Compliance Blog

Posted by Anthony Demangone

In what appears to be a trend, NCUA's Office of Inspector General has released two reports that deserve your attention.  

OIG Capping Report.   This report summarizes all of the material loss reviews that the OIG has issued this year, summarizing trends that appear throughout the credit union failures.  This report concludes that there are three main reasons why the 10 credit unions reviewed by the OIG failed. Those reasons would be: 1) poor strategic planning and decision making; 2) inadequate oversight (internal controls and policies); and 3) fraud.  If I were a betting man, I'd lay a wager that NCUA examiners will poke around credit unions in these three areas a bit more closely moving forward.  The report is a good read, and it might be something to share with senior management and your board.

The OIG Semi-Annual Report to Congress.  This is another broadly-written report that summarizes the efforts of the OIG from April 1 to September 30, 2010. The report also gives a nice overview of what happened at NCUA. I learned something new from this report. The OIG office reviewed more than the 10 credit unions that were the subject of material loss reviews.  In fact, they conducted 27 "limited reviews" of credit unions that failed and caused the NCUSIF less than $25 million in losses. On page 24 of the report, the OIG lists the principal reasons for each of the "smaller" failures. At least seven failures were due to some level of fraud.  In addition, poor management was a very common reason.  This report is worth sharing. 

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My conclusion?  If the OIG found that these problems caused credit union failures, NCUA examiners very well may focus their efforts to uncover weak management, weak internal controls, and situations that entice, or fail to detect, fraud.