April is National Financial Literacy month, a month devoted to highlighting the importance of financial literacy and teaching us how to establish and maintain healthy financial habits. This is also a good time to implement a training program that will ensure financial literacy of your Credit Union’s Board of Directors.
Financial Literacy is one of many responsibilities tasked to the Board Members, under Section b- NCUA Rules & Regulations 701.4, General authorities and duties of Federal credit union directors. Some state chartered credit unions have similar requirements in place under their state laws. This rule clarifies the fiduciary duties and responsibilities for Federal credit union directors:
b. Duties of Federal credit union directors
- Carry out duties in good faith
- Administer affairs fairly and impartially
- Within a reasonable time (not to exceed six months) have familiarity with basic financial and accounting practices;
- Ability to read and understand balance sheet and income statements
- Ability to ask appropriate questions
- Direct operations in conformity with FCU Act, NCUA Rules and Regulations, other laws and sound business practices
What does this really mean? Well, that depends. The level of financial literacy should be commensurate with the size and complexity of the credit union. The intent is to ensure that all credit union directors have a basic understanding of their credit union’s finances.
There is no one size fits all in the case of financial literacy training. NCUA’s Letter to Federal Credit Unions, 11-FCU-02 gives some guidance. The letter states that examiners will evaluate whether the credit union has a policy in place to make available the appropriate training to enhance the financial knowledge of the directors. The policy should also provide opportunities and funding for directors to acquire the skills needed to evaluate the credit union’s finances. There are a number of resources available to assist in the training, such as internal credit union accounting staff, Leagues, self-education, external auditors, on-the-job experience, or a combination of these activities. For small federal credit unions there is the NCUA’s Office of Small Credit Union Initiatives. This resource can be accessed at https://www.ncua.gov/services/Pages/small-credit-union-learning-center/governance.aspx.
Happy National Financial Literacy Month!