Sunday, January 22, 2017

See Youtube on SMDS  Multipurpose Cooperative which is still under construction as sound is missing.

Thursday, December 29, 2016


Please bear with the non alignments, missing tables and charts  ....



3.1 Policy and Procedures 18
6.1 Audit of Receivables 90
6.2 Audit of Investments 91
6.3 Audit of Property and Equipment 92
6.4 Audit of Unused Supplies 93
6.5 Audit of Prepaid Expenses 93
6.6 Audit of Share Capital 93
6.7 Audit of Statutory Funds 94
6.8 Audit of Expense 94
6.9 Substantive Testing of Cash 94

List of Tables

Clustering of Coop Areas………………………………………………………………..…………………      3
1.2 Coop Areas and Distribution of SMDS Regular Members…………………..…………………..     3
4.1 Purposes of Loans………………………………………………………………………….….……………..   33
4.2 Regular Loan Procedure (Cash Release below P10,000.00)………………..……………….....  35
4.3 Emergency Loan Procedure (Cash Release below P10,000.00)……………..…………………  39
4.4 Regular Loan Procedure (Cash Release at P10,000.00 and above)…………………………..  42
4.5 Emergency Loan Procedure (Cash Release at P10,000.00 and above)……………..……...  46
4.6 Collaterals and Percentage of Appraisal Value………………………………………………….……   49
4.7 Loan Approving Limits…………………………………………………………………………………….…    52
4.8 Loan Type According to Purpose………………………………………………………………………….   53
4.9 Procedure in Addressing Loan Delinquents ………………………………………………………….   55
4.10 Procedure on Closure of Delinquent Loan Account ……………………………………………….   56
5.1 Chart of Accounts …………………………………………………………………………………………….   59
5.2 Collection Through Area Collectors …………………………………………………………………….   62
5.3 Collection Through Tellers………………………………………………………………………………….   63
5.4 Reportorial Requirements …………………………………………………………………………………..  71
6.1 Audit Procedure for Receivables  ………………………………………………………………………..   80
6.2 Audit Procedure for Investments ………………………………………………………………………..   81
6.3 Audit Procedure for Property and Equipment ………………………………………………………     81
6.4 Procedure for Substantive Testing of Cash  …………………………………………………………    84

List of Charts

2.1 SMDS Organizational Structure  ………………………………………………………………………….    7
3.1 Application Process for New Membership …………………………………………………………….   19
3.2 Termination of Membership Flowchart  ……………………………………………………………….    20
4.1 Deposit Transaction Flowchart ……………………………………………………………………………   27
4.2 Withdrawal Transaction Flowchart ……………………………………………………………………….  29
4.3 Loan Procedures ………………………………………………………………………………………………..  35
4.4 Process Flow-Regular Loan (Cash Release below P10,000.00) ………………………………..   37
4.5 Process Flow-Emergency Loan (Cash Release below P10,000.00) …………………………..   40
4.6 Process Flow-Regular Loan (Cash Release at P10,000.00 and above) ………………………  44
4.7 Process Flow-Emergency Loan (Cash Release at P10,000.00 and above) ………………..  47
4.8 Procedure in Addressing Loan Delinquents ……………………………………………………………  57
4.9 Procedure on Closure of Delinquent Loan Account ………………………………………………..   58
5.1 Collection Through Area Collectors ……………………………………………………………………..   63
5.2 Collection Through Teller ……………………………………………………………………………………. 64

List of Exhibits

I.   General

1-Amended Articles of Cooperation
2-Amended By-Laws
3-Introductory Presentation (Membership Seminar)

II.  Various Form Documents/Letters

4-Application Form for Membership
5-Signature Card
6-Share Capital Passbook
7-Savings Passbook
8-Time Deposit Certificate
9-Withdrawal Slip
10-Proforma: Termination of Membership Letter
11-Promissory Note
12-Loan Passbook
13-Credit Action Sheet
14-Amortization Schedule
15-Cash Voucher

II.  Various Form Documents/Letters

16-Check Voucher
17-Collection Report
18-Provisional Receipt
19-Official Receipt
20-Daily Transaction Record
21-Loan Delinquency Report
22-Warning Letter
23-Closed Account Letter
24-Closed Account Computation Sheet
25-Journal Voucher
26-Loan Restructuring Agreement
27-Chattel Mortgage
28-Notice to Barangay Chairman
29-Fund Transfer
30-request for Payment Form


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OPERATIONS MANUAL                                        

1.1 History

The SMDS Multi-Purpose Cooperative (SMDS Coop) is a parish-based cooperative in Barangays Pansol and Loyola Heights, Quezon City.  It started in 1996, in the parish of Sta. Maria della Strada about 12 years after the parish had tried and had mixed results in many economic activities and livelihood projects such as pig raising, parol, candle and soap making and the like.  The framework was to survey the depressed areas of the community where most assistance were needed, identify what economic activities the residents were engaged in, understand how they were funded and what they needed to expand their activities.  Their inadequacy to borrow from formal lending institutions and to depend mostly on 5-6 operators was a major motivation for the founders to start a credit coop.  One of the founders was Monsignor Patricio H. Lim, the SMDS parish priest, who despite his initial reluctance was reassured with the fact that the proponents of the coop were experienced senior bankers and that it was starting with a controllable modest amount.

While the cooperative was licensed as a multipurpose cooperative with the Cooperative Development Authority (CDA) on May 3, 1996 under RA 938, otherwise known as the New Cooperative Code of the Philippines, SMDS Coop has decided to focus on being a Credit Coop after realizing that it would compete with a lot of its members if it operated as a multipurpose cooperative handling products and services that many members were also engaged in.  It started with a P30,000.00 capital contributions, P2,000 each from its 15 co-operators.  (See attached list of founding co-operators).  The coop started with and continued to be entirely funded by its members.  In other words, it has no external borrowings.  It has made a reality the basic purpose of a cooperative where capital contributions and deposits of members alone were sufficient to service the micro financing demand of its members while keeping its  operations viable, and even more because it has given  better than market return on investment

After 14 years, the SMDS Coop now has a total membership base of 4,000, total assets of P65 million and capital of 24.6 million.  It currently lends P6.5 Million per month on the average to about 500 borrowing members, averaging P12,000.00 per loan for an average term of 6 months.  It’s hard core past due obligations averages only 2 % of its loan portfolio and has been paying out at least 20% interest on share capital for several years and an average of 30% excess payments equivalent to patronage refund.

1.2 Mission and Vision

The Vision and Mission Statements help the coop to focus on its activities.  The vision statement expresses where the coop wants to be, an ideal future consistent with the values of the coop.  On the other hand, the mission statement expresses its “reason for being”.   Both these should be clear and concise statements that must be shared by the wider membership.  They were developed with the assistance of experts who conduct Vision and Mission workshops so that they become statements that are not just posted on walls or kept in wallets but statements that are in fact translated into day to day activities of members.

The SMDS Coop’s Vision and Mission are as follows:


A Christian community united in love for one another, supporting each other in self-help livelihood projects the cooperative way.


The SMDS Cooperative commits to gather and employ the resources of the community to improve members' standard of living.

Purpose and importance of the Manual

This manual is a priority undertaking of the Cooperative’s Board of Directors.  It  is envisioned to provide a comprehensive documentation and easy reference guide for the Coop’s policies and procedures including the logic behind some of them, and other information that the Officers and Employees may need to run the daily operations of the Cooperative.

Specifically, this manual has been developed to:

Serve as an aid in the development and maintenance of the coop’s continuing operations.

Offer both procedural and operational guidance, and the logic behind them, for the implementation of coop services and activities.

Function as a resource guide for the SMDS co-operators and management personnel in carrying out their role as members, officers and employees of the SMDS Coop.

Hopefully, others can likewise use this manual to help streamline their present operations or to help set up one.

It contains all the needed information about the coop including its management and organizational structure, and most importantly policies and procedures on its  daily operations. It also includes all the necessary accounting and audit tasks and various forms it currently uses.

Scope of Activities

Communities Served

The SMDS Parish is located along Katipunan Avenue, alternatively called C-5, a major access road in Quezon City.  It spans from the North, the University of the Philippines, and intersects several major roads like Aurora Boulevard and Boni Serrano.  It can also be accessed through the Pansol-Balara area which goes through White Plains and the Corinthian Gardens villages.

Major schools located in the area of coverage are Ateneo de Manila University and Miriam College which is beside the Sta. Maria della Strada Parish. Most of the shops, restaurants, and residence halls are aimed at the student population. Due to its accessibility, Katipunan is known to be a place where many people, especially college students, hang out and reside.

As authorized by the Cooperative Development Authority and as defined in its By-laws, almost all the members of the Coop reside in the area and/or employed by various establishments within the vicinity.

The SMDS Coop is located inside the Sta. Maria della Strada parish grounds. It caters to 6 major developing areas and 12 additional areas. The major areas are grouped into two (2) clusters namely Loyola Heights and Pansol. The components of each cluster are as follows:

Table 1.1
Clustering of Coop Areas

For each of the 18 areas the number of regular members as of November 2009 is distributed as follows:
Table 1.2
Coop Areas and Distribution of SMDS Regular Members

Additionally, the coop has XXX associate members as of the same date.

Types of Services and/or Products

There are two (2) major economic activities provided by the coop for its members:  deposit and credit (loans) services. To help the members monitor each activity, the coop management issues three (3) kinds of colour-coded passbooks.  They serve as records of business every time transactions with the Cooperative are made.  

There are six (6) types of deposit products members can avail of depending on their purpose, namely: Regular savings deposit, Special savings deposit, Time deposit, Educational deposit, Maternity deposit and the Kinabukasan Fund.

On the other hand, the Cooperative provides credit to highly creditworthy members.   It also has six (6) general types of credit facilities for members:  Productive, Emergency, Medical, Housing, Appliance and Educational loans.

As a postscript, deposit and credit products are developed by management, passed on and approved by the board, every now and then as may be needed.

The details on the different types of deposit and credit services will be discussed fully in the succeeding chapters of this Manual.


The SMDS Coop operates under an eleven member Board of Directors.  Six come from and are  respectively elected by the six major areas.  Four are mainstay volunteer “professional” bankers.  The last is the parish priest of SMDS as  an ex officio member.  Additionally, there are three advisers who are afforded equal board participation: the parish priest of Pentecost and two founding former directors.  All of the directors and advisers are presented for objection/ confirmation by the General Assembly during its annual membership meeting.

