Governance Health Check

How healthy is governance in your Cooperative?

Name organisation:
Date/Year:
contact person:

This tool is based on the Financial Health Check and has been adapted by Agriterra
© 2019 Agriterra

Agriterra professionalises ambitious farmer cooperatives and organisations worldwide. Cooperative expertise and peer-to-peer advice
from the Dutch agri & food top sector are key principles; advice, training and exchange are the key methodologies.

About Agriterra
Agriterra is dedicated to strengthen the governance of the Farmer Organisations it cooperates with. We aim to improve their
accountability towards their members and the outside world. The focus is on ensuring that the members of these organisations receive
high quality services for the best possible price. That way, Farmer Organisations themselves become the drivers of development and
will be acknowledged as transparent and reliable partners in the formulation and implementation of (inter)national development
strategies and programmes.
What can Agriterra’s Governance Health Check do?

The Governance Health Check can help you assess the health of your organisation’s governance. It is designed as a self assessment
tool so that you can identify the areas where you need to improve.

The Governance Health Check is a set of statements of good practice. They cover all the key areas of cooperative governance. For each
statement, you need to consider how well your own organisation is in line with good practice. By the end of the Governance Health
Check you will be able to tell if the governance in your organisation is healthy.

You may like to run the Governance Health Check again after a year, to assess and monitor your progress. The Governance Health
Check consists of two parts which should be completed both.

What can the Governance Health Check NOT do?

Every organisation is different and governance must reflect this. A ‘one size fits all’ approach cannot work. But the key aspects of good
practice are the same for most organisations most of the time. The Governance Health Check focuses on those key aspects. They are
the foundation stones of good practice.

The Governance Health Check only provides a general indication of the health of your governance. It is not an exhaustive list of all
aspects of governance. It does not describe a standard set of procedures which are relevant in every situation.

It is not appropriate to set a score as a ‘pass rate’ for partner assessment. It is not always appropriate to compare scores of two
organisations and make conclusions about differences between them.

Who is the Governance Health Check designed for?

The Governance Health Check has been designed for agricultural cooperatives.

How to use the Health Check

The Governance Health Check can be run by any member of staff or a board member. You do not need specialist governance skills to
complete it. It includes explanations of each section and a glossary of the terms used.

The most useful way to use this tool is to complete it in a workshop meeting, with input from the board of directors, supervisory board,
the Senior Management Team, staff members, and members. Do not ask the questions literally.

Taking each statement of best practice in turn, discuss whether it is true, or is in place, or happens in your organisation. Agree on a
score based on what actually happens, not what is supposed to happen, or what is documented. The scores available are 5,4,1 and 0
only.

Explanation Score
Our practice is totally in accordance with the statement 5
Close to 5, but not quite there 4
Close to 0, but not that poor 1
This is not in place, is not true, or does not happen 0

Clearly a degree of judgement is required to decide between ‘4’ or ‘1’, and it is not an exact science.
If you cannot give yourselves a clear cut 5 or 0, you need to decide which one you are closer to.

Often the real value in this exercise is not the score itself so much as the conversations and the details of issues
discussed. Make good notes and keep a list of action points as they come up.

Write down the score for each statement. Add up the total for each section and transfer it to page 9 to get a total. Then interpret the
score using the guidance given. If you don’t understand the question or when it is not applicable to your organisation, we recommend to
score a 2,5 so it won't affect the average score.

Comments

Agriterra welcomes and appreciates comments on their tools very much!

Please send any comments or suggestions you might have on the Health Check to trainings@agriterra.org
Thank you!

