But the 24-page report was also critical of examiners, noting they could have mitigated an estimated $33.5 million loss to NCUSIF.

The report said examiners failed to adequately identify transaction risks and address multiple red flags, such as excessive amounts of cash on deposit, the discovery of an unaccounted for bag of coins, an overdrawn employee account for an extended period, an overdrawn line of credit at the corporate credit union and an evasive CEO.

What's more, had examiners investigated the credit union's low ratio of investments to total assets, coupled with the high ratio of cash to total assets, they may have detected the fraud earlier, according to the report.

Read more: Faked financial statements looked genuine …

The $33.5 million hit to the share insurance fund was caused by former Taupa Lithuanian CEO Alex Spirikaitis overstating assets by $15.5 million, erroneously reported as cash on deposit at Corporate One Federal Credit Union in Columbus, Ohio. The NCUA's Asset Management Assistance Center also noted issues with members share accounts and other suspicious transactions resulted in member share deposits being understated by $18 million.

On July 12, 2013, Ohio State Supervisory Authority and NCUA examiners went to Taupa Lithuanian CU to confront the CEO and discovered numerous items, including Corporate One stamps and software that produced phantom fonts to generate statements, were used by Spirikaitis to forge fake statements and records. Spirikaitis kept these items in a locked room to which only he had access, credit union employees told the NCUA.

“Through our review of examination working papers, and later corroborated in interviews, we determined NCUA and Ohio SSA examiners agreed that the falsified statements allegedly prepared by Taupa management looked convincing,” according to the report.

Moreover, the OIG, after conducting a comparative documents review, agreed with examiners that the faked financial statements looked genuine.

Additionally, Spirikaitis intercepted communication between external auditors and Corporate One seeking to confirm statement balances.

“Examiners later discovered that Taupa's CEO had intercepted and altered the address on the confirmation sent by external auditors, and had them mailed to a P.O. Box he controlled rather than to Corporate One.”

The report also said Taupa Lithuanian's board of directors failed in their duties to adequately oversee the activities of management.

Board minutes were missing for some months and there were no minutes from the board's supervisory committee. Additionally, Spirikaitis was frequently absent from board meetings, though financial reports were consistently presented by the board treasurer.

The OIG also noted the board failed to challenge large swings in income, projections and operating results.

Examiners cited board deficiencies in 2006, 2007, 2009, 2010, 2011 and 2012.

“We found the board had not signed off on some minutes, and board discussion notes were very limited with regard to audit and exam results or follow-up,” the report stated. “We also found no substantive discussion related to policy reviews, risk management or strategy.”

As a result of the findings of this report, the OIG made three recommendations:

• Implement a more comprehensive strategy for responding to red flags, including examiner fraud training programs, specific procedures to address fraud risks and building fraud specific resources and tools;
• Update policies and procedure to require third party confirmations for all accounts where the balance or activity is significant to the operations of the credit union; and,
• Review policies and procedures to require that examiners gain an understanding through direct communications with external auditors of procedures performed to verify account balances, specifically the cash, investments, brokered CDs and member accounts. Examiners should document the results within the relevant examination working paper sections.

Spirikaitis pleaded guilty in February to one count of conspiracy to commit bank fraud and could face up to 30 years in federal prison. His sentencing hearing is scheduled for May 9.

Former Teller Michael Ruksenas, who embezzled more than $480,000 from the failed credit union, was sentenced to 17 months in federal prison in February. His father, Algis Ruksenas, served as president of the credit union's board from 2009 to 2011, according to IRS 990 forms.

Former Bookkeeper Vytas Apanavicius pleaded guilty to one count of conspiracy to commit embezzlement and also faces a May 9 sentencing hearing. He admitted to stealing nearly one million dollars the credit unions with help from Spirikaitis.

Cases against the other three individuals are pending.