2.1 Board of Directors (BoD)

It is best to just paraphrase Rule 7 of Republic Act 9520:
Section 1. Legal Basis. The legal basis for this Rule is Art. 44 of the Code, quoted as follows:
"Art. 44. Functions, Responsibilities, and Training Requirements of Directors, Officers, and Committee Members. The functions and responsibilities of the directors, officers and committee members, as well as their training requirements shall be in accordance with the rules and regulations issued by the Authority."
Section 2. Officers of the Cooperative. The Officers of the cooperative shall include the Members of the Board of Directors, Members of the Different Committees created by the General Assembly, General Manager or Chief Executive Officer, Secretary, Treasurer and Members holding other positions as maybe provided for in their By-laws. As such they are entrusted with the power of exercising authority within the scope of their defined functions which is permanent in nature and include the exercise of control and discretion in the performance of their duly.
Section 3. Committees of Cooperatives. The By-laws shall provide for the creation of the following committees:
1. Audit Committee;
2. Election Committee;
3. Mediation and Conciliation Committee;
4. Ethics Committee; and
5. Other Committees as may be necessary for the conduct of the affairs of the cooperative.
The members of Audit Election Committees shall be elected by the General Assembly while the Board of Directors shall appoint the rest.
Section 4. Functions and Responsibilities of the Officers of the Cooperative.
4.1 Board of Directors.
4.1.1 The Board of Directors shall have the following functions and responsibilities:
a. Provide general policy direction;
b. Formulate the strategic development plan;
c. Determine and prescribe the organizational and operational structure;
d. Review the Annual Plan and Budget and recommend for the approval of the General/Representative Assembly;
e. Establish policies and procedures for the effective operation and ensure proper implementation of such;
f. Evaluate the capability and qualification and recommended to the General/Representative Assembly the engagement of the services of an External Auditor;
g. Appoint the members of the Mediation/Conciliation and Ethics Committees and other Officers as specified in the Code and cooperative By-laws;
h. Decide election related cases involving the Election Committee or its members;
i. Act on the recommendation of the Ethics Committee on cases involving violations of Code of Governance and Ethical Standards; and
j. Perform such other functions as may be prescribed in the By-laws or authorized by the General/Representative Assembly.
4.1.2 The Chairperson shall:
a. Set the agenda foe board meetings in coordination with the other members of the Board of Directors;
b. Preside over all meetings of the Board of Directors and of the General/Representative assembly;
c. Sign contracts, agreements, certificates and other documents on behalf of the cooperative as authorized by the Board of Directors or by the General/Representative Assembly;
d. Issue Certificate of Non-Affiliation with any Federation or Union; and
e. Perform such other functions as may be authorized by the Board of Directors or by the General/Representative Assembly.
4.1.3 The Vice Chairperson shall:
a. Perform all duties and functions of the Chairperson in the absence of the latter;
b. To act as ex-officio Chairperson of the Education and Training Committee; and
c. Perform such other duties as may be delegated to him/her by the Board of Directors.
4.2 Treasurer. The Treasurer shall:
a. Ensure that all cash collections are deposited in accordance with the policies set by the Board of Directors;
b. Have custody of all funds, securities, and documentation's relating to all assets, liabilities, income and expenditures;
c. Monitor and review the financial management operations of the cooperative, subject to such limitations and control as may be prescribed by the Board of Directors;
d. Maintain full and complete records of cash transactions;
e. Maintain a Petty Cash Fund and Daily Cash Position Report; and Perform such other functions as may be prescribed in the By-laws or authorized by the General/Representative Assembly.
4.3 Secretary. The Secretary shall:
a. Keep an updated and complete registry of all members;
b. Record, prepare and maintain records of all minutes of meetings of the Board of Directors and the General/Representative Assembly;
c. Ensure that necessary Board of Directors actions and decisions are transmitted to the management for compliance and implementation;
d. Issue and certify the list of members who are in good standing entitled to vote as determined by the Board of Directors;
e. Prepare and issue Share Certificates;
f. Serve notice of all meetings called and certify the presence of quorum of all meetings of the Board of Directors and the General/Representative Assembly;
g. Keep copy Treasure's reports and other reports;
h. Keep and maintain the Share and Transfer Book;
i. Serve as custodian of the cooperative seal; and
Perform such other functions as may be prescribed in the By-laws or authorized by the General/ Representative Assembly.
4.4 Election Committee. The Election Committee shall:
a. Formulate election rules and guidelines and recommended to the General/Representative Assembly for approval;
b. Implement election rules and guidelines duly approved by the General/Representative Assembly;
c. Recommended necessary amendments to the election rules and guidelines, in consultation with the Board of Directors, for the General/Representatives Assembly's approval;
d. Supervise the conduct, manner and procedure of election and other election related activities and act on the changes thereto;
e. Canvass and certify the results of the election;
f. Proclaim the winning candidates;
g. Decide election and other election related cases except those involving the Election Committee or its members; and
h. Perform such other functions as prescribed in the By-laws or authorized by the General/Representative Assembly.
4.5 Audit Committee. The committee shall:
a. Monitor the adequacy and effectiveness of the cooperative's management and control system;
b. Audit the performance of the cooperative and its various responsibility centers;
c. Review continuously and periodically the books of account and other financial records to ensure that these are in accordance with the cooperative principles and generally accepted accounting procedures;
d. Submit reports on the result of the internal audit and recommend necessary changes on policies and other related matters on operation to the Board of Directors and General/Representative Assembly;
e. Perform such other functions as may be prescribed in the By-laws or authorized by the General/Representative Assembly.
4.6 Mediation and Conciliation Committee. The committee shall:
a. Formulate and develop the Conciliation-Mediation Program and ensure that it is properly implemented;
b. Monitor Conciliation-Mediation program and processes;
c. Submit semi-annual reports of cooperative cases to the Authority within fifteen (15) days after the end of every semester;
d. Accept and file Evaluation Reports;
e. Submit recommendations for improvement to the Board of Directors;
f. Recommend to the Board of Directors any member of the cooperative for Conciliation-Mediation Trainings as Cooperative Conciliator-Mediator;
g. Issue the Certificate of Non-Settlement (CNS);
h. Perform such other functions as may be prescribed in the By-laws or authorized by the General/Representative Assembly.
4.7 Ethics Committee. The committee shall:
a. Develop Code of Governance and Ethical Standards to be observed by the members, officers and employees of the cooperative subject to the approval of the Board of Directors and ratification of the General/Representative Assembly;
b. Disseminate, promote and implement the approved Code of Governance and Ethical standards;
c. Monitor compliance with the Code of Governance and Ethical Standards and recommend to the Board of Directors measures to address the gap, if any;
d. Conduct initial investigation or inquiry upon receipt of a complaint involving Code of Governance and Ethical Standards and submit report to the Board of Directors together with the appropriate sanctions.
e. Recommend ethical rules and policy to the Board of Directors;
f. Perform such other functions as may be prescribed in the By-laws or authorized by the General/Representative Assembly.
4.8 Other Committees. Other Committees that may be created shall assist in the formulation of policies and rules and in the implementation of the service of the cooperative. Their powers, functions, and responsibilities shall be defined in the By-laws.
4.9 General Manager. The General Manager shall:
a. Oversee the overall day to day business operations of the cooperative by providing general direction, supervision, management and administrative control over all the operating departments subject to such limitations as may be set forth by the Board of Directors or the General/Representative Assembly;
b. Formulate and recommend in coordination with the operating departments under his/her supervision, the Cooperative's Annual and Medium Term Development Plan, programs and projects, for approval of the Board of Directors and ratification of the General/Representative Assembly;
c. Implement the duly approved plans and programs of the Cooperative and any other directive or instruction of the Board of Directors.
d. Provide and submit to the Board of Directors monthly reports on the status of the Cooperative's operation vis-à-vis its targets and recommend appropriate policy or operational changes, if necessary;
e. Represent the Cooperative in any agreement, contract, business dealing, and in any other official business transaction as may be authorized by the Board of Directors;
f. Ensure compliance with all administrative and other requirements of regulatory bodies; and
g. Perform such other functions as may be prescribed in the By-laws or authorized by the General/Representative Assembly.
The Board of Directors has the responsibility for good governance over the supervision and operations  of the Cooperative.  It shall prescribe policies consistent with the law, by-laws and the resolutions of the General Assembly for the management of its business and the guidance of its members, officers and employees.  (Exhibit 1 Amended Articles of Cooperation; Exhibit 2 Amended By-Laws)

The 11 man board  is comprised of the Chairman and Vice – Chairman (Directors), Secretary and Treasurer (who can be non-directors) and nine (9) additional members of the Board. Meetings are normally conducted every 3rd Saturday of the month while special meetings are conducted accordingly as the need arises.

Executive Committee is composed of the five (5) BoD Officers namely:  Chairman, Vice Chairman, President, Treasurer, Internal Audit, and Corp. Secretary.. It approves  disbursements of the Coop amounting to more than P50,000.00.

Membership Committee is composed of such number as may be determined by the Board of Directors and appointed by it for a term of 1 year, without prejudice to their reappointment. The Board Vice Chairman/Vice President shall serve as ex-officio Chairman of this committee, provided that he is a qualified member or from outside the Board. It shall process and recommend to the Board the approval of the list of applicants for membership. Its membership shall also serve as resource persons/trainers in training programs.

Election Committee is composed of three members elected during the annual General Assembly. Within ten (10) days after their election, they shall elect their Chairman, Vice Chairman and Secretary. No member of the committee shall promulgate rules and regulations in the conduct of election, canvass and certify in writing the returns to the presiding officers, proclaim the wining candidates and shall decide election protest. Election protest filed by the members of the Election Committee shall be decided by the Board of Directors. The decision of the Election Committee of the Board of Directors may be appealed to the CDA within 15 days from notice for decision by itself or if either of the parties so desire, to arbitration of the three (3) persons one of whom shall come from the CDA and two (2) to be nominate by each of the parties concerned.

In the appreciation of ballots, cumulative voting shall be disregarded and a vote for a director or committee shall be counted as one vote.

Education and Training Committee is composed of such number as may be determined by the Board and appointed by it for a term of one year, without prejudice to their reappointment. An appointed director shall serve as ex-officio chairman of the committee. The committee shall be responsible in planning and implementing promotional activities and continuous education of the members of the Cooperative.

Audit and Inventory Committee is composed of three members who shall be elected during the annual general assembly.   The committee is headed by the person designated as  Auditor.    The members of the Committee shall hold office for one year or until their successors shall have been elected and qualified. The Committee shall provide internal audit service, maintain a complete record of its examination and inventory, recommend an external auditor to the board and the General Assembly so that at least an annual audited financial report can be submitted to the board and to the General Assembly.

Credit Committee.  All forms of credit need the approval of a credit committee which is composed of at least three members.  It fulfills a very important role in maintaining the quality of the loan portfolio.  It is currently composed of Loan Officers, the General Manager and at least  a member of the Execom.   Loan applications can be discussed and acted upon by the committee in a group meeting or by circulating the Credit Action Sheet.   Membership loans are evaluated and standard loans criteria applied to all personal, business and mortgage loans.   In the performance of its functions, it shall process, evaluate & act upon all loan applications and formulate and institute credit policies subject to the approval of the Board.  The committee shall also design a system to carry out and improve or expand the credit and collection operations/services of the Cooperative.

General Assembly (GA) Committee.   The Board decided and approved the creation of this committee.  It shall be in-charged of the preparations and conduct of of the annual General Assembly.  All incumbent area directors who personally volunteered and the collectors as appointed by the General Manager will be the members of the said committee.

                                                        Chart 2.1
                          SMDS Organizational Structure

Area Director:    The Area Directors are elected on a ‘sectoral’ basis, as provided for in the By Laws, to make sure that at least the six designated major areas are represented in the board.   This designation depends on the level of membership. The Area Directors are tasked to:

Be an active member of the board to ensure proper governance in the activities of the cooperative.
Disseminate information on agreements made during the BoD meeting through the conduct of regular monthly meetings with constituents every 3rd week of the month.
Initially screen new applicants for membership, endorse them to the membership committee and finally confirm the new members after approval of the membership committee.
Together with the area leaders, the area director will both agree on the project to be implemented in the area based on the criteria set for this particular undertaking of the Coop.

2.2. Officers and Staff

This section of the Operations Manual will be discussing the individual job descriptions of the Coop Management Officers and employees as currently structured.

General Manager (GM)

The Organizational Structure shows that the General Manager acts as the Chief Operations Officer.   He/She is the link between the Board and the operational team made up by the Coop staff. This position requires the management of the business in line with board policies and establishment and implementation of operating procedures. It also includes setting out jobs to be done on the day to day operations of the Coop. Specifically; the tasks of the position includes the following:

 Is accountable to the Board and the members in General.
 Recommends salaries including benefits within the ranges established by the
 Prepares the budget and does the reports to be submitted to the Board at meetings providing factual information as basis for board policy decisions.
     d.  Executes board and Execom instructions including the allocation of net surplus.
e.  Prepares board agenda and checks minutes to be signed by Corporate Secretary.
f.   Supervises all cooperative staff and conducts annual performance evaluation.
g. Checks transactions for the day; disbursement  on withdrawals, checks and
    approves revolving fund
h.  Double checks loan applications, disbursed loans, credit action sheets,
     withdrawals (post review), delinquencies, board reports and loan portfolio report.
i.   Verifies waived penalties by the Teller as against the credit action sheet.
j.   Checks investments in PNB and Planters Bank which has most of the funds.
k.  Checks and approves payroll every 1st week of the month.
l.   Conducts staff meetings with the area collectors after the Board Meeting
m. Checks all financial reports prepared by Control Officer every 1st week of the
n.  Serves as the back up custodian of the revolving fund.

Assistant to the GM

Acts as the General Manager in his absence.
Acts as the Assistant Secretary of the Board:  prepares minutes of Board meetings,
Records staff meetings, checks and verifies the daily transactions of the Coop.
Records staff meetings, checks and verifies the daily transactions of the Coop.  
Conducts cash count and prepares the revolving fund report and submits this to the General Manager.
Approves the computation on the Closed Account Computation Sheet
Verifies and checks the Patronage Refunds before they are paid out.
Together with the Control officer, deals with the Coop’s external auditor.
Prepares and transacts with bank on deposits
Conducts pre-member orientation and field visits to the coop areas.
Checks on the Coop’s computer systems and oversees the implementation of projects in the area.
Performs all functions assigned by the General Manager.