© Agriterra
Willemsplein 42, 6811 KD Arnhem, The Netherlands

T +31 26 44 55 445
agriterra@agriterra.org
www.agriterra.org
Foundation Agriterra Chamber of Commerce 41048542
1 - Structure of governing bodies % max
1.1 General meetings are held at least annually 4 80 100
1.2 The Board prepares and submits the annual report to the general meeting 5 100 100
1.3 Members have the right to call for an additional members meeting (and the procedure is described in the bylaws) 1 20 100
1.4 The audited annual financial statement is produced before the AGM 4 80 100
1.5 The audited annual financial statement is available and discussed at the AGM 1 20 100
1.6 In every AGM the approval of audited financial statements by an independent auditor is a subject 1 20 100
1.7 Board members are fairly elected by the members (through the AGM) 5 100 100
1.8 Board members are elected in rotation, to avoid a situation in which all board memebrs are new 5 100 100
1.9 A Supervisory Board/Audit Committee is fairly elected by the members (through the AGM) 5 100 100
The Supervisory Board has the technical knowledge required to review the financials records and to test compliance with administrative
1.10 0 0 100
procedures
1.11 The Supervisory Board presents its findings to the members of the AGM 1 20 100
1.12 The external auditor is appointed by the members each year or according to by-laws/ constitution 0 0 100
The external auditor presents a management letter to the governing body. Listing his recommendations regarding weaknesses in internal
1.13 0 0 100
controls/procedures
1.14 The external auditor presents his findings to the members at the AGM 1 20 100
In his most recent report, the external auditor, provided the organisation with an unqualified opinion (e.g. the financial statements were
1.15 0 0 100
approved)
1.16 There are special committees on specific subjects within the cooperative structure (e.g. finance) 0 0 100
1.17 There is a members' council (or a delegation system) 0 0 100

Total score for Section 1 33 39% 100

Explanation
Good governance is critical to be a successful cooperative. For example, it is important that managerial matters are overseen by a group of people who are not involved in the day to
day running of the organisation. In order to assure good governance, different governing bodies form the internal governance structure of the cooperative.
The highest authority in a cooperative is the Annual General Meeting of the members (AGM). The AGM elects a Governing Body that oversees a Chief Executive Offier/manager and
Management team. The AGM also elects board members and supervisory board who oversees the Board. This also applies to cooperatives where the board are effectively a
management committee (without other staff to do the work).
The annual audit by the external auditors plays a key role in that they are professionally qualified and totally independent. They should be appointed by and report directly to the
members (ideally in person at the AGM). It is good practice to change auditors regularly (ar least every 5 years) even if you are happy with their services.
Organisations should also share financial information with members to increase accountability and build confidence. An annual external audit verifies the accuracy of the financial
statements. Accountability: the board has an obligation to report, explain and be
answerable for the consequences of decions it has made on behalf of the community it represents. The decion-makers are accountable to the members and stakeholders.

Recommendations
Remarks
 2 - Roles & responsibilities governing bodies % max
2.1 The Board can explain their duties and their responsibilities to members (can they explain it to us?) 1 20 100
2.2 The Board consistently sets, reviews and modifies organisational policies, if needed (written proof?) 0 0 100
2.3 The Board regularly (at least every year) identifies and evaluates financial and other risks and this is registered (written proof?) 4 80 100
2.4 The Board hires, monitors and evaluates management in accordance with the co-operative’s policies, plans and job descriptions 1 20 100
2.5 The Board prepares and submits the annual report to the general meeting 4 80 100
2.6 There is a clear distinction between the roles of management and board 4 80 100
2.7 The Board provides a written job description for the General Manager 0 0 100
There is an explicit delineation of authority from Board to Management (written, specifying the rules for reporting and approval to ensure clarity and
2.8 0 0 100
continuity.)
2.9 Management reports describe activities performed and results achieved, including financial results, since the last meeting 4 80 100
After the Board has approved the operations plan submitted by Management, it then focusses on strategic issues and leave the day-to-day operations
2.10 1 20 100
to Management
2.11 Management reports regularly (at least quarterly) to the Board 4 80 100
2.12 The agenda of meetings between board and management is available 5 100 100
2.13 The minutes of meetings between board and management are available 5 100 100
2.14 There are action lists/to do lists available for meetings between board and management 1 20 100
2.15 The General Manager has been appointed by the Governing Body, following an independent job application procedure 1 20 100
2.16 The General Manager understands his/her role (can he/she explain it to us?) 4 80 100
2.17 Members of the Supervisory Board are not directly involved in the day to day running of the organisation 1 20 100
2.18 Supervisory board meets regularly (at least 4 times per year) 1 20 100
2.19 The supervisory board has a budget enabling the body to operate independently 0 0 100

Total score for Section 2 41 43% 100

Explanation

There is often confusion about roles and responsibilities of the board and management, and also between the different members of the board and committees (board chair, vice chair,
treasurer, secretary, supervisory committee, etc.). Formal duties and responsibilities are documented in statutes or by-laws. It is important that board members develop a good
understanding of their roles and responsibilities within the organisation in order to perform their function well. The board is the thinking “head” of the organisation, and within the
cooperative structure, the board plays a very important independent role of oversight and strategic guidance to the organisation.

