Introduction This Co-op Accounting and Audit Toolkit provides a simple method for identifying, collecting, recording, analyzing and reporting on performance for small scale co-operatives.
Co-operatives are owned and controlled by their members and members are individuals, families and other co-operatives who trade with the co-operative. Members receive dividends from the net profit and have a vote in general meetings about any issues that are raised.
The impact co-operatives have on their local communities and local economy is far greater than that of private business. Because the members receive the bulk of net profits it is much more widely distributed than the profits from a private business that are just distributed to a few people and often not spent locally. The multiplier effect of profits being distributed by co-operatives to local members/residents means that the impact a co-operative has is felt more acutely than a private business that is why co-operatives should measure and account for their impact more rigorously. The Co-op Accounting and Audit has been designed as a ‘light touch’ approach to what can sometimes be a complex and complicated process for members of small scale co-operatives and provides a way of engaging members more fully in the affairs of the co-operative.
All co-operatives should have a Co-operative Business Plan describing what the co-operative does, how it is managed and what the plans are for the future. Co-op Accounting and Audit will measure against this plan. For further information on how to develop your business plan please see our Co-operative Management and Planning Toolkit1 or see your local National Registrar of Co-operatives in the country for advice they should also be able to assist you with developing the plan.
The Co-op Accounting and Audit method uses a poster on which all the information is displayed and where progress is written up as it happens. This enables members to write in their thoughts, comments and ideas about the co-operative and how it might be improved. The Co-op Accounting and Audit poster is a tool to use in creating good governance – openness is a key operational principle for good governance.
The poster is a way of starting to gather data on a regular and systematic basis, which can be extended over time. Most of the data is already known and most is already collected, however it is often recorded in different forms and can be difficult to bring it all together. The poster is designed to be a single record of the relevant information to help the management and members of co-operatives understand what the plans are for the year and how the co-operative is performing in relation to the plans.
Triple Bottom Line
The triple bottom line is described using different terminology by different business sectors and agencies; however there are three core elements in common. Social Audit uses the heading commercial, social, and environmental; the UN uses profit, people, and planet; and in this Toolkit the headings of Strong Co-operatives, Strong People, and Strong Communities are used. These headings fundamentally underpin the same inclusive approach, where the interdependence of the parts combine in creating a more responsible and sustainable system of organisational performance and measurement.
Co-operatives need to be able to plan and manage these three key parts of a good organisation. Commercial functions need to be profitable but also of good and honest quality; social wealth needs to be developed through common ownership and the members and employees participating in the co-operative, and the opportunities the co-operative provides; and, community and environmental responsibility should be a result of the way the co-operative looks to mitigate their environmental cost to society in the way they operate their processes, package and transport goods, and produce and use energy, and in the effects on the community as a result of the co-operatives’ actions.
Co-operative Accounting and Audit is designed to bring together the three dimensions of performance, the triple bottom line, that combine to form best operational practice and good governance: financial, social and environmental, and which provide the foundation for self-assessment. For a fuller description of the triple bottom line please go to Annex 1.
Private sector businesses report to their shareholders on their financial performance. Co-operatives report to their members on their financial performance but also need to report on the achievement of social and environmental plans.
Shareholders are often removed from the businesses and are unaffected by operational performance, while members of co-operatives are intimately associated with the operations of their co-operatives and as local residents are affected by their impact.
It is suggested that the Co-op Accounting and Audit is used at the same time as the financial audit; providing a full picture of performance. The financial audit provides information relevant for shareholders, while social accounting and audit provides information relevant for society.