An audit team of four with some software and an annual budget of about $2,000 has become the bastion of Virginia Credit Union's mortgage review process.
"We have rallied to the cry to do more with less," said Paige Crump, information security analyst at the $812-million CU-a challenge intensified by an industry atmosphere of mega-mergers.
To increase audit efficiency and maintain audit quality, the 139,000-member Virginia CU automated most of its practices and tests in 1995 with ACL Services Ltd., provider of data analysis and reporting solutions for audit.
Since then, the CU has increased use of ACL for "quick and simple" confirmation of loans and shares, reasonableness testing of the loan portfolio, charged off loan analyses, escheatment/dormant accounts, delinquency and internal authorization levels, Crump said.
The Costs Involved
The initial software cost of about $3,200 to the CU has been well worth it. "One of the easiest and quickest ways to provide value to the organization and realize a return on investment in ACL software is to assume responsibility for the confirmation process from the external auditors," Crump said. "ACL has reduced our external audit fee by more than the cost of the software. We basically paid for ACL that very first year of taking over the confirmation process."
Virginia Credit Union's confirmation process is now entirely automated, except for some of the sample sizes, which are set by its CPA firm. VCU runs confirmations for all member accounts with separate tests for share accounts, savings certificates/IRAs, credit cards, mortgages and all other loans.
"We use ACL to get statistics on the file, eliminate any accounts not subject to confirmation, select the sample, join it with the name/address file, and export the fields to Word to produce the confirmation letters," Crump illustrated. "We consolidated this set of commands into a batch and we now run it every year."
Additional Costs
With an annual maintenance fee of $800, ACL's expense is easily sustainable, according to Lori McClain, vice president of internal audit and security.
A more significant commitment is required to train staff to use ACL, McClain said. Staff initially had some help getting its feet wet, as a consultant taught a class to two of the CU's auditors and helped write some custom batches.
But further training is costly. "The cost of the training is up to $1,300 per person. It's cost-prohibitive to send all four of us the same year," she explained.
Lack of training might be compensated by a surplus of time, McClain reasoned. "If we could just give someone a week or so without interruptions to concentrate on the tutorials, they could learn a lot."
Currently, only one of the staff of four, Internal Audit Manager Kenya Maddox, has received formal training.
Maddox said the most recent development in the use of ACL at the 13-branch CU has been to complete branch audit work. "We get I.S. to create a data file of teller transactions processed in our branches in order to test compliance with member withdrawal, check acceptance, and check hold policies. The file is downloaded from the mainframe onto the network to use with ACL."
Vancouver, B.C.-based ACL last month was voted the preferred software solution for data extraction and analysis in the seventh annual software survey of Internal Auditor magazine, official publication of The Institute of Internal Auditors (The IIA).
