Cooperative

Directors:

Asking

Necessary

Questions

United States

Department of 

Agriculture

Rural Development

Rural Business–

Cooperative

Service

Cooperative

Information Report 62
This report provides questions that directors need to ask in carrying out

their distinct roles and responsibilities. The questions pertain to a host of

issues and circumstances confronting directors. They are intended to

remind and educate directors about types of information they need to glean

from cooperative management, staff, auditors, members, other directors,

and from various outside contacts to effectively carry out their duties.

The questions presented pertain to important areas: cooperative character

and principles, governance structure, policy and legal aspects, member

relations and education, management, financial oversight, audits, consultants, and strategic planning. Some major strategic thinking issues for

directors to contemplate are also presented. A listing of USDA information

sources relevant to the posed questions is provided at the end of most sections that correlate to references at the end of the report. This report

provides a broader set of questions than another director information report

by authors at Cornell University. That report is referenced to provide

another information source.

Key Words: directors, responsibilities, questions, issues, information.

Cooperative Directors: Asking Necessary Questions

James J. Wadsworth

Program Leader

Education and Member Relations

http://www.rurdev.usda.gov/rbs/coops/csdir.htm

Cooperative Information Report 62

October 2003

Abstract
Cooperative directors, especially those with limited business experience,

may find themselves in a quandary as to what to ask managers, staff, auditors, members, other directors, and other outside resources about the

status of their cooperative. This report guides directors in asking the necessary questions to invoke informative responses. Answers are not provided

because every cooperative situation will be different and general answers

are not appropriate. However, the report does seek to point directors to

various cooperative reference materials developed by USDA, and a couple

outside sources, where applicable to particular sets of questions.

This report provides an educational resource for directors. It should be useful as a director self-help bulletin, for discussion and planning by full

boards, in director training workshops, and in technical assistance endeavors by cooperative professionals.

The USDA publications listed at the end of each of the question sections

give directors followup information sources on some topics. A similar report

is referenced to provide the reader with additional information. Many other

resources abound as well, but, due to brevity, are not listed in this report.

Cooperative directors seeking greater information should also look to

resources from cooperatives, universities, cooperative centers, State cooperative councils, and national or local cooperative organizations.

i

Preface
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

1. Cooperative Character and Principles . . . . . . . . . . . . . . . . . . . . . . . . 2

2. Governance Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

3. Policy and Legal Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Existing Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

New Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Public Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Sensitive Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Legal Aspects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

4. Member Relations and Education . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Director Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

5. Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Hiring a Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Manager Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

6. Financial Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Equity Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

7. Auditing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

ii

Contents
Auditor/Audit Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Hiring an Auditor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

8. Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

9. Strategic Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Mission/Vision Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Assessing the Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21

Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

New Strategic Direction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Feedback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

10. Major Strategic Thinking Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . .25

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

Endnote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35

iii
Introduction

Cooperative directors must prepare in a number of ways to

meet their responsibilities when they attend board and other

important meetings or forums. Not only must they read materials

and gather information ahead of time, but also be effective stewards of their cooperative. They must understand the types of

questions to ask—and in some cases answer. Many experienced

directors know the types of questions they need to ask themselves, members, other directors, management, auditors, legal

council, and others in carrying out their duties and responsibilities. Less experienced directors need to learn and understand

these types of questions.

This report is intended as a refresher and education piece for

cooperative directors. It provides examples of the types of questions directors need to ask—as individuals, while serving on

committees or as a full board. Questions are divided into 10 sections categorized into specific interest areas. They include

character and principles, governance structure, policy and legal

aspects, member relations and education, management, financial

management, auditing, consultants strategic planning, and major

strateic issues. Who the questions should be directed to should be

evident—in some cases more than one source (e.g., to themselves,

management, other directors, employees, etc.).

1

Cooperative Directors: 

Asking Necessary

Questions

James J. Wadsworth

Program Leader, Education and Member Relations

Rural Business-Cooperative Service
Questions listed under each category are not intended to be

exhaustive. Various other questions may need to be asked

depending upon the cooperative and issues involved. A recent

report by Anderson and Henehan lists some questions directors

should be asking of management in a number of different areas

and also gives some insight into how and when to inquire.1 This

report adds to that body of questions by taking a broader

approach in some instances. Questions may be aimed at a number

of cooperative players, but most often are to directors themselves.

Cooperative research and information reports developed by

USDA’s RBS are referenced for all but one section to provide

directors with sources of further information on a particular area

of director responsibility. Directors may wish to seek other

resources as well. Various articles from Rural Cooperatives magazine are often applicable to the circumstances outlined in this

report and could be researched.2 Numerous research reports,

information publications, and educational articles are available

from various other sources such as cooperatives, universities,

cooperative centers, State cooperative councils, national and local

cooperative/trade associations.

1. Character and Principles

Cooperative principles are operational and behavioral rules

developed to govern cooperatives to further the economic and

social goals of members. They are woven into the business fabric

of cooperative operations and structure. As the operating environment changes and cooperatives respond, directors need to be

cognizant of the impact on their cooperative’s governing principles. Directors need to distinguish whether their cooperative is

fulfilling its basic responsibility to operate under and be consistent with cooperative principles.

2

1 The report by Anderson and Henehan, Cornell University agricultural

economists, describes how directors should pose questions to management,

provides an extensive list of questions, outlines a generic format for asking

general questions, and assists in identifying important board issues and how to

handle them.

2 A few articles are referenced in this report and others may be found online at:

http://www.rurdev.usda.gov/rbs/pub/openmag.htm
Questions for directors to consider in regard to character and

principles:

● Is our cooperative adhering to the contemporary cooperative principles of user-owned, user-controlled, and

user-benefits?

● Do we adhere to the seven International Co-operative

Alliance (ICA) principles? (See endnote for listing of ICA

principles.)

● Is our cooperative owned and controlled by current members who use its services?

● Do our cooperative’s services benefit the members? How

do members benefit?

● Do members appreciate the importance of a patronage

refund?

● Why should cooperatives follow traditional principles?

● What are these principles and how did they originate?

● How can we better meet cooperative principles and assure

we are operating in that regard?

● Do any of our operations conflict with the cooperative

principles?

