OPERATING RULES AND GUIDELINES FOR CO-OPERATIVE CREDIT UNIONS AND CO-OPERATIVE FINANCIAL INSTITUTIONS (CFI)

Though credit unions have been around for nearly a century, some consumers are still unclear about exactly what they are and what they do.

Bank of Ghana (BoG) and Republic of Ghana Constitution

Co-operative Credit Unions (Credit Union)/Co-operative Financial Institutions (CFI) in Ghana are regulated by the Non-Bank Financial Institutions Act, 2008 (Act 774) and the Co-operative Credit Union Regulations, 2015 (L.I. 2225).

Regulated Activity

Co-operative Credit Unions/CFI’s undertaking activities that involve deposit taking, provision of credits and other financial services to their members constitutes regulated activity under Act 774 and are required to be registered and incorporated under sections 5 and 6 of the Co-operative Societies Act, 1968 (N.L.C.D. 252) and shall obtain a license issued by the Bank of Ghana before commencing or continuing such activities.

Regulatory Requirements

Business Form: the word “co-operative” shall form part of the name of every registered society. The word “limited” shall be the last word in the name of every registered society with limited liability.

Membership: A Co-operative Credit Union/CFI shall have a minimum membership of 150 with a potential membership of not less than 600

Capital: Minimum share capital of every member shall not be less than one hundred Ghana Cedi’s (GHS 100) or such amount as may be determined by the Bank of Ghana.

Shareholding: No member other than a registered Society or Credit Union/CFI shall hold more than one-fifth of the share capital of another Co-operative Credit Union or Society.

Branches and Agencies: Credit Unions/CFI shall not open, close or change a branch office, sub-office, agency or mobile 2 unit in the country without the prior approval of the Bank of Ghana obtained at least thirty days before the date of opening, closing or change and having complied with any other conditions determined by the Bank of Ghana.

Amalgamation or Transfer of Societies or Credit Unions/CFI: Any two or more Societies or Credit Unions/CFI’s may by resolution passed by their respective general or special meetings and with the prior approval of the Bank of Ghana amalgamate as a single society. Amalgamation or transfer of assets and liabilities which involves the transfer of liabilities by one society to another society shall require three (3) months’ notice to be given to the creditors of the societies or society concerned who shall be entitled to a refund of any sum due them upon a written demand at one month before the date fixed for the amalgamation or transfer. The Bank may revoke the license of a Credit Union/CFI in writing if it amalgamates or transfers its assets in a manner contrary to section 14 of NLCD 252.

Permissible activities: Credit Unions/CFI shall undertake the following permissible activities;

1. Deposit taking: No single deposit shall exceed 10% of the total deposit of the Co-operative Credit Union/CFI. A Credit Union/CFI wishing to exceed this limit shall obtain prior written approval of the Bank of Ghana.

2. Granting of loans: A registered Society shall grant loans only to a member of that Society. However, a Society, with the sanction of a Central Society of which it is a member may grant a loan to another Society which is a member of the same Central Society.

Loans granted to a member shall not be more than 10% of the assets of the Credit Union/CFI. A Credit Union/CFI shall not grant a loan on the security of its own shares.

3. Investment: A registered Society or Credit Union/CFI may invest part of its funds in:

ü Deposits in the Co-operative Credit Unions Association

ü Shares of the Co-operative Credit Unions Association

ü Bank deposits

ü Treasury bills and bonds issued by the Government of Ghana/Bank of Ghana securities or certificate

Aggregate investments of a Credit Union/CFI in investments from other Credit Unions shall not exceed 1% of the assets of the Co-operative Credit Union/CFI.

4. Reserve Funds: A Co-operative Credit Union/CFI shall:

ü Establish and maintain a statutory reserve fund into which shall be paid at least 25% of the annual profits of the Co-operative Credit Union/CFI

ü Pay into the Central Finance Facility an amount equivalent to 5% of the total assets of the Credit Union/CFI at the end of each financial year.

5. Borrowing: A Credit Union/CFI shall not:

ü borrow more than 40% of the assets of the Credit Union/CFI;

ü Grant a security interest in its property except with the prior written approval of the Co-operative Credit Unions Association.

