1

social auditmanual

2

3

The VICTO Social Audit Project wholeheartedlyacknowledges the very valuable partnership ofthe Canadian Cooperative Association (CCA)and the Canadian International DevelopmentAssistance (CIDA). It gives thanks too to thefinancial support of the two organizations.

The Project has been greatly inspired by theexperiences of the VanCity Credit Union ofVancouver and the Metro Credit Union ofToronto, both of Canada. The Van City Co-opeven had its manager provided the project withthe inspiring inputs on social audit.

The Project also gives thanks to theCebu People’s Multi-purpose Co-op and theConsolacion Multi-Purpose Co-op for theircollaboration, as well as in their providing of theappropriate platforms and conducive atmospherefor the first-hand experiencing of the social auditin actual conformation and practice in the field.Not the least, however, the Project owes a lot tothe officers and staff of VICTO for all the thingsthat make the whole endeavor productive andenriching.

As the project progressed, it has alsobeen getting inspiration from NATCCO and theSocio Economic Development for Co-ops in thePhilippines (SEDCOP). The Project thanks them.

Acknowledgement

4

5

Table of Contents

5 Chapter 1: Introduction

13 Chapter 2: Social Audit

31 Chapter 3 The Cooperatives

51 Chapter 4 The Social Audit Framework

75 Chapter 5 Stages in Social Audit

105 Chapter 6 Writing the Social Audit Report

123 Chapter 7 Reflections and Conclusion

128 Bibliography

129 The Social Audit Team

6

7

chapter 1

an Introduction :.

VICTO has already gone a longway — from the time when it took rootsin six small and impoverish towns onthe Pacific rim of Southern Leyte in theearly 1960s, to its circuitous routes toDumaguete City and the towns of NegrosOriental and Tacloban City and Biliranisland in Region 8, and finally to the timeof its birth in 1970 in Cebu City as aservice organization specializing incooperative education. Now, VICTOstands tall as a landmark of cooperativeendeavors in the Visayas.

VICTO is one of the most viable andstable cooperative-owned institutions inthe Philippines. It counts some 243affiliated cooperative primaries, with acombined membership of about 300,000individuals in almost all fields of endeav-ors. It offers a wide range of basicservices to cooperatives, and presently itis into consultancy services, financialand social audits, coop education andtraining, training on financial intermedia-tion, financing, inter-coop trading,research and publication, provision oftraining facilities, and hostelry. In 1991,it won international recognition for itsworks through the Development Manage-ment Award conferred by the WorldExecutive Digest and the Asian Instituteof Management, making it number onedevelopment institution in Asia.

VICTO’s Self- Image :.

VICTO’s whole ethos is captured by its distinctivelogo.

The square enclosuresymbolizes what VICTO aims toachieve: Total HumanDevelopment. The center squaredepicts VICTO as an institutioncommitted to promote co-operativism that ischaracterized by self-reliance,mutual assistance, democracy,justice and nationalism. The fourquarters magnify VICTO’smanagement roles as a socialdevelopment agency, people’smovement, business enterpriseand world class organization.The horizontal lines represent theCenter’s linkage with society andother institution as it unitespeople in the Visayas through thecooperative movement. And thevertical lines highlight its effortsin promotion and development,and the integration of the co-operative movement. 1

1 VICTO, Bridging the Isles: People Power Empowerment through Cooperatives,VICTO, 1999, p. 10.

Victo logo

8

Social audit, which is nowone of its various services, is themost recent among its manyservices to its affiliates. To besure, social audit is not some-thing new to VICTO; as early asthe 70s, it had made integratedmanagement studies in two co-ops. But it was only in 1996 andsince then that it has been intosocial audits, although withintermittent regularity. In fact,VICTO had completed ninesocial audit engagements ofprimary cooperatives in Bohol andCebu.

Gleaming from thereports, however, VICTO’s earlyexperiences in social audit weremore in the category of impactresearch. Those entirely partookof the social sciencemethodology, of the descriptivegenre and using one measure-

picture here

Early Experience in Social Audit :.

ment technique, the surveys, andinvolved only one stakeholder, themembers. And nearly in all, theonly method of analysis was thesingle variable frequency distribu-tion, and never did the reportstackle and give opinions, espe-cially with regards to the internaldynamics within the cooperativeor did deal on other importantareas of concern commonlytackled in social audits thatevolved from the traditions offinancial auditing, particularly onsuch areas as the co-op’s effortsat asset building, the co-op’sprovision of services to thecommunity and the members, itsalliance work with other coopera-tives and other society forma-tions, its education programs,etc., or did those cover theperceptions of other majorstakeholders like the staff, theofficers or the communityleaders.

9

10

VICTO’s New Initiative In Social Audit

VICTO’s new initiative in social audit iscertainly a leap from its past experiences. Forone, it began by learning from, and gaininginsights into, the experiences of other serviceorganizations doing social audits, both fromwithin the cooperative sector here and abroad andfrom the community and business sectors alsohere and abroad. For the record, the team gotfive reference materials and social audit frame-works, namely: Social Auditing: A Manual forCooperatives published by the Cooperative Unionof Canada; Social Auditing for Cooperatives byCoopNet, a CDA initiated group; Social AuditNotes from the Magtuloy, Neric & Co., CPAs, anauditor’s group; “Measuring Cooperative Differ-ence” from the Euro Coop General Assembly;and Social Auditing for Small Organizationspublished by the New Economic Foundation ofLondon, and three social audit reports, namely:VICTO’s report in “The Social Audit of the BoholDiocesan Multi-Purpose Cooperative”;Vancouver City Savings Credit Union’s VanCitySocial Report, 1998/99 and Metro Credit Union’s1999/2000 Social Audit Report, both of Canada,as a starting point and as bases of drafting acooperative-oriented social audit framework.Later, it got other social audit works through theInternet, particularly: Social Auditing and Commu-nity Cohesion by Dr. Leslie Brown of Canada;Social Auditing with Community Organizations by

11

the CBS Network of Edinburgh,Scotland; “Social Auditing –Feedback Control for Organiza-tions”, an article by George Clarkof England; “Social Auditing:Oxymoron or Wave of the Future?”by Curtis C. Verschoor and Jon H.Entine, for more insights into thesocial audit works as a tool forsocial performance improvement.

The mix of experiences asbases of learning is recognitionthat cooperatives are businessenterprises and people’s organiza-tions with social purposes. Assuch, cooperatives have similitudewith other business enterprises, asthey too have likeness with com-munity organizations. From theamalgamation of the works as citedcame the matrix, which became the

basis of several discussion sessionsamong peers within VICTO and evenamong friends in a business corpora-tion with strong social responsibilitycomponents. Later, the matrix wasalso the subject of discussion duringthe series of discussions with primaryorganizations chosen for the trial-running of the experience, the work-shops with their representatives todraft and finalize the social auditframework, and finally in the boardmeetings for the framework’s ap-proval. To enrich the framework, alongthe way and through suggestions ofcooperative primaries, certain disci-plines from the social sciences werealso integrated, particularly thesurveys and interviews of membersand staff.

12

In theory, it was fromthese processes that VICTO’ssocial audit framework hadevolved and came. But it was inthe “test of fire”, in the actualimplementations that the frame-work got firmed up as a doableprocedure. The social auditframework was pilot-tested in twocooperative primaries in Cebu,namely Cebu People’s Multi-Purpose Cooperative andConsolacion Multi-PurposeCooperative, and the resultsindicated that the procedure has

good-sized coverage that allowedfor deeper understanding of theorganizations under social audit. Inform and substance, the frameworkpassed the test quite well; but,above all, the procedure as delin-eated is replicable in other coopera-tive primaries and can be done byothers who may be interested insocial audit.

The social audit frameworkruns through and is stringed withthe cooperative principles. Theprinciples identify and fastidiously

13

distinguish the cooperatives as business enterprisesand people’s organizations. They make for thecooperatives’ uniqueness, so distinct from any otherbusinesses or community organizations, and invari-ably spell the cooperative difference. The cooperativeprinciples thus serve as the fundamental theses uponwhich the gamut of the social audit procedurerevolves, and upon which the compliance by thecooperatives to the essences of cooperativism isdetermined and their social performances areperpetually measured.

14

15

Social Audit :. Social audit emerged as a corporate act ofbusiness organizations to demonstrate goodwill —or to counter criticism.

chapter 2

16

In the 70s, when it first appeared, socialaudit was a response to the budding consumermovements that rode on the issues of unsafeproducts and to the environmentalists’ move-ments2 that protested on the wanton dumping ofpollutants to the environment. And in the lastdecade when it resurfaced from the lull in the80’s social audit was driven, and literally forcedupon, by the ‘green business’ and ‘ethicalinvestments’ communities that came to promi-nence through highly publicized boycotts offirms.3

Social audit in origin, it can be said then,has roots in the dire need to make businessorganizations more accountable to people andcommunities. That some business organiza-tions’ decisions and actions have far-reachingimplications on, and consequences to, commu-nities and lives of peoples have to be recog-nized, and that whatever their impact —whether beneficial or non-beneficial ­- theseorganizations have to account for them on theground of social responsibility.

2 Euro Coop General Assembly, “Measuring the Cooperative Difference”, 1999. P.4.3 Curtis C. Verschoor and Jon H. Entine, “Social Auditing: Oxymoron or Wave of the Future?”, July 1997, p. 1. (An Internet-generated article.)

17

Factors Credited for its Growth :.

Several factors are credited as having contributed to the signifi-cant growth of social audit at present. Some of these factors4 are:

· Investigative reporting by mass media organizations into theimpacts, usually negative, of corporations and other institutions onpeople, on the local community and on the environment;

· As pressures filed-up in the 1980s about the impact of industry onthe environment, standards began to be developed requiringcompanies, and others, to report on likely and actual environmen-tal ramification of its continued operations.

· The growth of interest in ethical investment has led to the need touncover and better understand just what corporations do and howthey use the funds invested in them.

· Consumers themselves, through consumers’ organizations, havebecome more conscious of how their patterns of consumption canaffect the actions of corporations and even governments.

· The movement of corporate social responsibility has given theimpetus to shift from simply doing good things in the communityto one that embrace the notion of improved accountability tostakeholders and the need to explain themselves, if only tomaintain a license to operate.

· The idea of stakeholders has opened up new understanding thatall organizations affect far more people than was perhaps realizedin the past and that these stakeholders have a legitimate right toat least know what is going on, or even have some influence onthem.

· And most recently the introduction of the concept of best value re-enforces the legitimacy of recognizing softer outcomes as well ashard outputs at the same time as making it more essential thatthere is some way of accounting for and reporting on that softerperformance.

4 CBS Network, Scottish Social Audit Program: Social Auditing with Community Organizations, November 2001, p. 4. (An Internet-generated social auditreport)

18

As the CBS Network says:“In essence therefore, social auditis accounting for what an organiza-tion does and listening to whatothers have to say so that futureperformance is well focused and isundeviatingly directed at achievingthe organization’s chosen objec-tives”.5

The scope of a social audit isnot restricted to corporate decisionsand actions that have a specific‘social’ focus. Social audit isconcerned with any action ordecision initiated by the organiza-tion that has social consequences.Social audit extends beyond theusual myopic preoccupation withcorporate interests to the more

socially responsible concerns,including the broader impact ofcorporate decisions and actions topeople and communities. Of course,this is not for philanthropy, entirely;because any organization will benefitfrom taking into account the expecta-tions of individuals, groups, and otherorganizations that affect the successof its operation.6

Definition of social audit :.

Social audit is a procedure that simply piggy-backs on a business organization’s own currently runningdocumentation and reporting. Yet: it allows the organiza-tion to assess its social impact and ethical performancevis-à-vis its stated vision-mission-goals; it enables theorganization to develop a process within, whereby it canaccount for its social performance, report on that perfor-

mance and draw up an action plan to improve thatperformance; and finally it makes the organization

understand its impact in the community and be account-able for its decisions and actions to its key stakeholders.

1 CBS Report, Ibid., p. 7. 6 Cooperative Union of Canada, Social Auditing: A Manual for Cooperative Organizations, 1985, p. 1.

pix of a meeting/ lecture

18

5 CBS Report, Ibid., p. 7.

19

The recent corporatedebacles, both here in the

Philippines and abroad as reported,are very good proofs to the aboveassertion, thus:

There are manylessons to learn –from the Enrondebacle to thelatest in WorldCombankruptcy. One ofthe world’s biggestaccounting firms isunder litigation. . .. The Enron bank-ruptcy has led to alot of finger pointingand commentaryabout what wentwrong. However,there is much to bedesired in resolvingand committing todoing things rightand making thingsbetter. But thismuch we know.Public trust andinvestor confi-dences havedwindled (Italicsadded).7

Social audit is similar, in some

respects, to financial audit butfocuses on social rather thanfinancial performance. Accordingto Geddes, an early author onsocial audit,

“Social audit then is bestunderstood as a reaction againstconventional accountingprinciples and practices,” whichfocus “on the financial viabilityand profitability of the individualeconomic enterprise. By contrast,social audit proposes a broaderfinancial and economicperspective, reaching far beyondthe individual enterprise. Socialaudit posits other goals as wellas, or instead of, financial profit-ability. Moreover social auditattempts to embrace not onlyeconomic and monetary variablesbut also ­ as its name suggests ­social ones, including some whichmay not be amenable to quantifi-cation in monetary terms.”8

7 Jerry Isla, “Public Trust in Corporate Reporting”, Philippine Daily Inquirer, September 16, 2002, p. C2.8 M. Geddes 1992, “The Social Audit Movement”, in Green reporting: the challenge of the nineties, Owen D (Ed), Chapman and Hall and quoted in CBS Report, Op.Cit.

19

20

Social audit consists of adistinct sequence of procedures or tasksthat begins with clear identification of theorganization’s social responsibilities,establishment of performance stan-dards, application of measurement toolsto assess the consequence of corporatedecisions and actions, and reporting onthe organization’s performance over aspecified period.10 The CooperativeUnion of Canada, in its social auditmanual, so says: “Effective and efficientorganizations have a clear vision ofwhere they are going and of how they aregoing to get there. The social auditprocess helps organizations achieve thatclarity of purpose and efficiency ofprocedure.”10

At this point, it is important to makea distinction between the role andpurpose of social audit for the commu-nity sector and for private corporations.In the community sector, their social orethical purpose is their primary purposeand their business and financial activityis what they do in order to fulfil theprimary purpose. On the other hand, for

9 Cooperative Union of Canada, Op. Cit, p. 1.10 George Clark, “Social Auditing – Feedback Control for Organizations”, p. 2. (An internet-generated article.)

21

private corporations their primarypurpose is about growing sharevalue and increasing returns toshareholders and the social auditis more of an exercise to demon-strate corporate social responsi-bility, with an eye on maintaining“the license to operate”. In thelatter, stakeholder consultationsand dialogues are “managingstakeholder relations”, so that theprimary purpose may be betterachieved. Anyway, at its best itdoes report widely and frankly tostakeholders about the goodnews and the bad news, and atits worst it may become no morethan a public relations exercise.11

Yet, this enhances corporatereputation and helps to minimizethe risk of crisis.12

11 CBS Report, Op. Cit., p. 7. 12 Executive Summary on the Study Tour Final Report of CCBC made available to members and publicly launched on May 4 at the CSR Conference in Vancouver, BC, p. 1. (An Internet generated article).

22

One reason for the growingimportance of social audit is thenecessity of having theinformation an organizationneeds, both qualitative andquantitative. The informationenables it to know how is itperforming and of what peoplethink about what it does and howit does it. But more thanknowing, the information helpsthe organization to improve itself,in its products and services andthe methods by which theseproducts and services aredelivered to their users. Thusimproves too its bottom lines.

