Supervisory Committee Duties and Responsibilities

1. Supervisory Committee Duties and Responsibilities Ashley M. Mobley C.U.C.E, B.S.A.C.S., A.A.P. Assistant Vice President Credit Union Auditing & Compliance Experts

2. Overview

4. Organization of a Credit Union Basic Organization Structure

5. Who should be considered to be a member of the Supervisory Committee?

6. Officers of the Supervisory Committee

7. Meetings

8. Attendance at Board Meetings

9. Why call a special meeting?

10. Oversight Powers

11. Expulsion of Supervisory Committee Members

12. Responsibilities of the Committee

13. Supervisory Committees are also known as…

14. Specific Responsibilities of the Supervisory Committee Determine whether: 1. Internal controls are established and effectively maintained in order to achieve the Credit Union’s financial reporting objectives which must be sufficient to satisfy the requirements of the Supervisory Committee audit, verification of members’ accounts, and its additional responsibilities. 2. The Credit Union’s accounting records and financial reports are promptly prepared and accurately reflect operations and results.

15. Specific Responsibilities of the Supervisory Committee Cont. Determine whether: 3. The relevant plans, policies, and control procedures established by the Board of Directors are properly administered. 4. Policies and control procedures are sufficient to safeguard against error, conflict of interest, self-dealing, and fraud.

16. Mandates of the Supervisory Committee

17. What must we do? • At least once every calendar year, complete (or have completed) the Supervisory Committee audit, and provide a report on the audit to the Board of Directors • At least every 2 years, you must conduct (or have conducted) a verification of members’ accounts • Continuously monitor to ensure the Board of Directors is safeguarding assets, and that Management complies with the policies and plans set forth by the Board of Directors • Report to members at the annual meeting

18. Other Things to Do • Continuously review and monitor internal control policies and procedures • Select and cooperate with external auditors, if applicable • Review examination and audit findings and ensure corrective action was taken and documented • Meet with the examiners and auditors as necessary • Research member complaints • Complete other recommended procedures

19. Types of Audits Annual Supervisory Committee audit Quarterly, or interim, audits ACH (Automated Clearing House) Audits OFAC (Office of Foreign Asset Control) scrubs BSA (Bank Secrecy Act) Audits Account Verifications IS & T (Information Systems & Technology) Audits Compliance Reviews Internal Control Reviews

20. Options for Fulfilling § 715.4(a) Federal Charter

21. Options for Fulfilling § 715.4(a) State Charter

22. Interim Audit Procedures

23. Interim Audit Procedures Some of the more commonly completed interim procedures include the following: • Review account activity on the Credit Union’s employees. • Review and test a sample of reconciliations for Federal Reserve, correspondent bank, On-Us, and Corporate Credit Union accounts. • Review activity on suspense and clearing accounts related to the accounts listed above. • Confirm a sample of new loans, new deposit accounts, and/or closed accounts since the last quarterly interim or annual audit. • Review for compliance with the Credit Union’s loan policy a sample of new loans granted since the last quarterly interim or annual audit. • Review a selection of file maintenance reports for randomly selected days. • Review procedures for handling negative balance accounts, including timeliness of collection or subsequent write-off. • Review a sample of loan exception reports, including paid ahead loans, non-amortizing loans, open-end loans with balances greater than established credit limits, closed end loans with balances greater than original loan amount, and/or loans by interest rate. • Test classification of delinquent status on a sample of loans classified as delinquent since the last quarterly interim or annual audit, including a review for compliance with the Credit Union’s collection policy. • Review a sample of delinquent loans and document collection efforts relative to the collection policy. • Review for compliance with the Credit Union’s charge-off policy a sample of loans charged-off since the last quarterly interim or annual audit. • Review corporate expenses and charge card accounts, including compliance with the Credit Union’s written policies. • Confirm activity on dormant or inactive accounts removed from the dormant report since the last annual or interim audit.

24. ACH Audit

25. ACH Audit • Must be performed by December 1 each year in order to be recognized by NACHA. • Credit Union must retain documentation supporting the completion of an audit for 6 years. • The retained documentation must be provided to the National Association upon request. • Audit provisions in Appendix 8 do not prescribe a specific methodology to be used for the completion of an audit, but identify key rule provisions that should be examined during the audit process.

26. OFAC Audit

27. Bank Secrecy Act Compliance Audit

28. Bank Secrecy Act Compliance Audit

29. Verification of Accounts

30. Review of Internal Controls

31. Reporting the Audit Findings

32. Be an Active Supervisory Committee • The Supervisory Committee should be granted access to all of the Credit Union’s records without exception • The Supervisory Committee should adequately document all reviews performed • ALL CREDIT UNION INFORMATION MUST BE KEPT CONFIDENTIAL

33. Questions? Thank You!