Effect of Sarbanes-Oxley on Credit Unions

Sarbanes-Oxley is the much-publicized law that applies to corporations that have registered equity or debt securities with the U.S. Securities and Exchange Commission. Since no credit union ever issues publicly traded equity securities, one would tend to think that credit unions are exempt from such oversight. Although credit unions are technically not required to comply, it is important that they recognize the implications and understand how they may be affected.

What will impact credit unions is the governmental and public reaction to the several corporate and accounting misdeeds of recent years. Clearly the public wants to put a stop to such shenanigans - in the corporate world and elsewhere. Credit unions will not be exempt from such scrutiny as part of this process.

While not subject to SEC oversight, credit unions do have numerous constituencies to which they routinely answer. These may include government regulators, their own governing bodies, members and the media.

While we probably will not see many individuals asking to see the credit union's audit report prior to joining or depositing funds, just about every credit union today is likely to feel at least some direct member pressure. Credit unions should recognize this as a trend of the future, and be ready to get on board the Sarbanes-Oxley Express.

Four actions Credit Unions should consider in the Era of Sarbanes-Oxley:

• Ensure your Board and Supervisory Committee are active and aware of the inner-workings of credit union's financial policies and procedures.
• Have your CEO and CFO attest to the accuracy, completeness and fairness of your financial statements, and to the adequacy of your internal accounting controls.
• Publicly disclose that you have adopted, and follow, a code of ethics for senior management and the governing bodies. If you do not have such a Code, adopt one at once!
• Consider very carefully all transactions between your credit union and any "insider", including executive compensation and fringe benefits. Would you be even slightly embarrassed to read details of these transactions in your local newspaper?