1. Philippine Council of Deans and Educators in Business (PCDEB), Philippines.

* Correspondence: Ldsison@rtu.edu.ph

Keywords: internal control, best practices, business sustainability

1. INTRODUCTION

Cooperative Principles- every cooperative shall conduct its affairs in accordance with Filipino culture and experience and the universally accepted principles of cooperation which include the following: Open and voluntary membership in a cooperative shall voluntary and available to all individuals regardless of their social, political, racial or religious background or beliefs [1]. Democratic control cooperative are democratic organizations. Their affairs shall be administered by persons elected or appointed in a manner agreed upon by the members. Members are primary cooperatives shall have equal voting rights on a one-member-one –vote principle: provided, however, that in the case of secondary and tertiary cooperatives, the provisions of article 37 of the cooperative code shall apply. Poverty Reduction Decaying state-sponsored co-operative enterprises following the era of planned economy, coupled with the fast pace of market-led private sector development in the succeeding era of globalization, pushed cooperatives more and more towards the periphery [2]. The situation offers a tremendous challenge to scrutinize and improve the quality of legislation to better serve members as well as communities impacted by cooperatives. An author reported that co-operatives were de-emphasized in introductory economics textbooks used in the United States. An author [3] argued that because the co-operative form of business has been largely ignored in primary, secondary, and post-secondary school texts it has become a “much maligned and often neglected option.” Hill surveyed twenty-five introductory economics textbooks used in Canada for their content concerning co-operatives. Four of the 25 were U.S. texts, ten were Canadianized versions of originally U.S. texts, and the balance were Canadian. He expected to find co-operatives dealt with under alternative business forms, or comparative economic systems, or under money and banking, or in a discussion of who controls the firm [4]. What he found was that while almost all texts mention credit unions, only one discusses why they exist. Non-financial co-ops fared less well. About half of the texts do not mention them at all, and when there is a mention, it tends to be cursory. The largest coverage in any of the texts was one page. As Hill put it, “Clearly, in most introductory textbooks, cooperative economic organizations are either entirely ignored or receive only a passing mention [5]. A survey of the most popular introductory business texts used in Canada shows a similar pattern. Of the six texts surveyed, one had no mention of co-operatives or credit unions, two had about two pages of material, and the balance some lesser amount [6]. Of the two texts with the largest coverage of co-operatives, one had two pages in a twenty-nine-page chapter on “Forms of Business Ownership,” the other used half of the space allocated to co-operatives describing the move of one large Canadian farm co-op to privatization and applauding the bankruptcy of a Japanese cooperative which had allegedly gouged its members. In short, the treatment of co-operatives in Canadian introductory business textbooks ranges from nonexistent to hostile. Only [7] has anything like an unbiased, non-cursory treatment of co-ops. As [8] points out, the discussion of co-operatives can “raise a variety of interesting positive and normative questions” that should be part of a business student’s introduction to economic understanding. Among these are: the extent to which democracy should be part of our economic lives as well as our civic lives; how do economic units actually behave outside of economic theory; what impact does the form of business have on economic incentives; are there alternative economic systems beyond pure capitalism or central planning; in the real world, how does the co-operative form impact on power in the market place? Filipino economists and students of cooperatives in this country have often attributed the failure of cooperative societies in this country to the following causes: Incompetent management, Lack of proper understanding of the principles, practices, true aims, and purposes of cooperative associations, Improper use of credits by the borrowers, who, instead of using money borrowed for production, spent it for fiestas or luxuries, Defective securities [9]. Political interference particularly in the collection of overdue accounts, Lack of compensation of officers. Inadequate character and moral responsibility in handling the other fellow’s money, Lack of adequate safeguard against unscrupulous officers who took advantage of their position to grant loans to themselves and their compadres which later proved disastrous to the system, The dominance of the individualistic attitude instead of the spirit of cooperation among the people, Inability of cooperatives to secure adequate capital, Their dependence on alien suppliers and distributors, Ineffectiveness of the government in the promotion of cooperative organizations, Inadequate marketing facilities [10]. The primary objective of every cooperative is to help improve the quality of life of its members. Towards this end, the cooperative shall aim to: Provide goods and services to its members to enable them to attain increased income, savings, investments, productivity, and purchasing power, and promote among themselves equitable distribution of net surplus through maximum utilization of economies of scale, cost-sharing and risk-sharing;  Provide optimum social and economic benefits to its members; Teach them efficient ways of doing things in a cooperative manner; Propagate cooperative practices and new ideas in business and management; Allow the lower income and less privileged groups to increase their ownership in the wealth of the nation; and Cooperate with the government, other cooperatives and people-oriented organizations to further the attainment of any of the foregoing objectives [11].  Every cooperative shall have an official postal address to which all notices and communications shall be sent. Such address and every change thereof shall be registered with the Authority. Every cooperative shall have the following documents ready and accessible to its members and representatives of the Authority for inspection during reasonable office hours at its official address: A copy of this Code and all other laws pertaining to cooperatives; A copy of the regulations of the Authority;  A copy of the articles of cooperation and bylaws of the cooperative; A register of members;  The books of the minutes of the meetings of the general assembly, board of directors and committee;  Share books, where applicable;  Financial statement; and Such other documents as may be prescribed by laws or the bylaws [12]. The accountant or the bookkeeper of the cooperative shall be responsible for the maintenance of the cooperative in accordance with generally accepted accounting practices. He shall also be responsible for the production of the same at the time of audit or inspection. “The audit committee shall be responsible for the continuous and periodic review of the books and records of account to ensure that these are in accordance with generally accepted accounting practices. He shall also be responsible for the production of the same at the time of audit or inspection [13]. Each cooperative shall maintain records of accounts such that the true and correct condition and the results of the operation of the cooperative may be ascertained there from at any time. The financial statements, audited according to generally accepted auditing standards, principles and practices, shall be published annually and shall be kept posted in a conspicuous place in the principal office of the cooperative.  Subject to the pertinent provisions of the National Internal Revenue Code and other laws, a cooperative may dispose by way of burning or other method of complete destruction any document, record or book pertaining to its financial and nonfinancial operations which are already more than five (5) years old except those relating to transactions which are the subject of civil, criminal and administrative proceedings [14]. An inventory of the audited documents, records and books to be disposed of shall be drawn up and certified to by the board secretary and the chairman of the audit committee and presented to the board of directors which may thereupon approve the disposition of said records. This study was conducted to assess the internal control, best practices and business sustainability of selected Multi-purpose Cooperatives with the end view of enhancing transformational management.