6. Dividends: A Credit Union/CFI shall not pay dividend in cash in excess of 50% of its annual profit without the prior approval of the Credit Union Association (CUA)

7. Non-permissible activities: A Credit Union/CFI shall not undertake any of the following:

ü Issue checking accounts. However, a medium to large Credit Union/CFI may, with the approval of the Bank of Ghana, issue checking accounts

ü Engage in foreign exchange business: and

ü Engage in any trading activities or hold any stocks of goods for sale to their clients

8. Display of license: A Cooperative Credit Union/CFI shall at all times display its license or copies of its license, its name and a statement of the fact that it is licensed to carry on business in a conspicuous position on the premises at which it carries on business.

Prudential Oversight

i. Prudential Reporting: The Credit Union Association of Ghana (CUA) shall collect and collate statistics on the operations of Credit Unions/CFIs and furnish this to the Bank of Ghana periodically as may be determined by the Bank.

ii. Submission of Returns: Credit Unions/CFIs shall submit prudential reports on assets, liabilities, income and expenditure to CUA of varying periodicity as may be determined by the Bank of Ghana.

iii. On-site Supervision: Credit Unions/CFIs may be subject to on-site supervision by CUA of such periodicity as may be determined by the Bank of Ghana.

iv. Capital Adequacy Ratio: A minimum Capital Adequacy Ratio of 15% shall be maintained by a Credit Union/CFI or such other ratio as may be determined by the Bank of Ghana.

v. Secondary Reserve Ratio: A Secondary Reserve Ratio of 18% shall be maintained by a Co-operative Credit Union/CFI or such other ratio as determined by the Bank of Ghana.

vi. Operating License: The Operating license of Credit Unions/CFI’s shall be subject to annual renewal upon satisfactory performance and payment of the appropriate license renewal fee as determined by Bank of Ghana.

Submission and Audited Financial Statements

A Credit Union/CFI shall:

ü Submit a copy of its audited financial Statements to CUA not later than three (3) calendar months after the end of its financial year.

ü Exhibit throughout the year at a conspicuous place in every office and branch a copy of last audited financial statements.

Prohibited Actions

A Credit Union/CFI shall not without the approval of the Bank of Ghana change its name as contained in its license; or in furtherance of the business for which it is licensed, use or refer to itself by a name other than the name under which it is licensed or by an abbreviation of that name unless the abbreviation has been approved by the Bank.

Introduction

This article discusses internal controls and measures of a warehouse. The management of a business has the responsibility for the proper recording of transactions in its books of account, for the safeguarding of its assets, and for the substantial accuracy and adequacy of its financial statements. (AICPA, November,1972).

Reviewing the effectiveness of internal control is an essential part of the Board’s responsibilities while management is accountable to the Board for developing, operating and monitoring the system of internal control and for providing assurance to the Board that it has done so.

The directors are of the responsibilities of maintaining a sound system of internal control and reviewing the effectiveness of such a system.

At the heart of the guidance is the premise that sound internal control is best achieved by a process firmly embedded within a company’s operations. However, the guidance asserts that the Board cannot rely solely on such an embedded process, but should regularly receive and review reports on internal control from management. (KPMG, October, 1999).

A company’s system of internal control commonly comprises:

Control environment; The control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure.

Identification and evaluation of risks and control objectives; every entity faces a variety of risks from external and internal sources that must be assessed. A precondition to risk assessment is establishment of objectives, linked at different levels and internally consistent. Risk assessment is the identification and analysis of relevant risks to achievement of objectives, forming a basis for determining how the risks should be managed.

Control activities; Control activities are the policies and procedures that help ensure that management directives are carried out. They help ensure that necessary actions are taken to address risks to achievement of the entity’s objectives

Information and communication processes and pertinent information must be identified, captured and communicated in a form and timeframe that enables people to carry out their responsibilities. All personnel must receive a clear message from top management that control responsibilities must be taken seriously. They must understand their own role in the internal control system, as well as how individual activities relate to the work of others. There also needs to be effective communication with external parties, such as customers, suppliers, regulators and shareholders.

Processes for monitoring the effectiveness of the system of internal control; Internal control systems need to be monitored — a process that assesses the quality of the system’s performance over time. This is accomplished through ongoing monitoring activities, separate evaluations or a combination of the two. Internal control deficiencies should be reported upstream, with serious matters reported to top management and the Board.

