Thursday, December 26, 2019

OIG Examines Joint Examination Process with State CU Regulators

The National Credit Union Administration (NCUA) Office of Inspector General (OIG) conducted an audit to assess the NCUA’s joint examination process with state supervisory authorities (SSAs).

The report found NCUA provides shared oversight of federally insured state-chartered credit unions (FISCUs) and that the NCUA effectively monitors FISCUs using off-site monitoring tools. However, the OIG determined there are aspects of the joint examination process with the SSAs that need improvement.

The OIG found that NCUA’s regional offices did not have updated operating agreements with each individual SSA that defined roles and responsibilities for joint on-site examinations of FISCUs. The OIG determined that NCUA had 18 signed operating agreements on file and 11 unsigned operating agreements on file. There were no operating agreement on file with 16 SSAs. Five state do not have FISCUs. The OIC concludes that because NCUA did not having updated and useable operating agreements with each SSA, there could be confusion regarding roles and responsibilities during joint on-site examinations. The OIG concluded that having an executed operating agreement in place would help bring consistency to the working relationship and across the joint examination process.

The OIG also determined supervisory examiners did not consistently document their decisions on follow-up actions recommended by examiners after completing WCC 26 reviews. OIG believed that it is a prudent and sound practice to consistently document supervisory examiner decisions regarding examiner recommendations. Doing so would ensure that examiners’ supervisory concerns would be consistently communicated and addressed.

The OIG recommended that NCUA management create a formal process to capture supervisory examiner decisions regarding recommended follow-up actions taken or not taken from work classification code 26 reviews to ensure concerns identified by examiners are properly documented. NCUA management agreed with the recommendation and indicated they will implement a formal process that addresses the recommendation by December 31, 2020.

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