ALEXANDRIA, Va. (7/14/11)--Weak management and inaccurate financial reporting on behalf of the credit union helped cause the collapse of Salt Lake City, Utah’s Beehive CU, the National Credit Union Administration’s (NCUA) Office of the Inspector General (OIG) has reported. The $145 million in assets, 18,000 member credit union was acquired by Security Service FCU in December of 2010. The OIG report said that the credit union failed “because management did not effectively manage the risks, policies, operations, and financial position of the credit union, nor did they demonstrate an understanding of the risks inherent in their strategic decisions. In addition, both the Board and management lacked sufficient and responsive action to address repeat findings raised by external auditors and examiners related to concentrations, Allowance for Loan and Lease Losses (ALLL) methodology, and asset quality.” The report also pinned the failure on questionable business decisions, including the decision to go forward with a planned$3 million branch expansion and risky lending programs. The credit union also spent on new computer and telecommunications systems as the financial status of the credit union, and the nation as a whole, grew weaker. The credit union’s board did not address its poor financial condition, and management did nothing to address declining loan originations and increasing loan delinquencies, the OIG added. Lax supervision by the NCUA and state regulators also contributed to the collapse. The OIG found that the regulators did not make a single supervisory contact between March of 2006 and November of 2008. This lapse “prevented examiners from detecting the deficiencies and curtailing the risky lending practices that eventually led to Beehive’s insolvency,” the OIG report said. The OIG said that recent NCUA actions to schedule inspections of credit unions with over $250 million in assets on a yearly basis "should help prevent the type of supervision gap that occurred with Beehive from occurring in the future." Beehive pursued a thrift charter conversion during that time period, but in 2009 said it abandoned its conversion plans, saying it "sensed" that the country's economic turmoil would make federal regulators reluctant to approve a new bank charter. For the full report, use the resource link.