The warehouse

Warehousing activities are diverse because the warehoused goods are diverse, the purposes of placing goods in custody are varied, and the scope of operations of warehouses is not uniform. A warehouse may be described as a facility operated by a warehouseman whose business is the maintaining of effective custody of goods for others.

Warehouses may be classified functionally as terminal warehouses or field warehouses:

Terminal Warehouse-The principal economic function of a terminal warehouse is to furnish storage. It may, however, perform other functions, including packaging and billing. It may be used to store a wide variety of goods or only a particular type of commodity.

Field Warehouse- A field warehouse is established in space leased by the warehouseman on the premises of the owner of the goods or the premises of a customer of the owner. In most circumstances all or most of the personnel at the warehouse location are employed by the warehouseman from among the employees of the owner (or customer), usually from among those who previously have been responsible for custody and handling of the goods. Field warehousing is essentially a financing arrangement, rather than a storage operation. The warehouse is established to permit the warehouseman to take and maintain custody of goods and issue warehouse receipts to be used as collateral for a loan or other form of credit.

Warehouses may be classified also by types of goods stored. A wide variety of goods, usually not requiring special storage facilities, is stored in general merchandise warehouses. Some warehouses confine their activities to storing furniture, other household goods, and personal effects.

Recommendations of Control Measures

ü Understanding of controls, relating to the accountability for and the custody of all goods placed in the warehouse

ü Perform tests of controls to evaluate their effectiveness.

ü Test the warehouseman’s records relating to accountability for all goods placed in his custody.

ü Test the warehouseman’s accountability under recorded outstanding warehouse receipts.

ü Observe physical counts of the goods in custody, wherever practicable and reasonable, and reconcile warehouseman’s tests of such counts with records of goods stored.

Internal Warehousing Control Procedures

Receiving, Storing, and Delivering Goods

Warehouse operating procedures should be current on file

Receiving documents should be made available at the time shipment is received

Items should be checked for description, quality and condition at the arrival of shipment & before accepting the bill of lading and completing the receiving report.

Appropriate segregation of duties in the performance of the respective operating functions should be emphasized.

Receipts should be issued for all goods admitted into storage.

Receiving clerks should prepare reports as to all goods received.

The receiving report should be compared with quantities shown on bills of lading or other documents received from the owner or other outside sources by an employee independent of receiving, storing, and shipping.

Goods received should be inspected, counted, weighed, measured, or graded in accordance with applicable requirements.

There should be a periodic check of the accuracy of any mechanical facilities used for these purposes.

Goods should be stored so that each lot is segregated and identified with the pertinent warehouse receipt.

Storage methods should be best suited to the characteristics of the storage areas

The storage plan should permit flexibility of operations and provide for adequate small-lot storage space.

Materials of similar categories should be grouped together as much as practicable.

Hazardous and flammable materials should be stored separately.

The warehouse office records should show the location of the goods represented by each outstanding receipt.

Items should be generally proper packaged and processed prior to receipt.

There should be adequate inspection made of the condition of incoming items.

Access to the storage area should be limited to those employees whose duties require it, and the custody of keys should be controlled.

Periodic statements to customers should identify the goods held and request that discrepancies be reported to a specified employee who is not connected with receiving, storing, and delivery of goods.

Instructions should be issued that goods may be released only on proper authorization which, in the case of negotiable receipts, includes surrender of the receipt.

The stored goods should be physically counted or tested periodically, and quantities agreed to the records by an employee independent of the storage function; the extent to which this is done may depend on the nature of the goods, the rate of turnover, and the effectiveness of other internal control structure policies and procedures.

Where the goods held are perishable, a regular schedule for inspection of condition should be established.

Protective devices such as burglar alarms, fire alarms, sprinkler systems, and temperature and humidity controls should be inspected regularly.

Adequate and proper steps taken to care and preserve storage items.

Goods should be released from the warehouse only on the basis of written instructions received from an authorized employee who does not have access to the goods.

Counts of goods released as made by stock clerks should be independently checked by shipping clerks or others and the two counts should be compared before the goods are released.

