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Coperative Financial Surveillance And Warning System: set standard
Cooperative Auditing Department
Thailand

The Problem

Cooperatives and agricultural groups were established in Thailand for more than 90 years ago. Their importance to Thai economy and community has been recognized from their contribution to around a tenth of national GDP and about more than a half of Thai population.
From the trend analysis of the financial infrastructure of Thai cooperatives and agricultural groups of the past 11 years (1994 - 2005), it was found that the rate of insolvency had increased substantially and continuously. The cause of failures of these institutions may due to the lack of using financial data to support the decisions concerning financial management. Since financial analysis is quite complicated, required specialization and expertise, cooperative administrators may fear and avoid using these information.
Cooperative Financial Information Research and Development Section realized the necessity to develop a financial tool that is simple to use and understand, to help support cooperatives and agricultural groups in decision making. As a result, we integrated our knowledge from various financial research results conducted by our section together with the IT technology and developed an early warning system which is simple, convenient, fast, accurate, timely and easy to understand.
The main objective is to encourage cooperative administrators to use these financial tools to support their decisions continuously and in turn become knowledge based society (learning society), be able to incorporate financial information into their planning processes, management and administration. It is expected that the tool would decrease the rate of insolvency and to bring cooperatives and agricultural groups to sustainability in the future.

Solution and Key Benefits

 What is the initiative about? (the solution)
From the survey of the users after our implementing early warning system or namely CFSAWS:ss, about 85 percents of both administrators and practitioners are satisfied with the tool. They are confident in the validity of the tool as an indicator of the cooperatives financial status. They believe that the system reflect the true critical financial crisis, provide a good warning. Besides the color symbols indicating the health of the financial status which are easy for users to grasp, the system also provides users with possible causes of the crisis and how to remedy.
The diagnosis given are based on collected financial expert opinions in the system knowledge base. The users are no longer fear of complicated ratios, feel at ease to use the tool and can understand both financial situations and possible causes of the situations. Based on the information about cooperatives’ and agricultural groups’ financial status, administrators, managers, auditors, Internal Auditor, financial analysts and members as stakeholders can all participate in making a group decision, making plans, balancing the financial structure of cooperation or take any necessary measures at and early stage together, and thus bring them into a knowledge based society.
Cooperatives and agricultural groups are aimed to become learning organizations in the use of our early warning system to prevent financial distress, to administer their finance smartly, with minimum risk. Since there are more than 10,000 coops and agricultural groups, with more than 1 trillion baht in business value, which is about 10% of the GDP of Thailand, the system can contribute to the financial stability of the country and to the well being ofmore than 65% of Thai population.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
Cooperative Financial Information Research and Development Section, which is a section under Cooperative Auditing Department(CAD) responsible for collecting and disseminating cooperatives’ and agricultural groups’ financial information, has a strong determination to increase value added of financial tools available to strengthen the financial stability of cooperatives and agricultural groups. Therefore, our section, with the help from external financial experts and financial institutions, together with the use of our research results conducted continually under our research plans, both short term and long term with emphasis on the financial system of cooperatives and agricultural groups, has developed and implemented an early warning system. The system uses IT technology and the internet, so as the users can access the system conveniently.
The section has introduced the developed system to cooperatives’ and agricultural groups’ administrators, auditors and members through out the country in order to stimulate and alert them to use financial information from the system to help them recognize financial distress and take measures at an early stage to prevent a financial disaster. The section also try to screen and find cooperatives and agricultural groups with best practices in financial management in order to learn their financial policy, their effective financial measures and solutions to financial problems. These solutions can thus be used to improve the existing system.
Moreover, the system and the knowledge about financial analysis have been disseminated widely among government auditors, private auditors, financial institutions, academic institutions, cooperatives, agricultural groups, related government organizations who are responsible for the promotion and regulation of cooperatives and agricultural organizations, e.g. The Cooperative Promotion Department, Agricultural Land Reform Office and Bank for Agricultural and Agricultural Cooperatives, including any individuals who are interested and want to use the tool.