● Do our members fully understand cooperative principles

and how they distinguish us from non-cooperative businesses? If not, how can we improve the situation?

● Will any contemplated changes to operations or structure

threaten our adherence to the principles?

● Are we effectively communicating to members and the

public that our governing cooperative principles and practices make us unique?

● Do members have an accurate understanding of the cooperative’s benefit?

● Do members understand their unique responsibilities as

user-owners of the cooperative?

● Are we advising members about their responsibilities and

issues that affect the cooperative?

● Are we communicating our cooperative image and character to our membership and the general public?

● Where is the cooperative positioned between strict adherence to and non-compliance with cooperative principles?

Is it acting and operating like a true cooperative? If not,

where is it failing?

3
Answers to these questions do not end the inquiry. If cooperative character and principles appear intact, directors must ask

how the business will grow and adapt to changing conditions. If

challenged or infringed upon, directors must ask hard questions

about what that means and what can be done to avoid anything

that could be detrimental to the owners.

2. Governance Structure

As cooperatives grow and change in an increasingly

dynamic environment, governance structure becomes a critical

area of member concern. While the subject should be reviewed by

all directors, it becomes especially important for cooperatives that

have seen significant member growth and expansion. Here are

some questions directors should ask to ensure an effective member governance system that sufficiently meets member needs and

a democratic cooperative process.

● Is our governance structure suited to effective member

control? Are members equitably represented?

4

For more information, consult the following USDA publications.

Reports on Character and Principles 3

CIR 1, Section 1—Cooperative Principles and Legal Foundations

CIR 1, Section 3—Cooperative Benefits and Limitations

CIR 5—Cooperatives in Agribusiness

CIR 11—Cooperatives: What They Are and the Role of Members,

Directors, Management and Employees

CIR 55—Co-ops 101: An Introduction to Cooperatives

CIR 59—Antitrust Status of Farmer Cooperatives: The Story of

the Capper-Volstead Act

CIR 60—Agricultural Cooperatives in the 21st Century

3 Reports in boxes at end of sections are available from USDA:

http://www.rurdev.usda.gov/rbs/pub/newpub.htm
● Do members control our cooperative?

● Do members feel adequately represented?

● Are significant numbers of members active in our governance process?

● Is our board the right size for effective governance?

● Is our redistricting committee performing well?

● What major issues are confronting our governance structure? What are the strengths and weaknesses of it?

● Is our governance structure suitable for future decisionmaking and challenges?

● Does the structure effectively permit communication from

the membership to the board and back?

● Is effective communications in place with the general manager from all local and regional governance levels?

● Do we have ample divisions and departments in our governance structure to stay in contact with a diverse

membership?

● How coordinated are our divisions and departments?

● Do we have the right type and number of well-functioning

committees?

● Do all members understand all aspects of our governance

structure?

5

For more information, consult the following USDA publications.

Cooperative Governance Reports

CIR 1, Section 6—Cooperative Organization and Structure

CIR 1, Section 7—Cooperative Member Responsibilities and

Control

CIR 37—Keeping Cooperative Membership Rolls Current

RR 72—Structuring for MemberControl in Large Cooperatives:

A Case Study in Dairy

RR 131—Membership Structural Design: A Pilot Test on DHI

Cooperatives

RR 156—Voting and Representation Systems in Agricultural

Cooperatives
3. Policy and Legal Aspects

The primary responsibility of directors is to originate and

approve policies. They provide the direction and specific guidance for effective management of a cooperative’s operations.

Policies need to reflect the cooperative’s basic philosophy. They

are a major ingredient for reaching cooperative goals.

Whether establishing new policy or assessing existing policy,

directors should ask and answer some basic questions to determine precisely how policy should be written. Directors need to

make, understand, assess, and enforce fair and strong cooperative

policy. Policy questions directors should consider:

Existing Policy

● Does it reflect the cooperative’s basic business philosophy?

● Does it provide equitable benefits to members?

● Does its language explicitly define the policy? Is it easy to

read?

● Does the entire board agree with the policy?

● Are any policies redundant?

● Does the policy create a conflict of interest for any member, director, or the manager?

● Is the policy in line with the clear delegation of duty

between the board and management?

● Does management have enough policies to follow to effectively operate the cooperative?

● Are there too many policies?

● Do all the policies work in concert with each other? If not,

which ones need to be modified/changed/removed?

● Do members know and understand the cooperative’s policies?

New Policy

● What exactly do we want the policy to do or not do?

● What action words will make the policy more explicit?

● Should the policy be indefinite or have a time limit?

● Will the policy fit with current operations and the strategic

plan (i.e., mission, goals, and strategies)?

● Will the policy be redundant or conflict with other policies?

6
● Will the membership agree with the policy? Does it represent their interests?

● Do we have all the information we need to assess a new

policy?

Public Policy

Cooperatives should develop a written set of policy resolutions and institute a regular procedure for revising them. The

policy program should include a plan to implement the resolutions through personal contacts with policymakers and

coordinated efforts with other cooperatives and interest groups

through coalitions and trade associations. Here are some areas for

directors to consider:

● What types of policy resolutions are needed to most accurately reflect our cooperative’s interests?

● Does our membership agree with the policy resolutions

we are devising? Are they in the membership’s best interests?

● Are members providing policy resolution suggestions?

● How often are we reviewing/changing our resolutions? Is

it often enough?

● What types and amounts of cooperative resources are

available to devote to public policy? How active can the

cooperative be?

● Are members on our resolution committee and is it effective?

● What other cooperatives or cooperative associations can

we work with on developing policy?

● Are we making the right contacts at local, State, and

national levels? Are we being heard?

● Are we supporting the organizations that carry out public

policy on our behalf?

● Are we using the resources that our public policy efforts

seek to augment?

Sensitive Policies

One sensitive area has to do with how much a cooperative

should become involved in political matters. If a cooperative

board wants to become active, questions arise that may help them

determine how involved to become or if any involvement is

desired. This is a sticky area. Cooperative members, like the gen7
eral public, often have a wide range of opinions on political matters. Issues may become especially sensitive when it comes to

political party differences and ideology. Here are questions to consider:

● Should our cooperative be involved in political matters? If

so, to what degree?

