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NCUA OIG Examiners could have eased Certified FCU losses
ALEXANDRIA, Va. (9/12/11)--National Credit Union Administration (NCUA) examiners “could have prevented or reduced” losses to the National Credit Union Share Insurance Fund that were caused when Certified FCU failed in 2010 if “swift and appropriate administrative remedies” had been taken, the NCUA’s Office of the Inspector General (OIG) has determined. Certified FCU, which was based in Commerce, Calif., was closed due to its declining financial condition in May 2010. The credit union held $37.6 million in assets from 8,850 members when it was liquidated. The credit union’s members and assets were assumed by Vons FCU. An NCUA investigation of Certified’s books found “serious internal control weaknesses, including inadequate segregation of duties and untrained accounting staff.” These weaknesses “allowed the CEO to override internal controls, prepare erroneous account reconciliations from the general ledger to the subsidiary ledgers, and inaccurately report financial results,” resulting in the credit union overstating its financial condition. The credit union, according to the NCUA, also failed to properly book some loan sales, “erroneously recording the offsetting credit to income, rather than reducing loans receivable.” This error resulted in $8.8 million in losses for the credit union. The OIG said that the NCUA examiners’ and Region V management’s “failure to take decisive action” permitted the credit union’s CEO “to breach his fiduciary duty and remain in his position until he resigned in May 2010.” The NCUA said it is implementing a National Supervision Policy Manual and has improved some review processes to deal with these issues in the future. The agency also noted it has expanded its examiner procedures to “require examiners ensure amounts reported on the general ledger for all material accounts such as loans, member deposits, cash, and investments, reconcile to subsidiary ledgers” and the credit union’s call report. For the full OIG report, use the resource link.
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