Ulster Federation of Credit Unions
Member Credit Union Operating Manual - V.2 2007 

                                     Contents:

 1.                   Operational responsibilities

 2.                   Credit Union Officials

2.1                Board of Directors

2.2                Duties and responsibilities of officers

2.3                Main function of the Main Committee

2.4                Job description of Main Committee/Board

3.                   Board meeting agenda

4.                   Application for membership & record of members

5.                   Collection of share and loan repayment

6.                   Members pass book

7.                  Credit Union basic loan policy

8.                   Internal Audit Procedures

9.                   Delinquent loans, bad debt and their recovery

10.               Members ledger sheet

11.               Cash book

12.               Monthly financial report

 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.

 

 

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 Functions 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 members 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

            Signatory of Cheques

            Internal Audit Officer

            Custodian of Application Cards

 

Secretary

 

 

            Takes Minutes at all Meetings

            Signatory of Cheques

            Credit Committee Member

            Custodian of Minute Book

            Receive/dispatch Correspondence

            Collector according to Rota

 

Assistant Secretary

 

 

            Fulfils 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

            Signatory 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 three members,

           one 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 abnormally large amounts of money. i.e. a person lodging large amounts and then doing a 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 Union the applicant must be known to and supported by a Proposer and Seconder 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 called 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 a condition 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 received and revised members balance on the prescribed form.

4.  The Collector should sign the Collection Sheet when the collection is completed and pass the sheet and money to the Treasurer who should sign the sheet signifying receipt of the money after counting the money 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 audit purposes, when the procedures set out later under the heading Internal Audit Procedures must be followed.

           

 

Members Pass 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 the member and 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 must be 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 of submitting 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 on the Individual Ledger Sheet of the Member.

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

       Ledger Sheet after advising him that if the missing book should be found it must be returned immediately to the Treasurer.

       When making entries in the individual Ledger Sheet of the Member the Treasurer should exercise particular 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 is recommended before any Loan Application will be considered.

 

2.   Members must be aware of the ideals and aims of the Credit Union

 

3.   Every Credit Union has its 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 5 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 Union appointed 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 members Pass Books verified, be supplied to the board.  Any Pass Book examined and not reconciled to Ledger Sheets should be 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 signatures and 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.

 

4.   Cash Book

 

Three banking entries per month in the main Cash Book must be verified to the Bank

Lodgement Book counterfoil with particular reference to the date of banking reflected in the Cash Book compared to the bank date stamp.  The counterfoil should be signed by the Audit officer on the reverse and dated.

 

Cash should be banked on the first banking day after close of business e.g. collections done on Friday or Saturday should be placed in night safe or first thing Monday morning.

 

10% of withdrawals per month should be verified to the member’s withdrawal forms.  The forms being signed and dated on the reverse by the Audit officer.

      The balance at the bank is reflected in the Monthly Financial Report from the Cash Book should be reconciled to the bank statements by the Chairman.

 

5.   Additional Procedures

 

Any additional Audit procedures may be instigated by the Board, but the authorisation

Procedure necessary for transactions as laid down provide an ongoing audit function by the Independence of the respective officers any such procedures must at all times be signed by the Audit Officer on the appropriate documents or entries.

 

 

Delinquent Loans/Bad Debts and their Recovery

 

Delinquent loans and bad debts are the result of numerous things i.e.

 

                  Too high a loan for a member

                  Not checking close enough for the reason of the loan

                  Bad loan policy on behalf of the board

                  The member did not take their repayment seriously

                  The loan only added to other outstanding debts of the member

                  Outside influences – i.e. sickness, unemployment

                  Matrimonial problems, bad money management the list could go on and on

 

In some cases as mentioned above the board may wish to interview the member in order to find the reasons for non-payment.  The board may wish to take a reduction in repayments, freeze interest, or wait until the members income improves.

 

But what about the member who deliberately refuses to pay, or who has left the district without informing anyone:-

 

1.  The Treasurer reports to the Board that a loan has become delinquent this is usually after 4 weeks       or 8 weeks for monthly accounts of non payment.

 

2.  A letter should go out to the member reminding the member that payments are overdue.

 

3.  If still not successful after 2 weeks a more strongly worded letter should be sent reminding that interest is still being charged and the concern the Board has for the loan outstanding this should be followed up with a visit within 2 weeks.

 

4.  If there is still no response a formal letter should be sent advising the member that if no contact made within 7 days legal action will be taken.

 

The Board at all times must stand by the procedure no matter how painful if seems, it has an obligation to protect members’ shares and recover any bad debts whenever possible.

 

It is recommended that the Board appoint a Delinquent Loan Officer to see to these procedures.

 

 

 

 

Members Ledger Sheets

 

A Ledger Sheet must be maintained by the Treasurer in respect of each member.

 

The information required on each Ledger Sheet:-

 

Shares Lodged

Loan Repayments

Interest Paid

Loans Granted

New Share Balance

New Loan Balance

 

All Ledger Sheets shall be updated from the Collection Sheets at regular intervals but in any event not less than weekly.

 

 

Cash Book

 

The Treasurer must at all times ensure that the Cash Book is fully written up and supported by necessary documentary evidence is available for examination by the Board or Internal Audit Officers.

 

The Cash Book should provide records of all money movements within the Credit Union.

 

The various transactions to be recorded are:-

 

                   Income

 

                  The date week ending

                  Amount of Shares received

                  Amount of Loan repayments

                  Amount of Interest received on loans

                  Bank Interest

                  New Starts

                  Any other receipts

 

                   Expenditure

 

                  Cheque Number

                  Name/Account Number

                  Withdrawals

                  Loans to members

                  All Expenses i.e. BT, Electricity, Stationery etc.

 

The safe-keeping of all financial records and books are the Treasurer’s responsibility with the co-operation of their Assistants and The Board.

 

 

 

Monthly Financial Report

 

The Treasurer must present a Financial Report to the Board every month, to be made up to the last day of the month.  These Reports are a summary of all transactions for the month.

 

At the Board Meeting, to which the monthly Financial Report is presented, the Treasurer must present the Cash Book in support of the Report to enable any questions to be answered.

 

Collecting Sheets, Cash Book and Bank Statements should be reconciled at least once a month by members of the Board other than the Treasurer.

 

All documents should be filed in a responsible way in date and week number.

 

Every Board Member must be present with a copy of this report in order for them to see the day to day running of the Credit Union.

 

The Cash Book along with Bank Statements plus any other relevant information regarding cash transactions (bills for expenses etc) should be available for inspection by the Board.

 

In the absence of the Treasurer these duties should be fulfilled by the Assistant Treasurer.

 

 

 

 

 

 

 

 

Ayn Rand

Money is the barometer of society’s virtue.

 A creative man is motivated by his desire to achieve,

not by his desire to beat others…..