Inventory

There should be stock checks conducted to determine the location of the material as reflected on the stock records

Inspectors should be notified when shelf- life items are scheduled for reinspection

Periodic inventories should be made

Periodic spot checks should be conducted to verify the quantity and the condition of material indicated on the stock records

Proper procedure should be used when discrepancies exist

Material in storage should be reviewed periodically to determine the necessity for reprocessing

Shipping

Outbound shipment should properly be manifested

Action should be taken to reconcile a shipment with the order

Carrier tariffs should be observed

Warehouse Receipts

Prenumbered receipt forms should be used, and procedures established for accounting for all forms used and for cancellation of negotiable receipts when goods have been delivered.

Unused forms should be safeguarded against theft or misuse and their custody assigned to a responsible employee who is not authorized to prepare or sign receipts.

Receipt forms should be furnished only to authorized persons, and in a quantity limited to the number required for current use. The signer of receipts should ascertain that the receipts are supported by receiving records or other underlying documents.

Receipts should be prepared and completed in a manner designed to prevent alteration.

Authorized signers should be a limited number of responsible employees.

Supervision

Supervisors should properly plan and schedule work.

There should be daily, weekly and monthly conferences held with key operating personnel to discuss warehouse problems and overall planning of warehousing activities.

There should be balanced of crews and labor used to best advantage.

There should be periodic checks made by supervisory personnel to see if there is idling or lagging on the job

Warehouse staff should be adequately trained for their particular jobs

Administrative personnel should receive adequate training in correct preparation of forms. reports and other clerical duties.

Time and attendance records should accurately and properly maintain.

Labor hours timekeeping should be recorded.

Differences between sick and annual leave should be explained to employees

Material Handling Equipment (MHE)

MHE should be utilized to the maximum and adequate for a balanced operation.

MHE should be centrally controlled and properly distributed for maximum utilization.

MHE should be of high quality, proper size and type for efficient handling of items in storage.

Routine adjustments and minor repairs should be made promptly.

There should be preventative maintenance inspections and lubrications made on each MHE item.

Operators should be instructed in the necessity of preventive maintenance

There should be thorough periodic checkups made of all motorized equipment

MHE records should be maintained so that information is readily available to meet inventory and accounting requirements.

Fire Protection

Firefighting equipment should be conspicuously marked and made readily accessible.

Fire extinguishers, sprinkler systems and other protective equipment should be inspected periodically and a record kept of the inspection date.

Personnel should be instructed about the location and use of available equipment as well as the method of notifying the local fire department when necessary.

There should be scheduled inspection of the premises made to eliminate fire hazards and enforce precautionary measures.

Fire extinguisher recommended by fire safety professionals should be available.

Safety

There should be safety and accidents prevention program in effect.

Management should take active interest and participate in it.

Combustible and flammable materials should be segregated from other materials.

Supervisory personnel should be safety conscious and understand safety and accident prevention methods.

Employees should be instructed in the use of safety methods on their particular jobs and what they are to do in an emergency.

There should be bold written signs of “no smoking”, “no trespassing”, and other safety signs adequately displayed

There should be safety devices provided and employees should adhere to safety clothing

Safety methods should be strictly enforced in handling and storing materials and in housekeeping practices.

Special safety measures should be used in the care and handling of all hazardous materials.

Guard Service

There should be adequate guard service for proper protection of real and personal property.

Contact alarm should provide responsive protection.

Contact alarm should be tested by management before being used at warehouse.

Accident Prevention

First aid facilities should be adequately available at all times

There should be trained first aid personnel available at the facility.

All accidents should be investigated, analyzed and reported promptly and accurately.

Housekeeping

Grounds and structures should be properly maintained and the responsibility should be assign to an individual(s).

There should be periodic inspections made of the storage facility to determine any major repairs or construction needed to protect the real property from abnormal depreciation.

Reports should be made to management of any overtaxing of existing facilities that may require additional construction, repairs or possible change in operating procedure.

There should be performance of general maintenance

Metal receptacles should be provided and emptied at night.

There should be a neat sanitary condition

Warehouse Layout

There should be storage areas designated on the plan and clearly marked.

Bay areas should broken down into sufficiently small areas so that materials can be located easily.

Maximum storage space should be utilized considering type of commodities, cube, floor load capacity,

aisle space and accessibility.

