Co-Ops and Member Equity Risks

We recently came across an article in a USDA magazine called Rural Cooperatives that discusses the increased risk factors cooperatives have faced including class action lawsuits by members alleging improper management of capital credits.  The article can be found here.

The article lists a number of reasons for different lawsuits including failing to retire member equity despite having the financial wherewithal to do so, having no system in place to routinely return member equity, and not notifying its members and patrons of their member equity allocations among others.

The article also discusses some risk management processes, the first and foremost being evaluating the co-op’s member equity policy and adhering to a rational member equity management plan.

I highly recommend the article, especially if you are a board member of a cooperative.  It is a good reminder of the importance of a member equity management plan and the importance of promoting goodwill with members and patrons.

Special thanks to David Enquist in our Moses Lake office for this post.

Paul Neiffer, CPA