The financial statements of the NCUA's four main funds are presented fairly, but there are serious difficulties in the agency's financial accounting, according to an independent audit released on May 16.
The audit by KPMG found that the reports of the NCUA's operating fund, the Central Liquidity Facility, the community development revolving loan fund and NCUSIF "present fairly, in all material respects" of their financial positions.
But the report found a significant deficiency in the agency's financial accounting for its operating fund, including problems by management to provide key documentation related to property and equipment, a lack of efficiency in recordkeeping and financial close procedures, and a lack of documentation of activities aimed at confirming journal entries documenting that certain transactions were made as approved.
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The auditor recommended that the NCUA assess staff workload levels to ensure that personnel are available to perform end-of-year financial tasks; expand the documentation of nonroutine activities in the agency's books and records so they are more quickly available for inspection; consider automated procedures and systems-based controls for supervisory reviews and certain journal entries.
The agency responded that it had already made some improvements to its accounting system and would make more of them to respond to the deficiencies.
On the Central Liquidity Facility, the auditor noted that the significant deficiency cited in last year's report on the way financial statements were prepared had been remedied. On the community development revolving loan fund, the audit noted that in two areas where last year's audit had found problems there had been improvements. The audit had recommended improvements in management review procedures over cash handling and reconciliation and cited it as a material weakness. The previous audit also cited a significant deficiency in the review procedures of the financial accounting and reporting process.
On the NCUSIF, the audit noted that the significant deficiency found in last year's audit on the financial accounting and reporting process had been remedied.
NCUA Deputy General Counsel Mary Mitchell Dunn said the association will monitor the agency's progress in making improvements.
"We will review the report with great detail with our accounting subcommittee. We want to be sure all the problems are corrected," she said.
The agency said it plans to release an audit on the Temporary Corporate Credit Union Stabilization Fund in the near future.
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