Kansas Department of Credit Unions Title

Frequently Asked Questions

Volunteers

General

Q: I want to volunteer at my credit union, how do I do that?

A: The best way to become involved with your credit union is to first attend an annual meeting. This will show you the democratic nature of your credit union and give you more knowledge about the various volunteer opportunities. If interested, then contact a volunteer of your credit union. Each committee will require a different set of skills and have various time requirements. You may be better suited to one committee than another.

Q: What volunteer positions are there at a credit union?

A: Management of the credit union is carried on by volunteers and staff. Because of the democratic nature of credit unions, a meeting of the credit union’s membership is held annually. The annual meeting is when members of the Board of Directors are elected. Depending on the bylaws of each credit union, members of the credit committee and supervisory committee may be elected at the annual meeting or may be appointed by the Board.
Depending on the size and complexity of the credit union there may be other volunteer opportunities available. The Board of Directors can establish either standing committees that address on going concerns such as budget, advertising, or member relations, or Ad Hoc committees that address specific concerns and disband upon completing their work.

Q: How does the system of volunteer oversight work at a Kansas-chartered credit union?

A: A credit union is like no other financial institution. Owned and operated by the people it serves, every credit union is formed by a group of people wanting to control their own financial destiny.

Management of Kansas credit unions is carried on by volunteers and staff. Members of the Board of elected from the credit unions membership at the annual meeting. The Board is responsible for the well being of the credit union, as members have put their faith in the Board to act in the best interest of the membership.

Responsibilities

Q: What are the duties of the Supervisory Committee?

A: The Supervisory Committee shall supervise the acts of the board of directors, credit committee and officers and they must ensure that the two following goals are completed:

1. Management’s financial reporting requirements have been met;
2. Management practices and procedures safeguard the members’ assets.

Additionally, the Supervisory Committee must determine whether the credit union manager has:

a) Established and maintained effective internal controls to achieve the credit union’s financial reporting objectives. These controls must meet the requirements of the Annual Supervisory Committee Audit, the verification of members’ accounts and the accuracy and reliability of accounting data.
b) Promptly prepared accounting records and financial reports to accurately reflect the credit union’s operations and results.
c) Properly administered the relevant plans, policies, and control procedures established by the board of directors.
d) Established policies and control procedures that safeguard against error, carelessness, conflict of interest, self-dealing and fraud.

Q: What are the duties of the Board of Directors?

A: The Board of Directors administers the credit union shall have the general management of the affairs, funds and records of the corporation, and unless they shall be specifically reserved to the members it shall be the special duty of the directors: to act upon all applications for membership, determine the rates of interest paid and charged to members, to acquire surety bonds, to fix the number of shares held or loaned to anyone one member, fill vacancies of the board and credit committee until the election, to have charge of the investment funds of the credit union, to meet at least six times each year with at least one meeting in each quarter year.

No member of the board or supervisory committee shall receive any compensation for their volunteerism at the credit union.

Additionally, the members of the Board of Directors are the managers of the credit union. The success of the credit union is the responsibility of each member of the Board of Directors. The board has a fiduciary and legal responsibility to ensure that the manager and staff of the credit union are full-filling their duties to the credit union. The Board should actively participate in the oversight of the manager and staff to ensure these responsibilities are carried out. The Board of Directors are the stewards of the credit union.

Q: What are the duties of the Credit Committee?

A: Committees help the Board of Directors administer the credit union. In most credit unions, the credit committee is responsible for approving or denying all loan applications. Depending on the bylaws of the credit union the credit committee may appoint one or more loan officers and delegate the power to approve or disapprove loans. The credit committee meets as often as the business of the credit union requires either considering applications for loans or reviewing the work of loan officers.

Compliance

Q: What is the Kansas Department of Credit Unions Report of Officials and does it have to be completed?

