Manual of Rules and Regulations for Savings and Credit Cooperatives (SCCs) in the Philippines

Introduction

It is the declared policy of the State under R.A. 6938 (An Act to Ordain A Cooperative Code of the Philippines) to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice.

Credit cooperatives and other types of cooperatives with lending activities have established themselves to be effective vehicles in the improvement of the social and economic conditions of their members, particularly those in the countryside. By providing their members access to financial services including savings, cooperatives have encouraged thrift and opened opportunities to the poor that other formal financial institutions may not be willing to provide.

As government veers away from direct intervention in the provision of financial services, the need to further develop and strengthen cooperatives into viable and sustainable financial institutions becomes more apparent. Safe and sound operations of cooperatives will have to be ensured in order to protect the investments and savings of their members. With strong credit cooperatives operating in a viable and efficient manner, creative and innovative loan products and financial services suited to the needs of the poor will continuously be offered and enhanced. By providing greater access to quality financial products and services, cooperatives with savings and credit activities can greatly contribute to the improvement of the lives and welfare of their constituents.

Recognizing these realities, the Cooperative Development Authority (hereinafter referred to as the Authority) has resolved to put in place measures to develop and strengthen cooperatives. These include, among others, the establishment of an effective regulatory and supervisory environment for credit and savings cooperatives. The Authority in collaboration with the National Credit Council (NCC)-Department of Finance (DOF), the Bangko Sentral Ng Pilipinas (BSP), other relevant government agencies and the major federations of cooperatives have initiated work towards this end. Following the establishment of the Standard Chart of Accounts (SCA), the performance standards for credit cooperatives (COOP-PESOS), and the adoption of the framework for effective regulation and supervision of credit and other types of cooperatives with credit services, this Manual of Rules and Regulations was developed.
The rules and regulations set forth in this Manual and the attached Appendices will provide credit cooperatives specific guidelines for the safe and sound conduct of their operations and for the development and strengthening of their respective institutions. It shall be the comprehensive authority on the rules and regulations to implement the provisions of RA 6938 and RA 6939 and other existing laws that will govern the operations of cooperatives with savings and credit operations. Any changes or amendments to the laws, circulars or issuance, shall subsequently be integrated and form part of the affected sections or subsections of this Manual while repealed rules shall thenceforth be deleted so that the user of this Manual shall no longer refer to a separate issuance, e.g., circular, memorandum, but shall instead cite the particular section or subsections of the manual, including its appendices.

As a code of regulations, the manual contains the basic features of division into parts further subdivided into major type of headings, which introduce the corresponding sections and subsections that will make up the provisions governing the operations and activities of SCCs subject to the related regulations. Parts and major topic headings as well as coded section numbers and headings are made uniform for all the groups of regulations.

This manual is useful for both the supervisory and regulatory authorities, and the Management of SCCs themselves. The performance indicators and standards established herein shall ensure that the SCCs have the financial discipline for the safety and soundness of the institution. In the end, this will result in stronger, viable and sustainable SCCs with greater public trust and confidence.

Article 1 Scope and Limitations

Section 1.1. Coverage

1.1.1. With Minimum Paid-In Capitalization. All prospective and duly registered cooperatives with a minimum paid-in capitalization of TWO MILLION AND FIVE HUNDRED MILLION PESOS (P2,500,000) that intends to or will continue to engage in savings and credit activities beyond the effectivity of this Manual, are hereby required to apply for a License to Operate as a Savings and Credit Cooperative (hereinafter referred to as SCC), subject to the herein rules and regulations.
1.1.2. With Less Than Minimum Paid-In Capitalization. Cooperatives with a paid-in capitalization of less than P2.5 million shall not be covered by these rules and regulations, PROVIDED, THAT, all other existing applicable laws, circulars, issuances, and rules and regulations shall apply, and PROVIDED, FURTHER, that as soon as the minimum capitalization of P2.5 million has been reached, the rules and regulations provided herein shall apply.
1.1.3. Not Engaging in Credit Activities. Duly registered cooperatives with a paid-in capitalization of P2.5 million and above, that do not apply or have been denied the License to Operate as a SCC, shall immediately terminate and cease from engaging in any credit activity within one (1) year from the date of effectivity of this Manual; PROVIDED, THAT, cooperatives without a License to Operate as a SCC may continue to engage in their savings activity in support of other business activities as approved by the Authority, and PROVIDED, FURTHER, that cooperatives previously allowed to engage in credit operations but did not apply or was denied the License, shall immediately amend their Articles of Cooperation and By-laws to reflect such changes, to be submitted to and subsequently approved by the Authority.

Section 1.2. Definition of Terms

For purposes of this Manual, the terms defined in the General Guidelines, Rules and Regulations for the Registration and Operation of Cooperatives and those enumerated below shall apply:

1.2.1. Credit accommodation includes borrowings of members and advances made by officers and employees;
1.2.2. Debentures are serial obligations or notes issued on the basis of the general credit of the corporation, since they are not secured by the corporation property, they are not bonds under Section 38 (Corporation Code, De Leon)
1.2.3. Loans in Litigation are total collectibles from past due loans under legal action.
1.2.4. Loans restructured are past due loans whose terms and conditions have been modified, extended or renewed after full payment of interest/surcharges due thereon. Items in litigation and loans subject of judicially approved compromise, as well as those covered by petitions for suspension or a new plan of payment approved by the court, shall not be classified as restructured loans.
1.2.5. Loans shall include all types of credit accommodations granted to the borrower.
1.2.6. Past due accounts shall refer to loan accounts where one amortization/installment has not been paid on the due date.
1.2.7. Savings deposits are deposits made by members evidenced by a passbook or any other equivalent financial document consisting of funds deposited to the credit of one (1) or more members that can be withdrawn anytime at the option of the member-depositor.
1.2.8. Time deposits are deposits made by the members over a specified period of time as evidenced by a time deposit certificate or any other equivalent financial instrument that provides on its face that the amount of such deposit is withdrawable at a predetermined date.

Article 2 Organization of SCCs

Section 2.1 - Definition of Savings and Credit Cooperative (SCC).

SCCs are duly registered cooperatives licensed to operate as a financial entity with savings and credit operations that are owned and operated by its members with the following objectives:

Encouraging thrift and savings among its members;
Creating a pool of such savings for which loans for productive or provident purposes maybe granted to its members; and
Providing related financial services to enable its members to maximize the benefit from such services.

Section 2.2. Minimum Requirements

Cooperatives covered under Article 1, Section 1.1.1 above are required to apply for a License to Operate as a SCC and submit to the Authority, a resolution of the Board of Directors indicating its approval of the following:

2.2.1. Savings and credit operations shall be a primary function of the Cooperative; and
2.2.2. A minimum amount of TWO MILLION AND FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) of the cooperative’s paid-in capitalization shall be exclusively allocated for its savings and credit operations. For this purpose, the following additional documents shall be submitted to the Authority:
1. 2.2.2.1. In the case of a new cooperative, a Depository Bank Certificate of deposits of the cooperative’s paid-in capital allotted for this purpose;
2. 2.2.2.2. In the case of existing cooperative, the financial statement indicating the P2.5 million capital allocated for savings and credit operations with the accompanying schedule;
3. 2.2.2.3. Duly notarized Treasurer’s Affidavit indicating that at least P2.5 Million of the paid-in capital has been allocated.

Section 2.3. Provisional License to Operate

2.3.1. Upon submission to and approval by the Authority of the minimum requirements in Section 2.1.2, the applicant cooperative shall be granted a provisional license to operate as SCC.
2.3.2. The provisional license shall be valid for a maximum of one (1) year within which the License to Operate shall have been issued by the CDA. Otherwise, the provisional license shall be automatically revoked and deemed null and void, unless extended by the CDA.

Section 2.4. Requirements for Regular License

Within one (1) year from receipt of the provisional license to operate, the applicant cooperative shall:

2.4.1. Establish the business site which shall be equipped with facilities, furniture, forms and stationery, and vault of reinforced concrete with a steel two-hour fire resistant door and equipped with time delay device, in accordance with standard specifications;
2.4.2. Effect and complete the training/seminar of directors and officers of the cooperative as hereby required;
2.4.3. At least thirty (30) days prior to the start of operations, the cooperative shall submit the following requirements:
1. 2.4.3.1. Amended Articles of Cooperation and By-laws;
2. 2.4.3.2. Request for ocular inspection of the premises at least thirty (30) days before the scheduled date of operations;
3. 2.4.3.3. Certificates of training/seminar of officers and employees on cooperative management by accredited federation/union;
4. 2.4.3.4. Certificates of attendance of the special seminar on financial intermediation and good governance for Members of the Board of Directors conducted by Bangko Sentral ng Pilipinas (BSP) or its accredited institutions;
5. 2.4.3.5. List of management officers and their respective designations and salaries;
6. 2.4.3.6. Biodata sheets, National Bureau of Investigation (NBI) and Bureau of Internal Revenue (BIR) clearances, statement of assets and liabilities, income tax returns and statement of income and expenses for the last three (3) years of directors/officers who have not had the previous approval of the Authority for evaluation of their qualifications prior to assumption of office;
7. 2.4.3.7. Chart of Organization. (The chart shall show the names of departments/units/offices with their respective functions and responsibilities, and the designations of positions in each department/unit/office with their respective duties and responsibilities);
8. 2.4.3.8. Manual of Operations embodying the policies and operating procedures;
9. 2.4.3.9. Pro-forma (two (2) sets) of accounting and other forms in conformity with the Standard Chart of Accounts (SCA) and Accounting Manual;
10. 2.4.3.10. Copy of Contract for the use of the SCC’s premises;
11. 2.4.3.11. Copy of the insurance coverage of the SCC office and premises;
12. 2.4.3.12. Copy of the Bonds of accountable officers/employees. This may be executed in the form of an insurance bond (such as fidelity, surety, or guarantee bond), cash bond or real estate bond.
13. 2.4.3.13. Excerpts of the minutes of meetings confirming all transactions relative to activities undertaken to prepare the cooperative to operate as SCC (e.g. appointment of officers, contract of lease, etc);
14. 2.4.3.14. An alphabetical list of regular and associate members with the number and percentage of the amount of share capital subscribed, paid and unpaid;
15. 2.4.3.15. A separate list containing the names of members who are related to each other within the 3^rd degree of consanguinity or affinity;
16. 2.4.3.16. Certification by the Chairman of the Board that no person who is the spouse or relative within the 2^nd degree of consanguinity or affinity of any person holding the position of Chairman, General Manager, Treasurer, Chief Cashier or Chief Accountant or any position of equivalent rank will be appointed to any of said positions in the SCC;
17. 2.4.3.17. Appointment of officer of the registered SCC who shall have undergone orientation on the reportorial requirements with the AUTHORITY and a certification by the Manager that he is fully aware of said reportorial requirements and the respective deadlines for submission to the AUTHORITY; and
18. 2.4.3.18. Other documents/papers which may be required by the Authority.

Section 2.5. Issuance of License to Operate

Within sixty (60) days from submission and full compliance of the mandatory requirements specified under this Section, the Authority shall issue to the applicant cooperative the License to Operate as a Savings and SCC.

Section 2.6. Validity of Contracts

Contracts executed between and among private persons and the cooperative prior to the issuance by the Authority of the License to Operate shall remain valid and binding between the concerned parties. A formal written contract shall be entered into by the contracting parties and made in the SCC's name or on its behalf.

Section 2.7. Business Name

Duly registered cooperatives organized and operating under R.A. 6938 and granted license by the Authority shall include in their names the term “Savings and SCC”. Such cooperative shall display at their business offices a sign including, among other things, the following words: “Licensed by the Cooperative Development Authority”.

Section 2.8. Prohibitions

2.8.1. No person, juridical or natural, shall do business or hold itself out as doing business as a savings and SCC, or shall use the term “Savings and SCC” or any other title or name tending to give the public impression that it is engaged in the savings and credit operations and activities unless licensed by the CDA.
2.8.2. The use of savings and SCCs of any other name or title or combination of names and titles or any other deviation from the requirements of this section shall not be made except upon prior authorization by the CDA.
2.8.3. SCCs shall not advertise nor represent itself to its members or to the public as a bank or a quasi-bank.

Section 2.9. Suspension, Cancellation or Revocation of License

The CDA may suspend, cancel or revoke, after due notice and hearing, the License to Operate as SCC on any violation or non-compliance of the provisions of this Manual, the Code, circulars and issuances of the CDA.

Article 3 Management

Section 3.1. Officers of the SCC

The Officers of the SCC shall be comprised of the members of the Board of Directors, and key management officers.

Section 3.2. Board of Directors

In addition to the provision of Section 6.02 of the General Guidelines on the Registration and Operations of Cooperatives provided for in Appendix A, at least one (1) of the members of the Board of Directors must have, in addition to the minimum qualifications prescribed in this Manual, at least one (1) year experience in banking or credit cooperative operations.

1. 3.2.1. Qualifications and Disqualifications of BOD. Persons elected or appointed as officers of SCCs without the qualifications or possessing any of the disqualifications as enumerated hereunder shall vacate their respective positions immediately.
2. 3.2.2. Minimum Qualifications of a SCC Board Director.
  1. 3.2.2.1. At least twenty-five (25) years of age at the time of his/her election or appointment;
  2. 3.2.2.2. At least college level or have at least three (3) years experience in business;
  3. 3.2.2.3. Must be fit and proper for the position of a director of the cooperative. In determining whether a person is fit and proper for the position of a director, the following must be considered:
    - Cooperative Values as defined in the International Cooperative Alliance (ICA);
    - Competence;
    - Education;
    - Diligence; and
    - Experience/ training.
  4. 3.2.2.4. Must be member in good standing for at least two (2) consecutive years prior to election, except in the case of newly registered SCC.
3. 3.2.3. Grounds for Disqualification of a SCC Board Director. Without prejudice to specific provisions of law prescribing disqualifications for Board directors, the following members are disqualified from becoming directors:
  1. 3.2.3.1. Permanently disqualified:
    1. 3.2.3.1. Persons who have been convicted by final judgment of the court for offenses involving dishonesty or breach of trust, such as estafa, embezzlement, extortion, forgery, malversation, swindling and theft;
    2. 3.2.3.2. Persons who have been convicted by final judgment of the court for violation of banking and cooperative laws; or
    3. 3.2.3.3. Persons who have been judicially declared insolvent, spendthrift, insane or incapacitated to contract.
  2. 3.2.3.2. Temporarily disqualified:
    1. 3.2.3.1. Persons who refuse to fully disclose the extent of their business interest to the Authority when required. This disqualification shall be in effect as long as the refusal persists;
    2. 3.2.3.2. Persons who have business directly competing with the cooperative business, until such time that such persons have divested their interests in and/or have disengaged from said business;
    3. 3.2.3.3. Directors who have been absent or who have not participated during their incumbency, in three (3) consecutive meetings or in more than fifty percent (50%) of all meetings within a twelve (12) month period, both regular and special, unless with valid excuse as approved by the Board of Directors. This disqualification shall be applied immediately and for the succeeding election;
    4. 3.2.3.4. Persons who are delinquent in the payment of their obligations as defined hereunder:
      1. 3.2.3.2.4.1. Obligations with the cooperative where he/she is a director or officer or at least two obligations with other cooperatives/financial institutions.
      2. 3.2.3.2.4.2. Obligations from a SCC/bank/quasi-bank or another cooperative obtained by:
        
        A director or officer for his own account or as the representative or agent of others or where he/she acts as guarantor, endorser or surety for loans from such financial institutions;
        
        The spouse or child under the parental authority of the director or officer;
        
        Any person whose borrowings or loan proceeds were credited to the account of, or used for the benefit of a director or officer;
        
        A partnership of which a director or officer, or his/her spouse is the managing partner or a general partner owning a controlling interest in the partnership; and
      - A corporation, association or firm wholly-owned or majority of the capital of which is owned by any or a group of persons mentioned in the foregoing items I), ii), and iv). This disqualification shall be in effect as long as the delinquency persists.
    5. 3.2.3.5. Persons convicted for offenses involving dishonesty, breach of trust or violation of cooperative/banking laws but whose conviction has not yet become final and executory;
    6. 3.2.3.6. Directors and officers of closed cooperatives/banks/quasi-banks/trust entities pending their clearance by the Authority or Monetary Board;
    7. 3.2.3.7. Directors disqualified for failure to observe/discharge their duties and responsibilities prescribed under existing regulations;
    8. 3.2.3.8. Directors who failed to attend the special seminar required for board of directors. This disqualification applies until the director concerned had attended such seminar;
    9. 3.2.3.9. Persons dismissed/terminated from employment for cause. This disqualification shall be in effect until they have cleared themselves of involvement in the alleged irregularity;
    10. 3.2.3.10. Those under preventive suspension; or
    11. 3.2.3.11. Persons with derogatory records with the National Bureau of Investigation (NBI), court, police, Interpol and monetary authority (central bank) of other countries involving violation of any law, rule or regulation of the Government or any of its instrumentalities adversely affecting the integrity and/or ability to discharge the duties of a cooperative/bank/quasi-bank/trust entity director/ officer. This disqualification applies until they have cleared themselves of involvement in the alleged irregularity.
4. 3.2.4. Additional Qualifications/Disqualifications. The foregoing qualifications/disqualifications for directors shall be in addition to those already required or prescribed under existing laws or By-laws.

Section 3.3. Key Management Officers.

The key management officers of a cooperative may either be elected or appointed by the General Assembly/Board and shall include but not be limited to the:

General Manager/Chief Executive Officer;
Treasurer,
Accountant; and
Committee Members.

3.3.1. Qualifications for Key Management Officers.
1. 3.3.1.1. At least twenty-one (21) years of age;
2. 3.3.1.2. At least a college graduate;
3. 3.3.1.3. Have at least three (3) years of experience in operations or related activities or in a field related to his/her position and responsibilities;
4. 3.3.1.4. Have undergone training in SCC/banking operations acceptable to the BSP/AUTHORITY or will undergo said training within six (6) months upon assumption of office; and
5. 3.3.1.5. Must be fit and proper for the position he/she is being proposed/appointed to, as indicated in Section 3.2.2.3 above.
6. 3.3.1.6. The foregoing qualifications for officers shall be in addition to those already required or prescribed under existing laws and the SCC’s By-laws.
3.3.2. Disqualification of Management Officers. The following grounds for disqualification shall apply to officers in addition to those already required or prescribed under existing laws, By-laws and the grounds for disqualification of directors, except that stated in Section 2.02 (E)(2)(iii) and (viii) hereto:
1. 3.3.2.1. The spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of Board of Directors and management officers;
2. 3.3.2.2. The spouse or relative within the second degree of consanguinity or affinity of any person holding the position of Manager, Cashier, or Accountant of a branch or office of a cooperative is disqualified from holding or being appointed to any of said positions in the same branch or office; and
3. 3.3.2.3. Any officer or employee of the CDA or any appointive or elective public official, except a barangay official.

Section 3.4 Committees

The SCC by-laws shall provide for the creation and establishment of the following committees:

Audit;
Credit;
Election;
Education/Training and Membership;
Ethics, Mediation and Conciliation; and
Other committees necessary for the proper conduct of the affairs of the SCC.

3.4.1. Appointment/Election of Committee Members
1. 3.4.1.1. Members of the Committees shall be elected during the holding of a General Assembly or appointed by the Board.
2. 3.4.1.2. The Board shall appoint from among themselves, other than the Chairman, the Chairperson of the Education/Training and Membership committee.
3. 3.4.1.3. Unless otherwise provided in the by-laws, the Board, in case of vacancy in said committees, may cause an election to fill the vacancy or appoint a person to fill the same subject to the provision that the person elected or appointed shall serve only for the unexpired portion of the term.

Section 3.5. Training of Directors and Officers.

Directors and officers of the SCC shall be required to undergo continuous training at an accredited organization of the BSP and/or Authority.

Section 3.6. Functions and Responsibilities.

The functions and responsibilities of the officers and members of various committees shall be those as prescribed in the SCC’s by-laws. (These functions are shown in Appendix E.)

Article 4 Governance

Section 4.1. Compensation of Directors, Officers and Committee Members.

The Board of Directors/committee members shall not receive any form of compensation other than reasonable per diem as set by the General Assembly. Provided, that payment of per diem shall not exceed two (2) meetings in a month; Provided further, that only per diems shall be paid during the first year of existence of the cooperative. In succeeding years, additional compensation maybe granted to directors/committee members; provided that such additional compensation shall be approved by a majority of the members with voting rights at a regular or special general assembly meeting. The By-laws shall specify the process by which the compensation of officers shall be determined.

Section 4.2. Dealings of Directors, Officers and Committee Members

4.2.1. At the option of the Cooperative, a contract of the cooperative with one (1) or more of its directors, officers or committee members may be deemed valid and binding should all the following conditions are present:
4.2.2. That the presence of such director in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;
1. 4.2.2.1. That the vote of such director was not necessary for the approval of the contract;
2. 4.2.2.2. That the contract is fair and reasonable under the circumstances; and
3. 4.2.2.3. That in the case of an officer or committee member, the contract with the officer or committee member has been previously authorized by the General Assembly or by the Board.
4. 4.2.2.4. Where any of the first two conditions set forth in the preceding paragraph is absent in the case of a contract with a director, such contract may be ratified by two-thirds (2/3) vote of all the members with voting rights in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors involved is made at such meeting, and that the contract is fair and reasonable under the circumstances.

