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Luxury Expenditure Policy

Policy Objectives
The Board of Directors and executive management of Santa Cruz Community Credit Union ("SCCCU") are committed to fulfilling the requirements set forth in the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009, and as implemented by the TARP Standards for Compensation and Corporate Governance; Interim Final Rule (31 CFR Part 30) and any other applicable rule or regulation, as the same shall be in effect from time to time (the "TARP Standards"), during the period that SCCCU participates in the Capital Purchase Program of the Troubled Assets Relief Program.

The objective of this Luxury Expenditure Policy (the "Policy") is to fulfill the requirement pursuant to the TARP Standards to have in place a company-wide policy regarding excessive or luxury expenditures.

Policy Statement
It is SCCCU's policy that excessive or luxury expenditures on entertainment or events, office and facility renovations, aviation or other transportation services, and other similar items, activities or events for which SCCCU may reasonably anticipate incurring expenses, or reimbursing an employee for incurring expenses, are prohibited to the extent that such expenditures are not reasonable expenditures for staff development, reasonable performance incentives, or other similar reasonable measures conducted in the normal course of business.

Expense Categories, Definitions and Expectations
1. Entertainment. Entertainment is defined as activities for which an employee or management would use corporate funds for business development purposes relating to current or prospective members or to enhance SCCCU's marketing efforts or perception in the market. Our expectation is that all expenses incurred for these activities would be for corporate purposes with the objective of attracting and/or retaining business for SCCCU. Examples of entertainment include taking members or prospects to restaurants, theater, sports events, concerts, golf, and other activities that the member/prospect would find enjoyable and provide an opportunity to enhance business relationships. Expenditures for these purposes in the normal course of business are a necessary part of SCCCU's business development efforts and are not deemed as "luxury" or a violation of this Policy. Supervisors are responsible for discussing the scope of common expenditures with their staff on a routine basis and prior to expenses being incurred. Prior approval of expenditures for this purpose must be consistent with SCCCU's financial management policies including Accounts Payable and VISA policies and procedures. These expenses should continue to be documented and detailed as to the benefit derived by SCCCU through the normal accounts payable process.

2. Conferences, Events and Retreats. Conferences, events and retreats are defined to include meetings, conferences, and employee recognition events that are intended to provide the SCCCU Board of Directors, management and employees with opportunities for individual and team education, development and recognition, business planning, market and industry networking, and related business purpose objectives. Meetings may include both those that are internally organized as well as those organized by other credit unions or banks, trade associations, vendors and similar organizations. Occasionally, SCCCU organized meetings are held in non-SCCCU facilities such as restaurants and hotels in order to accommodate the size of the group, facilitate better delivery of the meeting, or provide participants with a venue that is most conducive for the meeting's purpose.

Members of the SCCCU Board of Directors, management and employees may also participate in meetings hosted by other business partners that have a clear business purpose. Conferences typically offer educational, skill development and industry networking opportunities that enhance participant performance. These conferences should be related to the financial services industry and have a direct correlation to attendee's job. Although a rare occurrence, at times it may be appropriate that a spouse would travel to these events with an SCCCU attendee. It is expected that including a spouse in the travel will not result in additional SCCCU "fixed cost" items such as transportation to and from the airport, registration and hotel room lodging, etc. However, any potential SCCCU reimbursement for "variable cost" items such as spouse meals, etc. should be discussed with a member of executive management prior to travel unless a policy on reimbursement already exists. Conference participation is subject to approval by senior management. Employee recognition meetings, dinners and events are held occasionally to recognize the contribution of an individual, team or all employees. The cost of such meetings must be approved in advance by a member of senior management.

3. Renovations of Office and Facilities. Renovations of office and facilities are permitted only if relative to the approved project and current budget plan of SCCCU. An exception to this can be allowed if management must deal with an emergency situation, such as an act of nature, and the expenditure is necessary to make the facility operational for member use. Renovations must be in all regards consistent with SCCCU's brand and historical standards of thrift and at no time should have the appearance of being extraordinary or excessive from a member/shareholder perspective. The planning and cost of most significant renovations is primarily overseen by executive management.

4. Aviation and Other Transportation Services. Aviation and other transportation services for SCCCU staff to outlying locations, including conferences, business development purposes and other purposes should be conducted in the most appropriate manner. It is SCCCU's policy that SCCCU does not own or lease its own air transportation (plane, jet, helicopter, etc.). Permitted modes of transportation include automobiles and commercial air, bus or rail service. The selection of transportation services should include assessment of cost, efficiency and timeliness of travel.

Executive management is responsible for the effective implementation of this Policy and has the following roles:

1. Review the monitoring of expenditures addressed in this Policy to ensure compliance with this Policy.

2. Research, document and justify any exceptions to this Policy and report exceptions to the SCCCU Board of Directors.

3. Promptly recommend potential modifications of this Policy to the SCCCU Board of Directors to ensure it remains compliant.

4. Enforce consequences upon any employee(s) for violation of the Policy in one or more of the following ways: verbal or written counseling, disciplinary action such as repayment, suspension, etc. and/or termination of employment.

5. Ensure that this Policy is posted on the SCCCU internet web site.

6. The SCCCU Principal Executive Officer and Principal Financial Officer shall certify to the SCCCU Board of Directors at least annually that the provisions of this Policy are being enforced and are sufficient to provide reasonable assurance that the expenditures for such purposes are not excessive.

The SCCCU Board of Directors has oversight responsibility for SCCCU's compliance with the requirements of the TARP Standards. In support of its oversight responsibilities, the SCCCU Board of Directors shall have the following roles:

1. The SCCCU Board of Directors must review and approve this Policy on an annual basis, or, in the event of subsequent amendments to the TARP Standards, in such time frame as may be required by such amendments.

2. Ensure that the SCCCU Principal Executive Officer and Principal Financial Officer have complied with the certification requests as it relates to this Policy.

3. The SCCCU Board of Directors shall review any exceptions to this Policy as soon as reasonably practicable following the granting of any such exception.