Submitted for your approval: Reimbursement of volunteer expenses

The members of a credit union’s board of directors are often referred to as volunteers, and for good reason. The FCU Act and NCUA regulations – specifically section 701.33 – prohibit federal credit unions (FCUs) from compensating their directors, which means credit union directors are not paid for the work they do. There is one exception to this prohibition: one director may be compensated if provided for in the credit union’s bylaws.

Section 701.33(b)(2) provides some items that are not considered to be compensation, and which therefore can be provided to the directors without violating the “no compensation” rule. The provision we’ll focus on today is found in section 701.33(b)(2)(i), which allows a credit union to pay or reimburse “reasonable and proper costs”  incurred by a director “in carrying out the responsibilities of the position.” Such expenses may be covered for any “official,” which includes associate directors and committee members.

The regulation states that, for such costs to be paid, they should be “in accordance with written policies and procedures, including documentation requirements, established by the board of directors” (emphasis added). The NCUA has stated that FCUs are given “the flexibility to establish reimbursement programs that meet an FCU’s unique needs.” Once the policy is in place, it will be up to the board to determine if specific expenses fit the policy and procedures. The NCUA discussed the process in this 1991 legal opinion letter and this 1996 legal opinion letter. According to those letters, the first step is to determine if the costs were incurred during official business. Then, the board should consider whether the costs were “reasonable and proper.” Finally, the board should determine if payment would be “necessary and appropriate.”

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