Section 4.3. Liability of Directors, Officers and Committee Members

4.3.1. Directors, officers and committee members, who willfully and knowingly vote for or consents to patently unlawful acts, or who are guilty of gross negligence or bad faith in directing the affairs of the cooperative, or acquire any personal or pecuniary interest in conflict with their duty as such directors, officers or committee member, shall be liable jointly and severally to the SCC for the full amount of damages or personal gain resulting therefrom.
4.3.2. Directors, officers or committee members who, by virtue of his office, acquires for himself an opportunity which should belong to the cooperative, shall be liable for damages and must account for double the profits that otherwise would have accrued to the cooperative by refunding the same, unless his act has been ratified by a two-thirds (2/3) vote of all the members with voting rights. This provision shall be applicable, notwithstanding the fact that the director used his own funds in the venture.
4.3.3. Directors, officers or committee members who attempt to acquire or acquire, in violation of his duty, any interest or equity adverse to the cooperative with respect to any matter which has been reposed in him in confidence, he shall, as a trustee for the cooperative, be personally liable for damages and for twice the profits which otherwise would have accrued to the cooperative.
4.3.4. Directors, officers, or committee members, or their associates [1] who, make use of or disclose confidential information on the operation of a cooperative, that includes, among other things, transaction relating to shares or a debt obligation for his benefit or advantage or that of an associate, that, if generally known, might reasonably be expected to adversely and materially affect the condition of the SCC shall be held:
1. 4.3.4.1. Liable to compensate any person for a direct loss suffered by that person unless such information was known or reasonably should have been known to the person at the time of the transaction; and
2. 4.3.4.2. Accountable to the cooperative for any direct benefit or advantage received or yet to be received by him or his associate, as a result of the transaction.
3. 4.3.4.3. The cooperative shall take all the necessary steps and measures to enforce the liabilities described in this section.

Section 4.4. Bonds of Accountable Officers and Employees.

4.4.1. Every officer or employee handling funds, securities or property on behalf of a cooperative shall, before performing such duties, execute and deliver adequate and appropriate bonds for the faithful performance of his duties and obligations, and provide indemnity to the cooperative against the loss of money or securities by reason of their dishonesty or gross negligence. The board of directors shall determine the adequacy of such bonds.
4.4.2. The bond of the cashier, assistant cashier, treasurer and other employees having money accountability shall not be less than their average daily accountability for immediately preceding a three (3) month period. The bond must be issued by a reputable bonding company duly licensed by the Insurance Commission. Capital contribution or a cash bond deposited with the SCC or with a bank may also be allowed.

Article 5 Reportorial Requirements

Section 5.1. Required Reports.

SCCs shall regularly submit to the Authority the required reports listed in Appendix G of this Manual.

Section 5.2. Authorized Signatories.

5.2.1. Appendix H provides the guidelines on the prescribed report signatories for each report category and the requirements on signatory authorization. Reports submitted electronically shall be subject to the same requirements.
5.2.2. A report submitted under the signature of an officer who is not authorized in accordance with the requirements in this subsection shall be considered as not having been submitted.

Section 5.3. Manner of filing.

Reports shall be submitted personally to the Authority, or via registered mail or special delivery through couriers.

Section 5.4. Report on crime/losses.

SCCs shall report to the Authority the following:

5.4.1. Crimes whether consummated, frustrated or attempted against property/facilities (such as robbery, theft, swindling or estafa, forgery and other deceits) and other crimes involving loss/destruction of the cooperative property when the amount involved, in each crime is P20,000 or more.
5.4.2. Crimes involving officers and employees, regardless of whether or not such crimes involve the loss/destruction of cooperative property, even if the amount involved is less than P20,000 shall likewise be reported to the Authority.
5.4.3. Incidents involving material loss, destruction or damage to the cooperative property/facilities, other than arising from a crime, when the amount involved per incident is P100,000 or more.
5.4.4. The following guidelines shall be observed in the preparation and submission of the report on crime/loss:
1. 5.4.4.1. The report shall be prepared in the prescribed form as shown in Appendix G in two (2) copies and shall be submitted to the Authority within five (5) days from the knowledge of the crime or incident;
2. 5.4.4.2. Where a thorough investigation and evaluation of facts is necessary to complete the report, an initial report submitted within the deadline may be accepted: Provided, that a complete report is submitted not later than fifteen (15) business days from termination of investigation; and
3. 5.4.4.3. Proof of submission of the report within the deadline shall be determined by the date of postmark, if the report was sent by mail or by the date received, if hand-carried to the Authority.

Section 5.5. Sanctions for willful delay in submission of reports/refusal to permit examination.

5.5.1. Definition of terms. For purposes of this subsection, the following definitions shall apply:
1. 5.5.1.1. Reports shall refer to any reports or statement required of SCCs to be submitted to the Authority periodically or within a specified period.
2. 5.5.1.2. Willful delay in the submission of reports shall refer to the failure of SCCs to submit a report on time. Failure to submit a report on time due to fortuitous events, such as fire and other natural calamities, system breakdown and public disorders, including strike or lockout affecting the SCCs as defined in the Labor Code or a national emergency affecting the operations of SCCs shall not be considered as willful delay.
3. 5.5.1.3. Examination shall include, but need not be limited to, the verification, review, investigation and inspection of the books and records, business affairs, administration and financial condition of any SCC including the reproduction of its records as well as the taking possession of the books and records and keeping them under the AUTHORITY and/or deputized supervisor custody after giving proper receipt therefore. It shall also include the interview of the directors and personnel of the SCC including its Electronic Data Processing (EDP) service provider. Books and records shall include, but not limited to data and information stored in magnetic tapes, disks, printouts, logbooks and manual kept and maintained by the SCC or the EDP service provider, necessary and incidental to the use of EDP systems by the SCCs.
4. 5.5.1.4. Refusal to permit examination shall mean any act or omission which impedes, delays, or obstructs the duly authorized examiner from conducting an examination, including the act of refusing to accept or honor a letter of authority to examine presented by the Authority.
5.5.2. Fines for willful delay in submission of reports.
1. 5.5.2.1. SCCs incurring willful delay in the submission of required reports (A1 and A2) shall pay a fine of P100.00 per report per business day of default.
2. 5.5.2.2. Delay or default shall start to run on the day following the last day required for the submission of reports. However, should the last day of filing fall on a non-working day in the locality where the reporting SCC is situated, delay or default shall start to run on the day following the next working day.
3. 5.5.2.3. For the purpose of establishing delay or default, the date of acknowledgement by the Authority appearing on the copies of such reports filed or submitted or the date of mailing postmarked on the envelope/the date of registry or special delivery receipt, as the case may be, shall be considered as the date of filing.
4. 5.5.2.4. Delayed schedules or attachments and amendments shall be considered late reporting subject to the above penalties.
5.5.3. Fines for refusal to permit examination.
1. 5.5.3.1. Any SCC which shall willfully refuse to permit examination shall pay a fine of P3,000.00 daily from the day of refusal and for as long as such refusal lasts.
2. 5.5.3.2. The duly authorized examiner shall report to the Authority, who shall forthwith make a written demand upon the SCC concerned for such examination. If the SCC continues to refuse said examination without any satisfactory explanation therefor, the duly authorized examiner shall submit a report to the Authority.
3. 5.5.3.3. The fine shall be imposed starting on the day following the receipt by the said Authority of the written report submitted by the duly authorized examiner concerned regarding the continued refusal of the SCC to permit the desired examination. A copy of the said report shall be provided to the SCC. Transfer to the table of Sanctions
5.5.4. Manner of payment or collection of fines.
1. 5.5.4.1. SCCs shall, within thirty (30) calendar days from receipt of the statement of account from Authority, pay the fines imposed;
2. 5.5.4.2. Failure to settle the full amount of the fines within the period or on the day prescribed herein shall be subject to additional penalties, fines and surcharges as provided for in the Table of General Sanctions.
5.5.5. Other penalties. The imposition of the penalties shall be without prejudice to the imposition of other administrative sanctions and to the filing of a criminal case as provided for in other provisions of law.
5.5.6. Appeal to the AUTHORITY. SCCs may request for a reconsideration of the imposition of sanctions to the CDA within thirty (30) calendar days upon receipt of notice. The Board of Administrators of the Authority shall, upon receipt of the request for reconsideration, act within sixty (60) calendar days, otherwise the imposition of sanctions shall be deemed lifted. The decision of the Board of Administrators shall be final and executory.

Article 6 Capitalization

Section 6.1. Definition of Net Worth.

The term net worth shall refer to equity inclusive of members’ equity, donations/grants and reserve funds less unbooked allowance for probable losses on loans, investments and other assets and other capital adjustments as may be required by the CDA.

Section 6.2. Net Worth-To-Risk Assets Ratio.

The net worth of a SCCSCC shall at all times not be less than an amount equal to eight percent (8%) of its risk assets which is defined as its total assets minus the following assets:

6.2.1. Cash on hand;
6.2.2. Evidences of indebtedness of the Republic of the Philippines and of the BSP, and other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines ;
6.2.3. Loans to the extent covered by hold-outs on, or assignments of, deposits maintained in the SCC and held in the Philippines ;
6.2.4. Land owned by the SCC used for operations;
6.2.5. Building and land improvements, net of depreciation;
6.2.6. Furniture, fixtures and equipment, net of depreciation;
6.2.7. Real estate mortgage loans insured by the Home Insurance Guarantee Corporation (HIGC), to the extent of the amount of the insurances, and;
6.2.8. Other non-risk items as the CDA may, from time to time, authorize to be deducted from total assets.

Section 6.3. Prompt Corrective Action.

The SCC’s net worth position should be sufficient to meet competitive pressure and adverse economic conditions as they arise. It should enhance the safety of the members’ shares and keep pace with growth in SCC assets. Net worth categories for purposes of prompt corrective action are:

6.3.1. Well-capitalized – the SCC’s net worth to risk-asset ratio is at least ten percent (10%);
6.3.2. Adequately capitalized - net worth to risk-asset ratio is equal to eight percent (8%) but less than ten percent (10%);
6.3.3. Undercapitalized - net worth to risk-asset ratio is equal to six percent (6%) but less than eight percent (8%);
6.3.4. Significantly undercapitalized – net worth to risk-asset ratio is equal to two percent (2%) but less than six percent (6%)
6.3.5. Critically undercapitalized – net worth-to-risk asset ratio is less than two percent (2%).

Section 6.4. Rehabilitation Plan.

A SCC that is categorized, as either undercapitalized or significantly undercapitalized shall submit for approval within the deadline set by the Authority, a rehabilitation plan prior to its implementation.

Section 6.5. Period to Correct Capital Deficiency.

Whenever the net worth of SCCs are deficient with respect to the requirements of Section 3.2 above, the SCC shall within a two (2) year period meet the minimum requirement for net worth to risk asset ratio.

Section 6.6. Restrictions for undercapitalized SCCs:

From the time the Authority has declared the SCC as undercapitalized and until such time that the SCC is adequately capitalized, it shall not be permitted to:

6.6.1. Distribute interest on share capital and patronage refund unless added to share capital;
6.6.2. Increase its risk assets; and
6.6.3. Expand operations unless part of the rehabilitation plan

Section 6.7. Action required for critically undercapitalized SCCs.

The CDA, not later than ninety (90) days after the date on which a SCC becomes critically undercapitalized shall:

6.7.1. Appoint a conservator, receiver or liquidator, as the case may be; or
6.7.2. Take such other actions as it determines would better achieve the purpose in lieu of appointing a liquidator.

Section 6.8. Insolvency of SCCs.

A SCC will be determined to be insolvent when the cash value of its assets is less than its total liabilities.

6.8.1. Proceedings Upon Insolvency. In case a SCC is unable to fulfill its obligations to creditors due to insolvency, such SCC may apply for such remedies as it may deem fit under the provisions of the Insolvency Law (Act No. 1956, as amended). Nothing in this section, however, precludes creditors from seeking protection from said insolvency law.
6.8.2. Appointment of Conservator.
1. 6.8.2.1. Whenever, on the basis of a report submitted by the appropriate supervising or examining department of the Authority, or upon the request of the delegated supervising and examining federation or union, in accordance with Section 3.07 above (Action Required for Critically Undercapitalized) or the Authority finds that the primary cooperative is in a state of continuing liability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of members and creditors, the CDA may appoint a conservator with such powers as the CDA shall deem necessary to take charge of the assets, liabilities, and the management thereof, reorganize the management, collect all monies and debts due said SCC, and exercise all powers necessary to restore its viability.
2. 6.8.2.2. The conservator shall report and be responsible to the CDA and shall have the power to overrule or revoke the actions of the previous management and board of directors of the primary cooperative.
3. 6.8.2.3. The conservator should be competent and knowlegeable in cooperative operations and management. The conservatorship shall not exceed one (1) year.
4. 6.8.2.4. The conservator shall receive remuneration to be fixed by the AUTHORITY in an amount not to exceed two-thirds (2/3) of the salary of the manager of the primary cooperative or its equivalent in one (1) year, payable in twelve (12) equal monthly installments; Provided, that, at any time within the one (1) year period, the conservatorship is terminated on the ground that the institution can operate on its own, the conservator shall receive the balance of the remuneration which he would have received up to the end of the year; but if the conservatorship is terminated on other grounds, the conservator shall not be entitled to such remaining balance.
5. 6.8.2.5. The CDA shall not appoint a conservator from the unit or department of the Authority recommending conservatorship.
6. 6.8.2.6. The CDA shall, on the basis of its findings, the report of the conservator and/or the report of the examiner, terminate the conservatorship when:
  1. 6.8.2.1. It is satisfied that the SCC can continue to operate on its own; or
  2. 6.8.2.2. The continuance in business of the SCC would result in additional loss to its members or creditors, in which case the process of receivership and liquidation shall apply.
6.8.3. Proceedings in Receivership and Liquidation.
1. 6.8.3.1. The CDA may summarily and without need for prior hearing, forbid the SCC from doing business in the Philippines and designate a receiver of the SCC concerned, whenever the CDA finds that a SCC:
  1. 6.8.3.1. Is unable to pay its liabilities as they become due in the ordinary course of business; Provided, that this shall not include inability to pay caused by extraordinary demands induced by financial panic;
  2. 6.8.3.2. Cannot continue in business without resulting in probable losses to its members or creditors; or
  3. 6.8.3.3. Has willfully violated a cease and desist order that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the SCC.
2. 6.8.3.2. Any person of recognized competence in finance and cooperativism may be designated as receiver.
3. 6.8.3.3. The receiver shall immediately gather and take charge of all the assets and liabilities of the SCC, administer the same for the benefit of its members and creditors, and exercise the general powers of a receiver under the Revised Rules of Court but shall not, with the exception of administrative expenditures, pay or commit any act that will involve the transfer or disposition of any asset of the SCC; Provided, That the receiver may deposit or place the funds of the SCC in non-speculative investments.
4. 6.8.3.4. The receiver shall determine, as soon as possible but not later than ninety (90) days from takeover, whether the SCC may be rehabilitated or otherwise placed in such a condition so that it may be permitted to resume business with safety to its members and creditors, and the general public; Provided, That any determination for the resumption business of the SCC shall be subject to prior approval of the CDA.
5. 6.8.3.5. If the receiver determines that the SCC cannot be rehabilitated or permitted to resume business in accordance with the preceding paragraph, the CDA shall notify in writing the cooperative’s Board of Directors of its findings and direct the receiver to proceed with the liquidation of the cooperative. The receiver shall:
  1. 6.8.3.1. File ex-parte with the proper Regional Trial Court, and without requirement of prior notice or any other action, a petition for assistance in the liquidation of the SCC pursuant to a liquidation plan adopted by the CDA. The receiver shall pay the cost of the proceedings from the assets of the cooperative.
  2. 6.8.3.2. The designation of a conservator under the preceding Section or the appointment of a receiver under this Section shall be vested exclusively with the CDA. Furthermore, the designation of a conservator is not a precondition to the designation of a receiver.

6.8.4. Liquidation, Distribution and Disposition of Liquidation Proceeds.

The process for liquidation, and the distribution and disposition of the SCC’s assets after liquidation shall be governed by the provisions of Sections 12.05, 12.06 and 12.07 of the General Guidelines, Rules and Regulations on the Registration and Operation of Cooperatives.

Article 7 Deposit and Borrowing Operations

Section 7.1. Minimum Deposit.

Savings and Time Deposits with SSC may be opened with a minimum amount to be determined by the Board of Directors.

Section 7.2. Opening and Operation of Deposit Accounts.

The following shall govern the opening and operation of deposit accounts of SCC:

7.2.1. Who may open deposit accounts. Only members of the SCC may open savings and/or time deposit accounts. The cashier, bookkeeper and their assistants, and other employees and officers of the SCC whose duties entail the handling of cash or checks, can deposit and withdraw provided that such transactions are processed by another officer. Any withdrawal from their accounts has to be approved by the General Manager or his/her designated officer.
7.2.2. Identification of member-depositors. A SCC shall be responsible for the proper identification of its member-depositors.
7.2.3. Number of deposit accounts. A member-depositor may open and maintain several deposit accounts in his/her own name. In the case of savings deposits, the accounts so opened and maintained shall be on a per savings product basis while time deposit accounts shall be opened and maintained on the basis of its terms and conditions. He/she may also open an account in other capacities as guardian, agent or trustee for his/her immediate family members who are minors and cannot be qualified as a member.
7.2.4. Signature card. A signature card bearing at least three (3) specimen signatures of each member-depositor shall be required upon opening of a deposit account.
7.2.5. Savings Passbook and certificate of time deposits.
1. 7.2.5.1. A savings deposit passbook, signed by the receiving teller and an authorized officer, shall be issued to a member-depositor showing, among other things, his name and address, account number, date, amount of deposit/withdrawal, interest credits and balance.
2. 7.2.5.2. In the case of a time deposit, a certificate of time deposit or its equivalent instrument signed by at least two (2) authorized officers, shall be issued to the member-depositor containing, among other things, his name, amount of deposit, date when the deposit was made, its due date and interest rate.
3. 7.2.5.3. Savings deposit passbooks and certificates of time deposit shall be pre-numbered.

Section 7.3. Deposits of checks and other cash items.

Checks and other cash items may be accepted for deposit by the SCC: Provided, That withdrawals from such deposits shall not be made until the check or other cash items is collected.

Section 7.4. Payment of Interest on Time Deposits.

Interest on time deposits may be paid at maturity or upon withdrawal or in advance: Provided, That interest paid in advance shall not exceed the interest for one (1) year.

Section 7.5. Withdrawal of Deposits.

Withdrawal from:

7.5.1. Savings deposits can be made by presenting to the SCC a duly accomplished withdrawal slip together with the depositor’s passbook or through Automatic Teller Machines (ATMs).
7.5.2. Time deposits can be made upon presentation by the member-depositor of the certificate of time deposit or equivalent document that the SCC issued to evidence its receipt of time deposit placement. The Paying/Disbursing Teller shall immediately stamp the withdrawn certificate of time deposit or its equivalent document as “Cancelled” or “Paid” and shall require the member-depositor to acknowledge receipt of the proceeds said deposits.

Section 7.6. Dormant Savings Deposit.

A SCC may charge a service fee for the maintenance of dormant savings deposits. Savings deposits shall be classified as dormant if no deposit or withdrawal has been made for the last two (2) years.

Section 7.7. Matured Time Deposits.

A time deposit not withdrawn or renewed on its due date shall be treated as a savings deposit and shall earn interest from maturity to the date of actual withdrawal or renewal at a rate applicable to savings deposits.

Section 7.8. Tax on Interest on Deposits.

Interest income earned by members of the cooperative from any deposits or any other monetary benefit from deposit substitutes and similar arrangements shall be subject to the 20% final income tax on interest. SCCs are considered as withholding agents and are required to file withholding tax returns with and remit withholding taxes on interest income payments within the specified period as prescribed by the Bureau of Internal Revenue.

Section 7.9. Reserve Requirements against Deposit Liabilities

7.9.1. Liquidity Reserve Fund. SCCs shall maintain a liquidity reserve fund that will be restricted in nature to meet withdrawals against deposit liabilities equivalent to at least two percent (2%) of their savings and time deposit liabilities. The liquidity reserve fund shall be computed based on the preceding end-of-month level.
7.9.2. Form and Composition of Liquidity Reserve Fund. The composition of the reserve fund shall be:
1. 7.9.2.1. At least ten percent (10%) in the form of cash on hand and/or cash in banks, and
2. 7.9.2.2. The remaining ninety percent (90%), in the form of evidences of indebtedness or obligations of the government, its political subdivisions or instrumentalities.
3. 7.9.2.3. For the purpose of computing the reserve fund, the value of government securities shall be the cost of acquisition. The SCC may keep physical possession of such government securities, but shall supply the Authority with the following information:
  - Name of issuer
  - Serial number/Transaction code
  - Denominations
  - Cost of acquisition
  - Maturity Dates

Section 7.10. Borrowings.

The SCC through the Board of Directors as authorized by the general assembly, may borrow from any source at the best terms or conditions available and in such amount that may be needed.

Article 8 Loans and Investment

Section 8.1. Financial Service.

Loans represent a SCC’s primary earning asset and is an essential financial service provided by the SCC to its members.

Section 8.2. Lending Policies.

The Board of Directors shall be responsible for setting written loan policies. Lending policies should clearly reflect:

8.2.1. Limits on loan amounts; loan maturities and repayment terms; acceptable collateral; and interest rates that are reasonably designed to meet the SCC’s objectives.
8.2.2. Effective loan collection policies designed with the following characteristics:
1. 8.2.2.1. Prompt and accurate delinquent loan reporting to the board;
2. 8.2.2.2. Timely and consistent follow-up actions;
3. 8.2.2.3. Utilization of outside collection sources when internal efforts fail to produce results; and
4. 8.2.2.4. Maintenance of collection records.

