BIBLIOGRAPHY AGUIA, GERLY P. APRIL ...
BIBLIOGRAPHY
AGUIA, GERLY P. APRIL 2013. Benchmark Study on the Management and
Financial Performance of Selected Cooperatives in Benguet. Benguet State University, La
Trinidad, Benguet.
Adviser: Jovita M. Sim, MSc.
ABSTRACT
This study was conducted to look on the management and financial performance of
the selected cooperatives in Benguet. The study also, looks into the factor that affects the
financial performance of the cooperatives and the coping mechanisms they apply to cope
up with those factors.
The managers of the selected cooperatives served as the sources of primary
information with the use of survey questionnaire supplemented with personal interview,
while secondary information was obtained from the cooperatives records and files. These
information and data obtained were analyzed in order to come up with relevant
conclusions. This study was conducted from November 2012 to January 2013.
The result of the study showed that studied cooperatives have their financial
policies. The cooperatives prepared their annual plan and budget at the beginning of each
year. They used books of accounts in recording their business transactions. They
safeguarded their cash through depositing to the banks and use of cash vaults. They also
employed the necessary individuals in safeguarding their cash.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Internal audits were conducted monthly and external audits were done every year.
Performance evaluation was present also to most of the cooperatives. This was conducted
every year.
Most of the cooperatives complied with the administrative and legal requirements.
Generally, based on the performance rating, the cooperatives still have low rating scores
which they need to look into their evaluation and determine their points for improvement.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
INTRODUCTION
Rationale
Cooperatives were seen to be one of the essential organizations established in a
community. They have been develop and flourished because of their capacity to meet the
needs of people in every diverse circumstance. By their purpose and nature of existence, it
uplifts the spirit of unity among individuals that becomes a tool in reducing discrimination
among the rich and the poor. People choose to use cooperatives as a useful tool in
mobilizing human and financial capital in order to create jobs for themselves.
Benguet is one of those communities which have been dominated by non-
government organizations. It comprises thirteen municipalities; Bakun, Buguias,
Mankayan, Bokod, Atok, Kapangan, Itogon, Tuba, Sablan, LaTrinidad, Tublay,
and Kibungan. There are three major industries that help in the improvement of the
economy of the province; agriculture, tourism and mining industry. Benguet was showered
with immense richness of nature, fertile soil and temperate climate which made it as an
ideal place for producing vegetables. Due to this, the province was known as the “Salad
Bowl of the Philippines”.
Benguet was also known to be rich in mineral resources; beneath the mountains
there lies treasures of gold. It is one of the major sources of livelihood in the community.
This also contributes to the employment of the people. Because of the presence of Baguio
City and La Trinidad, it is one of the tourist’s favorite among the provinces of the country.
Warm people, unique culture, beautiful landscapes and temperate climate all contribute to
it being one of the tourist’s favorite.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Cooperatives play an important role among those industries, like for instance in the
agriculture industry where Agri-cooperatives are related with. They organize themselves
to help aid their needs. Also with the mining industry where miners formed their own
cooperative for them to utilize their incomes and have an additional source to augment their
daily needs.
On the other hand, cooperatives are now making a mark in the local but also in the
international economy. In other countries, cooperatives are known to part of large
industries. Based on the statistical data of cooperatives there are around 200 registered
cooperatives in the province as for the year 2012 (CDA 2012).
Statement of the Problem
The study wanted to address the following:
1. What is the profile of the cooperatives studied as to general profile and financial profile?
2. What are the financial performances of the different cooperatives as to portfolio quality,
efficiency, stability, operations and management and structure of assets?
3. Which of the cooperatives has the highest financial performance that could be adopted
as a basis of those with low financial performance?
4. What are the financial policies of the studied cooperatives?
5. What are the factors that affect the financial performance of the studied cooperatives?
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Objectives of the Study
`
The general objective of the study is to benchmark on the financial performance of
the selected cooperatives in Benguet.
Furthermore, the study would be able to:
1. Determine the profile of the benchmarked cooperatives in terms of general and financial
profile;
2. Determine the financial performances of the different cooperatives in terms of portfolio
quality, efficiency, stability, operations and structure of assets;
3. Determine the cooperative that has the highest financial performance that could be
adopted a basis y other cooperatives with low financial performances;
4. Determine the financial policies of the studied cooperatives;
5. Determine the factors that affect the financial performance of the studied cooperatives.
Importance of the Study
The study was conducted to provide information to readers and to the benchmark
cooperatives for them to determine and prioritize opportunities for improvements and
enhance performances. Help them to determine their strength and weaknesses, take actions
to improve the organizations competitiveness and most importantly, it helps them to look
into their performance gap and how to improve it.
Furthermore, the result of the study would be used as a reference/guide to other
researchers and students who would be working on the same field of study.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Scope and Delimitations of the Study
The study focused on the management and financial performance of the studied
cooperatives. It is also focused on the general and financial profile of these cooperatives,
financial policies implemented and factors that affects their financial performances.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
REVIEW OF LITERATURE
Benchmarking
It is defined as the process of identifying “best practice”. Its objective is to
understand and evaluate the current position of a business or organization in relation to
“best practice” and identify areas and means of improvement.
The simplest definition is “improving by learning from others”. Benchmarking is
the systematic comparison of process and performance in organizations. In other words, it
is a system used in management and particularly strategic management, in which
organizations evaluate various aspects of their processes in relation to best practice
(http/www.businessdictionary.com).
Benchmarking Process
In conducting benchmark study, there are some guidelines to be followed. First is
the planning stage; it includes the identifying of what process to be benchmarked,
determining of what are the organizations you can compare, and determining of what
methodology to be used. Next are data collection, carrying out primary research with the
identified tools, and carrying out through face-to-face interviews or through guide
questions. Collections of data vary on the type of data being collected if it is primary or
secondary data. Then data analysis, it is where the validation and normalization of gathered
information. It is essential that all data be validated to establish accuracy and completeness.
Other stages of the guidelines are reporting and integration of the result of the study
(http/www.businessdictionary.com).
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Performance Standards for Cooperatives
Performance standards Philippine Credit Cooperatives and other types have two
components:
Indicators on compliance with administrative and legal requirements. These
comprise a set of question which would give information on the cooperatives compliance
with the necessary administrative requirements. These questions provide information on
the governance, management, and organizational structure of the cooperatives.
Compliance with administrative and legal requirements. This includes set of
question which looks at whether the cooperative complies with the various legal
requirements by the Cooperative Development Authority, Bureau of Internal Revenue,
Department of Labor and others.
Organizational, Structure and linkages. This looks into the cooperatives governance and
membership structure, affiliation and linkages with other organizations and federations
promoting cooperative development.
Operations and management. This includes indicators that determine the presence
or absence of the necessary systems, policies and procedures for efficient and effective
management of the cooperatives.
Plans and programs. These include the parameters to determine whether the
cooperative has a developmental plan and approved plan and budget.
Financial Performance
A subjective measure of how well a firm can use assets from its primary mode of
business and generate revenues. It is a general measure of a firm’s overall financial health
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
over a given period of time, and can be used to compare similar firms across the same
industry or to compare industries or sectors in aggregation (http/www.investopedia.com).
Portfolio quality. This first group of indicators provides the managers and Board of
Directors of cooperatives the appropriate tools in monitoring the quality and the level of
risks of the loan portfolio of the cooperatives. This should be closely monitored in as much
as the loan portfolio constitutes the bulk of the cooperatives assets. In view of this, it is also
important that the risk of default is inadequately protected. Protection is measured by
comparing the adequacy of the allowance provided for loan losses against the amount of
delinquent loans. The status of the health of the portfolio of the cooperative will either
propel the cooperative to grow or imperil the whole sustainability of program of the
cooperative. There are two indicators included in this group. This is portfolio at risk and
allowance for probable losses on loans.
Efficiency. This second group of indicators focuses on the operational and
administrative efficiency of the delivery of financial services, i.e., loans and savings
products to its members. Indicators under this category determine the ability of the
cooperative to generate sufficient income to cover expenses on operations. Efficiency is
important because it affects the profitability of the cooperative's portfolio and the return on
member's share. Six indicators are included in this group; asset yield, operational self-
sufficiency, rate of return on members share, loan portfolio profitability, cost per peso loan,
and administrative efficiency.
Stability. Indicators on the stability of the cooperative determine whether
financial services can be delivered to its members in a sustained manner. One way to do is
to increase the institutional capital of the cooperative instead of purely relying on members
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
share capital. This will allow the cooperative to maintain sufficient liquidity to meet the
financial needs of its members in timely manner. Where the cooperative leadership
commits itself to ascertain the sustainability in cooperative structure, the membership of
the cooperative will also be serious and strongly support their cooperative. There are three
indicators under this category; solvency, liquidity, and net institutional capital.
Operations. There are two indicators included in this group. These indicators call for
minimizing dependence on external borrowings and greater emphasis on mobilizing
voluntary savings that will enable cooperatives to have a continuous and cheaper source of
funds for its operations and at the same time provide its members an alternative investment
mechanism for their excess funds. This will result in the cooperative less dependence on
external borrowings and lower financial costs. The indicators are performance of
membership growth and trend in external borrowings.
Structure of assets. These ratios will help ascertain the quality and the structure of assets
of the cooperative. These indicators determine the extent of the share of the cooperatives
various assets to its total assets and asses the effective use of the asset to generate revenues.
This includes non-earning assets, total deposits, net loans receivables, and total members
share capital.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
METHODOLOGY
Locale and Time of the Study
The study was conducted on the following cooperatives; La Trinidad Vegetable
Trading Post MPC, Philex Community Credit Cooperative, Bad-ayan Buguias
Development Multi-Purpose Cooperative, Benguet Government Employees Multi-purpose
Cooperative, Philex Mines Community Consumers Cooperative, Employees of COA-CAR
Multi-purpose Cooperative, La Trinidad Municipal Employees multi-purpose cooperative,
Trinidad Based Agawa Multi-purpose Cooperative, Seeds and Fruits Multi-purpose
Cooperative.