Can each board member explain what his or her responsibilities are? Do they know the roles and responsibilities of the board as a whole?

The duties and responsibilities of the Board are broad, but they do not include managing operations on a day-today basis. (This is the responsibility of the General Manager or CEO).
As elected members, the Board and Audit Committee have a responsibility to oversee the FO and therefore they need to review financial information as well. Managers need up-to-date
figures to monitor activities and make decisions.

Recommendations

687674487.xlsx Section 2
 Remarks

687674487.xlsx Section 2
 3 - Relationship Member - Cooperative % max
3.1 All regions/ organisations (primary cooperatives) are represented in the board 0 0 100
3.2 The composition of the board represents the membership (men-women, age etc.) 4 80 100
Besides the AGM, there are other means of communication with members (e.g. special meetings, newsletters, surveys, notice boards,
3.3 5 100 100
suggestion boxes, etc.)
3.4 Members are satisfied with the provision of information (quantity of information) 4 80 100
3.5 Members are satisfied with the provision of information (frequency of communication) 4 80 100
3.6 The frequency of communication with members is at least 5 times a year. 4 80 100
3.7 Board members communicate to members about what the Board is doing so that members are aware 1 20 100
Materials such as agendas, minutes, financial records and reports made available to members in a timely way, including ahead of time
3.8 4 80 100
for the AGM
The organisation carries out orientation sessions where members are informed of their rights and responsibilities and the basic business
3.9 1 20 100
operations of their cooperative (training cooperative principles).
3.10 The organisation has a membership registration/database (and is up to date) 1 20 100
3.11 Membership is open to all members of community who are eligible to join (non-discriminatory & fairly applied, incl. women/youth 1 20 100
3.12 The number of members is growing 4 80 100
3.13 The co-operative has equal voting rights for members: one member, one vote 5 100 100
3.14 The percentage of woman in the board is representative in relation to total number of female members 4 80 100
3.15 The participation of women in activities and trainings is in accordance with the % of female members 4 80 100
3.16 The % of young members, < 35 years, in the board is representative in relation to total number of young members 0 0 100
3.17 The participation of young members in activities and trainings is in accordance with the % of young members 0 0 100
3.18 The percentage of members attending the AGM is high (<20% = 0 | >40% = 1 | >60% = 4 | > 80% = 5) 1 20 100
3.19 The percentage of paying members is high (<20% = 0 | >40% = 1 | >60% = 4 | > 80% = 5) 1 20 100
3.20 The board is composed of elected members only 5 100 100
3.21 The cooperative uses collective means of communication (e.g. SMS messages) to communicate with members 4 80 100
3.22 Management and the board are approachable by members 4 80 100
3.23 There is a way for members to provide regular feedback about products and services 4 80 100
3.24 The board always represents the interests and concerns of members in the decision-making process 4 80 100
3.25 The board engages regularly with members (how often?) 1 20 100
3.26 The organisation carries out assessments of members’ needs (for example by questionnaires) 0 0 100

Total score for Section 3 70 54% 100

687674487.xlsx Section 3
 Explanation
The relationship between the cooperative and its members is crucial. it's a farmer-led business meaning that the cooperative is serving the economic needs of its members. there are 3 different relationships bet
cooperative:
1. User-Control:
Members vote on a democratic or proportional basis and govern their cooperative
farmers who control the cooperative are those who use it
2. User-Owner:
Members provide capital to finance their cooperative
farmers who own and finance the cooperative are those that use it
3. User-Benefit:
Cooperative provides needed services and net income is distributed to members as refunds on a cost basis
the cooperative’s sole purpose is: to provide and distribute benefits to users on the basis of their use
the board plays an important role in represting of and communication with members. Concepts like “accountability to members”, “members’ satisfaction” and “memers’ commitment” are crucial components in m
directly related to the governance style and to communication and transparency towards the members

