the credit management process by providing technical advice, training and support to the Approved Lending Agencies and final borrowers.
CASH
CASH
DISBURSEMENTS:
Cash Expenditure
The main areas
of expenditure by the CDFs are as follows:
(A) Loan
disbursements
(B) Investments
deposits
(C) Interest payments on loans security deposits
(D) Operating
(Administrative) expenditure
(E) Principal and
interest payments to MIDA and others
Cheque disbursement requirements:-
Cheque
disbursement requisitions are to be prepared for all cheque payments.
All Cheque
disbursement requisitions are to show the following:
(1) Date of
payment
(2) The name of
the payee
(3) Amount of
payment ($ amount)
(4) Cheque
number
(5)
Classification of payment
(6) The
signature of the Office Manager (the preparer)
(7) Evidence of
approval by the Chairman or Secretary of the CDF.
All cheque
disbursement requisitions MUST be supported by suppliers' invoices (attached to
the cheque disbursement requisitions) and as far as possible such disbursements
should be made payable to the suppliers.
Invoices are to be duly stamped PAID, with the cheque number and payment date recorded therewith upon disbursement of Cheque.
Canceled cheques
are to be attached to the cheque disbursement requirements which have been
clearly marked CANCELED.
Cheques
made payable to ”CASH” are PROHIBITED.
The signing or
countersigning of blank cheques are PROHIBITED
All cheques are
to be sequentially pre-numbered.
Custodian,
Approval and Cheque Signatories Functions:-
The custodian of the cheque disbursement records is NOT authorized to Approve cheque disbursement requisitions. The Office Manager of the CDF has the custodial responsibility. The responsibility for approval of cheque disbursement requisitions is that of the Secretary or the Chairman of the CDF.
Cheque
signatories are EITHER the Chairman OR the Secretary of the CDF and ONE member
of the Management Committee of the CDF. This cheque signer should be satisfied
that the amount of the cheque presented to him/her for signature covers, in the
aggregate, the amount of bona fide invoices/statements for purchases or for
loan repayments.
Cheque Distribution:-
The distribution of cheques is to be done once each week for operating expenditures and once each month for loan disbursements.
CASH DISBURSEMENT BOOK
The cash
disbursement book (hard cover analysis book) is to be prepared in columnar form
detailing the fooling information:-
(I)
date
(II)
particular (payee)
(III)
cheque number(all cheques are to be accounted for)
(IV)
amount of payment
(V)
allocation of payments, for example
a.
Rent
b.
Salary
c.
Electricity
d.
Stationery
e.
Petty Cash
f.
Loan repayments
See Appendix
(VI) for Chart of Account to facilitate the allocation of the Cash Disbursement
Book.
The Cash
Disbursement Book is to be maintained/updated on MONTHLY BASIS, with the
monthly allocations being totaled for positing to the general ledger.
PETTY CASH
Petty Cash Float:-
A petty Cash
float s to be established for each CDF. The recommendation range is between
$500.00 and 1,000.00. The Petty Cash System is to be on the IMPRES BASIS- that
is the float is to be reimbursed to the submission of duly approved Petty Cash
vouchers.
EXAMPLE: Petty Cash Limited $500.00
Less Payment made to: $
(i)
John Brown for stationery 150.00
(ii)
Taxifare 50.00
(iii)
Office Supplies
258.00
458.00 $458.00
(i) and (iii)
supported by bills
CASH IN HAND 42.00
Reimbursement
requested by cheque
requisition-1 $458.00
PETTY CASH FLOAT $500.00
1
the above (i) to (ii) petty cash vouchers are the supporting documentary
evidence for the cheque payment.
Petty Cash Vouchers:-
Petty cash
vouchers are to be prepared for all petty cash payments. The petty cash
vouchers are to show the following:
(i) date of payment
(ii) Amount of payment ($ amount)
(iii) Classification (purpose) of payment
(iv) The signature of the Office Manager (the preparer)
(v) The name of the payee (recipient)
(vi)
The signature of
the person receiving the cash
The Petty Cash
vouchers are to be prepared in INK
and the amounts should be written on it as well as indicated in figures.
