NCUA Audit Nightmares: My Examiners Were Wrong (and Sassy)!
In the American financial system, audits are considered especially heinous. Across the country, the dedicated employees who endure these vicious examinations are part of an elite group known as the credit union industry.

These are their stories.

The identities of the participants have been protected.

This Ain’t My First Rodeo

After a certain point, you must have confidence in your experience. In the case of um, let’s call him Mr. Blurry here, he has plenty of experience. Unfortunately, his confidence almost got him in trouble.

Mr. Blurry is a CPA, so he has strong background in accounting practices. Mr. Blurry also has many years of experience in credit unions. So much experience, in fact, that he’s currently the CEO of a prominent one that shall not be named. During the course of his tenure there, he’s survived around a dozen credit union exams by the NCUA.

While NCUA regulations don’t stress him out quite the same way they used to, they’re still strenuous affairs. Tensions run high.

NCUA Examiners Love Authority

If credit union exams are the mall, then NCUA examiners are the mall cops. They can see that what you’re doing is valuable, and they want to make sure it’s all safe and shipshape.

Unfortunately, they’re also blessed with an outsized estimation of their own infallibility. They roll in, flashing badges like eager Paul Blarts with NCUA regulations rulebooks, and look for anything—anything!—that could be amiss.

Credit Union Exams Gone Wild

One year, knee deep in what promised to be another routine credit union examination, Mr. Blurry got some bad news.

“They told us we had to increase our allowance for loan loss by over three hundred thousand dollars,” Mr. Blurry said.

As a CPA, Mr. Blurry was puzzled. Their loan loss allowance was, per his calculations, spot on. He tried to demonstrate his credit union’s risk management process to show that increasing their allowance by three hundred thousand would not only be overkill, but it would be detrimental to the financial health of the credit union.

The examiner was not amused. They pulled a power move: “we’re the examiners. You have to do what we tell you,” they said.

And so it was done.

They took a big hit to earnings.

Fast Forward One Year

The next year, they came back and let Mr. Blurry know that he could reverse that three hundred-thousand-dollar loan allowance.

Mr. Blurry went for the classic, “I told you so.”

Bad move. NCUA regulations don’t cover sass, but the NCUA examiners certainly have their own own to bring to the table. They shut him down immediately.

“Don’t go there,” they said. “You can’t talk to me like that.”

Authority certainly has its privileges.

audit checklist

FREE: Audit Checklist for Credit Unions

4 key principles and 13 questions to jumpstart your audit planning. From leading credit unions.

Credit Union Compliance Resources

Regardless of your past experience, credit union exams can throw curveballs your way. Some, like the above, may be unavoidable even with demonstrable compliance. Others can be avoided with good planning and great audit tools.

If you’d like to prepare for your next credit union exam, get a head start by reviewing some of our insightful blogs:

Using the NCUA Examiner's Guide as a Resource to Help Your Credit Union
Are you Ready for Your Internal Audit?

Written By Brad Powell

Brad Powell runs Redboard, a company that helps credit unions better respond to regulatory examinations. He has 20 years of experience developing technology for credit unions and financial services companies.
icon linkedin icon twitter