Corporate governance and accounting practices of public organizations remain in
the spotlight today. Ongoing revelations of questionable, if not unethical, directives
from management across Corporate America have ensured that regulators, shareholders,
customers and employees will keep a close eye on the financial reports of public
entities. In credit unions, the potential for manipulation of financial results
is presumably less due to the lack of a public market for ownership shares. Nevertheless,
credit unions are public entities that must continue to reinforce that they are
acting in the best interests of their membership in all of their management decisions.
The Importance of Transparency
Beyond ensuring that the controls are in place for accurate financial reporting,
each credit union's management team, Supervisory Committee and audit partner
have the opportunity to work together to make the benefits of the cooperative
structure visible to members. Credit unions are able to highlight a number of
key differences in their governance, not the least of which is that their Boards
of Directors and Supervisory Committee are composed of member volunteers elected
by their peers. These differences are a start, but steps can be taken to raise
the governance and financial transparency standards even higher, including:
- Making financial results accessible to members via regular postings in branches
and on the credit union website
- Establishing qualifications for Supervisory Committee members as well as
an ongoing training program on issues related to accounting guidelines and
credit union industry trends
- Adopting term limits for Supervisory Committee members and lead audit partners
to strengthen audit independence
As credit unions increase their presence in their communities through expanded
charters, the ability to differentiate their organization from competitors will
be an important aspect of their success. Credit unions' corporate governance
directly reflects the member-owned structure that distinguishes these institutions.
Reinforcing this difference in the public's mind is crucial to both their value
proposition and political standing.
The seventh edition of the Guide to Credit Union Auditors is now available.
Designed for both credit unions and their audit partners, this Guide is an important
tool when issues arise that would benefit from discussion across the industry.
For more information, click here.