Respondents of the Study
The respondents of the study were the managers of each cooperative. There were nine
cooperatives that served as respondents of the study.
Data Gathered
Data gathered were the financial data of the cooperatives from the previous years.
It also includes the general and financial information of the cooperatives.
Data Collection Procedure
Survey questionnaires were used to gather primary information accompanied with
personal interview. Other information’s were retrieved from the cooperatives records and
files such as financial records, performance standard ratings and financial policies.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Data were tabulated and analyzed with the use of frequency analysis and other appropriate
statistical tools and were presented using descriptive analysis.
Cooperatives performances were assessed using the formula and scoring system of the
COOP PESO. The COOP acronym stands for the legal requirements, organizational
structure and linkages, operation and management, and plans programs and performance.
The PESO stands for portfolio quality, efficiency, stability, Operations, and structure of
assets.
The result of each equation is allocated as point score and the overall point score based on
the weighing of each category of COOP PESOS indicators. These are being totaled with a
maximum score of 100 points. The overall rating was computed using 20% weight for
COOP and 80% for PESOS. The resulting rating for each is given the appropriate weight
to arrive at the overall rating. The following scale is used:
Overall Rating System
Very good (96 to 100%). The cooperative has a strong performance that
provides safe and sound operations. Cooperative in this group complies with the
cooperatives rules and regulations to external shocks and financial disturbances.
Good (90 to 95%). The cooperative shows satisfactory performance that
consistently provides safe and sound operations. Cooperative in this group withstands
business fluctuations well however there are some areas of concern that require important
attention which if unchecked can potentially develop into develop into conditions of greater
concern.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Fair (80 to 89%). The cooperatives performance is flowed to some degree and is
supervisory concern. Results of key performance measures indicate that safe and sound
operations may be adversely affected. The cooperative is nominally resistant to adverse
business conditions and may deteriorate if identifiable areas of weakness are not corrected
immediately.
Poor (70 to 79%). The cooperative performance is of serious supervisory
concern. The cooperative's performance if left unchecked would lead to conditions that
could threaten its viability. A high potential of failure is present but is not yet imminent. It
requires very close supervisory attention.
Very poor (below 70%). The cooperative has unsatisfactory performance and is in need of
immediate remedial action. In this group, cooperatives have very high probability of failure
and will likely require liquidation.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
RESULTS AND DISCUSSION
Cooperatives Studied
Table 1 presents the background of the studied cooperatives. Considered in this
study includes the years of operation, type of the cooperative, the services offered and the
number of regular members.
Cooperative background. Most of the studied cooperatives were multi-purpose, a
cooperative which combines two or more of the businesses of the different types of the
cooperative (RA 9520, 2008). Two of which were engaged in agricultural- related services,
farm inputs trading though their major source of income is that of lending services. On the
other hand, the other cooperative is engaged in the production and marketing of high valued
crops and a promoter of vermicomposting. Three of the studied cooperatives are engaged
in lending services alone, while two of the cooperatives having businesses such as retailing
of consumer goods, lending and canteen. One cooperative has the retailing and wholesaling
of goods operation alone.
The oldest of the cooperatives studied was the one with almost 50 years of operation and
the youngest was the cooperative with only 5 years of operation.
Highest numbers of regular members were ranging from 2,500 to 3,000 individuals under
the large category. Cooperatives with least regular members were from the small category
with members ranging from 20 to 300 individuals.
As shown in the table, some of the cooperatives still recall their cooperative’s history. This
includes the starting capital of the cooperative. The starting capitals of the cooperatives
were ranging from below 5,000 pesos to 375,000 pesos.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Financial Plan
Financial planning is defined as the process of framing objectives, policies,
procedures, programs and budgets regarding the financial activities. It helps ensure the
compatibility of the cooperatives operation and financial policies with their goals.
Policies identified by the studied cooperatives include the financial policies. These policies
are their bases in the flow of the cooperatives operation.
Preparation of annual budget plan. The result (Table 2) shows that all of the
cooperatives are preparing their budget plan every beginning of each year. Most of the
studied cooperatives mentioned that the management prepares it, and is being forwarded
to the Board of Directors for further study and approval. Then, it will be presented during
the general assembly meeting to be approved by the members.
Table 2. Financial plans and policies
PARTICULARS
FREQUENCY
PERCENTAGE
Presence of financial plans and policies
With financial plan and policies
9
100
Without financial plan and policies
0
0
Preparation of annual plan and budget
Prepare
9
100
Do not prepare
0
0
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Source of Fund
Business entities are like vehicles, which needs fuel in order for it to operate and
serve its purpose. Fund is the considered to be the fuel of a business like cooperative. It is
therefore important that these entities must maintain and increase their funds to sustain its
operation.
Generally, there are two main sources of the cooperatives funds; the internal source
and external source. Internal sources includes the members share capital, members savings
and deposits, and the income from operation. On the other hand, external source include
the loans from banks and donations and grants.
Table 3 shows the sources of funds of the studied cooperatives. It was noted that
majority of the cooperatives raised their funds through members share capital and members
savings and deposits and income from operation. Four of the studied cooperatives were
observed that part of their funds were generated from the external source such as
cooperatives awards, loans from federation and as well as donations and grants.
Moreover, of the cooperative mentioned that aside from the internal sources they
were granted assistance from federation Northern Luzon Federation of Cooperative
Development Center (NORLU CEDEC). One cooperative also received assistance from
the government. Another from the small category increases their funds by availing of
donations and grants through approved resolution. These cooperative is also sourcing out
funds from other institutions with lower interest.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 3. Sources of Funds
PARTICULARS
FREQUENCY
PERCENTAGE
Internal Source
Members share capital
9
100
Savings and deposits
7
77
Income from operation
9
100
External Sources
Loan from banks
3
33
Donations and Grants
1
11
Loan From federation
1
11
Cooperative Awards
1
11
Internal Control
This is important to ensure that the cooperative has the adopted measures and methods to
safeguard its assets. It also enhances the accuracy and reliability of its accounting records.
This helps reduce the risk of errors and irregularities. Table 4 presents the records and
documents utilized by the studied cooperatives.
Use of books of accounts. Furthermore, Table 4 shows that most of the cooperatives studied
used cash disbursement book, general journal, general ledger, as well as individual
deposit/loan ledger. One of the cooperative mentioned that they use loan journals while
three of the cooperative uses sales journal and purchase journal for their consumer services.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 4. Books of accounts utilized by the cooperative
PARTICULARS
FREQUENCY
PERCENTAGE
General Journal
9
100
General Ledger
9
100
Cash Receipts Journal
6
66
Cash Disbursement Journal
5
55
Individual Loan/deposit Ledger
7
77
Sales Journal
5
55
Purchase Journal
5
55
Subsidiary Ledger
2
22
Loan Journal
1
11
Moreover, one of the cooperative uses the E-Coop System in recording the cooperatives
transactions. Hard copies of the files are being kept for safety purposes. This indicates that
the cooperatives are using the books of accounts in recording their business transactions.
Recording of transactions is one way of showing transparency.
Use of official receipts and disbursement vouchers. All f the cooperatives studied mention
on the use of official receipts and disbursement vouchers in every transaction. This
emphasizes that there is a transparency of those transactions because it is being recorded.
Runkle et al. (1999) as cited by Pilas (2012) mentioned that to ensure the profitability and
growth of the cooperative there must be excellent management of the transaction records
of the income and expenses. Necessary documents must be kept and made available for
reference when needed. Moreover, transparency of records is a must have characteristics
of a certain cooperative. This will establish the members trust to the cooperative and enable
them to increase their investment to the cooperative.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Furthermore, safekeeping of the books and records shall be in accordance with the
Generally Accepted Accounting Principles (GAAP).
Adopted measure in safeguarding its cash.
Use of cash vault and deposit to bank are the two major adopted measures of the
cooperatives studied. Other than that most of the cooperatives employ the persons involved
in the financial management such as treasurer/cashier who is responsible of the cash, and
bookkeeper/accountant who is responsible in the record keeping and the supervisory
committee/ Audit committee responsible in the conducting of internal audit of the
cooperative.
Frequency of Audit
Auditing is defined as the examination of financial statements of any entity whether
profit oriented or not with a view of expressing an opinion thereon. There are two types of
audit practiced with in a cooperative depends as to who will conducts the audit; the external
and internal audit. Internal audit is conducted by the Audit committee of the cooperative.
This can be done daily, monthly or annually this depends on the schedule that is agreed
and set by the cooperative. On the other hand, external audit is conducted by an
independent auditor outside the organization. This is usually conducted at the end of each
year.
As stated in the Cooperative Code of 2008 (RA9520), that financial audit shall be
conducted by an external Auditor who has the two important qualifications; a. he is
independent of the cooperative or any of the subsidiary that he is auditing, b. he is a member
and in good standing of the Philippine Institute of Certified Public Accountant (PICPA)
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
and is both accredited by the Board of Accountancy and the Authority to avoid of some
group of individuals.
Internal audit.
Table 5 shows that almost all of the studied cooperatives are conducting their
internal audit monthly. One of the cooperatives were conducts their audit daily. However
some of the some of the respondents mentioned that due to arising software programs
which can automatically prepare financial reports, they can conduct their audit anytime
they want like for the La Trinidad Vegetable Trading Post Multi-purpose Cooperative that
is under E-Coop System.
External audit.
External audit of the cooperatives were all conducted annually, although one of the
studied cooperatives conducts their audit semi-annually. Conduct of external Audit is very
important to ensure that window dressed financial reports will be avoided authority
requires for the monitoring of the cooperatives.