● Should our cooperative actively engage in the political

process beyond specific issue declarations?

● How open and wide should that activity be? How will

diverse member interests be protected?

● What activities should be restricted or limited, and how?

● If our board decides to take a side on an issue, should

members be polled?

Legal Aspects

Directors should understand and periodically review their

cooperative’s legal documents and implement change where and

when needed. Legal counsel should be hired to help draft needed

changes. Still, directors need to understand what the documents

contain and be versed in various areas to effectively make policy

decisions. They must ensure that the cooperative is legally structured and that legal procedures are followed. Some questions to

consider:

● Does our cooperative have all the needed legal documentation in place?

● Do our articles of incorporation accurately spell out all

needed provisions (e.g., heading, name, principal place(s)

of business, purpose, powers, duration, directors, capital

structure, amendment, signatures, etc.)?

● Do the bylaws accurately describe membership, meetings

of members, directors and officers, directors duties, officer

duties, equity capital and redemption, consent, nonmember business, nonpatronage income, handling losses,

dissolution, indemnification, and amendment, etc?

● Does our cooperative’s marketing agreement contain necessary clauses and outline its functions? Does it need review

and amendment?

● Do we have a director’s handbook? Does it contain all the

necessary information directors need?

8
● Do we understand what directors’ liabilities are for the

cooperative?

● Do we have a legal compliance program in place to monitor danger areas of antitrust, taxation, environmental laws,

discrimination practices, and work safety?

● Does our cooperative need a legal audit to measure exposure to legal issues/concerns?

Directors need to explain, review, critically assess, and amend

cooperative policies and legal documents periodically so they

clearly understand what those documents contain.

4. Member Relations and Education

Directors need to periodically review their member relations

program and question if it meets member needs. A strong program is critical to sustaining member ownership and control in a

cooperative. It must be predicated on communication and education. Directors need to understand various facets associated with

their roles and responsibilities. The objective is effective cooperative communications leading to a stronger and more loyal

cooperative culture.

9

For more information, consult the following USDA publications.

Cooperative Policy Publications

CIR 34—Director Liability in Agricultural Cooperatives

CIR 39—Sample Policies for Cooperatives

CIR 40—Sample Legal Documents for Cooperatives

CIR 42—Co-op Involvement in Public Policy

RR 106—Cooperative Marketing Agreements: Legal Considerations

RR 153—Response of Cooperative Elevators to Changes in Government Policies
● Is our cooperative’s overall communication strategy effective and sufficient?

● So members ask questions of directors and management?

● Are they satisfied with the answers?

● Do members hear and know the cooperative’s mission?

● Does the cooperative have a newsletter? Do members read

it? Does it provide for feedback?

● How well attended are district/regional meetings of the

cooperative?

● Are members engaged with the cooperative’s operations

and services?

● Are members satisfied with the level of communication

they receive?

● Do members fulfill their responsibilities as members? What

could be improved? How can improvement be promoted?

● Does an effective mechanism (i.e., method or system) exist

to enlist member views or respond to member concerns?

How could this area be improved?

● Does our cooperative conduct enough cooperative education? Does it fulfill the educational needs of members,

employees, and directors?

● Does our education program take advantage of local,

regional, and national cooperative education efforts?

● Where do education gaps exist and how can they be filled?

● How can our education system be improved?

● Are director education needs properly assessed?

● Does our cooperative take education seriously enough?

● Are directors committed to education and self-improvement?

● What educational programs are most cost effective and

worthwhile?

● If our cooperative has a young cooperator’s program, how

well does it work?

Director Assessment

Cooperative directors must assess the effectiveness of their

ability and performance as a board to improve areas where

needed. Assessment should include the individual cooperative,

the board, and board meeting productivity. The objective is to

help directors assess their abilities so that corrective actions can be

taken if needed to improve their performance. Major questions

involve:

10
● Do my director skills need improvement?

● What areas need most improvement?

● Would further training improve my ability as a director?

● Do we understand our weaknesses and strengths as a

board of directors working together?

● Do we work together effectively and efficiently?

● Do we need further training to do a better job as a board?

● Do we complete our work within the allotted time?

● Are our meetings effective and efficient?

● Could we improve our meetings? Where and in what

areas?

● Do we need an outsider to more accurately assess our performance and education needs?

Directors should carry out assessments from time to time. A

reference publication takes directors through exercises of selfassessment, working together as a board, and effectiveness of

board meetings (CIR 58, "Assessing Performance and Needs of

Cooperative Boards of Directors").

11

For more information, consult the following USDA publications.

Member Relations and Education 

Reports & Articles

CIR 36—Recruiting and Training Co-op Employees

CIR 58—Assessing Performance and Needs of Cooperative

Boards of Directors

CIR 61—The Circle of Responsibilities of Co-op Boards

RR 151—Strengthening Ethics Within Agricultural Cooperatives

RR 155—Decision-Making in Cooperatives with Diverse Member Interests

RR 165—Member Participation in Agricultural Cooperatives
5. Management

In board meetings, management must be asked questions

related to the concerns and issues facing the cooperative. Most

will likely originate from the manager’s report or from immediate

issues raised by the manager during the meeting. Other questions

may arise from a director’s contact with members, their own

involvement and use of the cooperative, or from contact with

community businesses or residents. Directors need to be cognizant of questions to ask management to ensure that the

cooperative is well run and that necessary information is made

available to them and members. The objective is to ensure that

important information flows from management to directors.

Operations

● What concerns you most about current operations?

● What concerns you most about future positioning?

● What are your plans for the ____________

market/branch/service?

● What policies are working well; which ones need

review/change?

● Do we need any new policies to enable you to better carry

out your management responsibilities and meet goals?

● What major operational weaknesses need to be immediately addressed?

● What are members saying/asking in their direct communications with you?

● Do we fully understand the distinct responsibilities of the

board?

● Is our strategic plan working well in regard to operations?

Hiring a Manager

In hiring a manager, the board needs answers to a number of

questions that will reflect how well the prospective applicant will

fit with the cooperative. The objective is to gain enough information that will help in selecting a new manager. Here are some

questions to consider:

● What is the applicant’s educational background?

