Policy Area:

AUDIT

Policy Title: Policy Number

Audit and Internal Control Policy Revision Status
AUD.AIC.01
Resolution Number Effectivity Date
Date Approved Number of Pages

Article I. General Provisions

Section 1. Title

This policy shall be known and addressed as the Cavite Provincial Capitol Employees Multi-
Purpose Cooperative (CPCEMPC) Audit and Internal Control Policy and its Implementing Rules
and Regulations. The Cavite Provincial Capitol Employees Multi-Purpose Cooperative
(CPCEMPC) Audit Committee shall conduct its audit regularly in order to ensure that all
business transactions are recorded properly, cooperative assets are safeguarded appropriately,
and its members are protected against loss through poor operations.

Section 2. Policy Statement

This policy shall define the procedures to be undertaken in the conduct of audit by the members
of the Audit Committee of CPCEMPC.

Article II. Definition of Terms

Audit Committee – refers to the Committee within the cooperative responsible for internal audit
activities. In a traditional internal audit activity, the Committee serves for internal audit. In the
case where internal audit activities are obtained from a professional member employee, the
Committee is responsible for overseeing the service contract. It is composed of three members
acting as Chairperson, Vice-Chairperson and Secretary.

By-Laws – refer to the by-laws registered under the Cooperative Code and include any and all
registered amendment thereof.

Committee – refers to anybody entrusted with specific functions and responsibilities under the
By-laws or resolution of the General Assembly or the Board.

Cooperative Development Authority - refers to the government agency in charge of the

registration and regulation of cooperatives.

External Auditing – refers to audit conducted by an auditor, who is (a) independent of the
cooperative being audited or a subsidiary thereof; and (b) a member of a recognized
professional accounting association, or (c) a member of cooperative auditors association.

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Governance and Management Audit Working Paper- refers to the working paper to be used
by the Audit Committee or Internal Auditor in analyzing/assessing the performance of the
cooperative in a form to be prescribed by the Authority.

Governance and Management Audit Working Report – refers to the summary report of
analysis/assessment to be undertaken by the cooperative based on the result of the audit using
the tool prescribed by the Authority

Financial Statements - shall refer to the means i.e. Statement of Financial Condition (Balance
Sheet), Statement of Operation (Statement of Net Surplus) and Statement of Cash Flows, by
which the financial information accumulated and processed in financial accounting, is
periodically communicated to those who use it.

Internal auditing – refers to an independent, objective assurance and activity designed to add
value and improve the cooperative’s operations.

Internal Control – shall refer to all the systems and procedures adopted to safeguard the
cooperative’s assets, check the accuracy and reliability of its accounting data, promote
operational efficiency, and encourage adherence to prescribed managerial policies.

Management – refers to the body authorized to direct the business activities of the cooperative
in accordance with the policies determined or promulgated by the Board.

Regular members - a type of member who may have the right to vote and be voted upon. It
will be composed of permanent employees of Provincial Government of Cavite and regular
employees of CPCEMPC.

Associate members – a type of member who has no right to vote and be voted upon. It will be
composed of temporary, co-terminus, casual employees of the Provincial Government of Cavite;
retired or resigned employees of the Provincial Government of Cavite and CPCEMPC who wish
to continue their membership;

Officers of the Cooperative - shall include the members of the Board, members of the different
committee created by the General Assembly, general manager, secretary, treasurer and
members holding other positions as may be provided for in the Bylaws.

Reports - shall refer to any documents or statements required from cooperatives to be

submitted to the Cooperative Development Authority on a regular basis.

Social Audit – is a procedure where the cooperative assesses its social impact and ethical
performance vis-à-vis its stated mission, vision, goals and code of social responsibility.

General Assembly- highest policy making body composing of all the members of the
cooperative.

Members Entitled to Vote – a regular member who met the qualifications and have the right to
vote and be voted upon. Is equivalent to Members in Good Standing.

Membership Registry Book – a book required by the Cooperative Development Authority

(CDA) which contains the members’ information upon acceptance and their profile.

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Cooperative Governance – refers to the system of responsibility, accountability and
transparency which enhances the standards set-up for the cooperatives that would protect the
interest of building strong linkages with the members and other stakeholders of the cooperative.

Cooperative Management – refers to the body authorized to direct the business activities of
the cooperative in accordance with the policies determined or promulgated by the Board.