Section 8.3. Basis in the Grant of Loans.

The granting of loans by the credit committee and loan officers shall be based on the four "C’s" of credit: Character, Capacity to pay, Circumstances, and Collateral.

8.3.1. Character. A determination of character involves the development of information relating to the applicant’s credit history. This may be obtained from the community, other financial institutions and credit bureaus.
8.3.2. Capacity to Pay. In determining an applicant’s capacity to pay, the credit committee or loan officer should carefully examine income, debts, debt payments, and living expenses. After debt payments and living expenses are taken into account, the applicant’s income should be adequate to repay the loan in accordance with the agreed upon terms.
8.3.3. Collateral. A SCC may grant unsecured and secured loans. Unsecured loans are consumer-type loans, usually relatively small, traditionally offered for various purposes incidental to the members’ needs. Secured loans extend credit with a security interest in personal or real property of tangible value. The security may also be an endorsement by another person who agrees to repay if the borrower fails to do so. Co-maker loans, share-secured loans, and automobile loans are common types of secured loans. Other types of secured loans are home equity loans, residential real estate loans and member business loans.
8.3.4. Circumstances

Section 8.4. Lending Requirements

8.4.1. Application. A member-borrower applying for a loan must submit an application stating the purpose of the loan and such other information as may be required by the SCC. The loan application and other required documents shall form part of the credit information file of the member-borrower.
8.4.2. Credit investigation. No loan shall be approved unless prior investigation has been made to determine the credit standing of the applicant and/or the fair market value of the property offered as security and the report thereon shall be made part of the loan application.
8.4.3. Credit information file/collateral file. SCC shall maintain a credit information file which shall contain, among other things, the member-borrower’s application, financial record, the collateral and other information relative to the member-borrower.
8.4.4. Loan Approvals. Loans shall be approved in accordance with the Codified Approving and Signing Authority (CASA) (Appendix I) as approved by the General Assembly.
8.4.5. Loan Agreements. For each loan granted by a SCC, a promissory note shall be executed by the member-borrower in favor of the cooperative stating the amount of the loan, date granted, due date, interest rate and other information.
8.4.6. Inscription of Lien. In case of mortgage loans, no release against an approved loan shall be made before the inscription of the mortgage.

Section 8.5. Loan Collection.

While loan collections maybe delegated to a committee or staff member(s), the board has the responsibility of exercising close control and monitoring over the lending program.

Section 8.6. Loan Retention Saving Scheme.

SCCs may require member-borrowers to deposit a portion of the loan proceeds, whether in the form of savings or time deposits. Where, subsequent to the release of the loan proceeds, member-borrowers open deposit accounts or make additional deposits to their existing accounts, no part of such new deposits shall be covered by a stipulation prohibiting or limiting withdrawal while a portion of their loans are outstanding: Provided, That this prohibition shall not apply in cases of loans secured by a hold-out on deposits to the extent of the unencumbered amount of the deposit existing at the time of the above-mentioned loan application.

Section 8.7. Salary Deductions for Loan Repayment.

8.7.1. Pursuant to Section 59 of R.A. 6938 and in reference to Supreme Court Decision on the Legality of Salary Deduction dated June 30, 1995, the SCC is authorized to make the necessary payroll deduction arrangements with the employer of the member-borrowers.
8.7.2. In the case of a member-borrower who is a permanent employee or wage earner, the treasurer, cashier or paymaster of the firm employing him shall be authorized, pursuant to Supreme Court Decision on the Legality of Salary Deduction dated June 30, 1995 and Section 59 of R.A. 6938, to make deductions from his salary, wage or income in accordance with the terms of his/her loan, and to remit such deductions to the SCCs.
8.7.3. In case of government employees cooperative, participation in the automatic payroll deduction shall be subjected to the provisions and limitations of the General Appropriations Act (GAA) or any other government rules and regulations on the matter.

Section 8.8. Interest and Other Charges.

The following shall govern the rates of interest and other charges on loans granted by SCC:

8.8.1. Interest Rate. The rate of interest including commissions, premiums, fees and other charges on loans and forbearance of money, regardless of maturity and whether secured or unsecured, shall be reasonably set to at least fully cover the operational and financial costs of the SCC;
8.8.2. Payment of loan before maturity. Should a member-borrower opt to pay the outstanding balance of his loan before maturity, the SCC may impose a premium on the portion of the loan to be prepaid, subject to prior agreement between the SCC and its member-borrowers. Provided, That in case of interest paid in advance, the amount of interest for the unmatured portion of the loan shall be refunded to the member-borrower.
8.8.3. Interest in the absence of contract. The rate of interest for the loan or forbearance of any money, goods or credit and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be twelve percent (12%) per annum.
8.8.4. Accrual of interest earned on loans. SCCs shall not accrue interest income on loans that are already past due or on loan installments that are in arrears, regardless of whether the loans are secured or unsecured. Interest on past due loans or loan installments in arrears shall be taken up as income only when actual payments thereon are received.

Section 8.9. Secured Loans

8.9.1. Loans Secured by Real Estate Mortgages. Loans against real estate security shall not exceed seventy percent (70%) of the appraised value of the real estate security including insured improvements, if any, and such loans shall not be made unless title to the real estate is in the name of the mortgagor and properly annotated with the appropriate regulatory body.
8.9.2. Real Estate Security Without Torrens Title. Loans may also be granted on the security of lands without Torrens Title where:
1. 8.9.2.1. The owner of the private property can show 5 years or more of peaceful, continuous and uninterrupted possession in the concept of an owner;
2. 8.9.2.2. Portions of friar land estates or other lands administered by the Bureau of Lands are covered by sales contracts and the purchasers have paid at least five (5) years installment thereon, without the necessity of prior approval and consent by the Director of Lands;
3. 8.9.2.3. Portions of other estates under the administration of the Department of Land Reform (DLR) or other governmental agency are likewise covered by sales contracts and the purchases have paid at least five (5) years installments thereon, without the necessity of prior approval and consent of the DLR or corresponding governmental agency;
4. 8.9.2.4. Homesteads or free patent lands have approved titles that are yet to be issued, the provisions of any law or regulations to the contrary notwithstanding, Provided, That:
  1. 8.9.2.1. When the corresponding titles are issued, the same shall be delivered to the Register of Deeds of the province where such lands are situated for the annotation of the encumbrance;
  2. 8.9.2.2. Copies of notices for the presentation of the final proof shall also be furnished the SCC and, if the borrower applicants fail to present the final proof within thirty (30) days from date of notice, the SCC may do so for them at their expense;
  3. 8.9.2.3. The applicant for homestead or free patent has already made improvements on the land and the loan applied for is to be used for further development of the same or for other productive economic activities; and
  4. 8.9.2.4. The appraisal and verification of the status of a land is a full responsibility of the cooperative and any loan granted on any land which shall be found later to be within the forest zones shall be for the sole account of the cooperative.
8.9.3. Loans Secured by Chattels. Loans on the security of chattels shall not exceed fifty percent (50%) of the appraised value of the security, and such loans shall not be made unless title to the chattels, shall be in the name of the mortgagor.
8.9.4. Loans Secured by Personal Properties. Loans may be secured by unencumbered personal property which may consist of:
1. 8.9.4.1. Bonds and securities issued by the Government. Such bonds and securities may be accepted at their face value;
2. 8.9.4.2. Quedans or warehouse receipts issued by bonded warehouses covering stock deposited in said warehouses up to eighty percent (80%) of the calculated market value of the stock; and
3. 8.9.4.3. Any other personal property, up to fifty percent (50%) of the fair market value. If the property is newly purchased and the purchase price thereof appears in a bill of sale, then the above percentage shall be based on the price of the said bill of sale.
8.9.5. Loans Secured by Certificates of Time Deposits (CTDs). The following rules shall govern the grant of loans secured by hold-out on and/or assignment of CTDs issued by the lending cooperative or any other financial institution
1. 8.9.5.1. The original copy of the CTDs subject to hold-out or assignment shall be surrendered to the lending cooperative;
2. 8.9.5.2. If the terms of the CTDs subject to hold-out or assignment is shorter than the term of the loan, there shall be an agreement in writing that renewal of the time deposit upon maturity shall be made at least co-terminus with the term of the loan;
3. 8.9.5.3. The depository bank, other than the lending bank, shall be furnished a copy of the Deed of Assignment or hold-out agreement on the deposit used as collateral;
4. 8.9.5.4. There shall be no pre-termination of the time deposit without the consent of the lending cooperative and unless an acceptable substitute collateral for the loan has been made;
5. 8.9.5.5. The SCC shall keep a complete record of all pertinent loan documents, such as, but not limited to, the original copy of the CTDs subject to assignment or hold-out agreement; deed of assignment or hold-out agreement; and written waiver of the depositor required in item “6” below, which shall be made available for inspection and/or examination by the Authority; and
6. 8.9.5.6. The loan documents shall include a waiver on the part of the depositor of his rights under existing law to the confidentiality of his deposits.
8.9.6. Insurance on Real Estate Improvements. The required insurance on improvements used as collateral for loan should be such as shall be sufficient to secure seventy percent (70%) of the appraised value of such improvements or if inadequately insured, the loan value shall correspond to the extent of insurance taken on such improvements.
8.9.7. Foreclosure and Redemption of Mortgages. The foreclosure of mortgages and redemption shall be in accordance with existing laws.

Section 8.10. Unsecured Loans.

Before granting unsecured loans, SCCs must exercise proper caution by ascertaining that the borrowers, co-makers, endorsers, sureties and/or guarantors possess good credit standing and are financially capable of fulfilling their commitment to the cooperative. SCCs shall require:

8.10.1. Proof of Financial Capacity of Borrower. In addition to the usual personal information sheet about the borrower, cooperatives shall require that an application for a credit accommodation against personal security be accompanied by:
1. 8.10.1.1. A copy of the latest income tax returns of the borrower and his co-maker duly stamped as received by the BIR, if applicable, or a statement showing the household income and expenses of the borrower as verified by the SCC or
2. 8.10.1.2. If the borrower is or will be engaged in business, a copy of the borrower’s financial statements duly certified by an independent Certified Public Accountant (CPA) and/or a feasibility study of the project to be financed.
8.10.2. Loan Signatories. Loan documents of credit accommodations against personal security shall be signed by the principal borrower and at least one (1) co-maker except the spouse of the borrower. The co-maker shall at all times be a member of the cooperative.

Section 8.11. Restriction on Directors, Officers and Committee Members.

No director or committee member shall vote on a loan requested by a member of his family, natural or by affinity to the third degree, or can he become a co-maker, surety or endorser on any loan contracted by a member with the cooperative. The application for a loan by a member of the Credit committee shall be subject to the approval of the Board of Directors.

Section 8.12. Loan Limits/Maturity of Loans.

8.12.1. Loan limit to a single borrower. Loans granted to member-borrowers shall at no time exceed the following percentages of the net worth of the SCC:
1. 8.12.1.1. Five percent (5%) for individual member-borrower; and
2. 8.12.1.2. Ten percent (10%) for member-borrower and his/her immediate family member up to the third degree of consanguinity or affinity.
8.12.2. Loan Maturity. Loans granted by a SCC shall have a maximum term of not more than five (5) years except loans adequately secured by unencumbered real estate for the purpose of home building and home development which may be granted with maturity dates not exceeding fifteen (15) years: Provided, That extensions or renewals of loan shall be in accordance with the provisions of Sec.___.

Section 8.13. Deposits in banks.

The SCC shall maintain deposits in at least two (2) banks, but in no case shall deposits in one bank exceed twenty-five (25%) of the SCC’s net worth. The CDA may grant exemption from this provision in cases where there is no or limited number of banks in the city or municipality where the SCC is located.

Section 8.14. Loans/Credit Accommodations to Directors, Officers and their Related Interests (DORI)

8.14.1. Dealings of SCCs with any of its directors, officers and their related interests shall be in regular course of business, and upon terms and conditions not less favorable to those offered to other member-borrowers.
8.14.2. SCCs shall not indirectly make any loan to any director or officer of such cooperative, either for himself or as agent or as partner of another person or entity.
8.14.3. In all cases of accommodation granted to directors and officers, the written approval of the majority of the directors of the cooperative, excluding the director concerned, shall be entered upon the records of the cooperative. A monthly aging report of DORI accounts (individual and aggregate) shall be regularly reported to the Board. These reports and records shall be made available for inspection by the Authority.
8.14.4. The office of any director or officer of any SCC who violates the provisions of these rules on accommodations granted to directors and officers shall immediately become vacant.

Section 8.15. Sanctions.

Any violation of the loan ceilings prescribed in Section 8.12 and the provisions of Section 8.14 above shall be subject to any or all of the following:

8.15.1. Disqualification of the directors participating in and voting for the approval of the loan or credit accommodation: Provided that the disqualification maybe lifted by the AUTHORITY, as the circumstances warrant.
8.15.2. For the duration of each violation, imposition of a fine of one-tenth of one percent (1/10 of 1%) of the excess over the ceilings per day but not to exceed P________ a day on:
1. 8.15.2.1. The SCC; and
2. 8.15.2.2. Each of the directors voting for the approval of the loan or credit accommodation in excess of the ceiling.
3. 8.15.3. The penalty for exceeding the ceiling shall be computed on the average amount of loans in excess of said ceiling during the same week.

Section 8.16. Submission of Credit Information to a Credit Bureau.

SCCs shall regularly submit information on the credit transactions of a member-borrower to a credit bureau recognized by the Authority. Information from the credit bureau may be obtained and used by the SCCs in determining the credit worthiness of a borrower.

Section 8.17. Past Due Accounts.

Any amortization/installment not collected on due date shall be booked as past due and shall remain in this account until paid.

8.17.1. Loans Receivable-Past Due. These are total collectibles from past due loans of member-borrowers. Aging of loans receivables should be prepared to determine status and risk of non-collection of the past due loans. A loan shall remain in this account until fully paid or until arrangements are formalized for its renewal/extension /restructuring or collection/foreclosure of collateral.
8.17.2. Loans Receivable – Restructured. The restructuring of loans may be allowed only upon full payment of interest due or under exceptional conditions. Loans can at most be restructured twice. The restructuring of loans to directors or officers should be upon terms not less favorable to those offered to other member-borrowers.
1. 8.17.2.1. Procedural Requirements. Subject to the restructuring guidelines approved by the Board of Directors, a loan maybe restructured, the condition of which shall be contained in a resolution stating, among others the following:
  1. 8.17.2.1. The basis of or jurisdiction for the approval;
  2. 8.17.2.2. Determination of the borrowers capacity to pay, such as viability of the business; and
  3. 8.17.2.3. Nature and extent of protection of the SCC’s exposure.
2. 8.17.2.2. Approval Requirements. The approval/disapproval of restructured loans may be delegated by the Board of Directors to a committee or officers under existing restructuring guidelines set by the Board of Directors. Any action taken by the committee or officers shall be confirmed by the Board of Directors.
3. 8.17.3. Loans Receivable – Loans in Litigation. Loans in Litigation shall remain in this account during dependency of the legal proceedings until fully paid/restructured/foreclosed. All expenses incurred in litigation shall be charged to operations and lodged under Litigation Expense. The corresponding memorandum entries shall be made on the individual ledger account for reimbursement by the borrower during redemption of foreclosed properties.

Section 8.18. Loan Portfolio and Other Risk Assets Review System.

The SCC shall take timely and adequate management action to maintain the quality of loan portfolio and other risk assets. To ensure this, the management shall:

8.18.1. Set up and maintain adequate loan reserves at a level sufficient to absorb the loss inherent in the loan portfolio and other risk assets;
8.18.2. Establish a system of identifying and monitoring existing or potential problem loans and other risk assets; and
8.18.3. Evaluate credit policies vis-à-vis prevailing circumstances and emerging portfolio trends.

Section 8.19. Booked allowance for probable losses on loans (APLL) while the account is in the non-performing portfolio.

The amount of allowance for probable losses already booked while the account is still in the non-performing portfolio shall be used to cover required APLL for other accounts.

Section 8.20. Extension/Renewal of Loans.

Except for home building and home development loans, extension of the period of payment of loans shall not exceed one-half (1/2) of the original period: Provided, That the thirty percent (30%) of the loan shall have been paid. A second extension may be further granted but not to exceed one-half (1/2) of the period of the first extension. No further extension shall be granted after the second extension.

Section 8.21. “Truth in Lending Act” Disclosure Requirements.

Whenever applicable, SCCs shall conform to the provisions of R.A. 3765, otherwise known as the ”Truth in Lending Act” (Appendix K) and shall make the true and effective cost of borrowing an integral part of every loan contract.

Section 8.22. Treatment of Assets Acquired in Settlement of Loans

8.22.1. The property acquired in settlement of loans through foreclosure or dacion en pago (“payment in kind”) shall be booked or recorded in the amount equivalent to the balance of the loan (principal for time loans, or principal less interest payment deducted in advance) or bid (in the case of foreclosure)/agreed purchase price (in the case of dacion en pago), whichever is lower:
8.22.2. When the booked amount of the asset acquired in settlement of loans exceeds the appraised value of the acquired property, an allowance for probable losses equivalent to the excess of the amount booked over the appraised value shall be set-up.
8.22.3. Non-refundable capital gains tax and documentary stamp tax paid in connection with foreclosure/purchase of the acquired real estate property maybe included in the book value of the acquired real estate: Provided That the total book value does not exceed the appraised value of the acquired real estate: Provided further, That if the amount to be booked as ROPOA exceeds P5 million, the appraisal of the foreclosed/purchased asset shall be conducted by an independent appraiser acceptable to the AUTHORITY.
8.22.4. Any excess in loan balance over the amount booked shall be charged to “Alllowance for Probable Losses on Loans, if previously provided. Otherwise, such amount shall be charged to Miscellaneous Expense account.
8.22.5. Claims arising from deficiency judgments rendered in connection with the foreclosure of mortgaged properties shall be booked when collected as Miscellaneous Income.

Section 8.23. Appraisal of Properties to be foreclosed or acquired.

Before closing or acquiring any property in settlement of loans and other advances, it must properly be appraised to determine its true economic value. If the total amount to be booked as ROPOA exceeds P5 million, the appraisal must be conducted by an independent appraiser acceptable to the AUTHORITY. An in-house appraisal of such property shall be made at least every other year: Provided, That immediate re-appraisal shall be conducted on ROPOAs which materially decline in value.

Section 8.24. Investments.

A SCC may at times have funds in excess of its needs for loans to members that may be invested in safe and sound business activities to maximize profit.

Section 8.25. Investment Program.

A sound investment program shall be the sole responsibility and accountability of the Board of Directors. The scope of the program will depend largely on the SCC size and the extent of its surplus funds. Investment policies should be reduced to writing and should address at least the following:

8.25.1. Legality. Investments must comply with Article 79 of RA 6938. The Board of Directors is responsible for determining that they do.
8.25.2. Safety, Liquidity and Yield. Sound investment policies assume a conservative approach in balancing safety, liquidity and yield. In this connection, liquidity means the ability to respond quickly to anticipated and unanticipated shifts in the SCC’s flow of funds. Safety and yield should be carefully weighed prior to undertaking any investment that could result in a loss to the SCC. If a brokerage firm is used, the Board of Directors should satisfy itself as to the reliability and financial soundness of the firm.
8.25.3. Diversification. A policy of diversification shall be employed to maximize profitability. Such policy is particularly useful for SCC that invest in marketable securities. The board’s policies should clearly address diversification and specially note any limitations it may place on the types of investments, quantities and maturities to be purchased.
8.25.4. Delegation of Authority. The board may delegate specific investment authority to an executive committee, an investment committee, or a management official.
8.25.5. Valuation/Assessment of Securities. For purposes of fund management, the market value of securities must be assessed regularly (e.g. monthly, quarterly, semiannually, or annually).

Section 8.26. Allowable Investments.

A cooperative may invest in the following:

8.26.1. Shares or debentures of the federation or union of which it is a member;
8.26.2. Securities issued by cooperatives as may be authorized by law;
8.26.3. Any reputable bank;
8.26.4. Bonds, securities, and other obligations issued by the Government of the Philippines, or any of its political subdivisions, instrumentalities or corporations including government owned or controlled corporations, subject to such rules and regulations as the Authority may provide, in an aggregate amount not exceeding at any one time ten percent (10%) of the total assets of such cooperative;
8.26.5. Shares of stocks listed in the Philippine Stock Exchange (PSE) that are non-speculative in an aggregate amount not exceeding at any one time ten percent (10%) of the surplus of such cooperative: In this case, prior approval of the Authority shall be obtained; and
8.26.6. Real estate and improvements, including equipment, which shall not exceed fifty percent (50%) of the cooperative’s net worth as required in Section 8.02 (B) of this manual.

Section 8.27. Ceiling on SCC Investments.

The SCC shall not invest in any one entity of more than 20% of the book value of its total assets.

Article 9 Internal Control

Section 9.1. Definition of Internal Control.

Internal control comprises the plan of organization and all of the coordinate methods and measures adopted to safeguard the cooperative’s assets, check the accuracy and reliability of its accounting data, promote operational efficiency, and encourage adherence to prescribed managerial policies.