12
● What is the applicant’s cooperative experience, such as

with other cooperatives? How well versed is the applicant

in a cooperative’s governing principles?

● Has the applicant shown leadership ability in previous

endeavors (work and private life)?

● Is the applicant flexible and open-minded?

● Does the applicant clearly understand the role and responsibilities of a manager in a cooperative and the importance

of respect in the relationship between the board and manager?

● Is the applicant a good communicator who can connect

with the member-owners?

● What is the applicant’s pre-cooperative related experience?

How will that experience help or hurt the cooperative?

● Do we have a detailed position description for its general

manager?

● How well has the board chosen managers in the past? Are

there lessons learned that could help the process/choice

this time?

Manager Appraisal

One area where many cooperative boards struggle is in

appraising the general manager. Directors must use some type of

appraisal to objectively assess how well the manager is operating

the cooperative. The objective is to routinely conduct a fair and

forthright management appraisal. Here are some questions directors need to ask:

● Are we adequately appraising the general manager? Do

we follow a sound procedure?

● Does the manager appraisal depend on the cooperative’s

goals and strategy? Do we objectively measure the manager’s performance against some clear and distinct

standards?

● Does the manager understand and adhere to his/her

responsibilities as distinct and separate from the board’s?

● Is the manager a good leader and have human relations

skills?

● Has the manager made good employee hiring choices?

● Is the management team cohesive? Is the manager leading

them adequately?

● How well does the manager track the cooperative’s industry? Does he/she know the industry well?

13
● Does the manager finish projects in an efficient and timely

manner?

● Does the manager communicate well to the board and

members?

● Does the manager adhere to cooperative policies?

6. Financial Management

Financial management and capital issues are major concerns

in agricultural cooperatives. Increasingly, directors need to be

more attentive and educated on financial matters. Directors’ fiduciary duties dictate that they ask tough and information-seeking

questions about the cooperative’s financial situation and management. The objective is for directors to fully understand the

cooperative’s financial and equity position and make appropriate

decisions.

● Is our cooperative financially strong?

● Are its financial indicators (ratios) strong? Have they

improved? What should they be?

● What is our debt situation?

● Are we too highly leveraged?

● What is our equity situation?

● How much equity is allocated and unallocated?

● Do we have enough capital or access to capital to grow?

● What options do we have for obtaining necessary capital?

● What is our relationship with our credit provider(s)?

● Has our net worth been increasing?

● What State and/or Federal financial programs might benefit the cooperative?

14

For more information, consult the following USDA publications.

Management and Manager Appraisal Reports

CIR 1, Section 8—Cooperative Management

CIR 136—Appraising Manager Performance
● How well do we analyze investment decisions? Has our

analysis been accurate?

● Are we making financial progress?

● How well does our financial management coincide with

strategic plans?

Understanding a cooperative’s financial circumstances, condition, and future needs has become one of the greatest challenges

confronting cooperative directors. Given the dynamic agricultural

environment and vast structural changes taking place in agribusiness, understanding a cooperative’s financial position and

capacity for new initiatives, opportunities, or change is critically

important. Director education in general and advanced cooperative finance is a must.

Equity Management

● Are members satisfied with the cooperative’s equity program?

● Do members prefer the present way the cooperative accumulates equity or might a different system be more

beneficial?

● Are we redeeming equity effectively and consistent with

our bylaws?

● Are members adequately financing the cooperative?

● Is the financing coming from active and current members?

● Is the cooperative’s equity-to-assets ratio in a good range?

● Is our cooperative obtaining enough member equity for

sufficient financial strength and future growth opportunities?

● How well is our equity revolvement/retirement system

working?

● How can our equity management be improved?

● How well are we communicating with members about our

equity management situation?

Managing a cooperative’s equity is a critically important

aspect of effective control and a duty that directors must take seriously and studiously. Dependent on the cooperative’s distinct

equity accumulation and redemption scheme, various questions

will arise that directors must consider. Significant knowledge

about cooperative equity management is necessary.

15
16

For more information, consult the following USDA publications.

Financial Management Reports

CIR 23—Tax Treatment of Cooperatives

CIR 44, Parts 1-5—Income Tax Treatment of Cooperatives (see

references for section titles)

CIR 43—Working with Financial Statements

CIR 57—Understanding Cooperative Bookkeeping and Financial

Statements

RR 163—Cost of Capital for Agricultural Cooperatives

RR 175—Financial Management and Ratio Analysis for Cooperative Enterprises

Equity Management Reports

CIR 51—Base Capital Financing of Cooperatives

CIR 56—Managing Your Cooperative’s Equity

RR 23—Equity Redemption: Issues and Alternatives for Farmer

Cooperatives

RR 80—Nonqualified Notices: An Alternative for Distributing

Cooperative Earnings

RR 124—Equity Redemption and Member Equity Allocation

Practices of Agricultural Cooperatives

RR 139—Consolidation of Balance Sheet Components During

Cooperative Mergers

(Directors should also keep abreast of cooperative financial

trends RBS publishes a number of annual statistical reports.)
7. Auditing

An extremely important function of a board of directors is to

secure an accurate audit of the cooperative’s finances. The entire

board or the audit committee must meet with the cooperative’s

auditor after the audit has been performed. Directors must gather

information from the auditor to ensure that the audit was correctly conducted and accurate. They also need to obtain important

information that may not have been formally included in the

audit.

Cooperative boards in the midst of hiring an auditor must

also ask some important questions. While the manager may have

done some of the groundwork in finding qualified applicants, the

board is ultimately responsible for hiring the auditor. The board

needs to understand what to ask so it can select the right one.

Here are some questions to ask the auditor:

Auditor/Audit Firm

● Were correct procedures followed in conducting the audit?

Explain?

● Did management cooperate fully? Could dealings with

management have been improved?

● Did you encounter any problems with the way the cooperative handles its financial reporting and accounting

procedures?

● What were the audit’s general findings?

● Were there any new specific findings?

● Was anything different from the previous year’s audit?

● What did you find that should most concern us?

● What financial areas should we concentrate on improving?

● What should we know that doesn’t appear in your report?

● What haven’t you told us?