A: The Kansas Department of Credit Unions Report of Officials is an official listing of the persons on the board of directors, supervisory committee, credit committee and certain members of the credit union staff. This document must be completed quarterly, including any changes in the listing of persons, on a quarterly basis. The signed report must be sent to the Kansas Department of Credit Unions with each quarterly call report.

Q: What is the Bank Secrecy Act and who is ultimately responsible?

A: The Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) was originally enacted in 1970 to assist law enforcement in the investigation and thwarting of money laundering, terrorist financing, tax evasion, and other criminal activity. The “Act” has evolved and currently consists of the Money Laundering Control Act, the Anti-Drug Abuse Act, the Currency and Foreign Transactions Reporting Act, and the USA Patriot Act.

The credit union’s board of directors, acting through senior management, is ultimately responsible for ensuring that the credit union maintains an effective BSA/AML internal control structure, including suspicious activity monitoring and reporting. The board of directors and management should create a culture of compliance to ensure staff adherence to the credit union’s BSA/AML policies, procedures, and processes.

Q: What is the Allowance for Loan and Lease Loss account?

A: The ALLL account is a valuation account used to recognize impairment of a credit union’s recorded investment in loans on its balance sheet before losses have been confirmed later through a charge-off or write-down. A credit union should expense an amount to the ALLL for loans when:
1. It is probable a loss has been incurred and
2. The loss can be reasonably estimated.
The determination of the amounts of the ALLL and the provision for loan and lease losses are based on management’s current judgments about the credit quality of the loan portfolio, and consider all known relevant internal and external factors that affect loan collectibility as of the reporting date. Estimating the amount of an ALLL involves a high degree of management judgment and is inevitably imprecise.

Q: How much attention should I pay to delinquency at my credit union?

A: Delinquency is one of, if not the most important indicators of the financial condition of a credit union. Delinquency is an indicator both of current asset quality and of the potential for future loss to the credit union.

Delinquency is a direct indicator of the quality of loan underwriting, loan policies, procedures and practices, internal controls and due diligence as well as the ability of management to properly administer its assets, including the timely identification and collection of problem assets.

Q: When should loans be charged-off?

A: An essential part of a credit union’s management is a comprehensive, disciplined, timely and consistently applied charge-off policy for uncollectible loans.

When management (Board of Directors or other delegated official) deems a loan a loss, they must charge-off the loan to the ALLL account in compliance with full and fair disclosure requirements of Part 702 of NCUA Rules and Regulations.

Guidance regarding loan charge-off as well as specific examples of loans which would qualify for charge-off is contained in NCUA Letter to Credit Unions 03-CU-01. All credit union management (including volunteers) should ensure that they are familiar with this document.

Q: How often does the Supervisory Committee need to perform an audit of the credit union?

A: The Supervisory Committee shall make or cause to be made an annual audit of the receipts, disbursements, income, assets, and liabilities of the credit union and shall make a full report to the directors, which report shall be presented at the annual meeting and shall be filed and preserved with the records of the credit union.

Q: How often does the Supervisory Committee need to perform the verification of members’ account at the credit union?

A: The Supervisory Committee shall make, or cause to be made, a 100% certification of members’ accounts at least once each two years or a control random statistical sample in accordance with AICPA guidelines at least once each year.

Q: What is the Annual Supervisory Committee Checklist and does it need to be completed with the Annual Supervisory committee Audit?

A: The Annual Supervisory Committee Checklist is a questionnaire of the credit union operations developed by the Kansas Department of Credit Unions. This checklist is a required document that must be answered by the Supervisory Committee or a qualified person, such as a CPA, in charge of the annual audit.

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The next Credit Union Council Meeting is scheduled for September 25 at the Department of Credit Unions, 109 SW 9th Street, Suite 610, Topeka, KS 66612

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Department of Credit Unions
109 SW 9th Street
Suite 610
Topeka, KS 66612
Phone: 785-296-3021
Fax: 785-296-6830
E-mail: kdcuoffice@kdcu.ks.gov