EXECUTIVE SUMMARY

A. Introduction
The Cooperative Development Authority (CDA) was created by virtue of
Republic Act (RA) 6939 which was approved by Congress on March 10, 1990. This
was amended by RA 9520 on December 16, 2008 also known as the Philippine
Cooperative Code of 2008. Upon creation, CDA was under the supervision by the
Office of the President but was transferred to the Department of Finance by virtue of
Executive Order 332 dated July 16, 2004.
Its main objective is to promote the viability and growth of cooperatives as
instruments of equity, social justice and economic development.
A Board of Administrators, consisting of the Chairman and six members,
governs the CDA. They were appointed by the President from nominations of the
cooperative sector. Two members each come from cooperative sectors of Luzon,
Visayas and Mindanao. As of year-end, there were two vacancies in the Board of
Administrators.
The authorized plantilla position of CDA is 736, filled up was 560 with a
vacant position of 176 as of December 31, 2012.

B. Financial Highlights
A comparative analysis of the financial condition and results of operation
and the sources and application of funds for the years 2012 and 2011 is presented
below:
Particular
Financial Condition
Assets
Liabilities
Government Equity
Result of Operation
Total Income
Total Expense
Excess of Income over Expense

2012

2011

Increase/
(Decrease)

1,464,531,636.05 1,556,888,018.04 (92,356,381.99)

890,138,212.99 1,049,870,019.73 (159,731,806.74)
574,393,423.06
507,017,998.31
67,375,424.75
439,148,149.55
348,289,052.16
90,859,097.39

394,769,678.13
342,405,633.17
52,364,044.96

44,378,471.42
5,883,418.99
38,495,052.43

481,812,011.07
0.00
434,993,998.00
46,818,013.07

(17,455,634..03)
18,045,168.07
(40,768,418.65)
41,357,952.69

Sources and Application of Funds

Allotments Received
Continuing Appropriation
Obligations Incurred
Unexpended Balance

464,356,377.04
18,045,168.07
394,225,579.35
88,175,965.76

The CDA Statement of Allotments, Obligations and Balances for CY 2012 is

attached as Annex A.

C. Operational Highlights
The CDA accomplished the following activities during the year:
a. Registered 1,223 new cooperatives;
b. Enlisted 2,366,375 new members of cooperatives across the country;
c. Registered 6,719 amendments to Articles of Cooperation and By-laws of
cooperatives;
d. Issued 368 Certificates of Authority to cooperative branches and satellites;
e. Issued Certificates of Recognition to 23 laboratory cooperatives;
f. Supervised and Monitored accomplishments of 59,295 cooperatives;
g. Cancelled 3,673 cooperatives;
h. Conducted Mediation and conciliation assistance to 63 cooperatives;
i. Issued accreditation to 18 Training Providers, 15 cooperative External
Auditors and 16 Coop Mediators;
j. CDA information System Strategic Plan for CY 2013-2015 was approved;
k. Coveted the ISO 9001:2008 Certificate for CO and Manila Extension
Office (EO).

D. Scope of Audit
The audit covered the accounts and operations of the CDA for CY 2012. It
was aimed to ascertain the propriety of the financial transactions and determine the
fairness of the presentation of the financial statements and to ascertain compliance
with laws, rules and regulations.

E. Auditors Report on the Financial Statements

The Auditor rendered a qualified opinion on the fairness of presentation of the
CDAs financial statements as of December 31, 2012 due to some accounting
errors/deficiencies which are hereunder presented, the details of which are shown in
Part II of this Report:
1. Loans granted to cooperatives in prior years recorded under account Loans
Receivable-Others of P119,994,261.11 remained uncollected for 13 years now
due to the failure of Management to enforce the provisions of the CDA Policies
and Procedures on Lending and the Loan Agreement, depriving the government
of much needed resources. Moreover, the possibility of collection from some
cooperatives is remote because the addresses could not be located and the demand
letters sent were returned.

