Earlier this year, I wrote about the more than $40 million embezzled by a former CEO of CBS Employees FCU and how credit unions need to get back to the basics to prevent embezzlement. How did that much money escape the notice of internal auditors, supervisory committees, staff, and the NCUA? We’re talking about a credit union that was just over $21 million in assets! Unfortunately, these cases are not altogether uncommon, and in many cases can cost the credit union its charter.
As a 30-year veteran of the industry, including time spent as an examiner and audit and compliance specialist, I felt it was my duty to help credit unions safeguard themselves against these kinds of situations. In reviewing the case at CBS Employees, it became clear that basic internal controls were being ignored. Here are protections every credit union should be using. Some of these may seem self-evident, but based on this embezzlement case and many others, they may simply have been forgotten.
For my complete list of goals and tactics for each area of credit union operations, check out the AuditLink white paper.
Recommended controls for financial statements
Financial statements should be the first line of defense for preventing embezzlement. Here are some items to be on the lookout for:
As always, excellent material Jim. Your advice is not only timely for credit unions, but also for those of us in CUSOs. We have a duty to our member credit unions to ensure our shops have sufficient checks and balances in place. As CUSOs expand their services and regulatory scrutiny of CUSOs increases, executing sound internal controls just makes sense. Thanks for waving this rather unpopular flag.