● Is there anything else we should ask you?

● Did you create enough notes to accurately describe conditions to members?

● Are the interest rates on our loans in line with market

rates?

● Should we seek any accounting policy changes?

17
Hiring an Auditor

Directors need to ask questions to ensure that the best auditor is hired given the cooperative’s unique structure and

operations.

● Has the auditor worked with cooperatives before?

● Does the auditor have other cooperative clients?

● Does the auditor have sufficient knowledge of cooperative

accounting and finances?

● Is the auditor current with cooperative accounting practices and law?

● Does the auditor have any personal ties to the membership, the board, or operations of the cooperative?

● Does the auditor have a personal relationship with the

manager or any other cooperative employees?

● Does the auditor have professional references that can be

checked?

● After checking, are the references positive?

● Are the auditor’s charges reasonable and competitive with

those of other area auditors with similar credentials?

8. Consultants

Cooperatives often hire consultants to study issues and to

carry out special projects. Whether the consultants are paid professionals or are free services from outside sources, such as

non-profit centers or government, questions must be asked

regarding the task at hand. Once a cooperative decides to use and

hire a consultant, analysis questions need to follow the consultant’s work. Directors need to make sure they obtain as much

important information as possible.

18

For more information, consult the following USDA publications.

Auditing Report

CIR 41—Annual Audits—Board Responsibilities
While questions may differ depending on the specific project or

task, directors should seek to gain the most information possible

from the outside consultant(s). Here are some general questions to

ask:

● What did you find that was not obvious?

● Who in our industry did you talk to in your research?

● How do we compare with other similar cooperatives?

● How are we better or worse than other cooperatives?

● How are we better or worse than other like businesses?

● How well does our current structure fit for potential future

changes in the marketplace?

● What outside industry forces will impact our current business methods?

● Is our cooperative well positioned in its industry?

● What constraints (e.g., capital, operational) will affect our

future positioning?

● What would you recommend for overall

improvement/positioning of our cooperative?

● What goals/strategies should our cooperative pursue in

the short and long run?

● What are the major industry-related and competitive

threats to our cooperative?

● Are there any opportunities you feel our cooperative

could/should consider?

● What should be our first step in implementing your recommendations? What steps should come next?

9. Strategic Planning

Strategic planning is an important component of any director training program. A study by Hughes and Potter found that

strategic planning was a priority for future training and educational needs in Midwest cooperatives. Many cooperative leaders

make this same point. In strategic planning, directors must be able

to ask questions and seek answers in completing steps. Directors

must fully understand how strategic planning applies to their

cooperative, how they should best implement planning, and what

types of information are needed to make the process effective.

Here are questions related to various aspects of cooperative strategic planning:

19
General

● Do we need a facilitator?

● What type of facilitator would fit best for us? Who should

it be?

● Do we understand strategic planning and the steps and

process involved?

● Are we committed to going forward with the process?

● Are our plans written in a clear, easily readable format?

● Does our cooperative management regularly refer to the

plans?

● Is our strategic plan in line with our budget/cash flow

projections/plans?

Mission/Vision Statements

In developing or reviewing these statements, directors need

to ask if the mission statement provides a concise and clearly written description of what the cooperative is and what it does. Does

the vision statement indicate where the cooperative is heading

and what it wants to be? These questions should be answered to

ensure that the mission and vision statements are well written and

defined:

● Who are the cooperative’s patrons/members?

● What does the cooperative do?

● How does the cooperative do what it does?

● What is the cooperative’s major business?

● What should it be?

● How is the cooperative unique?

● What is its primary emphasis?

● What values define the cooperative?

● What is the cooperative not?

● What will the cooperative be in the future?

Assessing the Environment

For assessing the environment, directors need to answer

questions on an external and internal basis.

External

● What forces (e.g., market, governmental, environmental,

global, etc.) are helping the cooperative?

● What trends will have the greatest potential impact on the

cooperative?

20
● How will these forces affect the cooperative in the future?

● What is the cooperative’s territory?

● Who is the competition and how will it change?

● How does and will competition affect cooperative operations?

● What are the cooperative’s short- and long-term opportunities and threats?

● How adaptable is the cooperative to changing market conditions?

● What market conditions are most likely to change and

which will stay the same?

● Is the cooperative operating in a mature or an emerging

agricultural environment?

● How is the cooperative positioned in its industry/environment? Is it progressing, declining, or in a status quo state?

● What are the implications of its position for future operations and viability?

Internal

● What are the marketing/sales/service methods?

● Are they working well? What needs to be improved?

● What is the cooperative’s membership (members vs. nonmembers) situation?

● What business units or operational areas are working

well/not well?

● What services are needed or should be changed? What

new services are needed?

● What are the cooperative’s internal strengths and weaknesses?

● Is the internal structure efficient? If it could be improved,

how?

● How does the cooperative’s internal structure correspond

with its external environment?

● Is the business correctly structured for the services it provides and will be providing?

Goals

● What are the cooperative’s goals? Can they be clearly

described?

● Are they well defined and detailed?

● Are they realistic?

● Are they being achieved?

21
● Are they in an accurate short- or long-term context?

● Are they within the resource (e.g., financial, human, service) limitations of our cooperative?

● Are they in line with the cooperative’s mission and vision?

● Does the cooperative have the correct resource (human

and financial) mix to achieve all of them?

● What goals have been met, and which ones need to be

updated or modified?

● Are the goals ambitious enough, but not too ambitious

given the environmental assessment?

● What new goals are needed?

Strategies

● Are they consistent with the cooperative’s goals?

● Are they realistic and feasible?

● Have they been well analyzed?

● Do we have the resources to fully implement them without

harming current operations and our competitive position?

● How risky are they? Does the risk coincide with our risk

aversion level?

● Are they specific and measurable?

● Are strategy action plans in place?

● Will they take advantage of our strengths while not exposing our weaknesses?

● What strategies are needed given our mission and goals

and current condition and position in our industry and

environment?

● How well are we monitoring the strategies we have in

place? Should more be done?

● How have we adjusted our strategies and has it improved

things?

● Are our strategies consistent with operating on a cooperative basis?

● How and when will the strategies be implemented?