2. MATERIAL AND METHODS

This study employed the descriptive research. According to [15], descriptive research used when statistical data are needed on a fact. Accordingly, the tool used to conduct descriptive research is almost always surveys. The advantage of a survey is that, if the number of the people surveyed (the sample) is large enough, it can be said that a fact has been proved and is true of the entire group, further claimed that the descriptive survey data can give answers such as 37 percent of the consumers of a certain product. If a number of people asked to complete the survey is large enough compared to the total population under study, the answer can even be said to have been proven. Likewise, in a descriptive research design, best an [16] explained that descriptive research describes and interprets “what is”. Specifically, it describes data and characteristics about a population being studied. It also concerned with the relationships that exist. In other words, it deals with the relationships between variables, the testing of hypotheses, and the development of generalizations, principles or theories that have universal validity. Explanatory research design, on the other hand, also employed in this study. According to [17], explanatory research seeks to clarify why and how there is a difference between the evaluation or perceptions of the different groups of respondents. Since this study seeks to answer specific questions on the assessment of the three groups of respondents on the internal control practices of selected multi-purpose cooperatives in the National Capital Region namely: Simbayanan ni Maria Development Cooperative, Pasig Parish Development Cooperative and NOVADECI. The population of this study will be composed of three main groups, namely:  Cooperative Board Members, managers and members of Simbayanan ni Maria Development Cooperative, Pasig Parish Development Cooperative and NOVADECI, and Cooperative Development Authority (CDA) officers assigned in each cooperative. The cooperative employee are the organic employees of cooperative. The regular members are the legitimate members and who qualified to avail the services of cooperative. With regard to the Cooperative Development Authority representative, they are the officers of CDA who is in-charge in the supervision and monitoring of selected cooperatives at the National Capital Region. Purposive sampling technique applied in this research. According to [18], in purposive sampling, the researcher uses “sound judgment”. She handpicks only those whom she believes have the significant roles and have knowledge about the assessment of the three groups of respondents on the assessment of internal control practices of selected Multi-Purpose Cooperative towards an enhanced transformational management to uplift the financial conditions of members.