Section 9.2. Components of Internal Control

9.2.1. Accounting Control. This includes a plan of organization, procedures and records that are concerned with the safeguarding of assets and the reliability of financial records. Accounting controls are designed to provide reasonable assurance that:
1. 9.2.1.1. Transactions are executed with authorization;
2. 9.2.1.2. Transactions are recorded as necessary to:
  1. 9.2.1.1. Permit preparation of financial statements in conformity with GAAP;
  2. 9.2.1.2. Maintain accountability of assets;
  3. 9.2.1.3. Access to assets is permitted with management’s authorization; and
  4. 9.2.1.4. Record accountability for assets to compare with existing assets at reasonable intervals and take appropriate action whenever there are differences.
9.2.2. Accounting System. Accounting system pertains to the series of tasks in an entity by which transactions are processed as a means of maintaining financial records. If supplemented by internal control, it provides management with reasonable assurance that assets are safeguarded from unauthorized use or disposition. The essential purpose of an accounting system is to provide management with the complete and accurate financial information it needs to conduct sound and effective operations. The financial statements produced by the system are used by management to account to the members, creditors, the Authority and the general public.
9.2.3. Administrative control. This includes, but is not limited to, the plan of organization and the procedures and records that are concerned with the decision processes leading to management’s authorization of transactions.

Section 9.3. Internal Control Standards.

The following provisions are the minimum internal control standards for SCCs to attain efficiency and provide checks and balances:

9.3.1. Management Structure. The internal organization should provide for a management structure with clear accountability, a board of directors with ability to provide independent check on management and independent audit and compliance functions, and should follow the “four eyes” principle i.e., segregation of various functions, cross checking, dual control of assets and double signatures. For this purpose, the following records/data shall be compiled and made available for the inspection of duly authorized examiner:
1. 9.3.1.1. Records showing compliance with independent balancing procedures. These records should indicate the accounts and the periodic balancing procedures performed.
2. 9.3.1.2. Statements of actual duties of persons assigned to handle cash and securities
3. 9.3.1.3. All internal control audit reports or their equivalent.
4. 9.3.1.4. Information/data on the direct and/or indirect equity shareholdings in connection with any firm, partnership, corporation or other cooperatives of all the directors, officers as defined should be maintained.
5. 9.3.1.5. Information/data pertaining to the electronic data processing (EDP) department of the SCC particularly on organization, input controls, processing controls, output controls, software controls, program and documentation standards, logs on the operation of mainframes and peripherals, hardware controls and such other EDP internal control standards prescribed in existing separate rules and regulations.
9.3.2. Handling of SCC Deposit Accounts
1. 9.3.2.1. Opening and closing of deposit accounts shall be approved or authorized by the Board of Director;
2. 9.3.2.2. Checks issued by the SCC on cancelled transactions shall immediately be cancelled/perforated; and
3. 9.3.2.3. Reports on closed accounts and returned checks shall be prepared daily.
9.3.3. Handling of Member Deposit Accounts
1. 9.3.3.1. All new deposit accounts shall be approved or authorized by the designated officer.
2. 9.3.3.2. Signature cards and deposit ledger sheets shall be authenticated by some form of validation. Subsequent changes shall also be validated.
3. 9.3.3.3. Signature cards and deposit ledger sheets shall be accessible only to authorized persons.
4. 9.3.3.4. Deposit tickets shall be occasionally examined at irregular intervals to determine that postings are made on the actual date deposits are received.
5. 9.3.3.5. A system to identify member-depositors shall be established.
6. 9.3.3.6. Reports on closed accounts of members shall be prepared on a regular basis.
9.3.4. Handling of Dormant/Inactive Accounts. Dormant or inactive accounts are accounts showing no activity (deposit or withdrawals) for a period of two (2) years. As a matter of policy:
1. 9.3.4.1. SCCs shall review and segregate dormant/inactive account as herein defined at least once in every semester.
2. 9.3.4.2. It shall exert all efforts to prevent savings accounts from being dormant. When it becomes apparent that an account is inactive, a short letter should be sent to the depositor encouraging him to use his account.
3. 9.3.4.3. Dormant/inactive accounts shall be segregated from active files. Segregated dormant/inactive accounts, including signature cards and deposit ledger sheet, shall be placed under joint custody of two (2) responsible officers/employees.
4. 9.3.4.4. A subsidiary ledger control for individual dormant/inactive accounts shall be maintained.
5. 9.3.4.5. Entries to dormant/inactive account ledgers shall be verified and approved by a designated officer. His initials shall be placed next to the entry on the ledger sheet.
6. 9.3.4.6. All inquiries on dormant/inactive accounts shall be coursed to one officer who should obtain sufficient identification from the inquirer to assure that he is entitled to the information.
7. 9.3.4.7. A schedule of dormant/inactive account shall be prepared periodically by an employee other than the bookkeeper and shall tally the same with the general control account.
8. 9.3.4.8. All transactions affecting dormant/inactive accounts shall be subject to audit by the internal auditor.
9. 9.3.4.9. A semestral report on deposit accounts transferred to dormant shall be rendered to management and the Authority.
10. 9.3.4.10. A SCC may impose service charges on and deduct the same from dormant/inactive accounts, Provided That, after five (5) years reckoned from the date the account was declared dormant/inactive, the remaining balance, if any, shall be credited to the reserve fund.
9.3.5. Proper Accounting Records
1. 9.3.5.1. To assure compliance with the attributes of an effective and transparent cooperative accounting and financial information system, all SCCs shall follow the generally accepted accounting principles and standards as spelled out in the Standard Chart of Accounts for Credit and Other Types of Cooperative with Savings and Credit Services and the accompanying Accounting Manual (CDA Memo Circular 02-04, Appendix L)
2. 9.3.5.2. A SCC shall adopt the Guidelines for the Operationalisation of the Cooperative’s Bookkeeping/Accounting System under Memo Circular 94-008
3. 9.3.5.3. SCC shall maintain up-to-date and adequate accounting records. It shall contain sufficient detail so that an audit trail is established.
4. 9.3.5.4. Prior to approval, all vouchers shall bear the initials of both the person authorized to prepare and another person authorized to check.
9.3.6. Independent Balancing. Independent balancing shall mean that records posted by a person or cash held by a teller or cashier shall be balanced or counted by another person. The following minimum independent balancing procedures shall be adopted:
1. 9.3.6.1. Monthly reconciliation of general ledger balances against respective subsidiary and supporting records and documentation by someone other than the bookkeeper or the person handling the records;
2. 9.3.6.2. Irregular and unannounced count of teller’s cash and checks and other cash items at least twice a month by the auditor/control officer or by an officer not connected with cash department unit;
3. 9.3.6.3. Presence of incumbent tellers/cashiers during actual cash count by any authorized person or during examination by the Authority;
4. 9.3.6.4. Monthly reconciliation of due from banks, cash in bank accounts and due from/to head office/branches by someone other than the person handling the records or posting the general ledger entries
5. 9.3.6.5. Periodic verification of securities and collaterals by a person other than their custodian; and
6. 9.3.6.6. Periodic verification of the accuracy of the interest credits to deposit liabilities accounts.
9.3.7. Division of Duties and Responsibilities
1. 9.3.7.1. The duties of all the officers and employees shall be segregated, clearly defined, understood, documented and manualized. No individual shall have complete authority and responsibility for handling all phases of any transaction from beginning to end, without checks and balances from other parts of the organization;
2. 9.3.7.2. The physical handling of a transaction shall be separated from its recording and supervision as follows:
  1. 9.3.7.1. A person handling cash shall not be permitted to have access to the four (4) books of accounts (cash receipt book, cash disbursement book, general journal and general ledger) and subsidiary ledgers;
  2. 9.3.7.2. The person posting to the subsidiary ledger should not be allowed to record to the books of accounts;
  3. 9.3.7.3. A loan officer/account officer shall not be allowed to receive and disburse loan proceeds, for and in behalf of the borrowers, and accept loan payments nor post to the subsidiary loan ledgers
  4. 9.3.7.4. A loan officer/account officer/collector shall not be allowed to use the collections of any type in accommodating savings withdrawal;
  5. 9.3.7.5. The functions of issuing, recording and signing of drafts/checks shall be separated;
  6. 9.3.7.6. Checks and other cash items shall be in the custody of an employee not handling cash and that adequate controls are properly maintained as to the custody and disposition of funds;
  7. 9.3.7.7. The receipt of statements from depository banks shall be assigned to an employee other than the one connected with the preparation, recording and signing of bank drafts;
  8. 9.3.7.8. Custodians of securities shall not be allowed to handle security transactions;
  9. 9.3.7.9. Collateral appraisal shall be done by an employee/officer who does not approve loans;
  10. 9.3.7.10. Incoming checks and other cash items shall be recorded chronologically in a register by an employee other than the bookkeeper before they are forwarded for posting purposes;
  11. 9.3.7.11. Credit reports shall be obtained by a personnel other than loan officers;
  12. 9.3.7.12. Mailing of customers’ statements and delinquent notices shall be done by an employee other than the one who granted the loan or the one handling the records; and
  13. 9.3.7.13. Extensive background checking of persons intended to be assigned to handle cash and securities shall be conducted. Periodic checking after their employment shall also be made.
9.3.8. Rotation of Duties
1. 9.3.8.1. The full-time personnel handling cash, securities, loan accounts and bookkeeping records shall be rotated, Provided that the personnel handling treasury functions shall not be rotated tom positions handling accounting functions and vice versa;
2. 9.3.8.2. Rotation shall be random, unannounced and long enough to permit disclosure of any irregularities of manipulations;
3. 9.3.8.3. Prior to rotation proper, turn-over of cash accountabilities and records shall have been made.
9.3.9. Joint Custody. Joint custody shall mean the requirement of the presence of and direct observation of a second person in the performance of important tasks and functions. Both persons shall be equally accountable for the physical protection of the items and records involved. Persons who are related to each other within the third degree of consanguinity or affinity shall not be made joint custodians. Joint custody shall be required on the following:
1. 9.3.9.1. On the Operation of the Vault Compartment.
  1. 9.3.9.1. Physical protection shall be deemed established through the use of two (2) locks or combination on a vault compartment.
  2. 9.3.9.2. Persons who have access to the vault compartment shall not have access to the key to the entrance leading to the vault compartment.
  3. 9.3.9.3. Two (2) or more persons shall be assigned to each half of the control so that operating efficiency is not impaired if the one (1) person is not immediately available.
2. 9.3.9.2. On the Handling of Cash and Vital Documents
  1. 9.3.9.1. Cash in vault and in ATM cash dispensers;
  2. 9.3.9.2. All accountable forms;
  3. 9.3.9.3. Collaterals;
  4. 9.3.9.4. Securities;
  5. 9.3.9.5. Documents of title and/or ownership of properties or fixed assets
  6. 9.3.9.6. Dormant or inactive deposit ledgers/MIS print-outs and corresponding signature cards including on-line posting of dormant/inactive accounts;
  7. 9.3.9.7. Collection items;
  8. 9.3.9.8. Vault door and safe combinations;
  9. 9.3.9.9. Unissued specimen signature books;
  10. 9.3.9.10. Unissued and captured ATM cards and similar devices;
  11. 9.3.9.11. Access locks and keys to on-line MIS terminals and similar devices; and
  12. 9.3.9.12. Access locks and keys to MIS mainframes and peripherals.
9.3.10. Signing Authorities. The Board of Directors shall approve signing authorities for the different levels of officers to sign for and in behalf of the SCCs and the extent of each level of authority shall be clearly defined. These signing authorities shall include but need not be limited to the following:

· Lending;

· Investment;

· Disbursements;

· Various supervisory reports;

· Checks;

· Certificate of Time Deposits; and

· Contracts or Agreements.
9.3.11. Dual Control. Dual control shall mean the work of one (1) person is to be verified by a second person to ensure that the transaction is properly authorized, recorded and settled. The routine and completion of each transaction shall involve at least two (2) duly authorized individuals. Except as herein provided, the following accounts/transactions shall be under dual control:
1. 9.3.11.1. Checks - The signature of at least two (2) officers should be required in the issuance of checks. The board of directors may, however, prescribe a predetermined amount by which one (1) senior officer can sign checks, subject to appropriate control measures;
2. 9.3.11.2. Certificates of Time Deposit
  1. 9.3.11.1. The board of directors of a SCC is given the discretion to determine the number of signatories for the issuance of certificates of time deposits (CTDs);
  2. 9.3.11.2. For this purpose, all SCCs shall submit to the Authority their respective internal control measures for the issuance of the Certificate of Time Deposits (CTDs), the minimum of which shall include the following activities:
    1. 9.3.11.2.2.1. Joint custody of unissued CTD forms;
    2. 9.3.11.2.2.2. Accounting for all unissued/cancelled CTDs;
    3. 9.3.11.2.2.3. Signature requirement for the issuance of CTDs;
    4. 9.3.11.2.2.4. Counterchecking of issued CTDs against the teller’s proofsheets/validated slips; and
    5. 9.3.11.2.2.5. Recording of CTD transactions
  3. 9.3.11.3. Borrowings. The signature of at least two (2) authorized officers should be required.
  4. 9.3.11.4. Due to and Due From Accounts. All transactions giving rise to Due to or Due from accounts and all instruments of remittances evidencing these transactions shall be approved by two (2) authorized officers.
9.3.12. Number Control
1. 9.3.12.1. Sequence number controls shall be incorporated in the accounting system and shall be used in registering promissory notes, in issuing official checks and in other similar situations.
2. 9.3.12.2. The Audit Committee shall be responsible for and monitor the sequence number controls.
3. 9.3.12.3. The following are the forms, instruments and accounts that shall be number-controlled:
· Promissory notes;

· Savings deposit accounts and passbook;

· CTDs;

· Signature Cards;

· Official and provisional receipts;

· Share Certificate;

· Loan accounts;

· Expense and check vouchers; and

· MIS batch transmittal slips of documents.
9.3.13. Confirmation/Verification of Accounts. At least once a year, the internal auditing staff shall confirm by direct verification with SCC members/clients the following:
1. 9.3.13.1. Balances of loans and credit accommodations of borrowers;
2. 9.3.13.2. Deposit account balances particularly new deposit accounts, inactive or dormant accounts and closed accounts;
3. 9.3.13.3. Outstanding balances of borrowings and other liabilities; and
4. 9.3.13.4. Outstanding balances of receivables/payables.
9.3.14. Records Preservation System. A SCC shall be required to establish a records preservation system for the off-site storage of duplicate vital records, which can be used for reconstruction purposes in the event of a catastrophe. The vital records center is defined as any location far enough from the SCC’s office to avoid the simultaneous loss of both sets of records in the event of disaster.
1. 9.3.14.1. At least the following records, as of the most recent month end, must be stored:
  1. 9.3.14.1. A list of share and/or deposit and loan balances for each members’ accounts
  2. 9.3.14.2. Multiple loans of one account will be listed separately
  3. 9.3.14.3. Information sufficient to enable the SCC to locate each member, such as address and telephone number, shall also be included, unless the board of directors determine that such information is readily available from another source.
  4. 9.3.14.4. A financial report which lists all of the SCC’s assets and liability accounts
  5. 9.3.14.5. A list of the SCC’s banks, insurance policies and investments. This information may be marked “permanent” and be updated only when changes are made.
  6. 9.3.14.6. Records must be stored every three (3) months, within thirty (30) days after the end of the 3 month period. Previously stored records may be destroyed when the current records are stored.
  7. 9.3.14.7. A records preservation log will be maintained showing what records were stored, where the records were stored, when the records were stored, and who authorized the records for storage.
  8. 9.3.14.8. Stored records may be in any format that can be used to reconstruct the SCC’s records. Format includes paper originals, machine copies, microfilm or fiche, magnetic tape, etc.
  9. 9.3.14.9. SCC that have some or all of their records maintained by an off-site data processor are considered to be in compliance for the storage of those records.
9.3.15. Security Program. Each SCC shall be required to institute a written security program to protect the cooperative office from robberies, burglaries, larcenies and embezzlements; to prevent destruction of vital records as defined herein and to assist in the identification of persons who commit such crimes.
9.3.16. Change in Internal Control Measures. Any change in the internal control measures shall be submitted to the Authority not later than thirty (30) days prior to the implementation. For newly established SCCs, the requirement shall be submitted not later than a month from the start of operations.

Section 9.4. Independence of the Internal Auditor

9.4.1. The position of internal auditor shall be created and provided for in the by-laws of the SCCs indicating the duties and responsibilities thereto. The scope and objectives of internal audit shall likewise be defined.
9.4.2. The internal auditor shall not be a member of the audit committee.
9.4.3. The internal auditor shall report directly to the audit committee.
9.4.4. The internal auditor shall not install nor develop procedures, prepare records or engage in other activities which he normally reviews or appraises.
9.4.5. The internal auditor shall not be related to any officer and employee of the SCCs up to the fourth degree of consanguinity or affinity.

Section 9.5. External Auditor

9.5.1. SCCs shall engage the services of an independent certified public accountant duly recognized/accredited by the CDA to audit their books of accounts at least once a year;
9.5.2. The same individual external auditor, whether on his/her individual capacity or as partner of a firm, shall not undertake the external audit of the concerned cooperative for three (3) consecutive years.
9.5.3. SCCs which have engaged their respective external auditors for a consecutive period of three (3) years or more as of date the effectivity of this Manual, shall have a one-year period from said date within which to either change their external auditors or rotate the lead and/or concurring partner.
9.5.4. A SCC shall not engage the services of an external auditor whose partner or auditor-in-charge of audit engagement during the preceding year has been hired or employed by the SCC as Chief Executive Officer, Chief Financial Officer, Controller, Chief Accounting Officer or any position of equivalent rank.
9.5.5. It shall not also engage the services of an external auditor who is a member/officer of the SCC to which he/she belongs to or of any federation/union to which the SCC is affiliated.
9.5.6. The external auditor shall not be related to any officer and employee of the SCCs up to the fourth degree of consanguinity or affinity
9.5.7. When warranted, the AUTHORITY may, at the expense of the SCC require the external auditor to undertake a specific review of a particular aspect of the operations of the SCC. The report shall be submitted to the AUTHORITY and to the audited SCC simultaneously, within thirty (30) calendar days after the conclusion of the review.

Section 9.6. Disclosure of external auditor’s adverse findings.

9.6.1. To enable the AUTHORITY to take timely and appropriate remedial action, the external auditor must report to the AUTHORITY within thirty (30) calendar days after discovery, the following cases:
1. 9.6.1.1. Any material finding involving fraud or dishonesty (including cases that were resolved during the period of audit);
2. 9.6.1.2. Any potential losses the aggregate of which amounts to at least one percent (1%) of the paid-up share capital; and
3. 9.6.1.3. Inability of the auditor to confirm that the claims of the creditors can still be covered by the SCC’s assets.
9.6.2. The external auditor shall report directly to the AUTHORITY within fifteen (15) calendar days the occurrence of the following:
1. 9.6.2.1. Termination or resignation as external auditor, prior to the expiration of the contract, and stating the reason thereof;
2. 9.6.2.2. Discovery of a material breach of cooperative laws or these rules and regulations such as, but not limited to:
  1. 9.6.2.1. Net worth to risk assets ratio; and
  2. 9.6.2.2. Loans and other risk assets review and classification using portfolio at risk.
  3. 9.6.2.3. Findings on matters of cooperative governance that may require urgent action by the AUTHORITY.
3. 9.6.2.3. The management of the SCC shall be informed of the adverse findings and the external auditor’s report to the AUTHORITY, include its explanation and/or recommended corrective action.
4. 9.6.2.4. The management of the SCC shall be given the opportunity to be present in the discussions between the AUTHORITY and the external auditor regarding the audit findings, except in circumstances where the external auditor believes that the entity’s management is involved in fraudulent conduct.

Section 9.7. Miscellaneous Provisions on Internal Control

9.7.1. Loan applications and related documents shall be verified to ensure their authenticity particularly the name, residence, employment and current reputation of the borrower and co-maker, if any;
9.7.2. No employee shall be permitted to process transaction affecting his own account;
9.7.3. Tellers and other employees shall be prohibited from preparing deposit slip, withdrawal slip or other forms for the customers;
9.7.4. At any given time, tellers shall be allowed to have under their custody only up to a specific maximum amount of accountability as may be determined by the Board of Directors of the SCC. All cash in excess of this maximum amount shall be turned over to the cashier as the maximum limit is breached;
9.7.5. All checks received by the tellers shall be immediately stamped “For Deposit” to a specific deposit account of the SCC. These checks shall be deposited on the same day, except those which were received after the close of banking hours of the SCC’s depository bank/s. Such checks shall be kept under the joint custody of Board-designated officers who shall see to it that the same are promptly deposited on the following business day;
9.7.6. All SCC shall have a sound personnel policy; and
9.7.7. All accountable officers and employees shall be bonded.

