REVISED IRR OF RA 9520

ON COOPERATIVE
ACCOUNTING/ AUDITING
AND RELATED CONCERNS
DEFINITION OF TERMS

Area of Operations – refers to the

area where the coop operates and
where its members come from as
provided in their ACBL.
DEFINITION OF TERMS

Capital – refers to the totality of the

members, share capital , loans and
borrowings, including deposits, deferred
payment of interest on share capital and
patronage refund, subsidies, donations,
legacies, grants, aids, lands, structures,
plants, equipment, facilities, machines
and other assets of the cooperative.
 DEFINITION OF TERMS

Interest on Share Capital – refers to the

interest earned by the members’ paid up
capital. It is computed by multiplying the
rate of interest on share capital by
members’ average shares. The rate of
interest on share capital is computed by
dividing the amount allocated for total
interest on share capital by the total
average share.
DEFINITION OF TERMS
Net Surplus – refers to the excess payments made
by members, which shall not be construed as
profits, from the loans or goods and services
availed of or the difference of the rightful amount
due to the members for their products sold or
services rendered to the cooperative. It includes
other inflow of assets resulting from its other
operating activities, which shall be returned to
the members as prescribed in the Code.
 DEFINITION OF TERMS
Revolving Capital Certificate – refers to the
certificate issued by the Board of
Directors of the cooperative indicating the
serial number, name, amount, and rate of
interest to be paid and shall distinctly set

forth the
time of retirement of such certificate and
the amount to be returned.
DEFINITION OF TERMS

Net Worth – refers to equity inclusive

of members’ equity, donation ,
grants and reserve funds less
unbooked allowances for probable
losses on loans, accounts
receivables, investment and non-
performing assets and other capital
adjustments as may be allowed by
the Authority.
DEFINITION OF TERMS
Patronage Refund – refers to the
amount returned to the individual
members in proportion to their
individual patronage of the
cooperative products and
services.
 DEFINITION OF TERMS
Revolving Capital – refers to the amount constituting
the patronage refund and interest on share capital of
the members, the payment of which has been
deferred by the cooperative.
Revolving Capital Certificate - the certificate issued by
the BOD of the coop indicating the name, amount,
and rate of interest to be paid and shall distinctly
set forth the time of retirement of such certificate
and the amount to be returned.
DEFINITION OF TERMS
Risk Assets – refers to the coop’s total assets
less cash on hand, evidence of indebtedness,
loans to the extent covered by hold outs or
assignment of deposits, lands owned used for
operations, buildings and land improvements
net of depreciation, real estate mortgage,
loans and other non-risk items as the Authority
may from time to time authorized to be
deducted from the total assets.
DEFINITION OF TERMS
Total Average Share Months –
refers to the sum total of the
average share months which is
determined by adding the monthly
ending balances of the member’s
share capital and dividing the sum
by twelve months.
 RULE 10- CAPITALIZATION, AND
ACCOUNTING PROCEDURES OF COOPS

Legal Basis – Art. 71- “The

Capitalization of cooperatives and
the accounting procedures shall
be governed by the provisions of
this Code and the regulations
which shall be issued.”
 SECTION 2. CAPITAL SOURCES
Members' Share Capital;
Loans and Borrowings including Deposits;
Revolving Capital which consists of the deferred payment of
patronage refunds, or interest on share capital; and
Subsidies, donations, legacies, grants, aids and such other
assistance from any local or foreign institution whether
public or private; Provided, That capital coming from such
subsidies, donations, legacies, grants, aids and other
assistance shall not be divided into individual share capital
holdings at any time but shall instead form part of the
donated capital or fund of the cooperative.
SECTION 3. SHARE CAPITAL
. The Share Capital of a cooperative may
consist of common share capital and
preferred share capital if the latter is
provided for under the cooperative's Articles
of Cooperation and By-laws. The share
capital contribution of the members shall be
considered as equity. Provided, that it shall
not be withdrawn and should not be used in
offsetting obligations whether past due or
current while the membership subsists.
SECTION 3. SHARE CAPITAL
. The Share Capital of a cooperative may consist of
common share capital and preferred share
capital if the latter is provided for under the
cooperative's Articles of Cooperation and By-
laws. The share capital contribution of the
members shall be considered as equity.
Provided, that it shall not be withdrawn and
should not be used in offsetting obligations
whether past due or current while the
membership subsists.
SECTION 4. PREFERRED SHARES