3. RESULTS AND DISCUSSION

The results of this study, however, cannot be generalized.

Table 01: Summary of ANOVA Showing the Significant Difference in the Assessment of the Three (3) Groups of Respondents on the Internal Control of Selected Cooperatives.

The computed F-values per the assessment of the three (3) groups of respondents on the Internal control in terms of Integrity and ethical values; Organizational structure; Policies, procedures and control; and Information and communication were: 2.77892; 1.69052; 2.12185; and 3.24826, respectively and computed F Critical values were all 3.554557. Given the computed F values Internal control in terms of Integrity and ethical values; Organizational structure; Policies, procedures and control; and Information and communication were all lesser or smaller than the computed F critical values, the null hypotheses of no significant differences in the assessment of the three (3) groups of respondents on the Internal control of cooperatives were all retained. On the other hand, since the computed F value for organizational structure; policies, procedures and control; and information and communication were all lesser or smaller than F critical values, the null hypotheses of no significant differences in the assessment of the board members, managers, and members respondents on the internal control system of cooperatives were all accepted.

DISCUSSION

The three (3) groups of respondents assessed the Internal control of selected Multi-purpose Cooperatives as effective.  For integrity and ethical values, the same groups of respondents assessed the internal control of selected multi-purpose cooperatives as very effective (VE) with the statement “The cooperative has a code of ethical conduct made available to all members” was rated as the highest, while, statement “The transactions executed are in accordance with ethical values”, was rated as the lowest [19].  For organizational structure, the same groups of respondents assessed the internal control of selected multi-purpose cooperatives as very effective (VE), with the statement “The process of transactions are viewed annually for possible updating” was rated as the highest, while the statement “Clear procedures concerning major areas of the cooperative are embodied in the policies” was rated as the lowest [20]. For policies, procedures, and control, the same groups of respondents assessed the internal control of selected multi-purpose cooperatives as very effective, with the statement “Encourage thrift and saving mobilization among the members” was rated as the highest, the statement, “Provides good and service and other requirements to the members”, was rated as the lowest. For information and communication, the same groups of respondents assessed the internal control of selected multi-purpose cooperatives as very effective with the statement “Responsibilities are clearly communicated to all members” was rated as the highest, while the statement [21]. “The budget system process are integrated”, was rated as the lowest. There are no significant differences in the assessment of the three (3) groups of respondents on the Internal control of selected multi-purpose cooperatives in terms of integrity and ethical values, organizational structure, policies and procedures control; and information and communication [22].  For membership and governance, the same groups of respondents assessed the best practices of selected multi-purpose cooperatives as always practiced (AP), with the statement “Open membership and democratic governance” was rated as the highest, while statement “Update and give information for the level of each Members”, was rated as the lowest.  For implementation of cooperative principles, [23] the same groups of respondents assessed the best practices of selected multi-purpose cooperatives as always practiced (AP), with the statement “Implement the one member one vote principle” was rated as the highest, while the statement, “Cases distinction for the different categories and price of Shares were discuss”, was rated as the lowest [24].

