Ulster Federation of Credit Unions

Member Operating Manual

V.2 2007

Contents:

  1. Operational responsibilities
  2. Credit Union officials
  3. Board of Directors
  4. Duties and responsibilities of officers
  5. Main function of the Main Committee
  6. Job description of Main Committee/board
  7. Board meeting agenda
  8. Application for membership & record of members
  9. Collection of share and loan repayment
  10. Members pass book
  11. Credit Union basic loan policy
  12. Internal Audit Procedures
  13. Delinquent loans, bad debt and their recovery
  14. Members ledger sheet
  15. Cash book
  16. Monthly financial report

  1. Operational Responsibilities

Responsibilities for the overall management of the Credit Union fall on the Board of Directors. It is up to them to ensure that adequate control over the funds is exercised for the benefit of members.

In this respect the following procedures must be adopted, and the Directors must ensure that the stipulated checks are carried out to verify that the operational procedures are adhered to.

It is essential that these systems are maintained to ensure continuity in future years, furthermore these procedures have been adopted by the Credit Union in General Meeting thereby binding the Directors to adhere thereto.

All Directors are advised to remember that despite its relatively small scale of operation, a Credit Union is not too dissimilar in nature from a Building Society or a Bank and the standard of care and prudence expected of financial institution in general are no less applicable to a Credit Union.

Credit Union Officials

Composition of Board

Chairman

Vice-Chairman

Secretary

Assistant Secretary

Treasurer

Assistant Treasurer

Officers

Loan Committee

Collectors

Cheque Signatories

Internal Audit Officers

Money Laundering Officer

All Directors and Officers are appointed by simple majority of the members at the Annual General Meeting.

The Directors are empowered to appoint further directors or officers to fill any casual vacancies arising.

Board of Directors

The job of running the Credit Union is delegated to a Board of Directors who are elected by and from the membership at the Annual General Meeting. Only members of the Credit Union may be elected as Directors. This democratic election of Directors is the first active participation in the management of your Credit Union.

The duties of the Board of Directors

  • To be a good Trustee of the members’ savings
  • Board members are volunteers but being volunteers should not be an excuse for doing things in an unprofessional way
  • Must devote sufficient time to train in the understanding of the law, the rules and bookkeeping in order to serve the members to the best of their ability

The most important role of the Board of Directors is to be good Trustees of the member’s savings. This justifies the confidence that the members have placed in you and in your honesty and integrity, so at the end of the day the members will feel that their savings are in safe custody.

Success or failure of any Credit Union rests in the hand of those members who have undertaken to serve on the Board. They must try to understand the economies of the Credit Union and the way it functions in the service of its members. This can best be developed by taking an active interest in the way the Credit Unions is run on a day-to-day basis.

Composition of Board

Chairman Vice Chairman
Secretary
Assistant Secretary
Treasurer
Assistant Treasurer
Money Laundering Officer
Other Committee Members / -
-
-
-
-
-
-
- / Internal Audit Officer
Internal Audit Officer
Credit Committee
Internal Audit Officer
Credit Committee
Credit Committee/Collector
Credit Committee
Credit Committee/Collectors

Officers who are collectors should have a rota.

Any 4 persons of the Board may be cheque signatories one of whom should be the treasurer no two members of the same family should sign a cheque. All cheques should be signed by two of the signatories.

The Directors are empowered to appoint further directors or officers to fill any casual vacancies arising.(A separate section could be devoted to this

Duties and Responsibilities of Officers

Loan Committee

The loan committee shall comprise of a minimum of three officers, one of whom must be the Treasurer.

The loan committee shall meet at regular intervals at the discretion of its members, unless more specifically laid down by the Directors, but in any event meetings shall be held at least once per month.

At each meeting the committee shall consider the following:-

  1. Applications for Loans
  2. Arrears of loan repayments

Collectors

Collectors carry the major responsibility of receiving subscriptions and loan repayments, whilst doing so it is essential that the following accounting entries are recorded.

