OLYMPIA, Wash. State regulators said state chartered credit unions may establish an audit committee and substitute it for the mandated supervisory committee as long as it encompasses the same oversight functions as the traditional supervisory panel.
A state credit union may use the term “audit committee” synonymously and in place of “supervisory committee” in its bylaws. However, if a state credit union uses the term “audit committee” in its bylaws, it must still comply with the same requirements for a supervisory committee contained in the Act and all applicable rules for the supervisory committee of a federally insured credit union, said Washington CU Supervisor Linda Jekel in a new interpretative letter.
Under the state’s credit union statute, each credit union must appoint a supervisory committee which “is responsible for making sure the credit union’s financial records are in order and that internal controls are in place to protect the assets of the credit union and its members. The committee does this by making sure the annual audit is conducted and by making sure internal controls are tested regularly.”
The term “audit committee” typically is used by corporations, such as banks and other companies which are either publicly traded or otherwise regularly file reports with the Securities and Exchange Commission, explained Jekel. The audit committee is charged with oversight of financial reporting and disclosure. The role of audit committees continues to evolve as a result of the passage of the Sarbanes-Oxley Act of 2002. Many audit committees also have oversight of regulatory compliance and risk management activities. Not-for-profit entities, other than credit unions, also may have audit committees.
In addition, NCUA’s Supervisory Committee Guide states: “[f]or some federally insured, state chartered credit unions (FISCUs), the audit committee’ designated by state statute or regulation is the equivalent of a supervisory committee.” At least five states authorize their credit unions to use the term “audit” committee.
“The Division of Credit Unions is of the view that a State Credit Union may use the term audit committee’ synonymously and in place of supervisory committee’ in its bylaws as long as it complies with the same requirements for a supervisory committee contained in the Act and all applicable rules for a supervisory committee of a federally insured credit union,” said Jekel’s letter.