4. CONCLUSION

There are no significant differences in the assessment of the three (3) groups of respondents on the Internal control of selected multi-purpose cooperatives in terms of foundation of cooperatives, membership and governance, implementation of cooperative principles, service delivery, financing of cooperatives, maintenance and growth; and use of ICT tools. The three (3) groups of respondents assessed the Business sustainability of selected Multi-purpose Cooperatives as very sustainable.  For stakeholders’ engagement, the same groups of respondents assessed the business sustainability of selected multi-purpose cooperative, as very sustainable, with the statement “Organizations can learn from surrounding and community” was rated as the highest, while the statement “Organizations can learn from customers”, was rated as the lowest. Organizations collect entirely transparent information”, was rated as the lowest. For life cycle and analysis, the same groups of respondents assessed the business sustainability of selected multi-purpose cooperative as very sustainable, with the statement, “Measures more accurately impacts from the outsiders” was rated as the highest, while the statement, “Produce through life cycle analyses was rated as the lowest. There are no significant differences in the assessment of the three (3) groups of respondents on the business sustainability of selected multi-purpose cooperatives in terms of stakeholders’ engagement, environmental management, reporting and disclosure, and life cycle and analysis. To further improve the internal control, best practices, and business sustainability of the selected Multi-purpose Cooperatives, there shall be necessary to conduct future researches on the same topic but with greater magnitude and scope.   There were no significant differences in the assessment of the three (3) groups of respondents on the Business sustainability in terms of Stakeholders’ engagement; Environmental management; Reporting and disclosure; and Life cycle and analysis, as all their computed F-values of: 1.37892; 2.49052; 2.11285; and 3.14826, respectively, were all lesser or smaller than the F Critical value of 3.554557. Hence, the hypotheses of no significant differences between the assessments of the three (3) groups of respondents were all retained.

5. RECOMMENDATIONS

Based on the findings of the study following recommendations were proposed by the researcher:

• The Cooperative Development Authority shall extensively provide mechanisms to control, monitor and supervise all multi-purpose cooperatives for the latter to be effective and of service to members and other stake holders on matters, to wit:
• To strengthen the integrity and ethical values of Multi-purpose Cooperatives, the CDA must see to it that every cooperative must have a code of ethical conduct to be made available to all members and all transactions executed are in accordance with ethical values.
• Multi-purpose cooperatives must always update and review their organizational structure, to make sure the process of transactions is viewed annually for possible updating and clear procedures concerning major areas of the cooperative are embodied in the policies.
• Policies, procedures, and control of every Multi-purpose Cooperative must clearly provide positive statements to encourage thrift and saving mobilization among the members and that all the members must be provided with goods and services as well as other requirements needed.
• The responsibilities for Information and communication in every Multi-Purpose Cooperative, shall be clearly communicated to all members and the budget system process are integrated.
• The Best practices observed and undertaken in all Multi-purpose Cooperatives shall be continuously applied and if necessary be reviewed, analyzed for its improvement.
• To strictly advocate the principles that in the foundation of cooperatives, multi-purpose cooperatives shall require their respective Board and management to personally comply with all procedures and controls, thus setting the tone at the top and to establish system of password controls, password management and other application controls in the information systems.
• Board and other necessary officials shall critically review the membership and governance, of the Multi-purpose Cooperative and must ensure the observance of open membership and democratic governance as well as giving updates and required information for all levels of each Members.
• In the implementation of cooperative principles, the Board and necessary officials of the Multi-purpose Cooperatives shall implement the one member one vote principle and to properly discuss with concerned members should there be distinction for the different categories and price of shares.
• To improve service delivery, Board and concerned officials of the Multi-purpose Cooperatives shall discuss how service is being developed and delivered to members and outsiders as well to provide smooth interaction with concerned members.
• In Financing of cooperatives, Board and other concerned officials of Multi-purpose Cooperatives, must understand the financial condition of each member’s and must ensure better understanding for who their clients are.
• Board and other concerned officials of the Multi-purpose Cooperatives shall always monitor the maintenance and growth of their respective cooperatives by way of conducting actual interview to find out the organization’s economic status and asked for the members’ ideas as a factor to their success as members.
• To maximize the use of ICT tools in all Multi-purpose Cooperatives, Board and other concerned officials shall assess the use of ICT tools and to provide organization’s level researches.

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