COOPERATIVE DEVELOPMENT AUTHORITY £27 hora Br, encg Roo. iy. mmocule Conception I} Cuboe, vezon Cty, Pippnes @rcrnerccsngncs Qracmasciognen eos echina @mcncmrer MEMORANDUM CIRCULAR NO, _ 2018-08 Series of 2019 AUG 23 2019 iN} To : ALL CONCERNED CIE ye!) re i w SUBJECT : GUIDELINES IN THE ALLOCATION AND DISTRIBUTION OF PATRONAGE REFUND Section 1. Legal Basis Article 86 of the Philippine Cooperative Code of 2008: “(9) The remaining net surplus shall be made available to the members in the form of interest on share capital not to exceed the normal rate of return on investments and patronage refunds: Provided, that any amount remaining after the allowable interest and the patronage refund have been deducted shall be credited to the reserve fund Xxx." Rule 10, Section 14 of the Revised Implementing Rules and Regulation of R.A. 9520: “Patronage Refund. The principle of Patronage Refund is a principle of equity wherein an equal right of members to participate in the organization and to equitably share in the benefits accruing there from is established. Under this principle, the Net Surplus shall not be construed as profit, but as excess payments made by them from the cooperative and which shall be deemed to have been returned to them if the same is distributed as prescribed by the Code and by this Rule. Provided, however, that the amount allocated for patronage refund shall not be less than thirty percent (30%) of the net surplus after deducting the statutory reserves based on the principle of equity. Provided, further, that in no case shall the rate of patronage refund be more than twice the rate of interest on share capital.” Section 2. Scope This Guidelines shall cover all types and categories of cooperatives except Cooperative Union. — ageSection 3. Definition of Terms a. General Fund - refers to the fund set aside for the proportionate amount of patronage refund set aside for non-member patrons; b. Patronage Refund - refers to the amount returned to individual patrons in proportion to their individual patronage of the cooperative’s products and services; c. Patron - refers to an individual who availed the products and services of the cooperatives who may be members or non-members. Section 4. Guiding Principle The principle of Patronage Refund (PR) is a principle of equity wherein an equal right of members to participate in the organization and to equitably share in the benefits accruing therefrom is established. Under the principle, the net surplus shall not be construed as profit, but as excess payments made by them from the cooperative and which shall be deemed to have been returned to them if the same is distributed as prescribed by R.A. 9520 and its Revised Implementing Rules and Regulations. Section 5. Allocation of Patronage Refund Allocation of patronage refund shall be made only after allocation of the statutory funds and interest on share capital. The amount allocated for patronage refund shall not be less than thirty percent (30%) of the net surplus after deducting the statutory reserves based on the principle of equity, provided further, the rate of patronage refund shall not be more than twice the rate of interest on share capital. In case the rate of patronage refund is mor | Interest on Share Capital (ISC), the cooperative shdthredwoenbhe-animmmne ster allocation of thirty percent (30%) for patronage refurfd to'ffivet vi "Satisly” the requirement. AUG 23 2019 ” Recrny wl) The cooperatives shall maintain separate recording of sales and receipts transactions for members and non-members. \ | | Section 6. Recording of Transactions In the case of multipurpose cooperatives, separate recording of income and related expenses per business activity is required. 2of 91Section 7. Bases for Computation of Patronage Refund The bases for the computation of patronage refund shall depend on the cooperative’s business activities as reflected in the Statement of Operation for single type cooperative and departmentalized Statement of Operation for multi-purpose type cooperative. : The bases in determining the Patronage Refund and those entitled thereto for the different types of business activities are as follows: ‘Type of Cooperative’s | Basis for Patronage Refund | Who are entitled Business Activities to Patronage Refund 1. Lending Interest income from loans, | Members only service fees and filing fees received and earned for the year. a 2. Trading/Marketing | Net Sales (Gross Sales less| Members and Sales Returns and Sales | non-members Discounts) Services | Hospital fees and Other health | Members and service fees which form part of | non-members the income of the cooperatives 4. Transportation | Fares Members and Sales/receipts from allied | non-members services UP. LAW CENTER”) orrice oe saitovaL AOMIS}RATVE REGISTER Damaatave les nt en Any other Fees collected or derived from the members which form part of the income | ban 3 ae of the cooperative such as E } "butaw" /daily dues, management fees, etc. 5. Labor Service Gross Salary of deployed Derioete | member-employees member- | { employees 6. Services Provided | Payroll or Labor Cost Member-workers by Workers Cooperative | 7. Electric Total bill Member- = consumers 8. Water Service Total bill Member- consumers (9. Education Tuition and other fees Members and | non-members 30f 9Pages10. Housing Interest income from lease | Members agreement and/or other fees collected 11. Insurance Premiums Paid Members and non-members | 12. Credit Surety Service/Surety and other fees _| Members 13. Other Services [Other fees collected such as|Members and} rental fees, training fees, etc. non-members Multi-purpose cooperatives shall adopt the computation of patronage refund based on the activities enumerated above. For this purpose, multi- purpose cooperatives shall have separate recording of transactions per business activity. Section 8. Computation of Patronage Refund ‘The rate of Patronage Refund (PR) shall be compute fa eee orrce ct me waTOwsL ADMIVSTRATIVE REGISTER Pama Rls ane Reeios | Rrger AUG 23 2019 | EnyEl) MECI a. For Single Business Activity Rate of PR = Amount Allocated for PR Amount of Patronage* *based on Section 7. Bases for Computation of Patronage renal PR per individual = Rate of PR x amount of individual patronage b. For Multi-Purpose Cooperative 1. Determine the amount of Net Surplus per business activity. Common expenses may be allocated in accordance with the policy of the cooperative. 2. If there is Other Income, allocation shall be proportionate to the Net Surplus per business activity. 3. Determine the total amount allocated for PR per business activity. 4. Compute the rate of PR per business activity by dividing the amount allocated for PR per business activity over the amount of patronage per business activity 5. To determine the individual PR, multiply the rate of PR to the amount of individual patronage. 4of 9PagesTo determine if the PR does not exceed twice the rate of ISC, get the average of the rate of PR per business activity and compare the result to the rate of ISC. Sample Computation for Patronage Refund for Multi-Purpose Cooperative Facts: Interest income from Loans (Credit) P 1,000,000.00 Service Income (Labor) 3,000,000.00 Other Income (Income from Investment) 100,000.00 Salaries (deployed)-(Labor} 2,000,000.00 Other Operating Expenses: Credit 800,000.00 Labor TS TAAL waae?00,000.00 Average Share Mont les an Reglne ee Statement of Operation ID) Aus 7 bl p CREDIT LABOR (income toraL | from | ~_| Investment) Interest income from 1,000,000 - 7 1,000,000 Loans Service Income = 3,000,000 3,000,000 Gross Revenue 1,000,000 | 3,000,000 ‘4,000,000 Other Income = - 100,000 100,000 ‘Less: Expenses Salaries (deployed) = 2,000,000 2,000,000 Other OPEX: 800,000 700,000 1,500,000 | Total Expense 800,000 2,700,000 3,500,000 | (1) Net Surplus per business activity |___ before Allocation 200,000 300,000 100,000 | 600,000 (2)Proportionate share in Net 0.40 0.60 ‘Surplus (200,000/800,000) | (300,000/00,000) Net Surplus for Allocation 240,000 360,000 600,000 (30% Statutory Fund 72,000 108,000 180,000 ‘Amount Allocated for | ISCPR (70%) | 168,000 252,000 420,000 Sof 9PagesISC (70% x amount ] ] allocated for ISCPR) 117,600 | _176,400 | 294,000 (3) PR (80% x amount allocated for 50,400, | 75,600 126,000 ISCPR) | | (4) Rate of PR 0.0504 |, (0.0378 ‘Average rate of PR I |_0.0441 : Rate of ISC I | 0.0588 Rate of PR for Credit: Amount Allocated for PR 50,400 Interest income from Loans 1,000,000 Rate of PR for Credit 0.0504 Rate of PR for Labor: Amount Allocated for PR 75,600 Salaries of Deployed Member 2,000,000 Rate of PR for Labor * 0.0378 Rate of ISC: Amount Allocated for ISC Average Share Month U.P, LAW CENTER orice ct ne NATIONAL AOMINSTRATNE REGISTER AUG 23 2019 D geuyel Rate of ISC 0.0588 Ce CREDIT LABOR Members | Amount of | Rate of | Patronage | Amountof | Rate | Patronage ‘Total Individual | PR” | Refund’ | Individual | ofPR | Refund | Patronage Patronage Patronage Refund [200,000 | 0803 | 10,080 —|~ 300,000 ~|-0376 | 11.390 —| 21,420 B | 190,000| 0803 | 9,576 —| 500,000 ~|-0378 | 18,900 —| 28.476, c = o800 = 360,000—[0876-| 21.168] 21.168 [280,000 | 0508 | 14.119 = [-0ae [= Tait E | -390,000 | 0508 | 16,632 | 610,000 [0378 | 94,192 _| a0,a24 Total — [1,000,000 50,400 —| 2,000,000 75,600 | 126,000 ond ones of fais 6of 9PagesSection 9. Payment of Patronage Refund a. In the case of a member patron with paid-up share capital contribution, his/her proportionate amount of patronage refund shall be credited to his/her share capital as part of the Capital Build-up if stipulated in the by-laws. In the absence of the provision in the by-laws, it shall be paid to him/her unless he/she agrees to credit the amount to his/her account as additional share capital contribution; b. In the case of a member patron with unpaid share capital subscription, his/her proportionate amount of patronage refund shall be credited to his/her account until his/her share capital subscription has been fully paid; c. In case of a member patron with due and demandable obligation, his/her proportionate amount of patronage refund shall be credited to said obligation until his/her obligation has been fully paid provided that the unpaid share capital subscription has been fully paid; and d. For members who voluntarily withdrew 