Fundamentals of Credit Union Operations
This domain, Fundamentals of Credit Union Operations, tests the cooperative model and the controls that keep daily operations sound. Questions often compare credit unions with banks and probe governance, capital, liquidity, and internal control.
Ownership and governance
A credit union is a not-for-profit cooperative owned by members who share a field of membership defined in the charter and bylaws. Members elect a volunteer board of directors; each member has one vote regardless of balance. The board sets policy, hires the CEO, and delegates operations. The supervisory committee oversees audit and internal controls, while the credit committee or lending staff applies loan policy. Federally chartered credit unions are supervised by the NCUA; state-chartered, federally insured credit unions also answer to their state regulator.
Financial and operating controls
Shares are member deposits-liabilities, not equity. Net worth comes from retained earnings and absorbs losses. The NCUSIF insures accounts up to $250,000 per depositor, per insured credit union, per ownership category. Managers monitor net worth ratio, delinquency, liquidity, and asset-liability risk. Daily operations rely on segregation of duties, dual control of cash and vault, teller balancing, general-ledger reconciliation, and audit trails.
Worked example
A member with $80,000 in shares asks whether her votes increase with her balance and whether the credit union’s “profit” is hers. Reasoning: voting is one member, one vote; shares are insured deposits, not stock; any dividend is declared by the board under policy. Answer: her vote does not increase, and she receives dividends only as declared-not a shareholder profit distribution.
Traps
Do not call shares equity or members shareholders. Do not confuse board policy with management operations. Do not assume a single field of membership or regulator for every credit union. Do not treat dual control as optional in a small credit union.