PICPA Bldg.

, Mandaluyong City
OBJECTIVE:

Toequip the participants on the

rules and regulations on
cooperatives and the latest
issuances of the CDA and other
regulatory agencies relative to
cooperatives
 TOPICS:
1. Salient Provisions of RA 9520
(Accounting and Auditing Related
Provisions)
2. Issuances of CDA
3. Implementing Rules and Regulation of
RA 9520 related to accounting and
auditing including coop taxation
 Article 29. Liability of Members: A member
shall be liable for the debts of the cooperative
to the extent of his contribution to the share
capital of the coop
Article 30 (1). Termination of Membership:
xxx Subject to the bylaws of the coop, the
withdrawing member shall be entitled to a
refund of share capital contribution and all
other interest of the coop: Provided. That
such refund shall not be made if upon such
payment the value of assets of the coop
would be less than the aggregate amount of
its debt and liabilities exclusive of his share
capital contribution
 Article 31. Refund of Interests: All sums computed
in accordance with the bylaws to be due from a
coop to a former member shall be paid to him
either by the coop or the transferee, as the case
may be, in accordance with this Code
Article 37. Composition and Term of the Board:
Unless otherwise provided in the bylaws, the
direction and management of the affairs of a
coop shall be vested in a board composed of
not less than 5 nor more than 15 members
elected by the GA for a term fixed in their bylaws
but not exceeding a term of 2 years xxx
 Article 38. Powers of the Board of Directors:
The board of directors shall be responsible for
the strategic planning, direction-setting and
policy-formulation activities of the cooperatives
Article 39 (3): The members of the board of
directors shall not hold any other position
directly involved in the day to day operation and
management of the cooperative
 Article 39 (4): Any person engaged in a
business similar to that of the cooperative or
who in any way has a conflict of interest with it,
is disqualified from election as a director of
said cooperative
Article 45. Liability of Directors, officers and
Committee Members: xxx liable for the
damages and shall be accountable for double
the profits which otherwise would have accrued
to the coop
 Article
46. Compensation: In the absence
of any provisions in the bylaws fixing their
compensation, directors shall receive
reasonable per diems only. Provided,
however, that the directors and officers
shall not be entitled to any per diems
when, in the preceding calendar year:
Cooperative reported a net loss, or
Had a dividend rate less than the official inflation rate
for the same year
 Article 49. Illegal Use of Confidential
Information: (1) A director or officer, or an
associate of a director or officer, who, for his
benefit or advantage or that of an associate,
makes use of confidential information that, if
generally known, might reasonably be expected
to adversely affect the operation and viability of
the coop, shall be held (a) liable to compensate
the coop for the direct losses suffered by the
coop; and (b) accountable to the coop for any
direct benefit or advantage received or yet to
be received by him or his associate, as a result
of the transaction
 Chapter V. Responsibilities, Rights and
Privileges of Cooperatives:
Article 51. Address
Article 52. Books to be Kept Open (Code and
other laws, IRRs, AC & bylaws, Register of
members, the books of the minutes of the
meetings of GA, BOD and Committees, Share
Books, FS, other docs).
Article 53. Reports (CAPR, Social Audit Report,
Performance Report, AFS, and List of officers
and trainings undertaken/completed)
 Article 54. Register of members as Prima
Facie Evidence - particulars entered in:
the date on w/c the name of any person was entered
in such register or list as members, and
the date on which any such person ceased to be a
member)
Article 56. Bonding of Accountable
Officers: any officers handling funds, securities or
property on behalf of cooperative
Article 58. Instrument for Salary or Wage
Deduction
Member to execute an instrument
Employer shall make a deduction w/in 10 days