Another reason is attributableto the need for society to be ableto exert the controls and influenceover corporations. In the past,local communities could exertpressure over local companiesoperating locally. In the presentage of globalization, wherebusiness organizations extendbeyond national boundaries,local communities — and evencountries to some extent — are

no longer in the best of positionto having controls and influenceon them. It is a fact that in aneconomy of big business, it isnot enough to have them dofinancial audit, follow social andlabor standards and comply withenvironmental requirementsthrough the ECCs; the only bestway for society is for them toaccount for the impact of theirdecisions and actions to peopleand their communities throughsocial audits. In this regard,Goyder says: “ . . . (financialaccounting) is a one-sided stateof affairs and belongs to the dayswhen companies were small and

Value of social audit :.

23

public accountability wassecured. In an economy of bigbusiness, there is clearly asmuch need for a social auditas for a financial audit”.13

The third reason runsparallel to the two mentionedabove. While big business isbeyond the control and pres-sures of local communities, itstill depends a lot for its goodhealth and continued fruitful lifeon the goodwill of its variousstakeholders, particularly thosewho use its products andservices, those who work for it,those who work in partnershipwith it, those who support all itsinitiatives and those who investin it. These stakeholders needto know and understand thetrue nature of the added valuethat the organization hasachieved, for it to continuedoing what it is doing. Withoutthe trust and confidences ofthese stakeholders, the

organization cannot stand, orcannot stand a chance to existlonger, as evidenced by Enronand WorldCom debacles.

And finally, the fourth reasonis for organizations to have amark of prestige, a badge ofdistinction. This badge serves toguarantee trustworthiness asbusiness endeavors, as itassures adherence to socialresponsibility and ethical busi-ness practices. And this badgeon the sides serves also as goodadvertising tool, which in turncould translate into improvedbottom lines.

13 G. Goyder, 1961, “The Responsible Company”, Blackwell and quoted by the CBS Report,

op. cit., p.4.

24

Since the 70’s, and morerecently in the 90’s, there have beena number of social audit models thatcome to be utilized by both thecommunity sector and privatecorporations all over the world. Todate, however, there are only approxi-mately half a dozen social auditmodels14 that come to gain wideusage. And these are:

· social balance sheet, whichprevailed in the 1970s,

· social performance index, amodel that utilizes a form ofethical investment scorecards,which assign rankings or numeri-cal ratings to social issues,

· Independent social assessmentssuch as that of the “The 100Best Companies” series in theUS,

· Stakeholders surveys, a dimen-sion of the New EconomicsFoundation of the UK.

· Benchmarking by objectives,which is more commonly used inenvironmental audits,

· Disclosure reports which evaluatecompanies on their disclosure ofcritical information of stake-

holder concern, and· Disclosures screen which has

been adopted by somenonprofit and businesscorporations and has beenendorsed by the CertifiedManagement AccountantsAssociation of Canada.

From these models comealso a number of correspondinginternational standards. There arenow in place such standards as:AccountAbility 1000 (AA1000) ofthe Institute of Social and EthicalAccountability, which is thestandard social performanceadopted by BP, Body Shop of UKand Australia, Royal Dutch/ShellGroup, among others15 ;ETHIBEL Certificate and Solid’Rlabel of Belgium, a quality labelfor companies employing under-privileged groups and operating inthe sector for recycling textile andother goods; SA8000 of theSocial Accountability Interna-tional, whose standards arebased on ILO recommendations

Social Audit Models :.

14 Curtis c. Verschoor, et. al., Op. cit., p. 2.15 Euro Coop General Assembly, Op. cit, p. 4.

25

and on agreements and the Conventions of the UN; ISO 14001, for environ-mental management system; ISO 9001:2000, a quality management system;and OHSAS 18001 for occupational health and safety assessment series.16

The community sector and private corporations may be well served tocarefully consider which of the various models, individually or in tandem, arebest suited to address their internal needs and public disclosure objectives.It is imperative, however, that a social audit should thread beyond a review oftheir stated missions, because a successful social audit requires them todemonstrate their commitment to publicly disclose information about theiroperations and their responsiveness to solve problems uncovered by thesocial audit.17

The Social Audit Field :.

Social audit is the generic term referring to thefull range of activities of the entire procedure. In effect,it encompasses the following activities:

1. Social accounting, which covers:a. Social bookkeeping, an activity whereby all

information related to social performancebased on the organization’s social objectivesare collected, recorded and systematicallyclassified;

b. Summarization and interpretation of the data;and

c. Reporting the information to management.

2. Social auditing, which covers:a. Verification of the information, and certification

as to the correctness of the information; andb. Reporting the information to all the stakeholders and the public.

16 “Grants Offered to Firms Eyeing SA 8000 Paper”, Sun*Star Cebu, January 15, 2003, p. 2117 Curtis C. Verschoor, et. al., Loc. cit., p. 3.

26

It has to be recognized that not all organizations, especially from thecommunity sector, have the resources necessary to carry out and be able tofulfill all these principles in a given year. Social audit can be done incremen-tally: one way is by foregoing verification and disclosure during the first year;and another way is by reducing the comprehensiveness of the social auditframework by limiting it to few areas of decisions and actions. In this waythe organization moves slowly within the limits of its own resources, whileinching towards the completion of the full requirements of a social audit inall its eight principles and address in full the first principle which iscontinuous improvement in the social performance of the organization.19

Social Audit Principles :.

In the past years, there have been substantial efforts to define commonthemes in social audit. From the experience of all those involved, a good socialaudit carries all these characteristics:18

1. Improved social performance. This is the overarching principle, and this

refers to the continuous improvement in performance by the organization

relative to the chosen social objectives as the result of social audit;

2. Multi-perspective. It is important for all groups affected or who affect the

organization to be included in the process;

3. Comparative. The process should allow for comparison with other organiza-

tions, over time and between stakeholder groups.

4. Comprehensive. The process should be designed to collect all relevant

materials and areas of concern should not be left out simply because the

organization would not like the result.

5. Regular. To facilitate comparability and to demonstrate a commitment to the

process, it should be regular, with a frequency of once every two years.

6. Verified. Verification by independent auditors gives the process credibility.

7. Published. The result (or a synopsis) of the audit should be published so that

the stakeholders can see the results and to encourage openness.

8. Improvement. It is important to receive feedback about the process itself and

the report, and to improve the system over time.

9. Embeddedness. The social audit process should be integrated with other

business information gathering systems.

18 Euro Coop General Assembly, Op. cit., May 1999, pp. 4-5. (Note: Principles 1 to 7 are common to all social audit models.) 19 John Pearce, Peter Reynard and Simon Zadek, Social Auditing for Small Organizations, NEF, London, p.4.

27

Methodology of Social Audit

Social audit, as pointed outearlier, is actually an offshoot of account-ing, and both methods of reporting “aredealing with social ‘systems’ which survivein the long term only through being aliveto feedback concerning both their internal(subsystem) and external (supersystem)environments”.20 Being alive internallyrefers to both the methodology’s capaci-ties to improve internal processes andmodes of reporting over time as gainedfrom experience. And being alive exter-nally refers to the methodology’s capaci-ties to improve along with and in responseto the requirements of the people andtheir communities.

The term methodology is a broad one, and itencompasses the following: 1) formulating thesocial audit framework in relation to the areas ofdecisions and actions that the whole procedurewants to encompass, whatever the social auditmodel used; 2) planning what data are to becollected, why, how and by whom; 3) how theseare to be collective, collated and analyzed; and 4)how it is presented in the report, and by whom.All these are intertwined by theimportance and meaningfulness of the data,because a social audit is only as good as the datagenerated.

For a social audit to be meaningful it must studyareas of decisions and actions and use indicatorsthat are relevant to the organization. (Note: Inresearch, an area of decision and action is alsocalled variables.) The key is to choose variableson the basis of reasoning and knowledge of their

20 George Clark, “Social Auditing – Feedback Control for Organizations”, p. 2. (An internet-generated article)

28

significance — not just because they can bemeasured – and to choose indicators thatcan measureaccurately these variables. Any projectedimpacts should be identified, includingpotentially negative ones. These projectionscan guide decisions about what to measureand how. The usefulness of variables andindicators is enhanced when there is someway to set the information in context, suchas clearness of the rationale about whythese are the ones to assess, orcomparability of the information to pastperformance or appropriateness of theinformation to become a baseline againstwhich to compare future results, orcomparability to an appropriate externalbenchmark, or compatibility to goals ortargets set by the organization or toregulatory standards.

Social audit literatures are only just begin-ning to come to grip with the importance ofmethodology. But as it is at present, beingstill an evolving field, it now integrates certainprinciples and practices of the social sci-ences. This is especially the case when theauditor wants a representative sampling ofthe perceptions and motivations of variousstakeholders or wants to assess moredeeply the social consequences of organiza-tional outputs. 21

21 Dr. Leslie Brown, “Social Auditing and Community Cohesion: The Co-operative Way”, February 2001, p. 10.

29

Social audit by its verynature deals mostly with reportson outputs - to document whatthe organization is actually doingand how it is doing. Given such,at the most elementary level,social audit may be made only toreport on some data, or perhapssome statistics, and the taskmay be quite simple and the datareadily available, and even if attimes the data are difficult to findand calls for knowledge and skillwith information sources, little ispresented in terms of inferencesor conclusions. Or, at the secondlevel, the social audit may call fordescription to answer on ques-tions of who, what, when, where,and sometimes how, and involvesonly single variable frequencydistribution or even multivariaterelationships or multiple variablecross-tabulations with littleinferences or correlations gained,but still little is given in terms ofexplanation or prediction.

So, after gaining a handleon these outputs, the natural flowof an inquiring mind goes and

Levels of Inquiry in Social Audit :.

begins to shift focus to “sowhat?” or why certain resultshappen the way they happen. Inother words, the concern is nowshifted to the effects of theseoutputs to the individuals who aredirect beneficiaries of the outputand to the communities of theseindividuals.22 This is indeed areality. Can the organizationclaim to be accomplishing what ithas intended or what was in-tended? This is one significantchallenge. Here, it has to beestablished that the impact thatshows up is really the result of an

22 Dr. Leslie Brown, Ibid., p. 11.

30

input that the organization had made, and not a consequence of someother factors.

In the study of outcomes, the auditor needs to build a theory, alsocalled a hypothesis, of the effects of organizational outputs on thecommunity, given the various factors that co-exist within it. The theorygives focus and accounts for all the forces that caused a certainphenomenon to occur, as it guides the direction of the study, limits whatshall be studied and provides a framework for organizing the conclu-sions that will come out.

The study of outcomes is truly a difficult one. One possible way is toput comparatives for each area of concern being measured, andcomparatives of the organization’s targets. Another is the use ofmultiple indicators of the same area of concern or variables andmultiple measures of each indicator. And still another is studying theconvergence of all findings or finding the causes of the findings. Andabove all, it is also necessary that the social audit begin now to employvarious methods of inquiry such as interviews, surveys, compilation ofstatistics, case studies, and many others.23

23 Dr. Leslie Brown, Ibid., p. 11.

31

The Social Audit Evolution

Social audit is a work inprogress; it is evolving. Continuouslearning and improvements areimportant. There is always a need, forinstance, to improve both theconceptualization of the areas ofdecisions and actions that are beingaudited, and the indicators andmeasures of performance. Andlearning from others too, who dosocial audit, and from the widerliterature on the subject and relatedsubjects is advisable. Sharing ofexperiences, developing somecommon standards and sharing ofmeasures and indicators may alsohelp. For truly, what is important isthat the subsequent audit is always abetter one.

32

separator pix

33

chapter 3

The Cooperatives :. Cooperatives find in social audit a tool and a processthat is essentially and intrinsically congruent with their veryown nature.

34

Cooperatives are known for theircommitments to social responsibility, are member-owned and controlled, and practices real democ-racy, transparency and accountability. Social auditenhances these commitments while establishing agood balance between social and financial goals,as well as enhances support from the membersand of the general public.

1. That cooperatives are independent of government andother private businesses;

2. That the members, either individuals or juridical persons,have of their own choices joined together or have freelyjoined the cooperatives, invariably denoting that themembers are free to leave too;

3. That the purpose in their unity is to meet their individualor group needs through self-help and self-responsibility,in so many mutual ways;

Definition

Cooperatives are defined as “autonomous associations ofpersons united voluntarily to meet their common economic, social andcultural needs and aspirations through a jointly-owned and democrati-cally-controlled enterprises”24 . While this definition is minimal andbrief, it integrates within the definition many fundamental and impor-

tant concepts25 , such as:

24 ICA Statement on the Cooperative Identity as reformulated in 1995. 25 B. D. Sharma, “Action Plan for Actualization of Cooperative Identity Statement”, Report of the Special Workshop on the ICACooperative Identity – From Theory to Practice, ICA, New Delhi, 1997, pp. 68-70.

35

4. That the members are the sources of their capital, theusers of their products and services, the fountain oftheir enabling ideas and blazing initiatives and thefoundation of strength of their businesses.

5. That these are primarily organized for business, andmust function as businesses in the marketplace, butconsidering that the owners are the users of theirproducts and services, they necessarily bear along withthem both social and cultural goals for the membersand the communities where they operate and wheretheir members live;

6. That the enterprises are owned by the members asgroups and are controlled by them together in ademocratic manner, giving prime importance topersons than to capital in decision-making yet retain-ing the essential element of equitability in the enjoy-ment of the cooperatives’ produce.

36

The Cooperatives in Perspective :.

Cooperatives serve theirmembers and the communities oftheir members by working in threedifferent but inter-related frame-works: namely, member relations,managerial practices and organiza-tional structures26 . While eachframework has its own set ofpriorities, all these collaborativelyoperate to achieve the one com-mon purpose, and that is to makethe cooperatives strong and betterable to serve the members and thecommunity.

Member Relations. The servicesto members and community donewithin the framework of memberrelations operate in two prongs.One is the recruitment of moremembers who provide nourishmentto the cooperative through moreshare capital subscriptions and

savings deposits and continuouspatronage of its products andservices, and through which thecooperatives are able to buildtheir own assets and be placed inthe best position to serve themembers and the communitybetter. Two is the giving ofdividends on the members’investment capital, patronagerefunds for the members’ unend-ing utilization of the cooperative’sproducts and services, the givingof products and services thatimprove on the members’ ownassets, and the setting-up ofmechanisms for two-way commu-nication where members caneasily voice their ideas and aretruly heard. This quotation fromAWCF elucidates an aspect ofthis point quite well:

Co-ops have to notonly survive asbusinesses, theymust also addressthe social needs oftheir members andthe communities thatthey serve knowing,in fact, thataddressing thesesocial needs would,

26 Ian McPherson, “Understanding the ICA Co-operative Identity Statement”, Report of the Special Workshop on the ICA Co-operativeIdentity – From Theory to Practice, ICA, New Delhi, India, 1997, p. 21.