Table 5. Frequency of audit
PARTICULARS
FREQUENCY
PERCENTAGE
Internal audit
Daily
1
11
Monthly
8
88
Quarterly
-
-
Semi-annually
-
-
Annually
-
-
External audit
Semi-annually
1
11
Annually
8
88
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Utilization of Funds
Each of the cooperatives studied has areas where they allocate their funds. All the
cooperatives allocate fund for their working capital. This will be used for the lending
operation for the cooperative with lending services while .those with consumer service use
for purchasing of goods and stocks. Aside from those, there was allocated for the operation
such as maintenance of equipments, honorarium of officers and salaries and wages for the
employees. There is also allotted fund for the trainings, meetings, and office supplies and
members benefits.
Furthermore, most of the cooperatives mentioned that so far the fund generated from its
sources are sufficient for the cooperatives operation.
Monitoring
Monitoring is defined as an internal project activity designed to provide constant
feedback on the progress of a project, the problems it is facing and the efficiency with
which it is being implemented. Monitoring is important, this will help check on the
performances of the cooperatives in different aspects such as the management and financial
aspects. This will check if the set goals and objectives of the cooperative are attained.
Most of the cooperatives studied mentioned that they are conducting annual performance
evaluation for the officers and staff and also evaluation on the cooperative as a whole for
certain accomplishments. This will help them see their strengths and weaknesses and the
level of outcome of their performances.
Financial data of the cooperatives. Table 6 to Table 8 presents the financial data of the
studied cooperatives. Total assets, total liabilities, and net surplus of the cooperative were
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
recorded based on the financial data of the cooperatives from year 2009 until year 2011.
Percentage increase was also presented in the table.
As shown in Table 6 the highest total asset among the studied cooperatives was
noted followed was under the large category. All of the cooperatives have an increase of
their total assets especially on the 2009 to 2010. It was observed that there is a decrease
on the total asset of the cooperatives of 58.56% for the year 2010 to 2011.
As for the total liabilities, there is a total increase of 30.97% for the year 2009 to 2010 and
decreased for 9.79% for year 2010 to 2011. Two cooperatives had the highest increase,
with 31.3 % and the 31.05% in the year 2009 to 2010 (Table 7).
Moreover, as for the net surplus of the cooperative, Table 8 shows that there was an
increase for the year 2009 to 2010. The highest percentage increase with 62.89% was on
the year 2009 to 2010; on the other hand on the year 2010 to 2011 the highest increase was
40.12 %.
But for the year 2010 to 2011, four of the cooperatives have a decrease on their income.
The highest decrease was from the small category with 15.6% decrease on their income.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 6. Total assets of the cooperatives
2009
2010
2011
PARTICULARS
%
%
PHP
PHP
PHP
CHANGE
CHANGE
Large category
Cooperative A
232,424,506.5 256,409,374.8
8.2
279,637,987.5
8.3
Cooperative B
63,563,785.8
80,861,737.1
21.2
94, 149,588.3
14.1
Cooperative C
72,819,493.4
78,187,277.2
6.9
104,829,681.9
40.9
Medium category
Cooperative A
43,273,793.9
50,998,035.7
12.2
63,801,633.3
20.1
Cooperative B
45,125,923.1
54,581,719.1
6.3
57,652,946.6
5.3
Cooperative C
24,946,410.4
29,838,617
16.4
34,430,623.1
13.3
Small category
Cooperative A
4,430,119.8
6,134,205.1
27.8
9,775,120.4
37.2
Cooperative B
10,289,294.4
12,194,817.5
15.6
12,471,561.9
2.2
Cooperative C
2,281,312.6
11,174,750.6
79.5
11,419,287.7
2.1
TOTAL
499,154,639.8 910,198,859.3
45.2
574,018,842.2
(58.7)
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 7. Total liabilities of the cooperatives
2009
2010
2011
PARTICULARS
%
%
PHP
PHP
PHP
CHANGE
CHANGE
Large category
Cooperative A 36,154,135.8 42,641,248.5
15.2
57,604,275.1
25.1
Cooperative B 29,895,378.9 43,522,340.1
31.3
59,359,152.3
26.4
Cooperative C 57,404,010.1 60,337,167.9
4.9
83,466,096.3
27.7
Medium category
Cooperative A
3,962,898.3
5,408,265.6
26.7
5,670,812
4.6
Cooperative B 14,311,271.8 54,581,265.6
73.8
57,652,946.6
5.3
Cooperative C
6,523,502.1
8,757,360.9
25.4
9,980,219.6
12.3
Small category
Cooperative A
1,338,275.4
1,491,103.6
10.3
2,142,136.6
30.4
Cooperative B
680,144.9
986,533.9
31.1
884,629.1
(11.5)
Cooperative C
229,253.8
308,322.8
25.6
447,633.7
31.1
TOTAL
150,498,870.6
218,033,608.7
30.9
276,760,268.4
21.2
150,498,870.6
276,760,268.4
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 8. Net surplus of the cooperative
2009
2010
2011
PARTICULARS
%
%
PHP
PHP
PHP
CHANGE
CHANGE
Large category
Cooperative A
19,376,075.60
21,236,802.17
8.76
20,535,796.11
(3.41)
Cooperative B
1,246,232.43
2,050,264.73
39.21
3,424,173.53
40.12
Cooperative C
2,422,932.21
4,636,150.46
62.87
4,636,150.46
7.64
Medium category
Cooperative A
1,589,924.90
2,040,073.75
22.07
1,764,370.90
(15.6)
Cooperative B
6,345,173.59
7,553,695.38
15.10
7,197,972.48
(4.94)
Cooperative C
1,941,985.43
2,575,749.09
24.60
2,727,852.37
5.57
Small category
Cooperative A
680,503.86
844,803.57
19.45
1,313,208.45
35.67
Cooperative B
594,208.17
1,183,975.44
48.81
1,063,078.23
(11.37)
Cooperative C
299,253.77
308,322.82
25.64
447,633.69
31.12
TOTAL
34,496,289.96
42,075,654.49
18.01
43,110,236.22
2.39
Administrative Compliance and Management Structure.
(COOP Indicators)
This section represents the compliance with the administrative requirements.
Compliance of the cooperatives with the system, governance, policies and procedures, and
organizational structure. Compliance with these standards is expected to ensure the
protection of the cooperative and sustainability of operation as a basic financial institution.
This comprises the compliance with the administrative and legal requirements,
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
organizational structure and linkages, operation and management, and the plans and
programs.
Compliance with administrative and legal requirements. This looks whether the
cooperative complies with the various legal requirements by the Cooperative Development
Authority, Bureau of Internal Revenue, Department of Labor and others.
Organizational structure and linkages. This looks into the cooperatives governance
and membership structure, affiliation and linkages with other organizations and federations
promoting cooperative development.
Operations and management. These determine the presence or absence of the
necessary systems, policies and procedures for efficient and effective management of the
cooperatives.
Plans and programs. These include the parameters to determine whether the
cooperative has a developmental plan and approved plan and budget.
Table 9 shows the administrative compliance and management structure of the
cooperatives studied. As it was shown in the result, the highest score was 98 and equivalent
rating of 19.6 % and the lowest total score was 47 with an equivalent rating of 9.4%. This
indicates that the cooperative with high score implies that they are complying with the
requirements of the authority while those cooperatives with low score do not fully comply
with the requirements.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 9. Administrative compliance and management structure of the cooperatives
MAXIMUM ACTUAL EQUIVALEN
INDICATORS
PARTICULARS
SCORE
SCORE
T RATING
(%)
C
O
O
P
Large category
Cooperative A
17
20
31
12 100
80
16
Cooperative B
20
25
39
14 100
98
19.6
Cooperative C
20
25
36
14 100
95
19
Medium category
Cooperative A
18
22
34
12 100
86
17.2
Cooperative B
-
-
-
- 100
-
-
Cooperative C
12
13
38
14 100
77
15.4
Small category
Cooperative A
-
-
-
- 100
-
-
Cooperative B
12
13
15
7 100
47
9.4
Cooperative C
-
-
-
- 100
-
-
Financial Performance (PESOS Indicators)
The financial performances of the studied cooperatives were evaluated in terms of
portfolio quality, efficiency, stability, operations, and structure of assets. These are based
on the rating sheets of the cooperatives.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Under the portfolio quality, these include the indicator that provides the manager and board
of directors of the cooperatives a tool in monitoring the quality and the level of risks of the
loan portfolio of the cooperatives.
As for the efficiency, this focuses on the operational and administrative efficiency of the
delivery of the financial services, i.e., loans and savings products to its members. It
determines the ability of the cooperative to generate sufficient income to cover expenses
on operations. Stability determines whether the financial can be delivered to its members
in a sustained manner.
Operations, this call for the minimizing dependence on external borrowings and greater
emphasis on mobilizing voluntary savings that will enable the cooperative to have a
continuous and cheaper source of funds for its operations and at the same time provide its
members an alternative investment mechanism for their excess funds.
Structure of assets, helps ascertain the quality and the structure of assets of the
cooperatives. This determine the extent of the share of the cooperatives various assets to
its total assets and assess the effective use of the asset to generate revenues.
Among the studied cooperatives, there are two which do not have credit services. Four of
this provided complete reports submitted to the authority, on the other hand, three of the
respondents has incomplete data provided. Due to this, their financial performance rating
is not included. But the financial performance of the consumer cooperative was assessed
with the use of financial ratios.
Table 10 shows that 58.4 % was the highest score followed by 56.8%. On the other hand,
the lowest score was 34.8 %. This shows that the cooperatives must look into the five
indicators and asses the area that needs improvement.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 12 presents the financial ratio of the consumers’ cooperative. As to profitability ratio,
this measures the company's use of its assets and control of its expenses to generate an
acceptable rate of return/income. This means that the higher percentage the better.
As shown in the table, the consumer cooperative shows high profitability based on positive
changes on the profitability ratios. The cooperatives highest gross margin and profit margin
was attained on year 2010 with 11.23% and 8.93%, as well as return on equity with 29.36%.
The highest return on asset of the cooperative was on year 2009 with 14.06%.
