Working on work plans

1. Working on work plans

2. Supervisory Committee Work Plans “The better the planning, the better the result!” • Work plans provide an organized, systematic process • Enhanced Documentation for Regulator Oversight

3. Supervisory Committee Work Plans Questions: • How many have a work plan? • How many utilize internal auditors or other employees to help fulfill audits?

4. Supervisory Committee Work Plans Plan Considerations: • How much volunteer time does the Committee have? • Is there an Internal auditor • Utilize employees • Process owners? • What are risks facing the Credit Union? • Results of examinations and audits • What procedures has the Committee performed in the past?

5. Risk Categories for Credit Unions • Credit – nonpayment – ALLL – TDRs -Delinquency • Compliance – (noncompliance with laws and regulations) • Liquidity – (insufficient cash resources) • Interest rates – (loss due to changes in interest rates) • Strategic – (poor business decisions) • Transaction – (transactions are not processed completely or accurately) • Reputation – (loss of credibility or standing)

6. 2013 NCUA Supervisory Focus – 13-CU-01 • Operational Risk • Technology (controls over adopting new technology – remote deposit, mobile banking, social media, on-line banking) • Internal Controls • Balance Sheet Management • Interest Rate and Liquidity Risk (contingency funding) • Concentration Risk • Less Established Products (expertise and risk management) • NCUA – Clarity • Member Business Lending • Credit Ratings (assessment of securities and money market) • Troubled Debt Restructures

7. Typical Supervisory Committee Procedures • New member eligibility verification • Verify new loans with members • Thank you letters • Employee account review • Review dormant accounts • Closed accounts

8. Typical Supervisory Committee Procedures • Surprise cash counts – teller controls • Annual testing of market values of investments to an independent source – Part 703 of Rules and Regulations • Review of bank account reconciliations • Review of Risk Assessments – Entity Level, Security Program, IT

9. Typical Supervisory Committee Procedures • Loan reviews • System reports • Utilize internal employees for increased knowledge • Review charged-off loans • Review ALLL – perform validation • Oversee Internal Audit and the internal audit plan • Engage and monitor results of external auditors • Follow up on findings from audits/exams

10. Typical Supervisory Committee Procedures • Expense account review • Review file maintenance reports • Review new products • Review financial results/ financial statements • Talk with auditor on critical areas you would like addressed

11. Considerations for Work Plans • Consider utilizing management to perform procedures with Committee oversight • Public institutions utilize process owners • Consider whether they have influence over the control • Spend time with management personnel to understand processes before you test • Very important to understand it first

12. Considerations for Work Plans • Document results of the work performed • Evaluate the quality of testing from the number of items tested • Look for “systematic” problems when evaluating errors • Maintain minutes and report to the Board

13. Considerations for Work Plans • We have included basic sample work plans in your manual on the usb drive • Includes sample testing forms for numerous areas

14. Considerations for Work Plans • We have included basic sample work plans in your manual on the usb drive • Includes sample testing forms for numerous areas

16. Questions Scott Ewing, Credit Union Consultant Moss Adams LLP scott.ewing@mossadams.com