EduCom Annual Report_2019

CREDIT UNION

PRAYER Prayer of St. Francis of Assisi Lord, make me an instrument of thy peace; Where there is hatred, let me sow love; Where there is injury, pardon; Where there is doubt, faith;

Where there is despair, hope;

Where there is darkness, light;

And where there is sadness, joy.

Oh Divine Master, grant that I may not

So much seek to be consoled as to console; To be understood as to understand; To be loved as to love;

For it is in giving that we receive;

It is pardoning that we are pardoned;

And it is in dying that we are born to eternal life.

WHAT'S

INSIDE Notice of Meeting Agenda President’s Message Chief Executive Officer’s Message Minutes of the Previous Annual General Meeting Directors’ Profiles Board of Directors’ Report Treasurer’s Report Supervisory Committee’s Report Credit Committee’s Report Nomination Committee’s Report Management Team Management and Staff EduCom in the Community Financial Statements Resolutions for Rule Changes List of Deceased Members

1 2 3-4 5-6 7-21 23-28 29-38 39-45 46-49 50-52 53-54 55-56 57-61 63-69 71-157 158-159 160

EDUCOM CO-OP CREDIT UNION

NOTICE OF ANNUAL

GENERAL MEETING NOTICE IS HEREBY GIVEN that the 5th Annual General Meeting of EduCom Co-operative Credit Union Limited will be held on Monday, the 2nd day of November 2020 at the Kenneth Rattray Conference Room, Jamaica Conference Centre, 14-20 Port Royal Street, Kingston, commencing at 1:00p.m..

The purpose of the meeting is to examine the operations of the Credit Union for Year 2019 and to pass appropriate Resolutions.

Registration will begin at the venue at 11:30 a.m., however members will be able to register online by visiting the link below: www.educomco-op.com/agm Given that our Annual General Meeting will be held on November 2, 2020, all branches will be closed.

In order to comply with the measures entailed in the Disaster Risk Management Orders issued by the Government, a limited number of members will be permitted inside the venue. Members 65 years and older, those with weakened immune systems, as well as those with underlying conditions such as diabetes and hypertension are being advised to join the meeting remotely.

Members will be able to view the meeting live via Zoom Conference. The link will be made available prior to the meeting. Please note however, that members joining the meeting remotely will not be counted as part of the quorum for voting as the Credit Union Rules do not facilitate this.

Please note that for those members in attendance, the wearing of masks will be mandatory upon entry and throughout the entire meeting. Additionally, all members should observe the required social distancing protocols.

There should be no gathering of members before, during or after the meeting.

While we love and welcome children, this year, as a precaution against the spread of the Covid-19 virus and to ensure their safety, children will not be allowed into the venue as our usual Kids’ Room will not be in operation.

For your safety and that of our Team, we urge our members in attendance to be guided by the established protocols and to observe all health and safety measures implemented at the meeting.

BY ORDER OF THE BOARD

__________________________ Hector Stephenson Secretary Dated this 2nd day of October 2020

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ANNUAL REPORT 2019

AGENDA 1.

Ascertaining the presence of a quorum

11. Appropriation of Surplus

2.

Call to Order

12. Fixing a Maximum Liability

3.

Opening Prayer

13. Resolutions

4.

Obituaries

14. Any Other Business

5.

Authority to Convene and Notice of Meeting

15. Termination

6.

Apologies for Absence

7.

Welcome and Opening Remarks

8.

Minutes of the last Annual General Meeting

9.

Reports of: (a) Board of Directors (b) Treasurer & Auditor (c) Credit Committee (d) Supervisory Committee (e) Nominations Committee

10. Election to: (a) Board of Directors (b) Credit Committee (c) Supervisory Committee

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MESSAGE FROM THE

PRESIDENT The greatest thing in this world is not so much where we stand as in what direction we are moving.

Johann Wolfgang von Goethe

Dr. Mark Nicely President

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EDUCOM CO-OP CREDIT UNION

The past year has been a fulfilling and successful twelve (12) months for EduCom. Our Credit Union, established in 2015 as a merged entity, is intent on maximizing the collective resources of the former credit unions, to provide meaningful and sustainable financial value for its membership. We are indeed pleased with our performance over the first five (5) years of our operations, with 2019 being no exception.

We recognize the immense challenges presented as a result of the socio-economic conditions of the country, the intensity of the competitive environment and the regulatory restrictions which prevented us from pursuing options which could improve our performance. Notwithstanding these challenges, we are proud of the year’s achievements.

It is impossible to address the membership without speaking to the unprecedented times in which we are living. The disruption caused by the Covid-19 pandemic is affecting everyone and we know that our members are no exception. As an organization, being mindful of the possible challenges of the pandemic, we have been proactive in our response to the crisis. We have taken steps to negate the potential spread of the virus with a direct facilities management approach, establish the necessary mitigating measures to protect the Credit Union from the shock, and most importantly, provided an opportunity to all members who have been affected to substantively reduce the burden of loan repayment during a period of reduction in their income flows.

While epidemiologists are shaping government responses, virologists are driving the search for vaccines globally, and institutions are helping local communities through an exceptionally difficult period, we here at EduCom are doing our utmost to serve you better, while simultaneously securing the long-term viability of the Credit Union. We continue to wish for your safety and that of your family during arguably, the most challenging time that we have collectively encountered in our lives.

ANNUAL REPORT 2019

During the past year, EduCom has achieved noteworthy results in the key financial indicators. As a co-operative with a focus on member centricity, we measure our success by metrics beyond financial indicators. We believe that it is also critical to measure success in achieving our mission. It is with great pride and excitement that we can proclaim financial success in the past year, and a significant expansion of our medium to long-term goals, exemplified in our mission.

During the financial year 2019, we increased our net loan portfolio (balance before impairement and receivable) by 15.9% over 2018, Savings grew by 9.03%, Assets grew by 8.7%, and though we fell short on Surplus, when compared to the previous year, our achievement of $104.8M is quite commendable. Our effective management of the delinquency portfolio also enabled us to remain below the standard of 5%, closing the year at 3.5%.

EduCom’s sources of operational funding primarily consists of revenues from interest on loans and investment income. During 2019, interest rates (as indicated by the Treasury Bill rates) fell from a high of 2.27% to close the year at 1.32%. The impact of this on our business was quite noticeable, given that we would have made less on our investments and had to lower borrowing rates substantially to ensure competitiveness. These decisions are extremely important as we remain true to our objective to continue to provide the membership with the best value proposition. The marginal growth of 2.1% in our revenues is a reflection of these factors.

We are grateful to all our members, other volunteers and our very special employees who have worked tirelessly to contribute to the year’s performance.

We are also extremely grateful to my colleagues on the Board of Directors, who have devoted their time and efforts throughout the year to help us fulfill our mission. We look to the future with hope and inspiration.

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MESSAGE FROM

THE CEO We could not deliver a message without first referencing the most significant factor impacting human lives globally today. The coronavirus (Covid-19), has brought us a crisis of unprecedented proportion and effects. At the time of writing, all the scenarios projected for 2020 have now suddenly been overwhelmed by this seemingly unstoppable chain of events. We are however, confident that we will overcome the difficulties of the moment and we will do so, as always, by helping to protect each other, co-operating responsibly in solidarity with the authorities who continue to guide our actions, and being resilient in our efforts to succeed.

The 2019 financial year has been another period that we can reminisce on with admiration of that which we have accomplished. The Key Performance Indicators (Savings, Loans, Assets and Revenues) have all outperformed the previous year. One of the real pleasures for me, however, was having the privilege and opportunity to get to know our members even more, and witness their excitement as they embarked on their life-long aspirations, knowing that the Credit Union was integral in the accomplishment of these goals.

Having witnessed these individual achievements, it makes us even more excited about our future and the ways in which we can deepen our impact in serving our members.

We have used the last two (2) years to apprise the membership of the grave importance of improving our competitiveness through technology. I am positive that you will agree with me that this is a strategic imperative at this time. We have been bringing techology to the consciousness of the membership over an extended period of time, primarily because we want the buy-in from the membership as we undertake this major

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EDUCOM CO-OP CREDIT UNION

ANNUAL REPORT 2019

investment. We are now at the point of execution and it is you, the members, who will determine the success of this transformational initiative. I want to first share with you what this will mean for you individually and for the Credit Union as a collective, and then show how each of you can help make this a success and ultimately share in its triumph.

focusing on collecting detailed information about members in order to create a comprehensive view of the members’ needs, as we seek to compete with the best in the industry. This approach will also provide us with the member preferences and expectation insights that we can now leverage to achieve more personalized interactions.

We are mindful of the fact that success in the new arena for consumers of financial services, depends on leading-edge member experience. The differences in products and services offered will remain miniscule, therefore improving the member experience is, and will continue to be, one of the most powerful differentiators in the future of financial services.

Leveraging technology to enhance the service offering therefore becomes an obligation rather than a choice.

Our long-term sustainability will be determined by the very actions that we take now to become digitally transformed.

Having established that successful digital transformation requires investment in technologies, people and processes to drive our business value, the next step is to encourage you to partner with us in this process which will facilitate us achieving our collective objective. To this end, we will be advancing a Deferred Shares Offer, primarily to finance this strategic imperative. Your participation in this Offer will not only provide the funding that is needed to finance the project, but of equal importance, this offer will give you a guaranteed return on your investment which will be incomparable to those in the market. I implore you to take advantage of this investment opportunity as soon as it becomes available.

The motivating factor is the expectation that digital technologies will empower EduCom to interact with members in more engaging and effective ways. The goal is to create an unmatched experience that makes business interactions seamless and effortless. In doing so, the organization aspires to build strong, long-term member relationships which drive growth, revenue and surplus. We are therefore engaging in this strategic imperative in order to elevate our service delivery to you in a number of ways. First, by building capacity, we will be able to enhance financial services and business processes through the maintenance of integrated management information system applications that are online and real-time. This will allow data to be captured, verified and validated at source, increasing the efficiency and effectiveness of the business and administrative processes.

Second, by building capability, we will be able to prioritize and plan appropriate product and service offerings to respond to changes in financial service delivery. Third, through cost effectiveness and the value-added component, we will be able to develop and maintain all service standards at the highest possible levels, with emphasis on quality, member care and cost-effectiveness. Finally, through our business intelligence and targeted marketing approach, we will be able to analyze the data more comprehensively,

Notwithstanding the challenges of the time, the pride I feel for the extraordinary organization that EduCom is, will forever be attributable to our primary stakeholders: members, staff, and volunteers. Thanks to all of you who have made this possible. We are united by a common culture of: service that exceeds expectations, discipline to embrace and withstand whatever challenges may come, and co-operation that makes us unbeatable in the face of events like Covid-19. We are going to continue to provide the necessary resources to offer the maximum protection possible to all our members, the staff and their families, as we navigate through this period together.

Thank you for making EduCom your primary financial partner, as we work extensively to build a future of fiscal stability and success for each of you.

Elvis King

Chief Executive Officer

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EDUCOM CO-OP CREDIT UNION

MINUTES OF PREVIOUS

ANNUAL GENERAL MEETING Minutes of the 4th Annual General Meeting of the EduCom Co-Operative Credit Union Limited held on Saturday, May 4, 2019 at the Kenneth Rattray Conference Room, Jamaica Conference Centre, Kingston.

MEMBERS OF THE BOARD PRESENT WERE: Mr. Clide Nesbeth Dr. Mark Nicely Mr. Ruel Nelson Mr. Hector Stephenson Mr. Hilton Blenman Mr. Charles O’Connor Ms. Sonia Bennett Ms. Stacey-Ann Farquharson Ms. Valerie Hall-Buckle Mr. Ian McNaughton Mr. Ian Sutherland Mr. Hopeton Newell

President 1st Vice President 2nd Vice President Secretary Treasurer Director Director Director Director Director Director Director

ALSO PRESENT WERE: Ms. Deloris Mollison Ms. Sandra Smith-Dockery Mr. Carlton Stewart Ms. Cheryl Daley Ms. Petandra Timoll Mr. Frederick Mills Mr. Clive McLean Mr. Andrew Smith

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Secretary Member Member Chairman Secretary Member Member Member

-

Credit Committee Credit Committee Credit Committee Sup. Committee Sup. Committee Sup. Committee Sup. Committee Sup. Committee

ANNUAL REPORT 2019

ASCERTAINMENT OF QUORUM The Chairman reported that the Accreditation Committee advised that there were 210 persons registered, as such the meeting was properly constituted.

CALL TO ORDER The meeting was called to order at 10:14 a.m. by the President, Mr. Clide Nesbeth presiding as Chairman.

OPENING PRAYER The Chairman invited Dr. Mark Nicely to lead the meeting in the invocation.

AUTHORITY TO CONVENE AND NOTICE OF MEETING The Secretary, Mr. Hector Stephenson read the authority to convene the meeting that was received from the Registrar of Co-operatives and Friendly Societies. This was to be found on page 69 of the Annual Report.

He then proceeded to read the notice convening the meeting, which was to be found on page 1 of the Annual Report.

APOLOGIES FOR ABSENCE Apologies for absence were tendered on behalf of the following persons: Ms. Sonia Smith, Ms. Tasha Manley, Chairman of the Supervisory Committee, who was not well, Mr. Carlton Stewart who was unable to attend and Ms. Coleen Lewis, who was on study leave in the United Kingdom.

OBITUARIES The Secretary, Mr. Hector Stephenson directed the meeting’s attention to the passing of fellow cooperators of our Credit Union which was to be found at the back of the Annual Report. The Secretary took the opportunity on behalf of the Board, other volunteers, management, and staff to extend deepest sympathies to the relatives and friends of those who passed on in 2018. Other members who had passed during the year were also noted.

The meeting was invited to observe a minute of silence as a mark of respect.

WELCOME AND OPENING REMARKS The Chairman extended a warm welcome to those present at the fourth Annual General Meeting of the Educators and Community Co-operative Credit Union (EduCom). He acknowledged the presence of the Board Members, Mr. Elvis King (Chief Executive Officer), members of the management team and staff, members of the Supervisory Committee and members of the Credit Committee.

Continuing, the Chairman proceeded to introduce the specially invited guests as follows: Mr. Winston Fletcher (President, JCCUL), Ms. Vera Lindo and Ms. Katrina D’Aguilar (JCCUL Group), Karen Lyttle (Department of Co-operatives and Friendly Societies), Mr. Ronald McFarlane and Ms. Jennifer Hibbert (External Auditors, BDO), Mr. Ray Howell (President and General Secretary from TIP Friendly Society and JTA Co-operative Credit Union), Mr. Robert Ramsay (JTA Co-operative Credit Union), Mr. Marco Williams (CUNA Caribbean Insurance, Jamaica), former directors and volunteers of AAMM, UWI Mona and St. Catherine Co-operative Credit Unions.

MINUTES OF THE 3RD ANNUAL GENERAL MEETING The Minutes of the 3rd Annual General Meeting held on May 5, 2018 having been circulated, were taken as read on a motion by Ms. Patricia Reid-Waugh, duly seconded by Mr. Derrick Brown and carried.

AMENDMENTS TO THE MINUTES There were no amendments to the Minutes.

CONFIRMATION OF THE MINUTES The Minutes were confirmed on a motion by Ms. Winsome Heron-Fearon, duly seconded by Ms. Claudia Campbell and carried.

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EDUCOM CO-OP CREDIT UNION

MATTERS ARISING Spanish Town Branch Upgrade Ms. Tiffany Bowie sought an update on the improvement of the Spanish Town Branch. Mr. Elvis King, CEO, informed that because of the location of the Spanish Town Branch, the Credit Union leadership had decided to dispose of those properties on the open market throughout the year and move to a better location. As such, the management of the CU did not want to spend too much money upgrading the branch; however, some improvements were made at that location.

EduHome Loan A member sought an update on the EduHome Loan arrangement between EduCom and the National Housing Trust (NHT).

The Chief Executive Officer, Mr. Elvis King confirmed that EduCom was a participant in the NHT Home Loan arrangement. The EduHome Loan product, was designed under the NHT’s Housing Microfinance Programme for NHT contributors to access low priced funds for as low as 6% per annum. This programme was geared at almost any home related purpose.

REVIEW OF REPORTS BOARD OF DIRECTORS REPORT The Chairman presented the abovementioned report and highlighted the following: Legislation EduCom continued to keep an eye on the legislative environment, particularly in relation with the Credit Union Movement and noted that the Credit Union Regulations would be established as the Bank of Jamaica Credit Union Act. He informed that as soon as EduCom received information on this matter, it would be communicated to the membership.

2018’s Performance The Chairman proceeded to report on the Credit Union’s key performance indicators in 2018, which were as follows: -

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The Credit Union continued to experience growth in the areas of assets, surplus and membership while reducing delinquency levels and increasing member satisfaction.

The Credit Union had performed well organically, reflecting growth of 10.8% in savings to close at $7.388B compared to $6.669B over the previous year, net loans increased by 9.3% to close at $6.700M moving from $6.124B recorded in 2017, while total assets moved from $8.308B to $9.064B, an increase of 9.1% over 2017’s performance. This impressive organic growth reflected the success of EduCom’s continued emphasis on performance and dedication to serving our members, through the combined effort of the leadership and EduCom’s experienced and valued team members.

Notwithstanding the growth experienced, EduCom continued to face major challenges in the nonperforming loan portfolio as it sought to keep it at the lowest level possible. Delinquency increased by (20%) to 3.0% from the previous year’s 2.5%.

Operating Income for the period under review, closed at $895.5M, a growth of 1% over 2017's performance. The marginal increase in operating income reflected declining interest rates experienced throughout the year.

Operations EduCom’s achievements were demonstrated in its Enterprise Risk Management (ERM), in that the Credit Union commenced developing and implementing an ERM framework for the entire Credit Union.

Strategic Objectives The Chairman told the meeting that EduCom’s strategic focus for the organization over the next five years would be: • Strengthening the capital base • Improving service quality • Strengthening the relationship between the Credit Union and its members • Offering competitive rates in savings and loan products • Reducing the turnaround time for doing business

ANNUAL REPORT 2019

He also highlighted the other strategic initiatives to be undertaken: • Increasing member value by providing personalized financial solutions from an expanded suite of products • Increasing operational efficiencies and service delivery through the effective use of New Media and Online Channels, Process Re engineering and other Technological Solutions while bolstering the CU’s cybersecurity infrastructure • Seeking to procure a new Information Technology banking platform for the Credit Union to enhance its operational efficiency • Seeking to strengthen the governance framework of the Credit Union by building a culture of risk and compliance management; by ensuring regulatory compliance in all areas of our operation; by the establishment of Credit Union risk tolerance in all areas of our operations; and risk training for all members of staff and volunteers.

Business Process Review and Optimization The Chairman said that EduCom would be seeking to procure a new Information Technology banking platform to enhance its operational efficiencies to remain competitive. He said that the Credit Union had some issues that it continued to face into 2018 but assured the meeting that the Board and Management continue to work assiduously at correcting the issues.

Outreach The Credit Union continued to focus on giving meaningful assistance to a number of institutions and individuals. Worthy of note were the Annual Scholarship Programme to PEP and, tertiary students and specific high value scholarships to a number of our members attending other tertiary institutions.

Queries from the Board Report a. Community Outreach Initiative Ms. Winsome Heron-Fearon inquired of the Chairman whether there was any plan to diversify the community outreach initiative.

The Chairman informed the meeting that EduCom was thinking of establishing a Foundation that could attend to a wider spectrum of initiatives than the ones that existed. He said that EduCom was mindful of what had been happening to our boys in the society and that for some time, EduCom had been working at trying to develop a specific programme that would be aimed at seeking to assist boys in the society. He added that if EduCom could develop that programme, that it was going to be the primary social focus for the Credit Union. b) Foreign Currency Account Mr. Mario Jones asked whether EduCom had any plans to operate a Foreign Currency Account.

Mr. Clide Nesbeth advised that once the Credit Union was regulated by the Bank of Jamaica (BOJ), it was hoped that the Credit Union would be able to access this service. He informed the membership that the Credit Union League was having discussions with the BOJ about the right of the Credit Unions to operate a Foreign Exchange Account once they are under their regulation. However, EduCom could guide members where in the Credit Union Movement they could secure those foreign exchange accounts. c) Scholarships/Grants Ms. Taneisha Gordon noted that EduCom gave scholarships to final-year students at the tertiary level and asked what was being done about the second to fourth-year programme. She further asked if EduCom could offer Primary Exit Profile (PEP) Scholarships since the tertiary institution scholarships was only for the final year.

The CEO, Mr. Elvis King, stated that the scholarships to final-year students only were due to resource constraints. However, given that EduCom was looking at the Foundation, it would be at that time when the resources would be increased to offer more scholarships.

The member suggested that since EduCom was

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EDUCOM CO-OP CREDIT UNION

unable to stretch its resources, that a system be put in place where students were invited in branch to do part-time work during the summer break and based on the number of hours worked, the amount received would go towards their school fees.

The CEO advised that the suggestion put forward would be given due consideration.

There being no further questions on the Board report, it was adopted on a motion by Mr. Ray Howell, duly seconded by Ms. Tishauna Chisholm, and unanimously carried.

The Chairman, at this stage, paused to acknowledge the presence of Mr. Robin Levy, CEO of JCCUL Group and Mr. Michael Brydson, former Supervisory Committee member of AAMM and a member of the Nominating Committee.

Continuing, he proceeded to invite the Treasurer, Mr. Ruel Nelson to lead the meeting through the following reports: • • •

Registrar’s Report Auditor’s Report Treasurer’s Report

REGISTRAR’S REPORT The Registrar’s report was tabled and noted.

TREASURER AND AUDITOR’S REPORT The Treasurer proceeded to invite the Auditor from BDO, Ms. Jennifer Hibbert to present their findings of their assessment of the Credit Union’s financial affairs.

AUDITOR’S REPORT Ms. Jennifer Hibbert read the Independent Auditor’s report on the Credit Union’s financial affairs for the year ended December 2018.

TREASURER’S REPORT Mr. Ruel Nelson, Treasurer, reported that EduCom had produced fairly good results in terms of its overall financial performance when compared to the previous

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year’s financial outturn. The Credit Union’s financial performance was achieved against the background of significant changes in the financial market and the entrance of new players. He stated that despite the turbulence, our Credit Union performed creditably in terms of its core business – that of disbursement of loans to our members. That, he said, resulted in an increase of 9.4% in the loan portfolio over the previous year. Despite the challenges encountered, EduCom’s performance met and, in most cases, exceeded the key financial indicators as measured against the PEARLS standards used by the Jamaica Co-operative Credit Union League (JCCUL).

Mr. Ruel Nelson then proceeded to give an abridged version of the financial performance for the year 2018 as follows: Operating Performance Surplus - The Credit Union realized a surplus of $126.58M compared to $115.46M recorded in the corresponding period 2017. The 9.6% increase in surplus levels for the current year when compared with the previous year was attributed mainly to the growth in revenue from an increase in the loan portfolio and non-interest income and a decrease in delinquency expenses.

Loans The loan portfolio contributed 81% to income (2017 – 79%) which was an indication that the Credit Union basically focused on its core business of granting loans to meet the needs of its members.

Income from Investments in financial markets decreased by $25.8M or 34% due to the phasing out of the repurchase agreement instrument (Repo’s).

During the year under review, EduCom continued its drive to try to defray some of its costs that it would previously absorb, by adding non-interest income to its earnings, using a transactional-based approach. That approach, he pointed out, would only affect members who utilized the services. With this initiative, EduCom realized total non-interest income of $148.2M from loan processing, ATM, and management fees on scheme loans, when compared to $136.8M earned in 2017.

ANNUAL REPORT 2019

Operating Expenses increased to $727.5M in 2018: $669.8M in 2017) reflecting an 8.6% increase or $57.7M. The main contributing factors of the increase were the additional personnel and administration costs from inflationary factors.

serve members. The study was estimated to cost EduCom $16M. He said permission was being sought from the AGM for the amount to be taken from the current year’s surplus to cover the cost of the project.

Queries from the Treasurer’s Report

Portfolio Performance Total Assets increased to $9.06B in 2018, an overall increase of $756.4M or 9.1% compared to $8.31B in 2017.

Delinquency - Management continued to be successful in its objective to contain the delinquency rate, through the measures that were implemented to combat the very high delinquency rate of 7.7% experienced in 2016. The Credit Union achieved a delinquency rate of 3.04%, which was below the established benchmark of 5%, albeit it compared unfavourably to 2017 – 2.45%.

Members’ Savings increased to $7.39B, or a 10.8% growth over the period when compared to $6.67B in 2017. EduCom however, had not achieved its objective to satisfy its loan demand from members’ savings. The Credit Union would continue to offer attractive rates on savings products to maintain the gap between the total loan portfolio and the total members’ savings.

Future Outlook The Treasurer remarked that the Credit Union would soon be regulated by the Bank of Jamaica (BOJ). This would result in higher costs of operating through enhanced and regular financial reporting that would require dedicated personnel to execute such tasks.

He stated that the Board had sought to obtain an independent assessment of its operations, by commissioning a Business Process Review (BPR) study.

Based on a competitive bidding process, Fujitsu Caribbean (Jamaica) Limited was selected to conduct this project. The expected benefits from the exercise were the streamlining of the processes to gain operational efficiencies and the provision of a roadmap for technology advancement to better

a. PEARLS Ratios Ms. Patricia Reid-Waugh noted the omission of the PEARLS standards, which she believed was an important component of the Treasurer’s Report to the members. She stated that there should be a table in the report showing EduCom’s performance vis-a-vis the PEARLS standards.

Mr. Ruel Nelson concurred with the member that the PEARLS standards should have been included in the report. He invited the meeting to view the presentation showing the PEARLS standards against EduCom’s performance.

He reported that the Credit Union had met all the requirements, except in the Operational Expenses to Total Assets. b. Transactional Fees Withdrawal Mr. Leslie Woodhouse mentioned that each time he withdrew funds from his account, it attracted a withdrawal fee of $104.00 and asked that management review the matter for those fees being charged to pensioners.

The CEO, Mr. Elvis King informed that the decision had been taken a year before to charge fees on transactions. He further told the membership that a review of the fees was being done and the management would look at that matter.

Loan Processing Fees A member noted that while the interest rates on motor car loans might be competitive, the processing fees charged were too high when compared to other players in the market.

He stated that members were being asked to

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pay those fees upfront in addition to an advance payment of the loan and monies to satisfy the Shares requirement.

Mr. Elvis King advised that members were briefed on the fees required for loans at the time a loan was being negotiated. However, the processing fees and the advance payment were only paid by a member if the loan was approved.

The advance payment was used to buffer late fees if the loan payment was not made on or before the due date. c.

Business Process Review (BPR) Ms. Christine McIntosh mentioned that EduCom would be seeking members' approval to get money to purchase cutting edge technology.

She enquired about the technology EduCom was planning to use and what members could expect to see and how they would benefit.

Mr. Ruel Nelson informed that EduCom’s aim was to secure cutting edge technology to enable EduCom to better serve its members in terms of doing business from the comfort of their homes or elsewhere once they had internet access. He said that would aid in performing the functions that members would normally visit the Credit Union to get done.

The Treasurer’s report was accepted on a motion by Mr. Michael Brydson, duly seconded

by Mr. Lennox Deane and unanimously carried.

CREDIT COMMITTEE’S REPORT The Chairman invited Mr. Clayton McEwan, Chairman of the Committee to present the Committee’s Report.

Mr. McEwan sought a motion for the Credit Committee’s Report to be taken as read. The motion was moved by Mr. Lennox Deane, duly seconded by Mr. Rohan Clarke and carried.

Mr. McEwan reported that the Credit Union loan’s portfolio at the end of December 2018 was $6.73B, which represented a net increase of $0.60B or

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9.7% increase over the corresponding financial period. Total loans disbursed during the period under review was $3.88B. The loan portfolio mix consisted of Secured Loans which represented 41.73%, Unsecured Loans – 22.10% and Within Savings Loans – 16.05%. These were followed by Mortgage Loans - 14.98% and Scheme Loans – 3.03%.

Ms. Patricia Waugh-Reid noted that there was an error between the written report and what was projected in the presentation. Mr. McEwan concurred and asked that the figure of 9.7% increase in the loan portfolio be replaced to read 9.1%.

Ms. Winsome Heron-Fearon enquired about the status of the EduHome Facility.

Mr. Elvis King, CEO informed that the EduHome Facility was a joint venture with National Housing Trust that commenced in the year 2017. He said the portfolio grew in 15 months to $41M and that it was one of the loan products that was performing well. He added that the interest rate was marginally lower that what would have been offered directly at EduCom. There being no further questions, the Committee’s Report was adopted on a motion by Ms. Claudette Smallhorne, duly seconded by Diana Beswick and carried.

SUPERVISORY COMMITTEE’S REPORT In the absence of Ms. Tasha Manley, Committee Chairman, the Chairman proceeded to invite Ms. Erica Haughton, Member of the Supervisory Committee to present the Committee’s Report. On a motion by Mr. Eric Heslop and seconded by Mr. Michael Burke, the Supervisory Committee’s Report was taken as read.

There being no questions on the Supervisory Committee’s report, it was accepted on a motion by Ms. Lydia Oliver, duly seconded by Mr. Dean Watson and carried.

REPORT OF DELEGATES TO THE JAMAICA CO-OP. CREDIT UNION LEAGUE The Chairman proceeded to direct the meeting to the Delegates Report which was tabled and noted.

ANNUAL REPORT 2019

NOMINATING COMMITTEE’S REPORT Ms. Janice Green, Chairman of the Nominating Committee, presented the Committee’s Report. On a motion by Ms. Elaine Russell-King, duly seconded by Mr. Eric Heslop and carried, the report was taken as read.

