3 Scrutiny Tests

Boards of directors are responsible for the overall general management
of the credit union that include but are not limited to: establishing
policies, reviewing financial statements, and ratifying budgets.

To that end, there are three (3) scrutiny tests directors can apply to
make sound decisions on behalf of the financial institution and its
members.

Rational Basis Test

If the credit union policy or action aligns with the credit union’s mission and/or strategic goals, is reasonable and not cost-prohibitive in its undertaking, then the board should favor its ratification.

Intermediate Scrutiny Test

If the credit union policy or action doesn’t align with the credit union’s mission and/or strategic goals, is reasonable and not cost-prohibitive, and furthers a legitimate credit union interest, then the board could consider its ratification.”  Examples of a legitimate interest are seed funding for a start-up credit union or the creation of a credit union service organization (CUSO).

Strict Scrutiny Test

If the credit union policy or action doesn’t align with credit union’s mission and/or strategic goals, is reasonable and not cost-prohibitive, then the board should ratify it only if it serves a compelling interest in the credit union philosophy of “people helping people.  Examples of a compelling interest are the funding of a disaster relief effort or a charitable donation to a non-profit organization.

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