Moreover, as to liquidity ratio, this measures the availability of the cooperatives cash to
pay debt. This measures the amount of money that would be left if the cooperative
liquidates its assets to face value and use the proceeds to pay its current its liabilities. The
cooperatives net working capital shows decreasing pattern, which indicates that the cash
of the cooperative is decreasing. As for the debt equity ratio, it was observed that it
increased.
On the other hand, the debt ratio measures the ability of the cooperative to repay long term
debts. Where the lower percentage the better, but for the cooperative it was observed that
it is in an increasing pattern.
Efficiency ratio measures the cooperatives effectiveness in the use of cooperatives
resources. As shown in the table, there is positive efficiency of the cooperative. This
indicates that the cooperative can generate positive income through its available resources.
Overall, the cooperatives performance ratings were all still low. It is shown in Table 12
that two of the cooperatives fallen to rating 4, under poor performance which means that
the cooperatives is under serious supervisory concern that if this is left unchecked, it would
lead to conditions that could threaten its viability. On the other hand, four of the studied
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
cooperatives fall under rating 5, which means they have very poor performance that might
lead to the cooperatives liquidation.
The ratio reflected an unsatisfactory performance and is in need of immediate remedial
action. The cooperatives must look into their weaknesses that affect their performance and
source out solutions for the improvement of their performance.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 10. Financial performance of the cooperatives
MAXIMUM ACTUAL
EQUIVALENT
INDICATORS
PARTICULARS
SCORE
SCORE
RATING (%)
P
E
S
O S
Large category
Cooperative A
13 17
30
10 6
100
73
58.4
Cooperative B
18 8
10
5
11.5 100
52.5
42
Cooperative C
-
-
-
-
-
100
-
-
Medium category
Cooperative A
13.5 18
10 9.5
100
71
56.8
20
Cooperative B
-
-
-
-
-
100
-
-
Cooperative C
-
-
-
-
-
100
-
-
Small category
Cooperative A
-
-
-
-
-
100
-
-
Cooperative B
15 6
8
8
6.5
100
43.5
34.8
Cooperative C
-
-
-
-
-
100
-
-
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 11. Performance rating of the selected cooperatives
COOP
PESOS
ACTUAL EQUIVALENT
COOPERATIVES
SCORE
SCORE
SCORE
RATING (% )
Large category
Cooperative A
80
73
77
4
Cooperative B
98
52.5
61.6
5
Cooperative C
95
-
19
5
Medium category
Cooperative A
86
71
74
4
Cooperative B
-
-
-
-
Cooperative C
77
-
15.4
5
Small category
Cooperative A
-
-
-
-
Cooperative B
44
43
44.2
5
Cooperative C
-
-
-
-
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 12. Financial ratio of the Consumers Cooperative
Particulars
2009
2010
2011
Profitability Ratios
Gross Margin
10.38%
11.23%
9.88%
Profit Margin
7.44%
8.93%
8.15%
Return on Equity
20.59%
29.36%
27.69%
Return on Assets
14.06%
12.68%
12.49%
Liquidity Ratios
Net working capital
30,981,485.56
28,037,367.8
27,108,579.7
Debt to equity ratio
46 %
86.01%
91.36%
Debt Ratio
32 %
40.56%
41.19%
Efficiency/ Activity ratio
Asset Turnover
177 %
112%
110.9%
Working Capital
250 %
211%
220%
Factors that Affects the Cooperatives Performance
There were many factors that affect the performance of a certain cooperatives.
These factors may arise in the different aspects of the cooperative.
`
As to the management aspect, most of the identified problems were lack of trainings
of officers and sometimes PMES to members and presence of incompetent officers.
Under the financial aspect, most of the studied cooperatives mentioned specially
the cooperatives with credit services that delinquent loan payments, in- implementation of
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
their financial policies, inadequate financial policies. One cooperative mentioned that as
to present, their cooperatives problem is they need additional source of funds for their
cooperatives expansion and growth. Other problem identified as the fluctuating prices of
the vegetable produce as mentioned by the agri- based studied cooperative. This affects the
members’ income that leads to delay of paying their loans. They mentioned also that
sometimes if the there is an increase on the past due accounts this also contributes to the
lowering on the performance of the cooperative. This can also affect the cooperatives
income. Diclas (2005) as cited by Pilas (2012), stated that lack of adequate safeguards
against unscrupulous officers who are taking advantage of their positions to grant loans to
themselves relatives, and acquaintances can greatly affects the financial aspect of the
cooperatives.
Coping Mechanisms Employed by the Cooperative to Cope up with their Problems
In line with these problems, cooperatives find ways in order to address the arising
problems.
As mentioned by the cooperatives, they have their own way on how to cope up with these
problems. All the cooperatives agreed that in order to avoid the incompetent officers and
staff they need to undergo trainings and seminars.
Most of the cooperatives studied practice forwarding of demand letters to delinquent
borrowers; others practiced rigid collection or mass collection. Some of the respondents
said that Revisiting and reviewing of the policies helps them to come up with solutions to
arising problems and proper implementation of the policies.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The study was conducted with the selected cooperatives in Benguet. It was
conducted to look into the management and financial performance of the selected
cooperatives. The financial performance of the cooperatives was assessed using the COOP
PESOS rating. Furthermore, the study looks into the factors that affect the financial
performance and the coping mechanisms they apply to cope up with those factors.
The respondents of the study were nine cooperatives. This was divided into three
categories; small, medium and large category. Manager of these cooperatives serve as the
source of information. Primary data and secondary data were collected. The primary data
was gathered with the use of survey questionnaire supplemented with personal interview.
On the other hand, secondary data was taken from the cooperatives files submitted to the
Authority. Gathered data were analyzed with the use of frequency analysis and the
performance were assessed using the COOP ESOS scoring system.
The cooperatives studied have their financial policies. But most of the respondents
explained that until now there is no formality because their policy is disseminated verbally.
Two of the cooperatives have said that their financial policy is now on the process to be
added to the manual of their policies.
In the preparation of annual budget plan, all of the cooperatives studied prepare
their budget plans every beginning of each year.
Generally, all the cooperatives use the books of accounts in recording and documenting of
their transactions. They safeguard their cash through depositing it to the bank and use of
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
vaults. They also employ the necessary individual involves in the safeguarding of their cash
such as bookkeeper, cashier, and accountant.
Most of the funds of the cooperatives come from the members share capital, savings
and deposits and income from their operation. Other cooperatives source out their funds
from the external source such as donations and grants and loan from banks. The
cooperatives allocate their funds to daily revolving fund, working capital, honorarium of
officers and salaries of employees. There is also allocated for trainings and seminars,
meetings, office supplies and members benefits.
All cooperatives conduct their internal audit monthly, except for one who conducts
it daily. External audit of the cooperatives were also conducted annually. One of the
cooperatives conducts their external audit semi-annually.
Performance evaluation is present also to most of the cooperatives. This was conducted
every year specially the two cooperatives who mentioned they conducts performance
evaluation of the officers, management staff and the organization as a whole.
Most of the cooperatives complied with the administrative and legal requirements.
Although some of the cooperatives has not completed the requirements. This results to their
low scores. As to their financial performance, it is shown that scores of the cooperatives
falls to rating 5, where their scores are all below 70%.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Conclusions
Based on the results of the study, conclusions were drawn. The cooperatives studied have
informal policy as to their financial aspect. Most of the cooperatives rely on the members
share capital, savings and deposits, and income from their operation as source of their fund.
All the cooperatives studied used books of accounts in documenting their business
transactions. Internal audits of the cooperative are conducted monthly, except for the
consumer cooperative which conducts daily. Their external audits are conducted annually
except one cooperative who conducts their external audit semi-annually. Funds
accumulated from its sources are being utilized and allocated by the cooperatives to major
areas like for example on the cooperatives operation.
Most of the cooperatives monitor their performance through the conduct of annual
performance evaluation to the officers, management staff, and to the cooperative as a
whole. Based on the cooperatives COOP score, most of them complied with the
administrative and legal requirements though some of them did not fully complied with the
requirements.
Furthermore, looking into their PEOS score, there are only four cooperatives that has their
rating. They did not reach the standard scores required.
Lastly, on their overall score, the cooperative studied was not able to reach the standard
scores. Their liquidity and large amount of assets alone does not define good performance.
There are some aspects where they do not perform well that greatly affect their performance
as a whole.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Recommendations
Based on the results of the study the researcher arrived with some
recommendations. In order to help improve the cooperatives performance, cooperatives
should include to their routine the reviewing and revisiting of their policies as well as the
manual of operation. This will help in improving the cooperatives performance.
Moreover, cooperatives should review existing collection policies especially to the
cooperatives with increasing delinquent borrowers and those with past due loans to
improve their collection strategies.
On the other hand, cooperatives must review their performance evaluation to assess
and determine their strength and weaknesses this will help and enable them to come up
with solutions and strategies to improve their weaknesses.
Other than that, management and staff not only by the studied cooperatives but also
to existing cooperatives to continue attending trainings and seminars conducted by
authorities for them to be more knowledgeable.
In addition, cooperatives must not be complacent as to what they attained. Instead,
they must look for ways on how to improve more of their performances.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
LITERATURE CITED
BENCHMARKING.
Retrieved
October
24,
2012
from
http/www.businessdictionary.com.
COOPERATIVE DEVELOPMENT AUTHORITY. 2012. Statistical Data of
Cooperatives; All Province. Cordillera Extension Office. Pp. 1-3.
COOPERATIVE DEVELOPMENT AUTHORITY. 2012. Statistical Data of the
Performance Ratings of Cooperatives. All Province. Cordillera Extension Office. Pp. 3.
FINANCIAL
PERFORMANCE.
Retrieved
October
24,
2012
from
http/www.investopedia.com.
PILAS D.K. 2012. Financial Management of Selected Millionaires Cooperative: A Case
Study. BS Thesis. Benguet State University, La Trinidad, Benguet. Pp 7-15.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
AGUIA, GERLY P. APRIL 2013. Benchmark Study on the Management and
Financial Performance of Selected Cooperatives in Benguet. Benguet State University, La
Trinidad, Benguet.