Chief Accountant, Risk Management & Compliance Officer
General Duties and Responsibilities

Logic of the position:

Especially as the coop increases in number of members, in the volume and amounts of its business, there is a need to:

Ensure the integrity of its records, more especially its accounting records,
Make sure that the cooperative’s financial footings are on solid grounds based on acceptable financial ratios and financial guidelines established by the General Membership during its assemblies and/or by the board.
Make sure the cooperative is compliant with relevant government regulations and that its operations are founded under the system of good governance.

For these reasons, the position of Chief Accountant, Risk Management & Compliance Officer is hereby established who shall have oversight responsibilities on all the operations of the coop as well as to perform specific internal and governmental reportorial and compliance responsibilities.


The Chief Accountant, Risk Management & Compliance Officer shall be under the supervision of the General Manager on administrative matters and shall be under the responsibility of the Board of Directors in the performance of his/her duties.

Oversight Responsibilities:

Ensure that at least dual control is established on all aspects of operations, if not the maker, checker and approval set up in all operating and credit procedures.

Ensure that cash management and record keeping are always done separately and by at least 2 different staff members.

Ensure that personal passwords are never shared and are changed periodically, at least every quarter.

Ensure that all books of accounts, documents, vouchers, contracts and other records concerning the business of the Cooperative are kept and maintained by specific responsible individuals and they are made available for auditing purposes by the Chairman of the Audit Committee.  Along this line, make a gird chart of the records along side the names of specific responsible staff(s);

Conducts cash count and checks the revolving fund report and submits this to the General Manager for review and if needed to the board of directors at least once a month.

Supervises the system (Financial Performer System for Cooperatives) NATTCO and monitors access rights and security/passwords of users.

Suggest action steps and procedures that are needed for the proper check and balance of the operations to ensure long term success of the coop.

Direct Operating Responsibilities:

Cause and/or 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;

 Monitor and prepare monthly/quarterly/annual government ( SSS, Philhealth, HDMF,CDA ) reportorial requirements and prepares its corresponding BIR Forms (Withholding Tax – at source, on compensation, and Income Tax);

Develop financial ratios and guidelines for the cooperative to conform to and to present the same for the approval of the board and/or the General Assembly.  These will include assets liability and leverage ratios.

Compute and monitor monthly performance against the financial ratios and guidelines.

Provides assistance to the Board of Directors in the preparation of the annual budget;

Prepares Confirmation Sheet semi-annually (deadline is every April 30 and Oct 31)

Prepares mid – year Interest on Share Capital and Patronage Refunds ( Oct to Mar is released on May while April to Sept is released on Dec )

Prepares monthly payroll every 1st of the month.

Facilitates Philhealth and SSS payments and benefits of members.

Supervises the duties and responsibilities of the Accounting Assistant.

Other Responsibilities:

Assume other responsibilities consistent with the logic of the position as described above to include those assigned by the General Manager within the same logic and  other responsibilities that the Board may assign from time to time.


The Accountant shall be under the supervision and control of the General Manager but shall be directly responsible to the Board of Directors in the performance of duties:

Renders 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
Provides assistance to the Board of Directors in the preparation of the annual budget
Keeps, maintains and preserves all books of accounts, documents, vouchers, contracts and other records concerning the business of the Cooperative and makes them available for auditing purposes to the Chairman of the Audit Committee
Monitors and computes monthly/quarterly/annual government reportorial requirements and prepares its corresponding BIR Forms (Withholding Tax – at source, on compensation, and Income Tax)
Prepares correspondence/s pertaining to BIR accounts
Represents the company during BIR assessments

Control Officer

Records the waivers on interests and penalties.
Prepares the cash and check voucher (e. g. loan, withdrawals, salaries, etc.)
Checks the data application form and prepares the loan voucher and schedule of payment for consistency.
Affixes signature to confirm that previous loans have been offset and proper deductions are collected
Prepares journal voucher (interests, fund transfer , closed account and secondary market)
Supervises the computer system (Financial Performer System for Cooperatives) NATTCO
Verifies  secondary market for coop shares as stated in the Secondary Form
Supervises the Accounting Assistant in closing/deactivation of accounts and checks closed loan/account computation.
Supervises the financial e-system and overrides system errors.
Verifies fully paid loans
Prints Schedule of Accounts/Income Statement/Balance Sheet from the system every 1st week of the month.
Prepares advanced monthly payroll every third of the month
Monitors access rights and security/passwords of Ekoop users
Releases salaries of parish employees above P10,000.00 as indicated in the withdrawal slip (why not done by the tellers?)
Conducts quarterly random sampling of Interest on Regular Savings through the systems
Prepares summary of dormant accounts every quarter.
Performs other tasks instructed by the General Manager.

Prepares Confirmation Sheet of members semi-annually (deadline is every April 30 and Oct 31)
Prepares mid – year Interest on Share Capital ( Dec to May is released every June 30 while June to November is released December 30)
Verifies the computation of the Loan Officer on the Closed Account Computation Sheet with attached ledger/s to ensure correctness.


Records transactions in the Journal Voucher Book
Prepares the bank reconciliation every 1st week of the month.
Printing and analysis of accounts with abnormal balances.
Analysis of Various Schedules (e. g. expense)
Posts the interest earned by members from time Deposit accounts and during withdrawal of accounts  (is this not system generated?)

Loan Officer (Senior)

Interviews, evaluates, processes and acts upon loan application and withdrawal of deposits (why withdrawal of deposits too?)
Evaluates co-makers for prospective borrowers
Exercises general supervision including collection over all loans to members
Approves loans as one of the three members of the credit committee between P10,000.00 and P50,000.00
Provides recommendation on loan approval.
Releases checks for loan amounts exceeding P 10,000.00.  (should not the check be released by the tellers too?)
Conducts area visits to member borrowers 2 to 3 times per week as scheduled and investigates if loan proceeds were used for its intended purpose.
Prepares Loan Portfolio Report and past due reports twice a month, and consequently, generate reminder letters.
Prepares details and computes loan restructuring of current accounts
Conducts pre-membership seminar every Sunday
Prepares system generated loan releases report
Prepares secondary market/treasury report
Prepares delinquency report twice a month, after the grace period and negotiates during area visits for its settlement.
Computes delinquent account twice a month (for closed accounts)
Computes patronage refund when needed (semi-annually)

Loan Officer (Junior Staff)

Interviews and evaluates loan applicants (e.g. renewals, restructuring, closing of account)
Delivers checks for signing of authorized signatories and picks them up when already signed.
Collects checks from employee-members of specific corporations
Files loan vouchers, credit action sheets and promissory notes
Makes close-account computations and prepares closed account computation report.
Verifies delinquent accounts to be closed.
Prepares 1st notice (for accounts with two months in arrears) and notice of delinquency which is sent to principal borrowers and each co-maker.
Conducts scheduled area visitation for loans with a high amount of receivables including delinquent accounts for 2 months and beyond.
Negotiates during visitation as to compromise agreements, documents this and prepares the notice after the borrower’s failure to comply with the compromise agreement.
Closes the account if no compromise agreement was resolved during visitation and sends final notices for the formal closing of the account.
Files loan applications above P50,000.00
Performs other tasks delegated by General Manager

Admin Officer

Prepares the computation for the secondary market/treasury
Acts as replacement if the New Account Officer is not available
Maintains the Daily Time Record including leave of absences
Prepares quarterly DTR
Procures supplies (e.g. office, pantry, etc.)
Conducts monthly inventory of supplies
Releases the request of staff for supplies
Performs other tasks instructed by the General Manager (e. g. System generated List of Loans of Staff and Collectors)

Teller/ Cashier

Releases  maximum of P10, 000.00 for loans and withdrawals.
Accepts cash deposits and loan payments from coop members and collectors.
Issues Official Receipts
Updates loans, savings passbooks and time deposit certificates.
Prepares Petty Cash Vouchers and the Daily Transaction Report
Prepares check and cash deposits.
Organizes and maintains the filing of all supporting documents for all transactions such as official receipts, check and journal vouchers, signature cards
Preparation and release of Area Collectors’ allowances
Performs other tasks delegated by the GM and AGM

Accounting Assistant/New Accounts Officer

Serves as a member of the pre-membership seminar team.
Conducts interviews of new members.
Keeps the records of members
Distributes members passbook
Regularly updates membership profiles including membership status.
Prepares prints and distributes computerized IDs.
Submits insurance forms to Insurance Company for the new coop members.
Accomplishes forms for monthly submission to BIR, SSS, Pag-ibig and Philhealth
Provides messengerial services for the coop such as trips to the banks for deposits.
Closes/deactivates accounts
Other tasks that maybe assigned by the GM & AGM.

Area Leaders   are appointed by Management and confirmed by the Board. They are not employees of the Coop but trusted members of the community who have been tasked in carrying out the following functions:

Conducts credit investigation and helps screen the members in so far as the validity of their data and address and whether they are working or living in the area.
Recommends approval of membership to the Membership Committee. A stringent policy for a delinquent borrower is taken into consideration and may have difficulty in seeking membership if the collector does not endorse approval of membership.
Interviews and does background checks on loan applicants.
Together with the Area Director, disseminates information on agreements made during the BoD meeting through conduct of regular monthly meetings with constituents every 3rd week of the month and decides on the area project after consultation with members.
Does the collection from areas as scheduled, focusing on savings-generation with a quota of 40 members to visit daily. Loan payments are collected merely as consideration of member’s inability to pay directly at the Coop office.
Distribution or replacement of Provisional Receipts to Official Receipts.
Informs and reminds members of the minimum balance status of their deposits.


Applicants for regular membership will need to undergo an introductory seminar to ensure that they have a good understanding of their rights, duties and responsibilities and benefits in the  coop.   (Exhibit 3: Introductory Seminar Presentation)

To qualify as a member, an applicant has to comply with policy guidelines such as, qualifications, kinds or stages of membership, procedures and benefits of becoming a member and finally termination of membership.  These are discussed in more detail hereunder.
3.1 Policy and Procedures

3.1.1 Recruitment: Who may be a Regular Member?

Only natural persons who can comply with three (3) membership requisites can be Regular Members:

Applicant must have the capacity to contract or must be the head of the family;
Applicant must be residing in the area where the Coop operates;
Applicant must be doing business or working in the area where the Coop operates (Barangays Loyola and Pansol).
If the applicant is unable to meet at least 2 basic criteria above, the applicant cannot be granted Regular membership.
The residency requirement for homeowners is at least 3 consecutive years prior to application.  For applicants who are renting, the residency requirement is also a minimum of 3 consecutive years prior to the application.  The applicant is subject   background assessment from the area he/she belongs.  The membership committee with pass over the application and submit the same for approval of the Board of Directors.  
Minors may be granted membership into the coop provided that their parents are cooperative members themselves. At an early age, children of coop members can be taught and imbued with the values and principles of their parents and the cooperative. The young can learn to save whatever little they have for a brighter future. In fact, it has been a practice for some coop members to introduce their kids to membership by opening depository accounts and modestly save regular amounts  from the school allowance.
For those living or working outside the areas considered by the cooperative, becoming a member is grounded on several restrictions as may be directed by certain policies consistent with the provisions of the By-laws subject to  the evaluation of the Board of Directors. They may be allowed to invest by having depository accounts at competitive interest but not own any share nor borrow from the coop.

Types of Membership

The SMDS has the following types of membership:


Members are considered regular if they have completed the required share capital as maybe determined and approved by the Board of Directors.  Currently the existing policy requires P5,000.00 worth of stocks in the SMDS Cooperative. A special program was, however, launched by the Board reducing this amount by half and allowed full membership at P2,500.00. This,  however, has a corresponding reduced  insurance coverage.  Any new member must be of legal age, at least 18 years old but not more than 65 years old.  The maximum age  covered by insurance varies from 65 to 69 years old.


Members are considered associates if they have not fully paid or reached P5,000 capital share (or P2,500.00 under a special program), or are only maintaining depository and savings accounts. Individuals who have not yet attained the said legal age also fall under this type of membership.  Associate member status are also allowed for juridical persons and/or for those properly verified formal church or area organizations.  Necessary documents are pre requisite from the members of these organizations, such as area recognition of the existence of the organization,  members resolutions to open the account and appointments of at least dual signatories.

