NCUA issued a final rule at their September meeting that amends its regulations for a federally insured credit union (FICU) to obtain an annual supervisory committee audit. The revisions (effective in January 2020) update outdated provisions and provide additional flexibility to FICUs (with less than $500 million in assets) while continuing to ensure appropriate financial oversight.
A federal credit union’s (FCU’s) supervisory committee makes an annual audit, submits a report of that audit to the board of directors, and presents a summary of the report to the members at the next annual meeting of the credit union. In addition, the supervisory committee is required to make supplementary audits as it deems necessary. State-chartered credit unions in Montana also follow NCUA guidelines as set forth in M.C.A. 32-3-417(2).
FCUs with total assets of less than $500 million but more than $10 million that elect not to voluntarily obtain a financial statement audit currently have three options available:
- a Balance Sheet audit,
- a Report on Examination of Internal Controls over Call Reporting, or
- an audit performed in accordance with NCUA’s Supervisory Committee Guide.
The rule change eliminates the first two of the audit types in section 715.7 since they are so rarely used. It also removes the NCUA’s Supervisory Committee Guide and replaces it with a new Appendix to Part 715 covering minimum supervisory committee audit requirements. NCUA plans to publish reference materials on audit procedures to provide up-to-date resources and greater flexibility for credit unions as they conducting audits under the new Appendix.
Under the final rule, a credit union that is not required to obtain a financial statement can fulfill its supervisory committee requirements by obtaining an audit that is performed by the supervisory committee, its internal auditor, or any other qualified person who satisfies the minimum requirements in the new Part 715 Appendix. We will update you with more details once the new Appendix is available.