The other members comprising the Nominating Committee were: Mr. Michael Brydson Dr. Mark Nicely Board of Directors The following Directors retired at the Annual General Meeting: • • • • •

Mr. Hilton Blenman* Mr. Clide Nesbeth Mr. Hector Stephenson Mr. Ruel Nelson Mr. Ian McNaughton

*Mr. Hilton Blenman was appointed to the Board effective February 21, 2019 to fill a casual vacancy which arose from the resignation of Ms. Coleen Lewis, who had migrated to pursue further studies overseas.

The Committee acknowledged the sterling contribution of Ms. Coleen Lewis and her commitment and dedication to her assigned responsibilities. A recommendation was made for the following persons who had expressed their willingness to serve: Mr. Ian McNaughton, Ms. Sonia Bennett-Cunningham and Ms. Janice Green would serve for a term of two (2) years. The other proposed members of the Board and their respective tenures were as follows: • • • •

Mr. Ian Sutherland - one (1) year Mr. Charles O’Connor - one (1) year Dr. Mark Nicely - one (1) year Ms. Stacey-Ann Farquharson - one (1) year

The following Directors were recommended to serve for three (3) years:

• • • •

Mr. Clide Nesbeth Mr. Hector Stephenson Mr. Hilton Blenman Mr. Ruel Nelson

Credit Committee Members of the Credit Committee retiring were: • •

Mr. Carlton Stewart Ms. Deloris Mollison

The Committee recommended the following persons, and they had expressed their willingness to serve: • Ms. Deloris Mollison and Mr. Kurt Vaz would serve for two (2) years. Mr. Kurt Vaz replaced Mr. Carlton Stewart.

The Committee acknowledged the sterling contribution of Mr. Carlton Stewart and his commitment and dedication to his assigned responsibilities.

The other proposed members of the Credit Committee and their respective tenures were as follows: • • •

Mr. Clayton McEwan - one (1) year Mr. Hopeton Newell - one (1) year Ms. Sandra Dockery Smith - one (1) year

Supervisory Committee The following members of the Supervisory Committee were all due for retirement: • • • • •

Mr. Frederick Mills Ms. Paula Ferguson ** Mr. Clive McLean Ms. Tasha Manley Ms. Erica Haughton

**It was reported that Ms. Paula Ferguson was appointed to the Supervisory Committee on March 12, 2019 to fill a vacancy which arose from Ms. Cheryl Daley’s resignation. Ms. Cheryl Daley was on secondment overseas.

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EDUCOM CO-OP CREDIT UNION

BOARD OF DIRECTORS The Committee recommended the following persons who had expressed their willingness to serve for a period of (one) 1 year:

Name

Tenure

Mr. Hilton Blenman

3 Years

Mr. Clide Nesbeth

3 Years

• Ms. Tasha Manley • Ms. Erica Haughton • Mr. Andrew Smith • Mr. Clive McLean • Ms. Loraine Gordon Pinnock

Mr. Hector Stephenson

3 Years

Mr. Ruel Nelson

3 Years

Mr. Ian McNaughton

2 Years

Ms. Sonia Bennett

2 Years

Ms. Janice Green

2 Years

The Committee acknowledged the sterling contribution of Mr. Frederick Mills and Ms. Paula Ferguson and their commitment and dedication to their assigned responsibilities.

Mr. Ian Sutherland

1 Year

Mr. Charles O’Connor

1 Year

Dr. Mark Nicely

1 Year

Ms. Stacey-Ann Farquharson

1 Year

ELECTIONS/NOMINATIONS Ms. Janice Green, at this stage, invited Ms. Karen Lyttle from the Department of Co-operatives and Friendly Societies to preside over the elections.

Ms. Lyttle observed that the name Ms. Sonia Bennett was omitted from the slate of nominees for the Board of Directors. She asked that Ms. Sonia Bennett’s name be added to the list.

Continuing, the Presiding Officer sought a motion for the Nominating Committee’s recommendations for persons to serve on the Board of Directors, Credit Committee and Supervisory Committee to be taken en bloc. On a motion by Mr. Rohan Clarke, duly seconded by Mr. Nedrick Young, she declared the newly elected Board Members and Committee Members as follows:

CREDIT COMMITTEE

Name

Tenure

Mr. Kurt Vaz

2 Years

Ms. Deloris Mollison

2 Years

Mr. Clayton McEwan

1 Year

Mr. Hopeton Newell

1 Year

Ms. Sandra Smith-Dockery

1 Year

SUPERVISORY COMMITTEE

Name

Tenure

Ms. Tasha Manley

1 Year

Ms. Erica Haughton

1 Year

Mr. Andrew Smith

1 Year

Mr. Clive McLean

1 Year

Ms. Loraine Gordon Pinnock

1 Year

The Presiding Officer reminded the elected members that they must meet within 10 (ten) working days to elect their respective officers and submit the names and contact information of all volunteers elected to the Registrar of Co-operatives.

Delegates to the League Continuing, Ms. Karen Lyttle sought a motion for authority to be granted to the Board of Directors to elect its Delegates and Alternate Delegates to the

15

ANNUAL REPORT 2019

Jamaica Co-operative Credit Union League. That, she said, was in keeping with the Rules of the Credit Union.

A motion was moved by Ms. Elaine Russell-King, duly seconded by Ms. Claudia Campbell and carried.

RESOLUTIONS The Chairman, at this stage, proceeded to invite Mr. Hector Stephenson, Secretary, to lead the meeting through the proposed rule changes.

Mr. Hector Stephenson informed the meeting that there were four (4) resolutions being tabled in relation to amendments to the rules of the Society.

The amendments to the rules were presented to the meeting as follows: Resolution to Amend Rules Governing Nomination of Volunteers WHEREAS the Credit Union no longer accepts nomination from the floor based on the Fit & Proper exercise which must be fulfilled to satisfy Bank of Jamaica (BOJ) standard And whereas the Nomination Committee of the Board has been authorized to accept applications, interview and recruit new volunteers before each annual General Meeting and in keeping with Article VIII of the Credit Union’s Rules And whereas it is important that such guidelines are clear, unambiguous, allow for transparency and the timely conduct of the administrative activities leading to the selection of candidates

three (3) members Not less than eighty days (80) prior to the Annual General Meeting the Nominating Committee shall meet: i. Advertise among the membership in writing at least seventy-five (75) days before the Annual Meeting that nominations for the vacancies for the Board, Credit and Supervisory Committees may be made by petition and must be signed by 25 members.

The Committee may use electronic mail to notify members who have opted to receive notices or statements electronically. ii. Interview and recommend one (1) member for each vacancy. (g) A member seeking nomination to hold office shall be disqualified if he: i.

fails to satisfy the Registrar and/or the Supervisor that he is a fit and proper person to perform corporate management functions ii. has a dormant or inactive account for six (6) months and over iii. is a new member within the first six (6) month period of application iv. a member who is delinquent at the time of the Nominating Committee’s deliberations shall not be nominated for any vacancy of the Board, Credit and

And whereas weaknesses which could result in ambiguities and misinterpretation have been identified in the current nomination guidelines

A brief statement of qualifications and biographical data in a form approved by the Board of Directors will be included for each nominee submitted by the Nominating Committee.

BE IT RESOLVED that guidelines be amended and that the following simple rule changes be made to allow for a smooth nomination exercise.

The final selections with the terms are then presented at the AGM by the Nominating Committee.

Current Rule – Article XIII 66. (a) A Nominating Committee shall be appointed by the Board of Directors at least ninety (90) days prior to each Annual General Meeting and shall consist of

Proposed Amendment 66. (a) A Nominating Committee shall be appointed by the Board of Directors at least ninety (90) days prior to each Annual General Meeting and shall consist of five

i.

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EDUCOM CO-OP CREDIT UNION

(5) members, two (2) of whom shall be members of the Board of Directors, one (1) of whom shall be the Chair of the Committee.

The final selections with the terms are then presented at the AGM by the Nominating Committee.

Not less than eighty days (80) prior to the Annual General Meeting the Nominating Committee shall meet:

Resolution to Amend Rules Governing Nomination of Volunteers 1. WHEREAS Rule 67, paragraph 1 makes reference to a Returning Officer presiding over the elections

i.

Advertise among the membership in writing at least seventy-five (75) days before the Annual Meeting that nominations for the vacancies for the Board, Credit and Supervisory Committees may be made by petition and must be signed by 25 members. The Committee shall use written, print and electronic media to notify members of the vacancies. ii.

Conduct interviews and recommend one (1) member for each vacancy.

(g) A member seeking nomination to hold office or to fill a casual vacancy on the Board, Credit Committee or Supervisory Committee shall be disqualified if he: v. has been a member for less than six (6) months vi. has been delinquent during the twelvemonth period prior to the deliberations of the Nominating Committee.

AND WHEREAS this activity is conducted by the Registrar or his designate, BE IT RESOLVED THAT the Rule be amended to read: Current Rule - Article XIV: Elections 67. After the nominations of the Nominating Committee have been placed before the members, the returning officer which shall be appointed by the Chairman and will preside over the elections. If sufficient nominations are made by the Nominating Committee or by petition to provide at least as many nominees as positions to be filled, the election will not be conducted by ballot and the returning officer shall declare each nominee elected by general consent or acclamation at the annual meeting. In the event there are more nominations made by the nominating committee than the number of vacancies available there will be voting by ballot. The returning officer will appoint tellers, ballots are distributed, the vote is taken and tallied, and the results are announced.

Elections shall be in the following order:

(h) The Secretary will notify the members in writing, print or electronic media of the nominations submitted by the Nominating Committee at least 30 clear days before the Annual General Meeting. The notice should also be posted in a conspicuous place in each branch of the Credit Union. ii.

17

A listing of persons nominated, a brief statement of qualifications and biographical data will be presented at the AGM by the Chair of the Nominating Committee.

a.

Elections for members of the Board of Directors;

b.

Elections for members of the Credit Committee;

c.

Elections for members of the Supervisory Committee;

d. Delegates and Alternate Delegates to the Leagues hall be determined by the Board of Directors.

ANNUAL REPORT 2019

Proposed Amendment 67. After the nominations of the Nominating Committee have been placed before the members, the Registrar or his designate will preside over the elections. If sufficient nominations are made by the Nominating Committee or by petition to provide at least as many nominees as positions to be filled, the election will not be conducted by ballot and the returning officer shall declare each nominee elected by general consent or acclamation at the annual meeting. In the event there are more nominations made by the nominating committee than the number of vacancies available there will be voting by ballot.

The Registrar or his designate appoints tellers, ballots are distributed, the vote is taken and tallied, and the results are announced.

Elections shall be in the following order: a.

Elections for members of the Board of Directors;

b.

Elections for members of the Credit Committee;

c.

Elections for members of the Supervisory Committee;

d.

Delegates and Alternate Delegates to the League shall be determined by the Board of Directors.

2.

WHEREAS Rule 68 states: Within ten (10) days after their election, the members of the Board of Directors, Credit and Supervisory Committees shall meet and elect from their number the respective officers, as follows: -

a.

Board of Directors: President, one or more Vice-Presidents, Treasurer and Secretary. The Board may also appoint an Executive Committee and subcommittees such as an Audit Committee, Finance & Investment Committee, and Compensation Committee, etc.

b.

Credit and Supervisory Committees: Chairman and Secretary

AND WHEREAS this seems to suggest that the three (3) sets of volunteers will meet together AND WHEREAS this was not the intended objective BE IT RESOLVED THAT Rule 68 be amended to read: 68. (a) Within ten (10) days after their election, the members of the Board of Directors, shall meet and elect from their number the respective officers, as follows: President, one or more Vice-Presidents, Treasurer and Secretary. The Board may also appoint an Executive Committee and sub-committees such as an Audit Committee, Finance & Investment Committee, Compensation Committee or any other Committee deemed necessary for the effective operation of the Credit Union. (b) Within ten (10) days after their election, the members of the Credit and Supervisory Committees shall also meet separately and elect from their number the respective officers, as follows: Chairman and Secretary

RATIONALE FOR RULE CHANGE And whereas the Bank of Jamaica is advanced in its preparation to become the Regulator of Credit Unions And whereas Credit Unions have been strongly encouraged to merge in order to benefit from economies of scale and gain efficiencies And whereas EduCom is holding merger talks with different Credit Unions and in some cases entering into merger agreements And whereas some of these merger agreements will be concluded in the next 3 to 4 years

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EDUCOM CO-OP CREDIT UNION

And whereas the Credit Union requires experienced leadership to conduct and finalize these negotiations and stabilize the operations and culture of the Credit Union And Whereas the Board of Directors of EduCom Co-operative Credit Union is mandated to elect an executive after each AGM consisting of President, Treasurer, Secretary, one or more Vice President(s) in accordance with Article VIII, Rule 30 (ii) And whereas the Executive Committee shall hold office until their successors are elected And whereas the current Article IX Rule 37 states that no member of the Executive Committee shall be allowed to serve more than four (4) years And whereas the four-year term of the current leadership expires in 2020 and will deplete the required experience needed to advance merger agreements and bring stability to the new entity, as well as chart the growth path and strategic direction of the Credit Union Be it resolved that the current Article IX Rule 37 be amended to allow for a transitional rule change to allow for members of the current leadership to serve for no more than six (6) years Be it further resolved that the rule change be only for the transitional period leading to mergers and that the rule be reverted to the original form once this period has ended.

Current Rule : Article IX Rule 37 The Executive Committee of the Credit Union shall be a President, one or more Vice President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve more than four (4) years.

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Proposed Transitional Rule: Article IX Rule 37 The Executive Committee of the Credit Union shall be a President, one or more Vice President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve for more than six (6) years.

Mr. Dean expressed his concerns with respect to the proposed transitional rules, the premise of which, he thought, was fundamentally flawed. He pointed out that one could not determine the length of time Bank of Jamaica (BOJ) would be taking to come on board. Also, it would appear that there was no kind of cultivation of resources and expertise, and the executive persons were the only persons who could take the Credit Union though the transition.

The observations made were endorsed by Ms. Patricia Reid-Waugh. She added that even if other persons were elected to the Board, within the organization there were extensive competencies that could carry on the business.

The Secretary, in responding to the observations made, stated that the matter of BOJ taking over Credit Unions would be happening sooner than later, and there was a timeline by which the Government of Jamaica must take this necessary action.

He further added that based on where EduCom was at the present time, the stimulus for merging and encouraging Credit Unions to merge was really because of the imminent take-over of the BOJ and EduCom's need to have the most experienced leadership. Hence, on those premises, he believed that it was a reasonable proposal for amendment.

Ms. Karen Lyttle informed the meeting of the voting procedures. She stated that the first set of rules - 66, 67 and 68 which appeared on the leaflet would be voted on first. She asked whether the members were clear on those rules presented for amendments, and

ANNUAL REPORT 2019

there being no comments, the rules were put to the vote, resulting in: • • • •

Number voted for: 192 Number voted against: 0 Number abstention: 4 Number of members present at voting: 196

The Presiding Officer announced that amendments to rules 66, 67 and 68 were duly passed.

Continuing, the Presiding Officer stated that the second rule was about the tenure for the Executive Committee of the Board. She asked the meeting for a show of hands, for persons wishing to vote on the transitional change moving to six years, resulting in: • • • •

Number voted for: 95 Number voted against: 94 Number abstentions: 7 Number of members present at voting: 196

The Presiding Officer announced that the resolution was not passed as a total of 147 members were required for the resolution to have passed.

FIXING OF MAXIMUM LIABILITY Ms. Karen Lyttle proceeded to seek the meeting’s permission for the fixing of maximum liability. She mentioned that the rule states that the Credit Union can borrow 16 times its capital in the event of a significant emergency. As such, she recommended that the Maximum Liability be set at $12B. This was approved on a motion by Mr. Lennox Deane, duly seconded by Ms. Valerie Stupart and unanimously carried.

APPROPRIATION OF SURPLUS The Chairman stated that the Appropriation of Surplus should have been taken along with the Treasurer’s Report. He invited Mr. Ruel Nelson, Treasurer, to present the proposed Appropriation of Surplus. The breakdown was as follows:

Statutory Reserve

$ 31.6M

Dividend

$ 50.0M

Pension Reserve

$ 15.6M

Honoraria

$ 10.0M

Special Projects

$ 15.0M

Community Outreach

$ 4.3M

Total

$126.5M

On a motion by Ms. Patricia Reid-Waugh and seconded

by Mr. Earl Harris, the Appropriation of Surplus was unanimously approved.

ANY OTHER BUSINESS Innovative Ways to Get New Monies A member expressed the view that EduCom needed to find innovative ways to get new monies and not just apply increase in fees.

The Chairman, Mr. Clide Nesbeth informed that the matter of preferential shares, among other things would be examined.

Interest Rates on Loans A member noted the high interest rate charged on loans and enquired whether any consideration would be given to the senior citizens.

Mr. Clide Nesbeth informed that the Board had committed to looking at some of the considerations that could be extended to senior citizens.

Another enquiry was made as to when the interest rates on loans would be decreased or lessened.

The Chairman advised that this would be addressed when the Credit Union’s income and expenses were reviewed, and the Board determined how it could maintain the current stability of the Credit Union and reduce the interest rates for members. However, he said once EduCom had the opportunity to give something back to its members, they would be happy to do so.

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EDUCOM CO-OP CREDIT UNION

TERMINATION There being no other business, the meeting was terminated at 2:44 p.m. on a motion by Mr. Andrew Smith and seconded by Ms. Fay Clarke.

Confirmed on motion by:

……………………………………….

Seconded by:

…………………………………………

…………………………………………

Chairman

…………………………………………

Date ………………………......……..

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There is no elevator to success.

You have to take the steps Zig Ziglar

EDUCOM CO-OP CREDIT UNION

BOARD OF

DIRECTORS’ PROFILES DR. MARK NICELY PRESIDENT Dr. Mark Nicely is a seasoned educator with over twenty (20) years of service in the Jamaican Education Sector. He has served as principal at the Hayes Primary and Junior High School in Clarendon, and the Jamaica Baptist Union, William Knibb Memorial High School in Trelawny from 2004- 2011 and 2011 - 2015 respectively.

As a crowning achievement of his professional career, Dr. Nicely became the 49th President of the Jamaica Teachers’ Association and served in other notable roles such as Board Chairman at the One Way Group of Schools, External Examiner for the Joint Board of Teacher Education, Lecturer at The Mico University College, Northern Caribbean University, Heart Trust/NTA and the International University of the Caribbean. He also worked with the Ministry of Education to empanel several schools across the country and assisted with the training of new principals in school management and record keeping.

In his current role he occupies the post of Deputy Secretary General at the Jamaica Teachers’ Association with portfolio responsibility for Member Services and Industrial Relations, while extending his time to civic duties as Justice of the Peace for the parish of Kingston. He also volunteers as President of EduCom Cooperative Credit Union Board; is a member of the Teachers’ Services Commission and a Director on the E-Learning Jamaica Company Limited Board.

Dr. Nicely is adept at resolving problems and making timely decisions, as a result of his intuitive ability to assimilate challenging situations. His operational knowledge and practice of psychology, enables him to demonstrate people skills and execute emotional intelligence, in galvanizing harmony among stakeholders.

This commendable leader continues to maximize his skills to maintain efficiency and proficiency. He possesses high standards of performance and uses analytical approaches and strategic networking; which transitions into an in-depth understanding of life experiences.

Dr. Nicely is a proud single parent of two girls, Abbigel and Amiya, who he considers to be part of life’s greatest blessings. They are a source of inspiration and treasured ingredients in living an amazing life. His mother, Jennie Webb –Connor, remains his mentor, spiritual leader, example setter, motivator and holds him accountable to acceptable moral values and ethical standards.

He remains a patriotic Jamaican who is keen on giving back to the land of his birth.

STACEY-ANN FARQUHARSON 1ST VICE PRESIDENT Ms. Farquharson is an Attorney-at-Law and a senior human resource practitioner who is presently employed as a Senior Director in the Human Resource Division of the Bank of Jamaica where she has responsibility for organisation development and human resource strategy. She currently serves as Director of EduCom and Chair of the EduCom HR Committee. Ms. Farquharson is an ardent believer in the spirit of volunteerism and has served various organizations including the Jamaica Cancer Society, Dress for Success Jamaica, the National Youth Service and Youth Opportunities Unlimited.

Miss Farquharson holds several qualifications and certifications including a Bachelor of Laws Degree, a Master of Science Degree in Governance, a Diploma in Human Resource Management and is a Certified Senior Professional in Human Resource Management from the Society for Human Resource Management.

In her spare time, Ms. Farquharson provides professional development consultation through her brainchild, Farquharson.Image.Confidence.

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ANNUAL REPORT 2019

BOARD OF DIRECTORS’ PROFILES

IAN MCNAUGHTON 2ND VICE PRESIDENT Mr. McNaughton is a Consultant with a demonstrated history of working in both the financial services and manufacturing, sales and distribution sectors. He has over thirty years of professional experience in business planning, financial operations, capital structure, corporate governance and human resource development.

He has served as the Managing Director and Company Secretary of Barita Investments Limited, the Finance Director and Company Secretary of Goodyear Jamaica Limited and Chief Financial Officer and Company Secretary of Berger Paints Jamaica Limited.

Additionally, he served as Chairman of the Jamaica Stock Exchange (JSE) and Treasurer of the Jamaica Cooperative Credit Union League (JCCUL) Board.

He has an MBA (Finance) from Nova Southeastern University and a BSc. in Management Studies from the University of the West Indies, Mona, An avid footballer, Mr. McNaughton also sits on the board of the Harbour View Football Club.

RUEL NELSON TREASURER Mr. Nelson is a Financial Manager of the University of the West Indies with close to 20 years of finance and accounting experience. He holds an MBA from the University of the West Indies, Mona School of Business and is a Fellow of the Association of Chartered Certified Accountants (FCCA). He is also a Fellow of the Institute of Chartered Accountants of Jamaica. He recently completed his Bachelor of Law Degree from the University of the West Indies and is pursuing the Legal Education Certificate at the Norman Manley Law School.

Mr. Nelson currently serves in the capacity of Treasurer on the Board of Directors.

He has also served as a 2nd Vice President on the Board of Directors. In addition, he served as a member of the Supervisory Committee of EduCom Co-operative Credit Union and the Jamaica Co-operative Credit Union League Limited and was a former Chairman of the Supervisory Committee for UWI (Mona) & Community Co-operative Credit Union Limited.

24

EDUCOM CO-OP CREDIT UNION

BOARD OF DIRECTORS’ PROFILES

HECTOR STEPHENSON SECRETARY Mr. Stephenson began his professional career as a teacher of Integrated Science at St. Georges College in 1983 after completing his studies in Double Option Science at The Mico College (now Mico University College). During his sojourn at St Georges, he served as Grade Supervisor and Dean of Discipline before being awarded The Peter Hans Kolvenbach Scholarship to pursue a Master’s Degree in Secondary School Supervision and Administration at Boston College University in Massachusetts, USA. While at Boston College, he worked as a Graduate Assistant in the School of Education where he supervised undergraduate student-teachers who were seeking to gain professional teaching certification in the state of Massachusetts.

After returning to Jamaica in 1989, Mr. Stephenson was named Dean of Students at St. Georges College, before being promoted to the position of Vice-Principal in 1991 and Principal the following year becoming the first Non-Catholic permanently appointed Headmaster of St. Georges College. During his tenure as Headmaster, Mr. Stephenson also completed diplomas in Human Resources Development and Management Studies at the Institute of Management and Production (IMP) and Jamaica Institute Management respectively. Subsequent to joining the staff of the Overseas Examinations Office as Deputy Director, he served as Acting Executive Director before he was appointed Executive Director and Caribbean Examinations Council (CXC) Local Registrar in 2003.

Mr. Stephenson has served on several Boards and Committees including the Boards of the Excellence Coalition on Scholastic Aptitude Test; Edwin Allen High School, St. Hugh’s High School and Clan Carthy Primary School. He has been an active member of the Edwin Allen Past Students Association and a Past President of that body.

He is currently a board member and Secretary of EduCom Cooperative Credit Union. He is also a member of the Caribbean Examinations Council (CXC) National Committee, the CXC Final Awards Committee and the Steering Committee of the National Qualifications Framework of Jamaica.

HILTON BLENMAN DIRECTOR Mr. Blenman is a Fellow of the Institute of Chartered Accountants of Jamaica who holds a Master of Science (M.Sc.) Degree in Accounting and a Bachelor of Science (B.Sc.) Degree in Management of Business from the University of the West Indies, Mona Campus.

Mr. Blenman has spent over 40 years in the field of accounting where he started as an External Auditor with Touche Ross and later, served as Assistant Vice- President Finance and Accounting, and also Chief Internal Auditor at the Jamaica Mutual Life Assurance Society.

He served as Managing Director at Edward Gayle and Company and as the Director of Internal Audit at the Jamaica Public Service Limited for one year. He also served the banking sector as Manager, Accounting at CIBC First Caribbean Bank. In recent years he has been a consultant to various firms.

Mr. Blenman has served as a past Treasurer and is a current member of the Board of Directors of the Jamaica Child Evangelism Fellowship Limited.

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ANNUAL REPORT 2019

BOARD OF DIRECTORS’ PROFILES

CHARLES O’CONNOR DIRECTOR Charles O’Connor is the Chief Executive Officer of Charles O’Connor Consulting Network Limited (COCN), a professional services company with emphasis on Business Process Outsourcing, Web Based/Cloud Accounting Solution, Tax Planning and Business Advisory Services. Mr. O’Connor is a Fellow of the Institute of Chartered Accountants of Jamaica (ICAJ) and the Association of Chartered Certified Accountants (ACCA) in the UK. He has been a Registered Public Accountant since 2000. He received training in Fixed Income Securities at the New York Institute of Finance, Treasury Control within banks at The Bank of Jamaica in association with Crown Agents-UK, and Project Management with the University of New Orleans.

Over the last 25 years, Mr. O’Connor has held senior executive positions in both the Public and Private Sectors. He distinguished himself as General Manager of Finance and Planning at the Transport Authority of Jamaica (2006-2010) and Director - Securities Management in the Debt Management Division of the Ministry of Finance and Planning (1998-2001). In 2018, he successfully completed the Insolvency Practioner Course at the Council of Legal Education, Norman Manley Law School, and is now licensed to practise in Jamaica as an Insolvency Trustee.

Mr. O’Connor has served on various boards and is currently a member of the Dispute Resolution Tribunal of the Jamaica Consumer Affairs Commission. He is also a member of the Tax Committee of the Institute of Chartered Accountants of Jamaica.

JANICE GREEN DIRECTOR Mrs. Janice Green is an Occupational Safety and Health Professional and a Human Resource Practitioner employed to the Jamaica National Group. She is the International Commission on Occupational Health (ICOH), National Secretary for Jamaica.

She completed her Masters in Occupational Safety Health at the ILO/University of Turin, Italy. Mrs. Green did her undergraduate studies in Human Resources Management at the University of Technology, Jamaica. At the Mona School of Business, University of the West Indies, Jamaica, she completed post graduate studies where she attained a Masters in Business Administration.

Mrs. Green is actively involved in volunteerism. She is the Immediate Past President of the Jamaica Occupational Health and Safety Professionals Association. She currently serves as a Justice of the Peace for the parish of St. Catherine and was a former Board Director for the St. Catherine Co-operative Credit Union. She now serves on the Board of EduCom Cooperative Credit Union and its sub committees. Despite her extremely busy schedule, she is involved in the mentorship programme at the University of Technology, Jamaica.

Mrs. Green is a member of the Society for Human Resources Management, the Human Resources Management Association of Jamaica and currently serves on the International Commission on Occupational Health (ICOH) Scientific Committees – Accident Prevention, Work Organization and Psychological Factors, and Musculoskeletal Disorders.

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EDUCOM CO-OP CREDIT UNION

BOARD OF DIRECTORS’ PROFILES

IAN SUTHERLAND DIRECTOR Mr. Ian Sutherland is a Senior Manager at the University of the West Indies (Mona) with responsibility for Enterprise Applications at the Mona Information Technology Services.

His experience in the field of Computer Science and Information Technology spans over twenty (20) years, and includes, but is not limited to the areas of Data Management, Application Development, Reporting Solutions, Process Engineering and Systems Integration.

With a wide appreciation of Management and Information and Communication Technology (ICT), he is capable of representing a range of matters and has provided consulting services to several organizations including banks, financial institutions, insurance companies and medical facilities.

He holds a BSc. (Computer Science, Chemistry and Math), a Post-graduate Diploma in Management Studies, a MSc. Computer Based Management Information Systems from the University of the West Indies and a professional certificate in Project Management (PMP) from the Project Management Institute.

Mr. Sutherland currently serves as director on the boards of EduCom Co-operative Credit Union Limited (EDUCOM) and Quality Network Limited (QNET). During his tenure, he has contributed to various committees and special projects of EDUCOM, including the ICT (chairman), Policy, Risk and Compliance, Marketing, Business Process Review and Optimization and Delinquency Committees. He is the current chair of the Nominating Committee at QNET.

SONIA BENNETT DIRECTOR Ms. Sonia Bennett is the Publishing Manager/Educational Technologist at Carlong Publishers (Caribbean) Limited. Sonia has over 25 years’ experience in the field of education, from classroom teacher of English and Literature, to Principal at the tertiary level, serving as Director/Principal of the Vocational Training Development Institute (VTDI), a tertiary institution funded by the HEART Trust National Training Agency.

She is a graduate of Pepperdine University in California with a MA in Educational Technology. She holds a BA in Arts and General Studies – Social Sciences with Language and Literature from the University of the West Indies; a Certificate in Teacher Education majoring in English Language, Literature, Social Studies from Mico Teachers’ College (now Mico University College) and a certificate in Theatre Arts from the Jamaica School of Drama. Sonia has also begun work at the doctoral level in Curriculum and Instruction.​

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ANNUAL REPORT 2019

BOARD OF DIRECTORS’ PROFILES

CLIDE LEOPOLD NESBETH FORMER DIRECTOR / PRESIDENT Clide Leopold Nesbeth is a management professional who has specialized in the areas of Administration, Sales and Marketing and General Management for over thirty years, twenty five of which have been at the senior management level. A trained teacher, Mr. Nesbeth has over four years experience in the training of students, at the tertiary level, in the above areas of discipline.

