Removing Barriers Blog

CUNA Supports NCUA Supervisory Committee Audits Proposal
Posted April 23, 2019 by Chandler Schuette

Today, CUNA filed a letter in support of NCUA’s proposed rule on supervisory committee audits (Part 715), as we believe the proposed changes would make compliance with these requirements less burdensome. Specifically, the proposal would amend NCUA’s regulations governing the responsibilities of a federally insured credit union to obtain an annual supervisory committee audit of the credit union.

Section 715.7 outlines the alternatives a credit union that is not required to obtain a financial statement audit (i.e., a credit union between $10 million and $500 million in assets) may elect to utilize in lieu of obtaining a financial statement audit to fulfill its supervisory committee responsibilities. One such option is to conduct an audit per the Supervisory Committee Guide, which is published by the NCUA. Under the proposal, the option to conduct an audit per the Supervisory Committee Guide would be replaced with the option to conduct the audit to meet certain minimum requirements, which would be incorporated into a proposed new Appendix A to Part 715. The minimum procedures outlined in Appendix A reflect common industry practices for testing accounts and controls over financial institution financial statements. We support this proposed change. We agree with the NCUA that providing a targeted list of minimum procedures to be included in an audit would clarify and simplify the audit process. Credit unions would benefit from only needing to refer to the single page Appendix A, rather than the over 350-page Supervisory Committee Guide, which NCUA accurately notes is “overly specific, burdensome, and outdated.”

Section 715.9 addresses engagement letters a credit union may use to hire a compensated auditor to perform audit functions. The current regulation requires that an engagement letter specify a target date of delivery of written reports “not to exceed 120 days from the date of calendar or fiscal year-end under audit (period covered).” The proposal would replace the 120-day time frame with language that provides greater flexibility. Specifically, the proposed new standard would only require a credit union to specify in the engagement letter a target delivery date that enables the credit union to timely meet its annual audit requirements as provided in § 715.4. We support this proposed change. We agree with the NCUA that this proposed change would enable a credit union to better negotiate the target date for delivery of written reports with the firm it contracts with, and still meet the audit requirements.