Internal control environment – refers to the framework under which internal controls are
developed and implemented alone or in concert with other policies or procedures, to manage
and control a particular risk or business activity, or combination of risks or business activities, to
which the cooperative is exposed.

Social Development Plan – refers to the written plans of cooperative regarding its program on
social services for the members, the cooperative movement, community and nation.

Unannounced Audits – Audits that is not requiring for the auditee to be informed of the audit
schedule. This is also referred as surprise audit.

Article III. Responsibilities

Section 1. The following are the key persons involved in implementing the policy.

Audit Committee

 Conducts all the audit activities, including preparation of audit plan and audit reports
of the Cooperative. Monitor the adequacy and effectiveness of the cooperative’s
management and control system;

 Audit the performance of the cooperative and its various responsibility centers;

 Review continuously and periodically the books of account and other financial
records to ensure that these are in accordance with the cooperative principles &
generally accepted accounting procedures;

 Submit reports on the results of the internal audit and recommend necessary
changes on policies and other related matters on operation to the Board of Directors
and GA;

 Recommend or petition to the Board of Directors the conduct of special general

assembly when necessary; and

 Perform such other functions as may be prescribed in the By-laws or authorized by

the GA.

External Auditor

 Conducts external audit on an annual basis.

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Management-Assists in providing necessary documents and logistical support during the
conduct of audit.

Treasurer- Provide the audit committee with various reports necessary to conduct the audit.

Board of Directors- Accepts the audit report and provide necessary actions should there be
audit findings.

Article IV. Scope

Section 1. This audit procedure shall cover the financial, governance, social and performance
audits of the CPCEMPC.

Section 2. The financial audit shall have the following scope:

1. Include financial audit, performance audit, governance audit, social audit, inventory
checks, among others.
2. Conduct of cash count.
3. Receipt of funds thru Cash Receipts Journal against deposits as shown on bank
statements.
4. Verification of investments to other cooperatives and/or organizations, if any.
5. Verification of external and internal borrowings, if any.
6. Verification of bank reconciliation.
7. Books of accounts.
8. Monthly financial statements prepared by bookkeeper/accountant.
9. Records of share capital, loans receivable, savings and time deposits and other
accounts against the corresponding subsidiary ledger.
10. Reconciliation of statutory accounts from ending date of the last audit to ending date of
the current audit.
11. Reconciliation of any changes in the undivided earnings account from ending date of the
last audit to ending date of current audit.
12. Spot checking of dividend computations.
13. Loan applications to credit committee or loan officer, authorized signatories, amount and
proper computation.
14. Notes payable/receivables for signatures, amounts and proper computation.
15. Documents (security agreements, titles, insurance, etc.) necessary to loan is on file and
correct.
16. Verification of members’ passbook at least twice a year.

Section 3. Moreover, the governance audit shall cover the following:

1. Articles of cooperation and by-laws.
2. Regular minutes of board and general assembly meeting.
3. Board and general assembly resolutions.
4. Manual of policies with operating procedures.
5. Registration of cooperative to CDA, BIR, and any other related agency.
6. Title and registration of cooperative’s properties
7. Held securities and collaterals, if any.
8. Certificate of stocks and investments, if any.
9. Bonds and insurance, if any.
10. Inventory of fixed assets at least once a year.

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 11. Contract of lease and agreements entered into by the cooperative, if any.
12. Records of members with updated information.

Section 4. The Audit Committee shall also conduct social audit in order to assess its social
impact and ethical performance vis-à-vis its stated mission, vision, goals and code of social
responsibility.

Section 5. The Audit Committee shall likewise undertake performance audit in order to
determine the progress and achievement on the Cooperative’s program of activities as well as
organizational, economic and social aspects of the operation. This audit aims to identify problem
areas in the operation and determine the state of cooperative’s health.

Article V. General Audit Process

Section 1. Audit Engagement Planning

The audit objectives should be established in this stage, as well as the scope, criteria and
evidence to be audited. Audit Plan shall be prepared and issued to the auditee at least 5
working days prior the date of audit. This shall not apply to audits that are classified as
unannounced. Audit Plan shall be approved by the Board of Directors. Audit Plan can be
prepared at least in a quarterly basis. It can also be semestral or an annual audit plan. Audit
Plan Form shall be used.

