By: Rick Goluszka, Regional Director
The Supervisory Committee of a credit union has many important jobs. Many of those jobs are never seen by the membership, such as, audits of loans, accuracy of records, cash counts, etc. However, member account verification is very visible to the membership. Each year, the Supervisory Committee must verify a reasonable percentage of the members’ share and loan accounts. Every two years 100% of the members’ accounts need to be verified. Many Supervisory Committees use outside auditors for this role. In fact, this service is often included in outside audit contracts. However, many small credit union Supervisory Committees perform the audit themselves.
The following are controls used to complete the member account verification process:
• The verification must be on a surprise basis;
• All work is to be done by the Supervisory Committee. Once the list of accounts is received, all CU staff and other directors should not be involved;
• A general notice of the verification is to be publicized to the membership;
• All member verification responses and communications must go to the Supervisory Committee or its agents;
• The Supervisory Committee must maintain all verification records;
• Verifications can be a positive or negative response. A positive response requires a direct reply by the member confirming the correctness of their balances. A negative would require a response only if the member’s opinion was that the information was incorrect; and
• All discrepancies reported should be resolved, and if known, the reason for the error must be reported to the Board of Directors, along with the results of the audit.
Account types requiring positive verification:
• Inactive or dormant accounts;
• Accounts with recent activity following a period of 3 years of dormancy;
• Accounts that show unusually large share withdrawals;
• Accounts that have delinquent loans;
• Share & loan accounts closed or charged off since the last verification was conducted;
• Accounts where negative responses are returned due to an inaccurate address; and
• Accounts with unusual or significant activity should be positively verified to confirm the integrity of the negative verification requests.
A positive verification means a response, signed by the member to agree or disagree with the balance reported. Members should be provided with a stamped, self-addressed envelope to expedite the process. If a member does not respond within a reasonable amount of time (e.g. 2 weeks), a second request must be sent. If there is still no response, a third request can be sent, or the Supervisory Committee can use other means to confirm the balances are correct.
Your ICUL Regional Director is available to conduct training and has additional resources (checklists & sample spreadsheets) available to assist the Supervisory Committee.