4 Where Are Duties Promulgated? Federal Credit Union BylawsFederal Credit Union ActPart 715 – NCUA Rules and Regulations “Supervisory Committee Audits and Verifications”
5 Number of Committee Members The number of members is determined by the Board of DirectorsMinimum number of members is THREE. The maximum is FIVE.
6 Terms of Service The term is determined by the Board The terms are one, two, or three yearsAll terms must be for the same periodTerms should be staggered to provide continuity of the committeeRegular terms expire after the first Board meeting after the annual meeting
7 Committee LeadershipCommittee members select a Chairperson and SecretaryChairperson and Secretary may be the same personThe Secretary must maintain a record of actions taken by the committeeMinutes of meetings should be kept and summarize procedures performedCredit Union information is confidential
8 Who Can Be on The Committee? Must be a member of the Credit UnionMust be bondable by the SuretyEmployees and members of the Credit Committee are not eligible to be members
9 Goals of the Supervisory Committee The Supervisory Committee has two general goals:Management’s financial reporting objectives have been metManagement's practices and procedures safeguard members’ assets
10 To Meet These Goals The Committee is responsible for determining: Management has established and maintained effective internal controls.Management promptly prepares accounting records and financial reports to accurately reflect operating results.Management properly administered the relevant plans, policies, and control procedures established by the Board.Management has established policies and control procedures that safeguard against error, conflict of interest, self dealing, and fraud.Generally, these determinations are made through conducting audits and verifications.
11 Actions of the Supervisory Committee Audit – Once a calendar year, the Committee must have an audit completedAt least once every two years, your Committee must perform a member verificationCalifornia State Chartered CU is required annuallyYour Committee must ensure that the Board is safeguarding assets and that management complies with their policies and plansThe Supervisory Committee must report to members at the annual meeting
12 Actions of the Supervisory Committee Suspend, by unanimous vote, any Board Member, Executive Officer, or Credit Committee member.Need to call a special meeting within 14 days to act on the suspensionIndividual suspended must be given an opportunity to present a defenseThe Committee may call a special meeting to consider a violation of the following:Federal Credit Union ActRules and RegulationsCharterBylawsAny practice considered unsafe or unauthorized
13 Responsibilities In Summary Responsibilities are to ensure the policies and control procedures are sufficient to safeguard against error, conflict of interest, self dealing, and fraud.
14 Expectations of the Regulator An Active Supervisory CommitteeFamiliar with the FCU Act, Bylaws, and Rules and RegulationsUnderstanding of accounting, auditing, and internal controlsCoordinates annual audit and member account verificationDevelopment of an audit plan tailored to your credit union
15 Types of Audits Supervisory Committee Audit (agreed-upon procedures) Balance sheet auditFull opinion auditReport on internal controls related to the preparation of the call report
16 Supervisory Committee Audit NCUA has detailed minimum proceduresThese are MINIMUMS - Consider additional proceduresSample methods and size need to be consideredCoordination of verification of accountsSupervisory Committee is responsible for an effective audit, and must be in charge of the audit processSign engagement letter, select auditor, report from auditor
17 Opinion Audits Highest level of audit coverage Higher costs due to: Risk Assessment StandardsPreparation of financial statements and other related reportsMore audit proceduresMore professional standards, which require more procedures, tests, and documentation
18 Member Account Verifications Part 715.8 MethodologyControlled Verification of 100% of member accountsStatistical MethodNon-statistical Method – Option under an Opinion AuditIf performed by one independent person licensed by the stateSufficient accounts in both scope and numberAdditional procedures to be performed if confirmation evidence is not alone sufficientDocumentation of the sampling procedures used and their consistency with GAAS
19 Member Account Verifications Part 715.8 Easiest and most efficient – 100% member statement messageStatement Message“America’s Best Credit Union’s Supervisory Committee has engaged Moss Adams LLP CPAs to conduct a verification of member accounts. As a part of the verification, please review your account information on this enclosed statement, and should there be any difference, please provide a written response indicating the difference to Moss Adams LLP at Address, Seattle, WA 99XXX.”
20 Member Account Verifications Part 715.8 Other ConsiderationsFocus on completeness of membership populationConsideration of no-mail accountsPrint suppressedConsideration of E-statement accountsReconciliation of population of number of members to the number of statements issuedControl over “non-deliverable” mail returned statementsRetain documentation until the next verification is complete
21 Supervisory Committee Tasks The Committee should perform the following tasks:Follow-up on weaknesses or issues identified in audits or examinations and then monitor resolutionReview internal controlsWork with internal and external auditorsMeeting with examinersResearch member complaintsComplete other recommended proceduresOther recommended procedures – discuss in work plan section
22 Supervisory Committee Work Documentation Documentation of Committee WorkHold regular Supervisory Committee meetingsDocument meeting and work performed in minutesFollow your work plan and document when it variesWhen performing testing in your plan, document what was tested and the resultsReport results of audit and Committee work to the BoardDiscuss findings with management, for resolution of findingsFailure of staff to follow plans, policies and procedures established by the BoardInsufficient policies and or procedures
23 The Oversight Checklist The SC engages in an open transparent relationship with the chief audit executive (generally internal auditor)The SC reviews and approves the internal audit charter annuallyAs a result of the discussions with the CAE, the SC has a clear understanding of the strengths and weaknesses of the credit union’s internal control and risk management systems
24 The Oversight Checklist Internal audit activity is sufficiently resourced with competent objective professionals to carry out the audit plan, which has been reviewed and approved by the Supervisory CommitteeInternal audit activity is empowered to be independent by its appropriate reporting relationships to executive management and the Supervisory Committee
25 The Oversight Checklist The SC addresses with the CAE all issues related to internal audit independence and objectivityThe internal audit activity is quality oriented and has in place a Quality Assurance and Improvement ProgramThe SC meets regularly with the CEO about the performance and improvement of the CAE and the internal audit activity
26 The Oversight Checklist Internal audit reports are actionable and audit recommendations are successfully implemented by managementThe Supervisory Committee meets periodically with the CAE without the presence of management