Charged with safeguarding members’ assets and ensuring the credit union is operating in a safe and sound manner, the supervisory committee’s role is to be a watchdog and ensure no threats are lurking that could negatively impact the credit union.

“The supervisory committee is the flashlight for the member,” says attorney David Reed of Reed and Jolly, PLLC. “The CEO is the brains, the board is the heart, but the supervisory committee is the eyes and ears.”

Reed broke down the expectations for supervisory committees during a keynote address for 370 attendees at the 2019 CUNA Supervisory Committee and Internal Audit Conference in Las Vegas.

There has been a dramatic change in the regulatory environment, technology, service delivery, member expectations, and business models in recent years and all of those have implications on credit union operations.

Internal fraud remains the biggest threat, Reed says, because the individuals who carry out these activities are employed by the credit union, know how the institution operates, and have the ability to carry out any cover-ups that prevent the fraud from being detected.

Reed suggests supervisory committee members pay attention when a financial institution is in the news for a negative event—such as a lawsuit, embezzlement, robbery, internal dispute, or data breach—and use these stories as sources of information for what could potentially happen at their credit union.

 “When you look at how some of these frauds are discovered, it will help sharpen your own view,” Reed says.

In the course of their exams, NCUA examiners make sure credit unions are compliant with the applicable laws, regulations, and federal directives, and also initiate corrective actions when necessary, but Reed says the supervisory committee can play a critical in these exams.

A well-performing supervisory committee can provide an audit report that will allow NCUA examiners to lessen the scope of their exam due to being able to rely on information the committee provided.

“Make sure the machine itself is working well,” Reed says.