  1. Enter share payment and loan repayment in pass book
  2. Enter in the collection sheet or computer

At the end of the collection period, the monies received and the collection sheet or print out from the computer should be handed the Treasurer for banking, after reconciliation of monies and sheets are signed by the collector and Treasurer.

Cheque Signatories

All cheques must be signed by any two authorised signatories, after authority by the Board or the loan committee. The cheque signatories as detailed on the Bank Mandate shall be recorded in the minutes of the Board, who shall appoint the signatories. Signatories must also initial all counterfoils for cheques signed by them.

Internal Audit Officers(see section 8)

It is an essential feature of the operation of a Credit Union that the officers perform periodic audit tests to verify the accuracy of the accounting records and independently confirm that monies have been correctly accounted for.

The Audit Officers should be the Chairman, Vice Chairman and Assistant Secretary, who shall perform audit tests. Subject to the approval of the Board, the Internal Audit officers shall have the power to co-opt additional officers periodically to assist them in carrying out the Audit tests however, because of the nature of their duties, the Treasurer, Assistant Treasurer, nor any collector who handles money can not serve as an Internal Audit Officer.

Main Function of The Main Committee

1. ADMINISTRATION

  1. Members Applications etc
  2. Recording of Minutes
  3. Written Policies
  4. Internal/external correspondence
  5. Credit Union Records and files

2. FINANCIAL TRANSACTIONS

A. Receipts and payments of monies

B. Investments/release of monies

C. Keeping of correct set of accounts

D. Cheque Book/Lodgement Book Facilities

E. Insurance (Life and Fidelity Bond)

3. GRANTING OF LOANS AND WITHDRAWALS

A. Recording and granting of Loans and Withdrawals

B. Loan Policy and its functions

C. Monthly Reports

4. INTERNAL AUDITING

A. Collecting Sheets, Pass Books, Ledger Sheets duly checked

B. 4 Week System

C. Weekly Bank Statement reconciliation

D. Loans and Withdrawals

E. Checking figures for Share Protection Scheme.

This is an ongoing process of education.

Job description of duties allocated to member of

Main Board/Committee

Chairman

Presides over Meetings

Receives Bank Statements

Internal Audit Officer

Signature of cheques

Vice Chairman

Presides over Meetings in the absence of Chairman

Signature of Cheques

Internal Audit Officer

Custodian of Application Cards

Secretary

Takes Minutes at all Meetings

Signature of Cheques

Credit Committee Member

Custodian of Minute Book

Receive/despatch Correspondence

Collector according to Rota

Assistant Secretary

Fulfills Secretary duties in the absence of Secretary

Internal Audit Officer

Duty officer in charge of Rota

Custodian of The Address Book

Treasurer

Receives Bank Statement from Chairman for reconciliation

Keep legible recordings in Cash Book and Ledger

Keeps Control Accounts

Signature of Cheques

Writes all cheques

Makes sure all Banking procedures are followed

Prepares relevant Financial Statements monthly

Consultant to Credit Committee

Checks all loan applications for loans Committee

Assistant Treasurer

Assists Treasurer at all possible times

Takes on Treasurer’s duties when called to do so

Credit Committee Member

Board Members

Trustees of Members Savings

Collectors according to Rota

Credit Committee Member

Credit/Loan Committee

Loan Committee should not be less than 3,1 always being the Treasurer

Internal Audit Committee

Should be 3 Committee Members who do not handle money

Money Laundering Officer

This officer should keep a check of all accounts which are lodging amounts of money which are not normal i.e. a person lodging large amounts and them doinga withdrawal a few weeks later anything which causes concern must be reported to the police

Board Meeting Agenda

The following agenda is to apply to all Board Meetings:-

1. Apologies

2. Minutes of last meeting

3. Matters arising from Minutes

4. Finance Report

Monthly Financial Report

Internal Audit Report

Investments

Expenses Authorisation

Loan Committee Report

Withdrawals Report

Rota for Collections

5. Correspondence

6. Membership Application

7. Education and Training

8. Any other business

9. Venue and Time of Next Meeting

Application for Membership and Record of Members

Any person who wishes to apply for membership of the Credit Union must complete an application form which contains the following information:-