Seniors Savers

Senior Savers are Associate Members who do not have share capital but are aged 18 and above. Any associate can upgrade membership upon accomplishment of the mentioned determinants of regular membership. Special programs are introduced for those who by themselves are incapable of building-up capital and be considered regular members.

Junior Saver

Junior Savers is a kind of associate membership where individuals are below the legal age requirement and whose guardian is a regular member. To become one an initial deposit of Php. 200.00 is required but no ID fee is necessary.

3.1.3 How to be a Member

The following steps are requirements for membership

Attend Orientation Seminar

All applicants are required to attend the Pre-membership seminar (Confer: Pre-Membership Seminar of SMDS Cooperative). It is the first step in seeking membership into the Cooperative. During the seminar, rights of members; Coop policies and benefits are explained and discussed, membership process is presented and queries are carefully entertained.

The SMDS Coop holds this seminar on a regular basis, sometimes even four times a month, especially when undertaking membership campaign programs.  It is conducted by a Coop staff and/or any member of the Education Committee.

It is mandatory, as it is required by law, for interested applicants to attend this activity, may it be individuals or associations with assigned representatives. Attendance is recorded and has a validity of three (3) months. If the applicant has not applied for membership in the three month period, attendance to the seminar becomes void.

However, applicants for associate membership need not undergo the same seminar.  It is sufficient that they know the limits in terms of facilities and entitlements when it comes to services.  

Secure Documentary Requirements

The Coop adheres to the important principle of “knowing your members and/or clients”.  For this reason and for purposes of proper identification, the applicant is required to present and submit to the assigned membership accepting coop staff or the teller of the day, the following documentary requirements before being given his or her application form (Exhibit 4):

2 pcs. 1"x1” colored picture (most recent) –1st picture attached for the application form.

Any of the following identification documents:
Postal ID
Barangay ID
Voter’s ID
Phil. Regulatory Commission
Any government-issued ID
Company ID

These ID’s confirm primarily the applicant’s identity. Presenting any of the listed identification documents corroborate the real person the applicant wishes to convey on the application form. The validity of the presented documents is verified for its authenticity and conformity with the person applying.

Barangay Clearance/Certification (as maybe required by management) – this is to strengthen proof of the applicants residency or working identity in the locality and to confirm that the applicant has not been involved in any complaint.  If the applicant  is involved or has been involved, the nature of the complaint be recognized.

Lastly, area directors and eventually the Board have to confirm the acceptance of membership.

Visit the Cooperative Office

Applicants must personally go to the SMDS Cooperative situated at  Sta. Maria della Strada Parish compound in Katipunan, Quezon City, so that pictures can be taken and ID cards issued.   The office is located on the 3rd floor of the Lingkod Building at the rear portion of the parish compound. Exact address is:

SMDS Multi-Purpose Cooperative
3rd Floor Lingkod Center
Sta. Maria della Strada Parish
Katipunan Ave., cor. Pansol St., Quezon City

The orientation seminars are also conducted in the various areas but documentation requirements of new membership are done in the Coop Office.

Ask and Fill-out the Application form, ID and Signature card

After receiving the necessary and complete requirements, provide the applicant with an application form and signature card which he or she must properly and legibly fill-up consistent with the different identifications given and presented. The applicant must enter 3 signatures with the present date, complete name and address or his or her particular area in the signature card (Exhibit 5). The applicant must read thoroughly and write in print with a black pen and fill-up said application with a dark print much darker than the print in the form. Applicants must not hesitate to inquire if some vague subjects are encountered and he or she should formally leave some points provided on the final part of the form for the cooperative to fill up.

The applicant must be advised to present and give the form to an assigned Coop staff that checks and verifies the documents. The coop staff then immediately enters the applicants’ identity into the coop’s database and computer systems.
Subsequently, a cooperative personal identification card (coop ID) is given to the new member.  The member must affix his/her signature on the upper back corner of the card and identical to the specimen signatures on the signature card.

Receiving New Accounts Staff performs the following:

Receives and checks the veracity of data and signatures and the duly accomplished form, signature card and ID together with the pictures and a valid identification.
Clicks and opens Membership Module.
Updates database record and finds last entered control and membership number.
Gives number to the new member.
Clicks “New” for entering new membership then encodes and enters data and personal information on record.
Verifies entered records against the application form and saves the data.
For recording and entering the initial deposit account, “Open new accounts” is clicked and opened
New account number is consequently given to the member for the corresponding account opened.
Data is saved.
Informs the teller that acceptance of membership and entering of deposit is ready.

Prepare Deposit Slip and Membership dues

After completing the application form and the required documents already submitted, the applicant is requested to prepare a certain amount as may be required by the Board of Directors. This amount may change and vary from time to time. The nominated amount is allocated to cover membership fee, lamination of the personal coop ID and the initial deposit to open a savings account at least with  a minimum deposit amount. The initial savings deposit may be used as an instalment for build-up for later transfer to  share capital to fully pay up the subscription.  

SMDS Cooperative presently charges an applicant upon membership with a membership fee of P100.00 and P40.00 for the ID lamination. An additional P100.00 is then required to activate a regular savings account as membership is approved. Initially, for a total of P240.00 an interested individual can apply for membership as an associate. (charges are subject to change at anytime by the board).

The applicant however is not restricted and limited by the required initial dues to immediately make considerable deposit to fully build capital share upon membership. SMDS coop encourages  full payment of capital share in the amount of P 2,500 or P5,000 on one time basis. Once a member,  after a period of one (1) year, one can be part of the “Damayan Fund” with a  minimum of P500.00 deposit in his/herregular savings.
Membership fee and payment for ID lamination are strictly non-refundable however initial savings can be withdrawn in case membership is denied.

While personal information is being entered into the computer, the applicant then fills-up the deposit slips. The applicant then waits to be called by the teller.

Teller Receives Amounts and Deposits

As the particular amount is received from the applicant and counted by the teller, the corresponding computer generated official receipt is issued to record membership fee and lamination of ID. After the appropriate process in depositing is carried out and after the original and duplicate deposit slips are machine validated, the duplicate deposit slip is given back to the depositor.

For the membership fee and lamination of ID, the teller performs the following tasks:

Clicks and opens windows’ module labelled “Cash Receipts”
Searches new member’s name and account on the database.
Encodes and enters transaction number.
Edits accounting entries, membership fee for the account code “membership fee” and lamination fee for the account code “id lamination”
Clicks “ok” and saves particular transaction.
Official receipt is viewed and printed.

For the initial deposit, the teller follows the process for entering a deposit transaction process.

Other forms to include the coverage  for the free life insurance is given to the new members to be filled-up, but only if the new member has fully paid the required capital share

Claim Coop ID and Passbook after a week

SMDS Coop takes  at least a week for processing the Coop ID and Passbook before releasing. As membership is approved, the new member is expected to return to personally get the ID and passbook.

However, with written authorization, a new member  can give others  the responsibility to get  the individual coop ID and passbooks (Exhibit 6 & 7).

Chart 3.1

3.1.4 Termination of Membership

A member may terminate membership through a personal letter of request pre-formatted by the cooperative and addressed to the Board of Directors that ultimately approves such closure of accounts. However, the Manager possesses immediate discretion to approve said termination in case of necessity, which later should be passed for Board confirmation.

The following process should be observed:
Member approaches and informs any coop staff or teller about the case.
Termination form or a pre-formatted closure letter is given.
Member properly fills-up the form.
As form is returned, the teller accounts all balances and enters this into the form.
Authorized staff validates the figures and amount.
If there are loan balances, the Loan Officer computes and verifies for offsetting.
Member fills-up corresponding withdrawal slip with the amount based on balances that have all been accounted for. Necessary signatures are affixed and verified.
Form and properly signed documents are presented to the Manager for approval.
If closure is granted, cash is released through the teller or check is scheduled for releasing.

Chart 3.2

In case of delinquent loan accounts and for any other reason deemed appropriate, a member may be demoted to associate membership and/or fully terminated from membership under prior written notice giving specific reasons by the cooperative.  )

SMDS Coop mostly observes migration or change of residence outside the boundaries of coop operations to be the common cause for leaving the cooperative.

3.2 Benefits of a Regular Member

A full-fledged member, after having paid  the required amount of  shares,  deserves the right of ownership. Hence, several eligibilities and advantages accompany this entitlement as maybe promulgated by  the cooperative Board of Directors.

SMDS Cooperative presently offers the following benefits and programs:

Free life insurance coverage of P 25,000 or P50,000

The member fills-up the Insurance application form when the required minimum capital shares have been fully paid. The cooperative reserves a month of formal enrolment with the 3rd party Insurance Company which may regulate or deny an application. Members with at least P 2,500 share capital are insured for P 25,000 while those with at least P 5,000 share capital are covered for P 50,000.00.

The enrolled member is issued a certificate of his/her enlistment. His or her enrolment and coverage are reviewed annually which may be renewed, or denied and terminated as determined by the rules of the insurer.

If an individual share falls below the required capital, the cooperative has the right to inform the Insurance Company who will then cancel his/her particular enrolment from the roll of insured regular members.

Interest on share capital

A stockholder enjoys interest earning on paid up capital at the end of each fiscal ear when income is distributed depending on the financial performance of the Coop.  Based on historical performance, the Coop has been able to yearly pay at least 20% interest  since 1998.

Patronage Refund / Excess Payments returned to Members

The sum allocated for patronage refunds/excess payments shall be made available between 20% to 40% per loan  patron  depending on their loan repayment performance and e in proportion to their individual patronage. Provided, that:

a. In the case of a member patron with unpaid share capital contribution, his/her proportionate amount of patronage refund shall be credited to his/her account until his/her share contribution has been fully paid;
b. If within a period of time specified, any subscriber who has not paid his

Multiple loan availment

A particular regular member can legitimately borrow an amount equal to, or double, triple or even higher than the sum of all his or her account to include one’s share capital and deposit holdout: ( regular and special savings deposit and time deposit).  The multiple depends on the credit worthiness and experience of past performance.  The loan amount is  also  under a formula that the Board of directors may approve from time to time.

Hospitalization fund

A social fund had been established and allocated by the Board of Directors for the purpose of anticipating emergency medical and hospital bills.  The fund is allocated by area based on their pro rata share of total income.  This amounts at this time to a maximum of P3,000.00 per individual member  per year.  Availing of this benefit also requires a hospital confinement of at least 24-hours unless otherwise amended. To process this benefit, the member must approach the area director and collector concerned or visit the office and request the form for such an ailment.  If approved  the benefit is released.

Damayan fund

The Board of Directors introduced this particular benefit to be able to provide burial assistance to members who have been regular members for at least one year to avoid questions on the health condition of the member at the time of entry.   As directed by policy, all regular members are informed of the damayan fund deductions made on their accounts. Up to a maximum ofP50.00 shall be deducted from their regular savings every time a qualified member passes away.  Thus the total amount given to the beneficiary is the product of the individual deduction amount multiplied by the current total membership as of date.   A maximum of P250,000 has been set.  The Coop encourages members to deposit at least P300.00 to their regular savings to provide for future needs of this fund. Whenever members’ savings accounts are depleted or has a negative balance, they are informed through letters that a deposit should be made by the member. Information is also posted in conspicuous places.

Area projects

Subject to the financial performance of the Coop for the preceding year, it has set aside an amount for community projects of the six major areas.  It has in the past 4 years allocated P200,000 per annum. The amount is distributed proportionally to the overall coop income contributed by each area.  These are returned to the areas for their community projects.  Sample projects implemented were putting up of electrical posts, building chapels and purchase of medical supplies. These Projects are not exclusive to Coop members but rather, their contribution to the entire community. All programs are developed by committees headed by the Area Director and submitted for Board approval.  In identifying projects to be implemented, the following criteria have to be met:

Project is voted top 3 of all projects identified in the community;
It should be identified as an immediate need of the community;
It should not be a priority project of the Barangay local government.

Free Internet use  

If possible and practicable, computer units with Internet facility will be made  available for the members at the Coop office  for free.

