John Lahart (Dublin South West, Fianna Fail)
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4. To ask the Minister for Finance if his attention has been drawn to the fact that, in the absence of a dedicated treasurer in credit unions, branch accounts are prepared and finalised by operations, with no checks carried out by a director of the branch, and the board is required to sign off on the branch accounts without having had any input or without knowing if they are accurate or not; and if he will make a statement on the matter. [29931/16]

Michael Noonan (Limerick City, Fine Gael)
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The Report of the Commission on Credit Unions, published in 2012, made a number of recommendations, including in relation to governance requirements for credit unions.  Recommendations made were agreed by all stakeholders including credit union representative bodies. These governance requirements set out the role and responsibilities of two key positions within the credit union - those of chair of the board and the manager of the credit union.  Section 64 of the Credit Union Act 1997 (1997 Act) identifies the treasurer as the 'managing director' of the credit union and his/her responsibilities included executive responsibilities such as submitting financial statements to the board. In order to ensure that the role and responsibilities of board and management do not overlap and that board members have governance rather than executive responsibilities, the Commission recommended that the 1997 Act be amended to remove the role of treasurer and assign executive responsibilities to the management of the credit union.  This recommendation is reflected in section 21 of the Credit Union and Co-operation with Overseas Regulators Act 2012 (2012 Act).

More generally, in terms of board composition and competence and capability, under the 1997 Act, board of directors of a credit union must be of sufficient number and expertise to adequately oversee the operations of the credit union while the nomination committee must review the composition of the board for the purpose of identifying any deficiencies in composition of the board.  In addition, under the Fitness and Probity Regime for credit unions, a credit union must not permit a person to perform a Controlled Function (which includes all members of the board) unless it is satisfied on reasonable grounds that the person is, amongst other things, competent and capable to perform their role.

The governance requirements emphasise the importance of, and provide a framework to implement in practice, a separation between the two distinct sets of roles in a credit union, i.e. the executive or operational roles, and the non-executive or governance roles. This separation allows the respective roles to be clearly defined and for their responsibilities to be distinct. The executive or operational roles are performed by the manager, the management team, staff and voluntary assistants. The non-executive or governance roles are performed by the board of directors.

The governance requirements also require a credit union to have a board oversight committee, an internal audit function, a risk management officer and a compliance officer.

Under section 63A(4) of the 1997 Act functions of the manager of a credit union include:

- updating the board of directors on the financial position of the credit union, including submitting to the board of directors on a monthly basis unaudited financial statements that set out the financial position of the credit union; and

- preparing or causing to be prepared such financial reports and returns as may be required by the auditor of the credit union.

Under section 55(1) of the 1997 Act, one of the function of the board of directors is to review and consider any update of financial statements provided to the board by the manager under section 63A(4)(c).

Section 111 of the 1997 Act further provides for the preparation of annual accounts in a credit union and requires that the income and expenditure account, balance sheet or statement cannot be published until it has been audited by an auditor, signed by a member of the supervisory committee and a member of the board acting on behalf of the board of directors. 

I am advised by the Central Bank that where matters arise in relation to a credit union's accounts the board should ensure that it obtains the necessary clarification to inform it in carrying out its functions in relation to the accounts of the credit union. In the event that such matters are not addressed to the satisfaction of the board, the board must determine whether it is appropriate for a member of the board to sign the annual accounts on its behalf.

I am satisfied that there is an appropriate framework in place to adequately oversee and manage the preparation and publication of accounts in a credit union.