Areti Moularas, Senior Manager
WHAT’S MY
ROLE?
The material appearing in this presentation is for informational purposes
only and should not be construed as advice of any kind, including, without
limitation, legal, accounting, or investment advice. This information is not
intended to create, and receipt does not constitute, a legal relationship,
including, but not limited to, an accountant-client relationship. Although
this information may have been prepared by professionals, it should not be
used as a substitute for professional services. If legal, accounting,
investment, or other professional advice is required, the services of a
professional should be sought.
Where Are Duties Promulgated?
• Federal Credit Union Bylaws
• Federal Credit Union Act
• Part 715 – NCUA Rules and Regulations “Supervisory
Committee Audits and Verifications”
Number of Committee Members
• The number of members is determined by the Board of
Directors
• Minimum number of members is THREE. The maximum is
FIVE.
Terms of Service
• The term is determined by the Board
• The terms are one, two, or three years
• All terms must be for the same period
• Terms should be staggered to provide continuity of the
committee
• Regular terms expire after the first Board meeting after the
annual meeting
Committee Leadership
• Committee members select a Chairperson and Secretary
• Chairperson and Secretary may be the same person
• The Secretary must maintain a record of actions taken by
the committee
• Minutes of meetings should be kept and summarize
procedures performed
• Credit Union information is confidential
Who Can Be on The Committee?
• Must be a member of the Credit Union
• Must be bondable by the Surety
• Employees and members of the Credit Committee are
not eligible to be members
Goals of the Supervisory Committee
The Supervisory Committee has two general goals:
1. Management’s financial reporting objectives have
been met
2. Management's practices and procedures safeguard
members’ assets
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.
Actions of the Supervisory Committee
• Audit – Once a calendar year, the Committee must have an
audit completed
• At least once every two years, your Committee must
perform a member verification
 California State Chartered CU is required annually
• Your Committee must ensure that the Board is
safeguarding assets and that management complies with
their policies and plans
• The Supervisory Committee must report to members at
the annual meeting
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 suspension
 Individual suspended must be given an opportunity to
present a defense
• The Committee may call a special meeting to consider a
violation of the following:
 Federal Credit Union Act
 Rules and Regulations
 Charter
 Bylaws
 Any practice considered unsafe or unauthorized
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.
Expectations of the Regulator
• An Active Supervisory Committee
 Familiar with the FCU Act, Bylaws, and Rules and
Regulations
 Understanding of accounting, auditing, and internal
controls
 Coordinates annual audit and member account
verification
 Development of an audit plan tailored to your credit
union
Types of Audits
• Supervisory Committee Audit (agreed-upon procedures)
• Balance sheet audit
• Full opinion audit
• Report on internal controls related to the preparation of
the call report
Supervisory Committee Audit
• NCUA has detailed minimum procedures
• These are MINIMUMS - Consider additional procedures
• Sample methods and size need to be considered
• Coordination of verification of accounts
• Supervisory Committee is responsible for an effective
audit, and must be in charge of the audit process
 Sign engagement letter, select auditor, report from auditor
Opinion Audits
• Highest level of audit coverage
• Higher costs due to:
 Risk Assessment Standards
 Preparation of financial statements and other related
reports
 More audit procedures
 More professional standards, which require more
procedures, tests, and documentation
Member Account Verifications Part 715.8
• Methodology
 Controlled Verification of 100% of member accounts
 Statistical Method
 Non-statistical Method – Option under an Opinion Audit
o
If performed by one independent person licensed by the
state
o
Sufficient accounts in both scope and number
o
Additional procedures to be performed if confirmation
evidence is not alone sufficient
o
Documentation of the sampling procedures used and their
consistency with GAAS
Member Account Verifications Part 715.8
• Easiest and most efficient – 100% member statement
message
• Statement 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.”
Member Account Verifications Part 715.8
•
Other Considerations
 Focus on completeness of membership population
 Consideration of no-mail accounts
o
Print suppressed
 Consideration of E-statement accounts
 Reconciliation of population of number of members to
the number of statements issued
 Control over “non-deliverable” mail returned statements
• Retain documentation until the next verification is complete
Supervisory Committee Tasks
• The Committee should perform the following tasks:
 Follow-up on weaknesses or issues identified in audits
or examinations and then monitor resolution
 Review internal controls
 Work with internal and external auditors
 Meeting with examiners
 Research member complaints
 Complete other recommended procedures
Supervisory Committee Work Documentation
• Documentation of Committee Work
 Hold regular Supervisory Committee meetings
 Document meeting and work performed in minutes
 Follow your work plan and document when it varies
 When performing testing in your plan, document what was
tested and the results
 Report results of audit and Committee work to the Board
 Discuss findings with management, for resolution of findings
o Failure of staff to follow plans, policies and
procedures established by the Board
o Insufficient policies and or procedures
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
annually
• As 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
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 Committee
• Internal audit activity is empowered to be independent by
its appropriate reporting relationships to executive
management and the Supervisory Committee
The Oversight Checklist
• The SC addresses with the CAE all issues related to internal
audit independence and objectivity
• The internal audit activity is quality oriented and has in
place a Quality Assurance and Improvement Program
• The SC meets regularly with the CEO about the
performance and improvement of the CAE and the internal
audit activity
The Oversight Checklist
• Internal audit reports are actionable and audit
recommendations are successfully implemented by
management
• The Supervisory Committee meets periodically with the
CAE without the presence of management
Questions
Areti Moularas
Moss Adams LLP
360.685.2294
Areti.moularas@mossadams.com