whether big or small, play a vital role in the economic development of a
community. They serve as the fuel that
ignite and keep the engine of economic development running by providing jobs
that enable members of the community to earn money. The income that employees earned is used to
acquire products and services made by businesses that propel the economic
activities to cycle around. Without the
presence of businesses in the community, the economy within the area would
become inefficient and stagnant (“What Is The Role”, 2017).
Establishing a business
will demand a significant amount of capital which would be hard to produce
especially for the less privileged members of the community. However, individual members of the community
can act together and contribute financial resources even in small amounts. The
small amounts contributed by individual members of the community can be pooled
together to produce the required capitalization for the establishment of a
small business which can be specifically called a cooperative.
Republic Act 9520 which was enacted
on February 17, 2009 amended the Cooperative Code of the Philippines to be
known as the “Philippine Cooperative Code of 2008” defines cooperative as an involvement of
people who share the same kind of concern, freely coming in together for
the attainment of their social,
economic, and cultural targets by making rightful contributions to the capital
requirement, buying and using their products and services, and having a reasonable
share of the gains and losses of the endeavor in compliance to accepted
cooperative principles. Such association
is separate and duly registered.
The State recognizes the importance
of establishing cooperatives as illustrated under Article 2 of the code by encouraging
their creation and growth as a realistic tool for endorsing self-sufficiency
and employing the power of the people towards the achievement of economic
development and social justice. The government encourages the private sector to
venture into the actual assembly of cooperatives and shall produce an environment
which is beneficial to the betterment of cooperatives.
Cooperatives, with proper monitoring
and support from the government, can be an intrinsic component towards economic
growth because of their power to mobilize savings and capital which can serve
as inputs in the production of goods and services for the less privileged
members of the community (Castillo & Castillo, 2017).
However, similar with any other
forms business undertakings, cooperatives may be exposed to risks that may
adversely affect their operations.
Possible risks that may be encountered could be strategic, compliance,
financial and operational (www.nibusinessinfo.co.uk). The emergence of such
risks has led to improved drive for an efficient risk management and polished
governance. These situations make it
fundamental to synchronize every aspect or processes in the business in ethical,
effective and efficient ways which can be achieved with an effective internal
control system in the organization.
Internal controls involve methods in
which an organization protects and ensure that it has control over routine
accounting processes and that the processes are being followed which help in safeguarding resources against potential
fraud and unauthorized use. These
controls are good preventive measures against fraudulent intentions that may
adversely affect organizational operations (Helmick, 2013). Without internal controls, an organization
operates inefficiently, in an unreliable manner and non-compliant with
applicable laws and regulations (Duggan, 2018).
The absence of internal controls or
their ineffective implementation exposes any business organization to potential
risks such as improper recording of business activities, effecting unauthorized
transactions and frauds, among others. This is because poor internal control
permits or even promotes the commission of fraud as it creates opportunities
for fraud perpetrators (Buben, 2017). These incidents impact the organizational
productivity and competitiveness which deter the entity’s growth and
sustainability (Simon, n.d.).