Section 2. Audit Execution

The audit shall be done on the schedule indicated in the Audit Plan. An Entry Conference
should be done prior the conduct of the audit proper. This sets the tone of the audit. The entry
conference should be attended by the audit committee and the concerned people to be audited.
However, there are audits that will not require an entry conference. Respective audit checklists
shall be used for different kinds of audits. Refer to Audit Checklist Form. At the end of the
audit, after the report has been made, it should be concluded by an exit conference to discuss
the highlights of the audit findings with the auditee or responsible official/s that has sufficient
knowledge about the audit area. The exit conference should be done no more than three days
after the actual audit has finished. The exit conference also provides an opportunity to get the
auditee’s comments and insights about the significant audit issues as a way of validating the
audit findings. Management comments should be taken into consideration so as to arrive at
workable recommendations and obtain the auditee’s commitment towards performing remedial
actions.

Section 3. Compliance Audit Process

The steps in the conduct of Compliance Audit are as follows:

1. Gather and analyze evidence to establish the condition that the auditee is in. This refers
to findings of facts which is defined as a fact, supported by substantial evidence
(includes consequences, effects or impacts)
2. Compare conditions with criteria to draw conclusion.
3. Determine the probable cause(s). This is the establishing the facts and circumstances of
the non-compliance.

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 4. Prepare the working papers. The auditor should record relevant information to support
the audit results.
5. Consolidate the audit findings and prepare the highlights of the audit. Use the Audit
Findings Report Form.

Section 4. Audit Report should be kept short and to the point. Report on a timely basis and
should include four parts, at a minimum:
1. Executive summary: bullet list items of concern that require immediate attention
2. Describe the scope of work (period covered, business process or funding source, etc.)
3. List key findings of exception to policy, risks and recommendations
4. Note any prior recommendations that have not been implemented

The audit report shall be prepared and submitted to the Board of Directors 5 working days after
the audit, together with the recommendations.

Section 5. Actions of the BOD pertaining to the recommendations shall be validated one week
after the said report was taken up in the Board Meeting or as necessary.

Article VI. Financial Audits

Section 1. Financial audits dig deep into Cooperative’s financial situation, probing accounting
records, internal controls policies, cash holdings and other sensitive financial areas. Financial
audits on the Coop’s own books can help us to prepare the external audit, keep our accounting
system in order and discourage internal fraud and theft. A financial audit is an independent,
objective evaluation of the Cooperative’s financial reports and financial reporting processes. The
primary purpose for financial audits is to give regulators, cooperators, directors, and
manager reasonable assurance that financial statements are accurate and complete.

Section 2. Audit of Cash Funds

The audit committee shall conduct unannounced audit on a monthly basis of all cash funds
being maintained by the Cooperative such as Petty Cash Fund, Marketing Fund, Savings
Deposit Fund, Express Pay Fund, Emergency Loan Fund, Exchange Fund, etc. The audit shall
be based on the following premises:
a. Receipts and cash on hand should have a total amount corresponding to the
approved sum of the said fund;
b. The fund is being maintained and under the custody of the prescribed custodian
(i.e. Cashier, Treasurer, etc.);
c. Expenses charged under the cash fund shall be supported by receipts reflecting
valid transactions and approved by the General Manager;
d. The fund should be replenished monthly or when it is 74% exhausted, supported
by a properly accomplished petty cash voucher and is approved by the general
manager.

From time to time, the Audit Committee shall conduct surprise count of the collections and
prepares a report to the Board of Directors; copy furnished the General Manager.

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Section 3. General Cash and Bank Balances Audit

The cash in hand and cash in bank shall be audited every month. The audit shall be based on
the following premises:
a. The cash and relevant supporting documents shall be in the custody of the Treasurer;
b. The cash in hand together with the records of withdrawals shall be in the total amount of
Php100,000;
c. The Treasurer shall present all the bank reconciliation reports as of the end of each
month as well as the corresponding bank books and ensure its accuracy;
d. The auditor shall ensure that there is no unrecorded cash;
e. Ensure that there is consistency on the amounts recorded in the proper period;
f. Ensure that the cash balance and related statement of comprehensive cash entries are
correctly disclosed in the financial statements in accordance with legislation and
accounting standards;
g. Cash in the back as stated in the reconciliations foots correctly and agrees with the
general ledger.

Section 4. Deposit/Savings and Investment Accounts

The deposit accounts of the members of the Cooperative should be audited randomly on a
monthly basis. The assertions for auditing the savings accounts of the members are:
a. Passbook of the account holders is consistent with their records in the deposit database;
b. Records are up-to-date and current;
c. Passbooks are properly and duly accomplished including the signatures of posting clerk.