Adviser: Jovita M. Sim, MSc.
ABSTRACT
This study was conducted to look on the management and financial performance of
the selected cooperatives in Benguet. The study also, looks into the factor that affects the
financial performance of the cooperatives and the coping mechanisms they apply to cope
up with those factors.
The managers of the selected cooperatives served as the sources of primary
information with the use of survey questionnaire supplemented with personal interview,
while secondary information was obtained from the cooperatives records and files. These
information and data obtained were analyzed in order to come up with relevant
conclusions. This study was conducted from November 2012 to January 2013.
The result of the study showed that studied cooperatives have their financial
policies. The cooperatives prepared their annual plan and budget at the beginning of each
year. They used books of accounts in recording their business transactions. They
safeguarded their cash through depositing to the banks and use of cash vaults. They also
employed the necessary individuals in safeguarding their cash.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Internal audits were conducted monthly and external audits were done every year.
Performance evaluation was present also to most of the cooperatives. This was conducted
every year.
Most of the cooperatives complied with the administrative and legal requirements.
Generally, based on the performance rating, the cooperatives still have low rating scores
which they need to look into their evaluation and determine their points for improvement.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
INTRODUCTION
Rationale
Cooperatives were seen to be one of the essential organizations established in a
community. They have been develop and flourished because of their capacity to meet the
needs of people in every diverse circumstance. By their purpose and nature of existence, it
uplifts the spirit of unity among individuals that becomes a tool in reducing discrimination
among the rich and the poor. People choose to use cooperatives as a useful tool in
mobilizing human and financial capital in order to create jobs for themselves.
Benguet is one of those communities which have been dominated by non-
government organizations. It comprises thirteen municipalities; Bakun, Buguias,
Mankayan, Bokod, Atok, Kapangan, Itogon, Tuba, Sablan, LaTrinidad, Tublay,
and Kibungan. There are three major industries that help in the improvement of the
economy of the province; agriculture, tourism and mining industry. Benguet was showered
with immense richness of nature, fertile soil and temperate climate which made it as an
ideal place for producing vegetables. Due to this, the province was known as the “Salad
Bowl of the Philippines”.
Benguet was also known to be rich in mineral resources; beneath the mountains
there lies treasures of gold. It is one of the major sources of livelihood in the community.
This also contributes to the employment of the people. Because of the presence of Baguio
City and La Trinidad, it is one of the tourist’s favorite among the provinces of the country.
Warm people, unique culture, beautiful landscapes and temperate climate all contribute to
it being one of the tourist’s favorite.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Cooperatives play an important role among those industries, like for instance in the
agriculture industry where Agri-cooperatives are related with. They organize themselves
to help aid their needs. Also with the mining industry where miners formed their own
cooperative for them to utilize their incomes and have an additional source to augment their
daily needs.
On the other hand, cooperatives are now making a mark in the local but also in the
international economy. In other countries, cooperatives are known to part of large
industries. Based on the statistical data of cooperatives there are around 200 registered
cooperatives in the province as for the year 2012 (CDA 2012).
Statement of the Problem
The study wanted to address the following:
1. What is the profile of the cooperatives studied as to general profile and financial profile?
2. What are the financial performances of the different cooperatives as to portfolio quality,
efficiency, stability, operations and management and structure of assets?
3. Which of the cooperatives has the highest financial performance that could be adopted
as a basis of those with low financial performance?
4. What are the financial policies of the studied cooperatives?
5. What are the factors that affect the financial performance of the studied cooperatives?
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Objectives of the Study
`
The general objective of the study is to benchmark on the financial performance of
the selected cooperatives in Benguet.
Furthermore, the study would be able to:
1. Determine the profile of the benchmarked cooperatives in terms of general and financial
profile;
2. Determine the financial performances of the different cooperatives in terms of portfolio
quality, efficiency, stability, operations and structure of assets;
3. Determine the cooperative that has the highest financial performance that could be
adopted a basis y other cooperatives with low financial performances;
4. Determine the financial policies of the studied cooperatives;
5. Determine the factors that affect the financial performance of the studied cooperatives.
Importance of the Study
The study was conducted to provide information to readers and to the benchmark
cooperatives for them to determine and prioritize opportunities for improvements and
enhance performances. Help them to determine their strength and weaknesses, take actions
to improve the organizations competitiveness and most importantly, it helps them to look
into their performance gap and how to improve it.
Furthermore, the result of the study would be used as a reference/guide to other
researchers and students who would be working on the same field of study.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Scope and Delimitations of the Study
The study focused on the management and financial performance of the studied
cooperatives. It is also focused on the general and financial profile of these cooperatives,
financial policies implemented and factors that affects their financial performances.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
REVIEW OF LITERATURE
Benchmarking
It is defined as the process of identifying “best practice”. Its objective is to
understand and evaluate the current position of a business or organization in relation to
“best practice” and identify areas and means of improvement.
The simplest definition is “improving by learning from others”. Benchmarking is
the systematic comparison of process and performance in organizations. In other words, it
is a system used in management and particularly strategic management, in which
organizations evaluate various aspects of their processes in relation to best practice
(http/www.businessdictionary.com).
Benchmarking Process
In conducting benchmark study, there are some guidelines to be followed. First is
the planning stage; it includes the identifying of what process to be benchmarked,
determining of what are the organizations you can compare, and determining of what
methodology to be used. Next are data collection, carrying out primary research with the
identified tools, and carrying out through face-to-face interviews or through guide
questions. Collections of data vary on the type of data being collected if it is primary or
secondary data. Then data analysis, it is where the validation and normalization of gathered
information. It is essential that all data be validated to establish accuracy and completeness.
Other stages of the guidelines are reporting and integration of the result of the study
(http/www.businessdictionary.com).
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Performance Standards for Cooperatives
Performance standards Philippine Credit Cooperatives and other types have two
components:
Indicators on compliance with administrative and legal requirements. These
comprise a set of question which would give information on the cooperatives compliance
with the necessary administrative requirements. These questions provide information on
the governance, management, and organizational structure of the cooperatives.
Compliance with administrative and legal requirements. This includes set of
question which looks at whether the cooperative complies with the various legal
requirements by the Cooperative Development Authority, Bureau of Internal Revenue,
Department of Labor and others.
Organizational, Structure and linkages. This looks into the cooperatives governance and
membership structure, affiliation and linkages with other organizations and federations
promoting cooperative development.
Operations and management. This includes indicators that determine the presence
or absence of the necessary systems, policies and procedures for efficient and effective
management of the cooperatives.
Plans and programs. These include the parameters to determine whether the
cooperative has a developmental plan and approved plan and budget.
Financial Performance
A subjective measure of how well a firm can use assets from its primary mode of
business and generate revenues. It is a general measure of a firm’s overall financial health
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
over a given period of time, and can be used to compare similar firms across the same
industry or to compare industries or sectors in aggregation (http/www.investopedia.com).
Portfolio quality. This first group of indicators provides the managers and Board of
Directors of cooperatives the appropriate tools in monitoring the quality and the level of
risks of the loan portfolio of the cooperatives. This should be closely monitored in as much
as the loan portfolio constitutes the bulk of the cooperatives assets. In view of this, it is also
important that the risk of default is inadequately protected. Protection is measured by
comparing the adequacy of the allowance provided for loan losses against the amount of
delinquent loans. The status of the health of the portfolio of the cooperative will either
propel the cooperative to grow or imperil the whole sustainability of program of the
cooperative. There are two indicators included in this group. This is portfolio at risk and
allowance for probable losses on loans.
Efficiency. This second group of indicators focuses on the operational and
administrative efficiency of the delivery of financial services, i.e., loans and savings
products to its members. Indicators under this category determine the ability of the
cooperative to generate sufficient income to cover expenses on operations. Efficiency is
important because it affects the profitability of the cooperative's portfolio and the return on
member's share. Six indicators are included in this group; asset yield, operational self-
sufficiency, rate of return on members share, loan portfolio profitability, cost per peso loan,
and administrative efficiency.
Stability. Indicators on the stability of the cooperative determine whether
financial services can be delivered to its members in a sustained manner. One way to do is
to increase the institutional capital of the cooperative instead of purely relying on members
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
share capital. This will allow the cooperative to maintain sufficient liquidity to meet the
financial needs of its members in timely manner. Where the cooperative leadership
commits itself to ascertain the sustainability in cooperative structure, the membership of
the cooperative will also be serious and strongly support their cooperative. There are three
indicators under this category; solvency, liquidity, and net institutional capital.
Operations. There are two indicators included in this group. These indicators call for
minimizing dependence on external borrowings and greater emphasis on mobilizing
voluntary savings that will enable cooperatives to have a continuous and cheaper source of
funds for its operations and at the same time provide its members an alternative investment
mechanism for their excess funds. This will result in the cooperative less dependence on
external borrowings and lower financial costs. The indicators are performance of
membership growth and trend in external borrowings.
Structure of assets. These ratios will help ascertain the quality and the structure of assets
of the cooperative. These indicators determine the extent of the share of the cooperatives
various assets to its total assets and asses the effective use of the asset to generate revenues.
This includes non-earning assets, total deposits, net loans receivables, and total members
share capital.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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METHODOLOGY
Locale and Time of the Study
The study was conducted on the following cooperatives; La Trinidad Vegetable
Trading Post MPC, Philex Community Credit Cooperative, Bad-ayan Buguias
Development Multi-Purpose Cooperative, Benguet Government Employees Multi-purpose
Cooperative, Philex Mines Community Consumers Cooperative, Employees of COA-CAR
Multi-purpose Cooperative, La Trinidad Municipal Employees multi-purpose cooperative,
Trinidad Based Agawa Multi-purpose Cooperative, Seeds and Fruits Multi-purpose
Cooperative.
