Lecture -presentation for PFCCO - NCR March 18, 2022

1. Socio -Economic (Performance Audit for
Cooperatives)

2. https://www.ilo.org/global/topics/cooperatives/areas-of-work/WCMS_550541/lang--en/index.htm

3. • The resolution concerning further work on statistics of
cooperatives adopted by the 19th International Conference
of Labour Statisticians (ICLS) in 2013 (ILO, 2013)
recognized and recalled the need to produce statistics on
cooperatives in all countries of the world. The resolution
recommended that the International Labour Office, in
cooperation with International Labour Organization (ILO)
constituents and national statistical offices, carry out further
developmental work on the measurement of cooperatives, in
particular on the number and characteristics of
cooperatives, members of cooperatives, workers employed
in cooperatives and value added generated by cooperatives.

4. • Organization with specific economic objective functions The
status of an organization cannot always be inferred from its
name, and it is necessary to examine its objectives and
functions. As explained by J. Barea and J.-L. Monzón (CIRIEC,
2006).
• Cooperatives have different objective functions than other types
of corporations. The objective function of a corporation is
determined by the character and behaviour of those within it
who control the decision-making process and appropriate the
surplus
ILO, CIREIC, COPAC, 2020

5. Types of Cooperatives
RA 9520 CDA MC
20 types Agriculture
Small Scale Mining
Labor Service
Practice of Profession
MC 2021-11 | Guidelines Governing the
Organization and Registration of
Cooperatives to be Established by Youths
MC 2021-14 | Guidelines for the
Registration of a Technology Service
Cooperative

6. Type Objective Objective Measurement
RA 9520
1. Credit undertakes savings and lending services
among its members.
accumulation of assets at a local level;
facilitate their members’ access to
financial capital;
2.
Consumers
Cooperative
Procure and distribute commodities to
members and non-members
maximizing the welfare of its members
sets the price at the marginal cost; to
access good quality household supplies
like food, clothing, and other products
at affordable prices.
3. Producers
Cooperative
undertakes joint production whether
agricultural or industrial; undertake the
production and processing of raw materials
or goods produced by its members into
finished or processed products for sale by
the cooperative to its members and non-
members; Any end product or its derivative
arising from the raw materials produced by
its members, sold in the name and for the
account of the cooperative
As these functions express the
technological relationship between the
amounts of inputs and the amount of
output that can be produced by those
inputs, elasticities and economies of
scale can be computed directly;
to sell high quality products

7. Type Objective Objective Measurement
4. Marketing
Cooperative
is one which engages in the supply of production
inputs to members and markets their products;
Profit – Value Added;
Reduction of value
added due to payment
of raw materials
5. Service
Cooperative
engages in medical and dental care,
hospitalization, transportation, insurance,
housing, labor, electric light and power,
communication, professional and other services
services satisfaction
6. Multipurpose
Cooperative
combines two (2) or more of the business
activities of these different types of cooperatives;
7. Advocacy
Cooperative
promotes and advocates cooperativism among its
members and the public through socially-oriented
projects, education and training, research and
communication, and other similar activities to
reach out to its intended beneficiaries;

8. Type Objective Objective Measurement
5. Service
Cooperative
engages in medical and dental care, hospitalization,
transportation, insurance, housing, labor, electric
light and power, communication, professional and
other services
services
satisfaction
Quantitative
6. Multipurpose
Cooperative
combines two (2) or more of the business activities
of these different types of cooperatives;
7. Advocacy
Cooperative
promotes and advocates cooperativism among its
members and the public through socially-oriented
projects, education and training, research and
communication, and other similar activities to reach
out to its intended beneficiaries;
8. Agrarian Reform
Cooperative
is one organized for the purpose of developing an
appropriate system of land tenure, land
development, land consolidation or land
management in areas covered by agrarian reform;

9. Type Objective Objective Measurement
9. Cooperative
Bank
providing a wide range of financial services to
cooperatives and their members
bank stability; accumulation
of assets at a local level
10. Dairy
Cooperative
engaged in the production of fresh milk
which may be processed and/or marketed as
dairy products;
a high market share of
cooperatives decreases the
price volatility.
11. Education
Cooperative
primary purpose of owning and operating
licensed educational institutions
notwithstanding the provisions of Republic
Act No. 9155, otherwise known as the
Governance of Basic Education Act of 2001;
12. Electric
Cooperative
undertaking power generations, utilizing
renewable energy sources, including hybrid
systems, acquisition and operation of
subtransmission or distribution to its
household members;
consumers pay less for
electricity from a
cooperative but there is a
more important impact of
price transparency