Section 5. Audit on Book of Accounts

CPCEMPC’s accounting period shall be a 12-month period starting January 1 and ends at
December 31 of each year. The Cooperative is required to keep a record of their day to day
business transactions in order to know the result of their operations. The said record is referred
as the “book of accounts”. The assertions for auditing the Book of Accounts are:
a. Book of accounts are present and are duly registered with the Bureau of Internal
Revenue. Book of accounts are as follows:
i. General Journal – Book of original entry that contains all the business
transaction in order of date using the principle of “debit and credit”;
ii. General Ledger – Book of final entry that summarized all the journal
entries of an account to get the ending balances;
iii. Cash Receipt Journal – contains the record of cash sales and collection
of receivables; The OR is recorded in the Cash Receipt Book in numerical
sequence checked by the Accountant and reviewed by the Audit
Committee.
iv. Cash Disbursement Journal – records the cash payments of expenses
and/or payables; The Audit Committee reviews and checks the validity of
the cash disbursement voucher (CDV) and its supporting documents.
v. Sales Journal – used to record sales on credit (receivable from customer)
b. Book of Accounts are maintained and preserved ten (10) years reckoned from the day
following the deadline in filing a return for the taxable year when the last entry was made
on the books.
c. Book of accounts are audited by an independent Certified Public Accountant at the end
of the taxable year.

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 d. The book of accounts conforms to the Philippine Financial Reporting Framework for
Cooperatives, specifically the standard chart of accounts. Refer to MC 2016-06 Revised
Standard Chart of Accounts for Cooperative
e. Book of accounts are updated on real-time.

Section 6. Financial Statements Audit

The purpose of a financial statement audit is to add credibility to the reported financial
position and performance of the Cooperative. The financial statements should be in
compliance with the Philippine Financial Reporting Standards for Cooperative. A complete set of
financial statements includes the following components:

a. Statement of Financial Condition (Balance Sheet) presents a cooperative’s assets,

liabilities and equity as of a specific date—the end of the reporting period. Assets and
liabilities are further classified as current or non-current.

b. Statement of Operations (Income Statement) presents its financial performance for the
period.  It includes revenues, costs and expenses, gains and losses and net surplus or
net loss. Expenses are classified according to their function as part of cost of
sales/services rendered, distribution or administrative activities. In a cooperative the
difference between revenues and expenses is called net surplus that is allocated in
accordance with the Cooperative Code or the cooperative’s bylaws.

c. Statement of Changes in Equity presents the amounts of investments and withdrawals

by members, addition and utilization of statutory funds, movement in donations and
grants, and revaluation surplus during the period.  

d. Cash Flows Statement provides information about the changes in cash and cash
equivalents of a cooperative for a reporting period, showing separately changes from
operating activities, investing activities and financing activities .

The financial statements should also be supplemented with Notes to Financial Statements that
provide narrative descriptions or disaggregation of items presented in the above statements and
information about items that do not qualify for recognition in those statements.  It also describes
the accounting policies and the measurement basis/bases used in the preparation of the
financial statement. 

For purposes of monitoring, supervising and regulating all types of cooperatives, the following
basic financial reports and schedules shall be prepared on a monthly basis and should be
submitted to the Audit Committee every second Monday of the following month, namely:

a. Statement of Financial Condition

b. Statement of Operations
c. Statement of Changes in  Equity
d. Statement of Cash Flows
e. Notes to Financial Statement

Related Schedules should also be submitted monthly to Audit Committee before the scheduled
monthly board meeting along with the financial statements. These are the:
a. Bank reconciliation Statement 

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 b. Aging of Receivables using PAR 

c. Property and equipment lapsing schedule 

d. Members loans receivables, savings/time deposits, subscribed and paid-up share

capital 

e. Investments 

f. Accounts payable 

g. Loans payable 

h. Allocation and Utilization of Statutory Funds 

i. Distribution of Interest on Share Capital and Patronage Refund 

Statement of Operations should also be prepared by type of business activity such as one for
credit operation, and one for marketing operation. A combined statement should also be
prepared in order to ascertain the total picture of the Cooperative's operation.

Section 7. Property, Plant and Equipment

Property, plant, and equipment generally termed as PPE has been an influential contributor of
the asset side of balance sheet (Statement of Financial Position). The following serves as
guidelines in doing PPE audit:

Existence and Occurrence

Auditor should check whether PPE in the balance sheet physically exist taking into
considerations all additions (purchased, constructed, leased) and disposal (retired).