37

in turn, help theirmembers andcommunities to bemore economicallycapable. In the longterm, this increasedeconomic capabilitywould benefit theco-ops. There wouldbe increased savingsandborrowings frommembers as well astheir increasedcapacity to repay;and there would beincreased number ofcommunity memberswho can save andcan serve as a poolof potential membersof the co-op. Overall,addressing the socialand economic needsof the communitywould translate intocash or be goodbusiness for the co-ops. In short, socialresponsibility is goodbusiness.27

The need to providebetter service to members is

even more imperative at thistime, especially with theinevitability of full globalizationand the ensuing full liberaliza-tion in trade, e.g. the fallingdown of trade barriers and itsconcomitant flooding in thelocal marketplace of better andmore affordable products andservices. AWCF predicts: “Thefaithfulness to the co-op’sideology soon cannot bebanked on alone to keep themembers’ patronage within theco-op movement. Co-ops willhave to serve their membersbetter, one way of which is toprovide services to membersthat address their social needs.And co-ops would know betterwhat these needs are if theyconsult their members and

27 AWCF, Trainer’s Manual on Transformative Leadership Training for Co-operatives: Transformative Leadership, Transformative Cooperatives, 2001, p. 67.28 AWCF, Ibid., p. 99.

38

Attitudes, values and institutions determine the success or failure

of their (cooperative) endeavors. . . . And this can be done through

proper education and training. It has been experienced . . . that

through their continuous education programs, they have greatly

improved the attitudes and values of their members. And these

socially-oriented individuals have been the leaders in improving

the economic and social conditions in their communities. . . . We

need good and responsible citizens who are socially-oriented.

We need people whose interests go beyond their personal

interests. These are the people who think of and work for the

welfare of their country and fellowmen.30

open their doors to them”.28

Managerial Practices.

The services to members andcommunity done within theframework of managerialpractices come in many forms.First, it comes in the form ofmotivational and other ideationalprograms and the provision ofnew or additional skills to themembers on leadership, man-agement, and many others.Second, it shows up in theassistance to, and facilitation of,community projects or inworking with others to supportcommunity projects. Third, itmaterializes in the effort to helpthe community to work out its

own development plans, or inthe implementation of capacitybuilding programs for thecommunity. Fourth, it takes inactual forms in the gender-related and youth-orientedprograms, e.g. day care centers,women’s center for victims ofdomestic violence, co-oplaboratories, manpower devel-opment programs, in thecommunity. Fifth, it exudesconcerns in some ‘philanthropic’lending programs to “the ‘newpoor’ or the new set of economi-cally marginalized segment ofthe population that has noaccess to opportunities for abetter quality of life that human

Education, training, and the various socially-oriented extension works of thecooperative to the community make for a better community, as well asmake for better individuals and better families in the community. And thesame is also true vice versa.

29 Ibid., p. 18.30 Feliciano R. Fajardo and Fabian P. Abella, Cooperatives, 2nd Edition, Rex Book Store, 1986, p. 221-222.

39

beings deserve”.29 On education,this quotation:Organizational Structure.

The services to members andcommunity done within the frame-work of the organizational structurealso come in many forms. First is inthe promotion of a healthy respectfor diversity yet with a sense of thecommon good. Second is in thefostering of social interaction andgood social relationships amongindividuals in the community. Thirdis in the creation of a context wherepeople are able to work together toaddress common needs and goals.Fourth is in increasing local controlover matters significant to the localcommunity. Fifth is in building asense of community that includescommitment to, and acceptance of,one’s share of social responsibilityfor the community. Sixth is inlearning to handle disagreementsand conflict in an equitable and

40

democratic manner. And there is much, much more.

The cooperatives’ organizational structures aregood training grounds for productive citizenship. Throughthe dynamic workings of the cooperative structures, themembers are afforded the opportunity to see a functioningdemocracy and at work, to learn the enabling endowmentof the value of self-help and self-responsibility, to under-stand in a non-abstract way equality and equity, to practicesocial responsibility and the caring for others, and ofsolidarity, honesty, openness – values that a cooperativeholds. Through their active participation, the members inconsequence assimilate the essences of these values, ina way that is incarnate and authentic. And through thesemembers, who in turn become purveyors and missioners ofthese values to the community, the community gains,earns its peace, and becomes a better place for all.

Cooperatives, through all these interactions, develop;these aare their ways of becoming, purifying themselves asthey move along the way in their journeys to make them-selves truly human organizations devoted to total humandevelopment. The synergies of these interactions arereflected in this representation: 31

31 KOOPNET, Social Auditing of Cooperatives, 1997.

41

TheFamily

Communityservices: onsanitation andhealth, envi-ronment,ecology andother basicservices

Economicgains andassets building

Developingresponsive humanorganizations/cooperatives

Education andother formationprograms andservices

42

The Cooperative Principles :.

Cooperatives are guided by principles. These principles are the empoweringframework by which cooperatives move on in their daily activities, withoutbeing lost in the maze of their own operations. These are also the energizingtools upon which the cooperatives look and grasp the future and assuredlycope up with the future’s concomitant complications. These principles are:

This principle affirms the fundamental importance of people choosingby their own volition to make commitments to their cooperatives.Consequently, they must have to be afforded with all the opportunitiesto study and understand what their cooperatives are all about, thevalues on which they stand, the products and services that they offerand the kind of participation that they require of their members. Thisfurther affirms the universally accepted general commitment torecognize the fundamental dignity of all persons regardless of gender,social status and cultural preferences, race, political affiliation andreligious beliefs, as long as they have uses for their cooperative’sproducts and services and are willing to accept the obligations ofmembership.

This principle also puts weight on the special relationshipbetween the cooperatives and the persons they primarily serve, themembers, who are the reason for their existence. This special relation-ship defines the businesses of the cooperatives, specifies on the waythey do these businesses, and shapes the cooperatives’ plans for thefuture.

1st Principle: Voluntary and open member-ship. “Cooperatives are voluntary organizations,open to all persons able to use their servicesand willing to accept the responsibilities ofmembership, without gender, social, racial,political or religious discrimination”32 .

32 ICA, Loc. cit.

43

2nd Principle: Democratic member control.“Cooperatives are democratic organizationscontrolled by its members, who actively partici-pate in setting policies and making decisions.Men and women serving as elected representa-tives are accountable to the membership. Inprimary cooperatives, members have equal votingrights (one member, one vote), and cooperativesat other levels are also organized in a democraticmanner”.33

Democracy generally refers to rights — the right to vote and bevoted upon, equal voting rights, etc. — and to obligations. In the coopera-tive, however, democracy is not only about rights and obligations of mem-bers, it most importantly integrates in the idea of democracy, the fosteringitself and the promotions of the spirit of democracy within the organization.First, this comes in the form of member participation, albeit active involve-ment of members, in setting policies, in making key decisions, and insetting general directions of the cooperative. And second, this is in thedynamism and functionality of the system of accountability that can workthroughout the mandate of elected representatives.

3rd Principle: Member economicparticipation. “Members contribute equitablyto, and democratically control, the capital oftheir cooperatives. At least part of that capitalis usually the common property of thecooperatives. Members usually receive limitedcompensation, if any, on capital subscribed asa condition of membership. Members allocatesurpluses for any of the following purposes:developing their cooperative, possibly bysetting reserves, part of which at least isindivisible; benefiting members in proportion totheir transactions with the cooperative; andsupporting other activities approved by themembership.”34

33 ICA, Ibid. 34 ICA, Ibid.

44

The economic participation of the members in the cooperative isa three-sided affair. The first side is the members’ capital contribution,which comes in four ways: (a) the subscription of share capital, (b)putting in of savings deposits, (c) the building-up of the collectivelyowned reserves, (d) the plowing back of dividends in the form of newshares, and (e) participation in special fund campaigns for specialprojects.

The second side is the members’ enjoyment of the fruits out ofthe usage of the products and services of the cooperative, such asknowledge in management and technical support in the members’personal businesses, augmentation in the members’ working capital, andmany others, and enjoyment of the fruits of membership such asdividends on share capital, patronage refunds, and interests on deposits.

And the third is the sense of ownership, as well as the reality ofownership. It is not just enough to cement the bond by way of goodservice at competitive price with, if possible, a patronage refund; some-how, the members must arrive at the feeling that they are the coopera-tives, that they own the businesses and that they are the sole reason forthe cooperatives’ existence.

4th Principle: Autonomy andindependence. “Coopera-tives are autonomous, self-help organizations controlledby the members. If they enterinto agreements with otherorganization, including thegovernment, or raise capitalfrom external sources, they doso on terms that ensuredemocratic control by themembers and maintain theircooperative autonomy.”35

35 ICA, Ibid.

45

This principle addresses the essential nature ofcooperatives to be autonomous. This means vigilance, invarious ways, of its independence. When it enters intoagreements, either with government or with other businessentities, cooperatives have to define in very clear terms thatrelationships with them, in the same way that businessescontrolled by capital are autonomous in their dealings withgovernment or with other businesses. And this extends farbeyond: when cooperatives enter into agreements with otherorganizations or when they exert efforts to raise capital, orwhen they strengthen themselves, cooperatives have to dothese so freely and only on terms that ensure democraticcontrol by the members, and none other else.

This principle also implies that cooperatives have to findso many ways, through good business sense and respon-sible practices, to ensure that they are strong, that theirbusinesses are profitable ones, and that they can withstandcompetitions in the marketplace. These mean close adher-ence to operational and organizational standards that arebenchmarks of good business practices that are antholo-gized either from within the cooperative sector or from thebigger sector of financial intermediaries.

46

Education and training are vital components of thecooperatives’ life. Education is engaging the minds of members,elected officers, managers and employees to comprehend fullythe complexity and richness of cooperative thoughts and actions.And training means making sure that all those who are, in one wayor another, involved in cooperatives have or are fully provided withskills that are required to carry out their functions efficiently,effectively and responsibly. Training also includes preparing theyoung for leadership positions and good citizenship in the future.

This principle also extends to equipping the leaders withthe necessary skills in assessment and comprehension of theneeds of the members and the skills in the setting-up of mecha-nisms for two-way communications between the members and theleaders, because the members can only feel involved if they areconsulted and if they are confident that they will be heard.

And finally, cooperatives have the specific responsibility toinform young people, opinion leaders, and the general publicabout the nature and benefits of cooperation. People cannotsupport or appreciate what they do not understand, and this hasvery important implication to the growth and success of thecooperative in the long run. Besides, education is also there toexpand the membership base of cooperatives and be part of thelives of all the people who have need for the cooperatives’ ser-vices. A wide base in fact is imperative, because only throughsuch can cooperatives truly strengthen, serve better the membersand be able to meaningfully compete.

5th Principle: Education, training and informa-tion. “Cooperatives provide education and trainingfor their members, elected representatives,managers and employees, so they can contributeeffectively to the development of the cooperative.They inform the general public – particularly youngpeople and also leaders – about the nature andbenefits of cooperation.”36

36 ICA, Ibid

47

It has to be recognized that cooperators have incommon their individual vulnerability and powerlessness inthe marketplace, and the inadequacy of their personal wealthto meet their needs for subsistence and welfare. For coop-eration to be practiced by economically vulnerable people,the only way is for them to act together, to organize them-selves into cooperatives. That is one of the essences ofcooperatives.

However, cooperatives can only achieve much on alocal level — this one has to be recognized. Beyond are somuch more. To achieve full potential, cooperatives mustenter into practical and rigorous collaboration with othercooperatives. This can be done through alliances, mergers orjoint ventures, by way of large-scale business enterprisesthat can have real impact on the members and the commu-nity.

Care, however, should be taken not to compromiselocal involvement and ownership by carefully protecting theinterest of the members as it is being enhanced. This is adifficult balancing act but a test of cooperative ingenuity.

6th Principle: Cooperation among coop-eratives. “Cooperatives serve their mem-bers most effectively and strengthen thecooperative movement by working togetherthrough local, national, regional and interna-tional structures.”37

37 ICA, Ibid

48

Cooperatives existprimarily for the benefit of itsmembers. Because of thisreason, they carry with them avery strong affinity with thecommunities of the members. Itis this closeness that takescooperatives to assume certainserious responsibilities for thesustainable development of thecommunities, through suchconcerns as environmentalprotection, infrastructure facilita-tion, participation in communitysports, promotion of culture andmany others.

But more than thecontributions in physical terms tothe sustainable development ofthe communities are their specialgifts of negating bland and blindmaterialism, a precious qualitythat is germane to cooperativeenterprises, the promotion ofthrift and the wise use of money,and of the development of aculture of self-reliance andindustry.

The seven principles are

7th Principle: Concern for community. “Cooperatives work forsustainable development of its communities through policiesapproved by their members.”38

not simply measuring sticks.They are guidelines upon whichthe various stakeholders continu-ously evaluate the cooperative.They equally raise the questionof how the cooperatives canbetter carry out their work inconformity with the directionssuggested in each of the prin-ciples, as they raise the chal-lenge of how the cooperativesconform with the directions andpractices as suggested by theintegrated application of all theprinciples.39

picture of individual ormembers

38 ICA, Ibid.39 McPherson, Op. cit., p. 25.

49

The adaptive nature of cooperatives

Cooperatives are essentially the same all through history; butbecause cooperatives exist not apart from the members and theircommunities, they are known to be open to certain adjustments as theyadopt and adapt in step to the changes that usually come along with thechanging internal needs of the members or to externally-introducedchanges such as introduction of new technologies, or application of newtheories in management, or as they respond to the pressures from

competition or from globaliza-tion and liberalization or togovernment regulations, oraddress issues related to thefundamental changes in humanconditions. McPherson says:“Co-operatives function both inthe world of ideas and in theworld of everyday life. Theyalways manifest – and shouldmanifest – a continual strugglebetween what is desirable and

what is possible”.40 And even within the context of ICA’s reformulation ofthe definition of cooperatives in 1937, 1966 and 1995, Sharma says,these “demonstrate how cooperative thought can be applied in a chang-ing world; they suggest how cooperative can organize themselves tomeet new challenges . . . . Throughout its history, the cooperativemovement has constantly changed; it will do so in the future.”41

Cooperatives have been developed all over the world, taking ondifferent characteristics and objectives depending upon the societies inwhich they have emerged. Historically, cooperatives flourish in all kindsof economic systems: it has been successful under command econo-mies, as it has been very progressive in market economies. Coopera-tives have that ability to address major questions, and yet be able togrow, to adapt and to change, forge new alternatives, find new ways andnew needs to serve, and even assume new forms in many diversesocieties.

40 McPherson, Ibid., p. 21.41 B.D. Sharma, loc. cit., p. 65.

50

It is this adaptive nature of a cooperative that calls for amechanism that can perpetually assess its work at any given time.Here, social audit has particular relevance, because it reinforces thecooperative’s “commitment to social improvement which lies at theheart of the co-operative philosophy”.42

Social audit serves a number of purposes,43 thus:

1. it provides a way of measuring the performance of the coopera-tives and their compliance to, the co-operative principles;

2. it allows the cooperative to monitor and steer performance inways that have coactive implications to both social and commer-cial objectives;

3. It strengthens the effectiveness of the cooperative by highlightingareas of policy and action decisions that are requiring improve-ments.44

4. it allows the cooperative to understand the cost implications ofachieving the social, community and environmental objectives;

5. it provides information that are necessary to enable the coopera-tive to make choices in priorities and business practices;

6. it gives stakeholders the information for them to judge if thecooperative is achieving the social added value which it sets out toachieve;

7. it gives stakeholders in the cooperative a degree of power andinfluence;

8. it allows the organization to make verified and substantiatedclaims about its performance on the same level as its financialperformance;

it enables the cooperative to improve its management of socialperformance year-on-year, in a way that is inclusive, participatory,transparent and measurable.

Cooperatives and Social Audit :.

42 Cooperative Union of Canada, Loc. cit., p. 2. 43 Euro Coop General Assembly, Loc. cit., pp. 3-4.44 Magtuloy, Neric and Co., CPAs, Auditors’ Notes, unpublished.

