NCUA board issues supervisory committee audit proposal

February 14, 2019

The NCUA board issued a proposed rule on supervisory committee audits and heard a briefing on a final interagency flood rule at its Feb. 14 board meeting.

The proposed rule would amend NCUA’s regulations governing responsibilities of a federally insured credit union to obtain an annual supervisory committee audit of the credit union.

The proposal implements the following recommendations—both intended to provide flexibility—outlined in the agency’s 2017 Regulatory Reform Task Force’s Regulatory Reform Agenda:

  • Section 715.7: replace reference to the “NCUA’s Supervisory Committee Guide” with minimum standards a supervisory committee audit would be required to meet if they do not obtain a CPA opinion audit; and
  • Section 715.9: replace the 120-day timing requirement for delivery of written reports with language that provides that the target date of the engagement letter be presented so the credit union is able to meet the annual audit requirement.

The proposal has a 60-day comment deadline, which will begin upon its publication in the Federal Register.

The board was also briefed on a final interagency rule that implements the private flood insurance provisions of the Biggert-Waters Flood Insurance Reform Act of 2012. The board approved the rule at the end of last month by notation vote.

The rule requires regulated lending institutions—which include federally insured credit unions—to accept “private flood insurance,” as defined in the Biggert-Waters Act, and includes a streamlined compliance aid provision to help institutions evaluate whether a flood insurance policy meets the definition of “private flood insurance.”

It also permits institutions to choose to accept certain flood insurance policies issued by private insurers, even if the policies do not meet the statutory and regulatory definition of “private flood insurance.”

Institutions may accept these policies provided certain conditions are met, such as: the policy provides sufficient protection for a designated loan, consistent with general safety and soundness principles; and that the institution document its conclusion regarding the sufficiency of protection in writing.

The final rule also allows institutions to exercise their discretion to accept certain plans providing flood coverage issued by “mutual aid societies.”

It becomes effective July 1.