Auditor needs to reconcile summary of PPE and analysis of Accumulated depreciation with
Ledger
 
- Beginning: Prior working paper (must agree with the ledger balance, sub and gen)
- Addition and disposals: During audit
- Audit adjustment is posted in the controlling account

Auditor must also do physical inspection of major acquisition of PPE. Acquisition of property and
equipment should be in accordance with the approved budget. Approval of Acquisition of Fixed
Assets shall be as follows:
 General Manager - Up to P 100,000.00
 Board of Directors - Up to P 1,000,000.00
 General Assembly - Over P 1,000,000.00
 
Completeness

The PPE includes capitalizable costs and no capitalizable costs are expensed. The auditor
should be able to vouch additions and investigate disposal. The auditor should look into

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addition, either purchased or constructed PPE, disposal, supporting minutes of meeting of BOD,
purchase and sales agreements.

Rights and Ownership

Audit Committee shall check if the Cooperative has legal title or equivalent ownership rights to
PPE and related lease obligations of capitalized leased assets are recognized. The auditors
may examine evidence of legal ownership of PPE such as Deeds, Transfer certificate of title,
Insurance policy, Property tax bills, Operating lease, Capital or Finance lease, lease contracts,
Machinery and equipment’s purchase invoice and contract of sale as well as Cars, trucks and
delivery equipment’s certificates of title and registration documents.

Areas for consideration in conducting PPE Audit are:

 
Valuation and Allocation

- Check whether the PPE are stated at cost and allowances for depreciation and depletion
are computed using an acceptable and consistent method.
- Analyze repair and maintenance account.
- Check on the capitalization of extraordinary repairs
- Accuracy of repair and maintenance expenses
- Conduct random testing of depreciation cost.
- Fixed Asset with an acquisition cost of P2,000.00 or with an estimated useful life of more
than one year shall be treated as capital expenditures, subject to depreciation.
- Major repair/improvement on Fixed Assets shall likewise be capitalized
- subject to the following conditions:
o The repair / improvements should substantially increase/improve the useful life of
the Fixed Assets.
o The cost of the repair should be more than 25% of the acquisition cost.
- Semi expendable The asset shall be treated as outright expense if the acquisition cost is
less than P2,000.00 and the estimated useful life is one year and below.
Conduct of Inventory of PPE

- Inventory of PPE should be done once a year following the approved audit
schedule/audit program.
- The equipment and other properties should be tagged using the approved Inventory
Tag.
- All tags should be updated and all properties and equipment should possess a tag at
any given time.
- Investigate status of PPE
- Establish the status and safekeeping of condemned items.
- All property and equipment shall be in the name of CPCEMPC.
- The property custodian shall be responsible for the proper safeguarding and
maintenance of property and equipment.
- Where advisable, property and equipment should be adequately insured against fire,
theft and other risk.
- A Property and Equipment Register shall be maintained and updated by the designated
personnel for each property or equipment where the cost, depreciation charges and
other relevant data, like sale, disposition, trade-in, improvements, and exchange are
recorded.

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 - It is understood that any procurement is covered by appropriate documentation and
approved by proper authorities.
- A Memorandum Receipt (MR) properly accomplished and acknowledged by the
employees and/or officers to whom the furniture or equipment is issued.
- All property and equipment shall be numbered and properly identified and tagged when
applicable.

Depreciation

Depreciation shall be computed in accordance with the approved rates of depreciation.

For newly purchased Fixed Assets, the initial depreciation shall be booked in full the following
month after the acquisition. Thus no depreciation shall be booked on the month of acquisition.
When a unit is fully depreciated, a nominal amount equivalent to 10% of acquisition cost is
carried in the books. The straight-line method of depreciation is adopted.

Estimated Useful Life of Fixed Assets

a. Buildings - 20 years
b. Office furniture, fixtures and equipment - 5 years
Except for: Computers and accessories - 3 years
Cellular phones - 2 years
c. Vehicles - 10 years
d. Books/Appliances - 2 years

Disposition

Approval for the disposition of Fixed Assets shall be vested solely to the BOD unless the
amount involve is more than P1,000,000.00 otherwise, the General Assembly shall be the
appropriate body to approve such disposition. The following shall be strictly observed in the
disposition of Fixed Assets:
a. Fixed Assets shall be disposed subject to the existence of any of the following
conditions:
 Fully depreciated Fixed Assets, its replacements of which are duly
approved.
 Fixed Assets than are no longer being utilized.
 Unserviceable Fixed Assets or those beyond repair.
 Fixed Assets whose repair would no longer be beneficial or would
be costly.
b. Manner of disposition shall be through:
 Sealed bidding, which should be participated in by at least three
bidders.
 Negotiated Sale in case of failure in bidding for three (3)
consecutive times.