10. Type Objective Objective Measurement
13. Financial
Service
Cooperative
engaging in savings and credit services and other
financial services;
accumulation of
assets at a local level
14.
Fishermen
Cooperative
is one organized by marginalized fishermen in localities
whose products are marketed either as fresh or
processed products;
to improve product
quality
15. Health
Services
Cooperative
is one organized for the primary purpose of providing
medical, dental and other health services
promoting good
health and well-
being (goal #3).
16. Housing
Cooperative
to assist or provide access to housing for the benefit of
its regular members who actively participate in the
savings program for housing. It is co-owned and
controlled by its members;
reduces the costs of
home ownership and
maintenance.
17. Insurance
Cooperative
insuring life and poverty of cooperatives and their
members;
18. Transport
Cooperative
is one which includes land and sea transportation,
limited to small vessels, as defined or classified under the
Philippine maritime laws, organized under the provisions
of this Code;

11. Type Objective Objective Measurement
19. Water Service
Cooperative
is one organized to own, operate and manage
waters systems for the provision and distribution of
potable water for its members and their households
Economic
20. Workers
Cooperative
including the self-employed, who are at same time
the members and owners of the enterprise. Its
principal purpose is to provide employment and
business opportunities to its members and manage
it in accordance with cooperative principles; and
they propose
higher wages. On
the other hand,
they may suffer
from the
competition
imposed by
corporations,
which may attract
high-ability
members (Burdin,
2016).

12. Type Objective Objective Measurement
19. Water Service
Cooperative
is one organized to own, operate and
manage waters systems for the provision
and distribution of potable water for its
members and their households
keeping the prices low, the
cooperative also aims at
improving the quality of water
provision because its members
are simultaneously users of its
services (Douvista and
Kassavetis, 2014; Arvonen et al.,
2017). Economic
20. Workers
Cooperative
including the self-employed, who are at
same time the members and owners of the
enterprise. Its principal purpose is to
provide employment and business
opportunities to its members and manage
it in accordance with cooperative
principles; and

13. Type Objective Objective Measurement
CDA MCs
21. Agriculture The cooperative may engage in
all or any of the following
activities:
1. Raising, culture of plants,
animals;
2. Facilitating the
procurement of farm
inputs/implements for the
members;
3. Processing and marketing of
the members
products/produce;
4. Any other activities that
lead to the reduction of cost
and/or value addition of
outputs.
provide individual farmers with an
institutional mechanism that increases
their bargaining power against upstream
and downstream partners in food supply
chains, and corrects for excess supply
induced prices; Farm machinery
cooperatives have direct benefits such as
cost reduction, efficiency gain, and profit
increase; help farmers access inputs, and
help them process, transport and market
their produce, helping achieving food
security and put an end to hunger (goal
#2).

14. Type Objective Objective Measurement
23.Small Scale
Mining
Conduct mining activities
which relies heavily on manual
labor using simple implements
and methods and do not use
explosives or heavy mining
equipment.
24. Labor
Service
Providing service to principal
employers
For the labor market, cooperatives have a
stabilizing effect on employment with
respect to shocks (Delboni and Reggiani,
2013; Alves et al., 2016).
25.
Professionals to
Practice a
Particular
Profession
Cover all service cooperatives
organized among professionals
in the exercise of their
profession

15. Type Objective Objective Measurement
25. Practice of
Profession
26.
Technology
Service
Cooperative
To ensure the viability of
cooperatives through the utilization
of technologies.
27. Youth Coop To support RA No. 10679 or the
youth Entrepreneurship Act in
promoting the sustainable
development of young
entrepreneurs and encourage
entrepreneurial spirit among the
youth.

16. Implication
• There is a strong impact of governance on the effect: Procompetitive
effects are higher in the case of open membership but may disappear
if the membership is closed (i.e limit of the number of members or
total volume of activity),
• Negative effect (higher quality products proposed by for-profit
enterprises and lower quality products proposed by cooperatives) can
be addressed by a higher commitment of members and higher social
capital within the cooperative (Cai et al., 2016; Deng and Hendrikse,
2017).
• Some empirical evidence on the contribution of cooperatives to
assets and wealth accumulation at collective and individual levels.

17. • “Cooperatives can allow family farms to access markets turning
them into viable and competitive units of production thus
contributing to national programs such as food security and
poverty reduction”.
• Membership generally increases significantly household income
and welfare (Ahmed et al., 2017; Alemu and Adesina, 2015;
Pender and Gebremedhin, 2007; Mojo, 2017; Verhofstadt and
Maertens, 2014).
• Higher income of coop member than non members.
• Cooperatives can be a critical income and employment source to
remote rural communities (McNamara, 2001; Folsom, 2003). A
cooperative as a viable local enterprise is also reputed maintaining
the associated income and employment in a community that
would otherwise not be competitive in attracting other private
business capital.