Space used for non-storage activity should be kept to the minimum.

Receiving and shipping bays should be located and sized so that loading and unloading, “in and out checking”, and moving materials can be done efficiently.

Insurance

Warehouse legal liability insurance is insurance for warehouse storage operations. It helps cover a business as a “Bailee” or in other words, a business entrusted with the property of another, for directing physical loss or damage of property that happens during storage, cross-docking, packaging, labeling or other services provided by the Bailee. (TheHartFord, n.d.)

The adequacy, as to both type and amount, of insurance coverage carried by the warehouseman should be reviewed at appropriate intervals.

Protecting your building and what is inside are the ultimate goals for any warehouse owner. The precise type and amount of coverage you need depend on the type of structure you own, the kind of items you store inside and the way you handle those items. (TrustedChoice, n.d.)

Warehouse owners may want to consider these business insurance policies;

1. Warehouse business property insurance

2. Warehouse legal liability insurance

3. Commercial general liability coverage

4. Workers’ compensation

5. Employment practices liability

6. Cyber Liability

7. Employee theft and crime coverage

8. Commercial Auto Insurance

Warehouse liability claims can result from the following;

Ø Theft

Ø Fire

Ø Flood

Ø Temperature Variations

Ø Roof collapse

Ø Missing items

Ø Shipping and Handling

Ø Improper facility maintenance

Ø Infestations

Ø Windstorms

Legal Statues behind Warehouse Insurance Policies

As a warehouse operator’s warehouse legal liability policy only pays a customer if the warehouse operator has been negligent in caring for a customer’s goods, the customer is still responsible for insuring its goods against other types of losses. (e.g., fire, windstorm, etc.).

It is also important to note that virtually every warehouse legal liability policy excludes liability for loss or damage in instances where the warehouse operator has agreed to take on a higher degree of responsibility for the customer’s goods beyond what is legally required (i.e., “reasonable care” ).

This exclusion is necessary because warehouse legal liability policies are underwritten by insurance carriers on the basis of insuring the risks associated with the warehouse operator’s negligence. If a warehouse operator has agreed to assume greater liability for a customer’s goods, then the risk are obviously much more extensive than what the insurance carrier took into account when setting its premium.

In the event of significant loss or damage to the customer’s goods attributable to the warehouse operator’s failure to take reasonable care of the customer’s goods, both the warehouse operator and the customer depend on the warehouse operator’s insurance legal liability policy to respond to the claim. (Wowlogistics, n.d.)

As such, if the warehouse services agreement contains any provision that requires the warehouse operator to assume liability for a customer’s goods beyond the standard of “reasonable care”, then such a provision may void the warehouse operator’s legal liability coverage thereby putting both parties I an unfavorable position.

Controls in field warehousing and terminal warehousing

As indicated earlier, the purpose of field warehousing differs from terminal warehousing. Operating requirements also may differ because a field warehouseman may operate at a large number of locations.

In field warehousing, controls are applied at two points:

The field location

At the field location, the controls as to receipt, storage, and delivery of goods and issuance of warehouse receipts generally will comprise the controls suggested above, with such variations as may be appropriate in light of the requirements, and available personnel, at the respective locations. Only non-negotiable warehouse receipts should be issued from field locations, and the receipt forms should be furnished to the field.

The warehouseman’s central office

The central office should investigate and approve the field warehousing arrangements, and exercise control as to custody and release of goods and issuance of receipts at the field locations. Controls suggested for the central office are the following:

a) Consideration of the business reputation and financial standing of the depositor.

b) Preparation of a field warehouse contract in accordance with the particular requirements of the depositor and the lender.

c) Determination that the leased warehouse premises meet the physical requirements for segregation and effective custody of goods.

d) Satisfaction as to legal matters relative to the lease of the warehouse premises.

e) Investigation and bonding of the employees at the field locations.

f) Providing employees at field locations with written instructions covering their duties and responsibilities.

g) Maintenance of inventory records at the central office showing the quantity (and stated value, where applicable) of goods represented by each outstanding warehouse receipt.

h) Examination of the field warehouse by representatives of the central office. These examinations would include inspection of the facilities, observation as to adherence to prescribed procedures, physical counts or tests of goods in custody and reconcilement of quantities to records at the central office and at field locations, accounting for all receipt forms furnished to the field locations, and confirmation (on a test basis, where appropriate) of outstanding warehouse receipts with the registered holders.