The Petty Cash vouchers MUST be supported by payment invoices (bills attached to the petty cash vouchers). The Petty Cash vouchers presented for reimbursement should be canceled in the manner mentioned in cash disbursements. The reimbursement cheques are to be made payable to the Petty Cash Custodian. The Petty Cash fund is NOT to be used for unauthorized advances, in return for I.O.U.'s. and similar disbursements constituting at least an improper use of the CDF's All Petty Cash must be kept in a locked pan which should be stored in a safe place.
Petty Cash Book:-
Petty Cash book is to be prepared in columnar form detailing the following information:-
Expenditures:-
(i) date of payment
(ii) particulars (payees)
(iii) amount of payment/expenses
(iv) allocation of expenses, for example
a. Electricity
b. Rent
c. Stationery
d. Office supplies
Reimbursements:-
(i) date of receival of reimbursement
(ii) amount of money reimbursement
See Appendix IV for Chart of Account to facilitate the allocation of disbursement/expenditure.
The Petty Cash
book is to be maintained/updated on a MONTHLY BASIS; with the monthly
allocations being totaled for posting the general ledger.
CASH RECEIPTS
Sources of Income:-
- Governments Grants through Micro Investment development Agency
- Receipts of funds, for on-lending, from MIDA
- Interest Income
- Share deposits
- 25% Security deposit on loans
- Other grants
Cash receipts issued:-
Cash receipts are to be prepared for ALL monies (including cheques) received.
All cheques received are to be restrictively endorsed as soon as they are received. Such an endorsement would indicate that the cheque can be deposited only to the account of the CDF.
The bank at which the CDF has its account is to be instructed NOT to cash cheques payable to the CDF.
All cash receipts are to show the following:-
- Date of received of monies
- Amount of money received in both words and figures
- The name of the person or company making the remittance
- The signature of the officer of the company collecting the monies on behalf of the CDF.
- Classified or allocation of the amount of collected between principal and interest payments – where applicable.
Cash receipts are to be prepared in duplicated and distributed as follows:-
- Originals to the customers/clients
- Copies remain in the receipt books
Both original and copy cash receipts are to remain in the cash receipt book where the particular receipt is canceled.
All cash receipts are to be sequentially pre-numbered.
Banking:-
All bank accounts and signatures are to be authorized by the Management Committee. Formal notice of authorized cheque signatures in the form of certified copies of the minutes of the Management Committee at which the signatures were authorized is to be given to the CDF’s banker. The bank will honour cheques bearing these signatures until revocation of equal formality is received by the bank.
All
monies collected are to be deposited promptly and intact in the CDF’s bank
account on a DAILY basis or EVERY OTHER DAY depending on the volume of
transactions. NO MONIES ARE TO REMAIN IN THE CDF’s OFFICE OVER A WEEKEND OR
LONG
All cheques lodged by the CDF are to be listed on the duplicated deposit slip receipted by the bank. Details of cheques listed on the duplicated deposit slips are to be compared with particulars in the cash receipt records (at least on a test basis) by the Secretary of the CDF.
Cash Receipt Book:-
The cash receipt book (hard cover analysis book) is to be prepared in a columnar form detailing the following information:-
(i) date of receipt
(ii) particulars (persons making remittance)
(iii) receipt number (all receipts are to be accounted for)
(iv) amount of monies received
(v) bank(representing amount of monies lodged)
(vi) allocation of receipts for example
a. Loan repayment received – principal and interest
b. Shares
c. Interest on investments or deposits
d. Security deposits on Loan
e. Grants
f. Loans
g. Investment repaid on maturity
See Appendix V1 for Chart of Account to facilitate the allocation of the cash Receipt book.
The Cash Receipt book is to be maintained/updated on a MONTHLY BASIS, with the monthly allocation being totaled for posting to the general ledger.
