At the outset, the CDA expresses its full support for the passage of this proposed legislation with due consideration of its proposals/ recommendation. We share the aspiration of the declared policy of the proposed legislation.
As a background, the 1987 Philippine Constitution recognizes the important role of cooperatives in the development of the nation. The significant provisions are to wit:
Sec. 1, par. 3, 2ndsentence of Article XII which provides:
"Private enterprises including corporation, cooperatives and similar collective organizations shall be encouraged to broaden their base of membership." (Underscoring supplied)
Sec. 6, 2ndsentence of the same article which further states that:
"Individuals and private groups including corporations, cooperatives and similar collective organizations shall have the right to own establish, and operate economic enterprises subject to the duty of the state to promote distributive justice and to intervene when the common good so demands."
Sec. 15 of the same article which states that:
"The Congress shall create an agency to promote the viability and growth of cooperatives as instruments for social justice and economic development.
While Section 5 of Article XIII which holds that:
"The state shall recognize the right of farmers, farm workers, and land owners, as well as cooperatives, and other independent farmer's organization to participate in the planning, organization and management of the program, and shall provide support to agriculture through appropriate technology and research, and adequate financial, production, marketing and other support services."
Pursuant to these Constitutional mandate, Republic Act No. 6938 otherwise known as the "Cooperative Code of the Philippines" was enacted and approved on March 10, 1990 and was further amended by RA 9520 , otherwise known as the "Philippine Code of 2008 on February 17, 2009.
To implement the provisions of the Code and to see to it that the cooperatives be properly organized and managed by the members and assisted by the government,the COOPERATIVE DEVELOPMENT AUTHORITY was likewise created and approved on the same day under Republic Act No. 6939. The agency as the lead government agency on cooperative is charged to promote the viability and growth of cooperatives as instruments of equity, social justice and economic development, defining its powers, functions and responsibilities, rationalizing government policies and agencies with cooperative functions, supporting cooperative development, transferring the registration and regulations functions of existing government agencies on cooperatives as such and consolidating the same with the agency, appropriating funds therefore and for other purposes.,
With the above constitutional provisions, the following proposals are anchored:
A. Strengthening of the existing functions of the COOPERATIVE DEVELOPMENT AUTHORITY (CDA)
- By specifically mentioning that the CDA will be having quasi-judicial powers on its functions will strengthen its authority over cooperatives. At present, the quasi-judicial powers were anchored on the jurisprudence which was issued on May 29, 2002, by the Supreme Court, in the case entitled CDA vs. DARBCI, et. al., (G.R. No. 137489), rendered a decision, the dispositive portion of which states, that:
"WHEREFORE, judgment is hereby rendered as follows:
The petition for review on certiorari is hereby DENIED for lack of merit. The orders, resolutions, memoranda and any other acts rendered by petitioner Cooperative Development Authority in CDA-CO Case No. 97-011 are hereby declared null and void ab initio for lack of quasi-judicial authority of petitioner to adjudicate intra-cooperative disputes; and the petitioner is hereby ordered to cease and desist from taking any further proceedings therein;"
Apparent confusion thus arose as to whether the said decision is a broad pronouncement that the CDA has no absolute quasi-judicial power, or if it covers the exercise of quasi-judicial power on intra-cooperative disputes only.
To resolve the same, resort to the ratio decidendi of the Supreme Court has to be perused. As rationale, the Supreme Court ratiocinated that:
"After ascertaining the clear legislative intent underlying R.A. No. 6939, effect should be given to it by the judiciary. Consequently, we hold and rule that the CDA is devoid of any quasi-judicial authority to adjudicate intra-cooperative disputes and more particularly disputes as regards the election of the members of the Board of Directors and officers of cooperatives. The authority to conduct hearings or inquiries and the power to hold any person in contempt may be exercised by the CDA only in the performance of its administrative functions under R.A. No. 6939. "
In essence, the Supreme Court, in the case of CDA vs. DARBCI, et. al., (G.R. No. 137489, May 29, 2002) merely declared that the CDA has no quasi-judicial power to adjudicate intra-cooperative disputes, more particularly disputes as regards the election of the members of the Board of Directors and officers of cooperative, BUT not on the other aspects of the powers granted under Section 3 (e), (g) and (o) of R.A. 6939. Limited quasi-judicial authority remains in the dispensing of its administrative functions to hold hearings and cite in contempt on express areas allowed and expressly granted by the CDA charter itself. Such power was given recognition by the High tribunal when it declared in the same case that "the authority to conduct hearings or inquiries and the power to hold any person in contempt may be exercised by the CDA in the performance of its administrative functions under R.A. No. 6939."
