Submitted by sevans on Thu, 11/13/2014 - 3:28pm

Examination Objectives

  • Review income and expense trends
  • Analyze budget projections and practices
  • Evaluate due diligence by management of services and products

affecting the credit union’s profitability (e.g., cost-benefit

  • Determine adequacy of policies and practices addressing income

and expenses

  • Compare actual performance to the income and expense budget

and capitalization goals

  • Determine sufficiency of earnings to cover operating expenses,

dividends, and necessary reserve transfers

  • Determine adequacy of earnings to increase the net worth ratio (if

necessary) or to maintain the net worth ratio at or above

established benchmarks

  • Ensure compliance with applicable laws, regulations, accounting

practices, and policy statements when recording income and

expense items

  • Determine that management has instituted prompt correction of

deficiencies or exceptions


Associated Risks

  • Credit risk can result from poor underwriting of loans or high-

risk investments;

  • Interest rate risk can result from insufficient net interest margin

to cover operating expenses;

  • Liquidity risk can result from inadequate pricing policies, and

failure to properly structure share and loan products resulting in

weak or negative profitability;

  • Strategic risk can result from failure of management to plan for

sufficient resources to fulfill business plans or continue offering

competitive products and services; and

  • Reputation risk can result from loss of member confidence and

withdrawal of member shares due to questions regarding the

credit union’s on-going viability.

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