RECONCILIATION OF BANK BALANCES
Bank reconciliations are to be prepared on a monthly basis. The employee who inspects and approves the cheque disbursement requisitions, and the cheque signer, are NOT to take part in the preparation of the reconciliation.
The bank statements are paid cheques are to be delivered in unopened envelopes directly to the employee preparing the reconciliations.
In the preparation of the reconciliation the following are to be carried out to ensure an effective reconciliation:-
- The comparison of cheques with cash disbursement records including cheques dated prior to the opening reconciliation.
- The examination of endorsement, on a test basis
- The comparisons of the balances with the General Ledger balances
The CDF’s Secretary is to review ALL reconciliations, question unusual reconciliation items and initial the reconciliation as evidence of review.
The segregation of duties between the cash receipts function, cash disbursements function – approval, cheque signing and that of review of the banking reconciliation is ESSENTIAL for proper ACCOUNTING CONTROLS.
GENERAL JOURNAL
Journal entries are to be raised for the following:-
(I) accruals for interest expense/income
(II) accruals for investments interest
(III) accruals for depreciation of fixed assets
(IV) accruals for recurring expenses
Adjustments can be made in any of the CDF’s accounts, by means of a journal entry. Consequently, EVERY journal entry MUST be supported by appropriate supporting documents and approved by the Secretary of the CDF.
GENERAL LEDGER
Each CDF is to prepare a General Ledger. The General Ledger is to be maintained on a MONTHLY BASIS.
Posting to the General Ledger should emanate from the following:-
(i) cash disbursement book
(ii) cash receipt book
(iii) general journal entries
AUDIT AND ANNUAL RETURN
The Management Committee must ensure that the financial statements for the year/period ending 31st December of the Community Development Fund is audited, and Annual Returns filed with the Registrar of Companies by the 31st March in the following year.
SHORT TERM INVESTMENT AND RELATED INCOME
Short term investments consist mainly of fixed deposits at commercial banks.
Funds received from the Community Revolving funds are included in short term deposits.
The CDF is to obtain a listing of the members’ deposit from the CRFs on the receipt of the funds.
All investment securities held are to be in the CDF’s name. If the investment securities are not in the CDF’s name then they are to be endorsed restrictively in the name of the CDF.
All investment transactions are to be authorized or approved by the Management Committee.
Securities which are held as collateral (security deposits) are to be recorded and segregated (their costs are NOT to be recorded in the CDF’s books) from those of the CDF’s.
Interest income on the short term investment is to be accrued on a MONTHLY basis by way of General Journal.
An investment register must be maintained. This investment register is to record the following:
(I) date of purchase of investment
(II) name of company or financial institution invested in
(III) cost of investments
(IV) rate of interest
(V) maturity date (if applicable)
(VI) market value if quoted security
(VII) interest accrued calculations
LOANS
In order to obtain a loan through the CDF, shares have to be purchased in the CDF. The Provident Society Act states the maximum number and amount of shares, that is 80 shares and $400 respectively, required by members.
Prior to the approval of loans the Credit Committee reviews the loan proposal, and based on its assessment a recommendation is proposed. The Committee consists of a selection from the Management Committee.
Security:-
Cash collateral of 25% of the loan value is to be obtained for all loans approved. Additional collateral is to be taken if available.
Interest rate payable, on the security deposit, is determined by the Management Committee.
The respective journal voucher is to be approved by the Secretary of the CDF.
Security cards are to be maintained for all security deposits obtained. Interest payable is to be accrued MONTHLY on the cash (security) deposit.
Provisions for Loan Losses (Bad Debt Provision):-
Provisions for loans losses are to be made for all accounts 121 days overdue. Provision is to be made for the balance on principal less marketable security. The accruals of interest income on the delinquent loans cease at the date of provision or a date to be determined by the Management Committee.
Provision for loan losses (bad debt provision - expenses) are to be made for all loan balances, (in full) with principal repayment past due 121 days and over.
The required journal entry for bad debt provision, for example is:
Date:
Dr. Cr.
