The government is cracking down on the country's largest "associational" credit union, $526 million-asset Polish & Slavic Federal Credit Union.

According to a June 4 National Credit Union Administration enforcement order, Brooklyn, N.Y.-based Polish & Slavic is riddled with serious problems.

The 44,000-member credit union is poorly managed, has insufficient internal controls, suffers from conflicts of interest, lacks an appropriate investment policy, is careless of its interest rate risk and liquidity position, and is not complying with either the Bank Secrecy Act or year- 2000 guidelines, according to the order, a copy of which was obtained last week.

To remedy the problems, Polish & Slavic's officers agreed to a slew of fixes. These include notifying the NCUA of board meetings and providing the agency with written minutes; hiring consultants to assist the credit union with Bank Secrecy Act compliance, organizational management, internal controls, and interest rate risk management; and developing year-2000 and general business plans.

Each board and committee member agreed to sign a statement disclosing whether they, their family members, or associates are affiliated with any Polish & Slavic contractors or vendors.

Steven R. Bisker, the credit union's Washington counsel, said the problems are managerial, not financial. "They are financially very, very solid," he said.

The institution's managers are reluctant to rely on consultants and other "outsiders" and will hire Polish speakers only, he said. The management approach is more appropriate for a small institution, Mr. Bisker said.

Founded in 1976, the credit union makes membership available to anyone of Polish or Slavic origin who pays a $10 annual membership fee to the local Polish & Slavic center. For this reason, it is called "associational," in contrast to institutions with employer-based or geographically based memberships.

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