 Chapter VI. Insolvency of Cooperatives:
Article 63. Insolvency of Cooperatives (Act No.
1956)
Chapter VII. Dissolution of
Cooperatives:
Article 64. Voluntary Dissolution Where no
Creditors are Affected
Article 65. Voluntary Dissolution Where
Creditors are Affected
Article 66. Involuntary Dissolution
Article 67. Dissolution by Order of the Authority
Dissolution by Failure to Organize and operate
1. Accreditation of Cooperative EAs
Legal Basis:
1. Section 3(f) of Republic Act 6939
2. Article 80 (2) of Republic Act 9520
Application Requirements
1. For Individual CPA
a. Application Form
b. Professional Regulation Commission Identification Card
(PRC-ID);
c. Certificate of Registration with BOA/PRC
d. Current Professional Tax Receipt (PTR) issued by the
Local Government;
e. Certificate of Membership in Good Standing with the
PICPA Chapter
f. Certificate of Completion of Training
Application Requirements
2. For Partnership/Auditing Firm
a. Application Form
b. SEC Registration
c. Partnership/s Current Certificate of Registration with
the BOA;
d. Business Permit/Municipal License
e. Certificate of Membership in Good Standing with
PICPA Chapter of at least one (1) partner; and
f. Certification of at least 1 partner complied with the
training
 Accrediting Body: The CDA Board of Administrators
Validity of Accreditation and Inclusion in CDA List:
Valid for 3 years from the date of issue
Renewal within 3 months prior to expiration
CDA to circularize the list once a year
Conditions for Engagement of an EA:
a. No EA may be engaged/qualified in the audit & any of its
subsidiary if he/she or any member of his/her immediate
family had or has committed to acquire any direct or indirect
financial interest in the coop, or if his/her independence is
considered impaired under the circumstances specified in the
Code of Professional Ethics for CPA. In the case of partnership,
this prohibition shall apply to the partners and the auditors in-
charge of the engagement
 Conditions for Engagement of an EA:
b. The EA and the members of the audit team do not have/shall
not have outstanding loans or any credit accommodations with
the coop at the time of signing of the engagement and during
the engagement. In the case of partnership, this prohibition
shall apply to the partners and the auditor-in-charge of the
engagement
c. The EA must not be currently engaged nor was engaged during
the past 3 years in providing the following services to the coop
i. Internal audit functions
ii. Information systems design, implementation, and assessment; &
iii. Such other services, w/c could affect independence as may be
determined by CDA
Conditions for Engagement of an EA:
d. Adherence to the highest professional, ethical and
technical standard, such as the PAS, PFRS, and PSA
e. For the immediate past 3 years, must not have held the
following position to the coop being audited: CEO, Chief
Financial officer, Comptroller, Accountant, Bookkeeper,
Audit Committee, etc.
f. For the immediate past 3 years, should not have been an
officer/member/employee of federation/union of which
the coop being audited is affiliated
g. Should not be related up to the 4th degree of
consanguinity or affinity of the cooperative being audited
or to be audited
h. Prohibition on auditing for not more than 5 consecutive
years
Reportorial Requirements:
a. Preparing the AFS in accordance with the PFRS taking
into consideration the cooperative laws, rules and
regulations
b. Disclosure of external auditors adverse findings w/in
30 calendar days after discovery of the following
case:
i. Fraud or dishonest (including cases that were
resolved during the period of audit)
ii. Potential losses the aggregate amount of w/c is at
least 1% of the paid-up share capital; and
iii. Insufficiency of the coops assets to cover claims of
creditors
 c. Reporting to CDA the occurrence of the ff:
Termination/resignation prior the completion of
audit engagement, & stating the reason thereof
Discovery of material breach of coops laws or
rules, but not limited to: net worth to risk assets
ratio; loans and other risk assets review and
classification using PAR, and on coop governance