After leaving the teaching profession he was employed to SEPROD where he was promoted to the position of Sales and Marketing Manager of Jamaica Detergents Limited.

He has also worked as Group Marketing Manager of CMP Industries Ltd, as Marketing Manager of Jamaica Cane Products, as General Manager of CMA CGM Jamaica Limited and as Chief Marketing Officer at Kingston Freeport Terminal Limited.

A committed and knowledgeable cooperator, Mr. Nesbeth served as President of EduCom Cooperative Credit Union and was the 1st Vice-President of the Jamaica Co-operative Credit Union League Limited (JCCUL). He also serves on a number of other industry related boards and committees. Among his academic and professional qualifications, Mr. Nesbeth holds a Postgraduate Diploma in Education (UWI), a Masters of Commerce Degree in Marketing from the University of Strathclyde, Scotland and is a member of the Chartered Institute of Marketing.

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EDUCOM CO-OP CREDIT UNION

BOARD OF

DIRECTORS’ REPORT

To the 5th Annual General Meeting for the Year Ended December 31, 2019.

ECONOMIC AND SOCIAL OVERVIEW The 2019 calendar year ended with the Statistical Institute of Jamaica (STATIN), reporting that inflation closed at 6.2%. The inflation rate recorded for the year showed a substantial increase over the 2.4% recorded in the previous year. The Jamaican dollar continued to depreciate against its major trading partner, USA. At the beginning of the year, the dollar was trading at J$127.72 to US$1.00, but closed the year at J$132.57 to represent a 3.8% depreciation over the period.

The graph below depicts some of the key economic variables over the past three years.

ECONOMIC INDICES 2017- 2019 10.4

8.7 7.2 6.2 5.2

2.4 0.5

1.2

0.9

GDP

Inflation 2017

2018

Unemployment 2019

Source: Bank of Jamaica

GDP growth in 2019 is estimated at 0.9%, down from the 1.2 percent experienced in 2018. After three decades of economic growth that has averaged less than 1 percent a year, the growth in Jamaica’s economy in 2019 was consistent with that which it has accomplished throughout these decades. Growth has been impeded by a bloated public sector, high crime and corruption, red tape, weak rule of law, and a debt-to-GDP ratio which is still too high, though it is declining. The government’s main policy objectives are public-sector reforms, including wage restraint and budget austerity measures, the merger of public-sector agencies, and a workforce reduction plan, all of which has the risk of igniting social and political opposition. A rise in violent crime has contributed to a dampened growth in tourism. Despite these challenges, unemployment closed the year at 7.2 percent, down from the previous year’s 8.7%, continuing in the positive trend of the past three years.

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ANNUAL REPORT 2019

INTEREST RATES

INTEREST RATE - AVERAGE YIELD 90 - DAY T-BILL

2.50%

2.27%

2.27% 2.19%

2.30%

2.16%

2.10% 1.95%

2.10%

1.80%

1.84% 1.74%

1.90%

1.55%

1.70%

1.61%

1.32%

1.50% 1.30% 1.10% JAN - 19

FEB - 19

MAR- 19

APR - 19

MAY - 19

JUN - 19

JUL - 19

AUG - 19

SEP - 19

OCT - 19

NOV - 19

DEC - 19

The Figure above provides a graphical representation of interest rate over the past year. During the 12-month period, the 90 Day T-Bill showed a 41.9% reduction, to close at a low of 1.32%.

2019’S PERFORMANCE The key indicators used to measure the Credit Union’s performance are: savings, net loans, total assets, delinquency and gross income. The table below shows our performance in the key performance indicators for the three-year period, 2017 - 2019.

3-YEAR COMPARATIVE PERFORMANCE KEY PERFORMANCE INDICATORS

2017 ($)

2018 ($)

2019 ($)

EDUCOM’S 2019 GROWTH %

CU MOVEMENT’S 2019 GROWTH

Savings

6.669B

7.388B

8.055B

9.03%

7.9%

Net Loans

6.124B

6.694B

7.763B

15.9%

12.5%

Total Assets

8.308B

9.064B

9.850B

8.7%

8.6%

Gross Income

1.009B

1.045B

1.092B

4.5%

14%

Delinquency

2.5%

3.0%

3.5%

(16.7%)

10.4%

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EDUCOM CO-OP CREDIT UNION

The 2019 performance was again centered around organic growth as there were no mergers during the year under review. Despite the very competitive nature of the financial landscape, the Credit Union performed very well, as shown in the comparative growth within the Movement in the table above. This impressive growth reflects the success of our continued emphasis on performance, our dedication to serve you, through the combined effort of our experience and valued team members, along with the leadership being provided to you.

KEY FINANCIAL INDICATORS COMPARED 2017 - 2019 12 10 8 6 4 2 0 T/Savings

Net Loans

T/Assets

2017

6.669B

6.124B

8.308B

2018

7.388B

6.694B

9.064B

2019

8.055B

7.763B

9.850B

2017

2018

2019

We closed the year with savings of $8.055B, reflecting growth of 9.03% over the previous year’s $7.388B. Loans closed at $7.763B, an increase of 15.9% over 2018’s $6.694B, while the Movement experienced a comparative increase of 12.5%. Total assets grew by 8.7% over 2018’s performance, to close the year at $9.850B. The Movement’s assets grew by 8.6% for the comparable period.

The figure below shows graphically, our performance in another key indicator, namely, delinquency.

Rate of Delinquency (%)

3.7

3.5

4

3 2.5

3 2 1 0

2016

2017

2018

Rate of Delinquency (%)

31

2019

ANNUAL REPORT 2019

We made a change in how we approached nonperforming loans in 2019. Whereas in the past we were transferring from savings (used as collateral) to offset loans that were in default, we discontinued this practice at the beginning of the 2nd quarter of the year. We are very satisfied with the results of this initiative, as we are now able to move earlier on the securities, forcing members to be more committed to their obligations. We continue to implore our members to honor their obligations, so that we can serve you increasingly better.

Though there was an increase in the portfolio for

the current year, over that of the previous one, we recognize that this is mainly as a result of the changes we made in relation to transferring. We continue to commend the efforts of the Recovery Unit who worked tirelessly with our members to resolve the challenges they had. This, in an effort to manage the non-performing portfolio, while simultaneously acknowledging the individual factors that each member faces when they are unable to satisfy their obligations. This is certainly a win-win strategy that we will continue to practice for the foreseeable future.

The figure below shows our performance in our core business over the four-year period, 2016-2019.

OPERATING INCOME 2016- 2019 886.5

895.5

914.2

1000

($M)

800

632.7

600 400 200

0 Operating Income for the period closed at $914.3M, a growth of 2.1% over the performance of 2018. The 2016 2017 2018 2019 marginal increase in our operating income is a reflection of declining interest rates experienced throughout the year.

STRATEGIC OBJECTIVES Creating Organizational Alignment Achieving alignment where strategy, goals and meaningful purpose, reinforce each other, has given the credit union a major advantage, because it gives a clear sense of what to do at any given time, and compel people to move in the right direction. The Balanced Scorecard was chosen as an effective reporting tool for creating this alignment. We do however recognize that the actual success of the system as an alignment tool will vary depending on the strategic focus of the scorecard, the success of its implementation, and whether or not it is successfully cascaded.

In cascading the Balanced Scorecard, we have translated the corporate-wide objectives down to business units, support units and then to individuals.

The intended result is to have a focus across all levels of the organization, that is consistent with our purpose. The credit union’s alignment became clearly visible through strategy, the use of a strategy map, performance measures and targets, and initiatives. Department and individual scorecards are used to improve accountability through objective and performance measure ownership, thus enabling desired employee behaviors which are being incentivized with recognition and rewards.

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EDUCOM CO-OP CREDIT UNION

As the management system is cascaded down through the organization, objectives become more operational and tactical, as do the performance measures. Accountability then follows the objectives and measures, as ownership is defined at each level.

An emphasis on results and the strategies needed to produce results is communicated throughout the organization, as this alignment focus is considered to be critical in becoming strategy-driven.

Strategy Statement Our strategy statement that is being used to guide our actions over the next three-year planning cycle, is that we will improve the quality of lives for our members and their families by: 1. Expanding our membership through targeted marketing, direct recruitment of untapped businesses within the existing bond; and by capitalizing on merger opportunities.

2. Increasing member utilization of our services through effective public education, while migrating businesses from elsewhere, through an aggressive sales and rationalization strategy.

3. Increasing Member Value by understanding individual needs and providing personalized financial solutions from an expanded suite of products.

4. Increasing our effectiveness by engendering a culture of analytics and risk and research-based decision-making.

5. Increasing operational efficiencies and service delivery through the effective use of new media and online channels, process re-engineering and other technological solutions, while bolstering our cyber security infrastructure.

6. Strengthening our execution capabilities by realigning our people, governance, leadership, organization structure, accountability, culture and processes, to deliver on these strategies.

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High Level Performance Indicators & Targets The Key Performance Indicators (KPIs) devised at the corporate level that underscore the level of value creation to be facilitated by the organization over the strategic period are highlighted below.

Member Value At our last strategic retreat, we decided to focus our efforts on improving member value by understanding individual needs and providing personalized financial solutions from an expanded suite of products. In determining member value, we decided that the factors pertinent are; interest paid to the members, interest rate charged on loans, dividends paid, and fees charged. We compared our fees, rates and dividends to that of the market and are pleased to report that we have exceeded our first-year target on this strategic metric.

Member Satisfaction The Net Promoter Score (NPS) is one of the indices used to gauge both member satisfaction and their willingness to recommend the Credit Union’s product and services to others. We are pleased to report that our NPS for 2019 was a positive 28%, which means that the Credit Union’s promoters substantially outweigh our detractors. In essence, this signifies that 28% of the Credit Union’s members could be seen as part of our growth strategy.

Member satisfaction is extremely high on our list of priorities and based on the weighted satisfaction assessment for 2019, our overall satisfaction score was 78%. Our objective is to improve to a 90% satisfaction level by the end of the 3-year period and at the end of year 1, we had surpassed the year’s target.

Employee Engagement Employee engagement is a combination of commitment to the organization and its values, in addition to our willingness to help team members in all situations. At EduCom we place emphasis on engagement as it is considered to be more than job satisfaction and is more complex than mere motivation. More than two-thirds of the team

ANNUAL REPORT 2019

reported that they were satisfied with management’s recognition of their exceptional job performance, however 57% of respondents did not feel involved with decisions that would directly affect them at work, one of the things that we have to definitely improve on in 2020.

Teamwork is also necessary for successful outcomes and although the level of teamwork seen may vary depending on the type of job, it fosters a sense of camaraderie and engagement amongst staff. Seventy-three percent (73%) of the team believed that teamwork was valued at EduCom. In terms of the level of satisfaction at EduCom, seventy five percent (75%) of the team felt proud to tell people that they work at EduCom and 63% reported that they would recommend the Credit Union as a great place to work.

Promoting and sustaining a healthy and safe working environment and striking the right balance between work and personal life foster satisfied and engaged employees. Seventy percent (70%) of the team was satisfied with their level of safety in the work environment.

Having a positive relationship with one’s immediate supervisor/manager is also a condition for engagement. Fostering positive relationships encourages constructive dialogue between a supervisor and his or her direct report (from exchanging ideas to providing useful and constructive feedback on performance). Eighty six percent (86%) of the team reported that they were satisfied with the feedback received from their supervisors as it allowed them to improve their performance.

Compliance to Regulatory Requirements One of our strategic objectives is a focus on adhering to laws, regulations, guidelines and specifications relevant to the business processes. The focus on compliance is not restricted to completing reports and submitting them on time to regulatory agencies, but more importantly, that the established standards are met on a consistent basis. The emphasis on standards requires that management must provide

a report each month to the Board that shows the percentage adherence to compliance and regulatory requirements, in addition to a diagnosis of any deviation from expectations and a prognosis on how these will be corrected in the near future. The aim is to have 100% compliance by the end of the third year.

We are happy to report a 92% compliance at the end of Year 1.

Membership Growth The final component of our strategic focus for 2019 was growth in membership. The 3-year target is to increase membership by a minimum of 13 percentage points per year, to close the planning horizon with a minimum membership of 100,000. At the end of Year 1, membership grew by a mere 5.6% as we began to make the necessary changes to facilitate the sales culture that we knew was necessary to achieve the target we set over the three-year period.

In summary, we have exceeded our target for the first year in all of the metrics, except for membership growth.

Enterprise Risk Management EduCom remains steadfast in its mission to have a robust and effective Enterprise Risk Management (ERM) program that embodies its strategic and operational plan. During 2019, in pursuit of this objective, the Board of Directors approved a comprehensive risk appetite statement, emphasizing EduCom’s top down approach to risk management and ensuring that the management team is empowered to make decisions within acceptable risk limits.

The Credit Union, in its implementation of a risk aware culture, ensured that management as well as employees were trained to identify, measure, monitor and report risks within their operational spheres. This approach allowed EduCom to implement mitigating controls to ensure that the Credit Union is protected and is able to achieve its strategic objectives. One of the greatest accomplishments for 2019 was the completion of an annual business risk assessment which allowed the Credit Union

34

EDUCOM CO-OP CREDIT UNION

to identify the significant business activities that drive our business model and the inherent risks that threaten these activities and by extension the viability of EduCom. Consequently, the assessment of these inherent risks informed the overall level of protection needed and was incorporated in the 2020 strategic plan.

The Credit Union during 2019 expanded its compliance programme to include a corporate compliance plan. This provided a foundation on which the Credit Union assured itself of compliance with relevant laws, guidelines and regulations. The Board approved the purchase of an Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) electronic monitoring system - Alessa (previously known as CaseWare). The system is expected to provide us with an integrated solution, encompassing due diligence, sanctions and watchlist screening, transaction monitoring and transaction screening enhancing AML/CFT compliance and ensuring EduCom is protected from being used as a vehicle for money laundering.

Information and Communication Technology (ICT) We are convinced that Information and Communication Technology (ICT) must play a major role in improving the efficiency and effectiveness of our processes. There is a need for comprehensive automated solutions to replace, and, or support manual processes, with information sharing capabilities and support for decision making. Our strategic objective is therefore geared at acquiring a new ICT infrastructure that supports the daily business functions to replace the outdated and slow workstations as we strive to match the modern banking institutions in the industry, thus increasing our competitiveness. This will involve the acquisition of a core banking application that satisfies all the critical processes of the Credit Union.

OPERATIONS There were a number of critical operational changes made during the year to improve our efficiency level.

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Completion of the Digitization of Active Member Records Following the merger with SCCU in 2017, the digitization of the records of the four new branches, Portmore, Spanish Town, Linstead and Old Harbour was undertaken. There were particular challenges that this activity presented as files were housed in each branch location with no standard document management convention. Despite this, we were able to: • • •

centralize this activity in the Spanish Town Region complete the digitization to our records storage platform and, purge documents outside the retention period.

To improve the state of records management in that region, the 2020 Plan includes the creation of suitable storage facility for these physical files to include effective management of dormant records in adherence to policy directives and for ease of storage and retrieval.

Elimination of Duplicate and Triplicate Accounts With each merger, the existence of multiple accounts for a member created a challenge with delinquency as salary deductions now merged were not properly allocated. Approximately 230 accounts were merged from this exercise with members' obligations properly serviced.

Security Surveillance The security of some of our branches was being compromised due to outdated technology and inadequate surveillance. Upgrades were completed for two critical locations namely Montego Bay and Spanish Town. This resulted in enhanced coverage and image quality for all critical areas to include adequate retention for recall when necessary. The next phase in the 2020 Plan is a security audit/ assessment of all the locations.

ANNUAL REPORT 2019

Standardization of New Membership Process There was a bottleneck in the approval process for onboarding of new members which was significantly impacting our Records Management. This is now eliminated, as a new process flow was developed and adopted which has since reduced the average turnaround time for onboarding.

operating model defined. For the first year, we were able to make progress in a number of the areas that were of concern in the short term, namely; job specifications, reduction in the duplication of effort, increased approval authority and reduction in the lengthy credit application processing (adjudication to disbursement), that were identified in the report.

Electronic Securities Inventory In September 2019, the securities function was transferred from the Credit Department to the Operations Department.

We have also begun to make progress on the medium- and long-term issues that were raised in the report, which summarized that “failure to adopt an automated solution will prove inimical to the organization’s actualization of its stated vison and strategic objectives.” Acquire a Loan Origination solution that is easily integrated with the existing banking system as an interim measure to support the immediate need of the business and replacing the core banking applications with a multichannel solution in order to reduce the current vendor management challenges and high maintenance fees are therefore key recommendations that have become our priority.

A wholistic system change was embarked on to create greater accountability and ease of reference.

The priorities which were achieved included the centralization of a repository for all loan collaterals from the three merged Credit Unions. Additionally, we commenced the creation of an Electronic Securities Inventory to capture all physical securities being held on behalf of members.

The Motor Vehicle aspect of our inventory was successfully completed in 2019, with next steps to include completion of the inventory for land titles and insurance policies.

Business Process Review & Optimization In 2018 we embarked on a major project to do a complete review of our business processes.

Reviewing our processes was considered to be of significant importance as we recognize that improved efficiencies will increase competitiveness.

The documented business processes from the baseline, reviewed and identified gaps within our current operating environment. Gaps identified were considered to be either procedural or systemic.

Potential solutions to alleviate the risks arising from these gaps were analyzed and a high-level cost/ benefit analysis performed to ascertain the best approach for the Credit Union. Regulatory and industry standards and requirements were considered in the design and development of an IT optimized environment. Implementation models for the Governance, Sourcing, Process and Organizational structure were established and the target IT

OUTREACH In recognition of our commitment to being a good corporate citizen and with the guidance of our policy that focused on assisting those who are in greater need, meaningful assistance was provided to members, charitable organizations, other institutions and individuals during 2019. In line with our emphasis on education over the years, our Annual Scholarship programme and the support given to the Albert Street Basic School were the major beneficiaries from the budget allocation of our outreach initiative.

PRODUCTS & SERVICES Our Wealth Creator, Diamond Reserve and Executive Note continue to be the products in high demand for savers who are saving towards a specific purpose in the medium to long term. The competitive rates offered on these products continue to be unmatched in the industry. As it relates to loans, our Motor Vehicle Loan Facility and the Line of Credit continues to be in high demand. These products have been designed to meet your needs, based on the feedback we have received from you, and we continue to welcome your feedback on how we can further improve them.

36

EDUCOM CO-OP CREDIT UNION

We want to also use this opportunity to remind our members of the very competitive saving instruments that your credit union has on offer. Good financial management requires that you maximize the returns that you get on your savings and we encourage you to always be mindful of the rates that are on offer at your credit union before considering investing elsewhere.

Below is a list of our product offerings. Kindly visit our website, call and speak with one of our Member Care Representatives, or visit our offices to learn more and benefit from these superior products.

• • • • • • •

Personal EduCom Special Line of Credit Productive/ Business Educational Home Acquisition & Improvement Motor Vehicle

OTHER SERVICES

• Regular Deposits

competitive interest rate

• • • • • •

• Executive Note

competitive interest rate

VOLUNTEERS

SAVINGS PRODUCTS •

Permanent Share Account

-

dividend

• Diamond Reserve - interest credited monthly • Special/Fixed Deposits - competitive interest returns • Wealth Creator

long-term savings and investment, insured with monthly interest returns

• Christmas Savings Club - monthly savings and interest Christmas encashment • T.E.A.C.H - Share account for Trainee Teachers • Y.S.C. (Youth Savers Club)

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LOAN PRODUCTS

Savings for children of members with competitive interest returns

Standing Order Family Indemnity Plan (F.I.P) Health Insurance Internet Banking Access Plus debit card Financial Counseling

The Board of Directors is comprised of 11 members.

The following table shows the attendance at meetings. The Board held 16 meetings during the year, four (4) of which were Joint Meetings that included members of the Supervisory and Credit Committees. The Committees reported monthly on their activities and always provide useful suggestions for improvement in the quality of the service provided by the credit union.

ANNUAL REPORT 2019

ATTENDANCE OF BOARD MEMBERS - 2019

NAMES

PRESENT

EXCUSED

Mark Nicely

13

3

Hilton Blenman

12

2

Ian McNaughton

11

5

Ruel Nelson

15

1

Ian Sutherland

16

0

Charles O’Connor

12

4

Hector Stephenson

14

2

Janice Green

16

0

Stacey-Ann Farquharson

10

6

Sonia Bennett

15

1

Coleen Lewis

1

N/A

14

2

(Appointed 21 February)

(Resigned 19 Jan.)

Clide Nesbeth

*Total number of Board Meetings held: 16 Supervisory Committee The Committee comprised of: Ms. Tasha Manley (Chairperson), Mr. Andrew Smith, Mrs. Loraine GordonPinnock, Mr. Clive McLean and Ms. Erica Haughton (Secretary). The Committee met at least once per month during which they reviewed the governance of the organization, made recommendations, reviewed audits and followed up with outstanding matters that management cited in these reports.

Credit Committee The Committee comprising Mr. Clayton McEwan, (Chairman), Mr. Hopeton Newell, Ms. Delores Mollison, Mrs. Sandra Dockery, and Mr. Kurt Vaz met weekly and over the year has done an outstanding job to approve members' loans.

APPRECIATION

members of the Supervisory and Credit Committees, the management and staff, the team of EduCom Ambassadors and all other volunteers for their hard work and commitment throughout the year. Your invaluable contribution played a significant role in the performance of EduCom during 2019. We look forward to your continued support, dedication and involvement in 2020, as together we maintain our role as ambassadors to our Credit Union.

To those volunteers who have retired, we say a special thanks to you for your contribution while we welcome those who have joined our ranks.

A number of other persons and organizations supported us throughout the year and we would like to say special thanks to the following: •

The University of the West Indies and all its affiliates • The Principals, Bursars and Head Teachers in all our schools • The Credit Union League and its subsidiaries • Cuna Mutual Insurance Society • Jamaica Co-operative Insurance Agency • The Office of the Post Master General • NCB - Oxford Road • BDO & Associates • The Registrar of Co-operative and Friendly Societies • Samuda & Johnson, Attorneys at Law • Usim, Williams & Co. • Highgate Systems Ltd, our software provider • The National Housing Trust • The National Land Agency For and on behalf of the Board of Directors

................................................................

Dr. Mark Nicely President of the Board

The Board of Directors graciously uses this opportunity to place on record our appreciation to the

38

TREASURER'S

REPORT For The Year Ended December 31, 2019

Ruel Nelson Treasurer

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EDUCOM CO-OP CREDIT UNION

OVERVIEW I am very pleased to present the Treasurer’s Report to the Fifth Annual General Meeting of EduCom Cooperative Credit Union Limited (EduCom). Your Credit Union has produced fairly good results in terms of its overall financial performance when compared to the previous year’s financial outturn. We have continued to build on the gains that were realized through the merger of our operation. Conversely, we have had to overcome challenges confronted within the difficult economic environment and a very competitive marketplace.

It should be noted that EduCom’s financial performance was achieved against the background of significant changes in the financial market and the entrance of new players. Despite this turbulence, the Credit Union performed very well in terms of its core business – that of disbursement of loans to members. The result was an increase of 15.9% in the net loan portfolio over the previous year.

This was achieved despite fierce competitive pressure by other players in the financial market for loans. In addition, the situation was further exacerbated by low to moderate loan interest rates due to competition from other big players in the market, such as commercial banks. These entities have adopted credit union crafted products such as unsecured loans tied to salary deductions, being paid directly by their employers to the respective competitors.

Despite the challenges encountered, EduCom’s performance met, and in most cases exceeded key financial indicators as measured against the P.E.A.R.L.S. standards used by the Jamaica Cooperative Credit Union League (JCCUL) as a means of assessment.

OPERATING PERFORMANCE It is against the difficult challenge of continuing to develop a new culture for our Credit Union and the continued development of trade practices such as direct sales through the use of Business Development Officers (BDOs), that EduCom realized a surplus for the year of $104.8 million when compared to $126.6 million, the previous year. The 17.2% decrease in the

ANNUAL REPORT 2019

surplus for the current year when compared to the previous year, can be attributed mainly to the negative impact of loan impairment losses due to write-off of unrecoverable loans, an increase in the provision for possible uncollectible loans and the increase in operating expenses.

The total gross interest income from members’ loans and investments amounted to $914.2 million when compared to $895.5 million in 2018. This reflected a meagre performance in terms of growth in total gross interest income, approximately 2.4% increase over the previous year. The factors that contributed to this outturn were as follows: 1. The gross interest income from members’ loans increased by 4% but this was negatively impacted by the interest income from investments that saw a decline of 25% from the previous period.

2. The prevailing downward trend in the interest rates on investible funds resulted in a significant reduction in earnings.

3. A deliberate action to reduce the very high proportion of unsecured loans within the Credit Union’s loan portfolio from a high of 26% to more manageable range of 10% -15%. Whilst we had not attained this target, by closing the year at 18%, there was a substantial reduction in the number of unsecured loans, which are priced at a higher rate.

It should also be pointed out that whenever a member has not made a payment to his or her loan obligation for a period of ninety (90) days, interest earnings was not recorded in the credit union’s income statement for that member’s loan in accordance with credit union’s accounting policy.

This occurrence has a double negative effect on your credit union’s performance, as coupled with the fact that no interest income would be recorded, an expense in the form of bad debt provision would be charged to the income statement. We, therefore, continue to implore our members to be responsible in honouring their obligations to the Credit Union.

The loan portfolio contributed 80% to our income (in 2018- 81%), indicating that the credit union beneficially focuses on its core business of granting

40

EDUCOM CO-OP CREDIT UNION

loans to meet the needs of its members. However, given the competitive nature of the marketplace in which we operate, efforts are now being made to diversify our revenue stream in order to increase the level of noninterest income. Our 2019 income from investments in financial markets decreased by $12.8 million or 25%, as a result of the phasing out of the Repurchase Agreement Instrument (Repo’s). The result is that we had to resort to very low return investment vehicles such as unit funds.

Given the volatility in loan interest rates in the market and the fact that your Credit Union is very sensitive to downward movements in loan interest rates, your Board (as good stewards) has continued to gradually implement the strategy to diversify EduCom’s income stream. Your Credit Union has continued to try to defray some of the costs that it would previously absorb, by adding non-interest income to our earnings, using a transactional based approach that would affect only members who utilize the services. With this initiative, EduCom realized total non-interest income of $177.5 million from loan processing, ATM and management fees on schemes loans, when compared to $148.1 million earned in the previous year.

Operating expenses totalled $788.6 million when compared to $727.5 million for the previous year. This reflected an 8.4% increase in total operating expenses or $61.1 million. The main contributing factors to this increase were the additional costs from inflationary factors: 1. printing, stationery and supplies reflected an increase of 33%, 2. marketing and promotion reflected an increase of 18% 3. staff costs reflected an increase of 12% 4. security expenses reflected an increase of 10%

EduCom paid to our members $137.7 million in interest expense for voluntary shares, deferred shares and deposits held for the current year, when compared to $169.2 million, the previous year. This decrease of $31.5 million was attributed to lesser than expected inflows from members’ shares and deposits despite measures implemented to increase members’ participation in the products on offer. Additionally, there were downward adjustments in interest rates in order to maintain parity, based on the significant decline in interest rates on investible funds. It should also be noted that during the period under review, EduCom offered very competitive interest rates on members’ savings and deposits. These rates ranged between 0.75% to 4.25% per annum, and were determined by the type of saving products, market condition, amount of funds and tenure.

Additionally, EduCom continued the revolving loan agreement with the Credit Union Fund Management Company (CUFMC) and National Housing Trust in order to meet the high demand for loans. This resulted in external interest expense of $7.0 million when compared to $9.1 million in 2018.

The following chart shows the comparative financial performances over the past five years, of EduCom Cooperative Credit Union’s audited financial figures since its inception.

41

ANNUAL REPORT 2019

EDUCOM'S INCOME VS EXPENDITURE 2015 TO 2019 1,000.0 900.0 800.0

MILLIONS

700.0 600.0 500.0 400.0 300.0 200.0 100.0 -

2019

2018

2017

2016

2015

Gross Interest Income

914.2

895.5

886.5

632.7

579.3

Non-Interest Income

177.5

148.2

135.8

70.9

49.1

Operating Expenses

788.6

727.5

669.8

464.8

469.7

Interest Expenses on Savings

137.7

169.2

161.2

120.3

110.3

External Interest Expenses

17.4

15.0

22.1

27.5

26.8

Surplus for the Year

104.8

126.6

115.5

89.0

2.4

PORTFOLIO PERFORMANCE Based on EduCom’s financial performance for the year under review, total assets increased by $785.6 million or 8.7% and stood at $9.85 billion as at December 31, 2019. Similarly, net total loans increased by approximately $1.06 billion, closing at $7.76 billion to represent a 15.9% increase in the loan portfolio (mainly due to an increase in loan disbursements). Additionally, EduCom realized a Net Loan to Total Assets ratio of 79% for the current year, when compared to the 74% that was achieved in 2018.

It should be noted that management has been successful in its objective to keep the delinquency rate low, through the measures that were implemented to combat the very high level of delinquency in the order of 7.7% experienced in 2016. Through the concerted efforts of management, volunteers and staff, we have managed to control this very important indicator, by remaining vigilant in monitoring and managing the timely receipt of members’ payments

on our loan portfolio. For the year under review, we achieved a delinquency rate of 3.46%, which was below the standard of 5%, though it compares unfavorably to the previous year’s 3.04%.

Members’ savings at year-end increased to $8.06 billion when compared to the previous year of $7.39 billion. This represents a 9.0% growth over the period.