At the risk of being redundant, Section 3 of R.A. 6939 expressly empowers the CDA to conduct hearings on certain instances.
Applying the foregoing, the express powers of the CDA to cancel certificates of registration of cooperatives for non-compliance with administrative requirements or in cases of voluntary dissolution under Section 3(g), and the proceedings under section (e) of R.A. 6939, bespeaks of a limited quasi-judicial authority. The reason is that - in the performance of its functions such as dissolution and cancellation of certificate of registration, it is necessary to establish non-compliance or violation of administrative requirement. To do so, there arises an indispensable need to hold hearings, investigate or ascertain facts that possibly constitute non-compliance or violation and, based on the facts investigated or ascertained, it becomes incumbent upon the CDA to use its official discretion whether or not to cancel a cooperative's certificate of registration, thus, clearly revealing the limited quasi-judicial nature of the said function. The same, shall be limited on proceedings involving and related to the afore-cited power, and other petitions or actions requiring the conduct of hearing under 6938, as amended by R.A. 9520.
Verily, the CDA has limited quasi-judicial power in relation to its administrative functions of registration, cancellation, dissolution, cancellation and other related incidents, but not on intra-cooperative disputes. However, Article 137 of R.A. 9520 (which was enacted after the case was decided by the High Tribunal) expressly provides:
"ART. 137. Settlement of Disputes, Conciliation, and Mediation Proceedings. - Disputes among members, officers, directors, and committee members, and intra-cooperative, inter-cooperative, intra-federation or inter-federation disputes shall, as far as practicable, be settled amicably in accordance with the conciliation or mediation mechanisms embodied in the bylaws of cooperatives and in such other applicable laws.
"The conciliation and mediation committee of the cooperative shall facilitate the amicable settlement of intra-cooperative disputes and disputes among members, officers, directors, and committee members.
"Should such conciliation or mediation proceeding fail, the matter shall be settled through voluntary arbitration: Provided, however, That before any party can validly file a complaint with the Authority for voluntary arbitration, it must first secure a certification from its conciliation and mediation committee and from its conciliation and mediation committee and from the cooperative union or federation to which it belongs that despite all efforts to settle the issues, the same have failed.
"The jurisdiction of the voluntary arbitrators shall be exclusive and original and their decisions shall be appealable to the Office of the President. The Authority shall issue and adopt the proper rules of procedure governing arbitration as the primary and exclusive mode for dispute resolution in accordance with the Alternative Dispute Resolution Act of 2004.
"For this purpose, the Authority shall constitute a list of qualified voluntary arbitrators."
Accordingly, the CDA, through the voluntary arbitrators, now has power to adjudicate all intra-cooperative and inter-cooperative disputes, in compliance with Article 137 of R.A. 9520.
Hence, by stressing that the following functions are in the exercise of quasi-judicial powers of the Cooperative Development Authority is imperative, to wit:
- Exercise regulatory, supervisory, inspection, examination, investigate and adjudicatory powers over cooperatives, federations and unions, including their branches, subsidiaries and affiliates.
- Register all types of cooperatives, including amendments to its by-laws; division, merger, consolidation;
- Order the suspension, dissolution, cancellation and revocation of the certificate of registration after due notice and hearing pursuant to the pertinent provisions of the Philippine Cooperative Code 2008 articles of cooperation;
- Develop and formulate, in consultation with the cooperative sector, appropriate performance standards to implement the Philippine Cooperative Code of 2008 to ensure the sound operation of cooperatives;
- Require the submission of annual reports, audited financial statements, and such reports in compliance with the Philippine Cooperative Code 2008 and its implementing rules and regulation, in such forms, number of copies and type of document as may be prescribed by the authority;
- Conduct regular inspection or examination of a cooperative in accordance with rules and regulations promulgated by the authority and when necessary, conduct a special inspection and investigation to protect the interest and welfare of the members of cooperatives.
