When the CEO Serves as Treasurer: Print Preview
It may be common–and it certainly is permitted under NCUA rules–but debates are beginning to be heard among some credit union experts when it comes to credit union employees (frequently the CEO) serving on the board of directors as treasurer.
Exhibit A in the brouhaha is Ignacio Morales, CEO of the failed Borinquen Federal Credit Union, who siphoned out millions of dollars to buy real estate and cocaine. Morales was said to use his position on the board as treasurer to accept bogus documentation for the money transfers that put large amounts of the institution’s assets into his personal pockets.
Olympia, Wash.-based credit union expert Marvin Umholtz took a more controversial position. “The NCUA’s small credit union specialists will tell you that their biggest worry with smaller credit unions is fraud. However, simply rearranging the governance chairs on the Titanic will not deter fraud from sinking the ship. Separation of duties and other internal control protocols are much better methods to mitigate fraud risk on a day-to-day basis and an annual arms-length third-party audit is imperative.”
Umholtz added that the “lack of knowledge about finance by members of the board of directors or having a treasurer-manager who also serves on the board are not per se poor governance practices. However, the lack of attention to fraud risk and implementing the expected protocols to control that risk are heinous sins in any sized credit union.”