18. • Cooperative membership contributes to poverty reduction, often takes into
account the impacts on production and incomes.
Who are identified rich, poor? Gov't shows income class brackets in
PH
• Poor: Below P10,957 monthly income.
• Low-income but not poor: P10,957 to P21,914 monthly income.
• Lower middle: P21,914 to P43,828 monthly income.
• Middle: P43,828 to P76,66 monthly income.
• Upper middle: P76,669 to P131,484 monthly income.

19. • From a global perspective, cooperative membership enhances
market inclusion, namely the participation to domestic (Francesconi
and Heerink, 2010; Holloway et al., 2000; Okoye et al., 2016) or
exportable market (Bobojonov et al., 2016). Indeed, marketing
cooperatives can address existing market failures and can have
advantages in high-quality product markets; they are also able to
improve product quality, as well as attract and sustain a higher price
(Jardine et al., 2014).
• Various indicators of well-being have been used: the Life satisfaction
index popularized by the World values survey (Musson and
Rousselière, 2019), or the life aspirations (Mojo et al., 2016). For this
last indicator, the authors constructed five aspired dimensions for
each individual with a weight based on a qualitative approach on the
economic contribution of cooperatives, level of personal income, the
level of assets, the level of education, the level of social status, the
level of care for the environment and nature.

20. Performance
and Efficiency
• First of all, Performance is more general and may encompass
social, economic and environmental dimensions.
• One must define the various economic concepts. Drucker (1977)
defines efficiency as “doing things right”: efficiency is the ability of
an organization to attain a level of output with the utilization of a
minimum level of inputs. For the literature on production economics,
it can be defined either as input efficiency (minimal use of input for
a given output) or as output efficiency (maximum output production
for a given input) (Fuss and McFadden, 1978).
• At the theoretical level, there is a distinction between (Bagnoli and
Megali, 2011):
1. inputs, the resources that contribute to the activities
undertaken;
2. outputs, in terms of both activities realized to achieve the
mission and direct and countable goods/services obtained
by means of the activities carried out;
3. outcomes, the benefits or impact for the intended
beneficiaries; and
4. impacts, the consequences for the wider community.

21. ● Economic contribution can be defined as the
gross change in economic activity associated with
an industry, event or policy in an existing regional
or national economy.
● Economic impact is the net change in new
economic activity associated with an industry,
event or policy in an existing regional or national
economy.
● Economic benefit is a net increase in total social
welfare. Economic benefits include both market
and non-market values.
Watson et al. (2007) propose the following
definitions:
Economic
impact

22. Methods based on accounting databases
• Head counts model
• As a descriptive tool, the input-output model is very good at presenting an enormous
quantity of information in a concise and easily understood manner, at showing the supply
chain linkages by producing results sector by sector, and providing different scenarios.
The input-output model includes direct, indirect and induced impact of the cooperatives
(Deller et al., 2009).
a) direct impacts: revenue, jobs and taxes generated by the cooperatives;
b) indirect impacts: revenue, jobs and taxes generated by enterprises that
supply the cooperatives; and
c) induced impacts: revenue, jobs and taxes generated from spending by direct
and indirect employment; spending by employees of cooperatives, employees
of suppliers to the co-operatives, and their families.
• CBA (Cost-Benefit Analysis)
• Expanded Value Added Statement

23. PERFORMANCE INDICATORS
Is a measurement by which the performance, efficiency
and achievement of an organization can be assessed
often by comparison with an agreed standard or target.
Can be expressed either QUANTITATIVELY or
QUALITATIVELY.

24. BALANCED SCORECARD CONCEPT (BSC)
The BSC involves creating a set of measurements
for four (4) strategic perspectives. These
perspectives include:
1. Financial
2. Customer
3. Internal Business Process
4. Learning And Growth

25. BALANCED SCORECARD CONCEPT (BSC)
PERSPECTIVES QUESTION GOALS MEASUREMENTS
FINANCIAL
To succeed financially, How
should we appear to the
stakeholders?
Produce profits sufficient to
cover expenses and provide
reserves for the future
STEPS; Sales/Service income
growth; Cash flow
CUSTOMER
To achieve our Vision, How
should we appear to our
customers?
Provide products/services on
time and responsive to their
needs
Customer satisfaction Index ; %
of Customer complaints;
retention ratio
INTERNAL
BUSINESS
To satisfy our members, What
business process must we excel
at?
Continual Improvement of
services/products
No. of members availing co-op’s
products/services vs. total
membership
LEARNING &
GROWTH
To achieve our Vision, How will
we sustain our ability to change
& improve?
Improved Systems and People
(training, skills, morale)
No. of reviewed & approved
policies; % of employee turnover