NBOOG RISK AND AUDIT COMMITTEE

Date: 18th February 2024

RISK AND AUDIT COMMITTEE REPORT FOR END OF YEAR 2023

Introduction:
During the NBOOG Annual General Meeting held in Dec 2022, an audit committee was established to be part of the governance structure of this
mighty Group with the task.

To ensure the integrity of the financial processes and reporting and to oversee the maintenance of sound internal controls and risk
management systems of NBOOG.

Our role, therefore, is to oversee how the Executive is implementing all policies, By-laws, and regulations of MBOOG and to analyze risk
management and compliance, with risk mitigation and control strategies.
We are also responsible for overseeing expenses, investments, charges, and rewards of the Association.
Elected Committee members are.
1. Abaho John Bosco (chairperson)
2. Tugumisirize Evas (Member)
3. Rukikeire Arthur (Member)

Scope of the work in this Report.

The committee focused on the review of the status of recommendations in the previous audit report, and the end of the 2023 Financial report and
took on the assignment of possible solutions for members losing their savings through guarantor-ship as tasked by the 2023 Annual General
meeting.

Audit Findings for end of 2023 year of transactions.

Mr. Chairman and members, the committee reviewed financial records provided in soft copy by the NBOOG treasurer and other key documents of
NBOOG to establish whether they are accurate, reliable, and comply with association guidelines.

Our key objectives during the review, focused, and subsequent reviews will continue to focus, on value for money and group member benefit,
efficiency and effectiveness in funds spending, compliance, accuracy, completeness, and timeliness in serving NBOOG members.

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Mr. Chairman and members, from the work we did, the committee begs to report findings and recommendations.

A. Review of the Key recommendations in our previous Audit.

AREA FINDINGS RECOMMENDATION PURPOSE STATUS

Member According to Article 1 Section 4 of NBOOG Bylaws, its Membership Cards should be provided to all Membership card is Membership numbers
Identification states that; Upon payment of the membership fee, a legitimate NBOOG members. The Card a proof of were allocated to NBOOG
member shall be provided with a membership status should have unique features of membership. membership in members, but cards were
Card. number e.g. NBOOG-001, passport photo and NBOOG not yet provided.
The committee did not find any evidence of any member specimen signature of a member, and Validity
with a membership Card. period.
Loan Approvals Control is that all loans must be. Before the loan is approved, the Guidelines are Loans are approved
approved before the disbursement of funds, committee must have a loan approval standards for before disbursement.
however, in March 2023, out of 14 loans applied checklist, secretary fills in the internal controls
for, worth 1.264bln, 9 were formally approved. approved amount before appending
5 loans were signed without the amount and the the signature.
signatures of guarantors were missing.
Welfare Expenses The executive spends welfare funds without a Annual Budget estimates for each line It gives members No budget estimates
budget approved by the annual general meeting of spending should be presented to to authorize were presented in the
the annual general meeting for areas where their last AGM for
approval because historical data of money should approval (including
NBOOG transactions is substantial be spent within family day out
enough to set limits activity)
predict the future.
Review of The minutes were not signed To sign the minutes after reading Emphasizes Minutes are
Minutes them ownership of presented and
minutes signed.
Member savings We found out that some members deposit The treasurer should create a Not to overstate No suspense account
posted on savings in the bank without clear identification suspense account. for funds whose welfare funds. but treasure issues
welfare owners are not identified and