Should preferred share capital be

provided in their By-Laws, it shall
not exceed twenty five (25%) of
the total authorized capital of the
cooperative.
 SECTION 5. CAPITAL BUILD-UP

The By-laws of every cooperative shall

provide for a reasonable and realistic
member capital build-up program to
allow the continuing growth of the
members’ investments in their
cooperative as their own economic
conditions continue to improve.
SECTION 6. SUBSCRIPTION AGREEMENT
. The cooperative shall execute a
subscription agreement upon admission
of members and whenever additional
subscription shall be made by member/s
upon full payment of initial subscription.
Unless otherwise provided for in the By-
Laws, cooperative shall issue Share
Certificates at least every end of the
calendar year based on the number of
shares fully paid for the said period.
 SECTION 7. LIST OF SHARE CAPITAL CERTIFICATE
ISSUED.

All cooperatives, regardless of type and

category, shall issue to all its members
share capital certificate equivalent to
their share capital contribution. A list
of Share Capital Certificates issued to
members shall be maintained by the
cooperative.
SECTION 8. PAR VALUE

In a primary cooperative, the par value may

be fixed at any amount but not less than
Php100.00 nor more than Php1,000.00.
Cooperatives are prohibited from issuing
multiple types of Common Shares with
different par value per share. It is likewise
prohibited for any cooperative to
increase/decrease the par value of the
share capital by way of amending their
Articles of Cooperation and By-laws.
SECTION 9. LIMITATION ON SHARE CAPITAL
HOLDINGS

No member of a primary
cooperative other than a
cooperative itself shall own or hold
more than ten per centum (10%)
of the share capital of the
cooperative.
SECTION 10. FINES ON UNPAID SUBSCRIBED SHARE
CAPITAL

The By-laws of a cooperative shall

prescribe a fine on unpaid
subscribed share capital.
Provided, that such fine is fair and
reasonable under the
circumstances as determined by
the Board of Directors.
 ASSIGNMENT OF SHARE CAPITAL CONTRIBUTION
OR INTEREST.

He/She has held such share capital

contribution or interest for not less than one
(1) year;
The assignment is made to the cooperative
or to a person who falls within the field of
membership of the cooperative; and
The Board of Directors has approved such
assignment.
 INTEREST ON SHARE CAPITAL

Interest on share capital shall not exceed the Rate

of Return on Investment.
Unless otherwise provided for in the By-laws of the
cooperative, share capital shall earn interest. The
rate of interest shall be computed, as follows:
X(Net Surplus less Statutory Reserves)
Rate of interest = --------------------------------------------
Total Average Share Month
Where:
X shall be a percentage to be determined by the Board of
Directors allocated for interest on share capital.

No allocation of interest on share capital shall be made

without the approval of the Board of Directors.

Payment of interest, unless otherwise provided for in the By-

laws, must be made on such date as may be determined
by the Board of Directors. The General/Representative
Assembly, however, upon the recommendation of the
Board of Directors, may defer the payment of such
interest including patronage refund in order to raise
revolving capital.
Share capital shall receive a monthly limited rate of interest
 WITHDRAWAL OF SHARE CAPITAL
A member of a cooperative may, for any valid reason,
withdraw his/her membership from the cooperative by
giving a sixty (60)-day notice to the Board of Directors.
Subject to the By-laws of the cooperative, the withdrawing
member shall be entitled to a refund of his/her share
capital contribution and all other interests in the
cooperative. Provided, That such refund shall not be made
if upon such payment the value of the assets of the
cooperative would be less than the aggregate amount of its
debts and liabilities exclusive of his/her share capital
contribution
 PATRONAGE REFUND
The principle of Patronage Refund is a principle of equity
wherein an equal right of members to participate in the
organization and to equitably share in the benefits
accruing therefrom is established. Under this principle,
the Net Surplus shall not be construed as profit, but as
excess payments made by them from the cooperative
and which shall be deemed to have been returned to
them if the same is distributed as prescribed by the Code
and by this Rule. Provided, however, that the amount
allocated for patronage refund shall not be less than thirty
percent (30%) of the net surplus after deducting the
statutory reserves based on the principle of equity.
Provided, further, that in no case shall the rate of
patronage refund be more than twice the rate of interest
on share capital.
 ACCOUNTING PROCEDURE

The accounting system to be

instituted/maintained in the cooperative
shall be in accordance with the generally
accepted accounting principles and
practices. The cooperative shall use the
Standard Chart of Accounts and its
accompanying Accounting Manual
prescribed by the Authority.
 RULE 11
SOCIAL AUDIT OF COOPERATIVE

"Art. 80. Annual Audit. - Cooperatives

registered under this Code shall be subject
to an annual financial, performance and
social audit."

