Magazine article Rural Cooperatives

Integrity Essential in Reporting Financial Results. (Commentary)

Magazine article Rural Cooperatives

Integrity Essential in Reporting Financial Results. (Commentary)

Article excerpt

Corporate scandals have recently rocked the business world, shocked shareholders and the public at large, and led to the downfall of several large-scale firms. Congress responded to abuses with the Sarbanes-Oxley Act of 2002 which requires sign-offs from company officers when reporting financial results and greater attention to the auditing process.

This action is designed to help stem reporting abuses and to provide more accurate information to owners about the true financial health of companies. It was also designed to make officials more accountable to shareholders of publicly held companies.

Technically, cooperatives are not covered by this new legislation, unless they have issued securities to the public. These securities are most often in the form of debt instruments, such as bonds, debentures or preferred trusts. As user-owned businesses, cooperatives rarely have outside equity holders. The very few that do hold them as preferred stock investments rather than trading them on public markets.

So are cooperatives required to have officers vouch for the integrity of the numbers they are reporting to members? Technically no, but in a practical sense that is precisely what they should do.

As reported in several articles and Newsline items in this issue, the operating climate for cooperatives, like that for other businesses, is very challenging. This is heightened by low commodity prices and the drought, both of which have plagued the agricultural sector in many parts of the country for over 3 years. …

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