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BOD Roles & Responsability

TrailNorth Federal Credit Union General Authority and Duties of Directors Policy Background

The decision to serve as a director is a commitment which includes understanding the financial statements, risks and controls of the credit union so as to properly exercise authority over the credit union’s direction.

TrailNorth Federal Credit Union will comply with NCUA Rule 701.4, General authorities and duties of Federal credit union directors, which clarifies and documents the important duties of boards of directors of federal credit unions. NCUA Letter No. 11-FCU-02 provides general information about directors’ duties and the financial skills required by directors.

General Authority and Duties

1)  The Board of Directors is responsible for the general direction and control of the Credit Union. The Board may delegate operational functions to management, but not the responsibility for the Credit Union’s direction.

2)  A Director of the Board must carry out his or her duties in good faith, in a manner reasonably believed to be in the best interests of the membership, and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. “Good faith” as defined by the NCUA means, generally, that directors should take care not to violate the law, and also not be involved in decisions that benefit the Director personally.

3)  A Director of the Board must administer the affairs of the Credit Union fairly and impartially and without discrimination in favor of or against any particular member.

4)  A Director of the Board must have at least a working familiarity with basic finance and accounting practices, including the ability to read and understand the Credit Union’s balance sheet and income statement and the ability to ask, as appropriate, substantive questions of management and auditors. At a minimum, a Director should be able to examine the Credit Union balance sheet and income statements and understand at the line item level the following:

       a. What does this line item mean?

       b. Why is it important to the Credit Union?

       c. Is the value of this line item changing over time, and what does that change mean?

       d. Is the change important to the Credit Union?

5)  A Director of the Board must understand the specific activities the Credit Union engages in, how these activities generate revenue, and the various risks associated with these activities that could lead to financial loss. Directors should understand credit, liquidity, interest rate, compliance, strategic, transaction, and reputation risk. Directors should understand the internal control structures at the Credit Union that limit and control these risks.

6)  A Director of the Board must direct the operations of the Credit Union in conformity with the Federal Credit Union Act, NCUA’s Rules and Regulations, other applicable laws, and sound business practices.

7)  A Director of the Board may rely on information prepared or presented by employees or consultants the Director reasonably believes to be reliable and competent and who merit confidence in the particular functions performed.

The Credit Union will provide training opportunities for Directors to acquire the necessary financial skills. All training costs will be paid by the Credit Union. Directors may obtain the necessary financial skills through internal Credit Union training, external training, self-education, on-the-job experience, or a combination of these activities. Sitting Directors who were appointed or elected before January 27, 2011 and do not have these skills, have until July 27, 2011 to satisfy the minimum financial standards. Directors who are elected or appointed on or after January 27, 2011 will have received such training within six months of their appointment or election to the Board of Directors, unless they can already demonstrate their possession of the requisite financial skills.

Approved by the Board of Directors July 26, 2011