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We recommended that Management demand the full payment of loan balances,

institute appropriate legal remedies against the delinquent coop-beneficiaries
pursuant to Lending Policies and Procedures and the Loan Agreement and initiate
request for authority to write-off dormant accounts pursuant to COA Circular No.
97-001 dated February 5, 1997.
2. Management failed to closely monitor the submission of liquidation documents,
inspect project implementation and financial records and institute legal action
against the defaulting cooperatives, resulting in the accumulation of unliquidated
financial assistance of P421,732,710.99 recorded under the Due From NGOs/POs
account, contrary to COA Circular No. 2007-001 and the Memorandum of
Agreement (MOA). In addition, the possibility of compliance in the submission
of liquidation reports by some cooperatives is remote due to the status that
cooperatives could not be located and non-operating anymore.
We recommended that Management demand submission of liquidation documents
for the settlement of accounts, intensify inspection of project implementation and
institute legal action against the defaulting cooperatives pursuant to COA Circular
No. 2007-001 and the MOA; and initiate request for authority to write-off
accounts of cooperatives which could not be located and non-operating pursuant
to COA Circular No. 97-001.
3. The balances of the Property, Plant, and Equipment (PPE) accounts of the
Central Office (CO) and five Extension Offices (EOs) of P103,406,274.08 out of
the total of P135,852,089.28 are unreliable and their existence could not be
ascertained due to the failure to record donations of P2,281,915.00, complete the
physical inventory, prepare and submit a reconciled Report on the Physical Count
of PPE (RPCPPE), maintain PPE Ledger Cards (PPELCs) and Property Cards
(PCs), renew Acknowledgement Receipts of Equipment (AREs), and locate
missing properties.
We recommended that Management record the donated PPE, complete the
physical inventory, prepare and submit reconciled RPCPPE, maintain subsidiary
records both in Accounting and Property Sections, renew regularly the AREs,
locate the missing properties and/or require the Accountable Officer to
compensate for the lost value.
4. The Priority Development Assistance Fund (PDAF) project releases of Manila
and Dagupan EOs for CY 2012 to coop-beneficiaries of P1,750,000.00 and
P9,300,000.00, respectively, were erroneously recorded to account Subsidy to
NGOs/POs instead of Due from NGOs/POs as prescribed in COA Circular No.
2004-008 dated September 20, 2004, hence, accountability of coop-beneficiaries
was not established.
We recommended that the Accountants of Manila and Dagupan EOs prepare the
correcting entries for proper classification of accounts and to establish the
accountabilities of the coop-beneficiaries as they are required to liquidate the
funds and for proper control and monitoring.
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F. Other Significant Observations and Recommendations

1. The selection of the coop-beneficiaries on the releases of the PDAF project is not
being made by the Management of Manila EO who is duty bound to account for
the funds because these beneficiaries were already identified in the Special
Allotment Release Orders (SAROs), thus, not in accordance with COA Circular
No. 2007-001 dated October 25, 2007.
We recommended that Management of Manila EO make representation with the
DBM not to specify in the SARO/NCA the coop-beneficiary but to let the
Management evaluate the intended beneficiary in compliance with COA Circular
No. 2007-001.
2. The Management of Tuguegarao EO failed to release the amount of P475,000.00
as financial assistance to various cooperatives for the implementation of
livelihood projects/programs, thus, depriving the intended beneficiaries to avail of
the benefits of the program, resulting to the reversion of funds to the Bureau of
the Treasury (BTr).
We recommended that Management of Tuguegarao EO inform the proponent
legislator about the reversion of the fund to the BTr and request for possible
realignment and release of the fund from the DBM pursuant to paragraph 4.3.3.2
of NBC No. 537 dated February 20, 2012.
3. The Accountant of Tacloban EO recorded the obligation of P4,800,000.00 PDAF
by debiting Due from NGOs/POs and crediting Accounts Payable without the
necessary supporting documents or no valid claims yet by the coop-beneficiaries
and based only on the identified coop-beneficiary mentioned in the Special
Allotment and Release Order (SARO) contrary to Section 1.2 of DBM Circular
Letter No. 2004-2 and 2004-3 and COA Circular No. 2004-008 dated September
20, 2004.
We recommended that Management of Tacloban EO direct the Accountant to
prepare correcting entries for the adjustment of the balances of the affected
accounts.
4. The Management of CAR EO granted Cash Advance (CA) for salaries and wages
way beyond the net amount of payroll resulting in the excess funds in the hands of
the Accountable Officer, contrary to COA Circular No. 97-002 dated February 10,
1997. Moreover, cash advances were not liquidated within the reglementary
period.
We recommended that Management of CAR EO faithfully observe the rules and
regulations in the granting, utilization and liquidation of CAs: (a) by granting a
CA for salaries and wages equal to the net amount of payroll for a pay period;
and; (b) by requiring the AO to fully liquidate his CA within five (5) days after
each fifteen (15) day/end of the month pay period.
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5. Three bank accounts in the CO with balances aggregating P73,032,059.59 as of