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e.g. name and treasure post the money in the
welfare fund.
B. Review of 2023 Financial Reports.
# AREA OF RISK FINDINGS
1 Social Welfare and Compulsory Subscription: Member’s Total
Member monthly subscription for welfare was reduced
Participation and by 4.7% in the year 2023 compared to 2022 i.e.
Subscription Ugx (192,906,550 2022 to 184,270,000 2023)
due to reduction in the new members recruited
in 2023 compared to 2022.
Voluntary Subscription: During the 2023 year,
12 functions were reported, 3% of membership
contributed to none. Only 13 members
contributed to all the 11 functions (5.8%)
67 members contribute to more than half of the
functions 35%.
2 Member 105 (56%) Members took at least one loan
Participation in during the year 2023 leaving 46% to participate
Borrowing. only in Savings (83 members)
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keep welfare funds separate.
IMPLICATION
5.8% of the membership has full
capacity for the core purpose of
NBOOG!
35% of members' spirit of
contributing to social events is
more than half full.
The committee did not establish if
the 83 members were borrowing
somewhere else or if they did not
have a financial need during the
year 2023.
If members do not borrow, we
shall not generate income for
sharing as interest earned at the
end of the year
reminders every
month.
RECOMMENDATION
Strategies to reignite social spirit must be
sought.
(e.g, Nkakureta mu NBOOG, reeka
Kumpemura nobufuura bukye!)-Bring them
back on the right truck strategy.
We recommend that members who
recommended members who are not active,
must awaken them and keep NBOOG
shining.
A membership contribution list should be
posted on the social group with those who
contributed and those who were not able to
contribute.
All members must actively participate in
both saving and borrowing for better
financial performance of NBOOG.
 NBOOG RISK AND AUDIT COMMITTEE
3 WELFARE During the year 2023, NBOOG spent a total of The expenses grew by 72% despite The executive must manage controllable
EXPENSES Ugx 116,870,000 out of a total of Ugx a 4.7% decline in NBOOG welfare expenses and invest in welfare reserves
184,270,000 subscription collections made on collections in 2023. This implies where NBOOG can achieve high returns on
legitimate social obligations of the group. that in less than 5 years at this investments.
This means we spent 63% of the membership rate, we may consume all the
welfare subscriptions collected in 2023 balance of Ugx 768M.
compared to 35% of the membership welfare
subscriptions collected in 2022.
Spending without a budget Budgeting must be done because historical
We however noted that we spend welfare compromises the approval rights of data of NBOOG transactions is substantial
funds without a budget and no budget the annual general meeting on enough to predict the future.
estimates were presented at the last AGM. activities to be financed and
spending limits
4 Savings Growth Member total savings grew from UGX 2.76 There is a growth rate in member Members should continue to patronize their
billion in 2022 to UGX 5.26 billion in 2023 savings, and this is one of the signs group through savings.
registering a 90% growth rate in 2023 compared of member commitment to their
to 77% in 2022. group. Members whose total savings were below
Ugx 27.96M in 2023 performed below
The average savings per member increased NBOOG is a resilient group average and they should improve if means
from approximately 19.6 million of 202 to 27.96 because, during 2021, savings can allow because much as savings grew by
million in 2023 registering a 43% growth rate of registered a negative growth rate 90%, average savings per member only grew
2023 compared to 52% of 2022 of (19%) for total savings and (25%) by 43% in 2023 lower than in 2022 which
on average savings per member. was 52% improving from (25%)

5 Borrowings and Borrowing and investments grew from 9.4 in
Investments. 2022 billion to 25.4 billion in 2023 registering a
170% growth compared to 255% growth in
2022.
6. Return on Savings During the year 2023, Ugx 1,040,000,000 was
generated for sharing to ugx 5,256,700,000
And total member savings registering 20% interest
awarded to savings compared to 485,705,000
Borrowings and generated for sharing to ugx 2,763,566,987
investments.
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Though the growth with more than
100%, is was less than in 2022
when it more than doubled.
20% is more than 12.7% Bank of
Uganda yield to maturity for a 12-
month treasury bill as of 27th Dec
2023 treasury.
More member participation in borrowing
should be intensified to keep the growth
trend.
Members' participation in borrowings yields
more than any other investment.
Members should save and borrow.
 NBOOG RISK AND AUDIT COMMITTEE
registering 18% interest awarded to savings in
2022.
The ability of NBOOG borrowings
However, the Yield out of borrowings and and investments to generate
investment is reduced from 8% in 2021 and 5% income for sharing is reducing
in 2022 to 4% in 2023.