3.3 Records Management and Updating

As the application of the new member is approved, the Accounting Assistant/ New Accounts personnel encodes the necessary data in to the coop system. Pertinent data such as name of the member, category of membership, and updating the status of membership from associate to regular are encoded and this opens a new record into the system for the new member.

Back up of records is done on a daily basis to ensure that coop records are current and up to date.    The records are backed up on a CD and kept in a bank’s safe deposit box.


This Chapter focuses on the two major services the Cooperative is currently offering to its members, namely: deposit and loan services.  It intends to discuss these services in which both the coop and the members do the transactions. It does not include the operating procedures  as these are separately discussed in Chapter 5 of this Manual.

4.1 Savings Deposits

The Cooperative has different kinds of deposit products for a qualified member.  Specific policies govern the withdrawal and closure of these accounts.

Interest are paid to deposits normally as determined by the Board of Directors from time to time.  While most of the members do not have bank accounts, these rates are normally at higher than bank rates.

Currently, there are six (6) kinds of deposit accounts.   They may vary by interest rates or terms and conditions but ultimately the purpose is to encourage savings for future or emergency purposes. Unlike capital accounts, which are permanent or cannot be immediately withdrawn, these accounts are technically always withdraw-able anytime.

Members assume that putting-up capital and bigger shares only matters where they can have larger loans. They overlook the importance of savings and other forms of investment.  Thus, campaign programs to encourage members for these funds have been introduced.  Furthermore, deposits are included in applying the multiple to determine the total amount a member can borrow.  This loan multiple concept is to avoid the need to increase capital to be able to borrow more since capital is a more permanent commitment of the member to the coop and capital is subject to “interest on share capital.”

4.1.1 Types of Deposit Accounts

Regular savings deposit – an interest bearing deposit, which is withdraw-able by the presentation of a duly accomplished withdrawal slip accompanied with an identification document. This placement uses a deposit slip for machine validation.  

Special savings deposit – an interest bearing savings account with a one-year maturity period that likewise uses deposit slips for  machine validation.    It is not withdrawable before the 15th of December and has the same rate of interest as a time deposit.  
Time deposit – an interest bearing deposit evidenced by a certificate and issuance of an official receipt on placement. This placement has a specified minimum term of 30 days, renewable monthly (Exhibit 8).

Educational deposit – designed for parents who wish to save for the semestral tuition fee of their children in college.

Maternity deposit – the purpose of such deposit is to prepare for an eventual maternity expense after 9 months of pregnancy.

Kinabukasan Fund – intended for regular members to save for their retirement period when they are no longer fit for work or employment.

4.1.2 Classification of Accounts according to Organization

Individual deposits can be classified similarly into groups of accounts. These accounts can be set according to the member’s particular identity. A member or a group of individuals or association is given an individual account.

These accounts can be categorized into:  Note:  Checks deposits must be to the name of “SMDS Coop for acct of…”to limit risks related to “knowing your endorser”.   This is especially true for #2 below.

Individual – an account opened in the name of an individual and subject to his discretion.

Civic or unincorporated organization – an account opened in the name of a group of persons operating as a group widely known in the community but not legally incorporated under the existing laws. The organization operates under its articles of association or constitution and by-laws and its powers are vested in the Board of Trustees or Governors.

A Notarized Board resolution or Secretary’s Certificate authorizing the opening of such an account and designating at least two officers authorized to sign jointly for and in behalf of the organization.  The authority should be verified against their respective By-laws.

For associations, parish or religious organizations and other unregistered or unincorporated groups which do not have articles of association or constitution and by-laws, the Coop shall require some authorization from the religious or other leader like the bishop or parish priest which shall be verified for authenticity.  Transactions on the account shall be allowed in accordance with the authorization issued by the relevant authorities.

Cooperative – an account opened in the name of a group organized for the production or marketing of goods as owned collectively by its members and operating under its articles of association, constitution and by-laws and its powers are vested in the Board of Trustees or Governors.  Documents needed include:

Articles of Cooperation
Notarized Board resolution or Secretary’s Certificate authorizing the opening of the account naming the Coop and designating the officers authorized to sign for and in behalf of the organization, which shall be verified against the By-laws.
A Certification from the Cooperative Development Authority (CDA) shall be required.

Organized/Registered Corporation – an account opened in the name of the organization or corporation legally operating under the existing laws. The organization functions under its articles of association or constitution and by-laws and its powers are vested in the Board of Trustees or Governors.

The following shall be required:

Articles of Incorporation
Notarized Board resolution or Secretary’s Certificate authorizing the opening of the account naming the Coop and designating the officers authorized to sign for and in behalf of the organization, which shall be verified against the By-laws.
Certificate of Registration and filing with the Securities and Exchange Commission.

4.1.3 Policies and Procedures

All deposits earn competitive rates.  Some deposits are used as holdouts to support a loan.   They are, therefore, used as a guarantee to a loan and put on hold or tagged “non- withdrawable”  or “deposit holdout”  until the loan is paid or balances of the loan need to be covered only partially by the deposit or are already covered by the capital.

In opening an account, upon membership:

All approved members of the SMDS Multi-purpose Cooperative, regular or associate shall open a regular savings account with an initial minimum balance of P100.00. To earn interest, a savings deposit account shall have a maintaining balance of P500.00 or as the Board of Directors may set from time to time.

Special savings accounts can be opened only as a separate deposit or an additional account aside from the required savings account. Minimum initial deposit is P500.00 or as maybe directed by the Board.

A time deposit account may presently be opened for a minimum of P3,000.00. The term for the deposit is on a 30-day basis with automatic monthly rollover thereon. An additional amount can only be added upon the maturity otherwise a separate placement can be made for such an addition.

Deposits.  All deposits require a fully filled-up deposit slip designed by the cooperative. Entries must be legibly hand written. The particular date, account name, unit breakdown then amount in words of such deposit and signature of the depositor are important to be entered. The official receipt, which serves as proof of deposit, is entered and machine validated by the teller. The duplicate copy belongs to the depositing member and the original one copy is for the coop.

Cash deposits shall be accepted with the issuance of the duplicate copy of the deposit slip for savings and an official receipt for time deposit. Meantime, check deposits shall be accepted with the issuance of a provisional receipt then recorded for booking. A machine validated deposit slip for savings or an official receipt shall be issued only upon check clearance.

All checks and other forms of negotiable instruments shall be accepted for deposit only if they are in the name of SMDS Multi-Purpose Cooperative as payee or pay to cash. However the corresponding schedule or voucher shall be recorded for proper booking. Acceptance of deposit to an account with payee other than those specified above is prohibited, if ever allowed, it must have the explicit approval of the Board.   The receiving party or teller shall ensure that the check is free from any technical defects, such as alterations not signed by the drawer, wrong date, amount in words and figures differ.

Chart 4.1

Checks previously returned for reason “Payment Stopped” or “Account Closed” and items previously presented with another bank shall not be accepted for re-deposit but returned to the depositor.

Cash and check deposit transactions follow the process below:

The member first gets a number for queuing.
The Teller calls the number, asks for the member's name, and searches the system for the member's records.
Depositing member hands-over the cash money and or check and the passbook.
Upon receipt the Teller counts the money and issues the OR, updates the passbook and returns it to the member.

Withdrawals. All withdrawals shall be supported by a duly accomplished withdrawal slip, presentation of the member’s ID and/or if by an authorized representative, a written authorization, a valid ID of said party and passbook. SMDS Coop allocates a certain area for withdrawal slips to be filled-up. All items must be legibly and properly written: the date, name of depositor, signature of depositor and the determined amount to be withdrawn.

The teller shall ensure the following: that the amount in words and figures are written on the slip and they tally, that the date is current and that any alteration/correction is signed in full by the depositor, the verifiable signature of the depositor.

An authorized staff shall verify the depositor’s signature on the withdrawal slip and the required combinations and limitations of the signatories if any shall be determined.

Withdrawals by authorized representatives of substantial amount such as P5,000 and above shall be allowed as determined by the approving staff however, confirmed with the depositor. Presently, SDMS Coop releases cash through the teller for a maximum individual withdrawal of P10,000 per day only. In excess of that amount the withdrawal shall be released via check the following working day. This, however,  is subject to Board amendments.

In cases when the “Payment Received” portion in the withdrawal slip is already pre-signed upon presentation, the teller shall require the depositor or authorized representative to sign again on the slip and compare this with the signature in the “Payment Received” portion before paying out. The teller shall ensure that the person receiving payment is the same depositor or representative who presented the withdrawal slip.

In special management approved cases, specific withdrawals through thumb mark may be allowed provided the teller shall be required to authenticate, witness and sign beside the client’s thumb mark on the withdrawal slip.

These processes should be followed in transacting withdrawals:

A Member or an authorized party proceeds to the designated area or table for withdrawals and fills-up the withdrawal slip (Exhibit 9) and get a number.
Member or the authorized representative falls in line bringing the properly filled slip, coop’s ID and passbook in hand.
Member or the authorized representative approaches the tellers’ counter.
The teller receives withdrawal slip, ID and passbook.
An authorized staff checks and verifies the withdrawal slip for balances.
Withdrawal is then entered to the computer and the slip is machine validated by the teller.
The teller pays the corresponding amount to the withdrawing party and lets the machine validated slip be signed or received.
The duplicate copy and the passbook are given back to the member or authorized party.

Chart 4.2

Closing of Account. All accounts shall be automatically closed upon termination of membership. A pre-formatted letter (Exhibit 10) or form for such closure shall be properly filled-in by the member-depositor proposing said termination. Accounts are verified, cleared with the loan officer for balance offsetting and then released upon approval. Cash is released through the teller or check given at a scheduled date and accounting all remaining balances of said accounts.

Accounts of delinquent members are recommended for closure. The delinquent member is informed of a consequent termination and closure of all his accounts through prior written notices. If not replied to, said accounts are accounted against loan balances and/or put on regular savings for termination and full withdrawal.

The same procedure as membership termination steps stated in section 3.1.4 should apply regarding closure of accounts.

4.1.4 Others

Interest on regular savings account

Interest shall be computed based on the average daily balance which after computation should not be less than the required minimum ADB to earn interest. Interests are compounded and credited quarterly to the account.

Posting of quarterly interest shall be before the end of every quarter.

Interest on Time Deposit

Interest shall be computed upon maturity of 30 days and credited monthly to the account which is automatically rolled over if not withdrawn.
Preterminated time deposits, (withdrawn short of the required 30 days) shall be credited a corresponding interest equivalent to the regular savings account interest rate and based on average balance.
Partial withdrawal of this account shall be credited a corresponding interest earning and the remaining balance thereof shall be placed again under the same terms and conditions of a regular savings account. The balance amount, if again reinstated as Time Deposit, should not be less than the required ADB or it will be reverted to a regular savings account. If the amount is therefore substantial, it is suggested that it be broken down in smaller chunks.

C. Lost passbook

In case the passbook for accounts with a balance of P10,000.00 or more is lost, a notarized affidavit stating all the circumstances surrounding the loss is required from the depositor. However, if the balance is less than P10,000.00 a written notification signed by the depositor shall suffice.
In both cases, signatures should be verified and a new passbook shall be issued. The old account number shall be retained. It shall be noted in the new passbook that it is a replacement and shall be initialled by the manager or control officer.

4.2 Credit Services

For SMDS Cooperative, its lending activities are the main service offered for its members and they are its main source of revenues.  The main purpose is to make formal credit available much cheaper than the informal lending of 5-6 providers to primarily support livelihood projects of its creditworthy members, and similarly,  their personal needs.  The coop stands with the prudent policy of lending only its capital and reserves.  Deposits are never lent out.  Rather, they are re-deposited with third parties, normally banks, for interest differential All loan products (not loan availments)  are subject to the approval of the Board.


to develop a sound loan portfolio that will generate optimum yield acceptable and consistent with the Cooperative’s overall strategy
to maximize the Cooperative’s fund generation program consistent with the selection of borrowers who can provide the Cooperative with additional deposits, new members and increase in capital
to serve self-help livelihood projects, micro entrepreneurs and business and emergency needs of creditworthy members.

4.2.1 Loan Availment Policies and Procedures

In the establishment of Cooperatives, there exists a special relationship between parties. This particular relationship is guided and directed by norms according to the generally accepted standards at least among the involved parties. In all cases involving credit transactions, the following policy guidelines must be applied:

1. Geographic scope

To maximize the use of scarce resources, the cooperative will concentrate its credit marketing efforts in Barangays Loyola Heights and Pansol, Quezon City.