"The social audit shall be conducted by an

independent social auditor accredited by the
Authority."
All registered cooperatives regardless of type or
category shall be subject to social audit.
The Social Audit is a procedure where the
cooperative assesses its social impact and
ethical performance vis-a-vis its stated goals and
social missions. The cooperative's actual social
and ethical performances shall be quantified and
qualified according to the parameters to be
identified by the Authority
 SCOPE OF SOCIAL AUDIT

1) Level of participation of the Members and

Officers to the operations of the cooperative
2) Impact of the Cooperative Programs and
Policies to the Community
3) Uses of Community Development Fund
The Authority shall issue the Guidelines
concerning Social Audit.
 OBJECTIVES
The cooperative is both an economic
and social enterprise. As such, the
social contribution of the cooperative
shall indicate the improvement on the
social welfare of the members and the
community as a whole.
 APPLICABILITY

A social audit of a cooperative shall be

undertaken by an independent social auditor
accredited by the Authority, who shall submit
the social audit report to the Board of
Directors of the cooperative. Said report shall
form part of the Cooperative Annual Progress
Report (CAPR) to be filed with the Authority
 SANCTIONS

Failure of the cooperative to submit to

the Authority the required Social Audit
Report as an attachment to the CAPR
shall constitute non-compliance as
provided in Rule 8 of these Rules.
 TRANSITORY PROVISIONS
Upon approval of the Accreditation Guidelines of
Cooperative Social Auditors, the following shall apply:
For cooperatives with assets of at least ONE BILLION
PESOS (P1,000,000,000.00), the social audit shall be
undertaken by an independent social auditor
accredited by the Authority;
For cooperatives with assets less than ONE BILLION
PESOS (P1,000,000,000.00), the social audit shall be
undertaken by the internal auditor or the audit
committee of the cooperative.
 LABOR SERVICE COOPERATIVE AND
WORKERS COOPERATIVE

Legal Basis – Art. 23

Labor Service Coop – engaged in
providing a specific labor, job or
service to a principal under a
contracting or sub-contracting
arrangements
 CAPITAL SOURCES
Workers Cooperative – organized by workers,
including the self employed, who are at the
same time members and owners of the
enterprise. The principal purpose is to
provide employment and business
opportunities to its worker-members and to
manage it in accordance with the
cooperative principle.
Labor Service Coop Workers Cooperative
Engaged in contracting May engage in labor
and sub-contracting and production, including
arrangements as defined contracting and sub
in its by laws contracting
Existence of employer- arrangements in support
employee relationship at of its main activity as
all times in contracting defined by law.
and sub-contracting Self employed individual
arrangements during the is allowed by the coop in
deployment of member, regard to its enterprise.
 TRI LATERAL RELATIONSHIP
1) An employer-employee relationship exists
between the contractor and the worker-
member engaged to perform in a specific
job.
2) A contractual relationship between the
principal and the contractor.
 REQUIRED CONTRACTS

Membership agreement between the worker-

member and the cooperative
Employment Contract between the contractor
and worker-member
Service Agreement between the Principal and
the Contractor.
 REIMBURSABLE COSTS
A. Payable directly to member-employee
• Salaries xxx
• Night Differential xxx
• ECOLA
xxx
• 13th Month Pay xxx
• Service Incentive Leave xxx
Sub Total
 REIMBURSABLE COSTS
b) Mandatory Contributions for member-employee benefits payable to :
•SSS xxx
•Philhealth xxx
•ECC Insurance xxx
•Pagibig Fund xxx
Total Reimbursable Cost xxxxx
Administrative Fee (10%) xxxxx
Total Contract Cost XXXX