Credit Union Operations
Credit unions serve their members by offering a wide range of financial products and services, typically with better savings and loan rates compared to other types of financial institutions. This chapter will guide examiners through basic credit union operations, including how to review and assess the effectiveness of operations and the inherent risks associated with key operational areas.
Operations at small credit unions will differ from large credit unions. Small credit unions may have fewer share account types and may not have cash operations. Many small credit unions offer basic member financial services, such as share draft (checking) accounts, share (savings) accounts, and loans. The general ledger in small credit unions may have limited accounts and the financial statements may be basic in format. These credit unions may also struggle with establishing and maintaining adequate internal controls, such as limited or no segregation of duties, and generally have higher transaction risk.
Large credit unions usually offer a variety of share account types, which provide members more options for their specific needs. Additionally, large credit unions may offer more complex loan products and have more sophisticated cash operations. Large credit unions may also offer online or mobile banking and electronic payments which can increase their compliance and transaction risks. Large credit unions are required to comply with GAAP, and usually have robust core operating systems with a detailed general ledger and numerous categories of assets and liabilities. Internal controls are generally stronger in large credit unions, mainly due to increased staff size, which permits segregation of duties and more resources to outsource the internal control function if necessary.
In both small and large credit unions, the boards of directors are responsible for the credit union’s operations. Sound operations lead to positive net earnings, which are used to reward members with dividends, provide loan rebates, establish new products and services, and build net worth.
This chapter contains the following sections.
Last updated on February 14, 2022