December 31, 2012, remained idle at the Land Bank of the Philippines (LBP) and
not remitted to the BTr, contrary to Section 4 of the General Provisions of the
General Appropriation Act (GAA) of CY 2012 (RA 10155).
We recommended that Management of the CO remit these idle funds to the BTr
pursuant to Section 4 of the 2012 GAA of CY 2012 (RA 10155).
6. The balance of the Other Receivables account of P8,608,875.44 included the CO
account of P3,216,337.88 which is unreliable because the schedule that supports
the account lacked the necessary information, thus Management failed to recover
the outstanding balances, contrary to COA Circular No. 97-002 dated February
10, 1997.
We recommended that Management of the CO particularly the Accounting
Division analyze the accounts; trace prior years records and identify the
Accountable Officers/Office; demand collection; and request for authority to
write-off those accounts which could not be documented.
7. The non-disposal of unserviceable/beyond economic repair properties of the CO
and nine EOs valued at P18,777,440.53, not only deprived the government of the
possible income that may be generated from sale and the use of the limited
storage space but also exposed these properties to further deterioration.
We recommended and Management of the CO and the concerned EOs agreed to
immediately dispose the unserviceable properties thru the disposal procedures
prescribed under COA Circular No. 89-296 dated January 27, 1989.
8. The collections of Caraga EO sourced from registration, reservation and
miscellaneous fees were not deposited daily and intact, with delays ranging from
one to five days contrary to Sections 21 and 22 of the MNGAS, Volume I, thus,
exposing the government resources to possible loss and misuse.
We recommended that Management of Caraga EO instruct the Cashier to stop the
practice of accumulating collections for deposit to avoid the risk of possible loss
and/or misuse and to follow the provisions governing collections and deposits
under Sections 21 and 22 of the MNGAS, Volume I.
9. The Management of four EOs failed to submit the financial and accounting
reports within the prescribed deadline, contrary to COA Circular No. 95-006
dated May 18, 1995, thus, affecting the timely verification of reports, early
detection of deficiencies and immediate communication of audit results.
We recommended that Management of concerned EOs direct the Chief
Accountant and the Accountable Officers (AOs) to ensure that all financial and
accounting reports are submitted to the audit team within the prescribed period
pursuant to existing rules and regulations.
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10. Cash Advances granted to the AOs of the Caraga EO exceeded the maximum
cash accountability of P250,000.00 per approved fidelity bond, contrary to
Section 101 of PD 1445, Section 5.0 of the Treasury Circular No. 02-2009 and
Section 7.5 of COA Circular No. 97-002, thus exposing to risk of nonreplacement or non-recovery of government funds through the Fidelity Fund in
case of defalcations, shortages or unrelieved losses.
We recommended that Management of Caraga EO faithfully adhere to the
provisions on fidelity bond requirement under Treasury Circular No. 02-2009 and
pay the correct premiums based on the average cash accountability of the
concerned AO for the last six (6) months prior to the application for fidelity bond.
11. The balances of Suspensions and Disallowances of P14,162,500.46 and
P10,300,904.39, respectively, remained unsettled at year-end contrary to Sections
9.4 and 10.4 of the 2009 Rules and Regulations on Settlement of Accounts
(RRSA).
We recommended that Management enforce settlement of the suspensions and
disallowances of P14,162,500.46 and P10,300,904.39, respectively, within the
prescribed period in accordance with Sections 9.4 and 10.4 of the 2009 RRSA.
The aforementioned observations together with the corresponding
recommendations were discussed with Management officials concerned during the
exit conference on May 9, 2013. Management views and comments were
incorporated in the report, where appropriate.

G. Status of Implementation of Prior Years Audit Recommendations

Of the 32 audit recommendations embodied in the CY 2011 Consolidated
Annual Audit Report, nine were implemented, 19 were partially implemented, and
four were not implemented.

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