THE COOPERATIVE STRUCTURE, AN ALTERNATIVE ECONOMIC MODEL

A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

The cooperative definition was written based on the Cooperative Principles. The Cooperative Principles are guiding statements and directives that keep co-ops focused on their purpose. All cooperatives, whether consumer-, producer- or employee-owned and whether foreign or domestic, operate under the Cooperative Principles. The first six principles have been around for over 150 years. When the International Cooperative Association met in 1995, they added the seventh principle:

  1. Voluntary and Open Membership - No one is forced to become a member and membership is open to anyone who agrees to participate; membership is open to all without gender, social, racial, political, or religious discrimination.
  2. Democratic Member Control - Each member is equal and the organization is controlled by the membership: one member, one vote.
  3. Member Economic Participation – Members contribute equitably to, and democratically control, the capital of the cooperative. The economic benefits of a cooperative operation are returned to the members, reinvested in the co-op, or used to provide member services.
  4. Autonomy and Independence – Cooperatives are autonomous, self-help organizations controlled by their members.
  5. Education, Training and Information – Cooperatives provide education and training for members so they can contribute effectively to the development of their cooperatives. They inform the general public about the nature and benefits of cooperation.
  6. Cooperation Among Cooperatives – Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, regional, national and international structures.
  7. Concern for Community – While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members.

In compliance with the third principle, Member Economic Participation, patronage rebates are the cooperative way to equitably return a portion of profit (if any) to our Owners.

Patronage Rebates at WFC

Patronage rebates are based on how much you purchased during the rebate period, not on how much you invested.

We offer the following examples to help you understand how patronage rebates are calculated.

Following the close of the fiscal year, the Board reviews the overall financial health and business strategy of the organization to determine what amount of profit, if any, will be returned to Owners as a patronage rebate.

TOTAL SALES “PIE” EXAMPLE (2% slice = Profit)

According to WFC’s bylaws, the rebate percentage is based on the percentage of profit derived from purchases (patronage) by Owners.

TOTAL PROFIT “PIE” EXAMPLE (Profit from Purchases by Owners = 60%; Profit from Purchases by Non-Owners = 40%)

Pursuant to the revenue code, if a patronage rebate is allocated, at least 20% of that rebate must be allocated as cash with the balance retained as equity.

TOTAL REBATE “PIE” EXAMPLE (Cash Rebates = 20%; Retained Rebates = 80%)

If the Board approves a patronage rebate:

  1. The dollar amount of that rebate is divided by the sum of purchases by Owners in the rebate period, e.g., a $100,000 rebate divided by $6,000,000 of Owner purchases = 1.67% rebate percentage rate.
    1. The same rebate percentage is used to calculate each eligible Owner’s rebate for that rebate period.
    2. An eligible Owner is an Owner whose stock requirement is current or fully-paid, who is not indebted to the Co-op beyond policy limits, who has kept the Co-op apprised of his/her current mailing address, and whose cash rebate amounts to a minimum amount of $5.00.
  2. The rebate amount depends on the net (after discounts, coupons, etc.) amount of the Owner’s purchases in the rebate period multiplied by the rebate percentage rate, e.g.: $6,000 x 1.67% = $100.20 rebate amount (to be allocated 20% as cash and 80% as retained equity).
    1. Because each Owner provides his/her member number at the checkout, the Co-op can track your net purchases.
    2. The rebate period is based on the Co-op’s fiscal year that runs from July 1 through June 30.
    3. The revenue code requires that Owners be mailed a check for the cash portion of a rebate within eight months of the close of the fiscal year (June 30).
    4. Retained equity (up to 80% of the rebate) is held by WFC until such time as the Board authorizes payment. It is not distributed on demand. It cannot be allocated to reduce an Owner’s required equity investment nor to reduce the amount of an Owner’s IOU. If an Owner chooses to terminate his/her membership but keeps WFC apprised of a current address, he/she will receive retained equity in the event of an allocation after termination of a membership.
    5. Rebate checks not cashed will add to WFC’s tax liability in the next fiscal year. Please promptly cash your rebate check.

Following is a chart of the benefits of patronage rebates for Owners and for WFC:

BENEFITS FOR OWNERS BENEFITS FOR WFC

The more goods you purchase at WFC, the more you benefit, e.g., member only specials, member appreciation days, discounts on special orders and patronage rebates

Cooperatives are only as strong as the commitment of their Owners; allocating a patronage rebate after a profitable year ensures that operating and debt service goals have been met

Rebate check

Compliance with the third Cooperative Principle

Retained equity increases an Owner’s investment in WFC

Retained equity strengthens WFC’s balance sheet and reduces the need for outside financing

Patronage rebates are not taxable income for Owners

Allocating a patronage rebate reduces WFC’s tax liability that rebate period

The Co-op records retained equity as Owner equity (non-voting shares of Class B stock). Owner equity:

  • Represents ownership as opposed to debt
  • Increases operational flexibility and ensures adequate cash flow
  • Secures our access to products, services and information we trust and
  • Represents our shared commitment to our cooperative as a community resource and as our legacy to the next generation.

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