51

Adoption of Social Audit byCooperatives Worldwide

Social audit has been adopted by anumber of cooperatives worldwide. In Canada,the VanCity Coop and the Metro Credit Unionare adherents to the AA1000 of the Institute ofSocial and Ethical Accountability. In Denmark,the FDB uses social reporting to measure theimplementation of its core values and goalsand the achievements in its action plans. InSpain, the HISPACOOP has developed its ownsocial audit model for the consumercooperatives. In Sweden, the KF hasdeveloped the membership report, a tool for1) managing, evaluating and improvingbusiness, 2) strengthening the businessprofile, 3) developing membership democracyand enhancing the effectiveness and resourceallocation. In the UK, the CWS follows thepath set by the New Economics Foundation ofLondon. And in Italy, the ANCC (NationalAssociation of Consumer Cooperatives) andthe various associations under it are continu-ing to develop the balance sheet model, thesocial audit model that was prevalent in the70s.45

.

45 Euro Coop General Assembly, Ibid., pp. 7-14

52

53

chapter 4

The Social AuditFramework :.

Business corporations undertake a social audit as directresponse to certain situations, and historically to problemsituations. In cooperatives, however, social audit is a tooland process for strategic management purposes and foridentifying and promoting the “co-operative difference”.Social audit as a technology looks at how the cooperativesare able to meet their objectives, and at what the variousstakeholders from their respective perspectives, are thinkingabout their cooperatives.

54

A social audit begins by defining the scopeand focus of the entire procedure. This is its firstand its most important consideration, The scopeand focus includes the areas of decisions andactions, the objectives of the whole exercise andthe objectives of each area of concern, the mea-surement methodologies and the names of thespecific documents needed for the study. Thescope and focus limits the entire procedure forthat oneengagement being undertaken, and is agreed uponby the organization and the auditor. It likewiseprovides an approximation of the level of inquiry thatis necessary in order to get the information neededto understand and appreciate the cooperative’ssocial performance.

The scope and focus may incorporate all theareas of decisions and actions that are of concernto the whole organization, or it may only cover fewareas that the cooperative feels to be of pressingneed at the earliest time for deeper study. Cer-tainly, that resolve is entirely that of the organiza-tion, since taking such a comprehensive reviewtabs in on resources particularly if it is just startingto undertake the social audit process. It is good, ofcourse, to look at how the organization performs inthe most comprehensive way, but for practicalreasons the social audit can be done piecemeal, asmentioned earlier in gradual and incrementalmanner, limiting to few areas of decisions andactions at the start, and later expanding to otherdecisions and actions, until the social audit canencompass the full range of issues and stake-holder interests that fall within the organization’soperational sphere and influence.

Defining the Scope and Focus :.

55

To provide the cooperative organizations with a distinct approach tosocial audit, it is of prime importance to give stress to the cooperativeprinciples as basis. By doing this, the uniqueness of cooperatives is dulyhighlighted, and the recommendations and the social improvements thatcan come out of the exercise are well-focused and principle-specific. Andwith a common indicator, the cooperatives, here and abroad, are given ameans of comparing themselves with one another, 46 which may later evolveinto common indicators and common standards to measure social perfor-mance for the cooperative sector.

46 Euro Coop General Assembly, Loc. cit., p. 5.

Objectives :.

In this particular social audit design, the areas of decisions andactions under study for the last five years and the general objectives are:

1. To determine the effectiveness of the cooperatives in fulfillingthe requirements of the seven cooperative principles, particu-larly in their efforts to:

a) Answer the needs, uplift the economic status and empowerthe members, through the building up of their own economiccapacities and on the way they assist in building up theincome generating capacities of their members;

b) Involve in community improvement, in social and environ-mental concerns and in solidarity works with other coopera-tive organizations and other organizational formations;

c) Make them truly responsive and democratic organizations;d) Develop social capital, particularly with regards to the youth,

the women and the elderly; ande) Improve the level of efficiency of its management, in relation

to the delivery of services to the members and the commu-nity.

2. To look at the stakeholders’ perceptions, particularly those ofthe members and the staff, vis-a-vis the cooperative.

3. To know the directions for the future.

56

The specific objectives of each area of decision and action are:

Areas of Decisions and Actions*

1st Principle: Open andVoluntaryMembership

1. Database of its members

2. Percentage increase or decrease ofmembers

3. Market penetration

4. Obstacles to membership

5. Convenience in refund of capital forwithdrawing members

2nd Principle: Democratic MemberControl

1. Number of general assemblies

2. Average number of voting membersin GA

3. Percentage of MIGS to totalmembership

4. Quality of criteria in determiningMIGS

5. Members’ Perception on the impor-tance of the GA

6. Members’ perception on theirparticipation in the affaires of theco-op

Objectives

To determine how often the co-opupdates its membership databaseTo determine the rate of increase ordecrease of the co-op’s membersTo determine the depth of the co-op’smembership base in relation to totalpopulation in its area of coverageTo determine if there are policies thatserve as obstacles to the entry of newmembersTo determine how fast can a memberwithdraw investments in the co-op

To determine the co-op’s adherence to theby-laws and to the Cooperative Code,while recognizing the importance of theGeneral Assembly as the highest policymaking bodyTo determine the extent of participationof members in the parliamentary affairsof theco-opTo determine the quality of the composi-tion of the co-op’s to total membershipTo determine the co-op’s basis, whetherstringent or lenient, in determining theMIGSTo determine how the members perceiveof the general assemblies they hadattended.To determine how the members perceiveof their participation in the affairs of thecoop

*5 years, unless specified otherwise

57

7. Number of BOD meetings

8. Compliance to the provision on theterms of office of board of directors andcommittee members9. Number of committee meetings

10. Integrity, character and credibility ofofficers

11. Members’ perception on the perfor-mance, participation and conduct ofofficers

12. Presence of core management team (manager, cashier, bookkeeper)

13. Members perception on the deport-ment of staff

14. Members’ perception on the staffs’performance

15. Policies and procedures

16. Members’ perception on the efficiencyof the coop’s service delivery

17.Development plans

18. .Institutional mechanism throughwhich the board and management ofthe co-op consult the members priorto any decision

To check whether the board of directors isholding regular monthly meetings asmandatedTo determine the co-op’s compliance withthe provisions on the terms of office ofthe officersTo check if the different committees arefunctional and are performing theirmandated dutiesTo determine the character of the officersbased on the patterns of their contribu-tions to the share capital and theirrepayment to their loans.To determine the members’ perception onthe performance, participation and conductof the officersTo determine if there is properdelineation of duties, functions andresponsibilities, and to look at the internalcontrol system that is establishedTo determine the members’ perception onthe way the staff deals with themTo determine the members’ perception onthe performance of the staff in relation totheir jobsTo determine the level of codification ofboth financial and non-financial policiesand procedures of the cooperativeTo determine the perception of themembers on the manner the services ofthe cooperative are deliveredTo determine if the co-op has short-term,medium-term and long-term plans, all-important requirements in the realizationof goals, objectives and strategies.To determine the sensitivity and respon-siveness of the co-op to member participa-tion, and to determine the operationalmechanisms that are in place to generateideas and suggestions from the membersand staff prior to any decision

58

19. .Monitoring mechanisms to gatherfeedback

20.Members’ perception on thereceptiveness of the co-op on theirverbalizing of ideas, suggestions andcomplaints

21. Members’ satisfaction that theirideas, opinions and grievance are heard

22. Members’ perception on the creationof branches23. Members’ perception on the creationof chapters24. Board members, male female ratio

25. Committees, male female ratio

26. Explicit provisions in its vision-mission-goals, in its by-laws and orother policies and procedures regardinggender-fair promotions

3rd Principle: Member EconomicParticipation1. Number of members contributing to

share capital & savings deposits2. Membership patronage to cooperative

products and services

3. Paid-up capital and savings mobiliza-tion

4. Members’ borrowing pattern beforebecoming members

To determine the perceptions ofmembers on the officers andmanagement’s readiness to respond totheir opinions, ideas and grievancesTo determine the perception ofmembers on the creation of branchesTo determine the perception ofmembers on the creation of chaptersTo determine the earnestness of the co-op in promoting equality of represen-tation across gender in the BoardTo determine the earnestness of the co-op in promoting equality of represen-tation across gender in the committeesTo determine whether gender-fairpromotion has now been integrated inthe cooperative’s VMG, by-laws andother policy instruments

To determine the number of memberscontributing to savings and paid-upcapitalTo determine the extent of themembership patronage or responses tothe co-op products and servicesTo measure the percentage increase insavings and paid-up capitalTo know how the members fend forthemselves when they were in need ofcash before they became members ofthe coop

To determine the mechanisms employed by the co-op to gather feedback, ideas and suggestions frommembers and staffTo determine the perceptions of members on thedegree of ease that they have in verbalizing theirideas, suggestions and complaints

59

5. Members’ perception on the cost ofservices of the coop

6. Members’ perception of the interestsof the coop for their savingsdeposits

7. Co-op’s marketing practices

8. Members’ perception on co-oppractices in its dealings with its clients

9. Allocation of patronage refund andinterest on capital

10. Presence of institutional providen-tial services to members

11. Presence of specific programs andservices for senior members

4th Principle: Autonomy andIndependence

1. Type of internal capital-up build-upmechanisms being implemented oradopted2. Type of savings mobilization

schemes being implemented

3. Percentage increase (decrease) inworking capital

4. Profitability ratio (net income overgross income)5. Current ratio

To determine the perception of themembers on the pricing of the co-op’s products and servicesTo determine the perception of themembers on the interests rates forsavings deposits in the co-op.To determine whether the co-oppractices fair pricing of their products,and to find out the members’perception on this.To find out the perception of themembers on the co-op’s dealingswith themTo determine the ratio in theallocation of interest on capital andpatronage refund from the whole netsurplus packageTo measure the intensity of theefforts of the co-op to respond andprovide providential services to themembersTo know the presence ofcooperative’s specific programs andservices for its senior members

To find out if the co-op has adoptedsome mechanisms for its capitalbuild-upTo find out if the cooperative hasadopted schemes for savingsmobilizationTo measure the rate of increase ordecrease in the working capital of theco-op, internal or externalTo determine the profitability of theco-op as determinant of autonomyTo measure the liquidity of the co-opand its capability to extend betterfacilities and services to the members

60

6. Compliance with government rulesand regulations

5th Principle: Education, Training &Information

1. Education services/Programs for thelast 5 years

2. Members’ perception on theimportance of ownership meetings

3. Economic capability buildingprogram

4.. Culture building programs

5. Presence of gender related trainingfor officers, staff or general member-ship

6. Presence of education programsfor the successor generation

7. Presence of a youth developmentprogram

8. Dissemination of important co-op information on operation

9. Designation of point person incharge of information andcommunication

To find out the co-op’s compliancewith all legal requirements, in particularthe requirements of CDA, BIR, LGU,DOLE and SSS/Medicare

To determine the educational servicesand programs of the co-op for themembers, as part of its responsibili-ties and duties to develop themembersTo determine the perception of themembers on the importance ofownership meetings to their educationTo determine whether the co-op hasprograms to develop the capability ofthe members to manage their owneconomic endeavorsTo identify the culture buildingprograms of the co-op and to findout whether these are well aligned withthe co-op’s social purposeTo find out whether the co-op hasimplemented gender related trainingprograms for the officers, staff ormembersTo find out whether the co-op hasprograms that ensure the preparationof the younger staff and members forfuture leadership or key managementpositionsTo find out whether the co-op hasprograms for all the youth in its areaof operationTo determine if the co-op allows fullaccess by members to informationregarding management operationsTo determine the earnestness of theco-op in information dissemination

61

10. Dissemination of importantcooperative information on theorganization11.Media of communication todisseminate information

12. Capability enhancement programof board of directors, committeesand management staff

6th Principle: Co-operation AmongCo-operatives1. Economic participation in otherCo-ops

2. Active support to federation/apexorganization

3. Partnership, cooperation, and/oralliances (business or otherwise)with other co-operatives and civilsociety formations

4. Participation in the cooperativefederation/union activities/programs

5. Patronage of federation/apexorganizations’ services

6. Number of board members/officersin co-operative secondary organiza-tions and time spent

To determine the co-op’s activesupport to federation or apexorganizations, in terms of CETF andannual dues remittancesTo determine the co-op’s effort inpromoting mutual understandingwith other organizations, whether co-operatives or non-cooperativesTo determine the co-op’s level ofparticipation in the activities of thefederation or unionTo determine the co-op’s patronage ofthe services of the federations or apexorganizationsTo determine the number and timespent of officers and staff of the co-op who are participating in the affairsof the federation or union

To determine the cooperative’ssolidarity and partnership efforts inthe field of joint economic endeavorsor investments with other co-op orwith the federation

To determine if the co-op allows fullaccess by members to informationregarding the organizationTo determine the mechanismsemployed by the co-op to dissemi-nate information to members, staffand communityTo determine whether the co-op hasimplemented a capability enhance-ment programs for the board,committee members, and manage-ment staff to make them moreskillful and proficient in their duties

62

7th Principle: Concern forCommunity1. Environment protection programsand activities

2. Community infrastructure projectsfacilitation

3. Advocacy and education on socialdevelopment

4. Cultural, sports and value enhance-ment program

5. Participation in local governanceprograms

6. Presence of institutional gender-specific programs that were imple-mented in the last two years

The Coop’s Staff1. Commitment to the VMG

2. Enjoyment and satisfaction in work

3. Staff’ feeling of being a part of asupportive team

4. Agreeableness of work environmentto health5. Fairness and objectivity of perfor-mance rating

6. Reasonability of remuneration andother benefits

7. Long-term future with the co-op

To determine the level of commitment ofthe staff to the VMG of the cooperativeTo find out whether the staff findsenjoyment and satisfaction in their workTo determine the level of bonding andunity of the staff as an importantdevelopment block of the cooperativeTo look at the workplace for its hindranceto healthy livingTo determine the staff’s perception on thefairness and objectivity of the system ofperformance rating for the staffTo determine the staff’s perception on thereasonability and equitability of the co-op’ssystem of remuneration and the provisionof other benefitsTo determine the staff’s level of proclivityfor long term engagement with thecooperative

To find out whether the co-op isinvolved, and to determine its level ofinvolvement, in environmentalconcerns of the communityTo find out whether the co-op isinvolved, and to determine its level ofinvolvement, in the facilitation ofcommunity infrastructure projectsTo find out whether the cooperative isinvolved in advocacy work along socialdevelopment issuesTo determine the co-op’s communityinvolvement in cultural, sports andvalue enhancement activitiesTo find out and determine the co-op’s level of involvement in localgovernance programsTo determine if the co-op has concretegender specific programs for themembers and the community

63

Measurement

The other aspect thatcomes with the agreement on thefocus and scope is measurementand the measurement tools forgauging the cooperative’s socialperformance. Measurement, ineveryday usage, refers to someestablished yardsticks to deter-mine either the feature of aphysical object or the qualities ofcertain abstract concepts. In adictionary sense, it refers to theprocess of ascertaining theextent, the dimensions, thequantity, the range, the scope,the size, the magnitude, and thecapacity of, especially in compari-son with a standard. In research,measurement is the process bywhich one tests or deduces froma hypothesis or theory that certainconditions should exist in the realworld, then they are measured forthese conditions47 .

The measurement tools,on the other hand, refer to thetechniques and instruments usedas accurate counters of what areto be measured. These includesurvey questionnaires, interviews,observations, content analysis ofdocuments, etc. The choice ofmeasurement tools is determinedby a variety of factors that must

be satisfied to maintain theintegrity of the audit process.The following criteria 48 are testsof sound measurement tools.