- Compel the cooperative to call a general assembly under the supervision of the authority, subject to the criteria or condition/s to be defined in the implementing rules and regulations issued for this purpose.
In case a cooperative fails to call and conduct a general assembly, the authority shall, on its own, call a general assembly meeting to address and settle the issues. The authority may enlist the aid and support of an/or deputize any and all enforcement agencies of the government and federations and unions for the implementations of its orders;
- Impose sanctions for non- compliance with lawful orders, rules and regulations of the authority, including the articles of cooperation and the by-laws of the cooperative subject to conditions as defined in the implementing rules and regulations of this act;
- Collect reasonable fees, fines or charges in the performance of its registration and regulatory functions. Fifty percent (50%) of such annual collection shall be utilized for CDA operation and a trust fund for the purpose shall be created;
- Have original and exclusive jurisdiction to hear and decide cases involving: fraud and misrepresentation of the board of directors and offices of the cooperative; controversies arising from election or appointments of officers of the cooperative.
IN ORDER TO EFFECTIVELY EXERCISE SUCH JURISDICTION, THE AUTHORITY SHOULD INCLUDE THE FOLLOWING POWERS:
- To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the rules of court shall apply;
- To punish for contempt of the authority, both direct and indirect, in accordance with the pertinent provisions of, and penalties prescribed by, the rules of court;
- To compel the officers of any cooperative to call for a general assembly meeting of members thereof under its supervision in consonance with the provisions of RA 9520:
- To issue subpoena duces tecum and subpoena ad testificandum to appear in any proceedings of the authority and in appropriate cases order search and seizure or cause the search and seizure of all documents, papers, files and records as well as books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it;
- To impose fines and/or penalties for violation of this act and RA 9520, the pertinent rules and regulations, its orders, decisions and/or rulings.
2. It is likewise important that a provision on the authority of the Agency to use funds, investments, and earnings thereof, of all programs and projects under PD 175 and L01 23 that were transferred to CDA for its development functions for cooperatives, particularly for cooperatives which are classified as micro and small .
B. ON THE GOVERNING BODY
The Authority would like to emphasize its position that the CDA shall be governed by a Board of Administrators consisting of a Chairman and six (6) members to be appointed by the President, all of whom shall be chosen among the nominees of the cooperative sector. They shall serve on full-time basis for a term of six (6) years without reappointment.
RECOMMENDATION: The CDA, however, would like to propose an amendment to the representations of the seven (7) members of the Board of Administrators including the Chairman, to wit:
a) One (1) each from the major Islands of Luzon, Visayas and Mindanao;
b) One (1) each from the major clusters of cooperative such as:
- Agriculture cluster which shall include but not limited to all types of cooperatives that deal on production of crops (roots, leaves, flowers, fruits, juice (sap), and seeds); poultry, livestock, fish (inland and municipal fisheries), and industrial forestry either in raw material or processed form. It also includes cooperatives organized in land reform areas or districts.
- Finance cluster which shall include cooperative banks, cooperative insurance, cooperative savings and credit, and credit cooperatives.
- Utilities and services cluster which shall include electric cooperatives, transport cooperatives, water service cooperatives, health and medical cooperatives, and consumer cooperatives; and
- Academe cluster which shall include state and private schools, colleges, and universities with education, training, and research programs on cooperatives.
For proper island representation and familiarity with, expertise and direct personal knowledge of the Administrators on matters relating to the respective island and clusters.
The CDA opposes the proposal that the Administrators shall serve on part-time basis. Instead, the CDA proposes that the Administrators shall serve on full-time basis for a term of six (6) years without reappointment.