To reach its target market, the cooperative shall engage in a selective marketing program specifically addressed to prospective borrowers who satisfy the Cooperative’s criteria.

This program shall include public relations. In order to conserve its loan processing capacity as well as maintain credibility in the market, it is important for the Cooperative to identify and seek out clients on a selective basis to control the quality of its pre-screening procedure.

2. Eligible Borrowers

All qualified regular members within the geographic scope mentioned are eligible to borrow as long as they are in good credit standing. The Cooperative aims to develop a loan portfolio consisting of accounts of such individual sizes as to allow the cooperative to spread out credit risks and earn a reasonable return on risks capital and on the cost of evaluating, processing, and  administering the credit .

3. Criteria for Borrowers

A regular member who has at least P2,500.00 capital shares may take out a loan provided the following are met:
Membership of at least 15 days or 1 week upon recommendation of area director or collector.
Borrowers who are merely renting (not domiciled in the coop’s area of operation) should get as co-makers those members who recommended them for coop membership.
A member of good standing that is up to date in all payments and not a delinquent borrower or co-principal borrower.
Outstanding loan at a time does not exceed the individual credit limit.
A satisfactory credit experience and proven paying capacity.
Knowledgeable in managing a business.
Member-borrower has acceptable collateral and/or principal co-borrowers.

The Credit/Executive Committee or Board may impose additional requirements as the case may be.
Any regular member of good standing except the collectors, management staff, members of the Board and Credit Committee may be a co-principal borrower provided his/her unencumbered share capital and deposits must be sufficient to cover the amount to be guaranteed.
SMDS Coop presently grants loan availment of P5,500.00 to associate members for regularization of their membership. P5,000.00 shall be allocated to fully pay for the share capital and the rest or a minimum of P300.00 shall be accounted as regular savings.
Members who shouldered the loans of principal borrowers as co-makers eventually losing or partially reducing their capital contribution may build-up again their capital shares whenever they are able to.

Credit Quality

Credit quality is of key importance. The emphasis is on customers whose creditworthiness can be characterized as ranging from above average to high quality. Below average quality shall be avoided in order to maintain an overall loan portfolio of above average quality. Nevertheless, the Coop should provide for sufficient allowance for probable losses in accordance with Board policies.

Loan Purposes

All loans must be used for a specific purpose acceptable to the coop.   For example, re-lending is strictly prohibited to the extent that members who engage in this activity are asked to withdraw their membership.

Desired purposes are  for productive, self-help, financing, house improvements, educational, appliance, emergency and other income generating projects of residents and business establishments within Barangays Loyola Heights and Pansol, Quezon City.  However, providential loans are also allowed especially for employed members.

However, a portfolio mix is best established, for example,  60% for productive and 40% for providential loans.  This mix encourages creation of economic activities in the community.  The mix is reviewed from time to time to also reflect the kind of risks the coop is willing to take.

Borrowers proven to have diverted loan purposes shall be recommended for immediate full payment and closure of accounts. The Cooperative may opt to terminate any loan and demand immediate payment if it finds that the proceeds are being used for other purposes other than those agreed upon.

To give some indications, the SMDS Coop usually releases loan for the following

Table 4.1
Purposes of Loans

6. Loan Limits

A member of the Cooperative may borrow equivalent to double his/her share capital plus any or all available  deposit holdout. However, members with good credit standing and proven paying experience may borrow up to 4x their share capital, or as established by the Board from time to time, but not to exceed a maximum amount of P300,000.00 for prudent portfolio management.

7. Pricing/Interest Rate

The Cooperative’s pricing strategy shall be consistent with its objective of generating a credit portfolio of high-grade quality. At the same time, utmost care will be undertaken to ensure that loans are priced so as to adequately compensate the Cooperative for the risks of the credit, the cost of processing and administering the transactions and the cost of the funds used to support the credit. Presently, SMDS Coop presently charges 3% monthly interest rate, as decided by the members in various General Membership assembly,  and a one time 2% service charge.

The members decided in one Annual General Assembly to keep the interest rate at 3% per month as it has become a source of forced savings as the coop’s has consistently paid out “interest on share capital” of 20% pa, and as much as 40% or  an average of 30% patronage refund.  For amounts P100,000 and above, especially with terms beyond one year, borrowing members can opt to be charged only 2% per month as long as the interest payments are not anymore qualified for  patronage refund.

The following factors are considered in setting the price for a specific credit transaction:

The degree of risk in the transactions should consider all relevant factors such as:

creditworthiness of the borrower
purpose of the loan &/or
ability to repay
strength of the proposed security arrangement
maturity of the loan
compensating balance of deposit
share capital of the member and his/her co-principal borrowers

The cost of administering the loan. In this connection, it must be recognized that it generally entails as much administrative expense to service a small loan as it does a loan with a much larger amount. The other considerations that affect the costs of administering a credit are:
a. extent of evaluation required
b. cost of monitoring and controlling the collateral

The  cost of capital used to service the account and/or the prevailing yields on the alternative utilization of said funds.

Interest on loan is set by the Board and is on a per month basis, add-on and based on the principal balance. The interest is payable together with the principal amortization payments. Exhibit 14 presents an example of an amortization schedule.

8. Loan Releasing

The Coop has four (4) procedures for various types of loans released to members depending on the amount to be released and whether it is a regular or emergency loan. The Diagram below shows these releasing procedures:

Chart 4.3
Loan Procedures

Table 4.2
(Cash Release at P10, 000.00 and below)

Chart 4.4
Process Flow-Regular Loan
(Cash Releasing P10, 000.00 and below)

Table 4.3
(Cash Release at P10, 000.00 and below)

Chart 4.5
Process Flow- Emergency Loan
(Cash Releasing P10, 000.00 and below)

Table 4.4
(Check Release at P10, 000.00 and above)

Chart 4.6
Process Flow-Regular Loan
(Check Release at P10, 000.00 and above)

Table 4.5
(Check Release at P10, 000.00 and above)

Chart 4.7
Process Flow-Emergency Loan
(Check Release at P10, 000.00 and above)
9. Payment terms

Loan payments as a minimum should be at least monthly.  But arrangements can be made for daily, weekly, or bi-monthly payments, depending on the cash flow of the borrower.

In the event that co-makers have made good on the obligation, as a rule, collectibles and payables of principal borrowers must directly be paid to coop/collector and not be given to co-makers themselves for proper monitoring. Consequently, co-makers must explicitly authorize the coop to collect directly from the principal borrowers, This arrangement is indicated expressly in the promissory note (Exhibit 11), “Katunayan sa Utang.”  

10. Other Charges

Up front one time service fee can be collected as approved by the board.  Presently, this is two per cent (2%) of the principal amount of the loan for regular and emergency loans to cover loan processing cost.


The maturity pattern of the loan portfolio of the cooperative affects its liquidity as well as its risk exposure.  The Coop most of the time primarily caters to the short-term credit needs of the borrower where the maturity of the loan does not exceed one year.   However, this does not preclude the Cooperative from considering worthy proposals for term of loans beyond one year, up to a maximum term of 3 years.  It must be kept in mind that longer maturity of loans entails higher credit risks.

Another point of consideration is that the maturity of the loan should not extend beyond the completion of the project financed, or be more than the ability of the borrower to pay based on his/her comfortable cash flow.


Repayment plans should be discussed with the borrower thoroughly when the loan is made. If it is obvious that the borrower cannot meet the repayment requirements outlined, the Cooperative should have second thoughts in approving the loan to avoid possible problems later. Several renewals/extensions may be necessary before the final payment is repaid, and this certainly impairs the liquidity of the Coop and increases credit risks. More often than not, the loan after several renewals or extensions becomes subject to an unfavourable classification by the Board. Therefore, an annual clean up of customer’s obligations should be encouraged  especially during the seasonal cycle when the borrower’s capital position enables him to liquidate his indebtedness to operate on its own capital contribution.

As mentioned earlier, the Cooperative requires repayment of principal and interest at regular intervals of at least once a month.  Payments can also be daily, weekly, bi-monthly, based on the cash flow of the borrower.

The maturity of the loan term shall not go beyond the payback period of the project being financed.  Maturity beyond one year needs board approval.

The amortization schedule is given and should be explained thoroughly upon loan application and releasing. This includes the loan amount and terms, the particular date of every payment, the exact amount to be paid and the corresponding balances reflected.


Loans are mostly on clean basis based on cash flow analysis of the borrowers .   However, two co-makers are required, a practice that somehow helps establish the credit worthiness of the borrower.  In some cases, hard collaterals may be required as a second way-out.  In determining the acceptability of the collateral for secured loans, the Cooperative shall be guided by the following:

The economic value of the collateral should be at least 166% of the maximum term of the loan.
The Cooperative shall not be placed in an inferior position vis-à-vis other creditors with claims on the borrower.
In evaluating the collateral, attention must be focused not only on the reasonableness of the valuation but also on the marketability of asset, and the net-value of the asset. The approving authority must also be satisfied as to any insurance coverage on the collateral.

Other than cash and marketable securities, the Coop considers mortgages on real estate properties as the next best collaterals.   Other collaterals such as machinery and equipment, shares of stocks and other acceptable securities may also be considered.   Again, any form of collaterals are only second way out  (just in case).  The primary basis for the loan is the cash flow of the borrower.

Suggested valuation of collaterals are as :

Table 4.6
Collaterals and Percentage of Appraisal Value

In case of hold-out on time deposit, the certificate shall be endorsed and submitted to the Cooperative for safekeeping until the loan is paid. For hold-out on savings deposit, the word “HOLD-OUT” shall be written right after the last updated balance and signed by the Manager for approval/notation. In case the loan is paid, the word “RELEASED” shall be written alongside the word “HOLD-OUT” and signed by the Manager. In all cases, the date of approval shall also be indicated by the Manager.


Insured properties used as collateral such as buildings, machineries and equipment, motor vehicles, etc. must be fully covered by the insurance policy endorsed to the cooperative.

Past Due Loans

Borrower-members with two (2) past due instalment payments, even after a restructuring of the loan as the first recourse, and after an exhaustive collection by the management and follow-ups by written notices to both the borrowers and their respective co-makers, shall then be dropped as members of the SMDS Cooperative.

All capital outstanding and all unencumbered deposits of the borrower-member and co makers will be applied to the loan balance outstanding including interest due and penalty charges thereon.

Past due accounts beyond 90 days, after applying all capital and deposits of borrower and co-principal borrowers will be referred to the Barangay Captain for assistance in the collection and/or possession of collaterals. Collection is passed to external collectors when the account is closed.


A penalty charge of three percent (3%) per month or one tenth of a percent (0.1%) a day based on the remaining principal balance shall be imposed on past due loans after three (3) working days grace period from due date. However, a minimum penalty fee of P20 shall be collected whichever is higher than the computed penalty. Office holidays and government declared off-days are excluded from said grace period. Nonetheless computation shall begin from the due date if penalized.

To illustrate, a 5-day past due account with a remaining principal balance of P3,000 shall be charged P20, since the computed penalty fee falls below the minimum P20 penalty fee.  The actual computed penalty is P15 based on the computation of deriving 0.1% of P3,000 and multiplying the product by 5 days. A 2-day payment delay is equivalent to 5 days, since the 3-day grace period is included in counting.

P 3,000 -principal balance
x  0.001 -(0.1%) penalty multiplier
P        3 -product
x        5 -2 days of incurred payment delay plus the 3 grace period.
P      15 -actual computed penalty
P      20 -charged minimum penalty

Restructuring of Past Due Loans

Past due loans may be restructured based on the assessment and recommendation of the credit committee and approval of the Board provided the borrower can still pay the loan balance over the restructured period. Restructuring can only be done once.

Once share capital and savings deposit are applied to the loan balance of the delinquent borrower, the remaining balance maybe restructured including unpaid interest and penalty before applying the deposits of co-makers. However, a single missed payment during the restructuring period will warrant the loan officer to apply immediately the funds of the co-makers on the remaining balance of the delinquent borrower.  The funds include both the share capital and deposits of the co-maker(s). In all cases, a required minimum share capital must be preserved to maintain the membership of the co-maker(s).

Loans to Directors, Officers and Management Staff

Directors, officers and management staff who will avail themselves of the credit facilities are subject to Board approval and the same regulations as any regular member of the cooperative.

