IG Report: G.I.C. FCU Failed due to Fraud

NCUA's Office of the Inspector General (IG) determined that fraud led to the failure of G.I.C. Federal Credit Union of Euclid, Ohio.

According to the Material Loss Review, the failure of G.I.C. resulted in an estimated loss of $7 million to the National Credit Union Share Insurance Fund.

The IG report found that the credit union overstated its assets by $8.1 million, primarily through the misstatement of certificates of deposit held as investments and cash held on deposit.

The report noted that several factors contributed to the fraud going undetected, including

• senior management displaying a lack of integrity and not managing the credit union in the best interest of its members;

• supervisory committee failing to obtain supervisory committee audits for three consecutive fiscal years; and

• the Board of Directors of the credit union failing to exercise its responsibilities.

The IG report pointed out that only federal credit unions with $500 million or more in total assets are required to have a financial statement audit performed by a licensed independent auditor. However, the report makes the observation that "smaller credit unions ... often have less sophisticated supervisory committees, Boards of Directors, and/or management." The report suggested that NCUA management review various Material Loss Reviews and consult with various stakeholders whether the $500 million asset threshold is too high.

Read the Material Loss Review.