Working Paper Retention: Minimum of 7 years

Revocation/Cancellation of Accreditation:
Non-compliance of this circular or rules and
regulations issued by the Authority is a ground for
revocation/cancellation of accreditation
Once revoked or cancelled, may apply for
accreditation after 2 years
MC NO. 2011-05
Limitation on Share Capital Holding
Art. 14 of RA 9520 provides that No coops,
other than a coop union xxx shall be registered
unless accompanied with the xxx xxx and a
sworn statement of the treasurer elected by the
subscriber showing that at least 25% of the ASC
has been subscribed and at least 25% of the
total subscription has been paid.
 Art 73 of RA 9520 further provides that No
member of a primary coop other than a coop
itself shall own or hold more than 10% of the
share capital of the coop.
No member in a primary coop shall own more
than 10% of the total subscribed share capital
of the aforesaid coop.
Should preferred share capital be provided in
their by-laws, it shall not exceed 25% of the ASC.
MC-3013-16 GUIDELINES ON SOCIAL AUDIT

Legal Basis Art. 80, 53 0f RA 9520

Coverage All registered cooperatives shall be
subjected to social audit by an accredited
social auditor of the Authority.
A procedure to assess the social impact and
ethical performance of the coop taking into
consideration the CDF.
MC2013-15 PERFORMANCE REPORT
STANDARDS FOR COOPERATIVES
Legal Basis- Art. 53 , Art. 80 and Rule 8 of the
IRR of RA9520
Evaluation of the leadership, human resource
mgt., structures, and systems and mechanism
adopted by the cooperative.
MC-2012-05 RULES IMPLEMENTING
THE TRUTH IN LENDING ACT
Methods of Computing Interest
Based on the outstanding balance of the loan
at the beginning of the interest period.
All loans related documents shall show
repayment schedule
MC 2013-17- GRANT OF COMPENSATION TO
COOP DIRECTORS AND OFFICERS
Clarificatory Guidelines in the Implementation
of Art. 46 of RA 9520
Compensation refers to any remuneration
given for the services rendered like salaries
which is given regularly.
Per Diem refers to the allowance given as a
reimbursement for extra expenses incurred by
one in the performance of his duties.
 Honorarium a gesture of appreciation for the
service of one with expertise of professional
standing in recognition of his broad and
superior knowledge in a specific fields. It is
given to an official/employee not as a matter of
obligation but appreciation.
If the compensation is not fixed in the by-laws
only reasonable per diems b paid to the BOD.
SUSPENSION OF PER DIEMS

If the coop incurs a net loss in its operation

When the rate of interest on share capital is
less than inflation rate
The grant of compensation other than per diem
may be given to director shall be made only
after the adoption of GA
All examiners or inspectors of the authority
shall include the implementation of Art 46 of
RA9520 and the MC and to be reflected in their
inspection report.
 Implementing
Rules and
Regulations of RA (related to accounting
9520 and auditing including
taxation)
RULE 10: CAPITALIZATION & ACCOUNTING
PROCEDURES FOR COOPS
Legal Basis: Article 71
Capital Sources:
a. Members Share Capital
b. Loans and Borrowings including deposits
c. Revolving Capital
d. Subsidies, donations, legacies, grants, aids
and such other assistance from any local or
foreign institutions
RULE 10: CAPITALIZATION & ACCOUNTING
PROCEDURES FOR COOPS
Share Capital
Par value should not be more than P1,000.00
Common and Preferred Share Capital
Limitation on Preferred Shares: 25% limit
Capital Build Up: reasonable and realistic program
Limitation Share Capital Holding:10% limit
Fines on Unpaid Subscribed Share Capital: Fine on
unpaid subscribed share capital, provided, that it is
fair and reasonable under the circumstances as
determined by the BOD
RULE 10: CAPITALIZATION & ACCOUNTING
PROCEDURES FOR COOPS
Assignment of Share Capital Contribution or
Interest: No share or interest in the coop or any
part thereof, unless:
a. It was held for not less than 1 year
b. Assignment is made to coop or to a member
of the coop or to a person who falls within
the field of membership of the coop; and
c. The BOD has approved such assignment

Interest on Share Capital: The formula

ISC FORMULA

X (Net Surplus Statutory Reserves)

-----------------------------------------------------
Total Average Share per Month

Where X is the percentage allocation as

determined by the Board of Directors
RULE 10: CAPITALIZATION & ACCOUNTING
PROCEDURES FOR COOPS
Withdrawal of Share Capital: 60 days notice.
Entitled to refund provided that A>DL

Patronage Refund: minimum of 30% and should

not be more than twice the rate of IC

Accounting Procedure: Should be in accordance

with the GAAPP, taking into consideration the
coop principles and practices
RULE 11: SOCIAL AUDIT OF COOPS