Section 9.8. Other Internal Control Principles

9.8.1. Financial Management. Effective financial management is the basis for meeting sound financial objectives. By properly utilizing SCC resources, good management balances the extension of SCC services with the achievement of safe and sound operations. It provides for a fair return to members in the form of well-designed services and reasonable interest on share capital. At the same time, it allows for continued growth of the SCC and enhances and protects members’ equity. Financial management embraces a number of SCC programs. Of particular significance are the following:
9.8.2. Savings and Share Capital Build-up Program. Savings and share capital accounts are the primary source of SCC funds. Meeting the members’ thrift needs is a major consideration when deposit and share capital policies are established. The SCC must also, however, weigh the cost of these funds and match these accounts with assets of similar maturities. For example, if a SCC’s assets are mostly in long-term loans, deposit account policies should strive to offer deposit accounts with extended maturity and restricted withdrawal features. On the other hand, if a SCC’s assets are mostly in short-term loans, the SCC might offer just regular savings and short-term time deposit accounts.
9.8.3. Interest on Share Capital and Savings Deposits. Realistic interest on share capital and savings policies should also be established. When setting these rates, the board should carefully consider the SCC’s funding needs and market conditions. In the interest of sound financial management, the Board should avoid increasing interest on share capital in order to achieve rapid share growth. Such growth often results in excess liquidity which in turn can adversely affect earnings. The board shall set policies on savings deposit and interest on share capital with regards to payments, interest and methods of computation as provided for in Sections ____ and _____of this manual.
9.8.4. Lending Program. A sound-lending program is essential to the achievement of a SCC’s purpose. It enables a SCC to meet members’ needs while at the same time achieving the board’s financial objectives. A realistic approach should be taken in balancing members’ needs with SCC resources. The program should take into account a SCC’s financial structure and funds flow, its short- and long-range goals and objectives, and local economic conditions.
9.8.5. Loan Collections. Collection of loans is a vital part of a lending program. Effective loan collection contributes to a SCC’s ability to sustain loan services and to maintain a sound financial position. The board of directors should establish collection policies designed to keep loan delinquency to a minimum. While these policies may differ from one SCC to another, the following characteristics should be evident: prompt and accurate delinquent loan reporting to the board; timely and consistent follow-up actions; utilization of outside collection sources when internal efforts fail to produce results; and maintenance of collection records. While loan collections may be delegated to a committee or staff member(s), the board has the responsibility of exercising close control over the program.
9.8.6. Borrowings. SCC borrows funds from their creditors on a temporary basis. Properly planned, borrowing can stimulate growth, help meet financial objectives through a period of tight money, and satisfy seasonal or other temporary needs. It should not be a substitute for an effective thrift promotion program or a stop-gap attempt to replenish funds. The board shall recommend for the approval of the general assembly, borrowing policies, which include the conditions under which borrowings may be allowed. It shall approve and confirm all borrowings by the SCC in accordance with the approved policies. It may delegate the authority to negotiate such borrowings to the executive committee, financial officer, or general manager. The board’s borrowing and repayment plans should be coordinated with all other aspects of financial management.
9.8.7. Funds Management. Also referred to as asset/liability management, funds management is the continuing arrangement and rearrangement of both sides of a SCC’s balance sheet to obtain reasonable profits and provide for adequate liquidity and safety. It focuses on short-run adjustments of assets and liabilities to compensate for variations in the flow of funds. In the long run, a SCC’s success depends on reconciling the different elements involved in obtaining and using funds. Since a SCC must have sufficient liquid assets to meet loan demand, deposit withdrawals, share capital refund due to resignation and other short term liabilities, a funds management program is vital irrespective of the SCC’s size.
1. 9.8.7.1. The basis for applying funds management strategy is a thorough knowledge of the makeup of a SCC’s field of membership; the nature of its assets and liabilities; and the economic and competitive environment in which it operates. Funds management techniques should be applied with a full understanding of the characteristics of the individual SCC.
2. 9.8.7.2. The following are considered essential elements of an effective funds management program:
  1. 9.8.7.1. Regular evaluation of the SCC’s asset and liability structure;
  2. 9.8.7.2. Regular assessment of asset yields and liability costs;
  3. 9.8.7.3. Adequate planning for current and future liquidity needs; and
  4. 9.8.7.4. An on-going determination that policies are sufficient to efficiently structure assets and liabilities in order to meet changing economic conditions.
  5. 9.8.8. Management Information System. A necessary ingredient for sound financial management is a workable management information system.
    1. 9.8.8.1. Reports containing basic financial information should be prepared and reviewed on a regular basis.
    2. 9.8.8.2. Report formats and content will vary from one SCC to another, depending on the characteristics of each and its funds management methods.
    3. 9.8.8.3. The reports should, however, contain at least the following information:
      1. 9.8.8.1. Budgetary projections of income, expenses, and profitability.
      2. 9.8.8.2. Asset yields and liability costs.
      3. 9.8.8.3. Liquidity needs and sources of funds available to meet those needs, including the remaining maturities of all assets and liability accounts.
      4. 9.8.8.4. Economic and competitive conditions in the cooperative’s market area.

Section 9.9. Standard Audit System for Cooperatives (SASC).

As mandated under Article 81 of RA 6938, SCCs shall be annually subjected to a financial audit by an external and independent auditor duly accredited and recognized by the Authority.

9.9.1. Audit Report. The auditor shall submit to the audit committee a report of the audit which shall contain a statement of the assets and liabilities of the cooperative, including earnings and expenses, amount of net surplus as well as losses and bad debts, if any. The audit committee shall forthwith furnish the Board of Directors a copy of the audit report. Thereafter, the Board of Directors shall present the complete audit report to the general assembly in its next meeting.
9.9.2. Audited financial statement may either be submitted together with the cooperative’s Annual Report as required under Article 54 of RA 6938 or submitted separately within one hundred twenty (120) days after the closing of the calendar year. The audited financial statements submitted shall meet the following requirements:
1. 9.9.2.1. Standard format in the presentation of the audited financial statements with comparative figures of the immediately preceding year;
2. 9.9.2.2. Strict observance of the notes to Financial Statements and other disclosures as required by Section A of the SFAS No. 1;
3. 9.9.2.3. Indirect method presentation of the Statement of Cash Flows and Statement of Changes in Statutory Funds with comparative figures of the immediately preceding year;
4. 9.9.2.4. Summary of auditor’s findings, to include financial ratios and recommendations; and
5. 9.9.2.5. Statement of representation of the external auditor to the AUTHORITY
9.9.3. Non-liability of Defamation. An auditor is not liable to any person for defamation based on any act done, or any statement made by him in good faith in connection with any matter he is authorized or required to do or pursuant to the Code.

Article 10 Performance Standards for SCCs (COOP-PESOS)

Section 10.1. Compliance with Administrative and Legal requirements

10.1.1. Bureau of Internal Revenue Requirements.
1. 10.1.1.1. Registration as non-EVAT
2. 10.1.1.2. Filing of Account Information
3. 10.1.1.3. Withholding of appropriate taxes (which includes taxes or honoraria)
4. 10.1.1.4. Certificate of Tax Exemption
5. 10.1.1.5. Registration of Books of Accounts
10.1.2. Workers’ Compensation. Regular employees of a SCC shall comply with the various provisions of labor law, in particular,:
1. 10.1.2.1. Minimum Wage and 13^th Month Pay
2. 10.1.2.2. Social Security System
3. 10.1.2.3. Philhealth
4. 10.1.2.4. HDMF (Pag-Ibig)
10.1.3. Business Permit. A SCC shall secure its business permit license from the Local Government Unit.
10.1.4. Accounting Books and Records. As required under Memo Circular 97-04 of the AUTHORITY, the books and records of accounts of the cooperative shall be in accordance with Generally Accepted Accounting Principles (GAAP). The following books shall be kept and maintained by SCCs:
1. 10.1.4.1. Cash Receipts Books
2. 10.1.4.2. Cash Disbursement Book
3. 10.1.4.3. General Journal
4. 10.1.4.4. General Ledger
5. 10.1.4.5. Shares Book
10.1.5. Bond and Insurance Coverage. A SCC is required to obtain adequate bond coverage to protect it from direct losses resulting from dishonest and fraudulent acts of officials and employees and from losses such as theft and holdup caused by persons outside the SCC. The board of directors also has the important responsibility of securing other insurance to protect the SCC’s interest including fire, comprehensive, liability, and automobile insurance.

Section 10.2. Financial Transparency

10.2.1. Transparent Information. A policy of transparency and openness must always be maintained whereby books of accounts, general assembly and board resolutions and committee reports are properly kept and made accessible to members and regular financial statements are periodically prepared and made known to members, the Authority and other parties interested in the cooperative’s operations.
10.2.2. Financial Information System. Attributes of an effective and transparent cooperative accounting and financial information system:
1. 10.2.2.1. Clear and understandable for sound decisions and timely actions;
2. 10.2.2.2. Fairly stated where accounting policies shall be properly defined and accounting rules shall be consistently applied.
3. 10.2.2.3. Timely information shall be available on a regular basis to both the management and the members of the board of directors on a regular basis (e.g. monthly).
4. 10.2.2.4. Accessible to the concerned user and usable to the management and/or the board of directors.
5. 10.2.2.5. Comparable information that will allow the cooperative to compare results over time and among peer institutions.
10.2.3. Standard Chart of Accounts. All SCCs shall adopt the Standard Chart of Accounts and its accompanying Accounting Manual for Credit and Other Types of Cooperatives with Credit Services prescribed under Memorandum Circular No. 02-04, series of 2002 (Appendix L) issued by the AUTHORITY. The use of the common account title in their financial statements will facilitate comparison of their financial performance over time and across peers. The Accounting Manual which defines and prescribes the accounting systems and procedures to be adopted, will enable cooperatives to come up with a coherent and reliable set of information to be used in accomplishing the chart of accounts.

Section 10.3. Performance Standards

10.3.1. Indicators on management compliance to administrative requirements. These indicators comprise a set of questions that shall give information on the cooperative compliance with the legal and administrative requirements (Appendix O).
1. 10.3.1.1. Compliance with Administrative and Legal requirements. This includes a set of questions that looks at whether the SCC complies with the various legal requirements imposed by various institutions, i.e. CDA, BIR, Local Government Unit and DOLE.
2. 10.3.1.2. Organizational Structure and Linkage. This includes questions on the cooperative’s governance and membership structure, on affiliations and linkages with cooperative federations and other organizations involved in the promotion and development of cooperatives.
3. 10.3.1.3. Operation and Management. This includes indicators that determine presence or absence of the necessary system, policies and procedures for efficient and effective management of the SCCs including questions related to the Board of Directors and the cooperative management.
4. 10.3.1.4. Plans and Programs. This includes the parameters that determine whether the SCC has a development plan and an approved annual plans and budget. This also looks at whether the SCC reviews its performance vis-à-vis the projections in its business plan.
10.3.2. Indicators on Financial Performance (Appendix P)
1. 10.3.2.1. Portfolio Quality. This provides the managers and Board of Directors of SCCs appropriate tools in monitoring the quality and the level of risks of the loan portfolio of the cooperatives. This should be closely monitored inasmuch as the loan portfolio constitutes the bulk of the SCC’s assets. In view of this, it is also important that the risk of default is adequately 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 program of the cooperative. Two indicators are included in this group. These are:
  - Portfolio at Risk
  - Allowance for Probable Losses on Loans
2. 10.3.2.2. Efficiency. This 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 SCC to generate sufficient income to cover expenses on operations. Efficiency is important because it affects the profitability of the SCC’s portfolio and the return on members’ shares. Six (6) ratios/indicators are included in this group:
- Asset Yield Operational
- Self-Sufficiency
- Rate of Return on Members’ Share
- Loan Portfolio Profitability
- Cost per peso loan
- Administrative Efficiency
10.3.2.3. Stability. This determines whether financial services can be delivered to its members in a sustained manner. One way to do this is to increase the institutional capital of the cooperative instead of purely relying on the member’s share capital. This will allow the SCC to maintain sufficient liquidity to meet the financial needs of its members in a timely manner. Where the cooperative leadership commits itself to ascertain the sustainability in the cooperative structure, the membership of the cooperative will also be serious in strongly supporting their own cooperatives. Listed below are three (3) ratios/indicators under this category:
- Solvency
- Liquidity
- Net Institutional Capital
10.3.2.4. Operations. This highlights the new thrust for Philippine SCCs. The indicators and standards in this group call for minimizing dependence on external borrowings and greater emphasis on mobilizing voluntary savings from its members. Strong emphasis on mobilizing voluntary savings will enable cooperatives to have a continuous and cheaper sources of funds for its operations and, at the same, provide its members an alternative investment mechanism for their excess funds. This will result in the SCC’s less dependence on external borrowings and lower financial costs. The indicators are:
- · Performance of Membership Growth
- · Trend in External Borrowings
10.3.2.5. Structure of Assets. This helps ascertain the quality and the structure of the assets of the cooperative. These indicators and standards determine the extent of the share of the cooperative’s various assets to its total assets and assess the effective use of these assets to generate revenues. The following four (4) indicators are:
- Non-earning Assets / Total Assets
- Total Deposits / Total Assets
- Net Loans Receivables / Total Assets Total
- Members’ Share Capital / Total Assets

Section 10.4. Computation of COOP-PESOS.

The equivalent raw score for both the COOP and PESOS indicators are given the appropriate rating. The overall rating will be computed using a 20 percent weight for the COOP rating and 80 percent weight for the PESOS rating. A sample-rating sheet is shown in Appendix Q. The evaluator, in assessing the performance of the SCC, will use the sample-rating sheet.

Section 10.5. Overall Rating.

The raw score for each of the components is given an equivalent rating. The resulting rating for each of the component is given the appropriate weight to arrive at the overall rating. The following rating scale is used:

10.5.1. Rating 1 (96 to 100) – VERY GOOD. The SCC has strong performance that consistently provides safe and sound operations. SCCs in this group comply with cooperative rules and regulations and are resistant to external shocks and financial disturbances. They are also able to withstand unexpected adverse changes in business environment. These institutions do not need supervisory concern.
10.5.2. Rating 2 (90 to 95) – GOOD. The SCC shows satisfactory performance that consistently provides safe and sound operations. SCCs in this group are able to withstand business fluctuations well. However, there are some areas of concern that require important attention which if unchecked, can potentially develop into conditions of greater concern. Supervisory response is limited to minor adjustments to ensure that operations continue to be satisfactory and sustainable.
10.5.3. Rating 3 (80 to 89) – FAIR. The SCC’s performance is flawed to some degree and is a supervisory concern. Results of key performance measures indicate that safe and sound operations may be adversely affected. SCCs in this group are only nominally resistant to adverse business conditions and may deteriorate if identifiable areas of weakness are not corrected immediately.
10.5.4. Rating 4 (70 to 79) – POOR. The SCC has poor performance and is of serious supervisory concern. The SCC’s performance if left unchecked would lead to conditions that could threaten its viability. A high potential for failure is present but is not yet imminent. SCCs in this group require very close supervisory attention.
10.5.5. Rating 5 (below 70) – VERY POOR. The SCC has unsatisfactory performance and is in need of immediate remedial attention. SCCs in this group have a very high probability of failure and will likely require liquidation.

Article 11 Miscellaneous

Section 11.1. Confidential Information.

11.1.1. Directors, officers, employees or members of SCCs or of the Authority shall not disclose any information relating to member-borrowers and the operations of the SCC that are confidential in nature unless the disclosure of information is in accordance with the performance of his/her official duties and functions.
11.1.2. All deposits of whatever nature or shares with a SCC are considered absolutely confidential in nature, and may not be examined, inquired or looked into by any person or government official, bureau or office, except upon written permission of the member, or when the examination is conducted by the Authority, or in cases of impeachment, or upon order of a competent court.

Section 11.2. Cooperative Premises and Property and Equipment.

The following rules shall govern the premises and other fixed assets of SCCs:

11.2.1. Appreciation or increase in book value. Appreciation or increase in book value of SCC premises and other fixed assets is not allowed.
11.2.2. Ceilings. The total investment of a SCC in real estate and improvements thereof, including equipment shall not exceed fifty percent (50%) of the cooperative’s net worth. The investment shall include all real estate and equipment necessary for the cooperative’s immediate use in the transaction of its business. In determining compliance with such ceiling, the following are considered eligible investments:
1. 11.2.2.1. Cooperative Premises – Land, Buildings, Furnitures, Fixtures and Equipment including improvements and depreciation thereof, owned and used by the cooperative in the conduct of its business including staff houses, recreational facilities and landscaping costs, net of accumulated depreciation.
2. 11.2.2.2. Real properties, equipment or other chattels purchased by the SCC in its name for the benefit of its officers and employees, net of depreciation and in the case of land or other non-depreciable property, net of payments already made to the SCC by the officers and employees for whose benefits the property was bought, where such property has not yet been fully paid and ownership has not yet been transferred to them.
3. 11.2.2.3. The cost of real estate leased in whole or in part by the SCC from a corporation, other than a corporation primarily engaged in real estate in which the SCC has equity, equivalent to the amount obtained by applying the percentage of the equity of the SCC in the lessor to the cost of that portion of the property being leased, or the amount of equity in the lessor, whichever is lower.
11.2.3. Reclassification of real and other properties owned or acquired as SCC premises.
1. 11.2.3.1. Real and other properties owned or acquired (ROPOA) reclassified as SCC premises shall be booked at cost: Provided, That only such acquired asset or a portion thereof that will be immediately used or earmarked for future use may be reclassified and booked as SCC premises.
2. 11.2.3.2. Prior to the reclassification of the ROPOA accounts to SCC premises, prior approval of the AUTHORITY shall be secured before effecting the reclassification and the SCC shall submit, in case of future use, justification and plans for its expansion/use.

Section 11.3. Supervision and Examination of SCCs

11.3.1. Frequency of Examination. The AUTHORITY shall conduct, at least once a year and at such other times as it may deem necessary and expedient, an examination, inspection or investigation of the books and records, business affairs, administration and financial condition of any SCC to determine compliance with existing laws, circulars, rules and regulations, and other issuances.
11.3.2. Examination of Members of Deputized Federation/Union
1. 11.3.2.1. The CDA may, in accordance with the approved accreditation criteria, deputize a cooperative federation and/or union to conduct the examination of their member primaries.
2. 11.3.2.2. In cases where a SCC is a member of two or more deputized federations and/or unions, such cooperative shall choose only one (1) deputized federation and/or union where it will be subject to supervision and examination.
3. 11.3.2.3. The CDA shall regularly monitor and validate the performance of deputized federations and/or unions with regards to its supervision and examination functions.
11.3.3. Examination of Non-members of Deputized Federation/Union. SCCs that are not members of a deputized cooperative federation and/or union will be supervised and examined by the CDA until such time that the SCC becomes a member of a deputized cooperative federation and/or union.
11.3.4. Supervision and Examination Fees. SCC shall pay to the Authority a supervision and examination fee equivalent to 1/20^th of 1% of the SCC’s Average Assessable Assets (AAAs). The term “AAAs” shall be the sum of the end-of-month total assessable assets divided by the number of months in operation during the particular assessment period. The term “Total Assessable Assets” shall refer to total assets (end-of-month total assets per balance sheet), after deducting cash on hand and cash in bank.
1. 11.3.4.1. The Authority shall bill the SCC for the full amount of the supervision and examination fees.
2. 11.3.4.2. Within thirty (30) days from receipt of the bill, the SCC shall make the corresponding remittance to the Authority. Non-payment of the fees within the prescribed period shall subject the concerned SCC to the sanctions prescribed in Appendix I of this Manual and fines and penalties, thereon, shall be payable to the CDA.

Article 12 General Provisions on Sanctions

Section 12.1. Sanctions.

Any violation of the provisions of this manual shall be subject to the applicable sanctions as provided for below and Article124 of RA 6938, whenever applicable.

Section 12.2. Definition of Unsafe or Unsound Practice.

A SCC may be deemed to be engaging in an unsafe or unsound practice if it has deficiencies or less-than-satisfactory rating in the COOP-PESOS that, if not corrected, may materially or adversely affect the financial health of the cooperative.

Section 12.3. Monetary Penalty.

The rules and procedures of this Section shall apply to proceedings to assess penalties against any person or cooperative for violation of the provisions of the “Manual of Rules and Regulations for Savings and Credit Cooperatives” or any regulation, circular or order issued by the CDA pursuant thereto, in connection with the conduct of the affairs of the SCC.

12.3.1. Assessment of fines
1. 12.3.1.1. General Provision. Unless specifically provided for in this manual, any violation of the provisions of this manual or any regulation, circular or order issued by the CDA pursuant thereto, in connection with the conduct of the affairs of the SCC, shall be subjected to the following penalties.
2. 12.3.1.2. Amount of Penalty
  1. 12.3.1.1. Minor offense. Any person who violates any provision of the Manual or any rule, regulation, or order issued by the CDA pursuant thereto, shall pay a penalty of not more than P100 for each calendar day the violation continues.
  2. 12.3.1.2. Less grave offense. Any person who recklessly violates any provision of the Manual or any rule, regulation, or order issued by the CDA pursuant thereto; and engages in any unsafe or unsound practice in conducting the affairs of a SCC; or breaches any fiduciary duty; which violation, practice or breach is part of a pattern of misconduct; or causes or is likely to cause more than a minimal loss to such institution; or results in pecuniary gain or other benefit to such person, shall pay a penalty of not less than P100 but not more than P500 for each calendar day of such violation, practice or breach continues.
  3. 12.3.1.3. Grave offense. Any person who knowingly and willfully violates any provision of the Manual or any rule, regulation, or order issued by the CDA pursuant thereto; or engages in any unsafe or unsound practice in conducting the affairs of a depository institution; or breaches any fiduciary duty; and knowingly or recklessly causes a substantial loss to such institution or a substantial pecuniary gain or other benefit to such person by reason of such violation, practice or breach, shall pay a civil penalty not to exceed:
    1. 12.3.1.2.3.1. In the case of a person other than a SCC, P1,000 per day for each day the violation, practice or breach continues; or
    2. 12.3.1.2.3.2. In the case of a SCC, an amount equal to P5,000 or one percent of the total assets, whichever is lower, of such institution for each day the violation, practice or breach continues.
3. 12.3.1.3. Mitigating and Aggravating Factors.In assessing the amount of the penalty, the CDA shall consider the gravity of the violation, the history of previous violations, the respondent's financial resources, good faith, and any other matters as fairness and justice may require.
12.3.2. Filing of Appeal. The amount of penalty to be imposed shall be assessed upon the receipt by the person/s or SCC of a Notice of Assessment sent by the CDA, which shall become final and executory unless the person or persons involved requests for reconsideration or submits a written appeal to the CDA within seven (7) days from receipt of the Notice.
12.3.3. Failure to file an Appeal for Reconsideration.Failure of a person or SCC to file an appeal for consideration required by this section within the time provided constitutes a waiver of his or her right to appeal and contest the allegations in the notice of disapproval. A final order issued by the CDA Board of Administrators based upon a respondent's failure to answer is deemed to be an order issued upon consent.
12.3.4. Effective date of, and payment under, an order to pay. Penalties assessed pursuant hereto are due and payable within 60 days after an order to pay, issued after the hearing or upon default, is served upon the person/s or cooperative, unless the order provides for a different schedule of payment. A surcharge of ten percent (10%) shall be imposed on the assessed amount of penalty that was not paid on the prescribed deadline.
12.3.5. Collection of penalties. The CDA may collect any penalty assessed pursuant to this Section by agreement with the respondent, or the CDA may bring an action against the person/s or SCC to recover the penalty amount in the appropriate courts.