However, it should be noted that the need to satisfy our loan demand from members’ savings has not yet been achieved. Therefore, we continue to offer attractive rates on EduCom’s saving products, as we seek to maintain the gap between the total loan portfolio and the total members’ savings. We will continue to offer these attractive returns on saving products, creating the opportunities to encourage savings and build individual wealth for our members. It is important to remind you that it is primarily through savings that a person creates wealth.

The performance of the key indicators is captured graphically below and illustrates the actual increase in loans when compared to the increase in savings.

42

EDUCOM CO-OP CREDIT UNION

KEY PERFORMANCE INDICATORS 12,000 10,000 MILLIONS

8,000 6,000 4,000 2,000 -

2019

2018

2017

2016

2015

Members’ Savings

8,055

7,388

6,669

4,385

4,169

Members’ Loans, after provision from impairment

7,763

6,700

6,124

4,176

4,205

Total Assets

9,850

9,064

8,308

5,834

5,595

The gap between members' loan and savings is depicted in the chart below.

KEY OPERATING INDICATORS 12,000

MILLIONS

10,000 8,000 6,000 4,000 2,000 -

43

2019

2018

2017

2016

2015

Members’ Savings

8,055

7,388

6,669

4,385

4,169

Members’ Loans, after provision from impairment

7,763

6,700

6,124

4,176

4,205

Total Assets

9,850

9,064

8,308

5,834

5,595

ANNUAL REPORT 2019

FUTURE OUTLOOK

ACKNOWLEDGEMENTS:

Your Credit Union is operating in a changing environment, where the integrity and behaviour of some of our members are becoming questionable.

They borrow from the credit union with no intention to honour their obligations. This has resulted in loans becoming delinquent and being charged off the credit union accounting records, which was a significant cost to your credit union at approximately $47 million for the year, when compared to the previous year of $56 million. Management has taken steps to pursue these members through the following channels:

I thank God, the members, and fellow board members for affording me the opportunity to serve EduCom in the role of Treasurer. It has been an honour and a privilege to perform the functions. I thank our members for the continued business support that you have given to EduCom and entrusting your confidence in the Board of Directors and Management in serving you. We hope to continue to justify the confidence that you have placed in us.

1. The employment of bailiff services 2. The employment of attorneys-at-law to pursue recourse through the court system to collect sums owing.

3. The foreclosure of real estate properties that have been offered as securities.

4. The names of these delinquent members will be sent to the credit bureau to prevent them from accessing further credits from any other institution.

5. The names of these delinquent members will be published on notice boards in the branches and on the Credit Union's website.

6. The names of delinquent members who cannot be located will be published in the printed media.

As you may be aware, your Credit Union will soon be regulated by the Bank of Jamaica. This will result in higher cost of operating through enhanced and regular financial reporting with dedicated personnel to execute such tasks. Further, in order to improve operational efficiencies and to benefit from the advances in the current technology, such as digital transformation, your Credit Union will be embarking on a project to select and implement a core computerized business system and we have engaged the services of a consultant to aid in this very important process. We will be offering to our members deferred shares in the amount of $250 million in order to secure the funding for this very important project.

I thank and commend all the team members including volunteers, managers, and staff, who consistently applied themselves to EduCom's continued successful development.

On behalf of the Board of Directors, I express sincere appreciation to the following entities: •

•

The Registrar of Co-operative and Friendly Societies for the guidance and good advice provided, especially during the year and The Jamaica Co-operative Credit Union League (JCCUL) for guidance and expert services provided in relation to operational and regulatory matters.

Also, I thank the Auditor, BDO for the professionalism displayed in the execution of the audit.

We need the continued support of all our members to utilize the services of EduCom as we seek to live our vision in which EduCom’s operation is membercentric, service-oriented, financially sound, the technologically-enhanced employer of choice; and the top Credit Union in Jamaica in member value, compliance, and satisfaction.

44

EDUCOM CO-OP CREDIT UNION

EDUCOM CO-OPERATIVE CREDIT UNION LIMITED SCHEDULE OF P.E.A.R.L.S. INDICATORS AS AT DECEMBER 31, 2018 CATEGORY

2019

2018

2017

2016

2015

STANDARD

PROTECTION

%

%

%

%

%

%

Prov. For loan loss/Delinq.>12mnths.

100

100

100

100

100

100

Prov. For loan loss/Delinq.>6-12mnths.

60

60

60

60

60

60

Prov. For loan loss/Delinq.>3-6mnths.

30

30

30

30

30

30

Net loan/Total Assets

78.82%

73.92%

73.72%

71.57%

75.16%

60-80

Liquid Assets/Total Assets

11.86%

14.04%

11.61%

15.30%

13.10%

Max 5

Financial Investment/Total Assets

2.74%

5.05%

5.83%

3.67%

3.24%

Max 10

Savings/Total Assets

81.78%

81.51%

80.27%

75.17%

74.52%

70-80

External Credit/Total Assets

1.11%

1.54%

1.96%

3.96%

5.39%

10

Institutional Capital/Total Assets

11.31%

11.91%

12.21%

13.93%

11.87%

Min 10

Deliq.>60 days/Loan Portfolio

3.46

2.45%

3.55%

7.72%

6.00%

<5

Non-Earnig Assets/Total Assets

6.59%

6.98%

8.25%

9.46%

8.49%

<5

Zero-Cost Funds/Non-Earning Assets

251.27%

242.81%

215.36%

220.75%

236.43

>100

12.11%

13.17%

15.72%

13.91%

16.37

Market rates

2.41%

4.01%

7.63%

6.80%

5.98

Market rates

Financial Cost:Deposit/Avg. Deposit

1.77%

2.38%

2.86%

3.08%

3.00

Market rates

Opearting Expenses/Avg Assets

8.34%

8.38%

9.47%

8.79%

10.24

3-10

Gross Margin/Avg. Assets

8.03%

8.19%

9.95%

8.48%

10.12%

EFFECTIVE FINANCIAL STRUCTURE

ASSETS QUALITY

RATES OF RETURN AND COSTS Net Loan Income/Avg.Net Loan Portfolio Financial Investment Income/Avg. fin.

Invest.

cover* Measures the

LIQUIDITY

ability

Total Liquidity/Total Savings

16.52%

22.48%

21.93%

24.60%

22.75

20-30

Short-Term Payable/Total Deposit

2.15%

1.67%

1.60%

1.78%

1.82%

of the credit

Non-Earning Liquid Assets/Total Assets

0.67%

0.59%

1.44%

0.86%

0.26%

union to Meet

SIGNS OF GROWTH

withdrawals

Total Assets

8.67%

9.11%

42.40%

11.84

9.56

>Inflation

Membership

5.63

5.55

3.2

182.00

5.55

>5

4

4.6

2.00

3.70

5.50

NOTE: INFLATION

45

Enough to

ANNUAL REPORT 2019

SUPERVISORY

COMMITTEE’S REPORT Report of the Supervisory Committee for the year ended December 31, 2019 Co-operation, Alignment and Commitment

Tasha Manley - Chairman

Andrew Smith

Erica Haughton - Secretary

Loraine Gordon-Pinnock

Clive McLean

46

EDUCOM CO-OP CREDIT UNION

INTRODUCTION

ROLE, RESPONSIBILITIES & SCOPE OF WORK

This report highlights the outcomes of Internal Audit activities in financial year (FY) 2019, which demonstrate our efforts to assist management to identify and address significant risks and drive efficiencies while providing ongoing assurance to the Board of Directors and other stakeholders (e.g. the JCCUL). Several programmatic developments and improvements are also featured, as is statistical information on the utilization of Internal Audit’s resources and other performance metrics.

The Supervisory Committee is responsible, by virtue of the established Rules of EduCom Co-operative Credit Union Limited, for exercising oversight in relation to the proper conduct of the Credit Union’s operations, in particular, with regard to risk management and monitoring.

KEY ACHIEVEMENTS 1.

2.

3.

Influenced the board to pay greater attention to Implementation Status Of Audit Recommendation (“ISOAR”) issues to the extent that these now form part of the Chief Executive Officer’s (CEO) Key Performance Indicators (“KPI”) reporting on a monthly basis; Strategically coordinated with the Risk Management Unit on two important special audits, namely: (i) Spanish Town Branch Operations (ii) Debit Card Application Processing Completed eighty-eight percent (88%) of budgeted audit activities.

AUDITS & SURVEILLANCE Areas of operation and business processes that were audited during the year ended December 31, 2019 included; •

Review of ATM Switch Reports

•

Review of Dormant Accounts

•

Ad Hoc Investigations of Members’ Complaints

•

Cash Audits

•

Finance Department; examined Accounts Payable, Capital Management, Management of Bank Accounts and Investments

•

Branch Audits: o

Portmore Branch – Loans Processing

o

UTech Branch – Treasury Management, Teller Operations, ATM Operations, Opening

of New Accounts and KYC Requirements,

Processing of Incoming Mail and Branch

Physical Security 4. Produced 97 recommendations for improvements to governance, risk management, and internal control processes, with corresponding agreed-upon management corrective actions The conclusion at the end of this report presents the outcome of the Committee’s work in relation to its areas of responsibility. The conclusion also summarizes the main actions the Committee requests of Management. The Supervisory Committee also highlights some focus areas for its work going forward.

47

o

Spanish Town Branch

o

Mandeville Branch

o

Montego Bay Branch

The audit activities of the Internal Audit Unit were guided by the International Standards for the Professional Practice of Internal Auditing, recommended risk management techniques, the Proceeds of Crime Act and the Bank of Jamaica Guidance Notes. Although not yet enacted, where appropriate, audits were done consistent with the requirements of the proposed Bank of Jamaica (Credit Unions) Regulations.

ANNUAL REPORT 2019

KEY OBSERVATIONS

The overall results of our assessment indicate that sufficient assurance can be placed on the Credit Union’s system of internal control. Measures to secure the effective operation of internal controls are suitably designed and are operating effectively as there was general adherence to the policies and procedures. We identified some internal control weaknesses where opportunities for improvements were identified and brought to the attention of Management and the Board of Directors.

Management action plans have been obtained for remediation of the issues raised, some of which have already been implemented. The Internal Audit Unit is charged with the follow-up and validation of actions implemented by Management and the Board of Directors.

As a result of its work performed during 2019, the Supervisory Committee formulates the following key observations in this report. These are namely: •

Effective member management and processing of transactions in accordance with the rules and procedures of EduCom;

•

The need for continuous revision of policies and effective communication of the changes to respective staff;

•

the importance of continuing to ensure longterm financial strength and sustainability;

•

the need to review and enhance EduCom’s Internal Control and Risk Management Environment in view of the changing size and evolving complexity of the organization’s activities;

•

the need to achieve full implementation of best practices including in areas where pervasive compliance gaps remain, and;

•

the need to perform a comprehensive review and then revamp the credit approval and related decision-making processes at EduCom.

MEETINGS AND OTHER INVOLVEMENT The work of the Committee is achieved largely through a consistent schedule of meetings where matters are discussed and recommendations are made to the Board of Directors. The Committee members were diligent in their attendance and participation, therefore resulting in the high level of performance of the Committee. The following table gives a profile of members’ attendance at meetings during the year to December 31, 2019.

Supervisory Committee Attendance Record for the Year 2019 NAME

NUMBER OF POSSIBLE MEETINGS

NUMBER OF MEETING PRESENT

Tasha Manley

12

10

Clive McLean

12

11

Frederick Mills

4

4

Erica Haughton

12

10

Paula Ferguson

2

2

Loraine Gordon-Pinnock

8

4

Andrew Smith

8

7

48

EDUCOM CO-OP CREDIT UNION

Over the year, and in an effort to build capacity, the Internal Audit Manager and members of his team participated in training offered by JIFS and JCCUL. These covered areas such as IT audits, Investment audits and general audit approaches. In accordance with the statutory requirement under the Proceeds of Crime Act (“POCA”), the audit team as well as members of the Supervisory Committee also participated in the important training geared at detecting and preventing money laundering and terrorist financing offered by JIFS and JCCUL. Committee members as well as the Internal Auditor also participated in the Credit Union’s annual strategic retreat, adding value and gaining useful insights into the strategic direction articulated by management.

LOOKING OVER THE HORIZON Privacy and security of customer information will no doubt become a major driving force for the design of the Credit Union’s strategy in the future, as well as the connected development of its audit plan.

The revolution in financial technology is undeniable.

We are at a crossroads in terms of traditional banking methods versus online transactions. The audit process will have to become more agile in this regard to assure the Board that there is an appropriate balance between regulatory requirements such as Know Your Customer and satisfying customer needs for more sophisticated forms of “banking”.

Digital currency looms large on the horizon and the Credit Union must pay attention to this development.

Internal controls must reflect recognition of this.

The Supervisory Committee will follow these developments carefully and over the current financial year will focus closely on initiatives undertaken to enhance EduCom’s Internal Control and Risk Management Environment. These will include actions to further develop oversight; the establishment of a complete map of risks and ensuring the three lines of defence model is effectively deployed across

49

the organization, including addressing the findings coming from Internal Audit’s review on the credit risk management.

ACKNOWLEDGEMENTS The Supervisory Committee wishes to express its gratitude to all members who retired from the Committee during the year. Mr. Frederick Mills and Mrs. Paula Ferguson, are especially acknowledged.

The Committee welcomed Mrs. Loraine GordonPinnock and Mr. Andrew Smith , who have both added experience and strengthened capacity.

The members of the Committee express gratitude to the Membership for having been allowed the privilege of serving in this capacity.

Special thanks are extended to the Board of Directors, management and staff of the Credit Union and to the Internal Audit team, who have worked hard and provided us with immeasurable support and assistance throughout the year. Thanks are also expressed to my fellow committee members for their invaluable contribution during the year.

Respectfully submitted,

............................................................

Tasha Manley Supervisory Committee Chair

ANNUAL REPORT 2019

CREDIT

COMMITTEE’S REPORT

Clayton McEwan - Chairman

Delores Mollison - Secretary

Sandra Smith-Dockery

Educom Co-operative Credit Union continues to thrive to provide products and services to meet our members' needs. For the year ending December 31, 2019 our loan portfolio stood at $7.78B which represents a net increase of 15.9% over the previous financial year. Throughout the year the Committee offered a number of financial counselling sessions and met with members to assist them in making wise financial decisions, which are prudent to ensure a better quality of life.

Hopeton Newell

Kurt Vaz

LOAN DISBURSEMENT For the period under review a total of $4.574B was disbursed in new loans, which represents a net increase of $0.69B or 17.89% over the previous financial year. These new loans were granted for purposes such as education, home improvement and acquisition, motor vehicle purchase and personal expenses. Below is a reflection of our quarterly loan disbursement:

50

EDUCOM CO-OP CREDIT UNION

QUARTERS

TOTAL

PERCENTAGE

1st Quarter

$1.031

22.54%

2nd Quarter

$1.084

23.70%

3rd Quarter

$1.244

27.20%

4th Quarter

$1.215

26.56%

Total

$4.574B

100.00%

LOAN PORTFOLIO

LOAN PORTFOLIO MIX AS AT 2019 SCHEME LOANS

4%

STAFF LOANS CONCESSIONARY RATE

2%

RESTRUCTURED LOANS

Secured Loans

1%

EduHome

UNSECURED LOANS

18%

EDUHOME

1%

MORTGAGE

18%

Mortgage WITHIN SAVINGS LOANS

14%

Restructed Loans Scheme Loans Staff Loans - Concessionary Rate Unsecured Loans

SECURED LOANS

42%

51

Within Saving Loans

CATEGORY

VALUE

% OF PORTFOLIO

Unsecured Loans

1,383,201,521.17

17.76%

Within Savings Loans

1,109,269,361.19

14.24%

Secured Loans

3,260,795,582.53

41.87%

Eduhome

63,134,278.70

0.81%

Mortgage

1,426,252,442.27

18.31%

Restructured Loans

50,902,427.48

0.65%

Scheme Loans

342,264,737.14

4.39%

Staff Loans - Concessionary Rate

152,739,184.01

1.96%

TOTAL

7,788,559,534.49

100.00%

ANNUAL REPORT 2019

ATTENDANCE A total of 48 meetings were convened by the Committee which included special meetings to review loans issued by the internal team to ensure that these were disbursed in alignment with policy. These meetings were well attended with few cases of absences arising from extenuating circumstances. In addition to the Committee’s scheduled meetings, the members of the committee attended monthly meetings with the Delinquency Committee and quarterly meetings with the Board of Directors.

MEETINGS SCHEDULED

ATTENDED

ABSENT WITH EXCUSE

Clayton McEwan

48

45

3

Deloris Mollison

48

43

5

Kurt Vaz

48

30

18**

Hopeton Newell

48

45

3

Carlton Stewart

48

13

35*

Sandra Smith-Dockery

48

27

21*

MEMBERS

* Absence due to office demission ** Absence due to late commencement date of service on the Credit Committee

We want to place on record our appreciation to the late Mr. Clayton McEwan, who served the Credit Committee with apt direction before being promoted to the Board of Directors in January 2020. Mr. Kurt Vaz, who is a medical doctor by profession, joined the Credit Committee as a seasoned financial volunteer. He has brought with him a good balance to the team with his experience and wealth of knowledge which added value in our discussions and decision-making process.

We thank both Ms. Sandra Smith-Dockery and Mr. Carlton Stewart who served the Credit Committee with much tenacity throughout their tenure as volunteers on the Credit Committee.

Prepared by:

……………………………………….

Kurt Vaz Credit Committee Chair

52

EDUCOM CO-OP CREDIT UNION

NOMINATIONS

COMMITTEE’S REPORT REPORT OF THE NOMINATIONS COMMITTEE

• Ian Sutherland

TO THE 5TH ANNUAL GENERAL MEETING OF UNION

*Appointed to the Board effective August 22, 2020 to fill a casual vacancy which arose from the death of Clayton McEwan on June 29, 2020.

The Nominations Committee which held its 1st meeting on January 31, 2020 was chaired by Director Sonia Bennett. Other members of the Committee were Messrs. Michael Brydson, Frederick Mills, Tanjay Holmes and Director Hilton Blenman. The Committee was mandated to nominate members who it considers appropriate for nomination or appointment to the Board, and the Credit and Supervisory Committees.

Such persons must be “fit and proper” as defined in the preamble of the Credit Union’s Rules, and be willing and available to serve the Credit Union as volunteers.

**The late Director Clayton McEwan had been appointed to the Board to fill a casual vacancy which arose from the

EDUCOM LIMITED

CO-OPERATIVE

CREDIT

Preceding the selection of officers who would be proposed for nomination at the Annual General Meeting (AGM), the Committee held five (5) meetings.

The first and fifth meetings of the Committee were attended by four (4) Committee members. The remaining three (3) meetings were attended by the full Committee. In its deliberations, the Committee ensured that its activities were in accordance with the Credit Union’s Rules and its Terms of Reference and that its considerations and decisions came out of a high degree of assessment, integrity and fairness. The Committee is pleased to report that its objectives were successfully achieved.

BOARD OF DIRECTORS The following directors will retire at this AGM: • Coleen Lewis* • Mark Nicely • Stacey-Ann Farquharson • Charles O’Connor

53

resignation of Clide Nesbeth on February 10, 2020.

The Committee acknowledges the sterling contribution of the late Director Clayton McEwan and his commitment and dedication to his responsibilities as a director on the Board and in his other capacities while he served on the Credit Committee.

The Committee is recommending that Messrs. Mark Nicely, Charles O’Connor and Ian Sutherland, and that Misses Coleen Lewis and Stacey-Ann Farquharson be nominated to serve for another three (3) years.

The other proposed members of the Board and their respective tenures are as follows: • Hector Stephenson – 2 years • Hilton Blenman – 2 years • Ruel Nelson – 2 years • Janice Green – 1 year • Ian McNaughton – 2 years • Sonia Bennett – 1 year

CREDIT COMMITTEE Persons are normally elected to serve on this Committee for two (2) years. The Nominations Committee recognizes and appreciates the quality of service provided by the members of this Committee, who meet each week to review and make decisions on loans submitted for approval, as the Credit Union seeks to satisfy the needs of its members.

ANNUAL REPORT 2019

The following Committee members will retire at this AGM: • Hopeton Newell • Shashu Payne* • Rachelle McKenzie**

The Nominations Committee thanks you for the opportunity to serve. We recognize the challenges that we are encountering at this time, as we grapple with COVID-19. We endeavour, however, to serve the membership with zeal and enthusiasm, and despite everything, look forward to a productive year of service, as all the volunteers, staff and members work towards building brand EduCom.

* Appointed to the Credit Committee effective January 1, 2020 to fill the casual vacancy which arose as a result of Mrs. Sandra Smith Dockery’s resignation on August 14, 2019. **Appointed to the Credit Committee on August 2, 2020 to fill the casual vacancy which arose due to the appointment of the late Director Clayton McEwan to the Board of Directors on February 15, 2020.

……………………………………….

Sonia Bennett Nominations Committee Chair

The Committee is recommending that Mr. Hopeton Newell and Misses Shashu Payne and Rachelle McKenzie be nominated to serve for another two (2) years. The other proposed members and their respective tenures are: • Kurt Vaz – 1 year • Deloris Mollison – 1 year

SUPERVISORY COMMITTEE Members of this Committee are elected to serve for one (1) year and as such, all members retire at each AGM. The Committee comprises five (5) members.

The volunteers of this Committee have spent significant portions of their time ensuring that proper management control systems are in place for the sustainability of a viable credit union.

The recommended members of this Committee for 2020/2021 are: • Tasha Manley • Erica Haughton • Andrew Smith • Clive McLean • Loraine Gordon Pinnock

54

EDUCOM CO-OP CREDIT UNION

MANAGEMENT

TEAM

55

1

2

3

4

5

6

7

8

9

ANNUAL REPORT 2019

10

11

12

13

CAMILLE CAMPBELL-DRUMMOND Operations Manager

2 5

MILLICENT ANDERSON Accounting Manager

8

LEWIN BAXTER Internal Audit Manager

3 6 9

11

12

1 4 7 10

ELVIS KING Chief Executive Officer

NATASHA MILLS Regional Member Experience Manager

13

ERIC HESLOP Chief Financial Officer

ODENE JAMES Risk and Compliance Manager

CERAPHIA ROPER Regional Member Experience Manager

GARRET D’AGUILAR Chief Operating Officer

MARCIA SCOTT GOLDING Human Resource and Administration Manager

DELROY SCARLETT Member Experience and Marketing Manager NIGEL EDWARDS Assistant Information and Communications Technology Manager

ST. THERESA VERNON Credit Manager

56

EDUCOM CO-OP CREDIT UNION

MANAGEMENT

& STAFF NAME

POSITION

Executive Office

King Elvis

Chief Executive Officer

Head Office

D’Aguilar Garret

Chief Operating Officer

UWI

Dixon Michell

Executive Assistant

Head Office

(CURRENT)

Williams Karette

Administrative Assistant

Head Office

`

Vernon St. Theresa

Credit Manager

Head Office

Credit

Barnaby Michael

Junior Recovery Officer

UWI

Evans Norvalee

Junior Recovery Officer

Spanish Town

Francis Ki-Ki Ann

Junior Recovery Officer

UWI

Fray Barbara

HEART Trainee

UWI

Fyffe Shahna-Kae

Clerical Assistant

UWI

McLean Cassandra

Recovery Officer

UWI

Morgan Pierre-Charles

Loans Adjudicator

Head Office

Mowatt Hall Cheryl

Junior Recovery Officer

UWI

Richards Lyons Judith

Recovery Officer

UWI

Smith Leigh-Ann

Recovery Officer

UWI

Thoms Nicole

Senior Recovery Officer

UWI

Heslop Eric

Chief Financial Officer

Head Office

Anderson Millicent

Accounting Manager

Head Office

Edwards Michael

Accounting Officer 11

Head Office

Gayle Yakeisha

Accounting Officer 11

Head Office

Jones Ruth-Ann

Clerical Officer

Head Office

Morrison Kedeen

Senior Accountant

Head Office

Sinclair Navlette

Accountant

Head Office

Wallcom Tamara

Accounting Officer 1

Head Office

Finance and Investment

57

LOCATION

DEPARTMENT

ANNUAL REPORT 2019

LOCATION

DEPARTMENT

NAME

POSITION

Human Resource and Administration

Scott Golding Marcia

Human Resource and Administration Manager

Head Office

Daley Radcliff

Bearer

Head Office

Lothian Andrea

Human Resource Officer

Head Office

Reynolds Petula

Office Attendant

Head Office

Sinclair Williams Nova

Human Resource and Administration Officer

Head Office

Edwards Nigel

Assistant Information and Communication Technology Manager

Head Office

Bailey Tevin

User Support Officer

Head Office

Benjamin James

User Support Officer

Head Office

Phipps Brendan

Network Administrator

Head Office

Baxter Lewin

Internal Audit Manager

UWI

Batchu Kerson

Internal Audit Officer

UWI

Bennett Omar

Internal Audit Officer

UWI

Blair-Samuels Kerry-Ann

Internal Audit Officer

UWI

Information and Communication Technology

Internal Audit

(CURRENT)

58

EDUCOM CO-OP CREDIT UNION

MANAGEMENT & STAFF CONTINUED

59

DEPARTMENT

NAME

POSITION

Member Experience and Marketing

Scarlett Delroy

Member Experience and Marketing Manager

LOCATION

(CURRENT) UWI

Mills Natasha

Regional Member Experience Manager

UWI

Roper Ceraphia

Regional Member Experience Manager

Portmore

Allen Kayon

Credit Officer

Portmore

Belnavis Cavelle

Member Care Representative - Receptionist

UWI

Bent Lisa

Business Development Leader

Montego Bay

Blair Jermane

Business Development Leader

Portmore

Blair Kay-Ann

Member Care Representative – Telephone

UWI

Boswell Kimberlee

Member Care Representative - General

UTECH

Brinsley Justine

Business Development Officer

Head Office

Brown Mellicia

Member Care Representative - General

Linstead

Bucknor Baker Teisha

Teller

Spanish Town

Campbell Annikee

HEART Trainee

Montego Bay

Campbell Peta-Gay

Sales Representative

UWI

Campbell Veronica

Office Attendant

Linstead

Clarke Rajon

Teller

Linstead

Cole Natalie

Office Attendant

UWI

Crooks Chadeki

Teller

Head Office

Davidson Monique

Public Relations and Communications Officer

UWI

Davis Monique

Credit Officer

Head Office

Davis Monique M.

Business Development Officer

Old Harbour

Davis Hansel Patrine

Member Care Representative - General

Linstead

Ellis Hakeem

Credit Officer

Head Office

Fagan Janice

Credit Officer

Head Office

Guest Patrice

Member Care Representative - General

UWI

Guthrie Passard Danielle

Member Care Representative - General

UWI

Harvey Kimberly

Member Care Representative - General

Spanish Town

Henry Rochelle

Teller

Linstead

Henry Suzel

Teller

Head Office

Holgate Jodian

Teller

Portmore

Howe Tarana

Member Care Representative - General

UTECH

Hunter Rose

Evening Cleaner

Spanish Town

Insular Totyana

Member Care Representative - General

Mandeville

Jones Jodi

Business Development Leader

Head Office

Kelly-Bailey Tarika

Member Care Representative - General

Spanish Town

Kelly-Murphy Rosa-Lee

Business Development Leader

Linstead

Kirlew Brandon

Member Care Representative - General

Montego Bay

Lee Renardo

Teller

UTECH

Lewis Janine

Member Care Representative - Telephone

UWI

Linton Latoya

Member Care Representative - General

Portmore

LOCATION

DEPARTMENT

NAME

POSITION

Member Experience and Marketing

Masters Trishanna

Member Care Representative - General

Linstead

Mattis Kadian

Business Development Officer

Portmore

McDaniel-Tyrell Tashna

Member Care Representative - Receptionist

Portmore

McLean Venessa

Teller

Old Harbour

Montaque Therese

Credit Officer

UWI

Morgan Georgiana

Branch Liaison

Head Office

Morgan Tremaine

Marketing and Promotions Officer

UWI

Morris Patrick

Teller

UWI

(CURRENT)

Myers Salim

Business Development Leader

Old Harbour

Nelson Shannell

Member Care Representative - General

Portmore

Nicholson Natoya

Member Care Representative - General

Head Office

Owens Gabrielle

Business Development Officer

Linstead

Palmer Bennett Icylin

Office Attendant

Old Harbour

Parchment Shadé

Member Experience and Marketing Dept

Mandeville

Payne Lalibella

Marketing Assistant

UWI

Porter Davis Stacey-Ann

Business Development Leader

UWI

Ramus Rakeesha

Member Care Representative - General

Old Harbour

Redwood Kadene

Member Care Representative - Receptionist

Head Office

Ritchie Tassia

Teller

Old Harbour

Robinson Kris-Michael

Member Care Representative - General

Head Office

Rose Monique

Member Care Representative - General

Head Office

Russell Niesha

Member Care Representative - Telephone

UWI

Russell Shanique

Member Care Representative - Receptionist

Spanish Town

Sinclair Horace

Bearer

Spanish Town

Stewart Shane

Teller

UWI

Tennant Sabrina

Teller

Mandeville

Thompson Cyprain

Credit Officer

Credit Officer

Walker Raxon

Teller

Linstead

Wallace Jessica

Member Care Representative - Telephone

UWI

Ward Mauvallette

Member Care Representative - General

Montego Bay

Watson Roberta

Member Care Representative - General

UWI

Watson Roshain

Business Development Leader

Spanish Town

Whyte Taneca

Senior Member Care Representative

Mandeville

Williams Camise

Credit Officer

Spanish Town

Williams Ebony

Teller

Montego Bay

Williams Kemeisha

Credit Officer

Old Harbour

Williams Knight Dorothy

Evening Cleaner

Spanish Town

Wilson Suisj'aila

Member Care Representative - General

Spanish Town

Wisdom Christopher

Business Development Officer

Spanish Town

Wright Charnelle

Teller

Spanish Town

60

EDUCOM CO-OP CREDIT UNION

MANAGEMENT & STAFF CONTINUED NAME

Operations

Campbell Drummond Camille Operations Manager

Head Office

Bennett Alisa

Operations Assistant

Head Office

Brown Colletta

Operations Assistant

UWI

Campbell Triscia

Clerical Assistant

Head Office

Davy Richard

Operations Assistant

Head Office

Deans Grichen

Operations Assistant

Head Office

Fender Trishana

Operations Assistant

Head Office

Foster Tameka

Operations Officer

Head Office

Risk and Compliance

61

POSITION

LOCATION

DEPARTMENT

(CURRENT)

Grant Kimone

Clerical Assistant

Spanish Town

Holness Kadmiel

Clerical Assistant

Head Office

Johnson Azeim

Registry Clerk

Head Office

Kenton Anna

Clerical Assistant

Head Office

Lamothe Latoya

Clerical Assistant

Spanish Town

Lawrence Tashauna

Clerical Officer

UWI

Lennon Onecia

Clerical Assistant

Spanish Town

Lewis Kaneja

Clerical Assistant

Spanish Town

Liking Monique

Operations

Spanish Town

Logan Kelly Velma

Registry Clerk

Head Office

McKenzie Ivanna

Operations Officer

Head Office

McNeil Morrison Suzette

Clerical Assistant

Head Office

Morgan Marlique

Clerical Assistant

Spanish Town

Salmon Cashema

Clerical Assistant

Spanish Town

Terthoffer Marrifa

Operations Assistant

Head Office

Valentine-Brown Simone

Registry Clerk

Head Office

Walker Vivolyn

Operations Assistant

Head Office

White Michelle

Senior Operations Officer

Head Office

Whitley Seymour Saneka

Securities Officer

Head Office

Yee Princess

Clerical Assistant

Head Office

James Odene

Risk and Compliance Manager

UWI

Francis Ebony

Clerical Assistant

Spanish Town

Gray Daniel

Clerical Assistant

Head Office

Hemmings Patricia

Clerical Assistant

UWI

Lattibeaudiere Fyffe Cadene Compliance Officer

UWI

McLawrence Nadine

Administrative Assistant

UWI

O'Gere Shellique

Risk Analyst

UWI

Richards Tasha-Gaye

Risk Analyst

UWI

Smellie Samantha

Clerical Assistant

UWI

Community IN THE

62

EDUCOM CO-OP CREDIT UNION

EDUCOM IN THE

COMMUNITY HIGHLIGHTS FROM OUR 4th ANNUAL GENERAL MEETING EduCom staged its 4th Annual General Meeting on May 4, 2019 in the Kenneth Rattray Room at the Jamaica Conference Centre beginning at 10:00 a.m.