- The term of six (6) years on full-time basis without reappointment provides a cycle of continuous inflow of new ideas in the administration of CDA. These ideas invigorate the policy- making, administrative and management hierarchies of the CDA and make the policy-making body of the CDA attuned and current to the developments of time.
- The CDA strongly believes that cooperatives in the Philippines are largely still in the development stage and need guidance and supports. About 76% of the cooperatives, as of 2013, are in micro and small categories. They have small capital and assets, have officers usually performing multi-functions (policy- making, executive and managerial functions), and still in the fledging stage of business operation. In general, they are the groups that have difficulty in complying with the training requirements due to limited resources, and reportorial requirements due to inability to hire accredited auditors to conduct financial and social audits. As such, they need technical, financial, and institutional building supports to form viable business enterprises and build a competent governance of the cooperative.
Compounding the problem are the absence of a system of education, training, and research that responds to the needs of various types and categories of cooperatives; the incongruent system of financial support in cooperatives particularly for agricultural and micro cooperatives; and the absence of a system of delivery of technical assistance to micro and small cooperatives in the aspects of raw material production, food production, product development, trade, and marketing. All these non-existent and non-operational systems of supports have yet to be developed and instituted and they need full-time Administrators who will dedicate themselves to the service.
- The concerns of CDA are broad. The concerns include banking, insurance, power generation and distribution, transport business, potable water production and distribution, credit and savings business, trade and marketing, agriculture, agrarian reform, education and training, research and information management, among others. Every concern is an specialization in itself. These concerns of CDA need specially trained Administrators who shall serve full-time in order to have a sound, effective and efficient policy-making, and decision-making.
- Policy-making is a continuous process. As such it is a never ending process involving policy formulation, implementation, data gathering, impact assessment and policy reformulation.
The Administrators' function is primarily on policy-making. Through the oversight function, they have to know the progress in the implementation of the policies as well as the impacts of such policies. The execution of the policy-making and oversight functions of the Administrators require full-time services of the Administrators.
- Another concern that requires full-time services of the Administrators is accountability. Part-time Administrators cannot be made fully accountable to the consequences of their decisions, because the services are intermittent, hence denied of information or/and control over the progress of decision implementation. Only full-time decision-makers can be made fully accountable to the consequences of their decisions.
- The expansion of functions of CDA to include the quasi-judicial function is a huge function that requires close supervision and needs full-time attention of the Administrators. The CDA, with the approval of this function, becomes a party of the Philippine judicial system, which dispenses adjudicatory power over conflicts on cooperatives, in particular on governance.
- The expansion of roles of CDA to include the creation of system of education, training and research for cooperatives involving all types of cooperatives in all provinces and islands of the country require full-time services of the Administrators. Education, training, and research are never ending activities that need careful and full-time attention and cannot or should not be assigned to part-time Administrators.
- The inclusion of the role of CDA in "Cooperatives in agriculture and rural development" expands the responsibilities of the Administrators.
Agriculture is a large sector of the economy and cooperative in terms of land area covered, number of constituents included, problems to address, and significance in providing food and insuring food security, and in reducing rural poverty. The highest incidence of poverty in the country is in agriculture and rural areas.
So far, the most underdeveloped cooperatives are in agriculture, rural and agrarian reform areas. The systems of coordination of agencies involved in cooperatives, and the delivery of technical, financial and institutional supports to cooperatives in the said areas are yet to be developed and operationalized. This is a huge effort and need full-time Administrators who appreciate and understand the rudiments of agriculture, agrarian reform, and rural development.
C. ON REMOVAL OF MEMBER OF THE BOARD
The CDA has no objection in including this section in the revision of the Charter. We reiterate, we conform with the provisions of the section, to read as:
THE PRESIDENT OF THE PHILIPPINES MAY REMOVE ANY MEMBER OF THE BOARD FOR ANY OF THE FOLLOWING:
- If the member is subsequently disqualified under the provisions of this act;
- If the member becomes physically or mentally incapacitated to properly discharge the duties and responsibilities of the position and such incapacity has lasted more than six (6) months; and
- If the member is guilty of acts or omissions which are fraudulent or illegal in character or which are manifestly opposed to the aims, objectives and interests of the authority and the cooperative sector.
