Introducing Audit Link

1. Introducing Audit Link An Xtend and cuasterisk Collaboration January 10, 2008 Presented by: Jim Vilker, Manager cuasterisk.com Scott Collins, Xtend President

2. Agenda • A Call to Action • The X’s and O’s • Execution Team • Resources/Tools • Processes • Introducing MNAUDT • 2008 Pricing and Rollout Plan • Future direction

3. A Call to Action • Does it fit the Xtend “opportunity profile”? • Are our credit unions demanding it? • Do we have the skills to succeed? • Do we have the tools to execute? • Can we establish DISRUPTIVE PRICING? ‘YES’ to all four means WE WILL BE IN THE BUSINESS

4. Are Credit Unions Demanding It? • CU*Answers clients have been asking for it for years (Compliance is eating me alive…it is 80% of my time!) • Discussed at all three CEO Strategies events • Identified by filene Research Institute as the number one area for credit unions to cooperate

5. Do We Have the Skills to Succeed? • In order to succeed, we would need to assign/hire/contract a minimum of the following skill sets: • Someone with a history as an “Examiner” • An experienced legal counsel on retainer • An effective support staff as the business unit grows

6. Do We Have the Tools to Execute? • Build, Exploit, and/or Buy • 2007 Leadership Conference hinted at CU*BASE enhancements • Plethora of online resources exists • Critical fee services must be identified and included in Business Plan

7. Can We Establish Disruptive Pricing? • Our goal, as always, is to establish pricing that is SIGNIFICANTLY lower than 3rd party competition and represents an attractive alternative for out-tasking in our market space

8. A Call to ActionThe Opportunity Exists… • To provide a centralized focus for a vital area of the credit union operations • To provide a proactive approach to compliance and auditing vs. reacting to regulators LOA’s • To provide a forum for credit union audit personnel to communicate and share ideas • To act as a catalyst for future CU*BASE enhancements(e.g. Bookkeeping, Member Reach, Xtension) Shared Digital Intelligence so all our credit unions can benefit

9. The X’s and O’s Building an Execution Team… • Scott Collins – Resource deployment, marketing Building the support team • SRS Audit Staff – Daily tasks, CU communication A proven track record of efficiency and effectiveness • Jim Vilker – lead consultant, business development Leveraging his passion for compliance Not to mention a cuasterisk network of partners developing a parallel skill set

10. The X’s and O’sBuilding a Foundation… • Work Done To-Date • Leadership buy-in – overall vision reviewed with Xtend Board of Directors • Develop Business Plan – draft completed for review with Xtend and CU*Answers Boards • Define scope of service – tasks have been outlined and published • Draft contract – currently being reviewed by attorney • Address liability coverage – CUNA underwriter reviewing business processes and existing coverage

11. The X’s and O’sInventorying the Resources and Tools… • CU*BASE and new functionality • FFIEC and NCUA examination procedures • Federal Reserve web site for regulations and updates • Sheshunoff • NAFCU’s Compliance expert website and documentation • GAAP • Generally Accepted Auditing Procedures • Harland Financial Services compliance campus

12. The X’s and O’sDefining the Scope of Services… • The Audit Link Service will start out with three major components: • Consultative – “Getting to Know Your Credit Union” • Monitoring/Verification – “Doing the Work” • Ala Carte/CU-specific Requirements – “Ad Hoc Services”

13. The X’s and O’sGetting to Know Your Credit Union… • Prior to initial contact we will: • Review policies • Review CU*BASE configurations • Review Auditor and/or Examiner findings • Document recommended changes • During first onsite meeting we will: • Review recommended changes • Update configurations • Identify training requirements

14. The X’s and O’sGetting to Know Your Credit Union… • Initial Policy and Procedure Review includes: • Reg D • BSA • TIS • Denial notices • Reg CC • Reg E • Reg Z • ECOA • Employee security configurations/dual control …From Start

15. …to Finish • Interactively understanding your procedures and policies • Tuning up • Policies for compliance • Documenting your procedures • Updating configurations • Developing efficient processes to monitor activity in accordance with credit union policy • Verifying the work on a periodic basis

16. The X’s and O’sDoing the Work… • SRS monitors and verifies the following activities: • BSA reports and on-line update • Reg D violations • Dormancy • File maintenance logs • Wire transfer logs • Stale dated checks • Reversals of cash and checks • SAR reports • OFAC scans

17. The X’s and O’sAd Hoc Xtend Services… • Present at regulatory and auditor exit interview • Staff training • ECOA • BSA, CIP, Data Security • Other training in conjunction with CU*Answers education department • Suspense and settlement reconciliation review provided by SRS personnel • Marketing/Call Center Best Practices review

18. The X’s and O’sAd Hoc Partner Services… • Loan review and consulting services (performed by Lender VP) • Data Security review (performed by WescoNet) • Disaster Recovery Review (coorindated by WescoNet) • Strategic services (provided by CU*Answers Executive team)

19. Introducing MNAUDTHow We Will Get the Work Done… • A powerful auditor’s workbench added to your CU*BASE tool set • Centralizes all automated features for audit purposes • Identifies the daily work functions of an auditor • Expected to expand as we get further into the business

20. Additional CU*BASE Functionality • Introducing Audit Tracker • Creates a conversation record related to member activities on the member record • BSA • OFAC • FIDM • Suspend from dormancy • Gives auditors a comment pallet to describe what actions were taken based upon activity

21. Additional CU*BASE Functionality • Introducing Audit Tracker (spring release)

22. Training • Discussions are under way with Harland to add additional compliance-related classes the CU*Answers Online Campus • Reg 100 – The Bank Secrecy Act • Reg 106 – Truth in Savings Act • Reg 107 – USA Patriot Act • Reg 108 – Right to Financial Privacy • Reg 114 – Office of Foreign Asset Control

23. 2008 Rollout Plan • Ramp up plan calls for February start date • Review focus group input related to tasks proposed to be performed • Chose beta by the end of January • Complete contract and credit union risk assessment by mid-February • Schedule first contact with beta by end of February

24. Pricing • Consulting Phase – “Getting to Know Your Credit Union” • Estimated One Time Charge = $2,500 (plus T&E) • Ongoing Services – “Doing the Work” • Targeting $200/week • Ad Hoc Services • Will be bid on an individual basis

25. Future Direction • Development of risk assessment templates • Newsletter with “best practices” and “how-to’s” on system processes and reports • Audit Link website including: • RSS feeds from all major regulatory bodies • Automated alert capabilities on regulatory changes • Sharing of policies and procedures • Focus group Blog

26. Future Direction • Audit Link Focus Group with defined goals and meeting schedules • Meeting with regulators and auditors on new and upcoming hot buttons • CU*BASE changes based upon requests of the Audit Link personnel and Focus Group • Creating greater efficiencies • Re-organizing multiple features of the system yielding a true audit-menu functionality • Defining best practices through on-line help and streamlining all supporting documentation

27. Network Partnership • CU*NW • Committed to the offering to use it as a business plan to move forward with their own resources • Potentially share resources across the network

28. Q & A • Does the task list hit the mark? • Is the service affordable? • What other assistance do you require? • Etc.

29. Super Bowl Special • First six clients will receive a 50% discount on Consulting (“Getting to Know You”) one time charge • Beta Clients must commit to service by March 1st • Deploy one beta per month (February through July) Investing Together as we Learn Together

30. Wrap Up We will understand through this process how to set up an internal audit department Do you? What can you provide this new CUSO initiative to make sure we succeed and all partners will benefit?