NCUA Issues Cease and Desist Order to a New York Credit Union

A cease and desist order was issued to the $6.8 million Yonkers Postal Employees Credit Union (YPECU) in New York that serves nearly 500 members, the NCUA said Wednesday.

The federal agency determined that “grounds exist to initiate an administrative cease and desist action” against the credit union.

The order, signed on Nov. 4 by YPECU President/CEO Ginger R. Watkins and four board members, requires the credit union to implement four actions, which include hiring a certified fraud examiner to conduct a fraud examination covering the years 2019, 2020 and 2021, and to ensure bank and corporate accounts are reconciled every month and that the reconciling items are posted to the appropriate general ledger account by the tenth day of each month.

In 2019, YPECU posted a net income loss of $280,363, according to NCUA financial performance reports. What’s more, the credit union recorded net income losses of $11,455 and $32,504 in 2020 and 2021, respectively. At the end of the first quarter of this year, YPECU also showed a net income loss of $17,046, and a net income gain of $18,276 and $21,906 in the second and third quarters, respectively, according to NCUA financial performance reports.

YPECU also consented to obtaining a final opinion audit report for the 2020 financial statements no later than Nov. 30 and to hire a New York state licensed independent firm to perform a financial statement opinion audit, effective Dec. 31, 2021.

The NCUA noted that its administrative order superseded and replaced a “preliminary warning” letter that was delivered to the credit union on June 15, 2022. The federal agency did not reveal the contents of that letter.

Although not related to the NCUA administrative order, CU Times found that YPECU’s tax-exemption has been revoked because it has not filed a required Form 990 since 2016, IRS online records show. The IRS automatically revokes any nonprofit organization’s tax-exempt status when it fails to file a Form 990 for three consecutive years.

The IRS notes that even when an organization appears on the automatic revocation list, it does not mean the organization’s tax exempt status is currently revoked as it may have been reinstated. Nevertheless, the IRS does not state how it notifies the public when an organization’s tax-exempt status has been reinstated.

Form 990 is an annual informational return that state-chartered credit unions are required by law to file with the IRS annually. The form includes information about the credit union’s finances, including compensation of its top executives.

YPECU’s 2016 Form 990, shows that Watkins was the board’s secretary. She did not receive any compensation. Under the governance, management, and disclosure section of the credit union’s 2016 Form 990, YPECU reported that it did not become aware during the year of a “significant diversion of the organization’s assets.”

Watkins did not respond to CU Times’ phone and email requests for comment. In addition to her CEO position, Watkins is also listed as the treasurer on the five-member board of directors, according to YPECU’s third quarter profile report filed with the NCUA.