Validity. This refers to the extentto which a measurement tool canmeasure what are actually beingwished to measure. There aretwo forms of validity: externalvalidity and internal validity.External validity refers to thedata’s ability to be generalizedacross persons, settings andtimes. Internal validity refers tothe ability of the tools to reallymeasure what it claims it does.

Reliability. This deals with theaccuracy and precision of themeasurement procedure. Someof the tests here are: stability(consistency of results withrepeated measurement of thesame person with the same

47 C. Wiliam Emory and Donald R. Cooper, Business Research Methods, IRWIN, Boston, MA, 4th Edition, pp. 179-190.48 C. Wiliam Emory, et. al., Ibid., pp. 179-190.

64

instrument), and equivalence (to determine errorintroduced by different interviewers and differentsamples),

Practicality. This concerns with economy (the besttrade-off between the ideal social audit and thatwhich the budget can afford), convenience (easy toadminister and easy to answer by the respondents)and interpretability (the ease in the correlation ofdata, the effortlessness of the tasks of interpretationand analysis).

The co-operatives may choose to adopt a number ofmeasurement tools that are already available, andadapt them to their needs, or they may develop theirown. What is important is that the measurementtools chosen are capable of assembling as much ofthe available information as are required to carry outa good and thorough social audit.

65

Measurement tools for documents :.

Over the years, cooperatives usually accumulate volumes ofdocuments. These documents include time-bound lists of members,attendance sheets of general assemblies, ownership meetings,training programs, minutes of meetings, lists of beneficiaries ofprovidential programs, and many others too numerous to list themhere. These documents are kept and are usually easily available. Butmore often, these merely fallow in the files and archives, either

smoldering or just simply waiting torot. They remain unanalyzed for theircorresponding value in providinggood historical perspectives of thecooperative’s performance over theyears.

These documents, and thedecisions and actions containedtherein, are relatively easy tomeasure. In research, Calderon, et.al., calls this as content analysis,which he defines as “a researchtechnique for the objective, system-atic, and quantitative description of

the manifest content of communication.”49 It must, however, becarefully sifted to isolate the irrelevant from the materials that arepertinent to the assessment of social performance. Some of thesematerials might have been subject of past reports, to be sure, butothers are in the raw and still will require processing. Of course, thework would have been easier had it been routinely book-kept (socialbookkeeping is discussed in Chapter 2) along the way or right afterthe time when these decisions and actions had occurred.

Content analysis, to be of value to the social audit process,must have the following characteristics: 1. It is objective, by including

49 Jose Calderon, et. al., Loc. cit., p. 75.

getty image of fileddocs

66

Measurement tools for stakeholders’ perceptions :.

The social audit may explore further, venturing into such areas ofconcern as stakeholders perceptions, opinions, etc. on serviceefficiencies, deportment of officers and staff, cost of products andservices, and the like. These are not easy to get; there are no data thatare readily available in the cooperatives. To get to this valuable informa-tion, these must be operationally defined by adopting or developingprocedures and measurement tools and integrating them into the socialaudit process. These tools can come in the form of:

and considering all relevant items; 2. It is systematic,by utilizing forms that are previously prepared forease of recording and retrieval; and 3. It isquantitative, by using a system of tallying informationand by basing the interpretation of the data onfrequency counts.

To arrive at an objective analysis of thecooperatives’ social performance, standards are putin place in the social audit framework, to serve ashurdles to measure the level of compliance and laterto determine the strengths and weaknesses of thecooperative in each area of decision and action. Thestandards, as provided, are outcomes of discussionand have been agreed upon by the cooperatives andthe auditor, especially given the absence yet ofsector-wide standards and benchmarks. The hurdles,for lack of known term at the moment, are referredhereto as social performance hurdles — and act assuch — to measure the levels of performance. (Note:Detail on this are found in Chapter 5, particularly onthe section on interpreting the documents.)

67

Survey Questionnaires. In developing these tools, the following steps50

are taken:

a. Concept development. Here, the first task is to conceive and create theconstructs of interest. A construct is the general term to encompassseveral concepts; “cooperative’s image”, for instance, is a construct, andit refers to the cooperative’s reputation among various groups. Indeveloping this, the many specific ways of the cooperatives’ interactionand involvement with various groups must be enumerated, including thenature of all these involvement.

b . Concept specification. The second task is to break down the constructinto its component parts: “corporate citizenship”, “employer”, “supplier ofproducts and services”, “ treatment of customer”, “concern for members”,“participation of members in the affairs of the cooperative”, and someothers. “Corporate citizenship” may further be broken down into:“facilitation of community projects”, “participation in community affairs”,“implementation of missionary programs”, “advocacy work on socialissues”, etc. Or, “employer” may be broken down into: enjoyment inwork, satisfaction in promotion procedures, grievance handling, etc.(Note: a and b are covered in the formulation of the social audit frame-work, and referred to therein as areas of decisions and actions, which isalso equivalent to the term variable in research.)

c. Indicator selection. The indicators refer to the measures by which eachoperationally defined concept is rigidly determined. Indicators can beclassification (nominal, e.g. male, female), numbers (ordinal, e.g.a>b>c), differences between numbers (interval, e.g. bad 1 2 3 4 5good), or equality of ratio (with zero as origin).

d. Formation of indexes. When there are several dimensions of a concept,care should be taken that the indicators have their common equivalenceto enable later to combine these indicators into a single index. Onesimple way of doing it is to provide scale values to the responses andcombine the scores and average the scores, for better perspective of theissues under consideration. (Note: The details of the process on interpretation of the

data are discussed in Chapter 5.)

50 C. William Emory, et. al., Ibid., pp. 190-192.

68

Observations.Observation includes the full range of monitoring behavioral and non-behavioral activities and conditions. This is the least structured, but itcan be useful. As the social auditor acquires the experience inmeasuring social performance, observation will play an increasing partin information gathering and evaluation. However, it should only beused as a complimentary technique to more structured measurementtools.

StakeholdersCooperatives depend on a coordinated team consisting of four

major blocks – member-owners, board of directors and committeemembers, the manager and the other employees. Each block has itsown duties and responsibilities, and the cooperatives’ success verylargely depends on the intelligent and active cooperation and thediligent carrying of loads by each group52 .

Interview schedules. An interview is a highly productiveinformation gathering technique, provided that theserules51 are observed:

a. The interviewer is well trained and competent in hisrole;

b. The interview is well structured, by using an inter-view guide or schedule for consistency as tocontent, for suitability to comparison, and forguaranteeing completeness;

c. The interview process allows digression when it isclear that there are other useful information that theinterviewee can contribute; and

d. The interviewees are selected with the view ofassembling a reliable and representative cross-section of perspectives.

51 Cooperative Union of Canada, Op. cit., p. 17-18. 52 Donald A. Frederick, Coops 101: An introduction to Cooperatives, USDA, 1997, p. 24.

69

Members. The members are the foundation of coopera-tives. They organize them and their needs are the reasonfor the cooperatives’ existence. Their support, throughpatronage and capital investment, keeps the cooperativeseconomically healthy, and the members changingrequirements shape the cooperatives’ future.53

The members have the power to control thecooperatives and the duty to use those powers for theirmutual benefits. Such powers include the power to adoptand amend the Articles of Cooperation and By-laws, toelect and remove directors and other elected officers, todecide to dissolve, merge or consolidate or form jointventures with other cooperative or non-cooperative firms,and to make sure the officers, directors and otherscomply with all relevant laws and their articles of coopera-tion and by-laws.

On the other hand, the members also have veryspecific obligations to cooperatives. They must patronizethe products and services of the cooperatives and providethem with the necessary capital. The members’ otherobligations are: to be always informed about the coopera-tives, to be conscientious in selecting and evaluatingdirectors and other officers, and to evaluate the perfor-mances of the cooperatives.

53 Donald A. Frederick, Ibid. p. 24.

70

Directors and Committee Members. The directors ofcooperatives occupy a key position between the membersand management; they are both users of the cooperatives’products and services and representatives of the othermembers who depend on those same products and services.Acting as a group, they set the objectives of thecooperatives, and their decisions set the direction that thecooperatives take54 . Some of the broad managerial decisionsof the board are: hire competent managers, adopt broad andgeneral policies to guide the managers, develop and adoptlong-range business strategies, require financial reports andoperating statements, direct the managers to prepare budget,hire qualified auditors, and many others.

The committees are extension of the general assem-bly to perform some very special functions in relation to someorganizational and operational concerns of the cooperatives.

Manager. The success of cooperatives largely depends ona good board/manager relations. Their working relationship

54 Donald A. Frederick, Ibid., p. 26.

71

requires respect and an understanding of each other’s responsibilities.

The boards decide what the cooperatives will do; the manag-ers and key staff decide how these can best be done, subject toreview by the boards. The managers are chosen by the boards andare accountable to them. The responsibilities of the managersinclude, among others:

a. supervision and coordination of the business activities ofthe cooperative;

b. hiring, training, supervising and setting compensation foremployees; and

c. reviewing, reassigning or replacing employees not meetingacceptable performance levels.

Employees. Working for cooperatives is similar to doing the samejob at any other firm. But, working in cooperatives places uniqueobligations on the employees such as:

a. To understand the purpose, objectives, operations and their roleas employees, to help improve member relations, the coopera-tives’ image and the general public’s understanding of coopera-tives;

b. To provide the best possible services to members; andc. To maintain a high level of customer satisfaction.

72

Other stakeholders. In addition, cooperatives have other stakehold-ers. And these are the following, with the respective areas of deci-sions and actions of interest to them55 :

Other Stakeholder Groups

Customers (other thanowners)

Suppliers/depository banks

Lenders, depositors

Government

Local community

General public

Competitors (other coopera-tives, banks, other lendingretailers and deposit takers)

Areas of Decisions and Actions

Products, services, pricing and marketingpracticesBusiness survival, profits, growth potential,products or service developmentBusiness survival, growth potential, ability torepay, financial management, public imageTax revenues, legal compliance, employment,employment practices, environment, wastemanagementEnvironmental impact, products or services,contribution to community projects andactivitiesBusiness standards and practices, environ-mental impact, social contribution (assistanceto disadvantage groups, cultural support,social services related to organizationalactivities)Market share, profits, dividends, capitalinvestments, products or services, publicimage

In summary, these stakeholders can be classified56 into:

a. Those who affect the cooperative, in particular those whohave power over its direction such as the staff, the boardmembers and other officers, committee members andmember-owners.

55 Cooperative Union of Canada, Op. Cit., pp. 5-656 John Pearce, Peter Raynard and Simon Zadek, Social Auditing for Small Organizations: A workbook for Trainers and Practitioners,London, p. Stage 3, p. 5.

73

b. Those who are affected by the cooperativesuch as the leaders and staff themselvesand their respective families, the members,apex organizations, the community resi-dents, the local government and manyothers.

c. Those who are core to the goals, missionand vision of the cooperative such as theleaders, members, elders, apex organiza-tions, and others.

d. Those with whom the cooperative mostdirectly and commonly interacts with suchas suppliers, depository banks, and manyothers.

74

57 John Pearce, et. al., Ibid., p. Stage 3, p. 2.

Those core to itsvision/mission/goals

Those who affectthe cooperative

Those affected by thecooperative

Those mostinteractedwith

By way of schematics57 , this can be illustrated thus:

75

Determining the stakeholders of cooperatives is mostimportant in a social audit. This is even more crucialin the social audit models that give more premiums tostakeholders’ survey. But whatever the model, thestakeholders component is very important, becauseonly by taking account of the perceptions of variousstakeholders can a more profound and good-sided,albeit objective, picture of the cooperatives undersocial audit could be established.

76

77

chapter 5

Stages in Social Audit :. The stages of the social audit, as describedhere, enumerate and describe the actual step-by-stepprocess to complete the entire social audit procedure– from pre-social audit stage, to implementationstage, and finally to the post-social audit stage.

78

These stages are and, in many ways, have to be peculiar somehow tothe context and milieu*. Nevertheless, the entire procedure earnestlytrails the path and absorbs all the nuances of the financial auditpractice, social audit being directly descended from the former.

Pre-social audit stage

a. Terms of Reference and Contract

The first stage in a social audit engagement isagreeing on the terms of reference for the whole procedure.The terms of reference contains the basic agreements of thetwo parties — the cooperative and the auditor or the auditinggroup. This describes the context, the project partners andproblems, as well as defines the project strategy, the contentand the expected results. Furthermore, this gives details ofthe work structure, the project management, monitoring andevaluation mechanism, and the implementation plan of theentire procedure.

The terms of reference stands as the binding contractbetween the parties to the social auditengagement.

b. Packaging the Social Audit Framework

The second step is to write the social audit framework. Ofcourse, writing starts with researching on existing social auditinstruments, formulating a matrix of the instruments with theirrespective distinctive features, and the constructing itself ofthe provisional draft. The draft serves as the basis ofdiscussion, or talking points, in a workshop.The workshop isparticipated by the auditors, as facilitators, and therepresentatives of the client cooperative who are necessarilyfrom the ranks of both the staff and officers. The workshopserves as the arena for defining and fine-tuning the draft

*The process as described here is the exact paths of the social audits done in two co-ops in Cebu

79

framework, with the end in view of coming up with thefinal version of the social audit framework with theareas of decisions and actions and the variousindicators to determine the level of the cooperatives’social performance. In case so many changes areintroduced, another workshop may be called to wrapup and completely package the social audit frame-work.

With the results of the workshop, and alreadyin its final packaging, the social audit framework isnow for the approval of the Board of Directors of theclient cooperatives. Such presentation and approvalare necessary for purposes of common ownership,since the framework is the sole basis of all interpreta-tions on social performance later. (Refer to Book 2:Tools for Social Audit, Appendix No. 1. The details ofthe said social audit framework are also discussed inChapter 4.)

c. The Social Audit Assessment Instrument

Social audit, as pointed out earlier, comes with pedigree fromfinancial audit. As such, the main task after the approval of the socialaudit framework is to write the social audit assessment instrument. Asa tool, the social audit instrument is used (a) to determine theavailability of the documents as listed in the social audit framework,(b) to determine the codification status of each document, and (c) toidentify their respective custodians. Below is the SA Assessmentinstrument, in part:

Documents

1. Members information, indicating thefollowing data: number of members, ageprofile, sex profile, share capital as of Dec. 31,savings deposit as of Dec. 31, loan accounts asof Dec. 1, aging summary, MIGs profile

2. Criteria in determining of MIGS

information: attendance, date, venue

Availability

Yes NoCodification

StatusPerson in-

charge

(See complete details in Book No 2: Tools for Social Audit, Appendix No. 2)

80

e. The Working Papers

The writing of the working papers follows. The working papers arethe various tabular forms to capture the data from the source docu-ments. There are nearly 80 of them in this Manual, and each repre-sents an area of concern so specified and threaded in the social auditframework, and labeled as Working Paper No. 1.1 to 7.7. The numberof the working paper depends on the agreed areas of concern in thesocial audit framework as mutually agreed upon by the project manag-ers of both sides – the management of the client cooperatives and theauditors’ group.

The working papers are the instruments used to systematize thedata collection or extraction of information from the documents, alsocalled content analysis or documentary analysis, into a more compre-hendible format, to allow easier comparison and interpretation later.The numbering of the working papers is necessary for continuity inflow of both the process of recording and of the interpretation later,and in the filing of the working papers for easy retrieval and reference.(Refer to Book 2: Tools for Social Audit, Appendix No. 7)

d. The Social Audit Program

After the assessment instrument, the social audit programis also written. The social audit program is a tool that is specifying theprocess and the schedule of the streaming of the documents into thehands of the social auditor, and specifying further the nature of thework involved as well as determining the level of work given to eachdocument. Similarly, this tool in some ways also determines theprogress of the entire social audit procedure.

