ALEXANDRIA, Wash.–NCUA has retained an independent auditor to conduct what it said will be a “full-scope” material loss review (MLR) related to the failed Indianapolis’ Newspaper FCU, according to an agency Office of Inspector General report filed with Congress.
The OIG also offered updates on other CU failures and their cost to the insurance fund.
NCUA said it has retained Moss Adams, LLP to conduct the audit of the $6.6-million INFCU, which failed in January of this year at a cost of $2.29 million to the National Credit Union Share Insurance Fund. After being conserved, NCUA assigned most of its shares to Elements Financial FCU.
The Objective
NCUA said the objective of the OIG initiative is to assess the agency’s supervision of the credit union, to offer recommendations to mitigate future losses, and to get to the bottom of what happened at the credit union.
According to the report, there were “unusual circumstances,” involved, including that the CEO and manager were alleged to have committed fraud relating to the credit union’s loans.
The OIG report also covers four other insured credit unions that were closed from April through September, each of which led to losses below $25 million to the insurance fund. Of those, two were involuntarily liquidated and two were handled through assisted merger.
During NCUA’s November board meeting, agency staff said the NCUSIF has seen total of $4.8 million in losses to the insurance fund in 2021 due to fraud.
Failures Examined
Among the CU failures examined in the report:
- Defense Logistics FCU, Dover, N.J. NCUA said DLFCU’s failure cost the SIF $63,898. The institution was closed July 1 through involuntary liquidation and purchase-and-assumption with Pentagon FCU “due to ongoing unresolved non-compliance issues” related to NCUA rules and regulations.
- Community Owned FCU, Charleston, S.C. NCUA said COFCU’s failure is estimated to cost the SIF $750,772. It was involuntarily liquidated Sept. 17 due to insolvency from “a lack of a viable field of membership, inability to expand services, and lack of permanent, experienced personnel to operate the credit union,” the OIG report states. The credit union had $2.8 million in assets at the time it was shuttered.
- Fedstar FCU, Salem, Va. NCUA said FedStar’s failure is expected to cost the SIF $342,000. It was handled through an assisted merger June 1 with Infirst Federal Credit Union due to “insolvency from issues with an underfunded Allowance for Loan & Lease Losses account, failure to timely charge off non-performing loans, unreconciled accounts, unauthorized expenses on the corporate credit card of the former chief executive officer, improper controls over Automated Clearing House processing, weak internal controls, excessive unsecured loans over policy limits, and unreported nonmember deposits,” the OIG reported.
- Empire Branch 36 National Association of Letter Carriers Credit Union, New York. NCUA said NALCCU’s failure is estimated to cost the SIF $350,000. The credit union was conserved July 22 and subjected to an emergency assisted merger with Rockland Employees FCU due to “insolvency from eroding net worth, unprofitability, and insufficient earnings to cover operating expenses,” the OIG said.