Respondents of the Study
The respondents of the study were the managers of each cooperative. There were nine
cooperatives that served as respondents of the study.
Data Gathered
Data gathered were the financial data of the cooperatives from the previous years.
It also includes the general and financial information of the cooperatives.
Data Collection Procedure
Survey questionnaires were used to gather primary information accompanied with
personal interview. Other information’s were retrieved from the cooperatives records and
files such as financial records, performance standard ratings and financial policies.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Data were tabulated and analyzed with the use of frequency analysis and other appropriate
statistical tools and were presented using descriptive analysis.
Cooperatives performances were assessed using the formula and scoring system of the
COOP PESO. The COOP acronym stands for the legal requirements, organizational
structure and linkages, operation and management, and plans programs and performance.
The PESO stands for portfolio quality, efficiency, stability, Operations, and structure of
assets.
The result of each equation is allocated as point score and the overall point score based on
the weighing of each category of COOP PESOS indicators. These are being totaled with a
maximum score of 100 points. The overall rating was computed using 20% weight for
COOP and 80% for PESOS. The resulting rating for each is given the appropriate weight
to arrive at the overall rating. The following scale is used:
Overall Rating System
Very good (96 to 100%). The cooperative has a strong performance that
provides safe and sound operations. Cooperative in this group complies with the
cooperatives rules and regulations to external shocks and financial disturbances.
Good (90 to 95%). The cooperative shows satisfactory performance that
consistently provides safe and sound operations. Cooperative in this group withstands
business fluctuations well however there are some areas of concern that require important
attention which if unchecked can potentially develop into develop into conditions of greater
concern.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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Fair (80 to 89%). The cooperatives performance is flowed to some degree and is
supervisory concern. Results of key performance measures indicate that safe and sound
operations may be adversely affected. The cooperative is nominally resistant to adverse
business conditions and may deteriorate if identifiable areas of weakness are not corrected
immediately.
Poor (70 to 79%). The cooperative performance is of serious supervisory
concern. The cooperative's performance if left unchecked would lead to conditions that
could threaten its viability. A high potential of failure is present but is not yet imminent. It
requires very close supervisory attention.
Very poor (below 70%). The cooperative has unsatisfactory performance and is in need of
immediate remedial action. In this group, cooperatives have very high probability of failure
and will likely require liquidation.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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RESULTS AND DISCUSSION
Cooperatives Studied
Table 1 presents the background of the studied cooperatives. Considered in this
study includes the years of operation, type of the cooperative, the services offered and the
number of regular members.
Cooperative background. Most of the studied cooperatives were multi-purpose, a
cooperative which combines two or more of the businesses of the different types of the
cooperative (RA 9520, 2008). Two of which were engaged in agricultural- related services,
farm inputs trading though their major source of income is that of lending services. On the
other hand, the other cooperative is engaged in the production and marketing of high valued
crops and a promoter of vermicomposting. Three of the studied cooperatives are engaged
in lending services alone, while two of the cooperatives having businesses such as retailing
of consumer goods, lending and canteen. One cooperative has the retailing and wholesaling
of goods operation alone.
The oldest of the cooperatives studied was the one with almost 50 years of operation and
the youngest was the cooperative with only 5 years of operation.
Highest numbers of regular members were ranging from 2,500 to 3,000 individuals under
the large category. Cooperatives with least regular members were from the small category
with members ranging from 20 to 300 individuals.
As shown in the table, some of the cooperatives still recall their cooperative’s history. This
includes the starting capital of the cooperative. The starting capitals of the cooperatives
were ranging from below 5,000 pesos to 375,000 pesos.
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Financial Plan
Financial planning is defined as the process of framing objectives, policies,
procedures, programs and budgets regarding the financial activities. It helps ensure the
compatibility of the cooperatives operation and financial policies with their goals.
Policies identified by the studied cooperatives include the financial policies. These policies
are their bases in the flow of the cooperatives operation.
Preparation of annual budget plan. The result (Table 2) shows that all of the
cooperatives are preparing their budget plan every beginning of each year. Most of the
studied cooperatives mentioned that the management prepares it, and is being forwarded
to the Board of Directors for further study and approval. Then, it will be presented during
the general assembly meeting to be approved by the members.
Table 2. Financial plans and policies
PARTICULARS
FREQUENCY
PERCENTAGE
Presence of financial plans and policies
With financial plan and policies
9
100
Without financial plan and policies
0
0
Preparation of annual plan and budget
Prepare
9
100
Do not prepare
0
0
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Source of Fund
Business entities are like vehicles, which needs fuel in order for it to operate and
serve its purpose. Fund is the considered to be the fuel of a business like cooperative. It is
therefore important that these entities must maintain and increase their funds to sustain its
operation.
Generally, there are two main sources of the cooperatives funds; the internal source
and external source. Internal sources includes the members share capital, members savings
and deposits, and the income from operation. On the other hand, external source include
the loans from banks and donations and grants.
Table 3 shows the sources of funds of the studied cooperatives. It was noted that
majority of the cooperatives raised their funds through members share capital and members
savings and deposits and income from operation. Four of the studied cooperatives were
observed that part of their funds were generated from the external source such as
cooperatives awards, loans from federation and as well as donations and grants.
Moreover, of the cooperative mentioned that aside from the internal sources they
were granted assistance from federation Northern Luzon Federation of Cooperative
Development Center (NORLU CEDEC). One cooperative also received assistance from
the government. Another from the small category increases their funds by availing of
donations and grants through approved resolution. These cooperative is also sourcing out
funds from other institutions with lower interest.
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Table 3. Sources of Funds
PARTICULARS
FREQUENCY
PERCENTAGE
Internal Source
Members share capital
9
100
Savings and deposits
7
77
Income from operation
9
100
External Sources
Loan from banks
3
33
Donations and Grants
1
11
Loan From federation
1
11
Cooperative Awards
1
11
Internal Control
This is important to ensure that the cooperative has the adopted measures and methods to
safeguard its assets. It also enhances the accuracy and reliability of its accounting records.
This helps reduce the risk of errors and irregularities. Table 4 presents the records and
documents utilized by the studied cooperatives.
Use of books of accounts. Furthermore, Table 4 shows that most of the cooperatives studied
used cash disbursement book, general journal, general ledger, as well as individual
deposit/loan ledger. One of the cooperative mentioned that they use loan journals while
three of the cooperative uses sales journal and purchase journal for their consumer services.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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Table 4. Books of accounts utilized by the cooperative
PARTICULARS
FREQUENCY
PERCENTAGE
General Journal
9
100
General Ledger
9
100
Cash Receipts Journal
6
66
Cash Disbursement Journal
5
55
Individual Loan/deposit Ledger
7
77
Sales Journal
5
55
Purchase Journal
5
55
Subsidiary Ledger
2
22
Loan Journal
1
11
Moreover, one of the cooperative uses the E-Coop System in recording the cooperatives
transactions. Hard copies of the files are being kept for safety purposes. This indicates that
the cooperatives are using the books of accounts in recording their business transactions.
Recording of transactions is one way of showing transparency.
Use of official receipts and disbursement vouchers. All f the cooperatives studied mention
on the use of official receipts and disbursement vouchers in every transaction. This
emphasizes that there is a transparency of those transactions because it is being recorded.
Runkle et al. (1999) as cited by Pilas (2012) mentioned that to ensure the profitability and
growth of the cooperative there must be excellent management of the transaction records
of the income and expenses. Necessary documents must be kept and made available for
reference when needed. Moreover, transparency of records is a must have characteristics
of a certain cooperative. This will establish the members trust to the cooperative and enable
them to increase their investment to the cooperative.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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Furthermore, safekeeping of the books and records shall be in accordance with the
Generally Accepted Accounting Principles (GAAP).
Adopted measure in safeguarding its cash.
Use of cash vault and deposit to bank are the two major adopted measures of the
cooperatives studied. Other than that most of the cooperatives employ the persons involved
in the financial management such as treasurer/cashier who is responsible of the cash, and
bookkeeper/accountant who is responsible in the record keeping and the supervisory
committee/ Audit committee responsible in the conducting of internal audit of the
cooperative.
Frequency of Audit
Auditing is defined as the examination of financial statements of any entity whether
profit oriented or not with a view of expressing an opinion thereon. There are two types of
audit practiced with in a cooperative depends as to who will conducts the audit; the external
and internal audit. Internal audit is conducted by the Audit committee of the cooperative.
This can be done daily, monthly or annually this depends on the schedule that is agreed
and set by the cooperative. On the other hand, external audit is conducted by an
independent auditor outside the organization. This is usually conducted at the end of each
year.
As stated in the Cooperative Code of 2008 (RA9520), that financial audit shall be
conducted by an external Auditor who has the two important qualifications; a. he is
independent of the cooperative or any of the subsidiary that he is auditing, b. he is a member
and in good standing of the Philippine Institute of Certified Public Accountant (PICPA)
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and is both accredited by the Board of Accountancy and the Authority to avoid of some
group of individuals.
Internal audit.
Table 5 shows that almost all of the studied cooperatives are conducting their
internal audit monthly. One of the cooperatives were conducts their audit daily. However
some of the some of the respondents mentioned that due to arising software programs
which can automatically prepare financial reports, they can conduct their audit anytime
they want like for the La Trinidad Vegetable Trading Post Multi-purpose Cooperative that
is under E-Coop System.
External audit.
External audit of the cooperatives were all conducted annually, although one of the
studied cooperatives conducts their audit semi-annually. Conduct of external Audit is very
important to ensure that window dressed financial reports will be avoided authority
requires for the monitoring of the cooperatives.
Table 5. Frequency of audit
PARTICULARS
FREQUENCY
PERCENTAGE
Internal audit
Daily
1
11
Monthly
8
88
Quarterly
-
-
Semi-annually
-
-
Annually
-
-
External audit
Semi-annually
1
11
Annually
8
88
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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Utilization of Funds
Each of the cooperatives studied has areas where they allocate their funds. All the
cooperatives allocate fund for their working capital. This will be used for the lending
operation for the cooperative with lending services while .those with consumer service use
for purchasing of goods and stocks. Aside from those, there was allocated for the operation
such as maintenance of equipments, honorarium of officers and salaries and wages for the
employees. There is also allotted fund for the trainings, meetings, and office supplies and
members benefits.
