Reasons for Audit

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

Securing an annual audit of the cooperative’s financial records is the responsibility of the board of directors. Because the board acts as the trustee of the cooperative’s assets, it is responsible for safeguarding, auditing, and appraising the cooperative’s financial resources. The audit is a fundamental part of this trustee responsibility, and the cost of the audit should be considered a normal business expense.

The fiduciary responsibilities of …

How the Audit Committee Functions

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

A good understanding of how an audit committee should work is critical to the financial professionals who are part of the cooperative’s internal and external audit teams. An audit committee must have four important concerns:

  1. Selection of the auditor
  2. Determining the scope of the audit
  3. Exercising diligence
  4. Ability to ask the hard questions

Selecting the outside auditor is one of most important jobs of the audit committee. …

What the Cooperative Audit Should Include

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

The cooperative audit should include a review of the balance sheet, income statement and statement of cash flows. The underlying documents supporting the information is given in these financial statements, along with verification of accounts receivable and payable balances with cooperative customers, and a review of the inventory quality, quantity, valuation, records and procedures. The auditor also will verify the existence of recorded securities and review justification …

Why Form an Audit Committee?

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

The Sarbanes Oxley Act of 2002 mandated that firms which issue publicly traded securities must have a formal audit committee. The act also included requirements for the composition and functioning of the audit committee. Although the Sarbanes Oxley Act does not apply to most cooperatives, this increased focus on the board’s role with respect to the audit has encouraged cooperatives to evaluate forming an audit committee or …

Human Aspects of Control

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

Some balance is needed between individual discretion and formalized measures of performance. The greater the professional competence of the manager or staff involved, the more decentralized the decision-making process can be. Therefore, different types of controls are needed at different levels of the organization. Board members and managers must communicate, discuss and attain a high level of commitment to the goals and objectives of the organization. The …

Role of the Chairman

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

The chairman has a special role in the voting procedures of the board. The chairman is responsible for enforcing good decorum in the board room. He may appoint committees or decide points of order.

Voting by the chairman is a sensitive issue in many cases. According to Robert’s Rules of Order, the chair can make motions, speak on one side or the other on every motion, and …

Common Errors in Parliamentary Procedure

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

  1. Prolonged discussion without a motion. This tends to violate the principle of “one thing at a time.” It is the main reason the chair gets in trouble conducting meetings. Discussion without a motion can become rambling argument rather than constructive discussion; the chair may stop this rambling by requesting the business be placed before the group in the form of a motion.
  2. Failure to confine discussion to

Assess the Strengths and Weaknesses

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

The board should also analyze the strengths and weaknesses of the firm. Is the cooperative serving its customers? Few firms can afford to provide all of the services customers might want. Not all service needs of customers are unreasonable, however. Many increased services are sound business practices. The board should routinely make independent inquiries to determine that customer services are adequate. Some specific areas for assessment include: …

Step 1: Identify Key Performance Areas

Authors: Phil Kenkel, Oklahoma State University, phil.kenkel@okstate.edu, and Bill Fitzwater,
Oklahoma State University

Key performance areas (KPAs) are the few factors that greatly influence a business’ success. The number of KPAs depends on the company and the industry. One of the difficult tasks of the board is to identify (with the manager’s assistance) those areas in which performance vitally affects the success or failure of the firm. Some potential KPAs for agricultural cooperatives include:

  • Facilities. Does the cooperative have and