22
New Strategic Direction

● Is our cooperative structure appropriate for where we

intend to go?

● Do we need to consider other directions (i.e., consolidation, joint venture, strategic alliance, partnership, etc.)?

What direction will allow for the highest level of goal

attainment?

● Have we been doing a good job in improving our current

operations and service under our current strategic direction?

● If we pursue a new direction that will create significant

change, how will it affect our adherence to cooperative

principles?

● How receptive will the membership be to a significant

change in strategic direction? Are we prepared and able to

effectively communicate such a change?

● Have other cooperatives pursued the change we are contemplating? How has it worked for them?

● How will the change in direction affect how our competition views us and reacts to us?

Feedback

● Are we monitoring our strategies and revisiting our goals

on a regular basis?

● Are we adjusting our strategic plan if things aren’t going

as intended?

● Is management following the strategic plan and adjusting

operations accordingly?

● Has management fully implemented chosen strategies in a

timely manner?

● How well is the plan benefiting members?

● How well have we communicated the plan to members

and have we received sufficient member feedback?

● What positive/negative implications have arisen from

implementation of the plan?

● When do we need to have another strategic planning session to update and modify our plans?

Cooperative directors need to consider these and other questions for effective strategic planning. Many questions arise as

directors become ingrained and experienced in strategic planning

and their cooperative makes planned changes. Directors should

23
use various resources to develop a strategic planning process that

fits well with their cooperative’s internal organization and structure.

24

For more information, consult the following USDA publications.

Strategic Planning/Structural Issue Reports

CIR 48—Strategic Planning Handbook for Cooperatives

CIR 52—Cooperative Merger/Consolidation Negotiations-The

Important Role of Facilitation

RR 103—Strategic Planning Systems of Large Farmer Cooperatives

RR 112—Strategic Planning: A Conceptual Model for Small and

Midsize Farmer Cooperatives

RR 127—Cooperative Marketing Agencies in Common

RR 148—Cooperatives and New Uses for Agricultural Products:

An Assessment of the Fuel Ethanol Industry

RR 150—A Strategic Planning Study of the Dairy Herd Improvement System

RR 158—Strategies for Survival by Cooperative Country Elevators – Revisited

RR 162—Local Cooperatives Role in the Emerging Dairy Industry

RR 174—Cooperative Unification: Highlights from 1989 to Early

1999

RR 177—The Impact of New Generation Cooperatives on Their

Communities

RR 180—Grain Cooperative Mergers and Acquisitions, 1993-

1997
10. Major Strategic Thinking Issues

As part of the strategic planning process and for future contemplation, cooperative directors, management, and members

need to face and examine the big issues confronting cooperatives.

Issues confronting and likely to impact cooperatives’ unique organization warrant assessment by directors and management as

cooperatives work to position themselves in advantageous ways.

They must work to establish meaningful connections between the

issues and forces that will lead to successful cooperative

responses. Most of these questions are taken from an article in

Rural Cooperatives magazine by James Baarda, "Major Changes

in Agriculture Raise Big Questions."

● Can our cooperative continue to play a unique role, either

individually or collectively with others, in maintaining the

strength of the agricultural industry by effectively supporting our farmer members? How will our cooperative

heed the course? What do we have to do for this to continue?

25

RR 181—Local Cooperatives Role in the Identity-Preserved

Grain Industry

RR 184—Strategic Planning in Farmer Cooperatives

RR 187—Structural Change in the Dairy Cooperative Sector,

1992-2000

RR 190—The Changing Federated Relationship Between Local

and Regional Cooperatives

SR 57—Cooperative Restructuring, 1989-1998

Rural Cooperatives Magazine

"Ask the Right Questions" May/June 2002

"Adapting to Change: Educating Members Helps Smooth Transitions" May/June 2002
● Is our cooperative’s decision-making process adequate?

Does our board act fast enough in the contemporary (and

changing) environment? Is our board capable of making

the kinds of decisions needed, when they must be made, 

and with the needed decisiveness? How is our board in

this regard? What changes are needed?

● Is our cooperative business limited to service to members?

Does it lack flexibility to expand businesses? What does

serving members cost the cooperative?

● Do our members’ demands and behavior weaken our

cooperative? If members demand good prices, high

returns, and quick equity revolvement, does that place too

much strain on our cooperative? If so, what can we do to

alleviate this situation?

● Is there a maximum size to which cooperatives can grow

and still maintain their true relationship to members?

Where is our cooperative in the size spectrum?

● Does our cooperative have a fatal limit on capital

resources? What is that limit? What can be done to alter

that problem?

● What is our cooperative’s impact on the communities we

serve? Can we measure these impacts? Can we communicate what they are?

● If U.S. agriculture’s existence is challenged by global

changes, is our cooperative and others also doomed? Does

our cooperative have a special role to play in helping

farmers and the U.S. economy avoid the "death" of agriculture as we know it?

While answers to these big-issue questions are difficult, it is

important that directors think about how they might affect their

cooperative and its operations and membership in the future.

Preparation for and study of issues is important for effective governance and overall cooperative positioning.

26
Conclusion

This report provides numerous questions that directors

should consider asking in fulfilling their roles. The questions are

intended to remind directors of some of the questions they should

pursue as well as provide a starting point for further director education and information gathering. Directors will commonly

confront various important topics, problems, and issues and gaining more knowledge about such matters is important to ensure

member control. Being able to fully understand a situation by asking necessary questions is critically important to being an effective

director.

The USDA publications listed at the end of the question sections show directors further sources for information and

education. Other resources are available from universities, cooperative centers, State cooperative councils, and national and local

27

For more information, consult the following USDA publications.

Major Issues/Structure Reports and Articles

CIR 60—Agricultural Cooperatives in the 21st Century

RR 157—Cooperatives in a Changing Global Food System

RR 192—Problems and Issues Facing Farmer Cooperatives

RR 177—The Impact of New Generation Cooperatives on

Their Communities

Rural Cooperatives Magazine

"Major Changes in Agriculture Raise Big Questions for Nation’s

Cooperatives," November/December 2002.

"Meeting the Challenge: Co-ops in the 21st Century,"

January/February 2003.