D. ON COOPERATIVE IN EDUCATION SYSTEM
The CDA recommends the retention of this section with some modification. The section should read as:
The Authority shall create a system of education, training and research for cooperatives. The system shall recognize the existing state and private schools, colleges and universities as well as cooperatives with capacity to conduct education and training for cooperatives. The authority shall also re-define the use of cooperative education and training fund (CETF) in the creation of the said system of education, training and research for cooperatives.
This system of education, training and research should now be installed to insure a uniform or standard way of delivering the education and training services to members.
As of today, we allow cooperatives to conduct the training for their officers and members. The collected Cooperative Education and Training Fund (CETF) is used as the source of fund for this purpose. The observations are clear that the CETF is not properly used and the conduct of training and education is so varied in terms of depth, breadth and methods.
So much time and resources have been lost in the present system of education and training. It is now the high time a new system shall be installed to have a sound, effective, and efficient system of cooperative education, training and research in the Philippines.
E. ON COOPERATIVE IN AGRICULTURE AND RURAL DEVELOPMENT
The CDA strongly proposes the inclusion of this section in the revision of the Charter, to read as:
The promotion and development of agricultural cooperatives, in coordination with the Department of Agriculture and Department of Agrarian Reform shall be a primary concern of the Authority to ensure food security, and reduce rural poverty.
Agriculture including agrarian reform is the largest sector of the economy in terms of land area covered, number of people dependent on it for living, and contribution to GDP. It is also a major source of foreign exchange. But the ability of our agriculture sector to feed our people is now declining. It also a fact that the highest incidence of poverty in the country is in the agriculture and rural sector.
Given the abovementioned considerations, it is imperative that in order for our country to survive and compete in a globalized economic system, we need a strong productive agriculture sector. The development of cooperatives in agriculture and rural areas is the only way for the Philippines to compete in the globalized economy, to feed its people, have food security, and reduce rural poverty.
F. ON QUALIFICATION OF MEMBERS OF THE GOVERNING BOARD
The CDA agrees with the proposal to define the qualifications of the members of the Governing Board, and suggests to further specify the qualifications, to read:
The Chairperson or a member of the Board who shall be appointed must possess all the following qualifications:
- A natural born Filipino Citizen;
- A holder of at least bachelor's degree and five (5) years of experience as an officer of a cooperative, government agency, or non- government organization engaged in cooperative development, or in the absence of the bachelor's degree, at least ten (10) years of experience either as an officer of a cooperative or a government or non-government organization engaged in cooperative development.
- The Administrators from major island group must be a resident of the islands group he represents for at least five (5) years immediately preceding the appointment;
- The Administrator from cooperative cluster representation must have at least five (5) years of experience as officer of such cooperative and must be nominated by reputable cooperatives in such cooperative cluster.
Any person appointed as Chairman or member of the Board of Administrator shall divest himself of any direct or indirect pecuniary interest or dealing with cooperatives upon his appointment.
G. ON THE ISSUE OF REQUIREMENTS FOR TAX EXEMPTION OF COOPERATIVES
The Cooperative Code of 2008, RA 9520, states under Articles 60 and 61 the tax treatment for cooperatives which transact business for members and non- members.
The issue at hand is whether the Certificate of Registration (COR) is a sufficient requirement for cooperatives to avail of the income tax privilege.
There are two schools of thought on the issue. One school argues that COR is a sufficient requirement because it is a proof of its juridical personality and defines the entitlements to privileges as provided for in the Cooperative Code.
Another school argues that COR is a primary requirement, but not sufficient requirement to avail of the privilege. There should be another document that will prove that the cooperative is operating.
To settle the issue, the CDA proposes that for micro and small cooperatives, the COR is a sufficient requirement because the assets are so small such that the net surplus they can generate is also too small to warrant further scrutiny.
For large cooperatives, additional requirement on top of COR may be required such as certificate of compliance with reportorial requirements in order to avail of tax privilege.