Supervisory Committee
Purpose
The supervisory committee, or audit committee, is the "watchful
eye" for the credit union. The committee is responsible for assuring its membership
that their deposits are safe. In a democratic structure like the credit union, it's
imperative that the committee be visible and active in fulfilling its responsibilities to
the membership.
Qualifications For Serving
Supervisory committee members are volunteers who may come to the credit union
with little or no background in credit union operations. The simple fact that this small
group of volunteers come with diverse backgrounds is what makes the committee so
effective. Unfamiliarity with credit unions in combination with an enthusiasm to get
involved in a productive manner, can be most effective for members of the committee
because of the uninhibited nature of their inquiries regarding credit union matters.
Volunteers with little or no experience will be more apt to question the most routine
operations inherently causing a "no stone left unturned" impact on the overall
structure. As volunteers gain experience and training, the level of their scrutiny in
monitoring their credit union will naturally move up to the complexities of the
organization.
The sole qualification necessary to serve on the committee is to be a member in good
standing. This basically entails maintaining the credit union's minimum balance
requirement and not being delinquent on any loans outstanding. Beyond that, a desire to be
active and work cooperatively with the board of directors, staff and other volunteers is
all that is required. Ideally though, it is beneficial if at least one member of the
committee has some bookkeeping or accounting background.
Committee Structure
Usually the committee is comprised of at least three but no more than five
members. The committee should have strong communications with the board of directors.
Often they'll even be invited to attend the monthly board meetings. While not necessary,
some credit unions have found it effective to structure the supervisory committee so that
one member of the committee also serves on the board of directors. Having one member of
the supervisory committee serving on the board and/or attending periodic board meetings
offers the credit union two benefits; 1) it provides for excellent succession planning in
the event there is an unexpected vacancy on the board. Quite often, the board chairperson
will fill board vacancies with members from the supervisory committee or credit committee
knowing it may be less disruptive to the credit union having only to fill a vacancy on a
committee,and 2) it enhances the overall communications within the organizational
structure.
Power & Liability
As one might expect, with this enormous responsibility comes power. In fact,
some may argue that the supervisory committee holds more power than does the board of
directors. According to the Federal Credit Union Act, a federal regulation of the United
States government, the committee, "may by unanimous vote suspend any officer of the
credit union or any member of the credit committee or of the board of directors, until the
next members’ meeting, which shall be held not less than seven nor more than fourteen
days after such suspension". In addition, the supervisory committee may, by majority
vote, call a special meeting of the members to consider any suspensions imposed by the
committee.
The committee is required to have an annual audit completed and must report the results of
the audit to the board of directors as well as to the membership at its annual meeting. In
addition, an active committee is expected to do some "hands on" work themselves.
By the power vested to this body, the committee can have access to any and all records of
the credit union. Therefore, it is imperative that each member understands the sensitivity
of such information and complete his or her work with the highest degree of
professionalism and confidentiality.
Unlike other committees that may be exposed to only one activity of the credit union at
regular time intervals, the supervisory committee may get involved in any aspect of the
operation at any time. It is this level of freedom from which the committee works that
makes it so powerful. Their unexpected visits to examine loan files, perform a count of
cash drawers, review accounting records, etc., is what enables the committee to be so
effective. What the committee lacks in credit union expertise is greatly compensated by
the latitude of its freedom to work. They, by their mere presence, can have a profound
effect on the quality of staff’s overall work performance.
Finally, with all the responsibilities and power bestowed on the supervisory committee
comes considerable exposure to liability. It stands to reason that if anything detrimental
were to ever occur, the supervisory committee can be one of many to face the reality of a
lawsuit. It is for this reason that each committee member should take his or her position
seriously and exercise due diligence when performing their duties. In addition, the
committee should be familiar with the bond insurance its credit union is required to carry
and determine with the insurance provider that adequate liability coverage is maintained
to protect both the credit union and the volunteer.