An estimated 450 members from across the island were in attendance. Physical copies of the Annual Report, both in print and CD formats, were made available to our members. The Annual General Meeting had various companies in attendance, marketing their products and services. These included: •

Credit Info

•

Caribbean Insurance Jamaica Limited

•

Jamaica Co-operative Insurance Agency

•

Caribbean Assurance Brokers

•

JETCON Motors

Interested members stop at one of the many booths as the AGM progressed.

The meeting concluded with the election of several new members to the Board of Directors and the respective committees.

ANNUAL GENERAL MEETING

An aerial view of the 2019 Annual General Meeting.

63

Administrative Assistant Karette Williams assists a member as he makes his way into the Jamaica Conference Centre.

Sales Representative for the Mandeville Branch, Shade Parchment presents a token to a member as she makes her way to the meeting.

ANNUAL REPORT 2019

EDUCOM'S LABOUR DAY PROJECTS Team members, along with various volunteers, participated in EduCom's annual Labour Day Projects which saw the Credit Union, in 2019, assisting select Early Childhood and Primary Schools/Institutions across the island.

The facilities were provided with well-needed improvements to their infrastructure. This was in line with the National Labour Day theme for 2019 which was 'Child Safety...It's You, It's Me, It's All ah We'.

Representatives from the various branches visited the following locations: •

Kingston and St. Andrew: Albert Street Basic School

•

Montego Bay: Granville Health Centre

•

Mandeville: Woodlawn School of Special Education

•

Old Harbour: Bannister Basic School

CEO Elvis King paints a section of the Albert Street Basic School in Kingston as part of the Company's Labour Day activities.

LABOUR DAY PROJECTS

Member Care Representative of the Mandeville Branch, Totyana Insular paints a section of the Pepper Primary School on Labour Day, May 23, 2019.

CEO of EduCom Co-op Credit Union, Mr. Elvis King (centre), assists in painting a section of a wall at the Albert Street Basic School in Kingston as part of the company’s 2019 Labour Day Project.

Team members attached to the Montego Bay branch were out in their numbers as they assisted in cleaning the compound of the Granville Health Centre in St. James

64

EDUCOM CO-OP CREDIT UNION

CHILDREN'S TREAT We staged our annual Children's Day Treat on May 29, 2019 at our adopted basic schools in Kingston - Albert Street and Hope S.D.A Basic Schools. Representatives from EduCom provided refreshments and interacted with the students.

EduCom has been supporting both schools prior to its merger in 2015. The Credit Union has upgraded and beautified the institutions; while sponsoring various programmes and activities during the course of each school year.

Students at the Hope S.D.A Basic School pose with the Principal, Ms. Janice Walford(l) and teachers along with EduCom’s Public Relations and Communications Officer Ms. Monique Davidson (far right) during the observance of Child Month at the school on May 29, 2019.

EduCom’s Public Relations and Communications Officer, Monique Davidson (centre back) along with the Principal of Albert Street Basic School, Ms. Suzette Reid(l) and fellow teacher Ms. Nescika Brown pose with the students during the observance of Child’s Month at the School on May 29, 2019.

Students at the Albert Street Basic School enjoy a meal during the visit of the EduCom Family to mark Child Month 2019.

CHILDREN'S TREAT 65

ANNUAL REPORT 2019

FINANCIAL FORUM EduCom staged its inaugural Financial Forum on Thursday, October 31, 2019 at the Knutsford Court Hotel under the theme “Journey to Being Money Wise”. It was moderated by Business Editor at Nationwide News and host of ‘Taking Stock’, Kalilah Reynolds.

The forum formed part of our initiative to better advise our members on the critical importance of financial empowerment through education. The forum took the form of a panel discussion set to explore best budgeting practices and retirement planning. It spoke to the general theme of financial literacy with specific emphasis on the need to adequately prepare for retirement, wealth creation and the steps to achieve same, along with the countless investment options available to the average Jamaican.

Author and panelist Patricia Reid-Waugh makes a point during the discussion as Oran Hall (left) and Maurice Wright (right) look on.

The forum featured financial analysts Orville Johnson and Oran Hall. It also included retirement author, Mrs. Patricia Reid-Waugh, Account Executive at CUNA Caribbean Insurance, Marco Williams and Chief Investment Officer at the Credit Union Fund Management Company, CUFMC, Maurice Wright.

Financial Commentator Orville Johnson (r) makes a point during the Forum while moderator, Kalilah Reynolds looks on.

A snapshot of the audience as the session progressed.

FINANCIAL FORUM A member of the audience poses a question to the panelists during the question and answer segment of the Forum.

66

EDUCOM CO-OP CREDIT UNION

ANNUAL SCHOLARSHIP AWARDS EduCom awarded eighty-six (86) scholarships, for the 2019/2020 academic year, to students at the primary and tertiary levels across the island. The scholarships were presented at the organization’s Annual Awards Ceremony which was held on Wednesday, August 14, 2019 at the Knutsford Court Hotel, in Kingston.

The scholarships granted for the 2019/2020 academic year will allow students to pursue studies at the University of the West Indies Mona, The University of Technology Jamaica, various Community and Teachers’ Colleges as well as at several high schools. Special Guest Speaker, National Mathematics Co-ordinator in the Ministry of Education, Youth and Information, Dr. Tamika Benjamin, in her address, encouraged the awardees to surround themselves with like-minded friends so as to propel them to excel even further as they continue on their academic journey.

The EduCom Scholarship Awards Programme selects individuals from its membership who have maintained a minimum ‘A’ average in their recent examinations while demonstrating verifiable financial need. Of the 86 scholarships granted for the new academic year, seventy (70) of the recipients were PEP awardees. At the tertiary level, the EduCom Scholarships will allow sixteen (16) students to pursue degree courses.

EDUCOM SCHOLARSHIP AWARDS Chief Executive Officer of EduCom Co-op Credit Union, Mr. Elvis King (seventh from left, front row) and Board Secretary, Mr. Hector Stephenson (sixth from left, front row) sit among the full cohort of PEP awardees at the conclusion of the 2019 Scholarship Awards Ceremony.

67

ANNUAL REPORT 2019

National Mathematics Coordinator in the Ministry of Education, Youth & Information, Dr. Tamika Benjamin delivers her address to the 2019 scholarship recipients at the Annual Awards Ceremony held at the Knutsford Court Hotel on August 14, 2019.

Chief Executive Officer of EduCom Co-op Credit Union, Mr. Elvis King (4th right, standing) and Board Secretary, Mr. Hector Stephenson (5th right, standing) pose alongside the full cohort of tertiary level awardees at the conclusion of the 2019 Scholarship Awards Ceremony.

EduCom Co-op Credit Union’s Chief Executive Officer, Mr. Elvis King (left) presents a special award to EduCom’s Top Girl for the PEP exams, Fana Campbell at the Annual Scholarship Awards Ceremony on August 14, 2019 at the Knutsford Court Hotel in Kingston.

68

EDUCOM CO-OP CREDIT UNION

CREDIT UNION WEEK SOUP N" SOAP INITIATIVE International Credit Union Week was celebrated during the week of October 13 – 19, 2019 in all nine (9) branches. EduCom participated in a number of activities commemorating the week, as we showed our appreciation to our members.

In our role as a good corporate citizen, we visited select facilities on October 16, 2019 to share with the residents and wards of the State, through our ‘Soup N’ Soap Initiative.

We visited the Jamaica National Children’s Home (formerly the National Children’s Home) in St. Andrew. It caters to children who are neglected or abused, along with those exhibiting severe mental or physical disabilities.

Sales Representative for the Mandeville Branch, Shade Parchment presents a cheque to Assistant Director at the Mt. Olivet Boys Home, Ms. Kimberly Elliot during Credit Union Week.

We made donations to the following entities: • Jamaica National Children’s Home (formerly the National Children’s Home) – Kingston & St. Andrew • The Pregnancy Resource Centre – Montego Bay • The Mount Olivet Boys Home – Mandeville • The Sunbeam Children’s Home – St. Catherine.

EduCom Co-operative Credit Union’s Public Relations and Communications Officer, Miss Monique Davidson (R) presents a cheque valued at $20,000 to the Director of the Jamaica National Children’s Home, Ms. Nadeen Waugh as part of our annual Soup N’ Soap Initiative during Credit Union Week celebrated October 13th 19th, 2019.

CREDIT UNION WEEK

69

Venessa McLean, teller attached to the Old Harbour Branch presents a cheque to Social Worker assigned to the Sunbeam Children’s Home, Ms. Melise Greaves during our Soup N’ Soap Initiative that took place on Wednesday, October 16, 2019.

financial

Statement 31 DECEMBER 2019

Authority to Convene - Registrar of Co-operatives and Friendly Societies

71

Independent Auditors' Report to the Registrar

72

Financial Statements Statement of Surplus or Deficit and Other Comprehensive Income

75

Statement of Financial Position

76

Statement of Changes in Equity

77

Statement of Cash Flows

80

Notes to the Financial Statements

81

70

EDUCOM CO-OP CREDIT UNION

71

ANNUAL REPORT 2019

IBDO

Page 1 Tel: (876) 926-1616/7, 926-4421 Fax: Tel:(876) (876) 926·7580 926-1616/7, 926-4421 www.bdo.com.jm Fax: (876) 926-7580 www.bdo.com.jm

Chartered Accountants 26 Beechwood Avenue Chartered Accountants P.O. Box 351 26 Beechwood Avenue Kingston 5, Jamaica P.O. Box 351 Kingston 5, Jamaica

INDEPENDENT AUDITORS' REPORT To; The Registrar of Co-operatives and Friendly Societ1es Re: EduCom Co-operative Credit Union Limited Report on the Audit of the Financial Statements Opinion We have audited the financial statements of EduCom Co-operative Credit Union Limited set out on pages 75 4 to 157, 86, which comprise the statement of financial position as at 31 December 2019, and the statements of surplus or deficit and other comprehensive income, changes in equity and cash flows for the year then ended, and notes comprising significant accounting policies and other explanatory information.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Credit Union as at 31 December 2019, and of its financial performance and its cash flows for the year then ended in accordance with .International Financial Reporting Standards (IFRS) and the requirements of the Co-operatives Societies Act. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further eescribed in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Credit Union 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.

Other lnfor:matlon Management is responsible for the other information. The other information comprises the President's, Treasurers' and other reports included in the Annual Report but does not include the financial statements and our auditors' report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other infotmation identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

The Annual Report is expected to be made available to us after the date of this auditors' report.

Therefore, when we read the Annual Report, if we conclude that there is a material misstatement �herein, we are required to communicate the matter to those charged with governance.

Partners: R.L. McFarlane. K.A. Wilson, S.M. McFarlane, J. Green-Hibbert. 0. Hobson

Offices in Montego Bay. Mandeville and Ocho Rios network of independent member firms.

800 is a member of BOO International limited, a UK company limited by guarantee, and forms part of the mternatJonal BOO

72

EDUCOM CO-OP CREDIT UNION Page 2

IBDO INDEPENDENT AUDITORS' REPORT (CONT'D) To: The Registrar of Co-operative and Friendly Societies Re: EduCom Co-operative Credit Union Limited ResponsibUities of Management and the Board of Directors for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs and the Co-operative Societies Act, and for such internal control as management determines 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, management is responsible for assessing the Credit Union'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 management either intends to liquidate the Credit Union or to cease operations, or has no realistic alternative but to do so.

The Board of Directors is responsible for overseeing the Credit Union's financial reporting process.

Auditors' Responsibilities for the Audit of the fiinanctal Statements

Our objectives are to obtain reasonijble assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our 1opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs 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 finandal statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

73

•

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 Credit Union's internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

ANNUAL REPORT 2019 Page 3

IBDO INDEPENDENT AUDITORS' REPORT (CONT'D) To: The Registrar of Co-operatives and Friendly Societies Re: EduCom Co-operative Credit Union Limited Responsibilities of Management and the Board of Directors for the Financial Statements (cont'd) •

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 Credit Union's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' 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 auditors' report. However, future events or conditions may cause the Credit Union to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures . and whether the finan�ial sta�ements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit �nd significant audit findings, including any significant deficiencies in internal control that we identi;fy during our audit.

Report on additional matters as required by the Co-operative Societies Act We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.

In our opinion, proper accounting records have been kept, so far as appears from our examination of those records, and the financial statements, Wnicn are in agreement therewith, give the information required by the Co-operative Societies Act, in the manner required.

Chartered Accountants 25 March 2020

74

EDUCOM CO-OP CREDIT UNION

EduCom CREDIT UNION LIMITED EduCom Co-Operative Credit UnionCO-OPERATIVE Limited STATEMENT OF SURPLUS OR DEFICIT AND OTHER COMPREHENSIVE INCOME STATEMENT OF SURPLUS OR DEFICIT AND OTHER COMPREHENSIVE INCOME Year ended 31 December 2019 YEAR ENDED 31 DECEMBER 2019 Note INTEREST INCOME: Loans to members Liquid assets Financial investments Reverse repurchase agreements

INTEREST EXPENSE AND OTHER FINANCIAL COSTS: Deposits Voluntary shares Deferred shares External credits Other financial costs

2019 $’000

2018 $’000

875,841 11,203 9,228 17,965

844,297 4,817 14,229 32,169

914,237

895,512

107,596 28,935 1,210 7,011 10,361

130,685 36,915 1,605 9,061 5,947

155,113

184,213 711,299 ( 5,366)

NET INTEREST INCOME Impairment loss on investments Loan impairment losses

12

759,124 515 ( 43,730)

NET INTEREST INCOME AFTER IMPAIRMENT LOSSES ON LOANS AND INVESTMENTS Non-interest income

6

715,909 177,517

705,933 148,150

Operating expenses

7

893,426 (788,644)

854,083 (727,502)

NET SURPLUS BEFORE HONORARIUM Honorarium

104,782 ( 10,000)

126,581 .

NET SURPLUS AFTER HONORARIUM FOR THE YEAR

94,782

126,581

Item that will not be reclassified to surplus Re-measurement of defined benefit pension plan

17,587

( 15,606)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

112,369

110,975

OTHER COMPREHENSIVE INCOME:

75

ANNUAL REPORT 2019

EduCom Co-Operative Credit Union Limited STATEMENT OF FINANCIAL POSITION 31 December 2019

76

EDUCOM CO-OP CREDIT UNION Page 6

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Operative Credit Union Limited STATEMENT OF CHANGES IN EQUITY STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2019 YEAR ENDED 31 DECEMBER 2019

Institutional Capital $’000

Non Institutional Capital $’000

969,746

340,722

Total comprehensive income - Net surplus for the year - Other comprehensive income

-

126,581 ( 15,606)

Transactions with owners - Entrance fees - Dividend - Issue of permanent shares Transfer to statutory reserve Decrease in other reserve

1,868 21,249 8,029 31,645 -

( 24,999) ( 388) ( 31,645) ( 61,075)

Balance at 31 December 2018

1,032,537

333,590

1,366,127

Total comprehensive income - Net surplus for the year - Other comprehensive income

-

94,782 17,587

94,782 17,587

1,775 14,074 26,196 -

( 49,965) ( 1,108) ( 26,196) ( 26,276)

1,775 ( 49,965) 12,966 ( 26,276)

1,074,582

342,414

1,416,996

Note Balance at 1 January 2018

Transactions with owners - Entrance fees - Dividend - Issue of permanent shares Transfer to statutory reserve Decrease in other reserve

77

24 26(a)

24 26(a)

Total $’000 1,310,468 126,581 15,606)

(

( (

1,868 3,750) 7,641 61,075)

ANNUAL REPORT 2019 Page 7

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Operative Credit Union Limited STATEMENT OF CHANGES IN EQUITY STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2019 YEAR ENDED 31 DECEMBER 2019 Institutional Capital INSTITUTIONAL CAPITAL Business Permanent Combination Share Reserve Total $’000 $’000 $’000

Statutory Reserve $’000

Special Reserve $’000

Balance at 1 January 2018

256,685

253,143

171,841

288,077

969,746

Transactions with owners - Entrance fees - Dividend - Issue of permanent shares Transfer from undistributed surplus

1,868 31,645

-

21,249 8,029 -

-

1,868 21,249 8,029 31,645

Balance at 31 December 2018

290,198

253,143

201,119

288,077

Transactions with owners - Entrance fees - Issue of permanent shares Transfer from undistributed surplus

1,775 26,196

-

14,074 -

-

Balance at 31 December 2019

318,169

253,143

215,193

288,077

1,032,537 1,775 14,074 26,196 1,074,582

78

79 -

-

Transactions with owners - Dividend - Issue of permanent shares Increase in retirement benefits Transfer to statutory reserve Transfer to reserves Increase in loan loss reserve Honorarium Decrease in reserve

Balance at 31 December 2019

-

Total comprehensive income - Net surplus for the year - Other comprehensive income

26 (a)

-

47,800 (47,800)

Transactions with owners - Dividend - Issue of permanent shares Decrease in retirement benefits Transfer to statutory reserve Transfer to reserves Honorarium Decrease in reserve

Balance at 31 December 2018

-

Total comprehensive income - Net surplus for the year - Other comprehensive income-

26 (a)

-

Balance at 1 January 2018

Note

Special Reserve $’000

2,863

( 1,108) -

-

3,971

( 388) -

-

4,359

25,706

25,706 -

-

-

-

-

-

Permanent Loan Loss Shares Reserve Reserve $’000 $’000

37,754

18,366 -

-

19,388

(12,221) -

-

31,609

Retirement Benefit Reserve $’000

NON-INSTITUTIONAL CAPITAL

5,806

19,300 10,000 (26,276)

-

2,782

3,700 10,000 (13,275)

-

2,357

General Reserve $’000

YEAR ENDED 31 DECEMBER 2019

STATEMENT OF CHANGES IN EQUITY

204,253

-

-

204,253

-

-

204,253

Revaluation Reserve $’000

66,032

( 49,965) ( 18,366) ( 26,196) ( 19,300) ( 25,706) ( 10,000) -

94,782 17,587

103,196

( 24,999) 12,221 ( 31,645) ( 51,500) ( 10,000) -

126,581 ( 15,606)

98,144

Undistributed Surplus $’000

342,414

( 49,965) ( 1,108) ( 26,196) ( 26,276)

94,782 17,587

333,590

( 24,999) ( 388) ( 31,645) ( 61,075)

126,581 ( 15,606)

340,722

Total $’000

EDUCOM CO-OP CREDIT UNION

EduCom Co-Operative Credit Union Limited STATEMENT OF CHANGES IN EQUITY Year ended 31 December 2019 Non-institutional Capital

ANNUAL REPORT 2019

EduCom Co-Operative Credit Union Limited STATEMENT OF CASH FLOWS EduCom CO-OPERATIVE CREDIT UNION LIMITED Year ended 31 December 2019

Page 9

STATEMENT OF CASH FLOWS

YEAR ENDED 31 DECEMBER 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net surplus Adjustments for: Interest received Interest income Interest expense Interest paid Depreciation Amortisation of right of use asset Finance expense Loss on disposal of assets held for sale Unrealised foreign exchange gain Pension expense Impairment losses on investments Loan impairment losses Changes in operating assets and liabilities Saving deposits Voluntary shares Retirement benefit assets Inventories Other assets Loans Payables Decrease in reserves Cash (used in)/provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment Proceed on disposal of asset held for sale Reverse repurchase agreements Financial investments Cash provided by investing activities CASH FLOWS FROM FINANCING ACTIVITIES: External credits Increase/(decrease) in permanent shares Deferred shares Dividend paid Entrance fees Principal paid on lease liabilities Interest paid on lease liabilities Interest paid on external credit Cash used in financing activities Exchange gain on foreign cash balances .

Increase in cash and cash equivalents Cash and cash equivalents at beginning of year CASH AND CASH EQUIVALENTS AT END OF YEAR (note 13)

2019 $’000

2018 $’000

94,782

126,581

919,202 ( 914,237) 137,741 ( 137,053) 24,348 6,279 11,167 4,418 ( 696) 4,438 ( 515) 43,730 193,604

901,911 (895,512) 169,205 (155,181) 23,787 9,061 ( 1,169) 2,024 3,201 5,366 189,274

459,447 207,099 ( 5,217) 388 10,435 (1,110,615) 49,990 ( 26,276) ( 221,145)

591,866 116,602 ( 5,409) ( 474) 12,844 (624,976) 16,684 ( 13,275) 283,136

(

14,646) 42,318 189,568 188,024 405,264

( 13,556) 99,431 27,249 113,124

(

29,918) 12,966 7,677) 49,965) 1,775 3,294) 4,156) 7,011) 87,280)

( 23,165) ( 21,108) ( 535) 1,868

96,839 35

344,259.

154.

96,874 587,624 684,498

344,413 243,211 587,624

( ( ( ( ( (

( 9,061) ( 52,001)

80

EDUCOM CO-OP CREDIT UNION

EduCom CO-OPERATIVE CREDIT UNION LIMITED

Page 10

EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS 31 December 2019 31 DECEMBER 2019 1.

STATUS AND PRINCIPAL ACTIVITIES: EduCom Co-operative Credit Union Limited (the Credit Union) is incorporated under the laws of Jamaica and is registered under the Co-operative Societies Act. The registered office of the Credit Union is located at 10 Oxford Terrace, Kingston 5, Jamaica. The Credit Union was formed following the merger of A.A.M.M Co-operative Credit Union Limited and UWI (Mona) & Community Co-operative Credit Union Limited on 1 April 2015. On 1 January 2017, the Credit Union merged its operation with St. Catherine Co-operative Credit Union Limited.

The main activities of the Credit Union are to promote thrift among its members by affording them an opportunity to accumulate their savings and to create for them a source of credit for provident or productive purposes at reasonable rates of interest.

Membership to the Credit Union is obtained by members’ subscribing to a minimum of $2,000 permanent shares and a minimum of $600 voluntary shares. Voluntary shares are deposits available for withdrawals on demand, while permanent shares are paid in cash and invested in risk capital and are redeemable only upon transfer to another member. Individual membership may not exceed 20% of the total of the members’ shares of the Credit Union.

The Co-operative Societies Act requires, among other provisions, that at least 20% of the net surplus of the Credit Union be transferred annually to a reserve fund. Section 59 (1) & (11) of the Act provides for the exemption from income tax and stamp duty for the Credit Union.

The Credit Union’s operations are located in the parishes of Kingston, St. Andrew, St. Catherine, Manchester and St. James.

2.

FUNCTIONAL CURRENCY: These financial statements are presented in Jamaican dollars which is the Credit Union’s functional currency. Except where indicated to be otherwise, financial information presented are shown in thousands of Jamaican dollars.

3.

SIGNIFICANT ACCOUNTING POLICIES: The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. (a)

Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards as issued by the International Accounting Standards Board (IASB) and Interpretations (collectively IFRS).

The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain properties and financial assets that are measured at fair value or revalued amounts.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (a)

Basis of preparation (cont’d) The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Credit Union’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.

New standards, interpretations and amendments effective in the current year Certain new standards, amendments and interpretations to existing standards have been published that became effective during the current financial year. The Credit Union has assessed the relevance of all such new standards, amendments and interpretation and has put into effect the following, which are is immediately relevant to its operations: IFRS 16, 'Leases'(effective for annual reporting periods beginning on or after 1 January 2019). The standard eliminates the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and offbalance sheet operating leases. Instead, there is a single, on-balance sheet accounting model that is similar to current finance lease accounting. Entities will be required to bring all major leases on balance sheet, recognizing new assets and liabilities. The on-balance sheet liability will attract interest; the total lease expense will be higher in the early years of a lease even if a lease has fixed regular cash rentals. Optional lessee exemption will apply to short- term leases and for lowvalue items with value of US$5,000 or less.

Lessor accounting remains similar to current practice as the lessor will continue to classify leases as finance and operating leases.

The adoption of IFRS 16 from the 1 January resulted in changes in accounting policies and adjustments to amounts recognized in the 2019 financial statements. In accordance with the transitional provisions in IFRS 16, comparative figures have not been restated. Details of the new accounting policies are outlined in Note 3 (n) and the impact on the financial statements on the adoption of the new standard is disclosed in Note 29.

Amendment to IAS 19, Employee Benefits, (effective for annual periods beginning on or after January 1, 2019). This standard specifies how an entity determine pension expenses when there are changes to a defined pension plan. The amendment requires the entity to use updated actuarial assumptions to determine its current service cost and net interest for the remaining period when there is an amendment, curtailment or settlement of a defined benefit plan. The effect of the net asset ceiling is disregarded when calculating the gain or loss on the settlement of the defined benefit plan and is dealt with separately in other comprehensive income. The adoption of the standard did not have an impact on financial statement of the Credit Union.

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (a)

Basis of preparation (cont’d) New standards, interpretations and amendments effective in the current year (cont’d) Amendment to IFRS 9, ‘Financial Instruments - Prepayment features with negative compensation and modifications of financial liabilities’, (effective for annual periods beginning on or after 1 January 2019). The amendment was issued to address the concerns about how IFRS 9 classifies particular pre-payable financial assets. It amends the existing requirements in IFRS 9 regarding termination rights in order to allow measurement at amortized cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. However, the calculation of this compensation payment must be the same for both the case of an early repayment penalty and the case of an early repayment gain. The final amendments also contain (in the Basis for Conclusions) a clarification regarding the accounting for a modification or exchange of a financial liability measured at amortised cost that does not result in the derecognition of the financial liability. The amendments to the Basis for Conclusions clarify that an entity recognises any adjustment to the amortised cost of the financial liability arising from a modification or exchange in surplus or deficit at the date of the modification or exchange.

There was no impact from adoption of these amendments and clarification.

Annual improvements to IFRSs 2015 - 2017 cycles, (effective for annual periods beginning on or after 1 January 2019). There were four amendments as part of the 2015-2017 Annual Improvements Cycle. These were made to IFRS 3 Business Combinations and IFRS 11 Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs.

-

IFRS 3: A credit union re-measures its previously held interest in a joint operation when it obtains control of the business.

-

IFRS 11: A credit union does not re-measure its previously held interest in a joint operation when it obtains joint control of the business.

-

IAS 12: A credit union accounts for all income tax consequences of dividend payments in the same way.

-

IAS 23: A credit union treats as part of general borrowings any borrowing originally made to develop a specific asset when that asset is ready for its intended use or sale.

There was no impact from adoption of these amendments.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (a)

Basis of preparation (cont’d) New standards, amendments and interpretations not yet effective and have not been early adopted At the date of authorization, there are a number of standards, amendments to standards and interpretations which have been issued by the IASB that are effective in future accounting periods that the Credit Union has decided not to adopt early. The most significant of these are: Amendment to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, (effective for annual periods beginning on or after January 1, 2020). These standards are conceptual amendments to other IFRSs and provides the following definition of ‘material’ to guide preparers of financial statements in making judgements about information to be included in financial statements: “Information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The Credit Union does not expect the amendment to have a significant impact on its 2020 financial statements Revised Conceptual Framework for Financial Reporting (effective for annual periods beginning on or after 1 January 2020).

The revised conceptual framework will be used in standards-setting decisions with immediate effect, however no changes will be made to any of the current accounting standards.

Entities that apply the Conceptual Framework in determining accounting policies will need to consider whether their accounting policies are still appropriate under the revised Framework. The Credit Union is currently assessing the impact of this revision.

The Credit Union does not expect any other standards or interpretations issued by the IASB, but not yet effective, to have a material effect on its financial position.