The social audit program, in a nutshell, helps the socialauditor, as well as the project managers, to identify problem areasespecially in the obtainment of, and verification on, the authenticity ofthe documents and the precision of the entry of the contents of thedocuments into the working papers. See Book 2: Tools for SocialAudit, Appendix No.3 for the conformation of the SA Programminginstrument.

81

f. The Working Paper Monitor

The working paper monitor is a checklist on thefilling-up of the working papers. This serves as a consoli-dating instrument to guide the social auditor, and theproject managers, to quickly monitor the workflow anddetermine the achievements in terms of percentages tothe whole procedure. The monitor enables the auditorsome degree of thoroughness. Thus, there is no way thatcertain data are left out in the rush to complete the work.See Book 2: Tools for Social Audit, Appendix No. 4.

g. The Survey Questionnaires and Interview Schedules

After the approval of the social audit framework, another group ofwork, which can run in parallel with the writing of the assessmentinstrument and others, is the framing of the survey questionnaires andinterview schedules for stakeholders. As may be so specified, thesequestionnaires and schedules may be for the members, the staff, thecommunity, church and LGU leaders, the non-members, and even themembers who have withdrawn membership from the co-op. All thesehave to be made tailor-fit to the specificity of each stakeholder group.

The areas of decisions and actions as contained in the approvedsocial audit framework are already concept-specific; meaning, eacharea already represents a variable that is ready for verification. In

research, a variable is a symbol,or a subject matter that is readyfor formulation into question form,and to which numerals or values,also called indicators, are as-signed. With the variables in-place, the indicators of eachvariable are selected. And aspointed out in Chapter 4, there arefour types of indicators, namely:

picture of person doingsurvey or concentrating

82

1. The nominal scale. This utilizes indicators by simplypartitioning a set into subsets or categories that aremutually exclusive and collectively exhaustive — e.g.male, female — and if numerals are used these aremere labels and have no quantitative value.

2. The ordinal scale. This has the characteristics of thenominal scale plus an indicator of order, as ex-pressed in this postulate: if a is greater than b and bis greater than c, then a is greater than c — e.g. verysatisfactory, satisfactory and not satisfactory.However, this method does not take into account howmuch greater or lesser.

3. The interval scale has the strengths of nominal andordinal scales plus the concept of equality of interval,e.g. the distance between 1 and 2 is equal to thedistance between 2 and 3. To put this into operation,this can be expressed in scaling the categories into ascale of 1 to 5 where 1 is the lowest and 5 is thehighest.

4. The ratio scale incorporates all the strengths of thethree plus the concept of absolute zero as point oforigin.

In Book 2: Tools for Social Audit, two sample questionnaires aremade as part thereof. One is the members’ survey which is utilizingthe nominal and the ordinal scales, and the other – for the staff – withthe ordinal scales (See Book 2 Appendix No. 4 and 5). Of course, thechoice of the scale depends on the preference of the auditor, and thedepth by which the social audit is intended to be by the projectmanagers. The same process applies to the interview schedule.

83

d. Designing the Sampling Methodology

To ensure the reliability, accuracy and validity of the information gatheredfrom the surveys, the sampling methodology has to be tailored to thespecificity of the stakeholder being surveyed. In general, there are twogeneral classifications of sampling methodologies: the probability sam-pling, where the researchers use a random selection of elements to reduceor eliminate sampling bias; and the non-probability sampling, where theresearchers have choices which groups or persons to include in thesamples. Under each classification are:

Probabilitysampling

Simplerandom

Systematic

Cluster/area

Stratified

Double

General description

Samples are drawn using arandom number table, whereeveryone in the population haveequal chance of being included

Every kth element is sampled,beginning at a random start of 1

Sub-division of the populationinto clusters or areas, and ran-domly choosing a number ofareas which are then studied intoto

Subdivision of the populationinto homogeneous substrata, andrandomly choose elements fromwithin the chosen strata. begin-ning at a random start of 1

Collecting data using previouslydefined techniques from the samesamples, and selecting a sub-sample for further study

Non-probabilitysampling

Convenience

Judgement

Quota

Snowball

General descrip-tion

The researchers arefree to choosewhomever they findat their convenience.

The researchershandpick thesamples to conformto some criteria, i.e.all midwives on theissue of abortion

The researchers pre-study certaincharacteristics anddimensions of thepopulation, anddraw samples basedon that to representthe whole popula-tion

This method usesreferrals, e.g. fromone interviewee toanother throughthe referral of theformer

84

Given the nature of cooperatives – wherethe members are literally “everywhere butnowhere” (i.e., they are in the community butthe community has non-member residents) –what seems to fit is the “crossbreed” of thearea sampling of the complex probabilitysampling and quota sampling of the non-probability sampling. The aspect of areasampling, to be applicable to cooperatives, isthe identification of a chapter in an area that ishomogenous to the other chapters but with aheterogeneous population to represent thewhole group or cluster, and the aspect of quotasampling is the pre-identification of the samplechapters as representatives of certainstratification in the cooperatives’ membershipand the drawing of samples from thesechapters. And all those in attendance of theownership meetings are automaticallyconsidered as respondents to the survey,which is another basic feature of quotasampling.

The choice of the sampling design,however, has to be dictated by the require-ment of economy, fluidity of the samplingframe, the absence of more viable samplingdesigns for best trade-off, and the ease by

85

which the auditor can implement the surveys. There is no single principlethat would lead the investigator to choose a particular sample-scheme tothe exclusion of others.58 Definitely, deciding on the choice is premised onthe assumption that whatever the methodology chosen it is without eversacrificing the quality of the engagement and the integrity of the results.

To determine the number of respondents to the survey, even beforethe survey is done and be within acceptable margins of error, the for-mula59 is:

Population size (total membership count)

Sample size (unknown) = 1 + Population size (Desired margin of Error)2

The determination of the margin of error is the auditor and the projectmanagers’ decision. And the choice can be as stringent as +/-1% or asloose as +/-10% or more margins of error.

58 PSSC, PSSC Social Survey Series No. 1, Social Survey Research Design, 1973, p. 3:5659 Cynthia R. Guerrero de Leon, George Garcia and Cristobal M Pagoso, Fundamental Statistics for College Students, Sinag-TalaPublishers, Inc., Manila, 1992, p. 17.

86

i. CPM: Pre-Social Audit Stage

START 1

2

3

4

5 6

7

8

9

10

11

Writing the survey

questionnaire for staff

Designing the sampling frame

Writing the SAProgram

Writing thefinal SAframework

Additionaloutput on theSA

Writing the survey questionnaire for members

Writing thefinal SAframeworkdraft

Reproduction of

reading materials

Writingthe TOR

Developproposal

Review of

Literature

Presentation of

SA Presentation

87

Fieldwork Stage of the social audit

a. Assessment

The first step in the fieldwork stage is the assess-ment. As pointed out earlier, the social audit assessmentis there (a) to determine the availability of the documentsas listed in the social audit framework, (b) to determinethe codification status of each document, and (c) toidentify their respective custodians.

With these purposes, the auditors request the man-agement of the client cooperatives for a meeting with thekey staff o, especially those who are supposed to havecustody of records and are therefore the likely persons towrite down the information as specified in the workingpapers. For practical reasons, it may even do well for theauditor to elucidate to these individuals the rationale – thewhy, the what and the how — of social audit and toelucidate on its real implication to better services and tothe long-term stability of cooperative. (Note: Based onthe actual experience, there is truly a need to give orienta-tion to the staff, particularly for those who are not involvedin the earlier deliberations regarding social audit but arecrucial in the auditor’s getting hold of the documents. Theorientation is a kind of a leveling-off of understanding withthe sidelight of allying hidden fears for the exercise’sturning into a performance evaluation of the individual staffmembers.)

b. Letter Requesting for the Documents

With the codification determined, the auditor writes aletter to the management of the cooperative, requesting forthe co-op’s records. Together with the letter are the list ofthe documents, previously identified in the assessment asreadily available, and the working papers with which to use

88

for writing down the needed information ascontained in the co-op’s official records. In thisway, no official records are taken out of the co-op’s premises.

c. Content Analysis

In general, the co-op’s staff does the nextstep. This is content analysis, which is basicallydata collection or extraction of information fromthe cooperative’s source documents. In addition tothe discussion in the previous chapter, there arethree considerations that are worthy of attentionhere, and these are:

a. internalization of the purpose of the entireprocedure by the staff doing the contentanalysis;

b. uniformity in the manner of recording —whether verbatim, through paraphrase, or inoutline form and fidelity in the entry of data;and

c. development of an orderly recording system,for fast retrieval, for ready reference and forflexibility in organizing the information.

The entry of data from such source docu-ments as annual reports and the like into theworking papers may be done by the auditorhimself, since these materials can be taken out ofthe co-op’s premises.d. Recapturing the Essence of Lost Data

In the course of the data gathering, some

89

source documents may no longer be available, or are misplaced and canno longer be found. Here, the auditor has to recapture the essence ofthe information through interviews with the concerned staff, board orcommittee members, or with the concerned members themselves, asmay be the case, who might have an involvement with the specificactivity. This is done, if the information is so crucial to the social audit orif the information make for the accuracy and validity of the findings of thesocial audit engagement.

e. Validation of the data

After the data are collected, the next step is to validate the informationby cross-checking them with knowledgeable individuals on the mattersuch as the board members, the manager and the staff, either thosewho are in-charge of the safe-keeping of the documents or had involve-ment with the activity that is the subject of the document. Cross-checking also includes sampling inspections of the source documents,such as ledger cards, minutes of meetings, etc. This is especially donefor the data that are entered into the working papers by the co-op’sstaff, to check on the accuracy of the information given.

f. Preliminary Interpretation: Data from the Documents

The next step is the preliminary interpretation of the data. Preliminaryinterpretation is simply to compare the frequency counts (in terms ofoccurrences) and the qualitative and quantitative indicators in the docu-ments to that of the qualitative and quantitative indicators that are soprovided in the social audit framework and as reflected too in the workingpapers. The social audit framework provides standards upon which alldecisions and actions of the cooperatives are to be measured, e.g. 25%increase in membership, etc., and upon which the interpretations of thedata are based, on whether the cooperative is weak or strong in thatparticular area of decision and action. The standards of performance actas the social performance hurdles, and in detail these are:

90

91

92

g. The Conduct of the Surveys

As pointed out earlier, the surveys or interviews can run in parallelto the content analysis or extraction of data from the source docu-ments. The members’ survey, depending on the sampling design, caneither piggyback on the ownership meetings or can proceed accordingto its chosen sampling methodology. In case the survey utilizes theownership meetings, the questionnaires can be filled-up by therespondents individually but simultaneously right after every questionis read, translated into the native language and elucidated for its valuein relation to the social audit objectives. The process strengths thesurvey as a methodology by several notches through its assimilationof the nature of interviews where respondents can ask questions toclarify vague points in the instruments.

While the number of respondents may be pre-determined, the actualnumber of respondents still depends on a lot of factors, however, andsome of which are beyond the control of the auditor. These factorsmay include: 1) very wide spread of the dates of ownership meetings,which may likely affect the validity of the research output; 2) unavail-ability of most members, who are identified to be the samples, toattend the ownership meetings as scheduled, or 3) force of nature. Todetermine the margin of error with known number of samples, thefollowing formula60 is used instead:

Total Population - 1 Sample Population Margin of error = Square Root of _____________________

Total Population

h. Editing and Coding of Survey Returns

The survey returns are edited to ensure consistency across

60 This reverse formula is provided by Fedei Bence Lavesores, a student.

93

respondents and to locate omissions. Editing reduces errors in record-ing, improves legibility, and clarifies unclear and inappropriate re-sponses. As a general guide, all returns with less than 50% responsesto the questions have to be discarded.

Edited data are then put into a form that makes comparison andinterpretation possible. Because it is impractical to place raw data intothe forms, alphanumeric codes are used to reduce the responses to amore manageable level for storage and future processing. The codesfollow various decision rules that the auditor has to devise to assist withsorting, tabulating and analyzing. Below is a sample of a codingsystem.

The codes may be integrated into the questions’ responses in thesurvey forms, to make the work a little bit faster.

i. Encoding the Survey Returns

After the codes, the encoding of the responses follows. This isdone by using the spreadsheet program. The spreadsheet programallows a convenient and more flexible means of entering and viewing theraw data. The spreadsheet program is also compatible with somecomputer software on statistics. Data entry on a spreadsheet provides

94

numbered rows and letter columns into which thecoded responses as entries are placed. To encodethe data, this is the format:

The survey returns can be stored at this level ofsystemization. Already, this format allows a roughunderstanding of the data: for instance, respondentno. 1 comes from Branch 1, a female, and is be-tween 21 and 25 years old. This format also allows areview of the survey returns as encoded data in thespreadsheet, through the numbering of the surveyreturns in a way that it corresponds to the numberassigned in the encoded data. This format furtherallows a review even after the data are collated, eitherfor errors in encoding or errors in summarizing thefrequencies of a category’s occurrences, or simply toaudit on the accuracy of the tabulated data.

This part of the work has to come first beforeconstructing a talligram61 . A talligram is a simpletool for tallying responses, and it may be done in theway election results are tallied, or it may be done byvariable and by categories per variable. Or, thetalligram may be utilized for cross-tabulation (seediscussion on cross tabulation), using two or morevariables and so many categories. Doing a talligrambefore encoding the coded responses into thespreadsheet, it has to be stressed however, rendersthe data no longer open for review, except by looking

61 Jose Calderon, et. al., pp 206-208..

95

back again at all the source documents, which arethe survey returns.

i. Preliminary Interpretation: Data from theSurveys

Through the use of a talligram, the frequenciesare then counted and tabulated for preliminaryinterpretation. Preliminary interpretation involvesreducing accumulated data to a manageable size,by developing summaries, by looking for patterns,and applying known statistical techniques to the rawdata.

In nominal scales, the counting of number is theonly possible arithmetic operation. If numbers areused, as pointed out earlier, the numerals arerecognized as labels only and have no quantitativevalue.62 And the mode is the only measure of centraltendency here, with crosstabulation as tool toprovide insight into the important data patterns. Fortest of significance, if ever it is so necessary tocalculate them, the mathematical operation islimited to the chi-square test.

Because the ordinal scales have only a rank

62 C. William Emory, Ibid., p. 172.

96

meaning, the appropriate measure of central tendency isthe median, and the percentile or quartile measures fordispersion. For correlation, these are restricted to variousrank-order methods and for the measures of statisticalsignificance to all nonparametric methods.

For the intervals, both the mode and the mean canbe used as measures of central tendencies, with thestandard deviation as the measure of dispersion. Throughthe use of the mean, deeper analysis is possible by wayof the formation of indices and of item analysis, and forthe tests of significance, again if it is so necessary, theproduct moment correlation, analysis of variance, t-testand f-test are appropriate statistical procedures.

The ratio scales represent the actual amounts of thecategories in a variable, and these are very appropriate inmeasuring physical dimensions such as weight, height,distance and area, or in business in money values, returnrates, amount of time in a time-period sense, etc. Forratio scales, all statistical techniques mentioned aboveare usable, in addition to its ability to integrate othermanipulations using real numbers such as multiplicationand division. Geometric and harmonic means can be usedas measures of central tendency and coefficients ofvariations may also be calculated.

(Note: all mathematical operations to determinesignificance of data are beyond this manual. These are,however, found in all standard books on statistics.)