Section 12.4. Removal from Office of Erring Directors and Officers

12.4.1. Determining Factors. In determining whether an officer or director should be removed, prohibited or suspended, primary consideration shall be made by the CDA as to whether the SCC, officer or director took appropriate action to stop, or to prevent the recurrence of, a violation described herein:
12.4.2. Grounds for Removal. The following grounds shall be present before an officer or director can be removed from office:
1. 12.4.2.1. Whenever the CDA determines, after due notice and hearing, that such director or officer has, directly or indirectly:
  1. 12.4.2.1. Violated any law, rules and regulation, circular or any order issued by the CDA or any written agreement between the SCC and the CDA; or
  2. 12.4.2.2. Engaged or participated in any unsafe or unsound practice; or
  3. 12.4.2.3. Committed or engaged in any act, omission, or practice which constitutes a breach of the director’s or officer’s fiduciary duty; or
  4. 12.4.2.4. Knowledge that another director or officer is committing or has committed any of the acts enumerated above; and
2. 12.4.2.2. By reason of the violation, practice, or breach:
  1. 12.4.2.1. The SCC has suffered or will probably suffer financial loss or other damage; or
  2. 12.4.2.2. The interests of the SCC’s members have been or could be prejudiced; or
  3. 12.4.2.3. The director or officer has received financial gain or other benefit by reason of such violation, practice, or breach; and
  4. 12.4.2.3. Such violation, practice, or breach:
    1. 12.4.2.1. Involves personal dishonesty on the part of the director or officer; or
    2. 12.4.2.2. Demonstrates willful or continuing disregard for the safety or soundness of the SCC.
12.4.3. Notice of Intention. Notice of intention to remove from office shall immediately be served to the director or officer concerned. Such notice shall contain a statement of the facts constituting grounds for removal, and shall fix a time and place at which a hearing will be held thereon.
12.4.4. Conduct of Hearing. The hearing shall be fixed for a date not earlier than thirty days nor later than sixty days after the date of service of such notice, unless an earlier or a later date is set by the CDA at the request of the concerned director or officer, and for good cause shown.
12.4.5. Voluntary Consent. Unless the director or officer shall appear at the hearing in person or through a duly authorized representative, the director or officer shall be deemed to have consented to the issuance of an order of such removal.
12.4.6. Issuance of Order. If during the hearing, the CDA shall find that any of the grounds specified in such notice have been established, the CDA may issue the orders of suspension or removal from office, or prohibition from participation in the conduct of the affairs of the SCC, as it may deem appropriate.
12.4.7. Effectivity of Order of Removal from Office. After due notice and hearing, the order of removal from office shall become effective and executory thirty (30) days after service upon the SCC and the director or officer concerned (except in the case of an order issued upon consent, which shall become effective at the time specified therein). The order shall remain effective and enforceable except to such extent as it is modified, terminated, or lifted by the CDA.

Section 12.5. Prohibition and Suspension

12.5.1. Grounds for Prohibition and Suspension. In addition to the issuance of a written notice of intention to remove from office, the CDA may issue an order to suspend and/or prohibit the director or officer concerned from further participating, in any manner, in the conduct of the SCC’s affairs under the following conditions:
1. 12.5.1.1. If such action is deemed necessary for the protection of the SCC and the interests of its members; or
2. 12.5.1.2. Whenever a director or officer is charged in a court of law with the commission of or participation in a:
  1. 12.5.1.1. Crime involving dishonesty or breach of trust which is punishable by imprisonment; or
  2. 12.5.1.2. Criminal violation of any provision of the Cooperative Code or any other existing law that may pose a threat to the interests of the SCC’s depositors and or may threaten to impair public confidence in the SCC.
12.5.2. Prohibited Acts. For as long as the prohibition or suspension or removal from office order remains in effect, any person or persons subject to such order issued by the CDA, shall not:
1. 12.5.2.1. Continue or commence to hold any office in nor participate, in any manner, in the conduct of the affairs of the SCC and
2. 12.5.2.2. Exercise any voting rights and privileges in the SCC.
12.5.3. Effectivity of Prohibition or Suspension Order. Any prohibition and suspension order issued shall become effective upon receipt and shall remain in effect and enforceable until such time thatthe CDA dismisses the charges contained in the notice, unless specifically provided for in the order.
12.5.4. Appeals.
1. 12.5.4.1. Within thirty days from service of any notice of suspension or order of removal, the director or person concerned may request in writing an opportunity to appear before the CDA to show that the continued service to or participation in the conduct of the affairs of the SCC by such director or officer does not, or is not likely to, pose a threat to the interests of the member-depositors or threaten to impair public confidence in the depository institution.
2. 12.5.4.2. Upon receipt of any such request, the CDA shall fix a time (not more than thirty days after receipt of such request, unless extended at the request of such party) and place at which the director or officer may appear, personally or through counsel, before a duly-designated officer of the CDA to submit written materials (or, at the discretion of the CDA, oral testimony) and oral argument.
3. 12.5.4.3. Within sixty days from such hearing, the CDA shall notify the parties concerned whether the suspension or prohibition from participation in any manner in the conduct of the affairs of the SCC will be continued, terminated, or otherwise modified, or whether the order removing the director or officer from office has been rescinded or otherwise modified.
4. 12.5.4.4. Such order shall be given to all parties concerned and contain a statement of the basis for the CDA’s decision.

Section 12.6. Cease and Desist Order

12.6.1. Notice of Charges. If, in the opinion of the CDA, a SCC is:
1. 12.6.1.1. Engaging or has engaged or is about to engage, in an unsafe or unsound practice in conducting its business; or
2. 12.6.1.2. Violating or has violated, or is about to violate, a law, rule, or regulation, or any condition imposed in writing by the CDA in connection with the granting of the License to Operate as a Savings and Credit Cooperative, the CDA may issue and serve upon the SCC a notice of charges in respect thereof. The notice shall contain a statement of the facts constituting the alleged violation or violations or the unsafe or unsound practice or practices.
12.6.2. Schedule of Hearings. The CDA shall fix a time and place at which a hearing will be held to determine whether an order to cease and desist should be issued against the SCC. Such hearing shall be fixed for a date not earlier than thirty days nor later than sixty days after service of such notice unless an earlier or a later date is set by the CDA at the request of any party so served.
1. 12.6.2.1. Issuance of Cease and Desist Order Upon Hearing. The CDA may issue and serve upon the SCC an order to cease and desist from any violation or practice and to take affirmative action to correct the conditions resulting from any such violation or practice under any of the following situation:
  1. 12.6.2.1. During the hearing, the party or parties so served consent to the issuance of a cease-and-desist order or the CDA finds that the violation or unsafe or unsound practice specified in the notice of charges has been established; or
  2. 12.6.2.2. The SCC, through its duly designated representative, failed to appear at the scheduled hearing.
2. 12.6.2.2. Affirmative Action. The CDA may require the SCC to take affirmative action to correct or remedy any conditions resulting from any violation or practice with respect to which such order is issued including an order for the SCC or any other person to:
  1. 12.6.2.1. Make restitution or provide reimbursement, indemnification, or provide provisions against loss if:
    1. 12.6.2.2.1.1. Such depository institution or any other party was unjustly enriched in connection with such violation or practice; or
    2. 12.6.2.2.1.2. The violation or practice involved a reckless disregard for the law or any applicable regulations or prior order of the CDA
  2. 12.6.2.2. Restrict the growth of the institution;
  3. 12.6.2.3. Place limitations on the activities or functions.
  4. 12.6.2.4. Dispose of any loan or asset;
  5. 12.6.2.5. Rescind agreements or contracts;
  6. 12.6.2.6. Employ qualified officers or employees (who may be subject to approval by the CDA); and
  7. 12.6.2.7. Take such other actions as the CDA determines to be appropriate.
3. 12.6.2.3. Effectivity. A cease-and-desist order shall become effective (30) thirty days after the issuance of such order (except in the case of a cease-and-desist order issued upon consent, which shall become effective at the time specified therein), and shall remain effective and enforceable as provided therein, except to such extent as it is stayed, modified, terminated, or set aside by action of the CDA.
12.6.3. Temporary Issuance of Order without Hearing. Pending the holding and completion of a hearing as provided for above, the CDA may issue a cease and desist order that shall become effective upon receipt of such order by the SCC, should it determine that:
1. 12.6.3.1. The violation or threatened violation or the unsafe or unsound practice or practices, as specified in the notice of charges served upon the SCC, or the continuation thereof, is likely to:
  1. 12.6.3.1. Cause insolvency or significant dissipation of assets or earnings of the SCC, or
  2. 12.6.3.2. Weaken the condition of the SCC or otherwise prejudice the interests of its member-depositors.
2. 12.6.3.2. The SCC’s books and records are incomplete or inaccurate that:
  1. 12.6.3.1. The Authority is unable, through the normal supervisory process, to determine the financial condition of that SCC; or
  2. 12.6.3.2. The details or the purpose of any transaction or transactions may have an adverse material effect on the financial condition of the SCC.
12.6.4. Effectivity of Temporary Order without Hearing. Any temporary cease and desist order issued under the aforementioned provision is in force and in effect:
1. 12.6.4.1. Unless set aside, limited, or suspended by a court of law; or
2. 12.6.4.2. Until the earlier occurrence of any of the following circumstances:
  1. 12.6.4.1. The completion of the proceedings initiated in Section 5.4.4 above in connection with the notice of charges; or
  2. 12.6.4.2. The date the CDA determines that the circumstances or violations for which the Order has been issued, no longer exist.
12.6.5. Failure to Comply. Should the SCC fail to comply with the cease-and-desist order, the CDA may file for injunction with an appropriate court of law to enforce such order.

Article 13 Transitory Provisions

Section 13.1. Transitory Provisions.

All primary credit and other types of cooperatives with savings and credit services shall, from the effectivity date of this Manual, conform with the provisions of this Manual of Rules and Regulations in accordance with the following schedule:

Specific Provisions	Timetable for Compliance
1. Funding of Statutory Reserves	On top of the current provision, set aside cash to cover the unfunded reserves. The yearly amount to be set aside should at least be 20% of the unfunded reserves until fully funded.
2. Deposit Cash Reserve Level (2%) and Compliance to Required Composition of Liquidity Reserve Fund	Within two (2) years
3. Provisioning of Allowance for Probable Losses on Loans	Year 1: at least 30% of the total requirement; Year 2: at least 70%; and Year 3: 100%
4. Compliance on “License to Operate” as per Article ___ Section __.	Within one (1) year from the issuance of the provisional license to operate
5. Amendments of By-Laws and Articles of Cooperation to conform with the pertinent provisions of the Manual.	Within two (2) years from the effectivity of this Manual.

Section 13.2. Repealing Clause.

All CDA issuances, rules and regulations applicable to SCCs that are inconsistent with the provisions of this Manual are hereby repealed or modified accordingly.

Section 13.3. Effectivity.

This Manual of Rules and Regulations shall take effect upon approval by the President of the Philippines or his duly designated representative and fifteen (15) days after publication in the Official Gazette or in two (2) newspapers of general circulation.

Category: AboutUs

Code of Ethics

Article I Preamble

Section 1. TITLE. This Code shall be known as the Code of Ethics.

Section 2. DECLARATION OF POLICY. All officers, staff and members of the cooperative shall abide and adhere to this Code of Conduct. Towards this end, they shall serve with utmost professionalism, integrity, morality and nationalism.

Article II VISION

In keeping with the spirit of Cooperativism, we envision a GLEDCO that will actively promote and advance the upliftment of the quality of life of all members through savings, thrift and self-reliant entrepreneurship.

Article III SERVICE PHILOSOPHY

In the accomplishment of this vision, GLEDCO shall serve its members in a caring, accountable, responsive and ethical manner and thus worthy of the respect and emulation by others.

Article IV PROFESSIONAL ETHICAL STANDARDS

The officers and employees of GLEDCO shall be guided by the following:

Officers and employees, in the performance of their duties and responsibilities, shall be guided by the principles of honesty, dedication and sincerity.

They shall act with utmost professionalism, fairness and courtesy in all their dealings with co-officers, staff, members, and the general public.

They shall act as role models in uprightness, delicadeza and punctuality in the performance of their duties and responsibilities.

They shall, at all times protect, promote and advance the interest and welfare of the cooperative to sustain the growth and well-being of its members and the community in general.

Officers and employees shall not enrich themselves nor engage in any activity that is adverse or in conflict with the objectives of the cooperative and the interest of its members.

Officers and employees shall, at all times, lead an upright and proper lifestyle and shall not get involved in any immoral, indecent and disgraceful conduct.

As trustees of the cooperative, they shall protect the funds of members in accordance with prudent business practices.

They shall provide members timely and accurate information regarding the financial condition, operations and services of the cooperative.

Article V ETHICAL STANDARDS FOR MEMBERS

The members of the cooperative must comply with their sworn obligations and responsibilities. In so doing, they shall:

Promote the aims and purposes of the cooperative, the success of its business and the spirit of Cooperativism in all their dealings.

Participate actively in all affairs of the cooperative and endeavor always to contribute to the interest and welfare of the general membership.

Have the moral rectitude to sacrifice self-interest for the greater number in keeping with the time-honored principle of delicadeza.

Not engage in corrupt, dishonest and other unauthorized and illegal activities.

Obey the bylaws, policies, decision and resolutions of the Board of Directors, General Assembly and the Authority.

Work harmoniously with everyone and give due courtesy and respect to officers, members and the general public in all their dealings.

Article VI GENERAL PROVISIONS

In order to ensure commitment to this Code, the following shall be observed by the officers, staff and members:
1. All officers, staff and members shall bind themselves that the intent and spirit of this Code are honored and upheld at all times.
2. Directors and other officers shall set the example and be responsible for the observance of this Code.
3. All Directors, officers, staff and members shall take an oath that they shall commit themselves to this Code. The oath of commitment shall be done upon acceptance of membership, and upon election, appointment, promotion or assumption to duty of officers and employees.
Promotion and enhancement of this Code is a management policy and strict adherence thereto shall be the responsibility of all officers, employees and members.
Commission of acts/practices in violation of this Code shall be subjected to penalties and administrative sanctions as may be determined by the Board.
Any amendment of this Code may be proposed to the General or Special Assembly for approval and shall take effect upon its adoption.
This Code shall take effect upon approval by the General Assembly.

Category: AboutUs

By-Laws of the Government of Laoag Employees Development Cooperative (GLEDCO)

Article I     -   Objectives
Article II    -   Membership
Article III   -   Government
Article IV   -   Board of Directors
Article V    -   Committees
Article VI   -   Officers of the Cooperative
Article VII -   Capital Structure
Article VIII -   Operations
Article IX   -   Allocation and Distribution of Net Surplus
Article X    -   Settlement of Disputes
Article XI   -   Miscellaneous
Article XII -   Amendments

Know all men by these presents:

We, the undersigned Filipino citizens, all of legal age and residents of the Philippines, representing at least majority of the members of the Government of Laoag Employees Development Cooperative (GLEDCO), a primary MPN (Multi Purpose Non-Agricultural) cooperative, do hereby adopt the following code of By-laws.

Article I Objectives

Section I. Objectives. The objectives and purposes of this cooperative are those set forth on its Articles of Cooperation and those generally granted to cooperatives under RA 6938, and the rules and regulations thereunder.

Article II Membership

Section 2. Membership. This cooperative shall have regular and associate membership/s.

A regular member is one who is entitled to all rights and privileges of membership. An Associate member is one who has no right to vote and be voted upon and shall be entitled only to such rights and privileges provided in this by-laws.

Section 3. Qualifications for Membership. Regular membership. The regular membership of this cooperative is open to all natural person, Filipino citizen, of legal age, with capacity to contract, and an employee (regular / co-terminus) of the City Government of Laoag.

Associate Membership. The associate membership of this Cooperative shall be open to any natural person, Filipino citizen, of legal age, with capacity to contract, and an employee (elected official / separated) of the City Government of Laoag

The Regular / Associate Member must have:

Completed the prescribed pre-membership education training;
Undertake to uphold the By-laws, policies, guidelines, rules and regulations promulgated by the Board of Directors and the general assembly;

Section 4. Application for Membership. An applicant for regular or associate membership shall file a duly accomplished form with the Board of Directors who shall accept or deny it within five (5) days from the date of filing. The Board of Directors shall devise a form for the purpose which shall, aside from the personal data of the applicant, include the duty of a member to participate in all capital-build-up and savings mobilization programs of the Cooperative and such other information as may be deemed necessary.

“No application for membership shall be given due course if not accompanied with a membership fee of Three Hundred Pesos (P 300.00) which shall be refunded to the applicant in case of rejection. This fee to take effect for the year 2003, provided that for the year 2004, the membership fee shall be Five3 Hundred Pesos (P 500.00)”

Section 5. “Minimum Share Capital Subscription membership. An applicant for regular/associate membership shall subscribe at least Ten (10) shares and pay the value of at least one (1) share/s upon approval of his membership”

However, no regular or associate member shall own or hold more than 20 percent of the total subscribed share capital of the Cooperative. The Board of Directors shall issue membership certificate and subscription agreement with such terms and conditions as may be deemed equitable.

Section 6. Appeal. An applicant whose application was denied by the Board of Directors may appeal to the general assembly by giving notice to the Secretary of the Cooperative within thirty (30) days before the next General Assembly meeting, whose decisions on the matter shall be final.

Section 7. Duties and Responsibilities of a Member. Every member shall have the following duties and responsibilities:

Pay the installment of his share capital subscription as it falls due and to participate in the capital build-up and savings mobilization activities of the Cooperative.
Patronize the Cooperatives business and services;
Participate in the membership education seminar;
Attend and participate in the deliberation of all matters taken during general assembly meetings;
Observe and obey all lawful orders, decisions, rules and regulations adopted by the Board of Directors and the general assembly; and
Promote the goals and objectives of the Cooperative, the success of its business, the welfare of its members and the cooperative movement in general.

Section 8. Member entitled to Vote. Any regular member who meets the following condition is a member entitled to vote:

Paid the membership fee and the value of at least one (1) share;
Not delinquent in the payment of his share capital subscriptions and other accounts;
Not violated any provision of this By-laws; the terms and condition of the subscription agreement; and the decisions, guidelines and rules and regulations promulgated by the Board of Directors and general assembly;
Completed the basic orientation training program prescribed by the Board of Directors; and
Participates in the affairs of the Cooperative and patronizes its businesses.

Section 9. Rights of a Regular Member Entitled to Vote. A member entitled to vote shall have the following rights:

Participate and vote on all matters deliberated upon during general assembly meetings;
Seek any elective or appropriate position, subject to the provisions of this By-laws and Cooperative Code of the Philippines;
Avail himself of the services of the Cooperative, subject to certain conditions as may be prescribed by the Board of Directors;
Inspect and examine the Books of Accounts, the minutes books, share register, and other records of the Cooperative during office hours; and
e) Such other rights and privileges as may be provided by the General Assembly.

Section 10. Rights of an Associate Member. An associate member shall have the following rights and privileges:

Participate in the deliberation of any issue during general membership meetings except to vote and be voted upon;
Avail himself of the services of the Cooperative, subject to certain conditions as may be prescribed by the Board of Directors;
Inspect and examine the books of accounts, the minutes books, the share register, and other records of the Cooperative during office hours;
Has preference in the payment of interest on share capital in the distribution of the net assets of the Cooperative in case of liquidation; and
Such other rights and privileges as may be granted by the General Assembly.

Section 11. Liability of Members. A member shall be liable for the debts of the Cooperative only to the extent of his subscribed share capital.

Section 12. Termination of Membership. Termination of membership, which may be automatic, voluntary or involuntary, shall have the effect of extinguishing all rights if a member in the Cooperative or its assets, subject to the provisions of Section 14 of this By-laws as may be provided by the General Assembly.

Automatic Termination of Membership. The death, insanity, permanent incapacity or judicial declaration by a competent court of the insolvency of a member shall be considered an automatic termination of his membership in the Cooperative.

Voluntary Termination. A member may, for any reason, withdraw his membership from the Cooperative by giving a sixty (60) days notice to the Board of Directors. However, no member shall be allowed to withdraw or terminate his memberhsip during any period in which he has any pending obligation with the Cooperative.

