7th Cooperative principle and social audit of cooperatives (Part 1)

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Individuals pool their resources to form a cooperative that addresses their felt needs.  As a business enterprise owned by members with crafted vision, mission, goals and objectives, it also caters to the needs of the community where it exists. Different services are offered to satisfy the needs of its shareholders at the same time expanding its assistance to potential members who in turn can become part of the organization. When the cooperative reach out to the community it tries to fulfill the seventh (7th) international cooperative – “concern for the community”.

Underlying this commitment is for cooperatives to become economically viable and share part of its resources to advance socio-economic development. When realized this manifest the real motive of cooperatives as it looks to serve members and the community to the fullest through allocation of its net surplus.

In the Philippines, Article 86 of Republic Act 9520 provides an allocation for the social concern of cooperatives and often referred as “cooperative development fund (CDF)”. A three percent (3%) allocation from the net surplus is set aside every year to finance projects or activities that will benefit the community where the cooperative operates. As can be observed the Code and the CDA has not fixed the projects or activities that shall be funded by the CDF and the option belongs to the cooperative to determine such.

In our interactions with various cooperatives leaders allocated CDF funds had been donated to fund barangay infrastructure projects, used to support education of sons and daughters of members, support to victims of calamities, accidents and death aid. Queries were also raised by some officers and management staff on where to use such fund especially among micro and small cooperatives.

I remember the sharing of one cooperative participant to a recent exposure trip in Thailand last month. According to her much of the net surplus of the cooperative goes to social welfare but the cooperative does not give patronage refund. Also the interest on share capital is not too high as the cooperative focuses on providing socio-economic assistance to the poorest of the poor in the community where the cooperative operates. She eagerly shared her observations and wants to adopt such practice in her cooperative.

Listening to her impression on their recent trip, I proposed for her to suggest to the Board of Directors for possible review of its policies related to usage of community development fund rather than creating another fund for such purpose. The provisions of RA 9520 had clearly provided such and the remaining task of cooperatives is to have their own policy. I proposed that in case the cooperative has no clear guidelines on how to utilize its fund the Board can formulate policy to cover assistance to community residents who are not members of the cooperative. The fund can be allotted for health, education, environment and livelihood assistance to community residents with income below the threshold level. If the fund is not sufficient then a review on the allocation of optional and community development fund should be undertaken.

Given the CDA guidelines that the total allocation for optional and CDF should not exceed 10%, the Board can propose to the General Assembly to modify the allocation provided in the by-laws of the cooperative and possibly decrease the amount allotted for optional fund and increase the CDF allocation. Assuming that the cooperative has existing land and building for its operation, the focus on community development can become a major project of the cooperative. After all winning the hearts and minds of the community to subscribe to cooperative contributes to social development. When policy directions and programs on community development are clearly defined the cooperative will encounter lesser problems in assessing its social contributions to the community.

To be continued…

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