"Negotiating the Crossroads of a New Century," January/February 2003.
cooperative organizations. USDA’s Rural Cooperatives magazine

and other periodicals often have articles containing important

information related to cooperative director duties.

Cooperative director education is imperative to the successful future of cooperatives. It must be continual and consistent and

provided at both basic and in-depth levels. Directors must attain

advanced knowledge about their unique organizations and their

various facets so they can ask the right questions to fulfill their

important responsibilities. This report is intended as a tool that

directors can use to more effectively carry out their board duties.

28
Cooperative Publication References

Most of the USDA publications listed can be found online at:

http://www.rurdev.usda.gov/rbs/pub/newpub.htm.

USDA Cooperative Information Reports (CIR)

Baarda, James. "The Circle of Responsibilities for Co-op Boards,"

CIR 61, 2003.

Binion, Robert W. "Understanding Cooperative Bookkeeping and

Financial Statements," CIR 57, 1998.

Duffey, Patrick and James J. Wadsworth. "Cooperatives: What

They Are and the Role of Members, Directors, Managers, and

Employees," CIR 11, 2001.

Fee, Douglas, Allen C. Hoberg, and Linda Grim McCormick.

"Director Liability in Agricultural Cooperatives," CIR 34, 1996.

Frederick, Donald A. "Tax Treatment of Cooperatives," CIR 23

(pamphlet), 1995.

Frederick, Donald A. "Keeping Cooperative Membership Rolls

Current," CIR 37, 1991.

Frederick, Donald A. "Sample Legal Documents for

Cooperatives," CIR 40, 1999.

Frederick, Donald A. "Co-op Involvement in Public Policy," CIR

42, 1993.

Frederick, Donald A. "Income Tax Treatment of Cooperatives:

Background," CIR 44, Part 1, 2001; "Patronage Refunds," Part 2,

1996; "Distribution, Retains, Redemptions, and Patrons’

Taxation," Part 3, 2001; "Internal Revenue Code Section 521,"

Part 4, 2001; and "Handling of Losses," Part 5, 1999.

29
Frederick, Donald A. "Co-ops 101: An Introduction to

Cooperatives," CIR 55, 1999.

Frederick, Donald A. "Antitrust Status of Farmer Cooperatives:

The Story of the Capper-Volstead Act," CIR 59, 2002.

Frederick, Donald A., et al. "Agricultural Cooperatives in the 21st

Century," CIR 60, 2002.

Hanson, Katherine L. "Cooperatives in Agribusiness," CIR 5, 2002.

Kirkman, C. H. Jr. "Cooperative Member Responsibilities and

Control," CIR 1, Section 7, 1993.

Mahoney, Rosemary K. "Annual Audits Board Responsibilities,"

CIR 41, 1995.

Mather, Warren J. and Homer J. Preston. "Cooperative Benefits

and Limitations," CIR1, Section 3, 1990.

Namken, Jerry C. and Galen W. Rapp. "Strategic Planning

Handbook for Cooperatives," CIR 48, 1997.

Rapp, Galen. W. "Recruiting and Training Co-op Employees," CIR

36, 1990.

Rapp, Galen W. "Sample Policies for Cooperatives," CIR 39, 1993.

Rapp, Galen W. "Appraising Manager Performance," CIR 136,

1994

Rathbone, Robert C. and Donald R. Davidson. "Base Capital

Financing of Cooperatives," CIR 51, 1995.

Rathbone, Robert C. "Managing Your Cooperative’s Equity," CIR

56, 1997.

Reynolds, Bruce J., James J. Wadsworth, and Donald A. Frederick.

"Cooperative Merger/Consolidation Negotiations—The

Important Role of Facilitation," CIR 52, 1996.

30
Rural Business-Cooperative Service. "Cooperative Principles and

Legal Foundations," CIR 1, Section 1, 1993.

Rural Business-Cooperative Service. "Cooperative Management,"

CIR1, Section 8, 1995.

Vogelsang, Donald L., et al. "Cooperative Organization and

Structure," CIR 1, Section 6, 1993.

Wadsworth, James J. "Assessing Performance and Needs of

Cooperative Boards of Directors," CIR 58, 2000.

Wissman, Roger. "Working with Financial Statements," CIR 43,

1996.

USDA Research Reports (RR)

Chesnick, David S. "Financial Management and Ratio Analysis for

Cooperative Enterprises," RR 175, 2000.

Cobia, David, et al., "Equity Redemption: Issues and Alternatives

for Farmer Cooperatives," RR 23, 1982.

Crooks, Anthony C. "Cooperatives and New Uses for Agricultural

Products: An Assessment of the Fuel Ethanol Industry," RR

148, 1997.

Crooks, Anthony C. "Grain Cooperative Mergers and

Acquisitions, 1993-1997," RR 180, 2001.

Gray, Thomas W. "Structuring for Member Control in Large

Cooperatives: A Case Study in Dairy," RR 72, 1988.

Gray, Thomas W. and Gillian Butler. "Membership Structural

Design: A Pilot Test on DHI Cooperatives," RR 131, 1994.

Gray, Thomas W. and Charles A. Kraenzle. "Member Participation

in Agricultural Cooperatives: A Regression and Scale

Analysis," RR 165, 1998.

Gray, Thomas W. and Charles A. Kraenzle. "Problems and Issues

Facing Farmer Cooperatives," RR 196, 2002.

31
Hogeland, Julie A. "Local Cooperatives Role in the Emerging

Dairy Industry," RR 162, 1998.

Hogeland, Julie A. "Local Cooperatives Role in the IdentityPreserved Grain Industry," RR 181, 2001.

Hogeland, Julie, A. "The Changing Federated Relationship

Between Local and Regional Cooperatives," RR 192, 2002.

Lasley, Paul, et al. "Strengthening Ethics Within Agricultural

Cooperatives," RR 151, 1997.

Liebrand, Carolyn B. "Structural Change in the Dairy Cooperative

Sector," RR 187, 2001.

Pederson, Glenn. "Cost of Capital for Agricultural Cooperatives,"

RR 163, 1988.

Rathbone, Robert C. and Roger A. Wissman. "Equity Redemption

and Member Equity Allocation Practices of Ag Coops," RR

124, 1993.