6r have been terminated involuntarily (including automatic termination) the amount of share capital including ISC and PR not yet paid by the cooperative shall continue to earn interest until fully refunded to the member. e. In the case of a non-member patron, his/her proportionate amount of patronage refund shall be set aside in a general fund for such patrons through disclosure in the Notes to Financial Statement. It shall be allocated to individual non-member patrons only upon request and presentation of evidence of the amount of his/her patronage. The amount so allocated shall be credited to such patron toward payment of the minimum capital contribution for membership. When a sum equal to this amount has accumulated at any time within a period specified in the by-laws, such patron shall be deemed and become a member of the cooperative if he so complies with the provisions of the bylajsforvadmission:te membership. amnsiaive Rls a Rguaont AUG 23 2019Section 10. Unclaimed Patronage Refund of Non-Member Patron If within any period of time specified in the by-laws, any non-member patron who has accumulated the sum necessary for membership but who does not request nor agree to become a member or fails to comply with the provisions of the by-laws for admission to membership, the amount so accumulated or credited to their account together with any part of the general fund for nonmember patrons shall be credited to the reserve fund or to the education and training fund of the cooperative, at the option of the cooperative. Provided, that said non-members have ‘been duly notified of such amount of patronage refund and the effects of non-availment thereof within the prescribed period as specified in the by-laws and/or policies. Section 11. Accounting Entries for Patronage Refund a. To set up patronage refund for members and non-members Net Surplus (Dr.) xox Patronage Refund Payable (Cr.) xxx b. To record payment of patronage refund to me! eae Ras AuG 23 2019 ECE. Patronage Refund Payable (Dr.) ” cor Cash in Bank (Cr.) c. To record membership of the non-member pa‘ Patronage Refund Payable (Dr.) xxx Paid-Up Share Capital (Cr.) xx d. To record unclaimed patronage refund /non-membership Patronage Refund Payable (Dr) xx Reserve Fund/CETF (Cr.) xxx Section 12. Sanction for non-compliance Non-compliance of the provisions of this Guidelines shall be subject to the following sanctions after due notice and hearing: 1. Non-issuance of the Certificate of Compliance (COC) for the immediately succeeding year; 2. Dissolution of the cooperative for willful violation of the lawful order of the Authority. Bof 9Pages -Section 13, Penal Provision Failure to comply with the order of the Authority in the course of the implementation of this Guidelines shall be considered as an offense punishable by a penalty of imprisonment of not less than one (1) year nor more than five (5) years or a fine of not more than Fifty thousand pesos (P 50,000.00) or both at the discretion of the court. Section 14. Separability Clause In the event that any part of this Memorandum Circular is declared unconstitutional, the remaining provisions ‘not affected thereby shall continue to be in full force and effect. Section 15. Effectivity This Memorandum Circular shall take effect after fifteen (15) days from the date of publication in the Office of the National Administrative Register/Official Gazette. Approved by the Board of Administrators per Resolution No. 315, S- 2019 dated July 15, 2019. Quezon City, Philippines. For the Board of Administrators: By: August 22, 2019 Po ORLANDO R. RAV! Chairman a J UF LAW orrce ome aici Aug 23 2019 Ruger ye! rae: 9of 9PagesEO Ld COOPERATIVE DEVELOPMENT AUTHORITY £27 Ao fed, See Road By IneTaclle Concept. I CUBE, Quezon Cy Pipes Brevieercisgnin, Qrarssecsngnes Geox Qectinu Omereone EXCERPTS FROM MINUTES OF REGULAR MEETING OF THE CDA BOARD OF ADMINISTRATORS HELD ON JULY 15, 2019 AT GLAN, SARANGANI PROVINCE PRESENT: Hon, Orlando R. Ravanera ~ Chairman/Presiding Officer Hon. Paisal I. Cali ~ Administrator from Mindanao Hon. Abdulsalam A. Guinomla ~ Administrator from Mindanao Hon. Abad L. Santos ~ Administratof from Luzon Hon. Myrla B. Paradillo ~ Administrator from Luzon ALSO PRESENT: Mr. Ray R. Elevazo ~ Executive Director ABSENT: Hon, Benjie S. Oliva ~ Administrator from Visayas RESOLUTION NO. 315, S-2019 Upon motion by Adm. Abdulsalam A. Guinofla, duly seconded by Adm. Myrla B. Paradillo, be it RESOLVED as it is hereby RESOLVED, to approve the Guidelines in the Allocation, Distribution and Bases of Patronage Refund with inclusion of penal provision for the sanctions on the non-compliance of cooperatives. Resolved Further, to review the bases in determining the Patronage Refund particularly on the non-members of the Transportation cooperatives UNANIMOUSLY APPROVED. 20x 2x This is to certify that the foregoing is true and correct from the minutes of the CDA Board of Administrators’ Regular Meeting. ATTESTED: f ORLANDO ff. RAVANERA Chairman/Pfesiding Officer vox soa A. DE LOS REYES Acting Board Secretary re: Joreice ot mes R Aug 23 2019 CIE V. UP. LAW CENTER AOMISTRATWE REGITER les at Relaan