7 Loan Repayment During the year 2023, 93 member accounts
from Guarantor (including Dec deductions) were affected by
Savings and liquidations for loan repayment representing
Liquidations. 88.6% of members who borrowed during 2023.
The amount liquidated amounted to Ugx
839,935,338 of which Ugx 313,012,387 (37% of
liquidations) was deducted from Guarantors’
savings to clear loans for members they
guaranteed.
93 (88.6%) members with loans Refer to C below.
struggled to pay their loans with
ease and had to encroach on their
savings.
Ugx 313,012,387 guarantors'
savings did not earn interest to
guarantors' expectations because it
was used to clear loans

C. LOSS OF MEMBER SAVINGS THROUGH GUARANTORS

Over years of transactions, some NBOOG members have been encountering significant financial losses due to loans defaulted by fellow group
members whom they have guaranteed. This phenomenon not only undermines the financial stability of individual members who lose their savings
but also erodes trust within the group, potentially leading to its low member commitment and participation.

Finding effective solutions to mitigate these losses and restore confidence in NBOOG operations is imperative to safeguarding the financial well-
being of its members and sustaining the viability of such social-based financial systems.

During the last AGM, this raised a concern among the members hence assigned a responsibility to the Risk and Audit committee to come up with
possible solutions. The committee did research and would like to present the following possible solutions.

1. Recommender as a compulsory Guarantor; The committee assumes that the recommender of a new member to NBOOG has a strong
social history with the member better enough to shame them in case of default. NBOOG must leverage this as well.

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2. Proportional Guarantor-ship; Members borrowing large amounts of money must present more guarantors on top of the savings
requirement. The committee encourages borrowing members to spread their guaranteed obligations across many members (5 to loans
above 50M) rather than relying heavily on a few individual guarantees, thereby reducing exposure to default risk.

3. Monthly Strategic Communication about the role of a guarantor for 2 quarters: Provide comprehensive financial literacy training to all
members to enhance their understanding of loan agreements, repayment obligations, and the associated risks of guaranteeing loans for
other NBOOG members because of the number of new entrants is increasing.

4. Introduction of a list of shame on the monthly financial reports. NBOOG has a set of Clear Loan Terms and Conditions including
repayment schedules, interest rates, and consequences of default, to ensure mutual understanding and accountability among all parties
involved. However, being a social group, members who default and loans are paid by guarantors must appear on the list of shame and the
clause of expulsion should be implemented thereafter. On expulsion, social welfare funds for expelled members should be transferred to the
risk reserve fund and use it to support members who lost their savings through guarantor-ship.

5. Facilitating Peer Support and Accountability: Foster a culture of peer support and accountability within NBOOG by encouraging members
to hold each other accountable for loan repayments and providing mechanisms for mutual assistance in times of financial hardship.

6. Loan refinancing: Members who default with clear and understandable challenges resulting from challenges beyond their control, may have
their loans rescheduled instead of deducting guarantors' savings.

D. Our opinion of findings

The executive has been keeping the records of NBOOG transactions in proper order and therefore, We did not find any substantial risk, that will
affect the continuity of the business of mighty NBOOG.

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E. Conclusion
In conclusion, the Audit and Risk Committee remains steadfast in its commitment to ensuring the financial integrity and stability of our mighty
NBOOG. Through rigorous risk assessment, proactive monitoring, and collaboration with executive committee members, significant strides have
been made in mitigating the challenges posed by loan defaults and safeguarding members' savings. However, continued vigilance and collective
effort are essential to address emerging risks and uphold the trust and confidence of our members. We encourage all members to actively engage
in the ongoing improvement of our financial processes and to remain vigilant in safeguarding the financial health of NBOOG by confirming their
savings balances and other transactions in monthly financial reports. Together, we can navigate challenges, seize opportunities, and sustain our
commitment to financial empowerment and prosperity for all.

Prepared and signed by.

NAME POSITION SIGN DATE

1. Abaho John Bosco chairperson ……………………. 18/02/2024

2. Musimenta Evas Member ……… ……………. 18/02/2024

3. Rukikeire Arthur Member ……………………. 18/02/2024

NBOOG RISK AND AUDIT COMMITTEE

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