Article VI. Internal Control Testing

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Section 1. Internal control testing involves the assessment of the effectiveness of the
Cooperative’s suite of controls, concentrating on such areas as proper authorization, the
safeguarding of assets, and the segregation of duties. This can involve an array of tests
conducted on a sampling of transactions to determine the degree of control effectiveness.
Comprises the plan of organization and all coordinated methods and measures adopted within a
business to safeguard its assets, check the accuracy and reliability of its accounting data,
promote operational efficiency and encourage adherence to prescribed managerial policies.

Audit procedures are designed to evaluate the effectiveness of the design and operation of
internal controls. Internal control is based on the following premises:
a. Ensure that the business of the Coop is conducted in a prudent manner in accordance
with policies and strategies established by the board of directors;
b. Ensure that transactions are only entered into with appropriate authority
c. Ensure that assets are safeguarded and liabilities controlled;
d. Ensure that accounting and other records provide complete accurate and timely
information

a. Ensure that management is able to identify, assess, manage and control the risks of the
business.

The areas of internal control to be looked at are:

a. Organizational structures (definitions of duties and responsibilities, discretionary limits
for loan approval, and decision-making procedures)
b. Accounting procedures (reconciliation of account, control lists, periodic trial balances,
etc.)
c. The “four eyes” principles (segregation of various functions, cross-checking, dual control
of assets, double signatures, etc).
d. Physical control over assets and investments
The following minimum internal control standards should be observed:

Accounting Records:
- Accounting records should satisfy the needs of a particular financial intermediary.
- These should contain sufficient details to meet management and supervisory needs and
should be properly and currently posted.

Division of Duties and Responsibilities:

- Duties must be segregated to allow the proper functioning of automatic checks.
- No one person should be in complete charge of business transactions
- Operating instructions for each position should be reduced in writing

Signing Authorities:
- Different levels of officers to sign for and in behalf of the institution should be approved
by the Board of Directors
- Extent of authority should be clearly defined

Dual Control:
- Routine of each transaction should be so designed that at least two or more individuals
are involved in the completion of every transaction

Independent Balancing:

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 - This means that someone runs and balances records that are normally posted by
another person, or that someone counts held by another person

Joint Custody:
- Two or more persons are involved in the safekeeping of physical properties including
documents.

Physical Control:
- Safeguarding and housing of assets demand adequate physical protection. Physical
control includes the vault gate keys of equipment, alarms and other physical devices to
protect the premises.

Number Control:
- Sequence number controls incorporated in the accounting system serves two purposed:
(a) to control processing and (b) to identify individual transactions

Knowledge of Outside Activities of Employees:

- Periodic submission of statement of assets and liabilities ascertains the financial status
of officers and employees
- Any immediate or sudden change in appearance or habits of officers and employees
may be indicative of misconduct, particularly when the change reflect spending habits
that go beyond the limit of their income

Rotation of Duties
6. Rotation reduces the opportunity for fraud points to the adaptability of an employee and
often results in new ideas for the organization

Direct Verification
7. This pertains to confirmation of accounts or records by means of direct correspondence
with the coop’s customers

Section 2. Custodianship

a. The Treasurer or any employee authorized to receive cash is responsible to the

cooperative for all cash received and subsequent deposits to the bank.
b. A pre-numbered Official Receipt (OR) duly signed by the Treasurer or any employee
authorized to receive cash, is issued to acknowledge receipt of cash.
c. The Official Receipt (OR) is issued in two copies. The original copy goes to the
d. payor/member and the duplicate copy shall be the basis of the accounting personnel in
recording the cash received in the Cash Receipts Book.
e. The OR is recorded in the Cash Receipt Book in numerical sequence checked by the
f. Accountant and reviewed by the Audit Committee.
g. All cash received during the day should be deposited intact immediately or on the
following day.
h. The total amount of cash receipts acknowledged in the OR is compared against the
validated bank deposit slip.
i. All copies of cancelled ORs are stapled, preserved and retained in the booklet and
marked “CANCELLED”.