Legal Basis: Art 80, par 4, 5 and 6 of the Code

Coverage: All cooperatives
Components and Social Audit Indicators:
1. Membership
2. Assets building
3. Community Involvement & Solidarity
4. Information accessing and dissemination
5. Gender, Youth, Elderly, Children & Person with Disability
6. Leadership and Organizational Management
Sanctions non-compliance w/ the required report
Classification of coops according to the
extent of the tax exemption granted -
a) Those duly registered coops w/c transact business
with members only; and
b) Those duly registered coops w/c transact business
w/ both members and non-members w/c are
further sub-classified according to the following:
i. Coops w/ accumulated reserves and undivided
net savings of not more than Ten Million
Pesos (Php 10,000,000.00); and
ii. Coops w/ accumulated reserves and undivided
net savings of more than Ten Million Pesos
(Php 10,000,000.00);
Tax exemptions of duly registered coops w/c
transact business w/ members only AND duly
registered coops w/c transact business with
members and non-members but with
accumulated reserves and undivided net
savings of not more than Ten Million

a) Income Tax (Title II of the NIRC)

b) Value-Added Tax (Title IV of the NIRC)
c) Percentage Tax (Title V of the NIRC)
d) Donors Tax (Title III of the NIRC)
e) Excise Tax (Title VI of the NIRC)
f) Doc Stamp Tax (Title VIII of the NIRC)
g) Annual Registration fee (Sec 236B of the NIRC)
h) All taxes on transactions w/ insurance
companies and banks, including but not limited
to 20% final tax on interest deposits and 7.5%
final income tax on interest income derived
from a depository bank under the expanded
foreign currency deposit system; and
i) Electric coops duly registered with the
Authority shall be exempt from VAT on
revenues on system loss and VAT revenues on
distribution, supply, metering and lifeline
subsidy of electricity to their members.
Tax exemptions of duly registered coops w/c
transact business w/ members and non-members
but with accumulated reserves and undivided net
savings of more than Ten Million
Business activities engaged in by coops with
its members where said coop generates
revenues shall be exempt from all national
internal revenue taxes as enumerated in
Section 7
Business transactions with non-members shall
pay at the full rate the following taxes: income
tax, VAT, Percentage tax, and all Internal
Revenue Taxes
Taxability of Unrelated Income of Cooperative
Taxable regardless if the coop is dealing purely
with members or both members and non-
members
Certificate of Tax Exemption/Ruling All
cooperatives which were issued a new
certificate of registration by the CDA in
compliance to Art. 144 (1) of R.A. 9520 and
subsequent new cooperatives to be registered
under the same Act shall secure their tax
exemption certificate from the BIR by way of
confirmatory ruling to be issued by the RD or by
the Asst. Commissioner of Internal Revenue
(ACIR), Legal Service, as the case may be.
PROMULGATIONS
All entities that will engage or are engaged in
insurance activities, including microinsurance, are
IC-CDA-SEC
required to secure a Certificate of Authority from the
Insurance Commission

Wherein insurance activity is defined as

contributions/premiums that are regularly collected
prior the occurrence of a contingent event; and
IC-CDA-SEC guaranteed benefits are provided upon the
occurrence of a contingent event

Above definition excludes risk pooling practices such

IC-CDA-SEC
as the damayan or abuloy system
PROMULGATIONS
Entities, including coops, engaged in unauthorized
insurance of insurance-like activities shall terminate
IC-CDA-SEC such activities within one (1) year from the effectivity
of the Circular

To ensure smooth transition and to continually provide

insurance coverage w/in the 1 year transition period,
they could either partner with commercial insurance
IC-CDA-SEC companies that will provide approved insurance
products or having their members/clients become a
member of authorized insurance providers or mutual
benefit association of their choice

If intends to continually engage in insurance business,

the organization shall , within a period of 2 years,
IC-CDA-SEC
organize themselves into an insurance provider and
secure a Certificate of Authority from the IC
THANK YOU!