While credit unions were untouched by recent accounting and corporate
scandals many have wisely taken a cautionary lesson and have scrutinized
the roles and responsibilities of auditors, credit union boards
and supervisory committees. This openness is welcomed by all parties
it seems, and may help to preserve the credit union industry's white
Linda Boring, VP of administrative services at Community America
Credit Union, Lenexa, Kansas ($1.3B- assets) summed up that feeling
in a recent Callahan and Associates Webinar on the subject by saying,
"Given the current environment, we felt it was something we
wanted to do." The something was change auditors -after four
years with the same one- not because "it was a broken relationship
and needed to be fixed," but rather to add zest to the new
relationship and management's oversight and procedures.
CACU stipulated a three-year term and required separation of auditing
and consulting services. They considered the firm's auditing team
experience, its seniority; time needed for transition and price.
From RFP to selection it took just three months, said Boring.
George Poitou, chief operating officer and Bob Toohey, chairman
of the supervisory committee of SCE Federal Credit Union, El Monte,
California ($350M-assets) noted another important reason to reassess
the auditing relationship: the increasing complexity of credit union
operations. "We're a community charter with a lot of SEGs,
and we plan to grow through branching and through CUSOs, so we wanted
a firm that saw the relationship as an ongoing process rather than
a static one," Toohey said.
Critical to the selection process is allowing sufficient time for
both CU staff and audit firms to discuss findings with management
and later, for management to respond to those findings. That helps
the Supervisory Committee to make an informed decision.
It was mostly music to a CPA's ears, as Alan DeLeon, a CPA with
DeLeon & Stang CPA in Gaithersburg, Maryland suggested that
credit unions consider adopting some provisions of Sarbanes-Oxley,
Congress' response to the scandals, which pertains only to publicly
held companies. Credit unions should not use the same firm for internal
and external audit services either, he agreed.
Clarifying the role of the Supervisory Committee is essential and
its members (appointed by the CU board of directors) must be highly
qualified, as they hire and fire the external auditor, DeLeon said.
They must be free of inside pressure and able to meet the auditor
outside the presence of CU management.
When, and how often auditors should be rotated varies from a short
3-years to a long 9-years, but DeLeon stressed that changing too
often can be disruptive. Never changing is not an option, however,
and while NCUA has no set rotation policy, they look for a reasonable
The true value of the CPA firm extends beyond the numbers, he said,
also serving as a "sounding board" and fulfilling the
role of advisor/counselor.