NCUA Requirements - 5 - Supervisory Committee Duties and Responsibilities

Question 1

In FCUs who appoints the supervisory committee and determines the number of committee members and their term of service?

Answer 1

In an FCU, the board of directors appoints the supervisory committee and determines the number of members and their term of service. (Page 5-2)

Question 2

There are two requirements that must be met to serve on the supervisory committee. One is that the person be bondable. What is the other requirement?

Answer 2

To be a supervisory committee member, the person must be a member of the credit union and be bondable. (Page 5-3)

Question 3

What are the two basic responsibilities of the supervisory committee?

Answer 3

The two basic responsibilities for the supervisory committee are: (1) to ensure that the financial statements accurately and fairly present the financial condition of the credit union; and (2) to ensure that management practices and policies safeguard members’ assets. (Page 5-4)

Question 4

The supervisory committee is responsible for following up with management to assure that problems identified in the audit report are corrected. True or False

Answer 4

True. (Page 5-12)

Question 5

List four of the responsibilities of the supervisory committee.

Answer 5

Supervisory Committee duties include (Page 5-6)
* Conduct an annual audit
* Submit audit report to board and summary to members at annual meeting
* Ensure credit union properly completes and files call reports
* Verify internal controls
* Meet with the examiner
* Verify member savings and loan balances at least once every two years
* Research formal member complaints
* Suspend directors, officers, or credit committee members for cause
* Call special membership meetings for cause
* Request board approval for administrative and auditing expenses
* Maintain committee records

Question 6

How often does the Federal Credit Union Act require the supervisory committee to verify the passbooks and accounts of credit union members?

Answer 6

The Federal Credit Union Act states that the “supervisory committee shall cause the passbooks and accounts of the members to be verified with the records of the
treasurer from time to time and not less frequently than once every two years.” (Page 5-12)

Question 7

The three methods NCUA allows for verifying accounts are listed below. Give a brief description of each method.
Controlled verification
Statistical method
Nonstatistical method

Answer 7

NCUA’s Rules and Regulations (Section 715.8(b)) allows three methods for verifying accounts: (1) controlled verification — includes 100% of members’ share and loan accounts; (2) statistical method — includes a sampling of
accounts that either provides a random sampling which is representative of the population from which it was selected, or sufficient accounts in both number and scope on which to base conclusions concerning management’s financial
reporting objectives; and (3) nonstatistical method — a sampling that can only be done by an independent certified public accountant (CPA), choosing sampling methods consistent with generally accepted auditing standards
(GAAS), with documentation recorded and available to NCUA upon request. (Page 5-13)

Question 8

NCUA’s Rules and Regulations require the supervisory committee to retain records of each verification of member’s accounts for six months. True or False

Answer 8

False. (Page 5-13)