For years, the NCUA has burdened credit unions with frequent, tedious exams. The cycles call for audits every 12 months, but an audit could land at any point within that period. Unfortunately, the unpredictability of the current exam cycle creates stress and unduly disrupts operations.

Fortunately, the NCUA has proposed new changes to the exam cycle. We hope they make these changes effective immediately.

Smaller Credit Unions (<$500m)

One of the ideas that has received a lot of traction lately is the 18-month exam cycle for smaller credit unions. This longer cycle would significantly alleviate some of the pains that smaller credit unions have in coordinating their audits.

However, the NCUA came up with an even better solution that I think we can all be happy with:

Monthly examlets.

While we’re not thrilled about the name, we wholly endorse the strategy. To minimize the disruption that exams have on smaller credit unions, the NCUA will change their entire exam structure. Here are their proposed changes:

  1. Reduce the scope of each exam by roughly 50%
  2. Focus on only one issue (in depth) at a time
  3. Conduct exams monthly

In addition to monthly exams, the NCUA proposes on-site offices for examiners. Dedicated on-site offices will reduce uncertainty about exam scheduling, increase communication, and ensure that smaller credit unions never forget to build audit time into their schedules.

The only downside?

Credit unions will be required to provide the office, the desk, and a decent chair. Everything else will be provided by the NCUA or its examiners, including:

  • Cot or hide-a-bed
  • Toiletries
  • Hot plate, skillet, and mess kit
  • Bathrobe

We love the NCUA’s idea of live-in facilities for their examiners. But just wait till you see what they have in store for bigger credit unions.

Larger Credit Unions ($500m+)

Larger credit unions can also look forward to a more predictable exam schedule. However, instead of the bite-sized examlets for smaller credit unions, larger credit unions can expect even more consistency:

They’re calling it the Ongoing Exam Cycle, and they’re hoping to roll it out soon.

The Ongoing Exam Cycle would effectively replace the current 12-month cycle. In its stead, the ongoing cycle would introduce the following elements to credit union exams:

  1. A never-ending exam schedule
  2. Repeat questions to test consistency
  3. Trick questions to keep credit unions on their toes

The NCUA is hoping that they can keep credit union audit team stress down by ensuring that it never spikes. Instead, they aim for a moderate, constant stress level.

Our only gripe?

Some of the proposed changes to regulatory action. The NCUA has repeatedly stated that it doesn’t want to rule anything out of its recommendations or its punishments. Some of their proposed regulatory actions sound unorthodox and downright medieval:

  • One month without social media for repeat findings
  • Public humiliation for not understanding CECL
  • A ten-minute time-out for audit team members who roll their eyes
  • No coffee (no reason)

Additionally, credit unions must provide snacks in fealty to their examiners. While we’re concerned, we’re sure that they’ll come up with the right strategy by implementation time.

NCUA Exams for Banks

For too long, banks have been exempted from NCUA audits. Now that banks are questioning credit unions’ corporate tax exemption, the NCUA is fighting back!

The NCUA will now regulate banks and audit them to their exacting standards.

The future of finances and financial institutions have never looked so bright now that we’re all getting in the same boat!

Of course, we at Redboard will be there to help banks through every step of the NCUA audit process, just as we have been for credit unions. But don’t worry—we’ll charge them way more.

audit checklist

FREE: Audit Checklist for Credit Unions

4 key principles and 9 questions to jumpstart your audit planning. From leading credit unions.

Additional Reading

If you’d like to read some articles about credit unions that aren’t complete fabrications, then check out our blog! We try to keep it full of useful tips, tricks, information, and resources to help your credit union breeze through your audits.

Follow the links below to see how you can finish your audits 25% faster, or download our credit union audit checklist to help you prepare for your next audit or exam.