(b)

Foreign currency translation Transactions entered into by the Credit Union in a currency other than the currency of the primary economic environment in which they operate (their “functional currency”) are recorded at the rates ruling when the transactions occur.

Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognized immediately in surplus or deficit.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (c)

Financial assets A financial asset is any contract that gives rise to both a financial asset in one entity and a financial liability or equity of another entity.

Classification and subsequent measurement The Credit Union classifies its financial assets based on the business model used for managing the financial assets and the asset’s contractual terms. These are measured at either:  

Amortised cost, and; Fair value through profit or loss (FVPL).

The classification requirements for debt and equity instruments are described below: Debt instruments Measurement of debt instruments depends on the Credit Union’s business model for managing the asset and the cash flow characteristics of the asset. The Credit Union classifies its debt instruments into one of the following two measurement categories.

Amortised cost Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost.

Interest income from these financial assets is included in the income statement using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in the surplus or deficit. Impairment losses are presented as a line item in the income statement as credit impairment losses. Bad debt recoveries are included in other income.

Fair value through profit or loss (FVPL) Assets that do not meet the criteria for amortised cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt instruments that is measured at fair value through profit is recognised in profit or loss in the period in which it arises.

Interest income from these financial assets is included in ‘Interest income’ using the effective interest method.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (c)

Financial assets (cont’d) Classification and subsequent measurement (cont’d) Equity instruments Upon initial recognition, the Credit Union elects to classify irrevocably some of its equity investments as equity instruments at FVOCI when they are not held for trading.

Such classification is determined on an instrument-by-instrument basis. Gains and losses on such equity instruments are never reclassified to profit or loss and no impairment is recognised in profit or loss. Dividends are recognised in profit or loss unless they clearly represent a recovery of part of the cost of the investment, in which case they are recognised in OCI. Cumulative gains and losses recognised in OCI are transferred to accumulated surplus on disposal of an investment. Equity instruments at FVOCI are not subject to an impairment assessment.

Equity instruments held for trading are measured at FVPL and changes in the fair value are recognized in surplus for the period.

Derecognition The Credit Union derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Credit Union neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised) and the sum of (i) the consideration received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or loss that had been recognised in OCI is recognised in surplus or deficit.

Measurement and gains and losses Financial assets at amortised cost are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortised cost using the effective interest method. The amortised cost is reduced by impairment losses.

The investment securities' caption in the statement of financial position includes: -

debt investment securities measured at amortised cost which are initially measured at fair value plus incremental direct transaction costs, and subsequently at their amortised cost using the effective interest method;

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NOTES THE FINANCIAL STATEMENTS EduCom Co-Operative Credit UnionTO Limited NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 31 December 2019 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (c)

Financial assets (cont’d) Measurement and gains and losses (cont’d) The investment securities' caption in the statement of financial position includes (cont’d): -

equity investment securities mandatorily measured at FVTPL or designated as at FVTPL which are at fair value with changes recognised immediately in profit or loss;

-

equity investment securities designated as at FVOCI.

Impairment The Credit Union assesses on a forward looking basis the expected credit losses (ECL) associated with its financial assets classified at amortised cost.

The ECL will be recognised in surplus before a loss event has occurred. The measurement of ECL reflects an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes. The probability-weighted outcome considers multiple scenarios based on reasonable and supportable forecasts.

Under current guidance, impairment amount represents the single best outcome; the time value of money; and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions.

ECL is calculated by multiplying the Probability of default (PD), Loss Given Default (LGD) and Exposure at Default (EAD).

The impairment model uses a three-stage approach based on the extent of credit deterioration since origination: Stage 1 -

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12 month ECL applies to all financial assets that have not experienced a significant increase in credit risk since origination and are not nonperforming. The ECL will be computed using a 12-month PD that represents the probability of default occurring over the next 12 months.

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NOTES THE FINANCIAL STATEMENTS EduCom Co-Operative Credit UnionTO Limited NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 31 December 2019 3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (c)

Financial assets (cont’d) Impairment (cont’d) The impairment model uses a three-stage approach based on the extent of credit deterioration since origination (cont’d): Stage 2 –

When a financial asset experiences a significant increase in credit risk subsequent to origination but is not non-performing, it is considered to be in Stage 2. This requires the computation of ECL based on lifetime PD that represents the probability of default occurring over the remaining estimated life of the financial asset. Provisions are higher in this stage because of an increase in risk and the impact of a longer time horizon being considered compared to 12 months in Stage 1.

Stage 3 –

Financial assets that have an objective evidence of impairment will be included in this stage. Similar to Stage 2, the allowance for credit losses will continue to capture the lifetime ECL.

The Credit Union uses judgement when considering the following factors that affect the determination of impairment: Assessment of Significant Increase in Credit Risk (SICR) The assessment of a significant increase in credit risk is done on a relative basis. To assess whether the credit risk on a financial asset has increased significantly since origination, the Credit Union compares the risk of default occurring over the expected life of the financial asset at the reporting date to the corresponding risk of default at origination, using key risk indicators that are used in the Credit Union’s existing risk management processes. At each reporting date, the assessment of a change in credit risk will be assessed on a collective basis, this would require the segmentation of credit exposure on the basis of shared credit risk characteristics. This assessment is symmetrical in nature, allowing credit risk of financial assets to move back to Stage 1 if the increase in credit risk since origination has reduced and is no longer deemed to be significant.

Macroeconomic Factors, Forward Looking Information and Multiple Scenarios The Credit Union applies an unbiased and probability weighted estimate of credit losses by evaluating a range of possible outcomes that incorporates forecasts of future economic conditions.

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3.

SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (c)

Financial assets (cont’d) Impairment (cont’d) Macroeconomic Factors, Forward Looking Information and Multiple Scenarios (cont’d) Macroeconomic factors and forward looking information are incorporated into the measurement of ECL as well as the determination of whether there has been a significant increase in credit risk since origination. Measurement of ECLs at each reporting period reflect reasonable and supportable information at the reporting date about past events, current conditions and forecasts of future economic conditions.

The Credit Union uses three scenarios that are probability weighted to determine ECL: base, optimistic and pessimistic.

Expected Life When measuring ECL, the Credit Union considers the maximum contractual period over which the Credit Union is exposed to credit risk. All contractual terms are considered when determining the expected life. For certain revolving credit facilities that do not have a fixed maturity, the expected life is estimated based on the period over which the Credit Union is exposed to credit risk and where the credit loss would not be mitigated by management’s actions.

Application of the Simplified Approach For other receivables, the Credit Union applies the simplified approach permitted by IFRS 9, which requires that the impairment provision is measured at initial recognition and throughout the life of the receivables using a lifetime ECL. As a practical expedient, a provision matrix is utilised in determining the lifetime ECLs for other receivables.

The lifetime ECLs are determined by taking into consideration historical rates of default for each segment of aged receivables as well as the estimated impact of forward looking information.

(d)

Financial liabilities The Credit Union’s financial liabilities net of transaction costs, are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest method. At the reporting date, the items classified as financial liabilities are members’ voluntary shares, saving deposits, deferred shares, payables, external credits and lease liabilities.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (e)

Reverse repurchase agreements The purchase and sales of securities under resale and repurchase agreements are treated as collateral lending and borrowing transactions. The related interest income and expense are recorded on the accrual basis.

(f)

Cash and cash equivalents Cash and cash equivalents are carried in the statement of financial position at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash in hand and in bank and deposits not held to satisfy statutory requirements and short term highly liquid investments with original maturities of three months or less, net of bank overdraft.

(g)

Inventories Inventories are initially recognised at cost, and subsequently stated at the lower of cost and fair value less cost to sell, cost being determined on the first-in-first-out basis.

(h)

Other assets Other receivables are carried at anticipated realizable value. An estimate is made for doubtful receivables based on all outstanding amounts at year end. Bad debts are written off in the year in which they are identified.

(i)

Asset held for sale Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell except for assets such as investment property that are carried at fair value.

An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset, but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (j)

Property, plant and equipment Items of property, plant and equipment are recorded at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Freehold buildings are subsequently carried at fair value, based on periodic valuations by a professionally qualified valuer. These revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. Changes in fair value are recognised in other comprehensive income and accumulated in the revaluation reserve except to the extent that any decrease in value in excess of the credit balance on the revaluation reserve, or reversal of such a transaction, is recognised in surplus or deficit.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Credit Union and the cost of the item can be measured reliably. The carrying amount of any replaced part is derecognised. All other repairs and maintenance are charged to surplus or deficit during the financial period in which they are incurred.

Depreciation is calculated on the straight-line method at annual rates estimated to write off the costs of the assets over the period of their estimated useful lives. Land is not depreciated. Annual rates are as follows: Buildings Leasehold Improvement Computer and Equipment Computer software Furniture and Fixtures Motor vehicles

2½% 14 1/3% 20% 33 1/3% 10% 20%

Property, plant and equipment are periodically reviewed for impairment. Where the carrying amount of the assets is greater than the estimated recoverable amount, it is written down immediately to its recovery amount.

Gains and losses on disposals of property, plant and equipment are determined by reference to their carrying amounts and are taken into account in determining profit or loss.

The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (k)

Employee benefits The Credit Union contributes to two separate pension funds on behalf of its employees a defined contribution plan and a defined benefit plan independently administered as follows: Defined contribution plan This is a money purchase plan whereby it pays contributions to a privately administered fund. Once the contributions have been paid, the Credit Union has no further obligations. The regular contributions constitute net periodic costs for the year in which they are due and are included in staff costs.

Defined benefit plan This is a multi-employer defined benefit pension scheme. The pension is funded from payments from employee and by the Credit Union, taken into account the recommendation of independent qualified actuaries.

The asset or liability in respect of defined benefit plans is the difference between the present value of the defined benefit obligations and fair value of plan assets at the reporting date.

Where a pension asset arises, the amount recognized is limited to the present value of any economic benefits available in the form of funds from the plan or reductions in the future contributions to the plan. The valuation is performed annually by independent actuaries using the projected unit credit method. Under this method, the cost of providing pensions is charged to net surplus so as to spread the regular cost of service over the service lives of the employees. The pension obligation is measured as the present value of the estimated future cash outflows using discount rates based on market yields on government securities which have terms to maturity approximating the terms of the related liability. The pension plan assets are allocated based on the Credit Union’s obligations as a proportion of the total obligations of the plan.

Actuarial gains and losses arising from experience adjustments, changes in actuarial assumptions and amendments to pension plans are charged or credited to the undistributed surplus in other comprehensive income in the period in which they arise.

Past-service costs are recognised immediately in the statement of comprehensive income.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (k)

Employee benefits (cont’d) Leave accrual All obligation in respect of outstanding leave are recognised in the statement of comprehensive income in the year to which it relates.

(l)

External credit External credit is recognized initially as the proceeds received, net of transaction costs incurred. External credits are subsequently stated at amortised cost using the effective yield method. Any difference between proceeds, net of transaction costs, and the redemption value is recognized in surplus or deficit over the period of the external credit.

(m)

Saving deposits Saving deposits are recognized initially at the normal amount when funds are received.

Deposits are subsequently stated at amortised cost.

(n)

Leases Policy applicable from 1 January 2019 From 1 January 2019, all leases are accounted for by recognising a right-of-use asset and a corresponding lease liability, except for: • •

Leases of low value assets; and Leases with a duration of 12 months or less.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Credit Union’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payment and non-lease components are expensed in the period to which they relate.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (n)

Leases (cont’d) Policy applicable from 1 January 2019 (cont’d) On initial recognition, the carrying value of the lease liability also includes: • • •

amounts expected to be payable under any residual value guarantee; the exercise price of any purchase option granted in favour of the Credit Union if it is reasonable certain to assess that option; any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

Right-of-use assets are initially measured at an amount equal to the initial value of the lease liabilities reduced for any lease incentives received, and increased for: • • •

lease payments made at or before commencement of the lease; initial direct costs incurred; and the amount of any provision recognised where the Credit Union is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations).

Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

Policy applicable up to 31 December 2018 Leases of property where the entity has substantially all the risks and rewards of ownership are classified as finance leases. Finance charges are expensed in the statement of surplus or deficit over the lease period. Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments under operating leases are charged as an expense in the statement of surplus or deficit on the straight- line basis over the period of the lease. (o)

Shares Permanent shares Permanent shares represent a member’s ownership in the Credit Union and may be redeemable subject to the sale, transfer, or repurchase of such shares. Classified as equity, these shares form part of the capital of the Credit Union. Dividends may be paid on permanent shares subject to the profitability of the Credit Union.

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (o)

Shares (cont’d) Voluntary shares Members’ voluntary shares represent deposit holdings of the Credit Union’s members, to satisfy membership requirements and to facilitate eligibility for loans and other benefits. These shares are classified as financial liabilities. Interest payable on these shares are determined at the discretion of the Credit Union and reported as interest in the statement of income in the period in which they are approved.

Deferred shares Deferred shares form part of the capital of the Credit Union. These shares represent placement by members which are not withdrawable for a period of five (5) years. Any redemption before the expiration would result in a penalty being levied.

Interest payable on deferred shares is set at an interest rate of 8% per annum from the date of origination to 30 September 2017. Thereafter, the interest rate payable will be determined by the Bank of Jamaica 90-day Treasury Bill weighted average interest rate plus 1% on a quarterly basis until maturity.

(p)

Institutional capital Institutional capital includes the statutory reserve fund, as well as any other reserve established from time to time which, in the opinion of the directors, are necessary to support the operations of the Credit Union and, thereby, protect the interest of the members. These reserves are not available for distribution.

(q)

Related party A party is related to the Credit Union, if: (i)

Directly, or indirectly through one or more intermediaries, the party: (a) (b) (c)

(ii)

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is controlled by, or is under common control with, the Credit Union; has an interest in the Credit Union that gives it significant influence over the entity; or has joint control over the Credit Union.

The party is a member of the key management personnel of the entity or its parent;

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (q)

Related party (cont’d) A party is related to the Credit Union, if (cont’d): (iii) (iv)

The party is a close member of the family of any individual referred to in (i) or (iv); The party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (ii) or (iii).

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. The Credit Union has a related party relationship with its directors and key management personnel representing certain senior officers of the Credit Union. (r)

Revenue recognition Revenue represents income that arises in the course of the ordinary activities of the Credit Union. The Credit Union offers financial services to its approved members.

These services are provided on a time and fixed-price contact, with terms ranging from one year to thirty-five years. Revenue is generally recognised when the performance obligations are satisfied either at a point in time or over time as the services are provided. Accordingly, revenue comprises interest income, fees and commissions, dividends, rental and income. (i)

Interest income Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial assets, except for: -

Purchased or originated credit-impaired (POCI) financial assets, for which the original credit-adjusted effective interest rate is applied to the amortised cost of the financial asset.

-

Financial assets that are not ‘POCI’ but have subsequently become credit impaired (or ‘stage 3’), for which interest revenue is calculated by applying the effective interest rate to their amortised cost (i.e., net of the expected credit loss provision).

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SIGNIFICANT ACCOUNTING POLICIES (CONT’D): (r)

Revenue recognition (cont’d) (ii)

Fees and commission Fees and commission income are recognized on the accrual basis when the service has been provided. Fees and commission arising from negotiating or participating in the negotiation of a transaction are recognized on completion of the underlying transaction at a point in time or over time as the services are provided. It is the Credit Union’s policy not to defer loan origination fees over the life of the loan.

(iii)

Dividend Dividend income from equity financial investments is recognized at the point when the shareholder’s right to receive payment has been established.

(iv)

Rental income Rental income from operating leases is recognised on a straight-line basis over the term, period of occupancy, of the relevant lease.

(v)

Other income Other income is recognised on an accrual basis.

(s)

Provisions The Credit Union has recognised provision for liabilities of uncertain timing or amount.

The provision is measure at the best estimate of the expenditure required to settle the obligation at the reporting date.

4.

CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY: The Credit Union makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: (i)

Fair value estimation A number of assets included in the Credit Union’s financial statements require measurement at, and/or disclosure of, at fair value.

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CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY (CONT’D): (i)

Fair value estimation (cont’d) Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Market price is used to determine fair value where an active market (such as a recognized stock exchange) exists as it is the best evidence of the fair value of a financial instrument.

The fair value measurement of the Credit Union’s financial and non-financial assets and liabilities utilizes market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorized into different levels based on the degree to which the fair value is observable.

The standard requires disclosure of fair value measurements by level using the following fair value measurement hierarchy: (i)

Level 1 –

(ii)

Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

(iii) Level 3 dskjjll;lljj

Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Inputs for the asset or liability that are not based on f observable market data (that is, derived from prices).

The classifications of an item into the above levels are based on the lowest level of the inputs used that has a significant effect on the fair value measurement of these items.

The Credit Union measures a number of items at fair value Financial investments – (note 11) Revalued building – property, plant and equipment (note 16)

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CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATION UNCERTAINTY (CONT’D): (ii)

Retirement benefit obligation The cost of these benefits and the present value of the future obligations depend on a number of factors that are determined by actuaries using a number of assumptions.

The assumptions used in determining the net periodic cost or income for retirement benefits include the expected long-term rate of return on the relevant plan assets and the discount rate. Any changes in these assumptions will impact the net periodic cost or income recorded for retirement benefits and may affect planned funding of the pension plan. The Credit Union determines the appropriate discount rate at the end of each year, which represents the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the retirement benefit obligations. In determining the appropriate discount rate, the Credit Union considers interest rate of high-quality corporate bonds that are denominated in local currency and has terms to maturity approximating the terms of the related obligations. Other key assumptions for the retirement benefits are based on current market conditions.

(iii)

Impairment losses on financial assets The measurement of the expected credit loss allowance for financial assets measured at amortised cost requires the use of complex models and significant assumptions about future economic conditions and credit behaviour such as the likelihood of members’ defaulting and the resulting losses.

A number of significant judgements are also required in applying the accounting requirements for measuring ECL, such as:    

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Determining criteria for significant increase in credit risk Choosing appropriate models and assumptions for the measurement of ECL. Establishing the number and relative weights of forward looking scenarios.

Establishing groups of similar financial assets for the purpose of measuring ECL.

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT: The Credit Union’s activities are principally related to the use of financial instruments, which involve analysis, evaluation and management of some degree of risk or combination of risks.

The Credit Union manages risk through a framework of risk principles, organizational structures and risk management and monitoring processes that are closely aligned with the activities of the Credit Union. The Credit Union’s risk management policies are designed to identify and analyze the risks faced by the Credit Union, to set appropriate risk limits and controls, and to monitor risks and adherence to limits by means of regularly generated reports. The Credit Union’s aim is therefore to achieve an appropriate balance between risks and return and minimize potential adverse effects on the Credit Union’s financial performance.

The Credit Union has exposure to the following risks from its use of financial instruments:   

Credit risk Liquidity risk Market risk

In common with all other businesses, the Credit Union’s activities expose it to a variety of risks that arise from its use of financial instruments. This note describes the Credit Union’s objectives, policies and processes for managing those risks to minimize potential adverse effects on the financial performance of the Credit Union and the methods used to measure them. (i)

Principal financial instruments The principal financial instruments used by the Credit Union from which financial instrument risk arises, are as follows: -

Financial investments Loans receivables Liquid assets Reverse repurchase agreements Cash in hand and at bank Payables Voluntary shares Deferred shares Saving deposits Lease liabilities External credits

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FINANCIAL RISK MANAGEMENT (CONT’D): (ii)

Financial instruments by category Financial assets

Assets at Fair value through other comprehensive income $’000

Assets at Amortised cost $’000

Assets at fair Value through Profit or loss $’000

65,943 618,555

-

-

65,943 618,555

549,486 7,763,224 101,623

116,687

51,333

549,486 7,763,224 269,643

9,098,831

116,687

51,333

9,266,851

Total $’000

As at 31 December 2019: Cash in hand and bank Liquid assets Reverse repurchase agreements Loans receivables Financial investments

Assets at Fair value through other comprehensive income $’000

Assets at Amortised cost $’000

Assets at fair Value through Profit or loss $’000

53,365 534,259

-

-

53,365 534,259

738,582 6,700,193 239,993

166,748

51,333

738,582 6,700,193 458,074

8,266,392

166,748

51,333

8,484,473

Total $’000

As at 31 December 2018: Cash in hand and bank Liquid assets Reverse repurchase agreements Loans receivables Financial investments

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FINANCIAL RISK MANAGEMENT (CONT’D): (ii)

Financial instruments by category (cont’d) Financial liabilities At amortised cost 2019 2018 $’000 $’000 Payables Saving deposits Voluntary shares Deferred shares External credits Lease liabilities

(iii)

121,175 4,335,646 3,719,463 39,692 109,536 55,078

92,357 3,870,822 3,517,053 47,369 139,454 .

8,380,590

7,667,055

Financial instruments measured at fair value Financial investment which is comprised of unquoted equities classified as measured through other comprehensive income (OCI) are measured at historical cost as their values cannot be reliably determined. The Credit Union has no immediate intention of disposing of these investments.

Fair value is the amount for which an asset could be exchanged, or liability settled, between knowledgeable willing parties in an arm’s length transaction.

The following table provides an analysis of Credit Union’s financial instruments held as at 31 December that, subsequent to initial recognition, are measured at fair value.

The financial instruments are grouped into level 1 to 3 based on the degree to which the fair values are observable as follows: 

Level 1 includes those instruments which are measured based on quoted prices in active markets for identical assets or liabilities.



Level 2 includes those instruments which are measured using inputs other than quoted prices within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

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FINANCIAL RISK MANAGEMENT (CONT’D): (iii)

Financial instruments measured at fair value (cont’d) 

Level 3 includes those instruments which are measured using valuation techniques that include inputs for the instrument that are not based on observable market date (unobservable inputs).

Level 1 $’000

2019 level 2 $’000

Total $’000

.

-

51,333

51,333.

9,839 -

106,848

9,839 106,848

9,839

106,848

116,687

9,839

158,181

168,020

Level 1 $’000

2018 level 2 $’000

.

Total $’000

-

51,333

51,333.

9,408 -

157,340

9,408 157,340

9,408

157,340

166,748

9,408

208,673

218,081

Financial assets at fair Value through other comprehensive income: Unquoted equities Financial assets at fair through profit or loss: Quoted equities Others

Financial assets at fair Value through other comprehensive income: Unquoted equities Financial assets at fair through profit or loss: Quoted equities Others

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FINANCIAL RISK MANAGEMENT (CONT’D): (iii)

Financial instruments measured at fair value (cont’d) There were no transfers between levels during the year.

The valuation technique used in determining the fair value measurement of level 1 financial instrument is the Jamaica Stock Exchange trading rates.

Financial investments which have been categorized as level 2 valuation model is based on yields derived from pricing services which may include data not observed in actual market transaction but indicative information.

Measurement of fair value property, plant and equipment The fair value of building was determined by independent property values, having appropriate recognized professional qualification and recent experience in the location and categorizing of property.

The fair value measurement of building has been categorized as level 3 for fair value based on inputs to the valuation techniques relating to expected market yields, see note 16 for further details.

(iv)

Financial risk The Board of Directors is ultimately responsible for the establishment and oversight of the Credit Union’s risk management framework. The Board has established committees for managing and monitoring risks.

Five key committees for managing and monitoring risks are as follows: (a)

Supervisory Committee The Supervisory Committee oversees the Internal Audit function of the Credit Union and ensures that internal procedures and controls are adhered to. The Supervisory Committee is assisted in its oversight role by Internal Audit.

Internal Audit undertakes both regular and ad hoc reviews of management controls and procedures, the results of which are reported to the Supervisory Committee.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) Five key committees for managing and monitoring risks are as follows: (b)

Credit Committee The Credit Committee oversees the approval of the credit facilities to members. It is also primarily responsible for monitoring the quality of the loan portfolio.

(c)

Finance Committee The Finance Committee is responsible for overseeing the management of the Credit Union’s assets and liabilities and the overall financial structure. It is also primarily responsible for managing the funding and liquidity risks of the Credit Union.

(d)

Risk and Compliance Committee The Risk and Compliance Committee monitors the Credit Union’s exposure to business risks, primarily credit risk by ensuring that collaterals used to secure members’ loans are adequate prior to loan approval. It is also responsible for monitoring the Credit Union’s compliance to the rules and regulations governing the Credit Union as well as management’s policies and procedures.

(e)

Delinquency Committee The Delinquency Committee is responsible for overseeing the management of the Credit Union’s delinquency ratios and the recoverability of overdue loan balances. The committee also oversees the disposal of repossessed collateral with the assistance of the Risk and Compliance Committee.

These committees comprise persons independent of management and reports to the Board on a monthly basis.

The Credit Union’s overall risk management programme seeks to minimize potential adverse effects on the Credit Union’s financial performance. There have been no significant changes to the Credit Union’s exposure to financial risks or the manner in which it manages and measures its risks.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk The Credit Union takes on exposure to credit risk, which is the risk that a counterparty will cause a financial loss by being unable to pay amounts in full when due. Credit exposures arise principally in lending activities. For loans, strategic decisions are primarily made by the Board of Directors, with some delegation of credit approval authority to the Credit Committee and certain members of executive management. The Credit Union’s credit policy forms the basis for all its lending operations. The policy aims at maintaining a high quality loan portfolio, as well as enhancing the Credit Union’s mission and strategy. The policy sets the basic criteria for acceptable risk and identifies risk areas that require special attention.

Additionally, the Credit Union is exposed to credit risk in its treasury activities, arising from financial assets that the Credit Union uses for managing, its liquidity and interest rate risks, as well as other market risks.

There is also credit risk in relation to financial items not included in the statement of financial position at year end such as loan commitments.

Credit review process The Credit Union has established a credit quality review process involving regular analysis of the ability of borrowers and other counterparties to meet interest and loan repayment obligations.

The Credit Union assesses the probability of default of individual borrowers using internal ratings. The Credit Union assesses each borrower on four critical factors. These factors are the member’s credit history, ability to pay linked to the industry benchmarked debt service ratio of 75%, character profile and the member’s economic stability, based on employment and place of abode.

Borrowers of the Credit Union are segmented into two rating classes: performing and non-performing.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Credit review process (cont’d) The credit quality review process allows the Credit Union to assess the potential loss as a result of the risk to which it is exposed and take corrective action. Exposure to credit risk is managed, in part, by obtaining collateral and personal guarantees.

Credit risk limits The Credit Union manages concentrations of credit risk by placing limits on the amount of risk accepted in relation to a single borrower or group of related borrowers, and to product segments.

Borrowing limits are established by the use of the system described above.

Limits on the level of credit risk by product categories and for investment categories, are reviewed and approved annually by the Board of Directors.

Collateral The amount and type of collateral required depends on an assessment of the credit risk of the borrower. With the exception of loans, debt securities are generally unsecured while reverse repurchase agreements are secured by portfolios of financial instruments. Guidelines are implemented regarding the acceptability of different types of collateral. The Credit Union’s policy regarding obtaining collateral have not significantly changed during the reporting period and there has been no significant change in the overall quality of the collateral held by the Credit Union since the prior period. The principal collateral types for loans and advances are:    

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Mortgages over residential and commercial properties Charges over business assets such as premises, Bill of sale over motor vehicles Charges and hypothecations over deposit balances

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Collateral (cont’d) Management monitors the market value of collateral, request additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its annual review of individual credit facilities as well as during its review of the adequacy of the provision for credit losses.

Financial investments and resale agreements External rating agency grades are used to assess credit quality. These published grades are continuously monitored and updated. Default probabilities and recovery rates are assigned as published by the rating agency.

The Credit Union limits its exposure to credit risk by investing mainly in liquid securities, with counterparties that have high credit quality. As a consequence, management’s expectation of default is low.

Liquid assets and bank balances All liquid assets and bank balances are held in financial institutions which management regards as strong and reputable and are therefore assessed as having low credit risk at reporting date. The strength of these financial institutions is constantly reviewed by the Finance Committee.

Impairment of financial assets The Credit Union has three (3) types of financial assets that are subject to the expected credit loss model:   

Loans receivable, Debt investments carried at amortised cost, and; Reverse repurchase agreement.

While cash and cash equivalents are also subject to the requirements of IFRS 9, all bank balances are assessed to have low credit risk at each reporting date as they are held with reputable banking institution. No impairment loss was recognised.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Impairment - loans receivables The Credit Union applies the ‘three stage' model under IFRS 9 in measuring the expected credit losses on loans, and makes estimations about likelihood of defaults occurring, associated loss ratios, changes in market conditions and expected future cash flows. This is measured using the Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD) for a portfolio of assets. 

Probability of Default - This represents the likelihood of a borrower defaulting on its financial obligation either over the next 12 months (12 months PD) or over the remaining lifetime (Lifetime PD) of the obligation.



Exposure at Default - This represents the expected balance at default, taking into account the repayment of principal and interest from the statement of financial position date to the default event together with any expected drawdowns of committed facilities.



Loss Given Default - The LGD represents expected losses on the EAD given the event of default, taking into account the mitigating effect of collateral value at the time it is expected to be realized and also the time value of money.

The ‘three stage' model is used to categorize financial assets according to credit quality as follows:

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

Stage 1 - If a financial asset is subject to low credit risk at the reporting date, an amount equal to 12 month expected losses would be recognized.



Stage 2 - If the credit risk increases significantly from initial recognition, an amount equal to lifetime expected credit losses would be recognized.

Interest revenue would be on the gross basis.



Stage 3 - If the financial asset meets the credit impaired definition, an amount equal to lifetime expected credit losses would be recognized and interest revenue would be on the net basis, rather than on the gross amount.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Impairment - loans receivables (cont’d) Transfer between stages Loans, at any point in time, are either in stage 1, 2, or 3. At origination all loans are in stage 1 and a lifetime PD established based on the current risk score at that time. At future reporting dates loans are again rated and another lifetime PD establishes based on the remaining term of the loan. This remaining lifetime PD is then compared with the expected remaining lifetime PD to determine if there is any significant increase in credit risk based on the difference, if any, of the two.