Section 3. Bonding of Accountable Employees

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The treasurer or any employee authorized by the BOD to handle cash and or other
accountabilities should be bonded. The bonds should be in the amount adequate to cover
possible losses or shortages that may arise in the handling of cash and/or other accountabilities.

Section 4. Payments
a. All disbursements shall be paid by check except those, which are paid from the Petty
Cash.
b. Each check shall be supported by a pre-numbered Cash Disbursement Voucher (CDV)
with the appropriate supporting documents.
c. The Audit Committee reviews and checks the validity of the CDV and its supporting
documents.
d. The General Manager approves all CDV’s covering disbursements.
e. All copies of CDV and its supporting documents shall be stamped “PAID” indicating
therein the date of payments.
f. The payee/authorized representative shall acknowledge the receipt of payment or issue
Official Receipt or other evidence in exchange of the payment.

Section 5. Control of Checks

a. All checks are issued and recorded in numerical sequence in the Cash Disbursement
Book.
b. All checks are prepared based on the properly approved CDVs, duly verified by the
Accountant, reviewed by Audit Committee, signed and countersigned by at least two
authorized signatories.
c. The check is always made payable to a specific person or entity and must be crossed
(two parallel lines at the left side of the check).
d. Unused check booklets will be under the custody of the Treasurer (vault). Under no
circumstance shall check booklets be made available to any unauthorized person.
e. Voided, spoiled and cancelled checks shall be marked “CANCELLED” and attached to
the corresponding checkbook for subsequent inspection and reconciliation.
f. Signing or countersigning of blank checks in advance is strictly prohibited.
g. All checks issued should be recorded in the logbook and upon release the payee shall
be required to acknowledge receipt thereof.

Section 6. Bank Reconciliation

a. To determine the accuracy of the cash in bank account balance, a reconciliation of the
book and bank balances shall be done monthly by the accounting personnel.
b. The Accountant reviews the bank reconciliation statement and evaluates the reconciling
items.
c. Reconciling items should be recorded in the books.
d. The Accountant shall immediately communicate posting errors committed by the bank.

Section 7. Revolving Fund

a. A Revolving Fund (RF) in the amount approved by the Board shall set up to take care of
minor disbursements usually consisting of day-to-day expenses.
b. The fund is maintained on an imprest system. At any given time, the total cash on hand
and the unreplenished disbursement shall be equal to the amount of the fund.
c. The fund is in the custody of the Treasurer or any designate custodian. Access to and
responsibility for the fund is limited to the custodian.

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 d. The Treasurer ensures that the daily cash balance tallies with the cashbook, verified by
the accountant.
e. The fund is kept in safe.
f. In case of shortage, the custodian is liable and responsible for restitution without
prejudice to the filing of appropriate action.

Section 8. Managerial Policies

a. CPCEMPC has a total of SIX (6) full-time staff who are responsible for the
implementation of a smooth flow of the business operation of the cooperative.
b. The imprest cash system has been practiced on cash receipts (all receipts/collections
are deposited in the bank intact within the day of receipt) and petty cash fund.
c. Bank signatories are always a combination of a management staff and duly authorized
BOD member.
d. The major compatible functions are segregated, such as Authorization, Execution,
Recording and Custodianship. They are implemented in the following manners:
i. Authorization – is done by the GM within the plans and policies
formulated by the BOD, whom the GM is directly accountable. On urgent
cases wherein it is not within the authority of the GM the Board confirms
during its monthly meeting.
ii. Execution – refers to implementation of plans and programs based on
prescribed policies and guidelines. The GM is directly responsible in the
carrying out of the plans and programs with the full support of its staff.
iii. Recording – refers to timely and accurate recording of all daily
cooperative transactions. The staff prepares the Cash Voucher with the
Check based on duly approved Vouchers and other required documents.
It is then checked by the Accountant who endorses it to the Audit
Committee for final review and recommendation for approval by the GM.
Once approved and signed by one of the co-check signatories (BOD
member) is brought to the Treasurer for the final check signature. The
accountant records all transactions and responsible for bank
reconciliation and generation of financial statements. Accounting method
is in accordance with GAAP/IAS, Coop Code of the Philippines and
CPCEMPC By-laws. Like any cooperative, CPCEMPC is audited by the
elected Audit Committee and external auditor accredited by CDA.
iv. Custodianship – CPCPEMPC has a vault/safe for its documents and
records. Accountable officers and staff are bonded adequately. Cash held
by the cashier daily is only the petty cash fund of P10,000 and all cash
received are deposited in-tact within the day of receipt. Petty cash fund is
replenished upon reaching the 75% level of utilization. Accountable forms
and documents are physically controlled.

