Some Important Cooperative Practices

Alexander B. RaquepoCooperative Governance Practitioner and Advocate

1. Coops must allocate an allowance for probable losses (bad debts). The standard allocation is 35% for past due loans below 1 year and 100% for loans above 1 year.

2. According to Philippine Coop Laws, Cooperatives are tax exempted. However, to enjoy this privileged the cooperative must apply for tax exemption at BIR.

3. Cooperatives are required to submit yearly reports to the Cooperative Development Authority (CDA), a requirement in getting a Certificate of Operation (CO). A Certificate of Good Standing (CGS) is also issued by CDA for coops who have sound financial conditions.

4. Regular monitoring of DOSRI (Directors, Officers, Staff and Related Interests) must be undertaken. A separate report must be prepared.

5. Cooperatives are required to use the approved Standard Chart of Accounts (SCA) and must compute its COOP-PESOS Rating every month. COOP-PESOS is a rating system developed by CDA to evaluate the soundness and stability of cooperatives.

C – Compliance with Administrative and Legal Requirements;

O – Organizational Structure and Linkages;

O – Operational Management; and

P – Plans and Programs.

P – Portfolio Quality (Portfolio at Risk and Allowance for Probable Losses);

E – Efficiency (Asset Yield, Cost per Peso Loan, Administrative Efficiency, Loan Portfolio Profitability, Operational Self-Sufficiency);

S – Stability (Liquidity, Solvency);O – Operations (Membership Growth,

External Borrowings); andS – Structure of Assets (Non- Earning

Assets, Total Deposits, Share Capital, Loans Receivables)

6. The basic qualification of Board of Directors will be at least College graduate or 3 years experience in business. Once elected, they are required to undergo a coop governance course.

7. Loan delinquency is now computed based on Portfolio At Risk (PAR) and not based on loan maturity.

8. Cooperatives are required to fund its Reserve Funds. This fund must be deposited separately.

9. Coops are encouraged to network or link with other coops or become active members of apex organizations.

10. Cooperatives must be externally audited yearly by an independent CPA accredited by CDA or PICPA.

11. Coop records must be updated and regularly audited by the Audit and Inventory Committee.

12. Loans must be properly documented with all the necessary attachments complete and duly signed.

13. The cooperative must have a continuous capital build up (both share and savings) to minimize outside loans.

14. Remember this- “Your cooperative is in the business of business and is not a social welfare organization.” All transactions therefore must be treated in a business manner.

15. Monthly meeting of the BODs is a must and also the Committees (Credit, Audit, Education, etc.). During this BOD monthly meeting, the GM must report the operations of the cooperative.

16. Cooperatives must have a regular Annual Plan and Budget and a 5-Year Strategic Plan.