If credit unions want to stay two steps ahead of theircompetitors, a lofty yet doable goal is ensuring that their boards,supervisory committees and auditors put their differences aside andget on the same page

“Education and elbow grease are needed to make this happen,”explained Susan Mitchell, CEO of Mitchell, Stankovic & Associates, aboard governance consulting firm in Boulder City, Nev.

“It isn’t a choice, it’s a necessity,” she continued. “When yourlivelihood is dependent upon consistent results, you bridge thesegaps. Yes, there are real obstacles, real systemic concerns but thealternative is not acceptable. Fresh approaches will beneeded.”

Mitchell said she advises her clients to engage people in themission, the vision and the purpose of a unique cooperativebusiness model. She also provides financial knowledge for allboard members and explained that business acumen, riskmanagement, consumer advocacy and understanding and mitigatingregulatory involvement are equally key.

“There is a transition happening within the industry bothinternally with executive staff, and externally with volunteers,”Mitchell said. “The volunteer role has evolved and a moredisciplined approach to developing and recruiting board memberswill be needed.”

Mitchell said she was recently asked to serve as chair of thenominating committee for several credit unions to facilitate thetransition and she is working with several clients to create aformalized recruiting program for volunteers through a training program.

“The level of expertise needed for credit union volunteers isconsistent the world we live in today which is demanding, dynamicand 24/7,” Mitchell suggested. “Board members will need to bemotivated by making a difference and CEOs need to make theirdevelopment and engagement a top priority, a passion. Respectfulpreparation will also go a long way with the regulators andauditors.”

Brad Houle, president/CEO of the $115 million C.A.H.P. CreditUnion in Sacramento, Calif., recommended that board of directorsand supervisory committee members serve the credit union bychallenging management to run the organization moreeffectively.

“In order for credit union volunteers to accomplish this goal,all interested parties must agree that communication between theboard, supervisory committee, and senior management is an ongoing,multi-level process that involves varying opinions and emotionalhuman responses to challenging situations,” Houle said.

The most successful technique C.A.H.P. CU has used to evaluateboard and supervisory interaction is the ABC process orachievement, belonging and contribution, Houle noted.

“Everyone involved in the decision making process should feel astrong sense of achievement, belonging, and contribution to helpreinforce their charge as a volunteer or employee of the creditunion,” he added.

The ABC process creates opportunities for personal growth anddevelopment for volunteers to cultivate positive change thatcapitalizes on individual and organizational strengths through asense of collaboration, innovation and a sense of urgency, Houlesaid.

When the board and supervisory committee are motivated andpassionate about their credit union, they help develop a culture oftrust, accountability, and success that helps credit union staff toovercome challenges,” Houle said. “In my opinion, this is the heartof board governance.”

When a board of directors wants to determinehow effectively management is running the credit union, they shouldask questions that will make management evaluate current strategiesand initiatives, Houle suggested.

Sample questions that may help management challenge the statusquo include listing the five worst and most successful initiativesduring the last five years, according to Houle. A credit union canalso look at what steps it has taken to improve strategic planningthroughout the organization.

This approach to board governance encourages everyone toquestion the status quo, challenge what they are doing and why,deepen the understanding of differing opinions and perspectives,strengthen team dynamics, and promote a culture of innovation.

“These practices may help your credit union achieve moreeffective communication between board, supervisory and managementas it did for our credit union,” Houle said.

Now that the new American Institute of Certified Public Accountants’ AuditStandards Board is in effect, advocates say credit unions willbenefit from the new clarity standards. The roles of the auditor,audit committee, and management are different and distinct. Thosedifferences are now more evident in the areas of client acceptanceand continuance, annual engagement letter communication, andacknowledgement of key audit preconditions through the ASBguidelines.

Meanwhile, a good deal of interaction between boards andCEOs may be flawed due to a range of issues such as lack ofcommunication and unqualified board members.

Harvey Johnson, senior manager of PBMares LLP, a regionalaccounting and consulting firm in Newport News, Va., sees problemswith communication between boards and CEOs, especially for creditunions with less than $300 million in assets.

“I think the level of talent that sits on the board of manycredit unions is a big industry issue,” Johnson said. “The averageboard member has no background in finance. I see this as bigproblem.”

Board members should be chosen by their ability to understandfinance and other strategic issues, Johnson offered.

“There needs to be a requirement put into place that the boardmembers have some sort of financial literacy prerequisite is metwhen finding new board members,” he said. “CEOs need to incorporateboard development or educational activities into meetings.These are a few ways to keep your board focused ongovernance.”

Johnson also recommended that CEOs acquire the AICPA Audit ToolKit because it allows CEOs to evaluate board members.

“It will help you evaluate how strong the board is and who hasto go,” Johnson said. “If you don’t wake up and evaluate yourweaknesses, you’re going to have big problems.”