Furthermore, most of the cooperatives mentioned that so far the fund generated from its
sources are sufficient for the cooperatives operation.
Monitoring
Monitoring is defined as an internal project activity designed to provide constant
feedback on the progress of a project, the problems it is facing and the efficiency with
which it is being implemented. Monitoring is important, this will help check on the
performances of the cooperatives in different aspects such as the management and financial
aspects. This will check if the set goals and objectives of the cooperative are attained.
Most of the cooperatives studied mentioned that they are conducting annual performance
evaluation for the officers and staff and also evaluation on the cooperative as a whole for
certain accomplishments. This will help them see their strengths and weaknesses and the
level of outcome of their performances.
Financial data of the cooperatives. Table 6 to Table 8 presents the financial data of the
studied cooperatives. Total assets, total liabilities, and net surplus of the cooperative were
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
recorded based on the financial data of the cooperatives from year 2009 until year 2011.
Percentage increase was also presented in the table.
As shown in Table 6 the highest total asset among the studied cooperatives was
noted followed was under the large category. All of the cooperatives have an increase of
their total assets especially on the 2009 to 2010. It was observed that there is a decrease
on the total asset of the cooperatives of 58.56% for the year 2010 to 2011.
As for the total liabilities, there is a total increase of 30.97% for the year 2009 to 2010 and
decreased for 9.79% for year 2010 to 2011. Two cooperatives had the highest increase,
with 31.3 % and the 31.05% in the year 2009 to 2010 (Table 7).
Moreover, as for the net surplus of the cooperative, Table 8 shows that there was an
increase for the year 2009 to 2010. The highest percentage increase with 62.89% was on
the year 2009 to 2010; on the other hand on the year 2010 to 2011 the highest increase was
40.12 %.
But for the year 2010 to 2011, four of the cooperatives have a decrease on their income.
The highest decrease was from the small category with 15.6% decrease on their income.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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Table 6. Total assets of the cooperatives
2009
2010
2011
PARTICULARS
%
%
PHP
PHP
PHP
CHANGE
CHANGE
Large category
Cooperative A
232,424,506.5 256,409,374.8
8.2
279,637,987.5
8.3
Cooperative B
63,563,785.8
80,861,737.1
21.2
94, 149,588.3
14.1
Cooperative C
72,819,493.4
78,187,277.2
6.9
104,829,681.9
40.9
Medium category
Cooperative A
43,273,793.9
50,998,035.7
12.2
63,801,633.3
20.1
Cooperative B
45,125,923.1
54,581,719.1
6.3
57,652,946.6
5.3
Cooperative C
24,946,410.4
29,838,617
16.4
34,430,623.1
13.3
Small category
Cooperative A
4,430,119.8
6,134,205.1
27.8
9,775,120.4
37.2
Cooperative B
10,289,294.4
12,194,817.5
15.6
12,471,561.9
2.2
Cooperative C
2,281,312.6
11,174,750.6
79.5
11,419,287.7
2.1
TOTAL
499,154,639.8 910,198,859.3
45.2
574,018,842.2
(58.7)
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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Table 7. Total liabilities of the cooperatives
2009
2010
2011
PARTICULARS
%
%
PHP
PHP
PHP
CHANGE
CHANGE
Large category
Cooperative A 36,154,135.8 42,641,248.5
15.2
57,604,275.1
25.1
Cooperative B 29,895,378.9 43,522,340.1
31.3
59,359,152.3
26.4
Cooperative C 57,404,010.1 60,337,167.9
4.9
83,466,096.3
27.7
Medium category
Cooperative A
3,962,898.3
5,408,265.6
26.7
5,670,812
4.6
Cooperative B 14,311,271.8 54,581,265.6
73.8
57,652,946.6
5.3
Cooperative C
6,523,502.1
8,757,360.9
25.4
9,980,219.6
12.3
Small category
Cooperative A
1,338,275.4
1,491,103.6
10.3
2,142,136.6
30.4
Cooperative B
680,144.9
986,533.9
31.1
884,629.1
(11.5)
Cooperative C
229,253.8
308,322.8
25.6
447,633.7
31.1
TOTAL
150,498,870.6
218,033,608.7
30.9
276,760,268.4
21.2
150,498,870.6
276,760,268.4
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 8. Net surplus of the cooperative
2009
2010
2011
PARTICULARS
%
%
PHP
PHP
PHP
CHANGE
CHANGE
Large category
Cooperative A
19,376,075.60
21,236,802.17
8.76
20,535,796.11
(3.41)
Cooperative B
1,246,232.43
2,050,264.73
39.21
3,424,173.53
40.12
Cooperative C
2,422,932.21
4,636,150.46
62.87
4,636,150.46
7.64
Medium category
Cooperative A
1,589,924.90
2,040,073.75
22.07
1,764,370.90
(15.6)
Cooperative B
6,345,173.59
7,553,695.38
15.10
7,197,972.48
(4.94)
Cooperative C
1,941,985.43
2,575,749.09
24.60
2,727,852.37
5.57
Small category
Cooperative A
680,503.86
844,803.57
19.45
1,313,208.45
35.67
Cooperative B
594,208.17
1,183,975.44
48.81
1,063,078.23
(11.37)
Cooperative C
299,253.77
308,322.82
25.64
447,633.69
31.12
TOTAL
34,496,289.96
42,075,654.49
18.01
43,110,236.22
2.39
Administrative Compliance and Management Structure.
(COOP Indicators)
This section represents the compliance with the administrative requirements.
Compliance of the cooperatives with the system, governance, policies and procedures, and
organizational structure. Compliance with these standards is expected to ensure the
protection of the cooperative and sustainability of operation as a basic financial institution.
This comprises the compliance with the administrative and legal requirements,
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
organizational structure and linkages, operation and management, and the plans and
programs.
Compliance with administrative and legal requirements. This looks whether the
cooperative complies with the various legal requirements by the Cooperative Development
Authority, Bureau of Internal Revenue, Department of Labor and others.
Organizational structure and linkages. This looks into the cooperatives governance
and membership structure, affiliation and linkages with other organizations and federations
promoting cooperative development.
Operations and management. These determine the presence or absence of the
necessary systems, policies and procedures for efficient and effective management of the
cooperatives.
Plans and programs. These include the parameters to determine whether the
cooperative has a developmental plan and approved plan and budget.
Table 9 shows the administrative compliance and management structure of the
cooperatives studied. As it was shown in the result, the highest score was 98 and equivalent
rating of 19.6 % and the lowest total score was 47 with an equivalent rating of 9.4%. This
indicates that the cooperative with high score implies that they are complying with the
requirements of the authority while those cooperatives with low score do not fully comply
with the requirements.
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Table 9. Administrative compliance and management structure of the cooperatives
MAXIMUM ACTUAL EQUIVALEN
INDICATORS
PARTICULARS
SCORE
SCORE
T RATING
(%)
C
O
O
P
Large category
Cooperative A
17
20
31
12 100
80
16
Cooperative B
20
25
39
14 100
98
19.6
Cooperative C
20
25
36
14 100
95
19
Medium category
Cooperative A
18
22
34
12 100
86
17.2
Cooperative B
-
-
-
- 100
-
-
Cooperative C
12
13
38
14 100
77
15.4
Small category
Cooperative A
-
-
-
- 100
-
-
Cooperative B
12
13
15
7 100
47
9.4
Cooperative C
-
-
-
- 100
-
-
Financial Performance (PESOS Indicators)
The financial performances of the studied cooperatives were evaluated in terms of
portfolio quality, efficiency, stability, operations, and structure of assets. These are based
on the rating sheets of the cooperatives.
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Under the portfolio quality, these include the indicator that provides the manager and board
of directors of the cooperatives a tool in monitoring the quality and the level of risks of the
loan portfolio of the cooperatives.
As for the efficiency, this focuses on the operational and administrative efficiency of the
delivery of the financial services, i.e., loans and savings products to its members. It
determines the ability of the cooperative to generate sufficient income to cover expenses
on operations. Stability determines whether the financial can be delivered to its members
in a sustained manner.
Operations, this call for the minimizing dependence on external borrowings and greater
emphasis on mobilizing voluntary savings that will enable the cooperative to have a
continuous and cheaper source of funds for its operations and at the same time provide its
members an alternative investment mechanism for their excess funds.
Structure of assets, helps ascertain the quality and the structure of assets of the
cooperatives. This determine the extent of the share of the cooperatives various assets to
its total assets and assess the effective use of the asset to generate revenues.
Among the studied cooperatives, there are two which do not have credit services. Four of
this provided complete reports submitted to the authority, on the other hand, three of the
respondents has incomplete data provided. Due to this, their financial performance rating
is not included. But the financial performance of the consumer cooperative was assessed
with the use of financial ratios.
Table 10 shows that 58.4 % was the highest score followed by 56.8%. On the other hand,
the lowest score was 34.8 %. This shows that the cooperatives must look into the five
indicators and asses the area that needs improvement.
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Table 12 presents the financial ratio of the consumers’ cooperative. As to profitability ratio,
this measures the company's use of its assets and control of its expenses to generate an
acceptable rate of return/income. This means that the higher percentage the better.
As shown in the table, the consumer cooperative shows high profitability based on positive
changes on the profitability ratios. The cooperatives highest gross margin and profit margin
was attained on year 2010 with 11.23% and 8.93%, as well as return on equity with 29.36%.
The highest return on asset of the cooperative was on year 2009 with 14.06%.
Moreover, as to liquidity ratio, this measures the availability of the cooperatives cash to
pay debt. This measures the amount of money that would be left if the cooperative
liquidates its assets to face value and use the proceeds to pay its current its liabilities. The
cooperatives net working capital shows decreasing pattern, which indicates that the cash
of the cooperative is decreasing. As for the debt equity ratio, it was observed that it
increased.