Guidance on the controls for the owner of the goods

After the goods are placed in the warehouse, suggested controls that may be applied periodically by the owner in evaluating the warehouseman’s performance in maintaining custody of goods include the following:

1. Review and update the information developed from the investigation described above.

2. Physical counts (or test counts) of the goods, wherever practicable and reasonable (may not be practicable in the case of fungible goods).

3. Reconcilement of quantities shown on statements received from the warehouseman with the owner’s records.

4. In addition, he should review his own insurance, if any, on goods in the custody of the warehouseman.

Among the suggested controls that may be comprehended in an investigation of the warehouseman before the goods are placed in his custody are the following:

1. Consideration of the business reputation and financial standing of the warehouseman.

2. Inspection of the physical facilities.

3. Inquiries as to the warehouseman’s controls and whether the warehouseman holds goods for his own account.

4. Inquiries as to type and adequacy of the warehouseman’s insurance.

5. Inquiries as to government or other licensing and bonding requirements and the nature, extent, and results of any inspection by government or other agencies.

6. Review of the warehouseman’s financial statements and related reports of independent

Summary

Internal controls serve as the first line of defense in safeguarding assets and preventing and detecting errors, fraud, and violations of laws. Inventory controls, management oversight, and physical security should be comparable to the best industry practices. (Schornagel, 2006)

Recommendations

According to the library of congress of the United Sates, Attestation Report №2005-AT-904 June 2006, The Landover Warehouse Internal Controls suggest these overall control measures to be put in place in a warehouse internal controls;

The Logistics Section should maintain physical accountability of its Inventory

Performance of inventories of assets stored at the warehouse and maintaining a perpetual inventory of the assets. Conduction of periodic confirmation counts of the highly susceptible assets and compare the count against the inventory records. Limiting access to the Inventory system, to the extent possible, and assigning the Assistant Head of Logistics or a designated alternate responsibility for performing inventory adjustments.

Security measures should address the threat of employee theft

Overall security including infrastructure, security procedures, and guard forces needed to be better targeted to address the threat of employee theft. Infrastructure security weaknesses should be addressed. Management should consider assigning the guards exit or leave inspection duties at the main door.

Better Separation of Duties and Reconciliations Should Improve the Receiving and Shipping Functions

There should be separation of duties necessary to ensure inventory integrity. Separating the functions of inputting information into the inventory system and performing the custodial activities such as receiving, shipping, and storing physical assets. Also there should be logistics periodically to reconcile all back orders with the service units to determine if the vendors filled the orders.

Separation of Duties is Necessary to Ensure Integrity of Computers for Learning Program Greater

The warehouse staff should be responsible for both processing the application form and for surplusing the property. A surplus property may be out of date or no longer working. (businessdictionary, n.d.) To provide better separation of duties, management should assign someone not working at the warehouse.

References

AICPA. (November,1972). Research standards and Audittest. Retrieved from AICPA.ORG: https://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00901.pdf

businessdictionary. (n.d.). businessdictionary. Retrieved from businessdictionary.com: http://www.businessdictionary.com/definition/surplus-property.html

KPMG. (October, 1999). KPMG internal control practical guide. Retrieved from ECGI: http://www.ecgi.org/codes/documents/kpmg_internal_control_practical_guide.pdf

Schornagel, K. W. (2006, June 19, ). Office of the Inspector General of Library Congress. Retrieved from www.loc.gov: https://www.loc.gov/portals/static/about/office-of-the-inspector-general/documents/rpt2006junelandover.pdf

TheHartFord. (n.d.). Marine-Insurance/warehouse-logistics. Retrieved from TheHartFord: https://www.thehartford.com/marine-insurance/warehouse-logistics

TrustedChoice. (n.d.). Warehouse Insurance. Retrieved from trustedchoice.com: https://www.trustedchoice.com/n/48/warehouse-insurance/

Wowlogistics. (n.d.). warehousing insuarnce. Retrieved from Wowlogistics.com: http://wowlogistics.com/warehousing_insurance_faq.aspx