Recommendations

687674487.xlsx Section 3
 Remarks

687674487.xlsx Section 3
-led business meaning that the cooperative is serving the economic needs of its members. there are 3 different relationships between member and

s as refunds on a cost basis

n the basis of their use
ers. Concepts like “accountability to members”, “members’ satisfaction” and “memers’ commitment” are crucial components in member organisations and
owards the members

687674487.xlsx Section 3
4 - Recruitment, development & succession planning % max Remarks
4.1 Board members are being trained to do their job as a board member as good as possible (at least 1 training per year) 5 100 100
4.2 The board has received training about board functioning 4 80 100
4.3 There is a written profile/job description describing required knowledge and competences for board members and supervisory board me 0 0 100
4.4 The performance of the chairman and board members is evaluated regularly (by supervisory board or by themselves). 1 20 100
4.5 The chairman and/or board members get a remuneration (allowance) (if yes, score is 5) 4 80 100
4.6 There is an internal training (in house training) for board members 0 0 100
4.7 There is an introduction training for new board members to ensure familiarity with regulations, bylaws and policies 0 0 100
4.8 For board members, there is an assessment of possible gaps in skills and plans to resolve them (personal development plan) 1 20 100
4.9 The board has put down on paper plans for succession and the skills managers and directors should have in the future 0 0 100
4.10 There is a maximum period for being a board member (term) 5 100 100
There is a platform (e.g. youth council) in which young potential new leaders can get experienced and prepared to get a role in a
4.11 0 0 100
governing body

Total score for Section 4 20 36% 100

Explanation

Background and skills of board members are important. Directors need to have knowledge and skills which will help them meet the needs of the organisation. Sometimes this is
described as “key performance and knowledge areas”. Ideally, board directors will have some knowledge and experience in the cooperative’s area of business, though they do not
need to be experts. They can still be effective directors if they have the background and skills to acquire that knowledge. Effective directors also have to be team players with
personality traits, attitudes and interpersonal skills that will help the board fulfil its roles and responsibilities.

Because board members play such an important role in the successful operation of the business and as representatives of the interests of members, it is important that board
members receive some formal training. How many have participated? How often is board training available?
An effective Board is aware of its own strengths and weaknesses and tries always to improve its performance. Evaluation tools can be used for individual self-assessment, peer
assessment,assessment of the Board chairperson, and the Board as a whole. Individual self-assessment and Board self-assessment are the most useful. They should be done every
one or two years.

Recommendations
 5 - Transparency and ethics % max
5.1 There is a written regulation how to deal with conflict of interest of board members (e.g. a position in another organisation) 0 0 100
5.2 The cooperative is autonomous, e.g. independent from ties with political parties 4 80 100
5.3 The board ensures that sensitive information is kept in a professional /confidential manner (member/financial information) 0 0 100
5.4 The organisation’s board and management have developed written guidelines for ethical behaviour (This can also be called a code of conduct.) 0 0 100
5.5 These guidelines or code of conduct are implemented and enforced 0 0 100
5.6 The organisation has drafted and implemented a CSR-strategy (Corporate Social Responsibility) 1 20 100
5.7 The annual budget and/or work plan includes social and community development 0 0 100
5.8 Board members deliver all their produce to the cooperative 1 20 100
Total score for Section 5 6 15% 100