To make interpretation easier, some of the visualtechniques for displaying the data are:

96

97

Frequency Table. The frequency table is an array of data based on thenumber of frequencies that the responses as coded appeared in theencoded data, or in the talligram. Below is a frequency table:

Table 1. Age of Respondents

The unwieldy responses of the 182 respondents are now easily under-stood. The tabled values and percentages are easier to understand inthis format, and visualization of their relative sizes is now improved.(Note: in some practices, the missing responses — no answer — areintegrated proportionately into the other categories by changing the base.They call the new percentage as the valid percentage as distinguishedfrom the percentage taken out of the total number of respondents asbase. Our position, however, is to treat this question the way we treat“don’t know” responses — that is, it is either beyond the knowledge ofthe respondents or that the respondent is simply too courteous to saynegatively and therefore count it as a negative response.)

97

98

The bar graph can be used, using either percentages or theiroriginal units.

Pie Chart. The same data can also be analyzedthrough the pie chart. The pie chart is a bettertool to portray percentages, because the wholepie always represents the 100%. Below is the piechart:

Bar Graph. The same data can also be presented in a much betterway through a bar graph. This is the bar graph:

99

Histogram. For interval data, the histogramis the conventional solution to display thepatterns of the responses. A histogram isbasically similar to a bar graph in appear-ance, but it has displays on categories eventhose without an observe value and showsboth the modal pattern and the pattern of thedistribution, whether the distribution istowards the right or left from the mean, modeand median. Example: in a survey where themean, mode and median age are with thecategory 36–40, and the pattern of thedistribution leans towards the right, then wesay that the data are skewed towards theolder generations. The histogram is useful for(1) displaying all intervals in a distribution,even those without observed values, and (2)examining the shape of the distribution forskewness (measure of deviation fromsymmetry) and the modal pattern.

Crosstabulation. The frequency distribution, pie chart, bar graph,histogram, etc. are primarily concerned with single variabledistribution. Crosstabulation, on the other hand, is a techniquefor the comparison of two or more variables, by making use oftables having rows and columns. When tables are constructedfor statistical testing, we call these tables as contingency tables,and the test performed determines if the two variables areindependent from, or related to, each other. A contingency tablemay integrate two or more variables with as many or morecategories each.

100

In the data above, it is shown that the salary variable is independent fromthe sex of staff and years of service of staff variables.

Percentages. Percentages serve two purposes in data presentation. Theysimplify by reducing all numbers to a range of 0 to 100. They also translatethe data into a standard form, with a base of 100, for ease of comparisonwithin and for comparison with certain external standard or benchmark, orwith previous performance.

To determine the perceptions of the stakeholders based on the datapresentations, the following social performance hurdles are put in-place, toguide the auditor’s interpretation regarding an aspect of the cooperative’ssocial performance:

Below is an example of a 6 x 16 contingency table:

101

102

j. Writing the Preliminary Report

After the preliminary interpretation, the preliminaryreport is written. The preliminary report includes all the datagathered, but does not include yet deeper interpretations,conclusions and recommendations.

i. CPM Fieldwork Stage

Milestones11. Assessment14. Programming/Letter requestingfor documents17. Content analysis of documents21. Preliminary interpretation22. Preliminary report

11

12

13

14

15

16

17

18

19

20

21

22

writingtheprelimi-

Programming& requesting

Content analysis

Validation of data

Preliminary

Members’

Staff’s

Editing andEncoding in

Editing andEncoding in

Preliminary

103

Post-Social Audit Stage

a. Exit Conference

After packaging the report, the exit conference follows. Theexit conference is the objective presentation of the written report withall the data gathered at this point and presented in a manner of “let thefacts speak for themselves”, with spicing up of few commentaries withregards to very visible facts. The primary purpose of this conferenceis simply to validate the data and to add or subtract, or to get reac-tions, or whatever, and to see preliminarily on how the data as writtenare evolving into a compressed and comprehensive written report.

The exit conference has to avoid as much as practicable thegiving out of value judgments, in order not to cloud the presentationwith so much emotion as may be generated by such and rendering thevalidation process, which is the primary purpose, unproductive. It isenough that the board, officers and key staff can see the objectivefacts by themselves, add if some facts are lacking or correct if somefacts are wrong, or clarify if the facts are hazy, or react. Such methodrelies on their maturity to infer, to form opinions and make conclu-sions. No one has to tell them, or pontificate; they only becomedefensive, a state of mind that is so difficult to crack for positiveactions.

104

c. Publication.

The second to the last step in the social audit process is thepublication of the social audit report. This is usually done in twoversions: a short version for the general public and a long version forthe Board of Directors and other officers, the management staff andthe members who have special interest on the report.

d. Reporting to the GA

On request, however, by either the board of directors or themanagement staff, the auditor may close with finality the social auditengagement by reporting to the General Assembly the findings of thesocial audit. This is especially done, if there are disagreements on therecommendations, which the Board of Directors needs resolution atthe level of the general membership.

b. Audit Validation

In case so many data are added or taken out during the exitconference, an audit validation may become necessary. The final reportduring the social audit validation may already include inferencesthrough the identification of the organization’s strengths, weaknesses,opportunities and threats, and conclusions and recommendations. Therecommendations need not have to take the form of injunctions, but asa guide for the board, officers and key staff to formulate policies thattruly come out from their own appreciation of the whole import of theentire social audit procedure.

105

Review andResearch Integration of

new data

Preparation for exitconferencepublication

Preparation forvalidationconference

Writing the finalreport

Milestones23. Exit conference25. Validation conference26. Final Report27. Publication

23

24

25 26 27

e. CPM Post Social Audit Stage

106

107

chapter 6

Writing the Social AuditReport:.

A well presented study impresses, and whatimpresses naturally influences. So many studies withgreat scientific qualities do not get any impact simplybecause of weak presentation. It is thus necessary thatthe social audit report is not onlytechnically adequate and scientifically accurate, but it hasto be well-planned and soundly presented.

108

The Basic Writing Conformation :.

The social audit report is written for the board of directors, officersand staff, and indirectly for the members of the cooperative. Theseindividuals may not have much concern with specific methodological andstatistical details or time to absorb details, but are more concerned withlearning quickly the major findings, conclusions and recommendations63,or they may have little time to absorb details.

The report, therefore, is one that encourages rapid reading, quickcomprehension of major findings and prompt understanding of the implica-tions of these findings and recommendations. However, it should also takeespecial care for the accuracy of the data. In particular, the report carriesthese characteristics:

Readability. Readability is one consideration inwriting the social audit report. Readability meansthe writing conformation is at the level that isappropriate to the recipients’ reading abilities. Totest readability, there are standards, such as theFlesch Reading Ease, which gives scores between0 and 100 with the lower end indicating harderreading, and the Flesch Kincaid-Grade Level,which provide scores that are approximations ofthe school system’s grade levels. (Microsoft’sWord program has capability on these standards.)

These standards are mere approximationof the true readability of the report. But, of course,the report should not be written by formula alone,because good writing calls for a variety of otherskills to assure reading ease and comprehension.

63 C. Wiliam Emory, et. al., Op. Cit., p. 71.

109

Comprehensibility. Comprehensibility is another consid-eration in writing the social audit report. In its dictionarymeaning, comprehensibility means clearness, distinctnessand explicitness.

The social audit report by design is to conveyinformation of a precise nature. Thus, the report is, andshould be, in straight prose and of plain discourse. It hasnone, and should contain none, of the multiple meanings inelegant allusions that are characteristics of literary works.And neither should it be saddled by ambiguity nor riddledwith puzzles, nor written with good supply of jargons,including developmental jargons. Nevertheless, it shouldnot be dull too, or frilly, either. Particular care should begiven in the choice of words – by using words that conveyaccurately, clearly and efficiently the exact meaning andintendment of the messages.

Furthermore, as is required in prose writing thereshould be a judicious use of modifiers, and subordinateideas should not be mixed with major ones to avoidconfusion or reader load in sorting out the important fromthe secondary, or even from the trivial. And as tools, theremust be liberal use of visual displays, such as picturesand graphs. Sentences and paragraphs should be shortand direct.

Tone. Tone refers to the way the prosesounds and the mode it imparts.

The report should convey sincerity,warmth and involvement. There is no placefor negative phrasing in the report. This isnot to say, of course, that the findings orrecommendations have to be changed; itsimply means reforming them into positiveformulations, because the positive tones donot put the receivers of the report on thedefensive64.

64 C. Wiliam Emory, et. al., Ibid., pp. 684 – 686.

110

The social audit report follows a well-delineated format, thus:

I. Social Audit

1. Why conduct a Social Audit?2. What is a Social Audit?3. Value of Social Audit4. The Social Audit field

ii. Executive summary

III. The Auditor’s Prefatory Statements and Certifi-cation

1. The Report2. Basis of the Report3. Limitations4. Comments on the Process5. Auditor’s Certification6. Composition of the Social Audit team

IV. Summary of Findings

A. 1st Principle: Voluntary and Open Membership

1. Database of membersa. ageb. civil statusc. sex

The Report Format :.

111

d. religione. education

2. Percentage increase in regular membership3. Market Penetration

a. Members’ Means of livelihood Profileb. Chapters (in relation to membership expansion)c. Branches (in relation to membership expansion)

4. Obstacles to membership5. Convenience in refund of capital for withdrawing members

B. 2nd Principle: Democratic Member Control

1. Number of general assemblies2. Average number of voting members in GA3. Percentage of MIGS to total membership4. Criteria in determining MIGS5. Members’ perception: Importance of General Assembly6. Members’ perception: Members’ participation in the affairs

of the co-op7. Number of BOD meetings8. Compliance to the provision on the terms of office of board

of directors and committee members9. Number of committee meetings10. Integrity, character and credibility of officers11. Members’ perception: Performance, Participation and

Conduct of Officers12. Presence of core management team (manager, cashier,

bookkeeper)13. Members’ perception: Deportment of staff14. Members’ perception: On staff’s performance15. Policies and procedures16. Members’ perception: Efficiency in service delivery17. Development plans18. Institutional mechanism through which the board and

management of the co-op consult the members prior toany decision

112

19. Monitoring mechanisms to gather feedback20. Members’ perception on the receptiveness of the co-

op of their ideas, suggestions and complaints21. Members’ satisfaction that their ideas, opinions and

grievance are heard22. Members’ perception: Branching23. Members’ perception: Chapter24. Board members, male female ratio25. Committees, male female ratio26. Explicit provisions in its vision-mission-goals, in its

by-laws and or other policies and procedures regard-ing gender-fair promotions

C. 3rd Principle: Member Economic Participation

1. Number of members contributing to share capital &savings deposits

2. Membership patronage to cooperative products andservices

3. Paid-up capital and savings mobilization4. The members borrowing pattern before becoming

members5. Members’ perception: Cost of services6. Members’ perception: Interest rates on deposits7. Members’ perception: Availability of services8. Allocation of patronage refund and interest on capital9. Presence of institutional providential services to

members10. Presence of specific programs and services for

senior members

D. 4th Principle: Autonomy and Independence1. Type of capital-up build-up mechanisms being

implemented or adopted

113

2. Type of savings mobilization schemes being imple-mented

3. Number of income generating undertaking of the coop4. Percentage increase (decrease) in working capital5. Profitability ratio (net income over gross income)6. Current ratio7. Compliance with government rules and regulations

E. 5th Principles: Education, Training and Information

1. Education services/Programs for the last 5 years2. Members’ perception: The educative purpose of

ownership meetings3. Economic capability building program4. Culture building programs5. Presence of gender related training for staff officers

or general membership6. Presence of education programs for the successor

generation7. Presence of a youth development program8. Dissemination of important co-op information on

operation9. Dissemination of important cooperative information on

the organization10. Media of communication to disseminate information11. Designation of point person in charge of information

and communication12. Capability enhancement program of board of directors,

committees and management staff13. Members’ perception: Leadership development at the

chapters

F. 6th Principle: Cooperation among Cooperatives1. Economic participation in other Co-ops2. Active support to federation/apex organization

114

3. Partnership, cooperation, and/or alliances (business orotherwise) with other co-operatives and civil societyformations

4. Participation in the cooperative federation/union activities/programs

5. Patronage of federation/apex organizations’ services6. Number of board members/officers in co-operative

secondary organizations and time spent

G. 7th Principle: Concern for Community

1. Environment protection programs and activities2. Community infrastructure projects facilitation3. Advocacy and education on social development4. Co-op’s marketing practices5. Co-op practices in its dealings with its clients6. Members’ perception: Work ethics of staff7. Cultural, sports and value enhancement program8. Participation in local governance programs9. Presence of institutional

gender-specific programsthat were implemented in thelast two years

115

V. The Co-op’s Staff

1. Staffs’ profile2. Commitment to VMG3. Enjoyment and satisfaction4. Staffs’ feeling of being part of a team5. Agreeableness of work environment to health6. Fairness and objectivity of performance rating7. Reasonability of remuneration and other benefits8. Long-term future with the co-op9. Others

VI. The Auditor’s Analysis and Interpretations, and Conclu-sions

a. Identifying Weaknesses, Identifying Strengths

b. Opportunities that are Open, Threats that are Con-fronting the Co-op

c. Conclusions

VII. Recommendations

VIII. Co-op’s Response: Continuous Improvement of its SocialPerformance

116

The social audit reporttends to be long, given the socialaudit framework, and is usuallydefined and characterized interms of the degree of formality inits language and design. In brief,the contents by section are:

Social Audit.

This section brieflyexplains the value of social auditand why cooperatives have toundergo it, and explains whatsocial audit is all about, theprinciples involved and the scopeof the entire procedure.

Executive Summary.

This section contains ahigh density of significant terms,and serves two purposes. First, itserves as the report in miniature.And second, it is a concisesummary of the procedure’ssignificant findings and keyrecommendations.

This section is a briefstatement of the essentialfindings, by way of summaries. Incase there are a number of littlespecific findings, this section may

also integrate the same throughsectional summaries, and thencombine them into an overallsummary.

The Auditor’s Prefatory State-ments and Certification.

This section narratesthe process of the whole socialaudit engagement from theformulation of the various areasof decisions and actions, to thefieldwork and finally to thevalidation conference. This alsocontains comments on the sideissues and working relationshipsbetween the auditor and theclient cooperative, and specifiesthe limitations of the study. Andfinally, this section contains thecertification of the auditor as tothe reliability and accuracy of thesocial audit report, as well as tothe involvement of the generalmembership in the process.

Summary of Findings.

This is the longestsection of the report. Thissection arrays in very organizedmanner the results of the entireprocedure.

The Contents of the Report :.

117

The objective of thissection is the exposition of thedata. Thus, the data should bepresented as objectively aspossible, with their necessarydetails. Nevertheless, thissection should not be a clutter ofprose, charts and tables, butorganized prose and in plaindiscourse. And when quantita-tive data can be presented, thisshould be done as simply aspossible, meaning, simplecharts, graphics and tables.65

This section need notinclude everything, however. Theinclusion has to be dictated bythe materiality of the data to thefindings and to the essentiality ofsuch materials to better under-stand the findings.

The Auditor’s Analysis, Inter-pretations and Conclusions.