Involuntary Termination. A member may be terminated by a vote of the majority of all the members of the Board of Directors for any of the following causes:

When he has not patronized the services/business of the Cooperative at least once in a period of one (1) year;
When he has continuously failed to comply with his obligations;
When he has violated any provision of this By-laws and the rules promulgated by the Cooperative; and
For any act or omission injurious or prejudicial to the interest or the welfare of the Cooperative.

Section 13. Manner of Involuntary Termination. The Board of Directors shall notify in writing the member who is being considered for termination and shall give him the opportunity to be heard.

After hearing, the Board of Directors shall render its decision in writing within thirty (30) days and the same shall be given to said member by the Secretary, personally or by registered mail. The decision of the Board shall be appealable within thirty (30) days from receipt therof to the general assembly whose decision on the matter shall be final. Pending resolution by the general assembly, his membership remains valid and in force.

Section14. Refund of Share Capital Contribution. A member whose membership is terminated shall be entitled to a refund of his share capital contribution and for all other interests in the Cooperative. However, such refund shall not be made if on account of such payment, the value of the assets of the Cooperative would be less than the aggregate amount of its debts and liabilities exclusive capital stock subscribed, or will diminish the reserves required under existing laws. In which case, the terminated member shall continue to be entitled to the interest of his share capital contributions, patronage refund and the use of the services of the Cooperative until such time that all his interests in the Cooperative shall have been fully paid. Upon the acceptance of his withdrawal or approval of his termination, however, he losses his right to attend, participate and vote in any meeting to the Board of Directors or the general assembly.

Article III Government

Section 15. The General Assembly. The general assembly is composed of all the members entitled to vote and is the highest governing-body of the Cooperative.

Section 16. Powers of the General Assembly. Subject to the Provisions of the Cooperative Code of the Philippines and the rules issued thereunder, the general assembly duly assembled shall have the following powers:

To adopt and amend its Articles of Cooperation and By-laws, in accordance with law;
To elect, appoint or remove for cause any member of the Board of Directors, Officer or Committee member of the Cooperative;
To review, modify, reject or approve developmental plans and programs of the Cooperative;
To review and pass upon the reports of the Board of Directors, Officers and committees;
To review, modify, reject or approve any substantial change in the financial and operational policies of the Cooperative;
To adopt a Cooperative seal and exercise all other powers as may be authorized by law and the Constitution.

Section 17. Meetings. Meetings of the General Assembly, Board of Directors and Committees may be regular or special. All proceedings and businesses undertaken at any meeting of the General Assembly or Board of Directors, if within the powers or Authority of the Cooperative, there being a quorum, shall be valid.

Section 18. Regular General Assembly Meeting. The General Assembly shall hold its annual regular meeting at the principal office of the Cooperative or at any place within the Philippines on the date fixed by the Board of Directors; provided, that such date shall be within ninety (90) days after close of each fiscal year. The fiscal year of this Cooperative shall commence on the first day of January and ends on the last day of December and every year thereafter.

Section 19. Special General Assembly Meeting. The Board of Directors may, by a majority vote of all its members, call a special general assembly meeting at any time to consider urgent matters requiring immediate membership decision. The Board of Directors must likewise call a special general assembly meeting within thirty (30) days from receipt of a written request from

at least ten (10) percent of the total number of members entitled to vote;
the Chairman of the Audit Committee; or
the head of the Federation or Union to which the Cooperative is a member; or
by the Cooperative Development Authority.

Section 20. Notice of Meetings. All notices of meetings shall be in writing and the date, time and place thereof stated therein.

Regular General Assembly Meeting. Notice of the annual general assembly meeting shall be served by the Secretary personally or his duly authorized representative to each department or office concerned at least two (2) weeks before the said meeting. It shall be accompanied with an agenda, minutes of meeting of the last general assembly meeting, consolidated reports of the Board of Directors and Committees, audited financial statement, and other papers which may assist the members to intelligently participate in the proceedings.

Special General Assembly Meeting. Notice of any special general assembly meeting shall be served by the Secretary personally or his duly authorized representative to each department or office concerned. It shall state the purpose and, except for related issues, no other business shall be considered during the meeting.

Section 21. Agenda. As far as practicable, the order of business of a regular general assembly meeting shall be:

Call to order;
Roll Call;
Proof of due notice;
Declaration of presence of quorum;
Consideration of the minutes of the last regular general assembly meeting;
Matters arising from the minutes;
Consideration of the consolidated report of the Board of Directors, Officers, and the Committees, including Audited Financial Statements of the Cooperative;
Unfinished business;
Election of Directors and Committee members;
New business;
Other matters; and
Adjournment.

Section 22. Quorum for General Assembly Meeting. During regular or special general assembly meeting, at least twenty-five (25) percent of the total number of members entitled to vote shall constitute a quorum. (Must not be less than 25 percent)

Section 23. General Assembly Meeting by Chapter. In the event that the general membership has become more than 1,000, for purposes of holding a regular or special general assembly meeting, the Board of Directors may, by a majority vote of all its members, divide the members into Chapter, provided that each Chapter shall consist of not less than 100 members. The division may be according to geographical location, scope of operation or such other criteria as may be deemed appropriate.

Each Chapter shall elect their representative and two alternates from among themselves who shall represent their members in the consolidation of votes cast and/or decisions taken by the different chapters.

Upon compliance of the required quorum as prescribed in the preceding Section, a Chapter shall hold its general assembly meeting in accordance with the agenda prepared by the Board of Directors. The proceedings shall be under the supervision and control of the Board of Directors; provided that the Election Committee shall handle all the elections of directors and committee members and other officers.

The affirmative and negative votes cast by the members of each Chapter on a specific subject shall be consolidated by the Board of Directors and the Chapter representatives in a special meeting which shall be held within fifteen (15) days after all chapters shall have conducted their respective Assembly meetings.

If the consolidated affirmative votes on a specific subject reflects the majority votes of all the members entitled to vote, the same shall be considered a valid cooperative act; otherwise, the said subject is deemed disapproved by the general assembly.

In the event the Chapter failed to acquire a quorum, the Board of Directors shall reset another assembly meeting which shall not be later than 30 days and may adopt such reasonable measures to ensure attendance.

Section 24. Voting System. Only the members entitled to vote shall vote in any general assembly meeting. A member is entitled to one vote only regardless of the number of shares he owns.

Election or removal of Directors and Committee members shall be by secret ballot. Action on all other matters shall be in any manner that will truly and correctly reflect the will of the membership. No proxy and/or cumulative voting shall be allowed.

Article IV Board of Directors

Section 25. Composition of the Board of Directors. The Conduct and management of the affairs of the Cooperative shall be vested in the Board of Directors, which shall be composed of seven (7) members.

Section 26. Qualifications of and Disqualification for Directors. All members entitle to vote who have time and the willingness to serve, are qualified to be voted as a member of the Board of Directors except those who are under any of the following circumstances which disqualify them to be voted upon to the position or continue as such:

Holding any elective position in the government, except that of a Barangay Official;
Having served as director of the Cooperative for three (3) consecutive terms;
Having direct or indirect personal interest with the business of the Cooperative;
Having been absent for three (3) consecutive regular meetings without reasonable cause;
Being an official or employee of the Cooperative Development Authority; and
Having been disqualified by law.

Section 28. Election of Directors. The members of the Board of Directors shall be elected by a secret ballot by members entitled to vote during the annual regular general assembly meeting. Unless earlier removed for cause, or have resigned or become incapacitated, they shall hold office for a term of two (2) years or until their successors shall have been elected and qualified; Provided, that one-half plus one of the elected directors obtaining the highest number of votes during the first election after registration shall serve for two (2) years, and the remaining directors for one year. Thereafter, all directors shall be elected for a term of two (2) years; provided further that no director shall serve for more than three (3) consecutive terms. The term of the incorporating directors shall expire upon the election of their successors in the first regular general assembly after registration.

Section 29. Election of Officers. The Board of Directors shall convene within ten (10) days after the regular general assembly meeting to elect by secret ballot from among themselves the Chairman and the Vice-Chairman and to appoint or elect Secretary, Assistant Secretary, Treasurer and Assistant Treasurer from outside of the Board. The elected/appointed officers shall hold office for a term of two (2) years until their successors shall have been elected/appointed and actually assumed the functions of their positions. No two (2) or more persons with relationships up to the third civil degree or consanguinity or affinity shall hold any elective or appointive position in the same Board or Committee.

Section 30. Meeting of the Directors. The regular meeting of the Board of Directors shall be held at least once in a month. However, the Chairman or, in his absence, the Vice-Chairman, or majority of the directors may at any time call a special Board meeting to consider urgent matters. The call shall be addressed and delivered to the Secretary stating the date, time and place of such meeting and the matters to be considered. Notice of regular or special meetings of the Board of Directors, unless dispensed with, shall be served by the Secretary in writing to each director at least five (5) days before such meeting.

Majority of the total number of Directors constitutes a quorum to transact business. Any decision or action taken by the majority members of the Board of Directors in a meeting duly assembled shall be a valid Cooperative Act.

Section 31. Vacancies. Any vacancy occurring in the Board of Directors by reason of death, incapacity, removal or resignation may be filled by a majority vote of the remaining directors, if still constituting a quorum; otherwise, such vacancy shall be filled by general assembly in a regular or special meeting called for the purpose. The elected director shall serve only for the unexpired term of his predecessor in office.

In the event that the general assembly failed to muster a quorum to fill the positions vacated by directors whose term have expired and said directors refused to continue their functions on a hold-over capacity, the remaining members of the Board together with the members of the Audit Committee shall designate, from the qualified regular members of the general assembly, their replacements who shall serve as such until their successors shall have been elected and qualified in a regular or special general assembly meeting called for the purpose.

If a vacancy occurs in any elective committee, it shall be filled by the remaining members of the said committee, it still constituting a quorum, otherwise, the Board, in its discretion, may appoint or hold a special election to fill such vacancy.

Section 32. Removal of Directors and Committee Members. Any director or committee member elected by the general assembly may be removed from office for cause by a vote of at least two thirds (2/3) of the members entitled to vote present and constituting a quorum in a regular or special general assembly meeting called for the purpose after having been given the opportunity to be heard.

An officer elected or appointed by the Board of Directors or any committee may be removed from office for cause by a majority vote of all members of the Board Committee as the case may be.

Section 33. Powers and Duties of the Board. The Board of Directors shall direct, control and supervise the business, the property of the Cooperative and may, by resolution, exercise all such powers of the Cooperative as are not reserved for the general assembly under this By-laws and the Cooperative Code of the Philippines.

Article V Committees

Section 34. Audit Committee. An audit committee is hereby created and shall composed of three (3) members to be elected during a general assembly meeting and shall hold office for a term of two (2) years or until their successors shall have been elected and qualified. Within then (10) days after their election, they shall elect from among themselves a Chairman, a Vice Chairman, and a Secretary. No member of the committee shall hold any other position within the Cooperative during his term of office. (At least 3 members).

Section 35. Election Committee. An election Committee is hereby created and shall be composed of three (3) members to be elected during a general assembly meeting and shall hold office for a term of two (2) years until their successors shall have been elected and qualified. Within ten (10) days after their election they shall elect from among themselves a Chairman, Vice-Chairman and a Secretary. No member of the Committee shall hold any other position within the Cooperative during his term of office. (At least 3 members).

The Committee shall promulgate rules and regulations which shall govern the conduct of elections; pass upon the qualifications of candidates; supervise the conduct of elections, canvass and certify in writing the returns; proclaim the winning candidates; and hear and decide all election protests. Election protests filed by members of the Election Committee shall be decided by the Board of Directors.

The decision of the Election Committee is appealable to the Board of Directors within 15 days from receipt thereof who shall decide the case within thirty (30) days after receipt of the records of the case. The decision of the Board is likewise appealable to the Cooperative Development Authority within 15 days from receipt of said decision. At the option of any of the parties, however, the case may be submitted for arbitration to a special board composed of three (3) persons, one of whom shall come from the Cooperative Development Authority and the two (2) to be nominated by each of the parties concerned.

Section 36. Education and Training Committee. An Education and Training Committee is hereby created and shall be composed of three (3) members to be appointed by the Board of Directors and shall serve for a term of two (2) years, without prejudice to their reappointment. Except for the Vice-Chairman, no member of the Committee shall hold any other position within the Cooperative during his term of office. (At least 3 members).

The Committee shall be responsible for the planning and implementation of the information, educational and human resources development programs of the Cooperative for its members, officers and the Communities within its area of operation.

Section 37. Credit Committee. The Credit Committee shall be composed of three (3) members elected at the Annual General Assembly for a term of two (2) years or until their successors are elected and qualified. Within ten (10) days after election, the members shall elect from among themselves a Chairman, a Vice Chairman, and Secretary.

The Committee shall be responsible for the credit management of the cooperative. In the performance of its functions, it shall:

a. Process, evaluate and act upon loan application and withdrawals of deposits, except when the applicant is a member of the committee, in which case, the application shall be acted upon by the Board of Directors, and;

b. Exercise general supervision including collections over all loans to members.

Section 38. Conciliation Committee. A Conciliation Committee is hereby created and shall be composed of three (3) members to be elected during a regular general assembly meeting. Within ten (10) days after their elections they shall elect from among themselves a Chairman, Vice-Chairman, and a Secretary who shall serve for a term of two (2) years or until their successors shall have been elected and qualified. No member of the Committee shall hold any other position of the Cooperative during his term of office. (At least 3 members).

The Conciliation Committee shall have the following powers and functions:

To conciliate, hear and decide all intra-cooperative disputes between and/or among members, officers, directors and the community;
Subject to the approval of the general assembly, to issue supplemental rules and procedures concerning conciliation processes as may be deemed necessary; and
To exercise such other powers as may be necessary to ensure speedy, just, equitable and inexpensive settlement of disputes within the Cooperative.

Section 39. Other Committees. By a majority vote of all its members, the Board of Directors may form such other committees, as may be deemed necessary for the smooth operation of the Cooperative.

Article VI Officers of the Cooperative

Section 40. Officers and their Duties. The Cooperative shall have a Chairman, Vice-Chairman, Treasurer, Assistant Treasurer, a Secretary and Assistant Secretary who shall serve according to the functions of their respective offices as follows:

Chairman - The Chairman shall:

Preside overall meetings of the Cooperative and of the Board of Directors;
Sign all share certificates, revolving fund certificates, contracts and other instruments or papers essential to the operation of the Cooperative; and
Perform such other necessary functions, subject to the restrictions, which may be imposed by the Board of Directors or the General Assembly.

Vice-Chairman - In the absence or incapacity of the Chairman, the Vice- Chairman shall discharge the duties and responsibilities of the Chairman, provided, however, that in case of death, resignation, removal or permanent incapacity of the Chairman, the Board of Directors may elect a new Chairman. The Vice-Chairman of the Board shall serve as ex-officio chairman of the Education and Training Committee.

Treasurer - The Treasurer shall:

Take custody of all monies, securities and papers acquired by the Cooperative, and maintain a complete records of all its transactions;
Keep a complete record of its cash transactions for the establishment of proof of his cash position at any given time and date:
Pay all financial obligations incurred by the Cooperative as approved by the manager and/or the Board of Directors;
Render report and certify the correctness of the cash position of the Cooperative in all financial statements and other reports submitted to the Board of Directors, the general assembly and the Cooperative Development Authority;
Turnover to his successor all monies, securities, papers, books, and other properties belonging to the Cooperative in his possession upon the expiration/termination of his term of office;
Perform such other duties as the Board of Directors may prescribe.

Assistant Treasurer - In the absence or incapacity of the Treasurer, the Assistant Treasurer shall discharge the duties and responsibilities of the Treasurer. He shall assist the Treasurer in the preparation of necessary documents and reports, and perform such other duties as the Board of Directors may prescribe.

Secretary - The Secretary shall:

Keep and maintain a complete registry of all members and records/minutes of all meetings of the Board of Directors and the General Assembly;
Give notice to all meetings called;
Keep and maintain the Share and Transfer book and serve as the custodian of the corporate seal of the Cooperative;
Turnover to his successor all books, records and other properties belonging to the Cooperative in his possession upon the expiration/termination of his term of office; and
Perform such other duties as the Board of Directors may prescribe.

Assistant Secretary - In the absence or incapacity of the Secretary, the Assistant Secretary shall discharge the duties and responsibilities of the Secretary. He shall assist the Secretary in the preparation of necessary documents, and perform such other duties as the Board of Directors may prescribe.

Section 41. Liabilities of Directors, Officers and Committee Members. Directors, Officers and Committee members, who willfully and knowingly vote for and assent to patently unlawful acts, or who are guilty of gross negligence or bad faith in directing the affairs of the Cooperative or acquire any personal or pecuniary interest in conflict with their duties as directors, officers or committee members shall be liable jointly and severally for all damages resulting therefrom to the Cooperative members and other persons.

When a director, officer or committee member attempts to acquire or acquires in violation of his duties, any interest or equity adverse to the Cooperative in respect to any matter which has been reposed in him in confidence, he shall, as a trustee for the cooperative, be liable for damages or loss of profits which otherwise would have accrued to the Cooperative.

Section 42. Management Staff. The Board of Directors shall appoint the members of the Management Staff, fix their compensation and tenure of office.

Section 43. The General Manager. No person shall be appointed to the position of general manager unless he possesses the following qualifications and none of the disqualification’s herein enumerated:

He must be familiar with the business operation of the Cooperative;
He must have at least two (2) years experience in the operations of the Cooperative or related business;
He must not be engaged directly or indirectly in any activity similar to the business of the Cooperative;
He must not have been convicted of any administrative, civil or criminal case involving moral turpitude, gross negligence or grave misconduct in the performance of his duties;
He must not be addicted to any form of gambling or immoral or vicious habits;
At the time of his appointment he must have no pending administrative, civil or criminal case involving financial and/or property accountabilities; and
He must be willing to undergo pre-service and/or in-service trainings.

Section 44. Duties of the General Manager. The General Manager shall:

Have general charge of all the phases of the business operations of the Cooperative, subject to the policies and guidelines set by the Board of Directors and the General Assembly;
Maintain records and accounts of the Cooperative in such manner that the true condition of its business may be ascertained there from at any time;
Render reports monthly, annually or as may be required by the Board of Directors or the General Assembly, and preserve the books, documents, correspondence and records of whatever nature concerning the operations of the Cooperative which may come into his possession;
Subject to the policies set by the Board of Directors, employ, supervise and/or dismiss any agent or employee in the management force; and
Perform such other duties as the Board of Director may prescribe and turn over to his successor all properties belonging to the Cooperative in his possession or over which he has control upon the expiration/termination of his services.

Section 45. Accountant / Bookkeeper. No person shall be appointed to the position of accountant/bookkeeper unless he possesses the following qualifications and none of the disqualifications herein enumerated:

He must be knowledgeable in accounting and bookkeeping and must have at least two (2) years experience in Cooperative or related business;
He must not be engaged directly or indirectly in any activity similar to the business of the Cooperative;
He must not be convicted to any administrative, civil or criminal case involving moral turpitude, gross negligence or grave misconduct in the performance of his duties;
He must not be addicted to any form of gambling or immoral vicious habits;
He must be willing to undergo pre-service and/or in-service trainings in accounting;
At the time of his appointment, he must have no pending administrative, civil or criminal case involving financial and/or property accountabilities.

Section 46. Duties of the Accountant / Bookkeeper. The Accountant / Bookkeeper of the Cooperative, who shall be under the supervision and control of the General Manager shall;

Install an adequate and effective accounting system within the Cooperative;
Render reports on the financial condition and operations of the Cooperative monthly, annually or as may be required by the Board of Directors and/or the general assembly;
Provide assistance to the Board of Directors in the preparation of annual budget;
Keep, maintain and preserve all books of accounts, documents, vouchers, contracts and other records concerning the business of the Cooperative and make them available for auditing purposes to the Chairman of the Audit Committee; and
Perform such other duties as the Board of Directors may require.

Section 47. Compensation. Subject to the approval of the general assembly, the members of the Board and Committees may, in addition to per diems for actual attendance to board and committee meetings, and reimbursement of actual and necessary expenses while performing functions in behalf of the Cooperative, be given regular compensation. Provided, that no additional compensation other than the per diems shall be paid during the first year of existence of the Cooperative.

Article VII Capital Structure

Section 48. Source of Funds. The Cooperative may derive its funds from any or all of the following sources:

Member's share capital contribution, common and/or preferred;
Revolving capital build-up which consist of the deferred payment of patronage refund or interest on share capital;
Loans and borrowing including deposits;
Subsidies, grants, legacies, aids, donations and such other assistance from any local or foreign institution, public or private;
Retentions from proceeds of services/goods procured by members; and
Other sources of funds as may be authorized by law.

Section 49. Continuous Capital Build-up. Every member shall invest in any or all of the following:

At least 2 percent (2%) of his (daily, weekly, monthly, quarterly, yearly) income;
At least 50 percent (50%) of his annual interest on capital and patronage refund; and
At least 1 percent (1%) of each good/service acquired by him.

Section 50. Borrowing. The Board of Directors, upon approval of the General Assembly, may borrow money from any source, local or foreign under such terms and conditions that best serve the interest of the Cooperative.

Section 51. Revolving Capital. To strengthen the capital structure of the Cooperative, the general assembly may authorize the Board of Directors to raise a revolving capital by deferring the payment of patronage refunds and interest on share capital, or such other schemes as may be legally adopted. To implement this provision, the Board of Directors shall issue a Revolving Capital Certificate with serial number, name, rate of interest, date of retirement and such other rights and privileges or restrictions as may be deemed just and equitable.