$ $
JV#1. Bad debt provision (principal)…… 268,984.59
Accumulative Bad debt provision (principal) 268,984.59
Being bad debt provision for the following loans:
$
1. Brown - 49,651.50
2. Smith - 132,111.05
3.
4. Johnson - 67,102.01
268,984.59
If Brown’s loan is to be written-off at a later date, (no further payments received) the required journal entry will be:
Date
Dr. Cr.
$ $
JV#2.
Accumulative Bad debt provision…. 49,651.50
CDF loans portfolio (General Ledger) 49,651.50
Being balance on Brown’s loan, now written-off.
N.B. Brown’s loan card, (after write-off) is then removed from the CDF’s loans file and placed in “loans written-off” file. It is no longer part of the CDF’s asset.
N.B. If Brown starts to repay on the written-off loan, then the loan card should be placed back into the CDF’s asset through reversing JV#2 &JV#1 above.
The accruals of interest income on delinquent loans cease at the date of provision or a date to be determined by the Management Committee.
N.B. Uncollectable Interest
Provisions
and write-offs must also be made for uncollectible interest already booked as
per “Receivable:- Loan Interest”.
QUARTERLY ARREARS REPORT/ENTRY FOR A BAD
DEBT PROVISION
N.B. Field accountants delivering technical assistance must ensure that the CDFs’ Quarterly Arrears Reports are used to adjust the CDFs’ Provisions For Bad Debt Account by making the appropriate entries in each CDF’s General Ledger for each quarter.
Loans Disbursements:-
Disbursements by the CDF can be as follows:-
(i) Part disbursement to the borrower (based on supplier’s invoice)
(ii) Part disbursement directly to the supplier
(iii) Full disbursement to cover the cost of the equipment.
Interest Income:-
Interest receivable is to be calculated and accrued monthly in the general ledger. The customers’ (borrowers’) loan accounts are to be maintained MONTHLY. On the receipt of payment the amount collected is to be first applied to the loan interest outstanding BEFORE the principal balance.
The rate of interest (lending rate) as stipulated by Micro Investment Development Agency is determined by the Approved Lending Agencies and is not to exceed 32% on the declining balance.
General:-
A loan register is to be maintained detailing the following:-
(i) loan number (sequentially numbered)
(ii) name of borrower
(iii) amount of loan ($ amount)
(iv) cheque number
Individual files, containing the documentation to support the loan, are to be maintained for all borrowers. Details of supporting documentary evidence and credit policy will be stated in the CREDIT MANUAL
Accounting Records;-
A loans ledger (subsidiary ledger) is to be maintained (see Appendix IX). The loans ledger is to reflect the following:-
(i) name and address of the borrower
(ii) date of loan
DEBIT (iii) particulars, for example
a. loans receivable/principal
b. interest receivable/amount
CREDIT (iv) cash receipt, for example
a. principal repayment
b. interest repayment
(v) folio reference, for example
a. cash book reference
b. journal voucher number
The interest account in the subsidiary loans ledger (individual borrower) is to be debited with the interest receivable amounts. The general ledger is to be debited with total accounts receivable interest and credit with the interest income amounts.
The CDF is to prepare monthly loans arrears report for submission and review by Micro Investment Development agency (see Appendix X).
LOANS FROM MIDA
Loans are granted to the CDFs by Micro Investment Development Agency in accordance with its objective of energizing the micro enterprises.
MIDA loans granted are dependent on the approved projects in the hands of the CDF. A prerequisite of the MIDA loans is that the CDF MUST have 25% of the funds required , and this is to be hypothecated in the name of MIDA.
The rate of interest charged by MIDA is 19% per annum. The loans granted MIDA for on-lending are subject to the restriction of maximum lending rate of 32% per annum (on reducing balance).
A moratorium period not exceeding 12 months on PRINCIPAL ONLY is normally granted. No moratorium is granted on interest.
Repayments on principal and interest are on a quarterly basis.
