By Pamela Blevins, Remote Financial Services Manager, Credit Union Resources, Inc.
Many supervisory committees rely on their hired auditors to perform many of these tasks during their annual audit, which could consequently leave a potential liability for issues to arise and remain undiscovered until the next annual audit.
What would this mean for your credit union? Imagine your credit union has had their annual audit and it was discovered that a system error has occurred. Your member has been making their regular monthly payments for several months. However, due to a data processing error, none of those payments were applied to interest. The member is not delinquent, but their accrued interest is now out of control.
Now that this error has been discovered, your credit union will have to recalculate loan payments, and more importantly you would have to inform your member of the error and explain why this system error continued for so long. If the supervisory committee had been reviewing the Accrued Interest Greater than Payment Report each month and knew what to look for, this would have been discovered and corrected long before your annual audit. This would have saved your credit union time and ensured the continued confidence of your member. The best way to remedy these types of situations is for the supervisory committee to become active in performing these tasks monthly or to hire an independent auditor to undertake these responsibilities that would specialize in knowing what to look for.
These tasks include, but are not limited to:
Now that your watchdog knows what is expected, it is time to determine the best course of action and develop your action plan. Does your supervisory committee require additional training on what to look for when performing these tasks or would it be more cost effective to hire an independent auditor who specializes in these types of reviews? Should you hire an in-house auditor who can perform many ongoing reviews or should you outsource these tasks and share the expense with other credit unions?
These are decisions your credit union needs to consider when developing your action plan. As Benjamin Franklin once said, “If you fail to plan, you are planning to fail.”