Section 52. Retentions. The general assembly may authorize the Board of Directors to raise additional capital by deducting a certain percent on a per unit basis from the proceeds of services and/or goods procured by members.

Section 53. Share Capital Contribution. Share Capital Contribution refers to the unit of capital stated issued by Cooperative in accordance with its Articles of Cooperation, subscribed and paid for by a member.

Share Capital Certificate. The Board of Directors shall issue a Share Capital Certificate only to a member who has fully paid his subscription. The certificate shall be serially numbered and shall contain the shareholder’s name, the number of shares owned, the par value, and duly signed by the Chairman and the Secretary, and bearing the official seal of the Cooperative. All certificates issued and/or transferred shall be registered in the Cooperative’s Share and Transfer book.

The shares may be purchased, owned or held only by persons who are eligible for membership. Subject to existing government rules or laws, interest shall be paid only to paid-up shares which may be in cash; or credited as payment of unpaid subscriptions, outstanding accounts or additional shares; or to the revolving funds of the Cooperative.

Section 54. Transfer of Shares. The Cooperative shall have the first option to buy any share offered for sale. The amount to be paid for such shares shall be the par value or book value, whichever is lower.

If the Cooperative is not in a position or refuses to purchase such shares, the member shall have the right to sell them to any person eligible for membership in the Cooperative. No member may transfer his shares of interest in the Cooperative or any part thereof, unless:

He has held such shares or interest for at least one year;
The transfer is made to a member of the Cooperative or to a person who falls within the field of membership of the Cooperative, and that said person is acceptable to the Cooperative; and
The Board has approved such transfer.

The transfer of shares shall not be binding to the Cooperative until such transfer has been registered in the share and the transfer shall be completed until the old certificates shall have been endorsed and surrendered to the Cooperative and a new certificate is issued in the name of the member-transferee. If the last transferee, is not a member but qualified to be a member, he shall be required to pay the membership fee and a transfer fee of P150.00. In case of lost or destroyed share certificate, the Board of Directors may issue a replacement after the owner thereof has executed a sworn affidavit in triplicate, setting forth the following:

Circumstances as to how, when and where said certificate was lost or destroyed;
The serial number of the Certificate; and the number of shares it represents; and
The lost or destroyed certificate has never been transferred, sold or endorsed to any third party, and that should the same be found, the owner shall surrender to the Cooperative. Any false representation or statement made in the aforesaid affidavit shall be a ground for expulsion from the Cooperative.

Article VIII Operations

Section 55. Primary Consideration. Adhering to the principle of service over and above profit, the Cooperative shall endeavor to:

Formulate and implement program strategies that will provide its member and the communities within its area of operation needed goods/services; control a significant segment of the retail industry and stabilize the prices of basic commodities.
Adopt and implement plans and programs which ensures the continued build-up of the Cooperative capital structure with the end view of establishing other needed services for the member and the public; and
Extend productive and providential loans to all qualified members (regular and associate).
Extend productive and providential loans to qualified non-members who are employees of the City Government of Laoag.

Article IX Allocation and Distribution of Net Surplus

Section 56. At the end of the fiscal year, the Cooperative shall allocate and distribute its net surplus as follows:

A. Reserve Fund. Ten percent (10%) shall be set aside for Reserve Fund subject to the following rules: (minimum is 10% of net surplus).
1. The reserve fund shall be used for the stability of the Cooperative and to meet net losses in its operations. The general assembly may decrease the amount allocated to the reserve fund when it has already exceeded the authorized share capital. Any sum recovered on items previously charged to the reserve fund shall be credited to such fund.
2. The reserve shall fund shall not be utilized for investment, other than those allowed in the Cooperative Code. Such sum of the reserve fund in excess of the authorized share capital may be used at anytime for any project that would expand the operations of the Cooperative upon the resolution of the general assembly.
3. Upon the dissolution of the Cooperative, the reserve fund shall not be distributed among the members. However, the general assembly may resolve:
  1. To establish usufructuary fund for the benefit of any federation or union to which the Cooperative is affiliated.
  2. To donate, contribute or otherwise dispose of the amount for the benefit of the Community where the Cooperative operates. If the members could not decide on the disposition of the reserve fund, the same shall be given to the federation or union to which the cooperative is affiliated or operating within the Cooperative’s area of operation.
Education and Training Fund. Five percent (5%) shall be set aside for the Education and Training Fund. (Maximum is 10% of net surplus).
1. Half of the amount allocated to the education and training fund annually under this subsection may be spent by the Cooperative for education training and other purposes; while the other half shall be credited to the Cooperative education and training fund of the apex organization of which the Cooperative is a member.
2. Upon the dissolution of the Cooperative, the unexpected balance of the education and training fund pertaining to the Cooperative shall be credited to the Cooperative education and training fund of the above mentioned apex organization.
Optional Fund. Five percent (5%) shall be set aside for Optional fund for land and building fund, community development etc., (Maximum is 10% of net surplus)
Interest on Share Capital and Patronage Refund. The remaining net surplus shall be made available to the members in the form of interest on share capital not to exceed the normal rate of return on investments prescribed by law, and patronage refunds. The sum allocated for patronage refund shall be made available at the same rate to all patrons of the Cooperative in proportion to their individual patronage, subject to the following rules:
1. The patronage refund of a member with fully paid share capital shall be paid to him in cash or at his option be credited to his account as additional share capital;
2. The patronage refund of a member with unpaid share capital subscription shall be credited to his account as payment of his unpaid subscriptions until the same shall have been fully paid;
3. For non-member patrons, their proportionate refunds shall be set aside in a general fund created to their respective names only upon request and presentation of evidence of the amount of his patronage. When the amount so accumulated under his name within a period of two (2) years equals the minimum share capital contribution fee membership and he is qualified and willing to comply with the requirements for membership, said non-member patron shall be considered member of the cooperative upon payment of membership fee.
4. If within the period specified in the preceding paragraph, any non-member patron who has accumulated the sum necessary for membership, but refuses or fails to qualify for membership, the amount so accumulated in his account together with any part of the general fund for non-member patrons shall be credited to the reserve fund or to the education and training fund of the cooperative, at the option of the general assembly.

Article X Settlement of Disputes

Section 57. Conciliation Procedure. As far as practicable, all intra-cooperative disputes shall be settled within the Cooperative. If amicable settlement is not feasible, unless modified or amended by the general assembly, the following rules and procedures shall govern all conciliation processes within the Cooperative:

Parties to a Complaint. The party who places a Complaint shall be called Complainant and the party being charged shall be called Respondent.
Who may file a Complaint? Any member who has a cause of action against any member, officer or member of any Committee, or of the Board of Directors shall file a written complaint, in any form and in such numbers as there are respondents, to the Secretary of the Conciliation Committee, stating the following:
1. Name, address, position in Cooperative and status of membership of the complainant and the respondent, if known;
2. Brief statements of facts and circumstances which caused the commission or omission of the act complained of;
3. Rights violated and evidence or testimony of witnesses; and
4. Prayer which shall state the relief sought and such other relief as may be deemed just and equitable.
Baseless Complaints. Within seven (7) days from receipt of the complaint, the committee shall determine the merit of the complaint. If upon its sound discretion, the complaint is found to be baseless or without merit, it may out rightly dismiss the same and inform in writing the complaint, expressly stating the legal and factual basis of its decision.
Valid Cause of action. If the complaint states a valid cause of action, the Committee shall forthwith inform in writing the Respondent, providing him a copy of the complaint and directing him to submit his answer within ten (10) days from receipt thereof. The Committee Chairman may, upon written request by the Respondent, extend the period within which to file his answer provided that it shall not exceed ten (10) days.
Withdrawal of complaint. At any time before judgment, the Complainant may, in writing, withdraw his complaint or enter into a compromise agreement and the case shall be considered dismissed or settled, as the case maybe.
Answer. In his answer, the respondent shall specifically admit or deny, or deny only a part of any averment in the complaint. He shall set forth the substance of the matters upon which he relies to support his denial. If he denies only a part of the averment, he shall specify so much of it, as it is true and deny the remainder. He may also state that he had no sufficient knowledge as to the truth of a certain matter alleged in the complaint and this shall have the effect of denial. Any averment in the complaint not specifically denied shall be deemed admitted.
Preliminary conference. Within seven (7) days upon receipt of the answer, the Committee shall set a preliminary conference whereby only the parties are invited for possible amicable settlement. If no settlement is made, the Chairman may, at his discretion or upon request of either party, set another conference which shall not be later than ten (10) days. Any party may waive his right to a preliminary conference and instead move in writing for a formal hearing. In which case, the Chairman shall set a date, time and place of hearing and the Secretary shall notify in writing the parties at least three days before the date fixed.
Manner of hearing. The Committee may adopt any manner that best serve the purpose of resolving the dispute objectively, fairly and amicably. The Committee shall always exert all possible efforts to settle the disputes or encourage the parties to enter into a compromise agreement. The Committee may schedule a series of hearings until the parties shall have completed the presentation of their respective evidence. After which, it shall decide the case within 15 days from the date of the last hearing, categorically stating the legal and factual basis of its decision.
Appeal to the Board of Directors. Any party to a controversy may appeal to the Board of Directors within 15 days from receipt of a copy of the decision. After the period of appeal, the decision of the committee shall become final and executory and can no longer be reopened except when the appealing party can show proof that the decision is patently erroneous or obtained through Fraud, Accident, Mistake and Excusable negligence, or the Committee has committed grave abuse of discretion.
Decision of the Board. Within 30 days from receipt of the records of the case, the Board of Directors, constituting a quorum, shall review and decide the case, specifically stating the reasons and basis of its decision. The parties may be summoned to appear before the Board of Directors to clarify certain matters, or to submit additional evidence.
Appeal to the General Assembly. The decision of the Board of Directors may be appealed to the general assembly whose decision shall be final, save those reserved to the adjudicatory powers of the Cooperative Development Authority as provided under the Cooperative Code of the Philippines and other existing rules and laws.

Section 58. Disputes Involving Members of the Conciliation Committee and Board of directors. If one of the parties to a controversy is a member of the Conciliation Committee, the chairman shall endorse the case to the Board of Directors who shall resolve the case following the procedures prescribed in the preceding section.

If one or both parties are members of the Board of Directors and the Conciliation Committee, the Chairman of the Committee shall communicate in writing such fact to the Chairman of the Board of Directors who shall forthwith call a special board meeting to form a five-man Special Coalition Committee, consisting of the heads of Audit and Election Committees, the Secretary and one representative of each party. The special committee shall convene immediately and after electing from among themselves the Chairman, Vice-Chairman and the Secretary, proceed to resolve the case in accordance with the procedures prescribed in the preceding section. The Committee shall automatically cease to exist upon the final resolution of the Controversy.

Article XI Miscellaneous

Section 59. Investment on Capital. The Cooperative may invest its capital in any or all of the following:

Shares or debentures or securities of any other cooperative;
Cooperative Bank or any reputable bank in the locality;
Securities issued or guaranteed by Government; and/or
Estate primarily for the use of the Cooperative or its members; or
In any other manner approved by the General Assembly.

Section 60. Accounting System. The Cooperative shall keep, maintain and preserve all its Books of Accounts and other financial records in accordance with generally accepted accounting principles and practices, applied consistently from year to year, and subject to existing rules of law.

Section 61. External Audit. At least once a year, the Board of Directors shall in consultation with the Audit Committee, cause the audit of the books of accounts of the Cooperative by an independent Certified Public Accountant.

Section 62. Annual Report. During the annual regular general assembly meeting the Cooperative shall submit a report of its operations to the general assembly together with the audited financial statements. The annual reports shall be certified by the Chairman, Treasurer, Manager, Accountant, and other responsible officers of the Cooperative as true and correct in all aspects to the best of their knowledge. The audited financial statements shall be submitted to the Cooperative Development Authority within 60 days from the end of every fiscal year.

Article XII Amendments

Section 63. Amendments. Amendments to the Articles of Cooperation and By-laws may be adopted by at least two-thirds (2/3) votes of all members entitled to vote at any regular or special general assembly called for the purpose without prejudice to the rights of dissenting members to withdraw their membership under the provisions of the Cooperative Code of the Philippines.

The amendment/s shall take effect upon receipt by the Cooperative of the Certificate of the Registration of Amendments issued by the Cooperative Development Authority.

Voted and adopted this 29th day of November 2001, in Laoag City, Philippines.

NAME AND SIGNATURE OF MEMBERS

(SEE ATTACHED SHEET)

We, the undersigned, constituting a majority of the Board of Directors of the Government of Laoag Employees Development Cooperative (GLEDCO) do hereby certify that the foregoing instrument is the code of By-laws of the said Cooperative.

(Sgd)		(Sgd)
ENRICO A. AURELIO		LILIAN R. ABIJERO
(Chairman)		(Vice-Chairman)

(Sgd)		(Sgd)
ERLINDA R. RAGASA		RUBEN J. DOMINGO
(Director)		(Director)

(Sgd)		(Sgd)
DIOMEDES B. GAYBAN		OSCAR R. RECTA
(Director)		(Director)

	(Sgd)
	FRED C. AGPAOA
	(Director)

Category: AboutUs

Board of Directors

Name	Position
ENRICO A. AURELIO	Chairman of the Board
ESTELA A. DAMO	Vice-Chairman
LAUREL M. MARIANO	Member
RUBEN J. DOMINGO	Member
FRED C. AGPAOA	Member
RENATO R. MATEO	Member
DIOMEDES B. GAYBAN	Member

Management

Name	Position
EDGAR R. PASCUAL	General Manger
JOESELYN C. GUERRERO	Accountant
NORA M. QUESTIN	Treasurer
CARLINA V. CUMIGAD	Chairman, Credit Committee
REGELYN ABARA	Chairman, Audit Committee body

Category: AboutUs

Articles of Cooperation of Government of Laoag Employees Development Cooperative (GLEDCO)

Know all men by these presents:

We, the undersigned, Filipino citizens, all of legal age and residents of the Philippines, have on this day voluntarily agreed to form a primary Development Cooperative, under the laws of the Republic of the Philippines.

And we hereby certify:

Article I Name of the Cooperative

That the name of this cooperative shall be GOVERNMENT OF LAOAG EMPLOYEES DEVELOPMENT COOPERATIVE (GLEDCO).

Article II Objectives

That the objectives for which this Cooperative is formed are:

Primary

To create funds in order to grant loans for productive and providential purposes to all members (regular and associate) and non-members who are employees of the City Government of Laoag.

Secondary

In addition to the objectives and purposes provided for under Republic Act No. 6938, which are hereby made an integral part of this Articles of Cooperation, this Cooperative adopts the following secondary objectives:

To actively support the government and other concerned organizations, both local and foreign, in promoting cooperatives as a practical means towards sustainable socio-economic development under a truly and just democratic society;
To develop the knowledge of the members on the principles and practices of cooperatives to enable them to actively and competently participate in managing the affairs of the Cooperative;
To institutionalize a dynamic savings mobilization and capital build-up schemes to sustain its developmental activities and long term investments, thereby ensuring optimum economic benefits to the members, their families and the general public;
To implement policy guidelines that will ensure the transparency, equitable access to its resources and services, and promote the interest of the members; and
To adopt such other plans as may help foster the welfare of the members, their families and the community.

Article III Powers and Practices

In the furtherance of and not in limitation to the powers and capacities conferred by Republic Act No. 6938, this Cooperative shall have the following juridical powers and capacities:

To draw, make, accept, endorse, guarantee, execute and issue promissory notes, bills of exchange, debentures, bonds, drafts, warrants, certificates and all other kinds of obligations and instruments in connection with its lawful business operation;
To contract indebtedness and/or enter into joint ventures with local or foreign entities in order to achieve its goals and economic plans and programs;
To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property as the transaction of its lawful affairs may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution of the Philippines;
To exercise such other powers as may be essential and necessary to carry out its objectives in accordance with law.

Article IV Area of Operation

That this cooperative shall operate within the City Government of Laoag and its principal office shall be located at the Brgy. # 10 San Jose, City Hall, 2900 Laoag City.

(The area of operation is defined as the place where the cooperative can recruit its members. It may either be a Barangay, inter-barangay, municipal, inter-municipal, city, inter-city, provincial, inter-provincial, regional, inter-regional, or national.)

Article V Term of Existence

That the term for which this cooperative shall exist is fifty (50) years from the date of its registration with the Cooperative Development Authority. (The term is 50 years.)

Article VI Common Bond of Membership

That the common bond of membership of this Cooperative is institutional (official / employees of the City Government of Laoag) and shall be open to all natural persons who are Filipino citizens, of legal age, with the capacity to contract and possess all the qualifications and none of the disqualifications provided for in the By-laws:

Notes:

The common bond of membership is defined as the pre-existing conditions that motivate persons to associate together for the achievement of their common objectives and goals;
Common bond of membership may either be:
1. Residential - Which means the members are residing and/or working within the Cooperative’s area of operation.
2. Institutional - Which means the members are employees of a certain company, public or private.
3. Occupational/Professional - Which means the members belong to a certain association, organization, religious or civic groups whether formal or informal.
If the common bond of membership includes all categories, use Residential.

Article VII Name, Nationality and Address of Cooperators

That the name, nationality and address of the Cooperators are as follows:
	Name	Nationality	Postal Address
1	Lilian R. Abijero	Filipino	City Mayor’s Office, City Hall, 2900 Laoag City
2	Fred C. Agpaoa	Filipino	City Engineer’s Office, 2900 Laoag City
3	Nelson P. Aquino	Filipino	City Budget Office, City Hall, 2900 Laoag City
4	Eliezer P. Asuncion	Filipino	City Hospital, 2900 Laoag City
5	Enrico A. Aurelio	Filipino	Sanggunian Panlungsod Office, 2900 LC
6	Julia J. Bumanglag	Filipino	City Mayor’s Office, City Hall, 2900 Laoag City
7	Arturo M. Cabello	Filipino	City Veterinarian’s Office, 2900 Laoag City
8	Ma. Luisa F. Castro	Filipino	City Planning & Dev’t. Office, City Hall, 2900 LC
9	Aurora M. Corpuz	Filipino	City Social Welfare Office, 2900 Laoag City
10	Ruben J. Domingo	Filipino	City Assessor’s Office, City Hall, 2900 Laoag City
11	Asuncion C. Fariñas	Filipino	City Mayor’s Office, City Hall, 2900 Laoag City
12	Laurel M. Mariano	Filipino	City General Services Office, City Hall, 2900 LC
13	Renato R. Mateo	Filipino	City Health Office, 2900 Laoag City
14	. Edgar R. Pascual	Filipino	Office of the City Accountant, City Hall, 2900 LC
15	Gloria F. Peralta	Filipino	Office of the City Administrator, City Hall, 2900 LC
16	Erlinda R. Ragasa	Filipino	City Treasurer’s Office, City Hall, 2900 Laoag City
17	Oscar R. Recta	Filipino	City Agriculture Office, 2900 Laoag City
18	Ulderito D. Root	Filipino	City Engineer’s Office, 2900 Laoag City
19	Felicitas D. Santiago	Filipino	City Population Commission, 2900 Laoag City
20	Edmundo H. Tamayo	Filipino	City Civil Registry Office, City Hall, 2900 LC

Article VIII Board of Directors

That the number of directors of this Cooperative shall be seven (7) and the name, citizenship and the residence of the founding directors who are to serve until their successors shall have been elected and qualified as provided in the by-laws are:

	Name	Citizenship	Residence
1	Enrico A. Aurelio	Filipino	Laoag City
2	Lilian R. Abijero	Filipino	Laoag City
3	Erlinda R. Ragasa	Filipino	Vigan City
4	Oscar R. Recta	Filipino	Laoag City
5	Ruben J. Domingo	Filipino	Laoag City
6	Fred C. Agpaoa	Filipino	Laoag City
7	Diomedes B. Gayban	Filipino	Laoag City

Article IX Capitalization

That the authorized share capital of this Cooperative is Two Million Pesos (P2,000,000.00) Philippine currency, divided into four thousand (4,000) shares, with a par value of P500 per share:

Article X Subscribed and Paid-up Share Capital

That at least twenty five percent (25%) of the authorized share capital has been subscribed and at least twenty five percent (25%) of the total subscription has been paid by the following members-subscribers: (The minimum total paid-up common share is P125,000.00).

Be it known that:

Mrs. Nora M. Questin has been appointed as Treasurer of this Cooperative to act as such until her successor shall have been duly elected/appointed and qualified in accordance with the by-laws. As such Treasurer, she has been authorized to receive payments and issue receipts for membership fees, share capital subscription and other revenues for and in the name of this Cooperative.

IN WITNESS WHEREOF, we have hereunto signed our names this 29th day of November 2001 in Laoag City, Philippines.

Names and signature of cooperators

Lilian R. Abijero
Asuncion C. Fariñas
Fred C. Agpaoa
Laurel M. Mariano
Nelson P. Aquino
Renato R. Mateo
Eliezer P. Asuncion
Edgar R. Pascual
Enrico A. Aurelio
Gloria F. Peralta
Julia J. Bumanglag
Erlinda R. Ragasa
Arturo M. Cabello
Oscar R. Recta
Ma. Luisa F. Castro
Ulderito D. Root
Aurora M. Corpuz
Felicitas D. Santiago
Ruben J. Domingo
Edmundo H. Tamayo

Category: AboutUs

Announcement

No announcement as of this time..