Measuring and reporting
Financial reporting obligations for co-operatives are dictated by the Co-operatives National Law and tax laws. Small co-operatives have less onerous financial reporting obligations than large co-operatives. Large co-operatives must also comply with Australian Accounting Standards. Access information and guidance about the financial reporting obligations required by law through resources under the Financial reporting heading below.
All co-operatives need to use strategic planning (planning ahead) to reach their goals. There will already be a business plan prepared at start-up, but it is important for co-operatives to regularly identify what success looks like by identifying goals or targets and incorporating measurement systems so that progress can be monitored from the beginning.
For co-operatives, strategic planning involves identifying both financial and non-financial performance targets or indicators. While it is important to identify financial performance targets to ensure that the co-operative remains solvent, co-operatives must consider non-financial targets that contribute to the organisation achieving its purpose of delivering value to members.
Learn more about identifying targets, measuring progression and reporting to members on how the co-operative is achieving its purpose under the heading Non-financial performance indicators.
What are the legal requirements?
Co-operatives must report to the Registrar in their State or Territory and to their members. Financial reporting requirements for co-operatives registered in States or Territories under the Co-operatives National Law (CNL) scheme depend on whether the co-operative is small or large.
Co-operatives registered in all States or Territories are covered by the CNL or consistent legislation.
A small co-operative is defined in the CNL National Regulations as one that satisfies at least two of the following criteria:
- Revenue is less than $8million for the financial year,
- Value of gross assets is less than $4million for the financial year, and
- Fewer than 30 full time equivalent employees in a financial year.
A co-operative that does not satisfy at least two of the three criteria, or if it has a large scale share offer or other security offer to the public, will be classed as a large co-operative.
Read the definitions of a small and a large co-operative in the National Regulations.
Large co-operatives must prepare and lodge audited financial statements with the Registrar. The same financial statements are also presented to members. Audited financial statements are to be prepared in accordance with the Australian Accounting Standards.
Small co-operatives must prepare and lodge an annual return with the Registrar. The annual return does not include financial statements but does include information about the directors, any changes to the directors, and confirmation that the co-operative is solvent.
Small co-operatives must provide members with unaudited financial statements, which do not need to be prepared in accordance with Australian Accounting Standards. The required financial statements for members of a small co-operative are set out in the National Regulations. Members of small co-operatives do have a statutory right to require their co-operative to present audited or reviewed financial statements.
Information published by New South Wales Fair Trading also sets out the requirements for financial reporting by co-operatives under the CNL.
Financial reporting for co-operative shares
Co-operatives with share capital are required under the Australian Accounting Standards to classify their share capital as a liability on their balance sheet, unless the shares are non-redeemable. The Australian Accounting Standards Board (AASB) has published Guidance on how to meet this requirement in a way that is meaningful for members. You can also listen to the webinar and view the slide pack presented by the AASB.
Other reporting by co-operatives
In addition to the legal requirements for financial reporting, a co-operative’s rules may specify other forms of reporting to members. Even if there is no rule requiring additional reporting, the board may decide to prepare additional reports that they consider are useful for their members.
Reporting requirements under the Australian Accounting Standards, applying to large co-operatives, are designed for investor owned companies that offer shares for trading on a public. The different nature of shares in co-operatives, and the fact that co-operatives are ‘for purpose’ organisations delivering products and services to their members, means that reporting under the Australian Accounting Standards does not provide an accurate picture of the value co-operatives create for members.
Many co-operatives that deliver community or charitable services use impact reporting to demonstrate how they are meeting goals or delivering benefits, either to their members or the broader community. Community service co-operatives often rely on grant funding or philanthropic investments by organisations. These co-operatives need to be able to report on the impact or social benefit they have delivered. You can read more about social impact in the Guide to Social Return on Investment.
Other co-operatives may focus on reporting how they deliver value to members. Research conducted by Monash University in partnership with BCCM members has developed the Mutual Value Measurement framework to develop a range of metrics of value to members and other stakeholders.
Co-operatives that are registered charities are required to lodge reports to the Australian Charities and Not for profits Regulator (ACNC) and may be subject to auditing requirements by the ACNC or by agencies as a condition of their provide grant funding.
Co-operatives are different from investor-owned companies. They work to create value for members, rather than delivering dividends to investors.
Financial performance measures for companies focus on profits and dividends.
Creating value for members is about developing a strong, sustainable business that meets member needs over the long term while remaining financially sound.
You can read about some useful financial performance measures for co-operatives that help track how well a co-operative is progressing towards financial sustainability and delivering value to members.
Non-financial performance measures are strongly linked to the co-operative’s strategic plan. The process of identifying a plan for the future operations of the co-operative revolves around the co-operative’s purpose.
A co-operative with the purpose of processing and selling milk on behalf of its dairy farmer members will be focused on identifying and establishing a market and ensuring that its members can supply milk products into that market. Similarly, a local organic food co-operative will focus on engaging local organic producers to supply product and having local consumers buy these products.
These outcomes do not happen overnight but are arrived at through a series of smaller stages or milestones.
The milestones become non-financial performance indicators, once a way of measuring them is settled. Measurement need not be financial or even quantitative and can be qualitative, but should objective or capable of clear description so that progress can be identified.
A dairy co-operative wanting to increase its market settles on a milestone by specifying the quantity of milk that buyers commit to purchase within a time frame. At the same time, the co-operative may also identify the number of new farmer members it will need to meet buyer demand.
An organic food co-operative might specify a minimum number of organic growers to be engaged to supply products to the co-operative, whilst also specifying the hours the retailing operation of the co-operative will be open.
These examples of non-financial performance indicators are key to delivering financial outcomes and value to members.
There are other aspects of performance that will also be important for co-operatives. For co-operatives that rely on members supplying products, the efficiency with which the co-operative pays for those goods will be important. A co-operative that fails to pay its members promptly will not be delivering the benefits members expected.
A community service co-operative is likely to set goals related to the number of services provided or the number of community members who were reached by their services.
A co-operative in its start-up phase will be engaged in a variety of administrative and other possible set-up arrangements such us obtaining any necessary licenses or approvals, or acquiring premises and staff. The non-financial performance indicators for a co-operative at this stage may be related to settling the necessary preconditions to operating.
Identifying non-financial performance indicators is part of the board’s strategic planning task. The board must identify milestones that are:
- appropriate for the co-operative having regard to its stage of growth and purpose,
- able to be measured or quantified objectively, and
- identified as being short or long term.
One approach to strategic planning that aids in the identification of non-financial performance indicators and their measurement is known as the Balanced Scorecard. Learn about this approach by viewing this online training course. The Mutual Value Measurement framework is another option, with resources and consultancy for implementation available from BCCM.
Finally, it is important to communicate the co-operative’s strategic plan to members. Reporting on progress against milestones in the strategic plan will be the basis for reporting to members on progress towards achieving the co-operative’s purpose.
Learn more about financial and non-financial performance measures in our free, online training course starting up and measuring for co-ops.
Guidance for identifying appropriate performance indicators for co-operatives and reporting to members can be found in the following resources:
- Key Performance Indicators: A Framework and Guidance for Co-operatives
- Narrative reporting: A Framework and Guidance for Co-operatives
- AASB Staff FAQ: co-operative and mutual enterprises commentary and FAQs
- International Co-operative Alliance guide on sustainability reporting for co-operatives
- Mutual Value Measurement framework