Questions You and Your Supervisory Committee Should Ask

Transcription

1 Credit Union Protection 2014 Webinar Series Questions You and Your Supervisory Committee Should Ask CUNA Mutual Group Proprietary Reproduction, Adaptation or Distribution Prohibited CUNA Mutual Group, 2014, All Rights Reserved.

2 Session agenda & panelists Today, we ll cover: Supervisory committee goals and responsibilities Important questions to consider to ensure confident guidance Your input during a live Q&A session Jay Isaacson Vice President, Commercial Products CUNA Mutual Group Carlos Molina Risk Management Consultant CUNA Mutual Group Bob Bouvier Risk Management Consultant CUNA Mutual Group

3 Supervisory Committee goals It is fairly straight-forward Ensure management s financial reporting objectives have been met; and Ensure management s practices and procedures safeguard members assets Protecting the members and their assets that they ve entrusted to your credit union!

4 A watchful eye Does the supervisory committee have the right background? Strong communication skills Active participation Cooperative and work as a team Diverse backgrounds and experience Can handle complaint investigation and resolution Capable of interpreting financial statements Credit union business understanding Knowledgeable of credit union policy and procedures Ability to understand and comply with law, rules and regulations

5 Duties & Responsibilities Does your supervisory committee have a clear understanding of appropriate areas of focus? Evaluate policy effects on service quality & overall safety of funds Recommend policy changes to improve efficiency and service Protect against internal embezzlement Review surety bond Review insurance coverage Evaluate security and surveillance equipment All Board and Credit Committee meetings Monthly financial statements included in Board packets Review Policies & Procedures Safeguard Member Assets Review Minutes

6 Duties & Responsibilities Does your supervisory committee have a clear understanding of appropriate areas of focus? Member account verification Review monthly bank reconcilement Review file maintenance reports Review insider account activity General loan review Monthly report review Verification of new and closed accounts Verification of change of address Verification of dormant account activity Periodic cash counts Verification of individual expense billings Review investment practice vs. policy Handle member complaints / questions Review Credit Union Operations

7 Duties & Responsibilities Does your supervisory committee have a clear understanding of appropriate areas of focus? Ensure compliance Report to CU membership that credit union is in compliance Compliance with Consumer Credit regulations Maintain record of all actions taken by Supervisory Committee Furnish any documents requested by auditor or examiner Cooperate with regulatory agencies Review insider account activity Interact with personnel to determine operating effectiveness Ability to suspend any officer or committee member Evaluate performance of CU Officials

8 The reality of a lawsuit Are you prepared for considerable liability exposure? Take responsibility and power bestowed seriously Understand sensitivity Use highest degree of professionalism and confidentiality Exercise due diligence when performing duties Be familiar with Management Liability insurance coverage and limits

9 Ten risk trends facing credit unions Can you ensure operations are assessed? controls are in place? insurance adequacy maintained? 1. Employee / Director Dishonesty 2. Faithful Performance 3. Wire Transfer (Funds Transfer) 4. Electronic Crime 5. Plastic Card Fraud 6. Employment Practices Liability 7. Lender Liability 8. Professional Liability 9. Extra Expense 10. Cyber Liability

10 Risk trends facing credit unions Employee / Director Dishonesty General ledger manipulation Theft of vault cash Fraud and fraudulent loans Faithful Performance Loan personnel consciously disregarding established and enforced lending policies 2 nd largest source of claims paid under the Fidelity Bond coverage Bond Claim Category Combined Claim Count (frequency) Combined Claim Dollars (severity) Employee Dishonesty & Faithful Performance 19% 58%

11 Risk trends facing credit unions Inadvertent release or disclosure of info Cyber Liability Lost or Stolen Data Hacked System Distributed Denial of Services Key Questions to ask: What is our process to handle a data breach or DDoS attack and what outside firm(s) or teams would we engage in the event of a data breach? What insurance should I have for data breach exposure? What are the credit union s data security and notification obligations? What obligations do my data vendors or host service providers have related to my data security? How are credit union employees being trained on security risks and data protection? Is our data security adequate?

12 Staying on top of things What types of reports should be reviewed consistently? File maintenance report for loans and deposit accounts Dormant account activity report Supervisory override report Delinquent loan report Accrued loan interest report

13 Surprise surprise! How frequently should we conduct surprise cash counts? At least quarterly; however, if possible surprise cash counts should be down monthly Accompany the teller and count the drawer together Under no circumstances should the committee member handle alone Early detection is important to minimize losses related to employee dishonesty

14 Safeguards to minimize expense fraud What can our credit union do to minimize employee dishonesty exposures related to expense fraud or abuse? Implement policy addressing expenses and expense approval Require documentation of receipts / invoices Review expenses for policy compliance Select sample of general ledger expenses and trace to source docs Trace board-approved salaries to issued W2 s

15 Working together How should the supervisory committee interact and work with the internal auditor? Ideally, the internal auditor would report to the Supervisory Committee Review audit reports and discuss findings whether internal or completed by an outside third party Agree upon audit schedules and hold monthly meetings

16 Quick summary Ensure you and your peers understand your duties and responsibilities to keep a watchful eye Influence and lead Be an active participant and remain organized Have a plan Meet regularly Communicate Understand the controls in place at the credit union to help you manage risks Prepare through educational opportunities and accessing resources additional resources on risks within the Protection Resource Center at

17 Credit Union Protection 2014 Webinar Series Come learn with us at CUNA Mutual Group. Get a jump-start with up-to-date CUNA Mutual Group s webinars designed to help you achieve financial success, reduce your risks, and better serve your members.

18 This presentation was created by the CUNA Mutual Group based on our experience in the credit union and insurance market. It is intended to be used only as a guide, not as legal advice. Any examples provided have been simplified to give you an overview of the importance of selecting appropriate coverage limits, insuring-to-value and implementing loss prevention techniques. No coverage is provided by this presentation/ publication, nor does it replace any provisions of any insurance policy or bond. CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Insurance products offered to financial institutions and their affiliates are underwritten by CUMIS Insurance Society, Inc. or CUMIS Specialty Insurance Company, members of the CUNA Mutual Group. Some coverages may not be available in all states. If a coverage is not available from one of our member companies, CUNA Mutual Insurance Agency, Inc., our insurance producer affiliate, may assist us in placing coverage with other insurance carriers in order to serve our customers needs. For example, the Workers Compensation Policy is underwritten by non-affiliated admitted carriers. CUMIS Specialty Insurance Company, our excess and surplus lines carrier, underwrites coverages that are not available in the admitted market. Data breach services are offered by Kroll, a member of the Altegrity family of businesses. Cyber liability may be underwritten by Beazley Insurance Group. This summary is not a contract and no coverage is provided by this publication, nor does it replace any provisions of any insurance policy or bond. Please read the actual policy for specific coverage, terms, conditions, and exclusions CUNA Mutual Group 2014, All Rights Reserved.