Small credit unions claim that a proposal to require expanded audits of their financial statements will cost them more money without benefiting the public.
The Nov. 2 proposal from the National Credit Union Association would require credit unions to report on internal control problems or illegal acts discovered in an audit of their financial statements by either their own supervisory committee or an independent auditor.
The proposed rule would also require credit unions to provide a letter from the supervisory committee and the auditor specifying what will be covered in the audit and to allow the regulator unconditional access to audit examination papers.
The agency received more than 50 letters before the Jan. 2 comment deadline, and the responses appeared divided between large and small credit unions.
"Small credit unions continue struggling with regressive structures with bond costs, league dues, and audit costs," wrote Mel Huey, manager at $3 million-asset BiMart Federal Credit Union, Eugene, Ore., who added that the paperwork and labor involved in complying with the rule would double the cost of auditing his bank.
E.F. Spiering, president at $14 million-asset Oregon Rails Federal Credit Union, Portland, also wrote that his institution's supervisory committee audit costs would double under the proposed rules, and added that any credit union under $50 million in assets would feel similar effects.
The rule does not require institutions to hire an internal auditor, he said. But it brings the agency "one step closer to requiring all credit unions to have an internal auditor on staff."
Frank E. Berrish, president and CEO of $767 million-asset Visions Federal Credit Union, Endicott, N.Y., said providing the agency unlimited access to audit papers would create extra expenses for credit unions. The requirement is also unnecessary, he said.
However, Mr. Berrish said he did agree that formal letters are needed to specify what will be covered in the audit, and warned that the supervisory committee is responsible for any aspects the auditor does not cover.
Still, many larger credit union representatives wrote that the impact of the new proposal would be minimal.
"The changes will not impact what is already being done by this and other large credit unions," wrote Perry M. Dawson, president and CEO at $1.2 billion-asset Suncoast Schools Federal Credit Union, Tampa, Fla. For smaller credit unions, "the burden may be a bit greater, but we still believe that the proposed changes will be of benefit to them as well."