This section has threeparts, and these are:

a. Strengths and Weaknesses.This sub-section objectivelyclassifies the significant findingsinto strengths and weaknessesbased on the social performancehurdles, the standards that have

been pre-agreed by the auditorand the cooperative. To be sure,the classification into strengthsor weaknesses is very muchperipheral, but such efforts servethe purpose of arraying andidentifying patterns in the co-op’ssocial performance or of reveal-ing undercurrents within fordeeper understanding of theorganization.

b. Opportunities and Threats.This sub-section looks beyondthe very mechanical classifica-tions of strengths and weak-nesses, by looking into thecooperative itself as a businessenterprise and as a people’sorganization and into the milieuof the cooperative, and intimatescertain interpretations to keepthe cooperative posted, updatedor reminded of opportunities andthreats, that are either within thecooperative itself or from societyat large or from recent actions ofgovernment that have positive ornegative consequences to thecooperative and its members.The interpretations enable thecooperative to see its owninternal strengths and to appro-priately tap on the opportunitiesthat are open, as well as toenable the co-op to effectively

65 C. Wiliam Emory, et.al., Ibid., p.

118

quell the perils that may come itsway.

c. Conclusions. This sub-section sums up the discussionsin the two previous sub-sections.

Recommendations

This section contains therecommendations of the auditor.The recommendations may rangeinto: 1. maintenance or upgradingof identified strengths; 2.response to identified weak-nesses; 3. awareness messageof strengths that it can use forfurther growth; 4. awarenessmessage on possibilities of newthreats that may come out of theresponses to weaknesses, and 4.awareness message on externallygenerated opportunities andthreats, which are products of thegeneral interplay of the socialforces in the community andsociety as a whole.

Continuous Improvement.

This section integratesthe commitment of the coopera-tive to continuous improvement inits social performance andelucidates in broad strokes thegeneral direction of the coopera-

tive for the years to come as itsresponse to the social audit.

Pre-writing Concerns.

A number of importantconsiderations have to be takenbefore writing the social auditreport. And these are:

♦ The purpose of the report;

♦ The needs, temperamentsand biases of the boardmembers, officers and keystaff;

♦ The familiarity of theseindividuals on the subject ofthe report;

♦ The circumstances andlimitations under which thereport is done, such as timeconstraints, scope of thestudy, etc.; and

♦ The utilitarian value of thesocial audit report to thecooperative.

119

Presentation of Statistics

The presentation of statistics in social audit report comes infour ways: 1. Text paragraph, 2. Semi-tabular form, 3. Tables, and 4.Graphs.

Text Presentation. This is the most common approach, especiallywhen there are few statistics. Through it, the readers can be directedto certain numbers or comparison, and emphasis can be place oncertain points. This approach has a place in data presentation;however, this approach tends to submerge the data in the body,requiring the reader to scan the entire paragraph for the meaning ofthe data. Below is a typical example:

The records of the cooperative will show that it hasconducted the following, to wit: PMES – total number ofevents in the last 5 years – 35; ownership meetings – 68; andOther seminars – 20.

The generally accepted standards require that acooperative can conduct at least 1 PMES per quarter perchapter. In other words, the cooperative with 22 chaptersmust therefore have a total of at least 88 PMES each year.With a total of only 35 PMES in 5 years or an average of only7 PMES a year, said performance is miserably low . . ..

The generally accepted standards also require that acooperative can conduct at least 6 ownership meetings peryear per chapter. The cooperative conducted only 68 owner-ship meetings in the last 5 years or an average of only 14 peryear. Under the standard with 22 chapters it should haveconducted an average of at least 132 ownership meetings peryear. Their performance is sadly too low for comfort. . . .

The standards also require that a cooperative mustat least have other forms of education program of at least 12a year or once a month. The cooperative conducted a total of20 other seminars in the last 5 years or an average of 4 peryear. The performance of the cooperative is also very poor inthis regard. . . .66

66 A Social Audit Report, unpublished.

120

Semi-tabular Presentation. The data may be taken outof the text, and is set up in a simple listing. This methodallows reading and understanding quantitative comparisonmuch easier than when the statistics are embedded in thetext. To reformulate the text as written above, thus:

The standards are: for PMES, one per quarter per chap-ter; for ownership meeting, one bi-monthly per chapter;and for other seminars, 12 in a year. In effect, thesestandards call for 440 PMES, 660 OM and 40 otherseminars in 5 years time. The cooperative performancesin these activities are:

The cooperative’s performances in all three activities are all miserablylow.

This presentation improves readability and allows fastercomprehension.

Tabular Presentation. Tables are generally superior to text in present-ing statistics. It facilitates quantitative comparison and provides aconcise and efficient way of presenting numerical data. Below is a fulltable:

121

A table is defined as a systematic arrangement of related data inwhich classes of numerical facts are given each a row and their sub-classes are given each a column in order to present the relationships of thesets or numerical facts or data in a definite, compact, and understandableform or forms.67 Usually, a full table’s place is in the appendix. As itssubstitute within the body, full tables are presented in summary form withonly a few pieces of the data closely related to the findings by omittingunimportant details or by collapsing categories into those few that areclearly relevant.

In tables, averages, percentages, indexes and other computationsshould substitute data in its original units.

Graphic Presentation. Graphs and charts have the great advantage ofconveying quantitative values and makes comparison easier than tables, inaddition to its strength in readability and comprehensibility.

There are many different graphic forms (and some of these arediscussed in the previous chapter as tools for preliminary analysis), andthese include line graph for data on a time-series, stratum chart for data ona time-series and for conveying 100% representation, and pictographs andgeographics.

67 Jose Calderon, et. al., p. 210.

Table 1: Sex, Years of Service and Salary Range of Employees 2002

122

Below is a line graph.

With the same facts, presentation can be done using the stratumchart. With this chart, not only the yearly growth rates are expoundedbut also the overall growth of related data, and in this graph for in-stance savings deposits and share capital are shown as growing fromaround 50% to over 80% in 2001. The stratum chart combines thestrength of the line graph and the pie chart.

123

The graphs, however, need not be cut and dried. To give thepresentation more oomph, the data can be spiced up by using picto-graphs or geographics. A pictograph uses picture symbols such asthe picture of money for sales or surplus, persons for membershipgrowth, etc. While geographics uses maps, and this can be veryeffective in indicating membership concentration by chapter orvolumes of transactions by branches, etc.

Most computer programs have variations of these graphs. 3-Dscan also be generated.

124

125

chapter 7

Reflections and Con-clusion :.

126

The cooperatives’ ultimate objective is to serve themembers and to seek ways for the members’ social develop-ment. But this objective can only be achieved if the coopera-tives go into fruitful business endeavors that can sustainoperations and continue providing their services to themembers. This means that cooperatives have to compete inthe marketplace, probably against the best entities in theirlines of business. Being there in that milieu, cooperatives haveto approximate, or even do better, the operational efficienciesof competitors, whether non-cooperative or co-operativebusiness endeavors, by integrating technologies and practicesthat prove, and have been tested, to bring in improve bottomlines to their businesses.

With such situations, there is always that perpetualchallenge to reconcile the performances of the businessendeavors vis-à-vis the cooperatives ultimate objective ofservice and social development. It is still a fact that successesin the cooperatives’ businesses do not necessarily redound tobetter services to the members or the members’ socialdevelopment. Reconciling efforts in the business side andefforts in social development, however, brings to the forefrontcertain difficulties. Financial reporting is limited to the financialoperations of the co-operatives’ businesses; there are simplyno reports that come on sustained and regular basis that touchon the non-financial operations of the organizations, especiallybecause cooperatives are people’s organizations. Thus, thereis really a need for social audit.

127

The Purpose of this Manual

The purpose of this Manual is to put in concreteform, and in a way de-mystify, the social audit concepts andpractices, by writing down the details of the process, instages, to trail the path taken in actual implementation.Obviously, as experienced and in delineation, it follows thepath of financial auditing, from which social audit claimslineage, but with specificity and tailor-fitting to the contextof co-operatives and with the localization to the milieu of thetwo Cebu-based co-op primaries. And yet, this manual ispresented in generic terms to make it adaptable to differentcircumstances of cooperatives, whether big or small, orurban or rural.

In preparing this Manual,so much has been made to stickclosely to the fundamentalqualities of good social auditpractice: of accuracy and objec-tivity, of completeness, oftransparency, and of consultationand dialogue. The cooperativeprimaries have been substan-tially involved in all phases of theengagements, from the designingthe social audit frameworks tothe validation of the data throughboard and staff meetings.

In the main, this isdesigned for social auditors,whether internal or external. Butthis can be used by co-opeducators wishing to impart theconcepts and practices of socialaudit to individuals in the coop-erative organizations who arewishing to learn its suitability andpractical application to theirorganizations. Somehow, thisManual can also be used for thetraining of trainers, although thatwould require certain adjust-ments in the Manual’s format.

128

The Limitations of this Manual

Because this is based on actual experience, thisManual is definitely circumscribed by the requirementsand specifications of the two co-op primaries, which putlimits to the scope of the social audit framework. Andfurther, this is constrained by the auditors’ newness insocial audit work and the inadequacy of supply of readingmaterials on social audit that are co-op specific. Thus, onhindsight, and after due consultations with colleagues andother cooperators outside of the engagements, there are anumber of weaknesses that are duly noted. And these are:

1. The need to thicken the areas of concern and trulygive substance to each co-operative principle, such aspursuit of opportunities to expand market share, invest-ment policies, price setting, internal mechanisms tosupport an integrated approach to policy and programdevelopment, delinquency, litigation, programs to expandmarkets, benefits received by officers, earning growth,earning margin, efficiency report (overhead, marketingexpenses), net earning to net working capital, ratio ofmembers’ investments to total capital, ratio of members’investments to total liability, earnings per share, etc. Themain purpose of this is for meaningful corroboration anddeeper insights into the social performance of the co-operative.

129

1. The need to flesh out perceptions of the primary co-operatives vis-à-vis the federation, recognizing that the relationship partakes ofmutuality especially in reference to the 4th principle of autonomyand independence. In Principle 6, the relationship is rather toosingle-tracked.

2. The need to widen the coverage of the social audit to include otherstakeholders such as the community and church leaders, individu-als in the academe, the associate members, and many others.

3. The need to flesh out opinions from former members and staff,and non-members for better insights into the inner workings of thecooperative.

An Evolving Manual

This Manual is not a fixed reference material. This is a livingdocument that absorbs the evolving experience and insights of itsusers. Just as social audit is a work in progress, so too this Manual;over time, this is definitely subject to revisions for enrichments.

130

Bibliography

AWCF, Trainer’s Manual on Transformative Leadership Training for Cooperatives: Transformative Leadership, Transformative Cooperatives, AWCF, 2001.

Brown, Leslie, Social Auditing and Community Cohesion, Canada (from the internet), 2001.

Calderon, Jose D. and Expectation C. Gonzales, Methods of Research and Thesis Writing,National Book Store, Inc., Mandaluyong City, 1993.

CBS Network, Social Auditing with Community Organizations, Edinburgh, Scotland (from theinternet), 2001.

Clark, George, Social Auditing – Feedback Control for Organizations, (from the internet),2000.

Constantino-Pangilinan, Estelita, Journalism Handbook, Revised Edition, National Book Store,Inc., 1991.

Cooperative Union of Canada, Social Auditing: A Manual for Cooperative Organizations,1985.

Emory C. William and Donald R. Cooper, Business Research Methods, 4th Edition,IRWIN, MA, 1993.

Euro Coop General Assembly, “Measuring the Cooperative Difference”, a monograph, 1999.

Fajardo, Feliciano R.. and Fabian P. Abella, Cooperatives, 2nd Edition, Rex Book Store, Inc.,1986.

Frederick, Donald A., Coops 101: An Introduction to Cooperatives, USDA, 1997.

Guerrero De Leon, Cynthia R., George Garcia and Cristobal M. Pagosa, FundamentalStatistics for College Students, Sinag-Tala Publishers, Inc., Manila, 1992.

ICA, Report on the Special Workshop on the ICA Cooperative Identity Statement – FromTheory to Practice, ICA, Jaipur, India, 1997.

Magtuloy, Neric & Co., CPAs, auditor’s proposal, unpublished.

Pearce, John, Peter Raynard and Simon Zadek, Social Auditing for Samll Organizations: AWorkbook for Trainers and Practitioners, NEF, London.

PSSC, PSSC Social Survey Series No. 1: Social Survey Research Design, 1973

Verschoor, Curtis C. and Jon H. Entine, “Social Auditing: Oxymoron or Wave of the Future?,(from the internet), 1997.

131

The Social Audit Team

EDGAR V. COMEROS, Team Leader

Edgar V. Comeros is a dynamic leader who has selflesslydedicated his life to the growth and development of coopera-tives. His career path in the co-op movement includedrepresentation of the youth sector for a local chapter (1974),full time co-op development worker/community organizerwith city’s urban poor (1976) and manager (1978), all for theCebu People’s Multi-Purpose Co-op, development worker,trainer and Assistant Executive Director for ProgramsServices of VICTO (1980 – 1990), and Executive Director in1990. Other concurrent positions during those years were:membership in the RDC 7, Chairperson of a co-operativebank, PHILDHHRRA and CODE-NGO, and Senior Advisorfor the Developpement International Desjardins on co-opsand micro finance in Laos and Cambodia..

In March 2000, Edgar was awarded the Benigno S.Aquino Fellow for Public Service by the Embassy of theUnited States of America.

He is a graduate of the University of San Carlos (Cebu City)with BSC (accounting) degree. He finished his academic re-quirement for his Master in Management with major inBusiness Management.

FRANCO T. BARICUATRO, auditor

Franco T. Baricuatro has been in the co-op movementsince 1975, when he joined the Cebu People’s Multi-Purpose Co-op as manager. In 1976, he joined VICTO asaccountant/trainer, audit manager (1979) and financemanager (1992) until his retirement in July 2000. Pres-ently, he is serving the co-ops as external auditor.

Franco, a CPA, obtained his BSC (Accounting) from theUniversity of San Carlos (Cebu City). He also had specialtraining on management consultancy from the ISSI-UP(Diliman).

132

Rodulfus Reyes, AuditorRodulfus L. Reyes had been with VICTO for fouryears as Project Officer of CBDP and ExecutiveAssistance until his retirement in 2001. His otherprevious works included a two year stint with theCebu People’s Multi-purpose Cooperative asmanager, executive coordinator of the InterchurchDevelopment Education Agency, branch accountantof InterAds (Cebu branch), and administrativeofficer of Dupro Bandag (Phils.) Presently, he servesthe co-ops as external auditor.

Dodong is a CPA and Lawyer. He earned his BSC(accounting) degree from the Cebu City Colleges andLLB degree from the University of Southern Philip-pines (Cebu City). He has also completed the aca-demic requirements towards an MSBAdegree.

ALMA S. VITORILLO, Staff Coordinator

Alma S. Vitorillo is presently employed asa socialdevelopment worker with the Social DevelopmentAdvocacy (SDA) unit of the NATCCO Network-Visayas (VICTO).In particular,her work involveseducation and training on co-ops, and advocacywork on youth, gender and environment.

Alma has a BA (political science) and LlB degreesfrom the Divine Word College of Tagbilaran City andthe University of San Jose Recoletos, respectively.

133

BENJAMIN A. LAVESORESProcess Documentor

Benjamin A. Lavesores worked in the House ofRepresentatives as political officer in the office of theparty-list Coop-NATCCO. His other previous workswere as researcher/writer in the publication office ofSilliman University, associate editor of Atlas Miningand Dev. Corp., and executive coordinator of theInterchurch Development Education Agency (CebuCity).

Ben obtained his BJ degree from Silliman University(Dumaguete City) and MAED degree from the Philip-pine Women’s University (Manila).

Book 2:Tools of Social Audit(supplement)

136

NATCCO Network- Visayas (VICTO)Capitol Hills, Brgy Kalunasan, Cebu CityTel No.: (032) 253-3153Telefax No.: (032) 253-1317Email: victo@mozcom.com