Loan Approval Limits

The Coop implements the approval of loans using the following credit limits:

Table 4.7
Loan Approving Limits

Any loan amounting to P20,000.00 and above shall bear the endorsement of both the area director and collector, either confirmed through text or with their signatures on the promissory note. Further, promissory notes (loan form) should only be released with an applied loan amount, purpose and name of the principal borrower.

Board approved additional policies on its credit services are:

Student-members may borrow only back to back or “emergency loans”. However, working-students may avail of regular loans.

First time borrowers should pay their loan in full or wait until the term of their loan is down to only 1-month remaining in the amortization payments before a second loan is granted. Strictly, therefore, no second and/or additional loans until the current loan have been reduced to 1-month of amortization payment due.

Second-time borrowers may be allowed to take out a loan amount equivalent to a maximum of twice their capital plus additional P5,000.00 deposit under “hold-out”.  

Additional loans should only be granted upon one-year of good borrowing capacity.

Good standing borrowers may avail the maximum multiple of four times of their capital plus deposits.

4.2.2 Types of Loan

Credit in the cooperatives directly addresses the specific needs of its members. Loans are granted based on the accessed ability of the borrower to repay.  Two important information to ask from the borrower are:  1)  What is the purpose of the loan? (see 4.2.1 Item  #5),   and 2)  What is the source of repayment?

SMDS Coop primarily offers the Productive, Providential and Emergency loan types with specific products classified under any of these three:

Table 4.8
Loan Type as to Purpose

An individual personally approaches the cooperative hopeful that by being a member his or her micro-financing need will be met. Members personally undertake the process of loan availment requirements and procedures in order to avail of the cooperative loan service.

In response, the cooperative efficiently assesses the loan application.  Staff is accommodated as promptly as possible with a few hours turn around for loans less than P10,000.  Coop staff process loan applications with utmost care and urgency as time will permit.  A process system is in place and consistently carried out as well.

4.2.3 General Loan Payment Policies

Initially, the general procedure was:  payments were made on fixed dates to remember due dates easily: every 7th, 14th, 21st and 28th of the month.  This proved a good discipline to remember for the borrowers and acceptable operationally for the coop.  However, when the volume of transactions increased, the number of payments became unwieldy.  Thus, the system was changed to amortization scheme at the chosen date of the borrower.  In any event, efforts are made to have extra hands during payment dates to provide better and faster service.
Grace period equivalent to 3 days including holidays and Mondays (day off) is standard.  (“Palugig”).
Payments are mostly made visiting the coop office rather than through roving volunteer collectors/area coordinators.
However, Volunteer Area Coordinators accepts payments when they visit borrowers in the morning.   Collection reports are submitted in the afternoon. (Exhibit 17).   Provisional Receipts (Exhibit 18) are issued upon receipt of payment.
Tellers are encouraged to sometimes accompany Volunteer Area Coordinators and loan officers for delinquent accounts so they too are aware of what is going on at the ground level
Official Receipts (Exhibit 19) are issued by the Teller upon receipt of payment from the Borrower or Volunteer Area Coordinators
An Official Receipt (OR) should be issued by the Teller for every PR issued by the Volunteer Area Coordinators upon remittance
There is daily tallying and reconciliation of transactions (Exhibit 20).
Cash on hand in excess of P150,000.00 is deposited to the appropriate depository bank/s.  Lately, armor car pick up has been provided by a local bank.
Cash on hand P150,000.00 and below serves as the Revolving Fund, and is kept in the vault.

4.2.3 Accounts Delinquency Management
The Coop’s procedure in addressing loan delinquency among its members is as follows:

Table 4.9
Procedure in Addressing Loan Delinquents

Table 4.10
Procedure on Closure of Delinquent Loan Account

Chart 4.8
Procedure in Addressing Loan Delinquents

Chart 4.9
Procedure on Closure of Delinquent Loan Account


5.1 Chart of Accounts

The chart of accounts is a listing of all the accounts in the general ledger, each account is accompanied by a reference number.  In setting up a chart of accounts, management needs to define the various accounts to be used by the coop. Each account has a number to identify it.

Table 5.1
Chart of Accounts

5.2 General Procedures on Collection

This section discusses the step-by-step procedures in collecting loans and deposits. It also indicates the appointed persons who should perform the required tasks. Based on experience, only a small 6-20% of loan repayments are paid through Volunteer Area Coordinators.

Table 5.2
Collection Through Volunteer Area Coordinators

Chart 5.1
Collection Through Area Collectors

  MEMBER/               VOLUNTEER AREA                CONTROL
BORROWER                COORDINATOR                   TELLER                 OFFICER

Records the Transaction
Issue Official Receipt per Deposit Slip or P.R.
Visit member and ask for deposit or loan payment
Pays deposit or loan

Issue P.R.
(Provisional Receipt)
Receives Provisional Receipt

Log into Collection Sheet and remit to teller or prepare deposit slip for deposit

Receives O.R. the following week
Receives O.R.
and distribute the following week to Members

Table 5.3
Collection Through Teller

Chart 5.2
Collection Through Teller

BORROWER                                       TELLER

Get priority number and wait to be called
Calls member according to number. Ask the name of member and search for the record in the system. Ask for the cash and passbook.

Hands over money to teller

Count the money, Issue O.R., update passbook and record the transactions.

5.3 General Procedures on Disbursements

These are policies that need to be followed in check issuances and in disbursing revolving funds.  All disbursements P10,000 and above shall be issued in check. All disbursements below P10,000.00 shall be paid out in cash from the revolving fund.

As a general control concept, there must be at least three staff involved in any transaction:  the maker, the checker and the approver.    Additionally,  the Coop should ensure that there should be at least two different people or dual responsibilities for each activity. The one processing the loan should be different from the one disbursing it. The one handling cash must be different from the bookkeeper.  Furthermore, splitting or breaking-up of a transaction to circumvent limits of authority is strictly prohibited.

5.3.1 For Cash Disbursements

For cash disbursements, the Coop has the following policies:

All cash vouchers should be properly signed by the Chief Accountant and Approved by the GM.
All cash disbursements shall be covered by a cash voucher (see Exhibit 15) and attached supporting documents (See Table of Supporting Documents)
Operational disbursements such as Loan payments and withdrawals of deposit (Savings Accounts) are taken from the Revolving Fund if below P10,000.00
Expenditures on administrative supplies and others are taken from the Revolving fund if below P10,000

5.3.2 For Check Disbursements
All check disbursements shall be issued with the required supporting documents (see Table of Supporting Documents)

All operational disbursements P10,000 and above shall be duly approved by the specified authorities (see Loan Approving Limits Table)


All check disbursements shall be covered by two authorized signatories. The authorized signatories are as follows:

Class A: Any member of the Executive Committee
Class B: General Manager

The combination of signatories shall be as follows:
class B) + Class A) OR
class A + Class A

4. Checks must be issued in their proper numerical sequence and filed chronologically. Voided check must be marked “cancelled”, punched with holes, and kept for future reference and audit.

Unused and unissued checks must not be made available to unauthorized persons under any circumstances and must be keep in the General Manager’s vault

Payments shall be made payable to the specific company or persons in which the company has the liabilities. Checks must be made to specific payee/s. Checks payable to “cash” or to “bearer” are strictly prohibited.

All checks must be free from alterations or erasures.

5.3.3 Revolving Fund

To be prepared by the GM Assistant and to be checked and approved by the GM

Hovers around P150,000.00 per day depending on the projected demand

To be used for withdrawals and loans releases under P10,000.00

Cash on Hand is the one that is accounting entry used for this .

Revolving fund is turned over to and kept by the GM at the end of the day inside the vault, and then relinquished to the Teller the following morning

The GM acts as the authorized custodian. Access to and responsibilities for each of the funds are limited to the designated custodian.

5.4 Reporting and Recording Forms and Procedures

These are the standard accounting entries in the different kinds of transactions recorded in the books of accounts of the cooperative.

Accounting Entries

For release cash of loan ([1490202] LR-Medical – 1 for Client [05612] Fernandez, Jennelyn P.)

For release of check loan ([1490103] LR-Rice Vending – 1 for Client [05879] Valerio, Armando C.)

For recording of interest income from long-term investment – Plantersbank (5M)

For recording of allowance for probable losses

For recording of fund transfer according to member’s instruction

For recording of closing a borrower’s account due to delinquency

For offsetting of loan due to delinquency.

For recording of depreciation of fixed asset

For recording of upgrading of computer hardware/software

For recording of GL insurance amortization for the month of January 2009

For recording of the purchase of provisional receipts @ P40 each

For recording of interest income from RTB-Citibank Savings

For recording of investment in trust RTB3-06 8.50% 07.31.2011-PIID0311G065

For recording of provision of 13th month pay, interest expense and GA fund for January 2009

For recording of allocation of Net Surplus

For collection of loan/savings/fees *rvs*

5.5 Reportorial Requirements of External Parties

The cooperative as an economic entity has the duty of presenting the following reports to all stakeholders including government and private financial institutions. These are all generated by the financial system installed in the coop’s computers:

Table  5.4
Reportorial Requirements

5.6 Internal Control

Internal Controls are checks and balances built into policies and business procedures for the purpose of protecting the organization against the consequences of error and fraud. Internal controls are used primarily to reveal mistakes of miscalculation and oversight.  They are also used for Check and Balance of operations. Minor discrepancies, by themselves, may be of little consequence at one point; but little by little they can compound into a financially substantial problem. And if left unchecked, these discrepancies can lead to substantial financial loss that may affect the total viability of the Coop.
This section enumerates the different guidelines and techniques in monitoring the efficacy and relevance of internal controls.

5.6.1 Guidelines in Achieving Strong Internal Control and Managing risks

Establish clear lines of responsibility

The Cooperative should indicate clearly the person responsible for such functions as loan processing, releasing, tellering, purchasing, disbursements, cashiering and maintaining accounting records. The organizational chart should be supported by written job descriptions and by procedures manuals that explain in detail the authorities and responsibilities in the chart.

Establish clear segregation and distribution of duties

To direct the activities of a business according to plan, every transaction should go through four separate steps in all systems and procedures, the Coop adopts the policy that there are at least three staff that must be involved in any transaction.  The first is the initiator/writer/maker of the transaction.  The second is the checker of the transaction.  And finally, the third is the authorized approving staff to consummate the transaction.  

Initiator/Writer of the transaction/ Maker
Authorized Approving Staff

Subdivision of duties

Responsibilities should be assigned so that no one person or department handles a transaction completely from beginning to end.  Care must be taken to make sure that there are no two functions assigned too one person that will undermine required check and balance of any process.  For example, cashiering and bookkeeping must definitely be separated.

Accounting functions should be separate from custody of assets

Basic to the separation of duties is the concept that an employee as a Custodian of an asset (or having access to an asset) should not maintain the accounting record for that asset.

5.6.2 Other Steps Toward Achieving Internal Control

Internal Auditing

Internal Auditors are to monitor and improve the system of internal control.  Operational auditing involves studying, testing and evaluating the operating procedures and systems of internal control relating to a specific unit within the cooperative.  The purpose of the audit is to make recommendations to management for “improving the operational efficiency” of the department under study.

Financial Forecasts

A plan of operations is prepared each year setting goals for each division of the business. The comparison of actual results with forecasts strengthens control because variations from the planned results are investigated promptly.

3.   Control of Collections

One of the primary obligations of financial management is to minimize idle funds and to optimize earnings on the funds.

4. Proper Internal Control of Collections

Regardless of the source of cash, the very basic principle for the prevention of errors or fraud is the principle of control check.  Such a system involves the separation of the actual handling of cash from the records relating to cash.  It requires that the work of one employee be supplemented by the work of the other.

5.   Control of Cash Disbursements

There are also two aspects of control in this area of cash administration, as follows:
The timing of payments
The system of internal control

Careful control should be maintained over the timing of disbursements to ensure that bills are paid on or before they fall due and avoid advance payments. Take advantage of suppliers’ credit terms.  

6. Delinquency

All loan requests shall be carefully processed and evaluated before, during and after granting the loans, in accordance with credit policy guidelines set by the board of directors. A delinquency ratio shall be kept to a maximum of 5%.  Member-education on credit worthiness before a loan is granted shall also be undertaken by the credit committee or the manager.