Explanation
Board members occupy a position of trust and are elected to act on behalf of members. A conflict of interest occurs if a Board member has interests or obligations that might
interfere with the exercise of that responsibility or when a board member must make a decision from which he or she stands to benefit personally. For example, the organisation
may be thinking of acquiring a new building and one of the sites being considered is owned by a Director. Another example would be if one of the candidates for the General
Manager’s position is a relative of a Director. If there is a conflict of interest, or even a possibility of one, the board member must declare it and not be involved in making the
decision. Best practice is that there is a written conflict of interest policy/code of ethics which is followed.
A code of conduct or code of ethics is a set of rules governing the behaviour of members of an organisation. There are many different variations on codes of conduct and
guidelines. Many start with a statement of values: honesty, fairness, confidentiality, acting with due care, law-abiding, etc. For some organisations, this is enough. Others will
produce specific statements about what these values look like in practice – e.g., they will prescribe specific behaviour. Some examples of where rules of behaviour might apply are
discrimination and harassment, gifts and hospitality, and declaration of a conflict of interest. Codes of ethics for businesses may stress that the organisation will act as a
responsible corporate citizen – pay taxes; neither demand, accept nor pay bribes; comply with the legal framework for its sector, etc. An obvious one for co-operatives is that
directors should not engage in any other business or activity which competes directly with the co-operative or the services it offers. Another is a commitment to protect member
confidentiality. The code of conduct should also include an enforcement procedure.

The Board is responsible for ensuring that appropriate internal control and management information systems are in place. How does the Board ensure that:
- The integrity of data is verified?
- Accounting principles are complied with? - Member information is kept
confidential? The organisation’s board and management
understand that transparent and ethical governance is very important. They can demonstrate this by their willingness to devote time and effort to setting in place a written code of
conduct or guidelines for ethical behaviour. What strategies has the Board used to ensure that the code of conduct
is implemented and enforced?

Organisations should also share financial information with members to increase accountability and build confidence. An annual external audit verifies the accuracy of the financial
statements.

The highest authority in a cooperative are the members (AGM). Sharing financial information with members is often overlooked because of the pressure to report
to donors and because there is a perception that they may not understand the figures. Sharing financial results with members in a way that they can understand has an
extraordinary impact on the organisation’s relevance and effectiveness. It also empowers communities and curbs fraud and exploitation.

687674487.xlsx Section 5
 Remarks

687674487.xlsx Section 5
 6 - Strategic vision - forward looking % max
6.1 The Board establishes strategic and financial objectives every three years 0 0 100
6.2 There is a SMART strategic plan 0 0 100
6.3 The strategic plan is broke down in clear indicators 0 0 100
6.4 The strategic plan is jointly developed by board and management 0 0 100
6.5 The mission and vision of the cooperative is clear to all members 0 0 100
6.6 An approach for human resources development is elaborated in the strategic plan 0 0 100
6.7 The cooperative regularly (if needed) makes an analysis of its competitors 1 20 100
6.8 Members and staff are consulted about the strategic plan 0 0 100
6.9 Members and staff participate in the strategic planning process 0 0 100
6.10 The strategic plan is monitored with the participation/ involvement of members 0 0 100
6.11 Implementation of the strategic plan is regularly monitored and the plan is reviewed if necessary 0 0 100
6.12 Implementation of the strategic plan is evaluated at the end of implementation period 0 0 100

Total score for Section 6 1 2% 100

Explanation

A statement of vision, mission and goals, leading to a strategic plan, sets out guiding principles for the way in which the organisation will conduct its business. Organisations
should have statements of Vision, Mission and Goals. The quality of the vision and mission statement and goals should be consistent with cooperative values.

To achieve the mission, there has to be a plan – known as a strategic plan or strategic business plan – which sets out strategic goals. Goals are set in response to the
question,“What will the organisation accomplish in the next 1-5 years?”
The Strategic Plan (or Strategic Business Plan) needs to be in writing in order to have something to measure against and adjust as
required. It is also valuable to have both the Board and Management involved in developing the Plan in order to ensure that all players support the direction and ambition of the
co-operative.

SMART means:
-Specific
-Measurable
-Achievable
-Realistic
-Time Bound

Recommendations

687674487.xlsx Section 6
 Remarks

687674487.xlsx Section 6
Interpreting your Score
Section Your Score % High Risk Medium Risk Low Risk %

1 - Structure of governing bodies 33 39 0 - 30 31 - 65 66 - 85 100

2 - Roles & responsibilities governing bodies 41 43 0 - 35 36 - 65 66 - 95 100

3 - Relationship Member - Cooperative 70 54 0 - 45 46 - 90 91 - 130 100

4 - Recruitment, development & succession planning 20 36 0 - 20 21 - 41 41 - 55 100

5 - Transparency and ethics 6 15 0 - 15 16 - 30 31 - 40 100

6 - Strategic vision - forward looking 1 2 0 - 20 21 - 40 41 - 60 100

Total Score 171 37 0 - 170 171 - 335 336 - 465 100

Your score is over 336

Well done! Your governance is in good shape. The risks of not being able to complete your work because of governance problems are low. But do also consider
the risk assessment in each section: effective governance requires strength in all six areas. Use this opportunity to make improvements and further reduce your
risks.