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
One of the major strategies of our department is to embed research and development into our work routines. We therefore continuously conducted a series of research projects related to financial analysis, especially on the financial stability and financial management of Thai cooperatives and agricultural groups.
Early, our main responsibility is to regularly collect and disseminate Thai cooperatives and agricultural groups financial data. We therefore would like to increase the value of these financial information. To do so, we have established a network with external financial experts.
From the findings of our research and the knowledge learned from the financial experts, we thought it is necessary that Thai cooperatives and agricultural groups should use financial information of their organizations in their planning and decision processes. If cooperatives base financial decision on financial data and knowledge, the cooperatives can be stronge.
Nevertheless, most of cooperative administrators and managers are not financial experts. They do not understand financial ratios, do not know how to use them to diagnose financial status. A simpler tool is needed. We therefore integrated research findings, financial experts’ knowledge, IT technology and the Internet into a tool that can fulfill the gap between financial knowledge existed and Thai cooperative administrators and managers.
We emphasize on the governmental services of good quality, namely, simple, convenient, fast and accurate, to our customers, including government auditors, private auditors, cooperative administrators and managersร, internal auditors, financial analysts, and related organizations. Hopefully, they will be satisfied with our services and will be able to easily use the information gained from us to guid them to plan and issue an efficient and effective financial policy of the organizations.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
The concept of inventing a financial tool to help cooperatives and agricultural groups began eight years ago. From the desire of our section to add a value to our existing financial data, we initiated a network with external financial experts by inviting experts from private sectors and financial sectors as our advisors. We asked them to transfer their knowledge and expertise, modern and sophisticated financial techniques use in financial analysis to us continually since 2002.
We therefore were able to integrate the acquired knowledge from experts with our routines and were able to initiate many creative tasks. As mentioned before, we have a series of research projects on financial analysis. We thus integrated the findings of these researches into our routines.
We have introduced the tool to cooperative and agricultural group auditors, administrators, managers, related government officials, financial analysts and cooperative and agricultural group financial advisors continuously through the year 2007-2008. Our early warning system, CFSAW, has been accepted of its usefulness by the academic sector and has been approved of its initiative from Department of Intellectual Pioperty, has been selected for presentation at Thailand Research EXPO 2008, held by the National Research Council of Thailand, and has obtained a distinguished public sector management quality award on the innovation of service by Office of the Public Sector Development Commission Thailand in 2008.

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
The model of establishing a link between external experts and the staff in our section, together with the incorporation of research into our routines in order to initiate financial tools was quite new to many of our coworkers from other related sections compared to the conventional working environment in our organization. As a consequence, our main obstacle is the lack of cooperation from our coworkers and the reluctance in accepting this kind of practices. Our supervisor who played the role of decision maker and whose support could lead dramatic changes in the practices of our coworkers did not understand our processes and have not fully supported us. Our team were quite distressed. However, our team have still worked hard to disseminate our research findings to external organizations. We have been granted research funds from the National Research Council of Thailand, obtained a copyright from Department of Intellectual Property, have a chance to present our research results in many academic conferences and also have been awarded a distinguished public sector management quality award on the innovation of services, 2008.
To overcome the problem of getting supports from our department, our team have tried hard to explained the importance of our tools to related persons. We have organized a series of meetings to introduce cooperative and agricultural group administrators, managers and auditors to use our system and at the same time we persuaded our supervisor to participate and act as key persons in disseminating our tool. With the acceptance of external organizations and with our effort to promote participation of persons in our department, we are able to change our department values about our model of practices and our tool has been accepted as one of importance drivers in making Thai cooperatives and agricultural groups strong and sustainable.

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
An early warning system is designed by a government organization to help Thai cooperatives and agricultural groups be aware of financial distress at an early stage. The financial data used in the system are collected from cooperatives and agricultural groups monthly by our section. The cooperatives and agricultural groups can use the information and suggestions obtained from the system to support the decision concerning their financial policy and management Our section, consisted of …. persons, are responsible for initiating the system, with the help from external supervisors, financial experts, who provide advices concerning financial analysis of our existing financial data. Our IT staff has developed a web based system based on the designs of our team. The system is available both on the CAD department’s website and on CD for stand alone. The cooperatives and agricultural groups can choose to access via the Internet or stand alone, on their convenience. The budget used for creating this system is the annual budget obtained yearly, no supplement nor extra budget. The most important cost of the system is the courage and the determination to help the members of cooperatives and agricultural groups of the initiators.

Sustainability and Transferability

  Is the initiative sustainable and transferable?
In designing our early warning system, we have assigned our staff with clear responsibility for each tasks. We also incorporate all the comments from the users to improve the system so as to satisfy the users. For the implementation of the system, we have introduced the system to almost all cooperatives and agricultural groups.
From our survey, the users find that the warning system is effective. They can make decisions about financial status more efficiently. From the positive attitudes of the users, we are certain that our early warning system will be sustainable. We also introduced our system to cooperative-related public organizations with the aim to promote the use of the early warning system and in turn, strengthen the stability of Thai cooperatives and agricultural groups.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
The early warning system initiated by has been used by Thai cooperatives and agricultural groups nationwide, involved more than 65% of Thai population. The system is the result of the continuously cooperation between our staff and external financial experts. Even though we have encountered the problems of the differnce in opinions and practices, red tape due to the organization culture, but by the strong determination of our team, we are successful in developing the early warning system for the benefit of Thai cooperatives and agricultural groups. The lessons learned from our initiative are as follow:
6.1 The most important cost of our development processes is the courage of our staff.
6.2 The attraction of our system is to make complicated subjects into a tool that is simple, easy to use and understandable, and available nationwide.
6.3 Integration (of human resources,?) is the heart of the development.
6.4 The contribution of the tool to the well being of a large number of people involved is a driver of the implementation.

Contact Information

Institution Name:   Cooperative Auditing Department
Institution Type:   Government Agency  
Contact Person:   Mrs.Phanit Boonphoka
Title:   Cooperative Financial Information R&D Section  
Telephone/ Fax:   +(66)2 628 5012
Institution's / Project's Website:   +(66)2 281 4212
E-mail:   statistic@cad.go.th  
Address:   12 Krungkasaem Road Pranakorn
Postal Code:   10200
City:  
State/Province:   Bangkok
Country:   Thailand

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