Reilly, John D. "Cooperative Marketing Agreements: Legal

Considerations," RR 106, 1992.

Reynolds, Bruce J. "Cooperative Marketing Agencies in

Common," RR 127, 1994.

Reynolds, Bruce J. "Decision-Making in Cooperatives With

Diverse Member Interests," RR 155, 1997.

Reynolds, Bruce J., Thomas W. Gray, and Charles A. Kraenzle.

"Voting and Representation Systems in Agricultural

Cooperatives," RR 156, 1997.

Reynolds, Anne et. al. "The Impact of New Generation

Cooperatives on Their Communities," RR 177, 2001.

Royer, Jeffrey S. and Roger A. Wissman. "Nonqualified Notices:

An Alternative for Distributing Cooperative Earnings," RR 80,

1989.

32
Seipel, Michael F., and William Heffernan. "Cooperatives in a

Changing Global Food System," RR 157, 1997.

Stearns, Larry, David W. Cobia, and Marc Warman. "Response of

Cooperative Elevators to Changes in Government Policies,"

RR 153, 1997.

Wadsworth, James J. "Strategic Planning Systems of Large Farmer

Cooperatives," RR 103, 1993.

Wadsworth, James J. "Strategic Planning: A Conceptual Model for

Small and Midsize Farmer Cooperatives," RR 112, 1993.

Wadsworth, James J. and David S. Chesnick. "Consolidating

Balance Sheet Components During Cooperative Mergers," RR

139, 1995.

Wadsworth, James J. "A Strategic Planning Study of the Dairy

Herd Improvement System," RR 150, 1996.

Wadsworth, James J. "Cooperative Unification: Highlights From

1989 to Early 1999," RR 174, 1999.

Wadsworth, James J. "Strategic Planning in Farmer Cooperatives,"

RR 184, 2001.

Warman, Marc, Larry Stearns, and David W. Cobia. "Strategies for

Survival by Country Elevators-Revisited," RR 158, 1997.

USDA Service Reports (SR)

Wadsworth, James J. "Cooperative Restructuring, 1989-1998," SR

57, 1998.

USDA Rural Cooperatives Magazine Articles

Baarda, James R. and Randall E. Torgerson. "Ask the Right

Questions," Rural Cooperatives, May/June 2002, U.S.

Department of Agriculture, Washington, DC.

Baarda, James R. "Major Changes in Agriculture Raise Big

Questions for Nation’s Cooperatives," November/December

2002.

33
Dunn, John, et al. "Meeting the Challenge: Co-ops in the 21st

Century," January/February 2003.

Torgerson, Randall E. "Negotiating the Crossroads of a New

Century," January/February 2003.

Wadsworth, James J. "Adapting to Change: Educating Members

Helps Smooth Transitions," May/June 2002.

Other Reports

Anderson, Bruce L. and Brian M. Henehan. "Questions

Cooperative Directors Should Be Asking Management," Staff

Paper SP 2002-01, Department of Applied Economics and

Management, Cornell University, Ithaca, NY, January 2002.

Hughes, Will and Jessica Potter. "Board Training and Strategic

Planning Practices in Midwestern Agricultural Cooperatives,"

RBS 98-41 (UW-Madison #144-Hj35), August 2001.

34
Endnote

The International Co-operative Alliance (ICA) Principles

1st Principle: Voluntary and Open Membership

Co-operatives are voluntary organizations, open to all persons able to use their services and willing to accept the

responsibilities of membership, without gender, social, racial,

political or religious discrimination.

2nd Principle: Democratic Member Control

Co-operatives are democratic organizations controlled by

their members, who actively participate in setting their policies

and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary

co-operatives members have equal voting rights (one member,

one vote) and

co-operatives at other levels are also organized in a democratic

manner.

3rd Principle: Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is

usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as

a condition of membership. Members allocate surpluses for any or

all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be

indivisible; benefiting members in proportion to their transactions

with the co-operative; and supporting other activities approved

by the membership.

4th Principle: Autonomy and Independence

Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other

organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by

their members and maintain their co-operative autonomy.

35
5th Principle: Education, Training and Information

Co-operatives provide education and training for their members, elected representatives, managers, and employees so they

can contribute effectively to the development of their co-operatives. They inform the general public - particularly young people

and opinion leaders - about the nature and benefits of co-operation.

6th Principle: Co-operation among Co-operatives

Co-operatives serve their members most effectively and

strengthen the co-operative movement by working together

through local, national, regional and international structures.

7th Principle: Concern for Community

Co-operatives work for the sustainable development of their

communities through policies approved by their

members.

36
U.S. Department of Agriculture

Rural Development

Rural Business–Cooperative Service

Stop 3255

Washington, D.C. 20250-3255

Rural Business–Cooperative Service (RBS) provides research, management, and

educational assistance to cooperatives to strengthen the economic position of farmers

and other rural residents. It works directly with cooperative leaders and Federal and

State agencies to improve organization, leadership, and operation of cooperatives and to

give guidance to further development.

The cooperative segment of RBS (1) helps farmers and other rural residents develop

cooperatives to obtain supplies and services at lower cost and to get better prices for

products they sell; (2) advises rural residents on developing existing resources through

cooperative action to enhance rural living; (3) helps cooperatives improve services and

operating efficiency; (4) informs members, directors, employees, and the public on how

cooperatives work and benefit their members and their communities; and (5) encourages

international cooperative programs. RBS also publishes research and educational

materials and issues Rural Cooperatives magazine.

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs

and activities on the basis of race, color, national origin, sex, religion, age, disability,

political beliefs, sexual orientation, and marital or family status. (Not all prohibited

bases apply to all programs.) Persons with disabilities who require alternative means

for communication of program information (braille, large print, audiotape, etc.) should

contact USDA’s TARGET Center at 202-720-2600 (voice and TDD).

To file a complaint of discrimination, write: USDA, Director, Office of Civil Rights,

Room 326-W, Whitten Building, 14th and Independence Avenue, SW, Washington, DC

20250-9410 or call 202-720-5964 (voice and TDD). USDA is an equal opportunity

provider and employer.