7. Accounting System

All accounting staff to be hired must be qualified, with accounting majors, and shall follow the prescribed accounting system for credit unions.

8. Basic Safeguards

The manager shall incorporate in the Coop’s policies and procedures, the two basic safeguards, namely: segregation of duties and compulsory vacation of at least 10 consecutive working days.  If and when practicable, rotation of duties among staff should be practiced not only to add up to basic control but also to help train staff.
Embezzlement/Internal dishonesty

Any officer or employee caught embezzling or performing any other act of internal dishonesty shall be sued and removed from service and must pay his/her accountability.  Integrity and honesty is non-negotiable requirement for any staff member.

Flow of approval

All activities or transactions concerning lending, investing, budget appropriation, coop affiliations, writing off of bad debts and borrowing should appear in the minutes of the board of directors meeting. An adequate reporting system shall be designed by the Management, to keep the board of directors well-informed on such matters as delinquency, investments, financial statements, ratios, etc. The board of directors shall designate authorized signatories in the process of disbursements as follows: accounting staff’s preparation, verification by the Finance/Treasurer, authorization by the Manager and approval by the Chairman.

Reporting System

A daily cash position report is to be submitted by the cashier/teller daily to the AGM/GM; accounting and other financial reports by the bookkeeper/accountant at the end of the month; and delinquency reports by the loans clerk, etc.  The various reports and frequency of submission are shown in _________________.

Accounting Controls

In order to increase efficiency of both the staff and the organization, the coop maintains a record-keeping system prescribed by the CDA, uniform accounting system for credit cooperatives. It shall follow the accrual method of accounting and diminishing balance method of computing interest rate on loans. A complete set of books of accounts shall also be maintained, with pre-numbered official receipts, cash vouchers and general vouchers.

Cash Accounts
A safety vault, or cash box, filing cabinet shall be procured by the management for cash and other liquid or safekeeping purposes and based on existing operations, the cash on hand shall be a minimum of Php. 150,000.00.
Only authorized, designated cash custodian shall have access to cash collections, deposits and disbursements and he/she must be adequately bonded.
Checks shall be stamped or endorsed “for deposit only” upon receipt by the credit cooperative authorized staff
A clear-cut document must be prepared when transferring custodianship from one hand to the other
Postings to member’s passbooks shall not be done by the cashier, it should be given to the Teller.
All disbursement in excess of P10,000.00 shall be made through checks, otherwise, it shall be disbursed through the Revolving fund
Pre-signed blank checks are strictly prohibited or checks paid to cash.
All collections beyond the set working funds must be deposited in the bank during the day. No excess funds will be left undeposited except when a cut-off time has been set.

Reconciliation of Member’s Subsidiary Ledger Balances
Schedules of member’s subsidiary ledgers shall be prepared by personnel not involved in handling or recording cash transaction
A regular monthly reconciliation must be prepared to locate errors/ differences immediately which include schedule of share cap, schedule of all deposits, loan balances, payables, and everything in the subsidiary ledger.

Analysis of Credit Committee and Loan Services
 All loans submitted to the Board for notation and/or approval shall appear in the regular or special credit committee minutes of meetings, indicating the amount, reasons for approval and in case of rejection, reasons should be indicated as well.
All loans shall be noted and/or approved in accordance with its by – laws, circulars, rules and policies established by the Board of Directors
A delinquent loan committee shall also be composed of credit committee members and their goal is to keep delinquency at 5% or below
A delinquency report shall be reviewed regularly and results shall be submitted monthly to the board of directors for deliberation during the regular board meeting

 Analysis of Board of Directors
All policies, programs of the credit Cooperative shall be reflected in the minutes of meetings of the board of directors
A listing of codified policy manual shall be updated by the Secretary of the Board
All decisions, powers and authority of the board of directors should be done according to the democratic principle of the credit Cooperative
No board member shall exercise “insider-dealings” in the operations of the credit Cooperative resulting in a conflict of interest.

Loans receivables
All loan disbursements shall be effected only after credit committee’s approval, and if all loan documentation is properly accomplished and submitted by the borrower especially with regards to mortgage documents.
The Credit committee or loan officers should not be involved in any way with loan disbursements.
All loan notes, securities offered shall be stored in adequate safekeeping facilities
All loan notes paid in full should be stamped or marked “paid” and returned to the members
No withdrawals of shares and savings/time deposits shall be allowed if members’ loans are still outstanding
Interest on loans shall be properly disclosed as to the rate, method of computation and manner of disbursing the loan

All investments shall be approved by the board of directors, as indicated in the ratified Board Resolution.
All investment certificates shall be stored in a safe deposit box kept under the name of SMDS Multi-purpose Cooperative.

Borrowing Transactions
All borrowings from banks or other financial institutions shall be prescribed in the policy of the SMDS Multi-purpose Cooperative and duly approved by the Board of Directors

Authorization of payment of expenses shall be delegated by the board of directors and should be reflected in the minutes of the meetings
All expenses shall be covered by an approved operating budget. A regular review of expenses versus budget is also observed
Reimbursements to officials and staff should be adequately supported by bills, invoices, receipts and should have, where necessary, received approval in advance from the board of directors or manager
Paid invoices, receipts, bills should be marked “paid” by the staff in charge of issuing disbursements
Computations must be double-checked by one or more persons.
Patronage Refunds/Dividends:
The Declaration of patronage refunds and dividends should be reflected in the minutes of the board of directors
A method of computing patronage funds and dividend shall be designed in accordance with CDA uniform accounting system.

Furnitures/Fixtures, Land/Building
Purchases, dispositions and depreciations of fixed assets shall be authorized by the board of directors

Reserve Accounts and Undivided Earnings
The Coop should maintain at least 20% of net savings as general reserve fund; 5% cooperative education and training fund; 10% delinquency reserve and 5% land and building fund. Any write-offs on bad debts or transfer reserves shall be covered by a specific board resolutions

Member Verification Accounts
The Audit Committee shall conduct a regular verification of members’ accounts. Results of the verification must be addressed to the concerned parties. These reports shall be kept in a separate file maintained by the said Committee.(see loan application process)

5.6.3 Internal Control for Cash Disbursements

Those who sign the check must adopt a questioning attitude on every transaction that appears doubtful or is not fully understood.  Indeed, the review of documents attached to the check will often bring to light unnecessary expenditure and weaknesses in other procedures.

5.6.4 Investment Of “Excess” Cash Funds

Surplus or excess funds not needed for either operating purposes or compensating bank balances are available for investment even over weekends.  Prudent use of otherwise idle funds can add to income.  Periodic Monthly Investment Portfolio reports to top management would include the following:

Detail of individual securities, grouped by type and/or maturity
Summary by type
Summary by maturity
Summary by yield
Overall portfolio yield, by maturity

5.6.5 Fixed Assets

Fixed Assets are carried at cost less accumulated depreciation and impairment losses, if any.

Depreciation is computed based on the carrying values of the property using the straight-line method over their estimated useful lives.  Depreciation schedule is generated by the Accounting System and reviewed by Accounting Staff.

The useful lives and depreciation method are reviewed periodically to ensure that such useful lives and depreciation method are consistent with the expected pattern of economic benefits from those assets.

Initially, an item of fix asset is measured at its cost, which comprises its purchase price and any directly attributable costs of bringing the asset to working condition.  Subsequent expenditures are added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance, will flow to the Company.  All other subsequent expenditures are recognized as expenses in the period in which they are incurred.

When an asset is disposed of, or is permanently withdrawn from use and no future economic benefits are expected from its disposal, the cost and accumulated depreciation and impairment losses, if any, are removed from the accounts and any resulting gain or loss arising from the retirement or disposal is credited or charged to current operations.

When an asset is purchased against provisions previously established,  such as Land and Building, Computerization Fund, etc.,  the asset is recorded in the property books and in the balance sheet at one pesos (P1.00),  only considering that  provision has previously been expensed.

5.7 Management Reporting

These are reports used submitted and used by the General Manager to effectively manage the affairs of SMDS Coop. It also includes reports submitted to the Board of Directors during the monthly meeting to decide on matters affecting the cooperative such as the financial conditions and membership status.

In General

The loan portfolio report is done by the loan officers which includes the AR report, noted by GM. With the loan portfolio report as basis, the coop sends out warning letter to members with past due accounts every 12th and 22nd of the month.
Sample of accounting reports submitted to the Execom
The Financial statement  is prepared by Control Officer, noted by GM
The membership report is done by the accounting assistant and noted by GM.
All reports are checked by GM and noted by GM
All reports should have an indication of who prepared it and who checked it.

Reports used in Monthly Board Meeting

Reports on the Financial Condition of the SMDS Cooperative

Monthly Comparative Balance Sheet – these are statements of SMDS Assets, Liabilities and Capital.
Monthly Receipts and Disbursements – these are the movement of cash which includes the in-out as evidenced by forms and backed up by bank reconciliations.
Year to Date Budget Variance Report -
Monthly Supporting Schedules (For Balance Sheet Accounts)
Secondary Market Report

Reports on Loans and Discounts

Comparative Monthly Portfolio
Summary of Monthly Loan Releases
 Past Due Accounts

Membership Reports

Comparative Monthly Portfolio Report
Per Area Membership List
List of Dropped-out
Confirmation/ New Members List


This section details the procedures for auditing various accounts. Provided are techniques to test and ensure accuracy of data and information reported.  It is recommended that these guidelines and procedures be applied by the Cooperative in addition to the current internal controls being implemented.
6.1 Audit of Receivables

The table below presents the audit procedures for Receivables:

Table 6.1
Audit Procedures for Receivables

6.2 Audit of Investments

The procedure for audit on investments is as follows:

Table 6.2
Audit Procedure for Investments

6.3 Audit of Property and Equipment

The audit of Property and Equipment has the following procedures:

Table 6.3
Audit Procedure for Property and Equipment

6.4 Audit of Unused Supplies


Quantities: Physical inventory must tally with the recorded values
Prices must be within the range of market values
Mathematical computations in the findings per item must be accurate

Recommend write-off of unusable items
6.5 Audit of Prepaid Expenses

Prepaid Insurance Premiums
Request for a schedule and examine the insurance policies
Check the computation of the unexpired insurance premiums
Determine the adequacy of the insurance coverage

Taxes Paid in Advance
Request for a schedule of each type of tax
Check prepaid amounts

Prepaid Interest and Discount
Request for schedule of the notes or other indebtedness
Check calculation of the prepaid amounts
6.6 Audit of Share Capital
Request for a schedule of subscribed and paid up share capital
Determine amount of authorized share capital from the articles of cooperation
Verify and vouch entries in the share capital account
Schedule of subscribed and paid up share capital balances with the controlling accounts in the general ledger
List of members with schedule of paid-up share capital
Amount appearing in the share and transfer book with the member’s share certificate
Determine balance of subscribed share capital stock
Identify members whose subscribed share capital are not yet paid
Account for all shares outstanding
Check and ascertain:
Computation of interest on share capital and patronage refund; and
Whether the amount appearing in the books of accounts are correspondingly valued and properly paid
Confirm member’s share capital accounts
6.7 Audit of Statutory Funds
Determine allocation and maintenance as provided for in the bylaws and Republic Act No. 6938 (Cooperative Code)
Restrictions of reserves; and
Charges to all reserves and the corresponding authority from general assembly for charges to reserve fund
6.8 Audit of Expense
Review internal control system for expense
the authority for expense incurrence; and
Compliance with existing laws and regulations relative to pertinent expenses of the cooperative
Compare and analyze current expenses with similar expenses of prior period
Determine the propriety of expense account classification
Analyze expense accounts to ascertain if they are necessary in the operation of the cooperative
Watch for items charged to expense which should be capitalized
Inspect expense vouchers for major items, specially miscellaneous expenses
Ascertain that all expenses recorded are legitimate expenses of the cooperative
Compare each expense with the approved budget
6.9 Substantive Testing of Cash

The procedure for substantive testing of cash is as follows:

Table 6.4
Procedure for Substantive Testing of Cash

Philippine Federation of Credit Cooperatives, Inc. (PFCCO)- Internal Control System Policy Manual by Lucy G. Furo
Various training/ seminar materials attended on cooperative-related concerns.
Manual from the Technical Working Group (TWG) of the Cooperative Manualization Revolving Fund (CMRF) Project.