On the other hand, the debt ratio measures the ability of the cooperative to repay long term
debts. Where the lower percentage the better, but for the cooperative it was observed that
it is in an increasing pattern.
Efficiency ratio measures the cooperatives effectiveness in the use of cooperatives
resources. As shown in the table, there is positive efficiency of the cooperative. This
indicates that the cooperative can generate positive income through its available resources.
Overall, the cooperatives performance ratings were all still low. It is shown in Table 12
that two of the cooperatives fallen to rating 4, under poor performance which means that
the cooperatives is under serious supervisory concern that if this is left unchecked, it would
lead to conditions that could threaten its viability. On the other hand, four of the studied
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
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cooperatives fall under rating 5, which means they have very poor performance that might
lead to the cooperatives liquidation.
The ratio reflected an unsatisfactory performance and is in need of immediate remedial
action. The cooperatives must look into their weaknesses that affect their performance and
source out solutions for the improvement of their performance.
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Table 10. Financial performance of the cooperatives
MAXIMUM ACTUAL
EQUIVALENT
INDICATORS
PARTICULARS
SCORE
SCORE
RATING (%)
P
E
S
O S
Large category
Cooperative A
13 17
30
10 6
100
73
58.4
Cooperative B
18 8
10
5
11.5 100
52.5
42
Cooperative C
-
-
-
-
-
100
-
-
Medium category
Cooperative A
13.5 18
10 9.5
100
71
56.8
20
Cooperative B
-
-
-
-
-
100
-
-
Cooperative C
-
-
-
-
-
100
-
-
Small category
Cooperative A
-
-
-
-
-
100
-
-
Cooperative B
15 6
8
8
6.5
100
43.5
34.8
Cooperative C
-
-
-
-
-
100
-
-
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Table 11. Performance rating of the selected cooperatives
COOP
PESOS
ACTUAL EQUIVALENT
COOPERATIVES
SCORE
SCORE
SCORE
RATING (% )
Large category
Cooperative A
80
73
77
4
Cooperative B
98
52.5
61.6
5
Cooperative C
95
-
19
5
Medium category
Cooperative A
86
71
74
4
Cooperative B
-
-
-
-
Cooperative C
77
-
15.4
5
Small category
Cooperative A
-
-
-
-
Cooperative B
44
43
44.2
5
Cooperative C
-
-
-
-
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Table 12. Financial ratio of the Consumers Cooperative
Particulars
2009
2010
2011
Profitability Ratios
Gross Margin
10.38%
11.23%
9.88%
Profit Margin
7.44%
8.93%
8.15%
Return on Equity
20.59%
29.36%
27.69%
Return on Assets
14.06%
12.68%
12.49%
Liquidity Ratios
Net working capital
30,981,485.56
28,037,367.8
27,108,579.7
Debt to equity ratio
46 %
86.01%
91.36%
Debt Ratio
32 %
40.56%
41.19%
Efficiency/ Activity ratio
Asset Turnover
177 %
112%
110.9%
Working Capital
250 %
211%
220%
Factors that Affects the Cooperatives Performance
There were many factors that affect the performance of a certain cooperatives.
These factors may arise in the different aspects of the cooperative.
`
As to the management aspect, most of the identified problems were lack of trainings
of officers and sometimes PMES to members and presence of incompetent officers.
Under the financial aspect, most of the studied cooperatives mentioned specially
the cooperatives with credit services that delinquent loan payments, in- implementation of
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
their financial policies, inadequate financial policies. One cooperative mentioned that as
to present, their cooperatives problem is they need additional source of funds for their
cooperatives expansion and growth. Other problem identified as the fluctuating prices of
the vegetable produce as mentioned by the agri- based studied cooperative. This affects the
members’ income that leads to delay of paying their loans. They mentioned also that
sometimes if the there is an increase on the past due accounts this also contributes to the
lowering on the performance of the cooperative. This can also affect the cooperatives
income. Diclas (2005) as cited by Pilas (2012), stated that lack of adequate safeguards
against unscrupulous officers who are taking advantage of their positions to grant loans to
themselves relatives, and acquaintances can greatly affects the financial aspect of the
cooperatives.
Coping Mechanisms Employed by the Cooperative to Cope up with their Problems
In line with these problems, cooperatives find ways in order to address the arising
problems.
As mentioned by the cooperatives, they have their own way on how to cope up with these
problems. All the cooperatives agreed that in order to avoid the incompetent officers and
staff they need to undergo trainings and seminars.
Most of the cooperatives studied practice forwarding of demand letters to delinquent
borrowers; others practiced rigid collection or mass collection. Some of the respondents
said that Revisiting and reviewing of the policies helps them to come up with solutions to
arising problems and proper implementation of the policies.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Summary
The study was conducted with the selected cooperatives in Benguet. It was
conducted to look into the management and financial performance of the selected
cooperatives. The financial performance of the cooperatives was assessed using the COOP
PESOS rating. Furthermore, the study looks into the factors that affect the financial
performance and the coping mechanisms they apply to cope up with those factors.
The respondents of the study were nine cooperatives. This was divided into three
categories; small, medium and large category. Manager of these cooperatives serve as the
source of information. Primary data and secondary data were collected. The primary data
was gathered with the use of survey questionnaire supplemented with personal interview.
On the other hand, secondary data was taken from the cooperatives files submitted to the
Authority. Gathered data were analyzed with the use of frequency analysis and the
performance were assessed using the COOP ESOS scoring system.
The cooperatives studied have their financial policies. But most of the respondents
explained that until now there is no formality because their policy is disseminated verbally.
Two of the cooperatives have said that their financial policy is now on the process to be
added to the manual of their policies.
In the preparation of annual budget plan, all of the cooperatives studied prepare
their budget plans every beginning of each year.
Generally, all the cooperatives use the books of accounts in recording and documenting of
their transactions. They safeguard their cash through depositing it to the bank and use of
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
vaults. They also employ the necessary individual involves in the safeguarding of their cash
such as bookkeeper, cashier, and accountant.
Most of the funds of the cooperatives come from the members share capital, savings
and deposits and income from their operation. Other cooperatives source out their funds
from the external source such as donations and grants and loan from banks. The
cooperatives allocate their funds to daily revolving fund, working capital, honorarium of
officers and salaries of employees. There is also allocated for trainings and seminars,
meetings, office supplies and members benefits.
All cooperatives conduct their internal audit monthly, except for one who conducts
it daily. External audit of the cooperatives were also conducted annually. One of the
cooperatives conducts their external audit semi-annually.
Performance evaluation is present also to most of the cooperatives. This was conducted
every year specially the two cooperatives who mentioned they conducts performance
evaluation of the officers, management staff and the organization as a whole.
Most of the cooperatives complied with the administrative and legal requirements.
Although some of the cooperatives has not completed the requirements. This results to their
low scores. As to their financial performance, it is shown that scores of the cooperatives
falls to rating 5, where their scores are all below 70%.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Conclusions
Based on the results of the study, conclusions were drawn. The cooperatives studied have
informal policy as to their financial aspect. Most of the cooperatives rely on the members
share capital, savings and deposits, and income from their operation as source of their fund.
All the cooperatives studied used books of accounts in documenting their business
transactions. Internal audits of the cooperative are conducted monthly, except for the
consumer cooperative which conducts daily. Their external audits are conducted annually
except one cooperative who conducts their external audit semi-annually. Funds
accumulated from its sources are being utilized and allocated by the cooperatives to major
areas like for example on the cooperatives operation.
Most of the cooperatives monitor their performance through the conduct of annual
performance evaluation to the officers, management staff, and to the cooperative as a
whole. Based on the cooperatives COOP score, most of them complied with the
administrative and legal requirements though some of them did not fully complied with the
requirements.
Furthermore, looking into their PEOS score, there are only four cooperatives that has their
rating. They did not reach the standard scores required.
Lastly, on their overall score, the cooperative studied was not able to reach the standard
scores. Their liquidity and large amount of assets alone does not define good performance.
There are some aspects where they do not perform well that greatly affect their performance
as a whole.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
Recommendations
Based on the results of the study the researcher arrived with some
recommendations. In order to help improve the cooperatives performance, cooperatives
should include to their routine the reviewing and revisiting of their policies as well as the
manual of operation. This will help in improving the cooperatives performance.
Moreover, cooperatives should review existing collection policies especially to the
cooperatives with increasing delinquent borrowers and those with past due loans to
improve their collection strategies.
On the other hand, cooperatives must review their performance evaluation to assess
and determine their strength and weaknesses this will help and enable them to come up
with solutions and strategies to improve their weaknesses.
Other than that, management and staff not only by the studied cooperatives but also
to existing cooperatives to continue attending trainings and seminars conducted by
authorities for them to be more knowledgeable.
In addition, cooperatives must not be complacent as to what they attained. Instead,
they must look for ways on how to improve more of their performances.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013
LITERATURE CITED
BENCHMARKING.
Retrieved
October
24,
2012
from
http/www.businessdictionary.com.
COOPERATIVE DEVELOPMENT AUTHORITY. 2012. Statistical Data of
Cooperatives; All Province. Cordillera Extension Office. Pp. 1-3.
COOPERATIVE DEVELOPMENT AUTHORITY. 2012. Statistical Data of the
Performance Ratings of Cooperatives. All Province. Cordillera Extension Office. Pp. 3.
FINANCIAL
PERFORMANCE.
Retrieved
October
24,
2012
from
http/www.investopedia.com.
PILAS D.K. 2012. Financial Management of Selected Millionaires Cooperative: A Case
Study. BS Thesis. Benguet State University, La Trinidad, Benguet. Pp 7-15.
Benchmark Study on the Management and Financial Performance of Selected Cooperatives
in Benguet | AGUIA, GERLY P. APRIL 2013