Name

Address

Date of Birth

Marital Status

Employer’s Name & Address

Name & Address of Beneficiary

Name of Proposer/membership number

Name of Seconder/Membership number

Signature of Proposer and Seconder

Signature of Applicant

Membership Number allocated to applicant

Notes

1. The above information is necessary to establish that the applicant is within the Common Bond.

2. For the safeguard of the Credit Unions the applicant must be known to and supported by a Proposer andSeconder who are members.

3. A Proposer and Seconder should not support an application unless they are prepared to act as guarantee for any loans to the applicant.

4. All applications for membership should be filed in numerical order and retained by the Vice Chairman.

5. The Assistant Secretary must maintain an alphabetical list of members and officers here after call

The Address Book detailing – Name, Address, Telephone Number and Membership Number.

This is a requirement under the N.I. order.

6. All members of the Credit Union are obliged to advise the Secretary of any change of address as acondition of their membership.

Collection of Share and Loan Repayment

Shares or loan repayments can only be accepted by duly appointed collectors and the following procedures must be observed:-

1. The member must present their pass book when paying monies to the Collector.

2. The Collector must enter the amount received in the pass book:-

a)in the case of shares record the new accumulated investment balance

b)in the case of loan repayments record the new reduced loan balance outstanding

3. The Collector must enter the transaction on a Collection Sheet recording the amount receivedand revisedmembers balance on the prescribed form.

4. The Collector should sign the Collection Sheet when the collection is completed and pass thesheet andmoney to the Treasurer who should sign the sheet signifying receipt of the money after counting themoney in the presence of the Collector.

5. All pass books must be given back to the member at the time of collection except when retained for auditpurposes, when the procedures set out later under the heading Internal Audit Procedures must befollowed.

MembersPass Book

General

If applicable any membership fee must be paid prior to the issue of a Pass Book which shall also serve as the members receipt for the fee.

At the time of issue of a Pass Book the member must be given details of:-

The name and address of the Credit Union

Procedures for collection

Procedures for Loan Application

The Pass Book is the member’s acknowledgement of receipt of cash by the Credit Unions, and the member must be advised to check each entry.

Shares can only be accepted by a Credit Union, without production of a Pass Book in the following circumstances:-

1. When shares are invested by bank transfer (standing order or direct debit) in such cases the member must produce the Pass Book to the Treasurer for update at least quarterly.

2. When a Pass Book is mislaid in which case an official Credit Union receipt must be given to thememberand a duplicate retained by the Treasurer.

Closed or fully used Pass Books

When any account is closed (upon cessation of membership) or where a Pass Book is fully used, it mustbe returned to the Treasurer who must retain it in safe keeping.

All Pass Books remain the property of the Credit Unions at all times, however a member or past

Member should be allowed access to inspect closed or fully used Pass Books within seven days ofsubmitting a request to the Treasurer.

Lost or mislaid Pass Books

Any member who loses or mislays a Pass Book inform the Treasurer immediately.

The Treasurer must enter the fact of the missing Pass Book and the date it was reported missing onthe Individual Ledger Sheet of the Member.

A new Pass Book must be issued reflecting the balance recorded in the Individual Members

LedgerSheet after advising him that if the missing book should be found it must be returned immediately tothe Treasurer.

When making entries in the individual Ledger Sheet of the Member the Treasurer should exerciseparticular care to ensure that the ledger balance agrees with that recorded on the Collection Sheet.

Withdrawals

All applications for withdrawal must be made to the Treasurer on the appropriate Credit Union Withdrawal Form who must ensure that the form is completed by the member and retained on File by the Credit Union.

Requirement of 7 days notice is the usual procedure.

Credit Unions can also request 60 days notice.

All withdrawals should be made by cheque.

Signature of members required as receipt of Withdrawal.

Pass Book should be presented on receipt of Withdrawal and amount of Withdrawal entered therein.

Amount of Withdrawal to be entered in Member’s Ledger Sheet as soon as possible.

All Withdrawal must be recorded in the appropriate column of Cash Book, stating cheque number, date, name and amount.

Loans to Members

No request from a Member can be considered unless made on the Credit Union form of Loan Application.

The results of all applications must be recorded in the Minutes of the Loan Committee.

The Loan Application Form part 2 shall constitute authority for the issue of a cheque to the Applicant Member subject to the stipulated cheque signatures.

The following criteria shall be constitute authority for the issue of a cheque to the Applicant Member subject to the stipulated cheque signatures.

The following criteria shall considered in respect of every loan application:-

  • Available funds of the Credit Union
  • Amount of Loan required
  • Applicant’s ability to repay
  • Purpose of Loan
  • Character of applicant and regularity of previous savings or loan repayments

Credit Union Basic Loan Policy

1. 13 Weeks saving membership recommended before any Loan Application will be considered.

2. Members must be aware of the ideals and aims of the Credit Union e.g. must not be seen as an easyLoan Club or just another financial organisation.(could include a quote or similar ‘blurb’ for CUs to print and place on loan officers/collectors door / communal area)

3. Every Credit Union has their own loans Policy.

Example: First Loan £1 for £1 saved. Saved £100 Loan £100

Second Loan £2 for £1 saved. Saved £200 Loan £400

Thereafter Loans can be up to £10,000 above shareholding.

4. All members must be encouraged to save during their repayments.

5. Any new member must be introduced by a bona-fide Credit Union member.

6. All Loans should be paid over 4 years or less.

7. Interest is charged at 1% per month on the amount of Loan outstanding.

Credit Union Basic Loan Policy

1. 13 Weeks saving membership recommended before any Loan Application will be considered.

2. Members must be aware of the ideals and aims of the Credit Union e.g. must not be seen as an easy

Loan club or just another Financial Organisation.

3. Every Credit Union has their own loans Policy.

Example:

First Loan £1 for £1 saved. Saved £100 Loan £100

Second Loan £2 for £1 saved. Saved £200 Loan £400

Thereafter Loans can be up to £10,000 above shareholding

4. All members must be encouraged to save during their repayments.

5. Any new members must be introduced by a Bona-fide Credit Union Member.

6. All Loans should be paid over 4 years or less.

7. Interest is charged at 1% per month on the amount of Loan outstanding.

A Loan should not be made to a member if on the making thereof the members unsecured net liability to the Credit Union would exceed £150 or 5% of the total assets of the Credit Union, whichever is the greater figure (Section F.26) of the Rule Book should be followed at all times.

Internal Audit Procedures

1. General

The Internal Audit officers shall be the Chairman, Vice Chairman and Assistant Secretary.

As a matter of internal control, certain audit procedures must be undertaken periodically by the Internal Audit officers in addition to the Annual Independent Audit by the Credit Unionappointed Auditor.

These should be undertaken at least monthly and reported to the Board for recording in the Minutes.

2. Pass Book

Approximately 10% but not less that 5% of Members Ledger Sheets should be selected and the

Pass Books called in to verify accuracy to the Ledger Sheets.

Both the Ledger Sheet and Pass Book should be initialled by the Audit officer acknowledging

Verification at the point verified and a schedule of the names of membersPass Books verified,be supplied to the board. Any Pass Book examined and not reconciled to Ledger Sheets shouldbe reported to the Chairman for investigation with the Treasurer.

3. Collection Sheets

Audit officers must:-

Ensure that all collection sheets are numbered in sequence for easy reference.

Verify the addition totals and signatories endorsing the sheets with their signaturesand the date of their audit verification.

Verify the entries on at least five collection sheets to the members Ledger Sheets, initialling and dating the entries.