If there are major differences the loan moves to stage 2. Notwithstanding the above, loans on a watch list are placed in stage 2. Stage 2 loans are moved to stage 3 if the loan rating result in the borrower being rated as non-performing or in default.

If there are no significant increase in credit but the borrower is in for more than 30 days past due then the loan is placed in stage 2. Also, for those in arrears for more than 90 days past due, the loan is placed in stage 3. This rebuttable presumption is an after the fact measure. Stage 3 loans are said to be impaired and are subject to write-offs, cures, or debt consolidation. Transition means the ability to move from one stage (state) to the next.

Forward Transition

By forward transition we mean moving from stage 1 to 2, stage 2 to 3, or stage 1 to 3 between reporting and measurement periods.

Backward Transition

Backward transition means moving from stage 3 to 2, 2 to 1 but not directly from stage 3 to 1. All rehabilitated stage 3 loans, called “cured”, will remain in stage 3 for 6-month in good standing before moving to stage 2 and will have to remain in stage 2 for another 6 months before going to stage 1. Before a backward transition is made all arrears must be fully paid.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Impairment - loans receivables (cont’d) Cured Loans A “cured” loan is a loan that was in default and has recovered through the following routes or a combination thereof. 

All past due payments have been made and the borrower has made 6 monthly payments on time.



The loan has been restructured with due regards to a new payment plan which reduces the monthly payments by extending the maturity date.

Watch List A “watch list” is a mechanism used to track and report on loans from when they first reach stage 2 and, after they fall in arrears of over 30 days. The list also includes loans for which a significant increase in credit risk (SICR) has occurred using both quantitative and qualitative measures.

Significant increase in credit risk (SICR) The Credit Union considers a financial asset to have experienced a significant increase in credit risk when one or more of the following qualitative criteria have been met:

• • • •

Deterioration in the Borrower's Risk Rating (BRR) below established threshold Failure to comply with provisions of any statute under which the borrower conducts business Actual or expected restructuring Early signs of cash flow/liquidity problems

Loan commitments are assessed along with the category of loan the Credit Union is committed to provide.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (i)

Credit risk (cont’d) Impairment - loans receivables (cont’d) Significant increase in credit risk (SICR) (cont’d) The assessment of SICR is performed for individual loans, taking into consideration the sector grouping of the individual exposures, and incorporates forward-looking information. This assessment is performed on an annual basis.

Backstop Irrespective of the above qualitative assessment, the Credit Union presumes that the credit risk on a financial asset has increased significantly since initial recognition when contractual payments are more than 30 days past due.

Non-performing The Credit Union defines a financial instrument as non-performing, when it meets one or more of the following criteria: Quantitative criteria The borrower is more than 90 days past due on its contractual payments.

Qualitative criteria The borrower meets unlikeliness to pay criteria as outlined below, which indicates the borrower is in significant financial difficulty:    

Delinquency in contractual payments of principal and interest; Cash flow difficulties experienced by the borrower; Breach of loan covenants or conditions, and; Initiation of bankruptcy proceedings.

The criteria above have been applied to all loans held by the Credit Union and are consistent with the definition of ‘non-performing' used for internal credit risk management purposes.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Impairment - loans receivables (cont’d) Measuring the ECL- Inputs, Assumptions and Estimation Techniques The ECL is determined by projecting the PD, LCD, and EAD which are multiplied together and discounted back to the reporting date. The discount rate used in the ECL calculation is the original effective interest rate or an approximation thereof.

The 12 month PD is calculated by observing the rate of historical default within the first year of a portfolio of loans and adjusted for the expected impact of forward looking economic information.

The lifetime PD is calculated by observing the rate of historical default over the life of a portfolio of loans and adjusted for the impact of forward looking economic information.

Forward looking information The most significant period end assumptions used in determining the ECL as at the reporting date are set out below:

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Rate

.

2018

Economic factor

Scenarios

2019

Gross Domestic Product (GDP)

Base Optimistic Pessimistic

1.7% 2.0% 1.4%

1.6% 1.8% 1.4%

Inflation rate

Base Optimistic Pessimistic

0.8% 0.7% 0.9%

1.0% 0.9% 1.1%

Unemployment rate

Base Optimistic Pessimistic

9.5% 9.0% 9.5%

10.0% 9.5% 10.0%

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Impairment - loans receivables (cont’d) Forward looking information (cont’d) The underlying models and their calibration, how they react to forward-looking economic conditions was based on how the relationship of the Credit Union’s existing portfolio to these variables and remains subject to review and refinement as the Credit Union builds data. Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any regulatory, legislative or political changes, have also been considered, but not deemed to have a material impact and therefore no adjustment has been made to the ECL for such factors. This is reviewed and monitored for appropriateness on an annual basis.

Sensitivity Analysis Forward looking indicators having the most significant impact on the ECL are GDP growth, unemployment rate and inflation rate.

Set out below are the changes to the ECL as at 31 December that would result from reasonably possible changes in these parameters from the actual assumptions used in the Credit Union's economic variable assumptions.

Change in basis points %

Forward Effect on ECL $’000

Forward looking indicator: GDP growth Unemployment rate Inflation rate

Change in basis points %

Forward Effect on ECL . $’000

.

2019 +100bp +100bp +100bp

5,174 4,139 1,034

-100bp -100bp -100bp

( 5,174) ( 4,139) ( 1,034)

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Impairment - loans receivables (cont’d) Sensitivity Analysis (cont’d) Change in basis points %

Forward Effect on ECL $’000

Change in basis points %

Forward Effect on ECL . $’000

Forward looking indicator: .

2018 GDP growth Unemployment rate Inflation rate

+100bp +100bp +100bp

6,159 4,927 1,231

-100bp -100bp -100bp

( 6,159) ( 4,927) ( 1,231)

Portfolio Segmentation Expected credit loss provisions are modelled on a collective basis, by grouping exposures on the basis of shared risk characteristics, such that risk exposures within a group are homogeneous. In performing this grouping, there must be sufficient information for the group to be statistically credible.

Exposures are grouped according to loan type (Unsecured, mortgage, home equity, motor vehicle, line of credit, restructured and other). The appropriateness of groupings is monitored and reviewed on a periodic basis by the Credit Committee.

Stage 3 loans are assessed on an individual basis for impairment.

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Impairment - loans receivables (cont’d) Loss allowance – Loans receivables The loss allowance recognized in the period is impacted by a variety of factors.

The following table explains the changes in the loss allowance between the beginning and the end of the annual period due to these factors:

At 1 January Movements with income statement impact: Transfer: Transfer from Stage 1 to 2 Transfer from Stage 2 to 3 Transfer from Stage 2 to 1

.

Stage 1 12 Months ECL $’000

Stage 2 Lifetime ECL $’000

Stage 3 Lifetime ECL $’000

Total $’000

38,059

11,487

6,450

55,996

( 1,949) 175

( (

1,949 702) 175)

702 -

-

.

New financial assets originated Changes in PDs/LGDs/EADs Financial assets derecognized during the period Total net income statement change Write-offs

3,831 ( 7,052)

5,055 3,981

60,372 ( 3,841)

(

69,258 6,912)

( 3,348)

(10,341)

( 4,927)

( 18,616)

29,716 -

11,254 -

58,756 (52,835)

99,726 (52,835)

At 31 December

29,716

11,254

5,921

46,891

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CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-OperativeEduCom Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Maximum exposure to credit risk Loans receivables The Credit Union measures ECL considering the risk of default over the maximum contractual period (including extension options) over which it is exposed to credit risk and not a longer period, even if contract extension or renewal is common practice.

The gross carrying amount of financial assets below also represents the Credit Union’s maximum exposure to credit risk on these assets.

The following tables contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised. The gross carrying amount of financial assets below also represents the Credit Union's maximum exposure to credit risk on these assets.

Stage 1 12 Months ECL $’000

Stage 2 Lifetime ECL $’000

2019 Stage 3 Lifetime ECL $’000

Total $’000

6,760,326 -

849,339 -

178,894

7,609,665 178,894

6,760,326 29,716)

849,339 ( 11,254)

6,370,610

838,085

Performing Non-performing Gross carrying amount Loan impairment losses Carrying amount

117

(

(

178,894 5,921) 172,973

.

(

7,788,559 46,891) 7,741,668

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EduCom Co-OperativeEduCom Credit Union Limited CO-OPERATIVE CREDIT UNION LIMITED NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Maximum exposure to credit risk (cont’d) Loan receivables (cont’d) Stage 1 12 Months ECL $’000

Stage 2 Lifetime ECL $’000

2018 Stage 3 Lifetime ECL $’000

Total $’000

6,102,630 -

522,733 -

105,417

6,625,363 105,417

6,102,630 38,059)

522,733 ( 11,487)

6,064,571

511,246

Performing Non-performing Gross carrying amount Loan impairment losses Carrying amount

(

(

105,417 6,450) 98,967

.

(

6,730,780 55,996) 6,674,784

Loans exposure by product type The following table summarizes the Credit Union’s credit exposure for loans at their carrying amounts.

2019 2018 $’000 $’000 Educational Real estate Motor vehicle Personal Other Less: Loan impairment losses

11,098 1,524,884 2,778,678 2,314,118 1,159,781 (

7,788,559 46,891) 7,741,668

14,297 1,553,460 1,885,183 2,542,150 735,690 (

6,730,780 55,996) 6,674,784

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Maximum exposure to credit risk (cont’d) Loans receivables Loans are written off, in whole or in part, when the Credit Union has exhausted all practical recovery efforts and has concluded that there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include ceasing enforceable activity, and where the Credit Union’s recovery method is foreclosing on collateral, and the value of the collateral is such that there is no reasonable expectation of recovery in full.

As at 31 December 2019, the fair value of collateral held in respect of non-performing financial assets is $140,151,742 (2018-$79,015,924).

Debt Investments The Credit Union used external credit ratings as published by established rating agencies in its assessment of the probability of default on debt investments.

The PDs and LGDs for government bonds have been developed by the rating agencies based on statistics on the default loss and rating transition experience of government bond issuers.

The loss allowance on debt investments carried at amortised cost is measured using lifetime PDs. The credit ratings and associated PDs are reviewed and updated on an annual basis.

Based on available credit ratings for debt, debt securities were classified in stage 2 as they were below investment grade as defined by reputable rating agencies.

Maximum exposure to credit risks The following table summarizes the Credit Union’s credit exposure for debt securities at their carrying amounts, as categorized by issuer:

At amortised cost

119

2019 $’000

2018 $’000

101,623

239,993.

ANNUAL REPORT 2019

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EduCom Co-OperativeEduCom Credit Union Limited CO-OPERATIVE CREDIT UNION LIMITED NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (i)

Credit risk (cont’d) Maximum exposure to credit risk (cont’d) Debt Investments (cont’d) Allowance The loss allowance for investments at amortised cost as at 31 December is as follows: 2019 2018 $’000 $’000 At the 1 January Decrease in impairment losses

3,201 ( 515)

3,201 -

2,686

3,201.

Reverse repurchase agreements Similarly, to debt investments, the Credit Union used published external credit rating in assessing the probability of default on reverse repurchase agreement.

The credit ratings and associated PDs are reviewed and updated on an annual basis.

Based on available credit ratings, reverse repurchase agreement were classified in stage 2 as they were below investment grade as defined by reputable rating agencies.

Other than exposure on Government of Jamaica securities, there is no significant concentration of credit risk related to reverse repurchase agreements. As a consequence, management’s expectation of default is low.

Therefore, no impairment provision was recognised.

Maximum exposure to credit risks The following table summarizes the Credit Union’s credit exposure for reverse repurchase agreement at their carrying amounts:

At amortised cost

2019 $’000

2018 $’000

549,486

738,582.

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (ii)

Liquidity risk Liquidity risk is the risk that the Credit Union is unable to meet its payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. The consequence may be the failure to meet obligations to repay depositors and fulfil commitments to lend.

The Credit Union’s approach to managing liquidity is to ensure as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damages to the Credit Union’s reputation.

Liquidity risk management process The Credit Union’s liquidity management process, as carried out within the Credit Union, includes: (i)

Monitoring future cash flows and liquidity on a daily basis. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure funding if required;

(ii)

Maintaining a portfolio of highly marketable and diverse assets that can easily be liquidated as protection against any unforeseen interruption to cash flow;

(iii)

Optimising cash returns on investments;

(iv)

Managing the concentration and profile of debt maturities.

Monitoring and reporting take the form of an analysis of the cash balances and expected investment maturity profiles for the next day, week and month, respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of the contractual maturity of the financial liabilities and the expected collection date of the financial assets.

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk factors (cont’d) (ii)

Liquidity risk (cont’d) Liquidity risk management process (cont’d) The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest-bearing liabilities as they mature, are important factors in assessing the liquidity of the Credit Union and its exposure to changes in interest rates and exchange rates.

The tables below present the undiscounted cash flows payable (both interest and principal cash flows) of the Credit Union’s financial liabilities based on contractual repayment obligations. The Credit Union expects that many customers will not request repayment on the earliest date the Credit Union could be required to pay. The expected maturity dates of financial liabilities are based on estimates made by management and determined by retention history.

122

5.

123

(iv)

(ii)

121,175 2,086,326 3,455,644 1,998 5,665,143 92,357 1,673,055 3,342,554 5,107,966

Total financial liabilities (Contractual dates)

As at 31 December 2018: Payables Voluntary shares Deferred shares Saving deposits External credit

Total financial liabilities (Contractual dates)

Within 3 Months $’000

As at 31 December 2019: Payables Voluntary shares Deferred shares Saving deposits Lease liabilities External credit

Liquidity risk (cont’d)

Financial risk (cont’d)

FINANCIAL RISK MANAGEMENT (CONT’D):

608,747

205,165 395,453 8,129

759,881

281,138 10,009 462,552 6,111 71

3 to 12 Months $’000

31 DECEMBER 2019

1,288,266

1,001,951 51,190 133,560 101,565

1,655,875

987,674 32,895 439,240 47,627 148,439

1-5 Years $’000

NOTES TO THE FINANCIAL STATEMENTS

858,300

761,771 25,971 70,558

539,501

371,626 47,681 19,938 100,256

Over 5 Years $’000

7,863,279

92,357 3,641,942 51,190 3,897,538 180,252

8,620,400

121,175 3,726,764 42,904 4,405,117 75,674 248,766

Total contractual cash flows $’000

7,667,055

92,357 3,517,053 47,369 3,870,822 139,454

8,380,590.

121,175 3,719,463 39,692 4,335,646 55,078 109,536.

Total carrying Amounts $’000

EDUCOM CO-OP CREDIT UNION

EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS 31 December 2019

ANNUAL REPORT 2019

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Page 53

EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (ii)

Liquidity risk (cont’d) Assets available to meet all the liabilities and to cover outstanding loan commitments include cash, deposits short-term investments, reverse repurchase agreements and advances to customers.

The members’ voluntary shares are contractually on call except in cases where these balances are held as security for loans.

Items not carried on the statement of financial position At 31 December 2019, the Credit Union’s commitment to extend credit to members, in respect of loans approved but not yet disbursed, amounted to $278,729,841 (2018: $282,491,000).

(iii)

Market risk The Credit Union takes on exposure to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk mainly arises from changes in foreign currency exchange rates and interest rates. Market risk is monitored by the Finance Committee which carries out extensive research and monitors the price movement of financial assets on the local and international markets. Market risk exposures are measured using sensitivity analysis.

Currency risk Currency or foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Credit Union’s exposure to foreign currency risk at statement of financial position date was as follows:

.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Currency risk (cont’d)

Reverse repurchase agreementsUSD GBP Financial investmentsUSD

2019 ’000

2018 ’000

40,636

45,898

5,172

4,961

11,366

10,396

3,036

4,642

Cash in hand and at bank USD Foreign currency sensitivity The following tables indicate the currencies to which the Credit Union had significant exposure on its monetary assets and its forecast cash flows. The change in currency rates below represents management assessment of the possible change in foreign exchange rates.

Change in Effect on % Change in Effect on Currency Rate Net Surplus Currency Rate Net Surplus 2019 2019 2018 2018 % $’000 % $’000

125

Currency: USD

+6

3,302

+4

GBP

+6

310

+4

USD

-4

( 2,201)

-2

(1,219)

GBP

-4

(

-2

(

206)

2,437 198 .

99)

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Price risk Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Credit Union is exposed to equity securities price risk arising from its holding of investment measured at fair value through surplus or deficit.

The impact of a 10% (2018-10%) change in the quoted prices for these equities would result in an increase or decrease in the carrying value of $983,894 (2018$940,763) in surplus.

Interest rate risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates, and arises mainly from investments, loans, saving deposits, deferred shares, reverse repurchase agreements, lease liabilities and external credit.

Floating rate instruments expose the Credit Union to cash flow interest risk, whereas fixed interest rate instruments expose the Credit Union to fair value interest risk.

The Credit Union’s interest rate risk policy requires it to manage interest rate risk by maintaining an appropriate mix of fixed and variable rate instruments as determined by the Finance Committee. The policy also requires it to manage the maturities of interest bearing financial assets and interest bearing financial liabilities. The Board sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily by the Finance department.

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FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Interest rate risk (cont’d) The following tables summarize the Credit Union’s exposure to interest rate risk. They include the Credit Union’s financial instruments at carrying amounts, categorized by the earlier of contractual re-pricing or maturity dates.

2019 Within 3 Months $’000

127

3 to 12 Months $’000

1-5 Years $’000

Over 5 Years $’000

NonInterest Bearing $’000

Total $’000

-

-

-

-

618,555

Financial Assets: Liquid assets 618,555 Reverse repurchase agreements 438,702 Financial investments 53,743 Loans receivables 41,771

110,784 12,000 205,927

25,860 3,353,291 4,162,235

549,486 178,040 269,643 7,763,224

Total

1,152,771

328,711

3,379,151 4,162,235

178,040

9,200,908

Financial Liabilities: Savings deposits Voluntary shares Deferred shares Lease liabilities External credits

3,454,372 2,003,085 902 -

454,407 218,542 9,366 2,936 -

391,123 991,344 30,326 32,712 109,536

35,744 506,492 18,528 -

-

4,335,646 3,719,463 39,692 55,078 109,536

Total

5,458,359

685,251

1,555,041

560,764

-

8,259,415

Total interest rate Sensitivity gap

(4,305,588) ( 356,540) 1,824,110 3,601,471

178,040

941,493

Cumulative Gap

(4,305,588) (4,662,128) (2,838,018)

941,493

-

763,453

.

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Interest rate risk (cont’d) 2018 Within 3 Months $’000

3 to 12 Months $’000

1-5 Years $’000

Over 5 Years $’000

NonInterest Bearing $’000

Total $’000

-

534,259

Financial Assets: Liquid assets 534,259 Reverse repurchase agreements 738,582 Financial investments 136,164 Loans receivables 85,923

-

-

-

56,794 195,145

187,925 3,156,251

3,262,874

738,582 77,191 458,074 6,700,193

Total

1,494,928

251,939

3,344,176

3,262,874

77,191 8,431,108

Financial Liabilities: Savings deposits Voluntary shares Deferred shares External credits

3,315,838 1,673,055 -

395,453 205,165 7,920

133,560 877,063 47,369 93,137

25,971 761,770 38,397

-

3,870,822 3,517,053 47,369 139,454

Total

4,988,893

608,538

1,151,129

826,138

-

7,574,698

Total interest rate Sensitivity gap

(3,493,965) ( 356,599) 2,193,047

2,436,736

77,191

856,410

Cumulative Gap

(3,493,965) (3,850,564) (1,657,517)

779,219

856,410

-

.

128

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (iv)

Financial risk (cont’d) (iii)

Market risk (cont’d) Interest rate sensitivity The following table indicates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, on the Credit Union’s net surplus.

The sensitivity of the net surplus or deficit is the effect of the assumed changes in interest rates on net surplus or deficit based on the floating rate financial assets and financial liabilities. The correlation of variables will have a significant effect in determining the ultimate impact on market risk, but to demonstrate the impact due to changes in variable, variables had to be on an individual basis. It should be noted that movements in these variables are nonlinear.

(v)

Effect on Net Surplus 2019 $’000

Effect on Net Surplus 2018 $’000

Change in basis points: +100

-

143

-100

-

(143)

Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Credit Union’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Credit Union’s operations.

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FINANCIAL RISK MANAGEMENT (CONT’D): (v)

Operational risk (cont’d) The Credit Union’s objective is to manage operational risks so as to balance the avoidance of financial losses and damage to the Credit Union’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each department.

This responsibility is supported by the development of overall standards for the management of operational risk in the following areas: •

requirement for appropriate segregation of duties, including the independent authorisation of transactions;

•

requirements for the reconciliation and monitoring of transactions;

•

compliance with regulatory and other legal requirements;

•

documentation of control and procedures;

•

Requirement for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks indentified;

•

Requirements for the reporting of operational losses and proposed remedial action;

•

Development of a contingency plan;

•

Risk mitigation, including insurance where this is effective.

Compliance with the Credit Union’s standards is supported by a programme of periodic reviews undertaken by Internal Audit. The results of internal audit reviews are discussed with the department heads, with summaries submitted to senior management.

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5.

FINANCIAL RISK MANAGEMENT (CONT’D): (vi)

Capital management The Credit Union’s objectives when managing institutional capital, which is a broader concept than the ‘equity’ on the face of the statement of financial position. (i)

To comply with the capital requirements set by the Jamaica Co-operative Credit Union League and the Bank of Jamaica for the financial sector in which the Credit Union operates;

(ii)

To safeguard the Credit Union’s ability to continue as a going concern so that it can continue to provide returns and benefits for members;

(iii)

To maintain a 10% ratio of institutional capital to total assets;

(iv)

To maintain a strong capital base to support the development of its business through the allocation of 20% (minimum) of net surplus to institutional capital; and

(v)

To increase the permanent share capital as the main focus of building institutional capital.

Capital adequacy and the use of regulatory capital are monitored by the Credit Union’s management, based on the guidelines in its Capital Asset Management Policy.

The table below summaries the composition of regulatory capital and the ratios of the Credit Union as at 31 December 2019 and 2018. The total regulatory capital is comprised of institutional capital and deferred shares. During the year, the Credit Union complied with all externally imposed capital requirements to which they are subject.

Actual 2019 $’000 Total regulatory capital Risk – weighted assets: Total risk-weighted assets Risk weighted capital adequacy ratio

131

1,114,274

Required 2019 $’000 729,164

Actual 2018 $’000

Required 2018 $’000

1,079,906

678,685

7,291,637 15%

6,786,855 10%

16%

10%

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 5.

FINANCIAL RISK MANAGEMENT (CONT’D): (vi)

Capital management (cont’d) In determining the Credit Union’s capital base (institution capital), the institutional capital of the acquired credit unions at their dates of merger were included. UWI Mona & Community Co-operative Credit Union Limited (UWI) and A.A.M.M Co-operative Credit Union Limited (A.A.M.M.) merged to form EduCom Co-operative Credit Union Limited on 1 April 2015. St. Catherine Credit Union Limited (SCCU) merged with EduCom Cooperative Credit Union Limited as at 1 January 2017. As at the date of each merger, the institutional capital of the acquired entities included the following reserves:

Statutory reserve Retained earnings/ (deficit) General reserve

6.

NON-INTEREST INCOME:

Dividends from equity securities Rental income Fees Miscellaneous income

UWI $

SCCU $

163,881,381 22,312,866 24,390,297

154,586,335 (140,711,327) .

210,584,544

13,875,008

2019 $’000

2018 $’000

897 2,683 107,582 66,355

670 6,034 83,420 58,026

177,517

148,150

132

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 7.

OPERATING EXPENSES:

Utilities Depreciation Amortisation of right-of-use asset Audit and supervision Repairs and maintenance Telecommunication Printing, stationery and supplies Insurance premium Professional and consulting Subscription Administrative expenses Security Loss on disposal of asset held for sale Bad debt Members’ security Marketing and promotion Representation and affiliation Staff costs (note 8)

8.

STAFF COSTS:

Employee salaries and allowances Other staff benefits Pension (note 17)

2019 $’000

2018 $’000

16,067 24,348 6,279 4,580 7,611 20,075 18,339 7,570 20,003 114 56,989 20,896 4,418 23,361 28,273 48,910 480,811

15,544 23,787 5,180 6,580 20,301 13,763 8,128 19,357 395 55,046 18,997 10,184 22,273 23,933 54,480 429,554

788,644

727,502

2019 $’000

2018 $’000

365,851 110,522 4,438

323,317 104,213 2,024

480,811

429,554

139 10

148 4

149

152

The number of persons employed at December 31: Full-time Contract

133

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CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-OperativeEduCom Credit Union Limited

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 9.

LIQUID ASSETS:

Cumax Money Market Fund 10.

2019 $’000

2018 $’000

618,555

534,259

REVERSE REPURCHASE AGREEMENTS: The Credit Union enters into reverse repurchase agreements collaterised by Government of Jamaica securities as follows:

Principal Interest receivable

2019 $’000

2018 $’000

547,541 1,945

736,826 1,756

549,486

738,582

These agreements may result in a credit exposure in the event that the counter party to the transactions is unable to fulfill its collateral obligations.

11.

FINANCIAL INVESTMENTS: 2019 $’000

2018 $’000

Less impairment losses

71,779 20 10,063 22,447 104,309 ( 2,686)

58,005 154,919 20 10,034 20,216 243,194 ( 3,201)

Total (page 135) 64)

101,623

239,993

Amortised costs: Government of Jamaica Securities Victoria Mutual Building Society Special mortgage C & W Co-operative Credit Union First Heritage Co-operative Credit Union

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EduCom Co-Operative Credit UnionCO-OPERATIVE Limited EduCom CREDIT UNION LIMITED NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 11.

FINANCIAL INVESTMENTS (CONT’D): 2019 $’000

2018 $’000

Total (page 134) 63)

101,623

239,993

Fair value through profit or loss: Jamaica Co-operative Credit Union League (JCCUL) Jamaica Money Market Brokers Scotia Investment Limited Quoted equities Jamaica Money Market Brokers Preference Shares

45,853 11,366 26,515 9,839

98,593 10,396 25,237 9,408

23,114 116,687

23,114 166,748

14,161 11,383

14,161 11,383

11,002 13,787

11,002 13,787

1,000 51,333

1,000 51,333

269,643

458,074

2019 $’000

2018 $’000

65,743 25,860 178,040

192,958 188,200 77,191

269,643

458,074

Fair value through other comprehensive income: Jamaica Co-operative Credit Union League (JCCUL) Quality Network (QNET) C.O.K Sodality Co-operative Credit Union Limited Credit Union Fund Management Company Jamaica Co-operative Insurance Agency Limited

Maturity: Due within one year Due after one year No set maturity

135

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CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-OperativeEduCom Credit Union Limited

Page 65

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 11.

FINANCIAL INVESTMENTS (CONT’D): (a)

Government of Jamaica securities investment was disposed of during the period. In the period year, interest receivable amounting to $623,030.

(b)

The Victoria Mutual Building Society deposits include Certificate of Deposits which are held to secure joint mortgage facilities which are extended to members of the Credit Union.

(c)

Investments with Credit Union Fund Management Company represent deposits and mortgage fund instruments, used to secure joint mortgage facilities which are extended to members of the Credit Union.

(d)

The rules of the League stipulate that a minimum of 1,000,000 shares, each with a par value of $1.00, must be held with the League for the Credit Union to retain membership status. The equivalent of amounts held in the statutory reserve (Note 24 (a) must either be used to purchase League shares or placed in League term deposits (Note 9).

(e)

The QNET amount represents investment by the Credit Union in the company which will provide information services to participating Credit Unions. In total, the participating Credit Unions will account for 80% of the cost of the project and the remaining 20% will be funded by the League.

(f)

FHCCU Investment represents deferred shares held by the Credit Union in First Heritage Co-operative Credit Union. The shares are held for five years on which the Credit Union receives a fixed income.

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 12.

LOANS RECEIVABLES: Movement in loans during the year is as follows-

2019 $’000

2018 $’000

Balance at beginning of year Add: disbursements

6,700,193 13,021,988

6,124,431 5,741,157

Less: repayments and transfers

19,722,181 (11,933,621)

11,865,588 ( 5,134,808)

Less: Provision for loan impairment

(

Accrued interest Maturity: Due within 1 year Due after 1 year

7,788,560 46,891)

(

6,730,780 55,996)

7,741,669 21,555

6,674,784 25,409

7,763,224

6,700,193

247,698 7,515,526

281,068 6,419,125

7,763,224

6,700,193

The aggregate amount of non-performing loans on which interest was not being accrued amounted to $145,397,164 (2018: $142,577,644). Uncollected interest not accrued in the financial statements on these loans was estimated at $17,856,572 (2018: $12,902,292).

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EduCom Co-OperativeEduCom Credit Union Limited CO-OPERATIVE CREDIT UNION LIMITED NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 12.

LOANS RECEIVABLES (CONT’D): Provision for loan impairment The movement in the provision for loan impairment determined under the requirements of IFRS is as follows: 2019 $’000

2018 $’000

Balance at beginning of year Restated through opening retained earnings

55,996 -

43,805 9,544

Impairment losses as at 1 January Increase charged to revenue during the year

55,996 43,730

53,349 53,166

Bad debt written off

99,726 (52,835)

106,515 ( 50,519)

Impairment losses at year end

46,891

55,996

2019 $’000

2018 $’000

43,730 -

53,166 (47,800)

43,730

5,366

Loan Loss charge to revenue is as follows:

Increase in loan losses for the year Transfer

.

The provision for impairment losses under the JCCUL regulatory requirement is as follows: As at 31 December 2019: Months in Arrears

Number of Total accounts Loan Savings held in arrears Balances against loans $’000 $’000

Exposure $’000

Loan Loss Provision $’000

Provision Rate % 10 30 60 100

2 – 3 months 3 – 6 months 7 – 12 months 12 months and over

134 193 105 20

64,394 89,702 41,119 14,576

6,680 15,811 15,180 5,961

57,714 73,891 25,939 8,615

6,439 26,911 24,671 14,576

Totals

452

209,791

43,632

166,159

72,597

138

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 12.