Your score is between 171 and 335

Not bad! There is clearly some good governance practice in place, but still plenty of room for improvement. There is a risk that governance problems will prevent
you from doing your work. Low scoring sections require immediate attention from managers.

Your score is 170 or below

You do have serious problems. Your governance is not in good health. But use this as an opportunity to take action and improve! Managers and Board members
should meet urgently to discuss how the situation can be improved. You should consider calling in assistance as soon as possible. This must be dealt with right
now.

Governance Health
Organisation

1 - Structure of governing bodies

100

6 - Strategic vision - forward looking 2 - Roles & responsibilities governing bodies

50

5 - Transparency and ethics 3 - Relationship Member - Cooperative

4 - Recruitment, development & succession planning

Glossary
The board has an oblogation to report, explain and be answerable for the consequences of
Accountable decions it has made on behalf of the community it represents.
Assembly of the members of the organisaiont and the highest decision making authority of the
Annual General Meeting (AGM) FO
a group
Board ofof people, directly
directors. elected
The Board by thefrom
is elected AGM, responsible
among for overseeing
the membership by thethemembership.
administrative
The
Audit committee procedures and internall
Board is responsible, controls
on behalf of of
thethe FO
members, for providing overall direction and oversight of
the organization's activities, and is responsible and accountable to the membership for
Board decisions and results.

Board member A member of an FO’s governing body, who shares overall responsibility for the FO’s work.
all men and women have opportunities to improve or maintain their well-being, particularly the
equitable and inclusive most vulnerable should have opportunities to participate in the process
A review of the year-end financial statements carried out by a professionally qualified and
External audit legally registered auditor resulting in an opinion about whether they give a true and fair view.

FO Farmer Organisation
Executive council and / or board of directors consisting of elected members (by the AGM) who
Governing Body jointly oversee and are responsible for the activities of the FO
A chief Execitive Director and/ or team of Senior Managers, appointed by the Governinig Body,
Management responsible for running the daily activities of the FO
all men and women should have a voice in decion-making, either directly or through legitimate
participatory intermediaite institutions that represent their intention.
Board should always try to serve the needs of the entire community and all stakeholders while
responsive balancing competing interests in a timely, appropriate ans responsive manner.

Rule of law legal frameworks should be fair

The board andismanagement
Transparancy haveflow
built on the free a broad and long-term
of information. perspective
Processes, on good
institutions governance
and and
information
strategic vision human
are development,
directly accessiblealong withconcerned
to those a sense ofwith
what is needed
them, for such
and enough development.
information is provided to
understand and monitor them. People should be able to follow and understand the decision-
Transparant making process.
 Plan of approach

Identified challenge/Key reult area Activity Timeline By who Performance indicator

1 - Structure of governing bodies

*
*
*
2 - Roles & responsibilities governing bodies

*
*
*
4 - Recruitment, development & succession planning

*
*
*
3 - Relationship Member - Cooperative

*
*
*
5 - Transparency and ethics

*
*
*
6 - Strategic vision - forward looking

*
*
*

687674487.xlsx Action Plan

Bylaws
The bylaws, describing the regulations within the cooperative, are available and accessible for all members
The bylaws are in line with the cooperative legislation (Co-operative Societies Act)
The trade of the board members with the cooperative is regulated in the bylaws
Board elections are held according to constitution (bylaws)

HR - staff / business development

The organisation has the appropriate number of staff to accomplish the day-to-day activities (i.e. the quantity a
needs to be done)
Staff has the skills and knowledge necessary to achieve the goals and objectives of the organisation
Staff receives sufficient remuneration for the work that they do (The organisation is able to retain staff through
The work which is done by management and staff has an obvious link to the action plans
Staff members offer quality and knowledgeable service and understand the importance of engaging with memb