Certificate of Indebtedness (C of I) - Setup/Process for Patronage

Certificate of Indebtedness (C of I) – This is a debt instrument and is a way for the cooperative to borrow from the patrons to fund capital improvements.  These instruments are usually issued at a given rate of interest for a given period of time.

The ability to pay interest was added to the patronage package with V9.2.1 to provided cooperatives with the ability to use the patronage system as a way to track Certificates of Indebtedness (C of Is), pay interest and issue 1099s.  They need to be set up as a stock class because the user cannot control which equity code to pay interest on. There are only FIVE Stock Class options in Patronage. AGRIS is not programmed to pay interest on individual equity balances at this time. This is why Certificates of Indebtedness (C of Is) are set up as a stock class.

Setup

• Stock Class Information - Setup a one of the five stock types as your Certificate of Indebtedness
  Pat > setup > stock class Information
  Key in the description and the Price per share. In my example the certificates are issued in $5000 increments with a limit of 50.
  The Qualified/Unqualified flag should be referred to your accounting service.
  
  

  Open

  

• Setup Voucher type for Interest (assuming there is a voucher type already defined stock sale and purchases)
  ACP > Setup > Voucher type > define an interest voucher types and define what 1099 document this will appear on.

• Assign Voucher type to Interest document (assuming there is a voucher type already assigned for stock sale and purchases)
  PAT > setup > System Integration > bottom of screen 1 > turn on integration to A/P and assign new document type.
  
  

  Open

  

• Assign ledger code for interest.
  Pat > Setup > system integration > Screen 3
  Assign the GL code for the interest payment to post to.

Process

• Patron invests in Certificate
  Stock Purchase from patronage will be issued and it will create a voucher in ACP.
  Pat > Patronage Transactions > Stock Sale
  Issue stock to patron.
  
  

  Open

  

• When you are ready to pay interest, define the rate.
  PAT > Setup > Dividend/Interest Rates > Define the Interest percent to pay
  Define the Minimum Check Amount
  Define the % Withheld if no tax id
  Define the Minimum 1099 Amount.

  Open

  

• Pay the Interest
  PAT > Patronage Transactions > Interest Payments
  Select dates for voucher documents and stock to pay interest on.
  If integration is turned on to create vouchers in ACP, there will be unpaid vouchers waiting for check to be issued.

  Open

  

• Interest Payments Completed. Refer to the Interest Payments Report.
  PAT > Report Manager > Patronage Transactions > Standard > INTEREST PAYMENTS COMPLETED

• Issues disbursement checks for ACP vouchers just created.
  ACP > disbursements > Disbursement processing.

• Interest Voucher should print on 1099-INT forms at end of year.

Other Process Options: