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Every credit union in the country has a supervisory committee. This committee is unique for two reasons:
Like members of the credit union’s board, the members of the supervisory committee serve on the committee as unpaid volunteers. They receive no compensation for the time and energy, but perform the duties as an act of service for the credit union’s members.
However, how someone becomes part of the supervisory committee is quite different than how a credit union member becomes a board member.
Here’s how it works.
The board is elected by the credit union’s members. One member of that board may sit on the supervisory committee, but that isn’t mandatory. The board finds people willing to work for nothing, and appoints them to the supervisory committee.
Most organizations do not have a supervisory committee. Instead, the board of directors has a sub-committee that performs an audit function.
According to the NCUA:
“The supervisory committee safeguards member assets by ensuring a credit union is operating properly. It has broad oversight authority to hold a credit union’s board of directors and senior management accountable for fulfilling their responsibilities in the interests of the credit union’s members, and for operating according to sound business, ethical, and regulatory standards.”[1]
In plain English, the supervisory committee is the watchdog of the credit union.
Every credit union has a supervisory committee. However, most larger credit unions have an internal audit function, which does much of the auditing of the credit union’s operations. The head of that internal audit committee reports directly to the chair of the supervisory committee, but is usually managed by another employee.
That is, in the credit union’s organizational chart, there’s:
In smaller credit unions, the auditing function is often outsourced to an independent auditor, which is hired by and reports to the supervisory committee. Sometimes, the supervisory committee will fulfill ongoing audit functions, such as cash counts and loan verifications.
In all cases, the purpose of the supervisory committee is to ensure that business at the credit union is conducted on the up-and-up. The accounting is done properly. The loans are made prudently. Collections practices are up to snuff. Consumer regulations are properly followed. And so on.
Supervisory committees are made up of between 3 and 5 members. Often, serving on the supervisory committee is a steppingstone to serving on the board. As indicated earlier, one member of the supervisory committee can be a board member, if that board member is not compensated.
(“Wait,” you might say. “Aren’t all board members volunteers?” Yes, they are. However, up to one—and no more than one—board member is also allowed to be a paid employee. That is, that person serves a dual role as an employee and as a volunteer. The stuff the person does as an employee is paid for, but the stuff the person does as a board member is not paid for.)
Interestingly, although the board appoints and can remove members of the supervisory committee, the supervisory committee can also suspend a member of the board for inappropriate behavior, and call for a membership meeting so the members can vote on whether to retain or remove the board member.
As volunteers, the supervisory committee members donate their time and effort for the good of the credit union. It’s an important, low-visibility position that servers all the members of the institution.