Monthly accruals of interest due to MIDA is to be made in the general ledger, by means of general journals, for example:-
DR interest expense
CR MIDA interest payable
On the quarterly payment of interest to MIDA, the required entries from cash disbursement book is:-
DR MIDA interest payable
CR Bank
PAYABLES AND ACCRUALS
The monthly accrual of recurring items of expenditure is recorded by means of general journal.
Examples of items for which monthly accruals are made are as follows:-
(I) Interest payable on deposits from the Community Revolving funds
(II) Interest payable on security deposits
(III) Interest payable on MIDA loans
(IV) Interest on any other loans
On the actual payment, the accruals are reversed by general by general journal, for example:-
DR Accruals (Interest payable)
CR Bank
APPENDIX I
CHEQUE DISBURSEMENT VOUCHER
Community Development
Fund
DATE
CHEQUE
NO:
PAY
TO:
AMOUNT
$:
IN SETTLEMENT OF:
PREPARED
BY: CHECKED
BY APPROVED
BY:
APPENDIX II
PETTY CASH VOUCHER
Folio No. Date:
For
What Required Amount
Approved by Received
by
APPENDIX III
CASH RECEIPT 0213
………………………..……19…….
Received from………………………………………………………………………………………...........
The sum of………………………………………………………………………………………………….
………………………………………………….Dollars……………………………………………Cents
for………………………………………………………………………………………………………….
COMMUNITY
DEVELOPMENT FUND
J$.................................................... Per…………………………………………………...
With thanks
APPENDIX IV
BANK
RECONCILIATION
|
General Ledger Account
Balance |
$.................. |
|
Month………………………………. |
………..... |
|
Add Debits: .……………………………………………………………………………………………………………………………………………………………… Total DR TOTAL Less Credits ………………..$............................................................$............................................................$................................. Total CR Bank Balance as per General
Ledger |
$.................. $.................. $.................. $.................. |
|
Balance as per Bank
Statement as at ………………………….19………. Add Deposits in Transit ………………………………………………………………………………………………………………………………………………………………………… Total in Transit TOTAL Less Cheques Outstanding (see list
below) ………………………………………………………………………………………………………………………………... TOTAL Bank Balance as per
Reconciliation |
$............... $............... $............... $............... $............... $............... |
OUTSTANDING
CHEQUES
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NUMBER |
AMOUNT |
NUMBER |
AMOUNT |
NUMBER |
AMOUNT |
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APPENDIX V
COMMUNITY DEVELOPMENT FUND
JOURNAL VOUCHERS
MONTH
ENDING NO.
|
ACCOUNT # |
PARTICULARS |
DEBIT |
CREDIT |
|
|
Interest
Expense |
xxxx |
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Interest
Payable |
|
xxxx |
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Bad
Debt Expense |
xxxx |
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Provision
for Bad Debt |
|
xxxx |
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PREPARED
BY_________________________________ APPROVED
BY ___________
DATE _______________________________________
APPENDIX VI
COMMUNITY DEVELOPMENT FUND
GENERAL LEDGER
CHART OF ACCOUNTS
CASH
PROVISION
BANK ACCOUNT #1 PROVISION
FOR DEPRECIATION
PETTY CASH
DEPOSIT
– (SHORT TERM) INCOME
INTEREST
INCOME
FIXED
ASSETS MISC.
INCOME
INTEREST
INCOME (members loans)
EXPENSES
Advertising and Promotion GRANT - SESP
Audit Fees SHARE CAPITAL
Bank Charges LONG TERM LOAN
Board Meeting Expense
Depreciation
Donations
Electricity
Employer’s Pension Contribution
Employer’s Statutory Contribution
General Insurance – Fire/Perils
Miscellaneous Expenses
Office Rental
Office Supplies
Repairs and Maintenance - Building
Salary
Staff Welfare and Training
Stationery
Traveling Subsistence
Telephone
RECEIVABLES
Loan (member)
Misc. Receivable
Interest Receivable Deposit (short Term)
Interest Receivable Members’ Loans
PAYABLES
Misc. Payable
Members/C.R.F. payable