NCUA proposes rule affecting CUSO financial audits

ALEXANDRIA, Va. (3/18/05)--The National Credit Union Administration (NCUA) board issued a proposal Thursday to amend its credit union service organization (CUSO) regulation to allow a wholly owned CUSO to avoid the requirement to obtain a separate financial statement audit from a certified public accountant (CPA), as long as the CUSO's statement is included in the consolidated financial statement of the parent federal credit union.

NCUA's current rule states that prior to investing in or lending to a CUSO, a federal credit union must obtain a written commitment from the CUSO that the CUSO will secure an annual opinion audit of its financial statements from a CPA in accordance with generally accepted accounting principles (GAAP). Although NCUA does not directly regulate CUSOs, it has full access to CUSO financial information due to its oversight of the parent federal credit union.

While GAAP would also allow a credit union that is the majority owner of a CUSO to procure a consolidated audit, NCUA is limiting the proposed amendment to wholly owned CUSOs. The agency's reasoning is that this step will help ensure that full disclosure of potential risks is available to prospective minority investors in the CUSO.

Many small and mid-sized credit unions rely on CUSOs to provide services they could not offer through their credit unions. In fact, nearly 5,600 credit unions--more than 60% of all credit unions--have at least a minority stake in a CUSO. As of the June 30, 2004 Call Report, there are 588 wholly owned CUSOs.

The proposal will be published in the Federal Register in the next week.

  Resource Link
NCUA Proposed Rule


More Washington

Copyright © 2012 Credit Union National Association