LOANS RECEIVABLES (CONT’D): Provision for loan impairment (cont’d) As at 31 December 2018: Months in Arrears

accounts in arrears

Number of Total Loan Savings held Balance against loans $’000 $’000

Exposure $’000

Loan Loss Provision $’000

Provision Rate % 10 30 60 100

2 – 3 months 3 – 6 months 7 – 12 months 12 months and over

66 114 181 23

41,518 36,268 46,844 3,732

3,333 4,719 5,143 494

38,185 31,549 41,701 3,238

4,152 10,880 28,106 3,732

Totals

384

128,362

13,689

114,673

46,870

The provision for loan impairment under the JCCUL regulatory requirement for 2019 is in excess of the provision required under IFRS provisioning rules. The excess of the League’s provision over the IFRS provision is dealt with through a transfer from undistributed surplus to a loan loss reserve as follows –

IFRS provision as per above Loan loss reserve (note 25 (f))

13.

CASH AND BANK BALANCES: Cash Cash at bank and in hand Cash and cash equivalent in the cash flow comprise:

Cash and bank balances Liquid assets (note 9)

139

2019 $’000

2018 $’000

46,891 25,706

55,996 -

72,597

55,996

2019 $’000

2018 $’000

65,943

53,365

2019 $’000

2018 $’000

65,943 618,555

53,365 534,259

684,498

587,624

ANNUAL REPORT 2019 Page 69

CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Operative EduCom Credit Union Limited

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 14.

OTHER ASSETS:

Other receivables Payroll receivables Foreclosed properties Prepaid expenses

2019 $’000

2018 $’000

7,454 37,723 31,808 13,304

13,174 40,726 40,768 6,056

90,289

100,724

Foreclosed properties represent the fair value less costs to sell properties previously held as collateral on which the Credit Union has foreclosed. These assets are to be disposed of within three years.

15.

ASSET HELD FOR SALE:

Opening balance Reclassified to assets held-for-sale

2019 $’000

2018 $’000

-

48,300 (48,300).

-

-

This represented land and building at 6 West Street Old Harbour, St. Catherine. In 2018, the Board of Directors decided to dispose of its investment property. The sale was completed in January 2019. Currently, the property is being leased by the Credit Union.

140

141

16.

340,805 346,467

31 December 2018

35,464

At 31 December 2019

Net Book Value31 December 2019

29,802 5,662

24,136 5,666

At 31 December 2018 Charge for the year

Depreciation 1 January 2018 Charge for the year

376,269

376,269 -

At 31 December 2018 Additions

At 31 December 2019

151,192 4,145 -

376,269 -

At cost/ Valuation 1 January 2018 Additions Disposal

10,917

11,284

149,825

144,420 5,405

139,183 5,237

161,109

155,337 5,772

Computer Equipment & Software $’000

Freehold Land & Buildings $’000

PROPERTY, PLANT AND EQUIPMENT:

32,955

30,936

92,850

84,000 8,850

75,488 8,512

123,786

116,955 6,831

109,059 7,896 -

Furniture, Fixtures, Signs & Equipment $’000

31 DECEMBER 2019

11,354

10,095

14,300

12,290 2,010

10,372 1,918

24,395

23,644 751

22,215 1,049 380

Leasehold Improvement $’000

NOTES TO THE FINANCIAL STATEMENTS

EduCom CO-OPERATIVE CREDIT UNION LIMITED

5,941

3,520

8,749

6,328 2,421

3,874 2,454

12,269

12,269 -

12,269 -

Motor Vehicles $’000

(

466

1,758

-

-

-

1,758

466 1,292

380 466 380)

Capital Work-in Progress $’000

408,100

398,398

301,188

276,840 24,348

253,053 23,787

669,586

684,940 14,646

671,384 13,556 -

Total $’000

Page 70

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ANNUAL REPORT 2019 Page 71

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIALNOTES STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 16.

PROPERTY, PLANT AND EQUIPMENT (CONT’D): The Credit Union’s land and building were revalued on 4 November 2015, by independent qualified valuers. The valuation surplus was credited to other comprehensive income and is shown in non-institutional capital.

The fair value measurement of the building has been categorized as level 3 for fair value, based on inputs to the valuation technique relating to expected market rental growth, yields and rental rates. A reconciliation to the closing fair value balance is as follows –

17.

2019 $’000

2018 $’000

Historical cost Gains included in ‘other comprehensive income’ Gain on property revaluation

135,542

135,542

204,253

204,253

Closing balance (level 3 fair values)

339,795

339,795

RIGHTS-OF-USE ASSET: The Credit Union recognized the right-of-use asset for its leased premise as follows: 2019 $’000 Adoption of IFRS 16 Amortisation

59,936 ( 6,279)

Balance 31 December 2019

53,657.

The following table presents the lease obligation for the Credit Union: 2019 $’000 Adoption of IFRS 16 Interest expense on lease obligation Rent payments

58,372 4,156 ( 7,450)

Balance 31 December 2019

55,078.

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 17.

RIGHTS-OF-USE ASSET (CONT’D): The following table presents the lease liabilities obligation for the Credit Union (cont’d): 2019 $’000 Current portion Non-current portion

3,838 51,240

Balance 31 December 2019

55,078 2019 $’000

Short term lease expense

516

The Credit Union leases various office spaces for fixed periods of up to five (5) years with option to renew and obtain lease term extensions. When measuring the lease obligation, the Credit Union discounted the remaining lease payments using its incremental borrowing rate at the date of initial application, which is 8% per annum.

18.

PENSION, RETIREMENT BENEFIT ASSETS: The credit union has both a defined contribution pension scheme and a defined benefit pension scheme.

Defined Contribution Scheme The Credit Union is a participatory employer in a money purchase pension scheme administered

by Sagicor Life Jamaica Limited. The scheme is open to all employees who satisfy eligibility requirements. Contributions are determined by reference to gross salary with minimum contributions of 5% for employees with an option for additional amounts up to 5% and a contribution of 10% by the Credit Union for each employee contributing to the scheme.

Employer’s contributions to the pension scheme are expensed annually. Contributions for the year amounted to $19,490,654 (2018: $17,332,671).

The most recent actuarial valuation, which was conducted as at 30 June 2016 disclosed a surplus of $10,523,000.

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL NOTES STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 18.

PENSION, RETIREMENT BENEFIT ASSETS (CONT’D): Defined Benefit Scheme The Credit Union participates in a joint contributory pension scheme, which is restricted to all former permanent employees of AAMM Co-operative Credit Union and operated by the Jamaica Co-operative Credit Union League Limited. The plan provides benefits to members based on average earnings for their final three years of service, with each employee contributing 5-10% of pensionable salaries and the Credit Union contributing currently 8% The plan is valued by independent actuaries annually for financial reporting purposes using the projected unit credit method. Additionally, the plan is valued by independent actuaries annually to determine the adequacy of funding. The latest such valuation was at 31 December 2019 revealed that the scheme was adequately funded. (a)

The defined benefit asset recognised in the statement of financial position was determined as follows:

Fair value of plan assets Present value of obligations Asset recognised in the statement of financial position (b)

2019 $’000

2018 $’000

157,118 (119,364)

138,594 (119,206)

37,754

19,388

Movements in the net asset recognised in the statement of financial position: 2019 $’000

2018 $’000

Net assets at beginning of the year Contributions Income recognised in surplus Re-measurement recognised in other comprehensive income

19,388 5,217 ( 4,438)

31,609 5,409 ( 2,024)

17,587

(15,606)

Net assets at the end of the year

37,754

19,388 .

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 18.

PENSION, RETIREMENT BENEFIT ASSETS (CONT’D): . (c) The movement in the fair value of pension plan assets during the year was as follows:

At beginning of year Interest income on plan assets Actuarial gains/(loss) on plan assets Contributions: Employer Employee Administrative expenses Benefits paid At the end of the year (d)

( (

2019 $’000

2018 $’000

138,594 9,891 4,149

122,258 10,130 ( 1,641)

5,217 4,255 912) 4,076)

5,409 4,171 ( 874) ( 859)

157,118

138,594

The movement in the present value of the defined benefit obligation during the year was as follows: 2019 2018 $’000 $’000 At the beginning of the year Current service cost Employees’ contributions Interest cost on plan obligations Actuarial (losses)/gains on obligations Benefits paid

119,206 5,067 4,255 8,351 ( 13,439) ( 4,076)

90,649 3,895 4,171 7,385 13,965 ( 859)

At end of the year

119,364

119,206

Expected contributions to the plan for the year ended 31 December 2020 is $4.73 million.

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL NOTES STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 18.

PENSION, RETIREMENT BENEFITS ASSETS (CONT’D): (e)

(f)

The amounts recognised in surplus for the year are as follows: 2019 $’000

2018 $’000

Current service cost Interest cost on obligations Income on plan assets Administrative expenses

5,067 8,351 (9,891) 911

3,895 7,385 (10,130) 874

Total included in staff costs (note 8)

4,438

2,024

The amounts recognized in other comprehensive for the year are as follows:

Actuarial gain/ (loss) on net plan assets (g)

2019 $’000

2018 $’000

17,587

(15,606)

The pension plan assets are allocated based on the Credit Union’s obligation as a proportion of the total obligation of the plan. The distribution of plan assets was as follows:

Quoted equities Real estate – investment trust and property Government of Jamaica securities Repurchase agreements US$ Bonds Other

2019 %

2018 %

24 23 33 4 8 8

17 25 37 3 5 13

100

100

146

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CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-OperativeEduCom Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 18.

PENSION, RETIREMENT BENEFITS ASSETS (CONT’D): (h)

The five-year trend for the fair value of plan assets, the defined benefit obligation, the surplus in the plan, and experience adjustments for plan assets and liabilities are as follows: 2019 2018 2017 2016 2015 $’000 $’000 $’000 $’000 $’000 Fair value of plan assets Defined benefits obligation Surplus Experience adjustments: Fair value of plan assets Defined benefit obligation

(i)

157,118 (119,364)

138,594 122,258 (119,206) ( 90,649)

84,823 (60,639)

37,754

19,388

31,609

29,953

24,184

4,149 ( 5,902)

( 1,641) 1,421

2,133 ( 717)

3,649 ( 1,703)

(11,385) ( 6,695)

The principal actuarial assumptions used were as follows:

Discount rate Future salary increases Expected average remaining working lives of employees (years) (j)

102,931 ( 72,978)

2019 %

2018 %

7.50 8.00

7.00 7.50

41

31

Impact on Defined Benefit Obligation (DBO) of 1% change in key economic assumptions The change in the Defined Benefit Obligation (DBO) that would arise from a one present (1%) change in each of the key economic assumptions is shown below. In determining the impact of each assumption, the others are held constant. .

Sensitivity Analysis of Key Economic Assumptions Measurement Assumptions Discount rate Future salary increase Future pension increases

147

+1% $’000 (23,606) 15,088 14,005

2019

-1% $’000

+1% $’000

32,199 (12,636) (11,541)

(25,203) 17,057 14,426

2018

-1% $’000

34,950 (14,062) (11,785)

ANNUAL REPORT 2019 Page 77

EduCom CO-OPERATIVE CREDIT UNION LIMITED

EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL NOTES STATEMENTS TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019

18.

PENSION, RETIREMENT BENEFITS ASSETS (CONT’D): (k)

Liability duration Category of participant

Liability duration (years) 2019 2018

Active members Deferred pensioners Retirees

25.6 15.0 11.5

27.4 15.8 11.5

All participants

23.8

25.5

There was no movement in the liability duration of the active members during the year under review. However, reduction can result from changes in the actuarial assumptions, to include rates of withdrawal from service on grounds other than retirement or death.

19.

SAVING DEPOSITS: Ordinary deposits Balance at 1 January Deposits and transfers

2019 $’000

2018 $’000

3,870,822 29,066,822

3,272,769 29,560,996

Less withdrawals and transfers

32,937,644 (29,948,457)

32,833,765 (30,100,662)

Loan scheme deposits Fixed deposits

2,989,187 452,706 841,900

2,733,103 441,574 649,669.

Interest accrued

4,283,793 51,853

3,824,346 46,476

4,335,646

3,870,822

3,908,779 426,867

3,711,291 159,531

4,335,646

3,870,822

Maturity: Due within 1 year Due after 1 year

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EduCom Co-Operative Credit Union Limited EduCom CO-OPERATIVE CREDIT UNION LIMITED NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019 20.

VOLUNTARY SHARES:

2019 $’000

2018 $’000

Regular deposits: Balance at 1 January Share deposited

3,517,053 3,600,407

3,395,762 4,234,881.

Share withdrawn

7,117,460 (3,397,997)

7,630,643 (4,118,279)

Interest payables

3,719,463 -

3,512,364 4,689.

3,719,463

3,517,053

2,221,627 1,497,836

1,878,220 1,638,833

3,719,463

3,517,053

2019 $’000

2018 $’000

47,369 ( 2,096) ( 5,581)

44,753 ( 535) 3,151

39,692

47,369

9,366 30,326

47,369

39,692

47,369

Maturity: Due within 1 year Due after 1 year

21.

DEFERRED SHARES:

Balance at1 January Withdrawal Interest (paid)/ payable

Maturity: Due within 1 year Due after 1 year

These amounts are issued at a par value of $1,000.00. They are not withdrawable for a period of five (5) years and attract interest rate at 8% for the first two years. Thereafter the interest rate will be reset every three (3) months, at the average three (3) months treasury bill yield held prior to the commencement of each payment period, plus one hundred basis point (100).

Based on the proposed Bank of Jamaica Credit Union Regulations, deferred shares are treated as institutional capital, and as such are included in the calculation of the capital to asset ratio.

They are, however, classified in these financial statements as liabilities in accordance with the requirements of IFRS. Interest payable on this portfolio amounted to $NIL (2018 - 5,581,000).

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 22.

EXTERNAL CREDITS:

Credit Union Fund Management Company Limited – 10.5% Jamaica Co-operative Credit Union League - 7% NHT Micro Financing Facility – 4.5%

Maturity: Due within 1 year Due after 1 year

2019 $’000

2018 $’000

37,211 72,325

56,396 38,472 44,586

109,536

139,454

109,536

101,057 38,397

109,536

139,454

The Credit Union has a revolving term loan of $100M with the Credit Union Fund Management Company secured by loan receivables of the Credit Union. The loan was repaid during the period.

The Jamaica Co-operative Credit Union League loan is secured by First legal mortgage stamped to cover $ 76.5 million over commercial property located at 10 Oxford Road, Kingston 5, registered at volume 956 Folio 140 in the name of EduCom Cooperative Credit Union limited and charge over loan receivables.

The NHT Micro Financing Facility allows members of the Credit Union to apply through the Credit Union to access NHT Housing Financing. The facility is secured by the members’ loan receivable balances.

23.

PAYABLES:

Accounts payables Staled-dated cheques Withholding tax Accrued employee benefits Audit & accounting fees Others

2019 $’000

2018 $’000

17,684 7,999 6,329 3,722 4,366 133,048

13,615 7,868 4,141 4,053 5,175 88,306

173,148

123,158

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EduCom Co-Operative Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 24.

.

INSTITUTIONAL CAPITAL:

2019 $’000

2018 $’000

Statutory and legal reserves Balance brought forward Current year transfer Entrance fee

290,198 26,196 1,775

256,685 31,645 1,868

Special reserve

318,169 253,143

290,198 253,143

Members’ permanent shares

571,312 215,193

543,341 201,119

Business combination reserve

786,505 288,077

744,460 288,077

1,074,582

1,032,537

(a)

Statutory and legal reserves As required by the Co-operative Societies Act and the rules of the EduCom Co-operative Credit Union Limited, a minimum of twenty-five percent (25%) of the annual surplus and amounts collected for entrance fees are transferred to this reserve.

(b)

Special reserves The special reserves represent amount appropriated by members to strengthen the capital based of the Credit Union and is not available for distribution.

(c)

Members’ permanent shares – Permanent shares are shares issued at no par value, paid up in cash and form a permanent part of the capital of the Credit Union. Permanent shares may be redeemable subject to the sale, transfer, or repurchase of such shares per ‘Rule 16’ of the Credit Union’s Rule Book.

(d)

Business combination reserve This represents the excess of the net assets acquired and the deemed value for shares issued to members in the business combinations.

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CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-Operative EduCom Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 25.

NON-INSTITUTIONAL CAPITAL:

Undistributed surplus Retirement benefit reserve General reserves Revaluation Reserve for Permanent Shares Loan loss reserve

(a)

2019 $’000

2018 $’000

66,032 37,754 5,806 204,253 2,863 25,706

103,196 19,388 2,782 204,253 3,971 -

342,414

333,590

Undistributed surplus: This represents surplus not distributed at the statement of financial position date.

(b)

Retirement benefit reserve: This represents actuarial gain on plan assets as per annual revaluation.

(c)

General reserves: These represent appropriations for scholarships, donations and for other miscellaneous purposes.

(d)

Revaluation reserve: This represents unrealised gain on the revaluation of the Credit Union’s freehold land and buildings.

(e)

Permanent share reserve: This represents amount set aside from surplus to be ascribed as permanent shares for members. These permanent shares were issued to members during the year. The balance above represents shares bought back by the Credit Union from resigning and deceased members.

(f)

Loan loss reserve: This is the excess of the loan loss provision over IFRS 9 requirement.

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CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-OperativeEduCom Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 26.

APPROPRIATIONS TO AND DECREASE IN OTHER RESERVES: (a)

The following payments/ transfers were made from reserve during the year:

Payments: Honorarium BPR Project Community Outreach Program

2019 $’000

2018 $’000

10,000 13,064 3,212

10,000 3,275

26,276

13,275

-

12,745 35,055

-

47,800

IFRS 9 appropriation: 1 January Amount charged to surplus during the period

(b)

The following amounts were transferred from accumulated surplus to other reserves as per approval at special general meeting: 2019 2018 $’000 $’000 IFRS 9 appropriation Dividend Community Outreach Program BPR Project Honorarium

153

49,965 4,300 15,000 10,000

47,800 24,999 3,700 10,000

79,265

86,499

ANNUAL REPORT 2019

Page 83

CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-OperativeEduCom Credit Union Limited NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 27.

INSURANCE: (a)

Fidelity Insurance Coverage During the year the Credit Union had fidelity insurance coverage with British Caribbean Insurance Company Limited. The total premium for the year was $2,673,946 (2018: $2,557,452).

(b)

Life Savings and Loan Protection Coverage During the year the Credit Union had life savings and loan protection coverage with CMFG Life Insurance Company. Total premium for the year was $20,881,164 (2018: 19,694,896).

(c)

Golden Harvest Premium Insurance Coverage During the year the Credit Union had insurance coverage with CMFG Life Insurance Company. The total premium for the year was $2,480,789 (2018: $2,578,213). These policies remained in force throughout the year with all premiums being paid promptly.

28.

RELATED PARTY TRANSACTIONS: The Credit Union entered into the following transactions with related parties:

(a)

(b)

2019 $’000

2018 $’000

Board and committee members

156,019

145,831

Members of staff

237,623

166,270

Board and committee members

62,342

55,096

Members of staff

76,835

92,766

Loan balances (including interest) -

Deposits (including interest) -

At 31 December 2019 all loans owing by directors, committee members and staff were being repaid in accordance with their loan agreements.

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EDUCOM CO-OP CREDIT UNION Page 84

CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-OperativeEduCom Credit Union Limited

NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 28.

RELATED PARTY TRANSACTIONS (CONT’D): (c)

Compensation of key management personnel The remuneration of key members of management during the year was as follows-

Salaries and other short-term benefits Post employment benefits

2019 $’000

2018 $’000

83,549 6,560

75,654 5,729

90,109

81,383

Their remuneration is determined by the Board of Directors, having regard to their performance and prevailing macro economic factors. The remuneration of key members of management is fixed for two (2) years.

Post employee benefits represent employee’s contribution to a money purchase pension scheme.

29.

EFFECT OF CHANGE IN ACCOUNTING POLICY: The Credit Union adopted IFRS 16 ‘Leases’ with a transition date of 1 January 2019. The Credit Union has chosen not to restate comparatives on adoption the standard, and therefore, the revised requirements are not reflected in the prior year financial statements. There was no impact on the undistributed surplus in the opening statement of financial position on 1 January 2019. The Credit Union does not have significant leasing activities acting as a lessor.

IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Credit Union applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17: (a) (b) (c) (d) (e)

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Apply a single discount rate to a portfolio of leases with reasonably similar characteristics; Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if IFRS 16 had been applied since the commencement date; Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under IAS 36 as at the date of initial application; and Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application, and The use of hindsight in determine the lease term where the contract contains options to extend or terminate the lease.

ANNUAL REPORT 2019

EduCom Co-Operative Credit Union Limited EduCom CO-OPERATIVE CREDIT UNION LIMITED NOTES TO THE FINANCIAL STATEMENTS 31 December 2019

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NOTES TO THE FINANCIAL STATEMENTS 31 DECEMBER 2019

29.

EFFECT OF CHANGE IN ACCOUNTING POLICY (CONT’D): As a lessee, the Credit Union previously classified leases as operating based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Credit Union recognizes right-of-use assets and lease liabilities for most leases.

On adoption of IFRS 16, the Credit Union recognised right-of-use assets of $ 59,936,000 and lease liabilities of 58,372,000 as follows: Right-of-use assets Lease liabilities Right-of-use assets are measured at Measured at the present value of the remaining an amount equal to the lease lease payments, discounted using the Credit liability, adjusted by the amount of Union’s incremental borrowing rate as at 1 any prepaid or accrued lease January 2019. The Credit Union’s incremental payments. borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. The weighted-average rate applied was 8.00%.

In the prior period, operating lease commitment was immaterial and not disclosed. The following shows the reconciliation of the operating lease commitment as at 31 December 2018 to the lease liabilities as at 1 January 2019: 2019 $’000 Minimum operating lease commitment at 31 December 2018 Plus: effect of extension option reasonably certain to be exercised Plus: effect of discounting using the incremental borrowing rate as at the date of initial application

2,032 31,598 24,742

Lease liability as at 1 January 2019 30.

58,372

COMPARISON OF LEDGER BALANCES: The detailed records of balances relating to loans to members, deposits and share capital deferred from their respective control accounts as follows: Loans to Members $’000

Saving Deposits $’000

Deferred Shares $’000

Voluntary Share $’000

Permanent Share $’000

Balance as per general ledger

7,789,559

4,335,642

39,693

3,719,463

215,193

Balance as per members’ Ledger

7,789,559

4,335,642

39,693

3,719,463

215,193.

-

-

-

-

Difference

.

.

-

.

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EDUCOM CO-OP CREDIT UNION

CO-OPERATIVE CREDIT UNION LIMITED EduCom Co-OperativeEduCom Credit Union Limited

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NOTES TO THE FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS 31 December 2019 31 DECEMBER 2019 31.

SUBSEQUENT EVENT: In December 2019, a novel strain of coronavirus (“COVID-19”) emerged in Wuhan China which began to spread suddenly, at first locally but subsequently nationally, regionally and globally. Due to the rapid outbreak, on 30 January 2020; the World Health Organization declared the COVID-19 outbreak as a “Public Health Emergency of International Concern” and on 10 March 2020, declared it to be a pandemic.

In response to the pandemic, the Jamaican Government instituted quarantine areas, travel and logistics restrictions to control the spread of the virus. In adhering to local government restrictions, the Credit Union took appropriate steps to manage foot traffic and better protect its members. As a result, one branch was closed and a limit placed on the number of customers allowed in branch at any one time; which reduced members trafficking.

Effective 24 March 2020, there was a reduction in operating hours.

The Credit Union business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions. These measures caused significant disruption in daily banking activities and could potentially create business continuity issues for the Credit Union.

Given the uncertainty around the extent and timing of the potential future spread or mitigation of the Coronavirus and around the imposition or relaxation of protective measures; management cannot reasonably estimate the impact to the Credit Union’s financial statements, results of its operations and liquidity in 2020.

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ANNUAL REPORT 2019

RESOLUTIONS FOR

RULE CHANGES Whereas the Board of Directors of EduCom Co-operative Credit Union (CU) is mandated to elect an executive after each AGM consisting of President, Treasurer, Secretary, one or more Vice President(s) in accordance with Article VIII, Rule 66 And whereas the Executive Committee shall hold office until their successors are elected And whereas the current Article IX Rule 37 states that no member of the Executive Committee shall be allowed to serve more than four years And whereas the Vice-President may be next in line to be elected President to ensure continuity and stability in the leadership based on the CU succession plan And whereas the current rule 37 does not allow enough time for the Vice-President to serve as President, as both President and Vice-President may be elected to the Executive at the same time And whereas this would result in both President and Vice President demitting office at the same time, thereby creating a gap in continuity Be it resolved that the current Article IX Rule 37 be amended to allow for the president ONLY, to serve for a period of a maximum of 6 years to allow for his successor to serve for a minimum of two years as President Be it further resolved that all other members of the executive will serve for four (4) years ONLY, as stated in the current Rule 37.

CURRENT RULE: ARTICLE IX RULE 37 37. The Executive Committee of the Credit Union shall be a President, one or more Vice President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve more than four (4) years.

PROPOSED RULE CHANGE: ARTICLE IX RULE 37 37. The Executive Committee of the Credit Union shall be a President, one or more Vice President(s), a Treasurer and a Secretary, all of whom shall be elected by the Board of Directors in accordance with Article XIII, Rule 66, and the said Executive Committee shall hold office until their successors are elected, provided that no member of the Executive Committee shall be allowed to serve no more than four (4) CONSECUTIVE years except for the President who may serve for a period not exceeding six CONSECUTIVE YEARS (6) years.

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EDUCOM CO-OP CREDIT UNION

RULE CHANGE: ARTICLE VII, RULE 26 Whereas the current Article VII, Rules 26 states that “No Officer shall be allowed to borrow from the Society a total amount in excess of his shareholdings, and, unless approved by the unanimous decision of the joint membership of the Board of Directors, Credit and Supervisory Committees through electronic medium or at a meeting at which at least two-thirds of the members of the Board of Directors, Credit Committee and Supervisory Committee is present”.

And whereas the rule in its current form is ambiguous as it speaks to the unanimous decision of the joint membership of the volunteer corps as well as two-thirds of the said volunteer corps And whereas as such ambiguity could lead to some confusion and misinterpretation Be it resolved that Rule 26 be amended to read “No Officer shall be allowed to borrow from the Society a total amount in excess of his shareholdings, and, unless approved by the unanimous decision of the joint membership of the Board of Directors, Credit and Supervisory Committees through electronic medium or at a meeting at which at least two-thirds of the members of the Board of Directors, Credit Committee and Supervisory Committee is present, provided that, each arm of the volunteer corps is represented”.

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LIST OF

DECEASED MEMBERS Kevin Andrew Barrett

Horace Allen

Nurval Sharpe

Elsie M Delisser

Keith Carlton Blake

Robert Simms

Angela Theodora Dale

Jennifer Jenny Bowen

Lloyd George Sinclair

Noel George Dexter

Natoya Bryan Cooke

Vinnett Smith-Myers

Pauline Elebith Johnson

Delores Butler

Terry Gregory Thyme

Antoinette Maraellia Pryce

Beverley M Byrosingh

Joyce Robinson

Clinton Augustu Campbell

Eva Lee Vassell

Bernice Wilson

Pamella Chullan

Donald Moraise Williams

Agatha Daniels-Palmer

Angela Walters

Beverley Davis

Dennis Mark Cunningham

Lora Dawkins

Cedric O'gilvie Cardwell

Othniel Dawkins

Ronald Hamilton

Cynthia Dixon

Marlene Campbell

Verna Collet Edwards

Hilbert Leslie Wynter

Rose Marie Cassanova - Edwards

Eulalee Henry

Winston Ellis

Elvoso Yates

Gurleydean Watson

Petecia Francis

Delores Davis

Thomas E. Bell

Paul Grant

Trevor Orville Guest

Devon Maitland

Phyllis Emelin Henry

Stephen Stanley Beek

Jennifer Joan Harris-Davis

Graigory Herriman

Aston Whylie Bryan

Ollivene Clarke

Amos Hunt

Oliver Leonard Hanson

Angela Wallace-Meridith

Herbert Jackson

Leonard Lyn

Edgar Cato

Melvin Roy James

James Mclean

Gloria Ellis

Audley Seymour Lewis

Sheldon Ricardo Daley

Donna Beckford

Everton F Loney

Donnette White

Stanfordmahoney

Lola Mae Spence

Samuel Martin

Devon Maitland

Pearl Donaldson

Sashana Maragh-Thomas

Maxine Bryan

Winston Martin

Darren Mctaggart

Winsome Martin-Raymond

Karen Rodney

Darren Mctaggart

Lola Markland-Richards

Nicole Mills

John Crooks

Georgette Morgan

June Williamson

Lloyd Mullings

Claudette King

Carol Newman-Forbes

Deru-Jaheim Rael Martin

Stacy Ann Robinson

Edwin Richmond Pinnock

Ricardo Deveroo Reynolds

Audrey Bernard

Lascelles Robertson

Ruby Angela Gordon

Herbert Henry

Pauline Royal

Coleen Alverine Staycian Brown

Marcia Marie Hill

Rudolph Samuels

Pauline Cynthia Stubbs

Delroy Adamson

Zenemia Wallace-Scott

Deon Evone Mcdonald

Cislyn May Vickers Eulalee Murcel Walton-Hyman Bartley Watson Katecha Whyte Cislin Williams David Augustus Williams Donna Opelyn Williams Ivy May Wynter

Adolphus Bennett Charles Headley Lyon Marcus Sylvester Jones Vanessa Pricilla Peart-Levy Donna Mae Hart Earl Christopher Hobbins Dulcie Lee Maxwell Owen Anthony Robinson

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NOTES