Enterprise - Prudential Standards criteria



There are a number of issues known to bring about failure in credit unions.  The purpose of this Award is to look at what practical measures are in place to safeguard and avoid the risks of failure that have contributed to the collapse of too many credit unions over the past few years. Entries should describe in detail what measures your credit union has in place to ensure as much as possible these threats are mitigated against.   

All the instances noted below are known by or have been reported to the Foundation:  

Auditors -
Who don't carry out indepth audits, just accepting without question data provided to them by the credit union.
Who don't audit at least 10% of all Share and Loan Accounts, particularly those of all lay leaders, management and dormant accounts.
Who don't report and investigate untoward transactions fully.
Who, in their Management Letter with the draft Accounts to the Board of Directors, don't produce reports on accounting, management, operational and lay leader shortcomings
Who don't examine all the Minutes of the Board of Directors to ascertain that it has acted prudently, carried out all mandated actions, is not acting in breach of any laws, regulations or rules that govern the care and conduct of the credit union and any failures in corporate governance and report these in their Management Letter.
Who don't report openly on the state of the credit union to owner-members at Annual General Meetings.
Who don't make candid statements on these matters in the Annual Return submitted to the Regulators with the Audited Accounts.
Who don't produce an audit programme of tasks carried out with their fee note.

Banks -
Who don't know, understand or if they do, condone and ignore activities and suspicious transactions that are contrary to the objects of a credit union under the 1979 Credit Union Act.
Who have even offered finance to fund such activities.

Boards of Directors - 
Who might only exist on paper or not at all!
Who have constant vacant positions in breach of the credit union's own rules.
Who don't hold regular meetings in accordance with statutory/regulatory requirements.
Who accept regular absences from meetings by colleagues, rendering meetings inquorate and indecisive.
Who, to overcome the three items above, don't organise/run meetings remotely using modern technology.
Who are not educated to task to perform the role of a credit union director undertaking a specific role and able to perform others when required to do so.
Who don't realise that the Board is in "loco parentis", safeguarding the interest of all the owner-members and in office only with the consent of all the owner-members to whom they are accountable at all times.
Who do nothing to ensure that the structures of owner-membership democracy are in place and operating at all times.

Credit Union Association bodies and leagues - Although the formal recognition of self regulatory bodies and their common law authority over all their affiliates disappeared with FSMA 2000, they have not replaced it with ...
Outreach as a duty of care to their affiliates who pay subscriptions.
Genuine offers of assistance or mentoring to their subscribing affiliates, not helping credit unions experiencing difficulties

Computer Software -
That is outdated technology and cumbersome to operate.
That doesn't contain as standard the functionality for instant "real time" reporting to the Board of Directors, Supervisors, Senior Management, External Auditor (maybe) and Regulators.
That is expensive at outset (purchase), ongoing (service charges) but doesn't include as standard updates to UK credit union law and regulation.
With a service transaction charging structure too favourable to the supplier and adversely affects the credit union.
That doesn't include a service level agreement with the credit union, and the revers, on purchase.

Credit Union Consultants
Acting as "Shadow Directors" (an illegal act) by design or default, not just informing, educating and encouraging the organising committees of "proposed" credit unions or the Boards of "authorised" ones.
Assuming a formal professional role in a credit union, exerting executive authority (by design or default) making binding decisions without the legal or regulatory authority.
Who have a bias when recommending suppliers of products or services, but don't declare such a preference or relationship to the Board of Directors at outset.

Leadership Succession -
Credit unions fall foul of believing that the pure presence on paper of a democratic process assures the evolution of this - wrong!
To assume the continuity of quality progressive leadership at all levels, there must be in place a feed, a structure to ensure this.  Existing leaders at all levels should be developed to multitask.
Credit unions must recognise that not having enough people at entry level is an observation - not a solution!

Owner-Member Education -
A credit union's "customers", from outset and ongoing, should be aware that as depositor of funds and borrowers from the credit union, they along with other owner-members equally (not valued by the size of their deposits) own the business and by right can and should hold all of those that run it, in any capacity, to account at all times.
An engaged owner-member "bottom up" democracy is vital, as the lack of this engagement is a major cause of negligence and malfeasance committed by all of those in authority in a credit union and can be a major contriutory factor to its demise.

Professional Managers/Management and Contracted out back office functions -
Who - by the intention, ignorance, lethargy or default of the Board of Directors - assume control of the credit union and act as "Shadow Directors", instead of fulfilling their role of enacting the will of the Board of Directors, who are ultimately responsible to their electorate, the owner-members.
Contracted out back office functions - who often assume the function of professional management and, to suit their own purposes, impose a "one size fits all" solution on one or more credit unions.

Risk Management Appraisals - 
Every credit union should have a Risk Appraisal programme covering

  • People - not enough
  • Enterprise - such as competition threats
  • Events - physical, external, political
  • Property - disaster evacuation

These and more are the "What if" scenario, the contingency plan.  Regular Risk Management appraisals should be conducted.

Supervisors - 
Who exist on paper or not at all.
Who are too close personally to those that they supervise.
Who do not have or enact a rolling enternal audit programme of the entire credit union operation
Who do not identify and formally report to the Board of Directors and Regulators if and as necessary all failures in the corporate governance structure of the credit union.
Who don't take measures themselves to ensure that the Board of Directors is quorate at all times with locums in place.
Who don't report and hold to account all members of the Board of Directors for any dereliction of duties.


Any sensitive disclosures made in entries will only be seen by the Awards Office and Judges and not referred to in winning citations without prior consent.