The above major functions should be segregated as a measure against connivance. There is no
amount of internal control against connivance or collusion but with value-based leadership and
management which CPCEMPC always has and will have in the future, connivance can never
exist in this prestigious cooperative.

Article VI. Governance and Management Audit (Performance Audit)

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Section 1. The conduct of Governance and Management Audit is necessary in order to
establish compliance of the Cooperative to the governance and management practices
standards of the Cooperative Development Authority.

Section 2. The Audit Committee shall use the prescribed Governance and Management Audit
Working Paper by the CDA as basis in analyzing/assessing the performance of the Cooperative.

Section 3. As a management tool, this Audit will help to identify problem areas in its
governance and management practices.

Section 4. The Audit Committee in coordination with the responsible person/s in the key units of
the Cooperative signifying the presence of documents being asked shall conduct the audit. The
CDA form should be duly accomplished including the remarks portion.

Section 5. The results of the Performance Audit Report shall be submitted to the Board of
Directors on or before March 30, for their resolution for Acceptance and submission to the CDA.

Section 5. The Governance and Management Audit Report shall at least include the following
parts:
a. Basic Information
b. Executive Summary
c. Objectives and Scope of the Audit
d. Observation/Findings
e. Recommendation and Conclusion

Section 6. The Governance and Management Audit Report shall be submitted by the
Cooperative not later than April 15 of every calendar year.

Article VIII. Social Audit

Section1. Social Audit is the process whereby a cooperative can account for its social
performance, report on and improve that performance. It assesses the social impact and the
ethical performance of the cooperative in relation to its vision, mission, goals and Code of Social
Responsibility. It is also a process to assess the cooperative’s contribution for the upliftment of
the status not only to its members’ economic needs but also social needs of the community it
operates.

Section 2. In the conduct of audit, the following key areas shall be looked into: 
a. Vision, Mission, Core Values and Social Goals;
b. Policies and Guidelines on Social Development;
c. Social Development Program for the Cooperative and the Community; and
d. Utilization of Community Development Fund.

The Auditor shall use the Social Audit Working Document from the CDA to determine the
cooperative’s social performance and to serve as basis for writing a report.

Section 3. The tool to be used is in the form of survey which will be administered during the first
quarter of the following year. Random shall be the manner of sampling with the sample size
depending on the total number of members.

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Section 4. The Social Audit Report shall consist of narrative report on the
comments/observations, including recommendations, and the accomplished Social Audit
Working Document which shall be attached to the Cooperative Annual Progress Report
(CAPR). The Report shall be typewritten or printed in a form prescribed by the Authority and
prepared by cooperative’s audit committee. 

Section 5. The result of the Audit shall be presented to the Board of Directors during their
meeting. The Chairperson and the General Manager shall conform to the audit report.

Article IX. Annual Financial Audit

Section 1. The board of directors shall engage the services of a Certified Public
Accountant/Public Accountant/ for the purpose of auditing the financial records and accounts of
the cooperative at the end of each fiscal year.

Section 2. The engaged accountant shall be instructed to prepare an/Unqualified Opinion

/Qualified Opinion/ audit of the financial records. The final prepared audit shall include, but not
be limited to: a balance sheet, statement of operations, source and use of funds, and the
necessary supplementary schedules.

Section 3. Upon completion of the audit, a full report shall be presented to a majority of the
board in a official directors’ meeting. The accountant’s reports must be approved or rejected by
official board action, and made a part of the board’s minutes.

Article X. Related Forms

Monthly Committee Report Form – to be used by all committees for their monthly report to be
submitted every second Friday of the month

Cash Count Form – to be used during the monthly cash counts.

Inventory Tagging Form – tag to be attached to furniture, fixtures and equipment, when
applicable

Article XI. Final Provisions

Section 1. Level of Approval

This policy shall take effect on ___________ in the virtue of General Assembly Resolution #
________ dated _________ and shall repeal all existing similar policies.

Section 2. Amendments

This policy can be amended by the General Assembly. Amendments to this policy may be
adopted by majority (50%+1) votes of all members with voting rights present during the meeting.

Section 3. Effectivity

The amendment/s shall take effect upon approval by the General Assembly.

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